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ʮ̡
(Incorporated in the Cayman Islands with limited liability)
Stock code : 6683
Joint Global Coordinators, Joint Bookrunners and Joint Lead Managers
Sole Sponsor and Sole Overall Coordinator
Global
Offering


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If you are in any doubt about any of the contents of this prospectus, you should obtain independent professional advice.
Star Plus Legend Holdings Limited
ʮ̡
(Incorporated in the Cayman Islands with limited liability)
GLOBAL OFFERING
Number of Offer Shares under
the Global Offering
: 126,640,000 Shares (comprising 78,640,000 New
Shares and 48,000,000 Sale Shares, subject to
the Over-allotment Option)
Number of Hong Kong Offer Shares : 12,664,000 New Shares (subject to reallocation)
Number of International Offer Shares : 113,976,000 Shares (comprising 65,976,000 New
Shares and 48,000,000 Sale Shares, subject to
reallocation and the Over-allotment Option)
Offer Price : HK$4.25 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% (payable in
full on application in Hong Kong dollars and
subject to refund)
Nominal value : US$0.00001 per Share
Stock code : 6683
Sole Sponsor and Sole Overall Coordinator
Joint Global Coordinators, Joint Bookrunners and Joint Lead Managers
Joint Bookrunners and Joint Lead Managers
⳪暲@:9)
 QUAM SECURITIES
ॺᄽኤඋ
QUAM SECURITIES
Joint Lead Managers
Hong Kong Exchanges and Clearing Limited, The Stock Exchange of Hong Kong Limited and Hong Kong Securities Clearing Company Limited take no responsib ility for the contents of this
prospectus, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arisin g from or in reliance upon the whole or any
part of the contents of this prospectus.
A copy of this prospectus, having attached thereto the documents specified in the section headed “Documents Delivered to the Registrar of Companies a nd Available on Display” in Appendix VI
to this prospectus, has been registered by the Registrar of Companies in Hong Kong as required by Section 342C of the Companies (Winding Up and Miscella neous Provisions) Ordinance
(Chapter 32 of the Laws of Hong Kong). The Securities and Futures Commission of Hong Kong and the Registrar of Companies in Hong Kong take no responsibil ity for the contents of this
prospectus or any of the other documents referred to above.
The Offer Price has been determined at HK$4.25 per Share between the Sole Overall Coordinator (for itself and on behalf of the Underwriters), the Selli ng Shareholder and our Company.
Applicants for Hong Kong Offer Shares are required to pay, on application, the Offer Price of HK$4.25 for each Hong Kong Offer Share together with broke rage of 1%, SFC transaction levy of
0.0027% AFRC transaction levy of 0.00015% and Stock Exchange trading fee of 0.00565%.
Prior to making an investment decision, prospective investors should consider carefully all of the information set out in this prospectus, includin g the risk factors set out in the section
headed “Risk Factors” in this prospectus. The obligations of the Hong Kong Underwriters under the Hong Kong Underwriting Agreement to subscribe for, and to procure subscribers for, the
Hong Kong Offer Shares are subject to termination by the Sole Overall Coordinator (for itself and on behalf of the Hong Kong Underwriters) if certain gr ounds arise prior to 8:00 a.m. on the
Listing Date. For details of such grounds, please refer to the paragraph headed “Underwriting – Underwriting Arrangements and Expenses – Hong Kong Pu blic Offering – Grounds for
termination” in this prospectus. It is important that you refer to that section for further details.
The Offer Shares have not been and will not be registered under the U.S. Securities Act or any state securities law in the United States and may not be offe red, sold, pledged, or transferred
within the United States or to, or for the account or benefit of U.S. persons (as defined in Regulation S) except in transactions exempt from, or not subj ect to, the registration requirements of the
U.S. Securities Act. The Offer Shares are being offered and sold only outside the United States in an offshore transaction in accordance with Regulati on 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 or prin ted copies of any
application forms to the public in relation to the Hong Kong Public Offering.
This prospectus is available at the website of the Hong Kong Stock Exchange at www.hkexnews.hk and our website at www.splegend.com. If you require a pr inted copy of this
prospectus, you may download and print from the website addresses above.
Please refer to “How to Apply for Hong Kong Offer Shares” in this prospectus for further details of the procedures through which applications for the Ho ng Kong Offer Shares
can be made electronically.
IMPORTANT
June 30, 2023


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IMPORTANT NOTICE TO INVESTORS:
FULLY ELECTRONIC APPLICATION PROCESS
We have adopted a fully electronic application process for the Hong Kong Public Offering.
We will not provide any printed copies of this prospectus or any printed copies of any
application forms for use by the public.
This prospectus is available at the website of the Hong Kong Stock Exchange at
www.hkexnews.hk under the “ HKEXnews > New Listings > New Listing Information ”
section, and our website at www.splegend.com. If you require a printed copy of this
prospectus, you may download and print from the website addresses above.
To apply for the Hong Kong Offer Shares, you may:
(1) apply online through the White Form eIPO service at www.eipo.com.hk ;o r
(2) apply through the CCASS EIPO service to electronically cause HKSCC Nominees to apply
on your behalf, including by:
(i) instructing your broker or custodian who is a CCASS Clearing Participant or a
CCASS Custodian Participant to give electronic application instructions via CCASS
terminals to apply for the Hong Kong Offer Shares on your behalf; or
(ii) (if you are an existing CCASS Investor Participant) giving electronic application
instructions through the CCASS Internet System ( https://ip.ccass.com ) or through
the CCASS Phone System by calling +852 2979 7888 (using the procedures in
HKSCC’s “An Operating Guide for Investor Participants” in effect from time to time).
HKSCC can also input electronic application instructions for CCASS Investor
Participants through HKSCC’s Customer Service Centre at 1/F, One & Two Exchange
Square, 8 Connaught Place, Central, Hong Kong by completing an input request.
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 (Chapter
32 of the Laws of Hong Kong).
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.
IMPORTANT


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Your application through the White Form eIPO service or the CCASS EIPO service must be
for a minimum of 500 Hong Kong Offer Shares and in one of the numbers set out in the table.
No. of
Hong Kong
Offer Shares
applied for
Amount
payable on
application
No. of
Hong Kong
Offer Shares
applied for
Amount
payable on
application
No. of
Hong Kong
Offer Shares
applied for
Amount
payable on
application
No. of
Hong Kong
Offer Shares
applied for
Amount
payable on
application
HK$ HK$ HK$ HK$
500 2,146.43 7,000 30,050.02 50,000 214,643.07 700,000 3,005,002.88
1,000 4,292.86 8,000 34,342.89 60,000 257,571.68 800,000 3,434,289.00
1,500 6,439.29 9,000 38,635.75 70,000 300,500.29 900,000 3,863,575.13
2,000 8,585.72 10,000 42,928.61 80,000 343,428.90 1,000,000 4,292,861.26
2,500 10,732.16 15,000 64,392.92 90,000 386,357.51 1,500,000 6,439,291.88
3,000 12,878.58 20,000 85,857.23 100,000 429,286.13 2,000,000 8,585,722.50
3,500 15,025.01 25,000 107,321.53 200,000 858,572.26 2,500,000 10,732,153.13
4,000 17,171.45 30,000 128,785.83 300,000 1,287,858.38 3,000,000 12,878,583.76
4,500 19,317.88 35,000 150,250.14 400,000 1,717,144.50 4,000,000 17,171,445.00
5,000 21,464.30 40,000 171,714.46 500,000 2,146,430.63 5,000,000 21,464,306.26
6,000 25,757.17 45,000 193,178.76 600,000 2,575,716.76 6,332,000
(1) 27,182,397.44
Note:
(1) Maximum number of Hong Kong Offer Shares you may apply for.
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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Our Company will issue an announcement on the Stock Exchange’s website at
www.hkexnews.hk and our Company’s website at www.splegend.com if there is any change in
the following expected timetable of the Global Offering.
Hong Kong Public Offering commences from .............................. 9:00 a.m. on
Friday, June 30, 2023
Latest time for completing electronic applications under
White Form eIPO service through the designated website
www.eipo.com.hk (2) ...............................................1 1:30 a.m. on
Wednesday, July 5, 2023
Application lists of the Hong Kong Public Offering open (3) ..................1 1:45 a.m. on
Wednesday, July 5, 2023
Latest time for (a) completing payment for White Form eIPO
applications by effecting internet banking transfer(s) or PPS
payment transfer(s) and (b) giving electronic application
instructions to HKSCC
(4) .......................................... 12:00 noon on
Wednesday, July 5, 2023
If you are instructing your broker or custodian who is a CCASS Clearing Participant or a
CCASS Custodian Participant to give electronic application instructions via CCASS terminals
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, July 5, 2023
(1) Announcement of the level of indications of interest in the
International Offering, the level of applications in the Hong
Kong Public Offering and the basis of allocation of the
Hong Kong Offer Shares under the Hong Kong Public
Offering to be published on the website of the Stock
Exchange at www.hkexnews.hk and our Company at
www.splegend.com on or before
(9) .......................W ednesday, July 12, 2023
EXPECTED TIMETABLE (1)
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(2) An announcement of results of allocations in the Hong
Kong Public Offering (with successful applicants’
identification document numbers, where appropriate) to be
available through a variety of channels, including the
website of the Hong Kong Stock Exchange at
www.hkexnews.hk and the Company’s website at
www.splegend.com
(5) (see “How to Apply for Hong Kong
Offer Shares – 11. Publication of Results” in this
prospectus) from
(9) ....................................W ednesday, July 12, 2023
Results of allocations in the Hong Kong Public Offering
will be available at www.iporesults.com.hk (alternatively:
English https://www.eipo.com.hk/en/Allotment ; Chinese
https://www.eipo.com.hk/zh-hk/Allotment )
with a “search by ID” function from (9) ................................. 8:00 a.m. on
Wednesday, July 12, 2023 to
12:00 midnight on
Tuesday, July 18, 2023
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 ............................W ednesday, July 12, 2023 to
Friday, July 14, 2023 and
Monday, July 17, 2023
Share certificates in respect of wholly or partially successful
applications to be dispatched or deposited into CCASS on or
before
(6)(8)(9) ...........................................W ednesday, July 12, 2023
White Form e-Refund payment instructions/refund cheques in
respect of wholly or partially successful applications if the
final Offer Price is less than the maximum Offer Price per
Offer Share initially paid on application (if applicable) or
wholly or partially unsuccessful applications to be
dispatched/collected on or before
(7)(8)(9) ......................W ednesday, July 12, 2023
Dealings in the Shares on the Stock Exchange expected to
commence at 9:00 a.m. on (9) ................................ Thursday, July 13, 2023
EXPECTED TIMETABLE (1)
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Notes:
(1) All dates and times refer to Hong Kong local dates and time, except as otherwise stated.
(2) You will not be permitted to submit your application under the White Form eIPO service 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 and obtained an application reference number from the designated website at
or 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 a tropical cyclone warning signal number 8 or above or a “black” rainstorm warning and/or Extreme
Conditions in force in Hong Kong at any time between 9:00 a.m. and 12:00 noon on Wednesday, July 5, 2023,
the application lists will not open or close on that day. See the section headed “How to Apply for Hong Kong
Offer Shares – 10. Effect of Bad Weather and/or Extreme Conditions on the Opening of the Application Lists” in
this prospectus.
(4) Applicants who apply for Hong Kong Offer Shares by giving electronic application instructions to HKSCC via
CCASS should refer to the section headed “How to Apply for Hong Kong Offer Shares – 6. Applying by Giving
Electronic Application Instructions to HKSCC via CCASS – Giving Electronic Application Instructions to
HKSCC via CCASS” in this prospectus.
(5) None of the websites set out in this section or any of the information contained on the websites forms part of
this prospectus.
(6) Share certificates will only become valid at 8:00 a.m. on the Listing Date provided that the Global Offering has
become unconditional and the right of termination described in the section headed “Underwriting – Underwriting
Arrangements and Expenses – Hong Kong Public Offering – Grounds for termination” in this prospectus has not
been exercised. Investors who trade Shares on the basis of publicly available allocation details or prior to the
receipt of Share certificates or the Share certificates becoming valid do so entirely at their own risk.
(7) e-Refund payment instructions/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.
Part of the applicant’s Hong Kong identity card number or passport number, or, if the application is made by
joint applicants, part of the Hong Kong identity card number or passport number of the first-named applicant,
provided by the applicant(s) may be printed on the refund cheque, if any. Such data would also be transferred to
a third party for refund purposes. Banks may require verification of an applicant’s Hong Kong identity card
number or passport number before encashment of the refund cheque. Inaccurate completion of an applicant’s
Hong Kong identity card number or passport number may invalidate or delay encashment of the refund cheque.
(8) Applicants who have applied on White Form eIPO service for 1,000,000 or more Hong Kong Offer Shares and
have provided all information required may collect any refund cheques (where applicable) and/or Share
certificates in person from our Company’s Hong Kong Share Registrar, Computershare Hong Kong Investor
Services Limited, at Shops 1712–1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wan Chai, Hong
Kong, from 9:00 a.m. to 1:00 p.m. on Wednesday, July 12, 2023 or such other date as notified by our Company
in the newspapers as the date of despatch/collection of Share certificates/e-Refund payment instructions/refund
cheques. Applicants being individuals who are eligible for personal collection may not authorize any other
person to collect on their behalf. Applicants being corporations which are eligible for personal collection must
attend through their authorized representatives bearing letters of authorization from their corporation stamped
with the corporation’s chop. Both individuals and authorized representatives of corporations must produce
evidence of identity acceptable to our Hong Kong Share Registrar at the time of collection.
Applicants who have applied for Hong Kong Offer Shares by giving electronic application instructions to
HKSCC via CCASS should refer to the section headed “How to Apply for Hong Kong Offer Shares – 14.
Despatch/Collection of Share Certificates and Refund Monies – Personal Collection – (ii) If you apply via
Electronic Application Instructions to HKSCC” in this prospectus for details.
EXPECTED TIMETABLE (1)
– iii –


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Applicants who have applied through the White Form eIPO service and paid their applications monies through
single bank accounts may have refund monies (if any) despatched to the bank account in the form of 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 by ordinary post at their own risk.
Applicants who have applied for less than 1,000,000 Hong Kong Offer Shares and any uncollected Share
certificates and/or refund cheques will be dispatched by ordinary post, at the applicants’ risk, to the addresses
specified in the relevant applications.
Further information is set out in the sections headed “How to Apply for Hong Kong Offer Shares – 13. Refund of
Application Monies” and “How to Apply for Hong Kong Offer Shares – 14. Despatch/Collection of Share
Certificates and Refund Monies” in this prospectus.
(9) In case a typhoon warning signal no. 8 or above, a black rainstorm warning signal and/or Extreme Conditions
is/are in force in any days between Friday, June 30, 2023 to Wednesday, July 12, 2023, then the day of (i)
announcement of results of allocations in the Hong Kong Public Offering; (ii) dispatch of Share certificates and
refund cheques/ White Form e-Refund payment instructions; and (iii) dealings in the Shares on the Stock
Exchange may be postponed and an announcement may be made in such event.
The above expected timetable is a summary only. For details of the structure of the Global
Offering, including its conditions, and the procedures for applications for Hong Kong Offer
Shares, see the sections headed “Structure of the Global Offering” and “How to Apply for Hong
Kong Offer Shares” respectively.
If the Global Offering does not become unconditional or is terminated in accordance with
its terms, the Global Offering will not proceed. In such a case, the Company will make an
announcement as soon as practicable thereafter.
EXPECTED TIMETABLE (1)
–i v–


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IMPORTANT NOTICE TO PROSPECTIVE INVESTORS
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 securities 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 invitation 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 and no action has been
taken to permit the distribution of this prospectus in any jurisdiction other than Hong Kong.
The distribution of this prospectus 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 authorization by the relevant securities regulatory authorities
or an exemption therefrom.
You should rely only on the information contained in this prospectus and the Application
Forms to make your investment decision. The Hong Kong Public Offering is made solely on
the basis of the information contained and the representations made in this prospectus. We
have not authorized anyone to provide you with information that is different from what is
contained in this prospectus. Any information or representation not contained nor made in
this prospectus and the Application Forms must not be relied on by you as having been
authorized by us, the Sole Sponsor , the Sole Overall Coordinator , the Joint Global
Coordinators, the Joint Bookrunners, the Joint Lead Managers, any of the Underwriters, the
Capital Market Intermediaries, 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.
The information contained in our website at www.splegend.com does not form part of this
prospectus.
Page
EXPECTED TIMETABLE ............................................... i
CONTENTS ........................................................... v
SUMMARY ........................................................... 1
DEFINITIONS ........................................................ 2 1
GLOSSARY .......................................................... 4 4
FORW ARD-LOOKING STATEMENTS ..................................... 4 7
RISK FACTORS ....................................................... 4 9
INFORMATION ABOUT THIS PROSPECTUS AND THE GLOBAL OFFERING .. 9 8
DIRECTORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING ........ 1 0 3
CORPORATE INFORMATION ........................................... 1 1 4
CONTENTS
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Page
REGULATORY OVERVIEW ............................................ 1 1 6
INDUSTRY OVERVIEW ................................................ 1 3 8
HISTORY, DEVELOPMENT AND REORGANIZATION ...................... 1 5 9
BUSINESS ............................................................ 1 8 5
DISTRIBUTION ARRANGEMENT WITH KUNSHAN TINGSHE .............. 2 9 0
COOPERATION WITH CELEBRITIES ................................... 3 2 6
RELATIONSHIP WITH OUR CONTROLLING SHAREHOLDERS ............. 3 4 9
DIRECTORS AND SENIOR MANAGEMENT ............................... 3 5 5
SUBSTANTIAL SHAREHOLDERS ........................................ 3 7 2
SHARE CAPITAL ..................................................... 3 7 4
FINANCIAL INFORMATION ............................................ 3 7 7
FUTURE PLANS AND USE OF PROCEEDS ................................ 4 8 9
CORNERSTONE INVESTORS ........................................... 4 9 8
UNDERWRITING ...................................................... 5 0 3
STRUCTURE OF THE GLOBAL OFFERING ............................... 5 1 7
HOW TO APPLY FOR HONG KONG OFFER SHARES ...................... 5 2 8
APPENDIX I — ACCOUNTANT’S REPORT ........................... I - 1
APPENDIX II — UNAUDITED PRO FORMA FINANCIAL INFORMATION . II-1
APPENDIX III — PROPERTY V ALUATION REPORT ................... III-1
APPENDIX IV — SUMMARY OF THE CONSTITUTION OF OUR COMPANY
AND THE CAYMAN COMPANIES ACT .............. I V - 1
APPENDIX V — STATUTORY AND GENERAL INFORMATION .......... V - 1
APPENDIX VI — DOCUMENTS DELIVERED TO THE REGISTRAR OF
COMPANIES AND A V AILABLE ON DISPLAY ......... VI-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 in investing
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” in this prospectus.
OVERVIEW
Our business operations consist of two segments, namely new retail segment and IP
creation and operation segment. Each segment can be a source of revenue of its own, while our
IP creation and operation segment can also create a synergy effect by acting as one of our
marketing tools to promote our new retail products.
The diagram below illustrates our business model:
New Retail IP Creation and Operation
IP content creation and
management
– Media content creation
– Event planning
– Celebrity IP management
related products
IP Licensing and sales of
End
consumers
/g3Promotional platform
/g3Navigating traffic
/g3Marketing materials
Brand and product
endorsement
Empowerment
– Douyin stores,
 Tmall stores,
 Kuaishou stores
Product development
and supply
Distribution Channels
Distribution network
– Star Plus 4U APP
E-commerce channels
We (i) develop and introduce suitable products to the market; (ii) establish sales channels,
including extensive distributorship network and e-commerce channels; (iii) cooperate with
celebrities for IP content creation; and (iv) utilize our celebrity IPs and associate IP contents for
the marketing and promotion of our products, along with other sales and marketing strategies
and activities.
Our new retail business
In respect of our new retail business, we focus on development and sale of low-carb health
management products, as well as skincare products.
During the Track Record Period, a majority of our revenue for new retail business derived
from sales of MODONG coffee, of which we started the nationwide distribution thereof in April
2019. MODONG coffee is a bulletproof coffee, which is a type of beverage containing high-fat
specially designed for low-carbohydrate diet plan to meet the plan’s fat/energy ratio. In 2022,
we were the largest company in China’s bulletproof drink market in terms of GMV , with a
market share of 24.9%.
Leveraging our success with MODONG coffee, we launched a number of other low-carb
drinks and food under the MODONG sub-brand that further exemplify our strategy to offer our
end consumers a portfolio of complementary low-carb health management products. In 2022, we
launched our matcha powder under a new product line, Ai Chi Xian Mo Ren (ฌΦᒻᅙɛ ),
featuring healthy and additive-free food products. In addition, we launched multiple product
SUMMARY
–1–


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sub-brands in the skincare market, including Dr .mg and Chaxiaojie . The products under the
Dr .mg sub-brand are designed to address various skin problems caused by skin aging which
target aging population, whereas the products under Chaxiaojie sub-brand target younger
generation. We will continue to develop and launch new products for our new retail business
from time to time.
We primarily distribute our products through (i) a network of distributors and
sub-distributors; and (ii) other e-commerce channels such as online stores operated on social
media platforms. We conduct E-commerce Livestreaming through our Douyin account from time
to time to promote the sale of our products. During the Track Record Period, we generated a
substantial portion of revenue from sale of our products under the new retail segment through a
network of distributors and sub-distributors. We consider our sales of products as a new retail
business, as we primarily adopt a community-based social e-commerce model, where our
distributors and the sub-distributors procured by them mainly promote and sell our products
through a combination of online commerce elements (through social e-commerce channels, such
as WeChat, Douyin and XiaoHongShu ) and offline channels (through offline meetings among our
distributors, sub-distributors and end consumers, such as annual events, conferences and/or
face-to-face sales at distributors promotion meetings). Our distributors and the sub-distributors
are also consumers of our products. Some of them have further developed into KOCs
(1) and
promote our products in their respective private domain traffic or PDT (2) through word-of-mouth
by invoking their personal experience and exerting their personal influence over their followers,
through which we can effectively extend the consumer reach of our products. Apart from our use
of KOCs, we also collaborate with KOLs
(3) to promote our products through sharing and posts
and/or sell our products through E-commerce Livestreaming sessions on online platforms.
Our IP creation and operation business
Our IP creation and operation business comprises:
(i) IP content creation and management business, including provision of (a) media content
creation; (b) event planning; and (c) celebrity IP management services; and
(ii) IP licensing and sales of related products.
In media content creation, we mainly provide organizing, planning and other project
management services to the production of programs. For example, we are the lead creator and
own the IPs of J-Style Trip season one, which is a 12-episode reality show starring Mr. Jay Chou
aired on Zhejiang Satellite TV as well as Netflix and MGTV (؈TV) in March 2020. J-Style
Trip season one was well-received by TV audience. The average viewership rating of all 12
episodes ranked first among all TV programs broadcasted during the same timeslot from March
to June 2020, according to the publicly available rating data. We were also involved in the
planning and creation of a popular music talk show, namely You Can Run But You Can’ t Hide
(ᆀʘ ) that was centered around Mr. Harlem Yu and a variety show, that was centered
around Mr. Liu Keng-hung.
In event planning, we generally act as an event planning service provider, an investor
and/or sub-contractor for large scale music concerts and other events. For example, we initiated
and acted as a planning service provider to Zhanjiang Superstar Concert (စਨึ )
in August 2019, and initiated and acted as a planning service provider and an investor to Ningbo
Superstar Performance Mega Night (Бਗ൴ॴց ) in January 2020. Through our
experience and management’s networking in the Chinese entertainment industry, we are able to
gather different units to organize the creation of media content, as well as music concerts and
other events.
In celebrity IP management, we collaborate with celebrities and/or KOLs where we are
responsible for the development of their respective IPs. We are involved in the planning and
development of the public persona of celebrities and/or KOLs in, among others, Livestreaming
(1) KOCs refer to key opinion consumers, which are persons who share their personal experience with our products
through their own PDT.
(2) PDT refers to private domain traffic (ඎ ), which are traffic that can be controlled and utilized by the
content publisher vis-à-vis public domain traffic.
(3) KOLs refer to key opinion leaders, which are popular persons followed by the public audience.
SUMMARY
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sessions, online short videos and other online and offline performances on social media
platforms, in order to attract audiences and/or followers with similar interests or concerns.
For celebrity IP licensing and sales of related products, we create bespoke brands and
associated IP contents based on our proprietary unique celebrity IPs, including a nijigen-style
personality, namely ChouMate . Nijigen-style personality is two dimensional anime, manga or
real-life person inspired fictional character. We may license our celebrity IPs to our customers
and receive licensing fees and create and sell products related to the celebrity IPs.
Synergy between our new retail business and our IP creation and operation business
Empowerment of our new retail business by our unique celebrity IPs is achieved through
creating promotional effect at multiple complementary venues and platforms rather than a simple
brand name association, which we believe lends credibility and marketability to our products,
enhances the brand recognition of our products, and maintains the trust and confidence of our
distributors and customers. In 2020, we promoted MODONG coffee in J-Style Trip season one
by means of advertisement, spot cut and discrete product placement. We also leverage on the
popularity of Mr. Liu Keng-hung and Ms. Vivi Wang to empower the sale of our products. For
example, we promoted healthy eating and lifestyle through Livestreaming sessions of Mr. Liu
Keng-hung and Ms. Vivi Wang, and promoted our products, such as Matcha powder and
MODONG light brewed coffee, during E-commerce Livestreaming sessions conducted via our
Douyin account under the name of “㺘㺘દ ” since July 2022.
Nevertheless, it is our strategy that Mr. Liu Keng-hung would not participate in any
E-commerce Livestreaming as we consider that it would create the best value for him to devote
his time in developing his popularity through Livestreaming, brand endorsement and
participation in other IP programs. As advised by our PRC Legal Advisors, based on the
confirmation of our Company and according to the public information search, no search results
showed that, as of the Latest Practicable Date, Mr. Liu Keng-hung and Ms. Vivi Wang are
subject to any restrictions imposed by the competent governmental authorities under the relevant
laws and regulations in the PRC to conduct either Livestreaming or E-commerce Livestreaming.
As part of our celebrity IP management, we would advise on the activities that would create the
best value for the celebrities we cooperate with, including whether or not to participate in
E-commerce Livestreaming.
In addition to ChouMate , we started to use nijigen-style personalities of Mr. Liu Keng-hung
and Ms. Vivi Wang, namely “ Coach Liu (ᄎ઺ᇖ)” and “ Vivi” in the promotion of our products.
The judicious use of celebrity IP and our Group’s sales channels, including its distribution
network, enabled us to achieve overall financial growth during the Track Record Period.
We plan to continue to create more media contents and concerts, which may empower our
new retail business through creating promotional effect to promote our products. With our
capability and experience in using the strengths of these different business components in an
effective and efficient manner to create synergy effect, we believe we would be able to sustain
our business and achieve growth in our business going forward.
The use of Livestreaming and E-commerce Livestreaming in our business
In view of their growing popularity in recent years, we have made use of Livestreaming
and E-commerce Livestreaming in our business operation. During the Track Record Period, we
mainly provide celebrity IP management services in respect of the performances of Mr. Liu
Keng-hung and Ms. Vivi Wang. We were involved in originating and preparing the contents and
presentation of the Livestreaming sessions and generated revenue from brand owners who
engaged us to promote their products during the Livestreaming sessions of Mr. Liu Keng-hung.
We also generate revenue from sharing of commission for the sale of products of third party
brand owners by different celebrities and KOLs during the E-commerce Livestreaming sessions
conducted on our Douyin account. In addition, our products under the new retail business would
be promoted and sold through E-commerce Livestreaming sessions on our Douyin account.
Please refer to the section headed “Business – Our business – IP creation and operation – Media
content creation – Celebrity IP management – The use of Livestreaming and E-commerce
Livestreaming in our business”.
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OUR COOPERATION RELATIONSHIP WITH MR. JAY CHOU AND HIS
SIGNIFICANCE TO OUR BUSINESS OPERATION
We heavily rely on Mr. Jay Chou on both our new retail business and IP creation and
operation business. During the Track Record Period, our business grew as certain of our IPs
related to Mr. Jay Chou generated revenue on their own, and these IPs also created promotional
effect on our products under the new retail segment. Our products under the new retail segment
with promotional activities involving Mr. Jay Chou or his related IPs accounted for 83.0%,
72.8%, 64.8% and 45.2% of our total revenue respectively, while our IP creation and operation
that centered around Mr. Jay Chou or involved him as one of the performers accounted for 5.7%,
19.6%, 9.1% and 13.3% of our total revenue during the Track Record Period.
We have established long-term and mutually beneficial cooperation relationship with Mr.
Jay Chou, JVR Music (Mr. Jay Chou’s artiste management company and 40%-owned and
founded by Mr. Jay Chou) and Archstone (Mr. Jay Chou’s representative for business
negotiations in respect of one off or project based engagement). Our Founders, Controlling
Shareholders and/or non-executive Directors include Ms. Yeh (Mr. Jay Chou’s mother) and
directors and controlling shareholders of JVR Music or Archstone, namely, Mr. Yang and Mr.
Chen, respectively, and these parties, which are closely connected to Mr. Jay Chou, have
substantial influence over our overall development and business strategies.
We collaborated with Mr. Jay Chou through (i) being a planner and/or an investor to
large-scale concerts featuring Mr. Jay Chou, including one concert in each of 2019 and 2020,
where we procured Mr. Jay Chou to perform at such concerts through Archstone; (ii) being the
lead creator of J-Style Trip , where we procured Mr. Jay Chou to appear and obtained the right to
use Mr. Jay Chou’s publicity rights through Archstone; (iii) jointly developed and owned the
ChouMate trademarks with JVR Music; and (iv) entered into a 10-year IP Authorization
Agreement with JVR Music pursuant to which we have secured an exclusive right in relation to
projects related to ChouMate and a non-exclusive priority right to invest in projects related to
Mr. Jay Chou and his IPs globally.
Mr. Jay Chou’s relationship with each of JVR Music, Archstone, Mr. Yang, Ms. Yeh and
Mr. Chen will not have any restriction on our business activities. For details regarding analysis
of our relationship with Mr. Jay Chou, please refer to the section headed “Cooperation with
celebrities – Cooperation relationship with Mr. Jay Chou” in this prospectus.
Sustainability of our operation
Although we heavily rely on Mr. Jay Chou on both our new retail business and IP creation
and operation business, our Directors are of the view that the sustainability, profitability and
success of our Group’s business are attributable to our capability in our different business
components, including, among others, identify and introduce products that are well received by
our distributors and target consumers through establishing effective distribution network, and the
empowerment of our new retail business by our IP creation and operation business as well as
other various sales and marketing means. Apart from the importance of our different business
components, our Directors are of the view that the management’s experience and capability in
using the strengths of our Group’s different business components in an effective and efficient
manner to create synergy effect should be considered the fundamental contributive factor to the
success of our Group, and our business operation to be sustainable.
In 2021 and 2022, we recorded an increase in the proportion of revenue contribution from
(i) the sales of products without involving Mr. Jay Chou or his related IPs in the promotion
thereof; and (ii) IP creation and operation that was not centered around or significantly related to
Mr. Jay Chou or his related IPs. For 2019, 2020, 2021, and 2022, such revenue amounted to
RMB9.8 million, RMB34.5 million, RMB95.4 million and RMB142.7 million, respectively,
representing 11.3%, 7.6%, 26.1% and 41.5% of our total revenue in the corresponding year.
For details, please refer to the section headed “Cooperation with celebrities – Cooperation
relationship with Mr. Jay Chou – Mr. Jay Chou’s significance to our business operation –
Sustainability of our operation” in this prospectus.
SUMMARY
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PRODUCT DISTRIBUTION
During the Track Record Period and up to the Latest Practicable Date, we sold and
distributed our products under the new retail business through three channels, namely, (i) the
Distribution Agent Assisted Distribution Model; (ii) the general distribution model; and (iii)
other e-commerce channels.
Distribution Agent Assisted Distribution Model
During the Track Record Period, we generated a substantial portion of revenue from sale of
our products through a network of distributors and sub-distributors under the Distribution Agent
Assisted Distribution Model. We adopted a tiered and top-down distributor management model,
under which we engaged a Distribution Agent to assist us with the development and management
of our distributors, which in turn are responsible for monitoring their respective sub-distributors.
Our distributors would directly place sale orders with us and the sub-distributors procured by the
distributors would in turn place orders with them.
During the Track Record Period, we engaged Kunshan Tingshe (which is mainly operated
by Li Ting) as one of our Distribution Agents that are specifically responsible for the sale and
distribution of MODONG coffee and certain other products. Kunshan Tingshe provides services
to us and receives service fee from us in return. In addition, Kunshan Tingshe further engaged a
service provider, namely, Kunshan Jiameng for the provision of administrative and supportive
services in respect of the management of the distributors and sub-distributors of our products.
The diagram below illustrates the arrangement between our Group, Kunshan Tingshe and
Kunshan Jiameng under the Distribution Agent Assisted Distribution Model:
Our Group
Distributors
End Consumers
Kunshan Tingshe
Kunshan Jiameng
Main Distribution
Agreement
Distribution
Agreements
Service
Agreement
Sale (1)
Management (2)
Direct contractual relationship
Provision of services (3)
Sub-
distributors
Sub-distribution
Agreements
Notes:
(1) Distributors place sale orders directly with us and onward sell the products to the sub-distributors procured by
them and/or the end consumers.
(2) Kunshan Tingshe, as our Distribution Agent, is responsible for the development and management of the
distributors and sub-distributors, including but not limited to, providing trainings on sales and marketing
techniques to, and monitoring the performance of, the distributors and sub-distributors.
(3) Since June 2020, Kunshan Tingshe has engaged Kunshan Jiameng to provide assistance in the management of the
distribution network. Services provided by Kunshan Jiameng mainly include, inter alias, (i) providing trainings
and assistance to the distributors regarding the business registration under the applicable laws and regulations;
(ii) calculating the discounts and incentives entitled by the distributors; (iii) conducting marketing and
advertising activities for the development of the distribution network; and (iv) arrange settlement of certain
discounts and incentives payable to our distributors.
SUMMARY
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For further details of the arrangement between our Group, Kunshan Tingshe and Kunshan
Jiameng, please refer to the section headed “Distribution arrangement with Kunshan Tingshe” in
this prospectus.
Mutual reliance between our Group and Li Ting
Li Ting is the shareholder and key personnel of Kunshan Tingshe, and she has been heavily
involved with us in (i) establishing, developing and managing the distribution network for our
MODONG coffee and other Kunshan Tingshe Distributed Products, and (ii) conducting product
promotion for expansion of the distribution network since the launch of MODONG coffee.
We first commenced business relationship with Li Ting when our products (including LA
DEW facial masks) were first introduced to Li Ting and her team in January 2018.
Our Directors are of the view that there is mutual reliance between our Group and Li Ting
for the distribution of our MODONG coffee and other Kunshan Tingshe Distributed Products.
During the Track Record Period and as of the Latest Practicable Date, we mainly relied on Li
Ting and her team to manage our distributors and sub-distributors and develop our distribution
network. Conversely, Li Ting relies on us to continue her main distribution business. More
importantly, collaboration with us gives Li Ting the opportunity to leverage the empowerment of
our unique celebrity IPs to procure distributors for us and their respective sub-distributors. Such
empowerment enables Li Ting to quickly expand the distribution network, which in turn rewards
Li Ting and her team in the form of discount, incentives and fees as well as the Service Fees to
Li Ting. For further details, please refer to the section headed “Distribution arrangement with
Kunshan Tingshe – Mutual reliance between our Group and Li Ting” in this prospectus.
The general distribution model and other e-commerce channels
During the Track Record Period, we also sold our products through (i) the general
distribution model, where we sold our products to our distributors for their onward sale to the
end consumers without the engagement of a Distribution Agent; and (ii) other e-commerce
channels, where we directly sold our products to end consumers through various online
platforms, the Star Plus 4U App and Douyin stores (which would normally be linked to
E-commerce Livestreaming sessions of our celebrities and/or KOLs that promote our products).
For details, please refer to the section headed “Business – Distribution network” in this
prospectus.
Temporary suspension of bank accounts due to alleged pyramid selling
We received two pre-litigation asset preservation orders from the local Administration for
Market Regulation in two forth-tier cities in 2020 and 2021 due to unfounded allegation that we
were engaged in pyramid selling. Under the pre-litigation asset preservation orders, part of our
funds in certain bank accounts were temporarily frozen pending further investigations. After our
prompt actions to defend our legal rights and interest, the above two matters were resolved in
our favor and our funds were fully and unconditionally released subsequently. As advised by our
PRC Legal Advisors, the actions undertaken by these local authorities in the abovementioned
matters do not involve any imposition of administration penalties, and only serve the purpose of
maintaining the status quo for further investigations. In response to each of the above incidents,
we reported to Kunshan AMR, which carried out inspections on our operations and issued the
Inspection Opinions in 2020 and 2021, concluding that we were engaged in new retail activities
through a legitimate distribution model, thereby affirming the legitimacy of our social
e-commerce distribution model. Based on the interviews with Kunshan AMR, both incidents
were also reported to the SAMR in the manner followed by the PRC administrative authorities in
accordance with their normal practice. To the best of our Directors’ knowledge, no objection or
any opinion from the SAMR have been received by Kunshan AMR in relation to such reports.
Based on the Inspection Opinions and as advised by our PRC Legal Advisors, our social
e-commerce activities do not constitute pyramid selling under the PRC laws and regulations and
comply with all the relevant PRC laws and regulations in all material aspects. For details, please
refer to the section headed “Business – Distribution network – Distribution Agent Assisted
Distribution Model – the temporary suspension of bank accounts due to alleged pyramid selling”
in this prospectus.
SUMMARY
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OUR CUSTOMERS
Our customers mainly consist of our distributors, content producers, IP licensing partners
and online platform operators. Revenues generated from our top five customers accounted for
approximately 23.5%, 21.2%, 16.3% and 23.6% of our total revenues in each year during the
Track Record Period. For details, please refer to the section headed “Business – Customers” in
this Prospectus.
OUR SUPPLIERS
Our suppliers primarily include (i) third-party manufacturers in China that specialize in the
manufacturing of nutritional food or skincare products; and (ii) event or program planning and
management companies in China. In each year during the Track Record Period, purchases from
our five largest suppliers, accounted for approximately 75.1%, 73.3%, 58.3% and 47.9% of our
total purchases, respectively.
We co-developed the formula of our Group’s several products, including MODONG coffee,
with Hengmei Group and consider such formula to be a piece of sensitive and confidential
information. As we believe it is important to ensure such confidential formula not being leaked
and the quality of all our products being consistent, we consider engaging only one supplier for
the production of such products to be an appropriate safeguard. Having considered that we have
had a good relationship with Hengmei Group and we believe Hengmei Group is a sizable and
reputable health products manufacturer, Hengmei Group has been the only supplier of our
MODONG coffee since its nationwide launch in April 2019 and it was our largest supplier in
2020, 2021 and 2022. Purchases from Hengmei accounted for approximately 48.1%, 31.2% and
23.2% of our total purchases for the same periods, respectively. For more details, please refer to
the sections headed “Business – Suppliers” and “Risk factors – Risks relating to our business
and industry – Our business operations could be negatively impacted by our reliance on the sole
supplier to produce MODONG coffee” in this prospectus.
OUR COMPETITIVE STRENGTHS
We believe the following strengths contribute to our success:
 A new retail operator empowered by proprietary unique celebrity IPs that achieved
rapid and significant growth;
 Quickly established leading marketing position in China’s bulletproof drink market
resulted from extensive research and development knowledge of the bulletproof drink
market and consumer preference in low-carb diet;
 Rapid and organic growth of the distribution network with a focus on KOC
development and PDT marketing;
 Multi-facet IP creation and operation business that provides critical empowerment for
our new retail business through creating promotional effect to promote our products
and diversifies our revenue source; and
 Visionary management with decades of relevant industrial experience and continued
support from Mr. Jay Chou.
OUR BUSINESS STRATEGIES
Going forward, our goal is to solidify and replicate the success of our unique
IP-empowerment business model with additional core products and IP contents. We will continue
to offer our consumers complementary food and drink products for their low-carb lifestyle as
well as skincare products with high quality key ingredients. To promote existing and new
products, we will further leverage our unique celebrity IPs on multi-channel network, also
known as MCN. In particular, we intend to pursue the following strategies:
 Further diversify our product portfolio through product development;
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 Increase our brand exposure and product sales through online platforms;
 Continue to create high-quality and unique new IP contents to, among others,
empower our new retail business;
 Increase our sales and marketing efforts;
 Upgrade our IT infrastructure and increase investment in IT research and
development; and
 Grow our operational scale and work force in response to our strategic plans.
For details, please refer to the sections headed “Business – Our strategies and future plans”
and “Future plans and use of proceeds” in this prospectus.
RISK FACTORS
Our business and the Global Offering involve certain risks, which are set out in the section
headed “Risk factors” in this prospectus. You should read that section in its entirety carefully
before you decide to invest in our Shares. Some of the major risks that we face are relating to:
 We experienced fluctuation of our financial results during the Track Record Period
primarily attributable to the fluctuation in the sale of our MODONG coffee. We cannot
assure you that we will be able to maintain the growth rate that we have experienced
in the early stage of our development.
 We are subject to the key man risk of Mr. Jay Chou (whom has been and will continue
to have impact on us), and his persona had a significant impact on the events and
programs created by us, and created a promotion effect on the sales of our products
during the Track Record Period and such effect is expected to remain in the
foreseeable future. If we are not able to cooperate with Mr. Jay Chou, JVR Music or
any of his other affiliates, our business, financial position and results of operation may
be adversely affected.
 Our expansion plan and business operations in Mainland China may be affected as a
result of our Taiwan Shareholders’ interests in us as they may be required to obtain
approvals from the Taiwan Investment Commission for investments in Mainland
China, as well as the tensions between two sides of the strait.
 Our IP Authorization Agreement with JVR Music is subject to restrictions, in
particular, our priority rights thereunder are non-exclusive (other than ChouMate
Projects). If JVR Music decides not to co-operate with us on projects related to Mr.
Jay Chou, our business, financial position and results of operation may be adversely
affected.
 We rely on our cooperation with celebrities such as Mr. Jay Chou, Mr. Liu Keng-hung,
Ms. Vivi Wang and Mr. Harlem Yu etc. in our businesses, and any negative impact on
such celebrities’ reception by or exposure to our consumers may have material adverse
effects on our business, financial position and results of operations. Please refer to the
section headed “Business – Recent developments on our regulatory environment in
relation to celebrities and Livestreaming in the PRC – Impact on other celebrities and
KOLs whom we have been or will be cooperating with – Incident relating to products
promoted by Mr. Liu Keng-hung and Ms. Vivi Wang prior to our cooperation with
them”.
 We rely on our collaboration with KOCs and KOLs in the promotion of our products.
Our reputation may be affected by inaccurate or inappropriate comments or content
made or any negatively publicity of such KOCs and KOLs.
SUMMARY
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 During the Track Record Period and as of the Latest Practicable Date, we mainly
relied on Li Ting, as the key personnel of Kunshan Tingshe, for distribution of our
Kunshan Tingshe Distributed Products and may continue such arrangement in the
future.
 The relevant rules and regulations on social e-commerce in China are still under
development and subject to interpretation, and their implementation involves
uncertainty.
CONTROLLING SHAREHOLDERS
Immediately after the completion of the Global Offering (assuming the Over-allotment
Option is not exercised and without taking into account the Shares which may be issued upon
the exercise of the Options under the Share Option Schemes), our Founders, i.e. Ms. Ma, Mr.
Yang, Ms. Yeh and Mr. Chen, through respective holding companies, i.e. Harmony Culture,
Legend Key and Max One, will be able to exercise the voting rights attaching to approximately
58.1% of our issued share capital. Further, our Founders had been working together throughout
the Track Record Period. Our Founders confirmed in the Concert Party Agreement that they have
been collectively making key decisions regarding our business together throughout the Track
Record Period. Therefore, our Founders, together with Harmony Culture, Legend Key and Max
One shall be regarded as our Controlling Shareholders. For details, please refer to the section
headed “Relationship with our Controlling Shareholders – Our Controlling Shareholders” of this
prospectus.
Our Taiwan Shareholders’ compliance with the Approval of Investment Regulation
Pursuant to the Approval of Investment Regulations, investments in Mainland China by our
Taiwan Shareholders is subject to the approval of the Taiwan Investment Commission. Our
Taiwan Shareholders are also restricted by the Annual Investment Quota of US$5 million per
year for investments in Mainland China. As advised by our Taiwan Legal Advisors, the Taiwan
Investment Commission would likely take the position that any equity capital increase by our
Company into our subsidiary(ies) in Mainland China will be considered as additional investment
by our Taiwan Shareholders, and each of our Taiwan Shareholders will be required to obtain an
approval from the Taiwan Investment Commission for their equity capital increase. Based on our
Taiwan Legal Advisor’s interpretation of the case study provided in the Foreign and Mainland
China Investment Regulations and Case Sharing (ԷʱԮ ) published
by the Taiwan Investment Commission, equity capital increase by us into our Mainland China
subsidiary(ies) using proceeds from the Global Offering will not be counted towards the Original
Quota or Annual Investment Quota of each Taiwan Shareholder. Nonetheless, even if we are
unable to conduct equity capital increase into our Mainland China subsidiaries, we can make use
of funds such as intra-group loans or transactions (such as issuance of bonds) conducted by our
group companies at the subsidiary level which are not counted towards the Annual Investment
Quota of our Taiwan Shareholders. Our Taiwan Shareholders had filed their respective indirect
investment in our operating subsidiary in Mainland China with, and obtained the approval
thereof from the Taiwan Investment Commission, and as advised by our Taiwan Legal Advisors,
our Taiwan Shareholders had fulfilled all relevant legal requirements in respect of their
investment in our Group as required under Taiwan laws. For details, please refer to the sections
headed “Risk Factors – Our expansion plan and business operations in Mainland China may be
affected as a result of our Taiwan Shareholders’ interests in us as they are required to comply
with the Approval of Investment Regulations and obtain approvals from the Taiwan Investment
Commission for investments in Mainland China, as well as the tensions between two sides of the
strait” and “Regulatory Overview – Approval of Investment Regulations” of this prospectus.
PRE-IPO INVESTMENTS
We had six Pre-IPO Investors, namely Mr. Lai (our executive Director and chief financial
officer), Mr. Ho, Dr. Qian (our executive Director and chief executive officer), Ms. Zhang (the
spouse of Dr. Qian), Long Precise (an associate of Mr. Ho and Ms. Zhang) and Bradbury. Mr.
Lai, Mr. Ho, Dr. Qian and Ms. Zhang completed their Pre-IPO Investments by the acquisition of
our Shares or existing equity interest in Star Plus (Kunshan), whereas Long Precise and
Bradbury completed their Pre-IPO Investments by subscription of new Shares. As of the Latest
Practicable Date, Mr. Lai, Lake Ranch (a company wholly-owned by Mr. Ho), Kai Le (a
SUMMARY
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company wholly owned by Mr. Ho), Dr. Qian, Ms. Zhang and Bradbury were interested in
13.8%, 11.5%, 1.5%, 1.4%, 1.8% and 5.5% of our issued share capital, respectively. Immediately
following the completion of the Capitalization Issue and Global Offering (assuming the
Over-allotment Option is not exercised and without taking into account the Shares which may be
issued upon the exercise of Options under the Share Option Schemes), Mr. Lai, Lake Ranch, Kai
Le, Dr. Qian, Ms. Zhang and Bradbury will be interested in 12.5%, 4.4%, 1.3%, 1.2%, 1.7% and
5.0% of our issued share capital, respectively. For details, please refer to the section headed
“History, development and Reorganization – Pre-IPO Investments” of this prospectus. Each of
Mr. Lai, Dr. Qian, Ms. Zhang, Lake Ranch and Kai Le has voluntarily agreed that he/she/it will
not during the period of twelve months commencing on the date of the Listing, dispose any of
our Shares, whereas Bradbury agreed that it will not during the period of six months
commencing on the date of the Listing, dispose any of our Shares.
PRE-IPO STOCK INCENTIVE PLAN
On August 3, 2020, our Company adopted the Pre-IPO Stock Incentive Plan pursuant to
which 25,000,000 Shares (to be adjusted to 33,217,009 Shares upon the Capitalization Issue) are
issuable, representing 4.2% of the issued share capital of our Company immediately after the
completion of the Global Offering (assuming the Over-allotment Option is not exercised and
without taking into account the Shares which may be issued pursuant to the exercise of the
Options under the Share Option Schemes). As of the Latest Practicable Date, the Company
issued an aggregate of 25,000,000 Pre-IPO Share Options in consideration for the contribution
of the Pre-IPO Share Option Scheme Grantees to the initial establishment of our Group. No
further options will be granted under the Pre-IPO Stock Incentive Plan after our Listing. For
details, please refer to the section headed “Statutory and General Information – D. Share Option
Schemes – 1. Pre-IPO Stock Incentive Plan” in Appendix V to this Prospectus.
SUMMARY OF HISTORICAL FINANCIAL INFORMATION
The summary historical data of financial information set forth below have been derived
from, and should be read in conjunction with, our historical financial information, including the
accompanying notes, set forth in the Accountant’s Report attached as Appendix I to this
prospectus, as well as the information set forth in the section headed “Financial information” in
this prospectus.
Summary of consolidated statement of comprehensive income
Y ear ended December 31,
2019 2020 2021 2022
(in RMB thousands)
Revenue 86,585 456,944 365,345 344,157
Cost of revenue (29,972) (224,155) (137,963) (121,329)
Gross profit 56,613 232,789 227,382 222,828
Operating profit 32,000 113,806 73,594 92,035
Profit before income tax 31,840 113,841 64,652 93,138
Income tax expense (9,121) (38,210) (21,761) (28,240)
Profit for the year 22,719 75,631 42,891 64,898
Profit attributable to:
– Owners of the Company 23,559 78,064 43,649 60,389
– Non-controlling interests (840) (2,433) (758) 4,509
22,719 75,631 42,891 64,898
SUMMARY
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Non-HKFRS measures
In order to supplement our consolidated statement of comprehensive income, which is
presented in accordance with HKFRS, we also use adjusted net profit (non-HKFRS measure) as
an additional financial measure, which is not required by or presented in accordance with
HKFRS to evaluate our operating performance. We believe that these non-HKFRS measures help
identify underlying trends in our business and provide useful information to investors and others
in understanding and evaluating our results of operation. However, the use of adjusted net profit
(non-HKFRS measure) has material limitations as an analytical tool. When assessing our
operating and financial performance, you should not consider adjusted net profit (non-HKFRS
measure) in isolation from or as a substitute for any financial performance measure that is
calculated in accordance with HKFRS. Our presentation of adjusted net profit (non-HKFRS
measure) may not be comparable to similarly named measures presented by other companies.
We define adjusted net profit (non-HKFRS measure) as net profit for the period adjusted by
adding back (i) listing expenses; (ii) share-based compensation expenses; and (iii) interest
expense on financial instrument with redemption rights.
The following table sets forth our adjusted net profit (non-HKFRS measure) in each
respective year during the Track Record Period:
Y ears ended December 31,
2019 2020 2021 2022
(in RMB thousands)
Profit for the year 22,719 75,631 42,891 64,898
Add:
Listing expenses (1) – 2,893 15,535 10,059
Share-based compensation expenses (2) – 1,840 3,568 2,216
Interest expense on financial
instrument with redemption
rights
(3) – – 7,939 –
Adjusted net profit for the year
(non-HKFRS measures) 22,719 80,364 69,933 77,173
Notes:
(1) Our Listing expenses are arising from activities relating to the Listing.
(2) The share-based compensation expenses are non-cash in nature and were arising from the grant of share options
to Ms. Ma and certain employees of our Group.
(3) Our interest expense on financial instrument with redemption rights was arising from and relating to our Pre-IPO
Investments, which is non-cash in nature.
We recorded an overall increasing trend in our adjusted net profit (non-HKFRS measure)
during the four years ended December 31, 2022 while achieving exceptionally high adjusted net
profit in 2020. We recorded adjusted net profit (non-HKFRS measure) of RMB69.9 million and
RMB77.2 million in 2021 and 2022, respectively, that was higher than that in 2019, but lower
than the same in 2020, primarily due to the fact that our sales of MODONG coffee was
profoundly boosted by the airing of J-Style Trip season one in the first half of 2020.
SUMMARY
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Revenue
The table below sets forth a breakdown of our revenue by segment for the years indicated:
Y ear ended December 31,
2019 2020 2021 2022
RMB’000 % RMB’000 % RMB’000 % RMB’000 %
New retail
Health management products 71,927 83.0 340,787 74.5 275,261 75.4 216,036 62.8
Skincare products 3,450 4.0 20,422 4.5 21,274 5.8 16,272 4.7
Others 5,420 6.3 3,966 0.9 4,860 1.3 7,791 2.3
Subtotal 80,797 93.3 365,175 79.9 301,395 82.5 240,099 69.8
IP creation and operation
IP content creation and
management 4,761 5.5 86,567 19.0 54,399 14.9 95,026 27.6
IP licensing and sales of related
products 1,027 1.2 5,202 1.1 9,551 2.6 9,032 2.6
Subtotal 5,788 6.7 91,769 20.1 63,950 17.5 104,058 30.2
Total 86,585 100.0 456,944 100.0 365,345 100.0 344,157 100.0
During the Track Record Period, we generated revenue from (i) product sales in our new
retail business; and (ii) IP creation and operation business. For the years ended December 31,
2019, 2020, 2021 and 2022, our revenue was RMB86.6 million, RMB456.9 million, RMB365.3
million and RMB344.2 million, respectively. During the Track Record Period, a substantial
portion of our revenue was generated from our new retail business, which contributed revenue of
RMB80.8 million, RMB365.2 million, RMB301.4 million and RMB240.1 million, respectively,
representing 93.3%, 79.9%, 82.5% and 69.8% of our total revenue during the corresponding
periods. On the other hand, our IP creation and operation business generated revenue of RMB5.8
million, RMB91.8 million, RMB64.0 million and RMB104.1 million for the years ended
December 31, 2019, 2020, 2021 and 2022, respectively, representing 6.7%, 20.1%, 17.5% and
30.2% of our total revenue for the corresponding periods.
For details, please refer to the section headed “Financial information – Description of
major components of our results of operations – Revenue” in this prospectus.
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Gross profit and gross profit margin
The table below sets forth a breakdown of our gross profit and gross profit margin by
business segment for the years indicated:
Y ear ended December 31,
2019 2020 2021 2022
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 %
New retail 55,136 68.2 254,488 69.7 205,470 68.2 150,746 62.8
IP creation and operation 1,477 25.5 (21,699) (23.6) 21,912 34.3 72,082 69.3
Total 56,613 65.4 232,789 50.9 227,382 62.2 222,828 64.7
For details of the fluctuations in our gross profit and gross profit margin during the Track
Record Period, please refer to the section headed “Financial information – Description of major
components of our results of operations – Gross profit and gross profit margin” in this
prospectus.
Net profit
We experienced significant growth in operational scale as well as certain fluctuation in our
profitability during the Track Record Period. Our net profit increased significantly from
RMB22.7 million for 2019 to RMB75.6 million for 2020, mainly due to the significant increase
in our revenue generated from the sale of MODONG coffee which was empowered by the airing
of J-Style Trip season one in the first half of 2020. Our net profit decreased from RMB75.6
million for 2020 to RMB42.9 million for 2021 primarily attributable to the decrease in our
revenue from the sale of MODONG coffee due to (i) the cessation of material promotional effect
of J-Style Trip season one; and (ii) the fact that we were unable to launch any events and
programs that had a scale comparable to J-Style Trip season one as a result of the adverse
impact caused by the outbreak of COVID-19 pandemic. Our net profit increased from RMB42.9
million for 2021 to RMB64.9 million for 2022 mainly due to (i) the increase in our revenue
from IP creation and operation business which was attributable to our celebrity IP management
business which commenced since late 2021; (ii) the increase in our other income from
government grant; and (iii) decrease in our selling and marketing expenses as a result of the
restrictions imposed by local government for the prevention of the pandemic.
SUMMARY
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Summary of consolidated statement of financial position
The following table sets forth certain key items of our consolidated statement of financial
position as of the dates indicated.
As at December 31,
2019 2020 2021 2022
(in RMB thousands)
Non-current assets 9,334 67,010 116,940 138,666
Current assets 178,273 259,115 356,172 416,199
Total assets 187,607 326,125 473,112 554,865
Non-current liabilities 2,170 3,609 16,080 10,258
Current liabilities 159,770 187,496 291,838 310,496
Total liabilities 161,940 191,105 307,918 320,754
Net current assets 18,503 71,619 64,334 105,703
Net assets 25,667 135,020 165,194 234,111
Equity attributable to owners of the
Company 26,529 138,309 169,221 233,542
Non-controlling interests (862) (3,289) (4,027) 569
Total Equity 25,667 135,020 165,194 234,111
Net current assets
Our Group’s net current assets increased from RMB18.5 million as of December 31, 2019
to RMB71.6 million as of December 31, 2020, primarily due to (i) the increase in cash and cash
equivalent following the significant cash collected from the sales of MODONG coffee; (ii) a
significant increase in trade and other receivable, which was in line with the increase in sales
revenue in MODONG coffee in 2020; and (iii) increase in our inventory of raw materials for
skincare products under Chaxiaojie and Dr .mg sub-brands in preparation of launch; partially
offset by (1) the decrease of TV programs rights following completion of the airing of J-Style
Trip season one; and (2) the significant increase in contract liabilities.
The net current assets decreased to RMB64.3 million as of December 31, 2021, primarily
attributable to the recognition of financial instrument with redemption rights, partially offset by
the increase in our cash and cash equivalent as a result of the injection of capital from our
pre-IPO investment.
Our net current assets increased to RMB105.7 million as of December 31, 2022, mainly
attributable to (i) the increase in TV programs rights; and (ii) the increase in trade and other
receivables, partially offset by the increase in the book value of the financial instrument with
redemption right as a result of the devaluation of RMB.
Net assets
Our net assets increased from RMB25.7 million as of December 31, 2019 to RMB135.0
million as of December 31, 2020, which was primarily attributable to (i) the profit for 2020 of
RMB75.6 million; and (ii) issuance of ordinary shares to Long Precise of RMB33.0 million.
The Group’s net assets further increased to RMB165.2 million as of December 31, 2021,
which was mainly due to (i) the profit for 2021 of RMB42.9 million; (ii) issuance of ordinary
shares to Bradbury of RMB159.8 million; (iii) the equity-settled share-based payment
SUMMARY
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transactions of RMB3.6 million, partially offset by (1) the recognition of redemption liability of
RMB158.2 million; and (2) the dividend declared by our Company of RMB16.9 million.
Our net assets further increased to RMB234.1 million as of December 31, 2022, which was
primarily due to (i) the profit for the year of RMB64.9 million; (ii) currency translation
difference of RMB1.8 million; and (iii) the equity-settled share-based payment transactions of
RMB2.2 million.
Summary of consolidated statement of cash flows
Y ear ended December 31,
2019 2020 2021 2022
(in RMB thousands)
Net cash inflow/(outflow) from
operating activities 1,636 328,453 (9,285) 5,495
Net cash outflow from investing
activities (17,824) (197,722) (42,943) (24,863)
Net cash inflow/(outflow) from
financing activities 28,442 (39,030) 143,615 (11,387)
Cash and cash equivalents at end
of the year 29,298 120,962 211,873 182,633
We had net cash outflows from operating activities of RMB9.3 million for the year ended
December 31, 2021 mainly due to (i) the settlement of amounts due to related parties of
RMB11.3 million; (ii) the increase in prepayments to suppliers and services providers by
RMB18.4 million; (iii) cash used in the production of Yue Lai Yue Kuai Le (ᆀԸᆀҞᆀ ) and
J-Style Trip season two; and (iv) the income tax paid during 2021. For the year ended December
31, 2022, our operating cash position has improved and we recorded a net cash inflow of
RMB5.5 million from operating activities.
Key financial ratios
The following table sets forth certain of our key financial ratios as of the dates or for the
years indicated.
Y ear ended/as of December 31,
2019 2020 2021 2022
Gross profit margin 65.4% 50.9% 62.2% 64.7%
Net profit margin 26.2% 16.6% 11.7% 18.9%
Current ratio 1.1 times 1.4 times 1.2 times 1.3 times
Quick ratio 1.0 times 1.3 times 1.1 times 1.2 times
Return on assets 12.1% 23.2% 9.1% 11.7%
Return on equity 88.5% 56.0% 26.0% 27.7%
Gearing ratio 0.10 times 0.02 times 1.14 times 0.84 times
IMPACT OF THE OUTBREAK OF COVID-19 ON OUR BUSINESS
There had been an outbreak of the COVID-19 pandemic, which had quickly spread around
the globe since late 2019. During the year ended December 31, 2020, we recorded a gross loss
in our IP creation and operation business primarily because of the cancellation of a number of
sponsorships for J-Style Trip season one due to the uncertainty of the effect of the COVID-19
pandemic. The pandemic and the related control measures imposed by the local government also
affected the schedule of events and/or production of IP programs, which in turn affected our
revenue from the IP creation and operation business. Since late 2021, there had been another
wave of outbreak of the COVID-19 pandemic, which had subsequently developed into a
large-scale outbreak in the PRC during the first half of 2022 (i.e. the Resurgence). In response
to the Resurgence, local governments in PRC have imposed various restrictions on business and
SUMMARY
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social activities, including stringent travel restrictions, heightened quarantine measures and
mandated temporary suspension of business operations. The control measures have posed great
challenge to the PRC economy during the first half of 2022. The Resurgence also presented
challenges to our business and financial performances during the first half of 2022, as a
substantial part of our operations are located in the Yangtze River Delta area which was severely
affected by the Resurgence.
Despite the aforesaid, our Directors are of the view that the impact of the outbreak of
COVID-19 is temporary in nature and the pandemic is not expected to have a material adverse
impact on our Group in the long run. For details, please refer to the section headed “Business –
Impact of the outbreak of COVID-19 on our business” in this prospectus. We will continue to
monitor the development of the pandemic and actively take measures to mitigate potential
negative impacts on our business. Nevertheless, the COVID-19 pandemic remains an evolving
situation, and there remain significant uncertainties as to the future development of the
pandemic, which is beyond our control. If there are further waves of large-scale outbreaks of the
pandemic in the PRC, there may be further suspension of the services provided by our delivery
service providers. The pandemic may also continue to affect the overall economy and demand
for our products. In such circumstances, our operations and financial performance maybe
adversely affected. Please also see to the section headed “Risk factors – Our financial condition
and results of operations may be materially and adversely affected by the outbreak of COVID-19
pandemic” in this prospectus.
RECENT DEVELOPMENTS
Recent developments on our regulatory environment
Tightening of regulations on the PRC entertainment industry and online Livestreaming
activities
The PRC government authorities have taken initiatives to heighten regulation on the PRC
entertainment industry and online Livestreaming activities in 2021 (e.g. the promulgation of
Strengthening Regulations). After due analyzes, our Directors have grounds to believe that the
recent tightening of regulations on the PRC entertainment industry and Livestreaming activities
is unlikely to have a material adverse impact on our business operations and financial
performance in the foreseeable future. For details, please refer to the section headed “Business –
Recent developments on our regulatory environment in relation to celebrities and Livestreaming
in the PRC” in this prospectus.
Further, even if the popularity of Mr. Jay Chou declines as a result of various factors,
including but not limited to the tightening of the regulatory environment of the PRC
entertainment industry, which leads to a decline in the empowerment effect achieved by Mr. Jay
Chou’s IPs on our new retail business, we believe such decline will not have a material adverse
impact on the sustainability of our operations, business and financial performance, as evidenced
by our performance in 2020 to 2022 when we used less Mr. Jay Chou-related IPs since the
second half of 2020 and throughout 2021 and 2022.
Cybersecurity
During the Track Record Period, we collected information of our distributors,
sub-distributors and end consumers through the Ordering System and QR Code System only for
the purposes of facilitating the ordering and delivery of our products and keeping records of the
sale of our products for our business operations. As of the Latest Practicable Date, we had not
been involved in any service, product or data processing activities that might give rise to
national security risks based on the factors set out in Article 10 of the Cybersecurity Review
Measures (details of which are set out under the section headed “Regulatory overview –
Regulations relating to cybersecurity review” in this prospectus), did not process personal
information of over one million users and had not been inquired, investigated, warned or
penalized by any PRC authorities in this respect. Based on the foregoing, our PRC Legal
Advisors are of the view that, as of the Latest Practicable Date, the likelihood that our business
operations and/or the proposed initial public offering giving rise to national security risks which
subject us to cybersecurity review under the Cybersecurity Review Measures and the Draft
SUMMARY
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Regulations on Cyber Data Security (details of which are set out under the section headed
“Regulatory overview – Regulations relating to cybersecurity review” in this prospectus) is
relatively low. As such, our Directors are of the view that the Cybersecurity Review Measures
and the Draft Regulations on Cyber Data Security, if implemented in the current form, would not
have a material adverse impact on our business operations or the proposed initial public
offering. For further details, please refer to the section headed “Business – Data privacy and
cybersecurity” in this prospectus.
Overseas listing measures
On February 17, 2023, with the approval of the State Council, the CSRC released the Trial
Measures and five supporting guidelines, which came into effect on March 31, 2023. The Trial
Measures stipulate that, among other things, PRC domestic companies that seek to offer and list
securities in overseas markets, either in direct or indirect means, are required to fulfill the filing
procedure with the CSRC and report relevant information. For details, please refer to the section
headed “Regulatory overview – Regulations on overseas listings” in this prospectus.
On February 17, 2023, the CSRC also issued the Notice on Administration for the Filing of
Overseas Offering and Listing by Domestic Companies (၍ଣτ
ٝthe “ Notice ”), which, among others, clarified that (i) a six-month transition period
(i.e. from March 31, 2023 to September 30, 2023) will be granted to domestic companies which,
prior to the effective date of the Trial Measures, have already obtained the approval from
overseas regulatory authorities or stock exchanges (which, according to the Notice, include the
passing of the hearing for applicants who apply for listing on the Stock Exchange), but have not
completed the indirect overseas listing; and (ii) if domestic companies fail to complete the
overseas listing within such six-month transition period, they shall file with the CSRC according
to the Overseas Listing Measures.
As we have passed the hearing for the Listing before March 31, 2023, as advised by our
PRC Legal Advisors, we do not need to perform the filing procedures for the Listing under the
Trial Measures, provided that we complete the Listing before September 30, 2023 without going
through any rehearing procedures.
Recent developments on our business operations
Subsequent to December 31, 2022 and up to the Latest Practicable Date, we had the
following major developments on our business operations:
Mr. Jay Chou-related IP creation and operation business
 J-Style Trip season two : as at the Latest Practicable Date, such program was under
production, with 11 out of 12 episodes being filmed. It is expected that such program
will be aired in the second half of 2023. For further details, please refer to the section
headed “Business – Our business – IP creation and operation – Historical IPs and IPs
pipeline” in this prospectus.
 Other Mr. Jay Chou-related IPs : we entered into a collaboration framework
agreement with one of our top five customers during the Track Record Period, namely
Customer H Group, pursuant to which Customer H Group shall pay an agreed fee to
us for exclusively using Mr. Jay Chou-related IP(s) for its marketing activities
including, but not limited to, offline or online activities, in the PRC for a term of two
years. We shall enter into separate agreement(s) with Customer H Group for each
individual collaboration project to specify details thereof. We believe such
collaboration would not only enable us to generate revenue but also enable us to
enhance our brand awareness and publicity.
Non-Mr. Jay Chou-related IP creation and operation business
 A weekly music talk show : as at the Latest Practicable Date, such program was under
production with 10 out of 12 episodes being filmed, where Mr. Harlem Yu would
continue to be the lead host of such program and different guest being invited to
SUMMARY
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appear on each episode thereof. The program is expected to be aired in the second half
of 2023. For further details, please refer to the section headed “Business – Our
business – IP creation and operation – Historical IPs and IPs pipeline” in this
prospectus.
 Collaboration with other celebrities : we intend to collaborate with different
celebrities with respect to our IP creation and operation segment in order to further
diversify our portfolio of celebrities and IP portfolio. We entered into a memorandum
of understanding and a cooperation agreement with the respective artiste management
company of Eric Suen Yiu Wai and Monica Chan Fat Yung in January 2023 and May
2023, respectively.
As at the Latest Practicable Date, the relevant filing in respect of each of the above IP
programs had not been submitted by the TV channel(s) and/or online broadcasting platform(s).
However, our Directors are of the view that, and the Sole Sponsor concurs, that there is no
material impediment to the required filings. Based on our previous experience, the filing with
the relevant governmental department would normally take less than one month. For details,
please refer to the section headed “Business – Our business – IP creation and operation – Major
events and IP programs in the pipeline” in this prospectus.
Special dividend
On June 13, 2023, we declared a special dividend of HK$60.0 million to our then
Shareholders which is expected to be paid before the Listing. Please refer to the paragraph
headed “Dividends” in this section for further information.
As of December 31, 2022, we had cash and cash equivalents of approximately RMB182.6
million. Taking into account the financial resources available to us including existing
borrowings, cash and cash equivalents, cash generated from operations and the estimated net
proceeds from the Global Offering, our Directors are of the view that we have sufficient working
capital to meet our present requirements and for the next 12 months from the date of this
prospectus.
OFFERING STATISTICS
The statistics in the following table are based on the assumptions that: (i) the Global
Offering is completed and 126,640,000 Offer Shares are issued under the Global Offering; (ii)
the Over-allotment Option is not exercised and without taking into account any Shares which
may be issued upon exercise of any options which have been granted under the Share Option
Schemes; and (iii) 800,000,000 Shares are issued upon completion of the Global Offering.
Based on an Offer
Price of HK$4.25
per Offer Share
Market capitalization of Offer Shares HK$538 million
Market capitalization of our Shares upon completion of the Global
Offering (1) HK$3,400 million
Unaudited pro forma adjusted net tangible assets per Offer Share (2) HK$0.93
Notes:
(1) The calculation of market capitalization is based on 800,000,000 Shares expected to be in issue
immediately after completion of the Capitalization Issue and the Global Offering.
(2) The unaudited pro forma consolidated net tangible assets per Share is calculated based on 800,000,000
Shares expected to be in issue immediately after completion of the Capitalization Issue and the Global
Offering. Please refer to the section headed “Unaudited Pro Forma Financial Information” in Appendix II
to this prospectus for the bases and assumption.
(3) On June 13, 2023, we declared a special dividend of HK$60.0 million to our then Shareholders. Had the
special dividend of HK$60.0 million been declared on December 31, 2022, the unaudited pro forma
adjusted consolidated net tangible assets of our Group attributable to equity holders of our Company as at
SUMMARY
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December 31, 2022 would be approximately RMB599,865,000, while the unaudited pro forma adjusted
consolidated net tangible assets of our Group attributable to equity holders of our Company per Share as at
December 31, 2022 would be RMB0.75 (equivalent to HK$0.85).
LISTING EXPENSES
Our Listing expenses mainly include underwriting commissions, professional fees and other
fees incurred in connection with the Listing and the Global Offering. Based on the Offer Price of
HK$4.25 per Offer Share, the total Listing expenses (including underwriting commissions) are
estimated to be approximately RMB87.4 million, and represent approximately 18.4% of the
gross proceeds from the Global Offering. Among the total listing expenses, approximately
RMB78.4 million is expected to be borne by us and approximately RMB9.0 million is expected
to be borne by the Selling Shareholder. Listing expenses to be borne by us include (i)
underwriting commission of approximately RMB14.7 million, and (ii) non-underwriting related
expenses of approximately RMB63.7 million, which consist of (a) fees and expenses of the sole
sponsor, legal advisors and Reporting Accountant of approximately RMB40.9 million; and (b)
other fees and expenses of approximately RMB22.8 million. Up to December 31, 2022, we
incurred Listing expenses of approximately RMB36.8 million, among which approximately
RMB28.5 million was charged to the consolidated statement of comprehensive income, and
RMB8.3 million was recorded as prepayment in the consolidated statements of financial position
as of December 31, 2022 to be charged against equity upon successful Listing. We expect to
incur additional Listing related expenses of approximately RMB41.6 million (including
underwriting commissions of RMB14.7 million, assuming the Over-allotment Option is not
exercised), of which RMB30.4 million is expected to be charged to our consolidated statement
of comprehensive income and RMB11.2 million is expected to be charged against equity upon
the Listing. Our Directors do not expect such expenses to materially impact our results of
operations.
DIVIDENDS
Our Company declared a dividend of HK$20,000,000 for the year ended December 31,
2020, which was fully paid. On June 13, 2023, we further declared a special dividend of
HK$60.0 million to our then Shareholders which is expected to be paid before the Listing.
Public Shareholders after our Listing will not be entitled to such dividends. Our Directors are of
the view that the declaration of the special dividend was fair and reasonable and in the best
interest of our Company and the Shareholders as a whole. Other than the above, no dividend has
been proposed, paid or declared by our Company since its incorporation or during the Track
Record Period and up to the Latest Practicable Date.
We do not currently have a formal dividend policy or a fixed dividend payout ratio.
Investors should note that historical dividend distributions are not indicative of our future
dividend distribution policy.
The Board, with the approval of the Shareholders in general meeting, may direct any
dividend be satisfied wholly or in part by the distribution of specific assets of any kind. Any
declaration and payment as well as the amount of dividends will be subject to our constitutional
documents and the Cayman Companies Act. Our Shareholders in a general meeting may approve
any declaration of dividends, which must not exceed the amount recommended by our Board. No
dividends shall be declared or payable except out of our profits and reserves of our Company
lawfully available for distribution including share premium. No dividend shall carry interest
against our Company.
USE OF PROCEEDS
We estimate that we will receive net proceeds from the Global Offering of approximately
HK$245.2 million, assuming the Offer Price of HK$4.25 per Offer Share, after deducting the
underwriting commissions, and estimated expenses paid or payable by us in relation to the
Global Offering and assuming that the Over-allotment Option is not exercised.
SUMMARY
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In line with our strategies, we intend to apply the net proceeds from the Global Offering
for the following purposes and in the amounts set forth below:
 Approximately HK$58.4 million (equivalent to approximately RMB51.4 million),
representing 23.8% of the net proceeds from the Global Offering, will be used for the
diversification of product portfolio;
 Approximately HK$75.1 million (equivalent to approximately RMB66.1 million),
representing 30.6% of the net proceeds from the Global Offering, will be used to
increase our brand exposure and product sales through MCN, including cooperation
with selected top KOLs and development of proprietary Livestreaming accounts;
 Approximately HK$68.1 million (equivalent to approximately RMB60.0 million),
representing 27.8% of the net proceeds from the Global Offering, will be used for the
creation of unique celebrity IPs and associated IP contents, including media contents
and large-scale concerts;
 Approximately HK$30.2 million (equivalent to approximately RMB26.6 million),
representing 12.3% of the net proceeds from the Global Offering, will be used for
upgrading our IT infrastructure and increase investment in IT development; and
 Approximately HK$13.4 million (equivalent to approximately RMB11.8 million),
representing 5.5% of the net proceeds from the Global Offering, will be used for
working capital.
For details, please refer to the section headed “Future plans and use of proceeds” of this
prospectus.
NO MATERIAL ADVERSE CHANGE
After due and careful consideration, our Directors confirm that, up to the date of this
prospectus, there has not been any material adverse change in our financial or trading position or
prospects since December 31, 2022, and there is no event since December 31, 2022 which would
materially affect the information shown in the Accountant’s Report in Appendix I to this
prospectus.
SUMMARY
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In this prospectus, unless the context otherwise requires, the following terms shall have
the following meanings. Certain technical terms are explained in the section headed
“Glossary” in this prospectus.
“AFRC” Accounting and Financial Reporting Council
“Annual Investment Quota” the amount that individuals with Taiwan passport are
restricted to invest each year in the Mainland China by
the Approval of Investment Regulations
“Application Form(s)” GREEN Application Form(s), or where the context so
requires, any of them that is used in connection with the
Global Offering
“Approval of Investment
Regulations”
collectively, the Act Governing Relations between the
People of the Taiwan Area and the Mainland China Area
(ૢԷ), the Regulations
Governing the Approval of Investment or Technical
Cooperation in the Mainland China Area ( ίɽ௔ήਜ੽ԫҳ
), the Principles Governing Review of
Investment or Technical Cooperation in the Mainland China
Area () and
other relevant Taiwan laws and regulations
“Archstone” Archstone Co., Ltd., a BVI business company established
in the BVI with limited liability on February 24, 2011
which is wholly owned by Mr. Chen and our connected
person
“Articles” or “Articles of
Association”
the amended and restated articles of association of our
Company adopted by the Shareholders by a special
resolution passed on June 19, 2023 with effect from the
Listing Date, a summary of which is set out in the section
headed “Summary of the constitution of our Company and
the Cayman Companies Act” in Appendix IV to this
prospectus
“associate(s)” has the meaning ascribed thereto under the Listing Rules
DEFINITIONS
–2 1–


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“Beijing Master” Beijing Master Cultural Development Company Limited
(ʮ̡ ), a company established
in the PRC with limited liability on January 17, 2012,
which held 30% of the equity interest in Beijing Star Plus
Master as of the Latest Practicable Date, a connected
person of our Company at the subsidiary level
“Beijing Star Plus Action” Be ijing Star Plus Action E-Commerce Company Limited
(ʮ̡ ), a company established
in the PRC with limited liability on July 13, 2020 and our
wholly-owned subsidiary
“Beijing Star Plus Legend” Beijing Star Plus Legend Cultural Development Company
Limited (ʮ̡ ), a company
established in the PRC with limited liability on June 2,
2020 and our wholly-owned subsidiary
“Beijing Star Plus Master” Beijing Star Plus Master Cultural Communication
Company Limited (ʮ̡ ), a
company established in the PRC with limited liability on
November 6, 2017, a subsidiary which is owned as to 70%
by our Company
“Beijing Weideli” Beijing Weideli Commercial Management Company
Limited (ʮ̡ ), a company
established in the PRC with limited liability on November
16, 2017, through which Mr. Lai and Mr. Ho held 15%
and 15% of our beneficial interest prior to the
Reorganization, respectively
“Best Million” Best Million Holdings Limited, a BVI business company
established in the BVI with limited liability on March 1,
2011 and wholly owned by Ms. Ma
“Board” the board of directors of our Company
“Bradbury” Bradbury Private Investment III Inc., a BVI business
company established in the BVI with limited liability on
February 2, 2021, our Pre-IPO Investor and an
Independent Third Party
“business day” any day (other than a Saturday, Sunday or public holiday
in Hong Kong) on which banks in Hong Kong are
generally open for normal banking business
DEFINITIONS
–2 2–


--- page 33 ---
“BVI” the British Virgin Islands
“Capital Market Intermediaries” the capital market intermediaries as named in the section
headed “Directors and Parties Involved in the Global
Offering”
“Capitalization Issue” the issue of 178,445,376 Shares to be made upon
capitalization of certain sums standing to the credit of the
share premium account of our Company as referred to in
the paragraph headed “Statutory and general information –
A. Further information about our group – 3. Resolutions
of our Shareholders” in Appendix V to this prospectus
“Cayman Companies Act”
or “Companies Act”
the Companies Act (2023 Revision) of the Cayman
Islands, as amended, supplemented or otherwise modified
from time to time
“CCASS” the Central Clearing and Settlement System established
and operated by HKSCC
“CCASS Clearing Participant” a person admitted to participate in CCASS as a direct
clearing participant or a general clearing participant
“CCASS Custodian Participant” a person admitted to participate in CCASS as a custodian
participant
“CCASS Investor Participant” a person admitted to participate in CCASS as an investor
participant who may be an individual or joint individuals
or a corporation
“CCASS Participant” a CCASS Clearing Participant, a CCASS Custodian
Participant or a CCASS Investor Participant
“China”, “mainland China”, or
“PRC”
the People’s Republic of China, but for the purpose of this
prospectus and for geographical reference only, references
to “China”, “mainland China” and the “PRC” in this
prospectus do not apply to Hong Kong, Macau and
Taiwan, except where the context requires
“ChouMate ” ChouMate (մΝኪ), a nijigen-style personality of Mr. Jay
Chou, which was designed, developed and co-owned by
our Group
DEFINITIONS
–2 3–


--- page 34 ---
“ChouMate Projects” Projects based on ChouMate where we are involved in
planning, development and investment, as well as other
commercial projects based on ChouMate
“CIC” China Insights Industry Consultancy Limited, an
independent industry consultant
“Circular 698” Notice on Strengthening Administration of Enterprise
Income Tax Concerning Proceeds from Equity Transfers
by Non-Resident Enterprises (ڢ
 ), issued
by the SAT, which became effective retroactively as of
January 1, 2008 and abolished and void as of December 1,
2017
“Circular 7” Announcement on Several Issues Concerning Enterprise
Income Tax for Indirect Transfer of Assets by
Non-Resident Enterprises (͏Ά
ʮѓ ), which was
issued by the SAT on February 3, 2015
“Companies Ordinance” Companies Ordinance (Chapter 622 of the Laws of Hong
Kong), as amended, supplemented or otherwise modified
from time to time
“Companies (Winding Up and
Miscellaneous Provisions)
Ordinance”
Companies (Winding Up and Miscellaneous Provisions)
Ordinance (Chapter 32 of the Laws of Hong Kong), as
amended, supplemented or otherwise modified from time
to time
“Company” or “our Company” Star Plus Legend Holdings Limited (ʮ
̡) (formerly known as Star Plus (Group) Limited (݋
˖௴(ණྠ)ʮ̡ )), an exempted company established
in the Cayman Islands with limited liability on January 3,
2020
“Concert Party Agreement” the concert party agreement entered into amongst Ms. Ma,
Mr. Yang, Ms. Yeh and Mr. Chen on September 13, 2021
“connected person(s)” has the meaning ascribed to it under the Listing Rules
“connected transaction(s)” has the meaning ascribed to it under the Listing Rules
DEFINITIONS
–2 4–


--- page 35 ---
“Controlling Shareholder(s)” has the meaning ascribed to it under the Listing Rules and
unless the context otherwise requires, refers to Ms. Ma,
Mr. Yang, Ms. Yeh, Mr. Chen, Harmony Culture, Legend
Key and Max One. Please refer to the section headed
“Relationship with our Controlling Shareholders” in this
prospectus
“core connected person(s)” has the meaning ascribed to it under the Listing Rules
“COVID-19” coronavirus disease, an infectious disease caused by the
SARS-CoV-2 virus
“CSRC” China Securities Regulatory Commission ( ʕ਷ᗇՎ္ຖ
ึ )
“Cybersecurity Review Measures” the Cybersecurity Review Measures (፬
), which was jointly released by the Cyberspace
Administration of China (܃the
National Development and Reform Commission of the
PRC, the MIIT, and several other PRC governmental
authorities on December 28, 2021 and took effect on
February 15, 2022
“Deed of Indemnity” the deed of indemnity dated May 29, 2023 and entered
into by each of our Controlling Shareholders in favor of
our Company (for itself and as trustee for its subsidiaries),
further information of which is set out in the paragraph
headed “Statutory and general information – E. Other
information – 1. Tax and other indemnities” in Appendix
V to this prospectus
“Deed of Non-competition” the deed of non-competition dated May 29, 2023 and
entered into by each of our Controlling Shareholders in
favor of our Company (for itself and as trustee for its
subsidiaries), further information of which is set out in the
paragraph headed “Relationship with our Controlling
Shareholders – Non-competition undertakings – Deed of
Non-competition” in this prospectus
“Director(s)” the director(s) of our Company
DEFINITIONS
–2 5–


--- page 36 ---
“Distribution Agent” an entity that is identified as an a distribution agent of our
products under the Distribution Agent Assisted
Distribution Model who is regarded as a buyer of our
products from the legal and contractual perspective whilst
regarded as our agent from the accounting perspective,
details of which are set out in the section headed
“Business – Distribution network” in this prospectus
“Distribution Agent Assisted
Distribution Model”
the distribution model adopted by us for the distribution
of our MODONG coffee and other products, details of
which are set out in the section headed “Business –
Distribution network” in this prospectus
“Dr. Qian” Dr. Qian, Sam Zhongshan ( ፺ʕʆ), our executive
Director, chief executive officer and Pre-IPO Investor
“E-Commerce Law” E-Commerce Law of the PRC ( ʕശɛ͏΍ձ਷ཥɿਠਕ
)
“Extreme Conditions” the extreme conditions the government of Hong Kong may
announce in the event of, for example, serious disruption
of public transport services, extensive flooding, major
landslides, or large-scale power outage after super
typhoons according to the revised “Code of Practice in
Times of Typhoons and Rainstorms” issued by the Hong
Kong Labour Department
“Founder(s)” Ms. Ma, Mr. Yang, Ms. Yeh and Mr. Chen
“Global Offering” the Hong Kong Public Offering and the International
Offering
“Great Essence” Great Essence Holdings Limited (formerly known as Star
Plus Holding Ltd. and Star Plus Investment Co., Ltd.), an
exempted company established in Cayman Islands with
limited liability on February 15, 2016, which is
wholly-owned by Mr. Lai and our connected person
“GREEN Application Form(s)” the application form(s) to be completed by the White
Form eIPO Service Provider, Computershare Hong Kong
Investor Services Limited
DEFINITIONS
–2 6–


--- page 37 ---
“Group”, “our Group”,
“the Group”, “we”, “us”,
or “our”
our Company and our subsidiaries from time to time or,
where the context so requires, in respect of the period
prior to our Company became the holding company of our
present subsidiaries, such subsidiaries as if they were
subsidiaries of our Company at the relevant time
“Hangzhou Hengmei” Hangzhou Hengmei Food Science & Technology Co., Ltd.
(ʮ̡ ), a company established in
the PRC with limited liability on June 21, 2012, an
Independent Third Party
“Hangzhou Talent Planet” Hangzhou Talent Planet Culture Media Limited (ψ˂ረ
ʮ̡ ), a company established in the
PRC with limited liability on January 14, 2022, a
subsidiary which is owned as to 70% by our Company
“Harmony Culture” Harmony Culture Investment Limited, a BVI business
company established in the BVI with limited liability on
June 7, 2016, which is wholly owned by Ms. Ma and our
Controlling Shareholder
“Hengmei Group” collectively, Hangzhou Hengmei and its subsidiaries from
time to time
“HKSCC” Hong Kong Securities Clearing Company Limited, a
wholly-owned subsidiary of Hong Kong Exchanges and
Clearing Limited
“HKSCC Nominees” HKSCC Nominees Limited, a wholly-owned subsidiary of
HKSCC
“Hong Kong” or “HK” the Hong Kong Special Administrative Region of the
People’s Republic of China
“Hong Kong dollars” or
“HK dollars” or “HK$”
Hong Kong dollars, the lawful currency of Hong Kong
“Hong Kong Offer Shares” the 12,664,000 New Shares being initially offered by our
Company for subscription in the Hong Kong Public
Offering (subject to reallocation as described in the
section headed “Structure of the Global Offering – The
Hong Kong Public Offering” in this prospectus)
DEFINITIONS
–2 7–


--- page 38 ---
“Hong Kong Public Offering” the offer of the Hong Kong Offer Shares for subscription
by the public in Hong Kong at the Offer Price (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%) on the terms and subject to the
conditions described in this prospectus and the
Application Forms, as further described in the section
headed “Structure of the Global Offering – The Hong
Kong Public Offering” in this prospectus
“Hong Kong Share Registrar” Computershare Hong Kong Investor Services Limited
“Hong Kong Underwriters” the underwriters of the Hong Kong Public Offering as
listed in the section headed “Underwriting – Hong Kong
Underwriters” in this prospectus
“Hong Kong Underwriting
Agreement”
the underwriting agreement, dated June 28, 2023, relating
to the Hong Kong Public Offering, entered into by, among
others, our Company, our executive Directors, our
Controlling Shareholders, the Sole Sponsor, the Sole
Overall Coordinator and the Hong Kong Underwriters, as
further described in “Underwriting – Underwriting
arrangements and expenses – Hong Kong Public Offering”
in this prospectus
“Independent Third Party(ies)” any entity(ies) or person(s), as far as our Directors are
aware of, after having made all reasonable enquiries, not a
connected person(s) of our Company within the meaning
of the Listing Rules
“Individual Proprietor” industrial and commercial household (᜗ʈਠ˒ ), refers
to individuals conducting business within the scope
permitted by PRC law under its own trade name
“Inspection Opinions” the two inspection opinions issued by Kunshan AMR in
June 2020 and June 2021 in response to the temporary
suspensions of bank accounts as described in the section
headed “Business – Distribution network – The Temporary
Suspension of Bank Accounts due to alleged pyramid
selling” in this prospectus
DEFINITIONS
–2 8–


--- page 39 ---
“International Offer Shares” the 113,976,000 Shares being initially offered for
subscription under the International Offering, comprising
65,976,000 New Shares being initially offered by our
Company for subscription and 48,000,000 Sale Shares
offered by the Selling Shareholder for purchase together,
where relevant, with any additional Shares that may be
issued by our Company pursuant to any exercise of the
Over-allotment Option, subject to adjustment and
reallocation as described in the section headed “Structure
of the Global Offering – The International Offering” in
this prospectus
“International Offering” the offer of the International Offer Shares at the Offer
Price outside the United States in offshore transactions in
accordance with Regulation S or any other available
exemption from the registration requirement under the
U.S. Securities Act, as further described in the section
headed “Structure of the Global Offering – The
International Offering” in this prospectus
“International Underwriters” the underwriters of the International Offering
“International Underwriting
Agreement”
the international underwriting agreement relating to the
International Offering and expected to be entered into by,
among others, our Company, the Selling Shareholder, the
Sole Overall Coordinator and the International
Underwriters on or about July 5, 2023, as further
described in the section headed “Underwriting –
Underwriting arrangements and expenses – The
International Offering” in this prospectus
“IP Authorization Agreement” the IP authorization agreement entered into between the
Company, Star Plus Development and JVR Music on
August 30, 2021 as amended, supplemented or otherwise
modified from time to time
“IP Counsel” ELLALAN, our legal advisors as to Hong Kong
intellectual property laws
“Jesports (Beijing)” Jesports (Beijing) Cultural Development Company
Limited (ཥᘩ (̏ԯ)ʮ̡ ), a company
established in the PRC with limited liability on May 23,
2016, and a wholly-owned subsidiary of Jesports
(Kunshan)
DEFINITIONS
–2 9–


--- page 40 ---
“Jesports (Kunshan)” Jesports (Kunshan) Network Technology Company
Limited (ཥᘩ (ʆ)ʮ̡ ), a company
established in the PRC with limited liability on January
27, 2016 and owned by Shanghai Yige, Kunshan Renben
and Lhasa Juchuang by 46%, 27% and 27%, respectively
“Joint Bookrunners” the joint bookrunners as named in the section headed
“Directors and Parties Involved in the Global Offering”
“Joint Global Coordinators” the joint global coordinators as named in the section
headed “Directors and Parties Involved in the Global
Offering”
“Joint Lead Managers” the joint lead managers as named in the section headed
“Directors and Parties Involved in the Global Offering”
“Jointly-controlled Accounts” bank account(s) of Kunshan Tingshe which are designated
for the receipt of payments for the Kunshan Tingshe
Distributed Products from the distributors and jointly
controlled by Kunshan Tingshe and our Group pursuant to
the Jointly-controlled Accounts Agreements
“Jointly-controlled Accounts
Agreement(s)”
the agreement(s) entered into between our Group and
Kunshan Tingshe regarding the Jointly-controlled
Account(s)
“Jtea (Kunshan)” Jtea (Kunshan) Dining Company Limited (঩ (׺
ʆ)ʮ̡ ), a company established in the PRC
with limited liability on June 9, 2020, and a
wholly-owned subsidiary of Jesports (Kunshan)
“Jushi Creative” Jushi Creative (Kunshan) Asset Management Company
Limited (௴ (ʆ)ʮ̡ ), a company
established in the PRC with limited liability on December
17, 2015. To the knowledge of our Company, Jushi
Creative was owned by Beijing Movishow Technology
Co., Ltd (ʮ̡ ) and Kunshan Renben
as to 73% and 27%, respectively
“JVR Music” JVR Music International Ltd. (ʮ̡ ), a
company established in Taiwan with limited liability on
January 26, 2007, 45%, 40%, 10% and 5% of its equity
interest were held by Mr. Yang, Mr. Jay Chou, Mr. Fang
and Ms. Yeh as of the Latest Practicable Date and our
connected person
DEFINITIONS
–3 0–


--- page 41 ---
“J-Style Trip ” J-Style Trip (մ༷া), a reality show starring Mr. Jay
Chou, the season one of which was aired on Zhejiang
Satellite TV from March to June 2020
“Kai Le” Kai Le Investment Holdings I Ltd., an exempted company
established in the Cayman Islands with limited liability in
June 28, 2010 and wholly owned by Mr. Ho
“Kunshan AMR” Kunshan Municipal Administration for Market Regulation
(ʆ̹̹ఙ္ຖ၍ଣ҅ )
“Kunshan Jiabao” Kunshan Jiabao Netshang Culture Investment Co., Ltd.
(ʮ̡ ), a company established
in the PRC with limited liability on January 31, 2012 and
wholly owned by WS World (Kunshan) Digital Film
Culture Development Co. Ltd. (ޢ( ʆ)ᅰοཥᅂ
ʮ̡ ), an Independent Third Party
“Kunshan Jiameng”ʮ̡ (Kunshan Jiameng Management
Consultation Company Limited*), a company established
in the PRC and wholly-owned by Independent Third
Parties
“Kunshan Pilot Program” a program established by the government authorities in
Kunshan to encourage the development and operation of
social e-commerce industry in Kunshan Program
“Kunshan Renben” Kunshan Renben Cultural Consulting Agency Company
Limited (ʮ̡ ), a company
established in the PRC with limited liability on May 14,
2014, which was indirectly held by Lee, Chiu-yuan (߇
ᇝ), Ma, Shou-cheng ( ৵ྪϓ) and two Independent Third
Parties as to 93.1%, 1% and 5.9%, respectively. Ma,
Shou-cheng and Lee, Chiu-yuan is the brother and
sister-in-law of Ms. Ma, respectively
“Kunshan Star Plus Action” Kunshan Star Plus Action E-Commerce Company Limited
(ʮ̡ ), a company established
in the PRC with limited liability on March 17, 2016 and
our wholly-owned subsidiary
“Kunshan Talent Planet” Kunshan Talent Planet Culture Media Limited (ʆ˂ረ
ʮ̡ ), a company established in the
PRC with limited liability on May 26, 2022, a subsidiary
which is owned as to 70% by our Company
DEFINITIONS
–3 1–


--- page 42 ---
“Kunshan Tingshe” Kunshan Tingshe E-Commerce Company Limited (ʆ̶
ʮ̡ ), a company established in the
PRC with limited liability on June 18, 2019, in which we
held 80% equity interests prior to its disposal in May
2020
“Kunshan Tingshe Distributed
Products”
products of our Group which were distributed through
Kunshan Tingshe under the Distribution Agent Assisted
Distribution Model during the Track Record Period,
including MODONG coffee (being the major product
during the Track Record Period), Molitone prebiotic
gummy (being introduced by our Group in January 2020),
MODONG herb beverage and MODONG probiotics
lyophilized powder (together with MODONG herb
beverage, both being introduced by our Group in October
2021), as further explained in the section headed
“Distribution arrangement with Kunshan Tingshe” in this
prospectus
“Lake Ranch” Lake Ranch Limited, a BVI business company established
in the BVI with limited liability on May 2, 2018 and
wholly owned by Mr. Ho, and our Selling Shareholder
“Latest Practicable Date” June 20, 2023, being the latest practicable date for
ascertaining certain information in this prospectus before
its publication
“Legend Key” Legend Key International Limited, a company established
in Samoa with limited liability on July 25, 2018, the
shares of which were held by Mr. Yang and Ms. Yeh as to
50% and 50%, respectively and one of our Controlling
Shareholders
“Lhasa Juchuang” Lhasa Economic and Technology Development Zone
Juchuang Investment Company Limited (ᔜ຾᏶Ҧஔක
ʮ̡ ), a company established in the
PRC with limited liability on September 22, 2014. To the
knowledge of our Company, the equity interest of Lhasa
Juchuang was held by Wang Xiaoping ( ˮѽറ) and Wang
Guiqing (ڡin equal share; and each of Wang
Xiaoping ( ˮѽറ) and Wang Guiqing (ڡare
Independent Third Parties
“Listing” the listing of the Shares on the Main Board of the Stock
Exchange
DEFINITIONS
–3 2–


--- page 43 ---
“Listing Committee” the Listing Committee of the Stock Exchange
“Listing Date” the date on which our Shares are first listed and from
which dealings in our Shares first commence on the Main
Board of the Stock Exchange, expected to be on or around
July 13, 2023
“Listing Rules” the Rules Governing the Listing of Securities on the Stock
Exchange, as amended, supplemented or otherwise
modified from time to time
“Liu-related Nijigen-style
Personality(ies) Cooperation
Agreement”
the cooperation agreement dated July 8, 2022 and entered
into between our Group, Mr. Liu Keng-hung, Ms. Vivi
Wang and W&V regarding the creation and design of
nijigen-style personalities inspired by Mr. Liu Keng-hung
and Ms. Vivi Wang
“Liu’s Performance-related
Cooperation Agreements”
the cooperation agreements (as supplemented from time to
time) entered into between, among others, our Group and
Mr. Liu Keng-hung in 2021 and 2022 regarding the
entertainment and performance business of Mr. Liu
Keng-hung in the PRC
“Long Precise” Long Precise Limited, a BVI business company
established in the BVI with limited liability on January
16, 2018. To the knowledge of our Company, Long
Precise was owned as to 61.47% and 38.53% by Mr. Ho
and Ms. Zhang respectively, our Pre-IPO Investor. On
May 5, 2023, Long Precise transferred all the Shares it
owned to Kai Le and Ms. Zhang
“M&A Rules” Regulations on Merger with and Acquisition of Domestic
Enterprises by Foreign Investors (Իᒅ
) jointly issued by the MOFCOM, the
SASAC, the SAT, the CSRC, the SAIC and the SAFE on
August 8, 2006, effective as of September 8, 2006 and
amended on June 22, 2009
“Macau” the Macau Special Administrative Region of the PRC
“Main Board” the stock market (excluding the option market) operated
by the Stock Exchange which is independent from and
operated in parallel with GEM of the Stock Exchange
DEFINITIONS
–3 3–


--- page 44 ---
“Main Distribution Agreement” the distribution agreement entered into between our Group
and Kunshan Tingshe from time to time for the Kunshan
Tingshe Distributed Products
“Max One” Max One Ltd., a company established in the Republic of
Mauritius with limited liability on May 2, 2011 and
continued in Samoa which is wholly-owned by Mr. Chen
and one of our Controlling Shareholders
“MCN Company” a reputable MCN company in the PRC, also being
Customer G
“Memorandum” or
“Memorandum of Association”
the memorandum of association of our Company adopted
by the Shareholders by a special resolution passed on June
19, 2023, with effect from the Listing Date
“MIIT” Ministry of Industry and Information Technology of the
PRC (ʷ௅ )
“MOFCOM” Ministry of Commerce of the PRC ( ʕശɛ͏΍ձ਷ਠਕ
௅)
“Mr. Chen” Mr. Chen, Chung ( ௓ʕ), our Founder, one of our
Controlling Shareholders and a non-executive Director
“Mr. Fang” Mr. Fang, Wenshan ( ˙˖ʆ), a lyricist of Chinese pop
music, a music producer and our chief cultural officer
“Mr. Harlem Yu” Mr. Harlem Yu ( ੴᆋᅅ), a singer and songwriter in
Chinese pop music industry
“Mr. Ho” Mr. Ho, Chi Sing ( Оқϓ), our Pre-IPO Investor
“Mr. Jay Chou” Mr. Jay Chou (ࡐ؏a Taiwan singer, songwriter,
record producer and actor that has been well-known in
Chinese-speaking communities for over 20 years
“Mr. Lai” Mr. Lai, Kwok Fai Franki ( ፠਷ሾ), our substantial
shareholder, executive Director, chief financial officer and
Pre-IPO Investor
“Mr. Liu Keng-hung” Mr. Liu Keng-hung ( ᄎ䊿҃), a celebrity in the fitness and
body-building sector
DEFINITIONS
–3 4–


--- page 45 ---
“Mr. Yang” Mr. Yang, Chun-Jung (࿲), our Founder, one of our
Controlling Shareholders and a non-executive Director
“Ms. Ma” Ms. Ma, Hsin-Ting ( ৵ːణ), our Founder, one of our
Controlling Shareholders, and an executive Director
“Ms. Vivi Wang” Ms. Wang Peiyun ( ˮ᪮ʛ), Mr. Liu Keng-hung’s spouse
“Ms. Yeh” Ms. Yeh, Hui-Mei (ߕour Founder, Controlling
Shareholder and Mr. Jay Chou’s mother
“Ms. Zhang” Ms. Zhang, Jing ( ੵ᎑), the spouse of Dr. Qian and
Pre-IPO Investor
“New Shares” the new Shares being initially offered by our Company for
subscription under the Hong Kong Public Offering and the
International Offering
“NTD” New Taiwan dollar(s), the lawful currency of Taiwan
“Offer Price” HK$4.25 per Offer Share (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%), at which Hong Kong Offer Shares are to be
subscribed for pursuant to the Hong Kong Public Offering
and International Offer Shares are to be offered pursuant
to the International Offering
“Offer Share(s)” the Hong Kong Offer Shares and the International Offer
Shares together, where relevant, with any additional
Shares to be sold by our Company pursuant to the
exercise of the Over-allotment Option
“Option(s)” the share option(s) granted/to be granted pursuant to the
terms and conditions of the Share Option Schemes
“Option Price” in respect of any Option the price determined by the
Board and notified to an Option-holder
“Option-holder” a person holding an Option (and, where relevant, includes
his personal representatives)
DEFINITIONS
–3 5–


--- page 46 ---
“Ordering Management System” a mobile SaaS system that we operate by way of a
channel-faced WeChat mini-program which provides a
centralized system to manage the ordering and delivery of
our major products. The Ordering Management System
comprises two subsystems, namely the Ordering System
and the QR Code System, the details of which are set out
in the section headed “Business − Data privacy and
cybersecurity – Ordering Management System” in this
prospectus
“Ordering System” the ordering system, which enables our distributors and
the sub-distributors to place orders and records the
delivery of products from our warehouse to our
distributors or sub-distributors, the details of which are
set out in the section headed “Business – Data privacy and
cybersecurity – Ordering Management System” in this
prospectus
“Over-allotment Option” the option expected to be granted by our Company to the
International Underwriters, exercisable by the Sole
Overall Coordinator on behalf of the International
Underwriters for up to 30 days from the day following the
last day for the lodging of applications under the Hong
Kong Public Offering, to require our Company to allot
and issue up to 18,996,000 Shares (representing in
aggregate approximately 15% of the initial Offer Shares)
to the International Underwriters to cover over-allocations
in the International Offering, if any, details of which are
described in the section headed “Structure of the Global
Offering – The International Offering – Over-allotment
Option” in this prospectus
“Post-IPO Share Option Scheme” the post-IPO share option scheme approved and adopted
by our Company on June 19, 2023, the principal terms of
which are set out in the paragraph headed “Statutory and
general information – D. Share Option Schemes – 2.
Post-IPO Share Option Scheme” in Appendix V to this
prospectus
“PRC Legal Advisors” Han Kun Law Offices, our legal advisors on PRC laws
DEFINITIONS
–3 6–


--- page 47 ---
“Pre-IPO Investment(s)” certain rounds of transfers or financing carried out by our
Group or Shareholders before the Global Offering, details
of which are set out in the section headed “History,
development and Reorganization – Pre-IPO Investments”
in this prospectus
“Pre-IPO Investors” the investors of the Pre-IPO Investments
“Pre-IPO Share Option(s)” Option(s) granted under the Pre-IPO Stock Incentive Plan
“Pre-IPO Stock Incentive Plan” the pre-IPO stock incentive plan approved and adopted by
our Company on August 3, 2020, the principal terms of
which are set out in the paragraph headed “Statutory and
general information – D. Share Option Schemes – 1.
Pre-IPO Stock Incentive Plan” in Appendix V to this
prospectus
“QR Code System” the QR code system, which keeps track of the movement
of our products from our distributor or sub-distributors to
the end consumers, the details of which are set out in the
section headed “Business − Data privacy and
cybersecurity – Ordering Management System” in this
prospectus
“Regulation on the Prohibition of
Pyramid Selling”
Regulation on the Prohibition of Pyramid Selling ( ຫ˟
ෂቖૢԷ), which was issued by the State Council of
China on August 23, 2005, and took effect on November
1, 2005
“Regulation S” Regulation S under the U.S. Securities Act
“Reorganization” the reorganization arrangements undertaken by our Group
in preparation for the Listing, details of which are set out
in the section headed “History, development and
Reorganization – Reorganization” in this prospectus
“Reporting Accountant” PricewaterhouseCoopers, the reporting accountant of our
Company
“Resurgence” the resurgence of COVID-19 pandemic, including the
highly transmissible Omicron variant, in various districts
in the PRC since late 2021, which had subsequently
developed into a large-scale outbreak in the first half of
the 2022
DEFINITIONS
–3 7–


--- page 48 ---
“RMB” or “Renminbi” Renminbi, the lawful currency of China
“SAFE” the State Administration for Foreign Exchange of the PRC
(̮ි၍ଣ҅ )
“SAFE Circular No. 37” The Notice of the State Administration of Foreign
Exchange on the Administration of Foreign Exchange
Involved in Overseas Investment, financing and Return on
Investment Conducted by Residents in China via Special
Purpose Companies (͏ஷཀ
೻ҳ༟̮ි၍ଣ҅Ϟᗫਪᕚ
) promulgated by SAFE with effect from July 14,
2014
“SAIC” the State Administration of Industry and Commerce of the
PRC (၍ଣᐼ҅ ), which has
now been merged into the SAMR
“Sale Shares” the 48,000,000 Shares being offered by the Selling
Shareholder for purchase under the International Offering,
subject to adjustment and reallocation as described in the
section headed “Structure of the Global Offering – The
International Offering” in this prospectus
“SAMR” the State Administration for Market Regulation of the
PRC (̹ఙ္ຖ၍ଣᐼ҅ )
“SASAC” the State-owned Assets Supervision and Administration
Commission of the State Council of the PRC ( ʕശɛ͏΍
ึ )
“SAT” the State Administration of Taxation of the PRC ( ʕശɛ
೼ਕᐼ҅ )
“SCNPC” the Standing Committee of the National People’s Congress
(ึ )
“Secret Music (HK)” Secret Music (HK) Limited (ᆀ (ಥ)ʮ̡ ), a
company established in Hong Kong with limited liability
on July 4, 2018, a subsidiary which was owned by our
Company and Sapphire Prismatic Limited as to 50% and
50%, respectively
DEFINITIONS
–3 8–


--- page 49 ---
“Selected Distributor(s)” our distributor(s) who are selected by Kunshan Tingshe
and entitled to sales volume based fees (details of which
are discussed in the section headed “Distribution
arrangement with Kunshan Tingshe – Pricing arrangement
and discounts, incentives and fees in relation to the sales
of Kunshan Tingshe Distributed Products” in this
prospectus)
“Selling Shareholder” Lake Ranch, in the capacity of the seller of the Sale
Shares pursuant to the International Underwriting
Agreement
“SFC” Securities and Futures Commission of Hong Kong
“SFO” Securities and Futures Ordinance (Chapter 571 of the
Laws of Hong Kong), as amended, supplemented or
otherwise modified from time to time
“Shanghai Star Plus IP” Shanghai Star Plus IP Creative Cultural Company Limited
(ʮ̡ ), a company established
in the PRC with limited liability on November 29, 2021
and our wholly-owned subsidiary
“Shanghai Yige” Yige Corporation Management Consulting (Shanghai)
Company Limited (Άุ၍ଣፔ༔ (ɪऎ)ʮ̡ ), a
company established in the PRC with limited liability on
June 20, 2016 and our connected person by virtue of Mr.
Yang, Ms. Yeh and Mr. Fang indirectly holding 45%, 45%
and 10% of its equity interest, respectively
“Share(s)” ordinary share(s) in the share capital our Company with
nominal value US$0.00001 each
“Share Option Schemes” the Pre-IPO Stock Incentive Plan and the Post-IPO Share
Option Scheme
“Shareholder(s)” holder(s) of our Share(s)
“Sole Overall Coordinator” CMBC Securities Company Limited
“Sole Sponsor” CMBC International Capital Limited
“Stabilizing Manager” Bradbury Securities Limited
DEFINITIONS
–3 9–


--- page 50 ---
“Star Media” Star Media Global Ltd., a BVI business company
established in the BVI with limited liability on February
2, 2016 and wholly owned by Mr. Lai, our connected
person
“Star Plus Action (HK)” Star Plus Action (HK) Limited (Бਗ˖ʷ (ಥ)ࠢ
ʮ̡) (formerly known as Star Action Cultural (HK)
Limited), a company established in Hong Kong with
limited liability on December 5, 2019 and our
wholly-owned subsidiary
“Star Plus Aijia” Star Plus Aijia (Kunshan) E-Commerce Company
Limited (௴ฌྗ (ʆ)ʮ̡ ), a company
established in the PRC with limited liability on December
1, 2022 and our wholly-owned subsidiary
“Star Plus Aiyou” Star Plus Aiyou (Kunshan) E-Commerce Company
Limited (௴ฌᎴ (ʆ)ʮ̡ ), a company
established in the PRC with limited liability on September
29, 2022 and our wholly-owned subsidiary
“Star Plus Development” Star Plus Development Limited (ʮ̡ )
(formerly known as Jolly Concept Enterprises Limited ( ௴
ʮ̡ )), a BVI business company established in
the BVI with limited liability on December 21, 2007 and
our wholly-owned subsidiary
“Star Plus Entertainment” Star Plus Entertainment (HK) Limited (ᆀ (࠰
ಥ)ʮ̡ ) (formerly known as Talent Will
International Investment Limited (ʮ
̡)), a company established in Hong Kong with limited
liability on November 3, 2015 and our wholly-owned
subsidiary
“Star Plus Entertainment
(Hangzhou)”
Star Plus Entertainment (Hangzhou) Creative Culture
Company Limited (ʮ̡ ), a
company established in the PRC with limited liability on
March 11, 2022 and our wholly-owned subsidiary
“Star Plus Entertainment
(Kunshan)”
Star Plus Entertainment (Kunshan) Company Limited (݋
௴ᖵ(ʆ)ʮ̡ ), a company established in the
PRC with limited liability on June 29, 2021 and our
wholly-owned subsidiary
DEFINITIONS
–4 0–


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“Star Plus Excellence” Star Plus Excellence (Kunshan) E-Commerce Company
Limited (௴Ꮄ፯ (ʆ)ʮ̡ ), a company
established in the PRC with limited liability on June 7,
2021 and our wholly-owned subsidiary
“Star Plus IP” Star Plus IP (HK) Limited (˖௴౽ᛆ (ಥ)ʮ
̡), a company established in Hong Kong with limited
liability on August 2, 2018 and our wholly-owned
subsidiary
“Star Plus IP (Kunshan)” Star Plus IP (Kunshan) Creative Cultural Company
Limited (௴౽ᛆ (ʆ)ʮ̡ ), a company
established in the PRC with limited liability on June 30,
2021 and our wholly-owned subsidiary
“Star Plus J Movie” Star Plus J Movie (HK) Limited (௫ဧᅂุ (ಥ)ࠢ
ʮ̡) (formerly known as J Movie (HK) Limited (௫
ဧᅂุ(ಥ)ʮ̡ )), a company established in Hong
Kong with limited liability on July 26, 2018 and our
wholly-owned subsidiary
“Star Plus JM (Kunshan)” Star Plus JM (Kunshan) Cultural Development Company
Limited (ᅂ (ʆ)ʮ̡ ), a company
established in the PRC with limited liability on July 1,
2021 and our wholly-owned subsidiary
“Star Plus (Kunshan)” Star Plus Cultural (Kunshan) Investment Company
Limited (˖௴ (ʆ)ʮ̡ ), a company
established in the PRC with limited liability on November
4, 2015 and our wholly-owned subsidiary
“Star Plus Meishang” Star Plus Meishang (Kunshan) E-Commerce Company
Limited (֠ߕ( ʆ)ʮ̡ ), a company
established in the PRC with limited liability on December
1, 2022 and our wholly-owned subsidiary
“Star Plus Meiyou” Star Plus Meiyou (Kunshan) E-Commerce Company
Limited (Ꮄ (ʆ)ʮ̡ ), a company
established in the PRC with limited liability on December
1, 2022 and our wholly-owned subsidiary
“Star Plus Projects” Projects contemplated under the IP Authorization
Agreement
DEFINITIONS
–4 1–


--- page 52 ---
“Star Plus (Taiwan)” Star Plus Creative Cultural Company Limited (௴จ˖
ʮ̡ ), a company established in Taiwan with
limited liability on March 2, 2023 and our wholly-owned
subsidiary
“State Council” the PRC State Council ( ʕശɛ͏΍ձ਷਷ਕ৫ )
“Stock Borrowing Agreement” the stock borrowing agreement expected to be entered into
between Mr. Lai and the Stabilizing Manager or its
affiliates on or about July 5, 2023
“Stock Exchange” The Stock Exchange of Hong Kong Limited
“Strengthening Regulations” Regulations in Relation to Strengthening the Regulation of
Entertainment Industry (ආɓӉ̋੶˖ᖵືͦʿՉɛ
ٝwhich was released by the General Office
of the National Radio and Television Administration, on
September 2, 2021
“subsidiary(ies)” has the meaning ascribed to it in the Listing Rules
“Taiwan Investment Commission” the Investment Commission of the Ministry of Economic
Affairs of Taiwan
“Taiwan Legal Advisors” LCS & Partners, our legal advisors as to Taiwan laws
“Taiwan Shareholders” our Shareholders who are holders of Taiwan passports
“Takeovers Codes” The Codes on Takeovers and Mergers and Share
Buy-backs, as amended, supplemented or otherwise
modified from time to time
“Talent Planet” Talent Planet (HK) Limited (ଢ (ಥ)ʮ̡ ), a
company established in Hong Kong with limited liability
on November 26, 2021, our subsidiary which was owned
by Star Plus IP and W&V as to 70% and 30%,
respectively
“Track Record Period” the period comprising the four financial years ended
December 31, 2019, 2020, 2021 and 2022
DEFINITIONS
–4 2–


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“Trial Measures” Trial Administrative Measures of Overseas Securities
Offering and Listing by Domestic Companies ( ྤʫΆุྤ
جwhich was approved by
the State Council and released by the CSRC on February
17, 2023
“Underwriters” the Hong Kong Underwriters and the International
Underwriters
“Underwriting Agreements” the Hong Kong Underwriting Agreement and the
International Underwriting Agreement
“United States”, “U.S.” or “US” United States of America, its territories, its possessions
and all areas subject to its jurisdiction
“US dollars”, “U.S. dollars” or
“US$”
United States dollars, the lawful currency of the United
States
“U.S. Securities Act” United States Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder
“White Form eIPO ” the application of Hong Kong Offer Shares for issue in
the applicant’s own name by submitting applications
online through the designated website at
www.eipo.com.hk
“White Form eIPO Service
Provider”
the White Form eIPO service provider designated by our
Company, Computershare Hong Kong Investor Services
Limited
“W&V” W&V Limited, a company incorporated in the BVI with
limited liability, which is owned as to 95% by Ms. Meng
Ching-Jung (ᅅ࿲) and 5% by Ms. Vivi Wang, a
controlling shareholder of Talent Planet
“%” per cent.
Unless otherwise specified, all references to any shareholdings in our Company following
the completion of the Capitalization Issue and the Global Offering assume that the
Over-allotment Option is not exercised and no additional Shares are issued under the Pre-IPO
Stock Incentive Plan and Post-IPO Share Option Scheme.
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.
DEFINITIONS
–4 3–


--- page 54 ---
In this prospectus, unless the context otherwise requires, explanations and definitions of
certain terms used in this prospectus in connection with us and our business shall have the
meanings set out below. The terms and their meanings may not correspond to standard
industry meaning or usage of these terms.
“bulletproof coffee” a type of beverage containing high fat specially designed
for low-carbohydrate diet plan to meet the plan’s
fat/energy ratio
“CAGR” compound annual growth rate
“celebrity IP” refers to any IP that is based on, inspired by or relate to a
celebrity
“Douyin ” Douyin (ࠪa social media short-form video app for
creating and sharing short videos
“E-commerce Livestreaming” E-commerce Livestreaming (ᅧ੭஬ ) refers to
Livestreaming sessions involving sale of products, where
livestreamers would promote and/or demonstrate the
features of product(s) in order to motivate viewers of such
Livestreaming session to purchase such product(s) and
normally include a link on the screen which allow viewers
to access the online store and make purchase in real time
“GMV” gross merchandise volume, which is (i) the full value of
all purchases transacted and settled on the stores operated
by the Company; and (ii) the full value of all purchases
transacted and settled between other businesses and the
Company
“IP” refers to the properties that include intangible creations of
the human intellect, consisting of copyrights, patents,
trademarks, and etc., which could contain various IP types
in different nature, including literature, films and TVs,
games, cartoons and animation, music, live concerts, art
etc.
GLOSSARY
–4 4–


--- page 55 ---
“IP empowerment” a marketing strategy commonly adopted in the market by
(a) embedding a suitable IP, such as animation character,
celebrity IP and music, and related elements and concepts
to products and/or product package, or (b)
commercializing a suitable IP to promote a company’s
products, and enhance consumer’ stickiness, brand value
as well as brand awareness
“IT” information technology
“KOC” key opinion consumer
“KOL” key opinion leaders
“Kuaishou ” Kuaishou (Ҟ˓), a social media short-form video app for
creating and sharing short videos
“Livestreaming” Livestreaming (ᅧ) refers to the act of broadcasting
video content to an audience in real-time over the
internet, which can be done through various
online-platforms. Livestreaming has become increasingly
popular in recent years for entertainment, education, and
marketing purposes
“MCN” multi-channel network, an organization or platform that
works with video platforms to offer assistance to a
channel owner in areas such as product, programming,
funding, cross-promotion, partner management, digital
rights management, monetization/sales, and/or audience
development
“Netflix” an online platform providing subscription-based streaming
services
GLOSSARY
–4 5–


--- page 56 ---
“new retail business” a business model that: (i) combines online and offline
commerce through the digitization of the entire retail
value chain for the benefit of the merchants, the
distributors (if any), the consumers, and the company; (ii)
leverages digital payments data to create new efficiencies
and capabilities in logistics, marketing, and product
development; (iii) support merchants with new tools and
insights that cut costs and drive sales; and (iv) offer
customers a seamless and customized shopping experience
across the online and offline spaces (e.g. via interactions
between distributors and end consumers through
communications on social media and messaging apps or
participation of offline meetings, such as annual events,
conferences, meetings and/or face-to-face sales at
distributors’ retail shops), which is in line with industry
norm and commonly used
“nijigen-style personality” two-dimensional anime or manga inspired fictional
character or real-life person
“ODM” original design manufacturing or original design
manufacturer (as the case may be), a term used to refer to
arrangements under which products are designed and
manufactured for a customer that is a retailer and the said
products will be sold to consumers by the said customer
“OEM” original equipment manufacturing or original equipment
manufacturer (as the case may be), a term used to refer to
arrangements under which products are manufactured in
whole or in part in accordance with the customer’s
specifications and are marketed under the customer’s own
brand names
“PDT” private domain traffic (ඎ ), traffic that can be
freely controlled and utilized repeatedly by community
and content publishers vis-à-vis public domain traffic
“Tmall ” Tmall (˂፟), a website for business-to-consumer online
retail in China
“TMT” telecommunications, media and technology
“Zhejiang Satellite TV” Zhejiang Television ( एϪሊൖ ), a TV network under
Zhejiang Radio and Television Group ( एϪᄿᅧཥൖණ
ྠ), broadcast from Hangzhou, Zhejiang Province
GLOSSARY
–4 6–


--- page 57 ---
This prospectus contains certain forward-looking statements and information relating to our
Company and our subsidiaries that are based on the beliefs of our management as well as
assumptions made by and information currently available to our management. When used in this
prospectus, the words “aim”, “anticipate”, “believe”, “can”, “could”, “expect”, “going forward”,
“intend”, “may”, “might”, “ought to”, “plan”, “project”, “seek”, “should”, “will”, “would” and
the negative of these words and other similar expressions, as they relate to the Group or our
management, are intended to identify forward-looking statements. These forward-looking
statements are based on numerous assumptions regarding our present and future business
strategies and the environment in which we will operate in the future. Such statements reflect
the current views of our management with respect to future events, operations, liquidity and
capital resources, some of which may not materialize or may change. These statements are
subject to certain risks, uncertainties and assumptions, including the other risk factors as
described in this prospectus and other factors, some of which are beyond our control, which may
cause our actual results, performance or achievements, or industry results to be materially
different from any future results, performance or achievements expressed or implied by the
forward-looking statement. You are strongly cautioned that reliance on any forward-looking
statements involves known and unknown risks and uncertainties. The risks and uncertainties
facing our company which could affect the accuracy of forward-looking statements include, but
are not limited to, the following:
 our business prospects;
 future developments, trends and conditions in the industry and markets in which we
operate;
 our business strategies, ability and plans to achieve these strategies;
 general economic, political and business conditions in the markets in which we
operate;
 changes to the regulatory environment and general outlook in the industry and markets
in which we operate;
 the effects of the global financial markets and economic crisis;
 our ability to reduce costs;
 our dividend policy;
 the amount and nature of, and potential for, future development of our business;
 capital market developments;
 availability of bank loans and other forms of financing;
FORW ARD-LOOKING STATEMENTS
–4 7–


--- page 58 ---
 the actions and developments of our competitors;
 general economic, political and business conditions in the PRC; and
 change or volatility in interest rates, foreign exchange rates, equity prices, volumes,
operations, margins, risk management and overall market trends.
By their nature, certain disclosures relating to these and other risks are only estimates and
should one or more of these uncertainties or risks materialize or should underlying assumptions
prove to be incorrect, our financial condition and actual results of operations may be materially
and adversely affected and may vary significantly from those estimated, anticipated or projected,
as well as from historical results.
Subject to the requirements of applicable laws, rules and regulations, we do not have any
and 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 otherwise. As a result of
these and other risks, uncertainties and assumptions, the forward-looking events and
circumstances discussed in this prospectus might not occur in the way we expect or at all.
Accordingly, the forward-looking statements are not a guarantee of future performance and you
should not place undue reliance on any forward-looking information. Moreover, the inclusion of
forward-looking statements should not be regarded as representations by us that our plans and
objectives will be achieved or realized. All forward-looking statements in this prospectus are
qualified by reference to the cautionary statements in this section.
In this prospectus, statements of or references to our intentions or those of the Directors are
made as of the date of this prospectus. Any such information may change in light of future
developments.
FORW ARD-LOOKING STATEMENTS
–4 8–


--- page 59 ---
An investment in our Shares involves significant risks. You should carefully consider all
of the information in this prospectus, including the risks and uncertainties described below,
before making an investment in our Shares. The following is a description of what we
consider to be our material risks. Any of the following risks could have a material adverse
effect on our business, financial condition and results of operations. In any such case, the
market price of our Shares could significantly decline, and you may lose all or part of your
investment.
These factors are contingencies that may or may not occur , and we are not in a position
to express a view on the likelihood of any such contingency occurring. The information given
is as of the Latest Practicable Date unless otherwise stated, will not be updated after the date
hereof, and is subject to the cautionary statements in the section headed “Forward-looking
Statements” in this prospectus.
RISKS RELATING TO OUR BUSINESS AND INDUSTRY
We experienced fluctuation of our financial results during the Track Record Period
primarily attributable to the fluctuation in the sale of our MODONG coffee. We cannot
assure you that we will be able to maintain the growth rate that we have experienced in the
early stage of our development.
We experienced significant growth in operational scale and certain fluctuation in our
financial results during the Track Record Period. Our total revenue increased by 427.6% from
RMB86.6 million in 2019 to RMB456.9 million in 2020, decreased by 20.0% from RMB456.9
million in 2020 to RMB365.3 million in 2021, and decreased by 5.8% from RMB365.3 million
in 2021 to RMB344.2 million in 2022. In particular, the fluctuation in our revenue was primarily
resulted from the sale of our MODONG coffee launched in April 2019, the sales revenue of
which accounted for 83.0%, 72.8%, 62.3% and 43.8% of our total revenue in 2019, 2020, 2021,
and 2022, respectively. The decrease in our total revenue in 2021 to 2022 was mainly
attributable to the decrease in revenue from our new retail business due to the disruptions to our
business caused by the control measures imposed by the local government in respect of the
Resurgence of COVID-19 pandemic and the cessation of material promotional effect of J-Style
Trip season one since July 2020.
As a company with a relatively limited operating history, our historical growth may not be
indicative of our future performance. We cannot assure you that we will be able to grow at the
same rate as we did in 2019 and 2020, recover from the decline in revenue and profit
experienced for the year ended December 31, 2021, or recover from the decline in revenue
derived the new retail segment experienced for the year ended December 31, 2022. In particular,
in the event that the demand for MODONG coffee or its selling price declines, and we fail to
generate adequate revenue from other products or services that we provide, our business
prospects, financial condition and results of operations may be materially and adversely
impacted. Further, we may not be successful in executing our growth strategies, and even if we
achieve our strategic plan, we may not be able to sustain profitability. In future periods, our
RISK FACTORS
–4 9–


--- page 60 ---
revenue could decline further or grow more slowly than we expected. We may also incur
significant losses in the future for a number of reasons, some of which are beyond our control,
including decreasing consumer spending, increasing competitions, declining growth of our
overall market or industry, the emergence of alternative business models, changes in rules,
regulations, government policies or general economic conditions. It is difficult to evaluate our
prospects, as we may not have sufficient experiences in addressing the risks to which companies
operating in rapidly evolving markets may be exposed. If our growth rate declines, investors’
perceptions of our business and prospects may be materially and adversely affected. You should
consider our prospects in light of the risks and uncertainties that companies with a limited
operating history may encounter.
We are subject to the key man risk of Mr. Jay Chou (whom has been and will continue to
have impact on us), and his persona had a significant impact on the events and programs
created by us, and created a promotion effect on the sales of our products during the Track
Record Period and such effect is expected to remain in the foreseeable future. If we are not
able to cooperate with Mr. Jay Chou, JVR Music or any of his other affiliates, our business,
financial position and results of operation may be adversely affected.
Our business operation is subject to the key man risk of Mr. Jay Chou (whom has been and
will continue to have impact on us) as we heavily rely on the cooperation with Mr. Jay Chou and
his nijigen-style personalities, ChouMate , and we benefitted from Mr. Jay Chou’s influence
which came from various forms such as IP and fan group. Our cooperation with Mr. Jay Chou
had a significant impact on the events and programs created by us such as J Style Trip season
one, and created promotion effect on the sales of MODONG coffee during the Track Record
Period and such effect is expected to remain in the foreseeable future. We secured our
cooperation with Mr. Jay Chou through JVR Music and Archstone, being Mr. Jay Chou’s artiste
management company and representative, respectively, and from time to time enter into
agreements with them. JVR Music has been and is under Mr. Jay Chou’s authorization to use Mr.
Jay Chou’s publicity rights, while Archstone represents Mr. Jay Chou in business negotiations
under the authorization and consent of JVR Music.
Each of our existing cooperation agreements with JVR Music and any future agreements
that we may enter with it, including our cooperation agreements with JVR Music on ChouMate
and the IP Authorization Agreement, stipulate grounds of termination. Although our relationship
with JVR Music remained stable, we cannot assure you that we will be able to maintain such
relationship in the future, and there is no guarantee that JVR Music will enter into new
cooperation agreements with us, especially those that are related to Mr. Jay Chou.
On the other hand, if the business relationship among Mr. Jay Chou, JVR Music and/or
Archstone is terminated, and they decide to no longer cooperate with us or authorize us to use
Mr. Jay Chou’s publicity or intellectual properties rights, or if the agreements that we have
entered into with any of them are terminated, our cooperation with Mr. Jay Chou may be
affected and we may not be able to execute projects related to Mr. Jay Chou. If we do not
cooperate with Mr. Jay Chou, we may no longer enjoy the promotional effect that Mr. Jay Chou
has created on both new retail and IP creation and operation segments. We may also be unable to
RISK FACTORS
–5 0–


--- page 61 ---
identify alternative celebrities who have the same persona and influence of Mr. Jay Chou to
carry out our plans for IP creation and operation, thus the creation and production of our IP
contents might experience disruptions. As a result of the above, our business operations,
financial position and results of operation may be materially and adversely affected.
Our expansion plan and business operations in Mainland China may be affected as a result
of our Taiwan Shareholders’ interests in us as they may be required to obtain approvals
from the Taiwan Investment Commission for investments in Mainland China, as well as the
tensions between two sides of the strait.
Pursuant to the Approval of Investment Regulations, investment in the Mainland China by
any individual with Taiwan passport or Taiwan-incorporated entity is subject to the approval of
the Taiwan Investment Commission. For details, please refer to “Regulatory Overview –
Approval of Investment Regulations” of this prospectus. We cannot guarantee that the current
practice and policy of the Taiwan Investment Commission will remain the same in the future,
and any changes in the practice and policy may affect our Taiwan Shareholder’s likelihood in
obtaining the Taiwan Investment Commission’s approval.
Save for using proceeds from the Global Offering, if our Company conducts any equity
capital increase into our Mainland China subsidiaries such that any of our Taiwan Shareholders
exceeds the Annual Investment Quota, or our Taiwan Shareholder(s) are unable to obtain the
Taiwan Investment Commission’s approval, they may be required to reduce her/his shareholding
in our Company. We cannot assure you that she/he will be able to reduce her/his shareholding in
our Company in a timely and orderly manner, or at all. If any Taiwan Shareholder fails to reduce
her/his shareholding in our Company in a timely and orderly manner, our future investments
through equity capital increase into our Mainland China subsidiaries may be limited, which
could affect our future expansion plans and prospects in Mainland China. In addition, any
reduction of the shareholdings in our Company by them pursuant to the Approval of Investment
Regulations may cause volatility in, or otherwise have a material adverse effect on the trading
price of our Shares.
Any penalties for violation of the Approval of Investment Regulations for our Taiwan
Shareholders’ investments in our Company would be directed at the violating Taiwan
Shareholder(s), and any penalties for such breach will be more than of NTD50,000 but less than
NTD25 million. Such penalties will not be directed at our Company or Mainland China entities
which our Taiwan Shareholders invest in. Nevertheless, any violation of the Original Quota or
Annual Investment Quota of our Taiwan Shareholders or the failure of our Taiwan
Shareholder(s) to obtain the requisite approval from the Taiwan Investment Commission for their
investment in our Group may delay our expansion plan as we will be required to seek alternative
routes to implement our expansion plan, which may involve additional time and hence will affect
our business operations.
Further, there have been tensions in the relationship between two sides of the strait which
have impacted the trade, investments, and other economic activities between them, in particular,
since the outbreak of COVID-19 when travel restrictions have been tightened. As a number of
RISK FACTORS
–5 1–


--- page 62 ---
our Shareholders, including Ms. Ma, Mr. Yang, Ms. Yeh and Mr. Chen are holders of Taiwan
passports; and we from time to time cooperate with celebrities from Taiwan, including Mr. Jay
Chou, Mr. Harlem Yu, Mr. Liu Keng-hung and Ms. Vivi Wang who are critical to our IP creation
and operation segment, any further escalation in tensions between two sides of the strait or news
and rumors of any escalation could introduce uncertainties to economic activities between two
sides of the strait, which in turn could affect companies with collaboration in two sides of the
strait like us. In addition, we do not have any control over statements made by or actions of
such persons and/or their associated celebrities or close contacts via social media and other
forms of publicity, and rising geopolitical tensions could result in either Mainland China or
Taiwan authorities and/or consumers taking adverse positions with respect to intentional or
unintentional social or political statements or actions made by such persons that could
potentially negatively impact our business, results of operations and expansion plans.
Our IP Authorization Agreement with JVR Music is subject to restrictions, in particular,
our priority rights thereunder are non-exclusive (other than ChouMate Projects). If JVR
Music decides not to co-operate with us on projects related to Mr. Jay Chou, our business,
financial position and results of operation may be adversely affected.
Pursuant to the IP Authorization Agreement, our cooperation with Mr. Jay Chou through
JVR Music is subject to restrictions, for example, we are granted the non-exclusive priority right
to, among other things, (i) design and develop virtual idols centered on Mr. Jay Chou’s image in
anime and movies projects, (ii) design and plan shows related to Mr. Jay Chou, and (iii) invest
in JVR Music’s and/or Mr. Jay Chou’s Hollywood Movies. Even if any of the abovementioned
projects are proposed by us, JVR Music retains the sole discretion to decide whether to
cooperate with us or other third parties, hence there is no guarantee that we will be able to
participate in such projects at all. If we are unable to carry out the Star Plus Projects (except the
ChouMate Projects) with JVR Music or JVR Music decides not to cooperate with us on such
projects, plans that we have for our IP creation and operation segment will be affected, and our
business, financial position and results of operation may be adversely affected.
We rely on our cooperation with celebrities such as Mr. Jay Chou, Mr. Liu Keng-hung, Ms.
Vivi Wang and Mr. Harlem Yu etc. in our businesses, and any negative impact on such
celebrities’ reception by or exposure to our consumers may have material adverse effects on
our business, financial position and results of operations.
Our new retail and/or IP creation and operation businesses rely on the cooperation with
celebrities. For example, we created nijigen style personality for certain celebrities. During the
Track Record Period, we monetize our proprietary celebrity IPs by licensing them to our
business partners to generate revenue for our IP creation and operation business as well as using
them to empower the sales of our products by creating promotional effect. We believe
association of our products with relevant celebrities through such proprietary celebrity IPs
facilitate our efforts to introduce our products, in particular new products, to end consumers who
maybe be more familiar with the relevant IP/celebrity but have not previously purchased our
products.
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The empowerment of our proprietary IPs heavily relies on the public image of the relevant
celebrities. However, the entertainment industry is ever-changing. In the event that any of these
celebrities that we cooperate with, such as Mr. Jay Chou, Mr. Liu Keng-hung, Ms. Vivi Wang
and Mr. Harlem Yu etc., loses his/her popularity, or is involved in any negative publicity, such
negative public reception on the relevant celebrity may have material adverse effect on our
operations. Such negative impact may be out of our control, as well as the relevant celebrity’s
control, including but not limited to, change in market preference, unfavorable media coverage,
whether truthful or not, or rules and regulations on entertainment or social media industries that
affect or limit the scope and contents of performance by media persona. Any such negative
impact may limit the media exposure, and/or our ability to promote our product in association
with our proprietary celebrity IPs which centered around such celebrities, or our ability to plan
media programs or concerts that feature them. Please refer to the section headed “Business –
Recent developments on our regulatory environment in relation to celebrities and Livestreaming
in the PRC – Impact on other celebrities and KOLs whom we have been or will be cooperating
with – Incident relating to products promoted by Mr. Liu Keng-hung and Ms. Vivi Wang prior to
our cooperation with them”. If any such event has a lasting negative impact on the reception of
the relevant celebrity, by or exposure to the public, and in particular our consumers, our
business, financial position and results of operations may be materially and adversely affected.
In addition, despite the success of our cooperation with celebrities during the Track Record
Period, there is no assurance that we can secure cooperation with other celebrities in the future
or our cooperation with celebrities in the future will be as successful as we expected. The
effectiveness of our marketing activities depends on various factors, including but not limited to,
the change in public reception towards the corresponding celebrity and the change in public
policies relating to commercial activities conducted by celebrities. If we are not able to secure
cooperation with other celebrities in the future or our cooperation with celebrities is not as
successful as we expected, our business and results of operations may be adversely affected.
We rely on our collaboration with KOCs and KOLs in the promotion of our products. Our
reputation may be negatively affected by inaccurate or inappropriate comments or content
made or any negatively publicity of such KOCs and KOLs.
During the Track Record Period, a substantial portion of our revenue was generated from
the sale through a distribution network of our distributors and sub-distributors, who may further
developed into KOCs of our products through word-of-mouth by invoking their personal
experience and exerting their personal influence over their followers. We also collaborate with
KOLs from time to time to promote our products through E-commerce Livestreaming sessions
on online platforms. We are unable to always control the comments and content made by such
KOCs or KOLs. Our reputation and business may be negatively affected if the KOCs and KOLs
with whom we cooperate with provide inaccurate or misleading information regarding our
products or engage in any illegal, obscene or inflammatory conversations or activities, including
posting inappropriate or illegal content that may harm the public interests. In addition, the KOCs
and KOLs we cooperate with may be subject to negative media coverage and publicity from time
to time, which may negatively affect the reputation of our products, our brand and our Company.
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We may also be required to spend significant time and incur substantial costs in response to
allegations and negative publicity relating to such KOCs and KOLs, and may not be able to
diffuse them.
Our operations and reputation may be perceived to be connected with the reputation of the
KOCs that we collaborate with. Therefore, our brand image and reputation could be negatively
impacted by negative publicity in relation to the KOCs that we collaborate with. Negative
publicity about them could occur in many circumstances that are beyond our control. Any such
negative publicity, regardless of its veracity, could hurt our reputation and may result in costs
incurred to offset such reputation damage and have a negative impact on our business, results of
operations and financial condition.
During the Track Record Period and as of the Latest Practicable Date, we mainly relied on
Li Ting, as the key personnel of Kunshan Tingshe, for distribution of our Kunshan Tingshe
Distributed Products and may continue such arrangement in the future.
Li Ting was one of the key founders of the distribution channel of MODONG coffee
through her involvement with us in establishing the distribution network. During the Track
Record Period and as of the Latest Practicable Date, we mainly relied on Li Ting, a key
personnel of Kunshan Tingshe, for distribution of our Kunshan Tingshe Distributed Products. We
engaged Kunshan Tingshe, which is mainly conducted by Li Ting and her team, to help manage
our distributors and the sub-distributors and conduct product promotion so we can quickly
expand the distribution network after the launch of MODONG coffee. For more details, please
refer to the section headed “Distribution arrangement with Kunshan Tingshe” in this prospectus.
Given Li Ting was the key personnel of Kunshan Tingshe, we rely on Li Ting to manage
our distributors and the sub-distributors procured by our distributors.
To the best of our Directors’ knowledge and belief, many of our distributors and their
sub-distributors consider Li Ting as a respectful leader in the new retail distribution network.
Even though the required procedure to effect the change of distribution agent would not be time
consuming as Kunshan Tingshe can unilaterally novate its rights and obligations under the
distribution agreements entered into between Kunshan Tingshe and each of the Group’s
distributors without obtaining the prior consent of the distributors, if Li Ting ceases to act as our
distributor, or in any way ceases her involvement in our distribution network, we may not be
able to maintain our relationships with the distributors and sub-distributors as the distributors
and sub-distributors may not be willing to continue act as the Group’s distributors and
sub-distributors. In addition, we may not be able to secure a suitable individual that has similar
or better experience than Li Ting as replacement in a timely manner, or at all. Even if we secure
a replacement, certain distributors may still opt not to continue the distribution arrangement with
us. In such case, our business, financial condition and results of operations could be materially
and adversely affected.
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We may be exposed to credit risks in relation to trade and other receivables.
During the Track Record Period, our trade receivables mainly represented amounts
receivable from our customers of the IP creation and operation business and other receivables
mainly comprised amounts due from related parties and amounts due from or loan provided to
third parties. As at December 31, 2019, 2020, 2021 and 2022, our trade receivables balance of
our Group’s trade receivables (after provision for impairment) amounted to RMB252,000,
RMB40.2 million, RMB26.1 million and RMB38.1 million, respectively; and our other
receivables balance (after provision for impairment) amounted to RMB39.4 million, RMB32.0
million, RMB26.5 million and RMB23.0 million, respectively. In 2021, we had written off other
receivables of RMB3.0 million in relation to a loan provided to our ex-marketing agency. We
could not guarantee that we can successfully collect any or all debts due to us, and any failure
on the part of our customers or debtors to settle or settle on time the amounts due to us may
adversely affect our Group’s financial condition and operating cash flows. If we fail to
adequately manage our credit risks, our bad debt expense could be significantly higher than
historic levels, which could adversely affect our business, results of operations and financial
condition.
The relevant rules and regulations on social e-commerce in China are still under
development and subject to interpretation, and their implementation involves uncertainty.
Social e-commerce business is relatively new in the PRC and the relevant rules and
regulations are still in the process of development. Such rules and regulations are subject to the
interpretation of the competent authorities of various jurisdictions in their implementation,
which involves uncertainty. For example, there were various incidents in the past when the
Regulation on the Prohibition of Pyramid Selling was used as the regulatory basis for
disciplinary actions on social e-commerce companies by local government authorities. The
relevant PRC authorities, including regional and local governments, have broad discretion on
regulations of social e-commerce activities, and have the authority to impose sanctions thereon,
including but not limited to, temporary freezing of bank accounts, levying fines, confiscating
income or suspending operations. Any unfavorable new regulatory interpretation and
implementation could have a material adverse effect on our business, financial condition, results
of operations and prospects.
In particular, we operate under a novel sales model in which our end consumers are often
procured through social media, such as followers to PDT centered around our unique celebrity
IPs. Many of our distributors and the sub-distributors are themselves consumers of our products
first. It is necessary for our management and sales and marketing staff to spend significant time
and resources to educate the public, including competent authorities and end consumers, in
relation to our novel business model. Misunderstanding of our business model by competent
authorities or end consumers could result in negative publicity and potential regulatory sanctions
and adverse impact on our operations. For example, we were subject to two incidents of
temporary account freeze initiated by certain local government authorities in 2020 and 2021,
respectively. We were able to have both account freezes unconditionally released after reporting
to Kunshan AMR which issued the Inspection Opinions on our business activities. We
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implemented certain measures to reduce the risk of future similar regulatory actions, but we
could not assure you that we would not be subject to similar regulatory actions by other local
government authorities, which could have material adverse effect on our business, financial
condition, results of operations and prospects if such actions result in punitive measures or
sanctions. For more details, please refer to the section headed “Business – Distribution network
– Distribution Agent Assisted Distribution Model – The Temporary Suspension of Bank
Accounts due to alleged pyramid selling” in this prospectus.
Our brands and products may be subject to counterfeiting, imitation, and/or infringement
by third parties, and we may not be able to prevent the existence of counterfeit products on
the market.
We rely on intellectual property laws in the PRC and other jurisdictions to protect our
brands and trademarks. During the Track Record Period, we were subject to counterfeiting and
imitation by external parties that manufactured and marketed their products under brand names
and trademarks that highly resembled ours. We are actively taking measures to prevent
counterfeit products and infringement of our intellectual property rights. For more details, please
refer to the section headed “Business – Counterfeit products” in this prospectus. However, we
cannot assure you that such counterfeiting, forgery or imitation of our products, trademarks or
brands in the market will not occur in the future or, if it does occur, that we will be able to
detect or address the problem effectively. Such counterfeit or forged products are usually
difficult to detect or ban in a timely manner. Any occurrence of counterfeiting or imitation of
our products or other breaches of our intellectual property rights could adversely affect our
reputation and brand name, and lead to the loss of consumers’ confidence in our brand.
Despite that we are dedicated to fight against counterfeit goods by constantly monitoring
various social e-commerce platforms and report to the relevant regulatory authorities once we
detect any infringements or misappropriations towards our products. Regardless, these efforts
may not be sufficient and effective to protect our brand and intellectual property rights, which in
turn, could damage our reputation and consumers’ perception towards our products’ quality as a
result. In addition, litigations to prosecute infringements upon our rights and products will be
expensive and will divert the management’s attention as well as other resources away from our
business. Moreover, if there are any concerns about the quality of the counterfeit products and
consumers are not fully able to distinguish such counterfeit products from our products, our
reputation and brand value may be impaired. As a result, our business, financial condition,
results of operations and prospects may be materially and adversely affected.
Recent government initiatives to further regulate the entertainment industry may have
negative impact on our business operations centered around our unique celebrity IP.
We rely on our unique celebrity IPs and the related IP contents to empower our new retail
business by creating promotional effect. The current and future celebrities we collaborate with
may be active in the entertainment industry. Many of the media contents and large scale events
we planned in our IP creation and operation are entertainment contents. As such, our business
are affected by the relevant rules and regulations on the entertainment industry. For example, on
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September 2, 2021 the National Radio and Television Administration (ᄿᅧཥൖᐼ҅ ) issued
The Notice on Further Enhancing Regulation on Entertainment Contents and Industry
Participants ( ). The notice prohibits, among
other things, certain formats of media contents and business practices as well as provides
generic qualification requirements for entertainment industry participants. It is not yet clear how
such notice will be implemented and what impact it will have on the entertainment industry as a
whole. To the extend such notice or any future rules and regulations on the entertainment
industry negatively affect the public reception or exposure of our unique celebrity IPs or limit
the contents or venue of the media contents and events we planned, we may not be able to
promote our products in association with such unique celebrity IPs or related contents in our
new retail business or generate revenue based on such unique celebrity IPs in our IP creation
and operation business, which in turn may have material adverse effect on our financial position
and results of operations.
The licensing of our intellectual property rights is subject to certain contractual limitations,
and any disputes or disagreements arising between us and the joint owner of such rights
could negatively impact our sales and prospects, which lead to the decline in our business
profitability.
Our health management product MODONG coffee is marketed with our proprietary
“ChouMate ” trademarks. Additionally, we also engaged in the production of the reality show
“J-Style Trip season one”, which we aim to integrate both intellectual property licensing of
celebrities and commercial programs in order to expand our consumer base and strengthen our
brand awareness.
We are one of the two co-owners of the “ ChouMate ” trademarks and our usage of these
trademarks is subject to JVR Music’s approval. For instance, we could not license the
intellectual property rights of “ ChouMate ” to any third-party without the prior approval of JVR
Music. For more details, please refer to the section headed “Business – Intellectual property” in
this prospectus. We diversified our celebrities portfolio during the Track Record Period. As at
the Latest Practicable Date, we were under negotiation with other celebrities for cooperation
regarding creation and development of celebrity IPs. In the event any of these cooperation
materializes, our rights to the relevant celebrity IPs are subject to terms of agreement to be
entered into between us and the relevant celebrity. If any disputes or disagreements arise
between us, and we are not able to reach a consensus, we might not be able to use the celebrity
IPs in question, such as “ ChouMate (մΝኪ)”, or license the intellectual property as we
intended, or at all, which could lead to the decline in sales, and adversely affect our business
prospects and financial results. Please also refer to the paragraphs headed “If we are unable to
obtain, maintain and adequately protect our intellectual property rights, especially the
trademarks, copyrights and domain names that we use in connection with our products, our
ability to operate and compete could be compromised, thus adversely affects our business,
financial condition and results of operations” and “Our success depends on our ability to operate
our business without infringing, misappropriating or otherwise violating the trademarks,
copyrights and proprietary rights of other parties, which may be expensive to defend and disrupt
our business and operations” in this section.
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If we are unable to obtain, maintain and adequately protect our intellectual property
rights, especially the trademarks, copyrights and domain names that we use in connection
with our products, our ability to operate and compete could be compromised, thus
adversely affects our business, financial condition and results of operations.
Intellectual property licensing is crucial to our business operations and brand building. As
of the Latest Practicable Date, our Group registered 1,160 trademarks and 155 copyrights in the
PRC (including software copyrights in the PRC), and we were also applying and undergoing the
registrations of other intellectual property rights. Our copyrights, trademarks and domain names
are unique and valuable assets that support our brand and help to elevate public’s perception of
our products. In addition, we generate a portion of our revenue from IP licensing operations. Our
intellectual properties are unique and key assets of our Group. The sales and marketing for our
products depend to a significant extent on the brand and other intellectual properties associated
with our products.
There can be no assurances with respect to the nature and scope of rights associated with
intellectual properties in different countries, including our ability to use, maintain or defend key
trademarks and copyrights. To the extent possible, we rely on trademarks, copyrights, patents
and trade secret laws, as well as confidentiality procedures or other contractual restrictions of
the same or similar nature, to establish and protect our intellectual property or other proprietary
rights. However, these laws, procedures and restrictions may provide only limited and uncertain
protection and any of our intellectual property rights may be challenged, invalidated,
circumvented, infringed or misappropriated, including by counterfeiters. In addition, our
intellectual property portfolio in many jurisdictions other than the PRC is less extensive than our
portfolio in the PRC, and the laws of the other jurisdictions other than the PRC, may not protect
our intellectual property rights to the same extent as the laws of the PRC. The costs required to
protect our trademarks and copyrights may be substantial.
We may fail to apply for protection for certain aspects of the intellectual properties used in
or beneficial to our business. Furthermore, we cannot provide assurance that our applications for
trademarks, copyrights and other intellectual property rights will be granted, or, if granted, will
provide sound and effective protections. In addition, third parties have in the past and could in
the future bring infringement, invalidity or similar claims with respect to any of our intellectual
properties. Any such claims, whether or not successful, could be extremely costly to defend,
divert management’s attention and resources, damage our reputation and brands, and
substantially harm our business and results of operations.
Any lawsuits or proceedings that we initiate could be cost and time-consuming. Litigations
and other proceedings also put our intellectual property at risk of being invalidated, or result in
the scope of our intellectual property rights being narrowed. In addition, our efforts to try to
protect and defend our trademarks and copyrights and other intellectual properties may be
ineffective. Additionally, we may provoke third parties to assert claims against us. We may not
prevail in any lawsuits or other proceedings that we initiated, and the damages or other remedies
awarded, if any, may not be commercially valuable.
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The occurrence of any of these events may have a material adverse effect on our business,
financial condition and results of operations.
We rely on our distributors, the sub-distributors and the consumer community culture for
the sales of our products.
We rely on our distributors to distribute our products to end consumers and the
sub-distributors. As of December 31, 2022, our distribution network consisted of 742 distributors
and 16,044 sub-distributors.
We have no ownership or managerial control over any of our third-party distributors. Due
to the large number of our distributors and the sub-distributors, it is difficult for us to closely
monitor all aspects of their practices. We cannot assure you that all our distributors and the
sub-distributors will comply with and perform their contractual obligations. In addition, there
may be instances when these distributors carry out or omit actions, which are not consistent with
our business strategy, such as failing to participate in our marketing and promotional activities.
If any of our distributors fails to perform in accordance with the terms of the respective
distribution agreements, or at all, our brand image and end consumer relationship may be
adversely affected.
We believe that maintaining and promoting a community culture that involves our KOC
distributors is crucial for us to expand our consumer base and promote brand awareness.
Towards that end, we have various professional trainings in place to ensure that our distributors
keep pace with the latest industry trends and possess the sufficient knowledge of our products
and brand to advertise and sell our products. For more details related to the distribution network,
please refer to the section headed “Business – Distribution network” in this prospectus.
Nevertheless, despite our efforts, we may be unable to maintain our community culture. For
instance, conflicts could arise among our distributors, the sub-distributors and end consumers
and any inflammatory/inappropriate comments posted on any social media platforms may
damage our community culture and brand reputation, which in turn would be detrimental to our
business prospects and results of operations.
In addition, we may not be able to successfully manage our distributors and the
sub-distributors, and the cost of any consolidation or further expansion of our distribution
network may exceed the revenue generated from these efforts. There can be no assurance that we
or Kunshan Tingshe will be successful in detecting any non-compliance of our distributors with
provisions of the respective distribution agreements. Non-compliance by our distributors and the
sub-distributors could negatively affect our brand reputation and disrupt our sales. Furthermore,
if the sales volumes of our products sold to consumers are not maintained at a satisfactory level
or if our distribution orders fail to track consumers’ demand, our distributors may not place any
new orders from us, they may also decrease the quantity of their regular orders or ask for a
discounted price. The occurrence of any of these factors could result in a significant decrease in
the sales volume of our products and therefore adversely affect our financial conditions and
results of operations.
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Furthermore, our ability to accurately track the sales of our products and the inventory
level of our distributors is limited. Our sales to distributors may not be reflective of the actual
sales trends to the end consumers, and we may not be able to timely gather sufficient
information and data regarding the market demand and consumers’ preferences for our products.
Failure to accurately track the sales and inventory levels of our distributors and timely gather
market information may cause us to incorrectly predict sales trends and impede us to quickly
align our marketing and product strategies in response to market changes.
As a new retail company with a focus on social media and unique celebrity intellectual
properties (݋׼IPʹཥਠ ), our success is dependent on the continued popularity of our
products and our ability to anticipate and respond to changes in industry trends, consumer
preferences and behavior in a timely manner.
The success of our business and operations depends on our ability to continuously offer
quality products that are attractive to the end consumers. The new retail industry is driven in
part by entertainment, health and beauty trends as well as consumer preferences and behavior,
which may shift quickly and have been vastly affected by the rapidly increasing use and
proliferation of social and digital media by consumers, and the speed with which information
and opinions are shared. As industry trends and consumers’ preferences and behavior continue to
change, we must also continually work to develop, produce and market new products, maintain
and enhance the recognition of our brands, achieve a favorable mix of products, expand the
scope and scale of our intellectual property licensing with different celebrities, and refine our
approach as to how and where we market and sell our products.
Our success depends on our products’ appeal to a broad range of consumers whose
preferences and behavior cannot be predicted with certainty and may change rapidly, and on our
ability to anticipate and respond in a timely and cost-effective manner to industry trends,
consumer preferences and behavior through product innovations, product line extensions and
marketing and promotional activities, among other things. We cannot assure you that we will be
able to successfully anticipate and respond to consumers’ preferences and behavior at all times,
especially as we continue to broaden our customer base and diversify our product offerings
aimed at customers with different characteristics. If we are unable to anticipate and respond to
the changes in industry trends, consumer preferences and behavior, we may fail to continuously
develop products with wide market acceptance, capture emerging growth opportunities, adopt
competitive sales strategies for our existing products, or properly predict and manage our
inventory. Such failure could also negatively impact our brand image and result in the
diminishing of customer experiences and brand loyalty. Any of these occurrences could
materially and adversely affect our business, prospects and results of operations.
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Our business operations could be negatively impacted by our reliance on the sole supplier
to produce MODONG coffee.
The formula of MODONG coffee is co-developed by us and Hengmei Group, which is
currently our sole supplier for the product. Hengmei Group is in possession of the formula and
technology know-hows for the purpose of manufacturing the product. We also rely on Hengmei
Group to procure the raw materials and ingredients of MODONG coffee. We entered into a
strategic cooperation agreement with Hengmei Group. For more details, please refer to the
section headed “Business – Suppliers – Selection and management of supplier – Our relationship
with Hengmei Group” in this prospectus. We cannot assure you that our sole supplier for
MODONG coffee will continue to maintain business relationship with us by renewing the
contracts at the same terms or terms acceptable to us upon expiry thereof, or even maintain such
business relationship with us at all. Our reliance on our sole supplier for the production of
MODONG coffee could have a material adverse impact on our business in the event of any
shortage of, or failure or delay in the supply. Additionally, if the sole supplier terminates or
refuses to renew a contract with us or fails to fulfill their contractual obligations regarding the
production of MODONG coffee, we may not be able to secure any suitable alternative suppliers
as replacement on terms acceptable to us in a timely manner, or at all. As a result, our
production might experience critical disruptions, which in turn will have an adverse impact on
our reputation, business prospects and results of operations. Further, even if we are able to
replace our sole supplier with alternative suppliers, the costs and resources devoted to seeking
for new business partner could be significant and onerous to our business operations and
financial condition. For further details, please refer to the section headed “Business – Suppliers”
in this prospectus.
If our health management products are not effective in enabling consumers in achieving
their respective goals from consumption thereof, it could have a material adverse effect on
our business, prospects, financial condition and results of operations.
During the Track Record period, we generated substantial majority of our sales revenue for
our new retail business from health management products. We sold multiple health management
products, mainly under MODONG brand and Dr . INYOU brand. Our health management products
focus on the concept ketogenic diet, where these products are regarded as health management
food and beverages as they can be consumed (i) as meal replacements for consumers who are on
low-carb diets; and (ii) for weight management, as their ingredients consists of healthy elements
such as ketogenic, low-carb high-protein, high dietary fibers, vitamins, and prebiotics. For
details of the product features of our major health management products, please refer to
“Business – Our business – New retail business – Health management products” in this
prospectus.
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The effectiveness of our health management products are critical to the success of our
business. In particular, there has been a great demand in MODONG coffee mainly due to the fact
that our MODONG coffee were well-received by our end consumers. Thus, in the event that our
health management products no longer have effective features that enable consumers in
achieving their respective goals from consumption thereof, the demand in our health
management products may decrease and it could have a material adverse effect on our business,
prospects, financial condition and results of operations.
Our expansion into new product lines or categories may expose us to new challenges and
more risks. If our new product introduction is not as successful as we anticipated, it could
have a material adverse effect on our business, prospects, financial condition and results of
operations.
The fast-evolving entertainment and health management trends together with the consumer
preferences have shortened the life cycles of our products and required us to continually work to
develop, produce and market new products, maintain and enhance the recognition of our brands
and shorten our product development and supply chain cycles. Our continued success depends on
our ability to develop and launch products in a timely and cost-effective manner in response to
industry trends and consumer preferences. We have a pipeline of new low-carb food and drinks
and skincare products that are targeted in the near future. For more details, please refer to the
section headed “Business – Our strategies and future plans – Further diversify our product
portfolio through product development” in this prospectus. If we do not successfully and
consistently develop new products that appeal to our customers, our net revenues and margins
could suffer.
Each new product launch involves risks, as well as the possibility of unexpected
consequences. For instance, the acceptance of new product launches and sales to our customers
may not be as high as we anticipated, due to a lack of acceptance of the products themselves or
their price, or the limited effectiveness of our marketing strategies. Introduction of new products
targeted at expanding our product reach beyond our current customer base may not be as
successful as we anticipated due to the insufficient data insights on and understanding about the
preferences, trends and behaviors of such new customer groups. Our ability to launch new
products may be limited by delays or difficulties affecting the ability of our suppliers or
manufacturers to timely manufacture new products. In addition, we may experience a decrease in
the sales of certain existing products as a result of newly launched products.
Also, product innovation may place a strain on our employees and our financial resources,
including incurring expenses in connection with the product innovation and development,
marketing and advertising that are not subsequently supported by a sufficient level of sales.
Further, sales of new products may be affected by the efficacy of our inventory management and
quality of delivery and order fulfillment services provided by our logistics providers, and we
may experience product shortages, delay, defective or improper product delivery. Any of these
occurrences could delay or impede our ability to achieve our sales objectives, which could have
a material adverse effect on our business, financial condition and results of operations.
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The new retail industry is relatively new with an evolving business model. If our new
business model fails to generate or increase its revenue at the expected level and pace, our
overall growth and profitability would be adversely affected.
The new retail industry is relatively new and constantly evolving. To cater to such changes
in the industry, it is important that we keep ourselves up-to-date with market trends and adapt
accordingly by developing or implementing the latest business models into our products and/or
distribution channels on a timely basis. On the other hand, responding and adapting to an ever
changing industry may require us to invest substantial resources, time and capital, and we may
not be able to integrate the results of our market research to our business operations in a timely
manner to take advantage of the market opportunities available.
If we are unable to keep up with changes in the industry and end consumers’ purchasing
patterns in the future, our ability to expand our customer base and business may be adversely
affected and we may lose our distributors, end consumers and other business opportunities to our
competitors. There can be no assurance that we will be able to sufficiently and promptly respond
to changes in the industry, and all of the above may ultimately affect our business, financial
condition, results of operations and prospects adversely.
Future expansion and acquisition plans are subject to uncertainties and risks.
We have set out our future plans in the section headed “Future plans and use of proceeds”
in this prospectus. Whether our future plans can be implemented successfully may be beyond our
control and some future events may affect the smooth running of the expansion plan, such as
change in costs related to the changes in compliance with the laws, rules and regulations, delays
in obtaining the necessary licenses and approvals from the government.
In the future, we may decide to enter into new distribution channels or markets or
selectively pursue strategic acquisitions or investments in new markets. We may have limited or
no relevant experience to operate in new distribution channels or markets that have legal and
regulatory frameworks, competitive landscapes and customer preferences different from our
existing distribution channels or markets. We may not be familiar with the customer preference
of the new distribution channels and as such, we may fail to attract a sufficient number of end
consumers to achieve profitability.
There is no assurance that we will be successful in our expansion plans and materialize the
acquisitions. If we fail to project accurately the time, labor and costs required for implementing
our expansion plans, or if we fail to comply with the new regulatory requirements of new
distribution channels or secure sufficient amount of sales order or at all after the expansion, our
business and results of operation may be adversely affected.
In addition, we may consider strategically acquiring other companies, businesses, assets or
technologies that are complementary to our business and operations as part of our growth
strategy. The strategic acquisition and subsequent integration of new businesses is likely to
require significant managerial and financial resources and could result in a diversion of
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resources from our existing business, which in turn could have an adverse effect on our growth
and business operations. Acquired businesses or assets may not generate the financial results we
expect and may be loss making over time. The cost and duration of integrating newly acquired
businesses could also materially exceed our expectations. Any such negative developments could
have a material adverse effect on our business, financial condition and results of operations.
Our financial condition and results of operations may be materially and adversely affected
by the outbreak of COVID-19 pandemic.
Since the end of December 2019, the outbreak of COVID-19 has materially and adversely
affected the global economy. Demands for consumer goods were significantly affected.
According to the National Bureau of Statistics, China’s total retail sales of consumer goods
decreased by approximately 19.0% in the first quarter of 2020 compared with the same period of
2019. The PRC government and other governments across the world have implemented strict
measures to control such outbreak. While our supply partners and other service partners had to
operate at a reduced capacity during such period, we were able to maintain sufficient levels of
inventory and fulfillment capacity through our warehouses.
Nevertheless, our revenue was adversely affected during 2022, mainly due to the
large-scale regional static management control measures imposed by the local government in
view of the resurgence of COVID-19 pandemic in 2022. Even though, many of the quarantine
measures within China have since been relaxed as of the date of this prospectus, we cannot
predict when the COVID-19 pandemic will become completely under control and we cannot
guarantee that the COVID-19 pandemic will not worsen. If the spread of the disease is not
alleviated and contained in the foreseeable future, we may face a shortage of raw materials for
our products and difficulties of producing new seasons of our J-Style Trip as well as our ability
to plan new concerts or other large-scale public events. As a result, our business operations and
financial results could be adversely affected, as evidenced by the decrease in our revenue for the
year ended December 31, 2022. If the situation materially deteriorates in China or globally, our
business, results of operations and financial condition could be materially and adversely affected
as a result of the changes in the outlook of the industry, or any slowdown in the economic
growth, negative business sentiment or other factors that we cannot foresee. For details
regarding impact of the Resurgence of COVID-19 on our Group, please refer to the section
headed “Business – Impact of the outbreak of COVID-19 on our business” in this prospectus.
Social media based new retail industry is highly competitive. If we are unable to compete
effectively with existing or new competitors, we may lose our market share, and our
business, results of operations and financial condition may be materially and adversely
affected.
The new retail industry is, and will continue to be, highly competitive. We primarily
compete with social e-commerce focused new retail companies. Competition in our industry is
intense and based on multiple factors, including the ability to launch new products, pricing of
products, quality of products and packaging, brand awareness, perceived value and quality,
innovation, offline sales capabilities, customers’ functional and emotional satisfaction,
promotional activities, advertising, editorials, e-commerce and mobile-commerce initiatives and
other activities.
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Our competitors may have significantly more financial, technical, marketing and other
resources than we have, and may devote greater resources to develop, promote and support their
products. In addition, they may have more extensive industry relationships, longer operating
histories and greater brand recognitions than we have. Despite our differentiated business model,
existing and new players in the industry may also transform their business model and directly
compete with us. They may also roll out products targeting young generations at a
customer-friendly price or adopt a price-cutting strategy for their current products to directly
compete with us. As a result, these competitors may respond more quickly to consumer tastes
and trends, seeking ideas which will appeal to consumers and introducing new products that
compete with our products for consumer acceptance and adopt new technologies. It is difficult
for us to predict the timing and scale of our competitors’ activities in these areas or whether new
competitors will emerge in our industry. In addition, further technological breakthroughs,
including new and enhanced technologies which increase competitions in the online retail
market, new product offerings by competitors and the strength and success of our competitors’
marketing programs may impede our growth and the implementation of our business strategies.
Our ability to compete also depends on the continued strength of our brand and products,
our ability to predict and capture industry trends and consumer preferences, the success of our
marketing, innovation and execution strategies, the continued diversification of our product
offerings, the successful management of our new product introductions and innovations, strong
operational executions, including order fulfillment and supply chain management, and our
success in entering new markets and expanding our business in existing geographies. If we are
unable to continue to compete effectively, we may lose our market share and our business,
results of operations and financial condition may be materially and adversely affected.
We had recorded net cash outflow from operating activities in the year ended December 31,
2021.
For the year ended December 31, 2021, we had net cash flows outflowed from operating
activities of RMB9.3 million. The net cash outflow from operating activities for the year ended
December 31, 2021 is primarily attributable to the income tax payment of RMB50.0 million. We
cannot assure you that net cash outflows from operating activities will not occur in the future as
a result of other factors or developments. For further details on our liquidity position, please
refer to the section headed “Financial information – Liquidity and capital resources” in this
prospectus.
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Our success depends on our ability to operate our business without infringing,
misappropriating or otherwise violating the trademarks, copyrights and proprietary rights
of other parties, which may be expensive to defend and disrupt our business and
operations.
Our commercial success depends in part on our ability to operate without infringing,
misappropriating or otherwise violating the trademarks, patents, copyrights, trade secrets and
other proprietary rights of others. We have adopted and implemented internal procedures and
licensing practices to prevent unauthorized use of such intellectual properties or the infringement
by us of other rights of the third parties. However, we cannot be certain that these measures can
be effective in completely preventing all possible infringements, misappropriations and other
violations of third-party’s intellectual property rights or other rights during the course of our
business. As we face increasing competitions and as litigation becomes a more common way to
resolve disputes in China, we face a higher risk of being the subject of intellectual property
infringement claims.
We cannot be certain that our operations or any aspects of our business do not or will not
infringe upon or otherwise violate patents, copyrights or other intellectual property rights which
held by third parties. This is especially the case as our sales and marketing activities may use
photos or video clips that contain portraits of individuals and shows performed by others such as
recorded product promotion Livestreaming held by our cooperating celebrities and KOLs. We
cannot rule out the possibility that some of these photos or videos are not properly authorized by
the relevant performers and/or proprietary right holders, which may expose us to potential
liabilities for infringement of portrait rights or rights to network dissemination of information
under the PRC laws. There could also be existing intellectual property of which we are not
aware of that our operations and business may inadvertently infringe upon.
Furthermore, our internal procedures and licensing practices may not be effective in
completely preventing the unauthorized use of copyrighted materials or the infringement of other
rights of third parties by us and/or our employees. We may receive claims by third parties that
we and/or our employees have infringed or otherwise violated their software copyrights. We
license and use software and other technologies from third parties in our ordinary course of
business. These third-party software or technology licenses may not continue to be available to
us on acceptable terms or at all, and may expose us to potential infringement liabilities. Any
such liabilities, or our inability to use any of these third-party software or technologies on
acceptable terms or at all, could harm our reputation, result in increased operating costs, and/or
disruptions to our business that may materially and adversely affect our operations and financial
results.
We may from time to time in the future be subject to legal proceedings and claims relating
to the intellectual property rights of others. Also, we cannot assure you that we will not become
subject to intellectual property laws in other jurisdictions, such as the United States. If a claim
of infringement brought against us in China, the United States or another jurisdiction is
successful, we may be required to pay substantial penalties or other damages and fines, enter
into license agreements which may not be available on commercially reasonable terms or at all
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or be subject to injunctions or court orders. Even if the allegations or claims lack merit,
defending against them could be both costly and time consuming and could significantly divert
the efforts and resources of our management and other personnel.
Competitors and other third parties may claim as well that our officers or employees or our
suppliers have infringed, misappropriated or otherwise violated their product formulas,
confidential information, trade secrets or other proprietary information or technology in the
course of their employment with us or in their designing and manufacturing products for us, as
the case may be. Although we take steps to prevent the unauthorized use or disclosure of such
third-party information, intellectual property or technology by our officers, employees or
suppliers, we cannot guarantee that our internal intellectual property policies, any other policies
or contractual provisions that we have implemented or may implement will be effective. If a
claim of infringement, misappropriation or violation is brought against us or against one of our
officers or employees, we may suffer reputational harm and may be required to pay substantial
damages, subject to injunction or court orders or be required to suspend the sales of our
products or to remit to the plaintiff the revenues that we derive from the sales, any of which
could adversely affect our business, financial condition and results of operations.
Product quality is crucial to our business. Failure to maintain the quality, safety and
effectiveness of the products could harm our reputation, adversely affect our financial
condition and results of operations.
Any loss of confidence on the part of consumers in the ingredients used in our products,
whether related to product contamination or product safety or quality failures, actual or
perceived, or inclusion of prohibited or restricted ingredients or improper mixture of ingredients,
could tarnish the image of our brands and could cause consumers to choose other products.
Allegations of contamination or other adverse effects on the product safety or suitability for use
by a particular consumer, even if untrue, may require us to expend significant time and resources
responding to such allegations and could, from time to time, result in the suspension of sales or
a recall of a product from any or all of the markets in which the affected product was
distributed. Any such issues or recalls could negatively affect our profitability and brand image.
If our products are found to be, or perceived to be, defective or unsafe, or if they otherwise
fail to meet our consumers’ expectations, our relationships with the consumers could suffer, the
appeal of our brands could be harmed, thus we may need to recall some of our products and/or
become subject to regulatory actions, and we could lose sales or market share or become subject
to liability claims. In addition, safety or other defects in our competitors’ products could reduce
consumers’ demand for our own products if consumers view them to be similar. Any of these
outcomes could result in a material adverse effect on our business, financial condition and
results of operations. For more details, please refer to the section headed “Business – Quality
control” in this prospectus.
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We outsource our product manufacturing to third-party manufacturers. The limited control
that we have over the process may present risks to our business, and any failure in the
product quality control could adversely affect our reputation, business prospects and
results of operations.
In addition to Hengmei Group, we also use third-party manufacturers to manufacture our
other products, our ability to grow revenues in the future will depend in part on our success in
maintaining successful relationships with our manufacturing partners. As a result, the loss or
unavailability of one of our major manufacturers or factories, even temporarily, could have a
negative impact on our business, financial condition and results of operations. While we believe
that we have the ability to replace our manufacturers if necessary, any such move may be
time-consuming and costly. We believe manufacturing for us would generally take a significant
percentage of the total capacity of each factory that we work with, and therefore establishing
relationships with new manufacturers and having them work on similar terms with matching
quality may be challenging. We may also be required to seek out additional manufacturers in
response to increased demand for our products, as our current manufacturers may not have the
capacity to increase production. If we fail to receive a material portion of the products made by
our manufacturers, or if we fail to shift manufacturers, our sales and profitability could be
significantly reduced.
We have implemented a quality control system in relation to the manufacturing process of
our products. For further details, please refer to the section headed “Business – Quality control”
in this prospectus. Nevertheless, we may not have effective control over whether our
manufacturers would strictly follow our specifications and instructions. There is always a risk
that one or more of our third-party manufacturers will not comply with our requirements, and
that we may not be able to discover such non-compliance immediately or at all. As such, the use
of third-party manufacturers may expose us to product liability claims, administration penalties,
confiscation or the destruction of certain products and their revenue, the revocation of business
license, or the imposition of other administrative or criminal liabilities. If defective products are
manufactured and sold, it would damage our reputation, lead to product recall, consumer
litigations and other unfavorable outcome that could materially and adversely affect our
business.
Additionally, we cannot assure you that they do not ever and will not deviate from their
covenants. Any leakage, plagiary or disclosure of the formulas for manufacturing our products
could be detrimental to our business prospects and results of operations. In the event they
violate confidentiality agreements with other parties when developing formulas for us, we could
be negatively affected.
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If we fail to comply with the constantly evolving product safety laws, regulations and
standards, or our products otherwise are defective, we may be required to recall products
and may face penalties and product liability claims, either of which could damage our
reputation, result in unexpected costs and adversely affect our financial condition and
results of operations.
The manufacturing, distribution and packaging of our products and their components,
ingredients and raw materials are subject to complex product safety-related laws, regulations and
national and industrial standards. Please refer to the section headed “Regulatory overview – PRC
laws and regulations” in this prospectus. To comply with and promote product safety, we have
assigned quality inspectors to be responsible for the production inspection, product sampling and
quality issues resolution. We also cooperate with third-party international testing centers to
continually oversee the quality, safety of our products and conduct sampling check from time to
time. In addition, we closely work with our counsel on the development in laws, regulations and
standards applicable to our business. However, as these laws, regulations and standards are
relatively new and their interpretations and implementations have been constantly evolving, we
cannot assure you that the competent authorities will always hold the same view as our counsel
team does in terms of the compliance of our business operations.
We currently outsource our product manufacturing to third party suppliers, and in many
cases rely on them to procure raw materials, components and ingredients. Thus, we do not have
sufficient control over the raw material procurement and manufacturing process and thus cannot
be sure that all the suppliers of raw materials, components and ingredients chosen by our
contract manufacturers would have met our standards and expectations and been selected by us
had we done the procurement ourselves, neither could we guarantee that no contaminations,
defects or other safety issues would happen with respect to the raw materials, components and
ingredients or during the manufacturing process.
Our exposure to product liability risks may increase as our manufacturing and sales volume
increases. The situation is further complicated by the fact that a product may be safe for the
general population when used as directed but could cause an adverse reaction for a person who
has a health condition or allergies, or who is taking a prescription medication. While we include
what we believe are adequate instructions and warnings, previously unknown adverse reactions
could occur. If we discover that any of our products are causing adverse reactions, we could
suffer adverse publicity or administrative sanctions. If any batch of our products contain
contaminants, fail to meet the national safety standards or otherwise has defects or safety issues,
we may need to suspend the sale or, in severe cases, order recalls of such batch or all of the
products in question.
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To manage and mitigate any environmental, social and governance risks, we may incur
additional costs and expenses, which may materially and adversely affect our financial
performance.
To manage and mitigate any environmental, social and corporate governance risks that we
may identify, and to better fulfill our social responsibilities, we may incur additional costs and
expenses which may adversely and materially affect our financial performance. For instance, as
we aim to gradually switch to using more environmentally-friendly packaging materials in our
product delivery, which are usually more costly, expenses in relation to packaging may increase.
Moreover, our operating costs may increase as we may consider adopting measures to strengthen
our workplace safety. For further details on our policies and visions in environmental, social and
governance, please see the section headed “Business – Environmental, social and governance” in
this prospectus.
If the contents contained in videos, live broadcasting and other content formats published
by us or celebrities or KOLs that we collaborate with are deemed to violate any PRC laws
or regulations or are considered inappropriate, or there is any changes in the applicable
laws and regulations, our business, financial condition and results of operations may be
materially and adversely affected.
The PRC government and regulatory authorities have adopted regulations governing
contents contained within videos, live broadcasting and other information over the Internet and
Livestreaming marketing. Under these regulations, Internet content providers are prohibited from
posting or displaying contents that, among other things, violates PRC laws and regulations,
impairs the national dignity of China or the public interest, or promotes counterfeit or
substandard goods. We will closely monitor the contents that are provided in the videos and
Livestreaming marketing activities conduct by celebrities and KOLs that we collaborate with.
However, as the number of celebrities and KOLs that we collaborate with increases after Listing,
there can be no assurance that we can identify all the videos or other content that may violate
relevant laws and regulations in a timely manner, or at all.
Failure to identify and prevent illegal or inappropriate content from being disseminated
may subject us to liability as a service provider for E-commerce Livestreaming. In addition,
PRC laws and regulations are subject to interpretation by the relevant authorities, and it may not
be possible to determine in all cases the types of content that could result in our liability as a
service provider for E-commerce Livestreaming. Our financial position and results of operations
might be materially and adversely affected by any decision by end consumers or our customers
to reduce their purchase as a result of adverse media reports, complaints or other negative
publicity involving us.
Further, laws and regulations concerning Livestreaming and influences in the PRC are
relatively new and evolving, and their interpretation and enforcement involve significant
uncertainties. Therefore, in certain circumstances it may be difficult to determine what actions or
omissions may be deemed to be in violation of the applicable laws and regulations. In addition,
if new requirements are imposed by any new laws and regulations in the future, we may not be
able to continue our collaboration with celebrities and KOL/KOCs in the promotion of our
products.
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Our success is critically dependent on the efforts and dedication of our senior management
and key employees and officers, and the loss of one or more key employees, or our inability
to attract and retain qualified personnel and maintain our corporate culture, could
adversely affect our business and the results of operations.
Our success depends on the continued and collaborative efforts of our senior management
and key employees. If our senior management cannot work together effectively or efficiently,
our business may be severely disrupted. If, however, one or more of our executives or other key
personnel are unable or unwilling to continue to provide services to us, we may not be able to
find suitable replacements easily or at all. Competitions for management and key personnel are
intense and the pool of qualified candidates is limited. We may not be able to retain the services
of our executives or key personnel, or attract and retain experienced executives or key personnel
in the future.
Our future success will also depend on our ability to attract and retain highly skilled
technical, managerial, editorial, finance, marketing, sales and customer service employees.
Qualified individuals are in high demand and competition for talents could cause us to offer
higher compensation and other benefits to attract and retain them. Even if we were to offer
higher compensation, we may not be able to successfully attract, assimilate or retain the
personnel that we need to succeed.
If any of our executive officers or employees joins a competitor or forms a competing
business, they may divulge business secrets, know-how, customer lists and other valuable
resources. Our senior management and key employees have entered into employment
agreements, confidentiality and non-competition agreements with us. However, if any dispute
arises among any of them and us, we may have to incur substantial costs and expenses in order
to enforce such agreements in China or we may be unable to enforce such agreements at all. Any
failure to attract or retain key management and personnel could severely disrupt our business
and growth.
We have devoted significant efforts and invested much capital in a wide variety of sales and
marketing activities, including advertising and promotions to expand our consumer base
through multiple channels. If we are unable to conduct our sales and marketing efforts in a
cost-effective and efficient manner, our results of operations and financial conditions may
be materially and adversely affected.
We have invested, and will continue to invest, a large amount of financial and other
resources in promoting our brand awareness and acquiring customers, including expanding our
marketing and sales teams, purchasing advertisements and planning big music showcases and
concerts for celebrities. For the years ended December 31, 2019, 2020, 2021 and 2022, we
incurred selling and marketing expenses of RMB14.4 million, RMB94.9 million, RMB93.8
million and RMB72.4 million, accounting for 16.6%, 20.8%, 25.7% and 21.1% of our total
revenue, respectively.
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Our marketing and branding activities may not be well received, successful or
cost-effective, which may lead to significantly higher marketing expenses in the future. We may
also not be able to continue our existing marketing and branding activities, or successfully
identify and utilize the new trends in marketing strategies, channels and approaches that appeal
to or fit in the lifestyle of our targeted customers. We may also fail to adjust our sales and
marketing strategies fast enough to synchronize with consumers’ behavioral changes in using the
Internet and mobile devices. Failure to engage in sales and marketing activities in a
cost-effective manner and failure to achieve the anticipated results from our sales and marketing
activities may reduce our market share, cause our revenues to decline, negatively impact our
profitability, and materially harm our business, financial condition and results of operations.
In addition, failure to comply with the relevant provisions of Advertising Law of the PRC
(), which promulgated by the SCNPC in 1994 and amended on
October 26, 2018, the Consumer Protection Law of the PRC (ᚐ
), Regulations on the Supervision and Administration of Cosmetics (္ຖ၍ଣૢ
Է), which promulgated by the State Council on June 16, 2020 and which will become effective
from January 1, 2021, and other relevant laws and regulations will result in the restrictions,
inhibitions or delay of our ability to sell products. For more details, please refer to the section
headed “Regulatory overview – PRC laws and regulations” in this prospectus.
We may be adversely affected by the evolving PRC regulatory development on marketing
activities carried out by celebrities.
We have created and operated a portfolio of various forms of proprietary IPs, and our
unique celebrity IPs empower our product branding. We believe one of the sales and marketing
strategies that distinguishes us from other market participants is our focus on, and ability to,
utilize PDT to monetize our unique celebrity IPs to quickly procure loyal customers, as the
association with celebrities, such as Mr. Jay Chou, Mr. Liu Keng-hung and Ms. Vivi Wang, with
our products can enhance visibility and affinity to such products.
There has been evolving PRC regulatory development on marketing activities carried out by
celebrities where the competent government authorities have taken initiatives to tighten
regulation on the PRC entertainment industry. For example, Strengthening Regulations was
promulgated in 2021 which targets the aggressive “Fan Trap” (“ ඵਸ਼” practice for ill-gained
profit). For details, please refer to the sections headed “Regulatory overview – PRC laws and
regulations – Regulations in relation to strengthening the regulation of entertainment industry”
and “Regulatory overview – PRC laws and regulations – Regulations in relation to online
Livestreaming marketing” in this prospectus. These celebrities marketing-related laws and
regulations are relatively new and evolving, and their interpretation and enforcement involve
significant uncertainties. As a result, in certain circumstances it may be difficult to determine
what actions or omissions may be deemed to be in violation of the applicable laws and
regulations. Moreover, the adoption and application of additional laws or regulations to our
business may heighten the requirements for us to conduct our operations, which could in turn,
increase our cost of doing business, disrupt our operations and impede our development or
growth.
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We cannot assure you that subsequent laws and regulations would not render our operations
non-compliant or that we would always be in full compliance with the applicable laws and
regulations. In the event that we must remedy any violations, we may also become subject to
fines or other penalties and, if we determine that the requirements to operate in compliance are
overly burdensome, we may elect to terminate the non-compliant operations. In each case, our
business, financial condition and results of operations may be materially and adversely affected.
We rely on third-party service providers for logistics services. If these service providers fail
to provide reliable delivery services, our business and reputation may be adversely affected.
We rely on third-party couriers and logistics providers for order fulfillment and delivery
services, including, among others, collection of products, warehousing services, shipping
products to our customers, our designated warehouses and handling product returns. While these
arrangements allow us to focus on our main business, they reduce our direct control over the
logistics services provided to our customers. Logistics in our primary locations or transit to final
destinations may be disrupted for a variety of reasons, including events that are beyond our
control or the control of these service providers, such as inclement weather, natural and
man-made disasters, health epidemics, information technology system failures, transportation
disruptions, labor unrest, commercial disputes, military actions or economic, business,
environmental, public health, or political issues.
In addition, if our third-party logistics service providers fail to comply with the applicable
rules and regulations in China, our delivery services may be materially and adversely affected. If
any of our service providers’ operations or services are disrupted or terminated, we may not be
able to find alternative qualified service providers and on commercial terms to our satisfaction
in a timely and reliable manner, or at all. Furthermore, delivery personnel of the contracted
third-party logistics service providers act on our behalf and interact with our customers
personally. We need to effectively manage these third-party logistics service providers to ensure
the quality of our customer services. If our products are not delivered in proper conditions or in
a timely manner or there is any other failure to provide high-quality delivery services to our
customers, our products may be compromised, customer experience may be impaired and, as a
result, our business and reputation could suffer. Further, if our logistics providers raise their fee
rate, we may incur additional costs and may not be able to pass such costs to our customers.
Our success depends in part on our ability to successfully manage our inventories. We may
face the risk of inventory obsolescence.
We must maintain sufficient inventory levels to operate our business successfully, but we
must also avoid accumulating excess inventory, which increases working capital needs and
lowers gross margin. We obtain substantially all of our inventory from third-party manufacturers
and must typically order products in advance of the time these products will be offered for sale
to our customers. As a result, it may be difficult to respond to changes in consumers’ preferences
and market conditions, which for health and beauty products can change rapidly. If we do not
accurately anticipate the popularity of certain products, then we may not have sufficient
inventory to meet the demand. Alternatively, if demand or future sales do not reach our
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forecasted levels, we could have excess inventory that we may need to hold for a long period of
time, write down, sell at prices lower than expected or discard. If we are not successful in
managing our inventory, our business, financial condition and results of operations could be
adversely affected.
We may also be negatively affected by changes in distributors’ inventory policies and
practices. Our distributors make no binding long-term commitments to us regarding purchase
volumes and make all purchases by delivering purchase orders. Any distributor can therefore
freely reduce its overall purchase of our products, and reduce the number and variety of our
products that it carries and the shelf space allotted for our products. If demand or future sales do
not reach our forecasted levels, we could have excess inventory. If we are not successful in
managing our inventory, our business, financial condition and results of operations could be
adversely affected.
In addition, our business relies on consumers’ demand for our products. Any change in the
consumers’ demand for our products or the occurrences of catastrophic events may have an
adverse impact on our product sales, which may in turn lead to inventory obsolescence, decline
in inventory value or inventory write-off.
If we determine our prepayments and other current assets to be impaired, our business,
results of operations and financial condition may be adversely affected.
Our prepayments and other current assets mainly comprised prepayments made to suppliers
of our new retail business and service providers of our IP creation and operation business. As at
December 31, 2019, 2020, 2021 and 2022, our prepayments and other current assets amounted to
RMB16.6 million, RMB31.3 million, RMB53.7 million and RMB53.1 million, respectively,
representing a substantial portion of our current assets.
We may have to make provisions for impairment losses for our prepayments and other
current assets whenever events or changes in circumstances indicate that the carrying amount
may not be recoverable. The impairment assessment of prepayments and other current assets
involve substantial management judgments, estimates and assumptions. Our management would
typically take into account the credibility, financial performance, and default history (if any) of
our suppliers and/or service providers and other factors beyond our control. Consequently, any
material changes in the circumstances may negatively impact our forecasts and projections,
which in turn may lead to a decline in the carrying amount of our prepayments and other current
assets and result in impairment. The results of our assessment may also be materially different
from the actual results, and our periodic assessment on the impairment of our prepayments and
other current assets may turn out to be inaccurate. During the Track Record Period, we did not
record any impairment losses on our prepayments and other current assets. However, there is no
guarantee that we will not incur impairment losses in the future. Any significant impairment
losses could materially and adversely affect our business, results of operations and financial
condition.
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Our TV program rights may be subject to impairment.
As at December 31, 2019, 2020, 2021 and 2022, we recorded TV program rights of
RMB77.2 million, nil, RMB13.6 million and RMB89.6 million, respectively, which were arising
from the production of J-Style Trip season one and season two. We assess whether impairment
indicator exists on TV program rights and provides impairment (if any) up to its net realizable
amount. In determining whether impairment indicator exists and the net realizable amount of TV
program rights, we make reference to both internal and external market information, such as
sales forecasts, sales and distribution costs budget and the market condition. If there are any
impairment indicators, we may be required to record impairment charges in respect of our TV
program rights which may substantially and adversely affect our result of operations for the
relevant years.
We are exposed to fair value changes for financial assets measured at fair value through
profit and loss and valuation uncertainty due to the use of unobservable inputs that require
judgment and assumptions which are inherently uncertain, any adverse change in their fair
value may directly affect our results of operations.
During the year ended December 31, 2021, our Group purchased certain wealth
management products with floating returns and we recorded other gain from fair value change
on financial assets at fair value through profit and loss (“ FVPL ”) of RMB0.4 million.
Since the value of our financial assets depend on the investment performance of the
underlying financial instruments, our investments are subject to all of the risks associated with
those underlying financial instruments, including the possibility of a default by, or bankruptcy
of, the issuers of such products. Any potential realized or unrealized losses in our investments in
the future resulting from the changes in the value of the financial instruments we invested in
may adversely affect our business, our results of operations and our financial condition. The fair
value of our financial assets that are not traded in an active market is determined using valuation
techniques, which require judgment and assumptions and involve the use of unobservable input,
such as the expected yield of the underlying investment portfolio and discount rate. Changes in
the basis and assumptions used in the estimation could materially affect the fair value of these
financial assets and/or financial liabilities. Factors beyond our control, include, but not limited
to, general economic conditions, changes in market interest rates and stability of the capital
markets, can significantly influence and cause adverse changes to the estimates and thereby
affect the fair value. We recorded fair value change on financial assets at FVPL of
approximately RMB435,000 for the year ended December 31, 2021. The valuation may involve a
significant degree of judgment and assumptions which are inherently uncertain. If the fair value
on financial asset at FVPL were to fluctuate, our business, financial condition and results of
operations may be materially and adversely affected.
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Failure to fulfill our obligations in respect of contract liabilities could materially and
adversely affect our results of operations, liquidity and financial position.
Our contract liabilities mainly arose from the prepayments made by distributors for
purchase of our products which were received by Kunshan Tingshe through the
Jointly-controlled Accounts. We would account for such receipts in advance as contract
liabilities as we regard Kunshan Tingshe as our agent to receive such advance payments on our
behalf which were cleared and settled to us regularly. As at December 31, 2019, 2020, 2021 and
2022, our contract liabilities amounted to RMB13.5 million, RMB64.5 million, RMB59.3 million
and RMB31.4 million, respectively. There is no assurance that we will be able to fulfill our
obligations in respect of contract liabilities as provision of our products to our distributors
through Kunshan Tingshe is subject to various factors, including the production of our products
from third-party manufacturers. If we are not able to fulfill our obligations with respect to our
contract liabilities, the amount of contract liabilities will not be recognized as revenue, and we
may have to return the advance payment made by our distributors. As a result, our results of
operations, liquidity and financial position may be materially and adversely affected.
Settlement of investment in our TV programs is non-recurring in nature.
For the year ended December 31, 2020, we recorded other gains of RMB9.4 million which
represented the settlement sum paid by an Independent Third Party for the early termination of
its investment in J-Style Trip season one. For details, please refer to the section headed
“Financial information – Description of major components of our results of operations – Other
gains/(losses), net” in this prospectus and note 6 in the Accountant’s Report in Appendix I to
this prospectus. The settlement of investment in our TV programs is non-recurring in nature.
Third party investor(s) may decide to reduce, delay or discontinue the investment by amending
or terminating the investment agreement with us and we cannot assure you that we would be
able to reach a settlement with such investor(s) in the future.
The non-recurring nature of government grant could materially and adversely affect our
business, financial condition and results of operations.
During the Track Record Period, our Group received a government grant from the PRC
government as support to our operations. In particular, we received government grants of
RMB16.5 million for 2022 primarily comprised (i) the financial subsidies received from the
Department of Finance in Kunshan for the efforts of maintaining stability of employees and
business during the pandemic; and (ii) one-off awards from the government for our contribution
to the business of Kunshan Huaqiao Economic Development Zone. For details, please refer to
the note 6 in the Accountant’s Report in Appendix I to this prospectus.
We cannot assure you that we will be able to receive government grant in the future. As
government grant contributed certain portion of our profitability during the Track Record Period,
the non-recurring nature of government grant to us may affect our profitability. Hence, our
business, financial condition and results of operations could be affected as a result of the
non-recurring nature of government grants.
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A severe and prolonged economic downturn may negatively impact the consumer
discretionary spending and demand for our products and services, thus adversely affect our
results of operations and financial condition.
Our products may be considered as discretionary items for the consumers. Factors affecting
the level of consumer spending for such discretionary items include general economic conditions
and other factors, such as consumers’ confidence in the future economic conditions, consumer
sentiment, the availability and cost of consumer credit, levels of unemployment and tax rates.
Unfavorable economic conditions may cause consumers to delay or reduce the purchases of our
products and consumers’ demand for our products may not grow as we expect. Our sensitivity to
economic cycles and any related fluctuations in consumers’ demand for our products and
services may have an adverse effect on our results of operations and financial condition.
Security breaches and attacks against our systems and network may lead to the leakage and
unauthorized disclosure of data and information that we gather, which may thus harm our
brand image, our business and results of operations.
Despite the security measures that we have implemented, we may experience cyber-attacks
of varying degrees, including the attempts to hack into our cloud or our intranet and steal
customer and business information or obtain economic benefits from us. Our security measures
may also be breached due to employee errors, malfeasance or otherwise. Additionally, outside
parties may attempt to fraudulently induce our employees to disclose sensitive information in
order to gain access to our data, or may otherwise obtain access to such data. Any such breach
or unauthorized access could result in significant legal and financial exposure, damage to our
reputation and a loss of confidence in the security of our information system that could deter our
customers from engaging with us, and have an adverse effect on our business and results of
operations.
Due to the techniques being used to obtain unauthorized access, disable or degrade service
or sabotage systems change frequently and often are not recognized until launched against a
target, we may be unable to anticipate these techniques or to implement adequate preventative
measures. If an actual or perceived breach of our security occurs, our customers’ and business
partners’ perception of the effectiveness of our security measures could be harmed, we could
lose customers and business partners. Also, we may not be able to maintain the level of
engagement with customers and business partners and we could be exposed to significant legal
and financial risks, including legal claims and regulatory fines and penalties. Any of these
actions could have a material and adverse effect on our business and results of operations.
Failure to successfully operate and upgrade our information systems and procedures, and
the inability to implement new technologies in a timely fashion, either may have a material
adverse effect on our business, financial condition and results of operations.
As we grow our business, we will continue to invest in, implement and upgrade our
information technology systems and procedures. Without these improvements, our operations
might suffer from unanticipated system disruptions, slow data processing, unreliable service
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levels, impaired quality or delays in reporting accurate information, any of which could
negatively affect our reputation and our ability to attract and retain customers. However, such
upgrades may subject us to inherent costs and risks associated with changes to these systems,
including potential disruption of our internal control structure, additional administration and
operating expenses, failure to acquire or retain sufficiently skilled personnel to implement and
operate the new systems, demands on management time and other risks and costs of delays or
difficulties in transitioning to or integrating new systems into our current systems. If we fail to
respond to the technological changes or to adequately maintain and upgrade our systems and
infrastructure in response to the changing business needs in a timely, effective and cost-efficient
fashion, our business could be adversely affected.
We require various approvals, licenses, permits and registrations to operate our business
and any failure to obtain or renew any of these approvals, licenses, permits and
registrations or any failure to attain the above pursuant to the new enactment of
government policies, laws or regulations could materially and adversely affect our business
and results of operations.
Social media based e-commerce industry is highly regulated, and requires multiple licenses,
permits and approvals to conduct and develop business. As we increase our product and service
offerings, we may also become subject to new or existing laws and regulations that did not apply
to us before. In August 2018, the SCNPC promulgated the E-Commerce Law, which imposed a
number of new requirements and obligations on e-commerce platform operators. Pursuant to the
relevant PRC laws and regulations, e-commerce business operators shall operate legally and
fulfill relevant obligations in terms of protection of consumers’ rights and interests, intellectual
property rights as well as cybersecurity and personal information. We have adopted a series of
measures to comply with the requirements under the E-Commerce Law.
While we currently hold all the material licenses and permits required for our business
operations, we cannot assure you that we will not be subject to any penalties or disciplinary
actions in the future. For more details in relation to the licenses, permits and approvals which
we possess in order to operate our business, please refer to the section headed “Business –
Licenses, regulatory approvals and permits” in this prospectus. In addition, certain licenses,
permits or registrations which we hold are subject to periodic renewal. If we fail to maintain or
renew one or more of our licenses and certificates when their current term expires, or obtain
such renewals on a timely manner, our operations could be disrupted, and we may face penalties
and in extreme circumstances, order to suspend or terminate our website and online business.
Further, due to the uncertainties of interpretation and implementation of existing laws and
the adoption of additional laws and regulations, the licenses, permits, registrations or filings that
we held may be deemed insufficient by the PRC governments, which may restrain our ability to
expand our business scope and may subject us to fines or other regulatory actions. Furthermore,
as we develop and expand our business scope, we may need to obtain additional permits and
licenses and we cannot assure that we will be able to obtain such permits in a timely fashion or
at all. Complying with the government regulations may require substantial expenses, and any
non-compliance may expose us to liabilities. In case of any non-compliance, we may have to
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incur significant expenses and divert substantial management’s time and resources to resolving
any deficiencies. We may also experience negative publicity arising from such deficiencies,
which may materially and adversely affect our business and financial performance.
We face potential liabilities, expenses for legal claims and harm to our business based on
the nature of our convention business.
We are subject to laws, regulations and other obligations relating to our conventions. We
may incur significant expenses to comply with the applicable laws and regulations. We are
required to obtain approvals, permits and files with respect to the conventions or activities from
governmental authorities of public security and commerce at multiple levels, and we may face
delays or obstacles in obtaining the requisite approvals, permits and files to host such
conventions or activities. Once we encounter delays in obtaining or failure to obtain the
requisite approvals, permits and files to host such conventions or activities, our sales, and results
of operations may be adversely affected. In addition, we also face potential liabilities and
expenses for legal claims relating to the convention business, including potential claims related
to event injuries allegedly caused by us, creators, service providers, partners or unrelated third
parties. For example, third parties could assert legal claims against us in connection with
personal injuries related to occurrences at a convention or other events. Even if our personnel
are not involved in these occurrences, we may face legal claims and still incur substantial
expenses to resolve such claims.
Changes and misuse of our return and exchange policies may adversely affect our business
and results of operations.
We have adopted shipping policies that do not necessarily pass the full cost of shipping
onto our customers. We have also adopted return and exchange policies that allows customers to
return the products within seven days without cause, or to exchange the products within 30 days
without cause. We may also be legally required to adopt new or amend existing return and
exchange policies from time to time. However, these policies also subject us to additional costs
and expenses which we may not recoup through increased revenues. If our delivery, return and
exchange policies are misused by a significant number of customers or if the return or exchange
rates increase beyond historical records or otherwise substantially, our costs may increase
significantly and our results of operations may be materially and adversely affected. If we revise
these policies to reduce our costs and expenses, our customers may be dissatisfied, which may
result in the loss of existing customers or failure to acquire new customers at a desirable pace,
which may materially and adversely affect our results of operations.
We have limited business insurance coverage which could expose us to significant costs and
business disruptions.
Insurance companies in China currently do not offer as extensive an array of insurance
products as insurance companies do in more developed economies. We do not have any business
liability or disruption insurance to cover our operations. We have determined that the costs of
insuring for these risks and the difficulties associated with acquiring such insurance on
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commercially reasonable terms make it impractical for us to have such insurance. Any uninsured
occurrence may disrupt our business operations, require us to incur substantial costs and divert
our resources, which could have an adverse effect on our results of operations and financial
condition. Please refer to the section headed “Business – Insurance” in this prospectus for more
details on our insurance policies.
Some of our leased properties did not complete registration procedures at relevant
authorities and have title defects.
Our principal executive offices are located on leased premises in Kunshan, Jiangsu
Province. Under the relevant PRC laws, all lease agreements are required to be registered with
the relevant land and real estate administration bureaus. However, as of the Latest Practicable
Date, all lease agreements with respect to our leased properties had not been registered and filed
with the relevant land and real estate administration bureaus in the PRC because the relevant
lessors failed to provide necessary documents for us to register the leases with the local
government authorities. As advised by our PRC Legal Advisors, failure to complete the
registration and filing of lease agreements will not affect the validity of the lease agreements or
result in us being required to vacate the leased properties. However, the relevant PRC authorities
may impose a fine ranging from RMB1,000 to RMB10,000 for each of such lease agreements.
For details, please refer to the section headed “Business – Properties – Leased properties” in this
prospectus.
In addition, as of the Latest Practicable Date, with respect to six out of 40 of our leased
properties in the PRC, the lessors have not provided valid title certificates, valid title certificates
for commercial purpose or relevant authorization documents evidencing their rights to lease the
properties. For details, please refer to the section headed “Business – Properties – Leased
Properties” in this prospectus. As a result, we cannot assure you that we will not be subject to
any challenges, lawsuits or other actions taken against us with respect to the properties leased by
us for which the relevant lessors do not hold valid title certificates. Any disputes or claims in
relation to the titles of the properties that we occupy, including any litigations involving
allegations of illegal or unauthorized use of these properties, could require us to relocate our
offices and staff quarters occupying these properties. If any of our leases are terminated or
voided as a result of the challenges from third parties or the government, we would need to seek
alternative premises and incur relocation costs. Any relocation could disrupt our operations and
adversely affect our business, financial condition, results of operations and growth prospects.
We established the mechanism of share incentives and will continue to grant share option
plan in the future, which may result in increased share-based compensation expenses and
negatively impact our results of operations upon its implementation, and any options
granted under the Post-IPO Share Option Scheme may dilute the Shareholders’ equity
interests.
On June 19, 2023, our Board approved the establishment of the Post-IPO Share Option
Scheme. The Post-IPO Share Option Scheme shall be valid and effective for 10 years from the
Listing Date. The maximum number of Shares that may be issued pursuant to all awards under
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the Post-IPO Share Option Scheme shall be 80,000,000 Shares. Please refer to the section
headed “Statutory and general information – D. Share Option Schemes – 2. Post-IPO Share
Option Scheme” in Appendix V to this prospectus. We believe the granting of share-based
compensation is of significant importance to our ability to attract and retain key personnel and
employees, and we will continue to grant share-based compensation to employees in the future.
As a result, our expenses associated with share-based compensation may increase, which may
have an adverse effect on our results of operations. In addition, any additional grant of
share-based awards will also dilute existing shareholders’ shareholding.
Any future natural disasters, acts of war or terrorism, the outbreak of any contagious
disease, epidemic or the occurrence of other incidents that are beyond our control may
adversely affect our business, financial condition and results of operations.
Natural disasters, acts of war or terrorism or other factors beyond our control may
adversely affect the economy, infrastructure and livelihood of the people in the regions where
we conduct our business. Our operations may be under the threat of floods, earthquakes,
sandstorms, snowstorms, fire or drought, power, water or fuel shortages, failures, malfunction
and breakdown of the information management systems, unexpected maintenance or technical
problems, or are susceptible to potential wars or terrorist attacks. Serious natural disasters may
result in the loss of life, injury, destruction of assets and disruption of our business and
operations. Acts of war or terrorism may also injure our employees, cause the loss of lives,
disrupt our business networks and destroy our markets. Any of the aforementioned factors and
other factors which beyond our control could have an adverse effect on the overall business
sentiment and environment, cause uncertainties in the regions where we conduct our business,
cause our business to suffer in ways that we cannot predict and materially and adversely impact
our business, financial condition and results of operations.
We cannot guarantee that we will not be involved in claims, disputes or legal proceedings
during our ordinary course of business.
From time to time, we may be involved in claims, disputes or legal proceedings during our
ordinary course of business. These may concern issues relating to, among others, product quality
incidents relating to our health and beauty products, environmental matters, breach of contract,
employment or labor disputes and the infringement of our intellectual property rights. As of the
Latest Practicable Date, we were not involved in any litigations or legal proceedings that may
materially affect our business and results of operations. Any claims, disputes or legal
proceedings initiated by us or brought against us, with or without merit, may result in
substantial costs and diversion of resources, and if we are unsuccessful, could materially harm
our reputations. Furthermore, claims, disputes or legal proceedings against us may be due to
defective supplies sold to us by our suppliers, who may not be able to indemnify us in full and
in a timely manner, or at all, for any costs that we incur as a result of such claims, disputes and
legal proceedings. For more details, please refer to the section headed “Business – Legal
proceedings and compliance matters” in this prospectus.
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Our business operations may be subject to seasonality.
Our results of operations, in particular for our new retail segment, may be affected by our
promotional and marketing activities, which may be subject to different shopping festivals
during the year. For example, we may record higher sales volume of our products during 618
campaign in second quarter and/or Double 11 and Double 12 campaigns in fourth quarter during
each year. Accordingly, various aspects of our operations, including sales, working capital and
operating cashflow, may be exposed to the risks associated with seasonable fluctuations in
demand of our products, and our half year results may not reflect our full year results going
forward.
RISKS RELATING TO DOING BUSINESS IN THE PRC
As all of our operations are conducted in China, we are vulnerable to adverse changes in
China’s political, economic, and social conditions as well as government policies which
could negatively impact our business, prospects and results of operations.
Substantially all of our assets and operations are located in China. Accordingly, our
business, prospects, financial condition and results of operations may be influenced to a
significant degree by the political, economic and social conditions in China generally and by
continued economic growth in China as a whole.
China’s economy has been transitioning from a planned economy towards a more
market-oriented economy. However, a substantial portion of productive assets in China remain
state-owned and the PRC government exercises a high degree of control over these assets. The
Chinese economy differs from the economies of most developed countries in many respects,
including the amount of government involvement, level of development, growth rate, control of
foreign exchange and allocation of resources. Although the Chinese government has
implemented measures to emphasize the utilization of market forces for economic reform, the
reduction of state ownership of productive assets and the establishment of improved corporate
governance in the business enterprises, a substantial portion of the productive assets in China is
still owned by the government. In addition, the Chinese government continues to play a
significant role in regulating industry development by imposing industrial policies. The Chinese
government also exercises significant control over China’s economic growth by allocating
resources, controlling payment of foreign currency-denominated obligations, setting monetary
policies and providing preferential treatment to particular industries or companies.
While the PRC economy has experienced significant growth over the past decades, growth
has been uneven, both geographically and among various sectors of the economy. In addition,
the rate of growth has been slowing since 2012, and the impact of COVID-19 on the Chinese
and global economies in 2020 was severe. In particular, National Bureau of Statistics of China
reported a 6.8% drop in gross domestic product (GDP) for the first quarter of 2020 as compared
with the same period in 2019. Any adverse changes in the economic conditions in China, in the
policies of the PRC government or in the laws and regulations in China could have a material
adverse effect on the overall economic growth of China. Such developments could adversely
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affect our business and operating results, lead to the reduction in demand for our solutions and
services, thus adversely affect our competitive position.
The PRC government has implemented various measures to encourage economic growth
and guide the allocation of resources. Some of these measures may benefit the overall PRC
economy, but may have a negative effect on us. For instance, our financial condition and results
of operations may be adversely affected by government’s control over capital investments or
changes in tax regulations. In addition, in the past, the PRC government has implemented certain
measures, including interest rate adjustments, to control the pace of economic growth. These
measures may cause the decline of economic activities in China, which may adversely affect our
business and results of operations.
Uncertainties with respect to the interpretation and enforcement of the PRC laws and
regulations could limit the legal protections available to you and us.
The PRC legal system is based on written statutes. Unlike common law systems, it is a
system in which legal cases have limited precedential value. In the late 1970s, the PRC
government began to promulgate a comprehensive system of laws and regulations governing
economic matters in general. The overall effect of legislation over the past three decades has
significantly increased the protections provided to various forms of foreign or private sector
investment in China. Our PRC subsidiaries are subject to various PRC laws and regulations
generally applicable to companies in China. However, since these laws and regulations are
relatively new and the PRC legal system continues to rapidly evolve, the interpretations of many
laws, regulations and rules are not always uniform and the enforcement of these laws,
regulations and rules involves uncertainties.
From time to time, we may have to resort to administrative and court proceedings to
enforce our legal rights. However, since PRC administrative and court authorities may differ in
their discretion in interpreting and implementing statutory and contractual terms, it may be more
difficult to evaluate the outcome of the administrative and court proceedings and the level of
legal protections we enjoy than in more developed legal systems. Furthermore, the PRC legal
system is based in part on government policies and internal rules, some of which are not
published in a timely manner or at all, but which may have retroactive effect. As a result, we
may not be aware of our violation of these policies and rules until sometime after the violation.
Such uncertainties, including the uncertainties over the scope and effect of our contractual,
property (including intellectual property) and procedural rights, and any failure to respond to the
changes in the regulatory environment in China could materially and adversely affect our
business and therefore impede our ability to continue our operations.
We may be adversely affected by the complexity, uncertainties and changes in the PRC
regulation of Internet-related businesses and companies.
The PRC government extensively regulates the Internet industry, including foreign
ownership of, and the licensing and permit requirements pertaining to, companies in the Internet
industry. These Internet-related laws and regulations are relatively new and evolving, and their
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interpretation and enforcement involve significant uncertainties. As a result, in certain
circumstances it may be difficult to determine what actions or omissions may be deemed to be in
violation of the applicable laws and regulations.
The evolving PRC regulatory system for the Internet industry may lead to the establishment
of new regulatory agencies. For example, in May 2011, the State Council announced the
establishment of the State Internet Information Office (with the involvement of the State Council
Information Office, MIIT, and the Ministry of Public Security). The primary role of the State
Internet Information Office is to facilitate the policy-making and legislative development in this
field, to direct and coordinate with the relevant departments in connection with the online
content administration and to deal with cross-ministry regulatory matters in relation to the
internet industry.
Due to the increasing popularity and the use of the Internet and other online services, with
respect to online sales, advertising, customer acquisition, data acquisition and usage, or
otherwise related to the Internet industries, a number of laws and regulations have been adopted
and it is possible that more will be adopted in the future. The adoption of additional laws or
regulations, the application to our business of laws and regulations from jurisdictions whose
laws do not currently apply to our business, or the application to our business of existing laws
and regulations that are traditionally not applicable to digital forms of services, may heighten
the requirements for us to conduct our operations, which could in turn, increase our cost of
doing business, disrupt our operations and impede the development or growth of the Internet
industry generally.
We cannot assure you that subsequent laws and regulations or interpretation of existing
ones would not render our operations non-compliant or that we would always be in full
compliance with the applicable laws and regulations. In the event that we must remedy any
violations, we may be required to modify our business models in a manner that undermines the
experience of our customers. We may also become subject to fines or other penalties and, if we
determine that the requirements to operate in compliance are overly burdensome, we may elect
to terminate the non-compliant operations. In each case, our business, financial condition and
results of operations may be materially and adversely affected.
The M&A Rules and certain other PRC regulations establish complex procedures for some
acquisitions of Chinese companies by foreign investors, which could make it more difficult
for us to pursue growth through acquisitions in China.
The Regulations on Mergers and Acquisitions of Domestic Companies by Foreign Investors,
or the M&A Rules, adopted by six PRC regulatory agencies in 2006 and amended in 2009, and
some other regulations and rules concerning mergers and acquisitions established complex
procedures and requirements for some acquisitions of Chinese companies by foreign investors,
including requirements in some instances that the MOFCOM be notified in advance of any
change-of-control transaction in which a foreign investor takes control of a PRC domestic
enterprise. Moreover, the Anti-Monopoly Law promulgated by the SCNPC which became
effective in 2008 requires that transactions which are deemed concentrations and involve parties
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with specified turnover thresholds must be cleared by MOFCOM before they can be completed.
In addition, the security review rules issued by the MOFCOM that became effective in
September 2011 specify that mergers and acquisitions by foreign investors that raise “national
defense and security” concerns and mergers and acquisitions through which foreign investors
may acquire de facto control over domestic enterprises that raise “national security” concerns
are subject to strict review by the MOFCOM, and the rules prohibit any activities attempting to
bypass a security review, including by structuring a transaction through a proxy or contractual
control arrangement.
In the future, we may pursue potential strategic acquisitions that are complementary to our
business and operations. Complying with the requirements of the above-mentioned regulations
and other relevant rules to complete such transactions could be time-consuming, and any
required approval processes, including obtaining approval or clearance from MOFCOM, may
delay or inhibit our ability to complete such transactions, which could affect our ability to
expand our business or maintain our market share.
Y ou may experience difficulties in effecting service of legal process, enforcing foreign
judgments or bringing actions in China against us or our management named in the
Prospectus based on foreign laws.
We are an exempted company incorporated under the laws of the Cayman Islands. However,
we conduct substantially all of our operations in China and substantially all of our assets are
located in China. As a result, it may be difficult for you to effect service of process upon us or
our management named in the prospectus inside mainland China. It may also be difficult for you
to enforce in U.S. courts of the judgments obtained in the U.S. courts based on the civil liability
provisions of the U.S. federal securities laws against us and our officers and Directors as most
of them currently reside outside the United States. In addition, there is uncertainty as to whether
the courts of the Cayman Islands or the PRC would recognize or enforce judgments of the U.S.
courts against us or such persons predicated upon the civil liability provisions of the securities
laws of the United States or any state.
The recognition and enforcement of foreign judgments are provided for under the PRC
Civil Procedures Law. PRC courts may recognize and enforce foreign judgments in accordance
with the requirements of the PRC Civil Procedures Law based on either treaties between China
and the country where the judgments are made or on principles of reciprocity between
jurisdictions. China does not have any treaties or other forms of written arrangement with the
United States that provide for the reciprocal recognition and enforcement of foreign judgments.
In addition, according to the PRC Civil Procedures Law, the PRC courts will not enforce a
foreign judgment against us or our Directors and officers if they decide that the judgment
violates the basic principles of the PRC laws or national sovereignty, security or public interest.
As a result, it is uncertain whether and on what basis a PRC court would enforce a judgment
rendered by a court in the United States.
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We may be classified as a “PRC resident enterprise” for PRC enterprise income tax
purposes, which could result in unfavorable tax consequences to us and our Shareholders
and have a material adverse effect on our results of operations and the value of your
investment.
Under the PRC Enterprise Income Tax Law and its implementation rules, an enterprise
established outside of the PRC with a “de facto management body” within the PRC is considered
a “resident enterprise” and will be subject to the enterprise income tax on its global income at
the rate of 25%. The implementation rules define the term “de facto management body” as the
body that exercises full and substantial control over and overall management of the business,
productions, personnel, accounts and properties of an enterprise. In April 2009, the SAT issued a
circular, known as Circular 82, which provides certain specific criteria for determining whether
the “de facto management body” of a PRC-controlled enterprise that is incorporated offshore is
located in China. Although this circular only applies to offshore enterprises controlled by PRC
enterprises or PRC enterprise groups, not those controlled by PRC individuals or foreigners like
us, the criteria set forth in the circular may reflect the SAT’s general position on how the “de
facto management body” test should be applied in determining the tax resident status of all
offshore enterprises.
In addition, according to Circular 82, an offshore incorporated enterprise controlled by a
PRC enterprise or a PRC enterprise group will be regarded as a PRC tax resident by virtue of
having its “de facto management body” in China and will be subject to PRC enterprise income
tax on its global income only if all of the following conditions are met: (i) the primary location
of the day-to-day operational management is in the PRC; (ii) decisions relating to the
enterprise’s financial and human resource matters are made or are subject to approval by
organizations or personnel in the PRC; (iii) the enterprise’s primary assets, accounting books and
records, company seals, the board and shareholder resolutions, are located or maintained in the
PRC; and (iv) at least 50% of the voting board members or senior executives habitually reside in
the PRC.
We believe none of our entities outside of China is a PRC resident enterprise for PRC tax
purposes. However, the tax resident status of an enterprise is subject to determination by the
PRC tax authorities and uncertainties remain with respect to the interpretation of the term “de
facto management body.” As substantially all of our management members are based in China, it
remains unclear how the tax residency rule will apply to our case. If the PRC tax authorities
determine that we or any of our subsidiaries outside of China is a PRC resident enterprise for
PRC enterprise income tax purposes, then we or such subsidiary could be subject to PRC tax at
a rate of 25% on our or the subsidiary’s worldwide income, which could materially reduce our
net income. In addition, we will also be subject to PRC enterprise income tax reporting
obligations.
Furthermore, if the PRC tax authorities determine that we are a PRC resident enterprise for
enterprise income tax purposes, dividends paid by us will, and gains realized on the sale or other
disposition of our ordinary shares may be subject to PRC tax, at a rate of 10% in the case of
non-PRC enterprises or 20% in the case of non-PRC individuals (in each case, subject to the
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provisions of any applicable tax treaty), and in the case of dividends, the PRC tax will be
withheld at source if such dividends or gains are deemed to be from PRC sources. It is unclear
whether non-PRC shareholders of our Company would be able to claim the benefits of any tax
treaties between their country of tax residence and the PRC in the event that we are treated as a
PRC resident enterprise. Any such tax may reduce the returns on your investment in our Shares.
PRC regulations related to the establishment of offshore special purpose vehicles by PRC
residents may subject our PRC resident Shareholders to personal liabilities, and restrict
our ability to inject capital into our PRC subsidiaries and our PRC subsidiaries’ ability to
distribute profits to us, or otherwise affect our financial position.
The SAFE has promulgated several regulations that require PRC residents and PRC
corporate entities to register with, and obtain approval from, local branches of the SAFE and/or
their designated commercial banks in connection with their direct or indirect offshore investment
activities. The SAFE Circular 37, was promulgated by the SAFE in July 2014 that requires PRC
residents or entities to register with the SAFE or its local branch or designated commercial
banks in connection with their establishment or control of an offshore entity established for the
purpose of overseas investment or financing. These regulations apply to our Shareholders who
are PRC residents and may apply to any offshore acquisitions that we make in the future.
Under these foreign exchange regulations, PRC residents who make, or have previously
made, prior to the implementation of these foreign exchange regulations, direct or indirect
investments in the offshore companies are required to register those investments. In addition,
any PRC resident who is a direct or indirect shareholder of an offshore company is required to
update the previously filed registration with the local branch or commercial banks of the SAFE,
with respect to that offshore company, to reflect any material changes involving its round-trip
investment, capital variation, such as an increase or decrease in capital, transfer or swap of
shares, merger or division. If any PRC shareholder fails to make the required registration or
update the previously filed registration, the PRC subsidiary of that offshore parent company may
be restricted from distributing their profits and the proceeds from any reduction in capital, share
transfer or liquidation to their offshore parent company, and the offshore parent company may
also be restricted from injecting additional capital into its PRC subsidiary.
Moreover, failure to comply with the various foreign exchange registration requirements
described above could result in liabilities under PRC laws for evasion of applicable foreign
exchange restrictions, including (i) the requirement by the SAFE to return the foreign exchange
remitted overseas within a period of time specified by the SAFE, with a fine of up to 30% of the
total amount of foreign exchange remitted overseas and deemed to have been evasive or illegal;
and (ii) in circumstances involving serious violations, a fine of no less than 30% of and up to
the total amount of remitted foreign exchange deemed evasive or illegal.
In addition, we may not always be able to compel them to comply with SAFE Circular 37
or other related regulations. Failure by any such Shareholders to comply with SAFE Circular 37
or other related regulations could subject us to fines or legal sanctions, restrict our investment
activities in the PRC and overseas or cross-border investment activities, limit our subsidiaries’
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ability to make distributions, pay dividends or other payments to us or affect our ownership
structure, which could adversely affect our business and prospects. As of the Latest Practicable
Date, we cannot assure you that our individual Shareholders who are PRC citizens have
completed their registration under the SAFE Circular 37.
As there is uncertainty concerning the reconciliation of these foreign exchange regulations
with other approval requirements, it is unclear how these regulations, and any future regulations
concerning offshore or cross-border transactions, will be interpreted, amended and implemented
by the relevant governmental authorities. We cannot predict how these regulations will affect our
business operations or future strategies. For instance, we may be subject to a more stringent
review and approval process with respect to our foreign exchange activities, such as remittance
of dividends and foreign currency-denominated borrowings, which may adversely affect our
results of operations and financial condition. In addition, if we decide to acquire a PRC
domestic company, we cannot assure you that we or the owners of such company, as the case
may be, will be able to obtain the necessary approvals or complete the necessary filings and
registrations required by the foreign exchange regulations. This may restrict our ability to
implement our acquisition strategies and could adversely affect our business and prospects.
We may rely on dividends and other distributions on equity paid by our PRC subsidiaries
to fund any cash and financing requirements that we may have, the PRC government’s
control of foreign currency conversion may limit our foreign exchange transactions,
including dividend payments on our Shares.
The PRC government imposes controls on the convertibility of the RMB into foreign
currencies and, in certain cases, the remittance of currency out of China. We receive
substantially all of our net revenues in RMB. Under our current corporate structure, our
Company in the Cayman Islands relies on dividend payments from our PRC subsidiaries to fund
any cash and financing requirements that we may have. Under the existing PRC foreign
exchange regulations, payments of current account items, such as profit distributions, trade and
service-related foreign exchange transactions, can be made in foreign currencies without prior
approval from the SAFE by complying with certain procedural requirements. Therefore, our PRC
subsidiaries are able to pay dividends in foreign currencies to us without prior approval from
SAFE, subject to the condition that the remittance of such dividends outside of the PRC
complies with certain procedures under PRC foreign exchange regulation, such as the overseas
investment registrations by the beneficial owners of our Company who are PRC residents.
However, approval from or registration with appropriate governmental authorities or their
designated agencies like commercial banks is required where RMB is to be converted into
foreign currency and remitted out of China to pay capital expenses such as the repayment of
loans denominated in foreign currencies.
In light of the flood of capital outflows of China in 2016 due to the weakening of RMB,
the PRC government has imposed more restrictive foreign exchange policies and stepped up
scrutiny of major outbound capital movement. More restrictions and substantial vetting process
are put in place by SAFE to regulate cross-border transactions falling under the capital account.
The PRC government may at its discretion further restrict access to foreign currencies in the
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future for current account transactions. If the foreign exchange control system prevents us from
obtaining sufficient foreign currency to satisfy our foreign currency demands, we may not be
able to pay dividends in foreign currencies to our Shareholders.
Heightened scrutiny from the PRC tax authorities over the indirect transfer of equity
interests in PRC resident enterprises by their non-PRC holding companies may have a
negative impact on our business operations, our acquisitions or restructuring strategy or
the value of your investment in us.
Pursuant to the Circular 698, where a non-resident enterprise investor transfers equity
interests in a PRC resident enterprise indirectly by way of disposing of equity interests in an
overseas holding company, the non-resident enterprise investor, being the transferor, may be
subject to PRC enterprise income tax, if the indirect transfer is considered to be an abusive use
of company structure without reasonable commercial purposes. As a result, gains derived from
such indirect transfer may be subject to PRC withholding tax at the rate of up to 10%. In
addition, the PRC resident enterprise may be required to provide necessary assistance to support
the enforcement of Circular 698.
Circular 7 has introduced a new tax regime that is significantly different from that under
Circular 698. Circular 7 extends its tax jurisdiction to not only indirect transfers set forth under
Circular 698 but also transactions involving transfer of other PRC taxable assets through the
offshore transfer of a foreign intermediate holding company. In addition, Circular 7 provides
clearer criteria than Circular 698 on how to assess reasonable commercial purposes and has
introduced safe harbors for internal group restructurings and the purchase and sale of equity
through a public securities market. Circular 7 also brings challenges to both the foreign
transferor and transferee (or other person who is obligated to pay for the transfer) of the taxable
assets. Where a non-resident enterprise conducts an “indirect transfer” by transferring the
taxable assets indirectly by disposing of the equity interests of an overseas holding company, the
non-resident enterprise being the transferor, or the transferee, or the PRC entity which directly
owned the taxable assets may report to the relevant tax authority such indirect transfer. Using a
“substance over form” principle, the PRC tax authority may re-characterize such indirect transfer
as a direct transfer of the equity interests in the PRC tax resident enterprise and other properties
in China. As a result, gains derived from such indirect transfers may be subject to PRC
enterprise income tax, and the transferee or other person who is obligated to pay for the transfer
is obligated to withhold the applicable taxes, currently at a rate of up to 10% for the transfer of
equity interests in a PRC resident enterprise. Both the transferor and the transferee may be
subject to late payment fees and penalties under PRC tax laws if the transferee fails to withhold
the taxes and the transferor fails to pay the taxes on a timely manner.
We face uncertainties with respect to the reporting and consequences of private equity
financing transactions, share exchange or other transactions involving the transfer of shares in
our Company by investors that are non-PRC resident enterprises, or sale or purchase of shares in
other non-PRC resident companies, or other taxable assets, by us. Our Company and other
non-resident enterprises of ours may be subject to filing or tax obligations if our Company and
other non-resident enterprises of ours are transferors in such transactions, and we may be subject
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to withholding obligations if our Company and other non-resident enterprises of ours are
transferees in such transactions, under Circular 7. For the transfer of shares in our Company by
investors that are non-PRC resident enterprises, our PRC subsidiaries may be requested to assist
in the filing under Circular 7. As a result, we may be required to expend valuable resources to
comply with Circular 7 or to request the relevant transferors from whom we purchase taxable
assets to comply with these circulars, or to establish that our Company and other non-resident
enterprises of ours should not be taxed under these circulars. The PRC tax authorities have the
discretion under Circular 7 to make adjustments to the taxable capital gains based on the
difference between the fair value of the taxable assets transferred and the cost of investment. If
the PRC tax authorities make adjustments to the taxable income of the transactions under
Circular 7, our income tax costs associated with such transactions may be increased, which may
have an adverse effect on our financial condition and results of operations. We may conduct
acquisitions in the future. We cannot assure you that the PRC tax authorities will not, at their
discretion, adjust any capital gains and impose tax return filing obligations on us or require us to
provide assistance to them for the investigation of any transactions which we were involved in.
Heightened scrutiny over acquisition transactions by the PRC tax authorities may have a
negative impact on the potential acquisitions that we may pursue in the future.
PRC regulation of loans to and direct investments in PRC entities by offshore holding
companies may delay or prevent us from using the proceeds of the Global Offering to make
loans or additional capital contributions to our PRC subsidiaries, which could materially
and adversely affect our liquidity and our ability to fund and expand our business.
Any funds that we transfer to our PRC subsidiaries, either as a shareholder loan or as an
increase in the registered capital, are subject to approval by, or registration with, relevant
governmental authorities or their designated agencies such as commercial banks in China.
According to the relevant PRC regulations on foreign-invested enterprises in China, capital
contributions to our PRC subsidiaries are subject to the requirement of making necessary filings
in the Foreign Investment Comprehensive Management Information System (“ FICMIS ”), and
registration with other governmental authorities or designated commercial banks in China. In
addition, (i) any foreign loans procured by our PRC subsidiaries is required to be registered with
SAFE, or its local branches or designated commercial banks; and (ii) each of our PRC
subsidiaries may not procure loans which exceed the difference between its registered capital
and its total investment amount as recorded in FICMIS or twice the net assets of such applicable
PRC subsidiary. Any medium- or long-term loan exceeding one year to be provided by us must
be recorded and registered by the National Development and Reform Committee and the SAFE
or its local branches. We may not be able to complete such recording or registrations on a timely
basis, if at all, with respect to future capital contributions or foreign loans by us directly to our
PRC subsidiaries. If we fail to complete such recording or registration, our ability to use the
proceeds of this offering and to capitalize our PRC operations may be negatively affected, which
could adversely affect our liquidity and our ability to fund and expand our business.
On March 30, 2015, the SAFE promulgated the Circular on Reforming the Management
Approach Regarding the Foreign Exchange Capital Settlement of Foreign-Invested Enterprises
(the “ SAFE Circular 19 ”,ٙ
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). SAFE Circular 19 took effect as of June 1, 2015. SAFE Circular 19 launched a
nationwide reform of the administration of the settlement of the foreign exchange capital of
foreign-invested enterprises and allows foreign-invested enterprises to settle their foreign
exchange capital at their discretion, but continues to prohibit foreign-invested enterprises from
using RMB funds converted from their foreign exchange capital for expenditures beyond their
business scope, and other prohibited uses thereunder. On June 9, 2016, the SAFE promulgated
the Circular on the Reform and Standardization of the Management Policy of the Settlement of
Capital Account (the “ SAFE Circular 16 ”,ձ஝ᇍ༟͉ධͦഐි၍ଣ
). SAFE Circular 19 and SAFE Circular 16 continue to prohibit foreign-invested
enterprises consistent with SAFE Circular 19 from, among other things, using RMB fund
converted from its foreign exchange capital for expenditure beyond its business scope,
investment and financing of securities investment or non-guaranteed bank products, providing
loans to non-affiliated enterprises (except for those permitted within the business scope) or
constructing or purchasing real estate not for self-use. SAFE Circular 19 and SAFE Circular 16
may significantly limit our ability to transfer to and use in China with the net proceeds from this
offering, which may adversely affect our business, financial condition and results of operations.
We may be subject to the filing requirement with the CSRC if our Listing is not completed
before September 30, 2023.
On February 17, 2023, with the approval of the State Council, the CSRC released the Trial
Measures and five supporting guidelines, along with the Notice on Administration for the Filing
of Overseas Offering and Listing by Domestic Companies (၍ଣ
ٝi.e. the Notice), pursuant to which, PRC domestic companies that seek to offer and
list securities in overseas markets, either in direct or indirect means, are required to fulfill the
filing procedure with the CSRC and report relevant information, unless the domestic companies
(i) have already obtained the approval from overseas regulatory authorities or stock exchanges
(which, according to the Notice, include the passing of the hearing for applicants who apply for
listing on the Stock Exchange) prior to the effective date of the Trial Measures; and (ii)
complete the indirect overseas listing prior to September 30, 2023. If we are unable to complete
the Listing before September 30, 2023, the Listing may be subject to the filing requirement with
CSRC.
Any failure to comply with the PRC regulations in relation to the registration requirements
for employee stock incentive plans may subject our plan participants or us to fines and
other legal or administrative sanctions.
In February 2012, the SAFE promulgated the Notices on Issues Concerning the Foreign
Exchange Administration for Domestic Individuals Participating in Stock Incentive Plan of
Overseas Publicly Listed Company, replacing earlier rules promulgated in 2007. Pursuant to
these rules, PRC citizens and non-PRC citizens who reside in China for a continuous period of
not less than one year and participate in any stock incentive plan of an overseas publicly listed
company are required to register with the SAFE through a domestic qualified agent, which could
be the PRC subsidiaries of such overseas-listed company, and complete certain other procedures,
unless certain exceptions are available. In addition, an overseas-entrusted institution must be
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retained to handle matters in connection with the exercise or sale of stock options and the
purchase or sale of shares and interests. We and our executive officers and other employees who
are PRC citizens or non-PRC citizens living in China for a continuous period of not less than
one year and have been granted options are subject to these regulations as our Company has
become an overseas-listed company. Failure to complete SAFE registrations may subject them to
fines of up to RMB300,000 for entities and up to RMB50,000 for individuals and may also limit
our ability to contribute additional capital into our PRC subsidiaries and our PRC subsidiaries’
ability to distribute dividends to us. We also face regulatory uncertainties that could restrict our
ability to adopt additional incentive plans for our Directors, executive officers and employees
under PRC law.
In addition, the SAT, has issued certain circulars concerning employee share options and
restricted shares. Under these circulars, our employees working in China who exercise share
options or are granted restricted shares will be subject to PRC individual income tax. Our PRC
subsidiaries have obligations to file documents related to employee share options or restricted
shares with relevant tax authorities and to withhold individual income taxes for those employees
who exercise their share options. If our employees fail to pay or we fail to withhold their
income taxes according to relevant laws and regulations, we may face sanctions imposed by the
tax authorities or other PRC governmental authorities.
Fluctuations in exchange rates could result in foreign currency exchange losses, and
negatively impact our results of operations and the value of your investment.
The value of RMB against the Hong Kong dollar, the U.S. dollar and other currencies
fluctuates, is subject to changes resulting from the PRC government’s policies and depends on a
large extent regarding domestic and international economic and political developments as well as
supply and demand in the local market. It is difficult to predict how market forces or
government policies may impact the exchange rate between the RMB and the Hong Kong dollar,
the U.S. dollar or other currencies in the future. In addition, the People’s Bank of China
regularly intervenes in the foreign exchange market to limit the fluctuations in RMB exchange
rates and achieve policy goals.
The proceeds from the Global Offering will be received in Hong Kong dollars. As a result,
any appreciation of the RMB against the Hong Kong dollar may result in the decrease in the
value of our proceeds from the Global Offering. Conversely, any depreciation of the RMB may
adversely affect the value of, and any dividends payable on, the Shares in foreign currency. In
addition, there are limited instruments available for us to reduce our foreign currency risk
exposure at reasonable costs. Furthermore, we are also currently required to obtain the SAFE’s
approval before converting significant sums of foreign currencies into RMB. All of these factors
could materially and adversely affect our business, financial condition, results of operations and
prospects, and could reduce the value of, and dividends payable on, the Shares in foreign
currency terms.
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Changes in global economic conditions, international trade policies and rising political
tensions, particularly between the U.S. and China, may adversely impact our business and
operating results.
Recently there have been changes in the international trade policies and rising political
tensions, particularly between the U.S. and China. The U.S. government has made statements
and taken certain actions that may lead to potential changes to U.S. and international trade
policies towards China. While the “Phase One” agreement was signed between the United States
and China on trade matters, it remains unclear what additional actions, if any, will be taken by
the U.S. or other governments with respect to international trade, tax policy related to
international commerce, or other trade matters. In addition, China has implemented, and may
further implement, measures in response to new trade policies, treaties and tariffs initiated by
the U.S. government. The situation is further complicated by the political tensions between the
United States and China that escalated during the COVID-19 pandemic and in the wake of the
PRC National People’s Congress’ decision on Hong Kong national security legislation, sanctions
imposed by the U.S. Department of Treasury on certain officials of the Hong Kong Special
Administrative Region, the central government of the PRC and the executive orders issued by
U.S. President in August 2020 that prohibit certain transactions with certain China-based
companies and their respective subsidiaries. Rising trade and political tensions could reduce
levels of trades, investments, technological exchanges and other economic activities between
China and other countries, which would have an adverse effect on global economic conditions,
the stability of global financial markets, and international trade policies.
While cross-border business currently may not be an area of our focus, a portion of
materials, components and ingredients used for the manufacturing of our products are sourced by
our third-party manufacturers from overseas. Any rising trade and political tensions or
unfavorable government policies on international trade, such as capital controls or tariffs, may
affect our procurement cost for products relying on materials, components and ingredients
sourced from overseas, affect the price and demand for our products, impact the competitive
position of our products or prevent us from selling products in certain countries. In particular, if
any new tariffs, legislation and/or regulations are implemented, or if the existing trade
agreements are renegotiated or, especially, if the U.S. government takes retaliatory trade actions
due to the recent U.S.-China trade and political tension, such changes could have an adverse
effect on our business, financial condition and results of operations. In addition, our results of
operations could be adversely affected if any such tensions or unfavorable government trade
policies harm the Chinese economy or the global economy in general.
RISKS RELATING TO OUR SHARES AND 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 or be sustained after the Listing. The liquidity and market
price of our Shares may be volatile.
Prior to the completion of the Global Offering, there has been no public stock market for
our Shares. There can be no guarantee that an active trading market for our Shares will develop
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or be sustained after the completion of the Global Offering. The Offer Price is the result of
negotiations among our Company, the Selling Shareholder and the Sole Overall Coordinator (for
itself and on behalf of the Underwriters), which may not be indicative of the price at which our
Shares will be traded following the completion of the Global Offering. The market price of our
Shares may drop below the Offer Price at any time after the completion of the Global Offering.
The trading price of the Shares may be volatile, which could result in substantial losses to
you.
The trading price of our Shares may be volatile and could fluctuate widely in response to
factors beyond our control, including general market conditions of the securities markets in
Hong Kong, China, the United States and elsewhere in the world. In particular, the performance
and fluctuation of the market prices of other companies with business operations located mainly
in China that have listed their securities in Hong Kong may affect the volatility in the price of
and trading volumes for our Shares. A number of PRC-based companies have listed their
securities, and some are in the process of preparing for listing their securities in Hong Kong.
Some of these companies have experienced significant volatility, including significant price
declines after their initial public offerings. The trading performances of the securities of these
companies at the time of or after their offerings may affect the overall investor sentiment
towards PRC-based companies listed in Hong Kong and consequently may impact the trading
performance of our Shares. These broad market and industry factors may significantly affect the
market price and volatility of our Shares, regardless of our actual operating performances.
The price of our Shares when trading begins could be lower than the Offer Price as a result
of, among other things, adverse market conditions or other adverse developments that
could occur between the time of sale and the time trading begins.
The Offer Price is HK$4.25 per Offer Share. However, the Shares will not commence
trading on the Stock Exchange until they are delivered. As a result, investors may not be able to
sell or otherwise deal in the Shares during that period. Accordingly, holders of our Shares are
subject to the risk that the price of the Shares when trading begins could be lower than the Offer
Price as a result of adverse market conditions or other adverse developments that may occur
between the time of sale and the time trading begins.
We currently do not expect to pay dividends in the foreseeable future after this offering
and you must rely on the price appreciation of our Shares for return on your investment.
We currently intend to retain most, if not all, of our available funds and any future earnings
after this offering to fund the development and growth of our business. As a result, we do not
expect to pay any cash dividends in the foreseeable future. Therefore, you should not rely on an
investment in our Shares as a source for any future dividend income.
Our Board has complete discretion as to whether to distribute dividends, subject to certain
requirements of Cayman Islands law. In addition, our Shareholders may by ordinary resolution
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declare a dividend, but no dividend may exceed the amount recommended by our Directors.
Under Cayman Islands law, a Cayman Islands company may pay a dividend out of either profit
or share premium account, provided that in no circumstances may a dividend be paid if this
would result in the company being unable to pay its debts as they fall due in the ordinary course
of business. Even if our Board decides to declare and pay dividends, the timing, amount and
form of future dividends, if any, will depend on our future results of operations and cash flow,
our capital requirements and surplus, the amount of distributions, if any, received by us from our
subsidiaries, our financial condition, contractual restrictions and other factors deemed relevant
by our Board. Accordingly, the return on your investment in our Shares will likely depend
entirely upon any future price appreciation of our Shares. There is no guarantee that our Shares
will appreciate in value after this offering or even maintain the price at which you purchased the
Shares. You may not realize a return on your investment in our Shares and you may even lose
your entire investment in our Shares.
Y ou will incur immediate and substantial dilution and may experience further dilution if we
issue additional Shares in the future.
As the Offer Price of our Shares is higher than the net tangible book value per Share of our
Shares immediately prior to the Global Offering, purchasers of our Shares in the Global Offering
will experience an immediate dilution. If we issue additional Shares in the future, purchasers of
our Shares in the Global Offering may experience further dilutions in their shareholding
percentages.
Shareholders’ interest may be diluted in the future if additional Shares are issued under the
Post-IPO Share Option Scheme or upon exercise of Pre-IPO Options.
We have adopted the Pre-IPO Stock Incentive Plan under which Pre-IPO Options to
subscribe for an aggregate of 25,000,000 Shares (to be adjusted to an aggregate of 33,217,009
Shares upon the Capitalization Issue), representing approximately 4.2% of the total issued share
capital of our Company immediately upon completion of the Global Offering and Capitalization
Issue (assuming the Over-allotment Option is not exercised and without taking into account the
Shares which may be issued pursuant to the exercise of the Options under the Share Option
Schemes) at an exercise price of HK$1.90 per Share (to be adjusted to HK$1.43 per Share after
the Capitalization Issue). No further options will be granted under the Pre-IPO Stock Incentive
Plan after our Listing, however, the previously granted Pre-IPO Options will remain outstanding.
We have also conditionally adopted the Post-IPO Share Option Scheme to be effective upon
Listing under which options to subscribe for our Shares may be granted to employees and
consultants, including officers and Directors. Options may remain outstanding for up to ten
years. Options would be exercised presumably only when the closing price of the Shares on the
Stock Exchange is higher than the option exercise price.
Exercise of Pre-IPO Options or of options granted under the Post-IPO Share Option
Scheme after the Listing will result in dilution to our Shareholders and will accordingly result in
reduced earnings per Share and net asset value per Share.
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We are a Cayman Islands company and, because the availability of judicial precedents
regarding the rights of shareholders is more limited under the laws of the Cayman Islands
than other jurisdictions, you may have difficulties in protecting your shareholder rights.
Our corporate affairs are governed by our Memorandum and Articles and by the Cayman
Companies Act and common law of the Cayman Islands. The rights of Shareholders to take legal
action against our Directors and us, actions by minority Shareholders and the fiduciary
responsibilities of our Directors to us under Cayman Islands law are to a large extent governed
by the common law of the Cayman Islands. The common law of the Cayman Islands is derived
in part from comparatively limited judicial precedents in the Cayman Islands as well as from
English common law, which has persuasive, but not binding, authority on a court in the Cayman
Islands. The laws of the Cayman Islands relating to the protection of the interests of minority
shareholders differ in some respects from those under statutes and judicial precedents in
existence in the jurisdictions where minority Shareholders may be located. Please refer to the
section headed “Summary of the constitution of our Company and the Cayman Companies Act”
set out in Appendix IV of this prospectus for more details.
As a result of all of the above, minority Shareholders may have difficulties in protecting
their interests under the laws of the Cayman Islands through actions against our management,
Directors or Controlling Shareholders, which may provide different remedies to minority
Shareholders when compared to the laws of the jurisdiction in which such Shareholders are
located.
There can be no assurance of the accuracy or completeness of certain facts, forecasts and
other statistics obtained from various independent third-party sources, including the
industry expert reports, contained in this prospectus.
This prospectus, particularly the sections headed “Business” and “Industry overview” in
this prospectus, contain information and statistics relating to the social media based e-commerce
industry and our business and operations. Such information and statistics have been derived from
a third-party report commissioned by us and publicly available sources. We believe that the
sources of the information are appropriate and sufficient for such information, and we have
taken reasonable care in extracting and reproducing such information. However, we cannot
guarantee the quality or reliability of such source materials. The information has not been
independently verified by us, the Sole Sponsor, the Sole Overall Coordinator, the Joint Global
Coordinators, the Joint Bookrunners, the Joint Lead Managers, the Underwriters, the Capital
Market Intermediaries or any other parties involved in the Global Offering, and no
representation is given as to its accuracy. Collection methods of such information may be flawed
or ineffective, or there may be discrepancies between published information and market practice,
which may result in the statistics included in this Prospectus being inaccurate or not comparable
to statistics produced for other economies. You should therefore not place undue reliance on
such information. In addition, we cannot assure you that such information is stated or compiled
on the same basis or with the same degree of accuracy as similar statistics presented elsewhere.
You should consider carefully the importance placed on such information or statistics.
RISK FACTORS
–9 6–


--- page 107 ---
Y ou should read the entire prospectus carefully and are strongly cautioned against placing
any reliance on the information contained in any press articles or other media coverage
which contains information not being disclosed or which is inconsistent with the
information included in this prospectus.
We strongly caution you not to rely on any information contained in the press articles or
other media regarding us and the Global Offering. Prior to the publication of this prospectus,
there has been press and media coverage regarding us and the Global Offering. Such press and
media coverage may include references to certain information that does not appear in this
prospectus, including certain operating and financial information and projections, valuations and
other information. We have not authorized the disclosure of any such information in the press or
media and do not accept any responsibility for any such press or media coverage or the accuracy
or completeness of any such information or publication. We make no representation as to the
appropriateness, accuracy, completeness or reliability of any such information or publication. To
the extent that any such information is inconsistent or conflicts with the information contained
in this prospectus, we disclaim responsibility for it and you should not rely on such information.
RISK FACTORS
–9 7–


--- page 108 ---
DIRECTORS’ RESPONSIBILITY STATEMENT
This prospectus, for which the 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 with regard to our
Group. The 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.
THE HONG KONG PUBLIC OFFERING AND THIS PROSPECTUS
This prospectus is published solely in connection with the Hong Kong Public Offering,
which forms part of the Global Offering. For applicants under the Hong Kong Public Offering,
this prospectus and the Application Forms set out the terms and conditions of the Hong Kong
Public Offering.
The Hong Kong Offer Shares are offered solely on the basis of the information contained
and representations made in this prospectus and the Application Forms and on the terms and
subject to the conditions set out herein and therein. No person is authorized to give any
information in connection with the Global Offering or to make any representation not contained
in this prospectus, and any information or representation not contained herein must not be relied
upon as having been authorized by our Company, the Sole Sponsor, the Sole Overall
Coordinator, the Joint Global Coordinators, the Joint Bookrunners, the Joint Lead Managers, the
Underwriters, the Capital Market Intermediaries, any of their respective directors, agents,
employees or advisers or any other party involved in the Global Offering.
The Listing is sponsored by the Sole Sponsor and the Global Offering is managed by the
Sole Overall Coordinator. The Hong Kong Public Offering is fully underwritten by the Hong
Kong Underwriters under 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 terms and conditions of the International Underwriting Agreement, which is
expected to be entered into on or around July 5, 2023.
Neither the delivery of this prospectus nor any offering, sale or delivery made in
connection with the Shares should, under any circumstances, constitute a representation that
there has been no change or development reasonably likely to involve a change in our affairs
since the date of this prospectus or imply that the information contained in this prospectus is
correct as of any date subsequent to the date of this prospectus.
INFORMATION ABOUT THIS PROSPECTUS AND THE GLOBAL OFFERING
–9 8–


--- page 109 ---
PROCEDURES FOR APPLICATION FOR THE HONG KONG OFFER SHARES
The procedures for applying for the Hong Kong Offer Shares are set forth in the section
headed “How to apply for Hong Kong Offer Shares” in this prospectus and in the Application
Forms.
STRUCTURE AND CONDITIONS OF THE GLOBAL OFFERING
Details of the structure of the Global Offering, including its conditions, are set forth in the
section headed “Structure of the Global Offering” in this prospectus.
OVER-ALLOTMENT OPTION AND STABILIZATION
Details of the arrangements relating to the Over-allotment Option and stabilization are set
forth in the section headed “Structure of the Global Offering” in this prospectus.
RESTRICTIONS ON OFFERS AND SALES OF SHARES
Each person acquiring the Hong Kong Offer Shares under the Hong Kong Public Offering
will be required to, or be deemed by his/her acquisition of Offer Shares to, confirm that he/she
is aware of the restrictions on offers of the Offer Shares described in this prospectus.
No action has been taken to permit a public offering of the Offer Shares or the general
distribution of this prospectus and/or the Application Forms in any jurisdiction other than in
Hong Kong. Accordingly, this prospectus may not be used for the purposes of, and does not
constitute, an offer or invitation in any jurisdiction or in any circumstances in which such an
offer or invitation is not authorized or to any person to whom it is unlawful to make such an
offer or invitation. The distribution of this prospectus and the offering and sale of the Offer
Shares in other jurisdictions are subject to restrictions and may not be made except as permitted
under the applicable securities laws of such jurisdictions and pursuant to registration with or
authorization by the relevant securities regulatory authorities or an exemption therefrom.
APPLICATION FOR LISTING OF THE SHARES ON THE STOCK EXCHANGE
We have applied to the Stock Exchange for the listing of, and permission to deal in, the
Shares in issue, the Shares to be issued pursuant to the Global Offering (including the Shares
which may be issued pursuant to the Capitalization Issue and upon the exercise of the
Over-allotment Option) and the Shares which may be issued upon the exercise of the Options
granted under the Pre-IPO Stock Incentive Plan and any Options which may be granted under
the Post-IPO Share Option Scheme.
No part of our equity or debt securities 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.
INFORMATION ABOUT THIS PROSPECTUS AND THE GLOBAL OFFERING
–9 9–


--- page 110 ---
Under section 44B(1) of the Companies (Winding Up and Miscellaneous Provisions)
Ordinance, any allotment made in respect of any application will be invalid if the listing of, and
permission to deal in, the Shares on the Stock Exchange is refused before the expiration of three
weeks from the date of the closing of the application lists, or such longer period (not exceeding
six weeks) as may, within the said three weeks, be notified to the Company by or on behalf of
the Stock Exchange.
COMMENCEMENT OF DEALINGS IN THE SHARES
Dealings in the Shares on the Stock Exchange are expected to commence on July 13, 2023.
The Shares will be traded in board lots of 500 Shares each. The stock code of the Shares will be
6683.
SHARES WILL BE ELIGIBLE FOR ADMISSION INTO CCASS
If the Stock Exchange grants the listing of, and permission to deal in, the Shares 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 Listing Date or any other date as determined by HKSCC. Settlement of transactions between
participants of the Stock Exchange is required to take place in CCASS on the second settlement
day after any trading day.
All activities under CCASS are subject to the General Rules of CCASS and CCASS
Operational Procedures in effect from time to time.
Investors should seek the advice of their stockbroker or other professional advisers for
details of the settlement arrangement as such arrangements may affect their rights and interests.
All necessary arrangements have been made to enable the Shares to be admitted into CCASS.
PROFESSIONAL TAX ADVICE RECOMMENDED
You should consult your professional advisers if you are in any doubt as to the taxation
implications of subscribing for, purchasing, holding or disposing of, or dealing in, the Shares or
exercising any rights attaching to the Shares. We emphasize that none of our Company, the
Selling Shareholder, the Sole Sponsor, the Sole Overall Coordinator, the Joint Global
Coordinators, the Joint Bookrunners, the Joint Lead Managers, the Underwriters, the Capital
Market Intermediaries, any of our or their respective directors, officers or representatives or any
other person involved in the Global Offering accepts responsibility for any tax effects or
liabilities resulting from your subscription, purchase, holding or disposing of, or dealing in, the
Shares or your exercise of any rights attaching to the Shares.
INFORMATION ABOUT THIS PROSPECTUS AND THE GLOBAL OFFERING
– 100 –


--- page 111 ---
REGISTER OF MEMBERS AND STAMP DUTY
Our principal register of members will be maintained by our principal share registrar,
Tricor Services (Cayman Islands) Limited, in the Cayman Islands, and our Hong Kong register
of members will be maintained by the Hong Kong Share Registrar, Computershare Hong Kong
Investor Services Limited, in Hong Kong. Unless the Directors otherwise agree, all transfer and
other documents of title of Shares must be lodged for registration with and registered by the
Hong Kong Share Registrar and may not be lodged in the Cayman Islands.
Dealings in our Shares registered on our Hong Kong register of members 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 0.13% of the consideration for, or (if greater) the value of, the Shares
transferred. In other words, a total of 0.26% is currently payable on a typical sale and purchase
transaction of the Shares. In addition, a fixed duty of HK$5 is charged on each instrument of
transfer (if required).
EXCHANGE RATE CONVERSION
Unless otherwise specified, amounts denominated in RMB and US$ have been translated,
for the purpose of illustration only, into Hong Kong dollars in this prospectus at the following
exchange rates: RMB1.00:HK$1.135 and US$1.00:HK$7.78.
No representation is made that any amounts in RMB or US$ were or could have been or
could be converted into Hong Kong dollars at such rates or any other exchange rates on such
date or any other date.
ROUNDING
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.
LANGUAGE
If there is any inconsistency between the English version of this prospectus and its Chinese
translation, the English version of this prospectus shall prevail unless otherwise stated. However,
if there is any inconsistency between the names of any of the entities mentioned in this English
prospectus which are not in the English language and their English translations, the names in
their respective original languages shall prevail. The English translations of the Chinese names
of such PRC entities, enterprises, titles, laws, regulations and the like are provided for
identification purposes only.
INFORMATION ABOUT THIS PROSPECTUS AND THE GLOBAL OFFERING
– 101 –


--- page 112 ---
OTHER
Unless otherwise specified, all references to any shareholdings in our Company following
the completion of the Global Offering assume that the Over-allotment Option is not exercised
and without taking into account any Shares which may be issued upon the exercise of the
Options granted under the Pre-IPO Stock Incentive Plan or any Options which may be granted
under the Post-IPO Share Option Scheme.
INFORMATION ABOUT THIS PROSPECTUS AND THE GLOBAL OFFERING
– 102 –


--- page 113 ---
DIRECTORS
Name Address
ID issuing
country/territory
Executive Directors
Ms. Ma, Hsin-Ting
(৵ːణ)
2/F
No. 48, Lane 939
Zhonghua 5th Road
Kaohsiung
Taiwan
Chinese
(Taiwan)
Dr. Qian, Sam Zhongshan
(፺ʕʆ)
Room C, 27/F
Block 2
Fleur Pavilia
1 Kai Yuen Street
North Point
Hong Kong
Chinese
(Hong Kong)
Mr. Lai, Kwok Fai Franki
(፠਷ሾ)
Flat E, 24/F
Tung Shan Mansion
Taikoo Shing
Hong Kong
Chinese
(Hong Kong)
Non-executive Directors
Mr. Yang, Chun-Jung
(࿲)
14/F, No. 30, Aiguo West Road
Zhongzheng District
Taipei City 100
Taiwan
Chinese
(Taiwan)
Mr. Chen, Chung
(௓ʕ)
17/F, No. 10, Lane 21, Section 6
Hsin Hai Road
Wen Shan District
Taipei
Taiwan
Chinese
(Taiwan)
DIRECTORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING
– 103 –


--- page 114 ---
Name Address
ID issuing
country/territory
Independent non-executive Directors
Dr. Xue Jun
(ࠏ)
Apartment 310
505 Zhongguanyuan
Peking University
Haidian District
Beijing 100871
PRC
Chinese
Mr. Yang, Dave De 427 Ashbury Dr. Hinsdale
Illinois
United States
United States
Ms. Chung, Elizabeth Ching
Yee ( ᒤ᎑ᄃ)
Flat 3203, 32/F
Convention Plaza Apartment
1 Harbour Road
Wan Chai
Hong Kong
Chinese
(Hong Kong)
Please refer to the section headed “Directors and senior management” in this prospectus for
further details.
DIRECTORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING
– 104 –


--- page 115 ---
PARTIES INVOLVED IN THE GLOBAL OFFERING
Sole Sponsor CMBC International Capital Limited
45/F, One Exchange Square
8 Connaught Place, Central
Hong Kong
Sole Overall Coordinator CMBC Securities Company Limited
45/F, One Exchange Square
8 Connaught Place, Central
Hong Kong
Joint Global Coordinators,
Joint Bookrunners and
Joint Lead Managers
CMBC Securities Company Limited
45/F, One Exchange Square
8 Connaught Place, Central
Hong Kong
Bradbury Securities Limited
Unit 5106–07, 51/F, The Center
99 Queen’s Road Central
Hong Kong
Joint Bookrunners and
Joint Lead Managers
SPDB International Capital Limited
33/F, SPD Bank Tower
One Hennessy, 1 Hennessy Road
Hong Kong
First Shanghai Securities Limited
19/F, Wing On House
71 Des V oeux Road Central
Hong Kong
Guotai Junan Securities (Hong Kong) Limited
26/F–28/F, Low Block, Grand Millennium Plaza
181 Queen’s Road Central
Hong Kong
BOCOM International Securities Limited
9/F, Man Yee Building
68 Des V oeux Road Central
Hong Kong
DIRECTORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING
– 105 –


--- page 116 ---
China Industrial Securities International
Capital Limited
32/F, Infinitus Plaza
199 Des V oeux Road Central, Sheung Wan
Hong Kong
Valuable Capital Limited
3601, 36/F, China Merchants Tower
Shun Tak Centre
168–200 Connaught Road Central
Hong Kong
Eddid Securities and Futures Limited
21/F, Citic Tower
1 Tim Mei Avenue, Central
Hong Kong
South China Securities Limited
28/F, Bank of China Tower
1 Garden Road, Central
Hong Kong
Zhongtai International Securities Limited
19/F, Li Po Chun Chambers
189 Des V oeux Road Central
Hong Kong
China Everbright Securities (HK) Limited
12/F, Everbright Centre
108 Gloucester Road, Wan Chai
Hong Kong
Huafu International Securities Limited
Units 1703–1706, 17/F, Infinitus Plaza
199 Des V oeux Road Central
Hong Kong
Essence International Securities (Hong Kong)
Limited
39/F, One Exchange Square
Central
Hong Kong
CCB International Capital Limited
9/F, CCB Tower
3 Connaught Road Central
Hong Kong
DIRECTORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING
– 106 –


--- page 117 ---
Zheshang International Financial Holdings Co.,
Limited
Room 4405–06, Hopewell Centre
183 Queen’s Road East, Wan Chai
Hong Kong
Quam Securities Limited
5/F and 24/F (Rooms 2401 and 2412),
Wing On Centre
111 Connaught Road Central
Hong Kong
Winbull Securities International (HK) Limited
Unit A, 26/F, United Centre
95 Queensway, Admiralty
Hong Kong
uSmart Securities Limited
Unit 2606–07, 26/F, FWD Financial Centre
308 Des V oeux Road Central
Hong Kong
Joint Bookrunner ABCI Capital Limited
11/F, Agricultural Bank of China Tower
50 Connaught Road Central
Hong Kong
Joint Lead Managers ABCI Securities Company Limited
10/F, Agricultural Bank of China Tower
50 Connaught Road Central
Hong Kong
Futu Securities International (Hong Kong)
Limited
Unit C1–2, 13/F, United Centre
No. 95 Queensway
Hong Kong
China Demeter Securities Limited
Unit A1, 35/F, United Centre
95 Queensway, Admiralty
Hong Kong
DIRECTORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING
– 107 –


--- page 118 ---
I Win Securities Limited
Room 201, 2/F, China Insurance Group Building
141 Des V oeux Road Central, Central
Hong Kong
SBI China Capital Financial Services Limited
4/F, Henley Building
No. 5 Queen’s Road Central
Hong Kong
Livermore Holdings Limited
Unit 1214A, 12/F
Tower II Cheung Sha Wan Plaza
833 Cheung Sha Wan Road, Kowloon
Hong Kong
Capital Market Intermediaries CMBC Securities Company Limited
45/F, One Exchange Square
8 Connaught Place, Central
Hong Kong
Bradbury Securities Limited
Unit 5106–07, 51/F, The Center
99 Queen’s Road Central
Hong Kong
SPDB International Capital Limited
33/F, SPD Bank Tower
One Hennessy, 1 Hennessy Road
Hong Kong
First Shanghai Securities Limited
19/F, Wing On House
71 Des V oeux Road Central
Hong Kong
ABCI Capital Limited
11/F, Agricultural Bank of China Tower
50 Connaught Road Central
Hong Kong
Guotai Junan Securities (Hong Kong) Limited
26/F–28/F, Low Block, Grand Millennium Plaza
181 Queen’s Road Central
Hong Kong
DIRECTORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING
– 108 –


--- page 119 ---
BOCOM International Securities Limited
9/F, Man Yee Building
68 Des V oeux Road Central
Hong Kong
China Industrial Securities International
Capital Limited
32/F, Infinitus Plaza
199 Des V oeux Road Central, Sheung Wan
Hong Kong
Valuable Capital Limited
3601, 36/F, China Merchants Tower
Shun Tak Centre
168–200 Connaught Road Central
Hong Kong
Eddid Securities and Futures Limited
21/F, Citic Tower
1 Tim Mei Avenue, Central
Hong Kong
South China Securities Limited
28/F, Bank of China Tower
1 Garden Road, Central
Hong Kong
Zhongtai International Securities Limited
19/F, Li Po Chun Chambers
189 Des V oeux Road Central
Hong Kong
China Everbright Securities (HK) Limited
12/F, Everbright Centre
108 Gloucester Road, Wan Chai
Hong Kong
Huafu International Securities Limited
Units 1703–1706, 17/F, Infinitus Plaza
199 Des V oeux Road Central
Hong Kong
Essence International Securities (Hong Kong)
Limited
39/F, One Exchange Square
Central
Hong Kong
DIRECTORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING
– 109 –


--- page 120 ---
CCB International Capital Limited
9/F, CCB Tower
3 Connaught Road Central
Hong Kong
Zheshang International Financial Holdings Co.,
Limited
Room 4405–06, Hopewell Centre
183 Queen’s Road East, Wan Chai
Hong Kong
Quam Securities Limited
5/F and 24/F (Rooms 2401 and 2412),
Wing On Centre
111 Connaught Road Central
Hong Kong
Winbull Securities International (HK) Limited
Unit A, 26/F, United Centre
95 Queensway, Admiralty
Hong Kong
uSmart Securities Limited
Unit 2606–07, 26/F, FWD Financial Centre
308 Des V oeux Road Central
Hong Kong
ABCI Securities Company Limited
10/F, Agricultural Bank of China Tower
50 Connaught Road Central
Hong Kong
Futu Securities International (Hong Kong)
Limited
Unit C1–2, 13/F, United Centre
No. 95 Queensway
Hong Kong
China Demeter Securities Limited
Unit A1, 35/F, United Centre
95 Queensway, Admiralty
Hong Kong
DIRECTORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING
–1 1 0–


--- page 121 ---
I Win Securities Limited
Room 201, 2/F, China Insurance Group Building
141 Des V oeux Road Central, Central
Hong Kong
SBI China Capital Financial Services Limited
4/F, Henley Building
No. 5 Queen’s Road Central
Hong Kong
Livermore Holdings Limited
Unit 1214A, 12/F
Tower II Cheung Sha Wan Plaza
833 Cheung Sha Wan Road, Kowloon
Hong Kong
Legal Advisors to our Company as to Hong Kong law:
King and Wood Mallesons
13/F, Gloucester Tower, The Landmark
15 Queen’s Road Central
Central
Hong Kong
as to PRC law:
Han Kun Law Offices
9/F, Office Tower C1
Oriental Plaza
1 East Chang An Avenue
Dongcheng District
Beijing 100738
PRC
as to Cayman Islands law:
Harney Westwood & Riegels
3501 The Center
99 Queen’s Road Central
Hong Kong
as to Hong Kong intellectual property law:
ELLALAN
26th–28th Floors, The Hennessy
256 Hennessy Road
Wanchai
Hong Kong
DIRECTORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING
– 111 –


--- page 122 ---
as to Taiwan laws:
LCS & Partners
5F.,
No. 8, Sec. 5, Sinyi Rd.,
110 Taipei, Taiwan
Legal Advisors to the Sole Sponsor
and the Underwriters
as to Hong Kong law:
Jones Day
31/F, Edinburgh Tower, The Landmark
15 Queen’s Road Central
Hong Kong
Chiu & Partners
40th Floor, Jardine House
1 Connaught Place
Hong Kong
as to PRC law:
Jingtian & Gongcheng Law Firm
34/F, Tower 3, China Central Place
77 Jianguo Road
Chaoyang District, Beijing
PRC
Beijing Dentons Law Offices, LLP
16–21F, Tower B
ZT International Center
No. 10, Chaoyangmen Nandajie
Chaoyang District, Beijing
China
Auditor and Reporting Accountant PricewaterhouseCoopers
Certified Public Accountant and
Registered Public Interest Entity Auditor
22/F Prince’s Building
10 Chater Road
Central
Hong Kong
DIRECTORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING
–1 1 2–


--- page 123 ---
Industry Consultant China Insights Industry Consultancy Limited
10F, Block B
Jing’an lnternationaI Center
88 Puji Road
Jing’an District
Shanghai 200070
China
Independent property valuer and
consultant
Jones Lang LaSalle Corporate Appraisal
and Advisory Limited
7/F, One Taikoo Place
979 King’s Road
Hong Kong
Receiving Bank Hang Seng Bank Limited
83 Des V oeux Road Central
Hong Kong
DIRECTORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING
–1 1 3–


--- page 124 ---
Registered Office P.O. Box 31119
Grand Pavilion
Hibiscus Way
802 West Bay Road
Grand Cayman
KY1-1205
Cayman Islands
Headquarters 2/F, Block 1
Dream Star Garden
68 Jinjie Road
Huaqiao Town, Kunshan
PRC
Principal Place of Business
in Hong Kong
Unit 2310–11
23rd Floor
Tower Two, Lippo Centre
89 Queensway
Hong Kong
Company’s Website www.splegend.com
(The contents of this website do not form part of
this prospectus)
Company Secretary Ms. Law Kwok Wing, HKICP A
17/F United Centre
95 Queensway
Admiralty
Hong Kong
Authorized Representatives Mr. Lai, Kwok Fai Franki
Flat E, 24F
Tung Shan Mansion
Taikoo Shing
Hong Kong
Ms. Law Kwok Wing, HKICP A
17/F United Centre
95 Queensway
Admiralty
Hong Kong
Audit Committee Mr. Yang, Dave De (chairperson)
Dr. Xue, Jun (ࠏ)
Ms. Chung, Elizabeth Ching Yee ( ᒤ᎑ᄃ)
CORPORATE INFORMATION
–1 1 4–


--- page 125 ---
Remuneration Committee Ms. Chung, Elizabeth Ching Yee ( ᒤ᎑ᄃ)
(chairperson)
Ms. Ma, Hsin-Ting ( ৵ːణ)
Mr. Yang, Dave De
Nomination Committee Ms. Ma, Hsin-Ting ( ৵ːణ) (chairperson)
Dr. Xue, Jun (ࠏ)
Ms. Chung, Elizabeth Ching Yee ( ᒤ᎑ᄃ)
Cayman Islands Principal Share
Registrar and Transfer Office
Tricor Services (Cayman Islands) Limited
Third Floor
Century Yard
Cricket Square
P.O. Box 902
Grand Cayman
KY1-1103
Cayman Islands
Hong Kong Share Registrar
Computershare Hong Kong Investor Services Limited
Shops 1712–1716, 17th Floor
Hopewell Centre
183 Queen’s Road East
Wanchai
Hong Kong
Compliance Advisor CMBC International Capital Limited
45/F, One Exchange Square
8 Connaught Place
Central
Hong Kong
Principal Banks Nanyang Commercial Bank, Limited
151 Des V oeux Road Central
Central
Hong Kong
Bank of Communications, Huaqiao Kunshan branch
International Finance Building
No. 538, Shangyin Road
Huaqiao Town, Kunshan
Suzhou, Jiangsu
PRC
CORPORATE INFORMATION
–1 1 5–


--- page 126 ---
PRC LA WS AND REGULATIONS
Regulations in relation to company establishment and foreign investment
The establishment, operation and management of corporate entities in China are governed
by the Company Law of the PRC () (the “ Company Law ”), which
was promulgated by the SCNPC on December 29, 1993 and became effective on July 1, 1994. It
was subsequently amended on December 25, 1999, August 28, 2004, October 27, 2005,
December 28, 2013 and October 26, 2018. Pursuant to the Company Law, companies are
classified into categories, namely limited liability companies and companies limited by shares.
The Company Law shall also apply to foreign-invested limited liability companies and
companies limited by shares, where the laws on foreign investment provide otherwise, such
provisions shall prevail.
The Company Law is the principal law governing dividend distributions of PRC companies.
PRC companies may pay dividends only out of their after-tax profits, if any. In addition, PRC
companies are required to set aside each year at least 10% of their after-tax profit to their
statutory general reserves funds until the cumulative amount of such reserve fund reaches 50%
of their registered capital. These reserves or funds are not distributable as dividends. A PRC
company is not permitted to distribute any profits until any losses from prior fiscal years have
been offset. Profits retained from prior fiscal years may be distributed together with distributable
profits from the current fiscal year.
On March 15, 2019, the National People’s Congress (the “ NPC”) promulgated the Foreign
Investment Law of the PRC ( ) (the “ Foreign Investment Law ”),
which came into force on January 1, 2020 and repealed simultaneously the Law of the PRC on
Sino-foreign Equity Joint Ventures ( ), the Law of the
PRC on Wholly Foreign-owned Enterprise ( ) and the Law of the
PRC on Sino-foreign Cooperative Joint Ventures ( ).
Subject to the Foreign Investment Law, foreign invested enterprises incorporated before the
enforcement of the Foreign Investment Law may keep their original organizational forms for
five years after the enforcement of the Foreign Investment Law. The Implementation Regulations
for the Foreign Investment Law of the PRC (ૢԷ ) was
promulgated by the State Council on December 26, 2019 and took effect on January 1, 2020.
According to the Foreign Investment Law, the PRC government adopts the management system
of pre-establishment national treatment and negative list for foreign investment. The negative
list refers to special administrative measures for access of foreign investment in specific fields
as stipulated by the PRC government. The PRC government will give national treatment to
foreign investments outside the negative list. The negative list will be released by or upon
approval by the State Council.
Pursuant to the Catalogue for the Guidance of Foreign Investment Industries ( ̮ਠҳ༟ପุ
ኬͦ፽ ) (the “ Guidance Catalogue ”) which was most recently amended on June 28, 2017 and
came into effect on July 28, 2017, the industries invested by foreign investors are classified into
two categories: encouraged industries and the industries subject to special administrative
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measures for the access of foreign investment (including restricted industries and prohibited
industries). The Special Administrative Measures (Negative List) for the Access of Foreign
Investment (݄( ૶ఊ )) (the “ Negative List ”) which was
promulgated on June 28, 2018, revised on June 30, 2019 and came into effect on July 30, 2019,
replaced the portion of special administrative measures for the access of foreign investment in
the Guidance Catalogue. The Negative List (2021 version) was recently promulgated on
December 27, 2021 and came into effect on January 1, 2022. The Catalogue of Industries for
Encouraged Foreign Investment (2022 version) ( ོᎸ̮ਠҳ༟ପุͦ፽ (2022وthe
“Encouraged Catalogue ”) which was promulgated on October 26, 2022 and came into effect on
January 1, 2023, replaced the encouraged industries in the Guidance Catalogue. Foreign
investors shall not invest in the fields where foreign investment is prohibited in the Negative
List. Foreign investors shall meet the investment conditions stipulated under the Negative List
for any field with investment restricted by the Negative List for foreign investment access.
Unless otherwise prescribed by the PRC laws, any industries not falling into any of the
encouraged, restricted or prohibited industries set out in the Encouraged Catalogue and the
Negative List is a permitted industry for foreign investment.
Pursuant to the Interim Administrative Measures on Establishment and Modifications
(Filing) for Foreign Investment Enterprises ( )
(the “ Interim Measures ”) promulgated by MOFCOM on October 8, 2016 and amended on July
30, 2017 and June 29, 2018, establishment and modifications of foreign investment enterprises
that are not subject to the approval under the special administrative measures for the access of
foreign investment shall be filed with the competent commercial authorities.
The Measures on Reporting of Foreign Investment Information ()
was promulgated by MOFCOM and SAMR on December 30, 2019, which came into effect on
January 1, 2020 and replaced the Interim Measures. Since January 1, 2020, for foreign investors
carrying out investment activities directly or indirectly in China, the foreign investors or
foreign-invested enterprises shall submit investment information to the commerce authorities
pursuant to such measures.
Regulations in relation to food production, sale and safety
Food safety
Pursuant to the Food Safety Law of the PRC ( ) (the “ Food
Safety Law ”), as promulgated by the SCNPC on February 28, 2009, took effective on June 1,
2009 and amended on April 24, 2015, December 29, 2018, and April 29, 2021, and
Implementing Regulations of the Food Safety Law of the PRC (ྼ
ૢԷ)( “ Implementing Regulations of the Food Safety Law ”), passed by the State Council
on July 20, 2009 and amended on February 6, 2016 and October 11, 2019, food producers and
business operators shall, in accordance with laws, regulations and food safety standards, engage
in production and business operation activities, establish a sound food safety management
system, and take effective measures to prevent and control food safety risks, thus ensuring food
safety.
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According to the Food Safety Law and the Implementing Regulations of the Food Safety
Law, food safety standards are mandatory standards, other than food safety standards, no food
mandatory standard shall be formulated. The health administrative department under the State
Council shall, in concert with the food safety administration under the State Council, be
responsible for the formulation and release of national food safety standards. The standardization
administrative department under the State Council shall provide the reference codes for these
national standards. The health administrative department of the State Council shall, in
collaboration with the food safety supervision and management department and the agriculture
administrative department, etc. of the State Council, develop a national standard plan on food
safety and an annual plan for the implementation thereof. For local special foods without
national food safety standards, the health administrative departments of the people’s
governments of provinces, autonomous regions and municipalities directly under the central
government may formulate and publish local food safety standards and submit the same to the
health administrative department under the State Council for filing. After the national food
safety standards are formulated, such local standards shall be nullified immediately.
The PRC government encourages food producers to formulate corporate standards that are
stricter than the national or local food safety standards. Such corporate standards apply to such
producers and shall be reported to the health administrative department of the people’s
governments of provinces, autonomous regions and municipalities directly under the central
government for filing. The health administrative departments of the people’s governments at the
provincial level or above shall promulgate on their respective websites the national and local
food safety standards and corporate standards formulated and filed for inquiry and downloading
by the public free of charge.
The state has established a food recall system according to the Food Safety Law and the
Implementing Regulations of the Food Safety Law. Upon discovery of food produced not
conforming to food safety standards or if there is any evidence proving that the foods produced
may harm human health, food producers and operators shall (i) immediately cease production,
recall foods in the market, notify the relevant food producers, operators and consumers thereof,
and keep records of the recall and notification status; (ii) immediately cease operation, notify the
relevant food producers, operators and consumers thereof, and keep records of the cessation and
notification status. If a food producer considers a recall as necessary, then foods in the market
shall be recalled immediately.
Licensing system for food production and sale
Pursuant to the Food Safety Law and the Implementing Regulations of the Food Safety
Law, the state adopts a licensing system for food production and sale. To engage in food
production and food sale, a license shall be obtained in accordance with the law. A party who
intends to sell only pre-packaged food products shall report to the food safety administration of
the local people’s government at or above the county level at its domicile for record-filing.
Pursuant to the Administrative Measures of Food Production Licensing (͛ପ஢̙၍
) promulgated by the SAMR on January 2, 2020 and took effect on March 1, 2020, the
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food production license is valid for five years and is subject to the “one entity, one license”
principle. Pursuant to the Administrative Measures for Food Operation Licensing (຾ᐄ஢
), which was promulgated by the China Food and Drug Administration on August
31, 2015, took effect on October 1, 2015 and was latest amended on November 17, 2017, entities
engaging in food selling in the PRC shall obtain a food operation license. The principle of one
license for one site shall apply to the food operation license. Food and drug administrative
authorities shall implement classified licensing for food operation according to food operators’
types and the degree of risk of their operation projects. The food operation license is valid for
five years.
Food labeling management
According to the Food Safety Law, packaged food shall be labeled. The labels shall include
the following items: (1) name, specification, net weight, and production date; (2) content or
ingredient table; (3) name, address, and contact information of the producer; (4) best before
date; (5) the standards code of the product; (6) storage conditions; (7) generic names of food
additives used under the national standards; (8) the production license number; and (9) other
items that are required by laws, regulations and food safety standards. Major nutrition facts and
contents shall be specified on the labels of staple foods and supplementary foods exclusively for
infants and other designated groups. Where national food safety standards have otherwise
provisions on label matters, those provisions shall prevail. Food operators shall sell food in
accordance with warning marks, warning specifications or cautions stated on labels thereof.
Health Supplements
According to the Food Safety Law and the Implementation Regulations of the Food Safety
Law, the State Council implements strict supervision and administration for special categories of
foods such as health foods, foods for special medical purposes and infant formula foods. Health
supplements claiming the health-care functions shall have scientific basis, and shall not cause
acute, sub-acute or chronic harm to human health. Foods other than health supplements shall not
be claimed to have the health-care function. The food safety supervisory and administrative
department of the State Council and other competent governmental authorities authorized by the
Food Safety Law shall formulate, adjust and publish the catalog of raw materials for health
supplements and the catalog of functions that health supplements are permitted to claim.
According to the Administrative Measures for Health Supplements ()
issued by the Ministry of Health, on March 15, 1996, any food that is claimed to have the effect
of health-care must be identified by the Ministry of Health.
Measures for the Administration of the Catalogue of Ingredients and the Catalogue of
Health Functions of Health Supplements ( ),
which was promulgated by the SAMR on August 2, 2019 and became effective on October 1,
2019, stipulates the formulation, adjustment and publication of the catalog of ingredients and the
catalog of health functions that are permitted to be claimed for health supplements shall be
produced and operated within the territory of the PRC.
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The Announcement on Promulgation of the Catalogue of Ingredients for Health
Supplements (I) and the Catalogue of Permitted Health Functions Claimed by Health
Supplements (I) (ͦ፽ ( ɓ)਄̌ঐͦ
፽(ɓ)ʮѓ) was promulgated by the China Food and Drug Administration (currently known
as National Medical Products Administration), National Health and Family Planning
Commission, and the State Administration of Traditional Chinese Medicine on December 27,
2016 and became effective on the same day. Catalogue of Ingredients for Health Supplements (I)
regulates the list of ingredients for nutritional supplements, and the Catalogue of Permitted
Health Functions Claimed by Health Supplements (I) regulates the list of health functions for
nutritional supplements.
Regulations in relation to cosmetics
Pursuant to the Regulations on the Supervision and Administration of Cosmetics (ۜ
္ຖ၍ଣૢԷ) which was promulgated by the State Council on June 16, 2020 and became
effective on January 1, 2021, cosmetics are divided into special cosmetics and ordinary
cosmetics. The state implements registration management for special cosmetics and filing
management for ordinary cosmetics. Domestic ordinary cosmetics shall be filed with the
provincial drug regulatory authority where the filing applicant is located before going on sales.
In the case of entrusted production of cosmetics, the cosmetics registrant or the record-filing
applicant shall entrust the enterprise that has obtained the corresponding cosmetics production
license and supervise the production activities of the entrusted enterprise to ensure that the
production activities comply with the legal requirements. In accordance with the Work Practices
on the Registration and Filing Inspection of Cosmetics (Ꮸ᜕ʈЪ஝ᇍ )
promulgated by the National Medical Products Administration on September 3, 2019, which
became effective on the same day, cosmetic enterprises independently select an inspection and
testing institution with corresponding capacity to carry out cosmetics registration and filing
inspection.
Regulations in relation to e-commerce activities
Pursuant to the E-Commerce Law which was promulgated by SCNPC on August 31, 2018
and became effective on January 1, 2019, e-commerce operators refer to natural persons, legal
persons and unincorporated organizations that engage in business activities of selling
commodities or offering services through the internet and other information networks, including:
(i) e-commerce platform operators; (ii) in-platform business operators; and (iii) other
e-commerce operators that sell commodities or offer services through a self-built website or
other network services. An e-commerce platform operator means a legal person, or an
organization without the status of legal person that provides two or more parties in e-commerce
transactions with services such as online business premises, deal making, and information
release for the aforesaid parties to carry out transactions independently. The Ordering
Management System provided by our Group only allows users to place order rather than
allowing its users to conduct transactions independently, as an e-commerce platform such as
Taobao where users are able to display their products for sale on the platform, to enter into
purchase agreement with each other according to rules of the platform and/or make payment on
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the platform. Therefore the Ordering Management System is not an e-commerce platform and
our Group is not an e-commerce platform operator. An in-platform business operator means an
e-commerce operator who sells products or provide services through e-commerce platforms. An
e-commerce operator shall, in business operation, abide by the principles of voluntariness,
equality, fairness and good faith, observe the law and business ethics, fairly participate in market
competition, perform obligations in aspects including protection of consumer rights and
interests, environment, intellectual property rights, cyber security and individual information,
assume responsibility for quality of products or services and accept the supervision by the
government and the public.
E-commerce operators shall complete the market entity registration (unless no such
registration is required by laws and administrative regulations) and obtain the relevant
administrative licenses for conducting those operational activities which are required by law to
obtain administrative licenses. Commodities sold or services offered by e-commerce operators
shall meet the requirements to protect personal and property safety and the environmental
protection requirements, and e-commerce operators shall not sell or provide any commodity or
service prohibited by laws and administrative regulations. E-commerce operators shall, among
others, (i) continuously display its business license information and administrative license, or
relevant information which indicates that it does not need to complete the market entity
registration in a prominent position on its homepage; (ii) disclose information about
commodities or services in a comprehensive, truthful, accurate and timely manner so as to
safeguard the consumers’ right to know and right of choice; (iii) deliver commodities or services
according to its commitment or the ways and time limits as agreed upon with consumers, and
bear the risks and responsibilities when commodities are in transit; and (iv) bring the tie-in sales
of commodities or services to consumers’ attention in significant manner and shall not set tie-in
commodities or services as default options. Where an e-commerce operator ceases to engage in
e-commerce business, it shall continuously announce relevant information in a prominent
position on its homepage 30 days in advance. An e-commerce platform operator shall submit the
identity information of in-platform e-commerce operators to the administrative authorities of
market regulation as required, remind in-platform e-commerce operators that have not made
market entity registration to make registration as legally required, cooperate with the
administrative authorities of market regulation, and based on the characteristics of e-commerce,
provide in-platform e-commerce operators that are required to make market entity registration
with registration facilitation. As advised by our PRC Legal Advisors, as our Group is not an
e-commerce platform operator as defined under the E-Commerce Law, hence we are not required
to fulfill the responsibilities of an e-commerce platform operator, including but not limited to
monitoring, notifying and providing assistance to our distributors to complete registrations of
corporate entities.
On March 15, 2021, SAMR issued the Measures for the Supervision and Administration of
Online Trading (), or the Online Trading Supervision Measures, which
took effect on May 1, 2021, which abolished the Administrative Measures on Online Trading
() which was promulgated by the former SAIC on January 26, 2014. The
measures imposed various restrictions on the business operations of online transaction operators.
For example, online transaction operators are required to fully, truthfully, accurately and timely
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disclose information relating to goods and services to protect consumers’ right to information
and right to choose. In addition, the Online Trading Supervision Measures also stipulate detailed
requirements with respect to the protection of consumer rights and personal information. For
example, the Online Trading Supervision Measures provide that online transaction operators
shall not compel customer.
Regulations on jurisdiction of administration for market regulation
Article 5 of the Online Trading Supervision Measures promulgated on March 15, 2021 and
took effect on May 1, 2021, provides that the SAMR is responsible for organizing and guiding
the supervision and administration of online transactions nationwide. Local administrations for
market regulation at or above the county level are responsible for the supervision and
administration of online trading within their respective administrative regions. Article 7 of the
Provisions on Administrative Penalty Procedures for Market Regulation (ஈ
) promulgated on July 2, 2021 and took effect on July 15, 2021, and amended on
September 29, 2022 provides that, administrative penalty shall come under the jurisdiction of an
administration for market regulation at or above the county level in the place where the illegal
act is committed. Where there are provisions otherwise prescribed by laws, administrative
regulations and departmental rules, such provisions shall prevail. According to Article 8 of the
Provisions on Administrative Penalty Procedures for Market Regulation, an administration for
market regulation at the level of county or city comprising of different districts shall have
jurisdiction over administrative penalty cases occurring within its jurisdiction ex officio . Where
the laws, regulations and rules stipulate that market regulatory authorities at or above the
provincial level has jurisdiction, such provisions shall prevail. Article 10 of the Provisions on
Administrative Penalty Procedures for Market Regulation provides that, among others, any
illegal act committed by an online trading platform operator or an online trading operator selling
goods or providing services through its self-established website or other online services shall be
subject to the jurisdiction of the administration for market regulation at or above the county
level of the operator’s domicile.
Regulations in relation to online Livestreaming marketing
According to the Guiding Opinions of State Administration for Market Regulation on
Strengthening the Regulation of Online Livestreaming Marketing Activities (׵
ኬจԈ ) (the “ Guiding Opinions on Online Livestreaming
Marketing ”) issued by the SAMR on November 5, 2020, product business operators selling
goods or providing services through online Livestreaming are subject to the provisions under the
E-commerce Law, the Law on the Protection of Consumer Rights and Interests, the Anti-Unfair
Competition Law, the Product Quality Law, the Food Safety Law, the Advertising Law, the Price
Law, the Trademark Law, the Patent Law and other applicable laws. The promotion made by
livestreamers during Livestreaming shall be authentic and legal, and shall comply with relevant
provisions of the Anti-Unfair Competition Law and the Advertising Law. The Guiding Opinions
on Online Livestreaming Marketing sets out liabilities of product business operators and
livestreamers, including provisions on: (i) the marketing scope of goods or services, notably that
goods or services prohibited to be manufactured or sold by laws and regulations shall not be
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sold via livestreaming; (ii) the review and release of advertisements, namely that no
advertisement that requires prior review in accordance with laws and administrative regulations
may be published without such prior review; and (iii) the protection of consumers’ right to know
and right to choose. All illegal acts in connection with online Livestreaming marketing will be
investigated and penalized accordingly.
On April 23, 2021, the Cyberspace Administration of China, the Ministry of Public
Security, MOFCOM, the Ministry of Culture and Tourism, SAT, the National Radio and
Television Administration, and SAMR issued the Administrative Measures for Online
Livestreaming Marketing (for Trial Implementation) (ج( ༊Б)) (the
“Online Livestreaming Marketing Measures ”) which came into effect on May 25, 2021.
According to the Online Livestreaming Marketing Measures, Livestreaming room operators and
Livestreaming marketers are subject to relevant responsibilities and obligations with respect to
advertising compliance for Livestreaming marketing activities, the management of interactive
contents, the verification and recording of information of the suppliers of commodities and
services, consumer rights protection and other matters.
According to the Online Livestreaming Marketing Measures, Livestreaming room operators
and Livestreaming marketers engaging in online Livestreaming marketing activities must comply
with relevant laws and regulations, and shall not commit any of the following acts: (i) violate
Article 6 and 7 of the Provisions on the Governance of Network Information Content Ecology
(i.e., the publication of illegal and harmful information, including but not limited to information
that endangers national security, propagates terrorism, spreads obscene or pornographic content
or promotes vulgar content); (ii) publish false or misleading information to deceive or mislead
user-audience; (iii) market counterfeit or substandard goods or goods that infringe upon
intellectual property rights, or goods that fail to meet the requirements for personal and property
safety; (iv) fabricate or tamper with transactional data, attention data, page views, likes or other
data; (v) promote or attract traffic for others despite knowing or being in situations where they
ought to know the promoted individual engage or has engaged in illegal or high-risk behaviors;
(vi) harass, slander, insult or threaten others, or infringe upon the legitimate rights and interests
of others; (vii) engage in pyramid marketing, fraud, gambling, or selling contrabands or
controlled goods, etc.; and (viii) commit any other acts in violation of state laws, regulations
and relevant provisions. In addition, Livestreaming room operators and Livestreaming marketers
are subject to certain obligations during the operation of online Livestreaming marketing
activities, including but not limited to the obligations to: (i) perform duties and obligations of
advertisement publishers, advertisement agents or advertisement endorsers where their
Livestreaming content constitutes commercial advertisement; (ii) strengthen the management of
Livestreaming rooms, and must not implicitly or otherwise mislead user-audience; (iii)
effectively carry out real-time management of interactive contents such as voice and video
connections, comments and bullet screens, and must not deceive or mislead user-audience in any
way, such as by deleting or blocking relevant unfavorable comments; (iv) verify information of
suppliers of goods and services, such as their identity, address, contact information,
administrative permits, credibility information, and keep record of such information for further
inspection; and (v) protect consumers rights and interests in accordance with laws and
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regulations, and must not deliberately delay or refuse, without justifiable reasons, legitimate and
reasonable requests put forward by consumers.
Regulations in relation to strengthening the regulation of entertainment industry
According to the Circular of the General Office of the National Radio and
Television Administration on Further Strengthening the Administration on Culture Programs
and Related Personnel (ஷ
) promulgated by the National Radio and Television Administration on September 2, 2021,
government authorities intend to strengthen the regulation of culture programs and related
individuals, and strictly regulate and resolve problems of artists’ violation of law and morality
and chaos in the “fans community”. Specifically, (i) the selection of actors and guests for culture
programs by the broadcast and TV institutions and online audio-visual platforms should be
carefully controlled, with political literacy and moral conduct included as selection criteria;
individuals with the wrong political stance, breaking laws and regulations or are contrary to
public order and morals shall not be selected; (ii) broadcast and TV institutions and online
audio-visual platforms must not broadcast idol development programs or variety shows and
reality shows that feature the children of celebrities; encouragements for fans to spend money to
vote are strictly forbidden; unhealthy fan culture are strictly forbidden; (iii) “deformed” tastes
such as “effeminate” esthetics in programs should be forbidden; resolutely resist showing off
wealth and enjoyment, hyping up gossip and privacy, negative hot topics, vulgar ‘internet
celebrities’, and the bottomless appreciation of ugliness, and other pan-entertainment tendencies;
(iv) resolutely resist exaggerated actor salaries and tax evasion; actors and guests are encouraged
to assume social responsibilities and participate in public welfare program; and (v) strengthen
the regulation over practitioners of the performing arts industry, who must not pursue improper
benefits with professional status and popularity.
According to the Circular on Further Strengthening Work Relating to the Regulation of the
Online Information Involving Entertainment Celebrities (஝
) issued by the Cyberspace Administration of China on October 26, 2021,
the State will strengthen the regulation of entertainment celebrities’ online information
orientation. Entertainment celebrity-related information published online shall correctly lead
public discourse and value orientation and shall not contain content expressly prohibited by laws
and administrative regulations. These publications shall not encourage traffic supremacy,
deformed esthetics, wealth flaunting and other undesirable values; or stimulate and induce fan
groups to engage in excessive consumption, illegal fund-raising, irrational voting and other
irrational acts of support. Joint disciplinary measures will be taken against law-breaking and
unethical celebrities to strictly prevent these celebrities from relocating their online presence and
coming back.
Regulations on the approval process for launching programs (both on TV & platforms) in
the PRC
Pursuant to the Regulations on Radio and Television Administration (Revised in 2020)
(ᄿᅧཥൖ၍ଣૢԷ(2020ࠈࡌpromulgated by the State Council on August 11, 1997
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and last revised on November 29, 2020, radio station or television station shall carry
out pre-broadcast examinations of the content of radio and television programs they
broadcast. Pursuant to the Notice on Further Strengthening the Administration of Record-filing
of Radio and Television Programs and Punishment for Regulations Non-compliance (Xin Guang
Dian Fa [2017] No. 254) ((อᄿཥ೯
[2017]254໮)) promulgated by the State Administration of Press, Publication, Radio, Film and
Television on December 6, 2017, radio station or television station shall file for record with the
competent radio and television administrative department at or above the provincial level certain
key types of radio and television programs before broadcasting. Such key types of radio and
television programs include without limitation certain types of prime-time programs of satellite
comprehensive channels.
Pursuant to the Notice on Further Strengthening the Administration of Online Dramas,
Microfilms and other Online Audio-visual Programs (Guang Fa [2012] No. 53) (ආɓӉ̋
 (ᄿ೯[2012]53 ໮)) promulgated by the State
Administration of Radio, Film and Television and the Cyberspace Administration on July 6,
2012, an online audio-visual program service provider shall carry out the management system of
reviewing prior to broadcasting online audio-visual programs. Before broadcasting online
audio-visual programs, the online audio-visual program service provider shall arrange its content
censors to review the content of such online audio-visual programs proposed to be broadcasted,
and may not broadcast such programs on the Internet until they are approved upon review. An
online audio-visual program service provider shall file for record the information of the
approved online audio-visual programs with the provincial radio and television administrative
department.
Regulations in relation to product quality
The Product Quality Law of the PRC ( ) promulgated by the
SCNPC on February 22, 1993 and amended on July 8, 2000, August 27, 2009 and December 29,
2018 is the principal governing law relating to the supervision and administration of product
quality, which clarified liabilities of the manufactures and sellers. Manufacturers shall be
responsible for the quality of their products. If a defect in a product causes physical injury or
damage to property other than the defective product, the manufacturers shall bear liability for
compensation, unless they are able to prove that: (1) the product has not been put into
circulation; (2) the defects causing injuries or damage did not exist at the time when the product
was circulated; or (3) the science and technology at the time when the product was circulated
were at a level incapable of detecting the defects. A seller shall pay compensation if it fails to
indicate neither the manufacturer nor the supplier of the defective product. A person who is
injured or whose property is damaged by the defects in the product may claim for compensation
from the manufacturer or the seller.
Pursuant to the Tort Liability Law of the PRC ( ),
promulgated by the SCNPC on December 26, 2009 and effective from July 1, 2010,
manufacturers shall assume tort liability where the defects in relevant products cause damage to
others. Sellers shall assume tort liability where the defects in relevant products causing damage
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to others are attributable to the sellers. The infringed party may claim for compensation from the
manufacturer or the seller of the relevant product in which the defects have caused damage. The
Tort Liability Law of the PRC was repealed by the Civil Code of the PRC ( ʕശɛ͏΍ձ਷͏
Պ) (the “ Civil Code ”) which was promulgated on May 28, 2020 and became effective on
January 1, 2021. According to the Civil Code, if damages to other persons are caused by
defective products due to the fault of third parties, such as the parties providing transportation or
warehousing, the producers and the sellers of the products have the right to recover their
respective losses from such third parties. If defective products are identified after they have been
put into circulation, the producers or the sellers shall take remedial measures such as issuance of
a warning, recall of products, etc., in a timely manner. The producers or the sellers shall be
liable under tort if they fail to take remedial measures in a timely manner or have not made
efforts to take remedial measures, thus causing damages. If the products are produced or sold
with known defects, causing deaths or severe adverse health issues, the infringed party has the
right to claim punitive damages in addition to compensatory damages.
Regulations in relation to consumer protection
According to the Consumer Protection Law of the PRC (ᚐ
) (the “ Consumer Protection Law ”) which was promulgated by the SCNPC on October 31,
1993 and became effective on January 1, 1994 and was amended on August 27, 2009 and
October 25, 2013, where business operators sell commodities on the internet, on television, over
telephone, or by mail order, consumers shall have the right to return the commodities within
seven days of receipt of them without cause, subject to certain exceptions. Moreover, consumers
are entitled to the protection of their personal safety and property security at the time of
purchase and use of goods and receipt of services. Violations of the Consumer Protection Law
may result in the imposition of fines, the suspension of operation, the revocation of business
license or even criminal liability of the business operators.
Regulations in relation to intellectual property
Trademark
Trademarks are protected by the PRC Trademark Law ()
promulgated by the SCNPC on August 23, 1982 and subsequently amended on February 22,
1993, October 27, 2001, August 30, 2013 and April 23, 2019 as well as the Implementation
Regulation of the PRC Trademark Law (ૢԷ ) promulgated by the
State Council on August 3, 2002 and amended on April 29, 2014. The Trademark Office of
National Intellectual Property Administration (ᗆପᛆ҅ਠᅺ҅ ) (the “ Trademark
Office ”) handles trademark registrations and grants a term of ten years to registered trademarks
and another ten years if requested upon expiry of the first or any renewed ten-year term.
Trademark registrant may license its registered trademark to another party by entering into a
trademark license agreement. Trademark license agreements must be filed with the Trademark
Office to be recorded, while the non-filing of the licensing of a trademark shall not be contested
against a good faith third-party. The licensor shall supervise the quality of the commodities on
which the trademark is used, and the licensee shall guarantee the quality of such commodities.
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The PRC Trademark Law has adopted a “first-to-file” principle with respect to trademark
registration. Where a trademark for which a registration has been made is identical or similar to
another trademark which has already been registered or been subject to a preliminary
examination and approval for use on the same kind of or similar commodities or services, the
application for registration of such trademark may be rejected. Any person applying for the
registration of a trademark may not prejudice the existing right first obtained by others, nor may
any person register in advance a trademark that has already been used by another party and has
already gained a “sufficient degree of reputation” through such party’s use.
Domain name
Internet domain name registration and related matters are primarily regulated by the
Measures on Administration of Domain Names for the Chinese Internet ( ʕ਷ʝᑌၣഖਹΤ၍
) promulgated by the MII on November 5, 2004 and took into effect on December 20,
2004, which was superseded by the Measures on Administration of Internet Domain Names ( ʝ
) promulgated by the MIIT on August 24, 2017 and took into effect on
November 1, 2017. Domain name owners are required to register their domain names and the
MIIT is in charge of the administration of PRC Internet domain names. The domain name
services follow a “first come, first file” principle. Applicants for registration of domain names
shall provide their true, accurate and complete information of such domain names to and enter
into registration agreements with domain name registration service institutions. The applicants
will become the holders of such domain names upon the completion of the registration
procedure.
Patent
Pursuant to the Patent Law of the PRC (Revision 2020) (ج2020 ϋ
ࠈࡌ)) promulgated by the SCNPC on October 17, 2020 and took into effect on June 1, 2021,
and its Implementation Rules (Revision 2010) (ۆ2010ࡌ
ࠈ)) promulgated by the State Council on January 9, 2010 and took into effect on February 1,
2010, the National Intellectual Property Administration is responsible for administering patents
in the PRC. The patent administration departments of provincial or autonomous regions or
municipal governments are responsible for administering patents within their respective
jurisdictions. The Patent Law of the PRC and its implementation rules provide for three types of
patents, “invention”, “utility model” and “design”. Invention patents are valid for twenty years,
while design patents and utility model patents are valid for ten years, from the date of
application. The Chinese patent system adopts a “first come, first file” principle, which means
that where more than one person files a patent application for the same invention, a patent will
be granted to the person who files the application first. To be patentable, invention or utility
models must meet three criteria: novelty, inventiveness and practicability. A third party must
obtain consent or a proper license from the patent owner to use the patent. Otherwise, the use
constitutes an infringement of the patent rights.
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Copyright
Pursuant to the Copyright Law of the PRC ( ) promulgated by
the SCNPC on September 7, 1990, implemented on June 1, 1991 and amended on October 27,
2001, February 26, 2010 and November 11, 2020 (the latest revision became effective on June 1,
2021) and the Implementing Regulations of the Copyright Law of the PRC ( ʕശɛ͏΍ձ਷ഹ
ૢԷ) promulgated by the State Council on August 2, 2002, amended on January 8,
2011 and January 30, 2013 (the latest revision became effective on March 1, 2013), the PRC
nationals, legal persons, and other organizations shall, enjoy copyright in their works, whether
published or not, which include, among others, works of literature, art, natural science, social
science, engineering technology and computer software. The copyright owner enjoys various
kinds of rights, including right of publication, right of authorship and right of reproduction.
Any work of a foreigner or stateless person which acquires copyright under an agreement
concluded between the PRC and the country to which the author belongs or in which the author
permanently resides, or under an international treaty to which both countries are parties, shall be
protected by this Law. Any work of a foreigner or stateless person published for the first time
and within the territory of the PRC shall acquire copyright in accordance with the relevant rules.
Regulations in relation to employment and social welfare
The Labor Contract Law
Pursuant to the Labor Law of the PRC () promulgated by the
SCNPC on July 5, 1994, becoming effective on January 1, 1995 and amended on August 27,
2009 and on December 29, 2018, the Labor Contract Law of the PRC ( ʕശɛ͏΍ձ਷௶ਗΥ
) promulgated by the SCNPC on June 29, 2007, becoming effective on January 1, 2008
and amended on December 28, 2012 and effective from July 1, 2013, and the Regulations on the
Implementation of the Labor Contract Law (ૢԷ )
promulgated by the State Council and came into effect on September 18, 2008, labor
relationships between employers and employees must be executed in written form. Where a labor
relationship has already been established but no formal contract has been made, a written labor
contract shall be entered into within one month from the date when the employee begins to
work. Wages may not be lower than the local minimum wage. Employers must establish a
system for labor safety and sanitation, strictly abide by state standards and provide relevant
training to its employees. Employees are also required to work in safe and sanitary conditions.
Social insurance and housing fund
Enterprises in China are required by the PRC laws and regulations to participate in certain
employee benefit plans, including social insurance funds, namely a pension plan, a medical
insurance plan, an unemployment insurance plan, a work-related injury insurance plan and a
maternity insurance plan, and a housing provident fund.
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Pursuant to the Social Security Law of the PRC ( ), which
was promulgated by the SCNPC on October 28, 2010 and came into effect on July 1, 2011 and
amended on December 29, 2018, and other relevant PRC laws and regulations such as the
Interim Regulations on the Collection and Payment of Social Insurance Premiums (ᎈ൬
ᅄᖮᅲБૢԷ) came into effect on January 22, 1999 and amended on March 24, 2019,
Regulations on Work Injury Insurance (ᎈૢԷ) implemented on January 1, 2004 and
amended on December 20, 2010, Regulations on Unemployment Insurance (ᎈૢԷ)
promulgated on January 22, 1999 and Trial Measures on Employee Maternity Insurance of
Enterprises ( ) implemented on January 1, 1995, the employer
shall contribute to social insurance plans covering basic pensions insurance, basic medical
insurance, maternity insurance, work injury insurance and unemployment insurance. Basic
pension, medical and unemployment insurance contributions shall be paid by both employers and
employees, while work injury insurance and maternity insurance contributions shall be paid only
by employers, and employers who failed to promptly contribute social security premiums in full
amount shall be ordered by the social security premium collection agency to make or supplement
contributions within a stipulated period, and shall be subject to a late payment fine computed
from the due date at the rate of 0.05% per day; where payment is not made within the stipulated
period, the relevant administrative authorities shall impose a fine ranging from one to three
times the amount of the amount in arrears.
Pursuant to the Regulations on the Administration of Housing Fund (၍ଣૢ
Է), which was promulgated by the State Council and became effective on April 3, 1999, and
was amended on March 24, 2002 and March 24, 2019, enterprises in the PRC must register with
the competent managing center for housing funds and upon the examination by such center,
these enterprises shall complete procedures for opening an account at the relevant bank for the
deposit of employees’ housing funds. Enterprises are also required to pay and deposit housing
funds on behalf of their employees in full and in a timely manner. Employers that violate these
regulations and fail to process housing fund payments or deposit registrations with the housing
fund administration center within a designated period are subject to a fine ranging from
RMB10,000 to RMB50,000.
Regulations in relation to taxation
Enterprise income tax
Pursuant to the PRC Enterprise Income Tax Law ( ) (the
“EIT Law ”) promulgated on March 16, 2007, amended on February 24, 2017 and December 29,
2018, and the Enterprise Income Tax Implementation Regulations of the PRC ( ʕശɛ͏΍ձ਷
ૢԷ) (the “ EITIR ”), which was promulgated by the State Council on
December 6, 2007, became effective on January 1, 2008 and was amended on April 23, 2019, the
income tax rate for both domestic and foreign-invested enterprises is 25%. Enterprises
established outside the PRC with “de facto management bodies” located in the PRC are
considered as “resident enterprises” and are subject to the uniform 25% enterprise income tax
rate for their global income. “Non-resident enterprises” are defined as enterprises that are
organized under the laws of foreign countries and have “de facto management bodies” located
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outside the PRC, but have established institutions or premises in the PRC, or have no such
established institutions or premises but have income generated from inside the PRC. Under the
EIT Law, non-resident enterprises are generally subject to a uniform corporate income tax of
25%. However, pursuant to the EIT Law and its implementing rules, if non-resident enterprises
have not formed establishments or premises in the PRC, or if they have formed establishments
or premises in the PRC but there is no actual relationship between the relevant income derived
in the PRC and the establishments or premises set up by them, enterprise income tax is set at the
rate of 10% with respect to their income sourced from inside the PRC.
Dividends withholding tax
According to the EIT Law, dividends paid by foreign-invested companies to their foreign
investors that are non-resident enterprises as defined under the law are subject to withholding
tax at a rate of 10%, unless otherwise provided in the relevant tax agreements entered into with
the central government of the PRC. Pursuant to the Arrangement Between the Mainland of China
and the Hong Kong Special Administrative Region for the Avoidance of Double Taxation on
Income (τર ) (the “ Double
Tax Avoidance Arrangement ”) promulgated on August 21, 2006, if a Hong Kong resident
enterprise is determined by the competent PRC tax authority to have satisfied the relevant
conditions and requirements under such Double Tax Avoidance Arrangement, the withholding tax
rate on the dividends the Hong Kong resident enterprise receives from a PRC resident enterprise
may be reduced to 5% from 10% applicable under the EIT Law and the EITIR.
However, based on the Notice of the State Administration of Taxation on Certain Issues
with Respect to the Enforcement of Dividend Provisions in Tax Treaties (ੂБ
ٝpromulgated and took into effect on February 20, 2009 by
the SAT, if the relevant PRC tax authorities determine, in their discretion, that a company
benefits from such reduced income tax rate due to a structure or arrangement that is primarily
tax-driven, such PRC tax authorities may adjust the preferential tax treatment.
Based on the Notice of the State Administration of Taxation on the Recognition of
Beneficial Owners in Tax Treaties (ʕ “Ϟɛ ”ʮ
ѓ), which was promulgated by SAT on February 3, 2018 and came into effect on April 1, 2018,
a comprehensive analysis will be used to determine beneficial ownership based on the actual
situation of a specific case combined with certain principles, and if an applicant was obliged to
pay more than 50% of its income to a third country (region) resident within 12 months of the
receipt of the income, or the business activities undertaken by an applicant did not constitute
substantive business activities including substantive manufacturing, distribution, management
and other activities, the applicant was unlikely to be recognized as an beneficial owner to enjoy
tax treaty benefits.
V alue-added tax
Pursuant to the Pilot Proposals for the Collection of Value-Added Tax in Lieu of Business
Tax ( ) issued jointly by the Ministry of Finance (the “ MOF”) and
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the SAT on November 16, 2011 and with effect from November 16, 2011, the pilot program shall
be initiated on January 1, 2012, and timely improve the program according to the circumstances
and choose a right time to expand the scope of the pilot program. The pilot program shall be
conducted in the production-oriented service industries such as the transportation industry and
some modern service industries in the pilot regions and gradually spread to other industries. On
the basis of the current standard value-added tax (“ VAT”) rate of 17% and low V AT rate of 13%,
two low tax rates of 11% and 6% shall be added. The tax rate of 17% shall be applicable to
those like lease of tangible personal property, the tax rate of 11% shall be applicable to the
transportation industry and the construction industry, and the tax rate of 6% shall be applicable
to other modern service industries. Up to August 1, 2013, the scope of the pilot for the
Collection of Value-Added Tax in Lieu of Business Tax program had expanded to the whole
country.
Pursuant to the Provisional Regulations on Value-added Tax of the PRC ( ʕശɛ͏΍ձ਷
೼ᅲБૢԷ) which was promulgated by the State Council on December 13, 1993 and last
amended on November 19, 2017 with effect from the same day and the Implementing Rules of
the Provisional Regulations on Value-added Tax of the PRC (೼ᅲБૢԷ
) which was promulgated by the MOF on December 25, 1993, came into effect on
January 1, 1994, and was last amended on October 28, 2011, all entities or individuals in the
PRC engaging in the sale of goods, services, intangible assets or real estate, the provision of
processing repairing and replacement services, and the importation of goods are required to pay
V AT. The amount of V AT payable is calculated as “output V AT” minus “input V AT”. The rate of
V AT is 17% for those engaging in the sale or importation of goods, provision of processing,
repairing and replacement services, or lease of tangible personal property, except as otherwise
provided in the Provisional Regulations on Value-added Tax of the PRC.
Pursuant to the Circular of the Ministry of Finance and the State Administration of
Taxation on Adjusting Value-added Tax Rates (ஷ
) promulgated on April 4, 2018 and taking effect from May 1, 2018, a taxpayer who is
previously subject to V AT rates of 17% and 11% respectively on V AT-taxable sales activities or
imported goods shall have the applicable tax rates adjusted to 16% and 10% respectively. As
regards exported goods that are previously subject to V AT rate of 17% and are eligible for export
tax rebate of 17%, their export tax rebate shall be adjusted to 16%. As regards exported goods
and cross-border taxable activities that are previously subject to V AT rate of 11% and are
eligible for export tax rebate of 11%, their export tax rebate shall be adjusted to 10%.
According to the Announcement on Policies related to Deepening V AT Reform (ଉʷ
ʮѓ ), which was promulgated on March 20, 2019 and became effective
on April 1, 2019, V AT general taxpayers who conduct V AT taxable sales or import goods subject
to a 16% tax rate will enjoy an adjusted tax rate of 13% while those subject to a 10% tax rate
will enjoy an adjusted tax rate of 9%. For export goods subject to a 16% tax rate and export tax
rebate rate of 16%, the export tax rebate rate will be adjusted to 13%; while for exported goods
or cross-border taxable behaviors subject to a 10% tax rate and export tax rebate rate of 10%,
the export tax rebate rate will be adjusted to 9%.
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Enterprise income tax on indirect transfer of non-resident enterprises
On December 10, 2009, the SAT issued the Circular 698. By promulgating and
implementing the Circular 698, the PRC tax authorities have enhanced their scrutiny over the
indirect transfer of equity interests in a PRC resident enterprise by a non-resident enterprise. The
SAT further issued the Announcement on Several Issues Concerning Enterprise Income Tax for
Indirect Transfer of Assets by Non-Resident Enterprises (͏Άุගટᔷᜫ
ʮѓ ) (the “ Circular 7 ”) on February 3, 2015, to supersede existing
provisions in relation to the indirect transfer as set forth in the Circular 698. The Circular 7
introduces a new tax regime that is significantly different from that under the Circular 698. The
Circular 7 extends its tax jurisdiction to capture not only indirect transfer as set forth under the
Circular 698 but also transactions involving transfer of immovable property in China and assets
held under the establishment and place, in China of a foreign company through the offshore
transfer of a foreign intermediate holding company. The Circular 7 also provides clearer criteria
than the Circular 698 on how to assess reasonable commercial purposes and introduces safe
harbor scenarios applicable to internal group restructurings. Where a non-resident enterprise
indirectly transfers equity interests or other assets of a PRC resident enterprise by implementing
arrangements that are not for reasonable commercial purposes to avoid its obligation to pay
enterprise income tax, such an indirect transfer shall, in accordance with the EIT Law, be
recognized by the competent PRC tax authorities as a direct transfer of equity interests or other
assets by the PRC resident enterprise.
On October 17, 2017, the SAT promulgated the Announcement on Matters Concerning
Withholding and Payment of Income Tax of Non-resident Enterprises from Source (೼ਕᐼ
ʮѓ ) (the “ SAT Circular 37 ”), which came into
force and replace the Circular 698 and certain other regulations on December 1, 2017 and partly
amended on June 15, 2018. The SAT Circular 37 does, among other things, simplify procedures
of withholding and payment of income tax levied on non-resident enterprises.
Regulations in relation to foreign exchange
Pursuant to the Regulations of the PRC on Foreign Exchange Control ( ʕശɛ͏΍ձ਷̮
ි၍ଣૢԷ), which was promulgated by the State Council on January 29, 1996, taking effect
on April 1, 1996 and amended on August 5, 2008 and other related regulations, no restrictions
are imposed on international payments and transfers under the current account. Foreign exchange
receipts and payments under the current account, such as goods and service-related foreign
exchange transactions and interest and dividend payments, shall be based on true and legitimate
transactions and can be processed directly at a bank against authentic and valid transaction
documents. Foreign exchange receipts and payments under the capital account, such as direct
equity investment and loans, shall go with registration procedures at foreign exchange
administration departments, and shall also go through certain approval or record-filing
procedures if the relevant laws and regulations require such approval or record-filing. The
foreign exchange and settlement fund under the capital account shall be used for the purpose
approved by the relevant authorities and foreign exchange administration departments.
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In February 13, 2015, the State Administration for Foreign Exchange issued the Notice on
Further Simplifying and Improving the Administration of the Foreign Exchange Concerning
Direct Investment (ٝthe
“SAFE Circular 13 ”), pursuant to which, foreign exchange registration and approval in respect
of overseas direct investment are canceled and relevant banks are authorized to review and
handle foreign exchange registration in accordance with the SAFE Circular 13 and the
Operational Guidance for Direct Investment Foreign Exchange Business and SAFE and its local
counterparts will exert indirect supervision on direct investment foreign exchange registration
via banks.
In accordance with the Circular on the Reform and Standardization of the Management
Policy of the Settlement of Capital Accounts (ձ஝ᇍ༟͉ධͦഐි၍
ٝissued by SAFE on June 9, 2016, and taking effect on the same day, the
settlement of foreign exchange receipts under the capital account (including foreign exchange
capital, external debts, funds repatriated from overseas listing, etc.) entitled to discretionary
settlement in accordance with relevant policies, may be conducted at a bank based on the actual
operating needs of domestic entities. The discretionary settlement ratio of foreign exchange
receipts under the capital account of domestic entities is tentatively set as 100%. SAFE may
adjust the above ratio in due time in accordance with receipt and payment balance and status.
Regulations in relation to foreign exchange registration of domestic individuals
participating in stock incentive plan of overseas publicly listed company
Pursuant to the Notices on Issues Concerning the Foreign Exchange Administration
for Domestic Individuals Participating in Stock Incentive Plan of Overseas Publicly Listed
Company (ٙ
ٝpromulgated by the SAFE on February 15, 2012, PRC citizens and non-PRC citizens
residing in China for a continuous period of not less than one year with the exception of foreign
diplomats in China and the representatives of any international organization in China, who
participate in any stock incentive plan of an overseas publicly listed company, are required to
register with SAFE through a domestic qualified agent and complete certain other procedures,
unless certain exceptions are available. In addition, an overseas-entrusted institution must be
retained to handle matters in connection with the exercise or sale of stock options and the
purchase or sale of shares and interests.
Regulations relating to cybersecurity review
On November 14, 2021, the Cyberspace Administration of China (“ CAC”) published a draft
of the Administrative Regulations for Internet Data Security ( ၣഖᅰኽτΌ၍ଣૢԷ (ᅄӋจԈ
ᇃ)) (the “ Draft Cyber Data Security Regulations ”), providing that data processors conducting
the following activities must apply for cybersecurity review: (i) merger, reorganization, or
division of internet platform operators that have acquired a large number of data resources
related to national security, economic development, or public interests affects or may affect
national security; (ii) a foreign listing by data processors processing over one million users’
personal information; (iii) listing in Hong Kong that affects or may affect national security; or
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(iv) other data processing activities that affect or may affect national security. However, the
Draft Cyber Data Security Regulations does not provide the standard to determine the
circumstances that would be determined to “affect or may affect national security”. The CAC
solicited comments until December 13, 2021, but there is no timetable as to when it will be
enacted.
On December 28, 2021, the CAC, the National Development and Reform Commission of
the PRC, the MIIT and several other PRC governmental authorities jointly issued the
Cybersecurity Review Measures (جwhich became effective on February 15,
2022 and replaced the Cybersecurity Review Measures published on April 13, 2020. The
Cybersecurity Review Measures provides that, network platform operators with personal
information of over one million users shall be subject to cybersecurity review before listing
abroad ( ਷̮ɪ̹ ). The cybersecurity review will evaluate, among others, the risk of critical
information infrastructure, core data, important data, or a large amount of personal information
being influenced, controlled or maliciously used by foreign governments after going public, and
cyber information security risk. Pursuant to Cybersecurity Review Measures, critical information
infrastructure operators that purchase network products and services, and network platform
operators engaging in data processing activities that affect or may affect national security are
subject to cybersecurity review under the Cybersecurity Review Measures. In addition, (i) the
relevant government authorities may initiate the cybersecurity review against the relevant
operators if the authorities believe that the network products or services or data processing
activities of such operators affect or may affect national security; and (ii) network platform
operators who possess personal information of more than one million users and intend to be
listed at a foreign stock exchange must be subject to the cybersecurity review.
REGULATIONS ON OVERSEAS LISTINGS
On February 17, 2023, with the approval of the State Council, the CSRC released the Trial
Measures and five supporting guidelines, which came into effect on March 31, 2023. According
to the Trial Measures, (1) domestic companies that seek to offer or list securities overseas, both
directly and indirectly, should fulfill the filing procedure and report relevant information to the
CSRC. If a domestic company fails to complete the filing procedure or conceals any material
fact or falsifies any major content in its filing documents, such domestic company may be
subject to administrative penalties such as order to rectify, warnings, fines, and its controlling
shareholders, actual controllers, the person directly in charge and other directly liable persons
may also be subject to administrative penalties such as warnings and fines; (2) if the issuer
meets both of the following conditions, the overseas offering and listing shall be determined as
an indirect overseas offering and listing by a domestic company: (i) any of the total assets, net
assets, revenues or profits of the domestic operating entities of the issuer in the most recent
accounting year accounts for more than 50% of the corresponding figure in the issuer’s audited
consolidated financial statements for the same period; (ii) its major operational activities are
carried out in China or its main places of business are located in China, or the senior managers
in charge of operation and management of the issuer are mostly Chinese citizens or have
domicile in China; and (3) where a domestic company seeks to indirectly offer and list securities
in an overseas market, the issuer shall designate a major domestic operating entity responsible
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for all filing procedures with CSRC, and where an issuer makes an application for initial public
offering and listing in an overseas market, the issuer shall submit filings with the CSRC within 3
business days after such application is submitted.
Pursuant to the Trial Measures, PRC domestic companies that seek to offer and list
securities in overseas markets, either in direct or indirect means, are required to fulfill the filing
procedure with the CSRC and report relevant information. The Trial Measures provides that an
overseas offering and listing is explicitly prohibited, if any of the following: (i) such securities
offering and listing is explicitly prohibited by provisions in laws, administrative regulations and
relevant state rules; (ii) the intended overseas securities offering and listing may endanger
national security as reviewed and determined by competent authorities under the State Council
in accordance with law; (iii) the domestic company intending to make the securities offering and
listing, or its controlling shareholder(s) and the actual controller, have committed relevant
crimes such as corruption, bribery, embezzlement, misappropriation of property or undermining
the order of the socialist market economy during the latest three years; (iv) the domestic
company intending to make the securities offering and listing is currently under investigations
for suspicion of criminal offenses or major violations of laws and regulations, and no conclusion
has yet been made thereof; or (v) there are material ownership disputes over equity held by the
domestic company’s controlling shareholder(s) or by other shareholder(s) that are controlled by
the controlling shareholder(s) and/or actual controller.
On February 17, 2023, the CSRC also issued the Notice on Administration for the Filing of
Overseas Offering and Listing by Domestic Companies (၍ଣτ
ٝi.e. the Notice), which, among others, clarified that (1) on or prior to the effective
date of the Trial Measures, domestic companies that have already submitted valid applications
for overseas offering and listing but have not obtained approval from overseas regulatory
authorities or stock exchanges may reasonably arrange the timing for submitting their filing
applications with CSRC and must complete the filing before the completion of their overseas
offering and listing; (2) a six-month transition period will be granted to domestic companies
which, prior to the effective date of the Trial Measures, have already obtained the approval from
overseas regulatory authorities or stock exchanges (according to the Notice, such “approval from
overseas regulatory authorities or stock exchanges” include the pass of the hearing for applicants
who apply for listing on the Stock Exchange) but have not completed the indirect overseas
listing. If domestic companies fail to complete the overseas listing within such six-month
transition period, they shall file with CSRC according to the requirements. As confirmed by the
Company, if the above requirements cannot be met, the Company will schedule the submission
of the filing application in a reasonable manner after submitting the application documents for
issuance and listing, and undertake not to implement the issuance before completion of filing
procedures with the CSRC.
On February 24, 2023, the CSRC and other relevant government authorities promulgated
the Provisions on Strengthening the Confidentiality and Archives Administration of Overseas
Securities Issuance and Listing by Domestic Enterprises (̋੶ྤʫΆุྤ̮೯БᗇՎձɪ
 ) (the “ Provision on Confidentiality ”), which will be
effective on March 31, 2023. Pursuant to the Provision on Confidentiality, where a domestic
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enterprise provides or publicly discloses to the relevant securities companies, securities service
institutions, overseas regulatory authorities and other entities and individuals, or provides or
publicly discloses through its overseas listing subjects, documents and materials involving state
secrets and working secrets of state organs, it shall report the same to the competent department
with the examination and approval authority for approval in accordance with the law, and submit
the same to the secrecy administration department of the same level for filing. Domestic
enterprises providing accounting archives or copies thereof to entities and individuals concerned
such as securities companies, securities service institutions and overseas regulatory authorities
shall perform the corresponding procedures pursuant to the relevant provisions of the State. The
working papers formed within the territory of the PRC by the securities companies and securities
service institutions that provide corresponding services for the overseas issuance and listing of
domestic enterprises shall be kept within the territory of the PRC, and those that need to leave
the PRC shall go through the examination and approval formalities in accordance with the
relevant provisions.
APPROV AL OF INVESTMENT REGULATIONS
According to the Approval of Investment Regulations, direct or indirect investments made
by each individual with Taiwan passport or Taiwan-incorporated entity in Mainland China
through companies under its control are subject to the approval of the Taiwan Investment
Commission.
The Approval of Investment Regulations also set certain limitations on the amount and
business categories of investments that individuals with Taiwan passport or Taiwan-incorporated
entities may make in the Mainland China.
Other than investments in prohibited or conditionally permitted categories, if the total
investment amount of each individual with Taiwan passport or Taiwan-incorporated entity in a
single Mainland China entity does not exceed US$1 million (the “ Original Quota ”), these
persons can report to the Taiwan Investment Commission within six months after the investment
was made. If such individual or entity’s investment in a single Mainland China exceeds US$1
million, they are required to obtain the Taiwan Investment Commission’s prior approval before
conducting such investment. In addition, individuals with Taiwan passport are also restricted by
the Annual Investment Quota of US$5 million per year for investments in Mainland China.
As of the Latest Practicable Date, our Taiwan Shareholders indirectly held in aggregate
approximately 64.5% of our Shares. As advised by our Taiwan Legal Advisors, since our
Founders are holders of Taiwan passports, their indirect investment in our operating subsidiary
in Mainland China is subject to the approval of the Taiwan Investment Commission, and the
above investment shall be categorized under the general items (i.e. not businesses where
investment by investors with Taiwan passport or are Taiwan-incorporated entities is prohibited or
conditionally permitted) pursuant to the Approval of Investment Regulations. Our Taiwan
Shareholders had filed their respective indirect investment in our operating subsidiary in
Mainland China with, and obtained the approval thereof from the Taiwan Investment
Commission, and as advised by our Taiwan Legal Advisors, our Taiwan Shareholders had
fulfilled all relevant legal requirements in respect of their investment in our Group as required
under Taiwan laws.
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Any additional investment by each of our Taiwan Shareholder(s) in the future will be
subject to prior approval by the Taiwan Investment Commission (if the total investment made by
such Taiwan Shareholder in a single Mainland China entity exceeded the Original Quota). Each
of our Taiwan Shareholders are also subject to the Annual Investment Quota.
Based on our Taiwan Legal Advisors’ interpretation and its consultation with the Taiwan
Investment Commission, we believe that the Taiwan Investment Commission would likely take
the position that as long as our Taiwan Shareholders are interested in our Shares, certain equity
capital increase by us into our subsidiary(ies) in Mainland China will be considered as additional
indirect investment by our Taiwan Shareholders. The amount of investment made by each
Taiwan Shareholder will be determined with reference to their shareholding in our Company. If
the Taiwan Investment Commission takes that position, each of our Taiwan Shareholders will be
required to obtain an approval from the Taiwan Investment Commission for their equity capital
increase. As advised by our Taiwan Legal Advisors, based on the current practice and policy of
the Taiwan Investment Commission, our Taiwan Shareholders are not expected to have any legal
impediment in obtaining approval from the Taiwan Investment Commission for equity capital
increase into our Mainland China subsidiaries in the future so long as each of our Taiwan
Shareholders complies with the Approval of Investment Regulations and the equity capital
increase does not exceed the Original Quota (if applicable) or the Annual Investment Quota. We
cannot guarantee that the current practice and policy of the Taiwan Investment Commission will
remain the same in the future.
Based on our Taiwan Legal Advisor’s interpretation of the case study provided in the
Foreign and Mainland China Investment Regulations and Case Sharing (஝
ԷʱԮ ) published by the Taiwan Investment Commission in 2022, equity capital increase
by us into our Mainland China subsidiaries using proceeds from the Global Offering will not be
counted towards the Original Quota or Annual Investment Quota of each Taiwan Shareholder as
such proceeds represent funds received by us from third party investors. Intra-group loans or
transactions (such as issuance of bonds) conducted by our Company or our group companies at
the subsidiary level are also not counted towards the Original Quota or Annual Investment Quota
of each Taiwan Shareholder as they are not considered as an investment act. However, if we
conduct equity capital increase into our Mainland China subsidiaries using funds such as our
borrowings or internal resources, they will be counted towards our Taiwan Shareholders’
Original Quota or Annual Investment Quota, because the use of our internal resources are
considered as capital gain of the initial investment provided by them. When our Taiwan
Shareholders report their investment in Mainland China to the Taiwan Investment Commission to
obtain its approval, they shall substantiate source of fund used for the equity capital increase if
the authority enquires. Our Taiwan Shareholders are entitled to receive dividend declared by our
Company.
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The information and statistics set out in this section and other sections of this
prospectus were extracted from the report prepared by CIC, which was commissioned by us,
and from various official government publications and other publicly available publications.
We engaged CIC to prepare the CIC Report, an independent industry report, in connection
with the Global Offering. The information from official government sources has not been
independently verified by us, the Sole Sponsor , the Sole Overall Coordinator , the Joint Global
Coordinators, the Joint Bookrunners, the Joint Lead Managers, the Underwriters, the Capital
Market Intermediaries, any of their respective directors and advisers, or any other persons or
parties involved in the Global Offering, and no representation is given as to its accuracy.
SOURCES OF THE INDUSTRY INFORMATION
CIC was commissioned to conduct an analysis of, and to report the China’s social
e-commerce and IP creation and operation industry at a fee of approximately RMB1,130,000.
The commissioned report has been prepared by CIC independent of the influence of the
Company and other interested parties. CIC’s services include industry consulting, commercial
due diligence, strategic consulting, etc.. Its consulting team has been tracking the latest market
trends in e-commerce, consumer goods, environment, industry, energy, chemicals, healthcare,
transportation, agriculture, finance, etc., and has the relevant and insightful market intelligence
in the above industries.
CIC conducted both primary and secondary research using a variety of resources. Primary
research involved interviewing key industry experts and leading industry participants. Secondary
research involved analyzing data from various publicly available data sources, such as the
National Bureau of Statistics, International Monetary Fund, etc.. The market projections in the
commissioned report are based on the following key assumptions: (i) the overall social,
economic, and political environment in China is expected to remain stable during the forecast
period; (ii) China’s economic and industrial development is likely to maintain a steady growth
trajectory during the forecast period, accompanied by continuing urbanization; (iii) relevant key
industry drivers are likely to drive the social e-commerce and IP creation and operation market
in China during the forecast period; and (iv) there is no extreme force majeure or unforeseen set
of industry regulations in which the market may be affected in either a dramatic or fundamental
way.
Unless otherwise specified, all data and forecasts contained in this section are derived from
the consultancy report of CIC. The Directors, upon acting with reasonable prudence, confirmed
that there has been no occurrence of adverse change in the overall market information that
would subject the data to significant restrictions, contradiction or negative effects since the date
of the consultancy report.
OVERVIEW OF CHINA’S SOCIAL E-COMMERCE INDUSTRY AND IP CREATION AND
OPERATION INDUSTRY
China’s online retail market has experienced booming development during the past five
years. The total online retail sales value in China, reached approximately RMB13.8 trillion in
2022 from RMB7.2 trillion in 2017 and is expected to further grow at a CAGR of 10.0% to
RMB22.2 trillion by 2027. The expansion of online retail market in China has been continuing,
underpinned by the increasing purchasing power and the development of new retail business
models. The e-commerce market in China is relatively concentrated, mainly dominated by
Taobao ( ଇᘒ), Tmall (˂፟), JD.com (؇and Pinduoduo (εε), with their combined
market share accounting for about 90% in terms of GMV in 2022.
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By definition, new retail business is a business model that: (i) combines online and offline
commerce through the digitization of the entire retail value chain for the benefit of the
merchants, the distributors (if any), the consumers, and the company; (ii) leverages digital
payments data to create new efficiencies and capabilities in logistics, marketing, and product
development; (iii) supports merchants with new tools and insights that cut costs and drive sales;
and (iv) offers customers a seamless and customized shopping experience across the online and
offline spaces (e.g. via interactions between distributors and end consumers through
communications on social media and messaging apps or participation of offline meetings, such
as annual events, conferences, meetings and/or face-to-face sales at distributors’ retail shops).
China’s new retail market refers to a business that converges online and offline commerce
through the digitization of the entire retail value chain for the benefit of both the merchant, the
consumer, and the company enabling this transformation. And the company in new retail markets
operates new products sales channels which different from traditional e-commerce, such as sales
in WeChat (ڦ,)Douyin , XiaoHongShu (ࣣߎand Kuaishou , etc.. The Company’s business
model that utilizes its distributors and customers’ online community and offers customers a
seamless and customized shopping experience is viewed as one of the forms of “new retail
business”. The segmentation of China’s new retail market includes social e-commerce industry
which is further enhancing the development of China’s new retail market. China’s new retail
market leverages digital payments data to create new efficiencies and capabilities in logistics,
marketing, and product development; to support merchants with new tools and insights that cut
costs and drive sales; and to offer customers a seamless and customized shopping experience
across the online and offline spaces.
The market size of new retail markets in China increased from RMB0.0 trillion to RMB2.3
trillion from 2017 to 2022, representing an impressive CAGR of 125.2%, New retail market
develops at a fast pace and will further penetrate China’s retail market, in the foreseeable future,
from 2022 to 2027, China’s new retail market is projected to grow at a CAGR of 18.5%. By
2027, it is forecasted that China’s new retail market will reach a new high of RMB5.3 trillion.
Traditional e-commerce is a consumer search-based model where the purchasing process is
initiated by customers’ searching on e-commerce platforms and placing orders based on their
immediate demands. On a traditional e-commerce platform, the commodity information is
normally centralized and independent consumers rarely interact with each other. Traditional
e-commerce has become increasingly inefficient and presented a number of challenges to various
stakeholders. For consumers, overflow of information on traditional e-commerce platforms
became a pain point, while for merchants, they are troubled by increasing consumer acquisition
costs on traditional e-commerce platforms and difficulty in building brand awareness. In light of
these challenges, social e-commerce, defined as the sharing-based online shopping model built
on consumers’ social networks and communities, has emerged as a solution. The benefits of
social e-commerce include providing more accurate recommendation and source of information
for consumers, improving brands awareness by social connections, and reducing the costs of
consumer acquisition by leveraging community-building. Some market participants in China’s
social e-commerce industry are also empowered by IPs, which enable social e-commerce
companies to attract considerable traffic from fans base, usually helps the companies to enhance
the value and enrich the content of the brands and products.
China’s social e-commerce industry has experienced substantial growth over the past few
years in terms of GMV , reaching approximately RMB4,816.2 billion in 2022 from RMB691.2
billion in 2017, with a CAGR of 47.4%. It is expected to keep growing at a CAGR of 13.4%,
reaching RMB9,039.5 billion by 2027, according to CIC.
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Market size of social e-commerce industry, in terms of GMV , China, 2017–2027E
0
2,000
4,000
6,000
8,000
10,000
2017 2018 2019 2020 2021 2022 2023E 2024E 2025E 2026E 2027E
691.2 1,262.5
2,224.7
3,703.1
4,464.1 4,816.2
5,829.0
6,781.9
7,641.9
8,394.6
9,039.5
RMB billion CAGR 2017–2022
47.4%
CAGR 2022–2027
13.4%
Source: the CIC Report
Business model of social e-commerce
Social e-commerce enables customers and distributors to conveniently browse, make
purchases, share, promote and facilitate online transactions through their social networks by
providing features such as IT infrastructure support, embedded marketing tools and content.
China’s social e-commerce industry mainly consists of the following four business models:
Community-based social e-commerce model , where brands or individuals operate
e-commerce business through social media apps (mainly in WeChat). Based on their strong
personal social network, brands and individuals can generate social exposure through WeChat
official accounts, WeChat mini programs, WeChat Moments, or WeChat groups to attract and
engage with fans and consumers.
Membership-based model , where one has to become a member of the platform before
enjoying some member-exclusive rights. Only members of the platform can get access to the
products. New members are usually invited by existing members through social media. Members
can share and recommend products through social networks and essentially function as sellers on
the platform and earn commission fees.
Content-sharing model , where consumers are attracted by shopping experience sharing,
recommendations and reviews. It functions as a community to discover and share information of
good products among a group of people with similar interests.
Group purchase model , where consumers form a group to purchase products, typically at
competitive prices, and are encouraged to invite others to join the group.
Categorisation of IP derivatives in China
Intellectual property (IP) refers to the properties that include intangible creations of the
human intellect, consisting of copyrights, patents, trademarks, and etc. The properties could
contain various IP types in different nature, including literature, films and TVs, games, cartoons
and animation, music, live concerts, celebrities, art and etc.. Successful IPs can bring about
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considerable commercial value besides the value of their original formats through IP derivatives.
IP derivatives can be divided into the following three major categories:
Merchandise derivatives , refer to branded products developed and sold by licensees after
they acquire authorization from IP owners to use popular IPs for the benefit of business
interests. The authorization is normally valid for a specific period of time in a specific
geographical area.
Space derivatives , refer to themed events or space decoration, such as conventions,
exhibitions, themed stores and theme parks that incorporate IP and related concepts for the
purpose of providing immersive experiences as well as selling IP-related products.
IP-adaptation entertainment content , refer to entertainment content, mainly consisting of
games, films and TV dramas, animation, etc., that are adapted from IPs.
The linkage and synergy between social e-commerce and IP creation
IP creation becomes social e-commerce company’s assets , social e-commerce company
with IP background do not need to pay extra IP licensing fees and company can freely leverage
its IP assets to do commercial realization transactions, which is a huge competitive advantage
that compare to another industry players.
IPs can bring about considerable commercial value besides the value of their original
formats through IP derivatives , social e-commerce company can authorize its IPs value to
another branded companies or own subsidiary, with different forms of IP derivatives, such as
merchandise derivatives, space derivatives and IP-adaptation entertainment content, in order to
obtain a considerable sales value of IP derivatives and profits.
IPs can bring a considerable audience base which has strong emotion links with the IPs
to social e-commerce company . With the huge fan base of company’s IPs assets, which enable
the social e-commerce company enhances its IPs commercial value and leverages IP-based
marketing strategy to effectively improve the value and enrich the content of the social
e-commerce company’s brand and products, and can attract the fan base of the IPs to their
brands and products.
The empowerment and benefit of IP-based marketing for social e-commerce platforms
The social e-commerce platforms, which embedding suitable IPs and related elements and
concepts to products, product packages, free gifts, etc., can effectively gain the following
advantages:
IPs diversified the social e-commerce company’s business model. The social e-commerce
company can leverage its IPs assets to create different forms of IP derivatives, such as
embedding IPs into its merchandise products, themed events, space decoration and entertainment
content, etc., which brings company a huge development potential based on a diversified
business model.
IPs improve social e-commerce company’s brand awareness. IPs normally have a
considerable audience base which has strong emotion links with the IPs. Through using IP-based
marketing, companies can effectively enhance the value and enrich the content of their brands
and products, and can attract the fan base of the IPs to their brands and products.
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IPs bring impressive marketing and sales effects to social e-commerce company. The
quality of IP resources can enhance the core competitiveness of social e-commerce platforms.
The IP image, IP influence and IP quality can determine the marketing effects of the downstream
IP derivatives. Consumers in China is bombed by overwhelmed marketing information and their
attraction is distracted as a result of emergence of increasingly diverse marketing channels.
Quality IPs have premium content for business entities to utilize and process into good
marketing materials, and the organic combination of quality IPs and suitable products or services
can stir up great sparks and bring fun to consumers. All of which prove that leading IP resources
tend to bring impressive marketing and sales effects to business entities.
IPs enhance the social e-commerce company’s consumers stickiness and community
bonding. Fans with strong emotion links with IPs can easily be cultivated by IP-based social
e-commerce company into highly sticky consumers, KOCs and KOLs to company’s brand
through the strong IPs influence. The effect brought by loyal communities and consumers will
further raise company’s brand awareness and enable company to acquire new consumers at lower
costs.
IPs can reduce social e-commerce company’s advertising cost. IPs can enable company to
freely use IP-based marketing strategy with IPs naturally huge fan base to achieve a wider brand
or product exposure, which is huge competitive advantage that compare to industry players who
still using traditional digital marketing.
Market drivers of IP industry
The rapid growth of pan-entertainment industry in China. As a number of IPs are derived
from pan-entertainment content, the prosperity of China’s pan-entertainment is expected to
facilitate the growth of China’s IP creation and operation industry. The growing demand for
entertainment consumption in China are expected to further facilitate the growth of
pan-entertainment industry in China, and therefore drives the development of IP creation and
operation industry.
Large number of IP fans. Over the past years, the prevalence of fan economy in the PRC
has further driven the development of the entertainment and character IP licensing market.
Particular IPs including animation characters, celebrity and music can easily accumulate large
number of fans, which had become the main consumption power of IP derivative products and
services.
Enhanced purchase power. The improved consumption level have led to a boost in
consumers’ demand for unique and differentiated commodities. IP-related commodities can
convey a special emotion links between consumers and IPs through such commodities, which are
able to satisfy consumers’ taste for unique and differentiated commodities and are expected to be
welcomed by Chinese consumers. As a number of IPs are derived from pan-entertainment
content, the prosperity of China’s pan-entertainment is expected to facilitate the growth of
China’s IP creation and operation industry.
Competitive advantage of the Company’s IP resource
As of March 22, 2023, Jay Chou’s official account on Kuaishou , ChouMate had over 52
million subscriptions, ranking first among all celebrities on Kuaishou , in terms of the number of
fans of official accounts. Such account of Mr. Jay Chou on Kuaishou was not used to promote
any of our Group’s products. Such leading position on Kuaishou has reflected the considerable
influence of ChouMate .
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J-Style Trip season one was broadcast during 22:00 to 24:00, every Saturday on Zhejiang
Satellite TV from March 2020 to June 2020, and was also aired on Mango TV (؈TV) and
Netflix.
Based on the viewership ratings published by CSM Media Research Co., Ltd ( ʕ਷ᄿൖ॰
ʮ̡ ) (being one of the major providers of data of TV programs ratings in the
PRC) (“ CSM”), J-Style Trip season one recorded an average rating of 1.165% and ranked first
among the TV reality shows broadcasted during the same timeslot from March to June 2020. The
average ratings of the following two TV reality shows reached 0.747% and 0.697%, respectively.
Competitive landscape in China’s entertainment industry
The
ranking TV reality shows broadcast from March to June 2020
Average
rating
published by
CSM
1 J-Style Trip season one ( մ༷া1) 1.165%
2 The Sound season three ( ᑊᑗՉྤ 3) 0.747%
3 Dear, Come To Eat (ٙ,ԸΦඵ) 0.697%
4 If you are the one (Rebroadcast) (༐ʶᓔ ) 0.467%
5 M et oU s(ᆀඟ ) 0.373%
In addition, based on the average rating published by CSM, J-Style Trip season one ranked
27th among all TV reality shows broadcasted during 2020.
The number of Mr. Liu Keng-hung’s followers has been increasing since April 2022, with
his Douyin followers growing from approximately 5.0 million on April 12, 2022 to 65.4 million
on May 12, 2022, and to 71.5 million as at December 31, 2022. Only a few phenomenal
accounts on the Douyin platform can reach a monthly increase of more than 10 million fans,
while Mr. Liu Keng-hung increased his fan base by more than 60 million within a month,
surpassing Mr. Andy Lau’s record of 50 million within one month and becoming the account
with the highest monthly increase in the history of Douyin .
Mr. Liu Keng-hung’s popularity as a fitness enthusiast was consistent with his track
records, where he has been working as a fitness trainer for many years, which helped him in
building the IP of fitness icon.
Mr. Liu Keng-hung has accumulated 164 million likes for his works on Douyin , making
him the third most popular Douyin KOL account in terms of number of followers. His Douyin
topic “Ben Cao Gang Mu Exercise Challenge” ( ͉ণၤͦ๏ɿ዁ ) has been played 15.3 billion
times.
Leading entertainment content including films and TVs, and live concerts can draw great
attention from audience, thus are suitable for advertising placements. By integrating social
e-commerce company’s products and brands into entertainment content, brands and products can
achieve considerable exposure and increase awareness among targeted audience, thus boosting
product sales.
Key drivers of China’s social e-commerce industry
Increasing mobile internet usage, especially on social media apps. The proliferation of
mobile internet has developed significantly, the new generation of consumers spends more time
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on mobile internet, especially on social media apps, and the scale of social media apps users has
been increasing in recent years. According to CIC, consumers’ average daily time spent on
mobile internet has been quickly growing from approximately 4.5 hours in 2017 to 7.1 hours in
2022 per day, representing a CAGR of 9.5% between 2017 and 2022. There is also an increasing
tendency to share one’s everyday life, including shopping needs and experience through actively
using social media, such as WeChat and Weibo. The monthly active users on WeChat increased
from 1.0 billion accounts in 2017 to close to 1.3 billion accounts in 2022, representing a CAGR
of 5.9%. The rising scale and penetration of social media apps users reflects that there are more
consumers becoming aware of social e-commerce business, which is expected to boost the social
e-commerce business in China in the future.
Increasing tendency to share shopping experience. Young people in China are more
willing to share their personal life and shopping experiences online to their friends and families,
and their purchasing decisions are more prone to be influenced by KOLs, KOCs, communities
and social networks, which provides a huge potential for the growth of social e-commerce
industry.
Emergence of wider social connections. According to CIC, online social network has
expanded from personal and familial relationships to communities and groups of common
interests, which has become a major source of information acquisition and distribution, hence
influencing one’s decision making in various aspects, including shopping decisions.
Increasing demand on more personalized and accurate information for online shopping.
According to CIC, in traditional e-commerce industry, the overflow of information became a
pain point. There are huge amount of products and information available on the e-commerce
platform, such information is often unilateral, and difficult for consumers to relate to and rely
upon. This drives the increasing demand on more personalized and accurate information for
online shopping. In light of these challenges, multiple and diversified shopping business models
are emerging in China’s e-commerce market, driving the growth of the social e-commerce
market in China.
Spontaneous shopping. The emergence of social e-commerce facilitates the omni-channel
marketing of products. Social e-commerce, empowered by the advancement of mobile internet,
the mobile payment technology, cloud computing, big data technology and etc., can provide
consumers with a seamless, integrated and highly personalized shopping experience as well as
access to an increasingly diversified range of products. This generates numerous new
consumption scenarios for consumers to shop anywhere, anytime, thus facilitating the market of
social e-commerce.
Government support. Social e-commerce creates a novel way of e-transaction. It provides
information distribution networks connected by social media, offers trustworthy and
cost-effective product choices with less time commitment, and lowers customer acquisition and
retention costs. Social e-commerce business has been growing rapidly and became increasingly
prosperous during recent years in China and government has been more proactive in encouraging
innovation to develop new business models, such as social e-commerce. Furthermore, in order to
distinguish social e-commerce from pyramid selling, The Standing Committee of Kunshan
Municipal People’s Congress had introduced supportive measures to establish pilot zone in
Kunshan as the first city for the sustainable development of social e-commerce, which is one of
the major future new business models, according to CIC. The establishment of such pilot zone is
a measure commonly adopted by the PRC government to support the development of new forms
of business such as Cross-border e-commerce pilot zone ( ༨ྤཥਠၝΥ༊᜕ਜ ) since 2012, new
retail pilot zone in Hangzhou (ψอཧਯ༊᜕ਜ ) since 2018 and Smart City pilot zone (۬
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̹༊᜕ਜ ) since 2012, etc. On December 25, 2020, the Eighth Inter-provincial Level Joint
Conference on Kunshan Pilot Zone (ึᙄୋɞϣึᙄ , the “ Eighth Joint
Conference ”) was held in Kunshan. According to the meeting minutes of the Eighth Joint
Conference, various supportive measures were proposed on the Eighth Joint Conference to
deepen the cross-strait industrial cooperation. It was also resolved that the Administration for
Market Regulation and Development and Reform Commission shall support the development of
innovative business models such as social e-commerce in Kunshan Pilot Zone, and carry out
pioneering work in data sharing and law enforcement cooperation for the purpose of encouraging
innovation while maintaining its prudence and adhering to its principles. To further supplement
the supportive measures set out in the Eighth Joint Conference, the Progress Meeting on Social
E-commerce Pilot Enterprises (ʹཥਠ༊ᓃપආึᙄ , the “ Progress Meeting ”) hosted by
Kunshan Development and Reform Commission was held on March 16, 2021 and Kunshan Star
Plus Action has become the first social e-commerce pilot enterprise in the Kunshan Pilot Zone.
It is expected that the government support provide a strong growth basis and will drive the
future development of social e-commerce industry in China.
The empowerment of IP is expected to drive the growth of social e-commerce industry .
Embedding a suitable IP, especially celebrity IP, which can bring huge traffic to the social
e-commerce company’s brand and products. IP owners can commercialize their IP assets through
different IP transaction methods such as licensing, IP asset sales and franchising, or through
direct participation in the development and sales of IP derivatives, which enable the company
facilitate business growth. Therefore, the empowerment of IP becomes an increasing popular
marketing strategy and further driving the growth of social e-commerce industry.
Key trends of China’s social e-commerce industry
Evolvement of marketing strategy. The marketing strategy of market players will evolve
from marketing through personal acquaintances to marketing through communities, KOCs and
KOLs. Marketing through personal relationship has only limited range of consumers, as
acquaintances might not have similar interests in specific products or services. Communities,
KOCs and KOLs can match those who have similar demands and provide an efficient approach
for online stores to reach a huge amount of target consumers. Therefore, more products and
service are expected to be promoted through communities, KOCs and KOLs in the future.
Increasing product categories. Along with the consumption upgrade, consumer demand in
China is becoming more diversified, resulting in preferences towards companies that have
various products. To capture consumers’ needs, companies will continuously expand their
product mix.
Improving consumer services and quality control. Consumer services and quality control
management are two major pain points for social e-commerce, which consumers are highly
concerned about. Many online merchants at present are lack of services and thus unable to retain
consumers as well as achieve sustainable development. To solve such issues, more social
e-commerce market participants tend to construct professional consumer service teams and
quality control management teams to enhance their competitiveness and increase consumer
loyalty.
Increasing using IP-based marketing strategy . Over the past years, the prevalence of fan
economy in China has further driven the development of the entertainment and character IP
licensing market. Therefore, particular IPs including animation characters, celebrity and music
can easily accumulate large number of fans, which had become the major marketing strategy for
social e-commerce company to promote their product and enhance the brand value.
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Entry barriers
User acquisition and engagement. An active community with robust growth is crucial to
the development of a social e-commerce. With rising competition in the e-commerce industry,
the cost of acquiring new users and maintaining high user stickiness has increased.
Quality control of products. Product quality is crucial for social e-commerce, as
e-commerce might be materially and negatively impacted by any product quality issues,
including but not limited to potential penalties, litigation and reputational harm. New entrants
usually need a period of time to establish a sound quality control system, and therefore, product
quality control remains a barrier.
Strong brand recognition. consumers normally prefer social e-commerce company with
good credit. Any negative news about the e-commerce company will impose long-term and
extensive negative impact on the future development. Hence, good brand recognition can help
win customers’ trust and loyalty. Existing social e-commerce companies have already built up a
good reputation given their outstanding service offerings, especially the company who owned the
celebrity IP background already easily built up the company’s brand recognition which is an
exclusive and inimitable brand. Therefore, new entrants may find it rather hard to establish good
brand reputation in short run while also competing with other players.
Strong distribution capability. One of the most important elements of the social
e-commerce industry is the wide application of social networks in merchandise marketing.
Communities and distributors with loyalty are the foundation of social e-commerce marketing in
this industry. A social e-commerce company needs to develop a comprehensive system with
sound incentive and supervision mechanism to manage their distributors and to strengthen
distribution capability. New entrants that lack experienced distributors and expertise in
distributor management may fail to survive in the market.
Key success factors
Social e-commerce company who owns successful IP background will have strong
community bonding and highly sticky consumers. Since wide application of social networks in
merchandise marketing is vital to the market players who owned successful IPs background can
efficiently maintain strong community bonding and cultivate a large amount of highly sticky
consumers, KOCs and KOLs to their brands through the strong IPs influence which can attract
large fan based traffic. The effect brought by loyal communities and consumers will further raise
market players’ brand awareness, and enable them to acquire new consumers at lower costs.
Celebrity IP has great attractiveness to traffic naturally. Competition in social
e-commerce is relatively fierce. Attractiveness to traffic is important for social e-commerce
market participants to achieve cost-efficient mass consumer procurement. IPs, especially
celebrity IP can bring great brand recognition to social e-commerce market participants at very
short notice, which can in turn help promote the products and drive traffic to social e-commerce.
Meanwhile, social e-commerce associated with celebrity IPs enable to expedite the brand
awareness, further to leveraging on the large number of fans base and brand endorsement of
celebrity IPs which is conducive to convert fans of celebrity IPs into consumers, and therefore
boost the product sales more easily.
Full-serviced model enabling users to engage in buying and marketing of products easily.
An integrated full-serviced social e-commerce enables KOCs and distributors to easily navigate,
share, create content and interact with consumers, providing enjoyable on-purchase and
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after-sale services and familiarizing consumers with the product information and true user
experience. Additionally, under the full-serviced model, the influencers and distributors are also
provided with systematic marketing training on effective sharing, content creation and customer
interaction. Meanwhile, centralized order system and logistics services are implemented to
guarantee the completion of sales. Such model is likely to achieve higher consumer stickiness,
as it fulfills different needs of both consumers as buyers and as promoters of the products, and is
able to transform a customer into a distributor or influencer.
Advanced IT infrastructure. As the online retail market in China grew rapidly over the
past five years, an advanced IT infrastructure has become crucial for company to handle sales
and logistic data. Moreover, for social e-commerce, leveraging consumer relationship
management (CRM) and big data analyzes on consumers’ needs and feedback would enable them
to better understand the market trends. Also an advanced IT system is helpful for the quality
control of company’s products to avoid counterfeit enter into market, improving consumers
shopping experience.
CHINA’S COMMUNITY-BASED SOCIAL E-COMMERCE INDUSTRY
The China’s community-based social e-commerce industry comprises various models,
including (i) community-based model; (ii) membership-based model; (iii) content-sharing model;
and (iv) group purchase model. The community-based social e-commerce industry can be further
broken down by product types, including consumer health and beauty and personal care industry.
The following diagram illustrates the sub-segments of the China’s community-based social
e-commerce industry:

China’s social
e-commerce industry
Consumer
health
Beauty and
personal care
Community-based social
e-commerce industry
Source: the CIC Report
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Value chain of community-based social e-commerce model
Upstream
Manufacturers
Product/service
Brands Distributors Consumers
Midstream Downstream
Source: the CIC Report
Upstream: Social e-commerce companies mainly focus on product development and brand
building. In the community-based social e-commerce model, social e-commerce company either
produce the products by themselves or outsource the production to third party manufacturers and
then distribute the products through distributors.
Midstream: Community-based social e-commerce model involves different layers of
distribution. It is common in the industry that the social e-commerce company would engage an
independent third party distribution agent, to assist with distributor management and training as
well as sales and marketing activities pursuant to the distribution agreement while the social
e-commerce Company mainly focus on product development and brand building. The
distribution agent would engage multiple distributors and sub-distributors. The social
e-commerce company would provide various discounts or rebate arrangement with distributors
and/or sub-distributors based on amount of purchases and other factors. Each level of
distributors are also able to directly sell products to consumers at a guide price pre-stipulated by
the social e-commerce company. Given the sub-distributors are usually small-scale or even
personal merchants, most of them may not be able to and not willing to enter a formal
contractual relationship with social e-commerce company. It is a common industry practice that
the social e-commerce company would provide a standard sub-distribution agreement to
distributors which they are required to use when they enter into a contractual relationship with
their sub-distributors. Alternatively, distributors can establish a business relationship with their
sub-distributor by placing purchase orders with the social e-commerce company on behalf of the
sub-distributors.
Downstream: Each layer of distributors engages with consumers through social media apps
(such as WeChat) and therefore generate sales of products.
According to CIC, community-based social e-commerce industry has experienced rapid
growth in China, its market size growing from RMB466.3 billion in 2017 to RMB742.3 billion
in 2022, representing a CAGR of 9.7%, and is expected to grow at a CAGR of 9.0% to
RMB1,139.7 billion in 2027.
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Market size of China’s community-based social e-commerce industry, in terms of GMV ,
China, 2017–2027E
0
200
400
600
800
1,000
1,200
2017 2018 2019 2020 2021 2022 2023E 2024E 2025E 2026E 2027E
466.3 523.1
606.7
696.4 730.9 742.3
813.1
888.1
967.5
1,051.4
1,139.7
RMB billion CAGR 2017–2022
9.7%
CAGR 2022–2027
9.0%
Source: the CIC Report
By product type, China’s community-based social e-commerce industry mainly consists of
consumer health, beauty and personal care, and other product categories such as apparel, food
and beverage, etc.
China’s consumer health segment in community-based social e-commerce industry
China’s consumer health market is mainly comprised of vitamins and dietary supplements,
sports nutrition, health management products and other products. The market size of consumer
health community-based social e-commerce industry increased from RMB119.4 billion to
RMB178.8 billion in terms of GMV , at a CAGR of 8.4% from 2017 to 2022. China’s consumer
health community-based social e-commerce industry is expected to maintain strong growth
momentum in the foreseeable future, reaching reaching RMB262.0 billion by 2027, at a CAGR
of 7.9% between 2022 to 2027.
In the sub-market of consumer health, China’s health management products can be further
categorized into five sub segments including meal replacement, OTC obesity, slimming teas,
supplement nutrition drinks and weight loss supplements. The market size of health management
community-based social e-commerce industry increased from RMB16.8 billion to RMB25.6
billion in terms of GMV , at a CAGR of 8.8% from 2017 to 2022, and is expected to further grow
and reach RMB38.4 billion by 2027, at a CAGR of 8.4% from 2022 to 2027.
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Market size of China’s consumer health community-based social e-commerce industry,
in terms of GMV , by product type, 2017–2027E
0
50
100
150
200
250
300
2017 2018 2019 2020 2021 2022 2023E 2024E 2025E 2026E 2027E
0.8 1.2 1.4
39.2
16.8
42.6
19.4
50.1
21.7
57.3
25.1
1.6
60.2
26.1
1.7
58.4
25.6
1.7
63.4
27.9
1.9
69.1
30.4
2.1
74.6
32.9
2.4
80.0
35.6
2.762.6 69.8 79.7
90.0 94.5 93.1
101.1
109.3 117.7
126.4
119.4 132.9
152.9
174.1 182.6 178.8 194.6
210.9 227.6
244.6
85.5
38.4
3.0
135.2
262.0
RMB billion
CAGR 2017–2022
8.3%
8.8%
15.1%
8.3%
8.4%
CAGR 2022–2027E
7.7%
8.4%
12.2%
7.9%
7.9%
Vitamins and dietary supplements
Health management
Sports nutrition
Others
Total
Note: others include plasters and foot bath powder, etc.
Source: the CIC Report
The concept of the low-carbohydrate diet
The low-carbohydrate diet plan is a diet that substitutes nutrition and energy intake of
carbohydrates such as rice, flour or sugar with foods high in protein and fat percentages and
other low-carb foods as the main nutritional supplement to meet the plan’s fat/energy ratio, such
that the ratio of carbohydrates in energy supply structure is less than 10% and is commonly
useful for people trying to lose weight or suffering from epilepsy or diabetes. Based on existing
medical research and common knowledge of related experts, overweight and obese population
aged between 18 years old to 65 years old that have explicit willingness to lose weight and
receive guidance on low-carbohydrate diet.
The advantages of low-carbohydrate diet for weight loss includes (i) more intake of protein
and fat will lead to inhibition of hunger and calorie intake; (ii) low-carbohydrate diet act to rid
excess water from the body, lowering insulin levels and leading to rapid weight loss in short
term; and (iii) compared with traditional low-calorie weight loss solutions that have strict
restriction on calorie intake, allowing less food alternatives, low-carbohydrate diet spares of
calorie restriction and allows more food selection, helping people to insist on weight loss.
China’s bulletproof drink market
The concept of bulletproof coffee was first introduced in 2004 in the U.S. and
commercialized in China since 2016. As a new diet trend emerging from 2010 afterwards in
China, bulletproof drink market has experienced a relatively rapid growth during the past few
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years. The market size of China’s bulletproof drink market increased from RMB0.5 billion to
RMB2.2 billion in terms of GMV , at a CAGR of 34.6% from 2017 to 2022.
In 2020, the COVID-19 outbreak caught the world by surprise and the extent of its societal
and economic impact was unclear, which mildly affected Chinese people’s consumption
behavior. In addition, the static management control measures implemented were precisely
targeted to specific regions, as the majority of people’s daily lives were not severely affected.
The first static management control measures began in Wuhan on January 23, 2020, which lasted
until April 8, 2020. At the end of January 2020, static management control measures were
implemented by the PRC governmental authorities across the country as people were suggested
to cut back on outdoor activities. Gathering activities were halted and regional traffic controls
were imposed to curb the spread of the disease. Around one month later, national transportation
and production activities resumed across the PRC.
In 2021, the Delta variant of COVID-19 appeared in Guangzhou, Shenzhen, Nanjing, Xi’an
and many other places, resulting various small-scale static management control measures being
implemented in only middle and high risks neighborhoods. For regions with emerging outbreaks,
public gatherings and events were canceled, and transportation was also affected. The outbreak
of delta variant of COVID-19 in 2021 involved fewer cases than in 2020, but it was more
widespread, so the static management control measures affected more places. As regional static
management control measures became common, people’s income and consumption behaviors
were adversely affected, especially on unnecessary expenditures like health management
products.
During 2022, the Omicron variant of COVID-19 was raging across the globe and many
regions in China were severely affected. Starting in March 2022, Shanghai and Changchun, Jilin
province, entered into city-wide static management control measures for two months and 48
days, respectively. The outbreak in Shanghai was the largest urban cluster of aggregated
infections in mainland China after the outbreak in Wuhan in early 2020. As Shanghai is China’s
economic and logistics hub, the two-month static management control measure in Shanghai had
a major adverse impact on the Chinese economy. Furthermore, outbreaks in other major cities,
such as Beijing and Changchun, also adversely impacted the economy, causing downturns in
consumption. Thus, the impacts of pandemic on the overall retail sector in 2021 and 2022 were
much severe than in 2020. In the second half of 2021 and the first half of 2022, China’s
economy was severely affected by various static management control measures across the
country, resulting in slower-than-expected growth in the bulletproof coffee market in 2021 and
downward predictions for the first half of 2022.
In the future, as the pandemic weakens and the PRC government aiming to boost
consumption with policies, overall consumption is expected to recover from prior negative
activities and the bulletproof drink market is expected to resume growth. The General Office of
the State Council issued the “Opinions on Further Unleashing Consumption Potential and
Promoting the Sustained Recovery of Consumption” in late April 2022. The provincial and
municipal governments have studied the guidelines and drafted several supporting measures to
promote consumption in their respective regions. Driven by the macro economy, the bulletproof
drink industry is expected to resume year-on-year growth in the second half 2022, reaching a
level close to the first half of 2021, as the overall economy is predicted to stabilize and rebound.
Leading companies in the industry has accomplished market education resulting in the total
number of bulletproof drink consumers reaching 1.6 million in 2022, representing a CAGR of
34.6% from 2017 to 2022. The penetration rate of consumers out of obesity population aged
over 18 years old in China has increased from 0.07% in 2017 to 0.27% in 2022. However, in
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2022, the overall Chinese economy was affected negatively, as consumption level decreased with
the provisional resurgence of the pandemic. In April 2022, both Manufacturing Purchasing
Managers’ Index and Synthesized Purchasing Managers’ Index had reached the lowest record
since March 2020. For the six months ended June 30, 2022, the bulletproof drink market in the
PRC recorded a year-on-year decline of approximately 46.2% as compared to the corresponding
period in 2021. Total number of consumers of bulletproof drink in 2022 will also decrease
compared to 2021. On July 15, 2022, the National Bureau of Statistics (NBS) announced that
China’s GDP grew 2.5 percent in the first half (H1) of 2022, compared to the same period in the
previous year. The International Monetary Fund (IMF) then revised its forecast for China’s
economic growth to 3.3% annually, meaning H2 2022 is likely to achieve an estimated 4.0%
growth compared to H2 2021. Starting 2023, Chinese economy is predicted to stabilize and
resume rational growth, as GDP is foreseen to rise by 4.6% under IMF forecast, the bulletproof
drink industry will grow as total number of bulletproof drink consumer will also expand and
continue to show a rising tendency. The total beverage market in China increased from
RMB521.2 billion in 2017 to RMB606.2 billion in 2022 at a CAGR of 3.1%. It is expected to
grow to RMB733.4 billion in 2027, representing a CAGR of 3.9% from 2022 to 2027.
Market size of China’s bulletproof drink industry,
in terms of GMV , China, 2017–2027E
0.0
1.0
2.0
3.0
4.0
5.0
6.0
2017 2018 2019 2020 2021 2022 2023E 2024E 2025E 2026E 2027E
0.5
0.9
1.8
3.1 3.2
2.2
2.7
3.3
3.9
4.5
5.0
RMB billion CAGR 2017–2022
34.6%
CAGR 2022–2027
17.7%
Source: the CIC Report
Key drivers of China’s health management and bulletproof drink industry
Lightweight trend and on-the-go lifestyles boost demand. There is a growing trend towards
lightweight life in China, which involves a preference for light weight and convenience across
all areas of life, including clothing, food, shelter, transport and media. People pursuing this
lifestyle aims to get rid of daily trivia and make life simpler, which improves the development
of new ways of consumption, such as consuming meal replacement products, including
bulletproof coffee, meal replacement shakes, bars and biscuits, and weight loss supplements,
including package food with ingredients like probiotic. Moreover, with the growing prevalence
of busy lifestyles and the erosion of traditional consumption habits as a result of ongoing
urbanization, this is leading to an increasing demand for products that conveniently meet
consumers’ nutritional requirements, such as meal replacement products.
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Growing health awareness is expected to drive the growth of the health management
industry. The sedentary lifestyles and an increasing preference for junk food and fast food are
leading the increasing risks of obesity, which drives the growing awareness of health. Consumers
are increasingly health conscious, focusing on attributes such as health management through
health management solutions and reduced sugar consumption. This is leading to the adoption of
various new health management solution, such as low-carbohydrate diet plan, which helps
reduce fat naturally and has lesser chances of side effects as compared with traditional methods.
Therefore, the growing health consciousness is expected to drive the growth of China’s
bulletproof drink market during the forecast period.
Key trends of China’s health management and bulletproof drink industry
Providing premium taste of products. As the health management and bulletproof drink
products are becoming popular due to the increasing awareness of health, companies are trying
to innovate the flavor and taste of meal replacement products in order to catch consumers’
various preference, through producing a low sugar of meal replacement product which has the
similar taste with the taste of high-calorie product, such as bulletproof milk tea. Moreover, there
is also an increasing demand for tastes that accord with daily meals, which leads to the
appearance of other various flavors, such as black pepper, Chinese sauerkraut and Japanese
miso.
Increasing variety of product categories. Along with the consumption upgrade, consumer
demand in China is becoming more diversified, resulting in preferences towards companies
whom have various categories of low-carbohydrate products with different function. To satisfy
different consumers’ needs, there will be an increasing variety of low-carbohydrate product
categories in the future, which could provide a variety of health management solutions for body
building.
Entry barrier of China’s health management and bulletproof drink industry
Knowledge in marketing strategy and brand awareness. The customer’s choice and the
sales of health management and bulletproof drink products depend largely on marketing
strategies. Market participants may adopt sub-brands as marketing strategies for market
segmentation and precise customer targeting, and therefore succeed in taking more share of the
customer base. Therefore a strong knowledge in marketing strategy, including the strategy of
positioning, advertising, and promotion, is one of the important entry barriers for companies in
the health management and bulletproof drink market.
Product innovation ability. Chinese consumers for health management and bulletproof
drink products prefer differentiated products with unique brand value. In response to the ever
changing consumer market with various preferences, health management and bulletproof drink
companies have to invest a substantial amount of time and money into product research and
development. However, product research and development capabilities are supported by affluent
capital, talent resources, and industry experience, which are all hard for new entrants to access
to. New companies without sufficient product development capabilities cannot provide customers
with trendy products and therefore suffer when trying to survive in the market.
Celebrity IP . Only a few market participants in China’s social e-commerce industry are
empowered by celebrity IP. Celebrity IP, able to attract considerable traffic from fans base,
usually helps the social e-commerce market participants to achieve relatively quick growth.
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Competitive landscape
In 2022, the market size of the bulletproof drink industry in China reached RMB2.2 billion
in terms of GMV . There were more companies that began to develop and launch new bulletproof
drink products, while some of the competitors adopted a low-price strategy. The high end
products in the bulletproof drink industry are categorized with prices of more than RMB40 per
cup, while mid-to-low end products are priced below RMB40 per cup. Nevertheless, the
Company remains as the market leader in the bulletproof drink market in the PRC, recording a
market share of 24.9% in terms of GMV in 2022, which is more than eight times of the second
largest industry player.
In 2022, a new wave of COVID-19 pandemic started across many regions in China, and has
made China’s economy suffer. The government implemented various strict precautions including
city-wide static management control measures. Due to the rebound of the pandemic,
consumption has fallen sharply. While the demand of enterprises is facing the pressure of
contraction, the normal production of enterprises is also negatively affected, and the residents’
lives are affected to varying degrees, which inhibited the growth of consumption levels and
thereby dragged down overall economic growth.
In the past years, bulletproof drink and low-carbohydrate diet has experienced extensive
growth in China as consumer awareness continue to rise. Beginning 2021, with effective market
education of ketogenic diet and market participants’ success, the industry becomes attractive,
which leads to more new market players entering the bulletproof drink market. The majority of
the new market participants tend to adopt the low-price tactic as their brand strategy. In the
bulletproof drink industry with growing consumer awareness, such strategy diverted some
price-sensitive consumers to purchase from them, while the Company maintained its high
standard with the higher price tag. By having more market participants, the entire bulletproof
drink market became more disperse, but the Company remained the dominating industry leader.
In addition, when certain brands gain popularity in a niche market, it is not uncommon for
some manufacturers to “take shortcuts” and sell fake products. Under the influence of these
counterfeit products, company’s real market share could be diluted.
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Competitive landscape in China’s bulletproof drink industry (Note 1)
Ranking Company name Company Profile Sales channel
2022 GMV
in million
Market share
in %
(RMB)
1 The Company Company
established in
Jiangsu
province in
China in 2018.
WeChat/Third
party
e-commerce
platforms
555.7 24.9%
(Note 2)
2 Company J Company
established in
Hubei province
in China in 2015.
WeChat/Third party
e-commerce
platforms
67.9 3.0%
3 Company N Company
established in
China.
Third party
e-commerce
platforms
60.3 2.7%
4 Company K Company
established in
Korea.
Third party
e-commerce
platforms
12.2 0.5%
5 Company O Company
established in
China.
Third party
e-commerce
platforms
11.5 0.5%
Notes:
1. The China’s bulletproof drink industry covers all sale of bulletproof beverages within the PRC market
irrespective of the place of production, including but not limited to, the sale of bulletproof coffee, bulletproof
milk tea, bulletproof coconut milk etc.
2. The total number of market players increased significantly from approximately 300 in 2021 to approximately 350
in 2022. Coupled with the emergence of counterfeit products which are similar to our Group’s products in the
market, which attracted some of our price-sensitive potential consumers, our market share was diluted to
approximately 24.9% in 2022, as compared to approximately 25.6% in 2021.
Price analysis of raw materials in health management and bulletproof drink industry
The cost of raw materials represented a major cost item for the health management and
bulletproof drink industry. From 2016 to 2022, the 2014 based consumer price index (“ CPI”) of
food increased from 107.0 in 2016 to 131.5 in 2022.
The CPI of tea and beverage, as one of the main raw material for bulletproof drink
products, increased from 102.0 in 2016 to 108.5 in 2022. The CPI of dairy products, as another
major raw material, kept relatively stable during 2016 to 2022. The price of imported butter, the
major raw material of bulletproof drink, maintained relatively stable during 2016 to 2022 in
China.
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CPI of raw materials, China, 2016–2022
90
95
100
105
110
115
120
125
130
135
140
Food Tea and beverage Dairy products
CPI (2014=100) 2016 2017 2018 2019 2020 2021 2022
Food 107.0 105.5 107.4 117.3 129.7 128.0 131.5
Tea and beverage 102.0 103.2 104.9 106.6 108.1 108.0 108.5
Dairy products 98.8 98.9 100.3 101.9 102.9 104.8 105.6
Price of imported butter and fats, China, 2016–2022
3.0
4.5
6.0
7.5
2016
US$/kilogram
2017 2018 2019 2020 2022 2021
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China’s beauty and personal care segment in community-based social e-commerce industry
The market of beauty and personal care products consists of skin care, hair care, oral care,
color cosmetics, bath and shower, and other products. The market size of China’s beauty and
personal care community-based social e-commerce industry increased from approximately
RMB163.2 billion in 2017 to RMB262.3 billion in 2022 in terms of GMV in China, representing
a CAGR of 10.0%. China’s beauty and personal care community-based social e-commerce
industry is expected to continuously grow and reach RMB411.3 billion by 2027, at a CAGR of
9.4% between 2022 and 2027.
Market size of China’s beauty and personal care community-based
social e-commerce industry, in terms of GMV , China, 2017–2027E
0
100
200
300
400
500
2017 2018 2019 2020 2021 2022 2023E 2024E 2025E 2026E 2027E
163.2 183.1 212.4
243.7 255.9 262.3 288.0 315.7 345.4
377.2
411.3
RMB billion CAGR 2017–2022
10.0%
CAGR 2022–2027
9.4%
Source: the CIC Report
Key drivers of China’s beauty and personal care industry
Increasing affluence and accelerating urbanization process. The increasing affluence and
ongoing urbanization process in China has brought about significant changes in lifestyles,
consumption patterns and the habits of consumers. Urban residents who have already been used
to basic personal care consumption habits tend to use personal care products more widely and
frequently than before. For instance, urban residents have been increasing the complexity of
procedures in skin care, hair and body care, oral care and make up. Moreover, influenced by the
consumption habits of urban consumers and with the increasing disposable income, rural
consumers, which consist of a vast proportion of China’s total population, are nurturing their
habits of personal care maintenance, thus increasing their consumption of personal care
products.
Rising awareness in hygiene, health and beauty. With the rising consumption awareness
and burgeoning demand arising from increasing purchasing power, consumers tend to increase
their consumption budget on personal care products for a healthier life, better personal
appearance and personal hygiene purpose. With the expectation of maintaining beauty, skin care
and cosmetics products have shown strong sales performance with a deeper penetration as well
as larger annual expenditures. With the increasing awareness of oral health, along with the
Healthy China Strategy laying a solid foundation for the healthy development of oral care in
China, oral care products have also demonstrated rapid growth. Furthermore, hair and body care
products have embraced steady growth under the rising consciousness in hygiene.
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Continuous market education from social media and the influences of popular cultures.
Frequent market education via promotion and advertising on multiple social media tools have
formed numerous touchpoints for cosmetics information for consumers living in all tiers of
cities. The various promotion methods including makeup swatch and tryout, cosmetics tutorials,
unboxing, experience sharing, KOL endorsement and Livestreaming sales on platforms including
mobile media platform and e-commerce platforms have stirred large impact on consumers’
perception and consumption habits of personal care products. Consequently, a larger number of
consumers are willing to purchase personal care products.
Increasing desire for better personal appearance for social life. Influenced by the market
education, especially the experience of personal care maintenance shared by KOLs along with
the infusion of cultures from advanced countries such as Japan that regard personal appearance
as an important part of social life, there is a growing perception among consumers that personal
appearance is important to achieve social, professional and financial success, which is related to
a person’s self-confidence, social etiquette, status symbols and workplace etiquette to some
extent. Along with the rising purchasing power, consumers are paying more attention to
maintaining beauty standards.
Key trends of China’s beauty and personal care industry
Increasing popularity of emerging brands and China’s domestic brands. Emerging beauty
and personal care brands that employ new approaches to product rollout and consumer
engagement, and provide high quality, value-for-money products for consumers, are rapidly
gaining popularity among Chinese consumers. In addition, domestic brands have experienced
increasing popularity in China in recent years. Many of China’s domestic brands are able to
deliver high quality products at standards comparable to that of established international brands,
with sophisticated approaches to formula and product development as well as adherence to
global safety standards. Moreover, many domestic brands are more adept at digital marketing
with a deeper understanding of evolving consumer preferences in China.
Shift of distribution channels. The personal care market is experiencing a shift away from
traditional sales channels, such as hypermarkets and supermarkets, department stores, etc.,
towards online and specialty retailers. The engagement of the digital ecosystem not only
increased the efficiency of purchasing, but also changed how consumers interact with brands.
More consumers now research personal products online and make purchase decisions based on
user-generated content and social media influencers. Besides this, niche brands can engage
consumers directly online without the advertising spending that established brands have
traditionally used to acquire customers. Besides, instead of merely purchasing certain items,
traditional in-store consumers are now increasingly looking for a novel shopping experience,
therefore, specialty retailers such as Sephora and Watsons have developed and expanded rapidly
in recent years.
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OUR HISTORY AND DEVELOPMENT
Overview
Our Founders, namely, Ms. Ma, Mr. Yang, Ms. Yeh and Mr. Chen, who were parties acting
in concert with each other, started our Group’s business in 2017. Prior to founding our Group,
Ms. Ma had been working at an investment management firm, and by focusing on investments in
cultural, entertainment and media resources industry, she accumulated insights in the
empowerment that can be achieved through unique and valuable celebrity IPs. Leveraging her
business connections, Ms. Ma became acquainted with Mr. Yang and Mr. Chen, representatives
of Mr. Jay Chou’s artiste management companies and Mr. Jay Chou in the late 2000s when they
jointly participated in other projects and cooperations. Mr. Yang and Mr. Chen are experienced
in the entertainment industry as they have been working closely with well-known celebrities and
are familiar with the public’s preference of entertainment content. Please refer to the section
headed “Directors and senior management” to this prospectus for the relevant experience of Ms.
Ma, Mr. Yang and Mr. Chen. On the other hand, Ms. Yeh (the mother of Mr. Jay Chou) and Mr.
Yang are accustomed to make their investment decisions collectively through entities jointly
controlled by them. Together, Ms. Ma, Mr. Yang, Ms. Yeh and Mr. Chen had been making key
decisions in relation to the development of our business collectively since they were beneficially
interested in our group companies and throughout the Track Record Period, and they entered into
the Concert Party Agreement to acknowledge and confirm such arrangement. Please refer to the
section headed “Relationship with our Controlling Shareholders – Concert Party Agreement” for
further details.
Our Founders established our Group’s operating business focusing on new retail and IP
creation and operation (the “ Listing Business ”) in 2017, and they expected to empower our
distribution channels, products and consumer procurement in the new retail operations through
our proprietary celebrity IPs and IP-oriented media content and events.
Our key milestones
The following is a summary of the key development milestones of our Group:
Y ear Event
2017 Lead creator of J-Style Trip and we began planning the filming of J-Style Trip
season one
We provided sub-contracting service to Mr. Jay Chou’s world concert tour, The
Invincible in 2017 and 2018
2018 We engaged business partners to produce and launched our skincare products,
including LA DEW Hydrating Brightening Treatment Mask
We started developing the prototypes of MODONG coffee
HISTORY, DEVELOPMENT AND REORGANIZATION
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Y ear Event
2019 We officially launched MODONG coffee on a nationwide scale in April and
established the Distribution Agent Assisted Distribution Model and system for
other products distributed through the same channel
Creation and debut of ChouMate , and we launched the “ ChouMate Little
Musician” collection set in collaboration with Shanghai Pudong Development
Bank
MODONG coffee received the Popularity Award of PCLADY Beauty Award
We planned the Zhanjiang Superstar Concert in Zhanjiang
2020 We planned and invested in the Star Plus Action Mega Night in Ningbo
Premiere of J-Style Trip season one on various viewing platforms including
Zhejiang Satellite TV and Netflix
The “ ChouMate ” pop toy collection in collaboration with Pop Mart was
launched
2021 We officially launched two new lines of skincare products, Dr .mg and
Chaxiaojie
We planned an online music talk show You Can Run But You Can’ t Hide (Ը
ᆀʘ ) during Chinese New Year, based on which we plan to launch a
weekly online music talk show to be broadcasted in the second half of 2023
We launched other health management products, including MODONG flavored
bubbly water and MODONG konjac river snail noodle
We established new distribution channels, including entering into a main
distribution agreement for the distribution of MODONG flavored bubbly water
and the Star Plus 4U platform was launched
We started the filming and production of the J-Style Trip season two
We were appointed as the sole agent to manage Mr. Liu Keng-hung’s
commercial activities in the PRC, and we assisted him developing into a
popular KOL in the fitness and body-building sector in the PRC
HISTORY, DEVELOPMENT AND REORGANIZATION
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Y ear Event
2022 We have been in collaboration with Mr. Liu Keng-hung to develop his public
persona on social media platforms, which had achieved remarkable popularity
since April
We created a Douyin account under the name of “㺘㺘દ ”t o
promote our products with the cooperation with Ms. Vivi Wang and other
KOLs
We planned several IP events and programs that were centered around Mr. Jay
Chou, including (i) Mr. Jay Chou’s online music show (ʾึ )
which was first aired on online platform(s) owned by Kuaishou in November
2022; (ii) the World Cup-related variety show, being a spin-off of J-Style Trip
season two ( մ༷া 2೦̮ᇐ ) which was first aired on online
platform(s) owned by Migu (զ) in November 2022; and (iii) another World
Cup-related music show which was first aired on online platform(s) owned by
Migu in December 2022
Our major subsidiaries
The principal business activities of each member of our Group that made a material
contribution to our results of operations during the Track Record Period are set out below:
Name of major subsidiary Principal business activities
Star Plus (Kunshan) IP planning, management and licensing at the onshore
level
Kunshan Star Plus Action Product development, customer service and order
fulfillment for new retail business
Star Plus Development IP planning, management and licensing at the offshore
level
Beijing Star Plus Master Planning of television, online programs and concerts
Talent Planet Planning and management services in respect of the
entertainment and performance business for celebrities
Kunshan Tingshe
(Note) Development and management of the distribution network
for Kunshan Tingshe Distributed Products and
providing training to distributors on sales and
marketing techniques
Note: Kunshan Tingshe was disposed in May 2020. For details, please refer to the paragraphs headed “Our major
subsidiaries – Kunshan Tingshe” in this section.
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Star Plus (Kunshan)
On November 4, 2015, Star Plus (Kunshan) was established as a company with limited
liability in the PRC with a registered capital of RMB2,000,000. Prior to the commencement of
the Listing Business in 2017, Star Plus (Kunshan) was an intermediate holding company.
Star Plus (Kunshan) was authorized by Star Plus Development and JVR Music to operate
our IP licensing business for ChouMate within the PRC, and is responsible for the creation of
our IPs, including J-Style Trip season one.
Shareholding changes of Star Plus (Kunshan)
The original shareholders of Star Plus (Kunshan) were Beijing Jushi Music Culture
Development Co., Ltd. (ʮ̡ )( “ Beijing Jushi Music ”), Kunshan
Renben and Lhasa Juchuang, and they held 40%, 30% and 30% of Star Plus (Kunshan)’s equity
interest, respectively.
Beijing Jushi Music was a former business partner of Mr. Yang, Mr. Chen, and is an
Independent Third Party. On August 21, 2017, Beijing Jushi Music agreed to sell and Shanghai
Yige agreed to purchase 40% of the equity interest in Star Plus (Kunshan) at a consideration of
RMB800,000, which was based on the registered capital to be subscribed by Shanghai Yige.
Upon the completion of the abovementioned transfer and as at January 1, 2019, the shareholding
structure of Star Plus (Kunshan) was as follow:
Name of registered
shareholder
Percentage of
equity interest Relationship with our connected person(s)
Shanghai Yige 40% Mr. Yang, Ms. Yeh and Mr. Chen were the
beneficial owners of the equity interest of Star
Plus (Kunshan) held by Shanghai Yige
(1)
Kunshan Renben 30% Ms. Ma was the beneficial owner of the equity
interest of Star Plus (Kunshan) held by Kunshan
Renben
(2)
Lhasa Juchuang 30% N/A
Notes:
(1) Pursuant to the shareholding entrustment agreements dated July 10, 2017 and entered into between
Shanghai Yige and each of Mr. Yang, Ms. Yeh and Mr. Chen, Shanghai Yige held 15%, 15% and 10% of
Star Plus (Kunshan)’s equity interest on behalf of Mr. Yang, Ms. Yeh and Mr. Chen, respectively, and
exercised the shareholder rights on each of their behalves. Such arrangement was terminated when
Shanghai Yige transferred the entrusted shareholding in Star Plus (Kunshan) to Shanghai Sidapu
Commercial Management Company Limited (ʮ̡ )( “ Shanghai Sidapu ”), a
company established in the PRC with limited liability and a wholly-owned subsidiary of Star Plus
Entertainment as at the date of such transfer. As the registered shareholder of Shanghai Yige was not
jointly owned by Mr. Yang, Ms. Yeh and Mr. Chen, a shareholding entrustment agreement was entered into
amongst Mr. Yang, Ms. Yeh, Mr. Chen and Shanghai Yige to set out their beneficial interest in Star Plus
(Kunshan).
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(2) Pursuant to the shareholding entrustment agreement dated April 18, 2017 and entered into between
Kunshan Renben and Ms. Ma, Kunshan Renben held 30% of Star Plus (Kunshan)’s equity interest on
behalf of Ms. Ma and exercised the shareholder rights on her behalf, and the rights and obligations with
respect to the entrusted shareholding shall vest in Ms. Ma. Such arrangement was terminated when
Kunshan Renben transferred the entrusted shareholding in Star Plus (Kunshan) to Shanghai Sidapu. From
Kunshan Renben’s establishment to April 2017, Ms. Ma was indirectly interested in 93.1% of Kunshan
Renben’s equity interest. As Ms. Ma transferred her entire shareholding in such holding company to Lee,
Chiu-yuan (Ms. Ma’s sister-in-law) in April 2017, she entered into the shareholding entrustment agreement
to maintain her beneficial interest in Kunshan Renben after such transfer.
When Star Plus (Kunshan) was established, Ms. Ma through her personal network invited
Lhasa Juchuang as an investor and Lhasa Juchuang was particularly interested in the
esports-related business initiative contemplated. To the knowledge of our Company, Lhasa
Juchuang and its shareholders, namely Wang Xiaoping ( ˮѽറ) and Wang Guiqing (ڡare
Independent Third Parties and previously invested in the TMT sector. Lhasa Juchuang disposed
of its interest in Star Plus (Kunshan) after we no longer held any equity interest in Jesports
(Kunshan) and Jushi Creative which engaged in, amongst others, the esports-related business.
Separation of distinct business lines under Star Plus (Kunshan)
Apart from the Listing Business, Star Plus (Kunshan)’s subsidiaries have engaged in,
amongst others, the planning, operation and franchising of Internet cafes and organization of
e-sports competition since 2016 and intended to engage in asset management through Jesports
(Kunshan) and Jushi Creative, each of them being a wholly owned subsidiary of Star Plus
(Kunshan). To separate businesses which are clearly distinct from the Listing Business and have
independent and separate management teams with the Listing Business, Star Plus (Kunshan) sold
its entire equity interest in Jesports (Kunshan) and Jushi Creative to Shanghai Yige, Kunshan
Renben and Lhasa Juchuang in July 2019 and August 2019, respectively based on the target
company’s respective net assets value as of July 31, 2019 and August 31, 2019, respectively.
The financial results of Jesports (Kunshan) and Jushi Creative were not consolidated in our
accounts during the Track Record Period as their business activities are clearly different from
the Listing Business and hence do not form part of our Group. As advised by our PRC Legal
Advisors, prior to the above disposals, Jesports (Kunshan), Jushi Creative and each of their
subsidiaries were not in violation of all applicable laws, rules and regulations in the PRC in all
material respects.
Lhasa Juchuang intended to dispose of its equity interest in Star Plus (Kunshan) in 2017
when the intention to separate the distinct business lines under Star Plus (Kunshan) as
mentioned above was initiated, given Lhasa Juchuang was mainly interested in the business
operated by Jesports (Kunshan) and Jushi Creative. Such intention was materialized in 2019.
Following the disposal of Jesports (Kunshan) and Jushi Creative, Lhasa Juchuang sold its equity
interest in Star Plus (Kunshan) to Mr. Lai and Mr. Ho. For details, please refer to the paragraph
headed “Pre IPO Investments – Share transfers to Mr. Lai and Mr. Ho” in this section below.
Certain equity transfers of Star Plus (Kunshan) were also conducted subsequently pursuant to the
Reorganization. Upon completion of the Reorganization and the Pre-IPO Investments, Star Plus
(Kunshan) became an indirect wholly-owned subsidiary of our Company.
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Kunshan Star Plus Action
On March 17, 2016, Kunshan Star Plus Action was established as a company with limited
liability in the PRC with a registered capital of RMB10,000,000 and its equity interest was
initially wholly owned by Jushi Creative, a subsidiary of Star Plus (Kunshan). Kunshan Star Plus
Action is our main subsidiary involved in new retail operations, including product development,
customer services and order fulfillment since it commenced its business operations in 2018.
Prior to that, Kunshan Star Plus Action was a holding company.
On September 30, 2018, as part of our Group’s internal reorganization, Jushi Creative sold
the entire equity interest in Kunshan Star Plus Action to Star Plus (Kunshan) at a consideration
of RMB10,000,000 based on the valuation of Kunshan Star Plus Action as of March 31, 2018.
The consideration under the transfer has been settled and the transaction has been duly and
legally completed, and its relevant registration has been completed.
An equity transfer of Kunshan Star Plus Action was conducted subsequently as part of the
Reorganization. Upon completion of the Reorganization, Kunshan Star Plus Action became an
indirect wholly-owned subsidiary of our Company. For details, please refer to the paragraph
headed “Reorganization” in this section. As at the Latest Practicable Date, the registered capital
of Kunshan Star Plus Action was RMB100,000,000.
Star Plus Development
On December 21, 2007, Star Plus Development was established as a BVI business company
in the BVI with limited liability. The share subscribed by Star Plus Development’s initial
subscriber, an Independent Third Party, was transferred to Mr. Lai in December 2014. Star Plus
Development was a holding company prior to 2017. In order to allow us to commence our
offshore operations and for our Founders’ convenience to designate a person to handle the
administrative matters, our Founders entrusted Mr. Lai who has been closely involved in the
establishment of our business to hold 43%, 21.5%, 21.5% and 14% of Star Plus Development’s
interest on behalf of Ms. Ma, Mr. Yang, Ms. Yeh and Mr. Chen, respectively, since the
commencement of the Track Record Period. On June 28, 2018, Mr. Lai transferred the entire
issued share capital of Star Plus Development to Great Essence at a nominal consideration with
reference to the arrangement amongst our Founders and Mr. Lai that Great Essence shall hold
the interest of Star Plus Development on behalf of Ms. Ma, Mr. Yang, Ms. Yeh and Mr. Chen as
to 43%, 21.5%, 21.5% and 14%, respectively. Upon completion of the Reorganization, Star Plus
Development became an indirect wholly-owned subsidiary of our Company. For details, please
refer to the paragraph headed “Reorganization” in this section.
Star Plus Development is the holder of most of our IPs.
Beijing Star Plus Master
On November 6, 2017, Beijing Star Plus Master was established as a company with limited
liability in the PRC with a registered capital of RMB3,000,000 and since its establishment its
equity interest was owned by Star Plus (Kunshan) and Beijing Master as to 70% and 30%,
respectively. Beijing Star Plus Master is our principal subsidiary for the planning of our
television and online programs, including J-Style Trip season one, and our concerts.
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Talent Planet
On November 26, 2021, Talent Planet was established as a company with limited liability
in Hong Kong. Since its date of incorporation, it was owned by Star Plus IP and W&V as to
70% and 30%, respectively. Talent Planet is principally engaged in planning and management
services in respect of the entertainment and performance business for celebrities, such as Mr. Liu
Keng-hung, and management of celebrities’ commercial activities in the PRC.
Kunshan Tingshe
On June 18, 2019, Kunshan Tingshe was established as a company with limited liability in
the PRC with a subscribed registered capital of RMB1,000,000 and its equity interest was owned
by Kunshan Star Plus Action and Li Ting as to 80% and 20%, respectively. The subscribed
registered capital of Kunshan Tingshe was increased to RMB30,000,000 on August 5, 2022.
Pursuant to the articles of association, shareholders of Kunshan Tingshe are only required to
contribute Kunshan Tingshe’s registered capital by December 31, 2049, and none of the
shareholders of Kunshan Tingshe contributed any of their subscribed registered capital as at the
Latest Practicable Date.
Kunshan Tingshe’s principal business activities, i.e. development and management of
distribution network for Kunshan Tingshe Distributed Products and training for distributors on
sales and marketing techniques, were under the leadership of Li Ting since its establishment.
Expansion of a distribution network requires numerous distributors and sub-distributors, which
require development and management. Thus, Kunshan Tingshe, being a Distribution Agent, (i)
develops and manages our distribution network in a micro aspect in order to attract more
potential sub-distributors or end consumers to consume our products and/or join our distribution
network; and (ii) continuously provides trainings on sales and marketing techniques to
distributors and sub-distributors. Li Ting, as the leader of Kunshan Tingshe, is responsible for
setting the goals, target and strategic objectives for development and management of our
distribution network, while the implementation thereof are delegated to certain distributors with
managerial responsibilities, including the Selected Distributors.
Li Ting
Li Ting has established her social and business network through her experience of more
than seven years in new retail industry by engaging in distribution and sales of skincare
products, and is an Independent Third Party. Our Group, Founders, senior management and their
respective associates did not have any past or present relationship or dealing (including family,
business, employment, trust and financing) with Li Ting and her associates in any material
respect, other than the Individual Proprietor and company established by Li Ting, herself being
our distributor and her interest in Kunshan Tingshe, and there are transactions between Kunshan
Tingshe and Li Ting in relation to the sales and purchase of Kunshan Tingshe Distributed
Products and other products offered (e.g. skincare products and other health management
products). There are no other arrangements or understanding between Li Ting and our
Shareholders in relation to the management, business and operations of our Group and Kunshan
Tingshe.
Before Li Ting cooperated with us, she accumulated experience and built a network in
selling women’s apparel and skincare products, and she and her team had already proved their
ability to generate sales for products and clinched their status as a team of outstanding
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distributors. Li Ting aged 45, has engaged in her own trading business since 2003. As confirmed
by Li Ting and to the best knowledge of our Directors, Li Ting operated around nine retail
outlets, including fashion accessory stores, apparel retailers and nail salons. These retail outlets
were located in Ningbo, which were ran by Li Ting and her relatives, and its customers were
individuals who required such products or services for themselves. These retail outlets were
originally targeted towards women and sold affordable clothing, and subsequently as a result of
business diversification, Li Ting established other outlets which sold relatively high-end apparel
and men’s apparel. In around 2008, she sold her interest in the abovementioned retail outlets and
began to engage in the wholesale and distribution of apparel products, which were mainly wool
cashmere supplied by manufacturers and the annual turnover was around RMB30 million. She
then expanded the product offering in 2014 to include skincare products such as facial masks. Li
Ting’s wholesale and distribution operations was based in Ningbo, employed up to seven
employees, and its customers or distributors were mainly entities which purchased such products
for their onward sell. During such period, she accumulated customer base and knowledge in the
consumption preference of female consumers and also made acquaintance with various business
partners, including key downstream (such as owners of retail outlets) and upstream stakeholders
(such as product suppliers) of her wholesale and distribution business. These partners worked
closely together with Li Ting to understand consumers’ preference and devised plans to expand
their business scale, distribution channels and market share.
In 2015, as the PRC social e-commerce industry began to experience a rapid growth, Li
Ting, together with her team (some of them being the key business partners of Li Ting’s
wholesale and distribution business and became our Selected Distributors), started to expand
their sales channel by making use of their social network to sell skincare products, which was
her first step in the social e-commerce business, hence she was considered as an early mover in
the new retail industry. As Li Ting and her team found it easier to reach their targeted consumer
group by using their PDT and social media platforms, they gradually focused more of their
efforts on the social e-commerce business. Li Ting’s soft skills can be applied to distributing
other products and not limited to apparel products. In addition, she has accumulated a network
of customers who may be also the target consumer group of our products. Further, Li Ting
obtained the Award for Outstanding Women in Business in the New Era granted by PCLADY in
2019.
Our business relationship with Li Ting commenced in January 2018 when our products
(including LA DEW facial masks) were first introduced to Li Ting and her team by the
abovementioned marketing and consultancy company which was responsible for our brand
building activities and developing our sales channels, and after being aware of our products,
they began to sell our products as our distributor. Ms. Ma and Li Ting first became acquainted
with each other at our product launch conference in April 2018. In 2018, discounts and
incentives paid to Li Ting in connection with the sale of our products amounted to
approximately RMB1.0 million.
In early 2019, when we were preparing to launch MODONG coffee and designing its
distribution model, noticing Li Ting and her team’s performance in distributing our then existing
products and her expertise and network in the sales and marketing of products targeted at female
consumers, Ms. Ma reached out to Li Ting and invited her to establish the distribution model
and network together. As Li Ting was of the view that (i) health management would be a rising
trend in the future, and she personally tried MODONG coffee and was satisfied of its product
attributes; (ii) her satisfactory and solid prior working experience with us; (iii) her expectation
that with the support of our IP creation and operation segment it would be advantageous for her
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to extend the reach of our products; and (iv) cooperation with us represents a good opportunity
for her to utilize her prior experience, knowledge and network in the retail industry to develop a
distribution business under her leadership, she decided to establish a stronger relationship with
us by being responsible of MODONG coffee’s distribution arm.
Disposal of our interest in Kunshan Tingshe
The main reason of establishing Kunshan Tingshe as our 80%-controlled subsidiary in June
2019 was for risk management purpose as we had to ensure that the distribution network and
marketing activities of MODONG coffee were properly managed, especially at the initial stage
and we could provide support and guidance and communicate with Li Ting closely to ensure that
Kunshan Tingshe properly performed its expected function. At the same time, Li Ting had been
working closely with us to establish the distribution network and the underlying policies and
mechanisms for the distribution of MODONG coffee, and she was of the view that it would be
more effective for her to develop the distribution network for MODONG coffee and her
cooperation with us would be more solid and formalized if it can be demonstrated that she
received our endorsement through her co-ownership in the Distribution Agent with us.
After working closely with Li Ting for a year, in early 2020, the respective roles of
Kunshan Star Plus Action and Kunshan Tingshe as the brand owner and Distribution Agent of
MODONG coffee were well recognized. We have established mutual trust and confidence with Li
Ting, were confident of the capabilities of Li Ting to continuously develop and maintain the
distribution network of MODONG coffee for us, and were of the view that Kunshan Tingshe
could operate independently, hence we agreed that it was no longer necessary for us to hold any
equity interest in Kunshan Tingshe. From Li Ting’s perspective, as (i) she has been heavily
involved in developing the distribution network for MODONG coffee, devoted considerable time
to handle the operation of Kunshan Tingshe since its establishment, and had a proven track
record as witnessed by the expansion of MODONG coffee’s distribution network till May 2020;
and (ii) she intends to expand Kunshan Tingshe’s business towards distribution and sales of
apparel products which is not in line with our principal business activities, she was willing to
acquire the entire interests in Kunshan Tingshe.
The disposal of our interest in Kunshan Tingshe was in line with our corporate strategy as
we generated revenue in the new retail segment through sales of products including but not
limited to MODONG coffee. We also intend to focus on the planning and research and
development of new products and brands as well as the planning and development of IP content
and its licensing, rather than the management functions assumed by the Distribution Agent
which has all along been under the leadership of Li Ting. After the disposal, Kunshan Tingshe
remains as the Distribution Agent for our Kunshan Tingshe Distributed Products and the role and
function of Kunshan Tingshe and Li Ting as well as the contractual and business relationship
between Kunshan Tingshe and us remain unchanged.
On May 31, 2020, Kunshan Star Plus Action agreed to sell and Li Yanqing (ᅅ), an
Independent Third Party, agreed to purchase 80% of the equity interest in Kunshan Tingshe at a
consideration of RMB800 which was determined with reference to the net liability of Kunshan
Tingshe as of May 31, 2020. The consideration of the transfer was fully settled and the transfer
was duly and legally completed, and its relevant registration has been completed. Our Directors
are of the view that the disposal of our interest in Kunshan Tingshe did not have any material
impact on our business operations and financial performance as our business focus and major
revenue stream remain unchanged.
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To our Company’s knowledge, Li Yanqing has been holding 80% of Kunshan Tingshe’s
equity interest on behalf of Li Ting since Li Ting was busy handling the affairs of Kunshan
Tingshe, in particular, she was required to travel frequently to different parts of PRC to attend
and organize marketing and training activities for Kunshan Tingshe Distributed Products in
respect of the sales and marketing techniques such as regional sales forum and distributors
promotion meetings. Li Yanqing and Li Ting known each other since 2017, and developed
mutual trust as Li Ting perceived Li Yanqing have to be honest and reliable, and Li Yanqing has
already been aware of Li Ting’s reputation and stature in the social e-commerce industry, hence
he is willing to assist her in miscellaneous duties. As Li Yanqing has retired and lives in
Kunshan and despite he is not required to be involved in the daily operations of Kunshan
Tingshe, Li Ting was of the view that it would be more convenient for him to handle corporate
or administration related matters of Kunshan Tingshe by assuming the role of legal
representative of Kunshan Tingshe. Based on the agreements entered into between Li Ting and
Li Yanqing, (i) Li Ting enjoys the shareholder’s right and is entitled to the investment income
attributable to the 80% equity interest of Kunshan Tingshe (the “ Entrusted Interest ”) held by
Li Yanqing, whilst Li Yanqing shall only be the nominee shareholder of the Entrusted Interest
without any profit distribution rights and is not entitled to any gains received from the disposal
of the Entrusted Interest; and (ii) Li Yanqing shall exercise the voting rights of the Entrusted
Interest pursuant to the instructions of Li Ting; and after making due enquiries, to our best
knowledge, Li Yanqing and Li Ting has complied with the terms of such agreements.
Save as disclosed herein, there are no past and present relationship (including, without
limitation, business, family, trust, employment, shareholding, financing or otherwise) between Li
Yanqing and us, our Directors, Shareholders, senior management, or any of their respective
associates. Apart from Kunshan Tingshe, Li Yanqing has not held and does not hold any interest
in any other companies for and on behalf of Li Ting.
Principal business activities and financial performance of Kunshan Tingshe
As at the Latest Practicable Date, apart from the provision of distribution agent services,
Kunshan Tingshe and its subsidiaries also provided garment trading services and various beauty
and health services, including Chinese medicine consultation and therapy, facial treatments and
massages.
In 2019, Kunshan Tingshe and its subsidiaries recorded net profit of RMB718,000 from its
distribution agent services, and net profit of nil from its other businesses. Kunshan Tingshe and
its subsidiaries recorded a net loss of RMB945,000 during the five months ended May 31, 2020
(i.e. the period before our disposal of Kunshan Tingshe), which was mainly due to the
advertising and marketing expenses incurred in relation to the promotion of J-Style Trip season
one. The financial results of Kunshan Tingshe were consolidated in our financial statements
since its establishment till May 31, 2020. For the seven months ended December 31, 2020 (i.e.
the period after our disposal of Kunshan Tingshe), Kunshan Tingshe recorded a net profit of
RMB2.5 million, among which, RMB2.4 million was generated from its distribution agent
services, which was mainly attributable to the Additional Incentive Fee to Kunshan Tingshe
recorded and the decrease in advertising and marketing expenses during the relevant period. In
2021, Kunshan Tingshe and its subsidiaries recorded net loss of RMB2.0 million and RMB2.6
million, from its distribution agent services and other businesses, respectively. To our best
knowledge, information and belief, Kunshan Tingshe recorded a net loss in 2021 mainly due to
(i) the decrease in the revenue generated from its distribution agent services due to a decrease in
the sale of MODONG coffee in 2021; (ii) the fact that no Additional Incentive Fee to Kunshan
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Tingshe was paid to Kunshan Tingshe in 2021 as the sale volume of MODONG coffee through
Kunshan Tingshe did not meet the prescribed threshold; and (iii) the increase in selling expenses
and staff costs in connection with its other business activities. In 2022, Kunshan Tingshe and its
subsidiaries recorded a net profit of RMB338,000 from its distribution agent services and a net
loss of RMB1.1 million from other business. In addition, Kunshan Tingshe and its subsidiaries
recorded net assets of RMB718,000 and RMB2.2 million as of December 31, 2019 and 2020,
respectively, and net liabilities of RMB2.4 million and RMB3.1 million as of December 31, 2021
and 2022, respectively.
Notwithstanding Kunshan Tingshe and its subsidiaries recorded net liabilities position as of
December 31, 2021 and 2022, in the best knowledge of our Directors, Kunshan Tingshe and its
subsidiaries are able to continue their business as a going concern, taking into account that (i) Li
Ting, being the shareholder and leader of Kunshan Tingshe and received substantial service fee
from Kunshan Tingshe, would be able to provide continual financial support and adequate funds
to Kunshan Tingshe and its subsidiaries to enable them to meet their liabilities as and when they
fall due; (ii) Kunshan Tingshe has recorded a net profit of RMB338,000 from its distribution
agent services in 2022, as compared to a net loss of RMB2.0 million in 2021; and (iii) the
expected demand of our MODONG coffee will resume back to normal gradually in 2023 and
going forward considering the relaxation of restrictions to combat the COVID-19 in the PRC.
Under the pricing arrangement between our Group and Kunshan Tingshe in respect of the
distribution of the Kunshan Tingshe Distributed Products, a substantial portion of the Fixed
Mark-up would be utilized for the payments of the discounts, incentives and fees to our
distributors as well as the Service Fees to Li Ting. Taking into account of the estimated expenses
to be incurred by Kunshan Tingshe in, among other things, the marketing and promotion
activities for the development of the distribution network, our Directors are of the view that
Kunshan Tingshe would not record material profit or loss from its distribution agent business
provided to our Group. For details of the pricing arrangement, please see “Distribution
arrangement with Kunshan Tingshe – Pricing arrangement and discounts, incentives and fees in
relation to the sales of Kunshan Tingshe Distributed Products” in this prospectus. Our Directors
are of the view, and the Sole Sponsor concurs, that there is no material concern on the
sustainability of the business of Kunshan Tingshe and its subsidiaries and that there would not
be material adverse effect on the Group’s business operation and financial performances, on the
following basis:
(i) under the aforesaid pricing arrangement, Kunshan Tingshe would not record material
profit or loss from its distribution agent services provided to us. In particular,
Kunshan Tingshe and its subsidiaries generated an overall net profit of RMB471,000
from its distribution agent business during the four years ended December 31, 2022;
(ii) the net loss position of Kunshan Tingshe and its subsidiaries for 2022 was mainly
attributable to its other business but not the distribution agent services. To the best
knowledge and belief of our Directors, Kunshan Tingshe and its subsidiaries recorded
losses from its other business, including garment trading services and various beauty
and health services which are not related to our Group, primarily because such
businesses were still at an early development stage and were adversely affected by the
COVID-19 pandemic; and
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(iii) despite that Kunshan Tingshe and its subsidiaries did not record any material profit or
loss since its incorporation in 2019, Li Ting, being the key person in the business of
Kunshan Tingshe, was entitled to substantial amounts of service fees through the
distribution agent services provided by Kunshan Tingshe to our Group. During the
four years ended December 31, 2019, 2020, 2021 and 2022, the Service Fees to Li
Ting amounted to RMB3.3 million, RMB18.0 million, RMB12.9 million and RMB7.4
million, respectively. Accordingly, our Directors consider that Li Ting has been
properly rewarded for the distribution agent services provided by Kunshan Tingshe to
our Group. In addition, we expect that the demand of our MODONG coffee will
resume back to normal gradually in 2023 and going forwarding following the
relaxation of restrictions to combat the COVID-19 pandemic in the PRC. Based on the
above, our Directors are of the view that Li Ting would be able to continuously
provide financial support to Kunshan Tingshe.
As at the Latest Practicable Date, we did not have any intention to change our pricing
arrangement with Kunshan Tingshe and it is expected that such arrangement will remain the
same in all material respects after our Listing. We have undertaken to the Stock Exchange that,
in the event that (i) there is any material change in the aforesaid arrangement with Kunshan
Tingshe; or (ii) we became aware of any material change in the arrangement between Kunshan
Tingshe and Kunshan Jiameng, after Listing, we will issue an announcement setting out details
of the changes as soon as practicable.
As advised by our PRC Legal Advisors, (i) prior to the disposal of Kunshan Tingshe, it had
not been in violation of all applicable laws, rules and regulations in the PRC in all material
respects; and (ii) after the disposal of Kunshan Tingshe and up to the Latest Practicable Date,
Kunshan Tingshe had not been subject to any material administrative penalties for material
breach of relevant laws and regulations, and there was no ongoing or pending litigation or legal
proceedings against Kunshan Tingshe which would have a material adverse effect on the
Company.
OUR CONTROLLING SHAREHOLDERS
Our Founders, together with their respective intermediate holding companies (i.e. Harmony
Culture, Legend Key and Max One) are collectively our Controlling Shareholders. By virtue of
their long-standing business relationship in establishing our Group, our Founders have been
reaching voting decisions on an unanimous basis since each of them had a beneficial interest in
Star Plus (Kunshan) and throughout the Track Record Period. The Founders also entered into the
Concert Party Agreement, 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. Please refer to the section
headed “Relationship with our Controlling Shareholders – Concert Party Agreement” in this
prospectus.
REORGANIZATION
In preparation of the Listing, the companies comprising our Group underwent the
Reorganization, pursuant to which our Company became the holding company of our Group.
HISTORY, DEVELOPMENT AND REORGANIZATION
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OUR STRUCTURE BEFORE THE REORGANIZATION
The following chart sets out our corporate and shareholding structure immediately before commencement of the Reorganization and
the Pre-IPO Investments:
Star Plus EntertainmentStar Plus Action (HK)
100%100%
Star Plus J Movie Secret Music (HK)
Kunshan Secret Music
Cultural Development
Company Limited
ᆀ˖ʷ
ʮ̡
( “Kunshan
Secret Music”)
Beijing Secret Music
Cultural Development
Company Limited
ᆀ˖ʷ
ʮ̡
 (“Beijing
Secret Music”)
100%
100%
Kunshan Sidapu
Commercial Management
Company Limited
 (ʆ౶༺౷ਠุ
ʮ̡
Star Plus IP
Star Plus Development
100%
50%
represents indirect or entrusted shareholding interest
represents direct shareholding interest
70%
(Note 4)
100%
Ms. Ma Ms. YehMs. Ma
(Note 5)
(Note 6)
Mr. Yang
Our Controlling Shareholders
30%
Lhasa Juchuang
(Note 3)
Beijing Star
Plus Master (Note 7)
Kunshan JST One
Management Centre
(Limited Partnership)
(͡Άุ
Υྫ))
(“Kunshan JST One”)
 (Note 8)
Horgos Star Plus
Creative Information
Consulting Company
Limited
(௴
ʮ̡)
(“Horgos Star Plus”)
 (Note 9)
Star Plus (Kunshan)
Kunshan Star
Plus Action
70% 100% 100%
2.5% 97.5%
Offshore
Onshore
Shanghai Sidapu
Mr. Chen
HISTORY, DEVELOPMENT AND REORGANIZATION
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--- page 182 ---
Notes:
(3) Lhasa Juchuang intended to transfer its equity interest in Star Plus (Kunshan) to Mr. Lai and Mr. Ho after
companies not engaged in the Listing Business were carved out, and the transfer of Lhasa Juchuang’s interest in
Star Plus (Kunshan) was completed as part of the Pre-IPO Investments. For details, please refer to the paragraph
headed “Pre IPO Investments – Share transfers to Mr. Lai and Mr. Ho” in this section.
(4) Our Founders held 70% of Star Plus (Kunshan)’s equity interest through nominee arrangements prior to the
Reorganization and the Pre-IPO Investments. For details of the nominee arrangements, please refer to notes 1 and
2 under the paragraph headed “Our major subsidiaries – Star Plus (Kunshan)” in this section.
(5) Pursuant to the nominee and bare trust deed dated September 13, 2021 and entered into, among others, our
Founders and Mr. Lai, Mr. Lai and his controlled entities entrusted to hold 43%, 21.5%, 21.5% and 14% of Star
Plus Development, Star Plus Action (HK), Star Plus Entertainment and Star Plus J Movie on behalf of Ms. Ma,
Mr. Yang, Ms. Yeh and Mr. Chen, respectively since the commencement of the Track Record Period and before
the transfer of such companies to our Company and the Pre-IPO Investments, and the rights and interests of
those companies shall vest in each beneficial owner according to the abovementioned ratio.
(6) The shares in Secret Music (HK) were held by our Founders as to 50% in aggregate and Sapphire Prismatic
Limited as to 50%. Secret Music (HK) is our subsidiary as we are entitled to nominate a majority of its board of
directors. Pursuant to the nominee and bare trust deed dated September 13, 2021, since the commencement of the
Track Record Period and until immediately before the transfer of Secret Music (HK) to our Company and the
Pre-IPO Investments, the interest in Secret Music (HK) was beneficially owned by Ms. Ma, Mr. Yang, Ms. Yeh
and Mr. Chen as to 21.5%, 10.75%, 10.75% and 7% through Great Essence. Sapphire Prismatic Limited is a
company wholly owned by Chan Yu-hao and hence Sapphire Prismatic Limited and Chan Yu-hao are our
connected persons at subsidiary level upon Listing.
(7) The equity interest in Beijing Star Plus Master was held by Star Plus (Kunshan) and Beijing Master as to 70%
and 30%, respectively. To the knowledge of our Company, the ultimate beneficial controller of Beijing Master is
Zhang Shuming (׼ࣣhence each of Beijing Master and Zhang Shuming is our connected persons at
subsidiary level upon Listing.
(8) Kunshan JST One is a limited partnership established in the PRC on September 28, 2017 with Beijing Star Plus
Master, our indirect subsidiary, as the general partner. Kunshan JST One was the project company for J-Style
Trip season one.
(9) Horgos Star Plus was deregistered on December 15, 2021 as it had no business operations.
Onshore Reorganization
Internal transfer of the entire equity interest in Kunshan Star Plus Action
On February 18, 2020, Star Plus (Kunshan) agreed to sell and Star Plus Action (HK) agreed
to purchase the entire equity interest in Kunshan Star Plus Action at the consideration of
RMB10,000,000, which was determined with reference to the valuation of Kunshan Star Plus
Action as of December 31, 2019. Star Plus Action (HK) designated Beijing Star Plus Action, its
wholly-owned subsidiary, as the transferee of this transaction. The consideration was fully
settled and this transaction has been duly and legally completed, and its relevant registration has
been completed.
Acquisition of the entire equity interest in Star Plus (Kunshan)
On February 28, 2020, Shanghai Yige (on behalf of Mr. Yang, Ms. Yeh and Mr. Chen),
Kunshan Renben (on behalf of Ms. Ma) and Beijing Weideli (on behalf of Mr. Lai and Mr. Ho)
agreed to sell and Shanghai Sidapu agreed to purchase the entire equity interest in Star Plus
(Kunshan) (excluding its subsidiaries, including Kunshan Star Plus Action) at the consideration
of RMB800,000, RMB600,000, and RMB600,000, respectively, which was determined with
reference to the valuation of Star Plus (Kunshan) as of December 31, 2019. The consideration
was fully settled and this transaction has been duly and legally completed, and its relevant
registration has been completed.
HISTORY, DEVELOPMENT AND REORGANIZATION
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Beijing Star Plus Legend was a subsidiary of our Group established on June 2, 2020 along
with the Reorganization. On the same day, Shanghai Sidapu agreed to sell and Beijing Star Plus
Legend agreed to purchase the entire equity interest in Star Plus (Kunshan) at the consideration
of RMB2,000,000, which was determined with reference to the valuation of Star Plus (Kunshan)
(excluding its subsidiaries, including Kunshan Star Plus Action) as of December 31, 2019. The
consideration was fully settled and the transfer was duly and legally completed, and its relevant
registration has been completed. Shanghai Sidapu was an intermediate holding company and our
subsidiary since its establishment in June 2016 till its disposal on September 30, 2020. As our
Group sought to streamline its structure, Shanghai Sidapu was disposed to Jushi Creative at a
nominal consideration of RMB1 based on the net asset value of Shanghai Sidapu as of
September 30, 2020. The consideration was fully settled and as advised by the PRC Legal
Advisors, the transfer was duly and legally completed, and its relevant governmental registration
has been completed.
Offshore Reorganization
Incorporation of our Company and shareholders’ holding companies, and allotment of our
Shares to the beneficial Shareholders
On January 3, 2020, our Company was incorporated as an exempted company with limited
liability in the Cayman Islands. Upon incorporation, the authorized share capital of our
Company was US$50,000, divided into 50,000 ordinary shares of US$1 each. On the date of its
incorporation, one Share was issued to the initial subscriber, an Independent Third Party, who
transferred it to Star Media on the same day. On July 29, 2020, our authorized share capital was
subdivided to 5,000,000,000 Shares of US$0.00001 each.
Pursuant to a nominee and bare trust deed dated September 13, 2021 and entered into
between our Founders and Mr. Ho on one hand and Mr. Lai on the other hand, during the period
from the incorporation of our Company to immediately before Shares were allotted to each of
the Founders and Mr. Ho’s holding companies, Mr. Lai was entrusted to hold 30%, 15%, 15%,
10% and 15% of our beneficial interest on behalf of Ms. Ma, Mr. Yang, Ms. Yeh, Mr. Chen and
Mr. Ho, respectively, and the rights and interests with respect to the trust property shall vest in
each beneficial owner according to the abovementioned ratio. The remaining 15% interest in our
Company was held by Mr. Lai. Our Founders and Mr. Ho were beneficially interested in the
equity interest of Star Plus (Kunshan) and our other onshore entities during the period when the
bare trust arrangement was effective, and for the purpose of mirroring each of their beneficial
interest in the offshore platform they have established and our offshore business before our
Shares were allotted to each of our Founders and Mr. Ho, they formalized the arrangement
through entering into the nominee and bare trust deed.
Each of Ms. Ma, Mr. Yang and Ms. Yeh, Mr. Chen and Mr. Ho (our ultimate beneficial
owners since its incorporation) incorporated a holding company, details of which are set out
below:
Company name Name of shareholder Equity interest
Harmony Culture/Best Million Ms. Ma 100%
Legend Key Mr. Yang
Ms. Yeh
50%
50%
Max One Mr. Chen 100%
Lake Ranch Mr. Ho 100%
HISTORY, DEVELOPMENT AND REORGANIZATION
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On August 4, 2020, our Company allotted and issued 150,000,000, 150,000,000,
50,000,000, 75,000,000 and 74,900,000 Shares to Legend Key, Best Million, Max One, Lake
Ranch and Star Media, respectively, credited as fully paid. Immediately upon completion of the
allotment and issuance of our Shares, Legend Key, Best Million, Max One, Lake Ranch and Star
Media held 30%, 30%, 10%, 15% and 15% of our issued Shares, respectively. After the
allotment of such Shares, our Founders, Mr. Lai and Mr. Ho’s shareholding in our Company is
same as their beneficial interest in (i) Star Plus (Kunshan) immediately before it was acquired
by Shanghai Sidapu; and (ii) our Company immediately before the trust arrangement among our
Founders, Mr. Lai and Mr. Ho was terminated.
Acquisition of our offshore subsidiaries
Immediately before the Reorganization, Mr. Lai, through Great Essence, held various
offshore entities on behalf of the Controlling Shareholders and Mr. Ho pursuant to the nominee
and bare trust agreement entered into amongst them, and the following transfers were conducted
to transfer these offshore entities to our Company after our Company was incorporated:
(i) On February 5, 2020, Great Essence agreed to sell and our Company agreed to
purchase the entire equity interest in Star Plus Development at the nominal
consideration of US$1 based on the share capital of Star Plus Development. The
consideration was fully settled and the transaction has been duly and legally
completed.
(ii) On February 5, 2020, Great Essence agreed to sell and our Company agreed to
purchase the entire equity interest in Star Plus Entertainment, at the nominal
consideration of HK$1 based on the share capital of Star Plus Entertainment. The
consideration was fully settled and the transaction has been duly and legally
completed.
(iii) On February 18, 2020, Star Media agreed to sell and our Company agreed to purchase
the entire equity interest in Star Plus Action (HK) at the nominal consideration of
HK$1 based on the share capital of Star Plus Action (HK). The consideration was
fully settled and the transaction has been duly and legally completed.
(iv) On February 28, 2020, Great Essence agreed to sell and our Company agreed to
purchase 50% of the equity interest in Secret Music (HK) at the nominal consideration
of HK$50 based on the share capital of Secret Music (HK). The consideration was
fully settled and the transaction has been duly and legally completed. Great Essence
also assigned the right to control the composition of a majority of Secret Music
(HK)’s board of directors to our Company.
(v) On March 19, 2020, Great Essence agreed to sell and our Company agreed to purchase
the entire equity interest in Star Plus J Movie at the nominal consideration of HK$1
based on the share capital of Star Plus J Movie. The consideration was fully settled
and the transaction has been duly and legally completed.
As confirmed by our Directors, each of the transfers during the Reorganization was
properly and legally completed and the consideration was fully settled. Our Company has
obtained all relevant approvals required in connection with the Reorganization and has complied
with all relevant laws and regulations which are applicable to the Reorganization.
HISTORY, DEVELOPMENT AND REORGANIZATION
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As advised by our PRC Legal Advisors, the nominee arrangements at the onshore level did
not violate any PRC laws and regulations in all material respects. According to such
arrangements, each of our Substantial Shareholders, through their nominees, beneficially held
and owned the entrusted interests in Star Plus (Kunshan), and were entitled to all rights and
benefits arising from such equity interest.
CAPITALIZATION ISSUE
Conditional upon the crediting of our Company’s share premium account as a result of the
issue of the Offer Shares pursuant to the Global Offering, our Directors were authorized to
capitalize an amount of approximately US$1,748.45 standing to the credit of the share premium
account of our Company by applying such sum towards the paying up in full at par a total of
178,445,376 Shares for allotment and issue to our Shareholders as of on the register of members
of our Company at the close of business on the date immediately preceding the date on which
the Global Offering becomes unconditional, on a pro rata basis.
PRE-IPO STOCK INCENTIVE PLAN
On August 3, 2020, our Company adopted the Pre-IPO Stock Incentive Plan pursuant to
which 25,000,000 Shares (to be adjusted to 33,217,009 Shares upon the Capitalization Issue) are
issuable upon exercise of all options under the Pre-IPO Stock Incentive Plan, representing 4.2%
of the issued share capital of our Company immediately after the Global Offering (assuming the
Over-allotment Option is not exercised and without taking into account the Shares which may be
issued pursuant to the exercise of the Options under the Share Option Schemes). As of the Latest
Practicable Date, the Company issued an aggregate of 25,000,000 Pre-IPO Share Options in
consideration for the contribution of the Pre-IPO Share Option Scheme Grantees to the
establishment of our Group and to provide incentives to them. No further options will be granted
under the Pre-IPO Stock Incentive Plan after our Listing. For details of the Pre-IPO Stock
Incentive Plan, please refer to the paragraph headed “Statutory and general information – D.
Share Option Schemes – Pre-IPO Stock Incentive Plan” in Appendix V to this prospectus.
PRE-IPO INVESTMENTS
Share transfers to Mr. Lai and Mr. Ho
Lhasa Juchuang had been contemplating to exit from Star Plus (Kunshan) as a result of the
separation of business lines under Jesports (Kunshan) and Jushi Creative from our Group’s
structure. Hence, Lhasa Juchuang has been discussing with our Founders about exiting Star Plus
(Kunshan) since 2017. At the same time, Mr. Lai and Mr. Ho had been working closely with our
Founders to formulate the business strategies of our Group since our inception and advised on
corporate finance matters. After noticing Lhasa Juchuang’s intention to exit, our Founders agreed
that it would be beneficial to our Group should Mr. Lai and Mr. Ho take up the equity interest
disposed by Lhasa Juchuang as it would align their interest with our Group, and Mr. Lai and Mr.
Ho agreed that this would be a good opportunity for them to have a personal stake in our Group.
HISTORY, DEVELOPMENT AND REORGANIZATION
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--- page 186 ---
Owing to complications in handling formalities for the carving out of companies not
engaged in the Listing Business, such transfers were only completed in August 2019. After
completion of such procedures, on September 30, 2019, Lhasa Juchuang and each of Mr. Lai and
Mr. Ho entered into an agreement to transfer 15% of the equity interest in Star Plus (Kunshan)
at RMB300,000. The aggregate consideration has been agreed to be equivalent to Lhasa
Juchuang’s contribution to Star Plus (Kunshan)’s registered capital in view of Lhasa Juchuang’s
exit intention since 2017. For details of the carving out of companies not engaged in the Listing
Business, please refer to the paragraph headed “Our major subsidiaries – Star Plus (Kunshan) –
Separation of distinct business lines under Star Plus (Kunshan)” in this section.
As each of Mr. Lai and Mr. Ho is not a holder PRC ID and as our Group was contemplating
the Reorganization, Mr. Lai and Mr. Ho were only the beneficial shareholders of Star Plus
(Kunshan) from September 30, 2019 till its acquisition by Shanghai Sidapu; and they designated
Beijing Weideli as the legal owner of the equity interest of Star Plus (Kunshan) acquired by
them. The nominee arrangement was terminated when Beijing Weideli transferred the entrusted
shareholding in Star Plus (Kunshan) to Shanghai Sidapu as part of our Reorganization.
On August 4, 2020, as part of the Reorganization, 75,000,000 and 74,900,000 Shares were
allotted to Lake Ranch (a company wholly-owned by Mr. Ho) and Star Media (a company
wholly-owned by Mr. Lai), respectively, credited as fully paid.
Shares transfers to Dr. Qian and Ms. Zhang and subscriptions by Long Precise and
Bradbury
On February 29, 2020, Lake Ranch entered into a share transfer agreement with each of Dr.
Qian and Ms. Zhang, pursuant to which Lake Ranch agreed to sell and Dr. Qian and Ms. Zhang
agreed to purchase 7,500,000 Shares and 5,000,000 Shares at HK$1.5 million and HK$1 million,
respectively.
On September 30, 2020, Long Precise entered into a share purchase agreement with our
Company, pursuant to which our Company allotted and issued 12,820,512 Shares to Long
Precise in consideration of HK$37,500,000.
On February 17, 2021, Bradbury entered into an investment agreement with our Company,
pursuant to which our Company allotted and issued 30,094,112 Shares to Bradbury in
consideration of HK$200,000,000.
On May 5, 2023, Long Precise entered into a share transfer instrument with Kai Le and Ms.
Zhang respectively, pursuant to which (1) Long Precise agreed to sell and Kai Le agreed to
purchase 7,880,769 Shares and (2) Long Precise agreed to sell and Ms. Zhang agreed to
purchase 4,939,743 Shares. Upon completion of the above transactions, Long Precise ceased to
hold any Shares. Upon completion of the Global Offering, Shares held by Kai Le would be
counted as public float, whilst Shares held by Ms. Zhang would not be counted as public float.
HISTORY, DEVELOPMENT AND REORGANIZATION
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Details of the Pre-IPO Investments are summarized below:
Name of the investor Mr. Lai Mr. Ho Dr. Qian Ms. Zhang Long Precise Bradbury
Date of agreement September 30, 2019 September 30, 2019 February 29, 2020 February 29, 2020 September 30, 2020 February 17, 2021
Number of Shares
subscribed for
75,000,000 Shares
(Note a)
75,000,000 Shares
(Note a)
7,500,000 Shares 5,000,000 Shares 12,820,512 Shares 30,094,112 Shares
Shareholding in
our Company
immediately upon
completion of
the Global Offering
12.5% 5.7% (Note b) 1.2% 1.7% (Note c) N/A (Note c) 5.0%
Consideration RMB300,000 RMB300,000 HK$1,500,000 HK$1,000,000 HK$37.5 million HK$200 million
Basis of determination
of the consideration
After arm’s length negotiation between the parties
with reference to the registered capital to be
contributed by Lhasa Juchuang
After arm’s length negotiation between the parties with reference to the fair
value of the relevant Shares as appraised by an independent valuer at the
time of the investment
Post-money valuation
of our Group at HK$4
billion, which was
determined after arm’s
length negotiation with
reference to the status
of our businesses
carried out by our
Group
Date on which
consideration
was fully settled
July 29, 2020 July 29, 2020 March 3, 2021 June 16, 2021 September 30, 2020 February 23, 2021
Investment cost per
Share after taking
into account the
effect of the
Capitalization Issue
and the Global
Offering (but before
any exercise of
Options under the
Pre-IPO Stock
Incentive Plan and
Over-allotment
Option)
HK$0.003 HK$0.003 HK$0.15 HK$0.15 HK$2.20 HK$5.00
Discount/(premium) to
the Offer Price
99.9% 99.9% 96.5% 96.5% 48.2% (17.7)%
Use of net proceeds
and its utilization
by our Company
As the Pre-IPO
Investment by Mr. Lai
was effected by way of
equity transfer between
each of them and Lhasa
Juchuang, no proceeds
were received by our
Group.
As the Pre-IPO
Investment by Mr. Ho
was effected by way of
equity transfer between
each of them and Lhasa
Juchuang, no proceeds
were received by our
Group.
As the Pre-IPO
Investment by Dr. Qian
was effected by way of
equity transfer between
Dr. Qian and Lake
Ranch, the
consideration was paid
to Lake Ranch and no
proceeds were received
by our Group.
As the Pre-IPO
Investment by Ms.
Zhang was effected by
way of equity transfer
between Ms. Zhang and
Lake Ranch, no
proceeds were received
by our Group.
General working capital. As of the Latest
Practicable Date, approximately 40% of the net
proceeds from the Pre-IPO Investments by Long
Precise and Bradbury had been utilized as
intended.
Public float under the
Listing Rules
No Yes (Note b) No No (Note c) Yes
Lock-up 12 months from our
Listing
12 months from our
Listing (Note d)
12 months from our
Listing
12 months from our
Listing
(Note c) 6 months from our
Listing
HISTORY, DEVELOPMENT AND REORGANIZATION
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Notes:
(a) The Shares correspond to our Shares which were allotted to each of Mr. Ho and Mr. Lai on August 4, 2020; and
is equivalent to the percentage of Star Plus (Kunshan)’s equity interest acquired by each of them from Lhasa
Juchuang.
(b) Lake Ranch, as the Selling Shareholder, would sell 48,000,000 Shares in the Global Offering. Upon completion
of the Global Offering, the Shares beneficially owned by Mr. Ho will be counted as public float.
(c) On May 5, 2023, Long Precise entered into a share transfer instrument with Kai Le and Ms. Zhang respectively,
pursuant to which (1) Long Precise agreed to sell and Kai Le agreed to purchase 7,880,769 Shares and (2) Long
Precise agreed to sell and Ms. Zhang agreed to purchase 4,939,743 Shares. Upon completion of the above
transactions, Long Precise ceased to hold any Shares. Upon completion of the Global Offering, Shares held by
Kai Le would be counted as public float, whilst Shares held by Ms. Zhang would not be counted as public float.
(d) Each of Lake Ranch and Kai Le, being a company wholly owned by Mr. Ho, agreed not to dispose any of our
Shares for a period of twelve months commencing on the date of our Listing.
Strategic benefits to our Company
Our Directors are of the view that the investments made by the Pre-IPO Investors
demonstrate their confidence in the operation of our Group and serve as an endorsement of the
performance and prospect of our Group. In addition, at the time of respective investment made
by our Pre-IPO Investors, our Directors were of the view that our Group could benefit from the
Pre-IPO Investors’ business connection network, knowledge and experience.
Further, our Directors believe that (i) the Pre-IPO Investments allow us to enlarge our
shareholder base and to align the interest of Dr. Qian and Mr. Lai, being members of our senior
management, with that of ours, (ii) we can benefit from Mr. Ho’s knowledge on capital markets
and strategic advice given Mr. Ho’s experience in identifying investment targets, enhancing their
performance and providing support and advise, and (iii) Bradbury is a cross-border investor with
a focus on China’s fast growing industries and companies which are similar to our Group.
Background of the Pre-IPO Investors
Mr. Lai
Mr. Lai is an executive Director and a member of our senior management team. Please refer
to the section headed “Directors and senior management – Board of directors – Executive
Directors” in this prospectus for the background information on Mr. Lai.
Mr. Ho
Mr. Ho became acquainted with Ms. Ma and Mr. Lai in 2008 when they were previously
involved in a company which one of the funds of IDG Capital has invested in. Mr. Ho has over
15 years of experience in banking, finance and direct investment and is the chief financial
officer of IDG Capital, an investment firm focusing on developing companies through its
expertise in private equity, venture capital and mergers and acquisitions. Our Founders believe
that Mr. Ho can provide valuable guidance on the growth and development of our business, and
since our Founders had the idea to commence their own business, Mr. Ho has shared his
experience and insights on e-commerce. Lake Ranch is an investment holding company
incorporated in the BVI and wholly-owned by Mr. Ho.
Upon discussions among our Shareholders, it was agreed that Lake Ranch would be the
Selling Shareholder so as to broaden the shareholder base of our Company, increase the public
float, and reduce the concentration of our Shares in public hands. After the Global Offering, Mr.
HISTORY, DEVELOPMENT AND REORGANIZATION
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Ho remains to be one of our Shareholders and can focus on the long-term capital growth of our
Company upon Listing, which is in line with his investment strategies and objectives.
Dr. Qian and Ms. Zhang
Dr. Qian is an executive Director and a member of our senior management team. Please
refer to the section headed “Directors and senior management – Board of directors – Executive
Directors” in this prospectus for the background information on Dr. Qian. Mr. Ho became
acquainted with Dr. Qian in 2004 when they were involved in a company which one of the funds
of IDG Capital has invested in. As Dr. Qian has been continuously involved in formulating the
overall business strategy of our Group, he has been confident of our prospects. Ms. Zhang is the
spouse of Dr. Qian. Dr. Qian and Ms. Zhang also factored the potential increase in valuation of
the company after becoming a public company.
Mr. Ho decided to sell part of his interest in our Company, after arm’s length commercial
negotiations with Dr. Qian and Ms. Zhang, and having compared the immediate capital gain
from selling part of Mr. Ho’s interest in our Company against the initial investment cost taken
out by Mr. Ho together with Dr. Qian’s management role in our Group.
Long Precise
Long Precise is an investment holding company incorporated in the BVI. To our Company’s
knowledge, as of the Latest Practicable Date, Long Precise was owned as to 61.47% and 38.53%
by Mr. Ho and Ms. Zhang, respectively. Mr. Ho became acquainted with Ms. Zhang through Dr.
Qian. As there has been a continuous increase in demand of our products and expansion of our
distribution network, Mr. Ho and Ms. Zhang were of the view that the valuations of high growth
potential companies like us would remain at a relatively high level and it would be worthwhile
to increase their shareholding in our Company. On May 5, 2023, Long Precise transferred all the
Shares it owned to Kai Le and Ms. Zhang. Upon completion of the above transactions, Long
Precise no longer holds any Shares.
Bradbury
Bradbury is wholly-owned by Bradbury Strategic Investment Fund A, an independent
mutual fund registered in the Cayman Islands. Bradbury Asset Management (Hong Kong)
Limited, a company licensed to conduct type 9 (Asset Management) regulated activities as
defined under the SFO, has been appointed as the Investment Manager of Bradbury Strategic
Investment Fund A. The aggregate asset under management by Bradbury Asset Management
(Hong Kong) Limited amounted to over US$1.6 billion. Bradbury Group specializes in offering
International securities brokerage, asset management, investment funds and wealth management
services to accredited investors; and its prime private equity portfolios spans across capital
markets, real estate developments, green technology, e-commerce, healthcare.
Bradbury and Bradbury Securities Limited are both indirectly wholly-owned by Mr. Loo,
See Yuen. Other than Bradbury’s shareholding in our Company and Bradbury Securities Limited
being a Joint Global Coordinator, a Joint Bookrunner, a Joint Lead Manager and the Stabilizing
Manager, Bradbury and its associates do not have other relationship or dealings with our Group.
Special rights granted to the Pre-IPO Investors
No special rights were granted to Mr. Lai, Mr. Ho, Dr. Qian, Ms. Zhang and Long Precise
(before it transferred its Shares to Kai Le and Ms. Zhang). For the purpose of expressing
confidence in the long term value of the Company, each of Mr. Lai, Dr. Qian, Ms. Zhang, Lake
Ranch and Kai Le (being companies wholly owned by Mr. Ho), has voluntarily agreed and
HISTORY, DEVELOPMENT AND REORGANIZATION
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undertakes to us, the Sole Sponsor and the Joint Global Coordinators that without the prior
written consent of each of us and Bradbury Securities Limited, he/she/it will not, and will cause
his/her/its associates not to, whether directly or indirectly, at any time during the period of
twelve months commencing on the date of the Listing, dispose of, in any way, any of our Shares
or any interest in any company or entity holding our Shares.
Bradbury may require our Company to redeem the Shares subscribed by Bradbury during
its Pre-IPO Investment when: (i) a Qualified IPO does not take place by December 31, 2021; (ii)
our Company withdraws its listing application; (iii) our listing application being rejected by the
Stock Exchange or any competent authority; or (iv) our listing process being terminated or our
listing application has lapsed for any reason. The redemption price will be equivalent to the
subscription price paid by Bradbury for its Pre-IPO Investment. Such right was suspended
immediately prior to the submission of the listing application form of our Company to the Stock
Exchange for the purpose of the Global Offering. “Qualified IPO” means an initial public
offering with a valuation based on the offer price of the IPO which, impliedly values the equity
value of our Group immediately after our Listing at not less than HK$6 billion. Our Company
shall obtain a consent from Bradbury if the Qualified IPO cannot be achieved, and such consent
has been obtained. Bradbury undertakes to us that without the prior written consent of us, it will
not at any time during the period of six months commencing on the date of the Listing, dispose
of, in any way, any of our Shares.
Investment cost per Share and discount to the Offer Price
The basis of the consideration for the share transfers to Mr. Lai and Mr. Ho of HK$0.003
per Share was determined and agreed in 2017 when Lhasa Juchuang decided to divest from Star
Plus (Kunshan). At that time, our business model was still being developed and its prospects was
uncertain, which resulted in the relatively low valuation.
The increase in investment cost per Share from HK$0.003 in September 2019 to HK$0.15
in February 2020 was mainly due to the fact that we started to become profitable in 2018 and
our prospects and outlook were considered promising, especially in view of the expansion of the
product offerings in 2019 and the expected growth of the new retail segment with the launch of
MODONG coffee.
The increase in investment cost per Share to HK$2.20 in September 2020 was resulted from
the spike in sales of MODONG coffee during the first half of 2020; and the expected significant
increase in our revenue and net profit in 2020.
The increase in investment cost per Share to HK$5.00 in February 2021 was supported by
our financial performance in 2020, our management accounts, our plan for Listing, and the
prevailing optimistic market conditions and market sentiment at that time.
COMPLIANCE WITH INTERIM GUIDANCE AND GUIDANCE LETTERS
On the basis that (i) the consideration for each of the Pre-IPO Investments was irrevocably
settled more than 28 clear days before the date of our first submission of the listing application
to the Stock Exchange and (ii) no special right was granted to any Pre-IPO Investor that will
survive after the Listing, the Sole Sponsor has confirmed that the Pre-IPO Investments are in
compliance with the Guidance Letter HKEX-GL-29-12 issued by the Stock Exchange in January
2012 and as updated in March 2017 and the Guidance Letter HKEX-GL43-12 issued by the
Stock Exchange in October 2012 and as updated in July 2013 and March 2017 and the Guidance
Letter HKEX-GL44-12 issued by the Stock Exchange in October 2012 and as updated in March
2017.
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OUR STRUCTURE IMMEDIATELY PRIOR TO THE GLOBAL OFFERING
The following chart sets out our Group’s corporate and shareholding structure immediately upon completion of the Reorganization
and Pre-IPO Investments but prior to the Global Offering and the Capitalization Issue (without taking into account the Shares which may
be issued pursuant to the exercise of the Options under the Pre-IPO Stock Incentive Plan):
Shanghai Star Plus IP
(Note 12)
100%
Beijing Star Plus Master
(Note 7)
Star Plus (Kunshan)
100%95%
70%
5%
Kunshan JST One
(Note 8)
Kunshan JST Two
(Note 10)
2.5% 97.5%
Mr. HoMs. YehMr. Yang Mr. Chen
Star Plus Development
Star Plus IPStar Plus EntertainmentStar Plus Action (HK)
Beijing Star Plus Action
(Note 12)
Kunshan Star Plus Action
Beijing Star Plus Legend
(Note 12)
Star Plus J Movie
Kunshan Secret Music
Beijing Secret Music
Secret Music (HK)
(Note 6)
Our Company
50% 50% 100%
27.6% 9.2%
100%
100%
Star Plus IP (Kunshan)
(Note 12)
100%
Star Plus JM (Kunshan)
(Note 12)
100%
100%
100%
100%
100%
100%100%
100% 50%
100%
100%
Mr. Lai
(Note 14)
13.8%
Star Plus Excellence
(Note 12)
100%
Star Plus Meiyou
(Note 12)
100%
Star Plus Aijia
(Note 12)
100%
Star Plus Meishang
(Note 12)
Star Plus Aiyou
(Note 12)
100%
Hangzhou Talent Planet
100%
Kunshan Talent Planet
100%
Talent Planet
(Note 11)
70%
Star Plus Entertainment
(Kunshan) (Note 12)
100%
Legend Key Max One
Offshore
Onshore
Our Controlling Shareholders
Ms. Ma
(Note 13)
27.6%
%001
Harmony Culture
100%
Star Plus Entertainment
(Hangzhou)
1.4%1.8%
Dr. Qian
5.5%
BradburyMs. Zhang
100%
Star Plus (Taiwan)
(Note 12)
100%
Kai Le
(Note 15)Lake Ranch
11.5% 1.5%
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Notes:
For notes 6 to 8, please refer to the paragraph headed “Our structure before the Reorganization” in this section.
(10) Kunshan JST Two Management Centre (Limited Partnership) (͊Άุ၍ଣʕː (Υྫ )( “ Kunshan JST
Two”) is a limited partnership established in the PRC on January 6, 2020 with Star Plus (Kunshan), our
indirectly wholly-owned subsidiary, as the general partner. Kunshan JST Two is intended to be the project
company for J-Style Trip season two.
(11) Talent Planet was incorporated in Hong Kong on November 26, 2021. To the knowledge of our Company, the
ultimate beneficial controller of W&V is Meng Ching-Jung (ᅅ࿲), the mother of Ms. Vivi Wang.
(12) These companies were established along with the Reorganization and had been our wholly-owned subsidiaries
since establishment. Neither of them is our major subsidiary.
(13) On December 26, 2020, Best Million agreed to transfer 150,000,000 Shares at a nominal consideration of US$1
to Harmony Culture, with reference to the fact that Best Million and Harmony Culture are wholly owned by Ms.
Ma.
(14) On December 2, 2020, Star Media repurchased one share in Star Media from Mr. Lai, using Star Media’s entire
shareholding in our Company (i.e. 75,000,000 Shares) as consideration. Upon completion of the repurchase, Mr.
Lai is the beneficial owner of 75,000,000 Shares.
(15) On May 5, 2023, Long Precise entered into a share transfer instrument with Kai Le and Ms. Zhang respectively,
pursuant to which (i) Long Precise agreed to sell and Kai Le agreed to purchase 7,880,769 Shares and (ii) Long
Precise agreed to sell and Ms. Zhang agreed to purchase 4,939,743 Shares. Upon completion of the above
transactions, Long Precise ceased to hold any Shares.
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OUR STRUCTURE IMMEDIATELY FOLLOWING THE GLOBAL OFFERING
The following chart sets out our Group’s corporate and shareholding structure upon completion of the Global Offering and the
Capitalization Issue (assuming that the Over-allotment Option is not exercised and without taking into account the Shares which may be
issued pursuant to the exercise of the Options under the Share Option Schemes):
Ms. YehMr. Yang
Legend Key
Star Plus Development
Star Plus IPStar Plus EntertainmentStar Plus Action (HK)
Beijing Star Plus Action
(Note 12)
Kunshan Star Plus Action
Beijing Star Plus Master
(Note 7)
Beijing Star Plus Legend
(Note 12)
Star Plus (Kunshan)
Star Plus J Movie
Kunshan Secret Music
Secret Music (HK)
(Note 6)
Our Company
50% 50%
100%
100%100%
100%
100%95%
70%
5%
100%
100%
100%
100% 50%
100%
Beijing Secret Music
100%
Shanghai Star Plus IP
(Note 12)
100%
Dr. Qian Other public
ShareholdersBradbury
Kunshan JST One
(Note 8)
Kunshan JST Two
(Note 11)
Mr. Lai
(Note 15)
2.5% 97.5%
Star Plus Entertainment
(Kunshan) (Note 12)
100%
Star Plus IP (Kunshan)
(Note 12)
100%
Star Plus JM (Kunshan)
(Note 12)
100%
Offshore
Onshore
Our Controlling Shareholders
Mr. Chen
Max One
100%
Mr. Ho
100%
Ms. Ma
100%
Harmony Culture
100%
Star Plus Entertainment
(Hangzhou)
Talent Planet
(Note 13)
70%
Hangzhou Talent Planet
100%
Kunshan Talent Planet
100%
Star Plus Excellence
(Note 12)
100%
100% 100%
Star Plus Meiyou
(Note 12)
100%
Star Plus Aijia
(Note 12)
100%
Star Plus Meishang
(Note 12)
Star Plus Aiyou
(Note 12)
Ms. Zhang
Lake Ranch Kai Le
Star Plus (Taiwan)
(Note 12)
100%
8.3% 12.5% 4.4%24.9% 24.9% 1.3% 1.2% 5.0% 15.8%1.7%
Note: For notes 6 to 8 and 11 to 13 and 16, please refer to “– Our structure immediately prior to the Global Offering” in this section.
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PRC REGULATORY REQUIREMENTS
As advised by our PRC Legal Advisors, the relevant equity transfers in respect of our
subsidiaries in the PRC as described in this section have been properly and legally completed in
accordance with applicable PRC laws and regulations in all aspects, and all necessary PRC
regulatory approvals have been obtained in accordance with applicable PRC laws and
regulations.
M&A Rules
Under the M&A Rules, a foreign investor shall comply with M&A Rules when a foreign
investor acquires equity in a domestic non-foreign invested enterprise, thereby converting it into
a foreign-invested enterprise, or subscribes for new equity interest in a domestic non-foreign
enterprise via an increase in registered capital of the domestic non-foreign invested enterprise,
thereby converting it into a foreign-invested enterprise.
As advised by our PRC Legal Advisors, no approval from MOFCOM or CSRC under the
M&A Rules is required, for the reason that our ultimate individual Controlling Shareholders, i.e.
Ms. Ma, Mr. Yang, Ms. Yeh and Mr. Chen, are holders of Taiwan passports, the establishment
and acquisition of our onshore companies are not subject any approvals under the M&A Rules.
SAFE Circular No. 37
Referring to the section headed “Regulatory Overview – Regulations in relation to foreign
exchange” in this prospectus, SAFE Circular No. 37 requires PRC residents to register with local
branches of SAFE with regard to their establishment or indirect control of an offshore entity
established for the purpose of overseas investment and financing. SAFE Circular No. 37 further
requires amendment to the registration in the event of any significant changes with respect to,
among other things, the special purpose vehicle, the domestic individual resident shareholder,
the operating period, capital and merger or division events.
Our Founders, which are our ultimate individual Controlling Shareholders, are holders of
Taiwan passports and they used their offshore funds to invest in our Company. Based on the
foregoing, our PRC Legal Advisors is of the view that our Founders, Mr. Lai and Mr. Ho shall
not make the SAFE 37 Registration for their investment in our Company.
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OVERVIEW
Our business operations consist of two segments, namely new retail segment and IP
creation and operation segment. Each segment can be a source of revenue of its own, while our
IP creation and operation segment can also create a synergy effect by acting as one of our
marketing tools to promote our new retail products.
The diagram below illustrates our business model:
New Retail IP Creation and Operation
IP content creation and
management
– Media content creation
– Event planning
– Celebrity IP management
related products
IP Licensing and sales of
End
consumers
/g3Promotional platform
/g3Navigating traffic
/g3Marketing materials
Brand and product
endorsement
Empowerment
– Douyin stores,
 Tmall stores,
 Kuaishou stores
Product development
and supply
Distribution Channels
Distribution network
– Star Plus 4U APP
E-commerce channels
We (i) develop and introduce suitable products to the market; (ii) establish extensive sales
channels, including extensive distributorship network and e-commerce channels; (iii) cooperate
with celebrities for IP content creation; and (iv) utilize our celebrity IPs and associate IP
contents for the marketing and promotion of our products, along with other sales and marketing
strategies and activities.
Our new retail business
In respect of our new retail business, we focus on development and sale of low-carb health
management products, as well as skincare products.
During the Track Record Period, a majority of our revenue for new retail business derived
from sales of MODONG coffee, of which we started the nationwide distribution in April 2019.
MODONG coffee is a type of bulletproof, which is a type of beverage containing high-fat
specially designed for low-carbohydrate diet plan to meet the plan’s fat/energy ratio. In 2022,
we were the largest company in China’s bulletproof drink market in terms of GMV , with a
market share of 24.9%.
Leveraging our success with MODONG coffee, we launched a number of other low-carb
drinks and food under the MODONG sub-brand that further exemplify our strategy to offer our
end consumers a portfolio of complementary low-carb health management products. In 2022, we
launched our matcha powder under a new product line, Ai Chi Xian Mo Ren (ฌΦᒻᅙɛ ),
featuring healthy and additive-free food products. In addition, we launched multiple product
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sub-brands in the skincare market, including Dr .mg and Chaxiaojie . The products under the
Dr .mg sub-brand are designed to address various skin problems caused by skin aging which
target aging population, whereas the products under Chaxiaojie sub-brand target younger
generation. We will continue to develop and launch new products for our new retail business
from time to time.
We primarily distribute our products through (i) a network of distributors and
sub-distributors; and (ii) other e-commerce channels such as online stores operated on social
media platforms. We conduct E-commerce Livestreaming through our Douyin account from time
to time to promote the sale of our products. During the Track Record Period, we generated a
substantial portion of revenue from sale of our products under the new retail segment through a
network of distributors and sub-distributors. We consider our sales of products as a new retail
business, as we primarily adopt a community-based social e-commerce model, where our
distributors and the sub-distributors procured by them mainly promote and sell our products
through a combination of online commerce elements (through social e-commerce channels, such
as WeChat, Douyin and XiaoHongShu ) and offline channels (through offline meetings among our
distributors, sub-distributors and end consumers, such as annual events, conferences and/or
face-to-face sales at distributors promotion meetings). Our distributors and sub-distributors are
also consumers of our products. Some of them have further developed into KOCs and promote
our products in their respective private domain traffic or PDT through word-of-mouth by
invoking their personal experience and exerting their personal influence over their followers,
through which we can effectively extend the consumer reach of our products. Apart from our use
of KOCs, we also collaborate with KOLs to promote our products through sharing and posts
and/or sell our products through E-commerce Livestreaming sessions on online platforms.
Our IP creation and operation business
Our IP creation and operation business comprises:
(i) IP content creation and management business, including provision of (a) media content
creation; (b) event planning; and (c) celebrity IP management services; and
(ii) IP licensing and sales of related products.
In media content creation, we mainly provide organizing, planning and other project
management services to the production of programs. For example, we are the lead creator and
own the IPs of J-Style Trip season one, which is a 12-episode reality show starring Mr. Jay Chou
aired on Zhejiang Satellite TV as well as Netflix and MGTV (؈TV) in March 2020. J-Style
Trip season one was well-received by TV audience. The average viewership rating of all 12
episodes ranked first among all TV programs broadcasted during the same timeslot from March
to June 2020, according to publicly available rating data. We were also involved in the planning
and creation of a popular music talk show, namely You Can Run But You Can’ t Hide (ۆ
ᆀʘ) that was centered around Mr. Harlem Yu and a variety show, that was centered around Mr.
Liu Keng-hung.
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In event planning, we generally act as an event planning service provider, an investor
and/or sub-contractor for large scale music concerts and other events. For example, we initiated
and acted as a planning service provider to Zhanjiang Superstar Concert (စਨึ )
in August 2019 and initiated and acted as a planning service provider and an investor to Ningbo
Superstar Performance Mega Night (Бਗ൴ॴց ) in January 2020. Through our
experience and management’s networking in the Chinese entertainment industry, we are able to
gather different units to organize the creation of media content, as well as music concerts and
other events.
In celebrity IP management, we collaborate with celebrities and/or KOLs where we are
responsible for the development of their respective IPs. We are involved in the planning and
development of the public persona of celebrities and/or KOLs in, among others, Livestreaming
sessions, online short videos and other online and offline performances on social media
platforms, in order to attract audiences and/or followers with similar interests or concerns.
For celebrity IP licensing and sales of related products, we created bespoke brands and
associated IP contents based on our proprietary unique celebrity IPs, including a nijigen-style
personality, namely ChouMate . Nijigen-style personality is two dimensional anime, manga or
real-life person inspired fictional character. We may license our celebrity IPs to our customers
and receive licensing fees and create and sell products related to the celebrity IPs.
Synergy between our new retail business and our IP creation and operation business
Empowerment of our new retail business by our unique celebrity IPs is achieved through
creating promotional effect at multiple complementary venues and platforms rather than a simple
brand name association, which we believe lends credibility and marketability to our products,
enhances the brand recognition of our products, and maintains the trust and confidence of our
distributors and customers. In 2020, we promoted MODONG coffee in J-Style Trip season one
by means of advertisement, spot cut and discrete product placement. We also promoted healthy
eating and lifestyle through Livestreaming sessions of Mr. Liu Keng-hung and Ms. Vivi Wang,
and promote our products, such as Matcha powder and MODONG light brewed coffee during
E-commerce Livestreaming sessions conducted via our Douyin account under the name of “ ᄎ䊿
㺘㺘દ ” since July 2022. In addition to ChouMate , we started to use nijigen-style
personalities of Mr. Liu Keng-hung and Ms. Vivi Wang, namely “ Coach Liu (ᄎ઺ᇖ)” and
“Vivi” in the promotion of our products.
The judicious use of celebrity IP and our sales channels, including its distribution network,
enabled us to achieve overall financial growth during the Track Record Period.
We plan to continue to create more media contents and concerts, which may empower our
new retail business through creating promotional effect to promote our products. With our
capability and experience in using the strengths of these different business components in an
effective and efficient manner to create synergy effect, we believe we would be able to sustain
our business and achieve growth in our business going forward.
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OUR COMPETITIVE STRENGTHS
A new retail operator empowered by proprietary celebrity IPs that achieved rapid and
significant growth
We are a relatively new market entrant that quickly became the largest new retail company
in China’s bulletproof drink market in terms of GMV in 2022 with a market share of 24.9%.
We believe we achieved our leading market position in the developing bulletproof drink
market in China by leveraging our unique celebrity IPs. Through our IP creation and operation
business, we quickly broke the entry barrier and ramped up operation scale. We believe our IP
creation and operation business grants us mass consumer reach and significant consumers and
distributors retention power on social media. We may use our unique celebrity IPs to empower
our products for new retails business by creating a promotional effect, as well as other sales and
marketing activities, such as traditional advertisements, providing trial samples and packaged
gifts, hosting various events, conference and meeting, etc..
Our unique celebrity IPs empowers our product branding, our distribution network
expansion and consumer procurement. We have created and operated a portfolio of various forms
of proprietary IPs. We promoted our MODONG coffee with the empowerment of Mr. Jay
Chou-related IPs, in particular through featuring our product on J-Style Trip season one in the
first half of 2020, as well as using the nijigen ( ɚϣʩ)-style personification of Mr. Jay Chou,
namely ChouMate , as one of the means to market MODONG coffee. We believe the association
with Mr. Jay Chou instantly appeals to the existing fans and lends credibility to new consumers
for the product and promotes our brand awareness, which help us achieve significant sales
growth since its nationwide launch in April 2019. With successful promotion of MODONG
coffee through the empowerment of Mr. Jay Chou-related IPs during the Track Record Period,
we have become a leader in the bulletproof coffee market in the PRC and MODONG coffee has
become a well-known brand in the PRC by virtue of the specification of the product.
We have diversified our IPs portfolio by creating IPs that are related to other celebrities
since 2021, namely You Can Run But You Can’ t Hide (ᆀʘ ), that was centered around
Mr. Harlem Yu, and a variety show that was centered around Mr. Liu Keng-hung. Since
December 2021, we have further expanded our distribution channels to E-commerce
Livestreaming on Douyin , which is directly linked to our Douyin stores, and conducted
marketing and promotion activities through, among other things, cooperation with Mr. Liu
Keng-hung, Ms. Vivi Wang and other KOLs to promote our products. With (a) the Group’s
historical success in IP creation and operation; (b) the management’s extensive
network/experience in the Chinese entertainment industry; and (c) our collaboration with various
celebrities and creation of TV programs and music concerts in the PRC, we believe we will be
able to continue to create celebrity IPs by cooperating with celebrities.
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We believe the involvement of celebrity IPs has empowered our product distribution and
consumer retention, and has enabled us not only to quickly procure end consumers in mass
without having to incur significant sales and marketing expenses within a short period of time
after the product launched, but also to maintain high consumer loyalty for our products.
Going forward, we can leverage the experience in our success with MODONG coffee and
adapt the growth strategies to new product launched and the promotion of other products.
Quickly established leading marketing position in China’s bulletproof drink market
resulted from our extensive research and development knowledge of the bulletproof drink
market and consumer preference in low-carb diet
We derived the concept of MODONG coffee, which is a type of bulletproof drink, from a
low-carbohydrate diet regime that enjoys global popularity in recent years. We developed the
recipe of our product in collaboration with our supplier based on extensive market research, in
order to distinguish our products from existing competitive products in consumption experience.
We performed data amalgamation and analyzes of targeted consumer demography and conducted
pilot tests and consumer tastings. Based on such market research, we believe many competing
products were rejected by consumers because they demand a stringent diet scheme to accompany
the products to be effective. As such, our MODONG coffee formula is designed to complement
the low-carb diet regime but does not demand consumers to drastically deviate from their routine
diet.
As a result, MODONG coffee is well received by the market since its launch with a rapid
growing consumer base, evidenced by the increase in average monthly sales amount from
RMB9.0 million in 2019 to RMB27.7 million in 2020. In addition to consumer acceptance,
MODONG coffee was also recognized by industry peers and awarded Reputation of Popularity
(ɛंɹ຦ᆤ ) by PCLADY in 2019 and Annual Popular Bulletproof Coffee Award in 2020 Rayli
Fashion List (࿫ቖԣᅁդਥ ), which is a well-recognized award in the
fashion industry.
The health management community-based social e-commerce industry in China increased
from RMB16.8 billion in 2017 to RMB25.6 billion in 2022, in terms of GMV . We believe we are
well positioned to sustain and further increase our operational scale and revenue. We can
leverage our initial success in MODONG coffee and further expand our market shares in the
health management market. We have a portfolio of newly launched health management products,
in addition to our MODONG coffee. We believe such new health management product offerings
are complementary to our existing product line and further diversify our revenue source.
Rapid and organic growth of the distribution network with a focus on KOC development
and PDT marketing
We believe one of the sales and marketing strategies that distinguishes us from other
market participants is our focus on, and ability to, utilize PDT to monetize our unique celebrity
IPs model to quickly procure loyal consumers, as the association between celebrity and our
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products can enhance visibility and affinity to such products. Such PDT refers to
private-controlled net traffic flow through private channels such as WeChat where a community
of subscribers who share similar purchase behavior and preference participate in group chat. We
could develop such subscribers into consumers of our products by targeted promotion, in
particularly by our distributors who become KOC in such PDT.
Many of our distributors and sub-distributors are themselves committed and loyal
consumers of our products. For example, certain of our distributors are small business owners of
offline shops who used our products before. By converting to our distributors and promoting our
products to their customers through online and offline channels, they can increase their revenue
source and diversify their distribution channels. Such conversion helps to mitigate the negative
impact of e-commerce on owners and employees of small offline businesses and incorporate
them into the new “Internet+ ( ʝᑌၣ+)” development. Certain distributors and sub-distributors
are motivated by our success and strived to become KOCs in their relevant PDT through
voluntary promotion of our products to their respective subscribers by invoking their personal
experience and influence. Kunshan Tingshe, our Distribution Agent for Kunshan Tingshe
Distributed Products, provides assistance and relevant trainings to such distributors and
sub-distributors on sales and marketing techniques.
We were able to quickly grow our sales for Kunshan Tingshe Distributed Products through
the expansion of such tailor-made distribution network designed for our new retail business
during the Track Record Period. As of December 31, 2019, 2020, 2021 and 2022, our
distribution network consisted of 74, 575, 699 and 742 distributors and 2,719, 16,519, 18,871
and 16,044 sub-distributors, respectively. The increase in the number of distributors and
sub-distributors extended our consumer reach both online and in terms of geographic coverage.
We believe an expanded distribution network also increases the awareness of our products
through community and word-of-mouth promotion, which in turn increases the sales of our
products.
Community-based social e-commerce is a relatively new industry. As an early entrant to
this new industry, we actively educated our distributors and communicated with competent
authorities about the legitimacy of our business operations. For example, following regulatory
reviews of our distribution model, Kunshan AMR published the Inspection Opinions affirming
the legitimacy of our distribution model for MODONG coffee. Subsequently, we were treated by
Kunshan AMR as a social e-commerce pilot enterprise to participate in the Kunshan Pilot
Program. For more details, please refer to the paragraph headed “Distribution network –
Distribution Agent Assisted Distribution Model – Regulations relating to pyramid selling – The
Temporary Suspension of Bank Accounts due to alleged pyramid selling” in this section. We
believe such recognition of our Group by the government authority could have long-term
benefits on our business development.
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Multi-facet IP creation and operation business that provides critical empowerment for our
new retail business through creating promotional effect to promote our products and
diversifies our revenue source
Our IP creation and operation capacity includes media content creation, event planning,
celebrity IP creation and licensing, and celebrity IP management. To maximize the potential of
our unique proprietary celebrity IP assets, we developed the capacity and expertise to create
different types of IPs that enable us to operate with a relatively new product distribution model.
We market our branded products in association with our unique celebrity IPs, and our content
IPs that feature our celebrity IPs help disseminate our product promotion on social media as well
as e-commerce channels to our distributors, the sub-distributors and end consumers. We believe
our IP creation and operation business will continue to provide critical empowerment for our
new retail business.
Nijigen-style personality
We designed, developed and co-owned the ChouMate nijigen in collaboration with JVR
Music, Mr. Jay Chou’s artiste management company. The ChouMate nijigen is instantly
recognizable as artistical personifications of Mr. Jay Chou. We market certain products,
including MODONG coffee, in association with the ChouMate nijigen, in order to empower our
product branding and distribution network and enhance consumer loyalty. Apart from creation of
nijigen-style personality for Mr. Jay Chou, we have collaborated with other celebrities, such as
Mr. Liu Keng-hung and Ms. Vivi Wang, regarding the creation and usage of nijigen-style
personalities inspired by them, and are continuously exploring feasibility of designing and
creating nijigen-style personality for other celebrities as well. Please refer to the section headed
“Cooperation with celebrities” in this prospectus for details. We expect we would be able to
apply the same business model that we use on ChouMate with other celebrity-inspired
nijigen-style personality(ies).
Events, concerts and TV programs
In our media content creation segment, our ability to create and plan events and concerts
helps us to maintain cooperation with celebrities and provides us a certain extent of control in
advertisement and product promotion. For example, we created and owned the trademark of
J-Style Trip season one, which was aired on Zhejiang Satellite TV as well as Netflix and MGTV
(؈TV) in March 2020.
Livestreaming sessions
Leveraging on the experience in celebrity IP creation of our management team, we have
also been involved in the strategic planning and development of Mr. Liu Keng-hung’s public
persona and profile on social media platform since November 2021. In particular, we are
involved in selecting the target audience and preparing the contents and presentation of his
Livestreaming sessions, such as development of ideas and production of content of the
Livestreaming sessions that links the different brands to their respective target audience in order
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to create promotional effect. Given Livestreaming is a consumer-interaction focused promotional
tool, our Directors believe our involvement in preparing the contents and presentation of Mr. Liu
Keng-hung’s Livestreaming sessions is an important contributing factor to Mr. Liu Keng-hung’s
increased popularity in 2022. Our contribution to the contents and presentation of the
Livestreaming sessions includes, among others, advise on how Livestreaming sessions shall be
conducted, including Mr. Liu Keng-hung’s outfit, the guest(s) to be invited, how the rhythm of
Livestreaming sessions are controlled, and how Mr. Liu Keng-hung and his guest(s) interact with
audiences of Livestreaming sessions, all of which are very critical in catching the attention of
audiences (also being target consumers) and conveying the appropriate messages to them (e.g.
promotion of the relevant products). For details regarding cooperation with Mr. Liu Keng-hung,
please refer to the section headed “Cooperation with celebrities – cooperation with Mr. Liu
Keng-hung and Ms. Vivi Wang” in this prospectus.
Visionary management with decades of relevant industrial experience and continued
support from Mr. Jay Chou
We owe our success to the visionary strategic planning of our senior management, which
was key to our Group’s quick expansion into the market within a short period of operations. Our
Founder, Ms. Ma, Hsin-Ting, has over 20 years of experience in cultural, media and financial
industries. Our chief executive officer, Dr. Qian, Sam Zhongshan has over 20 years of
experience as senior management of companies in various industries, including enterprise that
engaged in online marketing. The head of our event planning team and our chief program
officer, Mr. Chang, Chih-Peng, has rich experience in entertainment program production and
execution, was the producer of reality shows. The head of our IP licensing department, Ms.
Zhou, Peimin, has more than 10 years’ experience in IP licensing and e-commerce, and is
responsible for developing our IP strategies.
In addition, we receive support and direction from Mr. Jay Chou, in particular in our IP
creation and operation segment. We have entered into the IP Authorization Agreement with JVR
Music, whereby JVR Music has granted us an exclusive right in relation to the development of
projects related to ChouMate and non-exclusive priority right to invest in certain types of
projects related to Mr. Jay Chou, including but not limited to the creation of other virtual idols
centered on Mr. Jay Chou’s image in anime and movies projects and to design, create, plan,
invest and launch certain shows (including variety shows designed and developed by Mr. Jay
Chou).
OUR STRATEGIES AND FUTURE PLANS
Our goal
We believe the empowerment of our new retail business by our unique celebrity IPs is what
sets up apart from our competitors and led to our success with MODONG coffee. Going forward,
our goal is to solidify and replicate the success of our unique IP-empowerment business model
with additional core products and IP contents, by leveraging the experiences that we gained from
MODONG coffee. We will continue to implement our strategies to offer our consumers with
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products for their low-carb life style. Towards that end, we will continue to leverage our IP
creation and operation capacity to build and expand the fan base of our unique celebrity IPs and
offer our consumers an increasing variety of core products. In particular, we aim to diversify our
product offerings that complement our low-carb diet regime through enhanced research and
development, and strengthen our control in research and procurement of key ingredients in our
health management and skincare products.
Further diversify our product portfolio through product development
We plan to leverage our experience with MODONG coffee to expand in the health
management and skincare markets by diversifying our product offerings to the existing and
potential consumers.
During the Track Record Period, we focused on measures that help us break into the health
management market with MODONG coffee as our core product, including research and
development of the recipe and formulas for the product through or in collaboration with our
suppliers, and expansion of its distribution network. We quickly followed the initial success of
MODONG coffee and offered various additional complementary low-carb food and drinks. We
incurred expenses of approximately RMB2.6 million, RMB9.2 million and RMB12.6 million in
the year ended December 31, 2020, 2021 and 2022, respectively on research and development,
which were primarily salaries and benefits paid to our internal research and development team.
Going forward, we plan to exert more control over our product development and develop
our exclusive formulas on foods and beverages and skincare products. We plan to strengthen our
capabilities for research and development of new products by expanding our in-house product
development team as well as cooperating with external research institutes (including agricultural
technology, food science and chemical engineering departments of universities). We also intend
to acquire machineries and equipment to be used in research and development of our new
products, including production machineries for trial production and equipment and temperature
and humidity control facilities. We believe this would further strengthen our growth, our product
offerings shall be diversified to appeal to a broadening demographic of end consumers and
distribution channels.
More health management products and skincare products
We plan to expand our research and development capabilities and collaboration with third
party institutes, and offer the low-carb series of popular food and drinks to our consumers by
further launching no fewer than 30 food and beverages and 30 skincare products in the three
years ending December 31, 2025, after taking into account (i) the market size of China’s health
management community-based social e-commerce industry, in terms of GMV , is expected to
grow from RMB25.6 billion in 2022 and reach RMB38.4 billion in 2027; and (ii) the market size
of China’s beauty and personal care segment in the community-based social e-commerce
industry, in terms of GMV , is expected to continuously grow from RMB163.2 billion in 2017 to
RMB411.3 billion in 2027, which demonstrates that there is significant growth potential in these
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markets. We believe such strategy will solidify our market position and realize our vision to
offer a holistic low-carb diet regime to our consumers.
We intend to use approximately HK$21.1 million of the net proceeds from the Global
Offering in the research and development of food and beverages products and HK$19.4 million
of the net proceeds from the Global Offering in the research and development of skincare
products in the three years ending December 31, 2025.
We may also explore opportunities to acquire businesses that are in possession of critical
technologies or formulas, such as companies specializing in technology and research, and having
extensive capabilities in developing formulas for new products with know-hows for mass
production of innovative key ingredients for skincare products, to quickly ramp up our
competitive advantages in the market. As of the Latest Practicable Date, we were yet to identify
a viable acquisition target or enter into substantive negotiation with any potential target for
acquisition.
Other product lines
We plan to develop other product lines. For example, we are looking into possibilities to
develop a line of pet food, pet toy and early child education products. In recent years, more
households in the PRC own pets and such population is gradually becoming younger. The
younger generation generally pays more attention to the health and appearance of their pets, and
are willing to spend more on pet products and food. We intend to use approximately HK$10.2
million of the net proceeds from the Global Offering on the research and development of the
new product lines. On the other hand, with the large population base and the loosening of
one-child policy, early child education products which are leisure in nature are expected to be
more popular. Leveraging our IP creation and operation capabilities and relationship with
celebrities who have a positive influence, we plan to seek licensing and cooperation
opportunities with book companies and educational devices production companies to develop
products. We believe the expansion of our product offerings will help us enhance our brand
recognition and reach out to our potential customers. In addition, we plan to explore
collaboration opportunities with other well-known companies to jointly offer new products that
feature our proprietary IPs, in order to expand our market reach and further reduce customer
procurement cost. We plan to utilize approximately HK$7.7 million of the net proceeds from the
Global Offering on the research and development products associated with our proprietary IPs.
At the current stage, we plan to utilize a total of approximately HK$58.4 million, or 23.8%
of the proceeds from the Global Offering in the diversification of product portfolio. For more
details, please refer to the section headed “Future plans and use of proceeds” in this prospectus.
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Increase our brand exposure and product sales through online platforms
During the Track Record Period, we (a) emphasized product promotion on social
e-commerce channels by KOC distributors; and (b) successfully developed Mr. Liu Keng-hung
and Ms. Vivi Wang into famous KOLs on the online short videos platforms, of which we
collaborated with them in the promotion of certain health management products, such as
low-carb beverages, protein powder and sports related health management products launched by
us.
Going forward, we plan to increase our brand exposure and product sales by hosting more
E-commerce Livestreaming sessions on e-commerce channels and online short video platforms,
such as Douyin . We could either host our own E-commerce Livestreaming sessions or cooperate
with selected KOLs on their E-commerce Livestreaming sessions, and the contents of the
sessions will center around our unique celebrity IPs and associated contents we create in our IP
creation and operation business, to empower the sales of our products.
We consider such strategy to be important as E-commerce Livestreaming (a) is a type of
platform where KOLs wield significant power of influence and can reach a large audience and
potential consumers through their PDT; and (b) has experienced significant growth in recent
years. We plan to increase our brand exposure and product sales online platforms which involves
a combination of methods, including:
 Enter into cooperation with well-known KOLs and e-commerce platforms to promote
our products: Our ownership of unique celebrity IPs, including those associated with
different celebrities (such as Mr. Liu Keng-hung and Ms. Vivi Wang) lend us
credibility in the new retail industry, which in turn could give well-known KOLs and
e-commerce platforms incentives to cooperate with us in a mutually beneficiary and
cost-effective manner. Towards that end, we plan to cooperate with well-known KOLs
to utilize their influence on online platform to promote products for us for
performance-based fees which shall be based on product sales volume.
 Cultivate our own KOLs and develop Livestreaming accounts and programs to
promote and sell our products: We will continue to leverage our experience and
resources to foster core online communities for our unique celebrity IPs and cultivate
our distributor KOCs to expand our social media influence and consumer reach, and
give them incentive to eventually become KOLs. We could host our own E-commerce
Livestreaming sessions featuring such KOCs and KOLs cultivated by us to promote
and sell our products. Towards that end, we plan to further develop our own
Livestreaming accounts and programs, including operating Livestreaming accounts on
social media platforms such as Douyin and creating Livestreaming contents. We will
also cultivate KOLs and KOCs for the purpose of product promotion.
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At the current stage, we plan to utilize approximately HK$75.1 million, or 30.6% of the
proceeds from the Global Offering to expand our product and brand exposure in such additional
social e-commerce channel and other media platforms. For more details, please refer to the
section headed “Future plans and use of proceeds” in this prospectus.
Continue to create high-quality and unique new IP contents to, among others, empower our
new retail business
We plan to strengthen our core competitive advantage and continue to invest in the creation
of high-quality and unique new IPs and associated IP contents, which we can offer to our
consumers, either directly or through dissemination by our distributors and the sub-distributors,
to empower our sales and marketing initiatives and new product launches. Such IPs could be
offered by either traditional ways, such as on TV , or ways that would be considered to be
increasingly popular amongst consumers from time to time, such as virtually on metaverse.
Towards that end, we plan to develop our IP creation and operation in the following areas:
IP content creation and event planning
We plan to continue to create additional IP contents, in particularly those in
association with our unique celebrity IPs, to expand our success in promoting our products
and consumer procurement through the empowerment with our IP contents. The IP content
that we plan to create include:
 New IP contents associated with our unique celebrity IPs : we plan to continue to
create traditional and social media contents such as music shows and programs,
including future seasons and episodes of J-Style Trip . We plan to make product
placement in the program to offer consumers the opportunities to make purchase
during the running time of the show. We have other comparable programs in our
pipeline for TV channels as well as social media platforms; and
 Large-scale concerts : we will continue to plan large-scale physical and/or virtual
concerts featuring celebrities we collaborate with to promote our products and
brands through printed advertisement at concert venue, product exhibition, gift
giving or other activities.
Based on our prior experience with involvement in different programs, such as J-Style
Trip season one, and other events, such as concert, such program and events typically
require significant initial investment but we can expect to recoup the majority portion of
our investment or generate net profit in the form of service or licensing fees and/or invest
return from advertisement revenue.
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Celebrity IP and licensing
We plan to actively explore strategic collaboration opportunities with selected
celebrities and create and register bespoke and unique celebrity IPs. Should we succeed in
such efforts, we believe we can effectively increase our unique celebrity IP portfolio
generate income for our IP creation and operations business, and further empower our new
retail business based on the expertise and nature of fan base of such celebrities. We expect
we would be able to apply the same business model that we use on ChouMate with other
celebrity-inspired nijigen-style personality(ies). Towards that end, we plan to create (a) new
designs of our existing IPs such as ChouMate; and (b) additional IPs by cooperating with
other celebrities or KOLs to create nijigen-style personality(ies) associated with them.
Efforts would also be placed on IP registration and operation, including renewing the
registration of our existing IPs and, registration of new IPs and our existing IPs in other
jurisdictions to safeguard our rights.
To effectively execute our IP creation and operation strategies, we also plan to hire
additional qualified professionals to strengthen our IP creation capacity.
At the current stage, we plan to utilize approximately HK$68.1 million, or 27.8% of
the proceeds from the Global Offering in our IP creation and operation operations. For
more details, please refer to the section headed “Future plans and use of proceeds” in this
prospectus.
Increase our sales and marketing efforts
During the Track Record Period, we did not incur significant sales and marketing expenses
on the sales and marketing events or advertisements. Instead, we mainly relied on promoting our
products through PDT which heavily relies on word-of-mouth of consumers, traditional sales and
marketing activities (such as TV advertisements/sponsorships, providing trial samples and
packaged gifts, hosting various events, conferences and meetings, etc.), as well as in association
with IP contents and large scale events that we planned. Going forward, we plan to prudently
increase our sales and marketing efforts on online and traditional sales and marketing channels
to increase public exposure of our existing and new products. We plan to host mid- and
large-scale promotional events, both online and offline, and purchase advertisement slots in TV
programs and online programs.
Such expense is expected to be satisfied by our internal resources or external financing (if
necessary).
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Upgrade our IT infrastructure and increase investment in IT research and development
As part of our investment in research and development, we plan to upgrade our IT
infrastructure and increase investment in IT research and development, to support software
development and research in social e-commerce channels. An upgrade in our IT infrastructure
and crucial business and financial software such as an advanced ERP system will also help to
enhance our internal control and financial reporting.
At the current stage, we plan to utilize approximately HK$30.2 million, or 12.3% of the net
proceeds from the Global Offering to upgrade our IT infrastructure and increase investment in IT
development. For details, please refer to the section headed “Future plans and use of proceeds”
in this prospectus.
Grow our operational scale and work force in response to our strategic plans
In response to the planned increase in product offerings, distribution operations and IP
creation and operation, we may make investment in expanding our operational scale and work
force. We plan to hire qualified professionals in our IP content creation and IP operation team.
In addition, to further enhance consumer experience, we plan to expand our after-sales service
team by hiring additional staff members. To accommodate the increase in our business scale and
in anticipation to our transition into a publicly listed company, we also plan to hire management
team members to enhance our internal control and financial reporting.
Such expense is expected to be satisfied by our internal resources or external financing (if
necessary).
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OUR BUSINESS
Our business operations consist of two segments, namely new retail segment and IP
creation operation segment. The table below sets forth a breakdown of our revenue by business
segments:
Y ear ended December 31,
2019 2020 2021 2022
RMB’000 % RMB’000 % RMB’000 % RMB’000 %
New retail
Health management products 71,927 83.0 340,787 74.5 275,261 75.4 216,036 62.8
Skincare products 3,450 4.0 20,422 4.5 21,274 5.8 16,272 4.7
Others 5,420 6.3 3,966 0.9 4,860 1.3 7,791 2.3
Subtotal 80,797 93.3 365,175 79.9 301,395 82.5 240,099 69.8
IP creation and operation
IP content creation and
management 4,761 5.5 86,567 19.0 54,399 14.9 95,026 27.6
IP licensing and sales of related
products 1,027 1.2 5,202 1.1 9,551 2.6 9,032 2.6
Subtotal 5,788 6.7 91,769 20.1 63,950 17.5 104,058 30.2
Total 86,585 100.0 456,944 100.0 365,345 100.0 344,157 100.0
New retail business
During the Track Record Period, the products that we sold in our new retail business
included (a) health management products, which primarily included MODONG coffee, other
products under MODONG brand, and products under Dr . INYOU brand; and (b) skincare
products under LA DEW brand, Dr .mg sub-brand and Chaxiaojie sub-brand. Our products are
sold through various distribution network as discussed under the paragraph headed “Distribution
network” in this section below. We generated the substantial majority of our sale revenue for our
new retail business from health management product, in particular MODONG coffee, during the
Track Record Period.
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Health management products
We launched multiple health management products mainly under MODONG brand and Dr .
INYOU brand. We may design sub-brand(s) for our health management products to capture
different target consumers, if necessary. The table below illustrates the main health management
products that we launched during the Track Record Period and up to the Latest Practicable Date:
Products Launch Time Image Product feature
MODONG coffee
(ᚭঋդਥ )
April 2019
 Low-carb, weight
management
beverage
Molitone
prebiotic gummy
(
ᚭɢஷू͛ʩழጟ )
January 2020
 Prebiotic gummy that
helps maintain
normal intestinal
function and assists
low-carb diet
MODONG probiotics
lyophilized powder
(
৻४ )
October 2021
 Probiotics lyophilized
powder that helps
correct imbalances
in digestive system
MODONG herb
beverage
(
ᚭঋ͉ণභ )
October 2021
 Drink with Chinese
edible medicinal
herbs and plant
enzymes as its main
ingredient
MODONG MCT coffee
(
ᚭঋMCT դਥ)
December 2021
 High medium-chain
triglyceride (MCT)
content beverage
Dr . INYOU collagen
peptide beverage
(
ஐͣ㹻
ۜ)
December 2021
 Beverage contains
combination of
collagen peptides
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Products Launch Time Image Product feature
Matcha powder (঩४ ) July 2022
 Finely grounded
powder of tea leaves
after multiple
procedures including
steaming, which
contains amino
acids and dietary
fiber, and can be
used as an
ingredient in
pastries or directly
consumed as matcha
after adding water
MODONG Light Brewed
Coffee (
ᚭঋჀയդਥ )
July 2022
 Light roasted coffee
containing a variety
of vitamins and
high-purity
medium-chain
triglyceride (MCT)
oil which can be
easily absorbed with
the aim to control
carbohydrate intake
and provide energy
to users
After consulting with an health expert, the abovementioned products focus on the concept
of ketogenic diet, where these products are regarded as health management food and beverages
(ۜ࠮as they can be consumed (i) as meal replacements for consumers who are on
low-carb diets; and (ii) for weight management and as skin care supplements, as their
ingredients consists of healthy elements such as ketogenic, low-carb, high-protein, high dietary
fibers, vitamins, and prebiotics.
By consuming these products in long-term, they would have certain health care effect on
the consumers, as compared with consuming other traditional food and beverages.
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MODONG coffee ( ᚭঋդਥ )
We started the nationwide distribution of MODONG coffee in April 2019, after
approximately one year of product development, tasting, pre-marketing and soft launch. Sale
revenue from MODONG coffee was RMB71.9 million, RMB332.9 million, RMB227.8 million
and RMB150.9 million in 2019, 2020, 2021, and 2022 respectively, representing 83.0%, 72.8%,
62.3% and 43.8% of our total revenue of the same periods.
Our MODONG coffee is a type of bulletproof drink that is a product concept derived from
the “ketogenesis” health management regime, a metabolic state where the body elects to burn fat
in the absence of carbohydrates. MODONG coffee was developed from the original bulletproof
coffee recipe and primarily made of freeze-dried coffee, virgin coconut oil, grass-fed butter and
medium-chain triglyceride (MCT) oil. MODONG coffee is our first low-carb health management
product and is a weight management beverage specially designed for MODONG low-carb diet
plan.
We collaborated with our main supplier, Hengmei Group, for the development of MODONG
coffee. For more details, please refer to the paragraph headed “Suppliers – Selection and
management of supplier – Our relationship with Hengmei Group” in this section below.
Compared with other bulletproof coffee products, we improved the recipe by including
high-quality raw materials and developed our proprietary formula aiming to attract the mass
population. Our MODONG coffee is one of the few bulletproof coffees that contain white kidney
beans, which can block starch decomposition and reduce glucose absorption and fat
accumulation. In terms of nutritional ingredients, our MODONG coffee also contains dietary
fiber in order to improve satiety, promote intestinal peristalsis and facilitate defecation. Each
box of MODONG coffee contains seven packages.
We engaged Kunshan Huaxing, a qualified Independent Third Party, for the operation of a
mobile App “ MODONG Health ( ᚭঋ਄ੰ )” to help monitoring the progress of our end
consumers’ low-carb diet plan. Our MODONG Health App offers users a MODONG low-carb
diet plan to substitute nutrition and energy intake of carbohydrate such as rice, flour or sugar
with fat by drinking MODONG coffee as the main nutritional supplement. Our goal is to offer
our end consumers a reasonable weight management recipe with which they can “Relax and
Enjoy Meat As You Desire ( ɽɹΦЂeჀᕦԮա )”, in order to differentiate MODONG coffee
from other competing products in the market.
To further enhance the effectiveness of MODONG low-carb diet plan, we also developed a
variety of other products, such as strawberry multivitamin effervescent tablets to complement
MODONG coffee. Other ancillary products that we offer include body fat management scale,
portable coffee cup and tape measures, with which our end consumers can monitor their weight,
witness their progress and have better experience when taking the MODONG low-carb diet.
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Molitone prebiotic gummy ( ᚭɢஷू͛ʩழጟ )
We launched Molitone prebiotic gummy in January 2020. Molitone prebiotic gummy
is a sugar-free nutritional supplement with mild prebiotics. Its main ingredients are
fructo-oligosaccharide (“ FOS”) and galacto-oligosaccharide. FOS is a type of dietary fiber that
can help maintain normal intestinal function. As ketogenic and low-carb diet requires fibers, and
most of the fibers are prebiotics, Molitone prebiotic gummy can assist such dietary pattern.
MODONG herb beverage (
ᚭঋ͉ণභ )
In October 2021 we launched the MODONG herb beverage, which is packaged as a
concentrated drink aimed to maintain normal bowel function, and developed based on Chinese
edible medicinal herbs and plant enzymes. The ingredients of MODONG herb beverage include
extracted nutrients, such as plant enzymes in hawthorn ( ʆ␠), licorice ( ͚ণ), tangerine peel ( ௓
ͤ), mangosteen (؈and cassia seeds (ɿ).
MODONG probiotics lyophilized powder (
৻४ )
In October 2021, we launched the MODONG probiotics lyophilized powder, which is a
powdered drink aimed to aid people who adhere to a low-carb diet, and the MODONG probiotics
lyophilized powder shall increase their intake of probiotics. Probiotics are live bacteria which
normally stabilize the bacterial balance in the gastrointestinal tract and thereby improving
gastrointestinal health.
MODONG MCT coffee (
ᚭঋMCT դਥ)
We launched the MODONG MCT coffee in December 2021, which contains primarily
medium-chain triglyceride (MCT) and is low Glycaemic Index (low-GI) in content. MCT is a
healthy source of fat which supplies energy and produces ketone bodies quickly to increase
thermal effect after meal intake. In addition, as it contains dietary fiber, it increases one’s
satiety.
Dr . INYOU collagen peptide beverage (
ۜ)
Dr . INYOU collagen peptide beverage is a beverage we launched under Dr . INYOU in
December 2021, which contains 6,000 mg of collagen peptide. Collagen is an essential nutrient
for skin.
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Matcha powder (঩४ )
Our Matcha powder is under our product line named Ai Chi Xian Mo Ren (ฌΦᒻᅙɛ ),
which features healthy and additive-free food products. Matcha is loaded with catechins that act
as natural antioxidants. Antioxidants help preventing cell damage and potentially reducing heart
disease risk. In addition, several of the components in matcha, such as caffeine and L-theanine,
could enhance brain function, citing faster reaction times and increased attention, while helping
to induce relaxation and decrease stress levels. Matcha also increases metabolism and fat
burning, both of which aid weight loss.
MODONG Light Brewed Coffee (
ᚭঋჀയդਥ )
MODONG Light Brewed Coffee is a black coffee powder drink which contains primarily
medium-chain triglyceride (MCT) and is low Glycaemic Index (low-GI) in content. The product
is designed for fitness population to help maintain carb intake.
Based on the abovementioned effects of each of the aforementioned products, our Directors
are of the view that these products are differentiated from traditional beverages and food
products.
Skincare products
We offer skincare products under our LA DEW core brand line and other sub-brands
namely, Dr .mg (ᅙЄ௹ɻ ) and Chaxiaojie (঩ʃ֎), which allows us to offer a broader range of
products and address different needs of our end consumers in the skincare market.
Revenue generated from the sales of skincare products was RMB3.5 million, RMB20.4
million, RMB21.3 million and RMB16.3 million in 2019, 2020, 2021 and 2022, respectively.
Sales of skincare products increased in 2020 and 2021 as we devoted more resources to skincare
products after the launch of MODONG coffee, and we expect to continue to develop the sales of
skincare products going forward.
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The table below illustrates the main skincare products or sub-brands that we sold during the
Track Record Period and up to the Latest Practicable Date:
Products/Sub-brand Launch Time Image
LA DEW Facial Mask
(LA DEWᇫ )
June 2018
Dr .mg (ᅙЄ௹ɻ ) January 2021
Chaxiaojie (঩ʃ֎) April 2021
LA DEW Facial Mask (LA DEWᇫ )
When we launched the sales of skincare products, all of our products were marketed under
the LA DEW brand. We sold our peel-off facial masks under the brand of LA DEW in a seven or
28-piece package, which contains components such as bioplasma and aquaxyl.
Dr .mg ( ᅙЄ௹ɻ )
Catering to the increasing demands for refined, diversified and efficient skincare products,
we launched a series of skincare products under Dr .mg sub-brand in January 2021 that target the
aging population. A key ingredient of certain skincare products under our Dr .mg sub-brand is
recombinant human collagen, a type of protein shown by scientific research paper to have the
function of promoting collagen production in skin and accelerating skin damage healing.
Products under Dr .mg sub-brand include lotions, facial masks and cleansing solutions. Such
products are designed to address various skin problems caused by skin aging.
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Chaxiaojie ( ঩ʃ֎ )
We launched a series of products under the Chaxiaojie sub-brand in April 2021, a skincare
brand targeting younger generation. Skincare products under this sub-brand include facial masks,
facial cream, facial spray and toiletry products.
Pipeline products
As at the Latest Practicable Date, we had over 30 products in the pipeline which are under
planning, research and development, and/or testing which are expected to be officially launched
during the year ending December 31, 2023. Our pipeline products mainly include food and
beverage for low-carb diet, dietary supplements and skincare products. The following table sets
forth information in relation to our major pipeline products which were expected to be launched
in 2023 as of the Latest Practicable Date:
Products Product Category Description
Red Ginseng drink Dietary supplements A dietary supplement containing
ginsenoside ( ɛਞӴ㹷 )
Matcha series products
(ۜ࠮)
Healthy diet A series of products made with
Matcha powder, including cakes
and protein bar
Konjac foods
(ۜ࠮)
Low-carb diet Foods made of Konjac which are
low in carbohydrate
Natural cereal and
vegetable powder
(˂್ᇅᇴ४ )
Wholefood Convenient dietary supports
containing various serving of
vegetables and cereal
Plant based protein
powder
(ஐͣ४ )
Dietary supplements Protein powder made with plant
protein to support protein
consumption and suitable for
vegans
Nut bar (ಏ) Dietary supplements Snack bars containing nuts with
vitamins, minerals and omega-3
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Our plan for product development and the expected time of launch are subject to and
maybe affected by various factors including our resources, market demand, progress of
development, feedback from our pre-launch sale, terms of cooperation with suppliers and the
overall strategic planning of our new retail business. We may adjust the schedule for product
development and release based on the circumstances.
For details on our research and development function, please refer to the paragraph headed
“Product research and development” in this section below.
IP creation and operation
Our IP creation and operation segment primarily comprises:
(i) IP content creation and management business, including provision of (a) media content
creation; (b) event planning; and (c) celebrity IP management services; and
(ii) IP licensing and sales of related products.
Revenues from our IP creation and operation business was RMB5.8 million, RMB91.8
million, RMB64.0 million and RMB104.1 million in 2019, 2020, 2021 and 2022, respectively.
Our IP creation and operation capabilities empower our new retail business by creating a
promotional effect, and are vital to the successful monetization of our IP assets. We have
established long-term strategic relationship with Mr. Jay Chou through JVR Music, Mr. Jay
Chou’s artiste management company. We jointly developed and own ChouMate trademarks,
including the nijigen-style personality of Mr. Jay Chou, with JVR Music. For details, please
refer to the section headed “Cooperation with celebrities – Cooperation relationship with Mr. Jay
Chou” in this prospectus.
We have an experienced in-house program and event planning team with strong IP media
production capability. As of December 31, 2022, we had 37 employees in the IP content creation
department. Our IP creation and operation team is led by a management team with extensive
relevant industrial expertise. The head of our event planning team and our chief program officer,
Mr. Chang, Chih-Peng, was a producer of reality shows. The head of our IP Licensing
department, Ms. Zhou, Peimin, has more than 10 years’ experience in IP licensing and
e-commerce. For details, please refer to the section headed “Directors and senior management –
Senior management” in this prospectus. Our Group is responsible for the (i) planning and
creation of the related programs and events; (ii) formulation of concepts of and design celebrity
IPs that appeal to the target audience; and (iii) engagement of different external companies and
units for the creation of each IP.
IP content creation and management
Our IP content creation and management business include there sub-segments, including,
the provision of (a) media content creation; (b) event planning; and (c) celebrity IP management
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services. Revenue generated from our IP content creation and management business was RMB4.8
million, RMB86.6 million, RMB54.4 million and RMB95.0 million in 2019, 2020, 2021 and
2022, respectively.
Media content creation
In general, we enter into program cooperation agreements with our business partners, such
as TV broadcasting companies. Subject to the content of program cooperation agreement, we
mainly provide organizing, planning and other project management services to the production of
TV programs and media contents for e-platforms. In terms of organizing and planning, we are
generally responsible for inviting celebrity guests to appear on the relevant shows, creation of
contents of the TV programs, and filming, creation and promotion of shows. Depending on scope
of services that we are required to deliver in the relevant cooperation agreements, we would
carry out certain services by ourselves, such as inviting celebrity guests, or outsource others,
such as filming and production of the required content, to our sub-contractors.
(i) J-Style Trip
We are the lead creator of J-Style Trip and commenced the planning of filming of J-Style
Trip season one in 2017. We registered the copyright of J-Style Trip in the PRC in March 2018
and also registered J-Style Trip as a trademark since January 2019.
In March 2020, we entered into a program cooperation agreement with Zhejiang Radio and
TV Group ( एϪᄿᅧཥൖණྠ ,“ Zhejiang RTG ”) and Beijing Master to co-invest in production
of a three-season reality show, J-Style Trip . Beijing Master holds 30% of equity interest in
Beijing Star Plus Master and Beijing Master is the holder of the license for the TV program
production and operation ( ᄿᅧཥൖືͦႡЪ຾ᐄ஢̙ᗇ ). J-Style Trip is a new type of outdoor
life and culture reality show, which is starred by Mr. Jay Chou and his friends as regular guests.
In J-Style Trip season one, Mr. Jay Chou traveled to various cities around the world with his
friends and brought travelog and performances to the audience. Each episode featured a special
guest including famous artists, singers and pianist. This is the first outdoor reality show fully
participated by Mr. Jay Chou, which included diversified highlights in the daily life of Mr. Jay
Chou and his friends, and conveyed positive message with songs, catch phrases and
performance.
Pursuant to the agreement, Zhejiang RTG is responsible for filing application to the
relevant regulatory authorities to obtain approval or complete the registration of J-Style Trip .W e
are responsible for the promotion of J-Style Trip and assisting and coordinating with Beijing
Master to complete the production of the program, while Beijing Master is responsible for the
implementation of J-Style Trip ’s production. In addition, Zhejiang RTG and us are the co-owner
of the copyrights and other related intellectual property rights. We are the sole owner of the
J-Style Trip trademark and we grant Zhejiang RTG the right to use it for nil consideration during
the production and promotion of the show.
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During the cooperation period, we are responsible for planning matters related to the
development, shooting, production and promotion of J-Style Trip and shall bear all the relevant
expenses (save for promotion fees for Zhejiang RTG’s satellite channels and its related ground
surface channels, as well as those initiated by Zhejiang RTG).
Pursuant to the agreement, we are entitled to a certain percentage of the program’s total TV
advertisement income for each season, which include the sales revenue from product placement
advertisements such as title broadcast, special broadcast and sponsored broadcast (and
initial-broadcast spot traditional advertisements), as well as income from advertisements during
the first re-broadcast of the program, after setting off, amongst others, the operating costs of
Zhejiang RTG. The fees paid or payable by Zhejiang RTG shall be paid to Beijing Master and
we shall split such amount with Beijing Master, which was engaged by Zhejiang RTG for the
provision of production services.
J-Style Trip season one was aired on Zhejiang Satellite TV , as well as Netflix and MGTV
(؈TV) in March 2020. J-Style Trip season one was well-received by TV audience. The
average viewership rating of all 12 episodes ranked first among all TV programs broadcasted
during the same timeslot, according to the publicly available rating data.
We also entered into a license agreement with Netflix Worldwide Entertainment, LLC
pursuant to which we granted Netflix the right and license to copy, reproduce, transmit, exhibit,
distribute, sublicense and communicate to the public J-Style Trip season one for 10 years
globally (excluding China) at a fixed fee.
Our MODONG coffee was presented in all episodes by means of advertisement, spot cut
and discrete product placement. We believe that J-Style Trip season one increased exposure and
enhanced the brand recognition of our products promoted in connection with the show.
As of the Latest Practicable Date, J-Style Trip season two was under production.
(ii) Others
In 2021, we also planned and produced a popular music talk show, namely You Can Run
But You Can’ t Hide (ᆀʘ ), that was centered around Mr. Harlem Yu, and a variety
show that was centered around Mr. Liu Keng-hung. Our Group was also involved in the planning
and creation of part of the performance in music shows and variety shows, that were either aired
on TV or streamed on e-platforms. Such shows featured the performance of Mr. Jay Chou as
well as many other celebrities who are popular in the Chinese-speaking communities.
We plan to (i) cooperate with well-known platforms in the market in the future to exert our
production strengths; (ii) produce more reality shows going forward; and (iii) create and
monetize new social e-commerce retail IP, including celebrity IP, content IP and commodity IP.
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Event planning
Similar to our media content production operations, we enter into cooperation/service
agreements with our business partners for our event planning operations. We generally act as a
planning service provider, an investor and/or a sub-contractor for large scale music concerts and
other events, which we generate revenue mainly from service fees. Our scope of services and
responsibilities for event planning varies, depending on our role in the relevant project and the
content of the relevant agreement. When acting as the planning service provider, we are in
charge of the overall planning, investment and execution of the event, including performer
procurement, stage design, lighting and sound design, live execution, director programming and
costume and makeup design. We generally enter into service agreements with sub-contractors to
outsource certain execution works of the event, such as stage design, lighting and sound design,
director programming etc. When acting as an investor, we provide fund commitment and will
receive revenue from the ticket sales in return.
During the Track Record Period, we provided concert planning services to Zhanjiang
Superstar Concert in August 2019 and provided concert planning services to and invested
approximately RMB4.4 million in Ningbo Superstar Performance Mega Night in January 2020,
at which we promoted our products through a combination of activities, including printed
advertisement at concert venue, product exhibition and gift giving, without incurring any
significant marketing expenses. Our provision of concert planning services at these concerts did
not involve any bidding process.
We have established our general policy in respect of investments in concerts and events,
pursuant to which, our investments shall only be made (i) with the authorization and approval
from the chairperson of our Board; (ii) after taking into consideration the background and
portfolio of other investment partners; and (iii) when we have sufficient capital resources as well
as resources to appropriate celebrity.
Celebrity IP management
We have been expanding our IP creation and operation business by providing celebrity IP
management services, where we would be responsible for the development of IP through
collaboration with celebrities and KOLs. Leveraging on our experience in media content
production and celebrity IP creation, we are involved in the planning and development of the
public persona of celebrities and KOLs in, among others, Livestreaming sessions, online short
videos and other online and offline performances on social media platforms, in order to attract
audiences and/or followers with similar interests or concerns. We mainly generate our revenue
from (i) sponsorship or promotion fees from brand owners or the MNC Company (depending on
which party entered into the cooperation agreement with the relevant brand owners) for
promotion of goods and services during Livestreaming sessions of celebrities whom we
cooperate with; and (ii) sharing of commission from sale of products of third party brand owners
by different celebrities and KOLs during the E-commerce Livestreaming sessions conducted on
our Douyin account.
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We firstly tapped into the celebrity IP management business in late 2021 when we were
involved in the development of Mr. Liu Keng-hung into a KOL in the fitness and body-building
sector in the PRC. We entered into cooperation agreements with Mr. Liu Keng-hung and his
artiste company, pursuant to which we shall provide planning and management services in
respect of the entertainment and performance business of Mr. Liu Keng-hung in the PRC and we
would be entitled to certain percentage of income generated therefrom. For details, please refer
to the section headed “Cooperation with celebrities – Cooperation with Mr. Liu Keng-hung and
Ms. Vivi Wang – Cooperation under our IP creation and operation business” in this prospectus.
The use of Livestreaming and E-commerce Livestreaming in our business
In recent years, Livestreaming has become one of the increasingly popular means to deliver
information to and/or attract public audiences for entertainment, education and marketing
purposes. In view of its growing popularity, we also make use of Livestreaming, as well as
E-commerce Livestreaming, in our business operation.
(i) Livestreaming
During the Track Record Period, we mainly provide celebrity IP management services in
relation to the Livestreaming sessions of Mr. Liu Keng-hung, where we were involved in
originating and preparing the contents and presentation of the Livestreaming sessions. Brand
owners may engage us to promote their products during the Livestreaming sessions of Mr. Liu
Keng-hung by, for example, placement of products during such Livestreaming sessions. We, in
turn, generate revenue from the sponsorship or promotion fees from the brand owners.
(ii) E-commerce Livestreaming
In addition, we created a Douyin account under the name of “㺘㺘દ ” where we
cooperate with different celebrities and KOLs to conduct E-commerce Livestreaming sessions
and promotion of the sale of products of other third party brand owners. In this regard, we
mainly generate revenue from the commission for the sale of products of third party brand
owners during the E-commerce Livestreaming sessions. On the other hand, we would pay
commissions to celebrities or KOLs who cooperate with us.
We also utilize Livestreaming and/or E-commerce Livestreaming sessions, online short
videos and other online and offline performances of the celebrities and KOLs to empower the
sales of our products under our new retail business. For details of the sale of our Douyin stores,
please refer to the paragraph headed “Distribution network – Distribution through other
e-commerce channels – Other e-commerce channels” in this section.
We leverage on the popularity of Mr. Liu Keng-hung and Ms. Vivi Wang to empower the
sale of our products. For example, the name of our Douyin account “㺘㺘દ ” was
originated from a popular slogan that is featured in Mr. Liu Keng-hung’s Livestreaming session.
Nevertheless, it is our strategy that Mr. Liu Keng-hung would not participate in any E-commerce
Livestreaming as we consider that it would create the best value for him to devote his time in
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developing his popularity through Livestreaming, brand endorsement and participation in other
IP programs. As advised by our PRC Legal Advisors, based on the confirmation of our Company
and according to the public information search, no search results showed that, as of the Latest
Practicable Date, Mr. Liu Keng-hung and Ms. Vivi Wang are subject to any restrictions imposed
by the competent governmental authorities under the relevant laws and regulations in the PRC to
conduct either Livestreaming or E-commerce Livestreaming. As part of our celebrity IP
management, we would advise on the activities that would create the best value for the
celebrities we cooperate with, including whether or not to participate in E-commerce
Livestreaming.
Even though Mr. Liu Keng-hung does not participate in E-commerce Livestreaming
sessions of our products, we rely on his popularity to attract potential audiences and customers
to our Douyin account through, amongst others, (i) promotion of concepts relating to healthy
eating and lifestyle in Mr. Liu Keng-hung’s videos and Livestreaming sessions; (ii) posting
videos of Mr. Liu Keng-hung’s previous Livestreaming sessions; and (iii) arranging Ms. Vivi
Wang and other KOLs who had appeared in Mr. Liu Keng-hung’s videos and Livestreaming
sessions to participate in E-commerce Livestreaming on our Douyin account from time to time.
The following screen shots illustrate the Livestreaming sessions conducted on Mr. Liu
Keng-hung’s Douyin account and E-commerce Livestreaming sessions conduct on our Douyin
account:
Livestreaming on Mr . Liu Keng-hung’ s
Douyin account
E-commerce Livestreaming on our
Douyin account with a link to our Douyin store
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IP licensing and sales of related products
We actively explore strategic collaboration opportunities with selected celebrities and
create and register bespoke and unique celebrity IPs. We may license our celebrity IPs to our
customers and receive licensing fees and create and sell products related to the celebrity IPs. For
2019, 2020, 2021 and 2022, our revenue generated from IP licensing and sale of related products
was RMB1.0 million, RMB5.2 million, RMB9.6 million and RMB9.0 million, respectively.
In general, we develop and create celebrity IP on our own or in collaboration with our
business partner(s). In the event that we develop and create celebrity IP with our business
partner(s), we will enter into an agreement with such business partner(s) to set out the respective
rights and obligations of each party, including but not limited to ownership of the celebrity IPs
and the trademark registration jurisdiction of such celebrity IPs. Depending on the terms of the
agreement, we may either be responsible for creating the design of the celebrity on our own or
co-create with our business partner(s). After considering various factors, such as general public
reception of the celebrity, influence of such celebrity, target audience of such celebrity IP, we
will formulate the basic ideas for such celebrity IP. These basic ideas shall include themes,
facial expressions, and poses of such celebrity IP. After finalization of basic ideas of celebrity
IP, we may subcontract the design of such celebrity IP. We will arrange trademark registration of
such celebrity IP after the design is made. The ownership of the design of such celebrity IP
belongs to us and/or our business partner(s) (where applicable). We will use such celebrity IP for
empowerment of our products to creating a promotional effect, and/or license such celebrity IP
trademark to our business partner(s).
During the Track Record Period, we created and licensed our celebrity IPs on nijigen
personification. The following summarize the major celebrity IP that was created by us:
ChouMate (
մΝኪ )
ChouMate is our proprietary IP and comprises a series of trademarks associated with Mr.
Jay Chou, including a nijigen personification of Mr. Jay Chou and readily identifiable with Mr.
Jay Chou himself that are currently registered in the mainland China. Such trademarks (together
with the copyright subsisting in the designs of such trademarks) are jointly owned by us and
JVR Music, Mr. Jay Chou’s artiste management company. For details of our cooperation with
JVR Music on ChouMate , please refer to the section headed “Cooperation with celebrities –
Cooperation relationship with Mr. Jay Chou – Cooperation agreements with JVR Music on
ChouMate ” in this prospectus.
The cost incurred in developing the ChouMate trademarks were approximately
RMB111,000, RMB2,198,000, RMB702,000 and RMB260,000 for each of the four years ended
December 31, 2022, respectively, which mainly comprised fees incurred in relation to the design
and registration of such IPs. On June 1, 2020, an official account for Mr. Jay Chou labeled
ChouMate was set up on Kuaishou . The account had over 51 million followers as of the Latest
Practicable Date.
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We generate profits from licensing of the ChouMate trademarks to parties not controlled by
JVR Music or us (the “ non-connected parties ”), and such revenue shall be shared with JVR
Music. Neither JVR Music nor us is required to pay any fee to each other when the ChouMate
trademarks are used by either party or its connected parties for their respective business
operations.
We licensed the ChouMate trademarks to non-connected parties including Shanghai Pudong
Development Bank and Pop Mart, as well as a leading music streaming service provider in the
PRC, and developed derivative products of ChouMate . The revenue contributed to us through the
licensing of the ChouMate trademarks to non-connected parties were approximately
RMB141,000, RMB1.9 million, RMB2.8 million and RMB5.9 million for each of the four years
ended December 31, 2022, respectively.
Non-Mr . Jay Chou-related nijigen-style personalities
Apart from ChouMate , we have been continuously exploring feasibility of designing and
creating nijigen-style personality for other celebrities as well. We entered into the Liu-related
Nijigen-style Personality(ies) Cooperation Agreement regarding creation and design of
nijigen-style personalities inspired by them. We also entered into cooperation agreements with
Mr. Fang and his artiste management company regarding (i) the creation and design of
nijigen-style personalities inspired by him; and (ii) the licensing of his existing nijigen-style
personality. As at the Latest Practicable Date, we entered into cooperation agreements with
certain Taiwan artists, namely, Chang Chieh ( ੵ௫), Lara Liang Xin-Yi ( ૑ː᎚) and Chan
Yu-Hao ( ༗ρႴ) for, among other things, the design and creation of nijigen style personalities
related to them. We will apply the same business model that we use on ChouMate with other
celebrity-inspired nijigen-style personality(ies).
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Historical IPs and IPs pipeline
The following table sets out all the events and IP programs that we have launched during the Track Record Period and their
corresponding revenue and gross profit:
Y ear ended December 31,
2019 2020 2021 2022
Revenue Gross profit
Gross
profit
margin Revenue Gross profit
Gross
profit
margin Revenue Gross profit
Gross profit
margin Revenue Gross profit
Gross profit
margin
RMB’000 % RMB’000 % RMB’000 % RMB’000 % RMB’000 % RMB’000 % RMB’000 % RMB’000 %
IP content creation and management
a. Zhanjiang Superstar Concert ( ರϪ൴ॴ̶
စਨึ ) 4,001 69.1 538 13.4 – – – – – –––––––
b. Ningbo Superstar Performance Mega Night
(Бਗ൴ॴց ) – – – – 4,505 4.9 76 1.7 – –––––––
c. J-Style Trip season one – – – – 81,590 88.9 (24,557) (30.1) – –––––––
d. You Can Run But You Can’ t Hide (
Ըʘ
ᆀʘ ) – – – – – – – – 18,868 29.5 5,262 27.9 ––––
e. A music award ceremony broadcasted on a
music streaming platform in the PRC (1) – – – – – – – – 9,974 15.6 2,873 28.8 ––––
f. A variety show that was centered around
Mr. Liu Keng-hung (2) – – – – – – – – 8,491 13.3 3,098 36.5 5,660 5.4 2,663 47.0
g. A music show broadcasted on a music
streaming platform in the PRC (1) – – – – – – – – 6,667 10.4 3,096 46.4 ––––
h. A music TV program (1) – – – – – – – – 6,340 9.9 1,811 28.6 ––––
i. A promotional short video about a
multiplayer online battle arena video
game
(3) – – – – – – – – 1,887 3.0 789 41.8 ––––
j. An online music show (ᇞɪဂʾึ )
and a promotional video about J-Style Trip
season two and new music album on a
Livestreaming platform in the PRC – – – – – – – – – – – – 23,894 23.0 16,385 68.6
k. 618 Livestreaming session
(4) – – – – – – – – – – – – 7,890 7.6 4,824 61.1
l. A World-cup related variety show
(մ༷া2೦̮ᇐ )(3) – – – – – – – – – – – – 3,962 3.8 3,461 87.4
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Y ear ended December 31,
2019 2020 2021 2022
Revenue Gross profit
Gross
profit
margin Revenue Gross profit
Gross
profit
margin Revenue Gross profit
Gross profit
margin Revenue Gross profit
Gross profit
margin
RMB’000 % RMB’000 % RMB’000 % RMB’000 % RMB’000 % RMB’000 % RMB’000 % RMB’000 %
m. A World-cup related online music show
(ᆀସՊ )(1) – – – – – – – – – – – – 9,433 9.1 5,030 53.3
n. Livestreaming sessions, online short videos
and other performance(s) that were
centered around Mr. Liu Keng-hung and
his related IP(s)
(5) – – – – – – – – – – – – 41,708 40.1 31,545 75.6
o. Others 760 13.1 752 99.0 472 0.5 470 99.6 2,172 3.4 1,293 59.5 2,479 2.3 1,589 64.1
Sub-total 4,761 82.3 1,290 27.1 86,567 94.3 (24,011) (27.7) 54,399 85.1 18,222 33.5 95,026 91.3 65,497 68.9
IP licensing and sales of related products 1,027 17.7 187 18.2 5,202 5.7 2,312 44.4 9,551 14.9 3,690 38.6 9,032 8.7 6,585 72.9
TOTAL 5,788 100.0 1,477 25.5 91,769 100.0 (21,699) (23.6) 63,950 100.0 21,912 34.3 104,058 100.0 72,082 69.3
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Notes:
1. We were responsible for creating Mr. Jay Chou-related content for such programs, which featured many other
celebrities as guests.
2. We were involved in the planning of such program. Such program, which was aired on one of the leading online
video platform in the PRC was centered around Mr. Liu Keng-hung who was the host thereof.
3. We were involved in the planning of such programs, which were hosted by Mr. Jay Chou.
4. We were engaged by the online platform which produced and broadcasted the relevant program for planning and
preparing Mr. Liu Keng-hung-related contents of such Livestreaming session. Such Livestreaming session was
streamed on Mr. Liu Keng-hung’s Douyin account. Our revenue represented the service fees paid by the online
platform after excluding the portion entitled by Mr. Liu Keng-hung and W&V .
5. Celebrity IP management business that centered around Mr. Liu Keng-hung. Pursuant to the relevant agreements
between Mr. Liu Keng-hung and us, we are entitled to a portion of such income from the brand owners or the
MCN Company as our revenue. For details, please refer to the section headed “Cooperation with celebrities –
Cooperation with Mr. Liu Keng-hung and Ms. Vivi Wang – Cooperation under our IP creation and operation
business” in this prospectus.
As demonstrated in the table above, our Group was diversifying types and sources of our IP
during the Track Record Period by cooperating with other celebrities, including Mr. Liu
Keng-hung and Mr. Harlem Yu.
Major events and IP programs in the pipeline
Set out below are the major events and IP programs in the pipeline and their respective
expected revenue contribution to our Group’s IP creation and operation segment:
TV and/or online programs
1) Yue Lai Yue Kuai Le (ᆀԸᆀҞᆀ )
Yue Lai Yue Kuai Le is a music talk show centered around Mr. Harlem Yu and is expected
to be aired in the second half of 2023. Mr. Harlem Yu will be the lead host who will appear on
all 12 episodes of such program, together with different guests to be invited to attend. Mr.
Harlem Yu is one of the most acclaimed singers and songwriters in Chinese pop music industry,
given that he won the Outstanding Singer-Songwriter in Asia from the Billboard Music Awards
in 1996 and the Best Male V ocalist – Mandarin from the 13th Golden Melody Awards in 2002.
Apart from music achievement, Mr. Harlem Yu was recognized for his variety show-related
work.
Apart from Mr. Jay Chou, none of the guests currently invited in this program are artists
managed by our Controlling Shareholders, or their respective associates (excluding our Group).
As at the Latest Practicable Date, (i) such program was under production, with 10 out of 12
episodes being filmed, (ii) we were in the process of negotiation of sponsorship of such program
with several brand owners, and (iii) we had entered into an agreement regarding licensing and
title sponsorship of such program with a contract amount of approximately RMB42.5 million, of
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which (i) about RMB14.5 million being contributed by the licensing of such show; and (ii) about
RMB28.0 million being contributed by sponsorship of such show. Given such program would be
aired in the second half of 2023, the revenue derived therefrom has not been recognized during
the year ended December 31, 2022.
We expect to recognize a revenue of about RMB32.7 million from such agreement (after
deducting the profit share of the relevant business partners from the total contract amount) for
the year ending December 31, 2023, which is estimated based on the information currently
available to us and the actual amount of revenue to be recognized by our Group is subject to
audit. Up to the Latest Practicable Date, we were in the process of negotiation with more
potential sponsors. Thus, we expect, in addition to the above contract amount, more revenue
would be recognized from such program upon its airing, which is expected to be in the second
half of 2023.
Our Directors believe that the popularity of the host and guests can attract audiences to
watch such program, hence promoting our products by such IPs can enable us to increase brand
and product awareness when there is sponsorship or product placement on the program.
2) J-Style Trip season two
Such program will continue to be centered around Mr. Jay Chou and is expected to be aired
in the second half of 2023. None of the guests currently invited are artists managed by our
Controlling Shareholders or their respective associates (excluding our Group). As at the Latest
Practicable Date, such program was under production, with 11 out of 12 episodes being filmed
and it is expected that such program will be aired in the second half of 2023. In late 2022, we
entered into an agreement regarding sponsorship of such program with a contract amount of
RMB40.0 million. As at the Latest Practicable Date, (i) we were in the process of negotiation of
sponsorship of such program with several brand owners, and (ii) we were in the process of the
licensing of such program. The expected revenue and costs with respect to J-Style Trip season
two would be recognized in the financial statements of our Company for the year ending
December 31, 2023.
Based on track record of J-Style Trip season one, where popularity of Mr. Jay Chou and the
sponsorship of J-Style Trip season one was affected by the outbreak of COVID-19, it is expected
that the revenue to be contributed by J-Style Trip season two would be of the similar level of the
revenue contributed by J-Style Trip season one, or even slightly higher. Given (i) our experience
from producing J-Style Trip season one, we incurred less expenses in relation to the planning for
the production of J-Style Trip season two; (ii) fewer guests had been invited for J-Style Trip
season two, as compared to J-Style Trip season one; and (iii) the production of J-Style Trip
season two has been more cost effective as it has been filmed in fewer countries or regions than
J-Style Trip season one, we expect the costs to be lower than that for J-Style Trip season one.
As advised by our PRC Legal Advisors, we are not required to obtain any governmental
approval for broadcasting the above IP programs in the PRC, and the television channels and/or
Internet broadcasting platforms with the license for publication of audio-visual programs (ࢹڦ
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ၣഖෂᅧൖᛓືͦ஢̙ᗇ ) that will broadcast these IP programs shall be responsible for
reviewing the contents of the programs and filing with the competent radio and television
administrative department before such broadcasting according to the relevant PRC laws and
regulations. As a result, our Company will liaise and cooperate with the relevant television
channel(s) and/or Internet broadcasting platform(s) in reviewing the content of the relevant IP
program(s) so to facilitate the relevant television channel(s) and/or Internet broadcasting
platform(s) to conduct the necessary filing with the competent radio and television
administrative department before broadcasting the relevant IP program(s).
Performance events
We were involved in the planning of a fitness-related performance event featuring Mr. Liu
Keng-hung, Ms. Vivi Wang, together with other celebrities held in Qingdao on May 20, 2023. As
at the Latest Practicable Date, our Group was seeking appropriate venue to hold similar
performance events in other cities in the PRC, and we expect such performance events will be
held in various cities in the PRC, including Haikou, Beijing and Sanya in 2023. Such
performance events would be subject to confirmation of an appropriate venue(s) and, as advised
by our PRC Legal Advisors, approval from the competent department of culture and tourism. We
expect to use such performance events to promote our products and/or IPs.
Cooperation with celebrities is important to our business growth
During the Track Record Period, we heavily relied on Mr. Jay Chou on both our new retail
business and IP creation and operation business. Nevertheless, our Directors are of the view that
the sustainability, profitability and success of our Group’s business are attributable to our
capability in our different business components instead of solely relying on Mr. Jay Chou and
such reliance would not materially affect our business. Please refer to the section headed
“Cooperation with celebrities” of this prospectus for further details of our relationship and
cooperation with Mr. Jay Chou and assessment of his significance to our business sustainability.
Based on our track record of the sales of our Group, we are confident that any other
celebrities-related promotional activity(ies) conducted by us can bring positive promotional
effect to the sales of product(s), where the sales thereof could be boosted to a certain extent.
In the future, we plan to continue explore the possibility of collaborating with other
celebrities by the same or different means as mentioned above in order to leverage on the
popularity thereof and promote our products.
RECENT DEVELOPMENTS ON OUR REGULATORY ENVIRONMENT IN RELATION
TO CELEBRITIES AND LIVESTREAMING IN THE PRC
The PRC government authorities have taken initiatives to heighten regulation on the PRC
entertainment industry and online Livestreaming activities. For example, Strengthening
Regulations was promulgated recently, which aims to strengthen the regulation on the contents
of culture programs and related individuals, and prohibits certain individuals’ violation of law
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and offense on morality in order to reap ill-gained profit in their fans communities, a practice
that can be loosely referred to as “Fan Trap” (“ ඵਸ਼”); and the Online Livestreaming Marketing
Measures was adopted to regulate Livestreaming room operators and Livestreaming marketers,
which includes our Group and those we engage to promote our products through Livestreaming
marketing. For details, please refer to the sections headed “Regulatory overview – PRC laws and
regulations – Regulations in relation to strengthening the regulation of entertainment industry”
and “Regulatory overview – PRC laws and regulations – Regulations in relation to online
Livestreaming marketing” in this prospectus.
Impact on our business operations
As advised by our PRC Legal Advisors, the recent tightening of and changes in the PRC
regulatory environment to further regulate the Livestreaming and influencers are mainly related
to, amongst others, (i) publication of illegal and harmful information; (ii) publication of false or
misleading information to deceive or mislead audiences; (iii) marketing of counterfeit or
substandard goods or goods that infringe intellectual property rights or goods which failed to
meet the requirements for personal and property safety; (iv) fabricating or tampering transaction
data, viewership and other similar data; (v) promotion or attracting traffic for others despite
knowing or being in situations where they ought to know that the promoted individual engages
or has engaged in illegal or high-risk behaviors; (vi) contents involving harassment, slander,
insulation or threatening of any person(s) or infringement of the legitimate rights and interests
of others; (vii) engaging in pyramid marketing, fraud, gambling or selling contrabands or
controlled goods etc; and (viii) violation of state laws, regulations and relevant provisions.
To the best of our Directors’ knowledge and belief, brand owners were not involved in any
of the previously reported cases related to Livestreaming and influencers. Based on the cases
reported, fines were imposed on third-party KOLs who promotes products, instead of the
companies which produce, and/or own the brand of, the product. As advised by our PRC Legal
Advisors, this regulatory tightening does not adversely affect our business operations because (i)
we did not engage in any activities prohibited by the Strengthening Regulations; and (ii) we
complied with the laws stated in the Guiding Opinions on Online Livestreaming Marketing, such
as Product Quality Law, the Food Safety Law, in all material aspects during the Track Record
Period and as at the Latest Practicable Date, which are the responsibilities of product business
operators (such as our Group) set out in the Guiding Opinions on Online Livestreaming
Marketing. On the other hand, as a Livestreaming room operator, for example, in respect of the
Douyin account managed or registered by us, we have full control over the content disseminated
through our proprietary accounts and we have established guidelines to ensure livestreamers who
appear on our accounts will not be transmitting messages in violation of the Online
Livestreaming Marketing Measures.
In addition, none of the celebrities or KOLs were investigated or being fined by the
relevant authorities when they were promoting our Group’s products on social media platforms
during the Track Record Period. Based on the above, including the advice given by our PRC
Legal Advisors, our Directors believe, and the Sole Sponsor concurs, that our Livestreaming and
E-commerce Livestreaming will not be affected by the implementation of such regulations. As
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advised by our PRC Legal Advisors, we are in compliance of all relevant laws and regulations in
all material aspects, and adequate measures are in place to cope with such changes in the
regulatory environment of the PRC entertainment industry. Hence, we believe, and the Sole
Sponsor concurs, that such changes are not expected to have a material adverse impact on our
business operations, financial performance and use of proceeds.
Nevertheless, laws and regulations concerning Livestreaming and influences in the PRC are
relative new and evolving, and their interpretation and enforcement involve significant
uncertainties. Please refer to the section headed “Risk factors – If the contents contained in
videos, live broadcasting and other content formats published by us or celebrities or KOLs that
we collaborate with are deemed to violate any PRC laws or regulations or are considered
inappropriate, or there is any changes in the applicable laws and regulations, our business,
financial condition and results of operations may be materially and adversely affected” in this
prospectus.
In addition, we do not engage in the illegal activities targeted by the Strengthening
Regulations in our operations. The Strengthening Regulations target the “Fan Trap” practices
that typically disseminate vulgar and immoral media contents in an indiscriminating manner for
the sole purpose of attracting online traffic and exposure. We primarily focus on new retail
business which contributes the majority of our revenue. Our IP events and programs are properly
planned by cooperating with selected celebrities whom we consider have complied with the
relevant laws and regulations after due assessment with an aim to create a positive brand image
of our Group and to convey positive messages. Given the above, our PRC Legal Advisors are of
the view that, during the Track Record Period and up to the Latest Practicable Date, we did not
engage in any activities prohibited by the Strengthening Regulations, and the Strengthening
Regulations had no adverse impact on our business operations.
Impact on Mr. Jay Chou
Mr. Jay Chou, being a celebrity who we frequently cooperated with during the Track
Record Period, has been a well-known celebrity in Chinese-speaking communities for over 20
years and has not been the subject of any significant negative publicity. During the Track Record
Period and up to the Latest Practicable Date, to our best knowledge, Mr. Jay Chou did not
engage in any activities prohibited by the Strengthening Regulations. Taking into account of Mr.
Jay Chou’s popularity, we believe the image of Mr. Jay Chou has remained positive since his
debut, and he has continued to exert positive influence on the public. Hence, as advised by our
PRC Legal Advisors, Mr. Jay Chou’s visibility in the PRC shall not be adversely affected by the
regulatory changes in the PRC entertainment industry.
Impact on other celebrities and KOLs whom we have been or will be cooperating with
Save as disclosed below, to our best knowledge after due and careful enquiries, other
celebrities and KOLs that we have entered into preliminary or definitive cooperation agreements
with (such as Mr. Fang, Mr. Harlem Yu and Mr. Liu Keng-hung) were not subject to any
investigation or penalty for activities prohibited pursuant to the relevant regulations or any
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significant negative publicity. For details of our internal control measures relating to activities of
the celebrities and KOLs whom we cooperate with, please refer to the paragraph headed “Risk
management and internal control – IP creation and operation segment” in this section below.
Incident relating to products promoted by Mr. Liu Keng-hung and Ms. Vivi Wang prior to our
cooperation with them
In September to October 2020, during their cooperation with a third-party agency company,
Mr. Liu Keng-hung and Ms. Vivi Wang hosted three E-commerce Livestreaming sessions to
promote the sale of certain bird’s nest products. Such products were subsequently involved in
disputes relating to false and misleading trade description (the “ Incident ”). To the best
knowledge of our Directors, after the Incident, the agency company has been assisting the
consumers who purchased the bird’s nest products through the relevant E-commerce
Livestreaming sessions to arrange for refunds.
We are of the view that the Incident did not and will not have any material adverse impacts
on the reputation and publicity of Mr. Liu Keng-hung and Ms. Vivi Wang or our business
operations and financial performances on the following basis:
(a) the Incident occurred before we established any business relationship with Mr. Liu
Keng-hung and Ms. Vivi Wang and is not related to any of our products, online stores
or platforms;
(b) as advised by our PRC Legal Advisors, as the Online Livestreaming Marketing
Measures (which was effective on May 25, 2021) were not yet implemented at the
time of the relevant E-commerce Livestreaming sessions, Mr. Liu Keng-hung and Ms.
Vivi Wang should not be liable for the Incident under the then PRC laws and
regulations merely by promoting the bird’s nest products during their E-commerce
Livestreaming sessions without knowledge of the defects in such products. Since the
effective date of the Online Livestreaming Marketing Measures and up to the Latest
Practicable Date, neither Mr. Liu Keng-hung nor Ms. Vivi Wang was blacklisted or
subject to investigations or fines from any online platform or government authority
and there has never been any request for suspension of their social media accounts as
a result of the Incident;
(c) no similar incident has occurred since our cooperation with Mr. Liu Keng-hung and
Ms. Vivi Wang. In addition, Mr. Liu Keng-hung no longer participated in E-commerce
Livestreaming since February 2022 as we consider that it would create the best value
for Mr. Liu Keng-hung to devote his time in developing his popularity through
Livestreaming, brand endorsement and participation in other IP programs. Please refer
to the paragraph headed “Our business – IP creation and operation – IP content
creation and management - Celebrity IP management – Empowerment of our new
retail sales” in this section for further details; and
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(d) the Incident did not have any material adverse impact on the publicity or reputation of
Mr. Liu Keng-hung. In particular, the number of followers of Mr. Liu Keng-hung’s
social media accounts has remained relatively stable even after the reports of the
Incident has gone public. Up to the Latest Practicable Date, the Incident did not have
any material adverse effect on our cooperation with Mr. Liu Keng-hung, including but
not limited to the operation of our celebrity IP management business. In addition,
given that the Douyin account “㺘㺘દ ” is owned by our Group, in the
event of any negative publicity of Mr. Liu Keng-hung or Ms. Vivi Wang or the
suspension of their accounts on any online platforms, we can still conduct
E-commerce Livestreaming sessions on other Douyin accounts owned by us. We may
also change the name of our Douyin account to mitigate the effect of such negative
publicity.
DISTRIBUTION NETWORK
Overview
During the Track Record Period and up to the Latest Practicable Date, we sold and
distributed our products under the new retail business through:
(i) the Distribution Agent Assisted Distribution Model, where we sold our products
through a network of distributors who would further expand the consumer reach by
procuring a network of sub-distributors. We would engage a Distribution Agent to
assist in the development and management of the network of distributors and their
sub-distributors;
(ii) general distribution model, where we sold our products to our distributors for their
onward sale to the end consumers without the engagement of a Distribution Agent;
and
(iii) other e-commerce channels, where we directly sold our products to end consumers
through various online platforms such as the Star Plus 4U (Ꮄ፯ ) App, as well as
our Tmall stores and Douyin stores.
In determining the distribution model to be adopted for our products, we would take into
consideration of various factors, including but not limited to, their respective market positioning,
target customers and product features. We primarily distribute our MODONG coffee (as well as
other products supporting a low-carb diet, including Moliton e prebiotic gummy, MODONG herb
beverage and MODONG probiotics lyophilized powder) through the Distribution Agent Assisted
Distribution Model having considered that such products mainly target end consumers who had a
pressing need for weight-management and require sufficient guidance and supports in connection
with the consumption of such products as a supplement to a low-carb diet. We also distribute our
skincare products under Dr .mg sub-brand through the Distribution Agent Assisted Distribution
Model given that such products mainly target users of mature skins which may require more
pre-sale supports and guidance. On the other hand, for our products that target general public
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and do not require specific knowledge or information in their use (such as our products under
the Dr . INYOU brand), we would generally distribute through general distributorship model
and/or other e-commerce channels with a view to enlarge our customer base at a lower
distribution cost.
Coverage of and revenue contribution by geographic regions
The table below sets forth a breakdown of our revenue from the new retail business by
geographical locations for the indicated periods:
Y ear ended December 31,
2019 2020 2021 2022
RMB’000 % RMB’000 % RMB’000 % RMB’000 %
Zhejiang 35,257 43.7 104,488 28.6 66,413 22.0 53,764 22.4
Jiangsu 6,007 7.4 61,791 16.9 59,385 19.7 30,367 12.7
Hunan 9,579 11.9 32,469 8.9 18,682 6.2 13,574 5.7
Shanghai 6,980 8.6 30,041 8.2 22,909 7.6 11,296 4.7
Shandong 5,650 7.0 22,723 6.2 26,882 8.9 19,659 8.2
Guangdong 6,817 8.5 19,203 5.3 15,635 5.2 13,072 5.3
Fujian 1,249 1.5 12,273 3.4 12,999 4.3 6,945 2.9
Guangxi 1,151 1.4 11,406 3.1 9,983 3.3 5,259 2.2
Anhui 90 0.1 10,906 3.0 9,840 3.3 9,754 4.1
Hubei 2,311 2.9 10,648 2.9 6,238 2.1 3,932 1.6
Shanxi 4,056 5.0 5,072 1.4 5,490 1.8 3,280 1.4
Others 1,617 2.0 41,389 11.3 37,254 12.4 28,545 11.9
Revenue from distribution
network
(1) 80,764 100.0 362,409 99.2 291,710 96.8 199,447 83.1
Revenue from other
channels (2) 33 0.0 2,766 0.8 9,685 3.2 40,652 16.9
Total revenue from
new retail business 80,797 100.0 365,175 100.0 301,395 100.0 240,099 100.0
Notes:
(1) Representing our revenue from sale under the Distribution Agent Assisted Distribution Model and the
general distribution model.
(2) Mainly included sales made directly to end consumers through other e-commerce platforms.
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Distribution Agent Assisted Distribution Model
We introduced the Distribution Agent Assisted Distribution Model in 2019 initially for the
sale and distribution of our MODONG coffee. Under the Distribution Agent Assisted Distribution
Model, we sell and distribute our branded products to end consumers primarily through our
distribution network that consists of a Distribution Agent, our distributors and their
sub-distributors. The Distribution Agents would be responsible for developing and managing the
distribution network for the respective products.
The diagram below illustrates the business flow of the Distribution Agent Assisted
Distribution Model:
Our Group
Distributors
End Consumers
Distribution Agent
Main Distribution
Agreement
Distribution
Agreements
Sub-
distributors
Sub-distribution
Agreements
Third-party
service provider
Service
Agreement
Sale (1)
Management (2)
Direct contractual relationship
Provision of services (3)
Notes:
(1) Distributors are considered as our customers who would place sale orders directly with our Group and onward
sell the products to the sub-distributors procured by them and/or the end consumers.
(2) Our Distribution Agent is responsible for the development and management of the distributors and
sub-distributors, including but not limited to providing trainings on sales and marketing techniques to, and
monitoring the performance of, the distributors and sub-distributors.
(3) Our Distribution Agent would engage a third party service provider to provide assistance in the management of
the distribution network. Services provided by such service provider mainly include, inter alias, (i) providing
trainings and assistance to the distributors regarding the business registration under the applicable laws and
regulations; (ii) calculating the discounts and incentives entitled by the distributors; (iii) conducting marketing
and advertising activities for the development of the distribution network; and (iv) arrange settlement of certain
discounts and incentives payable to our distributors.
We engage Distribution Agents to develop and manage our distributors and sub-distributors
as our business focus for the new retail segment is the design and development of products. As
of December 31, 2022, there were 742 distributors and 16,044 sub-distributors under the
Distribution Agent Assisted Distribution Model. In the event that we do not delegate distributors
management functions to the Distribution Agent(s), we would be required to divert our focus and
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resources, including manpower, in the development and management of the distribution
networks, including but not limited to the frequent liaison with our vast number of distributors
and sub-distributors and provision of trainings on sales and marketing techniques in a repeated
manners, which are considered to be mundane and time consuming. We believe delegating such
mundane works to the Distribution Agent(s) with the required expertise to assist us in
developing the distribution network and providing assistance and guidance to our distributors
and the sub-distributors would enable us to focus on our core businesses.
Pricing arrangement
We set benchmark prices for the sale of our products (i) by our distributors to their
sub-distributors; and (ii) by our distributors or the sub-distributors to the end consumers and
provide certain discounts, incentives and fees to our distributors to incentivize their sale
performances. For details of our pricing arrangement under the Distribution Agent Assisted
Distribution Model, please refer to the section headed “Distribution arrangement with Kunshan
Tingshe – Pricing arrangement and discounts, incentives and fees in relation to the sales of
Kunshan Tingshe Distributed Products” in this prospectus. Our distributors and their
sub-distributors are required to strictly comply with our pricing guidelines in the sale of our
products. For details on our distributor management measures, please refer to the paragraph
headed “Management of our distribution network – (V) Distributor management measures” in
this section below.
Our Distribution Agents
During the Track Record Period and up to the Latest Practicable Date, we have engaged
two Distribution Agents for the distribution of our products. We engaged Kunshan Tingshe as the
Distribution Agent of our MODONG coffee, Molitone prebiotic gummy, MODONG herb
beverage and MODONG probiotics lyophilized powder (i.e. the Kunshan Tingshe Distributed
Products). Kunshan Tingshe is our first and the largest Distribution Agent. For the year ended
December 31, 2019, 2020, 2021 and 2022, our revenue attributable to Kunshan Tingshe under
the Distribution Agent Assisted Distribution Model amounted to RMB71.0 million, RMB340.8
million, RMB254.3 million and RMB167.7 million, respectively. For details of the background
of, and our cooperation with Kunshan Tingshe, please refer to the sections headed “History,
development and reorganization – Our history and development – Our major subsidiaries –
Kunshan Tingshe – Disposal of our interest in Kunshan Tingshe” and “Distribution arrangement
with Kunshan Tingshe” in this prospectus.
On the other hand, we engaged another Distribution Agent, namely, Kunshan Shouwang
Xingguang E-commerce Company Limited (ʮ̡ )( “ Shouwang
Xingguang ”) as the Distribution Agent to manage our distributors and the sub-distributors in our
distributor network in relation to the sales and promotion of Dr .mg products. Shouwang
Xingguang is a PRC established company with a registered capital of RMB1,000,000 which
principally engages in the business of cosmetics wholesale and retail. According to publicly
available information, Shouwang Xingguang is owned as to 99.0% by Mr. Qi Ronglin, who has
over 10 years of industrial experience in cosmetic and e-commerce markets, and 1.0% by Mr.
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Yang Baoxing. We became acquainted with Shouwang Xingguang through Mr. Qi Ronglin, who
was a co-worker with a member of our senior management, Ms. Jiang Xiuhong, before she
joined our Group. To the best of the Directors’ knowledge and belief, both Mr. Qi Ronglin and
Mr. Yang Baoxing are Independent Third Parties. Our revenue attributable to Shouwang
Xingguang amounted to RMB12.6 million and RMB2.1 million for the two years ended
December 31, 2022, respectively. Our arrangement with Shouwang Xingguang is substantially
the same as that with Kunshan Tingshe.
Our Directors are of the view that it is common in the industry for a company engaging in
new retail business with a focus on sales through social media channels to cooperate with a
distribution agent, which will assist such company in managing the distribution network.
Distributor movement
The table below sets forth the number of our distributors and the sub-distributors, including
number of active sub-distributors, under our Distribution Agent Assisted Distribution Model in
our distribution network for the years indicated:
Y ear ended December 31,
2019 2020 2021 2022
Distributors
Number at the start of the year 36 74 575 699
Added during the year 39 530 242 92
Terminated during the year (1) (29) (118) (49)
Number at the end of the year 74 575 699 742
Sub-distributors
Number at the start of the year 639 2,719 16,519 18,871
Added during the year 2,177 15,736 6,252 2,545
Terminated during the year (97) (1,936) (3,900) (5,372)
Number at the end of the year
(Note) 2,719 16,519 18,871 16,044
Of which:
– Number of sub-distributors that
distributed the Kunshan Tingshe
Distributed Products 2,549 16,438 18,794 15,681
– Number of active sub-distributors
(Note) 2,633 15,922 15,128 10,043
Note: We assess the performance of our distributors and sub-distributors on a regular basis based on their
activeness. A sub-distributor is considered to be active if, in the past 12-month period, (i) it has introduced
other sub-distributors to us; (ii) it has placed order with us; or (iii) it has sold our products to downstream
sub-distributors and/or customers.
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The number of our distributors and the sub-distributors, including active sub-distributors,
increased significantly in 2020 as we expanded our distribution network following the launch of
MODONG coffee. To the best of our Directors’ knowledge and belief, our sub-distributors may
be end consumers, individuals who would further sell the products or a combination of both.
For the years ended December 31, 2019, 2020, 2021 and 2022, one, 29, 118 and 46
distributors and 97, 1,936, 3,900 and 5,372 sub-distributors, respectively, ceased to be our
distributors or sub-distributors (where applicable). The cessation of cooperation may be due to
personal reasons of the distributors and sub-distributors such as changes in their business focus
or termination of cooperation by us. The Distribution Agents and our Group would jointly decide
to terminate the cooperation with the distributors and sub-distributors if they become inactive or
in the event of their non-compliance with their respective obligations under the distribution
agreements. During the Track Record Period, the termination of cooperation with distributors
and/or sub-distributors were mainly due to their failure in complying with our pricing
guidelines. No distributors or sub-distributors were terminated due to provision of inappropriate
and/or misleading information of our Group’s products during the sales thereof.
Save as disclosed in the paragraph headed “Customers” in this section below, to the best of
our Directors’ knowledge and belief, there is no any other material past and present relationship
(including but not limited to, business, family, trust, employment, shareholding, financing or
otherwise) between our Group and our distributors/sub-distributors, and respective directors,
ultimate beneficial owner(s) (if any), shareholder(s) (if any), senior management, or any of their
respective associates.
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Risk of channel-stuffing
During the Track Record Period, we generated a substantial portion of our revenue from the
sale of MODONG coffee under the Distribution Agent Assisted Distribution Model. The table
below sets forth the breakdown of the sales of MODONG coffee for the indicated periods:
Y ear ended December 31,
2019 2020 2021 2022
Approximate total number of
boxes sold in distribution
network
(1) A=B+C 632,000 3,314,000 2,132,000 1,380,000
Sales revenue under
distribution network
(RMB’000) D 71,894 332,475 225,256 150,208
Average price (RMB) 114 100 106 109
Originated directly from
Distributors
Approximate number of
boxes sold to distributor
(excluding those sold to
sub-distributors through the
distributors)
(1) B 39,000 141,000 240,000 289,000
Average number of boxes sold
per distributor 584 280 382 463
Maximum number of boxes
purchased by a single
distributor 2,066 4,617 29,880 34,520
Originated from
Sub-distributors through
Distributors
Approximate number of
boxes sold to sub-distributors
through distributors
(1) C 593,000 3,173,000 1,892,000 1,091,000
Average number of boxes sold
per sub-distributor 228 184 142 129
Maximum number of boxes
purchased by a single
sub-distributor 2,220 2,420 4,000 5,020
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Y ear ended December 31,
2019 2020 2021 2022
Others sale channels
Sales revenue (RMB’000) (2) E 33 393 2,516 675
Approximate number of boxes
sold 100 1,000 1,000 1,000
Total sales revenue of
MODONG coffee (RMB’000) F=D+E 71,927 332,868 227,772 150,883
Notes:
(1) Represented the total number of boxes of MODONG coffee sold pursuant to orders directly placed by
distributors and orders from sub-distributors placed through distributors.
(2) Represented revenue generated from sale through e-commerce channels, which also included insignificant
amount generated from the sale of certain ancillary products of the MODONG coffee such as effervescent
tablets, coffee cups and body fat scale.
As illustrated in the above table, a substantial portion of the MODONG coffee sold to our
distributors was subsequently sold to their sub-distributors. Out of the total number of boxes of
MODONG coffee sold to our distributors, approximately 93.8%, 95.7%, 88.7% and 79.1% were
sold onward to our sub-distributors during the year ended December 31, 2019, 2020, 2021 and
2022, respectively.
In addition, based on (i) the scanning records of the QR code attached to each box of
MODONG coffee (which was independently undertaken by the distributors and sub-distributors
without the involvement of our Group); and (ii) the delivery records in respect of MODONG
coffee that were sold to distributors (excluding those sold to sub-distributors through
distributors) and directly delivered by us to the end consumers at the request of the distributors,
it is shown that approximately 69%, 90%, 94% and 64% of the total number of boxes of
MODONG coffee that were sold to end consumers during the four years ended December 31,
2022, respectively. We consider the remaining percentages mainly represent MODONG coffee
consumed by the distributors and their sub-distributors for their own consumption and
MODONG coffee sold to end consumers which had not been scanned by the distributors and
sub-distributors. Based on the above, we consider the risk of channel-stuffing is remote.
Management of our distribution network
We adopt a tiered and top-down distributor management model in which the Distribution
Agent assists us to monitor our distributors, which in turn are responsible for monitoring their
respective sub-distributors. Our distributors are responsible for ensuring that sub-distributors
comply with the terms and conditions set out in the sub-distribution agreement. In the event that
a sub-distributor fails to comply with the terms and conditions as set out in the sub-distribution
agreement, we will require the relevant distributor to terminate the sub-distribution agreement
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that it entered into with such sub-distributor if such sub-distributor failed to rectify the
identified non-compliances.
Set out below are the major policies and procedures in monitoring and managing the
conduct of our distributors and their sub-distributors relating to the sale of our products:
(I) Product return policies
Our distributors shall accept product return and/or exchange (i) unconditionally within
seven days of delivery in compliance with the E-Commerce Law; (ii) within 30 days of
delivery if the returned product can be resold; or (iii) due to damage caused by product
packaging or quality during product delivery, or problem arising from the consumption of
the products.
Based on our understanding, we believe our distributors generally adopt similar
product return policies with their sub-distributors.
(II) Market-oriented training programs
As a fast developing social e-commerce platform, distributor training is an essential
and integrated part of our operations. Such trainings not only provide critical product
information, knowledge and updates to our distributors for the promotion of our products,
they also serve as an important distributor and consumer procurement method. We provide
online and offline training services to our distributors and sub-distributors, where we train
them mainly on our brand and the features of our products, while Kunshan Tingshe trains
them mainly on sales and marketing techniques.
We founded Star Plus E-Academy (
݋Eኪ৫) course platform under our WeChat
official account, Star Plus Action, in order to advocate healthy lifestyle, instruct marketing
skills and promote our products. Both our Group and our Distribution Agents may provide
respective online trainings on such platform. We also conduct offline training meetings
which held in different venues such as hotels and conference centers. Course materials of
these trainings are designed to cover professional knowledge about our products, our
Company’s regulations, health management, sales and marketing skills and team
management. Our instructors team includes our in-house health management advisors, our
distributors, and external entrepreneurs or lecturers.
(III) Approval of distributorship
The applications to join our distribution network shall be approved by our Group and
the Distribution Agents before the sub-distributors can become our distributors. The criteria
for selection of potential distributors include, but not limited to, scale of customer base,
eligible business qualification and license and financial resources. Each of our distributors
is required to maintain certain number of qualified sub-distributors.
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(IV) Distributor database
Once a distributor is approved and granted access of the database, detailed record will
be kept for the distributor including product ordering record, order and delivery status,
stock and inventory level status. The database provides us with a holistic view and control
of our distribution network as well as detailed information of each distributor for
management purpose. In particular, analyzing product ordering record in the Ordering
Management System allow us to estimate the inventory level and activity levels of each
distributor.
(V) Distributor management measures
We manage the performance of our distributors by issuing and requiring strict
compliance of other market management policies and pricing guidelines. The key terms of
our market management policies include:
 Pricing guidelines. When our distributors or the sub-distributors onward sell our
products to the end consumers, they use a unit selling price set by us. We allow
our distributors and the sub-distributors to give certain volume-based discounts
to the end consumers based on the discount guidance that we set. All the
distributors and sub-distributors must strictly comply with our pricing guidelines,
and carry out sales and expand channels according to our pricing guidelines and
operating system policies. If distributors and sub-distributors violate such
policies, their distribution qualification may be suspended or canceled, and the
volume discount granted and the performance deposits paid in that month shall
also be forfeited. Meanwhile, penalties may also be imposed on the respective
distributor.
 Prohibition on sales by borrowing goods. Sub-distributors are not allowed to
borrow products for sale, and they must purchase our products from their
respective distributors.
 Non-compliance with distributions agreement (“ DSD Agreement
Non-Compliance ”). We have adopted different measures in preventing and
identifying any DSD Agreement Non-Compliance. On the one hand, we provide
trainings on, among others, rules that shall be complied for sales and promotion
of our products to our distributors and sub-distributors. In addition, distributors,
who (“ Introducing Distributors ”) assist the Distribution Agent to, among
others, extending our distribution network by procuring new distributors
(“Procured Distributors ”), also provide hands-on advice to Procured
Distributors which, among others, ensure the information provided by
sub-distributors, in particular newly-joined sub-distributors, to end consumers are
accurate and not misleading. On the other hand, we encourage our distributors
and sub-distributors to monitor and report to us any potential DSD Agreement
Non-compliance in the market. In addition, we have a dedicated team responsible
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for monitoring sales of our products on (a) the mainstream e-commerce
platforms; and (b) the social e-commerce channels of our distributors and
sub-distributors, in order to actively identify DSD Agreement Non-compliance,
such as sales on unauthorized channels/platforms. Our team also cooperates with
external law firms and/or intellectual property professionals in collecting
evidence for alleged DSD Agreement Non-compliance and possible infringement
activities on these sale channels/platforms. During the Track Record Period, no
distributors or sub-distributors were terminated due to provision of inappropriate
and/or misleading information of our Group’s products during the sales thereof.
Our PRC Legal Advisors are of the view, and our Directors concur, that our
Company has no liability for the DSD Agreement Non-compliance, particularly
with respect to provision of inappropriate and/or misleading information by the
distributors and sub-distributors of our Group’s products, having considered: (i)
the distribution agreements entered into by the distributors or the sub-distributors
provide that any promotional materials should be either provided or approved by
us; (ii) such inappropriate and/or misleading information of our products are
provided by the distributors and sub-distributors (if any) in breach of the
distribution agreements. We did not have any material financial disputes with our
distributors or the sub-distributors during the Track Record Period.
Our distributors’ compliances with the E-Commerce Law
Pursuant to the E-Commerce Law that came into effect on January 1, 2019, distributors that
conduct e-commerce business via WeChat, Kuaishou , XiaoHongShu or other platforms would be
regarded as e-commerce operators (i.e. in-platform business operators, or other e-commerce
operators sell commodities or offer services through a self-built website or other network
services) and be required to register with the competent authorities as Individual Proprietors or
corporate entities. Pursuant to the E-Commerce Law, if e-commerce operators fail to be
registered as Individual Proprietors or corporate entities, unless exempted under certain
circumstances, such e-commerce operator may be required to rectify the non-compliance within
a specified time limit and may also be fined an amount of no more than RMB10,000. During the
Track Record Period, the substantial majority of our distributors were individuals. For the year
ended December 31, 2019, 2020, 2021 and 2022, the aggregate number of distributors who had
historically failed to register as Individual Proprietors or corporate entitles throughout each year
were 75, 583, 718 and 70, respectively, contributing revenue of RMB80.8 million, RMB360.8
million, RMB176.7 million and RMB2.8 million, respectively, during the respective financial
year. Such revenue represented approximately 100.0%, 98.8%, 58.6% and 0.8% of our Group’s
total revenue with respect to the new retail segment during the Track Record Period,
respectively.
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As advised by our PRC Legal Advisors, our Group is not an e-commerce platform operator
and therefore not required to comply with the responsibilities of an e-commerce platform
operator (including but not limited to monitoring, notifying and providing assistance to our
distributors to complete registrations of corporate entities). Hence, there would not be any legal
implication to us even some of our distributors did not comply with the E-Commerce Law
during the Track Record Period.
Nevertheless, to encourage our distributors’ compliances with the relevant requirements
under the E-Commerce Law, we have been requiring our distributors to take action to change to
corporate entity or Individual Proprietor status and register with the competent authorities, while
we allow a transition period for them to do so, in order to minimize the potential impact that it
may have on our business or distributors. In addition, our Distribution Agent provides guidance
to our distributors on how to register oneself as an Individual Proprietor or a corporate entity.
The number of distributors who failed to register as Individual Proprietors or corporate entities
were 120, 25, 10 and 10, respectively, as at December 31, 2020, 2021, 2022 and the Latest
Practicable Date. Given a vast number of individual distributors failed to register as Individual
Proprietors or corporate entities when the E-commerce Law came into effect, it took a while for
our distributors to complete such registration.
As at the Latest Practicable Date, approximately 99% of our distributors had registered as
Individual Proprietors or corporate entities, whilst some new distributors were in the process of
the registration as Individual Proprietors or establishment of corporate entity(ies) for their
respective involvement in the distribution network as distributors. As almost all of our
distributors have been registered as Individual Proprietors or corporate entities as of the Latest
Practicable Date, our Directors are of the view that failure by a small number of distributors to
comply with the E-Commerce Law would not have any material impact on our business
operation and distributors.
The Temporary Suspension of Bank Accounts due to alleged pyramid selling
We and Kunshan Tingshe, one of our Distribution Agents, were subject to two incidents in
2020 and 2021 in respect of our business under the Distribution Agent Assisted Distribution
Model, whereby certain funds in our bank accounts were temporarily frozen by certain local
government authorities outside Kunshan, on the unfounded allegation that we were engaged in
pyramid selling under the Regulation on the Prohibition of Pyramid Selling (the “ Temporary
Suspension of Bank Accounts ”). After we took prompt actions to defend our legal rights and
interest, both of the above incidents were resolved in our favor and our funds were released in
full unconditionally within a short period of time.
In June 2020, a local Administration for Market Regulation of a fourth-tier city froze
certain bank accounts of our then group companies, Kunshan Tingshe, Li Ting and Li Ting’s
spouse for suspected pyramid selling. All of the above-mentioned group companies were
registered in Kunshan. In May 2021, a local Administration for Market Regulation of a
fourth-tier city froze certain bank accounts which belong to two of our group companies which
were registered in Kunshan and Beijing, respectively, Kunshan Tingshe, Li Ting, and a
distributor.
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As advised by our PRC Legal Advisors, the actions undertaken by the local government
authorities in the Temporary Suspension of Bank Accounts only concerns the issuance of
pre-litigation asset preservation orders pending further investigation, and does not involve any
imposition of administrative penalties. Additionally, save as the abovementioned parties which
had their bank accounts frozen during the Temporary Suspension of Bank Accounts (as the case
may be), none of our group companies or entities associated with Li Ting which were principally
engaged in new retail operations were subject to any administration penalties by market
regulation authorities during the Track Record Period and up to the Latest Practicable Date.
In response to each temporary account freeze, we reported to Kunshan AMR, which is the
competent authority supervising our new retail operations, and Kunshan AMR carried out
inspections on our operations and issued the two Inspection Opinions in June 2020 and June
2021, respectively, which concluded that we were engaged in new retail activities through a
legitimate distribution model. Following the discussion by Kunshan AMR with the local
authorities involved in the Inspection Opinion, the relevant local authorities ordered our frozen
funds to be fully and unconditionally released in July 2020 and July 2021, respectively.
According to Article 8 of the Provisions on Administrative Penalty Procedures for Market
Regulation (֛an administration for market regulation at the
level of county or city comprising different districts shall have jurisdiction over administrative
penalty cases occurring within its jurisdiction ex officio. As advised by our PRC Legal Advisors
and based on the confirmation provided by Kunshan AMR, since (i) our subsidiaries principally
engaging in new retail business and Kunshan Tingshe are domiciled in Kunshan which is a
county-level city; and (ii) the main functions of our new retail operation (including but not
limited to management, product development and our management over the distribution
channels) are conducted in our headquarters located in Kunshan only, therefore according to the
Regulations on Jurisdiction of Administration for Market Regulation, Kunshan shall be regarded
as the place where our new retail operations take place under the applicable PRC laws and
regulation. Even though our products are sold nationwide, Kunshan AMR is the competent
authority supervising our new retail operations.
Based on the interviews with Kunshan AMR, both the Temporary Suspension of Bank
Accounts were also reported to the SAMR in the manner followed by the PRC administrative
authorities in accordance with their normal practice. To the best of our Directors’ knowledge, no
objection or any opinion from the SAMR has been received by Kunshan AMR in relation to such
reports.
The Sole Sponsor, together with our PRC Legal Advisors, Jingtian & Gongcheng and Jones
Day (as one of the PRC and Hong Kong legal advisors of the Sole Sponsor, respectively),
conducted interviews with Kunshan AMR which confirmed that Kunshan AMR is the competent
authority supervising and regulating the new retail business operation of the Group and Kunshan
Tingshe, given that (i) territorial jurisdiction is one of the basic principles embodied in various
PRC administrative laws and regulations, and (ii) Kunshan AMR, being the local county level
AMR, is the competent authority supervising and regulating all enterprises in Kunshan.
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Regulations relating to pyramid selling under our Distribution Agent Assisted Distributors
Model
The Regulation on the Prohibition of Pyramid Selling prohibits, amongst others: (i) paying
remunerations to recruiters based on the number of persons recruited; (ii) requesting recruiters to
pay fees for the purpose of obtaining the qualification or recruiting others to participate in
pyramid selling; and (iii) requesting recruiters to persuade others to participate in pyramid
selling so as to form a multi-level relationship and paying remuneration to an upper-level
promoter based on the sales performance of the promoters at the lower-level, in each case, in
order for seeking illegal gains.
The Inspection Opinions
According to the Inspection Opinions, our new retail business operations complied with all
the relevant laws and regulations based on, amongst others, the following reasons:
 Legitimate distributor relationship and sales channel expansion methods: There is no
upstream contribution relationship between different levels of distributors that is
typical in pyramid selling, which means the proceeds to be received by distributors of
higher tiers is to be calculated based on the number of new distributors or members
that it is able to lure to join the network and who will be paying upfront fees to the
scheme upon joining. Our distributors and the sub-distributors generate profit from the
difference between the sales price and procurement price as well as relevant
discount(s). Our distributors and the sub-distributors are procured through legitimate
means with a focus on commercially reasonable returns through sales of products.
 Legitimate product distribution system: We are able to monitor the distribution of our
products and require our distributors and the sub-distributors to reach certain
benchmarks before they are allowed to join our distribution network.
 Legitimate transaction with a fair market value: Sales of our products are legitimate
transactions, and our products have a fair market value.
 No other enforcement actions: As of the date of the Inspection Opinion issued in June
2021, Kunshan Star Plus Action and Kunshan Tingshe were not subject to any
administration penalties by market regulation authorities for acquiring unlawful
benefits, damaging consumer interest or committing commercial frauds, and Kunshan
AMR did not receive reports from other market regulation authorities in relation to
suspected illegal activities of such companies.
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Our PRC Legal Advisors’ views
As advised by our PRC Legal Advisors, based on the Inspection Opinions issued by the
Kunshan AMR:
(a) our business model does not involve paying remunerations to the distributors based on
the number of persons recruited in order for seeking illegal gains, which is prohibited
by the Regulation on the Prohibition of Pyramid Selling, based on the following
reasons: (i) our products sold are legitimate transactions with reasonable price, and we
focus on the quality of the products with product return and exchange policies to
protect the interests of the end consumers in accordance with applicable PRC laws and
regulations; (ii) incentives we give to the Introducing Distributors for their efforts to
provide assistance and guidance to the Procured Distributors in relation to the
products and marketing strategies are not merely based on the number of persons
recruited by the Introducing Distributors, which are not prohibited by the Regulation
on the Prohibition of Pyramid Selling for the bases set forth in sub-paragraph (c)
below; and (iii) although we require each distributor to maintain a certain number of
qualified sub-distributors, such arrangement is not prohibited under the Regulation on
the Prohibition of Pyramid Selling as: (x) such arrangement is commercially logical
and not prohibited by the PRC law as no illegal purpose was involved; and (y)
distributors who failed to meet such requirement would not be prohibited from selling
our products (despite that the relevant distributors may be downgraded to
sub-distributors);
(b) our business model does not involve requesting the distributors to pay fees for the
purpose of obtaining the qualification or recruiting others to participate in selling, in
order for seeking any illegal gains prohibited by the PRC law, based on the following
reasons: (i) although distributors/sub-distributors are required to pay a deposit, such
deposit is solely for the purposes of guaranteeing the distributors’ compliance with the
distribution agreement; (ii) distributors/sub-distributors are able to freely exit the
distribution network and such deposit will be refunded upon termination according to
the clause of distribution agreement; and (iii) besides the deposit, the
distributors/sub-distributors are not required to pay any fees to the Group in order for
being qualified to distribute the products of the Group;
(c) our distribution model focuses on product sales (rather than merely receiving
incentives) for the purpose of seeking lawful interests, which is not prohibited under
the Regulation on the Prohibition of Pyramid Selling. Formal
distribution/sub-distribution agreements have been entered into with the
distributors/sub-distributors which clearly set forth their respective rights and
obligations. Incentives are given to the Introducing Distributors for their efforts to
provide assistance and guidance to the Procured Distributors, who are mostly new to
the social e-commerce industry and lack of sufficient skills and expertise, in relation
to the products and marketing strategies so that the Procured Distributors equipped
with relevant product and marketing skills and knowledge for their sales. The
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Introducing Distributors are required to provide (i) assistance in various training and
marketing events organized by us in respect of product expertise training, market
knowledge training and updates on development of our Group and our products; (ii)
various trainings mainly on sales and technique, such as organizing, product usage
experience sharing meetings, regional sales forum and distributors promotion
meetings; and (iii) guidance to get registered as an Individual Proprietor or a
company, the use of the Ordering System and other necessary procedures established
by us, by way of face-to-face meetings or online channels such as WeChat; and
(d) our new retail operations comply with all the relevant PRC laws and regulations in all
material respects and should not be considered as pyramid selling because the sales of
our Kunshan Tingshe Distributed Products does not fall under the prohibited
categories stipulated in the Regulation on the Prohibition of Pyramid Selling.
Board confirmation
Our Directors confirm that the Temporary Suspension of Bank Accounts did not have any
material adverse impact on our operations. During the Temporary Suspension of Bank Accounts,
we were able to utilize our remaining cash on hand and operating cash inflow to settle the
expenses incurred during our ordinary course of business.
Based on the advice of our PRC Legal Advisors, our Directors are of the view, and the Sole
Sponsor concurs, that our distribution model, including the incentives given to the Introducing
Distributors for procuring new distributors and the requirement for each distributor to maintain a
certain number of qualified sub-distributors, does not involve any activities prohibited under the
Regulation on the Prohibition of Pyramid Selling.
In addition, our Board, after taking into account the views of Kunshan AMR and the advice
of our PRC Legal Advisors, is of the view that: (i) the prompt resolutions of the Temporary
Suspension of Bank Accounts have essentially proven that we are not engaged in pyramid
selling; (ii) the implementation of the Kunshan Pilot Program has conveyed a clear message that
we are engaging in a legitimate new retail business, increase the awareness of our business
model nationwide so that local government authorities can have better understanding of our
business model and its legitimacy; and (iii) adequate controls and measures had been put in
place to prevent the occurrence of similar incidents. In May 2022, Ms. Ma (one of our Founders,
Controlling Shareholders and executive Directors) was appointed as a member of “New Retail
and Livestreaming E-commerce Expert Committee” (ึ )b yt h e
Research and Development Centre of the State Administration for Market Regulation of the PRC
(Ӻʕː ). We believe that such appointment of Ms. Ma
demonstrated the government’s support and recognition of the business model of our new retail
business.
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Please refer to the section headed “Risk factors – Risks relating to our business and
industry – The relevant rules and regulations on social e-commerce in China are still under
development and subject to interpretation, and their implementation involves uncertainty” in this
prospectus for the risks that we may face.
Preventive measures adopted to mitigate the risk of similar incidents and potential impact on
our operations
To prevent incidents similar to the Temporary Suspension of Bank Accounts from recurring
and to maintain normal operations should any similar incident recur, we implemented the
following preventive measures:
(a) We had been cooperating with the relevant competent authorities, including Kunshan
AMR, to facilitate the implementation of the Kunshan Pilot Program, which we
believe can increase the awareness of our business model nationwide. We also
maintain periodic communication with Kunshan AMR which allows Kunshan AMR to
supervise our operations and to ensure that no aspect of our operations is or might
violate the relevant rules and regulations. In particular, Kunshan AMR is able to have
direct access to our operation system in real time, which allows it to have full
knowledge of our business model by accessing our new retail operational data
covering aspects such as orders, shipments, and members in our distribution network
and their recent activities. Such guidance and cooperation help to maintain the
legitimacy of our business model.
(b) We have adopted procedures for regular review on the operation risk of the cities
and/or regions in which we operate. In particular, we have been monitoring any
pre-trial investigation or administrative measures, such as freezing of bank accounts,
adopted by the local Administration for Market Regulations in connection with any
alleged cases of pyramid-selling. We consider that operating in cities and/or regions
which adopted a relatively tough policy towards alleged cases of pyramid-selling
would impose a higher business interruption risk to our Group similar to that caused
by the Temporary Suspension of Bank Accounts. We may, after taken into accounts the
aforesaid operation risk, as well as the overall strategic importance of a specific city
and/or region to our business and the background of the local distributors and
sub-distributors, consider suspending our expansion in such cities and/or regions. As
at the Latest Practicable Date, we ceased to develop new distributors or
sub-distributors in 41 cities, municipalities or counties which were identified as
posing high operation risk to us. As advised by our PRC Legal Advisors, if we, our
distributors and sub-distributors, agents or other representatives have no or minimal
business presence in such municipality, the risk that law enforcement authorities in
such municipality issuing pre-litigation asset-preservation orders to wrongfully freeze
our bank accounts would be minimal.
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(c) We increased the amount of prepayment to our supplier to ensure that we have
sufficient inventory for two to four months of our operations.
(d) We allocated cash on hand across bank accounts of our various group companies,
including bank accounts of our group companies principally engaged in IP creation
and operation business, for temporary or contingency use. We also maintained
standing funds held in a Hong Kong bank account which could be utilized any time, if
necessary. We will take further initiatives to obtain credit lines from financial
institutions, which will act as additional contingency funds.
Cannibalisation
Our Directors are of the view that there was no cannibalisation issue among our distributors
and the sub-distributors, and sufficient and effective measures had been put in place to avoid
cannibalisation for the following reasons: (i) each of the sub-distributors purchases products
from a particular distributor after a sub-distribution agreement is entered into between both
parties which requires them to follow our Company’s market management policy. Such policy
prohibits a sub-distributor to purchase products from any other distributor, hence the competition
between our distributors over the sub-distributors is minimal; (ii) there is a guidance price that
our distributors and sub-distributors should closely adhere to when they on-sell our products,
and apart from monitoring activities carried out by ourselves, our distributors and the
sub-distributors will also keep track of each other’s marketing activities, hence we believe that
an effective system has been put in place to avoid any pricing disorder. Further, if we notice that
any of our distributors or the sub-distributors does not follow our pricing policy, the
distributorship arrangement with the relevant distributor or sub-distributor can be terminated at
our or the relevant distributor’s discretion, respectively; and (iii) our distributors and the
sub-distributors distribute our products through their own PDT (i.e. connections within their own
social network) to end consumers, hence each member in our distribution network should have
their own group of target customers and end consumers which do not materially overlap.
General distribution model
During the Track Record Period, we distributed products other than the Kunshan Tingshe
Distributed Products and skincare products under the Dr .mg sub-brand, mainly including
products under the Dr . INYOU brand, under the general distribution model, through our network
of distributors (including Kunshan Tingshe not acting in the capacity of Distribution Agent) and
sub-distributors without the engagement of a Distribution Agent.
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Background of the major distributor and the salient terms of our distribution agreement
entered therewith under the general distribution model
The following summarizes the background of our major distributor under the general
distribution model, Customer D, and the salient terms of our distribution agreement with it:
Major distributed products LA DEW skincare products, products under Chaxiaojie
sub-brand and products under Dr . INYOU brand
Background To the knowledge of our Company, Customer D is a PRC
incorporated company principally engages in the sales
of food products, cosmetics and daily necessities. Based
on publicly available information, Customer D is owned
by two Independent Third Parties, including (i) its legal
representative, executive director and general manager
as to 51%; and (ii) an individual as to 49%.
Our relationship with the
distributor
We became acquainted with Customer D through the
referral of Ms. Ma’s friend. To the best of our
Directors’ knowledge and belief, apart from the
distribution relationship, our Group does not have any
other past or present relationship (including, without
limitation, business family, trust, employment,
shareholding, financing or otherwise) with Customer D,
its directors, shareholders, senior management, or any of
their respective associates.
Salient terms of
distribution agreement
(a) Term: From December 1, 2021 to December 31, 2024, and
renewable upon negotiations 30 days before the expiry
of contract term.
(b) Security: Customer D is required to make a security deposit of
RMB1 million with us.
(c) Payment: The credit term shall be three months from December 1,
2021 to June 30, 2022, and one month thereafter.
(d) Sales and Pricing: Customer D shall set the price within a reasonable price
range. The distributor shall be responsible for all the
expenses for delivery, storage, operation and
development of distribution channels, training and
organization of offline activities.
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We commenced engaging Customer D in late 2021. The revenue contributed by Customer D
for the two years ended December 31, 2022 was RMB12.0 million and RMB4.5 million,
respectively.
Based on our communication with Customer D, we understand that Customer D distributed
our skincare products under LA DEW through two e-commerce platforms including Douyin , and
sold such skincare products to individuals offline. During the Track Record Period, we had other
distributors under the general distribution model with relatively smaller transaction amounts.
Based on our communication with our distributors under the general distribution model, we
understand their respective downstream sales channels. In the event that our distributor onward
sells our products to retailers, such as supermarket(s) and e-commerce platform(s), we will visit
the physical store(s) or e-commerce platform(s) (where appropriate) to verify whether our
products are being sold to end consumers. In addition, we would understand their respective
inventory level during our communication with our distributors under the general distribution
model from time to time. By understanding their inventory level, we would be able to
understand the fluctuation in their inventory level and check whether there are any obsolete
inventory. We are of the view that the inventory level monitoring arrangements would minimize
the risk of channel stuffing among our distributors under the general distribution model.
We expect our sale of health management products under MODONG brand, which would be
launched in the future, would also be distributed under the general distribution model.
Distribution through other e-commerce channels
We also distribute our products through other e-commerce channels where we directly sell
our products to the end consumers. Such e-commerce channels include our Star Plus 4U App ( ̶
Ꮄ፯) and our stores operated on various online platforms such as our Tmall stores, Kuaishou
stores and Douyin stores. End consumers may place orders for our products through these
e-commerce channels and we will be responsible for delivery of the products to the end
consumers. Payments for our products are made through the e-commerce channels, which will
subsequently paid to us according to the relevant policies of the e-commerce channels.
Star Plus 4U (
Ꮄ፯ )
On July 1, 2021, we entered into a cooperation agreement with Kunshan Huaxing Internet
Cultural Promotion Limited (ʮ̡ )( “ Kunshan Huaxing ”) for the
operation of Star Plus 4U (Ꮄ፯ ). We are the copyright and trademark owner of the Star
Plus 4U App, and Kunshan Huaxing is an Independent Third Party and obtained the value-added
telecommunication services license. Kunshan Huaxing operates the Star Plus 4U software,
through which users can directly purchase a majority of our products as well as the products
procured from other suppliers.
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The following summarizes the salient terms of the cooperation agreement with Kunshan
Huaxing:
Scope of cooperation: We granted Kunshan Huaxing the license to use Star Plus 4U and
Kunshan Huaxing agrees to operate Star Plus 4U . Subject to our prior approval, Kunshan
Huaxing is entitled to sell products procured from other suppliers in addition to our products on
Star Plus 4U .
Fee arrangement: We shall receive 50% of the sales revenue of all the products sold
through the platform, after deducting the cost of sales and sales and marketing expenses.
Term: Five years.
Our rights: We are the owner of the intellectual property of Star Plus 4U App and all the
business related information, except for the relevant operational and user data.
Other e-commerce channels
Other than the Star Plus 4U App , we also sell our products through various e-commence
channels including our Tmall stores, Kuaishou stores and Douyin stores. We normally sell our
products which target the general public through e-commerce platforms.
In addition, since December 2021, we have further expanded our sales channels where we
commenced selling the products for our new retail business through E-commerce Livestreaming
sessions and online short videos on Douyin . We created our own Douyin account
“㺘㺘દ ” (which is a popular slogan that is featured in Mr. Liu Keng-hung’s
Livestreaming session) to conduct E-commerce Livestreaming sessions for the sale of our
products and collaborate with celebrities and KOLs (e.g. Ms. Vivi Wang) to promote the sales of
our products on our Douyin stores through, among others, E-commerce Livestreaming sessions
and online short videos through our Douyin account and/or the accounts of the relevant
celebrities and KOLs. In 2022, we recognized revenue of RMB34.1 million from the sales of our
products through Douyin stores mainly directed from the E-commerce Livestreaming sessions.
For further details, please refer to the section headed “Cooperation with celebrities –
Cooperation with Mr. Liu Keng-hung and Ms. Vivi Wang” in this prospectus.
During the E-commerce Livestreaming sessions and/or in the online short videos, the
relevant celebrities and KOLs would normally introduce our products and share the features of
such products with his/her viewers. Viewers can access our Douyin stores by clicking the link
posted in the E-commerce Livestreaming sessions and/or online short videos in real time. Any
sales conducted through the specific link would then be recorded as sales attributable to the
relevant celebrities and KOLs. According to the terms and conditions of Douyin , we shall pay (i)
service fees to Douyin for operation and technical support services, which are generally at
standard fee rates (which vary depending on the types of products being sold) of our sales
derived from completed transactions, from the specific link; and (ii) commission to the relevant
celebrities and KOLs where such commission are generally based on pre-agreed percentage of
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the transactions completed from the specific link. During the year ended December 31, 2022,
commission rate payable by us to such celebrities and KOLs typically ranged from 10% to 30%
and we recorded expenses of commission of RMB8.6 million. Please also refer to the section
headed “Financial information – Description of major components of our results of operations –
Selling and marketing expenses – Commissions” for further details on the commissions to
celebrities and KOLs. Our Directors are of the view that the commission rate payable by our
Group to celebrities and KOLs is in line with the prevailing market rate.
As the celebrities and KOLs whom we collaborate with are of good reputation (i.e. with
good ratings on Douyin ) and generally have well-established viewers base, our Directors are of
the view that they should be able to promote our products effectively. We consider that
distribution of our products on these e-commerce platforms would enhance our brand awareness
as well as customer base.
CUSTOMERS
Our customers consist of customers from our new retail business and IP creation and
operation segments. For our new retail business, our customers are our distributors, and our end
consumers include our distributors, sub-distributors as well as the users of our products. For our
IP creation and operation, our customers primarily consist of content producers, IP licensing
partners and online platform operators. We have developed a stable relationship with our key
customers.
In each year during the Track Record Period, revenue generated from our top five
customers accounted for approximately 23.5%, 21.2%, 16.3% and 23.6%, and the total revenue
generated from our largest customer and its affiliates accounted for approximately 6.4%, 13.7%,
5.6% and 8.3% in each year during the Track Record Period, respectively.
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The following tables set forth the details of our five largest customers in each year during
the Track Record Period:
For the year ended December 31, 2019
Customer
Customer type/
background Business segment Place of business
Revenue
attributable
to customer
Approximate
%o fo u r
total revenue
Commencement
of business
relationship
(RMB’000) (%)
Zhang Yinmei
(ߕ)
1)
Distributor New retail Shanghai 5,581 6.4 2018
Zhou Rongmei
(մ࿲ૠ)(2)
Distributor New retail Zhejiang 3,976 4.6 2018
Customer A (3) Distributor New retail Zhejiang 3,823 4.4 2018
Wang Lei
(ˮᑜ)(4)
Distributor New retail Zhejiang 3,547 4.1 2018
Zhang Yanling
(ޛ5)
Distributor New retail Shandong 3,503 4.0 2018
Notes:
(1) Zhang Yinmei (ߕis an individual with business positions in both the trading and e-commerce
industries. She is the proprietor of a trading firm and a daily necessities firm, as well as a legal
representative and executive director of a trading company and a e-commerce company. For the year ended
December 31, 2019, Zhang Yinmei (ߕwas our distributor in her personal capacity. Subsequently,
such customer entered into a distribution agreement through a corporate entity controlled by him/her as to
80% and the remaining equity interest is owned by an individual who is an Independent Third Party.
(2) Zhou Rongmei ( մ࿲ૠ) is an individual with trading background. She is the legal representative,
executive director and manager of a trading company, as well as the proprietor of a trading firm and a food
store. She was awarded the Emerging Outstanding WeChat Business Team by China Beauty in 2015. For
the year ended December 31, 2019, Zhou Rongmei ( մ࿲ૠ) was our distributor in her personal capacity.
Such customer established an Individual Proprietor in July 2020 and such entity was subsequently our
distributor.
(3) Customer A is an individual with e-commerce and trading background. She is currently the legal
representative, executive director and general manager of an e-commerce company and a garment
company, as well as the proprietor of a trading firm, a clothing store, and a e-commerce studio. For the
year ended December 31, 2019, Customer A was our distributor in her personal capacity. Such customer
established an Individual Proprietor in July 2020 and such entity was subsequently our distributor.
(4) Wang Lei ( ˮᑜ) is an individual with e-commerce and trading background. She is currently the legal
representative, executive director and manager of an e-commerce company, as well as the proprietor of a
trading firm and a clothing store. For the year ended December 31, 2019, she was our distributor in her
personal capacity. She established an Individual Proprietor in April 2019 and such entity was subsequently
our distributor.
(5) Zhang Yanling (ޛis an individual with trading and business background. She is currently the legal
representative, executive director and general manager of a business services company, and the supervisor
for another business services company. She is also the proprietor of a trading firm and a clothing store.
For the year ended December 31, 2019, she was our distributor in her personal capacity. She established an
Individual Proprietor in July 2014 and such entity was subsequently our distributor.
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For the year ended December 31, 2020
Customer
Customer type/
background Business segment Place of business
Revenue
attributable
to customer
Approximate
%o fo u r
total revenue
Commencement
of business
relationship
(RMB’000) (%)
Customer B
(1) Cable television, radio and
television broadcasting with
program production, and
video on demand services
IP creation and
operation
Zhejiang 62,409 13.7 2020
Netflix, Inc. Streaming service provider
offering streaming of TV
series, documentaries and
films
IP creation and
operation
United States 19,181 4.2 2020
Xie Fang
(ٹ)
2)
Distributor New retail Fujian 5,785 1.3 2019
Customer A (3) Distributor New retail Zhejiang 4,913 1.1 2018
Gan Liping
(͚ᘆറ)(4)
Distributor New retail Guangxi 4,220 0.9 2018
Notes:
(1) Customer B is a comprehensive media group directly affiliated to the Provincial Party Committee and
Provincial Government of Zhejiang, China, with news and propaganda as its main sectors. It has more than
7,100 employees, 10 TV channels, and eight broadcasting frequencies. Its business scope covers
newspapers, magazines, audiovisual publishing, film and television drama production, cultural parks,
media engineering, tourist hotels, comprehensive properties, and other fields.
(2) Xie Fang (ٹis an individual with trading background. She is the legal representative, executive
director and general manager of a trading company, as well as the proprietor of a clothing store and a
trading firm. For the year ended December 31, 2020, she was our distributor in her personal capacity. She
established an Individual Proprietor in July 2020 and such entity was subsequently our distributor.
(3) Customer A was also one of our five largest customers for the year ended December 31, 2019. For details,
please refer to note 3 to the List of top five customers for the year ended December 31, 2019 above.
(4) Gan Liping ( ͚ᘆറ) is an individual with trading and e-commerce background. She is the legal
representative, executive director of a trading company and an e-commerce company. She is also the
proprietor of a trading firm and a department store firm. For the year ended December 31, 2020, she was
our distributor in her personal capacity. Subsequently, she entered into a distribution agreement through a
corporate entity established in July 2020, which was owned by her as to 99% and the remaining equity
interest was owned by an individual who is an Independent Third Party.
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For the year ended December 31, 2021
Customer
Customer type/
background Business segment Place of business
Revenue
attributable
to customer
Approximate
%o fo u r
total revenue
Commencement
of business
relationship
(RMB’000) (%)
Customer C
Group
(1)
Production and operation of
radio and television
programs; Advertising
designing
IP creation and
operation
Beijing 20,484 5.6 2021
Customer D
(2) Wholesaler New retail Jiangsu 11,964 3.3 2021
Customer E (3) Organize and plan cultural and
sports activities
IP creation and
operation
Sichuan 9,974 2.7 2021
Customer F (4) Cultural and creative design
services; Music art
consulting; Planning of
cultural activities
IP creation and
operation
Guangdong 8,726 2.4 2021
Customer G
(5) Production and operation of
radio and television
programs; Advertising
designing
IP creation and
operation
Zhejiang 8,491 2.3 2021
Notes:
(1) Customer C Group is listed on the Main Board of the Stock Exchange principally engaged in the operation
of video-based social platforms and the provision of livestreaming and online marketing services.
(2) Customer D is a PRC incorporated company with a registered capital of RMB100,000. Its principal
business includes the wholesale and retail of food products.
(3) Customer E is a PRC incorporated company with a registered capital RMB1 million. Its principal business
includes the organization and planning of cultural and sports activities.
(4) Customer F consists of two fellow companies under the same blue chip Chinese multinational technology
conglomerate listed on the Main Board of the Stock Exchange, whose principal business includes digital
content, communication and social platform.
(5) Customer G is a PRC incorporated company with a registered capital of RMB50 million. Its principal
business includes the production of radio and television programs, publication of advertisements, operation
of internet cultural content, and sale of packaged food products online. According to publicly available
information, Customer G has more than 900 employees.
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Y ear ended December 31, 2022
Customer
Customer type/
background Business segment Place of business
Revenue
attributable
to customer
Approximate
%o fo u r
total revenue
Commencement
of business
relationship
(RMB’000) (%)
Customer G
(1) Production and operation of
radio and television
programs; Advertising
designing
IP creation and
operation
Zhejiang 28,565 8.3 2021
Customer C
Group
(2)
Production and operation of
radio and television
programs; Advertising
designing
IP creation and
operation
Beijing 23,895 6.9 2021
Customer H
Group
(3)
Production and operation of
radio and television
programs; Advertising
designing
IP creation and
operation
Beijing 16,287 4.7 2022
Customer I
(4) Production and operation of
radio and television
programs; Advertising
designing
IP creation and
operation
Fujian 7,854 2.3 2022
Customer D
(5) Wholesaler New retail Jiangsu 4,478 1.3 2021
Notes:
(1) Customer G was also one of our five largest customers for the year ended December 31, 2021. For details,
please refer to note 5 to the List of top five customers for the year ended December 31, 2021 above.
(2) Customer C Group is also one of our five largest customers for the year ended December 31, 2021. For
details, please refer to note 1 to the List of top five customers for the year ended December 31, 2021
above.
(3) Customer H Group is listed on the Main Board of the Stock Exchange principally engaged in
telecommunications and information related businesses.
(4) Customer I is a PRC incorporated company with a registered capital of RMB100 million. Its principal
business includes advertisement consultation services, design, production and publication of
advertisements in the PRC, cultural, entertainment and performance agency services, as well as radio and
television program production and operation.
(5) Customer D was also one of our five largest customers for the year ended December 31, 2021. For details,
please refer to note 2 to the list of top five customers for the year ended December 31, 2021 above.
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As of the Latest Practicable Date, to the best knowledge of our Directors after the enquiry,
none of our Directors or their close associates or any Shareholders holding more than 5% of the
issued share capital of our Company immediately following the completion of the Global
Offering, had any interests in any of our five largest customers during the Track Record Period.
Jesports (Beijing) is one of our distributors and during its ordinary course of business, it
ordered our health management and skincare products in the new retail segment, which are
primarily distributed through the Internet cafes and teahouse chains operated by Jesports
(Beijing), its subsidiaries or within its franchise network. Save as Jesports (Beijing), Ms. Ma and
Ms. Zhang which were our distributors, to the best knowledge, information and belief of our
Directors, having made all reasonable enquiries, none of our Directors or their respective close
associates or any Shareholders owning more than 5% of our issued Shares were, or had any
interest in any of our distributors or the sub-distributors during the Track Record Period and up
to the Latest Practicable Date. The aggregate revenue contribution from Jesports (Beijing), Ms.
Ma and Ms. Zhang during the Track Record Period was less than 1% of our total revenue during
each year. The respective revenue contribution from Jesports (Beijing), Ms. Ma and Ms. Zhang
during the Track Record Period are set out as follows.
Y ear ended December 31,
2019 2020 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
Jesports (Beijing) – 1,656 2,510 73
Ms. Zhang – 39 32 128
Ms. Ma 8 37 – –
For further details, please refer to Note 36(b) to the Accountant’s Report in Appendix I to
this prospectus.
SUPPLIERS
Currently, our suppliers primarily include selected third-party manufacturers for our new
retail business and event planning and management for our IP creation and operation. We have
developed a stable relationship with our key suppliers.
For our new retail business, our suppliers are selected third-party manufacturers in China.
Our products are manufactured by selected third-party manufacturers in China that specialize in
the manufacturing of skincare products or nutritional food. Our manufacturing supply chain is
important to our growing business. We closely collaborate with a network of ODM and
packaging supply partners to produce our products, such as Hengmei Group. For further details
of our dealing with Hengmei Group, please refer to the paragraph headed “Suppliers – Selection
and management of supplier – Our relationship with Hengmei Group” in this section below.
For our IP creation and operation business, our suppliers include selected event or program
planning and management companies in China. Due to the business nature of the event or
program planning and management, we will engage suppliers from time to time on ad hoc basis
when we are engaged to provide media content, event planning and other designing and
licensing of proprietary celebrity IPs.
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In each year during the Track Record Period, purchases from our top five suppliers
accounted for approximately 75.1%, 73.3%, 58.3% and 47.9% of our total purchase,
respectively, and the total purchase from our largest supplier accounted for approximately
26.9%, 48.1%, 31.2% and 23.2% of our total purchase amount in each year during the Track
Record Period, respectively.
The following tables set forth the details of our five largest suppliers in each year during
the Track Record Period:
For the year ended December 31, 2019
Supplier
Products/services
provided to us Business segment Place of business
Purchase
amount
by us
Approximate
% of our
total
purchase
Commencement
of business
relationship
(RMB’000) (%)
Supplier A
(1) Program planning and
coordination
IP creation &
operation
Xinjiang 18,872 26.9 2018
Hangzhou
Hengmei
Manufacturer of
MODONG coffee
New retail Hangzhou 13,887 19.8 2019
Supplier B (2) Manufacturer of other
products
New retail Beijing 8,175 11.7 2018
Archstone Provision of planning
service, participation
and authorization of
IP of celebrities at
events and/or
programs etc.
IP creation and
operation
Taiwan 6,985 10.0 2018
Supplier C
(3) Production service IP creation and
operation
Shanghai 4,779 6.8 2018
Notes:
(1) Supplier A is a PRC incorporated company with a registered capital of RMB10 million. Its principal
business includes business consultation, e-commerce, and organization of cultural and artistic exchange
activities.
(2) Supplier B is a PRC incorporated company with a registered capital of RMB155.1 million. Its principal
business includes technological development, sales of food, daily necessities, and import and export of
goods and technologies.
(3) Supplier C is a PRC sole proprietorship* (“ɛዹ༟Άุ ”) with a registered capital of RMB10,000. Its
principal business includes the planning and consultation of film and television drama, exchange and
planning of film and television cultural and artistic activities, and technical development, technical
services and technical consultation in the field of film and television culture.
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For the year ended December 31, 2020
Supplier
Products/services
provided to us Business segment Place of business
Purchase
amount
by us
Approximate
% of our
total
purchase
Commencement
of business
relationship
(RMB’000) (%)
Hangzhou
Hengmei
Manufacturer of
MODONG coffee
New retail Hangzhou 74,389 48.1 2019
Handian
Biotechnology
(Jiangsu)
Inc.*
(ϪᘽဏՊ͛
΅
ʮ̡ )
(1)
Manufacturer of
health management
products
New retail Jiangsu 15,863 10.3 2019
Supplier D
(2) Program planning and
coordination of
J-Style Trip season
one and Ningbo
Superstar
Performance Mega
Night
IP creation and
operation
Taiwan 8,388 5.4 2018
Archstone Provision of planning
service, participation
and authorization of
IP of celebrities at
events and/or
programs etc.
IP creation and
operation
Taiwan 7,600 4.9 2018
Supplier E
(3) Manufacturer of
beauty equipment
New retail Beijing 7,114 4.6 2018
Notes:
(1) Handian Biotechnology (Jiangsu) Inc.* (ʮ̡ ) is a PRC incorporated company
listed on the New Third Board Market (OTC market in the PRC) with a registered capital of RMB10.7
million. Its principal business includes research and development, production and sales of health food.
(2) Supplier D is a company incorporated in the British Virgin Islands which mainly engages in cultural and
entertainment-related business.
(3) Supplier E is a PRC incorporated company with a registered capital of RMB1 million. Its principal
business includes organization of cultural and artistic exchanges and sales of daily necessities.
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For the year ended December 31, 2021
Supplier
Products/services
provided to us Business segment Place of business
Purchase
amount
by us
Approximate
% of our
total
purchase
Commencement
of business
relationship
(RMB’000) (%)
Hangzhou
Hengmei
(1)
Manufacturer of
MODONG coffee
New retail Hangzhou 47,121 31.2 2019
Archstone Provision of planning
service, participation
and authorization of
IP of celebrities at
events and/or
programs etc.
IP creation and
operation
Taiwan 11,461 7.6 2018
Supplier F
(2) Program planning and
coordination of
J-Style Trip season
two
IP creation and
operation
Taiwan 10,759 7.1 2021
Handian
Biotechnology
(Jiangsu)
Inc.*
(ϪᘽဏՊ͛
΅
ʮ̡ )
(3)
Manufacturer of health
management
products
New retail Jiangsu 9,895 6.6 2019
Supplier D
(4) Program planning and
coordination
IP creation and
operation
Taiwan 8,735 5.8 2018
Notes:
(1) The purchase from Hangzhou Hengmei in the year ended December 31, 2021 includes purchases from both
Hangzhou Hengmei and its wholly-owned subsidiary.
(2) Supplier F is a Taiwan incorporated company with a share capital of New Taiwan Dollar 1 million. Its
principal business includes entertainment-related business, artistic and cultural services, and advertisement
services.
(3) Handian Biotechnology (Jiangsu) Inc.* (ʮ̡ ) was also one of our five largest
suppliers for the year ended December 31, 2020. For details, please refer to note 1 of the table for the year
ended December 31, 2020.
(4) Supplier D was also one of our five largest suppliers for the year ended December 31, 2020. For details,
please refer to note 2 of the table for the year ended December 31, 2020.
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For the year ended December 31, 2022
Supplier
Products/services
provided to us Business segment Place of business
Purchase
amount
by us
Approximate
% of our
total
purchase
Commencement
of business
relationship
(RMB’000) (%)
Hangzhou
Hengmei
(1)
Manufacturer of
MODONG coffee
New retail Hangzhou 42,325 23.2 2019
Supplier G (2) Provision of stage and
set design planning
for our IP program
IP creation and
operation
Taiwan 18,434 10.1 2021
Supplier F
(3) Program planning and
coordination of Yue
Lai Yue Kuai Le (ᆀ
ԸᆀҞᆀ ) and
J-Style Trip season
two
IP creation and
operation
Taiwan 12,706 7.0 2021
Archstone Provision of planning
service, participation
and authorization of
IP of celebrities at
events and/or
programs etc.
IP creation and
operation
Taiwan 7,051 3.9 2018
Handian
Biotechnology
(Jiangsu)
Inc.* ( Ϫᘽ
߅ي
ࠢ
ʮ̡)
(4)
Manufacturer of
health management
products
New retail Jiangsu 6,712 3.7 2019
Notes:
(1) The purchase from Hangzhou Hengmei in the year ended December 31, 2022 includes purchases from both
Hangzhou Hengmei and its wholly-owned subsidiary.
(2) Supplier G is a Taiwan incorporated company with its shares listed on the Taiwan Stock Exchange. Its
principal business includes event-planning and the design and production of shows and stages.
(3) Supplier F was also one of our five largest suppliers for the year ended December 31, 2021. For details,
please refer to note 2 of the table for the year ended December 31, 2021.
(4) Handian Biotechnology (Jiangsu) Inc.* (ʮ̡ ) was also one of our five largest
suppliers for the years ended December 31, 2020 and 2021. For details, please refer to note 1 of the list of
top five suppliers for the year ended December 31, 2020.
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As of the Latest Practicable Date, save as Archstone, to the best knowledge of our
Directors after due inquiry, none of our Directors or their close associates or any Shareholders
holding more than 5% of the issued share capital of our Company immediately following the
completion of the Global Offering, had any interests in any of our five largest suppliers during
the Track Record Period.
Selection and management of supplier
Generally, we select third-party suppliers based on a number of factors such as
manufacturing capacity, source of raw materials, years of operation, reputation and compliance
with the applicable laws and regulations. We periodically review the performance of our
third-party suppliers and reserve alternative sources of supply in advance based on our product
launch plans.
To protect our intellectual property rights from infringement, we primarily rely on our
agreements with the third-party manufacturers to protect our intellectual property rights.
We from time to time enter into OEM cooperation framework agreements with OEM
manufacturers in relation to the production of various products. The following summarizes the
salient terms of such cooperation agreement.
Exclusivity. The supply or sales of the products with the same or similar formula and
relevant intellectual property rights or packaging, and the use of the formula to produce or
authorize any other third parties to produce and sell any products is exclusive to us.
Term. Two years, and shall be automatically renewed for one year upon expiration, unless
we give three months’ prior written notice to the relevant OEM manufacturers.
Intellectual property rights. We shall own the formula of the product and the rights to use
the formula of the product exclusively. We shall own all other intellectual property rights of the
products exclusively and without any limits.
In the event we engage OEM manufacturers to develop certain of our products, we may
include an extra clause which the formula and relevant intellectual property rights developed by
such manufacturers shall be owned by us.
Our relationship with Hengmei Group
During the Track Record Period and as of the Latest Practicable Date, we engaged
Hangzhou Hengmei and its undertaking companies as the sole manufacturer of certain of our
products, including our MODONG coffee, MODONG MCT coffee, Dr . INYOU collagen peptide
beverage, matcha powder and MODONG lightly brewed coffee.
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Hengmei Group is a manufacturer of health products in China with a focus on weight
management and nutritious diet management. It has the capacity of product research and
development, production as well as health consultation. According to publicly available
information, Hangzhou Hengmei has a registered capital of RMB38.4 million. To the best
knowledge and information of the Company, Hengmei Group has more than 600 employees, of
which 50 are professional research and development staff, and 92 are quality control staff as of
June 30, 2022. Hengmei Group has developed more than 20 series of food products including a
series of high-quality protein food bars, protein-based solid drinks and other products, and its
customers include a number of industrial leading companies which focusing on health products.
Hengmei Group is a Certified Supplier ( ႩᗇԶᏐਠ ) by Société Générale de Surveillance in
recognition of its site existence and business operation, and it has been certified as a High-tech
Enterprise ( ৷อҦஔΆุ ) in December 2019. In addition, Hangzhou Hengmei is a member of
the China Health Association ( ʕ਷਄ੰ՘ึ ). To the best knowledge of our Directors, each
member of Hengmei Group which we engage has obtained all the required permits and licenses
for its business under the relevant PRC laws and regulations.
For the year ended December 31, 2019, 2020, 2021 and 2022, our purchases from Hengmei
Group amounted to RMB13.9 million, RMB74.4 million, RMB47.1 million and RMB42.3
million, respectively. The fluctuation in our purchase from Hengmei Group during the Track
Record Period was mainly due to the fluctuation in the sale of our products, particularly
MODONG coffee, given that Hengmei Group is the only supplier of our MODONG coffee. In
addition, our purchases from Hengmei Group may also be affected, to a lesser extent, by (i) the
changes in the unit cost of MODONG coffee purchased from Hengmei Group, which was
determined by the parties at the time of placing of orders with reference to the price of raw
material; and (ii) our purchases of other products from Hangzhou Hengmei or its subsidiaries
since 2021.
The following table sets out the quantity of the major product that we purchased from
Hengmei Group for the year ended December 31, 2019, 2020, 2021 and 2022:
Y ear ended December 31,
2019 2020 2021 2022
MODONG coffee (boxes)
(in thousand) (Note) 641 3,393 2,156 1,440
Trial sample of MODONG
coffee (bags) 628 3,544 2,326 1,500
Note: Each box of MODONG coffee contains seven bags.
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Hengmei Group was one of our five largest suppliers in each year during the Track Record
Period. Based on our Directors’ knowledge and belief, after make all reasonable queries, we are
only one of Hengmei Group’s customers among its diversified customer base and our
transactions are not significant to Hengmei Group’s business or financial position.
To the best of our Directors’ knowledge and belief, apart from the supplier-customer
relationship, there is no any other past or present relationships (including, without limited to,
business, family, trust, employment, shareholding, financing or otherwise) between our Group
and Hangzhou Hengmei, as well as Hangzhou Hengmei’s directors, equity holders, senior
management, and their respective associates.
We did not experience a shortage or delay in the supply of raw materials which had
imposed a material impact on us during the Track Record Period. During the Track Record
Period, we did not experience any major fluctuations of raw material prices.
Salient terms of our cooperation with Hangzhou Hengmei
On May 26, 2021, we entered into a new five-year cooperation framework agreement with
Hangzhou Hengmei in relation to our MODONG coffee. The salient terms of the cooperation
framework agreement are as follow:
Exclusivity. The supply or sales (including supply or sale without authorization) of
MODONG coffee or other products with the same or similar formula and relevant intellectual
property rights or packaging of MODONG coffee, and the use of the formula of MODONG
coffee to produce or authorize any other third parties to produce and sell any products is
exclusive to our Company.
Term. Five years, and shall be automatically renewed for one year upon expiration, unless
we give three months’ prior written notice to Hangzhou Hengmei.
Intellectual property rights. We shall own the rights to use the formula of MODONG coffee
exclusively, including but not limited to the right to use certain ingredients in the formula of
MODONG coffee. We shall own all the other intellectual property rights of the entrusted
products (excluding the formula of our MODONG coffee) exclusively and without any limits.
Supervision. We are entitled to check and inspect Hangzhou Hengmei’s factories and
quality control system. For failures identified and quality improvement recommendations
proposed by us, Hangzhou Hengmei shall formulate improvement measures within the period
requested by us.
Inspection. We are entitled to inspect the products. If any products do not satisfy the
standards as agreed by the parties, we are entitled to refuse to accept them.
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We also entered into an ODM agreement with Hangzhou Hengmei on May 26, 2021,
pursuant to which we shall provide technical elements such as development ideas and concepts
and nutritional requirements for MODONG coffee and entrust Hangzhou Hengmei to carry out
research and development and the manufacturing of MODONG coffee. Hangzhou Hengmei is not
entitled to disclose the formula, manufacturing process, suppliers of ingredients or specification
of our MODONG coffee and the relevant IP exclusively, which enables us to subcontract any
other third party to manufacture MODONG coffee when we deem necessary.
We entered into cooperation agreements with Hengmei Group from time to time for
manufacturing of our products, such as MODONG MCT coffee, Dr . INYOU collagen peptide
beverage etc., during the Track Record Period. The salient terms of these cooperation framework
agreements are similar to those of the cooperation framework agreement therewith in relation to
MODONG coffee. Certain terms, such as ownership of the formula and relevant IP rights of
these products may vary, depending on the terms of the relevant agreements.
We co-developed the formulae of these products, including MODONG coffee, with
Hengmei Group and consider such formulae to be a piece of sensitive and confidential
information. We consider engaging only one supplier for the production of such products to be
appropriate to minimize the risk of leakage of confidential formulae and inconsistent quality of
our products in order to maintain our competitive advantages. Having considered that we have
had a good relationship with Hengmei Group and we believe Hengmei Group is a sizable and
reputable health products manufacturer based of its abovementioned certifications, Hengmei
Group is currently our sole supplier of these products, including MODONG coffee.
As there are several health products manufacturers in China which have similar
qualifications and capabilities, we believe that, in the event that Hengmei Group ceases to
cooperate with us and terminates the contract, we would be able to locate readily available
alternative supplier(s) and change suppliers(s) without incurring significant cost or experience
material delay on product supply as (i) we have maintained a sufficient amount of these
products, (ii) our distributors are required to make prepayments for the products ordered by them
and/or sub-distributors developed by them through the Ordering System which we would able to
monitor whether there is sufficient amount of these products to be delivered, and in the event we
identify there is insufficient inventory, it would be identified at an early stage and we would
have time to resolve the matter, and (iii) we entered into framework agreements with alternative
suppliers which would be able to produce these products at a quality level required by us, when
necessary.
We are also in possession of all the relevant licenses necessary to carry on and operate our
business and we have sufficient workforce and possess our own formulae to operate and produce
our products, including MODONG coffee, independently. For more details, please refer to the
section headed “Risk factors – Risks relating to our business and industry – Our business
operations could be negatively impacted by our reliance on the sole supplier to produce
MODONG coffee” in this prospectus.
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Overlapping of major supplier and customer
During the Track Record Period, one of our top five customers from the IP creation and
operation segment were also our supplier.
Customer G
During the year ended December 31, 2022, our largest customer (i.e. Customer G or the
MCN Company) was also one of our suppliers during the financial period. Customer G is a
reputable multi-channel network company in the PRC. Since late 2021, we have cooperated with
Customer G in the event planning and IP program associated with Mr. Liu Keng-hung under our
IP creation and operation segment and our Group, Customer G and Mr. Liu Keng-hung (and his
artiste management company) shall be entitled to certain percentage of the fees from brand
owners who engaged Mr. Liu Keng-hung to promote their products or services. Customer G is
treated as our customer when it enters into cooperation agreement with the brand owners and is
responsible for collecting the fees from the brand owner(s) and transferring to us our share of
the relevant fees. For the year ended December 31, 2022, our revenue derived from Customer G
amounted to RMB28.6 million.
On the other hand, during the year ended December 31, 2022, we planned and developed a
IP program, namely, 618 streaming session (618 ˴ᅧሗఱЗ ), which was broadcasted on Douyin
and involving Mr. Liu Keng-hung as one of the performers. Pursuant to the cooperation
agreement entered into between Customer G and Talent Planet, we shall pay to Customer G their
share of the fees in relation to Mr. Liu Keng-hung’s performance in the program. Accordingly,
Customer G was treated as our supplier for the production of such IP program. During the year
ended December 31, 2022, our purchases from Customer G amounted to RMB1.7 million.
SEASONALITY
We experience seasonality in our business, in particular for our new retail segment. Our
results of operations for our new retail segment are affected by our promotional and marketing
activities, which may be subject to different shopping festivals during the year. For example, we
may record higher sales volume of our products during 618 campaign in second quarter and/or
Double 11 and Double 12 campaigns in fourth quarter during each year. Overall, the impact of
seasonality of our business has been relatively mild due to our diversified new retail product
portfolio and IP offerings to compensate the seasonality effect, and our rapid growth. The
seasonable trends that we have experienced in the past may not apply to, or be indicative of, our
future operating results. For further information, please refer to the section headed “Risk factors
– Risks relating to our business and industry – Our business operations may be subject to
seasonality.” in this prospectus.
CONNECTED TRANSACTIONS
We from time to time enter into various one off or continuing transactions with our
connected persons during our ordinary course of business.
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For the IP creation and operation segment, we had and will continue to enter into
transactions with our connected persons, including JVR Music (Mr. Jay Chou’s artiste
management company) and Archstone (Mr. Jay Chou’s representative for business negotiations in
respect of one off or project based engagement) for the provision of various services and the
sharing of ChouMate related licensing fees, the licensing of ChouMate and the sales of
ChouMate related products at their outlets. For the new retail segment, we had and will continue
to enter into distribution and other retail arrangements with our connected persons, including
Jesports (Beijing) which was distributing certain of our products. For details, please refer to the
section headed “Financial information – Related party transactions and balances” of this
prospectus.
After the Track Record Period and before our Listing, we may enter into various
transactions with our connected persons, including but not limited to those stated in this section
and in the section headed “Summary – Recent developments” of this prospectus or transactions
arising from the IP Authorization Agreement, which may constitute connected transactions of our
Company if they were entered into upon our Listing. We will ensure ongoing compliance with
the applicable Listing Rules requirements (especially the requirements under Chapters 14 and
14A of the Listing Rules) upon Listing.
MARKETING INITIATIVES
We adopt multi-faceted marketing strategy. Our marketing strategies focus on our ability to
procure consumers through KOC promotion, in particular through private domain traffic, or
PDT, which is further empowered by celebrity participation through other complementary venues
and channels, such as TV programs and large-scale concerts. PDT refers to private-controlled net
traffic flow through private channel such as WeChat and Weibo, where users with similar
interests or buying habits participate in group chat. PDT can often be enhanced if a private
channel is owned by or features a KOL or KOC. Apart from marketing our products through
word-of-mouth through KOL or KOC promotion, we also devote significant efforts and invest
much capital in a wide variety of sales and marketing activities. We believe our IP-based
marketing boosts our product exposure and enables us to build our brand image through
multi-dimensional marketing campaigns. When considering which combination of marketing and
promotion methods should be used for a particular product, we will consider different factors,
among others, its target end consumer base, how common is such product in the market, whether
we will launch relatable IP(s) shortly before or after the launch of such product to create a
synergy effect.
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KOL/KOC marketing initiatives
KOL is a type of traditional influencers who are popular persons followed by the public
audience, while KOC is a new type of influencers in China, who procure content viewers and
account followers by testing products, sharing user experience, giving reviews and
recommending products based on their recognition of the products’ quality and effects through
their own PDT. Young people in China are more willing to share their personal life and shopping
experiences online, and their purchasing decisions are more prone to be influenced by KOLs,
KOCs, communities and social networks, which provides huge growth potential of the social
e-commerce industries. KOLs and KOCs can act as influencers, whose opinions are consumed by
an interested group or community and can attract loyal followers for brands which they
recommend. These influencers can have impact on the decision-making process of the potential
end consumers through their experience as first-hand end consumers.
The marketing strategy of market participants will evolve from marketing through personal
acquaintances to marketing through communities, KOCs and KOLs. Marketing through personal
relationship has only limited range of consumers, as acquaintances might not have similar
interests in specific products or services. Communities, KOCs and KOLs can match those who
have similar demands and provide an efficient approach for online stores to reach a huge amount
of target consumers. An integrated full-serviced social e-commerce enables influencers and
distributors to easily navigate, share, create content and interact with consumers, providing
enjoyable on-purchase and after-sale services and familiarizing consumers with the product
information and true user experience. Therefore, more products and services are expected to be
promoted through communities, KOCs and KOLs in the future.
Our marketing strategies focus on KOLs and KOCs, and PDT marketing channels. Many of
our distributors and sub-distributors are KOCs that are active in particular social communities
and have their own social media accounts to promote our products, providing trainings to end
consumers and conducting other related sales activities. Marketing efforts by KOC distributors
are complementary to our own sales and marketing efforts, such as product placement and
advertisement in TV program and large scale concerts.
Kunshan Tingshe, our Distribution Agent for Kunshan Tingshe Distributed Products, offers
free trainings to our distributors or sub-distributors mainly on sales and marketing techniques
regarding sales of our products to help them to become KOCs, which include: (i) product trials
and experiences sharing; (ii) continuous instructions conducted by KOC distributors based on
their personal experiences; and (iii) series of short-term and intensive tutorials such as
Seven-day Creation Camp ( ɖ˚௴ிᐄ ), for KOCs to enhance their influence through integrated
resources and professional support. We assist Kunshan Tingshe to host training sessions for
distributors regularly. Through supporting and cultivating distributors in their effort to become
KOCs, we and Kunshan Tingshe also assist our KOCs to promote our brand and products
through targeted professional trainings which mainly focus on our brand and features of our
products. As a result, we believe we are able to communicate focused messages to our potential
end consumers in a more effective and economical way. For more details on our distributors’
training system and program, please refer to the paragraph headed “Distribution network –
Distribution Agent Assisted Distribution Model – Management of our distribution network – (II)
Market-oriented training programs” in this section.
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Promotion and marketing activities
To maintain market recognition of our brands, and to avoid losing resonance in our brands’
target market, we gather feedback from consumers and conduct analysis on the sales of products.
We also observe the latest market trend, previous sales performance, market demand as well as
advertisements of new products developed by our competitors on a regular basis for ideas for
selecting new products for development.
In addition, we also formulate marketing strategies and promotes our brand awareness and
products through, among others, TV advertisements/sponsorships, providing trial samples and
packaged gifts, hosting various events, conferences and meetings and placing advertisements, to
expand our consumer base. One of our major promotion and marketing activities is our annual
event. We organized our annual event in Ningbo and Ocean Flower Island in January 2020 and
April 2021, respectively, which aimed to foster brand loyalty amongst our distributors and
sub-distributors and motivating them to further their sale performance and serve as a marketing
tool to enhance our brand awareness. During our annual events, we may announce our future
plan, introduce our new products, offer sales promotion of our products as well as invite
different performers to perform. We also provide customer services through our MODONG
Health App where we offer users a MODONG coffee low-carb diet plan.
IP-empowered marketing
We established an IP-empowered marketing strategy in which we promote our products in
association with our proprietary celebrity unique IPs and associated IP contents. We believe such
association facilitates our efforts to introduce new products to end consumers who may be more
familiar with the IP but have not previously purchased our products, and allows us to generate
engagement from our existing consumer base. One of our successful products, ChouMate Edition
of MODONG coffee, is a product marketed in association with ChouMate .
In addition, unique celebrity IPs with a vast fan base may be an incentive for our end
consumers, KOLs or KOCs to try our products and share their reviews on social media
platforms. By creating our own IPs, we may boost our influencers’ marketing capabilities at the
same time.
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PRODUCT RESEARCH AND DEVELOPMENT
We believe that product research and development is crucial to our success and sustainable
growth. We are continuously developing new products for our new retail business to enhance and
diversify our product offerings. Our product development department would conduct market
research to identify any particular demands in the market towards health management products
and skincare products.
The following illustrate the major steps we will go through for research and development
with respect to our health management products as an example:
I. Identification of
potential health
management product
II. Assessment on market
demand and supply of
the product and
its profitability
III. Conduct market
research on the features
and tastes that the market
will be interested in
VI. Design of product
packaging to highlight
the features of the
product
V. Trial production and
refinement of product
formula upon receipt of
feedback from our sample
testing group
IV. Collaboration with
our suppliers on research
and development to
co-develop the product
formula
During the Track Record Period, we mainly collaborated with external institutions for the
research and development of our products. We normally engage independent OEM manufacturers
in the PRC to co-develop the formula of the potential products by modifying and refining the
existing formula to fulfill all our requirements. The OEM manufacturers we engaged are all
established in the PRC and mainly engaged in the manufacturing and sales of food products
and/or beverages, for the supply of these products. For example, during the Track Record Period,
we engaged Hengmei Group for the co-development of various products, including (without
limitation) MODONG coffee and matcha powder based on the development ideas, concepts and
nutritional requirements provided by us. For details of salient terms of cooperation agreement
with OEM manufacturers, please refer to the paragraph headed “Suppliers – Selection and
management of supplier” in this section above.
During the Track Record Period, the research and development costs incurred by us mainly
comprised salaries and benefits paid to our internal research and development team, which was
insignificant to our general and administrative expenses. Such costs amounted to approximately
RMB2.6 million, RMB9.2 million and RMB12.6 million for the year ended December 31, 2020,
2021 and 2022, respectively. As at December 31, 2022. Our product development team has eight
employees.
Please also see to the paragraph headed “Our strategies and future plans – Further diversify
our product portfolio through product development” in this section.
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LOGISTICS AND INVENTORY MANAGEMENT
As of the Latest Practicable Date, we engaged three warehousing services providers
primarily to provide inventory management, meet our storage needs and ensure the delivery of
our products to the end consumers or distributors efficiently and economically.
We co-operate with third-party logistics service providers to collect our products from
warehouses and deliver them to our retail points. As of the Latest Practicable Date, we had one
warehousing and delivery service provider and several logistics service providers. Our
transportation arrangements with third-party logistics service providers enable us to maintain a
low level of capital investment in developing and maintaining an in-house logistics system. We
select logistics service providers based on their reputation, logistic network and financial
resources.
Inventory management
During the Track Record Period, all of our inventories were raw and packaging materials
and finished products. We need to maintain a sufficient amount of inventories in our warehouses
to satisfy the demands of our sales and distribution channels, and to support our expansion plan.
On March 26, 2020, we entered into an inventory management agreement with Hangzhou
Hengmei, the manufacturer of our MODONG coffee, which provides that Hangzhou Hengmei
shall stock up raw materials and ingredients for the annual production of 3.5 million boxes of
MODONG coffee in order to avoid any disruption to Hangzhou Hengmei’s production process
which may be caused by the COVID-19 pandemic. Such agreement has been renewed on April 8,
2022, pursuant to which Hangzhou Hengmei shall stock up raw materials and ingredients for
350,000 boxes of MODONG coffee. As of the Latest Practicable Date, the inventory
management agreement remained effective.
As of December 31, 2019, 2020, 2021 and 2022, the balance of inventories amounted to
RMB15.5 million, RMB24.1 million, RMB24.5 million and RMB28.8 million, respectively,
representing 8.7%, 9.3%, 6.9% and 6.9% of our total current assets, respectively. Our average
number of inventory turnover days for 2019, 2020, 2021 and 2022 were 180 days, 76 days, 128
days and 149 days, respectively.
To promote a healthy financial model and improve the cash flow of our distributors so as to
develop a sustainable distribution network, we have been monitoring the inventory levels based
on the inventory records provided by our distributors and sub-distributors. We have established
policies with regard to inventory management, such as a labeling system with traceable QR code
for each package of our product to trace the delivery status distributable by us. In addition, upon
the completion of stocking, the warehouse keeper shall promptly contact the procurement
personnel to input the relevant information into the inventory management system, and the
inventories shall be inspected on a monthly basis and a written inspection table shall be
generated and jointly signed by the personnel who in charge of the inspection. Moreover, we
have also put in place a security system to protect and prevent our inventory from theft,
embezzlement and damages.
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We believe the above-mentioned initiatives could reduce the exposure of our distributors to
financial and operational risks and hence promote a healthy distribution network.
IMPACT OF THE OUTBREAK OF COVID-19 ON OUR BUSINESS
There had been an outbreak of the new coronavirus (COVID-19), which had quickly spread
around the globe since late 2019. During the year ended December 31, 2020, we recorded a
gross loss in our IP creation and operation business primarily because of the cancellation of a
number of sponsorships for J-Style Trip season one due to the uncertainty of the effect of the
COVID-19 pandemic. The pandemic and the related control measures imposed by the local
government also affected the schedule of events and/or production of IP programs, which in turn
affect our revenue from the IP creation and operation business.
Since late 2021, there had been another wave of outbreak of the COVID-19 pandemic,
including the highly transmissible Omicron variant, in various districts in the PRC which had
subsequently developed into a large-scale outbreak during the first half of 2022. In response to
the Resurgence, local governments in PRC have imposed various restrictions on business and
social activities, including stringent travel restrictions, heightened quarantine measures and
mandated temporary suspension of business operations. Many regions in the PRC imposed
different scale of traveling restrictions. Particularly, a large-scale regional static management
control measure ( Όਹ᎑࿒၍ଣ ) had been imposed in Shanghai, being one of the most
large-scaled control measures imposed since the COVID-19 pandemic. The control measures
posed great challenge to the PRC economy during the first half of 2022. In April 2022, both
Manufacturing Purchasing Managers’ Index and Synthesized Purchasing Managers’ Index had
reached the lowest record since March 2020. In the first half of 2022, the bulletproof drink
market in the PRC recorded a year-on-year decline of approximately 46.2% as compared to the
corresponding period in 2021.
The Resurgence also presented further challenges to our business and financial
performances during the year ended December 31, 2022, as a substantial part of our operations
are located in the Yangtze River Delta area which was severely affected by the Resurgence. We
recorded a decrease in our revenue of RMB21.1 million from RMB365.3 million for the year
ended December 31, 2021 to RMB344.2 million for the year ended December 31, 2022,
representing a decrease of approximately 5.8%. Such decrease was mainly attributable to the
decrease in our revenue from our new retail business, which had recorded a decrease of 20.3%
from RMB301.4 million for the year ended December 31, 2021 to RMB240.1 million for the
year ended December 31, 2022. Particularly, our business and operations had been negatively
affected by (i) the disruptions to the operation of our logistics and delivery service providers
which had materially affected the delivery of our products to the distributors, sub-distributors or
end consumers; (ii) consumer demand was affected due to the overall worsening of the PRC
economy; (iii) the production of our products has been disrupted as raw materials were unable to
be delivered to our suppliers; (iv) travel restrictions and social distancing requirements imposed
by the local government which had prohibited Kunshan Tingshe and our distributors from
organizing offline promotion activities; and (v) the delays in the production and/or broadcasting
schedule of our IP programs, which have been used by us as one of the sales and marketing
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means for our new retail products, due to travel restrictions which had in turn affected our
revenue from the IP creation and operation segment. Set forth below are the details of the
original time of and revised estimated time of the broadcasting/launching schedule of our major
IP programs as a result of the outbreak of the COVID-19:
Our IP programs
Original time of
broadcasting/
launching
Estimated time of
broadcasting/
launching as at the
Latest Practicable
Date
Yue Lai Yue Kuai Le (ᆀԸᆀҞᆀ ) Fourth quarter of 2021 Second half of 2023
J-Style Trip season two During 2022 Second half of 2023
A fitness-related performance events
featuring Mr. Liu Keng-hung, Ms.
Vivi Wang and other celebrities
Fourth quarter of 2022 Middle of 2023
In view of the adverse impacts of the COVID-19 outbreak on the distribution of our
products through PDT which require substantial supports through offline marketing and
promotion activities, we have been expanding the distribution channels for our products. We
started to sell our products through various e-commerce platforms, including our Kuaishou
stores (which was opened in January 2021) and Tmall stores (which was opened in November
2020). Our sale through other e-commerce channels increased from RMB2.8 million for the year
ended December 2020 to RMB9.7 million for the year ended December 31, 2021. Since
December 2021, we have further expanded our distribution channels to E-commerce
Livestreaming sessions on Douyin , which is directly linked to our Douyin stores and conduct
marketing and promotion activities through, among other things, product placement in
Livestreaming sessions of Mr. Liu Keng-hung on Douyin . Since July 2022, we have commenced
increasing in the frequency in the organization of E-commerce Livestreaming sessions to two to
four E-commerce Livestreaming sessions each month in general in collaboration with Ms. Vivi
Wang and other KOLs to promote the sale of our new products. We are of the view that the
expansion of our distribution channels would effectively enhance (i) our ability to conduct
online marketing activities for the promotion of our products; and (ii) our geographical presence
across different regions in the PRC, which in turn diversify our risks in respect of regional
outbreak of the pandemic.
With the pandemic being more contained in 2022, there was lift of large-scale restrictive
measures. Since 2023, large scale activities and events have gradually resumed in the PRC. With
relaxation of restrictions in the PRC, it is expected that the consumer spending and demand in
healthcare and skincare products would return to normal in the near future. We were involved in
the planning of a fitness-related performance event featuring Mr. Liu Keng-hung, Ms. Vivi Wang
and other celebrities held in Qingdao on May 20, 2023. As at the Latest Practicable Date, we
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were also planning similar events to be held in various cities in the PRC, including Haikou,
Beijing and Sanya in 2023. Our Directors are of the view that the impact of the outbreak of
COVID-19 is temporary in nature and the pandemic is not expected to have a material adverse
impact on our Group going forward.
We will continue to monitor the development of the pandemic and actively take measures
to mitigate potential negative impacts on our business. Nevertheless, the COVID-19 pandemic
remains an evolving situation, and there remain uncertainties as to the future development of the
pandemic, which is beyond our control. If there are further waves of large-scale outbreaks of the
pandemic in the PRC, there may be further suspension of the services provided by our delivery
service providers. The pandemic may also continue to affect the overall economy and demand
for our products. In such circumstances, our operations and financial performance maybe
adversely affected. Please also see to the section headed “Risk factors – Risk relating to our
business and industry – Our financial condition and results of operations may be materially and
adversely affected by the outbreak of COVID-19 pandemic” in this prospectus.
QUALITY CONTROL
We believe that our commitment to product quality and safety is vital to our success. We
place strong emphasis on product quality and safety by implementing a comprehensive quality
control system in order to maintain our competitive edge, including the New Product
Development Procedures (೻ ), the Procurement Management Rules
(), the OEM Supervision Rules ( ։̮˾ʈ္ຖ஝ᇍ) and the System
Customer Service Guidelines (ਕ஝ᇍ). Although we do not conduct the day-to-day
manufacturing of our products, we conduct inspection on our third-party manufacturers to ensure
they are in compliance with the product safety compliance standards in China. We take great
care to ensure that our third-party manufacturers share our commitment to quality and ethics.
We cooperate with Société Générale de Surveillance, an international quality inspection
company to ensure that our products meet the applicable quality standards. Generally, our
manufacturers reserve sample products for our products for inspection and issue reports on the
results of inspection. In addition, we may conduct on-site ad hoc inspection on our
manufacturers to check whether the raw materials used are in compliance with the relevant laws,
regulations and standards, and to monitor the manufacturing processes and ensure compliance
with our quality control procedures. For details, please refer to the section headed “Risk factors
– Risks relating to our business and industry – We outsource our product manufacturing to
third-party manufacturers. The limited control that we have over the process may present risks to
our business, and any failure in the product quality control could adversely affect our reputation,
business prospects and results of operations” in this prospectus. To the best knowledge of our
Company, all of our third-party manufacturers obtained the requisite licenses and complied with
our internal standards during the Track Record Period and as of the Latest Practicable Date.
During the Track Record Period and up to the Latest Practicable Date, we did not
experience any material incidences in the course of our sales operation nor were there any
material claims for personal or property damages or compensation arising from our sales of
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products. Further, our supply contracts with our suppliers usually provide that product liability
in respect of any product supplied to us will be borne by the suppliers. We did not suffer from
any product liability claims which were, individually or on an aggregate basis, material during
the Track Record Period. To enhance customers’ satisfaction on our products, we have hotlines
and WeChat accounts for handling inquiries or complaints from our distributors, the
sub-distributors and end consumers. For details, please refer to the section headed “Risk factors
– Risks relating to our business and industry – Product quality is crucial to our business. Failure
to maintain the quality, safety and effectiveness of the products could harm our reputation,
adversely affect our financial condition and results of operations” in this prospectus.
A W ARDS
As of the Latest Practicable Date, we attained the following awards in recognition of our
products:
Certificates/Description Awarding organization Y ear of grant
Annual Popular Bulletproof
Coffee Award
(࿫ቖԣᅁդਥ )
Rayli Fashion List
(ɽ೦࿮ )
2020
Excellent Quality
Bulletproof Coffee
(ሯՙ൳ԣᅁդਥ )
OnlyLady Beauty Award
(OnlyLady˂Χɽሧ )
2020
Popularity Award
(ɛंɹ຦ᆤ )
PCLADY Beauty Award
(ථ࿮ )
2019
INTELLECTUAL PROPERTY
Intellectual property is fundamental and crucial to our success, and it enables us to
maintain our competitive position in the rapidly evolving market. Our IP creation and operation
capabilities empower us to create, develop and own IP contents, in particularly those in
association with our unique celebrity IPs. For details, please refer to the paragraph headed “–
Our business – IP creation and operation” in this section. We rely on trademark, copyright and
patent law, confidential contractual arrangements, invention assignment and non-compete
agreements with our employees and others to protect our proprietary rights. As of the Latest
Practicable Date, our Group registered 1,160 trademarks and 155 copyrights in the PRC
(including software copyrights in the PRC), and we were also applying and undergoing the
registrations of other intellectual property rights. For details, please refer to the section headed
“Statutory and general information – B. Further information about our business – 2. Intellectual
property rights of the Group” in Appendix V to this prospectus. We believe our copyrights,
trademarks and domain names are unique and valuable assets that support our brand and help to
elevate public’s perception of our products. Based on the advice of our PRC Legal Advisors and
to our best knowledge and belief, there is no material impediment in renewing the registration of
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our trademarks or domain names upon their expiry as long as we comply with the relevant legal
requirements and take all necessary steps and submit the relevant applications in accordance
with the requirements prescribed by the applicable PRC laws and regulations.
In order to better protect our intellectual property rights from third-party infringements, we
have implemented various measures and strictly followed the relevant internal protocols and
complied with the corresponding laws and regulations. We regularly detect the malicious
registrations of our intellectual properties by third parties, counterfeit products and contents on
e-commerce platforms, and any other forms of infringements of our intellectual properties. Since
our intellectual properties may be maliciously registered by the third parties, we timely register
our intellectual properties with the competent governmental authorities. We actively respond to
any infringements by warnings, notices, administrative claims and sometimes escalate to
litigations.
Additionally, for our proprietary IPs, our in-house design team carefully examines the
originality of our new products with the assistance of our in-house legal team. Our in-house
legal team is also responsible for the registration, consulting and other business or legal support
of our intellectual property related affairs.
During the Track Record Period and up to the Latest Practicable Date, we did not have any
material disputes or any other pending legal proceedings of intellectual property rights with
other third parties. To the best knowledge of our Directors, they are not aware of any potential
or threatened litigations and claims in relation to any intellectual property infringement that was
material during the Track Record Period and up to the Latest Practicable Date.
COUNTERFEIT PRODUCTS
We are aware that certain counterfeit products bearing our brand exist in the market. Please
refer to the section headed “Risk factors – Risks relating to our business and industry – Our
brands and products may be subject to counterfeiting, imitation, and/or infringement by third
parties, and we may not be able to prevent the existence of counterfeit products on the market”
in this prospectus for further details.
We have adopted a number of internal control measures to prevent counterfeit products and
infringement of our intellectual property rights, including internal policies setting out procedures
of how to handle counterfeit products and infringement incidents, our cooperation with
professional anti-counterfeit product organizations and law firms specializing in intellectual
property laws (“ IP Professionals ”). We have included confidentiality provisions in the
agreements with our employees, distributors and OEM suppliers.
We operate a flagship store on Tmall . Apart from its primary function to launch our new
products and attract new fans, it also serves as an official e-commerce channel for sales of our
products.
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Apart from delegating our business partners, such as distributors, to monitor infringement
activities, we have a dedicated team responsible for overseeing the implementation of our
internal control measures related to counterfeit products and infringement of our intellectual
property rights, coordinating with external IP Professional to resolve the disputes related to
counterfeit products and protect our legal rights as well as engaging in any potential legal
proceedings related to counterfeit products. IP Professionals are responsible for identifying any
possible infringement activities in the market from time to time. In addition, we encourage our
distributors and sub-distributors, which form an extensive distribution network comprising more
than 15,000 distributors/sub-distributors in aggregate, who are also stakeholders of our products,
to monitor and report to us any infringement activities in the market.
When we, through notification from IP Professionals and distributors/sub-distributors or by
ourselves, become aware of the possible infringement activity(ies), the authenticity of the
product in subject would be verified by us. If the product in subject is confirmed to be a
counterfeit product, we, through our business partner (in case such IP Professional is engaged by
our business partner), we may collect evidence on the mainstream e-commerce platforms such as
Taobao, Pinduoduo and JD.COM and notarize the infringement facts. We also communicate with
these platforms and ask for the removal of the relevant counterfeit products.
Where appropriate, we inform and cooperate with the relevant authorities, including the
Administration for Market Regulation and the police, of the existence of such counterfeit
products and request appropriate actions to be taken, including confiscation of the counterfeit
products, imposition of fines and commencement of proceedings against the counterfeiting party.
We will continue to take appropriate actions to defend our intellectual property and our products
against potential infringements. During the Track Record Period and up to the Latest Practicable
Date, there was no material adverse effect by counterfeit products on our business, financial
condition or results of operations.
Based on the monitoring activities carried out by our Group’s legal and compliance
department and external IP-protection company since December 2020, over 1,200 online stores
had been identified on major e-commerce platforms which distributed counterfeit version of our
products, and some of these products were widely distributed. We reported certain stores with
serious infringement activities to the local AMRs and brought approximately 62 lawsuits against
them (including their suppliers) as of December 31, 2022, (i) 15 of which were settled between
us and the relevant defendants, with approximately RMB1.7 million of damages being agreed to
be payable to us; (ii) 18 of which were ruled in favor of us, with approximately RMB1.8 million
of damages being held to be payable to us; (iii) three of which were withdrawn by us; and (iv)
the remaining remained ongoing. Notwithstanding the insignificant amount of damages being
claimed by us in the above lawsuits, we believe our continuous measures to prevent counterfeit
products and infringement are necessary as such measures are important to us for (i) protecting
and safeguarding our brand reputation; and (ii) reducing the business threat of counterfeit
products so that loss of sales of our new retail products will be minimized as consumers are not
able to purchase counterfeit products at a lower price in general. In addition to protecting our
intellectual properties, our enforcement actions also provide us valuable information on potential
demand of our products and insight into how to reach out to potential consumers.
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EMPLOYEES
We had a total of 68, 150, 190 and 250 employees as of December 31, 2019, 2020, 2021
and 2022, respectively. Substantially all of our employees are based in the PRC. The following
table sets forth a breakdown of our employees as at December 31, 2022 by functions:
Number of
employees
New retail operations 98
IT operations and maintenance 31
IP content creation 17
IP licensing 20
Finance 9
Design 11
Product development 8
Human resources and administration 14
Legal and compliance 7
Risk management and internal control 3
Strategic management and financing 4
President office 7
Group branding 9
Talent Planet-related affairs 12
Total 250
Our success depends on our ability to attract, retain and motivate qualified personnel. We
have invested significant resources in the recruiting of the suitable candidates for our Company
and we primarily recruit our employees through online channels and social networking
platforms. Further, we provide internal training program, which covers topics on our business
operations, corporate culture, products and the industry trends etc., which we believe will allow
our employees to envision their career paths and growth potential with us.
As required by the laws and regulations in China, we participate in various government
statutory employee benefit plans, including social insurance funds, namely a pension
contribution plan, a medical insurance plan, an unemployment insurance plan, a work-related
injury insurance plan, a maternity insurance plan, and a housing provident fund. We are required
under the PRC laws to contribute to employee benefit plans at specified percentages of the
salaries, bonuses and certain allowances of our employees up to a maximum amount specified by
the local government from time to time.
We enter into standard employment contracts and standard confidentiality agreements with
our permanent employees.
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We did not establish a labor union. We are of the view that we maintain a good and
friendly working relationship with all our employees, and we have not experienced any material
labor disputes or any difficulties in recruiting employees for our business operations during the
Track Record Period.
We have implemented the new product development procedures to manage product design
and development activities. Our product development team is focused on developing new
products, including both health management products and skincare products as well as expanding
the formats of our existing products. After Listing, we plan to strengthen our capabilities for the
research and development of new products by expanding our in-house team as well as
cooperating with research institutes.
INSURANCE
As of the Latest Practicable Date, we maintained various insurance policies to safeguard
against risks and unexpected events. We consider our insurance coverage to be adequate as we
have in place all the mandatory insurance policies required by the PRC laws and regulations and
in accordance with the commercial practices in our industry. We have purchased property
insurance covering our fixed assets such as equipment, furniture and office facilities. We also
provide social security insurance including pension insurance, unemployment insurance,
work-related injury insurance and medical insurance for our employees.
In line with the general market practice in the PRC, we do not maintain business
interruption insurance or key-man life insurance. We do not have insurance related to the
COVID-19 pandemic either. For details, please refer to the section headed “Risk factors – Risks
relating to our business and industry – We have limited business insurance coverage which could
expose us to significant costs and business disruptions” in this prospectus.
During the Track Record Period and up to the Latest Practicable Date, we did not make any
material claims on any insurance policies maintained by us.
PROPERTIES
Owned properties
In December 2020, we entered into sale & purchase contracts with Kunshan Jiabao, an
Independent Third Party real property developer, to purchase 69 units in a commercial complex
under construction in Kunshan, Jiangsu Province, with an aggregate gross floor area of 3,507.63
sq.m. at a consideration of RMB53.5 million, which will be used as staff quarters. As at the
Latest Practicable Date, we obtained the title certificates and the corresponding land use right
certificates of these 69 units. As at the Latest Practicable Date, each of these 69 units were
subject to mortgages. As advised by our PRC Legal Advisors, apart from the mortgages, we have
full legal ownership to the said units.
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The consideration was agreed after arm’s length negotiation between the parties with
reference to the price list published by Kunshan Jiabao, and was funded by a mortgage loan
from an Independent Third Party financial institution.
We entered into a preliminary agreement in February 2021, and sale and purchase
agreements subsequently in August 2021, with Kunshan Jiabao to purchase another 48 units in
the same complex in Kunshan, Jiangsu Province, with an aggregate gross floor area of 3,166.26
sq.m. at a consideration of RMB50.0 million, which will be used as office premises. As at the
Latest Practicable Date, we had not obtained the title certificates and the corresponding land use
right certificates of the aforesaid 48 units as construction work had just finished and we were in
the process of making the relevant completion filing.
The consideration was agreed after arm’s length negotiation between the parties with
reference to the price list published by Kunshan Jiabao. As of the Latest Practicable Date, we
settled the consideration to Kunshan Jiabao.
For details, please refer to the section headed “Financial information – Related party
transactions and balances – Balances with related parties – Non-trade in nature – Prepayment for
purchase of staff quarters” of this prospectus. All of the above properties are or will be used for
non-property activities as defined under Rule 5.01(2) of the Listing Rules. As our business
operations continue to grow, we will need more staff quarters and office premises to
accommodate our expanding team of staff. After searching for possible sites, we believe the
above properties are suitable venue for such purpose as the area in which the properties located
will become a developed residential and commercial area.
Except for the property interests described in the property valuation report prepared by
Jones Lang LaSalle Corporate Appraisal and Advisory Limited, our Group has no other owned
single property interest that forms part of our non-property activities that has a carrying amount
of 15% or more of total assets pursuant to Rule 5.01B(2)(b) of the Listing Rules. For details,
please refer to the property valuation report in Appendix III to this prospectus. As advised by
our PRC Legal Advisors, there is no legal impediment in obtaining the title certificates.
Leased properties
Our principal executive offices are located on leased premises in Kunshan, Jiangsu
Province, comprising approximately 1,050 sq.m..
As of the Latest Practicable Date, we leased and occupied 40 properties in Kunshan,
Beijing, Shanghai, Guangzhou and Hangzhou with an aggregate gross floor area of
approximately 8,882.7 sq.m.. Our leased properties are leased from Independent Third Parties,
with a lease term ranging from 11 months to three years. These properties are used for
non-property activities as defined under Rule 5.01(2) of the Listing Rules as office premises,
warehouses and staff dormitories.
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Title certificates or relevant authorization documents of 34 leased properties have been
duly obtained by the relevant landlords. With respect to the remaining six leased properties with
an aggregate gross floor area of 1,090 sq.m., or 12.3% of the total gross floor area of our leased
properties, the landlords failed to provide the relevant building ownership certificates, as a result
of which, there may be risks that these leases may be held invalid, and therefore we may not be
able to continue to occupy and use such properties. Our Directors believe that our use of these
six properties individually or collectively will not have a material adverse effect on our
business, financial condition or results of operations. Even if we are required to vacate from the
properties, we believe we will be able to readily find comparable properties to relocate and the
costs and expenses that we may incur for relocation will be immaterial. As of the Latest
Practicable Date, we were not aware of any ownership controversy or dispute or third party
claims, nor had we been imposed any administrative penalties.
In addition, these 40 leases have not been registered with the relevant competent
authorities. As advised by our PRC Legal Advisors, despite the leases not having been registered
with the relevant competent authorities, they remain valid and legally binding and enforceable
under the applicable PRC laws and regulations, according to the Civil Code of the PRC ( ʕശ
Պ). A maximum penalty of RMB10,000 may be imposed for non-registration
of each lease, and the estimated total maximum penalty would be RMB400,000 as advised by
our PRC Legal Advisors.
In order to ensure on-going compliance with the PRC laws and regulations relating to the
registration of executed lease agreements, where we are the tenant to an executed lease
agreement, we will continue to seek cooperation from the landlords of the leased properties to
register executed lease agreements with the relevant PRC governmental authorities and will
adopt a variety of risk control measures to mitigate such regulatory risk in the future. We have
established a checklist of our leased properties with detailed information, including the status of
the lease registration of office premises, to continue to liaise with the landlords with the aim of
pursuing registration of our leased properties. Our Directors confirmed that the facts above
would not materially and adversely affect our business operations because if we have to relocate
from such leased property, we should be able to locate qualified alternative premises within a
short period of time under comparable terms without incurring substantial additional costs.
As of the Latest Practicable Date, we had no single property with a carrying amount of
15% or more of our total assets. Therefore, we are not required to prepare a valuation report
with respect to our property interests in reliance upon the exemption provided by Section 6(2) of
the Companies (Exemption of Companies and Prospectuses from Compliance with Provisions)
Notice (Chapter 32L of the Laws of Hong Kong).
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LICENSES, REGULATORY APPROV ALS AND PERMITS
As of the Latest Practicable Date, as advised by our PRC Legal Advisors, we had obtained
all the requisite licenses, approvals and permits from the relevant authorities that are material to
our current operations. The following table sets out details of our material licenses and permits.
License/Permit holder License Issuing authority Effective date Expiry date
Kunshan Star Plus
Action
Administrative
Measures for Food
Operation Licensing
຾ᐄ஢̙ᗇ
Kunshan AMR August 17,
2021
August 16,
2026
Kunshan Star Plus
Action
Approval of the
National
Administrative
License for Special
Purpose Cosmetics
͜௄ʷѱ
஢̙ҭ΁
National Medical
Products
Administration
(္ຖ
၍ଣ҅)
March 12, 2020 March 11, 2024
Beijing Star Plus Master Commercial
performance license
စ̈஢̙ᗇ
Beijing Municipal
Bureau of Culture
and Tourism ( ̏ԯ̹
༷҅ )
April 24, 2022 April 23, 2024
Kunshan Talent Planet Commercial
performance license
စ̈஢̙ᗇ
Kunshan Municipal
Bureau of Culture,
Sports, Radio,
Television and
Tourism* (ʆ̹˖
༷҅ )
January 16,
2023
January 15,
2025
To the best of our knowledge and belief, there is no material risk that any of such licenses,
permits and approvals will be revoked prior to their expiration dates. In addition, based on the
advice of our PRC Legal Advisors and to our best knowledge and belief, there is no material
impediment in renewing the above licenses or permits upon their expiry as long as we comply
with the relevant legal requirements and take all necessary steps and submit the relevant
applications in accordance with the requirements prescribed by the applicable PRC laws and
regulations. For further information relating to the risks associated with obtaining and renewing
licenses, permits and approvals, please refer to the section headed “Risk factors – Risks relating
to our business and industry – We require various approvals, licenses, permits and registrations
to operate our business and any failure to obtain or renew any of these approvals, licenses,
permits and registrations or any failure to attain the above pursuant to the new enactment of
government policies, laws or regulations could materially and adversely affect our business and
results of operations” in this prospectus.
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LEGAL PROCEEDINGS AND COMPLIANCE MATTERS
As of the Latest Practicable Date, there was no litigation or arbitration proceedings pending
or threatened against our Group or any of our Directors which could have a material adverse
effect on our financial condition or results of operations.
Our Directors, as advised by our PRC Legal Advisors, confirm that our Group had
complied with all the relevant PRC laws and regulations, including the relevant regulations
relating to online Livestreaming marketing, in all material respects during the Track Record
Period and up to the Latest Practicable Date.
DATA PRIV ACY AND CYBERSECURITY
Our information technology systems are critical to our business operations and we have
implemented various data protection measures and stringent internal protocols to ensure the
security of our proprietary data. All the development and maintenance of our information
technology systems are currently responsible by our internal technical maintenance department
(ӻ୕༶ၪ௅ ), and we outsource certain technical operations to the third party service providers
in order to better support the development of our information technology systems. For instance,
our cloud service provider adopts multi-layer firewall to protect against attacks or unauthorized
access of our data, and they monitor the visits of the data regularly and generate reports on any
suspicious or unauthorized access or attacks to us.
Ordering Management System
To support our sales through the Distribution Agent Assisted Distribution Model, we
operate the Ordering Management System which provides a centralized system to manage the
ordering and delivery of our major products. The Ordering Management System comprises two
sub-systems, namely (i) the ordering system, which enables our distributors and their
sub-distributors to place orders and allows us to record the delivery of products from our
warehouse to our distributors or sub-distributors (i.e. the Ordering System); and (ii) the QR code
system, which keeps track of the movement of our products from our distributors or
sub-distributors to the end consumers (i.e. the QR Code System).
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The below illustrates the operation of the Ordering Management System in the sale and
distribution of our products under the Distribution Agent Assisted Distribution Model:
Delivery records from third
party logistics company(4)

Order received and
record keeping
(2)  Delivery of
products by
our Group
(3)
Order placing and
fee settlement
(1)
Our Group
End Consumers
Distributors/
Sub-distributors
Sales of products to
the end consumers
(5)(6)
Input of end
consumers’
details
(6)
Ordering
System
(7)
QR Code
System
(7)
(1) Our distributors or sub-distributors are required to make orders of our products
through their own respective accounts in the Ordering System. The Ordering System
also allows the sub-distributors to place orders with their respective distributors in the
system, the order of which will be approved by their distributors. Once a distributor
makes an order through his/her own account in the Ordering System, such distributor
is required to make prepayments for such order by making reference to it through
his/her own respective accounts in the Ordering System.
(2) Based on the record in the Ordering System, we would be able to receive the orders
from the distributors and sub-distributors and match their orders with relevant
settlement records.
(3) We may arrange delivery of our products directly to the distributors or
sub-distributors, or if so requested by the distributors or sub-distributors, to the end
consumers.
(4) After the delivery of our products, we will be able to track the deliveries of and
completion of the orders based on the delivery records of logistics service providers
engaged by us and such records would be linked up with the order records in our
Ordering System.
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(5) As part of the Ordering Management System, we also operate the QR Code System,
being our product tracking system, relying on a unique, traceable and
anti-counterfeiting QR code printed on each box of our products. Where our products
were delivered to the distributors or the sub-distributors for their onward delivery to
the end consumers, our distributors and sub-distributors are encouraged to scan the
QR code and record their transactions through the QR Code System immediately
before delivery of our products to their sub-distributors or end consumers. However,
we are not involved in the scanning of the QR code by our distributors and
sub-distributors.
(6) For each delivery to end consumers with QR code scanning, distributors and
sub-distributors are required to input the relevant details, including the name and
phone number of the end consumers and the products purchased, into the QR Code
System at the time when they scan the QR codes. The relevant record can only be
stored in the QR Code System upon scanning of the QR code and having input the
required information of the end consumer.
(7) Data in the two systems are linked so that we can trace the sale of our products from
order placing until the sale by the distributors/sub-distributors to the end consumers if
they have performed the QR code scanning process.
Reasons for adopting the QR Code System
Since the launch of MODONG coffee in 2019, we have implemented the QR Code System
mainly for the following purposes:
(i) keep track of the movement of our inventory – under the QR Code System, the QR
codes printed on the boxes of our products are scanned when such products are
delivered from the manufacturers to warehouses of our Group or our logistics service
providers, and subsequently from such warehouses to the designated address of
distributors or sub-distributors;
(ii) detect any counterfeit products being sold in the market – since the packaging of most
of our Group’s products contain a QR code, products that are originated from our
Group and found in the market should be easily identified through the QR Code
System. In other words, if any product is suspected to be counterfeit product, it can be
easily verified through the scanning of the QR code on its packaging, as no record of
such product could be found from the sales record of the Ordering System;
(iii) facilitate marketing activities directly to end consumers – as part of our marketing
initiatives, when the purchase volume of such end consumer reaches the level required
by our Group during the promotional campaign, conducted by us from time to time,
we would arrange delivery of gift(s) to such end consumers directly. Such
arrangements are also beneficial to our distributors and sub-distributors to boost sales
to end consumers during promotional campaign periods; and
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(iv) facilitate the recruitment of new sub-distributors and prevent any competition amongst
distributors and sub-distributors (where appropriate) – information of each end
consumer can only be recorded under one distributor in the QR Code System.
Therefore by scanning the QR code and recording details of its end consumers, the
distributors and sub-distributors would be able to ensure their respective end
consumers would not subsequently purchase our products through other distributors or
sub-distributors. Further, in the event that an end consumer subsequently becomes a
sub-distributor, such record would also be used to verify the purchases previously
made by such end consumer so that he/she would be entitled to become a qualified
sub-distributor.
We consider that the above factors would also incentivise the distributors and
sub-distributors to scan the QR code in the QR Code System when they delivered the products to
their respective end consumers.
We believe the engagement of distributors is commonly adopted across various industries,
even if the brand owners have the contact details of their existing end consumers so that they
may have direct access to these end consumers. Given our focus on the new retail segment is to
generate revenue through product design and development, even we possess the contact details
of our existing end consumers, we do not have the intention and the required resources,
including manpower, to sell our products directly to these end consumers or to develop new end
consumers on our own. We believe our distributors and sub-distributors, who have direct access
to their customers, would not have material concern on us using information of end consumers
to sell our products directly to them without engaging them, but would have the incentives to
scan the QR codes for the reasons discussed above.
V erification of information of end consumers
Prior to June 2022, we did not perform any cross-checking with respect to the information
of the end consumers and/or the delivery records input by our distributors and sub-distributors
on the basis that, we considered the risk of counterfeiting the records in the QR Code System is
relatively low, given (i) the vast number of distributors, sub-distributors and end consumers
involved in the scanning of the QR codes; (ii) the vast number of scanning records; and (iii) the
lack of incentive for the distributors and sub-distributors to counterfeit the relevant record. As
an additional internal control measure, since June 2022, we have started cross-checking the
information of the end consumers and/or the delivery records input by our distributors and
sub-distributors from time to time, by way of phone interviews with selected end consumers
(based on the phone number of the end consumers and the relevant transaction records as input
by the distributors or sub-distributors in the QR Code System) to ascertain the accuracy of the
data extracted from the QR Code System, and verify and confirm their order details on a random
sampling basis every month.
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Implication of Cybersecurity Review Measures and Draft Regulations on Cyber Data Security
The Cybersecurity Review Measures provides that, network platform operators with
personal information of over one million users shall be subject to cybersecurity review before
listing abroad ( ਷̮ɪ̹ ). As advised by our PRC Legal Advisors, it is unlikely that we would
be required to undergo a cybersecurity review for the proposed Listing based on the following
reasons: (i) according to a telephone consultation with the China Cybersecurity Review
Technology and Certification Center (ҦஔၾႩᗇʕː ) conducted by our PRC
Legal Advisors on March 9, 2023, which is the competent authority according to our PRC Legal
Advisors, the term “listing abroad ( ਷̮ɪ̹ )” under the Cybersecurity Review Measures
exempts listing in Hong Kong from the mandatory obligation of ex-ante declaration of
cybersecurity review; (ii) given that the Ordering System and QR Code System only open to our
distributors and sub-distributors and not to the public, and only for the purposes of facilitating
the ordering and delivery of our products and keeping records of the sale of our products for our
business operations, we do not fall within the scope of “internet platform operator”; and (iii) we
do not possess personal information of over one million users.
In addition, as of the Latest Practicable Date, we had not been notified by any authorities
of being classified as a critical information infrastructure operator as stipulated under the
Cybersecurity Review Measures. However, there is no clear explanation or interpretations under
the Cybersecurity Review Measures as to how to determine what constitutes “affecting national
security” and thus may be subject to cybersecurity review initiated by the relevant government
authorities.
During the Track Record Period, we collected information of our distributors,
sub-distributors and end consumers through the Ordering System and QR Code System only for
the purposes of facilitating the ordering and delivery of our products and keeping records of the
sale of our products for our business operations. As of the Latest Practicable Date, we had not
been involved in any service, product or data processing activities that might give rise to
national security risks based on the factors set out in Article 10 of the Cybersecurity Review
Measures, did not process personal information of over one million users, and have not been
inquired, investigated, warned or penalized by any PRC authorities in this respect. Based on the
foregoing, our PRC Legal Advisors are of the view that, as of the Latest Practicable Date, the
likelihood that our business operations and/or the proposed initial public offering give rise to
national security risks which subject us to cybersecurity review under the Cybersecurity Review
Measures and the Draft Regulations on Cyber Data Security is relatively low. Based on the
foregoing analysis and the advice of our PRC Legal Advisors, our Directors are of the view that
the Cybersecurity Review Measures and the Draft Regulations on Cyber Data Security, if
implemented in the current form, would not have a material adverse impact on our business
operations or the proposed initial public offering.
During the Track Record Period and up to the Latest Practicable Date, (i) there had been no
material incident of data or personal information leakage, infringement of data protection and
privacy laws and regulations or investigation or other legal proceeding, pending or threatened
against us initiated by competent government authorities or third parties; and (ii) we had not
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been subject to any fines, administrative penalties or other sanctions, or received any enquiries,
notices or warnings from any relevant regulatory authorities in relation to the infringement of
cybersecurity and data protection laws and regulations, and had not been involved in any
investigations on cyber security review by CAC. In addition, we have maintained a
comprehensive and rigorous data protection program and implemented comprehensive and strict
internal policies, procedures and measures to ensure our compliance practice in data protection.
Moreover, we will (a) closely monitor and assess any regulatory development in relation to
cybersecurity and data protection; (b) adjust and optimize our practice in data protection in a
timely manner to comply with the new requirements imposed by the new laws and regulations;
(c) continuously improve our data security protection technologies and internal control
procedures and engage external professional consultants to advise us on cybersecurity and data
protection requirements, if needed; and (d) proactively maintain communications with the local
branches of CAC, if needed. Based on the foregoing, if the Draft Regulations on Cyber Data
Security were implemented in the current form, our Directors and our PRC Legal Advisors do
not foresee any material impediments for us to comply with the requirements under the
Cybersecurity Review Measures and the Draft Regulations on Cyber Data Security in all
material aspects.
Based on the above, including the Directors’ assessment and the view of our PRC Legal
Advisors, the Sole Sponsor concurs with the views of our Directors as described above.
Other information technology systems
Furthermore, we maintain the security of our information technology systems which covers
cyber security, application security, data security and terminal security through various
technologies including encryption, anti-virus software and firewall. Furthermore, we conduct
regular information security trainings for our employees to enhance their awareness on
information security and improve the implementation of our information technology risk
management.
During the Track Record Period, we did not experience any material information leakage or
loss of user data. For more details in relation to the risks of our information technology system,
please refer to the sections headed “Risk factors – Risks relating to our business and industry –
Security breaches and attacks against our systems and network may lead to the leakage and
unauthorized disclosure of data and information that we gather, which may thus harm our brand
image, our business and results of operations” and “Risk factors – Risks relating to our business
and industry – Failure to successfully operate and upgrade our information systems and
procedures, and the inability to implement new technologies in a timely fashion, either may have
a material adverse effect on our business, financial condition and results of operations” in this
prospectus.
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COMPETITION
As the community-based social e-commerce industry is relatively fragmented, we compete
with numerous market participants. We are of the view that we compete primarily in areas such
as acquisition and engagement, quality control of products, brand recognition and distribution
capability.
We believe that we are in a desirable position to compete with other competitors on the
aforementioned factors. However, we cannot guarantee that we are able to predict the timing,
scale and effectiveness of our competitors’ actions in these areas or the timing and impact of
new entrants into the marketplace, and our current/future competitors may have longer operating
histories, greater brand recognition, better supplier relationships, larger user base or greater
financial, technical or marketing resources than we do. For additional risks that are associated
with our competitive position, please refer to the section headed “Risk factors – Risks relating to
our business and industry – Social media based new retail industry is highly competitive. If we
are unable to compete effectively with existing or new competitors, we may lose our market
share, and our business, results of operations and financial condition may be materially and
adversely affected” in this prospectus. For more details on the competitive landscape of the
social e-commerce business in China, please refer to the section headed “Industry overview –
China’s community-based social e-commerce industry – Competitive landscape” in this
prospectus.
ENVIRONMENTAL, SOCIAL AND GOVERNANCE
Our business is generally subject to numerous PRC national, municipal and local
environmental, health and safety laws and regulations. Nonetheless, due to the nature of our
business and we do not operate any production facilities, we do not discharge or produce any
industrial wastes or pollutants which are hazardous to the environment. As confirmed by our
PRC Legal Advisors, we are not required to obtain any approvals or certificates that are
applicable to the environment laws and regulations in the PRC.
Despite the environmental impact directly caused by us, we recognize our corporate social
responsibility is a key driving factor to promote the long-term development of our Group.
Therefore, we have integrated environmental, social and governance (“ ESG”) matters into
corporate management and operations and we are committed to comply with the ESG reporting
requirements upon Listing.
We are in the process of establishing ESG policies in accordance with Appendix 27 of the
Listing Rules, which would cover, among others, (i) ESG policies and performance, (ii) ESG
management strategy, and (iii) ESG risk management and monitoring. We focus on areas such as
economic responsibility, employee responsibility, customer responsibility, environment
responsibility and public responsibility. We also intend to establish communication channels with
stakeholders, so that we could review the issues material to stakeholders, and monitor how our
environmental, social and climate-related performance has impacted different stakeholders.
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Social matters
We are committed in providing a safe and healthy environment for our employees. To
ensure the compliance with the applicable laws and regulations, we have formulated workplace
safety policies and procedures to erect a favorable and harmonious work environment. During
the Track Record Period and up to the Latest Practicable Date, we were not subject to any fines
or other penalties due to non-compliances related to work safety, social or environmental
regulations, and did not have any accidents, or claims for personal or property damage made by
our employees which had materially and adversely affected our business and results of
operations.
In addition, we are committed to offering a fair and caring working environment to our
employees. We have equal opportunities and anti-discrimination. We hire employees based on
their merits and it is our corporate policy to offer equal opportunities and fair compensations to
our employees. We encourage our employees who encounter any discrimination to seek
immediate assistance, which also allows us to conduct timely investigation and follow up as
needed. In addition, we provide training programs on industry and regulatory developments to
our employees.
We believe it is our responsibility to contribute to our community and support the future
development of our next generation. Among other things, we made an aggregate of RMB1.0
million donation to an education foundation in the mainland China to fund the purchase of
general instruments and devices in 2020.
Environmental matters
We are dedicated in managing the environmental impacts associated with our operations,
and we endeavor to minimize the negative impact on the environment. We primarily consume
electricity, paper boxes and plastic wraps in our operational activities. Our current environmental
footprint is relatively small and our operations do not have a significant impact on the
environment. Nevertheless, we adhere to the concept of green management and actively seek
low-carbon sustainable development in our operations. Energy consumption of our office
premises is the main source of scope 2 greenhouse gas emissions in our operation. We will
implement policy to monitor and control our electricity consumption. For details, please refer to
the paragraph headed “– Environmental, social and governance – Identification and assessment
of ESG risks and issues – ESG related metrics and targets” below. We also adhere to the “3R”
approach to environmental conservation, i.e. reduction of waste, reuse of resources and recycling
of used materials, to the largest practicable extent in our business operation as a show of care
for the environment. We engage third-party manufacturers and logistic services providers in our
operations. To reduce our scope 3 greenhouse gas emissions, we have taken initiatives in
procuring our suppliers to accelerate more sustainable components, such as the use of
environmentally-friendly packaging materials like biodegradable paper packaging materials. To
further mitigate the impact of our packaging on the environment, we procure our suppliers in
trying to use minimal amount of packaging materials to pack our products. We also take
initiatives to shift from single-use to reusable packaging such as reusing paper boxes and
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replacing some packaging paper boxes with recycled paper boxes. Please also refer to the
paragraph headed “Environmental, social and governance – Supply chain management and
product safety” in this section below for further details.
In addition, as we engage third party logistics services providers in our delivery process,
we put emphasis on the ESG performances of such service providers, in addition to the
traditional parameters in procurement, such as price, quality and availability. For example, we
will conduct assessment for logistics service providers against environmental and social criteria
to give priority to service providers that pose fewer environmental impacts by using
environmental-friendly packaging materials, generating less greenhouse gas, consuming less
energy resource or having achieved relevant International Organization for Standardization
(“ISO”) standards.
We will, from time to time, evaluate and, if needed, secure more appropriate services
providers. We will closely monitor relevant industry developments and make management
improvements in accordance with changes in market condition or industry standards when
appropriate.
Supply chain management and product safety
We engage third-party manufacturers in the production of products under our new retail
business. We evaluate our suppliers based on production management, quality control processes,
delivery and other after-sales services and require our suppliers to provide us with the relevant
certificates and qualifications in relation to their manufacturing practices such as Good
Manufacturing Practice (GMP) and ISO. We also take into account their ESG performances in
our selection of suppliers and give priority to suppliers that pose fewer environmental impacts
by using environmental-friendly packaging materials, generating less greenhouse gas, consuming
less energy resource or having achieved relevant ISO standards. We have also obtained the
relevant government approval for the environmental impact review of our major suppliers in
order to evaluate and monitor their ESG performances. To the best knowledge of our Directors,
third-party manufactures of our products did not have any material ESG issue during the Track
Record Period. We would continuously monitor the quality of products produced by the
third-party manufacturers. Our suppliers are required to provide to us their internal quality
control reports for each of our orders and we also cooperate with an external quality inspection
company to perform annual inspection on the products supplied by our suppliers on a sampling
basis. We also conduct on-site ad hoc inspections on our major suppliers periodically. For
details, please refer to the paragraph headed “Quality control” in this section.
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Identification and assessment of ESG risks and issues
Based on our management’s judgment and with reference to the materiality maps provided
by well-known external institutions including the ESG Industry Materiality Map by MSCI and
SASB Materiality Map by Sustainability Accounting Standards Board (SASB), we have
identified the following material environmental, social and climate-related issues and their
respective potential impacts that are highly related to our business:
Material issues Potential risks
Product safety and quality Our product safety guidelines and policies, standards
and procedures, inspections and checks, and training
on proper product safety practices, among others,
may not be adequate. As a result, we may be subject
to risks of receiving consumer complaints or
governmental penalties and our reputation may be
adversely impacted.
Supply chain management Responsible sourcing and sound supply chain
management are essential for us to ensure reliable
product quality and sustainability along our supply
chain. If we are unable to select quality third-party
suppliers or monitor, audit and manage different
parties in the supply chain, we may be subject to
risks of suppliers’ non-compliance with applicable
laws and regulations and unethical practices, which
could diminish our competitiveness and harm our
reputation.
Physical impacts of climate change Climate change may lead to risks like more extreme
weather conditions. Floods, typhoons, storms, and
other extreme weather conditions and natural
disasters may cause price volatility of raw materials,
fluctuation in supply and physical damages to our
office facilities and our suppliers’ facilities, pose
safety risks to our staff and lead to delayed product
delivery by our suppliers, among other consequences.
We have established in place various mitigation and measures to prevent and manage the
risks from ESG-related issues from causing unnecessary impact on our operations. To mitigate
climate-related risks such as more frequent extreme weather conditions, we have in place
emergency plans against extreme weather conditions where employees and other personnel are
notified promptly with any related measures. To ensure that all personnel are well prepared for
such extreme weather conditions, regular evacuation drills are conducted.
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Furthermore, we are willing to consult third-party professional entities to improve its
compliance and quality on emission disclosures, and regularly communicates with different
stakeholders on their views on climate-related issues.
ESG related metrics and targets
As our business does not relate to manufacturing and production, and a large portion of
resources are provided by our suppliers and third party logistics service providers, our
operations does not have any direct negative impacts on the environment. Nevertheless, we will
regulate ourselves to reduce indirect negative impacts on the environment in our operations. In
implementing our ESG related strategies, we will use certain key performance indicators
(“KPIs ”) to evaluate our ESG performance annually to help ensure that we meet our targets and
take corrective actions when necessary.
Energy consumption of our office premises is the main source of our indirect greenhouse
emissions. Considering the nature of our business operation, the Board considers electricity
consumption to be our KPI to evaluate ESG performance. The following table sets for the
information in relation to the electricity consumption of our office premises in the PRC during
the Track Record Period:
Y ear ended December 31,
2019 2020 2021 2022
(kWh)
Total consumption amount 60,094 107,027 78,630 258,791
Average consumption amount
per employee (Note) 1,167 1,070 491 1,232
Note: Calculated based on the total consumption amount divided by the average number of employees of our
PRC offices as at the beginning and the end of each financial year.
We expect that our total electricity consumption to increase during the next three years as
we will expand our business operations through E-commerce Livestreaming sessions and other
online marketing activities. Nevertheless, we will implement policy to monitor and control our
electricity consumption. Taking into account the expected increase in the number of our
employees and expansion of our business operations through E-commerce Livestreaming
sessions and other online marketing activities, we target to maintain the annual average
electricity consumption of employees of PRC offices at approximately 2,000 kWh.
Going forward, the Board will continue to monitor the ESG implications of our business
and set metrics and targets for material KPIs for each financial year with reference to the
disclosure requirements of Appendix 27 to the Listing Rules.
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To better protect the environment, we have been gradually adopting more sustainable and
eco-friendly measures in our operations including product design. In particular, we have
established the following targets in respect of our ESG performances in addition to our target on
electricity consumption:
– implement recycling policy to ensure at least 80% of the packaging cartons for our
products will be collected and recycled by our Group or by qualified third parties by
the end of 2024;
– refine the design of our products and adopt and use eco-friendly and/or biodegradable
packaging materials for at least 20% of our products by the end of 2025;
– enhance the use of online marketing and promotion and reduce the resources
consumption level of offline marketing activities;
– fully implement the use of online system for internal administrative procedures to
reduce the use of paper documents by the end of 2023, and avoid waste of paper by
promoting printing on both sides;
– replace all energy-intensive lighting with high luminous efficacy light set such as LED
lights at our office premises by the end of 2024;
– set up a record-keeping system for internal teams to monitor and keep record of
relevant environmental metrics of our Group, such as electricity consumption, for
future improvement and reporting by the end of 2023; and
– fully implement our ESG policy in respect of raw material procurement by requiring
all of our suppliers and/or service providers to obtain relevant quality certifications
from third-party by the end of 2025.
We will regularly review the progress of achieving the targets and liaise with key
stakeholders to help map a more comprehensive view of the major indicators of our ESG
performances.
RISK MANAGEMENT AND INTERNAL CONTROL
We have established risk management and internal control systems consisting of policies
and procedures that we consider to be appropriate for our business operations. In particular, we
have adopted and implemented risk management policies in various aspects of our business
operations.
Financial reporting risk management
We have adopted comprehensive accounting policies in connection with our financial
reporting risk management, such as financial management, budget management and financial
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statement preparation. We also have procedures in place to carry out such accounting policies,
and our finance department reviews our management accounts in accordance with such
procedures. In addition, we provide ongoing trainings to our finance staff to ensure that these
policies are well-observed and effectively implemented.
Operational risk management
New retail segment
As advised by the PRC Legal Advisors, pursuant to the Food Safety Law of the PRC ( ʕശ
جand other relevant PRC laws and regulations, health supplements (਄
ۜ࠮are food products claiming the specific functions that fall within the catalogs promulgated
by the food safety supervisory and administrative department of the State Council and other
competent governmental authorities authorized by the Food Safety Law of the PRC, and shall be
registered or filed with the competent governmental authorities for the manufacture and sales.
We have adopted a number of internal control measures at different stages (e.g. raw
materials procurement, research and development, manufacturing, advertising, sale and
distribution of the Group’s health management products) to ensure that they shall not be
classified as health supplements as stipulated under the relevant PRC laws and regulations,
including, amongst others, (a) involving legal counsels to check the description of the products
on the package, and advertising materials against the applicable laws for the compliance, (b)
strict selection or formulation of the ingredients or formulas of our products fully in compliance
with the laws during the research and development stage, and (c) communication with, and
request of internal quality control reports from, the third party manufacturer, to ensure the
compliance of the manufacturing process.
Based on the foregoing and the advice of the PRC Legal Advisors, the Directors confirmed
that our health management products do not fall within any of the aforementioned catalogs under
the applicable PRC laws and regulations regulating health supplements (ۜ࠮and hence
our Directors are of the view that, and the PRC Legal Advisors concurred, our health
management products shall not be considered as health supplements (ۜ࠮which shall
subject to the regulations of the Food Safety Law of the PRC, and other applicable laws and
regulations.
IP creation and operation segment
In order to effectively manage our compliance and legal risks, we have adopted internal
procedures to ensure the compliance of our business operations with the relevant rules and
regulations, including specific measures to ensure compliance with the regulations in relation to
Livestreaming marketing and the PRC entertainment industry, such as (i) designating the director
of our legal and compliance department to closely monitor any changes in the relevant laws and
regulations and bring the change to senior managements’ attention for discussion on the risk
faced by us and the plan to respond to such change; (ii) consulting our legal advisors on any
changes in the laws and regulations regularly (at least bi-annually); (iii) closely monitoring the
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behavior of celebrities and KOLs which have a working relationship with us in the public
domain and maintain a list of celebrities and KOLs which have been cautioned or blacklisted by
relevant authorities; and (iv) terminating our cooperation with the relevant celebrity or KOL or
taking other disciplinary actions, if we discover content or promotions by our celebrities or
KOLs to be in violation of our agreements with them.
According to our internal guidelines on cooperation with celebrities and KOLs, our
agreements with celebrities and KOLs shall require them to ensure the information relating to
products they promote in Livestreaming are true, not misleading and in compliance with all PRC
laws and regulations. We shall procure the timely removal of any false or misleading
information. In accordance with these procedures, our legal and compliance department
examines the contractual terms and reviews all the relevant documents for our business
operations, including licenses and permits obtained by the counterparties to perform their
obligations under the business contracts and all necessary underlying due diligence materials,
before we enter into any contracts or business arrangements.
In order to ensure the information relating to products they promote in Livestreaming
sessions is true, not misleading and in compliance with all PRC laws and regulations, in addition
to reliance on contractual obligation imposed on celebrities and KOLs, we would (i) assess the
reputation of the celebrities and KOLs prior to engaging them, (ii) provide guidelines to the
celebrities and KOLs of how to promote our products, (iii) arrange our staff to view and monitor
the Livestreaming of celebrities and KOLs on a sampling basis. In the event we find out a
celebrity or KOL provides inaccurate or misleading information regarding promotion of our
products during one’s Livestreaming session, and/or we receive similar complaint from any third
party, we will take appropriate measures, such as terminating our cooperation with such celebrity
or KOL and/or blacklisting him/her. We believe there are a large number of celebrities or
influencers that we can cooperate with even if the reputation of any of our existing celebrity or
influencer is affected by the regulations. As of the Latest Practicable Date, to our best
knowledge after due and careful enquiries, none of the celebrities and KOLs we collaborated
with or in negotiation for collaboration was engaged in any activities prohibited by the
Strengthening Regulations and other rules and regulations applicable to Livestreaming activities.
Human resource risk management
We have established internal control policies covering various aspects of human resource
management such as recruitment, trainings, work ethics and legal compliance. We adopt high
standards in recruitment with strict procedures to ensure the quality of new hires. Our internal
management policies contain guidelines regarding best commercial practice, work ethics and
prevention of fraud, negligence and corruption. We have also made available an anonymous
reporting channel through which potential incidents of fraud in our Group can be timely reported
to the internal control department and appropriate measures can be taken to minimize damage.
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Audit committee experience and qualification and Board oversight
We have established an audit committee to monitor the implementation of our risk
management policies on an ongoing basis to ensure that our internal control system is effective
in identifying, managing and mitigating risks involved in our business operations. The audit
committee consists of three independent non-executive Directors. For the professional
qualifications and experiences of the members of our audit committee, please refer to the section
headed “Directors and senior management – Board of Directors” of this prospectus.
Our senior management is responsible for reviewing the effectiveness of internal controls
and reporting to the audit committee on any issues identified. The audit committee then
discusses the issues and reports to the Board if necessary.
Ongoing measures to monitor the implementation of risk management policies
Our audit committee and internal control department monitor the implementation of our
risk management policies across our Group on an ongoing basis to ensure that our internal
control system is effective in identifying, managing and mitigating the risks involved in our
operations.
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INTRODUCTION
During the Track Record Period, we engaged Kunshan Tingshe as the Distribution Agent of
our MODONG coffee and other Kunshan Tingshe Distributed Products under the Distribution
Agent Assisted Distribution Model. Under such distribution model, Kunshan Tingshe is
responsible for, amongst others, the development and management of the distribution network
for the sale of the relevant products. For the year ended December 31, 2019, 2020, 2021 and
2022, our revenue attributable to Kunshan Tingshe under the Distribution Agent Assisted
Distribution Model amounted to RMB71.0 million, RMB340.8 million, RMB254.3 million and
RMB167.7 million, respectively, representing 89.0%, 93.3%, 84.4% and 69.8% of our revenue
from new retail business in the corresponding year.
BACKGROUND LEADING TO OUR DISTRIBUTION ARRANGEMENT WITH
KUNSHAN TINGSHE
Kunshan Tingshe is our first and largest Distribution Agent. At the time when we
introduced the Distribution Agent Assisted Distribution Model in 2019, we separately established
Kunshan Tingshe as our 80%-owned subsidiary in June 2019 which was appointed and
positioned by us as the Distribution Agent for MODONG coffee (which is supplied by our
wholly-owned subsidiary, Kunshan Star Plus Action). Kunshan Tingshe, which is led by Li Ting,
principally engages in the development and management of the distribution network for
MODONG coffee and provision of trainings for our distributors mainly on sales and marketing
techniques. In addition, given that Kunshan Tingshe directly managed and contacted our
distributors as a subsidiary of our Company at the relevant time, we designated Kunshan Tingshe
to be the entity responsible for the sale of MODONG coffee to our distributors and therefore, as
part of our internal intra-group arrangement, Kunshan Tingshe purchased MODONG coffee from
Kunshan Star Plus Action, for the purpose of onward sales to our distributors.
Legal and contractual relationship
In order to formalize the aforesaid business, legal and internal intra-group relationships
between Kunshan Star Plus Action and Kunshan Tingshe, (i) Kunshan Star Plus Action entered
into the Main Distribution Agreement with Kunshan Tingshe, which stipulated the contractual
relationship between seller (Kunshan Star Plus Action) and buyer (Kunshan Tingshe); and (ii)
Kunshan Tingshe entered into distribution agreements with our distributors whereby the
contractual relationship between seller (Kunshan Tingshe) and buyer (our distributors) was
established (and our distributors in turn entered into agreements with the sub-distributors
whereby the contractual relationship between seller (our distributors) and buyer (the
sub-distributors) was established). Accordingly, the sub-distributors would settle the purchase
prices with our distributors, who would in turn settle the relevant sum with Kunshan Tingshe.
Kunshan Tingshe would then settle the product prices with us pursuant to the Main Distribution
Agreement. For details of our settlement arrangement, please refer to the paragraph headed
“Settlement arrangement among our Group, Kunshan Tingshe and our distributors” in this
section below. Such arrangement has been subsequently extended to the sales and distribution of
other Kunshan Tingshe Distributed Products after their respective official launch thereof.
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Relationship from accounting perspectives
Notwithstanding the legal and contractual relationship among Kunshan Star Plus Action,
Kunshan Tingshe and the distributors as aforementioned, based on the following facts and the
respective roles of Kunshan Star Plus Action and Kunshan Tingshe in the Distribution Agent
Assisted Distribution Model, in accordance with Hong Kong Financial Reporting Standard
(“HKFRS ”) 15, Kunshan Star Plus Action is regarded as the seller, Kunshan Tingshe is regarded
as an agent and our distributors are regarded as our customers from accounting perspective,
which is in line with our original business intention when Kunshan Tingshe was established, on
the following basis:
 Under HKFRS 15, an entity should recognize revenue to depict the transfer of
promised goods or services to customers in an amount that reflects the consideration
to which the entity expects to be entitled in exchange for those goods and services.
The Main Distribution Agreement entered into between our Group and Kunshan
Tingshe; and the distribution agreements entered into between Kunshan Tingshe and
our distributors merely set out the framework of the transactions between the
respective parties and did not specified the details of the individual transactions.
Accordingly, the existence of such agreements alone is not adequate to conclude the
identity of the customers under HKFRS 15, as each party’s rights and obligations
regarding the specific goods to be transferred are not identifiable. On the contrary, the
orders placed by our distributors through the Ordering System contain details of the
products to be transacted and we are committed to fulfill the obligations under such
orders, thereby creating enforceable rights and obligations between our Group and our
distributors, and consisted of a contract under HKFRS 15;
 Selling price of the Kunshan Tingshe Distributed Products and any discount offered to
our distributors are determined by Kunshan Star Plus Action, not Kunshan Tingshe.
Kunshan Tingshe has no discretion to determine the selling price of the Kunshan
Tingshe Distributed Products and it has to strictly comply with the selling price
determined by Kunshan Star Plus Action. After MODONG coffee is sold to our
distributors, our distributors will have discretion in establishing the selling price for
MODONG coffee to the sub-distributors and their end consumers, as long as they
comply with our pricing guidelines unless our prior approval has been obtained, and
our distributors are the primary obligor for providing MODONG coffee to the
sub-distributors and the end consumers;
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 Kunshan Star Plus Action, rather than Kunshan Tingshe, retains the primary
responsibility for the provision of the Kunshan Tingshe Distributed Products to each
of our distributors. Kunshan Tingshe never had control or ownership of the goods
throughout the entire process. Once our distributors place orders on our Ordering
System, Kunshan Tingshe Distributed Products will be delivered by independent
logistics service providers engaged by us directly from Kunshan Star Plus Action’s
warehouses to our distributors’ designated addresses. Kunshan Tingshe does not
maintain any inventories of the Kunshan Tingshe Distributed Products and bears no
inventory risk in the arrangement; and
 When a box of the Kunshan Tingshe Distributed Products is delivered by independent
logistics service providers engaged by us and accepted by a distributor (or at the
address designated by the distributor or sub-distributor), the legal title of the box sold
will be transferred to such distributor, who will then assume all the inventory risks
associated with the box sold. Save for returns for defective products within 30 days
after delivery of the products subject to the provision of the relevant details and
proofs from distributors, no product can be returned to us after the seven-day return
period as prescribed by the Consumer Protection Law. We will not reclaim any unsold
products from our distributors. For more details, please refer to the section headed
“Business – Distribution network – Distribution Agent Assisted Distribution Model –
Management of our distribution network – (I) Product return policies” in this
prospectus.
Accordingly, we only recognize revenue at the point when the Kunshan Tingshe Distributed
Products are delivered by independent logistics service providers engaged by us to and accepted
by our distributors (or at the addresses designated by our distributors or sub-distributors). Please
refer to the paragraph headed “Accounting treatment in relation to the sales of the Kunshan
Tingshe Distributed Products” in this section below for further details of the relevant accounting
treatment.
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Disposal of Kunshan Tingshe as our subsidiary and our continuous engagement of it as our
Distribution Agent
In May 2020, we divested our interest in Kunshan Tingshe. For details on the background
and reasons for the disposal, please refer to the section headed “History, development and
reorganization – Our history and development – Our major subsidiaries – Kunshan Tingshe –
Disposal of our interest in Kunshan Tingshe” in this prospectus.
We consider it is in the best interests of our Group and the Shareholders as a whole to
continue engaging Kunshan Tingshe as a Distribution Agent and maintain the above legal and
contractual relationships and agreements between (a) Kunshan Star Plus Action and Kunshan
Tingshe; (b) Kunshan Tingshe and our distributors; and (c) our distributors and their
sub-distributors, as well as the payment arrangement pursuant to the above arrangements even
after the disposal of Kunshan Tingshe, having taken into account of the followings:
(i) mutual trust has been well formed between our Group and Kunshan Tingshe for the
operation of the Distribution Agent Assisted Distribution Model as well as the pricing
arrangement among Kunshan Tingshe, distributors and sub-distributors have already
been well-established and well-operated by Kunshan Tingshe;
(ii) our Group was ready to dispose of Kunshan Tingshe in order for us to focus on our
core business;
(iii) we have not had any direct contractual relationship with our distributors, before and
after the disposal of Kunshan Tingshe. As such, our Directors are of the view that the
operation of the Distribution Agent Assisted Distribution Model would not be
adversely affected if it ceased to be our Distribution Agent by the absence of direct
contractual relationship between our Group and distributors, even after Kunshan
Tingshe is no longer a member of our Group after completion of its disposal. In order
to reduce Kunshan Tingshe’s risk to us, (a) we entered into the Jointly-controlled
Accounts Agreements with Kunshan Tingshe (please refer to the paragraph headed
“Control measures against risk of default of Kunshan Tingshe – (a) Jointly-controlled
Accounts” in this section); and (b) Kunshan Tingshe is obliged to terminate the
distribution agreements that it entered into with distributors and procure such
distributors to enter into distribution agreements (or other agreements required by us)
with our Group or our designated third parties if it ceased to be our Distribution
Agent; and
(iv) the cessation of retaining Kunshan Tingshe as our Distribution Agent or any major
alteration to the operation of the Distribution Agent Assisted Distribution Model may
result in material adverse change on our business and financial performance, given the
distribution model has comprised vast number of distributors and sub-distributors and
would defeat our intention for the disposal of Kunshan Tingshe.
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Apart from acting as our Distribution Agent, certain of our products, such as skincare
products under LA DEW brand, are sold to our distributors through Kunshan Tingshe without any
payment of discount, incentives and fees from time to time.
Prior to the disposal of Kunshan Tingshe, as Kunshan Tingshe was still our subsidiary, we
shared office and staff resources to support the administrative (including human resources and
audit), sales and marketing works (including assisting Kunshan Tingshe to provide trainings to
distributors and sub-distributors) of Kunshan Tingshe. After such disposal, we no longer shared
office and no longer provided administrative support to Kunshan Tingshe, and Kunshan Tingshe
had leased its own office and recruited its own employees. The following table sets out the
number of individuals being responsible for managing our distributors and sub-distributors under
the Distribution Agent Assisted Distribution Model during the four years ended December 31,
2022:
Y ear ended December 31,
2019 2020 2021 2022
Employees and senior
management of Kunshan
Tingshe (including Li Ting) 1 9 17 13
Selected Distributors
with managerial
responsibilities
(Note) –1 31 52 1
Note: After the disposal and with continuous increase in scale of the distribution network, in addition to
Kunshan Tingshe and Li Ting, certain Selected Distributors also has taken up the managerial
responsibilities in expanding and managing the distribution network.
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BUSINESS FLOW AND KEY PARTICIPANTS
The diagram below illustrates our Distribution Agent Assisted Distribution Model in respect
of the Kunshan Tingshe Distributed Products:
Main Distribution Agreement
Kunshan Star
Plus Action
Distribution Agent
(i.e. Kunshan Tingshe)
Distributors
End Consumers
Sale (1)
Delivery of products (2)
Settlement of purchase price (3)
Management (4)
Jointly controlled
Direct contractual relationship
Jointly-controlled
Accounts
Sub-distributors
Distribution
agreement
Sub-distribution
agreement
Notes:
(1) Our revenue from sales is recognized upon delivery of products to distributors, sub-distributors and/or end
consumers (as the case may be).
(2) Our Group is responsible for the delivery of our products to the distributors or sub-distributors. We may also
arrange direct delivery to end consumers from time to time at the specific requests of the distributors or
sub-distributors. Where our products were delivered to the distributors or the sub-distributors for their onward
delivery to the end consumers, our distributors and the sub-distributors are encouraged to scan the QR code using
our QR Code System immediately before delivery to sub-distributors or end consumers. For details regarding the
QR Code System, please refer to the section headed “Business – Data privacy and cybersecurity – Ordering
Management System” in this prospectus.
(3) Purchase price for our products shall be settled by the distributors by way of transfer to the Jointly-controlled
Accounts, which have been jointly-controlled by us and Kunshan Tingshe since June 1, 2020 after Kunshan
Tingshe was disposed of by us. For details, please refer to the paragraph headed “Settlement arrangement among
our Group, Kunshan Tingshe and our distributors” in this section below.
(4) Kunshan Tingshe is responsible for the development and management of the distributors and the sub-distributors
of our products, including providing training on sales and marketing techniques to the distributors and
sub-distributors and monitoring their performance.
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MAIN DISTRIBUTION AGREEMENT WITH KUNSHAN TINGSHE
We entered into the Main Distribution Agreement with Kunshan Tingshe for the Kunshan
Tingshe Distributed Products on September 24, 2021 (as supplemented by a supplemental
agreement dated October 31, 2022), which formalized the arrangement between Kunshan Tingshe
and us. The products sold through Kunshan Tingshe substantially comprised MODONG coffee
and, to a lesser extent, other Kunshan Tingshe Distributed Products during the Track Record
Period. The following summarizes the salient terms of the Main Distribution Agreement:
Geographic exclusivity: Kunshan Tingshe can only conduct distribution operations for
Distribution Agent Assisted Distribution Model products through social e-commerce channel
within the PRC.
Supply and payment of products: We shall supply the products to Kunshan Tingshe
according to the price stipulated in the relevant agreement, and Kunshan Tingshe shall settle the
payment and remit such payment to our bank accounts upon the receipt of our written notice.
Security deposit: The Main Distribution Agreement provides that Kunshan Tingshe is
required to make a security deposit of RMB50.0 million with us out of the fund in the
Jointly-controlled Accounts, with an objective to reduce the balance thereof and the amount due
from Kunshan Tingshe to us from to time. In October 2022, we entered into a supplemental
agreement to the Main Distribution Agreement provides that Kunshan Tingshe shall no longer be
required to maintain with our Group the security deposit of RMB50.0 million as we have
commenced daily settlement with Kunshan Tingshe since November 2022.
Minimum sales amount: The Main Distribution Agreement provides that Kunshan Tingshe
shall undertake to realize a minimum annual sales amount of 2,000,000 boxes of MODONG
coffee, with the minimum sales amount of RMB210 million payable to us by Kunshan Tingshe.
We are entitled to unilaterally terminate the Main Distribution Agreement with 30 days notice in
the event if such minimum sales amount is not achieved.
Pricing: Kunshan Tingshe is required to follow our nationwide uniform pricing guidelines.
The selling price can be further revised upon our prior approval if specific market requires such
adjustment. For details, please refer to the paragraph headed “Pricing arrangement and
discounts, incentives and fees paid for the sales of Kunshan Tingshe Distributed Products” in
this section.
Sales and marketing operations: Kunshan Tingshe shall strictly comply with the relevant
PRC laws, regulations and not engage in any illegal, inappropriate, misleading and false
advertising during the sales of products. Additionally, Kunshan Tingshe shall follow our sales
policies and distribution procedures. Kunshan Tingshe is also responsible for assessing and
providing guidance to distributors to comply with such sales policies and procedures. Any form
of online or offline marketing campaigns or events which is held under our name, whether
related or unrelated to our business, is forbidden without our prior written approval.
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Term of contract: The term of the Main Distribution Agreement is five years and is
automatically renewed for five years after the expiry date unless we provided prior written
notice to Kunshan Tingshe that the agreement will not be renewed.
Assignment: Shall the Main Distribution Agreement be discharged or terminated, the
distribution channels of Kunshan Tingshe shall be undertaken and managed by us or our
designated third party(ies). Kunshan Tingshe should collaborate with us or our designated third
party(ies) to facilitate any handover matters. Kunshan Tingshe shall not assign any of its rights
or obligations under the Main Distribution Agreement to any third party without our prior
written consent.
Change of distribution agent: Pursuant to the Main Distribution Agreement, the
management rights and obligations of the distribution channels of Kunshan Tingshe will be
transferred to us or our designated party(ies) if Kunshan Tingshe no longer distributes products
for us.
In the event that the management rights and obligations of the distribution channels of
Kunshan Tingshe is to be transferred to other parties, our distributors agreed that they shall
cooperate with Kunshan Tingshe or its assignees to take necessary measures to complete the
assignment or transfer. We will immediately identify alternative candidates which are capable to
perform such function, such candidates include entities which are controlled by our other
well-performing distributors or other service providers in the market which have similar
experience and expertise, and in such case we do not expect our underlying policies and
mechanisms for the distribution of Kunshan Tingshe Distributed Products pursuant to the
distributor agreement to undergo major changes should an alternative Distribution Agent be
engaged in place of Kunshan Tingshe. Further, we do not have any plans to manage our
distributors by allocating our internal human resources as that would not be in line with our
business strategy.
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CONTROL MEASURES AGAINST RISK OF DEFAULT OF KUNSHAN TINGSHE
We maintain critical control in our business relationship with Kunshan Tingshe, including:
(a) Jointly-controlled Accounts
Kunshan Tingshe ceased to be our subsidiary on May 31, 2020. Given the contractual
buyer and seller relationship between Kunshan Tingshe and our distributors in relation to
the sales of the Kunshan Tingshe Distributed Products pursuant to the distribution
agreements entered into between Kunshan Tingshe and our distributors prior to the disposal
of Kunshan Tingshe, immediately before and after disposal of Kunshan Tingshe by us,
Kunshan Tingshe has continued to be the legal entity being primarily responsible for
receiving the prepayments for purchases from our distributors.
In view of the settlement arrangement, in order to have a better control over the cash
received by Kunshan Tingshe regarding the distribution of the Kunshan Tingshe Distributed
Products and reduce the amount due from Kunshan Tingshe to us (being Kunshan Tingshe’s
credit risk to us), we entered into the Jointly-controlled Accounts Agreements with Kunshan
Tingshe. Pursuant to such Jointly-controlled Accounts Agreements, the Jointly-controlled
Accounts which were designated for the receipt of payments for the Kunshan Tingshe
Distributed Products from the distributors shall be jointly-controlled by us and Kunshan
Tingshe. Since November 2022, Kunshan Tingshe has agreed to transfer the amount payable
to us in respect of the prepayment received from the distributors on the working day
immediately following the date of such prepayment commencing. For details of the
settlement arrangement between our Group, Kunshan Tingshe and our distributors, please
refer to the paragraph headed “Settlement arrangement among our Group, Kunshan Tingshe
and our distributions” in this section.
The following summarizes the salient terms of the Jointly-controlled Accounts
Agreements:
Nature of the account: For the sole purpose of the deposit of prepayment and security
deposit from our distributors.
Legal title of the account: Subject to the co-management arrangement below, the legal
title of the Jointly-controlled Accounts belong to Kunshan Tingshe.
Co-management arrangement: Kunshan Tingshe and us each appoint a representative
as the co-manager of the account. Any remittance out of the account has to be approved by
both co-managers. In particular, each of our Group and Kunshan Tingshe holds one chop
for offline transaction and one set of login key to the online banking system in respect of
the Jointly-controlled Accounts. Any withdrawal from such bank accounts would require
presentation of both chops (as to offline transactions) and both login keys (as to online
transactions). Accordingly, Kunshan Tingshe cannot make unilateral withdrawal from the
account or pledge the account as collateral in any way, and we are entitled to seek damages
from Kunshan Tingshe for any breach.
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Term: For an indefinite term unless the Main Distribution Agreement is terminated.
Account settlement: Pursuant to the Main Distribution Agreement and the
supplemental agreement to the Main Distribution Agreement dated October 31, 2022, we
shall provide the sales invoice of the day before to Kunshan Tingshe each day, and
Kunshan Tingshe shall confirm the sales amount and settle the amount payable to us in
respect of prepayment received from the distributors on the working day immediately
following the date of such prepayment from the Jointly-controlled Accounts.
As of December 31, 2022, the balance of the Jointly-controlled Accounts was
approximately RMB1.3 million.
Given Kunshan Tingshe is unable to make any withdrawal from the Jointly-controlled
Accounts unilaterally, the risk of default of Kunshan Tingshe in respect of payments from
our distributors is relatively remote. During the Track Record Period and as at the Latest
Practicable Date, the funds in the Jointly-controlled Accounts had not been
misappropriated. In the event that there is any misappropriation of funds by Kunshan
Tingshe, our Group is legally able to enforce our rights, through legal actions or other
dispute resolutions, under the Jointly-controlled Accounts Agreements and/or the Main
Distribution Agreement.
(b) Control over product formula
We are in possession of the formulas required for the production of MODONG coffee
and majority of other Kunshan Tingshe Distributed Products, and we believe the unique
attributes of Kunshan Tingshe Distributed Products are critical to the end consumers’
purchase decisions.
(c) Control over order placement
All the orders of our Kunshan Tingshe Distributed Products are placed through the
Ordering System whereby we have full access to the orders placed by our distributors and
their sub-distributors.
(d) Control over contractual relationship
We entered into a five-year Main Distribution Agreement with Kunshan Tingshe, and
the term will be automatically extended for another five-year unless we decide otherwise.
In addition, the Main Distribution Agreement provides that, and Li Ting has reciprocally
undertaken that she will continue to provide sales and marketing services to our Group
during the term of the agreement. More importantly, in the event that such Main
Distribution Agreement is terminated, the management rights and obligations of the
distribution channels controlled by Kunshan Tingshe shall be transferred back to us or our
designated third party(ies).
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MUTUAL RELIANCE BETWEEN OUR GROUP AND LI TING
Li Ting is the shareholder and key personnel of Kunshan Tingshe (the distribution arm of
Kunshan Tingshe Distribution Products), and she has been heavily involved with us in (i)
establishing, developing and managing the distribution network for our Kunshan Tingshe
Distributed Products, and (ii) conducting product promotion for expansion of the distribution
network since the launch of MODONG coffee.
We first commenced business relationship with Li Ting when our products (including LA
DEW facial masks) were first introduced to Li Ting and her team in January 2018. For details
regarding our relationship with Li Ting, please refer to the section headed “History, development
and Reorganization – Our major subsidiaries – Kunshan Tingshe – Li Ting” in this prospectus.
Our Directors are of the view that there is mutual reliance between our Group and Li Ting,
for the distribution of our MODONG coffee and the other Kunshan Tingshe Distributed Products
as of the Latest Practicable Date. During the Track Record Period and as of the Latest
Practicable Date, we mainly relied on Li Ting and her team to manage our distributors and
sub-distributors and develop our distribution network. Conversely, Li Ting relies on us to
continue her main distribution business. More importantly, collaboration with us gives Li Ting
the opportunity to leverage the empowerment of our unique celebrity IPs to procure distributors
for us and their respective sub-distributors. Such empowerment enables Li Ting to quickly
expand the distribution network, which in turn reward Li Ting and her team in the form of
discount, incentives and fees as well as service fees paid to Li Ting.
DISTRIBUTION ARRANGEMENT WITH OUR DISTRIBUTORS
Orders for Kunshan Tingshe Distributed Products are directly placed by the distributors
through the Ordering System. We will only process and arrange delivery of products to the
distributors based on the distributors’ orders and the distributors may then onward sell the
products to the sub-distributors and/or the end consumers. While the sub-distributors can place
their orders of the Kunshan Tingshe Distributed Products with distributors using the Ordering
System, we do not enter into direct sales with the sub-distributors. The delivery of products to
distributors, sub-distributors or their end consumers is arranged by us at the instruction of the
relevant distributor or sub-distributor.
Kunshan Tingshe enters into distribution agreement with each distributor on our behalf as
our Distribution Agent. Kunshan Tingshe is required to enter into distribution agreements with
the distributors on the same terms and conditions as the distribution agreement template
provided by us.
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Salient terms of Kunshan Tingshe’s distribution agreements with its distributors
The following summarizes the salient terms of Kunshan Tingshe’s typical distribution
agreements with the distributors:
Exclusivity: The distributor cannot sell any product comparable to Kunshan Tingshe
Distributed Products.
Payment and delivery: The distributor should make full payment at the time of order
placement and the delivery should be made within 30 days.
Sales and pricing: Distributors are required to follow our nationwide price guidelines when
selling our products. The selling price can be adjusted in a particular local market with our
consent.
Purchase deposits from distributors: In addition to the payment in full of the purchase
price for orders of our products, distributors should pay an additional RMB40 per box of coffee
to be purchased by them, as a refundable purchase deposit as security for their compliance of the
contractual obligations imposed on the distributors, which shall be remitted to the
Jointly-controlled Accounts. Such deposit is typically returned to the distributor the following
month if no breach of contractual obligation has occurred.
Advertising
Distributors should strictly comply with the relevant PRC laws, regulations and not engage
in any illegal, inappropriate, misleading and false advertising during the sales of products.
Additionally, they should strictly follow our sales policies and procedures during the course of
business and assess and guide the sub-distributors properly from time to time. Furthermore, any
form of online or offline marketing campaigns/events which is held under our Company’s name,
whether related or unrelated to our business, is forbidden without prior written approval from
the Distribution Agent.
Security deposit
Distributors are required to make a refundable security deposit of RMB10,000 with the
Distribution Agent within five days upon the signing of the agreement. If the distributors engage
in any misconduct such as unauthorized price adjustment, the Distribution Agent is entitled to
deduct damages from the security deposit. Any security deposit that the distributor collected
from sub-distributors shall be remitted to the bank account designated by the Distribution Agent;
and will be refunded to the distributors upon the termination of the distributors’ relationships.
DISTRIBUTION ARRANGEMENT WITH KUNSHAN TINGSHE
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Return policy
We accept unconditional product return within seven days of product delivery in
accordance with the Law on the Protection of Consumer Rights and Interests provided that the
returned products are in re-sellable condition (unwashed, unused and not damaged). We also
accept returns for defective products within 30 days after delivery of the products subject to the
distributors providing the relevant details and proofs.
Distributor’s other responsibilities
The distributor is also required to, among other thing:
 comply with the applicable laws and regulations and obtain the relevant qualifications
and certifications;
 refrain from making sales commitment or promises for product return unless required
by law to sub-distributors;
 not to sell the products of third parties by using our distribution system; and
 attend mandatory training sessions and other sales and marketing events hosted by the
Distribution Agent or our Company.
Distribution Agent’s responsibilities
The Distribution Agent shall provide the distributors with marketing information and
mandatory business trainings.
Term of contract
The term of agreement is generally one year and is automatically renewed for one year
after the expiry date unless either party objects.
No minimum sales targets
As Kunshan Tingshe does not set any mandatory sales targets for the distributors and
sub-distributors, the distribution agreements do not set any minimum purchase amount for the
distributors.
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THE SUB-DISTRIBUTORS
We permit our distributors to engage sub-distributors during the ordinary course of business
to extend their consumer reach. The sub-distributors are only permitted to sell our products to
consumers and are prohibited from further engaging other distributors to conduct sales. We do
not have direct contractual relationships with the sub-distributors and we manage these
sub-distributors through our distributors, who have direct contractual relationship with the
Distribution Agent and their respective sub-distributors.
We provide a sub-distribution agreement template to distributors which is substantively
similar to the distribution agreement between the Distribution Agent and our distributors. We
require our distributors to use this form agreement when they enter into a contractual
relationship with their sub-distributors.
PRICING ARRANGEMENT AND DISCOUNTS, INCENTIVES AND FEES IN RELATION
TO THE SALES OF KUNSHAN TINGSHE DISTRIBUTED PRODUCTS
Pricing arrangement for sales from our Group to Kunshan Tingshe, distributors,
sub-distributors and end consumers
We adopt similar pricing arrangement and discounts, incentives and fees in relation to the
sales of Kunshan Tingshe Distributed Products. We use MODONG coffee, being our largest
revenue contributor, as example for illustrating our pricing arrangement and mechanism below.
Both the unit selling price of the MODONG coffee that we sell to Kunshan Tingshe (“ our unit
selling price to Kunshan Tingshe ” or denote it as “ Y”) and the unit selling price of the
MODONG coffee that Kunshan Tingshe sells to our distributors (“ Kunshan Tingshe’s unit
selling price to our distributors ”) are determined by us and have been fixed throughout the
Track Record Period. We also set the benchmark prices of the unit selling price of the MODONG
coffee that our distributors sell to the sub-distributors (“ distributors’ benchmark unit selling
price to the sub-distributors ”) and the unit selling price of the MODONG coffee that our
distributors or the sub-distributors sell to the end consumers (“ benchmark unit selling price to
end consumers ”).
Kunshan Tingshe’s unit selling price to our distributors is set at a fixed mark-up (the
“Fixed Mark-up ” or 0.5Y) of approximately 50% to our unit selling price to Kunshan Tingshe
(i.e. approximately 1.5Y). In other words, the Fixed Mark-up is equal to approximately 34% of
Kunshan Tingshe’s unit selling price to our distributors (i.e. ~0.5Y/1.5Y = ~34%). Distributors’
benchmark unit selling price to the sub-distributors is approximately marked up 25% based on
Kunshan Tingshe’s unit selling price to our distributors (i.e. 1.5Y x 1.25 = 1.9Y) before the
application of certain volume-based discounts based on our discount guidance. Benchmark unit
selling price to end consumers is approximately marked up 145% based on Kunshan Tingshe’s
unit selling price to our distributors (i.e. 1.5Y x 2.45 = 3.7Y) before the application of certain
volume-based discounts based on our discount guidance.
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Set out below is a numerical illustration of the pricing policies from our Group to end
consumers:
Distributors
Kunshan Tingshe
(as main distributor)
~1.5Y
~1.9Y (before any volume based discount)
(Recognized as our gross revenue
and before any volume based discount)
(before any volume based discount)~3.7Y
~3.7Y
End consumers
Our Group
~Y
Sub-distributors
Note: Y is used as a denotation of our unit selling price to Kunshan Tingshe in this section only for the purpose of
illustrating the relative amounts of the prices of MODONG coffee and related expenses under the Distribution
Agent Distribution Model. The unit selling prices of MODONG coffee has been fixed throughout the Track
Record Period.
The various mark-ups of selling prices between different levels mentioned above are used
to mobilize Kunshan Tingshe, our distributors and the sub-distributors to promote and market
our MODONG coffee. The mark-ups of selling prices between each level is in line with industry
norm.
Discounts, incentives and fees to distributors and Li Ting
1. The Fixed Mark-up, which represents the surplus of Kunshan Tingshe’s selling prices over
that of our unit selling price to Kunshan Tingshe, is determined by us after consultation
with Kunshan Tingshe and taking into account various discounts, incentives and fees
required to be given by Kunshan Tingshe to promote the sales of the MODONG coffee and
to expand the network of our distributors. In other words, the Fixed Mark-up is given to
Kunshan Tingshe to cover the following items:
1.1 various volume discounts and incentives given to our distributors. V olume discounts
are given to our distributors if they meet certain purchase targets in terms of the
number of boxes of the MODONG coffee as pre-determined by us. Incentives will also
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be given to distributors (“ Introducing Distributors ”) for their services provided to
assist Kunshan Tingshe to for, amongst others, extending our distribution network by
procuring new distributors (“ Procured Distributors ”), including their assistance and
guidance provided to the Procured Distributors in relation to our products and
marketing strategies. Such discounts and incentives amounted to approximately
20–24% of Kunshan Tingshe’s gross sales for the years ended December 31, 2019,
2020, 2021 and 2022 (i.e. approximately 20–24% of 1.5Y); and
1.2 sales volume based fees are given to a few distributors as selected by Kunshan
Tingshe (according to certain criteria including the distribution network they assisted
to develop, and the number of distributors they referred to Kunshan Tingshe) to
provide services to assist Kunshan Tingshe in promoting the sales of the MODONG
coffee and expanding the distribution network in order to incentivize the Selected
Distributors to promote sales through the distribution networks which they assisted to
develop. Such sales volume based fees to Selected Distributors amounted to
approximately 3–4% of Kunshan Tingshe’s gross sales for 2020 (i.e. approximately
3–4% of 1.5Y) as the Selected Distributors achieved a high completion rate of the
sales targets. In 2021 and 2022, as the sale volume of the MODONG coffee by the
Selected Distributors had decreased, thereby lowering the sale volume based fees to
1.4% and 1.0% of Kunshan Tingshe’s gross sales for 2021 and 2022, respectively (i.e.
approximately 1.4% and 1.0% of 1.5Y).
The volume discounts, incentives and fees to our distributors as mentioned in the above
items (1.1) to (1.2) are subject to our Group’s review and approval and are considered as
payments to customers under HKFRS 15 and they are net off with revenue accordingly. For
more details, please refer to the section headed “Financial information – Description of
major components of our results of operations – Revenue from new retail business” in this
prospectus.
2. Kunshan Tingshe shall be entitled to use the entire remaining balance of the Fixed Mark-up
after deducting the above items (1.1) and (1.2) (“ Remaining Balance of the Fixed
Mark-up ”) to cover its operating costs, including but not limited to, payment of fee to Li
Ting or company(ies) controlled or designated by Li Ting (“ Service Fee to Li Ting ”) for
her services provided to Kunshan Tingshe in managing Kunshan Tingshe and the network
of distributors and sub-distributors, marketing and promotion expenses and employee
benefit expenses.
The Service Fee to Li Ting is directly linked to the sales performance of MODONG coffee
and accordingly is based on the total boxes of the MODONG coffee sold by us to our
distributors multiplied by a fixed unit fee, which amounted to approximately 3% to 4% of
Kunshan Tingshe’s gross sales for 2019, 2020, 2021 and 2022 (i.e. approximately 3% to 4%
of 1.5Y).
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We believe the success of building, expanding and maintaining our Group’s extensive
distribution network is mainly contributable to Kunshan Tingshe’s development and
management thereof, which is carried out through the leadership of Li Ting. Accordingly,
we consider a service fee shall be paid to Li Ting in order to (i) recognize the soft skills
brought by Li Ting; and (ii) ensure her continuous effort to maintain and even expand our
distribution network. The Service Fee to Li Ting was negotiated and determined taking into
account, among others, our assessment to secure a reasonable margin on product sold, Li
Ting’s role in Kunshan Tingshe and her expected compensation. Our Directors are of the
view that it is not uncommon in the industry that social e-commerce companies to pay a
certain amount of fees to its distribution agent and/or key personnel of its distribution agent
to incentivize them.
Additional incentive fee to Kunshan Tingshe
In order to further incentivize and motivate Kunshan Tingshe to put more effort in
developing and expanding our distribution network, starting from 2020, we agreed to pay sales
incentives to Kunshan Tingshe (“ Additional Incentive Fee to Kunshan Tingshe ”) based on the
total boxes of MODONG coffee sold if minimum sales targets of 2,000,000 boxes, 3,000,000
boxes and 2,800,000 boxes can be achieved in 2020, 2021 and 2022, respectively. In 2020, the
sales incentive was RMB5 per box for the first 2,000,000 boxes and RMB8 per box for each box
exceeding 2,000,000 boxes. In 2021, the sales incentive was RMB5 per box for the first
3,000,000 boxes and RMB7 per box for each box exceeding 3,000,000 boxes. In 2022, the sales
incentive was RMB5 per box for the first 2,800,000 boxes and RMB7 per box for each box
exceeding 2,800,000 boxes. The above sales targets are simply the indication for entitlement of
the Additional Incentive Fee to Kunshan Tingshe, instead of being mandatory sales targets to be
achieved whereby the failure of which would result in either termination of our relationship
therewith or any penalty being imposed thereon.
ACCOUNTING TREATMENT IN RELATION TO THE SALES OF THE KUNSHAN
TINGSHE DISTRIBUTED PRODUCTS
Before the disposal of Kunshan Tingshe on May 31, 2020, Kunshan Tingshe was our
subsidiary and therefore all its sales, cost of sales as well as all operating costs (after
inter-companies eliminated) were consolidated in our Group’s consolidated financial statements.
In particular,
(A) our Group’s consolidated sales of the MODONG coffee were equal to the sales of
Kunshan Tingshe (i.e. Kunshan Tingshe’s unit selling price to our distributors, or
1.5Y), net of the discounts, incentives and fees to distributors as mentioned in the
above items (1.1) and (1.2) (which actually represent the discounts, incentives and
fees given to distributors by our Group as Kunshan Tingshe was part of our Group);
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(B) all the cost of sales as well as all operating costs (after inter-companies eliminated)
were consolidated as part of the related costs or expenses of our Group. In particular,
the Service Fee to Li Ting (which is part of such operating costs of Kunshan Tingshe)
was recorded as part of the selling and marketing expenses of our Group; and
(C) the Additional Incentive Fee to Kunshan Tingshe which was paid by our Group
(excluding Kunshan Tingshe) was eliminated upon consolidation.
The accounting treatments in relation to the sales and various components of the Fixed
Mark-up are substantially the same after the disposal of Kunshan Tingshe, except for the
Additional Incentive Fee to Kunshan Tingshe from our Group which would not be eliminated
and consolidated, and is recorded as part of the operating costs of our Group.
Based on the above, the gross and net sales of the Kunshan Tingshe Distributed Products
during the Track Record Period remain the same both before and after the disposal of Kunshan
Tingshe, which are summarized below with reference to the above explanations:
Y ear ended December 31,
2019
%t oo u r
gross
sales 2020
%t oo u r
gross
sales 2021
%t oo u r
gross
sales 2022
%t oo u r
gross
sales
Notes (in RMB thousands)
Gross revenue (a) 90,319 100.0% 467,926 100.0% 331,441 100.0% 222,557 100.0%
V olume discounts and incentives to
our distributors (b) (18,425) 20.4% (111,893) 23.9% (72,425) 21.9% (52,673) 23.7%
Sales volume based fees to the
Selected Distributors (c) – – (15,260) 3.3% (4,669) 1.4% (2,221) 1.0%
Revenue recognized by our Group (d) 71,894 79.6% 340,773 72.8% 254,347 76.7% 167,663 75.3%
Notes:
(a) Based on Kunshan Tingshe’s unit selling price to our distributors of approximately 1.5Y .
(b) Based on discounts and incentives to distributors as mentioned in the above item (1.1).
(c) Based on the sales volume based fees to distributors as mentioned in the above item (1.2).
(d) Represented the revenue recognized by our Group in respect of the sale of the Kunshan Tingshe Distributed
Products through Kunshan Tingshe.
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Illustration of the accounting treatment of the Fixed Mark-up (i.e. based on 0.5Y or 34% of
1.5Y)
Sales volume based fee
(see item 1.2 above)
Volume discounts and incentives
to distributor (see item 1.1 above)
Net with revenue
Recognized as expenses
Remaining Balance of
the Fixed Mark-up –
Service fee to Li Ting
(see item 2 above)
Remaining Balance of
the Fixed Mark-up –
to cover other operating costs of
Kunshan Tingshe
(see item 2 above)
Set out below is an analysis of the Fixed Mark-up during the Track Record Period:
Y ear ended December 31,
2019
%t oo u r
gross
sales 2020
%t oo u r
gross
sales 2021
%t oo u r
gross
sales 2022
%t oo u r
gross
sales
Notes (in RMB thousands)
To offset revenue as shown above
V olume discounts and incentives
to distributors (a) 18,425 20.4% 111,893 23.9% 72,425 21.9% 52,673 23.7%
Sales volume based fees to the
Selected Distributors (b) – – 15,260 3.3% 4,669 1.4% 2,221 1.0%
Recognized as expenses
Remaining Balance of Fixed
Mark-up (c)
– Service Fee to Li Ting 3,290 3.6% 17,957 3.8% 12,913 3.9% 7,389 3.3%
– To cover other operating costs
of Kunshan Tingshe 9,060 10.0% 18,347 3.9% 25,779 7.8% 15,595 7.0%
(Note d) (Note e) (Note d) (Note e) (Note e)
Total of Fixed Mark-up (f) 30,775 34.0% 163,457 34.9% 115,786 34.9% 77,878 35.0%
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Notes:
(a) Based on discounts and incentives to distributors as mentioned in the above item (1.1).
(b) Based on the sales volume based fees to distributors as mentioned in the above item (1.2).
(c) The Remaining Balance of the Fixed Mark-up are the amounts as mentioned in the above item (2).
(d) For the year ended December 31, 2019 and for the five months ended May 31, 2020, the Remaining Balance of
Fixed Mark-up to cover other operating costs of Kunshan Tingshe of RMB9.1 million and RMB9.9 million
respectively were eliminated on consolidation in preparing our consolidated financial statements and such other
operating costs of Kunshan Tingshe were consolidated in our financial statements.
(e) The percentage of the Remaining Balance of Fixed Mark-up to cover other operating costs of Kunshan Tingshe
to our gross sales was relatively higher in 2019 since we allocated more costs on the establishment of the
distribution network in the first year of sales of MODONG coffee as its sales volume was relatively low and we
were still introducing it to the market. In 2021 and 2022, we recorded a higher percentage of the Remaining
Balance of Fixed Mark-up to cover other operating costs of Kunshan Tingshe, mainly because the sale of
MODONG coffee decreased in the two years ended December 31, 2022, which resulted in the decrease in (i) the
volume discounts and incentives to distributors; and/or (ii) the sales volume based fees to the Selected
Distributors, which was determined with reference to the completion rate of predetermined sales targets.
(f) Notwithstanding that the Fixed Mark-up should be approximately 34% of Kunshan Tingshe’s unit selling price to
our distributors as illustrated above, there is a slight variation from the 34% during the Track Record Period as
we might from time to time (i) offer promotion activities to sell MODONG coffee together with our other
products in a bundle, or vice versa. For instance, our skincare products and MODONG coffee may be packaged
as a bundle to promote our sales. As a result, the selling price and gross revenue of our Kunshan Tingshe
Distributed Products is adjusted with fair value allocation in accordance with HKFRS 15; and (ii) organize
certain activities or campaign where our MODONG coffee and the ancillary products are directly sold through
Kunshan Tingshe to the end consumers without involving payment of discounts, incentives and fees to
distributors.
As illustrated in the above table, part of the Fixed Mark-up covering the volume discounts
and incentives and sales volume-based fees to be granted to distributors represented discounts,
incentives and fees paid by our Group to the distributors through Kunshan Tingshe and are
therefore not regarded as services fees to Kunshan Tingshe. On the other hand, the Remaining
Balance of the Fixed Mark-up for covering the Service Fees to Li Ting and other operating costs
of Kunshan Tingshe are regarded as service fees to Kunshan Tingshe for promotion and
marketing of the Kunshan Tingshe Distributed Products, including MODONG coffee, by
developing, expanding and managing our distribution network.
The Additional Incentive Fee to Kunshan Tingshe from our Group amounted to
approximately RMB19.5 million for 2020, which amounted to approximately 4.2% of our gross
sales for 2020. Of the aforesaid RMB19.5 million incurred in 2020, RMB7.8 million was the fee
paid for the five months ended May 31, 2020 and was therefore eliminated on consolidation in
preparing of our Group’s financial statements. We did not pay any Additional Incentive Fee to
Kunshan Tingshe in 2021 and 2022 as the sale volume of MODONG coffee through Kunshan
Tingshe in 2021 and 2022 did not meet the respective prescribed threshold for the Additional
Incentive Fee to Kunshan Tingshe.
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SETTLEMENT ARRANGEMENT AMONG OUR GROUP, KUNSHAN TINGSHE AND
OUR DISTRIBUTORS
Immediately before and after our disposal of Kunshan Tingshe, Kunshan Tingshe has been
primarily responsible for receiving prepayments for sales (based on Kunshan Tingshe’s unit
selling price to our distributors i.e. approximately 1.5Y) from our distributors through its bank
account. After retention of the Fixed Mark-up (i.e. 0.5Y) by Kunshan Tingshe, it will transfer
the related amount of sales (i.e. Y) from its bank accounts to the bank accounts of Kunshan Star
Plus Action.
Our Directors consider that it is commercially reasonable to continue with the above
settlement arrangement after the disposal of Kunshan Tingshe. Thus, we entered into one of the
Jointly-controlled Accounts Agreements with Kunshan Tingshe, pursuant to which the
Jointly-controlled Account, which was designated for the receipt of payments for the Kunshan
Tingshe Distributed Product from the distributors. For further details on the Jointly-controlled
Account and the security deposit, please refer to the paragraph headed “Control measures against
risk of default of Kunshan Tingshe – (a) Jointly controlled Accounts” in this section.
We see through Kunshan Tingshe for recording prepayments from our distributors from
accounting perspective, which means that the prepayments from our distributors to Kunshan
Tingshe are regarded as our contract liabilities, both before and after the disposal of Kunshan
Tingshe. Any balance of prepayments from our distributors kept in the Jointly-controlled
Accounts which has yet to be transferred to our bank accounts, net of RMB50 million security
deposit, is recorded as amount due from a third party after the disposal of Kunshan Tingshe.
To further lower our credit risk in respect of the fund in the Jointly-controlled Accounts
which have not been transferred to our Group, in or around September 2022, Kunshan Tingshe
and our Group agreed to accelerate the settlement of prepayment received in the
Jointly-controlled Accounts. On October 31, 2022, we entered into a supplemental agreement
with Kunshan Tingshe, pursuant to which Kunshan Tingshe shall transfer the amount payable to
us in respect of the prepayment received from the distributors on the working day immediately
following the date of such prepayment commencing from November 2022 and Kunshan Tingshe
would no longer be required to maintain with us the security deposit of RMB50.0 million. Upon
the implementation of the aforesaid settlement arrangement, the amounts due from Kunshan
Tingshe to our Group has been reduced to a relatively low level. As of December 31, 2022, there
was no amount due from Kunshan Tingshe and the balance of the Jointly-controlled Accounts
was RMB1.3 million.
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THE ENGAGEMENT OF KUNSHAN JIAMENG BY KUNSHAN TINGSHE
Circumstances leading to the engagement of Kunshan Jiameng
As we are considered to be a pioneer in relation to our social e-commerce operation for
sales of our products, i.e. sales of our products under the Distribution Agent Assisted
Distribution Model through vast number of distributors, being individuals, via e-commerce
channels, we were treated by Kunshan AMR as a social e-commerce pilot enterprise to
participate in the Kunshan Pilot Program, in particular, through the development of relevant
policies, laws and regulations regarding the operation of individuals/entities in the social
e-commerce industry. Our Group has maintained close communication with the local government
authorities in Kunshan to seek guidance from the government authorities on a regular basis to
ensure our business model (including the operations of our distributors) complies with the
relevant laws and regulations. Kunshan AMR has carried out pioneering work in data sharing
and cooperation with entities in Kunshan Pilot Program for the purposes of encouraging social
e-commerce industry players to conduct their businesses in the legally recognized manner. Based
on our understanding from communication with local government authorities, the local
government authorities encouraged the engagement of independent and professional service
provider(s) to assist each social e-commerce enterprise in the Kunshan Pilot Program to ensure
the operations of individuals involved in operations of such social e-commerce enterprise to
comply with the relevant laws and regulations.
Pursuant to the E-Commerce Law, our distributors are required to be registered as
Individual Proprietor or corporate entities. Further, the relevant authorities requested our
distributors to use a commercial premises as the registered address for business registration (the
“Registered Address ”). Even though there will not be any legal implication on us even if our
distributors did not comply with the E-Commerce Law, after being aware of such requirements
under the E-Commerce Law, we explored the possibility of assisting our distributors to complete
the registration process in order to ensure that they are in compliance with all applicable laws
and regulations. During such process, we noticed certain obstacles were faced by our
distributors, for example, it is practically infeasible for distributors to have their own Registered
Address solely for the purpose of completing the registration and fulfilling applicable regulatory
requirements as mentioned above.
In order to resolve the issues faced by our distributors in compliance with the relevant laws
and regulations, in April 2020, a meeting (the “ KDRC Meeting ”) was organized by Kunshan
Development and Reform Commission. Representatives of various government authorities
(including Kunshan AMR), Kunshan Jiabao (i.e. the property developer of Dream World Park
(෤ਜ ), the business hub where our office is located at) and our Group, amongst others,
had attended the KDRC meeting. We understand that, upon conclusion of the KDRC Meeting,
the Kunshan local government authorities recommended and agreed that separate
entities/individuals should be involved in different parts of the social e-commerce operation, i.e.
(i) our Group shall focus on the planning and research and development of new products and
brands as well as the planning and development of IP content and its licensing; (ii) Kunshan
Tingshe shall focus on its operation of expanding the distribution network; and (iii) a separate
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entity should act as a bridge between government authorities and participants in the social
e-commerce industry to ensure such participants (i.e. our distributors) are properly supervised
and comply with applicable laws and regulations in a timely and effective manner (i.e. an entity
with roles and responsibilities similar to Kunshan Jiameng). As Kunshan Tingshe did not have
the relevant experience and expertise in handling the regulatory related matters for our
distributors, it engaged Kunshan Jiameng as a service provider to provide the relevant
administrative and regulatory supports.
Background of Kunshan Jiameng and its shareholder
M r .L iY i( ҽ඀)( “ Mr. Li ”), being the controlling shareholder of Kunshan Jiameng, was
invited by Kunshan Jiabao to attend the KDRC Meeting given his past experience in dealing
with the Kunshan Tax Bureau and Kunshan Industry and Commerce Bureau when handling
tax-related matters and providing consultancy and regulatory compliance services, which has
laid the foundation for him to assume the roles and responsibilities to be provided by Kunshan
Jiameng.
Mr. Li was the general manager of Kunshan Qiye Investment Consulting Co., Ltd.* (ʆ઼
ʮ̡ ) and the consultant of Haichuang Consulting (Suzhou) Co., Ltd.* ( ऎ௴ፔ
༔(ᘽψ)ʮ̡ ), which were all principally engaged in the provision of business consultation
services to customers which are mainly small to medium enterprises covering different industries
(such as advising on the form of entity each business should establish based on their specific
circumstance, assisting businesses on the relevant registration process, and compliance with the
filing and reporting requirements of tax authorities and industry and commerce bureau) from
2016 to 2020 (immediately before the establishment of Kunshan Jiameng). From 2012 to 2016,
Mr. Li worked in a property development company under Kingboard Holdings Limited (stock
code: 148) where he was in charge of fiscal and taxation management, and such role required
him to have a thorough understanding of the relevant taxation policies and regulatory framework
as well as frequent communication with government authorities (especially the tax bureau). Mr.
Li’s previous roles required him to maintain frequent communication with local government
authorities to ensure that both sides’ interpretation of the local policies, such as tax, are aligned,
and the good working relationship with the local government authorities made his advisory work
more efficient. Mr. Li’s connections and previous experience (especially the provision of
consultancy and regulatory compliance services) has laid the foundation for him to set foot in
assuming Kunshan Jiameng’s role, particularly in providing advisory services to our distributors
and verifying and releasing fees payable to them.
In March 2022, Kunshan Jiameng was officially recognized by Jiangsu Kunshan Huaqiao
Economic Development Zone Management Committee* (ึ )
as a third party service provider to assist social e-commerce enterprises or participants in the
Kunshan Digital E-Commerce Business Hub* (ᅰοཥਠପุ෤ ) within Kunshan Pilot Zone
in their operations in accordance with the relevant laws and regulations, and in good faith by
reporting the latest industry development to the relevant governmental authority(ies) regularly.
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The roles and responsibilities of Kunshan Jiameng
Led by Mr. Li, Kunshan Jiameng provides administrative and regulatory support to
Kunshan Tingshe and our distributors, most of whom are individuals with limited knowledge on
legal and regulatory requirements, such as registration as Individual Proprietor and/or tax filings.
Kunshan Jiameng also acts as a bridge between local government authorities for the Kunshan
Pilot Program and Kunshan Tingshe in relation to distributors’ compliance matters, so that
Kunshan Tingshe and distributors would be informed of any regulatory updates in a timely
manner.
Prior to our disposal of Kunshan Tingshe, Kunshan Tingshe’s operation was supported by
our Group where we provided human resources, office and administrative support to Kunshan
Tingshe. Since Kunshan Tingshe has been operating separately from us after its disposal, in
addition to being responsible for providing regulatory support, Kunshan Jiameng also provides
other administrative supports to Kunshan Tingshe to execute both offline and online advertising
and promotional activities for the development of the distribution network.
To the best of our Directors’ knowledge and belief, Kunshan Tingshe entered into an
agreement with Kunshan Jiameng in June 2020, pursuant to which Kunshan Tingshe engaged
Kunshan Jiameng to provide administrative and supportive in relation to the management of the
distribution network. Please refer to the paragraph headed “– Roles and responsibilities of our
Group, Kunshan Tingshe and Kunshan Jiameng” in this section below.
Monitoring the tax filings of our distributors by Kunshan Jiameng
One of the major roles of Kunshan Jiameng is to assist our distributors in their tax filings.
Our distributors have generally authorized Kunshan Jiameng to arrange registration of the
account (“ Tax Account ”), which such distributors use for tax filing with the PRC tax authority,
as well as authorize and grant Kunshan Jiameng to gain access and operate their respective Tax
Accounts.
As Kunshan Tingshe would share the sales data withdrawn from the Ordering System with
Kunshan Jiameng each month, Kunshan Jiameng would be able to assist Kunshan Tingshe in
calculating the volume discounts and incentives to be granted to our distributors based on such
shared sales data. Thus, Kunshan Jiameng can confirm with each of our distributors the exact
amount of volume discount and incentives to be granted to each of them by cross-checking the
sales data generated from the Ordering System against the sales orders provided by our
distributors with respect to those orders placed by them during that particular month.
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After Kunshan Jiameng has confirmed the volume discounts and incentives that our
distributors are entitled to, Kunshan Jiameng would normally (i) inform our distributors the
amount of volume discounts and incentives that the relevant distributors would be entitled to
during that particular month; and (ii) log in the relevant distributor’s Tax Account, and use such
Tax Account to issue invoice (“ Invoice ”) in the name of such distributor on their behalf to
Kunshan Jiameng (i.e. issuances of invoices on behalf of our distributors), after that Kunshan
Jiameng would arrange payment of the relevant volume discounts and incentives to our
distributors according to the Invoices.
The records of the Invoices that are made by Kunshan Jiameng on behalf of our distributors
in their respective Tax Accounts as mentioned above are also considered as Kunshan Jiameng
providing assistance to our distributors in recording the discounts and incentives received by
them with respect to their sales of Kunshan Tingshe Distributed Products in their respective Tax
Accounts (i.e. record keeping of the volume discounts and incentives received by the Group’s
distributors with respect to their sales of Kunshan Tingshe Distributed Products). Such
arrangement is to ensure our distributors have properly reported the appropriate taxable amount
to the local government in accordance with all the relevant PRC laws and regulations. with
respect to the onward retail sales of our products from our distributors to their customers, each
of our distributors would be the only responsible party for the reporting of appropriate taxable
amount to the local tax authority and the issuance of invoices. As (1) approximately 85% of our
distributors are Individual Proprietors; and (2) their operation scale are relatively small, they
would be subject to tax based on deemed income basis pursuant to the relevant PRC laws and
regulations. Accordingly, their income tax with respect to their onward retail sales to their
customers would be calculated based on a deemed income basis with reference to their operation
scale.
As the transactions between our distributors and their customers are relatively simple, as
compared to the transactions between Kunshan Tingshe and our distributors, the related tax
compliance matters are considered to be straightforward. Thus, given Kunshan Jiameng is not
involved in the transactions between our distributors and their customers, unlike the above
mentioned arrangement, Kunshan Jiameng would not report the appropriate taxable amount of
our distributors on their behalf to the local tax authority and the issuance of invoices on behalf
of our distributors with respect to their onward retails to their customers. However, Kunshan
Jiameng would give advice to our distributors on their compliance of the relevant PRC laws and
regulations by answering their enquiries (if any) and providing assistance if it is requested by
our distributors.
The arrangement between Kunshan Tingshe and Kunshan Jiameng is in line with the
directive put forward at the KDRC Meeting by local government authorities.
Payment arrangement between Kunshan Tingshe and Kunshan Jiameng
In consideration of, and for the purpose of providing the necessary funds for, the
administrative and supportive services provided by Kunshan Jiameng as well as payments of
volume discounts, incentives and fees to our distributors and Li Ting on behalf of Kunshan
DISTRIBUTION ARRANGEMENT WITH KUNSHAN TINGSHE
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Tingshe, Kunshan Tingshe shall make payments to Kunshan Jiameng based on the sale volume
of the Kunshan Tingshe Distributed Products (the “ Payments to Jiameng ”). In particular with
respect to the sale of MODONG coffee through Kunshan Tingshe, the Payments to Jiameng
payable by Kunshan Tingshe is determined with reference to the sale of each box of MODONG
coffee and is equal to approximately 73% of the Fixed Mark-up (i.e. 0.5Y x 73% = ~0.38Y),
which is financed out of the Fixed Mark-up received by Kunshan Tingshe from us (i.e. 0.5Y).
During the years ended December 31, 2020 and 2021 and the six months ended June 30, 2022,
based on the sale of the Kunshan Tingshe Distributed Products, the Payments to Jiameng
amounted to RMB62.6 million, RMB90.4 million and RMB27.0 million, respectively.
The Payments to Jiameng are for Kunshan Jiameng to make the payments on behalf of
Kunshan Tingshe for (i) certain discounts, incentives and fees to our distributors and Li Ting;
and (ii) the expenses for marketing and advertising activities for the development of the
distribution network undertaken under the instruction of Kunshan Tingshe which will be borne
and paid by Kunshan Jiameng as part of Kunshan Jiameng’s responsibility to assist Kunshan
Tingshe. To our best knowledge, information and belief, such payment arrangement regarding
item (i) above is to assist the local government to supervise whether the distributors and Li Ting
have properly prepared their respective tax filings and discharge their respective tax obligation
in accordance with the relevant laws and regulations.
After the payments of the above items (i) and (ii), the remaining amount represents the
service fees to Kunshan Jiameng. Kunshan Tingshe will monitor the amounts of the above items
(i) and (ii) from time to time such that the resulted services fees to Kunshan Jiameng will be at
the intended rate of approximately 5% of the Payments to Jiameng (i.e. approximately RMB2.8
million, RMB4.1 million and RMB1.2 million respectively during the years ended December 31,
2020 and 2021 and the six months ended June 30, 2022 based on the aforesaid respective
amounts of Payments to Jiameng during the respective year).
There are other service providers in the PRC which provide services that are similar to that
of Kunshan Jiameng (“ Other Service Providers ”). Such Other Service Providers principally
provide consolidated administrative works for a large group of dispersed participants who
contribute services (“ Participants ”) to the clients of the Other Service Providers (“ Clients ”).
The Other Service Providers’ service fee ranges from 5% to 10% of the total monthly sum
payable from the Clients to the Participants, which may vary depending on the industry nature
and scale of the Clients. Based on the foregoing, our Directors are of the view that the service
fee charged by Kunshan Jiameng and the total monthly amount settled by it on behalf of
Kunshan Tingshe is comparable to the market rates.
To the best knowledge, information and belief of our Directors, to facilitate Kunshan
Jiameng in providing its services, Kunshan Tingshe would transfer the Payments to Jiameng on a
prepayment basis based on the estimated sales of the Kunshan Tingshe Distributed Products.
Kunshan Tingshe and Kunshan Jiameng would subsequently confirm and settle the amounts
(including the service fees to Kunshan Jiameng) based on the actual orders placed by the
distributors. During the year ended December 31, 2020 and 2021 and the six months ended June
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30, 2022, the net amounts transferred by Kunshan Tingshe to Kunshan Jiameng was RMB71.4
million, RMB121.6 million and RMB53.4 million, respectively.
Size of operation of Kunshan Jiameng
As at December 31, 2022, Kunshan Jiameng had 10 staff being responsible for the above
roles, and it did not provide any similar services to its other clients, save as Shouwang
Xingguang. Apart from the above services provided to Kunshan Tingshe, Kunshan Jiameng
mainly engages in provision of consultation services, design, production and publication of
advertisements. To the best knowledge, information and belief of our Directors, the following
table sets forth certain key financial information of Kunshan Jiameng for the year/period
indicated:
For the year ended
December 31,
For the six
months ended
June 30,
2020 2021 2022
(in RMB thousands)
(unaudited) (unaudited) (unaudited)
Revenue (Note) 39,185 97,461 40,112
Gross profit 3,362 6,759 2,469
Net profit/(loss) 1,883 (357) 841
Note: The revenue of Kunshan Jiameng was primarily attributable to the services provided to Kunshan Tingshe
which was recorded on a gross basis including, among other things, the Payments to Jiameng for
settlement of certain discounts, incentives and fees to our distributors and Li Ting; and (ii) the expenses
for marketing and advertising activities for the development of the distribution network. The difference
between the revenue of Kunshan Jiameng as discussed above and the Payments to Jiameng of
approximately RMB62.6 million, RMB90.4 million and RMB27.0 million as recorded in Kunshan
Tingshe’s book was primarily attributable to cut-off adjustments arising from the fact that the revenue of
Kunshan Jiameng were recorded on cash basis or partial accrual basis and were not recognized in
accordance with HKFRS. As advised by management of Kunshan Jiameng, the revenue recognized in its
management account was based on (i) the invoice issued by Kunshan Jiameng to Kunshan Tingshe; and (ii)
for transaction that invoice was yet to be issued by Kunshan Jiameng, the management’s estimation of the
accrued revenue. On the other hand, the Payments to Jiameng were recognized by Kunshan Tingshe in
accordance with applicable HKFRS when such relevant expenses were incurred. The management has
reconciled such expenses relating to the goods sold to customers with the delivery record to confirm that
such expenses have been properly recorded in correct period.
Our Directors confirm, and the Sole Sponsor concurs, that, throughout the Track Record
Period, there was no cost or expense that was incurred by Kunshan Tingshe and/or Kunshan
Jiameng in respect of the distribution of our products which had not been properly taken up or
recorded in our financial statements in accordance with the contractual and business relationship
between (i) our Group and Kunshan Tingshe; and/or (ii) Kunshan Tingshe and Kunshan Jiameng.
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Companies providing similar services as Kunshan Jiameng
Based on the administrative directive issued by the Jiangsu Kunshan Huaqiao Economic
Development Zone Management Committee in March 2022 (“ Administrative Directive ”),
Kunshan Guozhen Enterprise Management Company Limited* (ʮ̡ ),
(“Service Provider A ”) and Kunshan Hanhong Technology Investment Development Company
Limited* (ʮ̡ )( “ Service Provider B ”) are the other two service
providers in addition to Kunshan Jiameng recognized by Jiangsu Kunshan Huaqiao Economic
Development Zone Management Committee* (ึ ) to assist
the other two groups of e-commerce enterprises and related entities/individuals engaging in
e-commerce business at the other two business hubs in Kunshan Digital E-commence Business
Hub* (ᅰοཥਠପุ਷ ) within Kunshan Pilot Zone. Based on the Administrative Directive,
the main role of each of Service Provider A, Service Provider B and Kunshan Jiameng is to
assist with the regulation of entities/individuals engaging in e-commerce business for the local
government authorities. To the best of our Directors’ knowledge and belief, customers of Service
Provider A are mainly e-commerce enterprises with relatively larger scale of operation. Thus,
Service Provider A is not requested by its customers to provide some services similar to those
provided by Kunshan Jiameng, i.e. coordinating and facilitating the execution of the advertising
and promotional activities/events contemplated by Kunshan Tingshe and verifying, and arranging
settlement.
Although the services provided by Service Provider A are not exactly the same as that of
Kunshan Jiameng, based on the main role of each of Service Provider A, Service Provider B and
Kunshan Jiameng as set out in the Administrative Directive, as well as the basis set out below,
our Directors are of the view that the core value and the roles of Service Provider A and Service
Provider B are to provide support and assistance to enterprises engaging in e-commerce business
at the other two business hubs in Kunshan Pilot Zone in relation to (i) the compliance with the
applicable registration and tax requirements; and (ii) liaison with the local government
authorities, and thus are substantially the same as the ones of Kunshan Jiameng:
1. based on a press release of the Kunshan Huaqiao Economic Development Zone
Administration Committee* (ึ ) dated June 28, 2022,
customers of Service Provider A are mainly mid-to-large size enterprises. As they are
comparatively sizable than our Group’s distributors, which are mainly small scale
business operators, it is reasonable that Service Provider A is not engaged to provide
administrative support services similar to those provided by Kunshan Jiameng; and
2. all of Kunshan Jiameng, Service Provider A and Service Provider B act as a bridge
between local government authorities in Kunshan Pilot Zone and the three respective
groups of e-commerce enterprises and related entities engaging in e-commerce
business at the respective business hubs in Kunshan Pilot Zone for compliance
matters.
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Apart from the above mentioned Service Provider A and Service Provider B, there are the
Other Service Providers. The Clients normally engage a large group of Participants who are not
their employees in producing goods or providing services that such Clients require, which is
similar to the arrangement between our Group and our distributors and sub-distributors with
respect to the sales of Kunshan Tingshe Distributed Products. The services provided by the
Other Service Providers normally include (i) verifying amount payable to the Participants by the
Clients; (ii) paying such amount to such Participants on behalf of the Clients thereafter; and (iii)
assisting the Participants in compliance matters (e.g. tax filing, book-keeping and filings with
the SAMR etc.). The Other Service Providers would assist the Clients in calculating the amounts
payable to the Participants. The Clients would transfer the aggregate amount that both Other
Service Providers and the Participants are entitled to on a monthly basis. Upon receipt of such
amount, the Other Service Providers would confirm and check with each Participant that the
amount payable thereto as represented by the Clients is the same as the amount that such
Participants have in mind. Our Directors are of the view that such services provided by the
Other Service Providers are comparable to that of Kunshan Jiameng.
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ROLES AND RESPONSIBILITIES OF OUR GROUP, KUNSHAN TINGSHE AND KUNSHAN JIAMENG
The below table summarizes the respective roles and responsibilities of each of our Group, Kunshan Tingshe and Kunshan Jiameng in
relation to the Kunshan Tingshe Distributed Products, where (i) our Group generally serves as the brand owner which focuses on product
development and brand building, (ii) Kunshan Tingshe generally serves as our Distribution Agent which focuses on the manner and
effectiveness of the sales of Kunshan Tingshe Distributed Products by our distributors and their sub-distributors, and (iii) Kunshan Jiameng
mainly provides support to Kunshan Tingshe and monitors the compliance of our distributors with the applicable laws and regulations.
Our Group Kunshan Tingshe Kunshan Jiameng
Product
development
– Conduct product and market research
– Engage independent third party(ies) to co-develop
new products
– Introduce new products
– Provide our Group with end consumers’ feedback
on the use of our products
N/A
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Our Group Kunshan Tingshe Kunshan Jiameng
Development
and
management
of
distribution
network
– Determine the pricing policies, including
discounts, incentives and fees, in relation to the
sales of Kunshan Tingshe Distributed Products and
additional incentives payable to Kunshan Tingshe
to motivate Li Ting and distributors to expand our
distribution network
– Provide guidance to our distributors in organizing
distributors promotion meetings
– Assist us in organizing annual events by inviting
our distributors and their sub-distributors to join
such annual events
– Monitor the performance of our distributors, e.g.
how our distributors sell the Kunshan Tingshe
Distributed products to sub-distributors or end
consumers (where applicable) and whether our
distributors set price in violation of pricing
guidelines sets by us
– Provide guidance to our distributors as to how to
register themselves as Individual Proprietors or
companies (where applicable) and answer any
compliance-related enquiries from our distributors
from time to time in order to ensure their
compliance with relevant PRC laws and
regulations
– Assist our distributors to perform general record
keeping and to issue the invoices on behalf of our
distributors
– Assist our distributors in preparing tax filing to the
governmental authority in relation to the discounts,
incentives and fees received by them. Please refer
to the paragraph headed “The engagement of
Kunshan Jiameng by Kunshan Tingshe – The roles
of Kunshan Jiameng – monitoring the tax filings of
our distributors by Kunshan Jiameng” in this
section for further details
– Liaise with the relevant governmental
authority(ies) and provide them with the latest
industry development, such as any complaints filed
against our products and sales channel thereof, in
order to assist the governmental authority(ies) to
fine tune the regulations on social e-commerce
industry players
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Our Group Kunshan Tingshe Kunshan Jiameng
Marketing and
promotional
activities
According to the respective roles and responsibilities of our Group and Kunshan Tingshe in respect of the sale of the Kunshan Tingshe Distributed Prod ucts, with our Group focusing
on the development of products and Kunshan Tingshe being responsible for the development and day-to-day management of the distribution network, the marketing and promotion
activities conducted by our Group mainly focus on the promotion of our brand and products; whereas Kunshan Tingshe (with assistance from Kunshan Jiam eng) mainly conducts
marketing and promotion activities for the development of the distribution network.
– Conduct marketing and promotional activities for
our products
– Create celebrity IPs which have synergy to
promote our retail products as well as enhance our
brand awareness
– Organize large-scale annual events which aim to
foster brand loyalty amongst our distributors and
their sub-distributors and motivate them to further
enhance their sale performance and serve as a
marketing tool to enhance our brand awareness
through announcing upcoming development of our
Group such as IP programs or events to be
launched by us, launch of new products and/or
promotion activities of our products.
– Conduct marketing and advertising activities for
the development of the distribution network such
as distributors promotion meetings for the sharing
of KOC experience by the distributors and
distributors recruitment events
– Form ideas for advertisements and promotional
social media contents and production of promotion
video for image building and promotion of our
distributors in order to enhance the effectiveness
of promotion and sales of our products by the
relevant distributors
– Coordinate with and assist in engaging independent
third party service providers to execute offline and
online marketing and advertising activities and
events contemplated by Kunshan Tingshe
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Our Group Kunshan Tingshe Kunshan Jiameng
Trainings Our Group and Kunshan Tingshe (with assistance from Kunshan Jiameng) provide introductory trainings in different perspective (as set out below) to newly joined sub-distributors,
whom may not have any prior knowledge in our corporate culture and/or rules that they should comply with while promoting our products. Such trainings a re designed to be provided
to all distributors and sub-distributors in general and are usually conducted formally.
– Prepare training materials regarding our products
jointly with Kunshan Tingshe
– Provide trainings on our corporate culture, rules
that distributors and sub-distributors that need to
comply with for sales and promotion of our
products, knowledge on ketogenic diet, our brands,
theory on ketogenic diet, the features, usage and
ingredients of our products and how consumption
of our products can be implemented to daily lives
to maximize the effect thereof etc., to distributors
and sub-distributors
– Prepare training materials regarding our products
jointly with our Group
– Provide trainings to distributors and
sub-distributors of how to use the Ordering System
– Provide (i) trainings on our products via product
trials and experiences sharing during offline
training meetings and continuous instructions
conducted by KOC distributors based on their
personal experiences; and (ii) trainings on general
sales and marketing skills. Trainings on selling and
promotion skills include how to provide aftersales
services (e.g. how to answer queries regarding our
products from end consumers), how to edit
materials to be published on social media to
promote our products, and how to host distributors
promotion meetings. Trainings on distribution
network management skills include how to create
and enhance the image building of our distributors
or sub-distributors, how to support amongst
distributors and sub-distributors etc.
– Arrange training meetings regarding sales and
marketing techniques organized by Kunshan
Tingshe, such as securing venues and
accommodations for participants
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Our Group Kunshan Tingshe Kunshan Jiameng
Development
and use of
the Ordering
System
The Ordering System was originally developed and launched by our Group in 2019. Our Group utilizes the Ordering
System to manage the orders placed by our distributors and their sub-distributors. Subsequent to our disposal of
Kunshan Tingshe, the Ordering System is continuously used by our Group and Kunshan Tingshe where:
(i) Kunshan Tingshe is responsible for overall management of the orders placed by our distributors on behalf of us,
such as receiving the prepayment from our distributors immediately before and after the disposal of Kunshan
Tingshe by us as discussed below, arranging settlement of product price as discussed below, providing discounts
and incentives to distributors and sub-distributors etc.; and
(ii) our Group uses the data in the Ordering System to arrange delivery of our products
N/A
Settlement of
product price
and the
corresponding
discounts,
incentives
and fees in
relation to
the sales of
Kunshan
Tingshe
Distributed
Products
– We designate the product settlement function to
Kunshan Tingshe and we will settle the fee with
Kunshan Tingshe on a regular basis based on the
records in the Ordering System
– Calculate, with the assistance from Kunshan
Jiameng, volume discount and incentives, sales
volume-based fees to be granted to distributors and
the Service Fee to Li Ting based on the sales data
being withdrawn from the Ordering System, and
arrange the settlement with them
– Verify certain volume discounts, incentives and
fees payable to Li Ting and our distributors
– Provide assistance to Kunshan Tingshe with
respect to payment of the volume discounts,
incentives and fees to the distributors and Li Ting
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Our Group Kunshan Tingshe Kunshan Jiameng
Arrangement of
the
Jointly-controlled
Accounts
– Approve jointly with Kunshan Tingshe regarding
any remittance of cash out of the Jointly-controlled
Accounts
– Approve jointly with our Group regarding any
remittance of cash out of the Jointly-controlled
Accounts
– Be, immediately before and after disposal of
Kunshan Tingshe by us, primarily responsible for
receiving prepayments for sales (which are
normally non-refundable) from our distributors
through the Jointly-controlled Accounts, and
transfer purchase price for such products to us on
the working day immediately following the date of
such prepayment
– Receive, hold and manage the refundable security
deposit from distributors to secure the distributors’
compliance of the distribution agreements. The
refundable security deposit will be retained in the
Jointly-controlled Accounts and refunded to the
distributors when they ceased to be our distributor
N/A
– Receive, hold and manage the refundable purchase
deposit from distributors for each purchase order
placed by them, as a guarantee for performance of
contractual obligations imposed on them through
the Jointly-controlled Accounts, at the time when
prepayment for the purchase price of our products
is made by the distributors and return such
refundable purchase deposit to the said distributors
in the following month if no breach of contractual
obligation occurred
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Our Group Kunshan Tingshe Kunshan Jiameng
– Given that the refundable security deposit and the
refundable purchase deposit are fully refundable to
the distributors if there is no breach of the relevant
distribution agreement, Kunshan Tingshe will not
transfer such amounts to our Group
Delivery of
products
Process and arrange delivery of our products directly to
our distributors, sub-distributors or end consumers by
engaging independent logistics service provider(s), upon
receipt of orders placed directly from distributors or
sub-distributors through the Ordering System
N/A N/A
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INTRODUCTION
We cooperate with celebrities from time to time to implement our business plans. Our
cooperation with celebrities are important to our business model as (i) our IP creation and
operation segment is a standalone revenue-generating business segment; and (ii) proprietary IPs
we created empowers our new retail business through creating promotional effect on our
products. During the Track Record Period, we have cooperated with various celebrities,
including Mr. Jay Chou, Mr Liu Keng-hung, Ms. Vivi Wang and Mr. Fang, for different aspects
of our business operations.
COOPERATION RELATIONSHIP WITH MR. JAY CHOU
We have established long-term cooperation relationship with Mr. Jay Chou, JVR Music
(Mr. Jay Chou’s artiste management company) and Archstone (Mr. Jay Chou’s representative for
business negotiations in respect of one off or project based engagement). JVR Music is owned
by Mr. Yang, Mr. Jay Chou, Mr. Fang and Ms. Yeh as to 45%, 40%, 10% and 5% respectively.
Mr. Jay Chou is a founder of JVR Music, and Mr. Fang is our chief cultural officer. Archstone is
wholly-owned by Mr. Chen. Our Founders, Controlling Shareholders and/or non-executive
Directors include Ms. Yeh (Mr. Jay Chou’s mother) and directors and controlling shareholders of
JVR Music or Archstone, namely, Mr. Yang and Mr. Chen, respectively, and these parties have
substantial influence over our overall development and business strategies.
During the Track Record Period, we collaborated with Mr. Jay Chou, JVR Music and/or
Archstone through various business undertakings, such as (i) being a planner and/or an investor
to large-scale concerts featuring Mr. Jay Chou, including one concert in each of 2019 and 2020,
where we procured Mr. Jay Chou to perform at such concerts through Archstone; (ii) being the
lead creator of J-Style Trip , where we procured Mr. Jay Chou to appear and obtained the right to
use Mr. Jay Chou’s publicity rights through Archstone; (iii) jointly developed and owned the
ChouMate trademarks with JVR Music; and (iv) entered into a 10-year IP Authorization
Agreement with JVR Music pursuant to which we have secured an exclusive right in relation to
projects related to ChouMate and a non-exclusive priority right to invest in projects related to
Mr. Jay Chou and his IPs globally. Through such collaborations, Mr. Jay Chou, JVR Music,
Archstone and us established a mutually beneficial relationship in which we help solidify Mr.
Jay Chou’s popularity among our consumers and unique celebrity IPs centered around Mr. Jay
Chou empower our new retail business through creating promotional effect for our products. Our
synergistic relationship with them is expected to continue in the future.
We have entered into the cooperation agreements on ChouMate and IP Authorization
Agreement with JVR Music with the details set out below.
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1. Cooperation agreements with JVR Music on ChouMate
In August 2019 and September 2019, we entered into cooperation agreements with JVR
Music and agreed, amongst others, to jointly develop and own the ChouMate trademarks, and
JVR Music has the final right to approve our use of any ChouMate trademarks. As advised by
the IP Counsel, as the ChouMate trademarks originated from the image of Mr. Jay Chou, it is in
line with industry norm for the artiste management company of Mr. Jay Chou, to retain such
right as the use of the ChouMate trademarks may affect Mr. Jay Chou’s reputation and goodwill,
which determines the commercial value of an artist. Against this background, the final right of
approval is one of the safeguards put in place by JVR Music to ensure Mr. Jay Chou’s reputation
and goodwill are preserved and that his interest will not be prejudiced. During the Track Record
Period, we never encountered any difficulty in obtaining JVR Music’s consent in our endeavors
to use or license any ChouMate trademarks.
Based on the views of the IP Counsel, our Directors and the Sole Sponsor are of the view
that, as a co-owner of the ChouMate trademarks, our ownership of and legal entitlement to the
exclusive rights to use the ChouMate trademarks in accordance with the agreements with JVR
Music will not be affected even if there is any change in the ownership of JVR Music. Since our
cooperation with JVR Music on ChouMate and its related projects precedes the entering of the
IP Authorization Agreement, as advised by the IP Counsel, we have the right to use the
ChouMate trademarks irrespective of the IP Authorization Agreement, since our ownership in,
and our rights as a co-owner of the ChouMate trademarks are perpetual.
Our Directors are of the view that Mr. Jay Chou, ChouMate and our reputation will be
safeguarded as (i) JVR Music and us are committed to maintain and protect the reputation of Mr.
Jay Chou and ChouMate to protect our common interests; (ii) given that we are the only party
authorizing other third parties for ChouMate Projects, we will only grant licenses to trusted
partners and we can constantly monitor, supervise and direct the use of any ChouMate
trademarks; and (iii) we can identify counterfeit goods bearing ChouMate trademarks and take
suitable enforcement actions to eliminate them from the market.
2. IP Authorization Agreement with JVR Music on ChouMate Projects
To formalize our long cooperation relationship with JVR Music and to ensure the continuity
thereof, on August 30, 2021, we entered into the IP Authorization Agreement with JVR Music.
Pursuant to the IP Authorization Agreement, for a term of 10 years that can be renewed by us for
an additional 10 years, we have secured (a) an exclusive right to conduct projects based on
ChouMate globally; and (b) a non-exclusive priority right to invest in certain types of projects.
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Terms of the IP Authorization Agreement
Set out below is a summary of various rights granted to us by JVR Music under the IP
Authorization Agreement:
Exclusive rights Planning, development, investment and other commercial projects
based on ChouMate globally (“ ChouMate Projects ”)
JVR Music further agreed not to carry out the ChouMate Projects
with any third parties without our prior approval. Since JVR
Music is principally engaged in artiste management, our Directors
are of the view that chances which JVR Music would exercise its
right to carry out the ChouMate Projects on its own are remote.
Non-exclusive
priority
rights
(Note 1)
(1) Design, create, plan, develop and invest in virtual idols
centered on Mr. Jay Chou’s image in anime and movies
projects
(2) Design, create, plan, develop and invest and launch of
certain shows (including variety shows designed and
developed by Mr. Jay Chou, but excluding performances,
music awards ceremonies, music magazines etc. where Mr.
Jay Chou participates solely in his capacity as a singer and
programs within the scope of JVR Music’s agency business,
including but not limited to Mr. Jay Chou appearing as a
guest, mentor, guest host, performing artist or guest
interviewee on programs)
(3) Investing in JVR Music’s and/or Mr. Jay Chou’s Hollywood
Movies (as defined in the IP Authorization Agreement)
Note:
1. We have the right to invest in these projects which can be proposed by other third parties. For any such projects
proposed by a third party and accepted by JVR Music to be carried out by a third party, JVR Music will, to the
extent within its power, invite us to co-invest in such projects on a priority basis. For any such projects proposed
by us and accepted by JVR Music to be carried out by us, we will develop such projects and enjoy the priority
right to decide whether to develop such projects by ourselves or together with other third parties.
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Other rights (1) Arranging Mr. Jay Chou to participate and attend commercial
concerts hosted, invested or sponsored by us, as well as the
promotion activities of such concerts
(2) Investing in Mr. Jay Chou’s personal concerts or other
concerts where Mr. Jay Chou is the main performer
(3) Procuring Mr. Jay Chou’s participation and/or attendance of
events and activities in relation to Star Plus Projects (as
defined below)
Other major terms of the IP Authorization Agreement are summarized as follows:
Ownership of
intellectual
property rights
 Projects that needs to combine or utilize JVR Music’s or Mr.
Jay Chou’s works shall be authorized by JVR Music
separately, and the ownership of intellectual property rights
of such projects will be separately agreed with JVR Music;
 Projects which we act as the main investor shall be fully
owned by us (except for the intellectual property rights
related to Mr. Jay Chou’s concerts, which will be determined
by the relevant concert contracts); and
 With respect to other projects which are not covered above,
the intellectual property rights shall be separately agreed
with JVR Music on a case-by-case basis.
Grounds of
termination
The IP Authorization Agreement will be terminated if, among
other things:
(i) a fundamental breach is caused by us, which includes the use
of Mr. Jay Chou’s image and name in any projects or the
execution of any projects contemplated under the IP
Authorization Agreement (“ Star Plus Projects ”) without
obtaining the prior consent of JVR Music;
(ii) any party continuously or materially breaches any provisions
of the agreement and such breach is not remedied after the
complying party notifies the breaching party; or
(iii) if we are not listed on or before August 30, 2023 (the “ Early
Termination Right ”).
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Our non-exclusive priority rights in projects associated with Mr. Jay Chou
The above non-exclusive priority rights provide us with the opportunity to participate
in all projects associated with Mr. Jay Chou in these agreed respects. Our Directors
consider it reasonable that any proposal of these projects will need to be accepted or
approved by JVR Music, as (i) the projects will utilize Mr. Jay Chou’s related IP and
therefore, JVR Music should have the right to accept or approve the projects on behalf of
Mr. Jay Chou; (ii) JVR Music shall select suitable projects which can benefit Mr. Jay Chou
or his career development; and (iii) JVR Music needs to ensure that the proposed projects
would not, among others, be derogatory to Mr. Jay Chou’s reputation and/or image, or
result in any breach of pre-existing contracts or commitments. We believe it is also an
industry norm for artiste management companies to have similar approval right in respect
of any projects involving its artists and/or the artist’s image, publicity rights or intellectual
property rights for the above reasons. During the Track Record Period and up to the Latest
Practicable Date, there was no occasion of us being rejected by JVR Music in relation to
any projects associated with Mr. Jay Chou, including those which we have non-exclusive
priority rights under the IP Authorization Agreement.
Authorization of JVR Music to enter into the IP Authorization Agreement and our rights
to use the Relevant IP Rights
JVR Music confirmed that it has obtained all necessary authorizations to enter into the
IP Authorization Agreement and is capable of performing its obligations thereunder. Given:
(i) the cooperation between JVR Music and Mr. Jay Chou in the past 14 years; and (ii) JVR
Music confirmed that it shall continue to be Mr. Jay Chou’s artiste management company at
least until December 30, 2031, our Directors do not expect that there will be material
change in relationship between JVR Music and Mr. Jay Chou during the term of the IP
Authorization Agreement.
Mr. Jay Chou also provided us a confirmation (the “ Confirmation ”) that: (i) the
authorization given by JVR Music to us under the IP Authorization Agreement (and
agreements derived therefrom) will not be affected due to any change in the cooperation
relationship between JVR Music and him. If JVR Music is no longer the artiste
management company of Mr. Jay Chou, JVR Music would continue to retain the requisite
authorization to perform its obligations under existing contracts, including its rights to
authorize us to use the relevant publicity rights and other intellectual property of Mr. Jay
Chou (the “ Relevant IP Rights ”); and (ii) if JVR Music is unable to authorize us to use the
Relevant IP Rights (other than due to our breach of the IP Authorization Agreement), Mr.
Jay Chou agrees to procure his then agent to enter into a new IP authorization agreement
with us on terms substantially the same as those of the IP Authorization Agreement. As
advised by the IP Counsel, (i) the Confirmation is legally binding and enforceable since the
essential elements of a valid and binding contract under Hong Kong law are present; (ii)
the Confirmation remains binding and enforceable against Mr. Jay Chou regardless of the
governing law of future agreements to be entered into between Mr. Jay Chou and his then
agent; and (iii) the Confirmation enables us to continue to enjoy the rights to use the
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Relevant IP Rights. Accordingly, our Directors are of the view, and the Sole Sponsor
concurs, that our interests under the IP Authorization Agreement would not be prejudiced
and our cooperation with Mr. Jay Chou can be safeguarded, even if another party becomes
Mr. Jay Chou’s agent during the term of the IP Authorization Agreement.
Whether JVR Music would exercise the Early Termination Right
The Early Termination Right was agreed based on the commercial rationale that we
would have more resources to implement the potential cooperation under the IP
Authorization Agreement upon our Listing. In that case, we believe that it is also logical
that Mr. Jay Chou and JVR Music would have more incentive to further strengthen their
cooperation with us after our Listing if we have more resources and capacity in creating
sizable events and programs to further enhance his public exposure and raise his popularity,
as we could gain access to capital market, and apply funds raised on our IP creation and
operation segment. Please see the paragraph headed “Mutual beneficial relationship
between our Group and Mr. Jay Chou” below for details. To our best knowledge, given the
long-standing cooperation between JVR Music and us, we understand that JVR Music
would not exercise the Early Termination Right even if we are not listed by August 30,
2023 as long as we remain capable in providing the backing required by JVR Music and
possess the relevant resources and connections to execute the Star Plus Projects.
Our recourse if there is negative publicity surrounding Mr. Jay Chou
We do not have the unilateral right to terminate the IP Authorization Agreement in
situations where there is negative publicity surrounding Mr. Jay Chou, and such rights are
unnecessary because we do not commit ourselves to any potential projects or are required
to perform any positive obligations thereunder. In the unlikely event that there is negative
publicity surrounding Mr. Jay Chou, we retain the power to decide whether to cooperate
with JVR Music on Star Plus Projects that have not materialized; and for Star Plus Projects
that we have committed, we will decide how they should be proceeded based on the
separate agreement to be entered for each project which sets out the major terms (typically
including back-to-back indemnification clauses where JVR Music would indemnify us in
the event Mr. Jay Chou is associated with negative publicity, the termination cost (if any)).
If we decide to terminate such projects, our operations and results of may be adversely
affected, please refer to the section headed “Risk factors – Risks relating to our business
and industry – We rely on our cooperation with celebrities such as Mr. Jay Chou, Mr. Liu
Keng-hung, Ms. Vivi Wang and Mr. Harlem Yu etc. in our businesses, and any negative
impact on such celebrities’ reception by or exposure to our consumers may have material
adverse effects on our business, financial position and results of operations.” in this
prospectus for details.
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Long-term, stable and secure relationship with Mr. Jay Chou’s agent and representative
We believe that we have established and maintained a long-term, stable and secure
relationship with Mr. Jay Chou through JVR Music and/or Archstone by (a) being engaged in
media content production and event planning that were related to him when we procured Mr. Jay
Chou to perform at concerts planned and/or invested by us, and to appear in J-Style Trip season
one and obtained right to use IPs related to Mr. Jay Chou in the show and (b) through the
10-year IP Authorization Agreement. We believe the rights given to us under the IP
Authorization Agreement and its term demonstrates that Mr. Jay Chou will collaborate with us
on a long-term basis.
In addition, we understand that Mr. Jay Chou has maintained a stable and long-term
relationship with Mr. Yang and Mr. Chen through JVR Music and Archstone, respectively, and
we believe the relationship between them reduces the risk of us not being able to cooperate with
Mr. Jay Chou as Mr. Yang and Mr. Chen are our Founders, Controlling Shareholders and
non-executive Directors. Further, Mr. Jay Chou’s relationship with each of JVR Music,
Archstone, Mr. Yang, Ms. Yeh and Mr. Chen will not have any restriction on our business
activities.
Mr. Jay Chou’s relationship with JVR Music
JVR Music is Mr. Jay Chou’s agent since 2008 which possesses the exclusive right to deal
with the copyright in all of Mr. Jay Chou’s lyrics, music works, audio-visuals and video works
and Mr. Jay Chou’s publicity rights for and on behalf of Mr. Jay Chou. JVR Music has been and
is under Mr. Jay Chou’s authorization to use Mr. Jay Chou’s publicity rights, and handle Mr. Jay
Chou’s commercial licensing activities globally.
In the event Mr. Jay Chou’s relationship with JVR Music or its directors and shareholders
deteriorates, his cooperation with us will not be substantively affected as (i) our cooperation
with JVR Music and Mr. Jay Chou under the IP Authorization Agreement will not be affected;
(ii) we have the proprietary right to use the ChouMate trademarks; (iii) we are the co-owner of
the copyrights and other related intellectual property rights of J-Style Trip created by us; and
(iv) Mr. Jay Chou’s publicity rights are personal to him, and he may enter into project-based
engagements with us. For details, please see the sub-paragraph headed “Mutual beneficial
relationship between our Group and Mr. Jay Chou”.
Mr. Jay Chou’s relationship with Archstone
Archstone represents Mr. Jay Chou in business negotiations in respect of one-off or
project-based management under the authorization and consent of JVR Music, such as product
endorsements and commercial concerts in the PRC. Archstone does not possess any of Mr. Jay
Chou’s intellectual property rights and publicity rights or any rights to deal with the foregoing
for and on behalf of Mr. Jay Chou, and it shall enter into one-off authorization agreement(s)
with JVR Music on a case by case basis which sets out the specific scope of authorization.
Hence, any change in the relationship between Mr. Jay Chou and Mr. Chen or Archstone, would
not have impact on our business activities.
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As advised by the IP Counsel, and our Directors and the Sole Sponsor concur, our interest
with respect to Mr. Jay Chou’s intellectual property rights under the IP Authorization Agreement
will not be affected even if Archstone is able to use Mr. Jay Chou’s intellectual property rights
because Archstone’s right to enter into engagements on behalf of Mr. Jay Chou and to use Mr.
Jay Chou’s publicity and intellectual property rights originates from JVR Music. It follows that
since JVR Music is required to comply with the terms of the IP Authorization Agreement, it will
not grant any rights to Archstone to such extent that would render it breaching the IP
Authorization Agreement.
Impact of Mr. Jay Chou’s commercial activities other than those with our Group
Mr. Jay Chou also carries out commercial activities with parties other than us (including
his personal concerts, appearance in programs not planned by us, or acting as the spokesperson
for other brands or products), and such activities may impose restrictive covenants on Mr. Jay
Chou. Such restrictive covenants affects the scope of the Star Plus Projects that can be carried
out. However, JVR Music, in its capacity as an artiste management company, would ensure that
restrictive covenants that Mr. Jay Chou is required to comply do not affect his ongoing
cooperations with us. We do not believe Mr. Jay Chou’s commercial activities other than those
with us poses risk or has any adverse impact to our business activities because we can always
cooperate with other celebrities if we have a concrete business initiative or work on projects
with Mr. Jay Chou outside restrictive covenants on him.
Mutual beneficial relationship between our Group and Mr. Jay Chou
Our Directors are of the view that there is a mutual beneficial relationship between our
Group and Mr. Jay Chou. Our IP creation capacity was critical to the creation of our IPs,
including but not limited to those associated with Mr. Jay Chou, such as ChouMate and J-Style
Trip season one. Our celebrity IPs have empowered our brands, products and distribution
network by creating a promotional effect. Licensing of such IPs to third parties raised Mr. Jay
Chou’s popularity.
On the other hand, as a leading figure in China’s entertainment industry, Mr. Jay Chou has
a large fan base and can attract significant interest to products associated with him, which has
empowered our new retail operations. We believe the image of Mr. Jay Chou has remained
positive, and he has continued to exert positive influence on the public. We also believe Mr. Jay
Chou will continue to be a well-regarded celebrity in the near future, thereby continuing to
contribute to our operations through the empowerment achieved by his celebrity IP.
In addition, our Directors are of the view that there may only be a handful of celebrities
that have a similar level of popularity and influence as compared to Mr. Jay Chou.
Notwithstanding the fact that it is rare for artists to enter into long-term and wide-ranging
cooperation agreement with business partners in the China market, we were able to secure
long-term collaborations with Mr. Jay Chou through the IP Authorization Agreement. Going
forward, we will continue to leverage our long-term cooperative and mutually beneficial
relationship with Mr. Jay Chou.
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Mr. Jay Chou’s significance to our business operation
Mr. Jay Chou’s role in our business operations
We heavily rely on Mr. Jay Chou on both our new retail business and IP creation and
operation business. In respect of IP creation and operation business, as discussed in the section
headed “Business – Our business – IP creation and operation” in this prospectus, Mr. Jay Chou
was an inspiration source for creation of IPs or one of the performers in our IP contents. Our
Group generated revenue from (a) IPs that centered around Mr. Jay Chou in 2020, with the
airing of J-Style Trip season one in early 2020; and (b) various events planning and programs
with creation and operation that involved Mr. Jay Chou as one of the performers throughout the
Track Record Period. Since 2021, revenue derived from our IP creation and operation business
has been diversified and we generate revenue from cooperation with other celebrities, namely,
Mr, Harlem Yu and Mr. Liu Keng-hung. During the Track Record Period, our IP creation and
operation that centered around Mr. Jay Chou or involved him as one of the performers accounted
for 5.7%, 19.6%, 9.1% and 13.3% of our total revenue for the four years ended December 31,
2022, respectively.
In respect of new retail business, our Group’s major product, MODONG coffee, had used
the empowerment of Mr. Jay Chou to create promotional effect, including the use of ChouMate
on the product’s packaging and featuring such product in J-Style Trip season one. During the
Track Record Period, sales of our products under the new retail segment whereby the
promotional activities involved Mr. Jay Chou or his related IPs accounted for 83.0%, 72.8%,
64.8% and 45.2% of our total revenue, respectively.
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Our business has remained sustainable after the broadcast of J-Style Trip season one in
2020. Set forth below is a breakdown of our revenue which was: (i) products under the new
retail segment that the promotional activities of which included involvement of Mr. Jay Chou or
his related IPs; (ii) products under the new retail segment that promotional activities of which
did not include involvement of Mr. Jay Chou or his related IPs; (iii) IP creation and operation
that centered around Mr. Jay Chou or involved him as one of the performers; and (iv) IP creation
and operation that was not centered around or significantly related to Mr. Jay Chou or his
related IPs for the years indicated:
Y ear ended December 31,
2019 2020 2021 2022
RMB’000 % RMB’000 % RMB’000 % RMB’000 %
New Retail
Empowered by Mr. Jay Chou and his
related IPs
– MODONG coffee ChouMate edition (1) A – – 135,195 29.6 110,663 30.3 85,452 24.8
– MODONG coffee traditional edition (1) A 71,927 83.0 197,673 43.2 117,109 32.1 65,431 19.0
Sub-total 71,927 83.0 332,868 72.8 227,772 62.3 150,883 43.8
– Other health management products A – – – – 8,325 2.3 3,527 1.0
– Others A – – – – 676 0.2 1,240 0.4
Not empowered by Mr. Jay Chou or his
related IPs
Health Management Products
– MODONG probiotics lyophilized
powder B – – – – 13,076 3.6 11,585 3.4
– MODONG herb beverage B – – – – 14,185 3.9 5,829 1.7
– MODONG light brewed coffee – – – – – – 8,628 2.5
– Matcha powder – – – – – – 24,049 7.0
– Products under Dr . INYOU brand B – – – – 5,845 1.6 3,367 1.0
– Other health management products B – – 7,919 1.7 6,058 1.7 8,168 2.4
Skincare products
– LA DEW Facial Mask B 3,450 4.0 14,347 3.1 5,132 1.4 419 0.1
– Products under Dr .mg sub-brand B – – 6,058 1.3 12,677 3.5 12,540 3.6
– Products under Chaxiaojie sub-brand B – – 17 0.0 3,465 0.9 3,313 1.0
Others B 5,420 6.3 3,966 0.9 4,184 1.1 6,551 1.9
Sub-total 80,797 93.3 365,175 79.9 301,395 82.5 240,099 69.8
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Y ear ended December 31,
2019 2020 2021 2022
RMB’000 % RMB’000 % RMB’000 % RMB’000 %
IP Creation and Operation
Events and programs involving Mr. Jay
Chou
– Centered around Mr. Jay Chou (2) C – – 81,590 17.9 – – 27,856 8.1
– Involved Mr. Jay Chou as one of the
performers (3) C 4,761 5.5 4,505 1.0 24,867 6.8 9,433 2.7
IP licensing and sales of related
products relating to ChouMate (4) C 141 0.2 3,506 0.8 8,270 2.3 8,560 2.5
IP Creation and Operation unrelated to
Mr. Jay Chou or his related IPs
– Events and IP programs (5)(6) D – – 472 0.1 29,532 8.1 57,737 16.8
– IP products and licensing fees D 886 1.0 1,696 0.4 1,281 0.3 472 0.1
Sub-total 5,788 6.7 91,769 20.1 63,950 17.5 104,058 30.2
TOTAL 86,585 100.0 456,944 100.0 365,345 100.0 344,157 100.0
New Retail
Products under the new retail segment
that the promotional activities of
which included involvement of Mr.
Jay Chou or his related IPs A 71,927 83.0 332,868 72.8 236,773 64.8 155,650 45.2
Products under the new retail segment
that the promotional activities of
which did not included involvement
of Mr. Jay Chou or his related IPs B 8,870 10.3 32,307 7.1 64,622 17.7 84,449 24.6
IP Creation and Operation
IP creation and operation that centered
around Mr. Jay Chou or involved him
as one of the performers C 4,902 5.7 89,601 19.6 33,137 9.1 45,849 13.3
IP creation and operation that was not
centered around or significantly
related to Mr. Jay Chou or his related
IPs D 886 1.0 2,168 0.5 30,813 8.4 58,209 16.9
TOTAL 86,585 100.0 456,944 100.0 365,345 100.0 344,157 100.0
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Notes:
(1) During 2019, we did not use any celebrity IP in the empowerment of the sale of our MODONG coffee. We
promoted our MODONG coffee through (a) J-Style Trip season one; and (b) the launching of a special edition of
MODONG coffee with illustration of ChouMate being displayed on the packaging thereof (the i.e. the ChouMate
Edition). Since July 2020, while we have continued to sell part of our MODONG coffee under the ChouMate
Edition, we had not conducted any event or program with the use of Mr. Jay Chou-related IPs comparable to
J-Style Trip season one for the empowerment of our MODONG coffee and other products.
(2) Mainly represented our revenue generated from (i) the airing of J-Style Trip season one in 2020; and (ii) a
World-Cup related program, a promotional video relating to J-style Trip season two and a new music album of
Mr. Jay Chou and an online music show centered around Mr. Jay Chou broadcasted during the fourth quarter of
2022.
(3) Represented revenue generated from various events and programs that Mr. Jay Chou appeared as one of many
performers or guests (where applicable). Despite Mr. Jay Chou was only one of many guests appeared in such
events and programs, the Group was only responsible for creating Mr. Jay Chou-related content for these events
and programs.
(4) Represented revenue from licensing of ChouMate and sale of related products.
(5) Represented revenue generated from (i) programs which were centered around celebrities other than Mr. Jay
Chou, including You Can Run But You Can’ t Hide (ᆀʘ ) that was centered around Mr. Harlem Yu and
featured other guests including Mr. Jay Chou; and a variety show that was centered around Mr. Liu Keng-hung
and featured other celebrities. Apart from appearing as one of the guests, Mr. Jay Chou was not involved in the
relevant events and programs; and (ii) other events and/or programs that were totally unrelated to Mr. Jay Chou.
(6) The increase in our revenue generated from events and IP programs that was unrelated to Mr. Jay Chou or his
related IP increased from RMB29.5 million in 2021 to RMB57.7 million in 2022 was mainly attributable to our
cooperation with Mr. Liu Keng-hung since November 2021, including revenue generated from 618 streaming
session and other Livestreaming sessions that were centered around Mr. Liu Keng-hung.
Sustainability of our operation
Based on the followings, we consider that our new retail business, in particular, sales of
MODONG coffee has remained sustainable after the airing of J-Style Trip season one and the
extensive use of Mr. Jay Chou-related IPs:
a. Health management products:
(i) MODONG coffee
Sales of MODONG coffee was not material in 2019 as it was only launched in
April 2019. With the IP empowerment effect brought by J-Style Trip season one and
the introduction of special edition of MODONG coffee with packages featuring
ChouMate , the sales of our MODONG coffee has increased significantly in 2020.
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Our Directors believe that the decline in our Group’s sales revenue in 2021 and
2022 was mainly due to (i) the cessation of material promotional effect of the airing
of J-Style Trip season one since July 2020; and (ii) the temporary disruptions to,
among others, the operation of our logistics and delivery service providers, the
organization of offline sales and marketing activities, as a result of the implementation
of the strict measures to combat the outbreak of Omicron variant of COVID-19,
instead of due to the end of its product life cycle for this product.
Set forth below is the average monthly sale volume (boxes) per quarter of our
MODONG coffee during the each of the four years ended December 31, 2022:
Y ear ended December 31,
2019 2020 2021 2022
(boxes)
First quarter – 140,000 188,000 102,000
Second quarter 74,000 (1) 550,000 200,000 (2) 114,000
Third quarter 59,000 223,000 134,000 (3) 75,000
Fourth quarter 79,000 191,000 189,000 (2) 169,000
Notes:
1. MODONG coffee commenced its nationwide distribution in April 2019. Therefore, there had
been no sale record for the first quarter of 2019.
2. For second quarter 2021, particularly in April and June, there was promotional effect of (i) the
airing of a reality show about traveling and Chinese culture, namely The Journey of Poetic
Soul season two ( ᒔϞ་ձჃ˙ 2); and (ii) launching of promotional campaign where
discounts and gifts were offered when purchasing MODONG coffee. In December 2021, there
was promotional effect of the airing of another variety show about traveling, namely The
Shape of Culture season two ( ຬԢԐఊᕣ 2). Such programs were not produced by us but we
promoted MODONG coffee therein through placing TV advertisement. Such programs featured
different celebrities, and Mr. Jay Chou was not involved in that variety show at all.
3. The decrease in the sale volume of our MODONG coffee in the third quarter of 2021 was
mainly due to the shift in the management’s focus to prepare for the Listing in which
resources were temporarily allocated to, among others, preparation of various listing works
and documents, strengthening of our internal control and corporate governance and
management of our distribution network. The sale function of our distribution network was
also temporarily affected as we imposed additional requirements on the distributors and
sub-distributors in order to strengthen our internal control.
We believe that the market demand for bulletproof coffee remains strong, based
on the following facts:
(i) Market demand for bulletproof coffee in general
The concept of bulletproof coffee was first commercialized in China since
2016. The market size of China’s bulletproof drink market increased from
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RMB0.5 billion to RMB2.2 billion in terms of GMV , at a CAGR of 34.6% from
2017 to 2022. In addition, bulletproof coffee currently constitutes the largest
segment in China’s bulletproof drinks market which accounted for over 80% of
the bulletproof drinks market in 2022.
The market size of bulletproof drink in the PRC only recorded a relatively
small growth between 2020 and 2021 from RMB3.1 billion in 2020 to RMB3.2
billion in 2021 due to the implementation of various strict measures in different
regions across the PRC, including city-wide static management control measures.
With recent relaxation of restrictions to combat the COVID-19 in the PRC,
it is expected that the economy in the PRC will be stabilized and resume to
rational growth from 2023 onwards. Thus, it is expected that the market size of
bulletproof drink will increase from RMB2.7 billion in 2022 to RMB5.0 billion
in 2027, at a CAGR of 17.7%.
(ii)
Market demand for and our ability to sustain sales of MODONG coffee
We believe we have built a brand name of our own in the bulletproof drink
market, as evidenced by the fact that we ranked first in China’s bulletproof drink
industry in terms of GMV in both 2021 and 2022, with a market share of 24.9%
in 2022. With the continuous growth of market size in China’s bulletproof drink
industry and our current leading position, our Directors believe that the demand
for our product will not deteriorate in the foreseeable future.
Our Directors consider that sales of MODONG coffee, similar to any other
products in the retail industry, is subject to, among other things, our allocation of
resources and the level of sales and marketing activities organized for the
product.
Despite the outbreak of COVID-19 which adversely affected the general
consumption behavior of consumers in the PRC during 2022, we continued to
rank first in the bulletproof drink market in the PRC in 2022 since our MODONG
coffee is perceived by end consumers as a product of good quality and has
effective features. Thus, we believe the demand of our MODONG coffee will
resume back to normal gradually in 2023 and going forward having considered
that, despite the impact of the increase in COVID-19 cases in the first quarter of
2023 immediately following the relaxation of restrictive measures, our Group
received orders of MODONG coffee placed by our distributors of approximately
510,000 boxes in the first quarter of 2023, which was (a) comparable to the
number of orders of MODONG coffee placed by our distributors of
approximately 520,000 boxes during the first quarter of 2022; and (b) higher than
the average quarterly orders of MODONG coffee placed by our distributors of
approximately 330,000 boxes in 2022, during which control measures were
imposed in the PRC from time to time in response to the Resurgence. In addition,
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we expect that more offline marketing activities would be resumed by Kunshan
Tingshe and our distributors in 2023 following the relaxation of restrictions to
combat the COVID-19 in the PRC. 35 distributors promotion meetings were
organized in the first quarter of 2023, as compared to only seven for the same
period in 2022.
As such, our Directors believe we could remain competitive against our
competitors by being the leading industry leader of the bulletproof drink market
in the PRC and the overall sales of MODONG coffee in foreseeable future is
sustainable and there is no apparent sign of decline in demand permanently.
(ii) Our other health management products
Other than MODONG coffee, we diversified our product portfolio by launching
various new products, such as MODONG herb beverage and MODONG probiotics
lyophilized powder in October 2021, that were not empowered by any celebrity IPs. In
addition, we also launched new products, namely matcha powder and MODONG light
brewed coffee, which we sold through E-commerce Livestreaming sessions feature
celebrities and KOLs, including Ms. Vivi Wang.
b. Skincare products:
Even without celebrity IPs’ empowerment, our Group recorded a significant growth in
its sales of skincare products during the Track Record Period. Revenue derived from
skincare products increased by more than 500% between 2019 and 2021, which was mainly
attributable to the introduction of new products, namely products under Dr .mg sub-brand,
which were sold through our distribution network.
With sizeable market size of each of consumer health community-based social e-commerce
industry and beauty and personal care products community-based social e-commerce industry,
and expected continuous growth in market size for both industries, we believe that there will
continue to be market demand in our new retail products, including those new health
management and skincare products to be launched by our Group in the future.
Major collective factors to our success other than Mr. Jay Chou-related IPs
Although we successfully leveraged on Mr. Jay Chou’s influence to achieve the significant
growth of our business during the Track Record Period, in particular in the first half of 2020,
our Directors consider the empowerment of Mr. Jay Chou-related IPs is not the sole and
dominant factor for our Group’s success. The success of MODONG coffee, which is similar to
any other retail products, de facto depends on a number of other critical factors.
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We believe each of the following factors is equally important and contributed to our
success:
1. V arious sales and marketing means – We promote our products: (i) by word-of-mouth
through KOCs; (ii) through traditional sales and marketing methods, such as TV
sponsorship, providing trial samples and packages, providing after sales services etc.;
and (iii) through empowerment of our IP creation and operation business, such as Mr.
Jay Chou-related IPs, i.e. using ChouMate trademark on packaging and featuring
MODONG coffee in J-Style Trip season one by way of placing advertisement and/or
product placement in such TV program. Our ability to combine our product portfolio
to the use of its distributorship network and creative use and creation of IP and other
marketing means for the promotion of our products in ways that save direct
advertising costs;
2. Development and introduction of suitable new products – We have the ability to
identify, research and develop, manufacture through contract arrangement and market
MODONG coffee as our main product, which is well-received by end consumers. We
believe such ability was critical to our significant growth during the Track Record
Period;
Leveraging our experience in the successful commercialization of MODONG coffee,
we are able to continue to develop and introduce new products to the market and
accordingly diversify our product offerings which will generate growth in our
business, such as MODONG probiotics lyophilized powder, and MODONG herb
beverage etc.. Our management’s abilities and insight in strategic planning and
deployment of our products in the new retail segment were key to our quick expansion
into the market within a short period of operations, thus helping us become one of the
growing new retail operators in China with a focus on the sales of health management
and skincare products primarily through social e-commerce channel. Without such
capability, our Group would not be able to identify bulletproof coffee as a product that
has sufficient unsatisfied market demand in the first place, and subsequently develop a
product recipe and formula that finds favor among target consumers; and
3. Establishment of extensive sales channels – We were able to quickly establish our
distribution network together with Kunshan Tingshe, which remains our strategic and
long-term partner in our new retail business. By leveraging KOC’s influence and PDT
centered marketing strategies, our distribution network model is tailor-made for the
new retail business which helps to extend our consumer reach, increase the awareness
of our products through community and word-of-mouth promotion, and raise the sales
volume of our products in the long term. We also developed e-commerce channels,
where we could directly sell our products to end consumers through various online
platforms, namely Douyin stores (which would normally be linked to E-commerce
Livestreaming sessions of our celebrities or KOLs that promote our products).
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Our Directors consider the aforementioned factors will remain as the major and collective
factors to the success and sustainability of our Group, rather than the standalone empowerment
of Mr. Jay Chou-related IPs (being a sales marketing strategy), especially after MODONG coffee
has become a leader in the bulletproof coffee market in the PRC. Based on the foregoing, our
Group is able to conduct and sustain its business with the reduction of involvement of Mr. Jay
Chou.
COOPERATION WITH MR. LIU KENG-HUNG AND MS. VIVI W ANG
In November 2021, we established Talent Planet, a company held as to 70% by our Group
and 30% by W&V , the artiste management company of Mr. Liu Keng-hung. Talent Planet entered
into an agreement (being one of the Liu’s Performance-related Cooperation Agreements) with
Mr. Liu Keng-hung and W&V , pursuant to which Talent Planet shall provide planning and
management services in respect of the entertainment and performance business of Mr. Liu
Keng-hung in the PRC. Since then, we have been in active collaboration with Mr. Liu
Keng-hung in his development into a KOL in the fitness and body-building sector in the PRC.
Mr. Liu Keng-hung has been sharing workout videos on Douyin , featuring calisthenics originated
from him, and his videos have become very popular since April 2022. The number of followers
of Mr. Liu Keng-hung’s Douyin account achieved a tenfold increase of 60 million new followers
from April 2022 to May 2022. We believe such monthly growth in the number of followers was
the fastest amongst all other accounts on Douyin in history so far. As at December 31, 2022, the
number of followers of Mr. Liu Keng-hung’s Douyin account further increased to approximately
71.5 million.
By appearing in Mr. Liu Keng-hung’s Livestreaming sessions, Ms. Vivi Wang, has also
gained popularity and attracted many followers. Ms. Vivi Wang has gained close to 4 million
followers from April 2022 to June 2022, reaching approximately 4.2 million as of December 31,
2022.
With Mr. Liu Keng-hung and Ms. Vivi Wang gaining more popularity, we believe it would
attract more opportunities for us to create more IPs, including TV programs, centered around
them, in particular Mr. Liu Keng-hung. Thus, going forward, apart from creating more Mr. Liu
Keng-hung-related IPs, including but not limited to, TV programs and nijigen-style
personality(ies), it is our plan to leverage on his popularity to use such IP(s) to promote our new
retail products by way of various means, such as featuring products in TV programs by way of
placing advertisements and/or product placement to enhance product and brand exposure and
placing nijigen-style personality(ies) on the packaging of our product(s) which would bring
significant promotional effect to us. We believe that the remarkable achievement of Mr. Liu
Keng-hung demonstrated our ability in collaborating with different celebrities to create popular
IPs.
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Cooperation under our IP creation and operation business
Cooperation in respect of events and IP programs of Mr. Liu Keng-hung
(a) Livestreaming and performances of Mr . Liu Keng-hung
Mr. Liu Keng-hung mainly shares workout videos during Livestreaming on his Douyin
account, featuring calisthenics originated from him. As part of our celebrity IP management
services, we are involved in the planning and development of Mr. Liu Keng-hung’s public
persona and profile on social medial platforms in order to attract audiences and/or followers
with similar interests or concerns. In particular, we were involved in advising and selecting the
target audience and originating and preparing the contents and presentation of his Livestreaming
sessions, including Mr. Liu Keng-hung’s outfit, the guest(s) to be invited, how the rhythm of
Livestreaming sessions are controlled, and how Mr. Liu Keng-hung and his guest(s) interact with
audiences of Livestreaming sessions, which are very critical in catching the attention of
audiences and conveying the appropriate message to them.
The popularity of Mr. Liu Keng-hung has shown great potentials for various kinds of brand
owners, including sports brand owners, with products of the relevant brand owners have been
placed in Livestreaming sessions, online short videos and other online and offline performance
that he appears for promotion, and creating more attention in the public regarding products being
promoted there. We entered into a number of cooperative agreements with third party brand
owners to promote their respective products, pursuant to which, we originated or prepared the
contents and presentation of Livestreaming sessions, online short videos and other online and
offline performance of Mr. Liu Keng-hung, such as development of ideas and production of
content that links the respective brands to its target audience in order to create promotional
effect.
In addition to Livestreaming sessions, we are also involved in the planning of certain IP
programs that were centered around Mr. Liu Keng-hung, including a variety show on a leading
social media platform in December 2021. For details, please refer to the section headed
“Business – Our business – IP creation and operation – Historical IPs and IPs pipeline”.
(b) Terms of cooperation agreements with Mr . Liu Keng-hung
On November 27, 2021, we entered into a master celebrity IP management agreement (as
supplemented by a supplemental agreement dated January 3, 2022) (the “ November 2021
Agreement ”) with W&V and Mr. Liu Keng-hung, pursuant to which W&V and Mr. Liu
Keng-hung appointed us to act as the sole agent to manage Mr. Liu Keng-hung’s commercial
activities in the PRC. Under the November 2021 Agreement, the parties have agreed that,
amongst others, Mr. Liu Keng-hung shall continue to be bound by such agreement even if W&V
is no longer Mr. Liu Keng-hung’s artiste management company.
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To set out the details of our cooperation regarding Mr. Liu Keng-hung’s entertainment and
performance business in the PRC, we further entered into several cooperation agreements with,
inter alias, Mr. Liu Keng-hung and W&V . In particular, Talent Planet entered into two sets of
business cooperation agreements with its wholly-owned subsidiaries, conferring upon each
subsidiary the non-exclusive rights to negotiate, execute and perform contracts concerning
entertainment-related work involving Mr. Liu Keng-hung. Each set of business cooperation
agreements consists of two agreements, one of which was entered into between Talent Planet and
its subsidiary setting out the general principles of the scope of authorization (the “ Intra-group
Business Cooperation Agreement ”). Another one was entered into by and among Talent Planet,
the respective subsidiary and Mr. Liu Keng-hung with a key focus on revenue sharing
arrangements of projects under the Intra-group Business Cooperation Agreement. The above
agreements and the November 2021 Agreement are collectively referred to as the Liu’s
Performance-related Cooperation Agreements.
The following summarizes the salient terms of the Liu’s Performance-related Cooperation
Agreements:
Term: A term of ranging from two to three years ending on November 30, 2024. Talent
Planet has the priority right to renew the relevant agreement over other third parties.
Responsibilities of parties to the agreement: Talent Planet has the exclusive right to
provide planning and management services in respect of the entertainment and performance
business of Mr. Liu Keng-hung in the PRC, including the strategic planning and development of
Mr. Liu Keng-hung’s public persona and profile on social media platforms. W&V (where
applicable) and Mr. Liu Keng-hung shall cooperate with Talent Planet in executing the strategic
plans and arrangements made, including but not limited to participation of press conference,
variety shows, and charitable events. Mr. Liu Keng-hung shall also maintain a positive public
image, and should not be involved in any activities that damage his reputation.
Fee arrangement: For all activities, functions or collaborations carried out during the term
of the relevant agreement, each of Talent Planet, W&V (where applicable) and Mr. Liu
Keng-hung shall be entitled to certain proportion of the revenue derived therefrom, depending on
the ways of collaborations
(Note) .
Termination: These agreements can be terminated by any party thereto by giving three
months’ prior written notice, provided that the other party explicitly expresses that it will not
perform its main obligations under the agreement, or if a party is in breach of the relevant
agreement and such breach is not ratified in a reasonable time. W&V (where applicable) and Mr.
Liu Keng-hung shall not terminate the relevant agreement unilaterally without prior written
approval from Talent Planet.
Note: The revenue is recognized after netting off, among others, (i) the entitlements of other business partner(s) (if
any); and (ii) operating costs of the relevant collaboration. Depending on the circumstances, further agreements
may be entered into with specific details of the relevant collaboration and different fee allocation arrangements
between the Group, Mr. Liu Keng-hung, and W&V set out therein. Depending on the relevant contract terms, we
are entitled to sharing of sponsorship amounts from brand owners on agreed rates.
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Enforceability of the agreements
As advised by the IP Counsel, the November 2021 Agreement is a tripartite agreement
entered into by and among Talent Planet, W&V and Mr. Liu Keng-hung. As our subsidiary
is a party to the November 2021 Agreement, we are able to procure Talent Planet to enforce
the terms thereof against either or both W&V and Mr. Liu Keng-hung. Further, the
November 2021 Agreement contains a clause to the effect that if Mr. Liu Keng-hung is no
longer an artist under the management of W&V or otherwise W&V withdraws from
collaboration projects under the November 2021 Agreement, then (i) Mr. Liu Keng-hung
shall continue to perform the November 2021 Agreement; and (ii) our subsidiary shall
remain as the exclusive artiste management company of Mr. Liu Keng-hung on a worldwide
basis with respect to the scope of cooperation set out in the November 2021 Agreement,
and Talent Planet shall separately discuss and confirm with Mr. Liu Keng-hung the manner
in which Mr. Liu Keng-hung shall perform the November 2021 Agreement. In addition, any
projects under the Intra-group Business Cooperation Agreement would have been entered
into under the authorisation of Talent Planet (hence the authorization of Mr. Liu
Keng-hung). Accordingly, the IP Counsel is of the view, and the Sole Sponsor concurs, that
even if W&V is no longer Mr. Liu Keng-hung’s artiste management company, Mr. Liu
Keng-hung remains contractually bound by the November 2021 Agreement, hence our
cooperations with Mr. Liu Keng-hung and interest under the Liu’s Performance-related
Cooperation Agreements will not be prejudiced in the event Mr. Liu Keng-hung is no
longer an artist under the management of W&V or otherwise W&V withdraws from
collaboration projects under Liu’s Performance-related Cooperation Agreements, provided
that the November 2021 Agreement remains valid and effective at the material time.
(c) Cooperation with the MCN Company
On November 26, 2021, Talent Planet entered into an artist cooperation agreement with the
MCN Company and W&V , pursuant to which the parties agreed to cooperate in the IP content
creation and management in respect of IP programs associated with Mr. Liu Keng-hung on
certain designated online platforms, including Douyin and Kuaishou . Each of the MCN Company
and Talent Planet would be entitled to 50% of the fees from brand owners (after deducting the
relevant operating costs). Brand owners may enter into cooperation agreement with (i) the MCN
Company, in which case the MCN Company would be treated as our customer who would
transfer to us our share of the fees (i.e. 50% of the total fees (net of the relevant operating
costs)); or (ii) our Group, in which case the brand owners would be treated as our customers and
we are required to transfer to the MCN Company their share of the fees (i.e. 50% of the total
fees (net of the relevant operating costs)). We would subsequently share the fees with W&V and
Mr. Liu Keng-hung pursuant to the Liu’s Performance-related Cooperation Agreements.
COOPERATION WITH CELEBRITIES
– 345 –


--- page 356 ---
Cooperation in respect of events and IP programs of Ms. Vivi Wang
In July 2022, we entered into agreements with, among others, Ms. Vivi Wang regarding her
entertainment and performance business in the PRC. The terms of such agreements are
substantially the same as those Liu’s Performance-related Cooperation Agreements as mentioned
under the paragraph headed “Cooperation in respect of events and IP programs of Mr. Liu
Keng-hung” above.
We collaborate with Ms. Vivi Wang to promote our products, including Matcha powder and
MODONG light brewed coffee, through her E-commerce Livestreaming sessions in our Douyin
account without the involvement of Mr. Liu Keng-hung. Apart from cooperating with our Group
as a KOL, Ms. Vivi Wang is also our sales and marketing director, who is mainly responsible
for, together with the Group, preparing contents and presentation of E-commerce Livestreaming
sessions which she appears, and promoting our products.
Cooperation in respect of nijigen-style personalities inspired by Mr. Liu Keng-hung and Ms.
Vivi Wang
Apart from cooperating with Mr. Liu Keng-hung regarding his entertainment and
performance business in the PRC, we also cooperated with him in creating and design
nijigen-style personalities inspired by him and his spouse. As our cooperation with Mr. Liu
Keng-hung and Ms. Vivi Wang regarding their respective entertainment and performance
business in the PRC differ from our cooperation with them regarding nijigen-style personalities,
in July 2022, we entered into the Liu-related Nijigen-style Personality(ies) Cooperation
Agreement with Mr. Liu Keng-hung, Ms. Vivi Wang and W&V regarding the creation and design
of nijigen-style personalities inspired by them. Pursuant to the Liu-related Nijigen-style
Personality(ies) Cooperation Agreement, we shall develop and own nijigen-style personality(ies)
related to Mr. Liu Keng-hung and Ms. Vivi Wang (“ Liu-related Nijigen-style
Personality(ies) ”), and it was agreed that the relevant IP rights of the Liu-related Nijigen-style
Personalities shall be wholly owned by Talent Planet.
As at the Latest Practicable Date, we launched and started to use various Liu-related
Nijigen-style Personalities in the promotion of our products. For example, we used nijigen-style
personalities of Mr. Liu Keng-hung and Ms. Vivi Wang, namely “ Coach Liu (ᄎ઺ᇖ)” and
“Vivi” in our special promotional gift set for Christmas in 2022.
Cooperation under our new retail business
We also leverage on popularity of Mr. Liu Keng-hung and Ms. Vivi Wang to empower the
sale of our products through their related IPs. Please refer to the sections headed “Business –
Our business – IP creation and operation – IP content creation and management – Celebrity IP
management – Empowerment of our new retail sales” and “– Distribution network – Other
e-commerce channels” in this prospectus for further details.
COOPERATION WITH CELEBRITIES
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--- page 357 ---
COOPERATION WITH MR. FANG
Mr. Fang is our chief cultural officer, and he will continue to develop various products and
programs with us with strong traditional Chinese characteristics, such as tea, pottery and
traditional Chinese clothing that incorporate elements of poetry and calligraphy created by Mr.
Fang.
In December 2022, we entered into the following cooperation agreements regarding (i) the
creation and design of nijigen-style personalities inspired by him; and (ii) the licensing of his
existing nijigen-style personality. We believe that such traditional Chinese cultural influence of
Mr. Fang’s IP will appeal to the general public.
(i) Creation and design of nijigen-style personalities inspired by Mr. Fang
We entered into a cooperation agreement with Mr. Fang and his artiste management
company, pursuant to which we shall have the right to use Mr. Fang’s personal image to design,
develop and create nijigen-style personalities, including but not limited to characters in cartoons,
manga, games, and toys. The parties also agreed to co-own the intellectual property rights
arising from such nijigen-style personalities, and that we will be solely responsible for the
authorization of the nijigen-style personalities to third parties in the PRC region, under which
Mr. Fang and his artiste management company will be entitled to a share of revenue with us. It
is our responsibility to maintain Mr. Fang’s good public image during the design, development
and creation of the nijigen-style personalities, and Mr. Fang and his artiste management
company are entitled to give suggestions to us during such processes.
(ii) Licensing of nijigen-style personality created by Mr. Fang
As Mr. Fang’s artiste management company owns the intellectual property rights of an
existing nijigen-style personalities, Punk Cat* ( ᕼд፟), created by Mr. Fang, we entered into a
two-year cooperation agreement with his artiste management company in relation to the IP
authorization of such nijigen-style personalities. Pursuant to the agreement, we have the right to
conduct IP licensing business in relation to Punk Cat in the PRC region, and Mr. Fang’s artiste
management company is entitled to a portion of the licensing fees that we receive from any third
parties other than our associated companies.
COOPERATION WITH CELEBRITIES
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--- page 358 ---
OUR COOPERATION WITH CELEBRITIES AND KOLs
During the Track Record Period, we have been diversifying our portfolio of celebrities and
related IPs by entering into cooperation with different celebrities or KOLs. As illustrated above,
apart from Mr. Jay Chou, we also enter into cooperation with Mr. Harlem Yu, Mr. Liu
Keng-hung, Ms. Vivi Wang and Mr. Fang. As at the Latest Practicable Date, we have also
entered into cooperation agreements with certain Taiwan artists, namely, Chang Chieh ( ੵ௫),
Lara Liang Xin-Yi ( ૑ː᎚) and Chan Yu-Hao ( ༗ρႴ), and the artiste management company of
Monica Chan Fat Yung, and a memorandum of understanding in respect of potential cooperation
with Eric Suen Yiu Wai. All of these collaboration demonstrated that our Group’s capability and
access to cooperate with other celebrities and/or KOLs, other than merely with Mr. Jay Chou,
whether by way of media content creation, event planning or the creation of nijigen-style
personality. As at the Latest Practicable Date, all of the celebrities or KOLs that we
preliminarily engaged for future cooperation were not artistes managed by our Controlling
Shareholders and their respective associates (excluding our Group).
Given (i) our Group’s historical success in IP creation and operation with celebrities,
including the creation and design of nijigen-style personalities inspired by them, (ii) our
management’s extensive network/experience in the Chinese entertainment industry, (iii) our track
record of engaging KOLs in the PRC for promoting our products during the Track Record
Period, and (iv) cooperation with KOLs is not difficult as there is a great supply of KOLs in the
PRC, our Directors do not expect any difficulty in diversifying its portfolio of celebrities and
KOLs and expanding its IP repertoire.
COOPERATION WITH CELEBRITIES
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--- page 359 ---
OUR CONTROLLING SHAREHOLDERS
As of the Latest Practicable Date, Ms. Ma (through Harmony Culture, her wholly-owned
company); Mr. Yang and Ms. Yeh (through Legend Key, their wholly-owned company in equal
shares); and Mr. Chen (through Max One, his wholly-owned company) beneficially owned
27.6%, 27.6% and 9.2% of the issued share capital of our Company, respectively, and pursuant
to the Concert Party Agreement entered into by our Founders on September 13, 2021, together
they are collectively entitled to exercise control of approximately 64.5% voting powers of our
Company.
Since Ms. Ma, Mr. Yang, Ms. Yeh and Mr. Chen were together interested in our group
companies in 2017 and throughout the Track Record Period, they have cooperated as parties
acting in concert to exercise control over our Group and to develop the business of our Group.
They have collectively made key decisions regarding our strategies and plans, including the
production concept of different programs, establishment of various business lines and the
development and creation of our IPs and brands and exercised control over our Group through
cooperation with each other, which has been formalized in the Concert Party Arrangement.
Accordingly, they are presumed to be parties acting in concert under the Takeovers Codes and,
through their respective holding companies, are our Controlling Shareholders as of the date of
this prospectus.
Immediately following completion of the Global Offering (assuming the Over-allotment
Option is not exercised and without taking into account the Shares which may be issued upon
the exercise of the Options under the Share Option Schemes), Harmony Culture, Legend Key
and Max One will collectively be entitled to exercise voting rights of approximately 58.1% of
our total issued Shares. Accordingly, Ms. Ma, Mr. Yang, Ms. Yeh and Mr. Chen (through their
respective holding companies) are our Controlling Shareholders.
Each of Ms. Ma, Mr. Yang, Ms. Yeh and Mr. Chen are our Founder. Ms. Ma is the
chairperson of our Board and our executive Director. Each of Mr. Yang and Mr. Chen are our
non-executive Director. Ms. Yeh is the mother of Mr. Jay Chou and an investment partner of Mr.
Yang.
CONCERT PARTY AGREEMENT
In order to strengthen voting rights in our Company, our Founders entered into the Concert
Party Agreement pursuant to which, among others, (i) the Founders shall act in concert in
respect of their voting rights and actively cooperate to consolidate control over voting rights of
our Company, and (ii) our Founders also acknowledged that since each of them had a beneficial
interest in our Group to the date thereof, they have been acting in concert and operating and
exercising their voting rights in a consistent manner.
RELATIONSHIP WITH OUR CONTROLLING SHAREHOLDERS
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--- page 360 ---
COMPETING INTERESTS
Each of our Controlling Shareholders and Directors confirms that, as of the Latest
Practicable Date, he/she or it or their respective close associates did not have any interest in a
business, apart from the business of our Group, which competes or is likely to compete, directly
or indirectly, with our business, which would require disclosure under Rule 8.10 of the Listing
Rules.
NON-COMPETITION UNDERTAKINGS
Deed of Non-competition
To ensure that competition will not exist in the future, each of our Controlling Shareholders
has entered into the Deed of Non-competition in favor of our Company under which each of our
Controlling Shareholders has, warranted and undertaken to our Company that he/she/it shall not,
and he/she/it shall use his/her/its best endeavors to procure that none of his/her/its close
associates (other than any member of our Group) shall, directly or indirectly as principal or
agent, either on his/her/its own account or in conjunction with or on behalf of any person, or
through any entities (except in or through any members of our Group), compete with our
business as disclosed in this prospectus (the “ Restricted Business ”).
The Deed of Non-competition given by our Controlling Shareholders does not apply to:
(a) the relevant Controlling Shareholder’s holding of interests in the shares of a company
where the total number of shares directly or indirectly held by our Controlling
Shareholders, and/or his/her/its respective close associates in aggregate does not
exceed 10% of the issued shares of the relevant company or control the exercise of
more than 10% of the voting rights thereof, or control the composition of a majority
of the board of directors of such company; and
(b) the Forgone Business Opportunity (as defined in the Deed of Non-competition) which
our Company has confirmed that it does not intend to pursue.
The respective obligations of each of our Controlling Shareholders under the Deed of
Non-competition shall take effect from the Listing Date, and shall terminate on the earliest of (i)
the Shares cease to be listed on the Stock Exchange; (ii) our Controlling Shareholders and their
close associates, individually or jointly, cease to hold or control 30% or more of the entire share
capital of the Company; and (iii) any one of our Controlling Shareholders together with
its/his/her close associates cease to hold or control, directly or indirectly, any securities in the
entire share capital of our Company.
Our Company will disclose decisions on matters reviewed by our independent
non-executive Directors relating to the compliance and enforcement of the non-competition
undertakings under the Deed of Non-competition in our annual reports. Our Controlling
RELATIONSHIP WITH OUR CONTROLLING SHAREHOLDERS
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--- page 361 ---
Shareholders will make an annual confirmation on their compliance with the non-competition
undertakings under the Deed of Non-competition in our annual reports.
INDEPENDENCE FROM OUR CONTROLLING SHAREHOLDERS
Pursuant to our Reorganization, all companies and businesses of our Controlling
Shareholders related to, or incidental to, the operation of our Group were transferred to our
Company. We believe that our Group is capable of carrying on its business independently of our
Controlling Shareholders and their respective close associates (other than our Group) after
Listing for the following reasons:
Management independence
Our business is managed by our Board and senior management. Our Board currently
comprises three executive Directors, two non-executive Directors and three independent
non-executive Directors. Our senior management consists of seven members. Our Directors
and senior management team have sufficient expertise and experience to handle the
day-to-day management and operations of our Group.
Our Directors are of the view that our Board together with our senior management
team is able to manage our business independently from our Controlling Shareholders for
the following reasons:
(a) there are adequate corporate governance measures in place to manage the
existing and potential conflicts of interest. In addition, our Directors shall not
vote in any Board resolution approving any contract, arrangement or proposal
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;
(b) we have three independent non-executive Directors, who help to enhance the
independence of our management;
(c) our senior management team possesses in-depth experience and understanding of
the industry in which our Group is engaged. This ensures the independence of the
daily management and operations of our Group from those of our Controlling
Shareholders; and
(d) each of our Directors is aware of his/her fiduciary duties as a Director, which
require, among other things, that he/she acts for the benefit and in the best
interests of our Shareholders as a whole and does not allow any conflict between
his/her duties as a Director and his/her personal interests to affect the
performance of his/her duties as a Director. For instance, when our Board
considers any resolution which are related to the cooperation with JVR Music,
Mr. Yang (being a director of our Company and JVR Music) will abstain from
voting on the relevant resolution.
RELATIONSHIP WITH OUR CONTROLLING SHAREHOLDERS
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--- page 362 ---
Operational independence
Our Company (through its operating subsidiaries) holds or enjoys the benefit of all
relevant licenses necessary to carry out its business in all material respects, and has
sufficient capital, equipment, production facilities and employees to operate our business
independently from our Controlling Shareholders. We do not rely on any of our Controlling
Shareholders’ respective operational, administration or human resources services. Further,
we do not have any recurring transactions with our Controlling Shareholders and their
respective close associates.
In addition, we have established our organizational structure which is made up of
individual departments, each with specific areas of responsibilities. We have also
established a set of internal control measures to facilitate the effective operation of our
business.
Based on the above, our Directors are of the view that our Group has been operating
independently from our Controlling Shareholders and their respective close associates
during the Track Record Period and will continue to operate independently.
Financial independence
All loans, advances and balances due from our Controlling Shareholders and their
respective close associates and all loans, advances and balances due to our Controlling
Shareholders and their respective close associates will be repaid before Listing. All share
pledges and guarantees provided by our Controlling Shareholders and their respective close
associates on our Group’s borrowing will also be fully released upon Listing.
Accordingly, we believe we are able to maintain financial independence from our
Controlling Shareholders and their respective close associates. In addition, we have our
own internal control systems, accounting and finance department, independent treasury
function for cash receipts and payment and independent access to third-party financing. Our
Directors believe that we are capable of obtaining financing from external sources without
reliance on our Controlling Shareholders.
Based on the above, our Directors are of the view that our Company will have the
ability to operate independently from our Controlling Shareholders and their respective
close associates from a financial perspective and to maintain financial independence from
our Controlling Shareholders and their respective close associates.
RELATIONSHIP WITH OUR CONTROLLING SHAREHOLDERS
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--- page 363 ---
CORPORATE GOVERNANCE MEASURES
Our Company will comply with the provisions of the Corporate Governance Code in
Appendix 14 to the Listing Rules.
Each of our Controlling Shareholders and Directors has confirmed that he/she/it fully
comprehends his/her/its obligations to act in our Shareholders’ best interests as a whole. Our
Directors believe that there are adequate corporate governance measures in place to manage
existing and potential conflicts of interest. In order to further avoid potential conflicts of
interest, we have implemented the following measures:
(a) our Articles provided that a Director shall not vote on any resolution approving any
contract or arrangement or any other proposal in which such Director or any of his/her
close associates have a material interest nor shall such Director be counted in the
quorum present at the meeting;
(b) a Director with material interests shall make full disclosure in respect of matters that
conflict or potentially conflict with our interest and absent himself or herself from the
board meetings on matters in which such Director or his/her associates have a material
interest, unless the attendance or participation of such Director at such meeting of the
Board is specifically requested by a majority of the independent non-executive
Directors;
(c) we have established internal control mechanisms to identify connected transactions.
Upon Listing, if our Company enters into connected transactions with our Controlling
Shareholders or any of his/her/its associates, the Company will comply with the
applicable Listing Rules;
(d) we are committed that our Board should include a balanced composition of executive
Directors, non-executive Directors and independent non-executive Directors. We have
appointed independent non-executive Directors and we believe our independent
non-executive Directors possess sufficient experience and they are free of any
business or other relationship which could interfere in any material manner with the
exercise of their independent judgment and will be able to provide an impartial,
external opinion to protect the interests of our public Shareholders;
(e) where our Directors reasonably request the advice of independent professionals, such
as financial advisors, the appointment of such independent professionals will be made
at our expenses;
(f) the independent non-executive Directors will review, on an annual basis, the
compliance with the non-competition undertakings under the Deed of Non-competition
by our Controlling Shareholders, the options, pre-emptive rights or first rights of
refusals provided by our Controlling Shareholders on their existing or future
competing businesses; and
RELATIONSHIP WITH OUR CONTROLLING SHAREHOLDERS
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--- page 364 ---
(g) we have appointed CMBC International Capital Limited as our compliance adviser,
which will provide advice and guidance to us in respect of compliance with the
applicable laws and the Listing Rules including various requirements relating to
directors’ duties and corporate governance.
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’ interests after the Listing.
RELATIONSHIP WITH OUR CONTROLLING SHAREHOLDERS
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--- page 365 ---
BOARD OF DIRECTORS
Our Board currently consists of eight Directors, comprising three executive Directors, two
non-executive Directors and three independent non-executive Directors. The powers and duties
of our Board include convening general meetings and reporting our Board’s work at general
meetings, determining our business and development plans, preparing our annual financial
budgets and financial reports, formulating proposals for dividend distributions and for the
increase or reduction of our authorized share capital as well as exercising other powers,
functions and duties as conferred by our Memorandum and Articles of Association.
The table below sets out certain information in relation to our Directors and senior
management (“ Senior Management ”):
Members of our Board
Name Age
Date of joining
our Group
Date of
appointment as
Director
Existing position(s)
in our Company
Principal
responsibilities
Relationship with
other Directors
and Senior
Management
Ms. Ma, Hsin-Ting
(৵ːణ)
47 November
2015
(Note)
September 13,
2021
Chairperson of the
Board and
executive Director
Responsible for
overall business
strategy, daily
management and
operations of our
Group
Nil
Dr. Qian, Sam
Zhongshan
(፺ʕʆ)
59 April 2017 September 13,
2021
Executive Director
and chief executive
officer
Responsible for
overall business
strategy and
corporate finance
strategy of our
Group
Nil
Mr. Lai, Kwok Fai
Franki
(፠਷ሾ)
58 November
2015
(Note)
September 13,
2021
Executive Director
and chief financial
officer
Responsible for
overall financial
management and
corporate finance
strategy of our
Group
Nil
DIRECTORS AND SENIOR MANAGEMENT
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--- page 366 ---
Name Age
Date of joining
our Group
Date of
appointment as
Director
Existing position(s)
in our Company
Principal
responsibilities
Relationship with
other Directors
and Senior
Management
Mr. Yang,
Chun-Jung
(࿲)
59 August 2017 September 13,
2021
Non-executive
Director
Responsible for
advising on the
overall
development of our
Group
Nil
Mr. Chen, Chung
(௓ʕ)
62 August 2017 September 13,
2021
Non-executive
Director
Responsible for
advising on the
overall
development of our
Group
Nil
Dr. Xue Jun
(ࠏ)
48 April 2023 April 18, 2023 Independent
non-executive
Director
Responsible for
providing
independent advice
on the operation
and management of
our Group
Nil
Mr. Yang, Dave De 57 April 2023 April 18, 2023 Independent
non-executive
Director
Responsible for
providing
independent advice
on the operation
and management of
our Group
Nil
Ms. Chung,
Elizabeth Ching
Yee
(ᒤ᎑ᄃ)
52 April 2023 April 18, 2023 Independent
non-executive
Director
Responsible for
providing
independent advice
on the operation
and management of
our Group
Nil
DIRECTORS AND SENIOR MANAGEMENT
– 356 –


--- page 367 ---
Members of our senior management
Name Age
Date of joining
our Group
Date of
appointment as
senior
management of
our Group
Existing
position(s) in
our Company
Principal
responsibilities
Relationship
with other
Directors
and Senior
Management
Ms. Ma,
Hsin-Ting
(৵ːణ)
47 November
2015
(Note)
November 2015 Chairperson of
the Board and
executive
Director
Responsible for
overall
business
strategy, daily
management
and operations
of our Group
Nil
Dr. Qian,
Sam
Zhongshan
(፺ʕʆ)
59 April 2017 October 2020 Executive
Director and
chief executive
officer
Responsible for
overall
business
strategy and
corporate
finance
strategy of our
Group
Nil
Mr. Lai,
Kwok Fai
Franki
(፠਷ሾ)
58 November
2015
(Note)
November 2015 Executive
Director and
chief financial
officer
Responsible for
overall
financial
management
and corporate
finance
strategy of our
Group
Nil
Ms. Zhou,
Peimin
(մԽઽ)
45 April 2017 April 2019 Chief operating
officer
Responsible for
developing IP
strategy and IP
licensing
business and
related daily
management
and operations
of our Group
Nil
DIRECTORS AND SENIOR MANAGEMENT
– 357 –


--- page 368 ---
Name Age
Date of joining
our Group
Date of
appointment as
senior
management of
our Group
Existing
position(s) in
our Company
Principal
responsibilities
Relationship
with other
Directors
and Senior
Management
Mr. Chang,
Chih-Peng
(ੵқᘄ)
54 April 2017 December 2017 Chief program
officer
Responsible for
developing
entertainment
IP strategy and
related daily
management
and operations
of our Group
Nil
Mr. Fang,
Wenshan
(˙˖ʆ)
54 February 2021 February 2021 Chief cultural
officer
Responsible for
marketing and
advertising the
Group’s
products and
creative
strategy
planning of our
Group
Nil
Ms. Jiang,
Xiuhong
(ࠀ)
44 November 2017 March 2019 Operation
director
Responsible for
managing
product
marketing and
sales strategies
of our Group
Nil
Note: Prior to the commencement of our business operations in 2017, Ms. Ma and Mr. Lai were involved in the
planning of the Listing Business and negotiations with potential business partners.
DIRECTORS AND SENIOR MANAGEMENT
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--- page 369 ---
Executive Directors
Ms. Ma, Hsin-Ting ( ৵ːణ ), aged 47, joined our Group in November 2015 and is one of
our Founders. Ms. Ma was the chief executive officer of Star Plus (Kunshan) from November
2015 to August 2018. Ms. Ma was appointed as our executive Director and chairperson of our
Board in September 2021, and has also been the chief executive officer of Kunshan Star Plus
Action and Beijing Star Plus Legend since March 2016 and June 2020, respectively. Ms. Ma is
primarily responsible for overall business strategy, daily management and operations of our
Group and has been responsible for overseeing the sales function of our Group and the branding
of our products. She has also been heavily involved in the establishment of the distribution
system and network for MODONG coffee. Ms. Ma has more than 20 years of working
experience in cultural, media and financial industries.
Prior to founding our Group, Ms. Ma served in Taiwan Eastern Broadcasting Co., Ltd. (؇
ʮ̡ ) from December 1997 to April 2007, with her last position as news
producer, Ms. Ma served as consultant in a company held by IDG Capital from August 2008 to
March 2020, where she was primarily responsible for providing investment-related advisory
services. In May 2022, Ms. Ma was appointed as an expert of the Brand Committee (೐˙ਖ਼։
࢕of the New Retail and Livestream E-commerce Expert Committee (ᅧཥਠਖ਼
ึ ) established by the Development Research Center of the State Administration for
Market Regulation.
Ms. Ma was a supervisor of the following dissolved companies and confirmed that they
were solvent immediately prior to its dissolution and had no outstanding claims or liabilities.
The relevant details are as follows:
Company name
Place of
establishment Status
Date of
deregistration
Reason for
deregistration
Shin Kong International
Commerce (Shanghai)
Company Limited
(อΈ਷ყਠ൱ (ɪऎ)
ʮ̡ )
PRC Dissolved by
deregistration
October 27,
2020
No business
operations
Beijing Superstar Daren
Cultural Development Co.,
Ltd. (༺ɛ˖ʷ೯
ʮ̡ )
PRC Dissolved by
deregistration
July 30, 2021 No business
operations
Ms. Ma obtained a master’s degree in marketing and distribution management from
National Kaohsiung University of Science and Technology (formerly known as National
Kaohsiung First University of Science and Technology) in June 2003 and a college degree in
Japanese language from Wenzao Ursuline University of Languages (formerly known as Wenzao
Ursuline College of Languages (ࣧin June 1995.
DIRECTORS AND SENIOR MANAGEMENT
– 359 –


--- page 370 ---
Dr. Qian, Sam Zhongshan ( ፺ʕʆ ), aged 59, joined our Group in April 2017 as a
consultant of Star Plus (Kunshan) and was appointed as the strategy officer of Star Plus
(Kunshan) in August 2018. Dr. Qian was appointed as the chief executive officer of Star Plus
Development in October 2020. Dr. Qian was appointed as our chief executive officer and
executive Director in September 2021. Dr. Qian is primarily responsible for overall business
strategy and corporate finance strategy of our Group. Dr. Qian has over 20 years of experience
in financial market and management of public companies.
Prior to joining our Group, Dr. Qian served as an associate in the strategic trading division
of Chase Manhattan Bank from December 1993 to July 1996; associate director in the risk
finance group of Barclays Capital, an investment bank, from July 1996 to February 2000; vice
president in Sohu.com Limited (formerly known as Sohu.com Inc.), the shares of which are
listed on the Nasdaq Stock Market (NASDAQ: SOHU), a company principally engaged in brand
advertising and online games, from March 2000 to March 2004, where he was in charge of
strategising business plans. Dr. Qian served as the president and chief financial officer of China
Finance Online Co., Ltd, the shares of which are listed on the Nasdaq Stock Market (NASDAQ:
JRJC), a web-based financial information/service company, from April 2004 to June 2006, where
he supervised works relating to finance, investors relations and administration. Dr. Qian also
served as the chief financial officer of Allyes Information Technology Company Limited (ڦߚ
Ҧஔ(ɪऎ)ʮ̡ ), a company principally engaged in online marketing, from June 2006 to
April 2007, where he supervised the financial operations of the company; and the managing
director of ExaByte Capital Management (HK) Limited, an asset management company, from
April 2012 to December 2016, where he participated in the formulation of strategies.
Dr. Qian has served as an independent non-executive director of Yoho Group Holdings
Limited, a company listed on the Main Board of the Stock Exchange (stock code: 2347) since
May 2022.
Dr. Qian obtained a Doctor of Philosophy degree in astro-physics from Columbia
University in the United States in February 1991 and a bachelor’s degree in physics from the
University of Science and Technology of China in June 1985.
Mr. Lai, Kwok Fai Franki ( ፠਷ሾ ), aged 58, joined our Group in November 2015 as the
vice president of finance of Star Plus (Kunshan). Mr. Lai was appointed as our executive
Director and chief financial officer in September 2021. Mr. Lai is also the director of Star Plus
Development and the general manager and director of Star Plus (Kunshan) and Beijing Star Plus
Master. Mr. Lai is primarily responsible for overall financial management and corporate finance
strategy of our Group. Mr. Lai has over 30 years of working experience in accounting and
financial advisory.
DIRECTORS AND SENIOR MANAGEMENT
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--- page 371 ---
Prior to joining our Group, Mr. Lai served at Citibank, N.A. from October 1989 to
September 2000, with his last position as Vice President of the Worldwide Securities Services
Department; and JPMorgan Chase & Co. from September 2000 to February 2008, with his last
position as executive director of the treasury & securities services department, where he was
responsible for providing investment-related advisory services. Mr. Lai served as chief financial
officer of Net Movie Limited from March 2008 to March 2015, where he was responsible for
formulating the financial strategies; and the general manager of each of Kunshan Dream World
Commercial Management Company Limited (ʮ̡ ) from April 2015 to
December 2017, and China Dream World (HK) Limited from January 2018 to February 2021,
respectively, which were both engaged in cultural project management where he was responsible
for formulating financial strategies.
Mr. Lai served as an executive director of China Digital Culture (Group) Limited, a
company listed on the GEM of the Stock Exchange (stock code: 8175) from July 2016 to March
2020.
Mr. Lai was a director of the following dissolved companies and confirmed that they were
solvent immediately prior to their dissolution and had no outstanding claims or liabilities. The
relevant details are as follows:
Company name
Place of
establishment Status
Date of
deregistration
Reason for
deregistration
Weifang Sidapu Business
Management Company
Limited ( ᐂѥ౶༺౷ਠุ
ʮ̡ )
PRC Dissolved by
deregistration
October 28,
2020
No business
operations
Shangrao Chengda Zhipai
Technology Company
Limited (ݼߧ
ʮ̡ )
PRC Dissolved by
deregistration
June 22, 2020 No business
operations
Beijing Superstar Daren
Cultural Development Co.,
Ltd. (༺ɛ˖ʷ೯
ʮ̡ )
PRC Dissolved by
deregistration
July 30, 2021 No business
operations
Mr. Lai obtained a bachelor’s degree in computing studies from Hong Kong Polytechnic
(now known as the Hong Kong Polytechnic University) in November 1989.
DIRECTORS AND SENIOR MANAGEMENT
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--- page 372 ---
Non-executive Directors
Mr. Y ang, Chun-Jung (࿲ ), aged 59, is one of our Founders. Mr. Yang was appointed
as our non-executive Director in September 2021. Mr. Yang is responsible for advising on the
overall development of our Group. Mr. Yang is an established music album producer with more
than 20 years of experience in the music industry and artiste management.
Mr. Yang has been the chief executive officer, director and controlling shareholder of JVR
Music, the artiste management company of various celebrities including Mr. Jay Chou, since
April 2007, where he is responsible for the provision of artiste management service to celebrities
and acted as the agent of celebrities including Mr. Jay Chou. He also assists celebrities in
relation to the creation and production of songs and music albums.
Mr. Yang has been a non-executive director of G.H.Y Culture & Media Holding Co.,
Limited since November 2020, the shares of which are listed on the Main Board of Singapore
Exchange Securities Trading Limited (SGX: XJB).
Mr. Yang obtained a bachelor’s degree in agricultural promotion from National Taiwan
University in June 1987.
Mr. Chen, Chung ( ௓ʕ), aged 62, is one of our Founders. He was appointed as our
non-executive Director in September 2021. Mr. Chen is responsible for advising on the overall
development of our Group. Mr. Chen has over 15 years of working experience in artiste
management.
Mr. Chen has served as the general manager of Juicy Music Co Ltd (ᆀႡЪϞ
ʮ̡), a company principally engaged in artiste management, since 2005, where he has been
responsible for the negotiation of endorsement agreements for various artists, including Mr. Jay
Chou, and execution of concerts.
Mr. Chen was a director of the following dissolved company and confirmed that it was
solvent immediately prior to its dissolution and had no outstanding claims or liabilities. The
relevant details are as follows:
Company name
Place of
incorporation Status
Date of
deregistration
Reason for
deregistration
Chongqing Boer Pusi
Culture Communication
Culture Co., Ltd. (ᅅ௹
ʮ̡ )
PRC Dissolved by
deregistration
December 6,
2016
V oluntary
deregistration
as agreed by
shareholders
DIRECTORS AND SENIOR MANAGEMENT
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Independent non-executive Directors
Dr. Xue Jun (ࠏ)aged 48, joined our Group as our independent non-executive Director
in April 2023. Dr. Xue is responsible for providing independent advice on the operation and
management of our Group. Dr. Xue has considerable professional experience in the legal field,
in particular, e-commerce related laws in the PRC.
Dr. Xue has been working at the Peking University since 2005 and is currently a professor
and vice dean at the Law School of Peking University ( ̏ԯɽኪ ), and the director of
e-commerce law research center of Peking University. Dr. Xue was a legal advisor of SAMR and
a legislative expert consultant of the Financial and Economic Committee of the National
People’s Congress from September 2016 to March 2018, participating in the legislative work of
e-commerce related laws.
In July 1996 and June 2000, Dr. Xue received a bachelors of laws degree and master’s
degree in civil and commercial laws from Zhongnan University of Economics and Law (ৌ
ɽኪ ) (previously known as Zhongnan University of Political Science and Law (ج݁ی
ኪ৫)) and Zhongnan University of Economics and Law (ɽኪ ) respectively. In
October 2005, Dr. Xue obtained his doctorate in Roman law from Università degli Studi di
Roma Tor Vergata.
Dr. Xue has served as an independent non-executive director of Sino-Ocean Service
Holding Limited, the shares of which are listed on the Main Board of the Stock Exchange (stock
code: 6677) since November 2020.
Mr. Y ang, Dave De (former name: Yang Dezhi ( เᅃқ)), aged 57, joined our Group as our
independent non-executive Director in April 2023. Mr. Yang is responsible for providing
independent advice on the operation and management of our Group.
Mr. Yang served as the regional finance director for the North Asia region of Reckitt
Benckiser Group PLC, the shares of which are listed on the London Stock Exchange (LON: RB),
a company providing hygiene, health and nutrition products, from September 2012 to September
2016; and partner and chief financial officer of Dalton International, from January 2017 to
February 2019.
Mr. Yang served as an independent director and chairperson of the audit committee of
ChangYou.com Limited, a company previously listed on the Nasdaq Stock Market (NASDAQ:
CYOU) from April 2009 to April 2020; and has been an independent director and member of the
audit committee of Sohu.com Limited (formerly known as Sohu.com Inc.), the shares of which
are listed on the Nasdaq Stock Market (NASDAQ: SOHU) since April 2017.
Mr. Yang obtained a master’s degree in science from the City University of New York in
June 1995, a master’s degree in management engineering from the University of Science and
Technology of China (ኪҦஔɽኪ ) in August 1989, and bachelor’s degree in geophysics
from the University of Science and Technology of China in July 1986.
DIRECTORS AND SENIOR MANAGEMENT
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--- page 374 ---
Ms. Chung, Elizabeth Ching Y ee ( ᒤ᎑ᄃ ), aged 52, joined our Group as our independent
non-executive Director in April 2023. Ms. Chung is responsible for providing independent
advice on the operation and management of our Group.
Ms. Chung was appointed as an executive director and the chief executive officer of China
Brilliant Global Limited (a company listed on the GEM of the Stock Exchange, stock code:
8026) on May 18, 2018. Prior to that, she was appointed as chief executive officer and executive
director of Paganini Milano (SG) PTE Limited in 2017, responsible for brand positioning,
strategic planning, and business development. Ms. Chung was an employee of BOCI Securities
Limited and HSBC Broking Securities (Asia) Limited from April 2003 to April 2017.
Ms. Chung was a director of the following dissolved companies and confirmed that they
were solvent immediately prior to their dissolution and had no outstanding claims or liabilities.
The relevant details are as follows:
Company name
Place of
establishment Status
Date of
deregistration
Reason for
deregistration
Collezione Paganini
Limited
Hong Kong Dissolved by
deregistration
April 1, 2022 No business
operation
Angel Master Limited Hong Kong Dissolved by
deregistration
January 28,
2022
No business
operation
Ms. Chung obtained a bachelor of science degree from Rutgers, The State University of
New Jersey in October 1994.
Save as disclosed above, none of our Directors held any other directorships in any other
company listed in Hong Kong or overseas during the three years immediately preceding the
Latest Practicable Date. Please refer to the section headed “Statutory and general information –
C. Further information about our Directors and Substantial Shareholders” in Appendix V to this
Prospectus for further information about the Directors, including the particulars of their service
contracts and remuneration, and details of interests of the Directors in our Shares. Save as
disclosed herein, to the best knowledge, information and belief of our Directors having made all
reasonable enquiries, there are no other matters in respect of each of our Directors that is
required to be disclosed pursuant to Rule 13.51(2) of the Listing Rules and there is no other
material matter relating to our Directors that needs to be brought to the attention of our
Shareholders.
DIRECTORS AND SENIOR MANAGEMENT
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--- page 375 ---
SENIOR MANAGEMENT
Our Senior Management are responsible for the day-to-day operations and management of
our business. For information concerning our Senior Management who also serve as executive
Directors, please refer to the paragraph headed “– Board of Directors – Executive Directors” in
this section above. Members of our Senior Management, in addition to the executive Directors,
are as follows:
Ms. Zhou, Peimin ( մԽઽ ), aged 45, joined our Group in April 2017 as a consultant of
Star Plus (Kunshan) and was appointed as the chief operating officer of Star Plus (Kunshan) in
April 2019 and director and general manager of Beijing Star Plus Legend in August 2020. Ms.
Zhou was appointed as our chief operating officer in September 2021. Ms. Zhou is responsible
for developing IP strategy and IP licensing business and related daily management and
operations of our Group. Ms. Zhou has approximately 20 years of working experience in retail
industry and intellectual property related work.
Prior to joining our Group, Ms. Zhou worked in Shanghai SEB Electric Appliances Co.,
Ltd. (ʮ̡ ), from July 2000 to June 2003 and Adidas (Suzhou) Co., Ltd. (ڛ
༺౶(ᘽψ)ʮ̡ ), from October 2003 to December 2005. Ms. Zhou also served as a senior
manager of the Digital Business Development department in The Walt Disney Company (China)
Limited (ɻ̵ (ʕ਷)ʮ̡ ) from January 2006 to March 2018.
Ms. Zhou obtained a bachelor’s degree in computer science from Shanghai University of
Engineering Science ( ɪऎʈ೻Ҧஔɽኪ ) in July 2000.
Ms. Zhou was a director of the following dissolved company and she confirmed that the
dissolved company was solvent immediately prior to its dissolution and had no outstanding
claims or liabilities. The relevant details are as follows:
Company name
Place of
incorporation Status
Date of
deregistration
Reason for
deregistration
Costarry Culture (HK)
Limited
Hong Kong Dissolved by
striking off
October 11,
2019
No business
operations
Mr. Chang, Chih-Peng ( ੵқᘄ ), aged 54, joined our Group in April 2017 as a consultant
of Star Plus (Kunshan) and was appointed as the director and general manager of Beijing Star
Plus Master and our chief program officer in December 2017 and September 2021, respectively.
Mr. Chang is responsible for developing entertainment IP strategy and related daily management
and operations of our Group. Mr. Chang has more than 25 years of working experience in
program production.
DIRECTORS AND SENIOR MANAGEMENT
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--- page 376 ---
Prior to joining our Group, Mr. Chang was a producer of entertainment programs including
The Fantastic Brothers (Ҕ), which was aired from 1993 to 2000, and Hello Jacky ( ၝ
ᖵ࿩ᘶ). Mr. Chang served as the general manager in Beijing Master, a company principally
engaged in production and distribution of television and online program, from June 2012 to
November 2017. Mr. Chang also served as general manager in Shanghai Bright Culture
Broadcasting Company Limited (ʮ̡ ) from January 2008 to November
2017.
Mr. Chang obtained a diploma in radio and television from National School of Arts (now
known as National Taiwan University of Arts ( ਷ͭၽᝄᖵஔɽኪ )) in June 1990.
Mr. Fang, Wenshan ( ˙˖ʆ ), aged 54, joined our Group in February 2021 as the chief
cultural officer of Star Plus Development and was appointed as our chief cultural officer in
September 2021. Mr. Fang is responsible for marketing and advertising the Group’s products and
creative strategy planning of our Group. Mr. Fang has approximately 20 years of working
experience in songwriting and cultural creation.
Mr. Fang is a lyricist of Chinese pop music and a music producer. Mr. Fang joined JVR
Music in April 2007, where he was responsible for songwriting; has served as the chief
executive officer in Fang-Wen-Shan Cultural Media Limited (ʮ̡ ) since
August 2007, a company principally engaged in providing art performance agency services,
where he has been mainly responsible for management and operations; the chairman of the board
of Elf Village Creative Land Company Limited (ʮ̡ ) since March 2017,
a company principally engaged in manufacturing cultural and creative products and execution of
art exhibitions, where he has been mainly responsible for managing the operation of the
company; and the chief executive officer in Beijing Fang-Wen-Shan Cultural Media Limited ( ̏
ʮ̡ ) since February 2011, a company principally engaged in
providing artiste management services, where he has been mainly responsible for managing the
operation of the company. Mr. Fang was involved in the creation of lyrics and cultural products
at these companies.
Mr. Fang received the best lyricist award for the 13th and 19th Golden Melody Awards in
2002 and 2008, respectively.
Ms. Jiang, Xiuhong (ࠀ) aged 44, joined our Group in November 2017 as a
consultant of Kunshan Star Plus Action and served as Kunshan Star Plus Action’s operation
director since March 2019 and was responsible for the operation of its new retail business
operations. Ms. Jiang was appointed as our operation director in September 2021 and is
responsible for managing product marketing and sales strategies of our Group. Ms. Jiang has
approximately 15 years of working experience in sales industry.
DIRECTORS AND SENIOR MANAGEMENT
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--- page 377 ---
Prior to joining our Group, Ms. Jiang served as an assistant to the operation director in
Shenzhen Sanda Cosmetic Co., Ltd (ʮ̡ ), a company principally
engaged in sales of cosmetic products, from August 2007 to May 2010; the marketing director of
Guangzhou Cating Cosmetics Co., Ltd. (ʮ̡ ) from June 2010 to February
2017, where she was responsible for handling the marketing activities; and the marketing
director of Guangzhou Qingcong Trading Co., Ltd. (ʮ̡ ), a company
principally engaged in social e-commerce, from February 2017 to February 2019, where she was
responsible for handling promotion activities.
Ms. Jiang was a supervisor of the following dissolved company and confirmed that the
dissolved company was solvent immediately prior to their dissolution and had no outstanding
claims or liabilities. The relevant details are as follows:
Company name
Place of
incorporation Status
Date of
deregistration
Reason for
deregistration
Weifang Sidapu
Business
Management
Company Limited
(ᐂѥ౶༺౷ਠุ၍
ʮ̡ )
PRC Dissolved by
deregistration
October 2,
2020
No business
operations
Ms. Jiang graduated from Shantou Nanhai V ocational High School in July 1997.
COMPANY SECRETARY
Ms. Law Kwok Wing ( ᖯ࿈൘ ), aged 37, was appointed as our company secretary on
September 13, 2021 and is responsible for our company secretarial affairs.
Ms. Law has over five years of experience in the auditing field and over six years of
experience in compliance and corporate governance matters for various listed companies in
Hong Kong. From January 2012 to January 2014, she worked at Deloitte Touche Tohmatsu as a
senior of its audit department. From March 2014 to January 2021, she worked at Greater China
Appraisal Limited with her last position as a manager of its professional development and
standards division. Since January 2021, Ms. Law has been working at Acclime Corporate
Services Limited which has been amalgamated with BPO Global Services Limited as senior
manager of its listed company division.
Ms. Law obtained a bachelor’s degree in business administration from Lingnan University
in Hong Kong in October 2008. Ms. Law has been a member of the Hong Kong Institute of
Certified Public Accountants since September 2013.
During the three years preceding the Latest Practicable Date, Ms. Law did not hold any
directorships in any company listed in Hong Kong or overseas.
DIRECTORS AND SENIOR MANAGEMENT
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--- page 378 ---
BOARD COMMITTEES
Our Board has established the audit committee, the remuneration committee and the
nomination committee and delegated various responsibilities to these committees, which assist
our Board in discharging its duties and overseeing particular aspects of our Group’s activities.
Audit committee
We have established an audit committee with written terms of reference in compliance with
Rule 3.21 of the Listing Rules and the Corporate Governance Code as set out in Appendix 14 to
the Listing Rules. The primary duties of the audit committee are to review and supervise our
financial reporting process and internal control system of our Group, risk management and
internal audit, provide advice and comments to our Board and perform other duties and
responsibilities as may be assigned by our Board. The audit committee consists of three
members, namely Mr. Yang, Dave De, Dr. Xue, Jun (ࠏand Ms. Chung, Elizabeth Ching Yee
(ᒤ᎑ᄃ). The chairperson of the audit committee is Mr. Yang, Dave De.
Remuneration committee
We have established a remuneration committee with written terms of reference in
compliance with Rule 3.25 of the Listing Rules and the Corporate Governance Code as set out in
Appendix 14 of the Listing Rules. The primary duties of the remuneration committee are to
establish, review and provide advices to our Board on our policy and structure concerning
remuneration of our Directors and senior management and on the establishment of a formal and
transparent procedure for developing policies concerning such remuneration, make
recommendations to our Board the terms of the specific remuneration package of each executive
Director and senior management and review and approve performance-based remuneration by
reference to corporate goals and objectives resolved by our Directors from time-to-time. The
remuneration committee consists of three members, namely Ms. Chung, Elizabeth Ching Yee ( ᒤ
᎑ᄃ), Ms. Ma, Hsin-Ting ( ৵ːణ) and Mr. Yang, Dave De. The chairperson of the remuneration
committee is Ms. Chung, Elizabeth Ching Yee ( ᒤ᎑ᄃ).
Nomination committee
We have established a nomination committee with written terms of reference in compliance
with the Corporate Governance Code as set out in Appendix 14 of the Listing Rules. The
primary duties of the nomination committee are to review the structure, size and composition of
our Board on a regular basis and make recommendations to our Board regarding any proposed
changes to the composition of our Board; identify, select or make recommendations to our Board
on the selection of individuals nominated for directorships, and ensure the diversity of our Board
members; assess the independence of our independent non-executive Directors and make
recommendations to our Board on relevant matters relating to the appointment, re-appointment
and removal of our Directors and succession planning for our Directors. The nomination
committee consists of three members, namely Ms. Ma, Hsin-Ting ( ৵ːణ), Dr. Xue, Jun (ࠏ)
and Ms. Chung, Elizabeth Ching Yee ( ᒤ᎑ᄃ). The chairperson of the nomination committee is
Ms. Ma, Hsin-Ting ( ৵ːణ).
DIRECTORS AND SENIOR MANAGEMENT
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Emolument of Directors and senior management
Our Directors and senior management receive emolument in the form of salaries and
bonuses, contribution to retirement scheme, medical insurances and other social insurance.
The remuneration payable to our Directors in aggregate (including share-based
compensation) for each of the four years ended December 31, 2022 were nil, RMB0.4 million,
RMB4.8 million and RMB4.5 million, respectively. None of our Directors had waived or agreed
to waive any remuneration during the Track Record Period. Saved as disclosed above, no other
payments have been paid or are payable by our Company to our Directors during the Track
Record Period.
Our Company’s five highest paid individuals includes nil, nil, three and three Directors for
each of the four years ended December 31, 2022, respectively. The aggregate remuneration
payable to the five highest individuals who are not Directors (including share-based
compensation) for each of the four years ended December 31, 2022, were RMB2.1 million,
RMB3.5 million, RMB2.7 million and RMB3.3 million, respectively. During the Track Record
Period, no remuneration was paid by us to our Directors or the five highest paid individuals as
an inducement to join or upon joining our Group, and save as required by relevant laws and
regulations, no compensation was made by us to our Directors for the loss of office during the
Track Record Period.
Pursuant to the existing arrangements that are currently in force as of the date of this
prospectus, the amount of remuneration (excluding share-based payments and discretionary
bonuses) payable to our Directors by our Company for the year ending December 31, 2023 is
estimated to be approximately RMB3.6 million.
Our Board will review and determine the remuneration and compensation packages of our
Directors and senior management and will, following the Listing, receive recommendation from
our remuneration committee which will take into account salaries paid by comparable
companies, time commitment and responsibilities of our Directors and performance of our
Group.
Save as disclosed above, no other payments had been made, or were payable, by any
member of our Group to our Directors during the Track Record Period. For additional
information on our Directors’ remuneration during the Track Record Period as well as
information on the highest paid individuals, please refer to Note 8 of the section headed
Accountant’s Report in Appendix I to this Prospectus.
DIRECTORS AND SENIOR MANAGEMENT
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BOARD DIVERSITY POLICY
We have adopted a board diversity policy (the “ Board Diversity Policy ”), which sets out
the criteria in selecting candidates to our Board, to achieve and maintain diversity of our Board
in order to enhance the effectiveness of our Board and to maintain a high standard of corporate
governance. Our Board Diversity Policy is well implemented as our Board currently consists of
both female and male Directors with a mix of cultural and education background, professional
qualifications, skills, knowledge, and industry experience. We believe they can contribute
different knowledge, skills and industry experience, such as overall management, strategic
development, financial and accounting and investment. The Board is of the view that our Board
achieves the board diversity requirement in our Board Diversity Policy.
We are also committed to adopting a similar approach to promote diversity within
management (including but not limited to the senior management) of our Company to enhance
the effectiveness of corporate governance of our Company as a whole.
Our nomination committee is delegated by our Board to review and assess the composition
of the Board and make recommendations to the Board on measurable objectives for achieving
diversity and appointment of members of the Board. The nomination committee will also review
the Board Diversity Policy from time to time and include in successive annual reports a
summary of the Board Diversity Policy and the progress on achieving these objectives.
PRE-IPO STOCK INCENTIVE PLAN AND POST-IPO SHARE OPTION SCHEME
Our Company adopted the Pre-IPO Stock Incentive Plan on August 3, 2020 and
conditionally adopted the Post-IPO Share Option Scheme on June 19, 2023, pursuant to which
new Shares will be granted to eligible Directors and employees. The principal terms of the
Pre-IPO Stock Incentive Plan and the Post-IPO Share Option Scheme are summarized in the
section headed “Statutory and general information – D. Share Option Schemes” in Appendix V
to this prospectus.
COMPLIANCE ADVISER
Our Group has appointed CMBC International Capital Limited as our compliance adviser
upon the listing of our Shares on the Stock Exchange pursuant to Rule 3A.19 of the Listing
Rules. The material terms of the compliance adviser’s agreement entered into between our Group
and the compliance adviser are as follows:
(1) the compliance adviser shall provide our Group with services including guidance and
advice as to compliance with the requirement of the Listing Rules and other applicable
laws, rules, codes and guidelines, and accompany our Group to any meetings with the
Stock Exchange;
DIRECTORS AND SENIOR MANAGEMENT
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(2) our Group may terminate the appointment of the compliance adviser by giving a no
less than seven days’ prior written notice to the compliance adviser. Our Group will
exercise such right in compliance with Rule 3A.26 of the Listing Rules. The
compliance adviser will have the right to terminate its appointment as compliance
adviser under certain specific circumstances and upon notification of the reason of its
resignation to the Stock Exchange; and
(3) during the period of appointment, our Group must consult with, and if necessary, seek
advice from the compliance adviser on a timely basis in the following circumstances:
(a) before the publication of any regulatory announcement, circular or financial
report;
(b) where a transaction, which might be a notifiable or connected transaction, is
contemplated, including share issues and share repurchases;
(c) where the Company proposes to use the proceeds of the Global Offering in a
manner different from that detailed in this prospectus or where our business
activities, developments or results deviate from any forecast, estimate or other
information in this prospectus; and
(d) where the Stock Exchange makes an inquiry of our Group regarding unusual
movements in the price or trading volume of our Shares.
The term of the appointment shall commence on the Listing Date and end on the date on
which we distribute our annual report in respect of our financial results for the first full
financial year commencing after the Listing Date.
CORPORATE GOVERNANCE
We aim to achieve high standards of corporate governance which are crucial to our
development and safeguard the interests of our Shareholders. To accomplish this, we expect to
comply with the Corporate Governance Code set out in Appendix 14 to the Listing Rules after
the Listing.
COMPETITION
None of our Directors have any interest in a business which materially competes or is
likely to compete, directly or indirectly, with our business, and requires disclosure under
Rule 8.10 of the Listing Rules.
DIRECTORS AND SENIOR MANAGEMENT
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So far as is known to our Directors, the following persons will, immediately prior to and
following the completion of the Capitalization Issue and the Global Offering (assuming the
Over-allotment Option is not exercised and without taking into account any Shares which may
be issued pursuant to the Share Option Schemes), have interests or short positions in our Shares
or underlying Shares of our Company which would be required to be disclosed to our Company
and the Stock Exchange pursuant to 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 issued voting Shares of our
Company:
Name of
Shareholder Nature of Interest
Shares held immediately prior
to the Capitalization Issue and
the Global Offering
Shares held immediately following
the completion of the Capitalization
Issue and the Global Offering
(2)
Number
Approximate
percentage Number
Approximate
percentage
Harmony Culture Beneficial interest 150,000,000 (L) 27.6% 199,302,054 (L) 24.9%
Ms. Ma (3)(4) Interest in a controlled
corporation/interest of
party acting in concert
350,000,000 (L) 64.5% 465,038,126 (L) 58.1%
Legend Key Beneficial interest 150,000,000 (L) 27.6% 199,302,054 (L) 24.9%
Mr. Yang
(4)(5) Interest in a controlled
corporation/interest of
party acting in concert
350,000,000 (L) 64.5% 465,038,126 (L) 58.1%
Ms. Yeh
(4)(5) Interest in a controlled
corporation/interest of
party acting in concert
350,000,000 (L) 64.5% 465,038,126 (L) 58.1%
Max One Beneficial interest 50,000,000 (L) 9.2% 66,434,018 (L) 8.3%
Mr. Chen
(4)(6) Interest in a controlled
corporation/interest of
party acting in concert
350,000,000 (L) 64.5% 465,038,126 (L) 58.1%
Mr. Lai Beneficial interest 75,000,000 (L) 13.8% 99,651,027 (L) 12.5%
Lake Ranch Beneficial interest 62,500,000 (L) 11.5% 35,042,523 (L) 4.4%
Mr. Ho
(7) Interest in a controlled
corporation
70,380,769 (L) 13.0% 45,513,546 (L) 5.7%
Bradbury Beneficial interest 30,094,112 (L) 5.5% 39,985,456 (L) 5.0%
Bradbury Strategic
Investment
Fund A
(8)
Interest in a controlled
corporation
30,094,112 (L) 5.5% 39,985,456 (L) 5.0%
Bradbury Fund
Management
Limited
(8)
Interest in a controlled
corporation
30,094,112 (L) 5.5% 39,985,456 (L) 5.0%
Mr. Loo, See Yuen (8) Interest in a controlled
corporation
30,094,112 (L) 5.5% 39,985,456 (L) 5.0%
SUBSTANTIAL SHAREHOLDERS
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Notes:
(1) The letter “L” denotes the person’s long position in our Shares.
(2) The calculation is based on the total number of 800,000,000 Shares in issue immediately following the
completion of the Capitalization Issue and the Global Offering (assuming the Over-allotment Option is not
exercised and without taking into account any Shares which may be issued pursuant to the Share Option
Schemes).
(3) Harmony Culture is wholly owned by Ms. Ma. As such, Ms. Ma is deemed to be interested in the Shares
held by Harmony Culture under the SFO.
(4) Pursuant to the Concert Party Agreement, Ms. Ma, Mr. Yang, Ms. Yeh, and Mr. Chen have agreed, among
other things, that they shall act in concert in respect of their voting rights and actively cooperate to
consolidate control over voting rights of our Company. Accordingly, Ms. Ma, Mr. Yang, Ms. Yeh and Mr.
Chen are parties acting in concert (having the meaning ascribed to it under the Takeovers Codes); and each
of Ms. Ma, Mr. Yang, Ms. Yeh and Mr. Chen is deemed to be interested in all the Shares in which each of
them is interested under the SFO. For further details, please refer to “Relationship with our Controlling
Shareholders – Concert Party Agreement” in this prospectus.
(5) Legend Key is beneficially and owned by Mr. Yang and Ms. Yeh as to 50% and 50%, respectively. As
such, each of Mr. Yang and Ms. Yeh is deemed to be interested in the Shares held by Legend Key under
the SFO.
(6) Max One is wholly owned by Mr. Chen. As such, Mr. Chen is deemed to be interested in the Shares held
by Max One under the SFO.
(7) Lake Ranch is beneficially and wholly owned by Mr. Ho. As such, Mr. Ho is deemed to be interested in
the Shares held by Lake Ranch under the SFO.
(8) Bradbury is wholly owned by Bradbury Strategic Investment Fund A, which is in turn wholly owned by
Bradbury Fund Management Limited. Bradbury Fund Management Limited is wholly owned by Mr. Loo,
See Yuen. As such, each of Bradbury Strategic Investment Fund A, Bradbury Fund Management Limited
and Mr. Loo, See Yuen is deemed to be interested in the Shares held by Bradbury under the SFO.
Save as disclosed above and in the section headed “Statutory and general information – C.
Further Information about our Directors and Substantial Shareholders – 1. Disclosure of
Interests” in Appendix V to this prospectus, our Directors are not aware of any person who will,
immediately to and following the completion of the Capitalization Issue and the Global Offering
(assuming the Over-allotment Option is not exercised and without taking into account any
Shares which may be issued pursuant to the Share Option Schemes), have interests or short
positions in any Shares or underlying Shares of our Company, which would fall to be disclosed
to us under the provisions of Divisions 2 and 3 of Part XV of the SFO, or who will be, directly
or indirectly interested in 10% or more of the issued voting Shares of our Company.
SUBSTANTIAL SHAREHOLDERS
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AUTHORIZED AND ISSUED SHARE CAPITAL
The following is a description of the authorized share capital of our Company as of the
Latest Practicable Date and immediately following the completion of the Capitalization Issue
and the Global Offering (assuming the Over-allotment Option is not exercised and without
taking into account any Shares which may be issued pursuant to the Share Option Schemes):
Authorized share capital
Number of Shares Description of Shares
Total Nominal
Value
(US$)
5,000,000,000 ordinary Shares of US$0.00001 each 50,000
The following is a description of the issued share capital of the Company in issue and to be
issued as fully paid or credited as fully paid prior to and following the completion of the
Capitalization Issue and the Global Offering (assuming the Over-allotment Option is not
exercised and without taking into account any Shares which may be issued pursuant to the Share
Option Schemes):
Issued share capital
Number of Shares Description of Shares
Total Nominal
Value
(US$)
542,914,624 ordinary Shares of US$0.00001 each in issue as of
the Latest Practicable Date
5,429.15
178,445,376 ordinary Shares of US$0.00001 each to be issued
pursuant to the Capitalization Issue
1,784.45
78,640,000 ordinary Shares of US$0.00001 each to be issued
pursuant to the Global Offering
786.40
800,000,000 Total 8,000.00
SHARE CAPITAL
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--- page 385 ---
ASSUMPTIONS
The above table assumes that the Global Offering becomes unconditional and the Shares are
issued pursuant to the Global Offering. The above does not take into account any Shares which
may be issued pursuant to the Over-allotment Option, the Share Option Schemes, or any Shares
which may be issued or repurchased by our Company pursuant to the general mandates granted
to our Directors to issue or repurchase Shares as described below.
RANKING
The Offer Shares are ordinary shares in the share capital of our Company and rank equally
with all ordinary shares currently in issue or to be issued and, in particular, will rank in full for
all dividends or other distributions declared, made or paid on the ordinary shares in respect of a
record date which falls after the date of this prospectus (other than the Capitalization Issue).
CAPITALIZATION ISSUE
Pursuant to the resolutions of our Shareholders passed on June 19, 2023, subject to and
conditional upon the share premium account of our Company being credited as a result of the
issue of Offer Shares pursuant to the Global Offering, our Directors were authorized to allot and
issue a total of 178,445,376 Shares credited as fully paid at par to the holders of Shares whose
names are entered on the principal register of members of the Company maintained in the
Cayman Islands prior to the Capitalization Issue (or as they may direct) in proportion to their
respective shareholdings by way of capitalization of the sum of approximately US$1,784.45
standing to the credit of the share premium account of our Company, and the Shares to be
allotted and issued pursuant to this resolution shall rank pari passu in all respects with the then
existing issued Shares.
CIRCUMSTANCES UNDER WHICH GENERAL MEETINGS AND CLASS MEETINGS
ARE REQUIRED
Pursuant to the Cayman Companies Act and the terms of our Memorandum and Articles of
Association, our Company may from time to time by ordinary resolution of shareholders (i)
increase its capital; (ii) consolidate and divide its Shares into Shares of larger amount; (iii)
divide its Shares into several classes; (iv) subdivide its Shares into Shares of smaller amount;
and (v) cancel any Shares which have not been taken. In addition, our Company may, subject to
the provisions of the Cayman Companies Act, reduce its capital or capital redemption reserve by
special resolution of shareholders. For details, please refer to the section headed “Summary of
the constitution of our Company and the Cayman Companies Act – 2. Articles of Association –
2.1 Shares – (c) Alteration of capital” in Appendix IV to this prospectus.
SHARE CAPITAL
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Pursuant to the Cayman Companies Act and the terms of our Memorandum and Articles of
Association, all or any of the special rights attached to the Share or any class of Shares may be
varied, modified or abrogated either with the consent in writing of the holders of not less than
three-fourths in nominal value of the issued Shares of that class or with the sanction of a special
resolution passed at a separate general meeting of the holders of the Shares of that class. For
details, please refer to the section headed “Summary of the constitution of our Company and the
Cayman Companies Act – 2. Articles of Association – 2.1 Shares – (b) Variation of rights of
existing shares or classes of shares” in Appendix IV to this prospectus.
Further, our Company will also hold general meetings from time to time as may be required
under the Articles of Association, a summary of which is set out in the section headed
“Summary of the Constitution of our Company and the Cayman Companies Act” in Appendix IV
to this Prospectus.
GENERAL MANDATE TO ISSUE AND REPURCHASE SHARES
Subject to the conditions in the section headed “Structure of the global Offering – The
Hong Kong Public Offering” in this prospectus, our Directors have been granted general
unconditional mandates to issue and repurchase our Shares.
For further details of these general mandate, please refer to the section headed “Statutory
and general Information – A. Further information about our Group – 3. Resolutions of our
Shareholders” in Appendix V to this prospectus.
SHARE OPTION SCHEMES
We have adopted the Pre-IPO Stock Incentive Plan and conditionally adopted the Post-IPO
Share Option Scheme, pursuant to which we have granted the Pre-IPO Share Options and may
grant Options under the Post-IPO Share Option Scheme to eligible directors, officers and
employees of our Group. The principle terms of the Share Option Schemes are summarized in
the section headed “Statutory and general Information – D. Share Option Schemes” in Appendix
V to this prospectus.
SHARE CAPITAL
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You should read the following discussion and analysis of our financial condition and
results of operations in conjunction with our consolidated financial information, including the
notes thereto, included in the Accountant’ s Report in Appendix I to this Prospectus which
have been prepared in accordance with HKFRS. You should read the whole of the
Accountant’ s Report included in Appendix I to the prospectus and not only rely merely on the
information contained in this section.
The following discussion and analysis contain forward-looking statements that involve
risks and uncertainties and that reflect our current views with respect to future events and
financial performance. These statements are based on our assumptions and analysis in light
of our experiences and perception of historical trends, current conditions and expected future
developments, as well as other factors we believe are appropriate under the circumstances.
However , whether actual outcomes and developments will meet our expectations and
predictions depends on a number of risks and uncertainties, many of which we cannot control
or foresee. Our actual results and timing of selected events could differ materially from those
anticipated in these forward-looking statements as a result of various factors, including but
not limited to, those set forth under “Risk factors” in this prospectus. In evaluating our
business, you should carefully consider all of the information provided in this prospectus,
including the sections headed “Risk factors” and “Business” in this prospectus.
For the purpose of this section, unless the context otherwise requires, references to
2019, 2020, 2021 and 2022 refer to our financial years ended December 31 of such years.
Unless the context otherwise requires, financial information described in this section is
described on a consolidated basis.
OVERVIEW
Our business operations consist of two segments, namely (i) new retail segment, which we
primarily develop and sell health management products and skincare products, and (ii) IP
creation and operation segment, which we create unique celebrity IPs by providing planning and
other project management services to media contents, acting as event planning service provider
and/or investor in large-scale concerts featuring celebrities and other events, together with
designing and licensing of proprietary celebrity IPs. Each segment can be a source of revenue of
its own, while our IP creation and operation segment can also create a synergy effect by acting
as one of our marketing tools to promote our new retail products and empowered us to become a
new retail operator in China with a focus on the sales of health management and skincare
products through various channels, including primarily social e-commerce channel such as
WeChat. For instance, our J-Style Trip season one had empowered the sale of our MODONG
coffee and we promoted healthy eating and lifestyle through Livestreaming sessions of Mr. Liu
Keng-hung and/or Ms. Vivi Wang.
Our business operation comprises several aspects including product development, IP
creation and operation, marketing and promotion. During the Track Record Period, our main
products included health management and skincare products. During the Track Record Period,
FINANCIAL INFORMATION
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we achieved rapid growth in our new retail operations, a majority of which was attributable to
the sales of MODONG coffee, which we started to distribute nationwide in April 2019. We also
provide IP creation and operation services such as IP creations, media content creation, and
event planning, through which we created bespoke brands and associated IP contents which in
turn empower our new retail business. Our product branding, distribution network and consumer
procurement are empowered by our proprietary celebrity IPs and IP-oriented reality shows and
events, including a portfolio of various forms of proprietary IPs, such as ChouMate and J-Style
Trip season one which were centered around Mr. Jay Chou. Furthermore, as part of our IP
creation and operation services, we produce various TV and online programs which also assisted
in the promotion of our new retail operations. For example, we placed discrete product
placements in J-Style Trip season one, together with the television advertisements accompanying
the commercial breaks of J-Style Trip season one when being aired in Zhejiang Satellite TV
from March to June 2020. Since 2021, we have diversified our portfolio of celebrities and
expand our IP portfolio by creating IPs that are related to other celebrities. For example, we
were involved in the planning and creation of a popular music talk show, namely You Can Run
But You Can’ t Hide (ᆀʘ ) that was centered around Mr. Harlem Yu and a variety show
that was centered around Mr. Liu Keng-hung. We also expanded into the provision of celebrity
IP management services since we commenced cooperation with Mr. Liu Keng-hung in late 2021
and successfully boosted our revenue from IP creation and operation business and empowered
the sale of our new products, such as Matcha powder, in 2022.
We considered that our business growth during the Track Record Period was mainly
attributable to our ability in (a) product development; (b) IP creation and operation; (c)
diversified marketing and promotion strategies and activities; (d) building and maintenance of
distribution networks; and (e) our management’s experience and capability in using the strengths
of our Group’s different business components in an effective and efficient manner to create
synergy effect.
For the years ended December 31, 2019, 2020, 2021 and 2022, our revenue was RMB86.6
million, RMB456.9 million, RMB365.3 million and RMB344.2 million, respectively,
representing a CAGR of approximately 58.4%.
We recorded net profit of RMB22.7 million, RMB75.6 million, RMB42.9 million and
RMB64.9 million for the years ended December 31, 2019, 2020, 2021 and 2022, respectively,
representing a CAGR of approximately 41.9%.
BASIS OF PREPARATION
The Historical Financial Information of the Company has been prepared in accordance with
Hong Kong Financial Reporting Standards (“ HKFRS ”) issued by Hong Kong Institute of
Certified Public Accountants (“ HKICPA ”) are set out below. The Historical Financial
Information has been prepared on a historical cost basis unless otherwise stated.
The preparation of financial statements in conformity with HKFRSs requires the use of
certain critical accounting estimates. It also requires management to exercise its judgment in the
FINANCIAL INFORMATION
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process of applying our accounting policies. The areas involving a higher degree of judgment or
complexity, or areas where assumptions and estimates are significant to the consolidated
financial statements are disclosed in Note 4 to the Accountant’s Report in Appendix I to this
prospectus.
All relevant standards, amendments and interpretations to the existing standards that are
effective during the Track Record Period have been adopted by us consistently throughout the
Track Record Period, including HKFRS 9 Financial Instruments (“ HKFRS 9 ”), HKFRS 15
Revenue from Contracts with Customers (“ HKFRS 15 ”) and HKFRS 16 Leases (“ HKFRS 16 ”).
KEY FACTORS AFFECTING OUR RESULTS OF OPERATIONS
Our results of operations have been and will continue to be affected by a number of factors,
some of which are beyond our control, including those factors set out in the section headed
“Risk factors” in this prospectus and those set out below. Accordingly, our historical financial
results may not be indicative of our future performance and our management’s assessment of our
prospects. The key factors affecting our results of operations include, among other factors, the
following:
Development and popularity of e-commerce in China and in our target markets
Driven by the growth of the internet, broadband, personal computer, mobile penetration and
the development of fulfillment, payment and other ancillary services associated with online
purchases, e-commerce is rapidly rising in significance in China. China’s social e-commerce
industry has experienced substantial growth over the past few years in terms of GMV , growing
from RMB691.2 billion in 2017 to RMB4,816.2 billion in 2022, with a CAGR of 47.4%. It is
expected to keep growing at a CAGR of 13.4%, reaching RMB9,039.5 billion by 2027. On the
other hand, the total online retail sales value in China, reached approximately RMB13.8 trillion
in 2022 from RMB7.2 trillion in 2017 and is expected to further grow at a CAGR of 10.0% to
RMB22.2 trillion by 2027. The growing number of online shoppers has made online
marketplaces and other e-commerce channels popular retail platforms for brands. The growth of
our business depends on the development and popularity of e-commerce and the continued
expansion in the size of e-commerce.
Levels of per capita disposable income and consumer spending in China and in our target
markets
Consumer spending power has been rising in China and in our other target markets in Asia.
The growth of the e-commerce market in these markets depends on the continued increase in
consumption. From 2017 to 2022, the per capita disposable income in China increased from
RMB25,974 to RMB36,883, at a CAGR of 7.3%. The improved consumption level has led to a
boost in consumers’ demand for unique and differentiated commodities. IP-related commodities
can convey a special emotion links between consumers and IPs through such commodities,
which are able to satisfy consumers’ taste for unique and differentiated commodities and are
expected to be welcomed by Chinese consumers. As a number of IPs are derived from
FINANCIAL INFORMATION
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pan-entertainment content, the prosperity of China’s pan-entertainment is expected to facilitate
the growth of China’s IP creation and operation industry. From 2017 to 2022, the per capita
spending on education, culture and entertainment in China has increased steadily from
RMB2,086 to RMB2,469, at a CAGR of 3.4%. The growing demand for entertainment
consumption in China is expected to further facilitate the growth of pan-entertainment industry
in China, and therefore drives the development of IP creation and operation industry.
Supportive measures implemented by the PRC government in relation to the sustainable
development of social e-commerce
Social e-commerce business has been growing rapidly and became increasingly prosperous
during recent years in China and PRC government has been more proactive in encouraging
innovation to develop new business models, such as social e-commerce. Furthermore, in order to
distinguish social e-commerce from pyramid selling, the Standing Committee of Kunshan
Municipal People’s Congress had introduced supportive measures to establish pilot zone in
Kunshan as the first city for the sustainable development of social e-commerce, which our
Directors believe is one of the major future new business models. It is expected that the
government support will provide a strong growth basis and will drive the future development of
social e-commerce industry in China.
Our ability to launch new product and celebrity IPs
Our ability to successfully develop and launch new products and introduce popular
celebrity IPs when appropriate is critical to our success, and in particular to our ability to
attract, engage and retain customers, which is key to our continued net revenue growth. During
the Track Record Period, a substantial portion of our revenue was generated from the sale of
MODONG coffee since its nationwide launch in April 2019. Leveraging our success in the
launch of MODONG coffee, we have been expanding our product offerings and introduced other
health management products, such as MODONG probiotics lyophilized powder, MODONG herb
beverage, Matcha powder and MODONG light brewed coffee.
We have also introduced various celebrity and other IPs which were used for empowerment
of the sale of our products. We designed and developed the ChouMate nijigen which is instantly
recognizable as artistical personifications of Mr. Jay Chou and market a variety of products,
including MODONG coffee, in association with the ChouMate nijigen, which are well received
by the consumers. We have also launched nijigen related to Mr. Liu Keng-hung (i.e. Coach Liu
(ᄎ઺ᇖ)), and Ms. Vivi Wang, which are used in the promotion of our products. In addition, we
also designed a portfolio of other bespoke IPs, such as Chaxiaojie (঩ʃ֎) and Dr .mg (ᅙЄ௹
ɻ), for our various product lines, which provide us with creative and operational control in the
manner and content of production promotion.
Having a broad, attractive and updated product mix, together with our popular IPs, helps to
maintain the popularity of our brands, increases consumer loyalty and encourages customer
purchases. We expect to continue to develop and launch new products and create celebrity and
other IPs to respond to the latest industry trends and customer feedbacks.
FINANCIAL INFORMATION
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Our ability to manage and continue to expand our distribution network
We generate a substantial portion of our revenues from product sales through our
distribution network. We established a distribution network of our distributors who further
established and expanded the distribution by sale of the sub-distributors procured by them,
thereby expanding the consumer reach of our products. Some of our distributors and
sub-distributors further developed into KOCs of our products and actively promote our products
among their PDT through word-of-mouth by invoking their personal experience and exerting
their personal influence over their followers.
We expanded our distribution network significantly for the sales of our products under the
new retail business during the Track Record Period. As of December 31, 2022, we had
approximately 742 distributors and 16,044 sub-distributors in China. For the years ended
December 31, 2019, 2020, 2021 and 2022, our revenue generated from distributors through the
Distribution Agent Assisted Distribution Model and general distribution model amounted to
RMB80.8 million, RMB362.4 million, RMB291.7 million and RMB199.4 million, respectively.
Our future growth will depend on our ability to manage and continue to expand our distribution
network.
Effectiveness of our marketing strategies
Our results of operations also depend on our ability to attract and retain consumers at
reasonable marketing expenses. We created bespoke brands and marketing our products through
the empowerment by our unique celebrity IPs and associated contents. For example, we place
advertisement and product placement in TV program to promote our products. We select
distributors with PDT influence potential and turn them into KOC with the purpose to promote
our products and brand awareness. Our close cooperation with such KOCs provides us with
valuable insights into the impact which these KOCs have on our targeted consumers, and helps
us to improve marketing efficiency and effectiveness.
Our marketing expenses and efficiency are also expected to be further improved with our
continued rollout of company channels on WeChat, other major e-commerce and social media
platforms. Thus, we foster long-term loyalty beyond the point of purchase, promote repeat
purchases and increase customer lifetime value in a cost-efficient manner. Moreover, our
engagement in different channels and platforms helps to effectively market our brands and
products by promoting stronger customer engagement and stickiness through cross-channel
integration.
Relationship with Hengmei Group
During the Track Record Period, we generated a substantial portion of our revenue from the
sales of MODONG coffee. We officially launched MODONG coffee nationwide in April 2019.
For the years ended December 31, 2019, 2020, 2021 and 2022, the sales of MODONG coffee
accounted for 83.0%, 72.8%, 62.3% and 43.8% of our total revenue, respectively.
FINANCIAL INFORMATION
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The formula of MODONG coffee was co-developed by us and Hengmei Group, which is
currently our sole supplier for the product. Hengmei Group is in possession of the technology
know-hows for the purpose of manufacturing the product. We also rely on Hengmei Group to
procure the raw materials and ingredients of MODONG coffee. Maintaining our relationship with
Hengmei Group is important to maintain a timely and adequate supply of MODONG coffee. Any
material adverse change in our relationship with Hengmei Group or other factors affecting the
supply of MODONG coffee could negatively impact our results of operations and financial
condition. Please refer to the section headed “Risk factors – Risk relating to our business and
industry – Our business operations could be negatively impacted by our reliance on the sole
supplier to produce MODONG coffee” in this prospectus.
The following tables demonstrate the impact of the hypothetical fluctuation in cost of
goods sold under our cost of revenue on our profit before income tax for the years indicated
below, assuming that all other factors remain unchanged:
Impact of a change in cost of goods sold under our cost of revenue
For the year ended December 31,
2019 2020 2021 2022
Changes in profit before income tax
(in RMB thousands)
(unaudited)
+/-20% (4,848)/4,848 (20,445)/20,445 (17,301)/17,301 (15,318)/15,318
+/-15% (3,636)/3,636 (15,333)/15,333 (12,976)/12,976 (11,489)/11,489
+/-10% (2,424)/2,424 (10,222)/10,222 (8,650)/8,650 (7,659)/7,659
Our ability to control our employee benefit expense
Employee benefit expense was one of the largest component of our selling and marketing
expenses and general and administrative expenses. During the years ended December 31, 2019,
2020, 2021 and 2022, our total employee benefit expense amounted to RMB9.1 million,
RMB23.9 million, RMB42.7 million and RMB51.5 million, respectively. The increase in
employee benefit expenses during the Track Record Period was mainly resulted from (i) the
increase in the number of our employees along our business growth; (ii) we recorded an
increasing trend for the average base salary of our employees during the Track Record Period;
and (iii) the payment of share-based compensation expenses accrued in 2020, 2021 and 2022 of
RMB1.8 million, RMB3.6 million and RMB2.2 million, respectively, in recognition of our
employees’ contribution to our business growth.
FINANCIAL INFORMATION
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Set forth below are details of the number of our employees as at each relevant year end during the Track Record Period, their average
salary and salary range (based on the basic salary as provided in their employment contracts):
As of December 31,
2019 2020 2021 2022
No. of
employees
Average
salary
(RMB)
Salary range
(RMB)
No. of
employees
Average
salary
(RMB)
Salary range
(RMB)
No. of
employees
Average
salary
(RMB)
Salary range
(RMB)
No. of
employees
Average
salary
(RMB)
Salary range
(RMB)
Senior management 3 25,667 12,000–35,000 6 22,650 18,667–41,667 7 62,459 25,333–83,333 7 67,675 40,000–86,957
Mid-level management 7 16,093 7,750–25,000 14 24,292 9,687–50,000 17 27,963 12,000–50,000 22 41,637 14,400–200,000
Other employees 58 8,127 2,575–25,000 130 8,680 1,913–20,000 166 10,023 2,522–30,000 221 10,481 1,200–30,400
Total/Overall 68 9,721 2,575–35,000 150 10,696 1,913–50,000 190 13,560 2,522–83,333 250 14,859 1,200–200,000
On April 1, 2022, we entered into an employment contract with Ms. Vivi Wang pursuant to which she was employed as our Sale and
marketing director at a monthly salary of RMB200,000. For details of our cooperation with Ms. Vivi Wang, please refer to the section
headed “Cooperation with celebrities – Cooperation with Mr. Liu Keng-hung and Ms. Vivi Wang” in this prospectus.
FINANCIAL INFORMATION
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The following tables demonstrate the impact of the hypothetical fluctuation in our
employee benefit expenses on our profit before income tax for the years indicated below,
assuming that all other factors remain unchanged:
Impact of change in employee benefit expense
For the year ended December 31,
2019 2020 2021 2022
Changes in profit before income tax
(in RMB thousands)
(unaudited)
+/-20% (1,815)/1,815 (4,771)/4,771 (8,546)/8,546 (10,300)/10,300
+/-15% (1,361)/1,361 (3,578)/3,578 (6,410)/6,410 (7,725)/7,725
+/-10% (907)/907 (2,386)/2,386 (4,273)/4,273 (5,150)/5,150
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Some of our accounting policies require us to apply estimates and assumptions as well as
complex judgments relating to accounting items. The estimates and assumptions we use and the
judgments we make in applying our accounting policies have a significant impact on our
financial position and results of operations. Our management continually evaluates such
estimates, assumptions and judgments based on past experiences and other factors, including
industry practices and expectations of future events that are believed to be reasonable under the
circumstances. There has not been any material deviation between our management’s estimates
or assumptions and the actual results, and we have not made any material changes to these
estimates or assumptions during the Track Record Period. We do not expect any material
changes in these estimates and assumptions in the foreseeable future.
Set forth below are discussions of the accounting policies that we believe are of critical
importance to us or involve the most significant estimates, assumptions and judgments used in
the preparation of our financial statements. Other significant accounting policies, estimates,
assumptions and judgments, which are important for understanding our financial condition and
results of operations, are set forth in details in Notes 2 and 4 to the Accountant’s Report in
Appendix I to this prospectus.
Revenue recognition
Revenue is recognized when or as the control of goods or services is transferred to the
customer. Depending on the terms of the contract and the laws that apply to the contract,
revenue may be recognized over time or at a point in time. Generally, there is no delay due to
time required for inspection and acceptance by the customers.
FINANCIAL INFORMATION
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Revenue from new retail business
Sales of health management and skincare products
Revenue from the sale of goods is recognized at the point in time when control of the asset
is transferred to the customer, generally upon the acceptance of the products.
We recognize revenue in an amount equal to the contract sales prices less value-added tax,
estimated sales allowances for sales returns and discount (i.e. volume discounts and incentives to
distributors, and sales volume based fees to the Selected Distributors). Estimated sales
allowances for sales returns and discount (i.e. volume discounts and incentives to distributors,
and sales volume based fees to the Selected Distributors) are made based on contract terms and
historical patterns.
We are regarded as the principal since in combination, that (a) we are the primary obligator
to provide the specified good or service to distributors; (b) we keep all the inventory risk and
are responsible for delivery of products; (c) we have discretion in establishing the pricing policy
for the health management and skincare products and pre-determine the discounts, incentives and
fees required to promote the sales. Thus, revenue from sales of goods is recognized on a gross
basis.
Revenue from IP creation and operation
Revenue from production of TV program
Where we undertook the role of investor for the production of TV programs, we either (i)
license the copyright and ancillary rights to such TV program to the customers for fixed fees in
a period of time in designated geographic region. Revenue is recognized at the point in time
upon delivery and acceptance of the product by the customer as control of the TV program is
transferred so that the customer can direct the use and obtain the associated benefits; or (ii) sell
the copyright and ancillary rights to such TV program to the customers in exchange for cash
consideration calculated based on an agreed mechanism, e.g. advertisement income for each
episodes in designated geographic region. This constitutes a variable consideration and such
revenue is only recognized to the extent that it is highly probable that there will be no
significant reversal when the uncertainty is resolved.
Revenue from production and licensing of entertainment videos
Our Group produces and licenses entertainment videos for customers’ specific events with
fixed considerations. Revenue is recognized when the videos are available to the customers,
generally on delivery of the videos when the customers are provided with rights to use the
videos.
FINANCIAL INFORMATION
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Revenue from event planning and management
Revenue from event planning and management where we undertook the role of concert or
Internet live broadcasting management, is recognized over the show or event period of a project
as customers have simultaneously received and consumed the benefits provided by our services.
Revenue is recognized using a straight-line basis over the term of the contract.
Licensing and royalty income
We license proprietary celebrity intellectual properties and created media content to third
parties. Any agreed upfront licensing fee is recognized on a straight-line basis over the period of
the license agreement. Royalty income from the licensing arrangements is recognized in
accordance with the terms of agreements.
Since we have the ability to determine the pricing of the TV programs and entertainment
videos licensing and the concerts or Internet live broadcasting, and negotiate the service terms,
and bear the relevant costs including the self-production costs of TV programs, entertainment
videos and concerts, and take responsibility for managing the licensed libraries, we are regarded
as the principal and recognize revenue from the above revenue streams on a gross basis and
recognize production costs and other applicable fulfillment costs as cost of revenue.
Celebrity IP management income
Revenue from celebrity IP management arises from the service fee earned us by managing
IP of certain celebrities and is recognized on a straight-line basis over the show or broadcasting
period. Considering that the celebrities whose IP currently is managed by us has the discretion
to determine the basis of performances measurement and the service prices in the contract with
advertisers and bear majority of the service costs, the Group is regarded as an agent in such an
arrangement and, therefore, recognizes revenue from celebrity IP management on a net basis.
Equity-settled share-based payment
The fair value of share options granted to employees is recognized as an employee benefits
expense with a corresponding increase in equity. The total amount to be expensed is determined
by reference to the fair value of the options granted, (i) including any market performance
conditions (such as the entity’s share price); (ii) excluding the impact of any service and
non-market performance vesting conditions (profitability, sales growth targets and remaining an
employee of the entity over a specified time period); and (iii) including the impact of any
non-vesting conditions (for instance, the requirement for employees to save or hold shares for a
specific period of time).
FINANCIAL INFORMATION
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The total expense is recognized over the vesting period, which is the period over which all
of the specified vesting conditions are to be satisfied. At the end of each period, the entity
revises its estimates of the number of options that are expected to vest based on the non-market
vesting and service conditions. It recognizes the impact of the revision to original estimates, if
any, in profit or loss, with a corresponding adjustment to equity. Information relating to the
scheme is set out in Note 2 to the Accountant’s Report included in Appendix I to this prospectus.
Intangible assets
Acquired software are capitalized on the basis of the costs incurred to acquire and bring to
use the specific software. These costs are amortized on a straight-line method over their
estimated useful lives of 10 years. Based on the current functionalities equipped by the acquired
computer software and our Group’s daily operation needs, our Group considers useful lives of 10
years are the best estimation under the current financial reporting needs.
TV program rights
TV program rights are stated at the lower of cost and net realizable value. Cost of TV
program rights under production includes all direct costs associated with the production of TV
program rights. TV program rights under production are transferred to “TV program rights
completed” upon completion of production. Net realizable value is the estimated selling price in
the ordinary course of business, less the applicable variable selling expense.
Critical accounting estimates and judgments
Estimates and judgments are continually evaluated and are based on historical experience
and other factors, including expectations of future events that are believed to be reasonable
under the circumstances.
We make estimates and assumptions concerning the future. The resulting accounting
estimates will, by definition, seldom equal the related actual results. The estimates and
assumptions that have a significant risk of causing a material adjustment to the carrying amounts
of assets and liabilities within the next financial year are discussed below.
Impairment of financial assets at amortized cost
Our management determines the provision for impairment of trade and other receivables
based on an assessment of the expected credit losses of these receivables. The assessment is
based on the historical loss experience, adjusted to reflect the effects of current market
conditions and forward-looking information, which requires the use of judgments and estimates.
Management reassesses the provision at each reporting date.
FINANCIAL INFORMATION
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Net realizable value of inventories
Net realizable value of inventories is the estimated selling price in the ordinary course of
business, less the applicable variable and selling expenses. These estimates are based on the
current market condition and the historical experience of manufacturing and selling products of
similar nature. It could change significantly as a result of changes in consumer preferences and
competitor actions in response to severe industry cycles. Management reassesses these
estimations by each statement of financial position date.
Net realizable value of TV program rights
Our management determines the impairment for the TV program rights with reference to
the estimated future economic benefits derived from the use of these assets. These estimates are
based on the current market condition and the historical experience of the economic benefits
derived from the assets of similar nature. We take into consideration both internal and external
market information, for example, the sales forecasts, sales and distribution costs budget and the
general economic condition of the relevant markets. Management reassesses these estimations by
each of the balance sheet date.
Current and deferred income taxes
We are subject to income taxes in the PRC and other jurisdictions. Judgment is required in
determining the provision for income taxes in each of these jurisdictions. There are transactions
and calculations during the ordinary course of business for which the ultimate tax determination
is uncertain. Where the final tax outcome of these matters is different from the amounts that
were initially recorded, such differences will impact the income tax and deferred income tax
provisions in the period in which such determination is made.
Deferred income tax assets relating to certain temporary differences and tax losses are
recognized when management considers it is probable that future taxable profits will be
available against which the temporary differences or tax losses can be utilized. When the
expectation is different from the original estimate, such differences will impact the recognition
of deferred income tax assets and taxation charges in the period in which such estimate is
changed.
Financial instrument with redemption rights
We issued ordinary Shares with redemption rights to a Pre-IPO Investor. The potential cash
payments relating to the redeemable rights are accounted for as a financial liability. The liability
is initially recognized at present value of the redemption amount, which is determined by the
management in accordance with the terms under the investment agreement. Significant
judgments and estimates are involved in making assumptions, including discount rates, in
determining the present value of the redemption amount.
FINANCIAL INFORMATION
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--- page 399 ---
SUMMARY OF FINANCIAL RESULTS
The following table sets forth our consolidated statement of comprehensive income for the
years indicated:
Y ear ended December 31,
2019 2020 2021 2022
(in RMB thousands)
Revenue 86,585 456,944 365,345 344,157
Cost of revenue (29,972) (224,155) (137,963) (121,329)
Gross profit 56,613 232,789 227,382 222,828
Selling and marketing expenses (14,393) (94,914) (93,809) (72,447)
General and administrative expenses (10,330) (31,563) (65,091) (64,094)
Reversal of/(provision for)
impairment losses on financial
assets 73 (4,452) 922 (745)
Other income 151 1,692 234 21,844
Other expenses – – – (5,798)
Other gains/(losses), net (114) 10,254 3,956 (9,553)
Operating profit 32,000 113,806 73,594 92,035
Finance income/(costs), net (160) 35 (8,942) 1,103
Profit before income tax 31,840 113,841 64,652 93,138
Income tax expense (9,121) (38,210) (21,761) (28,240)
Profit for the year 22,719 75,631 42,891 64,898
Profit attributable to:
– Owners of the Company 23,559 78,064 43,649 60,389
– Non-controlling interests (840) (2,433) (758) 4,509
22,719 75,631 42,891 64,898
FINANCIAL INFORMATION
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NON-HKFRS MEASURES
In order to supplement our consolidated statement of comprehensive income, which is
presented in accordance with HKFRS, we also use adjusted net profit (non-HKFRS measure) as
an additional financial measure, which is not required by, or presented in accordance with
HKFRS to evaluate our operating performance. We believe that these non-HKFRS measures help
identify underlying trends in our business and provide useful information to investors and others
in understanding and evaluating our results of operation. However, the use of adjusted net profit
(non-HKFRS measure) has material limitations as an analytical tool. When assessing our
operating and financial performance, you should not consider adjusted net profit (non-HKFRS
measure) in isolation from or as a substitute for any financial performance measure that is
calculated in accordance with HKFRS. The term “adjusted net profit (non-HKFRS measure)” is
not defined under HKFRS, and such term may not be comparable to other similarly named
measures used by other companies.
We define adjusted net profit (non-HKFRS measure) as net profit for the year adjusted by
adding back (i) listing expenses; (ii) share-based compensation expenses; and (iii) interest
expense on financial instrument with redemption rights.
The following table sets forth our adjusted net profit (non-HKFRS measure) in each
respective year during the Track Record Period:
Y ear ended December 31,
2019 2020 2021 2022
(in RMB thousands)
Profit for the year 22,719 75,631 42,891 64,898
Add:
Listing expenses (1) – 2,893 15,535 10,059
Share-based compensation
expenses (2) – 1,840 3,568 2,216
Interest expense on financial
instrument with redemption
rights
(3) – – 7,939 –
Adjusted net profit for the year
(non-HKFRS measure) 22,719 80,364 69,933 77,173
Notes:
(1) Our Listing expenses are arising from activities relating to the Listing.
(2) The share-based compensation expenses are non-cash in nature and were arising from the grant of share
options to Ms. Ma and certain employees of our Group.
(3) Our interest expense on financial instrument with redemption rights was arising from and relating to our
Pre-IPO Investments, which is non-cash in nature.
FINANCIAL INFORMATION
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We recorded an overall increasing trend in our revenue and adjusted net profit (non-HKFRS
measure) during the Track Record Period while achieving exceptionally high revenue in 2020.
We recorded adjusted net profit (non-HKFRS measure) of RMB69.9 million in 2021, that was
higher than that in 2019, but lower than the same in 2020, primarily due to the fact that our
sales of MODONG coffee was profoundly boosted by the airing of J-Style Trip season one in the
first half of 2020, which empowered the sales of MODONG coffee, in particular in the second
quarter of 2020. However, after the cessation of material promotional effect of J-Style Trip
season one since July 2020, the sales of MODONG coffee (i) remained at a sustainable level
since second half year of 2020 and throughout 2021 in general, and (ii) was significantly higher
than that in 2019. Our sales was slightly adversely affected in second half of 2021 as we, our
distributors and sub-distributors allocated our resources for the preparation of Listing in the
third quarter of 2021.
With respect to our IP creation and operation segment, despite the fact that there was a
decrease in revenue from 2020 to 2021 as we did not introduce or being involved in any event
planning and IP programs at a scale that were comparable to J-Style Trip season one in 2021, we
have a significant improvement in the gross profit from IP creation and operation business and
recorded a gross profit of RMB21.9 million in 2021, as compared to a gross loss of RMB21.7
million in 2020. We recorded a gross loss in our IP creation and operation business in 2020
mainly because of the cancellation of a number of advertisements due to COVID-19 pandemic at
the time when J-Style Trip season one was aired.
In 2021, we were unable to launch any events and programs that had a scale as comparable
to J-Style Trip season one as a result of the adverse impact caused by the outbreak of COVID-19
pandemic, including the implementation of various quarantine measures and traveling
restrictions. Our Directors believe this was one of the reasons leading to the fluctuation of the
revenue and our adjusted net profit (non-HKFRS measure) discussed above.
Our revenue decreased from RMB365.3 million for 2021 to RMB344.2 million for 2022
mainly due to the decrease in our revenue from the new retail business as a result of the
large-scale regional static management control measures imposed by the local government in
view of the Resurgence of the COVID-19 pandemic, in particular, our offline marketing
activities and the delivery of our products had been severely affected by the travel restrictions
imposed. Please refer to the section headed “Business – Impact of the outbreak of COVID-19 on
our business” in this prospectus for further details. Such decrease was partially offset by the
increase in our revenue from the IP creation and operation segment. Despite decrease in revenue
derived from new retail segment, we recorded an increase in revenue derived from IP creation
and operation segment mainly attributable to our expansion of our IP offerings in the IP creation
and operation segment during 2022. Our adjusted net profit (non-HKFRS measure) has increased
from RMB69.9 million for the year ended December 31, 2021 to RMB77.2 million for the year
ended December 31, 2022, which was primarily attributable to (i) the increase in our other
income from government grant and (ii) decrease in our selling and marketing expenses as a
result of the restrictions imposed by local government for the prevention of the pandemic.
FINANCIAL INFORMATION
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--- page 402 ---
DESCRIPTION OF MAJOR COMPONENTS OF OUR RESULTS OF OPERATIONS
Revenue
During the Track Record Period, we generated revenue from (i) product sales in our new
retail business; and (ii) IP creation and operation business. For the years ended December 31,
2019, 2020, 2021 and 2022, our revenue was RMB86.6 million, RMB456.9 million, RMB365.3
million and RMB344.2 million, respectively. During the Track Record Period, a substantial
portion of our revenue was generated from our new retail business. For the years ended
December 31, 2019, 2020, 2021 and 2022, our new retail business contributed revenue of
RMB80.8 million, RMB365.2 million, RMB301.4 million and RMB240.1 million, respectively,
representing 93.3%, 79.9%, 82.5% and 69.8% of our total revenue during the corresponding
periods. On the other hand, our IP creation and operation business generated revenue of RMB5.8
million, RMB91.8 million, RMB64.0 million and RMB104.1 million for the years ended
December 31, 2019, 2020, 2021 and 2022, respectively, representing 6.7%, 20.1%, 17.5% and
30.2% of our total revenue for the corresponding periods.
The table below sets forth our revenue breakdowns by segment for the years indicated:
Y ear ended December 31,
2019 2020 2021 2022
RMB’000 % RMB’000 % RMB’000 % RMB’000 %
New retail
Health management products 71,927 83.0 340,787 74.5 275,261 75.4 216,036 62.8
Skincare products 3,450 4.0 20,422 4.5 21,274 5.8 16,272 4.7
Others 5,420 6.3 3,966 0.9 4,860 1.3 7,791 2.3
Subtotal 80,797 93.3 365,175 79.9 301,395 82.5 240,099 69.8
IP creation and operation
IP content creation and
management 4,761 5.5 86,567 19.0 54,399 14.9 95,026 27.6
IP licensing and sales of related
products 1,027 1.2 5,202 1.1 9,551 2.6 9,032 2.6
Subtotal 5,788 6.7 91,769 20.1 63,950 17.5 104,058 30.2
Total 86,585 100.0 456,944 100.0 365,345 100.0 344,157 100.0
FINANCIAL INFORMATION
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Revenue from new retail business
For the years ended December 31, 2019, 2020, 2021 and 2022, our revenue generated from
new retail business was RMB80.8 million, RMB365.2 million, RMB301.4 million and
RMB240.1 million, representing 93.3%, 79.9%, 82.5% and 69.8% of our total revenue for the
same periods, respectively. Since 2019, our new retail business was boosted following the launch
of our MODONG coffee and other health management products. For the year ended December
31, 2019, 2020, 2021 and 2022, our sale of (i) health management products contributed to
revenue of RMB71.9 million, RMB340.8 million, RMB275.3 million and RMB216.0 million,
respectively; and (ii) skincare products contributed to revenue of RMB3.5 million, RMB20.4
million, RMB21.3 million and RMB16.3 million, respectively.
Revenue generated from our health management products
Set forth below is the breakdown of revenue from the sale of our health management
products by product type for the years indicated:
Y ear ended December 31,
2019 2020 2021 2022
RMB’000 % RMB’000 % RMB’000 % RMB’000 %
MODONG coffee (Note) 71,927 100.0 332,868 97.7 227,772 82.7 150,883 69.8
Molitone prebiotic gummy – – 7,919 2.3 2,475 0.9 67 0.0
MODONG probiotics lyophilized powder –––– 13,076 4.8 11,585 5.4
MODONG herb beverage –––– 14,185 5.2 5,829 2.7
Matcha powder –––––– 24,049 11.1
MODONG light brewed coffee –––––– 8,628 4.0
Others –––– 17,753 6.4 14,995 7.0
Total 71,927 100.0 340,787 100.0 275,261 100.0 216,036 100.0
Note: The sale of our MODONG coffee also included revenue allocated to certain ancillary products which were
sold to our consumers as a bundle with MODONG coffee such as effervescent tablets, coffee cups and
body fat scale.
Since its launch in April 2019, MODONG coffee has been one of the key products under
our health management products. During the years ended December 31, 2019, 2020, 2021 and
2022, our sale revenue from MODONG coffee amounted to RMB71.9 million, RMB332.9
million, RMB227.8 million and RMB150.9 million, respectively, representing 83.0%, 72.8%,
62.3% and 43.8% of our total revenue in the corresponding periods. Since 2020, we have been
developing various health management products as supplements to the low-carb diet, including
the Molitone prebiotic gummy, MODONG probiotics lyophilized powder and MODONG herb
beverage, all of which were primarily sold through Kunshan Tingshe. Since 2021, we have also
launched other new health management products such as Dr . INYOU series, Matcha powder,
FINANCIAL INFORMATION
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MODONG light brewed coffee and MODONG MCT coffee. We have generated revenue of
RMB45.0 million and RMB65.1 million for the year ended December 31, 2021 and 2022,
respectively from health management products that were newly launched since 2021. For details
of our health management products, please refer to the section headed “Business – Our business
– New retail business – Health management products” in this prospectus. With our effort in
expanding our product offerings, sale revenue attributable to MODONG coffee had been
gradually reduced from 83.0% of our total revenue for the year ended December 31, 2019 to
43.8% of our total revenue for the year ended December 31, 2022.
Revenue, sales volume, and average selling prices of MODONG coffee
The table below sets forth the revenue, sales volume, and average selling price of
MODONG coffee for the years indicated:
Y ear ended December 31,
2019 2020 2021 2022
Sales revenue (RMB’000) 71,927 332,868 227,772 150,883
Sales volume (boxes)
(in thousand) 632 3,315 2,133 1,381
Average selling price
(RMB per box) 114 100 107 109
(i) Revenue and sales volume of MODONG coffee
We officially launched MODONG coffee nationwide in April 2019. Sales volume of
MODONG coffee was 632,000 boxes, 3.3 million boxes, 2.1 million boxes and 1.4 million boxes
for the years ended December 31, 2019, 2020, 2021 and 2022, respectively. Sales revenue of
MODONG coffee was RMB71.9 million, RMB332.9 million, RMB227.8 million and RMB150.9
million for the years ended December 31, 2019, 2020, 2021 and 2022, respectively, accounted
for 83.0%, 72.8%, 62.3% and 43.8% of our total revenue in the same periods.
In 2020, we recorded increasing sales revenue and volume of our MODONG coffee,
primarily due to the celebrity IP branding effect empowered by our proprietary celebrity IP
imprinted in J-Style Trip season one, where MODONG coffee was mentioned to be the brand
sponsoring the show and the product itself appeared in the program frequently through product
placement, and thus enabling us to (i) enhance the value and enrich the content of our products;
(ii) attract and enlarge the fan base of our proprietary celebrity IPs to our products; and (iii)
create emotion linkage and resonance between our proprietary celebrities IPs and its fan base.
FINANCIAL INFORMATION
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Our Directors also consider promoting our products in association with our proprietary
celebrity IPs would have positive influence and effectiveness on our sales and increase product
recognition. Furthermore, the use of proprietary celebrity IPs allow our distributors to increase
their interaction with potential consumers as they can share their product feedback and opinion
in their social media account.
Our Directors are of the view that the use of proprietary celebrity IP branding in
advertising make the advertisement more noticeable to consumers, as they stand out from the
media clutter.
Together with our celebrity IP empowerment strategy, we have also placed discrete product
placements in J-Style Trip season one, together with the television advertisements accompanying
the commercial breaks of J-Style Trip season one when being aired in Zhejiang Satellite TV
from March to June 2020.
As a result of these efforts, we recorded an increase of sales volume of MODONG coffee
from 632,000 boxes for the year ended December 31, 2019 to 3.3 million boxes for the year
ended December 31, 2020 and hence resulted in an increase of sales revenue of MODONG
coffee from RMB71.9 million for the year ended December 31, 2019 to RMB332.9 million for
the year ended December 31, 2020. Our Directors consider the primary reason for such increase
in sales volume (as well as the sales revenue) are directly related to the empowerment by our
proprietary celebrity IPs and IP-oriented reality shows and programs (such as J-Style Trip season
one).
Relying on the solid customer foundation, strong distribution networks and the market
presence established through the branding effect empowered by our celebrity IPs in 2020, our
MODONG coffee recorded a sale volume of 2.1 million boxes and sale revenue of RMB227.8
million for the year ended December 31, 2021, despite the cessation of material promotional
effect of J-Style Trip season one since July 2020 and the fact that we have substantially reduced
the utilization of empowerment of Mr. Jay Chou-related IPs in the sale of our MODONG coffee
in 2021. The sale performance of our MODONG coffee in 2021 showed that we are able to
maintain our sale at a sustainable level after the cessation of material promotional effect of
J-Style Trip season one since July 2020 and we reduced to use celebrity IP empowerment, in
particular, in view of the fact that the sale of our MODONG coffee in 2021 was significantly
higher than the previous level in 2019 before the empowerment by Mr. Jay Chou’s celebrity IP
took effect. The sale volume of our MODONG coffee decreased from 2.1 million boxes in the
year ended December 31, 2021 to 1.4 million boxes in the year ended December 31, 2022
mainly due to the Resurgence of the COVID-19 pandemic and the related control measures
imposed by the local government. Nevertheless, we expect that our sale would gradually recover
following the relaxation of the restrictive measures in Yangtze River Delta area and nearby
regions. For details, please refer to the section headed “Business – Impact of the outbreak of
COVID-19 on our business” in this prospectus.
FINANCIAL INFORMATION
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(ii) Average selling price of MODONG coffee
The average selling price of MODONG coffee is calculated based on our revenue
recognized for the sale of our MODONG coffee (i.e. after netting off with (i) various
volume-based discounts and incentives given to our distributors; and (ii) volume-based fees
given to the Selected Distributors selected by Kunshan Tingshe as they are considered as
payments to customers under HKFRS 15). For more details regarding the revenue recognition in
respect of our sale of MODONG coffee, please refer to the section headed “Distribution
arrangement with Kunshan Tingshe – Pricing Arrangement and Discounts, Incentives and Fees in
relation to the sales of Kunshan Tingshe Distributed Products” in this prospectus.
Our average selling price per box of MODONG coffee decreased from RMB114 per box for
the year ended December 31, 2019 to RMB100 per box for the year ended December 31, 2020,
primarily due to (i) the commencement of payment of sales volume based fees to the Selected
Distributors starting from 2020 to assist Kunshan Tingshe to promote the sales of MODONG
coffee and expanding the distribution network; and (ii) more volume discount given to our
distributors for meeting certain purchase targets as pre-determined by us.
The average selling price per box of MODONG coffee increased from RMB100 per box for
the year ended December 31, 2020 to RMB107 per box for the year ended December 31, 2021,
primarily because the volume discounts and incentives offered to our distributors and the sales
volume based fees to the Selected Distributors in 2021 were lower as compared with those of
2020 primarily resulted from the decrease in sale volume of our MODONG coffee in 2021.
The average selling price per box of MODONG coffee increased from RMB107 per box for
the year ended December 31, 2021 to RMB109 per box for the year ended December 31, 2022,
primarily attributable to the decrease in the sales volume based fees to the Selected Distributors
due to a lower completion rate of the purchase targets pre-determined by us.
Sales revenue from skincare products
Sales revenue of our skincare products was RMB3.5 million, RMB20.4 million, RMB21.3
million and RMB16.3 million for the years ended December 31, 2019, 2020, 2021 and 2022,
respectively, which accounted for 4.0%, 4.5%, 5.8% and 4.7% of our total revenue in the same
periods.
FINANCIAL INFORMATION
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Our sale revenue from skincare products increased from RMB3.5 million for the year ended
December 31, 2019 to RMB20.4 million for the year ended December 31, 2020 mainly
attributable to (i) the increase in the sale of LA DEW Facial Mask in 2020; and (ii) the sale of
our products under the Dr .mg sub-brand during its soft launch in 2020. Our sale revenue from
LA DEW skincare series further increased from RMB20.4 million for the year ended December
31, 2020 to RMB21.3 million for the year ended December 31, 2021, primarily attributable to
sale generated from products under the Dr .mg sub-brand which was officially launched in 2021.
Such increase in sales was partially offset by the decrease in sale of LA DEW Facial Mask which
would be gradually discontinued and replaced by new products to be launched by us.
The sale revenue of our skincare products decreased to RMB16.3 million for the year ended
December 31, 2022, which was mainly due to the decline in the revenue contribution through
Shouwang Xingguang, our Distribution Agent of skincare products, as a result of the Resurgence
where various restriction imposed on social activities and operation of logistics and delivery.
Distribution channels of our new retail business
During the Track Record Period, we primarily distribute our products under the new retail
business through (i) Distribution Agent Assisted Distribution Model; (ii) general distribution
model; and (iii) other e-commerce channels. For details of our distribution channels, please refer
to the section headed “Business – Distribution network” in this prospectus.
Set forth below is the breakdown of revenue from the sale of our new retail business by
distribution channels for the years indicated:
Y ear ended December 31,
2019 2020 2021 2022
RMB’000 % RMB’000 % RMB’000 % RMB’000 %
Distribution Agent Assisted Distribution
Model
– through Kunshan Tingshe 71,894 89.0 340,773 93.3 254,347 84.4 167,663 69.8
– through other
Distribution Agents
(Note a) –––– 12,647 4.2 2,142 0.9
Subtotal 71,894 89.0 340,773 93.3 266,994 88.6 169,805 70.7
General distribution
model (Note b) 8,870 11.0 21,636 5.9 24,716 8.2 29,642 12.4
Other e-commerce channels 33 0.0 2,766 0.8 9,685 3.2 40,652 16.9
Total 80,797 100.0 365,175 100.0 301,395 100.0 240,099 100.0
FINANCIAL INFORMATION
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--- page 408 ---
Notes:
(a) During the years ended December 31, 2021 and 2022, we also generated revenue from sale of products
under Dr .mg sub-brand under the Distribution Agent Assisted Distribution Model primarily through
Shouwang Xingguang as our Distribution Agent.
(b) During the Track Record Period, distributors managed by Kunshan Tingshe have purchased certain other
products other than the Kunshan Tingshe Distributed Products. The relevant sale amounted to RMB2.8
million, RMB21.6 million, RMB10.3 million and RMB24.8 million in the year ended December 31, 2019,
2020, 2021 and 2022, respectively, and the revenue was classified under general distribution model.
(i) Distribution Agent Assisted Distribution Model
During the Track Record Period, we generated a substantial part of our revenue from the
new retail business through the Distribution Agent Assisted Distribution Model. In particular,
our revenue of RMB71.9 million, RMB340.8 million, RMB267.0 million and RMB169.8 million
was generated from sales through the Distribution Agent Assisted Distribution Model for the
year ended December 31, 2019, 2020, 2021 and 2022, respectively, representing 89.0%, 93.3%,
88.6% and 70.7% of our total revenue from our new retail business in the corresponding year.
Under the Distribution Agent Assisted Distribution Model, Distribution Agents are treated
as our agents and our revenue from the relevant sales were based on the selling price of our
products from the Distribution Agents to the downstream distributors, after deducting all
relevant volume discounts, incentives and sales volume based fees payable by the Distribution
Agents to the downstream distributors, which were considered as payments to our customers
under HKFRS 15. Please refer to the section headed “Distribution arrangement with Kunshan
Tingshe – Background leading to our distribution arrangement with Kunshan Tingshe –
Relationship from accounting perspectives”.
(ii) Sale revenue generated from Kunshan Tingshe
Kunshan Tingshe is our largest Distribution Agent. For the years ended December 31, 2019,
2020, 2021 and 2022, our revenue from sale through Kunshan Tingshe under the Distribution
Agent Assisted Distribution Model amounted to RMB71.9 million, RMB340.8 million,
RMB254.3 million and RMB167.7 million, respectively, representing 83.0%, 74.6%, 69.6% and
48.7% of our total revenue for the corresponding year.
During the Track Record Period, we sold a substantial portion of our health management
products, including our MODONG coffee, Molitone prebiotic gummy, MODONG herb beverage
and MODONG probiotics lyophilized powder (i.e. the Kunshan Tingshe Distributed Products)
through Kunshan Tingshe under the Distribution Agent Assisted Distribution Model. Our revenue
recognized under the relevant sale was derived from the gross revenue of our products (based on
Kunshan Tingshe’s unit selling price to our distributors), after deducting (i) volume discounts
and incentives to distributors; and (ii) sales volume based fees to the Selected Distributors. For
details, please refer to the section headed “Distribution arrangement with Kunshan Tingshe –
Pricing arrangement and discounts, incentives and fees in relation to the sales of Kunshan
Tingshe Distributed Products” in this prospectus.
FINANCIAL INFORMATION
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--- page 409 ---
Set forth below is the breakdown of our gross revenue from the sale of Kunshan Tingshe
Distributed Products and reconciliation between the gross revenue and our revenue recognized
by us:
Y ear ended December 31,
2019 2020 2021 2022
(in RMB thousands)
Gross revenue (Note 1)
MODONG coffee 90,319 457,052 297,693 199,387
Molitone prebiotic gummy – 10,874 2,757 57
MODONG herb beverage – – 15,549 15,375
MODONG probiotics lyophilized
powder – – 15,442 7,738
Total gross revenue 90,319 467,926 331,441 222,557
V olume discounts and incentives to
distributors
(Note 2) (18,425) (111,893) (72,425) (52,673)
Sales volume based fees to the
Selected Distributors
(Note 3) – (15,260) (4,669) (2,221)
Our revenue from the Kunshan
Tingshe Distributed Products
(Note 4) 71,894 340,773 254,347 167,663
Notes:
(1) The gross revenue were determined based on Kunshan Tingshe’s unit selling price to our distributors of the
relevant products.
(2) Details of the volume discounts and incentives to distributors are set out in the section headed “
Distribution arrangement with Kunshan Tingshe – Pricing arrangement and discounts, incentives and fees
in relation to the sales of Kunshan Tingshe Distributed Products – Discount, incentives and fees to
distributors and Li Ting – 1.1”.
(3) Details of the sales volume based fees to the Selected Distributors are set out in the section headed
Distribution arrangement with Kunshan Tingshe – Pricing arrangement and discounts, incentives and fees
in relation to the sales of Kunshan Tingshe Distributed Products – Discount, incentives and fees to
distributors and Li Ting – 1.2”.
(4) Represent our revenue recognized from the sale of Kunshan Tingshe Distributed Products through Kunshan
Tingshe.
FINANCIAL INFORMATION
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--- page 410 ---
During the Track Record Period, distributors managed by Kunshan Tingshe have also
purchased products other than the Kunshan Tingshe Distributed Products for, inter alia,
promotion of the sale of the Kunshan Tingshe Distributed Products by placing orders on the
Ordering System. Despite that the distributors would make such purchases through Kunshan
Tingshe, no discounts, incentives or fees would be payable to Kunshan Tingshe for the relevant
sales and Kunshan Tingshe was not acting as the Distribution Agent in the relevant sales. The
relevant sale amounted to RMB2.8 million, RMB21.6 million, RMB10.3 million and RMB24.8
million in the year ended December 31, 2019, 2020 and 2021 and 2022, respectively, and the
revenue was classified under general distribution model. Our total revenue attributable to sales
through Kunshan Tingshe, including the sale under the general distribution model, amounted to
RMB74.7 million, RMB362.4 million, RMB264.6 million and RMB192.5 million for the year
ended December 31, 2019, 2020, 2021 and 2022, respectively.
We have endeavored to diversify our distribution channels by introducing sales through the
general distribution model and other e-commerce channels. For details, please refer to the
section headed “Business – Distribution network” in this prospectus.
(iii) Sale through general distribution model
During the Track Record Period, we also sold certain health management and skincare
products through our network of distributors and sub-distributors without engagement of a
Distribution Agent. Apart from the sale to the distributors managed by Kunshan Tingshe, under
the general distribution model, our products were directly sold to the distributors, who would
further sell our products to end consumers through various online and offline channels. For the
year ended December 31, 2019, 2020, 2021 and 2022, we generated revenue of RMB8.9 million,
RMB21.6 million, RMB24.7 million and RMB29.6 million, respectively, through the general
distribution model. For details of our other distributors under the general distribution model,
please refer to the section headed “Business – Distribution network – General distribution
model” in this prospectus.
(iv) Sale through other e-commerce channels
During the Track Record Period, we have been expanding our distribution channels to
various e-commerce channels, including our Star Plus 4U App (Ꮄ፯ ) and our stores on
third party online platforms such as our Tmall stores, Kuaishou stores and Douyin stores. In
particular, we have expanded our distribution channels to sale through E-commerce
Livestreaming sessions on Douyin since December 2021 in view of the impacts of the
Resurgence on the conduct of offline marketing activities. During the Track Record Period, our
revenue generated from sales through other e-commerce channels witnessed an increasing trend
amounting to RMB33,000, RMB2.8 million, RMB9.7 million and RMB40.7 million for the years
ended December 31, 2019, 2020, 2021 and 2022, respectively. Please also refer to the section
headed “Business – Distribution network – Distribution through other e-commerce channels –
Other e-commerce channels” in this prospectus for further details.
FINANCIAL INFORMATION
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Revenue from IP creation and operation business
For the years ended December 31, 2019, 2020, 2021 and 2022, our revenue generated from
IP creation and operation business was RMB5.8 million, RMB91.8 million, RMB64.0 million
and RMB104.1 million, representing 6.7%, 20.1%, 17.5% and 30.2% of our total revenue for the
same periods, respectively. Our IP creation and operation business could be further subdivided
into (i) IP content creation and management; and (ii) IP licensing and sales of related products.
Revenue from IP content creation and management
During the Track Record Period, our revenue generated from IP content creation and
management primarily included advertisement income, licensing fees and/or service fees arising
from TV and online programs initiated and created by us, service fees generated from project
planning services provided to large scale concerts and other events, and income from celebrity
IP management. Revenue from this business segment was RMB4.8 million, RMB86.6 million,
RMB54.4 million and RMB95.0 million for the years ended December 31, 2019, 2020, 2021 and
2022, respectively, which accounted for 5.5%, 19.0%, 14.9% and 27.6% of our total revenue in
the same periods.
In 2019, we recorded revenue of RMB4.8 million from IP content creation and management
which was mainly attributable to our services as a planning service provider for Zhanjiang
Superstar Concert held in August 2019. In 2020, we recorded a significant amount of revenue
resulting from the airing of J-Style Trip season one on Zhejiang Satellite TV and Netflix. For the
year ended December 31, 2020, we recorded revenue of RMB81.6 million from the airing of
J-Style Trip season one which mainly consisted of (i) the licensing fees received from Zhejiang
Satellite TV and Netflix during 2020 for the airing of J-Style Trip season one; and (ii)
advertisement income received from Zhejiang Satellite TV resulting from the airing of J-Style
Trip season one on their platform. We also generated service fee from the planning of the
Ningbo Superstar Performance Mega Night in 2020.
In 2021, our revenue from IP content creation and management decreased to RMB54.4
million mainly because (i) we have generated a significant amount of revenue from the airing of
J-Style Trip season one in 2020; and (ii) the schedule of events and/or production of IP program
have been affected by the COVID-19 pandemic and the related control measures. In addition, we
have been expanding our IP content creation and management business through cooperating with
different platforms. Our revenue from IP content creation and management during the year ended
December 31, 2021 was mainly generated from service fees for the planning and creation of (i) a
music talk show, namely You Can Run But You Can’ t Hide (ᆀʘ )o n Kuaishou ; (ii)
performances at a music award ceremony organized by a leading music streaming service
provider in the PRC; and (iii) performances at variety shows that were streamed on various
online platforms, including a leading video sharing and streaming platform in the PRC. We
consider that, by leveraging on established business relationship, we would be able to further
develop our IP content creation and management business through deeper cooperation with the
leading online platforms.
FINANCIAL INFORMATION
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--- page 412 ---
Our revenue from IP content creation and management has increased from RMB54.4
million for the year ended December 31, 2021 to RMB95.0 million for the year ended December
31, 2022. Such increase was mainly attributable to the revenue generated from (i) certain IP
programs, including two World-Cup related music and variety programs, a promotional video for
J-Style Trip season two and the new music album of Mr. Jay Chou and an online music show
centered around Mr. Jay Chou; and (ii) our cooperation with Mr. Liu Keng-hung through Talent
Planet. For details of our cooperation with Mr. Liu Keng-hung, please refer to the section
headed “Cooperation with celebrities – Cooperation with Mr. Liu Keng-hung and Ms. Vivi Wang
– Cooperation under our IP creation and operation business – Cooperation in respect of events
and IP programs of Mr. Liu Keng-hung” in this prospectus. We recognized our revenue from our
cooperation with Mr. Liu Keng-hung was derived after deducting, from the total amount of fees
to be received from brand owners or the MCN Company (as the case may be), the profit share of
the relevant business partners, including but not limited to, channel providers, Mr. Liu
Keng-hung and W&V . During the year ended December 31, 2022, we cooperated with the MCN
Company in the event planning and IP program associated with Mr. Liu Keng-hung on certain
designated online platforms, under which we were entitled to sharing of the sponsorship amounts
from brand owners on agreed rates. For details of the cooperation arrangement, please refer to
the section headed “Cooperation with celebrities – Cooperation with Mr. Liu Keng-hung and Ms.
Vivi Wang – Cooperation under our IP creation and operation business – Cooperation in respect
of events and IP programs of Mr. Liu Keng-hung” in this prospectus.
Revenue from IP licensing and sales of related products
In addition to IP content creation and management, we also generated revenue from
licensing of our IPs and sale of related products. Since 2019, we have licensed the ChouMate IP
to certain entities including banks and toy companies, and designed offline IP operation plans
around ChouMate as well as sell other accessories products.
For the year ended December 31, 2019, 2020, 2021 and the 2022, we generated revenue of
RMB1.0 million, RMB5.2 million, RMB9.6 million, and RMB9.0 million, respectively, from IP
licensing and sales of related products which accounted for 1.2%, 1.1%, 2.6% and 2.6% of our
total revenue in the same periods. Our revenue from IP licensing and sales of related products
increased during the Track Record Period mainly because (i) we have licensed the ChouMate IP
to increasing number of companies for the use in their business; and (ii) the sale of ChouMate
accessories and related products had increased.
FINANCIAL INFORMATION
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--- page 413 ---
Cost of revenue
For the years ended December 31, 2019, 2020, 2021 and 2022, our cost of revenue was
RMB30.0 million, RMB224.2 million, RMB138.0 million and RMB121.3 million, respectively.
The following table sets forth the major components of our cost of revenue for the years
indicated:
Y ear ended December 31,
2019 2020 2021 2022
(in RMB thousands)
Cost of goods sold 24,239 102,223 86,504 76,590
Cost of event planning and
management services 3,901 5,414 36,311 29,529
Transportation and logistics expense 818 2,242 6,238 5,039
Costs of TV program rights – 106,024 – –
Other tax and surcharges 742 3,273 2,374 2,008
Provision for impairment of
inventories – 3,029 6,189 6,725
Others 272 1,950 347 1,438
Total 29,972 224,155 137,963 121,329
Cost of goods sold
Costs of revenue from new retail business consisted primarily of cost of goods sold, which
was the cost paid to third-party manufacturers and other suppliers for the production of our
products. Cost of goods sold was RMB24.2 million, RMB102.2 million, RMB86.5 million and
RMB76.6 million for the years ended December 31, 2019, 2020, 2021 and 2022 respectively,
which accounted for 80.9%, 45.6%, 62.7% and 63.1% of our total cost of revenue in the same
periods. The fluctuation in cost of goods sold was mainly attributable to the fluctuation in our
sale of MODONG coffee, which was the major products under our new retail business during the
Track Record Period.
FINANCIAL INFORMATION
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--- page 414 ---
Cost of event planning and management services
Cost of event planning and management services was primarily attributable to the cost paid
to performers, artist agencies and/or other suppliers in relation to the concerts, event or
programs for which we acted as a planning service provider. For the years ended December 31,
2019, 2020, 2021 and 2022, we mainly acted as a planning service provider for one, one, six and
seven concerts, events or programs, respectively. For the year ended December 31, 2022, our
cost of event planning and management services mainly included (i) fees to service providers in
relation to the IP events and programs associated with our cooperation with Mr. Liu Keng-hung
and Mr. Jay Chou; and (ii) the monthly service fees to W&V for artiste management services
provided in relation to Mr. Liu Keng-hung.
Cost of TV program rights
Our TV program rights are recognized as our costs during the period the relevant programs
are released through distribution channels. Costs of TV program rights for the year ended
December 31, 2020 was primarily attributable to J-Style Trip season one, which was first aired
in March 2020 and completed in June 2020. As we did not launch other TV program during
other year during the Track Record Period, we did not record any costs of TV program rights in
the relevant year.
Provision for impairment of inventories
For the year ended December 31, 2020, 2021 and 2022, we recorded provision for
impairment of inventories of RMB3.0 million, RMB6.2 million and RMB6.7 million,
respectively, which was mainly related to our inventories of certain non-core products, including
children educational gadgets namely Maji Doggie ( ʃ௦Λ)( “ Maji Doggie ”) and beauty
treatment equipment. The relevant products were launched by us in 2018 when we initially
tapped into the new retail business on a trial basis. The sale of these products had been
adversely affected by the COVID-19 pandemic as (i) their prices were relatively high as
compared to our other products; and (ii) the target customers of the beauty treatment equipment
were mainly beauty salons, the operation of which had been materially affected by the pandemic.
As we consider that (i) the sale of these products would continue to be affected by the pandemic
in the near future; and (ii) the target consumers of these products were not in line with our
current distribution network, we decided to make full provisions for the inventories of the
relevant products for the year ended December 31, 2022. In addition, we have made provision
for impairment of inventories for certain raw materials and finished goods of our health
management and skincare products during the year ended December 31, 2022. As at December
31, 2022, all the provision of impairment of inventories had been fully written-off. Please refer
to the paragraph headed “– Discussion of certain key items of consolidated statement of
financial position – Inventories” in this section for further details for the write-off of our
provision.
FINANCIAL INFORMATION
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--- page 415 ---
Gross profit and gross profit margin
The table below sets forth our gross profit and gross profit margin by business segment for
the years indicated:
Y ear ended December 31,
2019 2020 2021 2022
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 %
New retail
Health management
products 51,111 71.1 242,166 71.1 197,177 71.6 140,192 64.9
Skincare products 1,424 41.3 14,381 70.4 13,970 65.7 9,815 60.3
Others
(Note) 2,601 48.0 (2,059) (51.9) (5,677) (116.8) 739 9.5
Subtotal 55,136 68.2 254,488 69.7 205,470 68.2 150,746 62.8
IP creation and operation
IP content creation and
management 1,290 27.1 (24,011) (27.7) 18,222 33.5 65,497 68.9
IP licensing and sales of
related products 187 18.2 2,312 44.4 3,690 38.6 6,585 72.9
Subtotal 1,477 25.5 (21,699) (23.6) 21,912 34.3 72,082 69.3
Total 56,613 65.4 232,789 50.9 227,382 62.2 222,828 64.7
Note: Others represent our gross profit/(loss) and gross profit/(loss) margin of the sale of our non-core products,
mainly including Maji Doggie (a children educational gadget), beauty treatment equipment and air purifier.
We recorded gross loss from the sale of other products for the year ended December 31, 2020 and 2021
mainly due to the provision for impairment in respect of inventories of certain non-core products. For
details, please refer to the paragraph headed “– Description of major components of our results of
operations – Cost of revenue – Provision for impairment of inventories” in this section above.
FINANCIAL INFORMATION
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--- page 416 ---
Our gross profit was RMB56.6 million, RMB232.8 million, RMB227.4 million and
RMB222.8 million for the years ended December 31, 2019, 2020, 2021 and 2022, respectively.
Our gross profit margin was 65.4%, 50.9%, 62.2% and 64.7% in the same periods, respectively.
Our gross profit increased from RMB56.6 million for 2019 to RMB232.8 million for 2020
primarily due to the increase of gross profit generated from the sale of our MODONG coffee. We
recorded a decrease in the gross profit margin from 65.4% in 2019 to 50.9% in 2020 primarily
because we recorded a gross loss for our IP creation and operation business which was
negatively impacted by COVID-19 in 2020. Our gross profit decreased from RMB232.8 million
in 2020 to RMB227.4 million in 2021 mainly due to the decrease in the sale of our MODONG
coffee. Our gross profit margin increased from 50.9% in 2020 to 62.2% in 2021, mainly due to
the improvement in the gross profit margin of our IP creation and operation services. Our gross
profit decreased from RMB227.4 million for the year ended December 31, 2021 to RMB222.8
million for the year ended December 31, 2022, which was mainly due to the decrease in our
gross profit from the new retail business, as partially offset by the increase in our gross profit
from the IP creation and operation business. Our gross profit margin increased from 62.2% for
the year ended December 31, 2021 to 64.7% for the year ended December 31, 2022, which was
mainly attributable to the increase in the gross profit margin of our IP creation and operation
business.
New retail business
Our gross profit for new retail business was RMB55.1 million, RMB254.5 million,
RMB205.5 million and RMB150.7 million for the years ended December 31, 2019, 2020, 2021
and 2022, respectively. Our gross profit margin was 68.2%, 69.7%, 68.2% and 62.8% in the
same periods, respectively.
Gross profit and gross profit margin of health management products
We officially launched MODONG coffee and Molitone prebiotic gummy nationwide in April
2019 and April 2020, respectively. In 2021, with a view to expand our product offerings, we
further launched various health management products including the MODONG herb beverage
and MODONG probiotics lyophilized powder. Our gross profit for health management products
was RMB51.1 million, RMB242.2 million, RMB197.2 million and RMB140.2 million for the
years ended December 31, 2019, 2020, 2021 and 2022, respectively. The gross profit of our
health management products demonstrated a similar trend as the revenue. The gross profit
margin of our health management products remained relatively stable at 71.1%, 71.1% and
71.6% for the years ended December 31, 2019, 2020 and 2021, respectively. The gross profit
margin of our health management products decreased to 64.9% for the year ended December 31,
2022 mainly due to the decrease in the revenue contribution of MODONG coffee which has a
relatively higher gross profit margin than other health management products.
FINANCIAL INFORMATION
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--- page 417 ---
Gross profit and gross profit margin of skincare products
Our gross profit for skincare products was RMB1.4 million, RMB14.4 million, RMB14.0
million and RMB9.8 million for the years ended December 31, 2019, 2020, 2021 and 2022,
respectively. Our gross profit margin was 41.3%, 70.4%, 65.7% and 60.3% in the same periods,
respectively.
We recorded an increase in our gross profit for skincare products from 2019 to 2020
because, with the airing of J-Style Trip season one on various viewing platforms such as
Zhejiang Satellite TV and Netflix in March 2020, less operational and marketing resources
would have to be placed into MODONG coffee given the airing J-Style Trip season one has
directly empowered the sales volume of MODONG coffee during the relevant period by creating
a promotional effect. As a result, we were able to divert the excess resources into the marketing
of skincare products, and this resulted in an increase in the sales revenue of skincare products in
2020. Moreover, by this stage, we have obtained a more thorough understanding of the market
and therefore we decided to focus on selling products that has a relative higher gross profit
margin during 2020. As a result, our gross profit margin for the year ended December 31, 2020
increased to 70.4%.
For the year ended December 31, 2021, our gross profit from skincare products remained
relatively stable at RMB14.0 million, as compared to that of 2020. The gross profit margin of
our skincare products decreased from 70.4% in the year ended December 31, 2020 to 65.7% in
the year ended December 31, 2021, primarily due to the launch of certain new products in 2021
with lower gross profit margin.
Our gross profit from skincare products decreased from RMB14.0 million for the year
ended December 31, 2021 to RMB9.8 million for the year ended December 31, 2022. The gross
profit margin of our skincare products also decreased from 65.7% for the year ended December,
2021 to 60.3% for the year ended December 31, 2022. Such decrease was mainly due to (i) the
decrease in the average price of our skincare products arising from marketing activities
conducted by us, including the offer of bulk-purchase discounts and the provision of samples
and gifts, in view of the weak market sentiment during the year ended December 31, 2022; and
(ii) our provision made for impairment for certain, inter alias, raw materials and finished goods
of our skincare products during the year ended December 31, 2022.
Gross profit and gross profit margin of other products
We recorded gross profit from the sale of other products of RMB2.6 million and RMB0.7
million for the year ended December 31, 2019 and 2022, respectively with a gross profit margin
of 48.0% and 9.5%, respectively. For the year ended December 31, 2020 and 2021, we recorded
gross loss of RMB2.1 million and RMB5.7 million respectively, from our sale of our other
products, primarily due to the provision of impairment for inventories of RMB3.0 million and
RMB6.2 million recorded in the corresponding periods, in connection with certain slow-moving
products which were our non-core products. For details of our provision for impairment for
FINANCIAL INFORMATION
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--- page 418 ---
inventories, please refer to the paragraph headed “– Description of major components of our
results of operations – Cost of revenue – Provision for impairment of inventories” in this section
above.
Gross profit and gross profit margin of IP creation and operation business
We recorded gross profit for IP creation and operation business of RMB1.5 million,
RMB21.9 million and RMB72.1 million for the years ended December 31, 2019, 2021 and 2022,
respectively. Our gross profit margin was 25.5%, 34.3% and 69.3% in the same periods,
respectively. For the year ended December 31, 2020, we have recorded a gross loss of RMB21.7
million primarily due to the gross loss we recorded in connection with J-Style Trip season one.
Gross profit and gross profit margin of IP content creation and management
In the year ended December 31, 2019, we generated a gross profit of RMB1.3 million, with
a gross profit margin of 27.1%, from our provision of planning services for Zhanjiang Superstar
Concert. For the year ended December 31, 2020, we have recorded a gross loss of RMB24.0
million as compared to gross profit of RMB1.3 million for the year ended December 31, 2019,
primarily attributable to the uncertain economic conditions resulting from COVID-19 during the
period of airing J-Style Trip season one in March 2020 in Zhejiang Satellite TV . Given the
uncertain economic conditions during the relevant period, there was a cancellation of a number
of advertisements in and between the shows as a result of the general negative impact of
COVID-19 at the time, and ultimately resulted in a significant decrease in the relevant
advertisement fees received by us.
For the year ended December 31, 2021, we recorded a gross profit of RMB18.2 million and
gross profit margin of 33.5% for our IP content creation and management business. This is
primarily attributable to the service fees we received from organizing (i) the music talk show of
You Can Run But You Can’ t Hide (ᆀʘ ), which was aired on Kuaishou during the
Chinese New Year in 2021; (ii) the performances in a music event organized by a leading music
streaming service provider in the PRC; and (iii) variety shows that were streamed on various
online platforms.
Our gross profit from IP content creation and management increased from RMB18.2 million
for the year ended December 31, 2021 to RMB65.5 million for the year ended December 31,
2022, which was mainly attributable to our service fees from organizing and planning of a
variety show broadcast and Livestreaming sessions on a leading short videos platform in the
PRC, as well as revenue generated from our cooperation with Mr. Liu Keng-hung. For details of
our cooperation, please refer to the section headed “Cooperation with celebrities – Cooperation
with Mr. Liu Keng-hung and Ms. Vivi Wang” in this prospectus. Our gross profit margin from IP
content creation and management also increased from 33.5% for the year ended December 31,
2021 to 68.9% for the year ended December 31, 2022, mainly because our revenue from the
cooperation with Mr. Liu Keng-hung was recorded on a net basis, after deducting the fees
payable to the MCN Company, W&V and/or Mr. Liu Keng-hung. Please refer to the paragraph
headed “Description of major components of our results of operations – Revenue – Revenue
from IP creation and operation business” in this section.
FINANCIAL INFORMATION
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--- page 419 ---
Gross profit and gross profit margin of IP licensing and sales of related products
Our gross profit for IP licensing and sales of related products, such as ChouMate and other
accessories products was RMB187,000, RMB2.3 million, RMB3.7 million and RMB6.6 million
for the years ended December 31, 2019, 2020, 2021 and 2022, respectively. Our gross profit
margin was 18.2%, 44.4%, 38.6% and 72.9% in the same periods, respectively. We recorded an
increase in gross profit and gross profit margin for the year ended December 31, 2022 mainly
due to (i) the increase in the revenue contribution from licensing fee which had a comparatively
higher gross profit margin; and (ii) the decrease in the revenue contribution from sale of IP
related products which had a relatively lower gross profit margin.
Selling and marketing expenses
The table below sets forth a breakdown of the components of our selling and marketing
expenses for the years indicated:
Y ear ended December 31,
2019 2020 2021 2022
RMB’000 % RMB’000 % RMB’000 % RMB’000 %
Advertising and marketing
expenses 4,423 30.7 41,517 43.7 35,462 37.8 17,571 24.3
Commissions 3,290 22.9 38,026 40.1 40,122 42.8 32,309 44.6
Employee benefit expenses 3,993 27.7 10,748 11.3 14,970 16.0 19,328 26.7
Traveling and entertainment
expenses 1,107 7.7 2,079 2.2 1,845 2.0 1,771 2.4
Office expenses 517 3.6 847 0.9 328 0.3 757 1.0
Others 1,063 7.4 1,697 1.8 1,082 1.1 711 1.0
14,393 100.0 94,914 100.0 93,809 100.0 72,447 100.0
For the years ended December 31, 2019, 2020, 2021 and 2022, our selling and marketing
expenses amounted to RMB14.4 million, RMB94.9 million, RMB93.8 million and RMB72.4
million, which accounted for 16.6%, 20.8%, 25.7% and 21.1% of our total revenue for the same
periods, respectively. The significant increase in selling and marketing expenses during the three
years ended December 31, 2021 was primarily due to the increase in advertising and marketing
expenses, commissions, and employee benefit expenses, which was in line with our business
expansion and development. Our selling and marketing expenses decreased from RMB93.8
million for the year ended December 31, 2021 to RMB72.4 million for the year ended December
31, 2022 mainly due to the decrease in our advertising and marketing expenses and
commissions. For details, please refer to the paragraph headed “– Description of major
components of our results of operations – Selling and marketing expenses – Advertising and
marketing expenses” in this section below.
FINANCIAL INFORMATION
– 409 –


--- page 420 ---
Our selling and marketing expenses primarily include:
 advertising and marketing expenses , which mainly consisted of TV sponsorship,
advertisement and marketing, expenses for providing trial samples and packaged gifts,
expenses for hosting events, conferences, meetings and training workshops for our
distributors. Please refer to the below paragraph headed “– Advertising and marketing
expenses” for further details for our advertising and marketing expenses;
 commissions , which mainly consisted of Service Fee to Li Ting, Remaining Balance of
the Fixed Mark-up to cover other operating costs of Kunshan Tingshe, Additional
Incentive Fee to Kunshan Tingshe and commissions to celebrities and KOLs. For
details, please refer to the paragraph headed “– Commission” below;
 employee benefit expenses , which mainly consisted of wages, social security costs,
housing benefits and compensation expenses paid to our sales and marketing staff;
 traveling and entertainment expenses , which mainly consisted of disbursement
incurred in connection with the sales and marketing activities;
 office expenses , which mainly consist of decorations, refurbishments, and daily
maintenance; and
 others , such as daily operating expenses.
Advertising and marketing expenses
The following table sets forth the breakdown of advertising and marketing expenses for the
years indicated:
Y ear ended December 31,
2019 2020 2021 2022
RMB’000 % RMB’000 % RMB’000 % RMB’000 %
TV sponsorship,
advertisement and
marketing
(Note 1) 1,404 31.7 14,135 34.0 5,669 16.0 8,131 46.3
Trial samples and packaged
gifts (Note 2) – – 7,181 17.3 9,374 26.4 3,686 21.0
Events and trainings (Note 3) 1,469 33.3 11,440 27.6 14,472 40.8 4,301 24.5
Concert sponsorship fees – – 3,532 8.5 ––––
Spokesperson fees 1,067 24.1 1,045 2.5 771 2.2 – –
Others
(Note 4) 483 10.9 4,184 10.1 5,176 14.6 1,453 8.2
4,423 100.0 41,517 100.0 35,462 100.0 17,571 100.0
FINANCIAL INFORMATION
– 410 –


--- page 421 ---
Notes:
1. Our expenses on TV sponsorship, advertisement and marketing mainly included fees paid to advertisement
agencies and service providers for advertisement production and organizing promotion campaigns in
respect of our products, including our marketing fees incurred for (i) the placement of TV advertisement
and product placement of our MODONG coffee in a TV program on Zhejiang Satellite TV , namely The
Journey of Poetic Soul ( ᒔϞ་ձჃ˙ ) in the amount of RMB9.4 million and RMB1.9 million for 2020
and 2021, respectively; (ii) the placement of TV advertisement for MODONG coffee during the airing time
of The Shape of Culture season 2 (ຬԢԐఊᕣ 2) in the amount of RMB314,000 and RMB1.6 million for
2021 and 2022, respectively; (iii) service fees for the operation of the MODONG health ( ᚭঋ਄ੰ ) APP,
which was used in a promotion campaign of the Group, in the amount of RMB2.1 million and RMB3.5
million for 2020 and 2021, respectively; and (iv) service fees paid to Kunshan Huaxing mainly for the
operation of Star Plus 4U (Ꮄ፯ ) App in the amount of RMB3.4 million during 2022.
2. We provided trial samples and packaged gifts to existing and potential distributors, sub-distributors and
consumers as part of our promotion activities. As the provision of trial samples and packaged gifts was
mainly for the promotion of our products and our brand, the relevant expenses were borne by our Group
instead of Kunshan Tingshe.
3. Our expenses on event and training mainly included our fees incurred in the hosting of our annual events,
conferences, meetings and trainings relating to our branding and products among our distributors,
sub-distributors and/or other business partners, including but not limited to expenses on transportation,
venue and accommodations for the relevant events, for the purpose of, among other things, promoting and
enhancing our brand awareness. Such expenses were mainly attributable to (i) hosting of our annual
events, conference tours and other large-size events, including (a) our annual event in Ningbo and
conference tour in Chengdu during 2020 in the amount of RMB5.5 million and RMB3.6 million,
respectively; (b) our four-day annual event in Ocean Flower Island and conference tour in Xi’an and
Qinghai during 2021 in the amount of RMB7.0 million and 5.1 million, respectively; and (c) conference
tour in Xishuangbanna and Changxing during 2022 in the amount of RMB1.5 million and RMB2.1 million,
respectively. The above events were for, among other things, the promotion of our brand’s awareness and
foster brand loyalty among our distributors, during which we may announce our business plans such as
upcoming IP programs or events and launch of new products; and (ii) payment to a service provider in the
amount of RMB2.4 million and RMB1.9 million for 2020 and 2021, respectively, for the provision of
trainings on our corporate culture, knowledge and theory of low-carb diet, the features, usage and
ingredients of our products and how consumption of our products can be implemented to daily lives to
maximize the effect thereof etc. For details, please refer to the section headed “Business – Marketing
initiatives – Promotion and marketing activities”.
4. Others mainly included our expenses in relation to the promotion and marketing of our brand and/or our
products, such as fees to external service provider for the production of promotional videos and materials
and planning of marketing activities. Such expenses increased in 2020 and 2021 mainly due to the
expansion of our business scale and product offerings.
We recorded advertising and marketing expenses of RMB4.4 million, RMB41.5 million,
RMB35.5 million and RMB17.6 million for the years ended December 31, 2019, 2020, 2021 and
2022, respectively.
FINANCIAL INFORMATION
–4 1 1–


--- page 422 ---
Since the disposal of Kunshan Tingshe in May 2020, the marketing and promotion activities
conducted by our Group have mainly focused on the promotion of our brand and products;
whereas Kunshan Tingshe has mainly conducted marketing and promotion activities for the
development of the distribution network. Such arrangement is in line with the respective roles
and responsibilities of our Group and Kunshan Tingshe in respect of the sale of the Kunshan
Tingshe Distributed Products, with our Group focusing on the development of products and
Kunshan Tingshe being responsible for the development and day-to-day management of the
distribution network. For details of the marketing and promotion activities and training activities
respectively conducted by us and Kunshan Tingshe, please refer to the section headed
“Distribution arrangement with Kunshan Tingshe – Roles and responsibilities of our Group,
Kunshan Tingshe and Kunshan Jiameng” in this prospectus.
For the year ended December 31, 2020, our advertising marketing expenses increased
significantly by RMB37.1 million from RMB4.4 million in 2019 to RMB41.5 million in 2020.
Such increase was mainly attributable to:
(i) increase in our expenses on TV sponsorship, advertisement and marketing activities
from RMB1.4 million in 2019 to RMB14.1 million in 2020, primarily included (a)
marketing fees to a marketing agency service provider (the “ Marketing Agency ”) for
the placement of TV advertisement and product placement of our MODONG coffee in
a TV program on Zhejiang Satellite TV , namely The Journey of Poetic Soul (ᒔϞ་ձ
Ⴣ˙), in the amount of RMB9.4 million. For details of our cooperation with the
Marketing Agency, please refer to the paragraph headed “– Description of major
components of our results of operations – Selling and marketing expenses –
Advertising and marketing expenses – Our cooperation with the Marketing Agency” in
this section below; and (b) service fees paid to Kunshan Huaxing in the amount of
RMB2.1 million for the operation of the MODONG health ( ᚭঋ਄ੰ ) APP, which was
used in a promotion campaign of the Group; and
(ii) increase in our expenses on events and trainings from RMB1.5 million in 2019 to
RMB11.4 million in 2020 as a result of the significant increase in the number of our
distributors and sub-distributors, primarily attributable to (a) expenses on the hosting
of our annual event in Ningbo in January 2020 in the amount of RMB5.5 million; (b)
expenses on organizing a distributors’ conference in Chengdu in August 2020 in the
amount of RMB3.6 million; and (c) payment to a service provider in the amount of
RMB2.4 million for the provision of trainings to our distributors.
FINANCIAL INFORMATION
– 412 –


--- page 423 ---
Our advertising and marketing expenses decreased from RMB41.5 million in 2020 to
RMB35.5 million in 2021, which was primarily due to (i) the decrease of our expenses on TV
sponsorship, advertisement and marketing activities from RMB14.1 million in 2020 to RMB5.7
million in 2021; and (ii) the fact that we did not incur any concert sponsorship fees as we have
not planned any concert in 2021. Such decrease was partially offset by (a) the increase in our
expenses on events and trainings from RMB11.4 million in 2020 to RMB14.5 million in 2021
which was mainly attributable to our expenses incurred on the hosing of a four-day annual event
held in Ocean Flower Island in April 2021, including expenses on transportation, venue,
accommodation and stage production, in the amount of RMB7.0 million; and (b) the increase in
expenses for providing trial samples and packaged gifts by RMB2.2 million for the promotion of
our new retail business on various sales channels.
Our advertising and marketing expenses decreased significantly from RMB35.5 million in
the year ended December 31, 2021 to RMB17.6 million in the year ended December 31, 2022
mainly attributable to (i) the decrease in our expenses on events and trainings by RMB10.2
million; and (ii) the decrease in expenses on trial samples and packaged gifts by RMB5.7
million as our offline marketing activities were materially affected by control measures imposed
by the local government due to the Resurgence of the COVID-19 pandemic.
Our cooperation with the Marketing Agency
During the Track Record Period, we engaged the Marketing Agency for the placement of
advertisements of our products primarily through TV channels. For the years ended December
31, 2020, 2021 and 2022, our advertising and marketing expenses attributable to the Marketing
Agency amounted to RMB9.4 million, RMB2.2 million and RMB1.6 million, respectively. To the
best knowledge and information of our Director, the Marketing Agency is a designated
marketing agent of certain online media platforms and TV channels. Our Directors are of the
view that it is a common market practice for media platforms and/or TV channels to appoint or
designate one or more marketing agent(s) to arrange for placement and production of
advertisements to be placed on their platforms or channels. Please also refer to the paragraph
headed “– Description of certain key items of consolidated statement of financial position –
Trade and other receivables – Other receivables – Deposits” in this section below for further
discussion on the balance of our deposit to the Marketing Agency as of December 31, 2022.
FINANCIAL INFORMATION
– 413 –


--- page 424 ---
Commissions
The following table sets forth the breakdown of commissions for the years indicated:
Y ear ended December 31,
2019 2020 2021 2022
(in RMB thousands)
Commissions to Kunshan Tingshe
Remaining Balance of the Fixed
Mark-up
– Service Fee to Li Ting (1) 3,290 17,957 12,913 7,389
– To cover other operating costs of
Kunshan Tingshe (1)(3) – 8,404 25,779 15,595
Additional Incentive
Fee to Kunshan Tingshe (2)(3) – 11,665 – –
Sub-total 3,290 38,026 38,692 22,984
Commissions to other Distribution
Agents – – 1,430 753
Commissions to celebrities and
KOLs (4) – – – 8,572
3,290 38,026 40,122 32,309
Notes:
1. As mentioned in the section headed “Distribution arrangement with Kunshan Tingshe – Pricing
arrangement and discounts, incentives and fees in relation to the sales of Kunshan Tingshe Distributed
Products – Discount, incentives and fees to distributors and Li Ting”, the Remaining Balance of the Fixed
Mark-up was used to cover operating costs of Kunshan Tingshe including Service Fee to Li Ting.
2. It represented the sales incentives to Kunshan Tingshe. For details, please refer to the section headed “
Distribution arrangement with Kunshan Tingshe – Pricing arrangement and discounts, incentives and fees
in relation to the sales of Kunshan Tingshe Distributed Products – Additional incentive fees to Kunshan
Tingshe”.
3. Remaining Balance of Fixed Mark-up to cover other operating costs of Kunshan Tingshe of RMB9.1
million and RMB9.9 million for 2019 and the five months ended May 31, 2020 respectively; and
Additional Incentive Fee to Kunshan Tingshe of RMB7.8 million for the five months ended May 31, 2020
were fully eliminated in our consolidated financial statements. For details, please refer to the section
headed “Distribution arrangement with Kunshan Tingshe – Pricing Arrangement and Discounts, Incentives
and Fees in relation to the Sales of Kunshan Tingshe Distributed Products”.
FINANCIAL INFORMATION
– 414 –


--- page 425 ---
4. Represented commissions to celebrities and/or KOLs for promotion of (i) the sales of our products on our
Douyin stores; and (ii) the sales of other products on our Douyin account. For details, please refer to the
section headed “Business – Distribution network – Distribution through other e-commerce channels –
Other e-commerce channels” in this prospectus”.
The significant increase in commission expense from RMB3.3 million in 2019 to RMB38.0
million in 2020 was primarily due to the fact that: (i) the Service Fee to Li Ting increased from
RMB3.3 million in 2019 to RMB18.0 million in 2020 as a result of the increase in sales volume
of MODONG coffee; (ii) the sales incentive scheme with Kunshan Tingshe since 2020 to further
motivate Kunshan Tingshe for the sales of MODONG coffee, leading to Additional Incentive Fee
to Kunshan Tingshe of RMB11.7 million; and (iii) Remaining Balance of the Fixed Mark-up to
cover other operating costs of Kunshan Tingshe as expense of RMB8.4 million since the disposal
of Kunshan Tingshe in May 2020.
Our commission expense further increased from RMB38.0 million from 2020 to RMB40.1
million in 2021, primarily due to the increase in the Remaining Balance of Fixed Mark-up to
cover other operating costs of Kunshan Tingshe by RMB17.4 million in 2021 as compared to
that of 2020. The increase in the Remaining Balance of Fixed Mark-up to cover other operating
costs of Kunshan Tingshe was mainly attributable to (i) the decrease in the sale of the MODONG
coffee in 2021, which resulted in decrease in the discounts and incentives to distributors and the
sales volume based fees to the Selected Distributors; and (ii) the amounts of the Remaining
Balance of Mark-up incurred prior to our disposal of Kunshan Tingshe in 2020 had been
eliminated in our consolidated financial statements for the year ended December 31, 2020, which
was partially offset by (i) the decrease in the Service Fee to Li Ting by RMB5.0 million resulted
from the decrease in the sale of MODONG coffee; and (ii) the decrease in Additional Incentive
Fee to Kunshan Tingshe by RMB11.7 million as the sale of MODONG coffee for the year ended
December 31, 2021 did not meet our prescribed target.
Our commission expenses decreased from RMB40.1 million for the year ended December
31, 2021 to RMB32.3 million for the year ended December 31, 2022 mainly due to the decrease
in the sale of the Kunshan Tingshe Distributed Products resulted from the Resurgence of
COVID-19 pandemic in the PRC during the year ended December 31, 2022, in particular in the
first half of 2022. The decrease in our commission to Kunshan Tingshe during the year ended
December 31, 2022 was partially offset by our commission to celebrities and KOLs for
promotion of the sale of our products through online platforms, which is in line with the growth
in our revenue from the new retail business attributable to sale through other e-commerce
channels during the year ended December 31, 2022. For details, please refer to “Business –
Distribution network – Distribution through other e-commerce channels – Other e-commerce
channels” in this prospectus.
Pursuant to our agreement with Kunshan Tingshe, Kunshan Tingshe shall sell our products
to the distributors at a price equals to our selling price to Kunshan Tingshe plus the Fixed
Mark-up and the Fixed Mark-up is intended to cover certain volume discounts, incentives and
sales volume based fees to the Selected Distributors, Service Fees to Li Ting and other operating
costs of Kunshan Tingshe. For details of the pricing arrangement in respect of the Kunshan
Tingshe Distributed Products, please refer to the section headed “Distribution arrangement with
FINANCIAL INFORMATION
– 415 –


--- page 426 ---
Kunshan Tingshe – Pricing arrangement and discounts, incentives and fees in relation to the
sales of Kunshan Tingshe Distributed Products” in this prospectus.
Accordingly, assuming that other factors remain constant, in the event of a decrease in
volume discounts and incentives to distributors, sales volume based fees to the Selected
Distributors and/or Service Fees to Li Ting, which were directly associated with the sale of the
Kunshan Tingshe Distributed Products, the portion of the Fixed Mark-up to cover the other
operating costs of Kunshan Tingshe will increase. As confirmed by the Company, such
mechanism was established with the aim to provide additional funding to Kunshan Tingshe for
sale and marketing activities in the event of a decrease in the sale of Kunshan Tingshe
Distributed Products.
General and administrative expenses
The table below sets forth a breakdown of the components of our general and
administrative expenses for the years indicated:
Y ear ended December 31,
2019 2020 2021 2022
RMB’000 % RMB’000 % RMB’000 % RMB’000 %
Legal and professional fees 1,179 11.4 5,671 18.0 9,381 14.4 6,113 9.5
Employee benefit expenses 4,870 47.1 12,824 40.6 27,762 42.7 32,176 50.2
Rental expenses for
short-term leases 304 2.9 396 1.3 538 0.8 959 1.5
Traveling and entertainment
expenses 1,451 14.0 1,525 4.8 3,075 4.7 2,405 3.8
Depreciation of right-of-use
assets 436 4.2 955 3.0 1,121 1.7 2,608 4.1
Office expenses 549 5.3 2,623 8.3 2,255 3.5 2,495 3.9
Depreciation of property,
plant and equipment 59 0.6 539 1.7 1,504 2.3 3,502 5.5
Donations – – 1,494 4.7 – – 500 0.8
Listing expenses – – 2,893 9.2 15,535 23.9 10,059 15.7
Others 1,482 14.5 2,643 8.4 3,920 6.0 3,277 5.0
Total 10,330 100.0 31,563 100.0 65,091 100.0 64,094 100.0
FINANCIAL INFORMATION
– 416 –


--- page 427 ---
Our general and administrative expenses primarily consisted of:
 legal and professional fees , which mainly consisted of fees for legal and compliance
services, consultancy services and other professional services, details of which were
set out in the paragraph headed “– Legal and professional fees” below;
 employee benefit expenses , which mainly consisted of wages, social security costs,
housing benefits and compensation expenses for our administrative staff;
 traveling and entertainment expenses , which mainly consisted of disbursement
incurred during our daily operation in an administrative aspect;
 depreciation of right-of-use assets , which mainly consisted of depreciation of our
property leases;
 depreciation of property, plant and equipment , which mainly consisted of depreciation
of our land and buildings and leasehold improvements;
 listing expenses , which mainly consisted of professional fees and other fees incurred
in connection with the Listing; and
 others , which mainly consisted of miscellaneous and administrative expenses.
For the years ended December 31, 2019, 2020, 2021 and 2022, our general and
administrative expenses amounted to RMB10.3 million, RMB31.6 million, RMB65.1 million and
RMB64.1 million, which accounted for 11.9%, 6.9%, 17.8% and 18.6% of our total revenue for
the same periods, respectively. The increase in our general and administrative expenses during
the Track Record Period was primarily due to the increase of employee benefit expenses and
legal and professional fees which illustrate our continuous support and enhancement on the
expansion of IP portfolio and our business growth. As a result of our historical results of
operations, and in light of the significant growth of our operational scale, we consider it is
necessary to devote additional efforts to expand our workforce and strengthen our corporate
governance. Therefore, we recorded a general increase in our general and administrative
expenses during the Track Record Period.
Legal and professional fees
Our legal and professional fees amounted to RMB1.2 million, RMB5.7 million, RMB9.4
million and RMB6.1 million for the year ended December 31, 2019, 2020, 2021 and 2022,
respectively. We recorded an increasing trend in our legal and professional fees for the three
years ended December 31, 2021, which was in line with our business growth. Such increase was
mainly attributable to the increase in our expenses on (i) IP registration and related legal
services following the expansion of our IP portfolio, including IPs of ChouMate , Dr .mg,
Chaxiaojie as well as our IP programs; and (ii) audit, assurance and tax advisory services as
well as financial and management reporting advisory services in connection with our preparation
for the listing.
FINANCIAL INFORMATION
– 417 –


--- page 428 ---
Set forth below is the breakdown of our legal and professional fees for the years indicated:
For the year ended December 31,
2019 2020 2021 2022
(in RMB thousands)
Legal and compliance services
Litigation and related legal services (1) 100 693 1,683 878
IP registration and related legal
services 163 3,310 2,534 2,063
Company secretary and other legal
and compliance services 65 417 999 457
328 4,420 5,216 3,398
Professional services
Audit, assurance and tax advisory (2) 13 602 964 734
Valuation (3) 36 250 272 –
Design and brand building advisory 568 304 150 –
IT system related services 226 – 193 –
843 1,156 1,579 734
Consultancy services
Financial and management reporting
advisory
(4) – – 2,215 386
Business consultancy (5) – – 210 1,529
– – 2,425 1,915
Others (6) 8 95 161 66
Total 1,179 5,671 9,381 6,113
FINANCIAL INFORMATION
– 418 –


--- page 429 ---
Notes:
(1) Our expenses on litigation and related legal services during the Track Record Period was mainly related to
the litigation with our ex-marketing agency and legal proceedings relating to counterfeit products and our
IPs.
(2) Mainly represented professional service fees payable to audit firms and tax advisory service providers in
respect of our preparation of the statutory financial statements of our subsidiaries in the PRC and Hong
Kong.
(3) Mainly represented service fees for valuation services in connection with the Reorganization.
(4) Represented our fees paid to an consultant for advisory services in relation to the financial and
management reporting of our Group for the preparation of the Listing.
(5) We recorded an increase in the professional fees for business consultancy services for the year ended
December 31, 2022, which was mainly attributable to the consultancy services for the business
development relating to metaverse.
(6) Others mainly represented fees to services providers for, among other things, services related to product
development and office management with a relatively insignificant transaction amounts.
Other income
The following table sets forth our other income for the years indicated:
Y ear ended December 31,
2019 2020 2021 2022
(in RMB thousands)
Forfeited deposit – 1,600 – –
Government grants 123 1 116 16,471
Additional deduction of input V AT 28 91 118 289
Others – – – 5,084
Total 151 1,692 234 21,844
Forfeited deposit
In June 2018 and March 2019, an Independent Third Party placed an initial deposit with us,
intending to co-invest in the Ningbo Superstar Performance Mega Night which held in January
2020. However, given significant uncertainties brought by the COVID-19 outbreak and its
further development as a global pandemic, the investor decided not to honor its contractual
obligation to continue its investment, and we therefore confiscated its deposit by exercising our
contractual right after the defaulted investor ceased its investment. As a result, we recorded
forfeited deposit of RMB1.6 million as other income for the year ended December 31, 2020.
FINANCIAL INFORMATION
– 419 –


--- page 430 ---
Government grants
Governments grants of RMB16.5 million for the year ended December 31, 2022 primarily
comprised (i) the financial subsidies received from the Department of Finance in Kunshan for
the efforts of maintaining stability of employees and business during the pandemic; and (ii)
one-off awards from the government for our contribution to the business of Kunshan Huaqiao
Economic Development Zone. These grants are recognized as income upon receipt.
Others
Our other income during the year ended December 31, 2022 mainly represented the income
from our promotion activities. To stimulate the order demand of our new retail business, we
organized a promotion activity in February and March 2022, where distributors who ordered a
large amount of our products would receive a smartphone as incentive. The smartphones have
been treated as a separate performance obligation where income has been allocated based on
their relative standalone selling price estimated using observable market information. We
recognized other expenses of RMB5.8 million for the year ended December 31, 2022, being the
purchase costs of the smartphones for the abovementioned promotion activity.
Other gains/(losses), net
The following table sets forth our other gains/(losses), net for the years indicated:
Y ear ended December 31,
2019 2020 2021 2022
(in RMB thousands)
Settlement of J-Style Trip season
one’s investment – 9,400 – –
Net foreign exchange gains/(losses) – 34 3,558 (9,855)
Fair value change on financial assets
at FVPL – – 435 –
Gains on disposal of subsidiaries – 829 – –
Losses on deregistration of a
subsidiary – – (54) –
Others (114) (9) 17 302
Other gains/(losses) – net (114) 10,254 3,956 (9,553)
FINANCIAL INFORMATION
– 420 –


--- page 431 ---
We recorded other losses of RMB114,000 and RMB9.6 million for the year ended
December 31, 2019 and 2022, respectively and other gains of RMB10.3 million and RMB4.0
million for the year ended December 31, 2020 and 2021, respectively.
For the year ended December 31, 2020, we recorded a settlement sum of RMB9.4 million,
in connection with the investment made by an investor, who is an Independent Third Party, in
connection with the J-Style Trip season one. The investor initially entered into an investment
agreement in March 2018 with us to invest RMB21.4 million into J-Style Trip season one and
the investment fund of RMB21.4 million received from the investor were recorded as other
payable as of December 31, 2019. In April 2020, in view of the uncertainty in the investment
return of the program due to the outbreak of COVID-19, the investor and the Group agreed to
early terminate the agreement with RMB12.0 million as the final settlement. The difference
between funding receipt and settlement payment amounting to RMB9.4 million was recognized
accordingly during the year ended December 31, 2020.
We recorded other gains of RMB4.0 million for the year ended December 31, 2021,
comprising (i) net foreign exchange gains of RMB3.6 million mainly arising from cash
denominated in RMB of our Hong Kong subsidiaries; and (ii) fair value gains of RMB435,000 in
connection with the wealth management products that we purchased during the relevant period.
We recorded other loss of RMB9.6 million for the year ended December 31, 2022, which
was primarily attributable to our net foreign exchange losses of RMB9.9 million mainly due to
the exchange loss arising from the bank balance held by the offshore subsidiaries which was
denominated in RMB as a result of the depreciation of RMB against HK dollars during the
period, which was denominated in HK dollars, as a result of the devaluation of RMB to HK
dollars during the relevant period.
Fair value change on financial assets at FVPL
During the year ended December 31, 2021, we acquired financial assets at FVPL in the
amount of RMB80.0 million. Such financial assets at FVPL comprised certain wealth
management products with floating returns from state-owned or reputable national banks in the
PRC denominated in RMB and redeemable within three months. As the wealth management
products have been redeemed during the year ended December 31, 2021, we did not record any
financial assets at FVPL as at December 31, 2021. During the year ended December 31, 2021,
we recorded other gain from the change in fair value of financial assets at FVPL of
RMB435,000.
FINANCIAL INFORMATION
– 421 –


--- page 432 ---
As part of our treasury management policy, we have purchased wealth management
products as a mean to better utilize of our cash on hand on a short-term basis. We have
established a set of investment policies and internal control measures to safeguard our exposure
to investment risks in connection with the purchase of wealth management products. These
policies and measures include:
 the types of investments shall generally be low risk wealth management products
including fixed deposits and investments with fixed investment amounts and/or
guaranteed returns;
 our investments in wealth management products shall be authorized and approved by
Mr. Lai, our executive Director and chief financial officer, who has over 30 years of
working experience in accounting and financial advisory. For details of the experience
of Mr. Lai, please refer to the section headed “Directors and senior management” in
this prospectus;
 investments shall only be made when we have surplus cash that is not required for
short-term working capital purposes;
 we shall only purchase wealth management products issued by creditworthy
commercial banks and/or other qualified financial institution; and
 our finance department is responsible for ensuring that the wealth management
products are properly recorded in our financial statements and monitoring the
performance of our wealth management products. Any significant or adverse
fluctuation in the wealth management products shall be reported to our management in
a timely manner.
Any proposed investment in wealth management products which are not made in
accordance with our treasury policy shall be subject to the approval of our Board.
The purchases or subscriptions of wealth management products by our Group will, upon
Listing, constitute notifiable transactions of our Company and will be subject to the applicable
requirements under Chapter 14 of the Listing Rules.
Operating profit
Our operating profit was RMB32.0 million, RMB113.8 million, RMB73.6 million and
RMB92.0 million for the years ended December 31, 2019, 2020, 2021 and 2022, respectively.
FINANCIAL INFORMATION
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Finance income/(costs), net
The following table sets forth our finance income, finance costs and net finance
income/(costs) for the years indicated:
Y ear ended December 31,
2019 2020 2021 2022
(in RMB thousands)
Finance income:
Interest income on time deposits – – 58 –
Interest income on bank deposits 62 479 1,248 2,443
Subtotal 62 479 1,306 2,443
Finance costs:
Interest expense on lease liabilities (222) (444) (224) (305)
Interest expense on bank borrowings – – (1,245) (1,035)
Interest expense on loan from a third
party (note 1) – – (840) –
Interest expense on financial
instrument with redemption rights
(note 2) – – (7,939) –
Subtotal (222) (444) (10,248) (1,340)
Finance income/(costs) – net (160) 35 (8,942) 1,103
Notes:
1. On May 24, 2021, the Group entered into a six-months loan agreement with an Independent Third Party to
obtain a loan with maturity amount of RMB14 million and fixed interest rate of 12% per annum. In August
2021, the loan was fully settled by the Group.
2. Represented the imputed interest expenses arising from the financial instrument with redemption rights in
connection with our Pre-IPO investments. As the relevant interest expenses have been fully recognized to
unwind the financial instrument to its redemption amount of HK$200.0 million (equivalent to RMB163.5
million as at December 31, 2021) and has been fully reflected as current liability in our balance sheet as at
December 31, 2021, no additional interest expense was incurred in relation to the financial instrument in
2022.
FINANCIAL INFORMATION
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Our finance income was primarily generated from interest income on bank deposits and our
finance costs mainly comprised interest expenses arising from our lease liabilities, bank
borrowings, loan from a third party and financial instrument with redemption rights. We
recorded net finance costs for the year ended December 31, 2019 and 2021 of RMB160,000 and
RMB8.9 million, respectively. For the year ended December 31, 2020, we recorded net finance
income of RMB35,000.
We recorded a significant increase in net finance costs for the year ended December 31,
2021 as compared to the year ended December 31, 2020, primarily due to: (i) the recognition of
the financial instrument with redemption rights of RMB158.2 million in connection with the
Pre-IPO Investments, of which interest expenses of RMB7.9 million has been incurred; (ii) the
facilitation of staff accommodation and purchase of office building, necessitating the obtainment
of a mortgage of RMB25.0 million, of which interest expenses of RMB1.2 million has been
incurred; and (iii) interest expenses of RMB0.8 million because of borrowing from a third party.
During the year ended December 31, 2022, we recorded net finance income of RMB1.1
million, which was mainly due to the fact that we did not incur any interest expense on financial
instrument with redemption rights during 2022.
Income tax expense
The following table sets forth our current income tax and deferred income tax for the years
indicated:
Y ear ended December 31,
2019 2020 2021 2022
(in RMB thousands)
Current income tax
– PRC corporate income tax 12,611 43,661 15,303 23,662
– Hong Kong profits tax – – 7,724 5,733
12,611 43,661 23,027 29,395
Deferred income tax
– PRC corporate income tax (3,490) (3,238) (3,475) (1,158)
– Hong Kong profits tax – (2,213) 2,209 3
(3,490) (5,451) (1,266) (1,155)
Total 9,121 38,210 21,761 28,240
FINANCIAL INFORMATION
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Our income tax expense primarily consisted of the current income tax at the statutory rates
applicable to our assessable profit before tax as determined under the relevant laws and
regulations in China and Hong Kong. For the years ended December 31, 2019, 2020 and 2021,
our income tax expense was RMB9.1 million, RMB38.2 million and RMB21.8 million,
respectively. Our income tax expense increased significantly from 2019 to 2020 primarily due to
the growth of our profit before income tax, the amount of non-deductible expenses incurred and
unutilized tax loss with no deferred income tax assets recognized. Our income tax expense
decreased from RMB38.2 million for 2020 to RMB21.8 million for 2021 mainly because of the
decrease in our profit before income tax from RMB113.8 million for 2020 to RMB64.7 million
for 2021. Our income tax expense increased from RMB21.8 million for the year ended December
31, 2021 to RMB28.2 million for the year ended December 31, 2022 mainly due to the increase
in our profit before income tax. Our effective tax rate for the years ended December 31, 2019,
2020, 2021 and 2022, was 28.6%, 33.6%, 33.7% and 30.3%, respectively. Please refer to Note
10(e) to the Accountant’s Report in Appendix I to this prospectus for details.
Net profit and net profit margin
As a result of the foregoing, we recorded net profit of RMB22.7 million, RMB75.6 million,
RMB42.9 million and RMB64.9 million for the years ended December 31, 2019, 2020, 2021 and
2022, respectively, representing net profit margin of 26.2%, 16.6%, 11.7% and 18.9% of the
same periods.
PERIOD-TO-PERIOD COMPARISON OF RESULTS OF OPERATIONS
Y ear ended December 31, 2022 compared with the year ended December 31, 2021
Revenue
Our revenue decrease by 5.8% from RMB365.3 million for the year ended December 31,
2021 to RMB344.2 million for the year ended December 31, 2022.
Revenue from new retail business
Our revenue generated from new retail business decreased by 20.3% from RMB301.4
million for the year ended December 31, 2021 to RMB240.1 million for the year ended
December 31, 2022. Such decrease was mainly attributable to the decrease in the sale of our
health management products from RMB275.3 million for the year ended December 31, 2021 to
RMB216.0 million for the year ended December 31, 2022, primarily due to disruptions caused
by the control measures imposed by the local government in respect of the Resurgence of
COVID-19 pandemic. For further details, please refer to the section headed “Business – Impact
of the outbreak of COVID-19 on our business” in this prospectus.
FINANCIAL INFORMATION
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Revenue from IP creation and operation business
Our revenue generated from IP creation and operation business increased by 62.7% from
RMB64.0 million for the year ended December 31, 2021 to RMB104.1 million for the year
ended December 31, 2022, primarily attributable to the increase in our revenue from (i) certain
IP programs, including two World-Cup related music and variety programs, a promotional video
for J-Style Trip season two and the new music album of Mr. Jay Chou, and an online music
show centered around Mr. Jay Chou; and (ii) our celebrity management business in relation to
our cooperation with Mr. Liu Keng-hung through Talent Planet. For details of our cooperation
with Mr. Liu Keng-hung, please refer to the section headed “Cooperation with celebrities –
Cooperation with Mr. Liu Keng-hung and Ms. Vivi Wang” in this prospectus.
Cost of revenue
Our cost of revenue decreased by 12.1% from RMB138.0 million for the year ended
December 31, 2021 to RMB121.3 million for the year ended December 31, 2022, mainly due to
(i) the decrease in our cost of goods sold by RMB9.9 million as a result of the decrease in the
sale of our products under the new retail business; and (ii) the decrease in our cost of event
planning and management services by RMB6.8 million because we incurred relatively higher
cost in our IP program in 2021 which involved more celebrities.
Gross profit and gross profit margin
Our gross profit decreased by 2.0% from RMB227.4 million for the year ended December
31, 2021 to RMB222.8 million for the year ended December 31, 2022, primarily due to the
decrease in the gross profit generated from our new retail business by RMB54.7 million, which
was partially offset by the increase in our gross profit from the IP creation and operation
business by RMB50.2 million. Our gross profit margin has increased from 62.2% for the year
ended December 31, 2021 to 64.7% for the year ended December 31, 2022.
Gross profit and gross profit margin in new retail business
Our gross profit from the new retail business decreased by 26.7% from RMB205.5 million
for the year ended December 31, 2021 to RMB150.7 million for the year ended December 31,
2022, primarily due to the decrease in the sale of our health management products and skincare
products as a result of the control measures in relation to the Resurgence of the COVID-19
pandemic.
Gross profit margin of our new retail business decreased from 68.2% for the year ended
December 31, 2021 to 62.8% for the year ended December 31, 2022, primarily attributable to (i)
the decrease in gross profit margin of our health management products from 71.6% in 2021 to
64.9% in 2022 due to the decrease in revenue contribution of MODONG coffee which has a
relatively higher gross profit margin than other health management products; and (ii) the
decrease in the gross profit margin of our skincare products because we gave out certain
skincare products as gifts in sale transactions during promotion and marketing activities which
resulted in the decrease in the average price of our skincare products.
FINANCIAL INFORMATION
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Gross profit and gross profit margin in IP creation and operation business
Our gross profit in IP creation and operation business increased by 229.2% from RMB21.9
million for the year ended December 31, 2021 to RMB72.1 million for the year ended December
31, 2022, primarily due to the increase in our revenue from IP content creation and management.
Gross profit margin in IP creation and operation business increased from 34.3% for the year
ended December 31, 2021 to 69.3% for the year ended December 31, 2022, which was primarily
attributable to (i) the increase in revenue contribution from licensing fee which has a
comparatively higher gross profit margin; and (ii) our cooperation with Mr. Liu Keng-hung as
our revenue from the relevant transaction was recognized after netting off, among other things,
the fees payable to our business partners and the relevant operating costs, thereby resulting in a
relatively higher gross profit margin.
Selling and marketing expenses
Our selling and marketing expenses decreased by 22.8% from RMB93.8 million for the
year ended December 31, 2021 to RMB72.4 million for the year ended December 31, 2022. Such
decrease was mainly attributable to the decrease in (i) our advertising and marketing expenses
by RMB17.9 million as our offline marketing activities have been materially affected by control
measures imposed by the local government due to the Resurgence of the COVID-19 pandemic;
and (ii) commissions by RMB7.8 million due to the decrease in the sale of the Kunshan Tingshe
Distributed Products.
General and administrative expenses
Our general and administrative expenses decreased slightly by 1.5% from RMB65.1 million
for the year ended December 31, 2021 to RMB64.1 million for the year ended December 31,
2022, primarily due to (i) the decrease in legal and professional fees by RMB3.3 million mainly
due to the decrease in our expenses on litigation and related legal services and financial and
management reporting advisory services; and (ii) the decrease in listing expenses by RMB5.5
million, which was partially offset by the increase in employee benefit expense by RMB4.4
million primarily attributable to the increase in the number of employees for our celebrity IP
management business.
Other income
Our other income increased from RMB234,000 for the year ended December 31, 2021 to
RMB21.8 million for the year ended December 31, 2022, mainly due to government grants of
RMB16.5 million in relation to (i) financial subsidies from the local government for maintain
stability of employees and business during the COVID-19 pandemic; and (ii) a one-off awards
from the government for our contribution to the business of Kunshan Huaqiao Economic
Development Zone.
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Other gains/(losses), net
For the year ended December 31, 2022, we recorded other loss of RMB9.6 million, as
compared to other gains of RMB4.0 million for the year ended December 31, 2021, which was
mainly attributable to the net foreign exchange losses of RMB9.9 million primarily arising from
the bank balance held by our offshore subsidiaries which was denominated in RMB as a result of
the devaluation of RMB against HK dollars during the period.
Operating profit
As a result of the foregoing, our operating profit increase by 25.1% from RMB73.6 million
for the year ended December 31, 2021 to RMB92.0 million for the year ended December 31,
2022.
Finance income/(costs), net
For the year ended December 31, 2021, we recorded net finance costs of RMB8.9 million
which was mainly attributable to our interest expense on financial instrument with redemption
rights of RMB7.9 million. For the year ended December 31, 2022, we recorded net finance
income of RMB1.1 million which as mainly due to the fact that we did not incur any interest
expenses on financial instrument with redemption rights in 2022.
Income tax expense
Our income tax expense increase by 29.4% from RMB21.8 million for the year ended
December 31, 2021 to RMB28.2 million for the year ended December 31, 2022, primarily due to
the increase in our profit before income tax. Our effective tax rate decreased from 33.7% for
2021 to 30.3% for 2022, mainly due to increase in the proportion of profit subject to Hong Kong
profit tax which has a lower tax rate than the PRC.
Net profit and net profit margin
As a result of the foregoing, our net profit increased by 51.3% from RMB42.9 million for
the year ended December 31, 2021 to RMB64.9 million for the year ended December 31, 2022.
Our net profit margin increased from 11.7% for the year ended December 31, 2021 to 18.9% for
the year ended December 31, 2022.
Adjusted net profit (non-HKFRS measure) and adjusted net profit margin (non-HKFRS
measure)
Our adjusted net profit (non-HKFRS measure) increased from RMB69.9 million for the
year ended December 31, 2021 to RMB77.2 million for the year ended December 31, 2022 and
our adjusted net profit margin (non-HKFRS measure) increased from 19.1% in 2021 to 22.4% in
2022.
FINANCIAL INFORMATION
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Y ear ended December 31, 2021 compared with the year ended December 31, 2020
Revenue
Our total revenue decreased by 20.0% from RMB456.9 million for the year ended
December 31, 2020 to RMB365.3 million for the year ended December 31, 2021.
Revenue from new retail business
Our revenue generated from new retail business decreased by 17.5% from RMB365.2
million for the year ended December 31, 2020 to RMB301.4 million for the year ended
December 31, 2021. Such decrease was primarily because the sales performance of our
MODONG coffee was profoundly boosted by the airing of J-Style Trip season one in the first
half of 2020 and our sales returned back to a normal and sustainable level in 2021, after the
cessation of material promotional effect of the airing of J-Style Trip season one since July 2020
and we reduced usage of Mr. Jay Chou-related IPs’ empowerment throughout 2021, which was
partially offset by sales generated from certain health management products that were newly
launched in 2021, including MODONG herb beverage and MODONG probiotics lyophilized
powder.
Revenue from IP creation and operation business
Our revenue generated from IP creation and operation business decreased by 30.3% from
RMB91.8 million for the year ended December 31, 2020 to RMB64.0 million for the year ended
December 31, 2021, primarily attributable to completion of the broadcast of J-Style Trip season
one in 2020 which was partially offset by services fees received by us in the planning and
creation of, amongst others, You Can Run But You Can’ t Hide (ᆀʘ ) and performances
at a music events organized by a leading music streaming service provider in the PRC and
variety shows that were streamed on various online platforms.
Cost of revenue
Our cost of revenue decreased by 38.4% from RMB224.2 million for the year ended
December 31, 2020 to RMB138.0 million for the year ended December 31, 2021, primarily
attributable to (i) the decrease in our cost of goods sold by RMB15.7 million as a result of the
decline in revenue of our new retail business in 2021; and (ii) the fact that we did not incurred
any costs of TV program rights in 2021, which was partially offset by the increase in our cost of
event planning and management services arising from our planning and creation of a music talk
show and performances at music events and variety shows in 2021.
Gross profit and gross profit margin
Our gross profit decreased by 2.3% from RMB232.8 million for the year ended December
31, 2020 to RMB227.4 million for the year ended December 31, 2021, primarily attributable to
the decrease in gross profit generated from our new retail business in 2021, which was partially
FINANCIAL INFORMATION
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offset by the increase in gross profit from our IP creation and operations business. Our gross
profit margin increased from 50.9% in 2020 to 62.2% in 2021, primarily due to the increase in
the gross profit margin of our IP creation and operations business.
Gross profit and gross profit margin of new retail business
Gross profit of our new retail business decreased by 19.3% from RMB254.5 million in
2020 to RMB205.5 million in 2021, primarily because the sales performance of our MODONG
coffee was profoundly boosted by the airing of J-Style Trip season one in the first half of 2020
and our sales returned back to a normal and sustainable level in 2021. The gross profit margin of
our new retail business remained relatively stable at 69.7% and 68.2% in 2020 and 2021,
respectively.
Gross profit and gross profit margin of IP creation and operation business
We recorded a gross profit from IP creation and operation business of RMB21.9 million for
the year ended December 31, 2021, as compared to a gross loss of RMB21.7 million for the year
ended December 31, 2020 resulted from the cancellation of a number of advertisements due to
COVID-19 pandemic at the time when J-Style Trip season one was aired. We recorded a gross
profit margin of 34.3% for the year ended December 31, 2021 mainly due to the improvement in
our gross profit margin from IP content creation and management business.
Selling and marketing expenses
Our selling and marketing expenses slightly decreased by 1.2% from RMB94.9 million
from 2020 to RMB93.8 million in 2021. Such decrease was primarily resulted from the decrease
in our advertising and marketing expenses by RMB6.1 million, attributable to the decrease in
expenses in (i) TV sponsorship, advertisement and marketing; and (ii) concert sponsorship fees
as we did not create any TV program or provide planning services to concerts in 2021. The
decrease in advertising and marketing expenses was partially offset by the increase in our
employee benefit expenses of RMB4.2 million.
General and administrative expenses
Our general and administrative expenses increased by 106.0% from RMB31.6 million for
the year ended December 31, 2020 to RMB65.1 million for the year ended December 31, 2021.
Such increase was mainly attributable to the increase of employee benefit expenses, listing
expenses and legal and professional fees by RMB14.9 million, RMB12.6 million and RMB3.7
million, respectively, as compared to the relevant expenses in the year ended December 31,
2020.
Other income
Our other income decreased from RMB1.7 million for the year ended December 31, 2020 to
RMB234,000 for the year ended December 31, 2021 primarily due to the forfeited deposit
FINANCIAL INFORMATION
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recognized in 2020. Please refer to the paragraph headed “– Year ended December 31, 2020
compared with the year ended December 31, 2019 – Other income” below.
Other gains/(losses)
We recorded other gains of RMB4.0 million for the year ended December 31, 2021, as
compared to other gains of RMB10.3 million for the year ended December 31, 2020. Our other
gains in 2021 was mainly attributable to net foreign exchange gains of RMB3.6 million, and the
decrease in other gains in 2021 was mainly due to the fact that we recognized settlement of
J-Style Trip season one’s investment of RMB9.4 million in 2020.
Operating profit
As a result of the foregoing, our operating profit decreased from RMB113.8 million in 2020
to RMB73.6 million in 2021.
Finance income/(costs), net
We recorded net finance costs of RMB8.9 million for the year ended December 31, 2021,
as compared to a net finance income of RMB35,000 for the year ended December 31, 2020. Our
net finance costs in 2021 was mainly resulted from (i) interest expense on financial instrument
with redemption rights of RMB7.9 million; and (ii) interest expense on bank borrowings of
RMB1.2 million.
Income tax expense
Our income tax expense decreased from RMB38.2 million for the year ended December 31,
2020 to RMB21.8 million for the year ended December 31, 2021, primarily attributable to the
decrease in our profit before income tax. Our effective tax rate remained relatively stable at
33.6% and 33.7% in the year ended December 31, 2020 and 2021, respectively.
Net profit and net profit margin
As a result of the foregoing, our net profit decreased by 43.3% from RMB75.6 million for
the year ended December 31, 2020 to RMB42.9 million for the year ended December 31, 2021.
Our net profit margin decreased from 16.6% in 2020 to 11.7% in 2021.
Adjusted net profit (non-HKFRS measure) and adjusted net profit margin (non-HKFRS
measure)
Our adjusted net profit (non-HKFRS measure) decreased by 13.0% from RMB80.4 million
for the year ended December 31, 2020 to RMB69.9 million for the year ended December 31,
2021 and our adjusted net profit margin (non-HKFRS measure) increased from 17.6% in 2020 to
19.1% in 2021.
FINANCIAL INFORMATION
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Y ear ended December 31, 2020 compared with the year ended December 31, 2019
Revenue
Our total revenue increased by 427.6% from RMB86.6 million in 2019 to RMB456.9
million in 2020, primarily attributable to the increase of sales of MODONG coffee and revenue
generated from J-Style Trip season one which was aired from March to June 2020.
Revenue from new retail business
Our revenue generated from new retail business significantly increased from RMB80.8
million in 2019 to RMB365.2 million in 2020. The increase in our revenues generated from the
new retail business was primarily attributable to the significant increase in the sales of
MODONG coffee from RMB71.9 million in 2019 to RMB332.9 million in 2020 as a result of the
promotion of such products along with the airing of J-Style Trip season one from March to June
2020. In addition, the introduction of our new product Molitone prebiotic gummy in April 2020
also contributed to the increase of our revenues. It is also noted that with the airing of J-Style
Trip season one in March 2020 on various viewing platforms such as Zhejiang Satellite TV and
Netflix, less operational and marketing resources was needed to be placed into MODONG coffee
given the sales volume was directly empowered by our proprietary celebrity IPs and IP-oriented
reality shows and programs, such as placing advertisement and product placement in TV
program. As a result, we were able to divert our resources into the marketing of LA DEW
Skincare series, and this resulted in an increase in the sales revenue of LA DEW Skincare series
in 2020 from RMB3.5 million to RMB20.4 million.
Revenue from IP creation and operation business
Our revenue generated from IP creation and operation business increased from RMB5.8
million in 2019 to RMB91.8 million in 2020. The increase in our revenues generated from this
sector was primarily attributable to the licensing fee and advertising income of RMB81.6 million
generated from the airing of J-Style Trip season one from March to June 2020.
Cost of revenue
Our cost of revenue increased by 647.3% from RMB30.0 million in 2019 to RMB224.2
million in 2020, which was primarily attributable to (i) the increase of cost of goods sold of
RMB24.2 million for 2019 to RMB102.2 million for 2020 as a result of the increase in sales of
MODONG coffee; and (ii) the recognition of cost of TV program rights of RMB106.0 million in
relation to J-Style Trip season one which was aired from March to June 2020.
Gross profit and gross profit margin
Our gross profit increased significantly by 311.3% from RMB56.6 million in 2019 to
RMB232.8 million in 2020, primarily due to the increase in the sales of MODONG coffee, which
was officially launched in nationwide in April 2019. Gross profit margin decreased from 65.4%
FINANCIAL INFORMATION
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in 2019 to 50.9% in 2020, primarily due to the gross loss incurred for J-Style Trip season one
which was aired from March to June 2020.
Gross profit and gross profit margin in new retail business
Gross profit in new retail business increased significantly from RMB55.1 million in 2019
to RMB254.5 million in 2020, primarily attributable to (i) the increase in gross profit of health
management products from RMB51.1 million in 2019 to RMB242.2 million in 2020; and (ii) the
increase in gross profit of RMB1.4 million in 2019 to RMB14.4 million in 2020 from skincare
products.
Gross profit margin in new retail business slightly increased from 68.2% for 2019 to 69.7%
for 2020, primarily attributable to an increase in the proportion of sales from MODONG coffee
and Molitone prebiotic gummy, which has higher gross profit margin compared with other
products, and the increase in gross profit margin on skincare products from 41.3% in 2019 to
70.4% in 2020.
Gross profit and gross profit margin in IP creation and operation business
For IP creation and operation business, we recorded a gross profit of RMB1.5 million in
2019 and incurred a gross loss of RMB21.7 million in 2020, primarily due to a gross loss of
RMB24.6 million incurred by J-Style Trip season one which aired from March to June 2020,
given the cancellation of a number of advertisements in the show as a result of the general
negative impact of COVID-19.
Selling and marketing expenses
Our selling and marketing expenses significantly increased by 559.0% from RMB14.4
million in 2019 to RMB94.9 million in 2020, primarily attributable to: (i) the significant
increase in advertising and marketing expenses from RMB4.4 million in 2019 to RMB41.5
million in 2020 due to the significant increase in advertisement and promotional activities,
primarily due to an amount of RMB9.4 million for sponsoring a TV program on Zhejiang
Satellite TV; an amount of RMB7.2 million for giving out trial samples and packaged gifts; an
amount of RMB9.1 million for hosting our annual event in Ningbo and conference tour in
Chengdu during 2020, and an amount of RMB3.5 million concert sponsorship fees for Ningbo
Superstar Performance Mega Night in January 2020, which was in line with our rapid sales
growth of MODONG coffee; (ii) the increase in commissions expenses from RMB3.3 million in
2019 to RMB38.0 million in 2020, primarily due to the fact that (a) the Service Fee to Li Ting
increased from RMB3.3 million in 2019 to RMB18.0 million in 2020 as a result of the increase
in sales volume of MODONG coffee; (b) the sales incentive scheme with Kunshan Tingshe since
2020 to further motivate Kunshan Tingshe for the sales of MODONG coffee, leading to
FINANCIAL INFORMATION
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Additional Incentive Fee to Kunshan Tingshe of RMB11.7 million (1), and (c) Remaining Balance
of the Fixed Mark-up to cover other operating costs of Kunshan Tingshe as expense of RMB8.4
million since the disposal of Kunshan Tingshe in May 2020
(2); and (iii) the increase in employee
benefit expenses from RMB4.0 million in 2019 to RMB10.7 million in 2020 due to an increase
in the number of our sales and marketing staff and an increase in the salary level, and to support
our expanded distribution network.
General and administrative expenses
Our general and administrative expenses increased by 206.8% from RMB10.3 million in
2019 to RMB31.6 million in 2020, primarily due to: (i) the increase in employee benefit
expenses from RMB4.9 million in 2019 to RMB12.8 million in 2020 due to an increase in the
number of our administrative staff, senior management headcount and an increase in the salary
level to support our expanded distribution network; and (ii) the increase in legal and
professional fees from RMB1.2 million in 2019 to RMB5.7 million in 2020 due to the increase
in our payment to IP registration agents with an aim to expand our IP portfolio and business
growth as well as litigation costs with an ex-marketing agency.
Other income
Our other income increased by 1,020.5% from RMB151,000 in 2019 to RMB1.7 million in
2020, mainly attributable to the exercise of our contractual right to confiscate the investor’s
deposit after it ceased its investment from the Ningbo Superstar Performance Mega Night, which
was planned in January 2020.
Other gains/(losses), net
We recorded net other losses of RMB114,000 in 2019 and net other gains of RMB10.3
million in 2020, respectively. For 2020, the net other gains of RMB10.3 million consisted of (i)
the settlement sum of RMB9.4 million in connection with the investment made by an investor,
who is an Independent Third Party, in connection with the J-Style Trip season one. The investor
initially entered into an investment agreement with us in March 2018 to invest RMB21.4 million
in J-Style Trip season one and the investment fund of RMB21.4 million received from the
investor were recorded as other payable as of December 31, 2019. In April 2020, in view of the
uncertainty in the timing of the launch of the program due to the outbreak of COVID-19, the
Notes:
1. An amount of RMB7.8 million for the five months ended May 31, 2020 was fully eliminated in our consolidated
financial statements. For details, please refer to the section headed “Distribution arrangement with Kunshan
Tingshe – Pricing arrangement and discounts, incentives and fees in relation to the sales of Kunshan Tingshe
Distributed Products”.
2. Such expense of RMB9.1 million and RMB9.9 million for 2019 and the five months ended May 31, 2020 was
fully eliminated in our consolidated financial statements. For details, please refer to the section headed
“Distribution arrangement with Kunshan Tingshe – Pricing arrangement and discounts, incentives and fees in
relation to the sales of Kunshan Tingshe Distributed Products”.
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investor and the Group agreed to early terminate the agreement with RMB12.0 million as the
final settlement. The difference between funding receipt and settlement payment amounting to
RMB9.4 million was recognized accordingly for the year ended December 31, 2020; and (ii) the
other gains of RMB854,000 consisted of RMB829,000 gains on the disposal of subsidiaries.
Operating profit
As a result of the foregoing, our operating profit increased significantly from RMB32.0
million in 2019 to RMB113.8 million in 2020.
Finance income/(costs), net
We recorded net finance costs which amounted to RMB160,000 in 2019, and we recorded
net finance income of RMB35,000 in 2020.
Income tax expense
Our income tax expense increased significantly from RMB9.1 million in 2019 to RMB38.2
million in 2020 due to the growth of our profit before income tax. Our effective tax rate
increased from 28.6% in 2019 to 33.6% in 2020, primarily due to the increase in expenses not
deductible for taxation purpose and tax losses not recognized for deferred income tax.
Net profit and net profit margin
As a result of the foregoing, our net profit increased from RMB22.7 million in 2019 to
RMB75.6 million in 2020, and our net profit margin decrease from 26.2% in 2019 to 16.6% in
2020.
Adjusted net profit (non-HKFRS measure) and adjusted net profit margin (non-HKFRS
measure)
Our adjusted net profit (non-HKFRS measure) significantly increased from RMB22.7
million for the year ended December 31, 2019 to RMB80.4 million for the year ended December
31, 2020 and our adjusted net profit margin (non-HKFRS measure) decreased from 26.2% in
2019 to 17.6% in 2020.
FINANCIAL INFORMATION
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DISCUSSION OF CERTAIN KEY ITEMS OF CONSOLIDATED STATEMENT OF
FINANCIAL POSITION
The following table sets forth the selected information from our consolidated statement of
financial position as of the dates indicated, which have been extracted from our audited
consolidated financial statements included in Appendix I to this prospectus.
As of December 31,
2019 2020 2021 2022
(in RMB thousands)
Non-current assets
Property, plant and equipment 1,314 3,247 58,975 69,086
Right-of-use assets 2,469 2,786 3,893 1,878
Intangible assets 10 80 625 3,878
Deferred income tax assets 3,650 3,965 3,031 4,186
Trade and other receivables – 2,421 – –
Other non-current assets 1,891 54,511 50,416 59,638
Total non-current assets 9,334 67,010 116,940 138,666
Current assets
Inventories 15,510 24,107 24,490 28,828
TV program rights 77,247 – 13,594 89,602
Trade and other receivables 39,617 71,760 52,538 62,066
Prepayment and other current assets 16,601 31,278 53,677 53,070
Restricted bank deposits – 11,008 – –
Cash and cash equivalents 29,298 120,962 211,873 182,633
Total current assets 178,273 259,115 356,172 416,199
Total assets 187,607 326,125 473,112 554,865
FINANCIAL INFORMATION
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As of December 31,
2019 2020 2021 2022
(in RMB thousands)
Current liabilities
Trade and other payables 130,975 79,314 45,576 69,010
Contract liabilities 12,850 64,533 59,308 31,385
Current income tax liabilities 14,932 42,076 15,153 24,575
Lease liabilities 1,013 1,573 3,281 1,872
Financial instrument with
redemption rights – – 163,520 178,654
Borrowings – – 5,000 5,000
Total current liabilities 159,770 187,496 291,838 310,496
Non-current liabilities
Lease liabilities 1,484 1,409 1,035 220
Contract liabilities 686 – 45 38
Deferred income tax liabilities – 2,200 – –
Borrowings – – 15,000 10,000
Total non-current liabilities 2,170 3,609 16,080 10,258
Total liabilities 161,940 191,105 307,918 320,754
Equity attributable to owners of the
Company 26,529 138,309 169,221 233,542
Non-controlling interests (862) (3,289) (4,027) 569
Total equity 25,667 135,020 165,194 234,111
Total equity and liabilities 187,607 326,125 473,112 554,865
FINANCIAL INFORMATION
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Property, plant and equipment
Our property, plant and equipment mainly comprised building, furniture, fixture and
equipment and leasehold improvements. As at December 31, 2019, 2020, 2021 and 2022, the
carrying amounts of our property, plant and equipment amounted to RMB1.3 million, RMB3.2
million, RMB59.0 million and RMB69.1 million, respectively.
The following table sets forth the carrying amounts of our property, plant and equipment as
at the dates indicated:
As at December 31,
2019 2020 2021 2022
(in RMB thousands)
Computers 245 506 450 759
Furniture, fixture and equipment 1,069 1,235 2,115 2,948
Leasehold improvements – 1,506 1,375 10,330
Land and buildings – – 55,035 55,049
Total 1,314 3,247 58,975 69,086
Our property, plant and equipment increased from RMB1.3 million as of December 31,
2019 to RMB3.2 million as of December 31, 2020, primarily due to additions of leasehold
improvements of RMB1.8 million resulting from the expansion of our office premises and
warehouses.
Our property, plant and equipment further increased from RMB3.2 million as of December
31, 2020 to RMB59.0 million as of December 31, 2021. The increase was primarily resulted
from the additions of building of RMB55.0 million in connection with completion and delivery
of our staff quarter in 2021. For detailed of the properties acquired by us, please refer to the
section headed “Business – Properties – Owned properties” in this prospectus.
Our property, plant and equipment further increased from RMB59.0 million as of December
31, 2021 to RMB69.1 million as of December 31, 2022. The increase was primarily resulted
from the additions of leasehold improvement in relation to our staff quarter.
Right-of-use assets
During the Track Record Period, our right-of-use assets were mainly arising from the leases
of our office premises. As of December 31, 2019, 2020, 2021 and 2022, our right-of-use assets
were RMB2.5 million, RMB2.8 million, RMB3.9 million and RMB1.9 million, respectively. The
increase in our right-of-use assets during the three years ended December 31, 2021 were
primarily attributable to the entering of leases in respect of our offices in Beijing, Shanghai and
Kunshan and our warehouses in view of the continuous expansion of our business scale. We
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recorded a decrease in right-of-use assets as of December 31, 2022 mainly attributable to
depreciation of our right-of-use assets and early termination of one of our leases.
Inventories
Our inventories comprised of raw and packaging materials and finished goods. The
following table sets forth a breakdown of our inventories as of the dates indicated:
As of December 31,
2019 2020 2021 2022
(in RMB thousands)
Raw and packaging materials 682 3,967 6,137 5,140
Finished goods 14,828 23,169 27,571 23,688
15,510 27,136 33,708 28,828
Less: provision for impairment – (3,029) (9,218) –
Total 15,510 24,107 24,490 28,828
Our inventories increased from RMB15.5 million as of December 31, 2019 to RMB24.1
million as of December 31, 2020, primarily due to (i) the new products such as Chaxiaojie and
Dr .mg in preparation of launch; and (ii) raw materials required for production of skincare
products.
Our inventories slightly increased from RMB24.1 million as of December 31, 2020 to
RMB24.5 million as of December 31, 2021, mainly due to (i) the increase in the inventories of
raw materials and finished goods under our skincare products; and (ii) the launch of various new
health management products in the fourth quarter in 2021, including, the MODONG probiotics
lyophilized powder and MODONG herb beverage, which were partially offset by the increase in
provision for impairment over our inventories as of December 31, 2021.
We recorded an increase in inventories from RMB24.5 million as of December 31, 2021 to
RMB28.8 million as of December 31, 2022 mainly due to increase in both raw materials and
finished goods (before write-off of inventories RMB15.9 million) to cater for the expected
demand for our products in early 2023.
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The following table sets forth an aging analysis of our inventories as of the dates indicated:
As of December 31,
2019 2020 2021 2022
(in RMB thousands)
Within 30 days 4,272 5,682 8,895 5,921
31–60 days 631 2,482 1,139 1,448
61–180 days 1,516 7,981 3,260 10,833
181–365 days 5,182 325 5,414 3,480
Over 365 days 3,909 7,637 5,782 7,146
Total (after the provision for impairment) 15,510 24,107 24,490 28,828
Despite the increase in our inventory balance which aged over 180 days during the Track
Record Period, we are of the view that sufficient provisions have been made in respect of our
inventory balance. For further details, please refer to the below discussion on the turnover days
and subsequent settlement of our inventories.
We recorded provision of impairment for inventories of RMB3.0 million and RMB9.2
million as of December 31, 2020, and 2021, respectively. There was a provision of impairment
for inventories as of December 31, 2020 and 2021 primarily due to the impairment made for
slow-moving products which were our non-core products. During 2022, we made provision for
impairment of inventories for certain non-core products, including Maji Doggie and beauty
treatment equipment and certain raw materials and finished goods of our health management and
skincare products in the amount of RMB6.7 million. As at December 31, 2022, we did not
record any provision for impairment for inventories as we had fully written-off the provision for
impairment made in current and previous financial years on the basis that as we do not intend to
conduct further sale of the relevant products. For details, please refer to the paragraph headed “–
Description of major components of our results of operations – Cost of revenue – Provision for
impairment of inventories” in this section.
The following table sets forth our inventory turnover days for the Track Record Period:
Y ear ended December 31,
2019 2020 2021 2022
(days)
Inventory turnover days (1) 180 76 128 149
Note:
(1) Inventory turnover days were calculated by dividing the average of the opening and closing inventories
balance (before provision) by total cost of goods sold for the relevant year and multiplying by 365 days.
FINANCIAL INFORMATION
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Our inventory turnover days was 180 days, 76 days, 128 days and 149 days for the year
ended December 31, 2019, 2020, 2021 and 2022, respectively. The inventory turnover days
decreased from 180 days for 2019 to 76 days for 2020, primarily due to the rapid growth of
MODONG coffee which were outsourced to Hengmei Group for production with no raw material
held by us and relatively low level of finished goods of MODONG coffee were stored at our
warehouse given we could generally estimate the demand for MODONG coffee from distributors
based on the prepayments made by distributors. Inventory turnover day further increased from
76 days for 2020 to 128 days for 2021, mainly due to the increase in inventories (before
provision) from RMB27.1 million as of December 31, 2020 to RMB33.7 million as of December
31, 2021 as a result of (i) the increase in our inventories balance of skincare products and health
management products that were newly launched in 2021; and (ii) increase in the average
inventories balance of certain slow-moving products which were our non-core products. Our
inventory turnover days further increased to 149 days for the year ended December 31, 2022
mainly due to the decrease in cost of goods sold as a result of the decline in revenue of our new
retail business at a relatively larger degree than the decrease in our inventory balance. For
details, please refer to the paragraph headed “– Description of major components of our results
of operations – Cost of revenue – Provision for impairment of inventories” in this section
above.”
As of May 31, 2023, RMB23.8 million, or 82.4%, of our inventories as of December 31,
2022 had been subsequently utilized.
Despite the relatively low inventory utilization rate in respect of our inventory balance as
of December 31, 2022, our Directors are of the view that there is no material recoverability
issue on the basis that (i) most of the types of our inventory of raw materials and packaging
materials were consumed from time to time during 2022 and up to the Latest Practicable Date;
(ii) we substantially sold our finished goods at prices higher than their costs during 2022 and up
to the Latest Practicable Date; (iii) our contract liabilities for the sale of goods, mainly consist
of prepayments made by our distributors for purchase of our products, amounted to RMB24.4
million as of December 31, 2022; (iv) we expect that a substantial portion of our inventories as
at December 31, 2022 will be consumed in 2023 and 2024, particularly following the airing of
our upcoming IP programs such as J-Style Trip season two and Yue Lai Yue Kuai Le (ᆀԸᆀҞ
ᆀ), which would empower our new retail business; and (v) we would arrange more marketing
and promotion activities to boost up the sales of long aged inventories. We will closely monitor
the utilization of our inventory from time to time to ensure that sufficient impairment has been
provided for our inventories and/or adjust our plans for procurement of raw materials and
finished goods accordingly.
TV program rights
We recorded TV program rights of RMB77.2 million, nil, RMB13.6 million and RMB89.6
million as of December 31, 2019, 2020, 2021 and 2022, respectively. Our TV program rights as
of December 31, 2019 were arising from J-Style Trip season one which were fully amortized and
recognized in our cost of revenue in during the period from March to June 2020 when J-Style
Trip season one was aired. As of December 31, 2021 and 2022, we recorded TV program rights
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in the amount of RMB13.6 million and RMB89.6 million which was arising from Yue Lai Yue
Kuai Le (ᆀԸᆀҞᆀ ) and J-Style Trip season two. As at the Latest Practicable Date, as both Yue
Lai Yue Kuai Le (ᆀԸᆀҞᆀ ) and J-Style Trip season two were under production, our TV
program rights as at December 31, 2022 had not been recognized in our cost of revenue. It is
expected that J-Style Trip season two and Yue Lai Yue Kuai Le (ᆀԸᆀҞᆀ ) will be aired in the
second half of 2023, and the relevant TV program rights would be recognized in our cost of
revenue accordingly.
Our Directors assessed the net realizable amount of the TV program rights as at each
balance sheet date in order to determine whether any impairment provision is required to be
made. The net realizable amount is estimated by reference to the advertising and other related
income to be generated from the broadcast of the TV program based on confirmed order and/or
letter of intent received by our Group less cost of completion of the TV program. Based on our
Directors’ best estimate, as at each balance sheet date, the TV program rights are profit
generating with income exceeding related production cost, indicating that the net realizable
amount should exceed the carrying value of the relevant rights. Accordingly, no provision for
impairment has been made.
Trade and other receivables
Trade receivables
Trade receivables are amounts due from customers for products sold or services performed
by us in our ordinary course of business. The following table sets forth the details of our trade
receivables as of the dates indicated:
As of December 31,
2019 2020 2021 2022
(in RMB thousands)
Trade receivables
Third parties 254 12,388 26,439 39,166
Related parties – 28,708 38 38
254 41,096 26,477 39,204
Less: provision for impairment (2) (932) (400) (1,134)
Total 252 40,164 26,077 38,070
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Our total trade receivables after provision for impairment (including both current and
non-current portion) was RMB252,000, RMB40.2 million, RMB26.1 million and RMB38.1
million as of December 31, 2019, 2020, 2021 and 2022, respectively. Our trade receivables as of
December 31, 2019 and 2020 mainly arose from our IP creation and operation business as our
customers of the new retail business were generally required to make advances to us for the
products purchased by them. In 2021, we further expanded our product offerings and distribution
channels of our products and we granted credit periods to some of the distributors under the
general distribution model. For details of the terms the distribution agreements entered into
between us and our distributors, please refer to the section headed “Business – Distribution
network – General distribution model” in this prospectus. Accordingly, we also recorded trade
receivables balances arising from our new retail business as of December 31, 2021 and 2022.
Our trade receivables as of December 31, 2019 consisted primarily of a licensing fee due
from a third party for the use of our proprietary celebrity IPs on souvenir by bank. Our trade
receivables increased from RMB252,000 as of December 31, 2019 to RMB40.2 million as of
December 31, 2020. This is primarily attributable to the amount payable to us from Netflix in
connection with the broadcasting of J-Style Trip season one, and also from Beijing Master in
connection with the airing of J-Style Trip season one on Zhejiang Satellite TV in March 2020.
For further details regarding our license agreement with Netflix and Zhejiang Satellite TV ,
please refer to the section headed “Business – Our business – IP Creation and Operation – IP
content creation and management – Media content creation” in this prospectus.
Our trade receivables decreased from RMB40.2 million as of December 31, 2020 to
RMB26.1 million as of December 31, 2021 primarily due to the substantial settlement of the
trade receivable from Beijing Master in the amount of RMB27.4 million and Netflix in the
amount of RMB10.2 million during 2021, which was partially offset by the amounts receivable
from Customer D, being the distributor of, inter alias, our skincare products and products under
Dr . INYOU brand under the general distribution model, in the amount of RMB13.5 million. For
the years ended December 31, 2021 and 2022, our revenue attributable to Customer D amounted
to RMB12.0 million and RMB4.5 million, respectively, and the gross profit margin attributable
thereto was 64.1% and 50.7%, respectively.
Our trade receivables increased from RMB26.1 million as of December 31, 2021 to
RMB38.1 million as of December 31, 2022, which was mainly attributable to our IP programs
broadcasted in the fourth quarter of 2022, including (i) amounts receivable from Customer H
Group of RMB14.2 million in relation to two World-Cup related music and variety programs;
and (ii) amounts receivable from Customer C Group of RMB9.0 million in relation to an online
music show centered around Mr. Jay Chou and a promotional video for J-Style Trip season two
and the new music album of Mr. Jay Chou.
As of December 31, 2019, 2020, 2021 and 2022, we had made provision for impairment of
trade receivables (including both current and non-current portion) of RMB2,000, RMB932,000
and RMB400,000 and RMB1.1 million, respectively.
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The following table sets forth an aging analysis of our trade receivables, based on revenue
recognition date, as of the dates indicated:
As of December 31,
2019 2020 2021 2022
(in RMB thousands)
Within 30 days – 26,115 23,909 27,802
31–90 days – 210 1,127 10,161
91–120 days 254 3,301 179 768
121–365 days – 11,470 1 473
Over 365 days – – 1,261 –
Total (before the provision for
impairment) 254 41,096 26,477 39,204
The typical credit period granted to our debtors is generally ranging from five days to two
years.
During the Track Record Period, majority of our trade receivables balance were aged within
30 days. As of December 31, 2020 and 2021, we had an outstanding trade receivables balance of
RMB11.5 million and RMB1.3 million, which were aged 121–365 days and over 365 days,
respectively. The relevant amount represented the licensing fees receivable from Netflix for the
arising of J-Style Trip season one, which was under a two-year scheduled payment term.
The following table sets forth our trade receivables turnover days during the Track Record
Period:
Y ear ended December 31,
2019 2020 2021 2022
(days)
Average trade receivables turnover days
– Overall (1) 28 17 34 35
– New Retail (2) –0 (4) 11 16
– IP creation and operation (3) 412 81 142 79
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Notes:
(1) Overall trade receivables turnover days equals the average of the opening and closing trade receivables
(before provision) divided by total revenue for the relevant year and multiplied by 365 days.
(2) Trade receivables turnover days for new retail business equals the average of the opening and closing trade
receivables (before provision) relating to new retail business divided by total revenue of new retail
business for the relevant year and multiplied by 365 days.
(3) Trade receivables turnover days for IP creation and operation business equals the average of the opening
and closing trade receivables (before provision) relating to IP creation and operation business divided by
total revenue of IP creation and operation business for the relevant year and multiplied by 365 days.
(4) Figure represent insignificant amount.
Overall trade receivables turnover days
Our overall trade receivables turnover days decreased from 28 days for 2019 to 17 days for
2020, primarily due to the increase in (i) revenue from MODONG coffee which required our
distributors to make prepayments in advance; and (ii) revenue for IP creation and operation
business as a result of the airing of J-Style Trip season one from March to June 2020. The
overall trade receivables turnover days increased from 17 days for the year ended December 31,
2020 to 34 days for the year ended December 31, 2021, primarily due to (i) the increase in
receivable from a distributor of our new retail business with the balance of RMB13.5 million;
and (ii) a longer settlement period granted to Netflix where we have agreed for two years
scheduled payment term. Our overall trade receivables turnover days remained stable at 35 days
for the year ended December 31, 2022.
Trade receivables turnover days for new retail business
Our trade receivables turnover days for new retail business were nil and 0
(1) for the years
ended December 31, 2019 and 2020, respectively, as we normally require our distributors to
make prepayments in advance. Our trade receivables turnover days for new retail business
increased to 11 days for 2021 primarily due to the increase in receivable from a distributor of
our new retail business with the balance of RMB13.5 million. Our trade receivables turnover
days for new retail business further increased to 16 days for 2022, primarily due to the decrease
in revenue from new retail business as a result of the Resurgence where our business and
operations had been negatively affected by the disruptions to the operation of our logistics and
delivery service providers which had materially affected the delivery of our products to the
distributors, sub-distributors or end consumers, which was partially offset by the impact of the
significant decrease in the balance due from Customer D from RMB13.5 million as of December
31, 2021 to RMB1.0 million as of December 31, 2022.
FINANCIAL INFORMATION
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Trade receivables turnover days for IP creation and operation business
Our trade receivables turnover days for IP creation and operation business decreased from
412 days for 2019 to 81 days for 2020, primarily due to the airing of J-Style Trip season one
from March to June 2020 and settlement of the trade receivables relating to The Invincible in
prior year. Our trade receivables turnover days for IP creation and operation business further
increased from 81 days for 2020 to 142 days 2021, primarily due to a longer settlement period
granted to Netflix where we have agreed for two years scheduled payment term. Our trade
receivables turnover days for IP creation and operation business decreased from 142 days for
2021 to 79 days for 2022, primarily due to (i) the increase in our revenue from IP creation and
operation business, particularly our revenue from our cooperation with Mr. Liu Keng-hung
which had a relatively shorter credit period as compared to our other IP creation and operation
projects; and (ii) the settlement of the balance due from Netflix where we have agreed for two
years scheduled payment term.
As of May 31, 2023, RMB22.3 million, or 56.9%, of our trade receivables (before
provision for impairment) as of December 31, 2022 had been subsequently settled.
Considering (i) the subsequent settlement of our trade receivables balance as of December
31, 2022 up to May 31, 2023; (ii) the fact that a substantial portion of our trade receivables
balance as of December 31, 2022 was aged within 30 days based on revenue recognition date;
and (iii) our trade receivable as at December 31, 2022 was mainly attributable to our customers
with whom we have good business relationship or which are sizable corporation with good
reputation and financial position. In particular, our trade receivable of RMB15.9 million and
RMB9.0 million was attributable to Customer H Group and Customer C Group, respectively,
both of which are companies with their holding companies listed on the Main Board of the Stock
Exchange and hence the expected credit losses of these companies were considered to be
relatively low. Thus, our Directors consider that there is no material risk of the recoverability of
our trade receivables and the impairment provided for our trade receivables balance was
sufficient.
Bill receivables
As of December 31, 2020, we recorded bill receivables of RMB2.0 million which was
received from Beijing Master. As of December 31, 2022, we recorded bill receivables of
RMB1.0 million received from one of our customers for settlement of amounts due to our
Group.
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Other receivables
As of December 31,
2019 2020 2021 2022
(in RMB thousands)
Amounts due from related parties 29,219 4,087 – 3
Deposits 6,230 463 895 12,443
Staff advances 553 1,020 50 200
Amounts due from a third party – 26,758 25,702 –
Other receivables in respect of celebrity IP
management business – – – 10,145
Loan to third parties 3,135 3,035 – –
Others 314 262 – 402
39,451 35,625 26,647 23,193
Less: provision for impairment of other
receivables (86) (3,608) (186) (197)
Total 39,365 32,017 26,461 22,996
Our other receivables (after provision for impairment) was RMB39.4 million, RMB32.0
million, RMB26.5 million and RMB23.0 million as of December 31, 2019, 2020, 2021 and 2022,
respectively.
Amounts due from related parties
For details about the receivables due from related parties, please refer to the paragraph
headed “– Related party transactions and balances” in this section.
Deposits
Our deposits was RMB6.2 million, RMB463,000, RMB895,000 and RMB12.4 million as of
December 31, 2019, 2020, 2021 and 2022, respectively. Our deposits as of December 31, 2019,
2020 and 2021 mainly represented potential co-investment deposits, rental deposit, sundries
deposit, equipment deposit or utilities deposit with different services provided. We recorded
deposits of RMB6.2 million as of December 31, 2019 which was primarily attributable to two
lump sum of deposits of an equal amount of RMB3.0 million being placed into two companies
as deposits for the potential co-investments. Such investment was subsequently terminated and
the deposits were returned to us in 2021.
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Our deposits as of December 31, 2022 mainly represented our deposits paid to the
Marketing Agency in relation to a title sponsorship in Yue Lai Yue Kuai Le (ᆀԸᆀҞᆀ ), which
is one of our upcoming IP programs currently planning to be jointly presented by our Group and
a leading short video platform in the PRC (the “ Online Platform ”). We shall be responsible for
the planning of and soliciting sponsorship for such program. Accordingly, in May 2022, we
entered into a cooperation agreement with the agent of an online entertainment platform which is
owned by a state-owned telecommunication service provider (the “ Investor ”) for its investment
in Yue Lai Yue Kuai Le (ᆀԸᆀҞᆀ ), including title sponsorship in the amount of RMB28.0
million and licensing fees of RMB14.5 million, which shall be payable to our Group by stages
upon the broadcasting of such program. In order to expedite the cooperation with the Online
Platform, we entered into an agreement with the Marketing Agency, being a designated
advertising agent of the Online Platform, pursuant to which our Group have agreed to pay a total
of RMB28.0 million for title sponsorship of Yue Lai Yue Kuai Le (ᆀԸᆀҞᆀ ) (out of which
RMB11.2 million has been paid as deposits as of December 31, 2022) to the Marketing Agency.
As at the Latest Practicable Date, we were in the course of producing Yue Lai Yue Kuai Le (ᆀԸ
ᆀҞᆀ), which is expected to launch in the second half of 2023, after which we will receive the
investment amounts from the Investor (including its title sponsorship of RMB28.0 million from
which we can recover our payment of RMB11.2 million deposit).
Amount due from a third party
As of December 31, 2020 and 2021, we recorded amounts due from a third party in the
amounts of RMB26.8 million and RMB25.7 million, respectively. The balance represented the
prepayments for the sale of the Kunshan Tingshe Distributed Products from distributors received
by Kunshan Tingshe (through the Jointly-controlled Accounts) on behalf of us as our
Distribution Agent, partially offset by a security deposit of RMB50.0 million paid to us from
Kunshan Tingshe, which is yet to transfer to us from the Jointly-controlled Accounts to our
account. For more details of our settlement arrangement with Kunshan Tingshe and the security
deposit, please refer to the section headed “Distribution arrangement with Kunshan Tingshe –
Settlement arrangement among our Group, Kunshan Tingshe and our distributors” in this
prospectus.
Our amounts due from a third party decreased significantly from RMB25.7 million as of
December 31, 2021 to nil as of December 31, 2022 mainly because we agreed with Kunshan
Tingshe to accelerate the settlement arrangement in respect of the amounts in the
Jointly-controlled Accounts in or around September 2022. In particular, we agreed with Kunshan
Tingshe that, commencing from November 2022, Kunshan Tingshe shall transfer the amount
payable to us in respect of the prepayment received from the distributors on the working day
immediately following the date of such prepayment and Kunshan Tingshe would no longer be
required to maintain with us the security deposit of RMB50.0 million. For details, please refer to
the section headed “Distribution arrangement with Kunshan Tingshe – Settlement arrangement
among our Group, Kunshan Tingshe and our distributors” in this prospectus.
FINANCIAL INFORMATION
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Other receivables in respect of celebrity IP management business
We recorded other receivables in respect of celebrity IP management business of RMB10.1
million as at December 31, 2022 in relation to our cooperation with Mr. Liu Keng-hung and the
MCN Company. Such amount represented the amount receivable by our Group from brand
owners or the MCN Company (as the case may be) to which Mr. Liu Keng-hung, W&V and/or
the MCN Company are entitled to under the cooperation agreements entered into between our
Group (through Talent Planet) with Mr. Liu Keng-hung and W&V . Please refer to the section
headed “Cooperation with celebrities – Cooperation with Mr. Liu Keng-hung and Ms. Vivi Wang
– Cooperation under our IP creation and operation business – Cooperation in respect of events
and IP programs of Mr. Liu Keng-hung” for further details on the cooperation with the MCN
Company and our profit-sharing arrangement with Mr. Liu Keng-hung and W&V .
Loan to third parties
The balance mainly represented a loan to a third party of RMB3.1 million, RMB3.0
million, nil and nil as of December 31, 2019, 2020, 2021 and 2022 respectively. Such balance
remained stable at RMB3.1 million and RMB3.0 million as of December 31, 2019 and 2020
respectively, and further decreased to nil as of December 31, 2021 as we fully wrote off the
balance during 2021.
According to the General Lending Provisions () promulgated by the People’s
Bank of China (“ PBoC ”) in 1996 (the “ General Lending Provisions ”), financing arrangements
or money lending between non-financial institutions are prohibited. The PBoC may impose on
the non-compliant lender a fine equivalent to one to five times of the income generated (being
interests charged) from loan advancing activities between the enterprises. Notwithstanding the
General Lending Provisions, the Supreme People’s Court has made new interpretations
concerning financing arrangements and lending transactions between non-financial institutions in
the Provisions of the Supreme People’s Court on Several Issues concerning the Application of
Law in the Trial of Private Lending Cases (ʍ
), last amended in December 2020 (the “ Private Lending Provisions ”), in which
the Supreme People’s Court recognizes the validity and legality of financing arrangements and
lending transactions between non-financial institutions so long as, among other, the enterprises
entered into a loan agreement and the interest rates charged do not exceed four times of the
quoted interest rate within one year of the loan agreement. In addition, the Private Lending
Provisions and Civil Code of the PRC (Պ) set out situations that allow
the People’s Court to void a loan agreement. As confirmed by our Directors, the
above-mentioned loan to third parties did not generate any interest income.
As advised by our PRC Legal Advisors and our Directors, given the loan did not incur any
interest income and the loan arrangement will be generally recognized by the court of the PRC,
the risk of us being penalized by the PBoC is remote.
FINANCIAL INFORMATION
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Provision for impairment of other receivables
Our provision for impairment of other receivables was RMB86,000, RMB3.6 million,
RMB186,000 and RMB197,000 as of December 31, 2019, 2020, 2021 and 2022 respectively. As
of December 31, 2020, we made a provision of RMB3.0 million for a loan to a third party which
was our ex-marketing agency. Such balance was written off during the year ended December 31,
2021 due to the entering of a settlement agreement between us and such marketing agency in
May 2021, pursuant to which, it was agreed that, inter alias, we shall release our ex-marketing
agency from its obligation to repay the loan to us and our ex-marketing agency shall return our
inventories that was previously withheld by it at its warehouse.
Other non-current assets
The following table sets forth a breakdown of our other non-current assets as of the dates
indicated:
As of December 31,
2019 2020 2021 2022
(in RMB thousands)
Prepayments for purchase of staff quarters
and office premises – 53,468 50,026 50,421
Prepayments for leasehold improvement – – – 1,044
Prepayment to a related party – – – 1,376
Prepayment for software development – – – 4,800
Others 1,891 1,043 390 1,997
Total 1,891 54,511 50,416 59,638
We had other non-current assets in the amount of RMB1.9 million, RMB54.5 million,
RMB50.4 million and RMB59.6 million as of December 31, 2019, 2020, 2021 and 2022,
respectively. The significant increase in our other non-current assets from RMB1.9 million as of
December 31, 2019 to RMB54.5 million as of December 31, 2020 was primarily due to the
prepayment of RMB53.5 million to Kunshan Jiabao for the purchase of staff quarters. Our other
non-current assets decreased from RMB54.5 million as of December 31, 2020 to RMB50.4
million as of December 31, 2021 mainly due to the transfer of the prepayments for the purchase
of staff quarter as property, plant and equipment upon the completion and delivery of such staff
quarter in 2021, which was partially offset by our prepayment to Kunshan Jiabao for the
purchase of office premises pursuant to an agreement entered into in February 2021. For details
of the properties acquired from Kunshan Jiabao, please refer to the section headed “Business –
Properties – Owned properties”. For details about the purchase of properties from Kunshan
Jiabao, please refer to the paragraph headed “– Related party transactions and balances” in this
section. Our other non-current assets increased to RMB59.6 million as of December 31, 2022
mainly attributable to (i) our prepayment for leasehold improvement for our staff quarter which
FINANCIAL INFORMATION
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was newly established in 2021; (ii) prepayment of RMB4.8 million to an Independent Third
Party primarily for the development of an app for video creation and editing, which is expected
to be used for our online marketing activities; and (iii) prepayment to a related party of RMB1.4
million, which represent the non-current portion of the prepayment for the monthly service fees
payable to W&V for the artiste management services in respect of Mr. Liu Keng-hung. For
details, please refer to the paragraph headed “Related party transactions and balances” in this
section.
Prepayments and other current assets
Prepayments and other current assets primarily comprised of (i) prepayments to related
parties; (ii) prepayments to suppliers and services providers; (iii) value-added tax recoverable;
and (iv) prepayments for Listing expenses. The following table sets forth a breakdown of our
prepayments and other current assets as of the dates indicated:
As of December 31,
2019 2020 2021 2022
(in RMB thousands)
Prepayments to related parties 838 905 – 1,501
Prepayments to suppliers and services
providers 15,012 28,997 47,444 40,216
Value-added tax recoverable 751 931 1,154 3,093
Prepayments for Listing expenses – 445 5,079 8,260
Total 16,601 31,278 53,677 53,070
Prepayments to related parties
For details about the prepayment to related parties, please refer to the paragraph headed
“– Related party transactions and balances” in this section.
FINANCIAL INFORMATION
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Prepayments to suppliers and service providers
As of December 31, 2019, 2020, 2021 and 2022, the balance of our prepayments to
suppliers and service providers amounted to RMB15.0 million, RMB29.0 million, RMB47.4
million and RMB40.2 million, respectively. Set forth below is a breakdown of our prepayments
to suppliers and service providers during the Track Record Period:
As of December 31,
2019 2020 2021 2022
(in RMB thousands)
Prepayments for:
Production of products (1) 8,865 23,391 15,999 15,949
Advertising and promotion services (2) 1,395 144 25,084 15,320
Production of events and IP programs 1,951 2,790 2,710 3,244
Other
(3) 2,801 2,672 3,651 5,703
Total 15,012 28,997 47,444 40,216
Notes:
(1) Represented prepayments to our suppliers for the production of products for our new retail business.
(2) Represented prepayments to advertising agencies and other service providers of advertising and promotion
services for our products and IP programs.
(3) Mainly included prepayments for IT services consultancy and equipment, logistic and other services.
The prepayment balance as at December 31, 2019 mainly consisted of our prepayment to
our suppliers in connection with Ningbo Superstar Performance Mega Night which was held in
January 2020. Our prepayments to suppliers and services providers increased from RMB15.0
million as of December 31, 2019 to RMB29.0 million as of December 31, 2020. The outstanding
balance as of December 31, 2020 mainly consisted of our prepayment for the production of
MODONG coffee, and the production of screenplay for our events, respectively.
Our prepayments to suppliers and service providers further increased from RMB29.0
million as of December 31, 2020 to RMB47.4 million as of December 31, 2021. Our prepayment
to supplier and services providers as of December 31, 2021 mainly consisted of our prepayment
to (i) Hengmei Group for the production of MODONG coffee in the amount of RMB10.4
million; and (ii) the Marketing Agency for placement of advertisements in the amount of
RMB24.7 million. Pursuant to the agreement entered into with the Marketing Agency, the parties
agreed that, among other things, (a) we are entitled to place the relevant advertisements based
on a fixed fees, which shall not be affected by future price adjustments; and (b) we shall be
entitled to a refund of our prepayment if we were unable to utilize the prepayments during the
term of the agreement. In addition, we have established good business relation with the
FINANCIAL INFORMATION
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Marketing Agency and have successfully requested for refund in respect of our prepayments due
to delays in the production of our IP program. Accordingly, our Directors agreed to make a
relatively large sum of prepayment to the Marketing Agency for the placement of advertisements
and consider that there is no material recoverability issue in respect of our prepayment to the
Marketing Agency despite our long-aged prepayments to the Marketing Agency as of December
31, 2022. Please refer to the paragraph headed “– Description of major components of our
results of operations – Selling and marketing expenses – Advertising and marketing expenses –
Our cooperation with the Marketing Agency” in this section for further details of our
cooperation with the Marketing Agency.
Our prepayments to suppliers and service providers decreased to RMB40.2 million as of
December 31, 2022 mainly attributable to the decrease in our prepayments for advertising and
promotion services from RMB25.1 million as of December 31, 2021 to RMB15.3 million as of
December 31, 2022 due to the utilization and/or refund of part of our prepayment to the
Marketing Agency made in 2021.
The following table sets out an aging analysis of our prepayments to suppliers and service
providers as at the dates indicated:
As of December 31,
2019 2020 2021 2022
(in RMB thousands)
0–30 days 5,687 16,799 7,816 12,600
31–90 days 539 7,719 2,886 2,693
91–120 days 454 913 30,261
(3) 3,725
121–365 days 250 3,431 (2) 3,456 1,855
Over 365 days 8,082 (1) 135 3,025 (2) 19,343 (2)(3)
Total 15,012 28,997 47,444 40,216
Notes:
(1) Represented our prepayment to the supplier of beauty treatment equipment, which was our non-core
products, and had been substantially utilized in the subsequent year.
(2) Such amounts were mainly attributable to our prepayment for the potential investment in the production of
a movie in the amount of approximately US$425,000 pursuant to a co-financing agreement entered into by
us in June 2020.
(3) Such amounts mainly included our prepayment to the Marketing Agency for the placement of
advertisements for our products and our brand, which amounted to RMB24.7 million and RMB15.0 million
as of December 31, 2021 and December 31, 2022, respectively. For details of our prepayment to the
Marketing Agency, please refer to the discussion above. In particular, we plan to utilize a substantial
portion of the prepayments to the Marketing Agency for the placement of advertisement during the airing
of Yue Lai Yue Kuai Le (ᆀԸᆀҞᆀ ). As the airing schedule of Yue Lai Yue Kuai Le (ᆀԸᆀҞᆀ ) was
delayed, the relevant prepayments had not yet been utilized as at the Latest Practicable Date. It is expected
that such prepayment will be fully utilized on or before December 31, 2023.
FINANCIAL INFORMATION
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As of May 31, 2023, RMB15.4 million, or 38.2%, of our prepayments to suppliers and
services providers as of December 31, 2022 had been subsequently utilized.
Set forth below is the expected timeline for the utilization of our prepayments to suppliers
and services providers as of December 31, 2022:
From January 1 to
December 31, 2023
From January 1 to
June 30, 2024
(RMB’000) % (1) (RMB’000) % (1)
Prepayments for:
Production of products 15,949 39.7 – –
Advertising and promotion services 15,320 38.1 – –
Production of events and IP programs 284 0.7 2,960
(2) 7.4
Other 5,698 14.1 5 0.0
Total 37,251 92.6 2,965 7.4
Notes:
(1) Represented the percentage of the prepayments utilized to the total prepayments balance of the Group as of
December 31, 2022.
(2) Represented our prepayments in relation to our potential investment in the production of a movie.
Restricted bank deposits
We recorded restricted bank deposits of RMB11.0 million as of December 31, 2020. We
recorded such balance as of December 31, 2020, primarily due to our dispute with our
ex-marketing agency, and as a result, our certain bank accounts were temporarily frozen. In
January 2021, all of the funds frozen were unconditionally released. In May 2021, our bank
accounts was temporarily frozen by the local authority in Xianan pending for investigation. In
late July 2021, all of the funds temporarily frozen by Xianan Authorities were unconditionally
released. For details, please refer to the section headed “Business – Distribution network –
Distribution Agent Assisted Distribution Model – The Temporary Suspension of Bank Accounts
due to alleged pyramid selling” in this prospectus. Accordingly, we did not have any restricted
bank deposits as of December 31, 2021 and 2022.
FINANCIAL INFORMATION
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Trade and other payables
Trade Payables
As of December 31,
2019 2020 2021 2022
(in RMB thousands)
Trade payables
– Related parties 499 5,425 5,428 1,128
– Third parties 8,130 5,241 16,072 8,556
Total 8,629 10,666 21,500 9,684
Trade payables primarily represented our obligations to pay for services and goods from
suppliers in the ordinary course of business. Our suppliers generally grant us credit terms of up
to 60 days.
Our trade payables were RMB8.6 million, RMB10.7 million, RMB21.5 million and
RMB9.7 million as of December 31, 2019, 2020, 2021 and 2022, respectively.
Trade payables to related parties
For details about the trade payables to related parties, please refer to the paragraph headed
“– Related party transactions and balances” in this section.
Trade payables to third parties
Our trade payables to third parties amounted to RMB8.1 million, RMB5.2 million,
RMB16.1 million and RMB8.6 million as of December 31, 2019, 2020, 2021 and 2022,
respectively.
As of December 31, 2019, our trade payables to third parties amounted to RMB8.1 million,
which mainly consisted of payables to suppliers for their services provided for the production of
J-Style Trip season one.
Our trade payables to third parties decreased from RMB8.1 million as of December 31,
2019 to RMB5.2 million as of December 31, 2020, primarily due to the substantial settlement of
the service fees payable to our suppliers related to the production of J-Style Trip season one in
2019.
Our trade payables to third parties increased from RMB5.2 million as of December 31,
2020 to RMB16.1 million as of December 31, 2021, primarily attributable to the amounts
payables to a service provider for an online Livestreaming event in the amount of RMB3.2
million and suppliers of our health management products in the aggregated amount of RMB5.0
million.
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Our trade payables to third parties decreased from RMB16.1 million as of December 31,
2021 to RMB8.6 million as of December 31, 2022, which was primarily due to (i) the settlement
of amounts due to Supplier D, a supplier of our IP creation and operation business, of RMB3.2
million during 2022; and (ii) decrease in the amounts payable to the supplier of MODONG herb
beverage.
The following table sets forth an aging analysis of our trade payables as of the dates
indicated:
As of December 31,
2019 2020 2021 2022
(in RMB thousands)
0–60 days 7,710 2,510 19,927 8,190
61–120 days 107 6,947 753 43
121–365 days 186 372 753 66
Over 365 days 626 837 67 1,385
Total 8,629 10,666 21,500 9,684
The following table sets forth our trade payables turnover days during the Track Record
Period:
Y ear ended December 31,
2019 2020 2021 2022
(in days)
Average trade payables
turnover days
– Overall (1) 72 25 41 31
– New retail (2) 3 4 92 84 2
– IP creation and operation (3) 97 75 66 22
Notes:
(1) Overall trade payable turnover days equals the average of the opening and closing trade payables divided
by the sum of “Cost of goods sold”, “Transportation and logistics expenses”, “Cost of event planning and
management services” and “Addition to TV programs rights” for the relevant year and multiplied by 365
days.
(2) Trade payable turnover days for new retail business equals the average of the opening and closing trade
payables divided by sum of “Cost of goods sold”, and “Transportation and logistics expenses” for the
relevant year and multiplied by 365 days.
(3) Trade payable turnover days for IP creation and operation business equals the average of the opening and
closing trade payables divided by sum of “Cost of event planning and management services” and ‘Addition
to TV programs rights” for the relevant year and multiplied by 365 days.
FINANCIAL INFORMATION
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Overall trade payable turnover days
The overall trade payable turnover days decreased from 72 days for 2019 to 25 days for
2020, primarily due to the rapid growth of MODONG coffee business where our production cost
paid to Hengmei Group were required to be settled in advance; and the settlement of payable
due to a major supplier in connection with planning concerts in 12 cities in China in 2018. The
overall trade payable turnover days increased to 41 days for the year ended December 31, 2021,
primarily due to the increased trade payables balances related to new retail business following
the launch of the new products such as MODONG herb beverage, partially offset by the effect
from the increase in the cost of event planning and management services incurred in 2021. The
overall trade payable turnover days decreased to 31 days for the year ended December 31, 2022,
primarily due to the addition of TV programs rights of RMB74.8 million during 2022 and
partially offset by the impact of the lower costs of goods sold incurred as a results of the
Resurgence where our revenue of new retails business were negatively affected.
Trade payable turnover days for new retail business
Our trade payable turnover days decreased from 34 days for 2019 to nine days for 2020,
mainly due to the rapid growth of MODONG coffee business where our production cost paid to
Hengmei Group were required to be settled in advance. Our trade payable days for new retail
business increased to 28 days for the year ended December 31, 2021, mainly due to the
increased trade payables balances related to new retail business following the launch of the new
products such as MODONG herb beverage. The trade payable turnover days for new retail
business further increased from 28 days for the year ended December 31, 2021 to 42 days for
the year ended December 31, 2022, primarily due to the lower cost of goods sold incurred
during 2022 as a result of the Resurgence where our revenue of new retails business were
negatively affected.
Trade payable turnover days for IP creation and operation
The trade payable turnover days for IP creation and operation business decreased from 97
days for 2019 to 75 days for 2020, primarily due to the decrease in average trade payable
balance related to IP creation and operation business as a result of the settlement of payable due
to a major supplier in connection with planning concerts in 12 cities in China in 2018. The trade
payable turnover days for IP creation and operation business decreased to 66 days for the year
ended December 31, 2021, primarily due to the increase in the cost of event planning and
management services incurred in 2021 arising from the music talk shows and performance in
music events and variety shows planned and created by us in 2021. The trade payable turnover
days for IP creation and operation business decreased to 22 days for the year ended December
31, 2022, primarily due to (i) the addition of TV program rights of RMB74.8 million as of
December 31, 2022; and (ii) the decrease in trade payable related to IP creation and operation
business due to the settlement of trade payable balance due to Supplier D and JVR Music as of
December 31, 2021.
FINANCIAL INFORMATION
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As of May 31, 2023, RMB4.7 million, or 48.4%, of our trade payables as of December 31,
2022 had been subsequently settled.
Other payables
Our other payables and accruals consisted mainly of: (i) amounts due to related parties; (ii)
investment received for J-Style Trip season one; (iii) salaries and staff welfare payable; (iv)
other taxes payable; (v) Listing expense accrual; (vi) accrued expense; (vii) deposits from
customers; (viii) sales commission payable; (ix) refund liability; (x) amounts due to third
parties; and (xi) others. The following table sets forth a breakdown of our other payables and
accruals as of the dates indicated:
As of December 31,
2019 2020 2021 2022
(in RMB thousands)
Amounts due to related parties 72,788 11,307 – 15,946
Investment received for J-Style Trip
season one 21,400 – – –
Salaries and staff welfare payable 1,592 5,727 6,054 6,083
Other taxes payable 6,967 19,731 9,144 16,975
Listing expense accrual – 1,780 781 3,580
Accrued expense 714 1,065 1,193 1,200
Deposits from customers 11,553 5,829 6,815 4,328
Sales commission payable 3,290 20,635 – –
Refund liability 2,742 – – –
Amounts due to third parties – – – 10,176
Others
(Note) 1,300 2,574 89 1,038
Total 122,346 68,648 24,076 59,326
Note: Others mainly represented payables to administrative and miscellaneous expenses.
Amounts due to related parties
For details of our amounts due to related parties during the Track Record Period, please
refer to the paragraph headed “– Related Party Transactions and Balances” in this section.
Investment received for J-Style Trip season one
We recorded investment received for J-Style Trip season one in the amount of RMB21.4
million as of December 31, 2019, which represented the funds received by us from an
Independent Third Party for the investment in J-Style Trip season one. Such investor had
subsequently terminated its investment due to the then uncertainty in the investment return of
J-Style Trip season one amid the outbreak of COVID-19. For details, please refer to the
paragraph headed “Description of major components of our results of operation – other
gain/(losses), net” in this section.
FINANCIAL INFORMATION
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Other taxes payable
Our other taxes payable was RMB7.0 million, RMB19.7 million, RMB9.1 million and
RMB17.0 million as of December 31, 2019, 2020, 2021 and 2022, respectively. Such balances
mainly represented value-added tax payable. Our other tax payable increased significantly from
December 31, 2019 to December 31, 2020 mainly due to the increase in the revenue generated
from our new retail business. As of December 31, 2021, our other tax payable decreased to
RMB9.1 million mainly attributable to the decrease in the revenue generated from our new retail
business in 2021. Our other taxes payable increased from RMB9.1 million as of December 31,
2021 to RMB17.0 million as of December 31, 2022 mainly due to increase in output V AT
payable resulted from the increase in revenue for the fourth quarter of 2022 which had not been
settled as at December 31, 2022.
Deposits from customers
Our deposits from customers was RMB11.6 million, RMB5.8 million, RMB6.8 million and
RMB4.3 million as of December 31, 2019, 2020, 2021 and 2022, respectively. Such amount
primarily represented the security deposits paid by (i) our distributors of MODONG coffee
which were primarily received and held by Kunshan Tingshe (being our Distribution Agent). As
Kunshan Tingshe was our subsidiary prior to May 2020, the deposits received were also
recorded under our consolidated financial statements; and (ii) other distributors, including
Customer D, in accordance with the distribution agreements entered into between us and other
distributors who engage in distribution of our skincare products brought forward since 2018. The
balance of our deposits from customers decreased from RMB11.6 million as of December 31,
2019 to RMB5.8 million as of December 31, 2020, primarily due to the disposal of Kunshan
Tingshe. Our deposits from customers increased to RMB6.8 million as of December 31, 2021,
primarily due to deposits received from Customer D for our products which were newly
launched in 2021. Deposits from customers decreased from RMB6.8 million as of December 31,
2021 to RMB4.3 million as of December 31, 2022 mainly due to the cessation of our business
relationship with certain distributors and the refund of the relevant deposits to them.
Sales commission payable
We recorded sales commission payable of RMB3.3 million and RMB20.6 million as of
December 31, 2019 and 2020, respectively. As of December 31, 2019, our sales commission
payable represented the amount payable in respect of the Service Fee to Li Ting. As of
December 31, 2020, our sales commission payable mainly represented the Additional Incentive
Fee to Kunshan Tingshe. As of December 31, 2021 and 2022, no Additional Incentive Fee to
Kunshan Tingshe was payable by us as the sale of the Kunshan Tingshe Distributed Products
during the year ended December 31, 2021 and 2022 did not meet the prescribed target for the
Additional Incentive Fee. For details of the pricing arrangement between us and Kunshan
Tingshe, please refer to the section headed “Distribution arrangement with Kunshan Tingshe –
Pricing arrangement and discounts, incentives and fees in relation to the sales of Kunshan
Tingshe Distributed Products” in this prospectus.
FINANCIAL INFORMATION
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Amounts due to third parties
We recorded amounts due to third parties of RMB10.2 million as of December 31, 2022.
Such amounts mainly represented the fees payable to Mr. Liu Keng-hung and the MCN Company
in relation to our celebrity IP management services provided to brand owners or the MCN
Company (as the case may be). Please refer to the section headed “Cooperation with celebrities
– Cooperation with Mr. Liu Keng-hung and Ms. Vivi Wang – Cooperation under our IP creation
and operation business – Cooperation in respect of events and IP programs of Mr. Liu
Keng-hung” in this prospectus for further details on the cooperation with the MCN Company
and our profit-sharing arrangement with Mr. Liu Keng-hung and W&V .
Contract liabilities
Our contract liabilities mainly arose from the prepayments made by distributors for
purchase of our products which are received by our Distribution Agent Kunshan Tingshe through
the Jointly-controlled Accounts. We would account for such receipts in advance as contract
liabilities as we regard Kunshan Tingshe as our agent to receive such advance payments on our
behalf which were cleared and settled to us regularly. For more details, please refer to the
sections headed “Distribution arrangement with Kunshan Tingshe – Settlement arrangement
among our Group, Kunshan Tingshe and our distributors”, and “– Control measures against risk
of default of Kunshan Tingshe – (a) Jointly-controlled Accounts” in this prospectus and the
paragraph headed “Discussion of certain key items of consolidated statement of financial
position – Trade and other receivables – Other receivables – Other receivables – Due from a
third party” in this section. Alongside with the prepayments made by distributors, to a lesser
extent, we received prepayments from other customers for other products and licensing services.
The following table shows the contract liabilities as of the dates indicated:
As of December 31,
2019 2020 2021 2022
(in RMB thousands)
Sale of goods 11,559 63,056 54,863 24,414
Provision of IP creation and operation
service 1,977 1,477 4,490 7,009
Total 13,536 64,533 59,353 31,423
FINANCIAL INFORMATION
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We recorded total contract liabilities (including both current and non-current portion) of
RMB13.5 million, RMB64.5 million, RMB59.4 million and RMB31.4 million as of December
31, 2019, 2020, 2021 and 2022, respectively. During the Track Record Period, our contract
liabilities mainly arose from advances from distributors for the purchase of products under our
new retail business, which amounted to RMB11.6 million, RMB63.1 million, RMB54.9 million
and RMB24.4 million as of December 31, 2019, 2020, 2021 and 2022, respectively, representing
85.9%, 97.8%, 92.4% and 77.7% of our total contract liabilities as of the corresponding year
end. Our contract liabilities arising from the provision of IP creation and operation service
increased from RMB4.5 million as of December 31, 2021 to RMB7.0 million as of December 31,
2022, which was mainly attributable to payments received from certain brand owners in relation
to our celebrity IP management business.
Approximately 100%, 100% and 100% of our contract liabilities as at December 31, 2019,
2020 and 2021 had been subsequently recognized as revenue during the Track Record Period.
For details, please refer to note 28(b) of the Accountant’s Report in Appendix I to this
prospectus. As of May 31, 2023, RMB8.8 million, or 27.9%, of our contract liabilities as of
December 31, 2022 had been recognized as revenue.
Below we further sets out further details regarding the number of our distributors, the
average amount of our contract liabilities and the proportion of prepayment made by these
distributors to the total contract liabilities in relation to the sales of goods as of December 31,
2022.
No. of
distributor
Average
amount as of
December 31,
2022
Proportion of
prepayment
made by
distributors to
the total
contract
liabilities in
relation to the
sales of goods
(in RMB
thousands)
(%)
Range of prepayment
(in RMB thousands)
0–100 703 27 74.4
101–500 38 158 23.5
501–1,000 1 522 2.1
Total 742 100.0
FINANCIAL INFORMATION
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KEY FINANCIAL RATIOS
The following table sets forth certain of our key financial ratios as of the dates or for the
years indicated.
Y ear ended/as of December 31,
2019 2020 2021 2022
Gross profit margin 65.4% 50.9% 62.2% 64.7%
Net profit margin 26.2% 16.6% 11.7% 18.9%
Current ratio
(1) 1.1 times 1.4 times 1.2 times 1.3 times
Quick ratio (2) 1.0 times 1.3 times 1.1 times 1.2 times
Return on assets (3) 12.1% 23.2% 9.1% 11.7%
Return on equity (4) 88.5% 56.0% 26.0% 27.7%
Gearing ratio (5) 0.10 times 0.02 times 1.14 times 0.84 times
Notes:
(1) Current ratio is calculated based on our total current assets divided by our total current liabilities.
(2) Quick ratio is calculated based on our total current assets less inventories and divided by our total current
liabilities.
(3) Return on assets is calculated based on our net profit for the year divided by our total assets at the end of
the year and multiplied by 100%.
(4) Return on equity is calculated based on our net profit for the year divided by the total equity as of the end
of the year and multiplied by 100%.
(5) Gearing ratio is calculated based on the total borrowings (including bank borrowings, lease liabilities and
financial instrument with redemption rights) divided by total equity.
FINANCIAL INFORMATION
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--- page 473 ---
Gross profit margin and net profit margin
For further details of the gross profit margin and net profit margin, please refer to the
paragraphs headed “Description of major components of our results of operations – Gross profit
and gross profit margin” and “– Period-to-period comparison of results of operations” in this
section.
Current ratio and quick ratio
Our current ratio as of December 31, 2019, 2020, 2021 and 2022 was approximately 1.1
times, 1.4 times, 1.2 times and 1.3 times, respectively. The increase in our current ratio from 1.1
times as of December 31, 2019 to 1.4 times as of December 31, 2020 was primarily due to the
increase in current assets by RMB80.8 million as a result of the increase in trade and other
receivables and cash and cash equivalents, which outpaced the increase in current liabilities of
RMB27.7 million. Notwithstanding our current assets increased by 37.5% from RMB259.1
million as of December 31, 2020 to RMB356.2 million as of December 31, 2021, the current
ratio slightly decreased to 1.2 times as of December 31, 2021, primarily due to the increase in
current liabilities by 55.7% from RMB187.5 million as of December 31, 2020 to RMB291.8
million as of December 31, 2021 mainly resulted from financial instrument with redemption
rights of RMB163.5 million. Our current ratio increased slightly to 1.3 times as at December 31,
2022 mainly due to the increase in our current assets, which was mainly attributable to the
increase in our TV program rights. Our quick ratio was 1.0 times, 1.3 times, 1.1 times and 1.2
times as of December 31, 2019, 2020, 2021 and 2022, respectively. The quick ratio demonstrated
a similar trend as the current ratio and the reasons for the fluctuations are also similar to that of
the current ratio.
Return on assets
Our return on assets for the years ended December 31, 2019, 2020, 2021 and 2022 was
approximately 12.1%, 23.2%, 9.1% and 11.7%, respectively. The increase in our return on assets
from 2019 to 2020 was mainly due to the increase in net profit which outweighed the increase in
the total asset. Our return on assets decreased from 2020 to 2021 primarily due to the decrease
in our net profit from RMB75.6 million for the year ended December 31, 2020 to RMB42.9
million for the year ended December 31, 2021 as a result of the decrease in our revenue and
increase in our general and administrative expenses. Our return on assets increased to 11.7% for
the year ended December 31, 2022 mainly due to the fact that our net profit for 2022 increased
at a higher rate than our total assets as at December 31, 2022.
FINANCIAL INFORMATION
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--- page 474 ---
Return on equity
Our return on equity for the years ended December 31, 2019, 2020, 2021 and 2022 was
approximately 88.5%, 56.0%, 26.0% and 27.7%, respectively. Our return on equity decreased
moderately in 2020 given the increase in our equity base as a result of the issuance of ordinary
shares to our Pre-IPO investor at a consideration of HK$37.5 million. Our return on equity
further decreased from 2020 to 2021 mainly due to the decrease in our net profit from RMB75.6
million for the year ended December 31, 2020 to RMB42.9 million for the year ended December
31, 2021 as a result of the decrease in our revenue and increase in our general and
administrative expenses. Our return on equity increased to 27.7% for the year ended December
31, 2022 mainly due to the fact that our net profit for 2022 increased at a higher rate than our
total equity as at December 31, 2022.
Gearing ratio
Our gearing ratio was 0.10 times, 0.02 times, 1.14 times and 0.84 times as of December 31,
2019, 2020, 2021 and 2022, respectively. The decrease of the gearing ratio from 2019 to 2020
was primarily attributable to the increase in equity base following the profit generated and the
issuance of shares in 2020. The gearing ratio significantly increased to 1.14 times as of
December 31, 2021, primarily due to the financial instrument with redemption rights of
RMB163.5 million and borrowings of RMB20.0 million as of December 31, 2021. Our gearing
ratio decreased to 0.84 times as of December 31, 2022, primarily due to the increase in equity
base following the profit generated during 2022.
RELATED PARTY TRANSACTIONS AND BALANCES
Transactions with related parties
During the Track Record Period, we entered into transactions with certain related parties
from time to time. For a discussion of related party transactions, please refer to Note 36(b) to
the Accountant’s Report set forth in Appendix I to this prospectus.
Our Directors believe that the related party transactions were carried out on an arm’s length
basis and will not distort our results during the Track Record Period or make such results not
reflective of our future performance.
FINANCIAL INFORMATION
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--- page 475 ---
Balances with related parties
The table below sets forth the breakdowns of our balances with related parties as of the
dates indicated below.
Trade in nature:
As of December 31,
2019 2020 2021 2022
(in RMB thousands)
Trade receivables
Beijing Master – 27,407 – –
Jtea (Kunshan) – 1,019 – 23
Jesports (Beijing) – 282 38 15
– 28,708 38 38
Prepayments
Max One 838 905 – –
W&V
(1) – – – 2,877
838 905 – 2,877
Trade payables
Archstone – 4,881 1,030 140
Lu Yu Music
(2) 4 9 9–––
JVR Music – 494 4,190 984
Jtea (Kunshan) – 50 92 4
W&V
(1) –– 1 1 6–
499 5,425 5,428 1,128
Contract liabilities
Jesports (Beijing) – 1,447 – –
Jtea (Kunshan) ––1–
– 1,447 1 –
Amount due to a related party
W&V
(1) – – – 15,946
Notes:
(1) W&V is the non-controlling shareholder holding 30% of the entire issued share capital of Talent Planet.
(2)ʮ̡ (Lu Yu Music Co.)* (“ Lu Yu Music ”) is a company controlled by Mr. Chan Yu-hao, the
ultimate shareholder of 50% equity interests in Secret Music (HK).
FINANCIAL INFORMATION
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--- page 476 ---
Non-trade in nature:
As of December 31,
2019 2020 2021 2022
(in RMB thousands)
Amounts due from related parties
M a x O n e –3––
Mr. Lai 4,670 3,907 – –
Kunshan Jiabao 10,000 – N/A N/A
Jushi Creative 8,468 177 – –
Lhasa Juchuang 1,080 – – –
Kunshan Renben 1,080 – – –
Shanghai Yige 1,840 – – –
Jesports (Beijing) 2,000 – – –
M s . M a 8 1–––
W & V –––3
29,219 4,087 – 3
Amounts due to related parties
Great Essence Holdings Ltd. 35,762 – – –
Jushi Creative 10,000 – – –
Kunshan Jiabao – 531 N/A N/A
Kunshan Renben 26,742 7,742 – –
Jesports (Beijing) 3–––
M s . M a 5–––
Mr. Lai 276 3,034 – –
72,788 11,307 – –
Sales commission payables
Li Ting 3,290 N/A N/A N/A
Prepayment for purchase of staff
quarters
Kunshan Jiabao – 53,468 N/A N/A
FINANCIAL INFORMATION
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--- page 477 ---
Trade in nature
Trade receivables
As of December 31, 2019, 2020, 2021 and 2022, our trade receivables from related parties
was nil, RMB28.7 million, RMB38,000 and RMB38,000, respectively. Our trade receivables
from related parties during the Track Record Period mainly consisted of (i) the licensing fees
and advertisement fees relating to J-Style Trip season one payable to us by Beijing Master, a
PRC-established company holding 30% of the equity interest in Beijing Star Plus Master; and
(ii) purchases of MODONG coffee and ChouMate related products from Jtea (Kunshan) and
Jesports (Beijing), each of which was a wholly-owned subsidiary of Jesports (Kunshan) which
was in turn controlled by Mr. Yang, Mr. Chen and Ms. Yeh, for reselling at their outlets.
Prepayments
As of December 31, 2019, 2020, 2021 and 2022, our prepayments from related parties was
RMB838,000, RMB905,000, nil and RMB2.9 million, respectively. The prepayments as of
December 31, 2019 and 2020 were mainly arising from the services provided by Max One, a
company wholly-owned by Mr. Chen, in connection with the celebrity endorsement for one of
our products under our new retail business. We recorded prepayment to related parties of
RMB2.9 million as of December 31, 2022. Such amount represented our prepayment for the
monthly service fees payable to W&V under a service agreement entered into between Talent
Planet and W&V , pursuant to which Talent Planet engaged W&V to provide artiste management
services in relation to IP programs involving Mr. Liu Keng-hung at a monthly service fees of
HK$140,000.
Trade payable
As of December 31, 2019, 2020, 2021 and 2022, our trade payables to related parties was
RMB499,000, RMB5.4 million, RMB5.4 million and RMB1.1 million, respectively. Our trade
payable to related parties as of December 31, 2020 was mainly arising from the logistical and
coordination service fees payable to Archstone, a BVI business company wholly owned by Mr.
Chen, for its services provided to us in J-Style Trip season one. Our trade payable to related
parties as of December 31, 2021 was mainly arising from services fees payable to JVR Music,
the artiste management company of Mr. Jay Chou, for planning and coordinating the
performance participated by Mr. Jay Chou at a music event organized by a leading online music
streaming service provider in the PRC. Our trade payables to related parties as of December 31,
2022 was mainly attributable to the fees payable to JVR Music for the licensing of ChouMate
under our IP creation and operation business.
Contract liabilities
As of December 31, 2019, 2020, 2021 and 2022, contract liabilities attributable to related
parties was nil, RMB1.4 million, RMB1,000 and nil respectively. We recorded such balance with
Jesports (Beijing) as of December 31, 2020, primarily attributable to the advance payment made
by Jesports (Beijing) for MODONG coffee yet to be delivered to Jesports (Beijing).
FINANCIAL INFORMATION
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--- page 478 ---
Amount due to a related party
As of December 31, 2022, we recorded amount due to a related party in the amount of
RMB15.9 million, which represented the fees payable to W&V in relation to our celebrity IP
management services provided to brand owners or the MCN Company (as the case may be)
which commenced in 2022. For details of our cooperation with the MCN Company and our
profit-sharing arrangement with Mr. Liu Keng-hung and W&V , please refer to the section headed
“Cooperation with celebrities – Cooperation with Mr. Liu Keng-hung and Ms. Vivi Wang –
Cooperation under our IP creation and operation business – Cooperation in respect of events and
IP programs of Mr. Liu Keng-hung” in this prospectus.
Non-trade in nature
Amounts due from related parties
As of December 31, 2019, 2020, 2021 and 2022, our amounts due from the related parties
was RMB29.2 million, RMB4.1 million, nil and RMB3,000, respectively. Our amount due from
related parties as of December 31, 2019 mainly represented (i) the earnest money paid to
Kunshan Jiabao, a company of which Ms. Ma had been a director from March 2019 to August
2021, for the purchase of properties which was fully refunded in 2020; and (ii) the loan provided
by us to Jushi Creative and the consideration receivable from related parties in relation to the
disposal of Jushi Creative. The decrease in our amounts due from related parties as of December
31, 2020 was mainly due to the refund of the deposit paid by us for the properties purchased
from Kunshan Jiabao. For details of the properties acquired from Kunshan Jiabao, please refer to
the section headed “Business – Properties – Owned properties” in this prospectus. As of
December 31, 2021, all the abovementioned outstanding amounts due from our related parties
had been settled. As of December 31, 2022, we recorded amounts due from related parties of
RMB3,000, which represented the unpaid registered share capital payable by W&V as a
shareholder of Talent Planet. Such balance will be fully settled before Listing.
These amounts are unsecured, non-interest bearing and have no fixed terms of repayment.
Amounts due to related parties
As of December 31, 2019 and 2020, our amounts due to related parties was approximately
RMB72.8 million and RMB11.3 million, respectively. The decrease was mainly due to the
repayment of loans provided by Kunshan Renben and Great Essence and the settlement of
consideration payable by us to Jushi Creative in relation to the acquisition of Kunshan Star Plus
Action from Jushi Creative in 2018. As of December 31, 2021 and 2022, all the abovementioned
outstanding amounts due to our related parties had been settled.
These amounts are unsecured, non-interest bearing and have no fixed terms of repayment.
FINANCIAL INFORMATION
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--- page 479 ---
Sales commission payables
As of December 31, 2019, we recorded sales commission payable to related parties of
RMB3.3 million. The balance mainly represented the fee payable to Li Ting for her sales
commission in connection with the MODONG coffee in 2019. Li Ting was no longer our related
party upon our disposal of Kunshan Tingshe in May 2020.
Prepayment for purchase of staff quarters
We recorded prepayment to related parties as of December 31, 2020 in the amount of
RMB53.5 million which was arising from our purchase of staff quarters from Kunshan Jiabao,
which is wholly owned by WS World (Kunshan) Digital Film Culture Development Co. Ltd.,
who is an Independent Third Party. We also entered into an agreement with Kunshan Jiabao in
February 2021 for the purchase of office premises. To our best knowledge, Kunshan Jiabao is
principally engaged in property investment and development with a primarily focus in Kunshan.
Given Ms. Ma was acquainted with the management of Kunshan Jiabao since 2012, they
maintained good relationship and trust. Based on Ms. Ma’s extensive business network in
Kunshan, Ms. Ma was invited by the management of Kunshan Jiabao to provide strategic advice
and was the legal representative and director of Kunshan Jiabao from March 2019 to August
2021. Therefore, Kunshan Jiabao was treated as one of our related parties under the applicable
accounting standard.
For the avoidance of doubt, Ms. Ma was not involved in the operation of Kunshan Jiabao.
As of the Latest Practicable Date, Ms. Ma had resigned from all positions from Kunshan Jiabao.
Despite our relationship with Kunshan Jiabao, our Directors consider our related party
transaction with Kunshan Jiabao was conducted in our ordinary and usual course of business and
on normal commercial terms. Further, the consideration of the transaction and all relevant terms
are fair and reasonable, given the consideration was agreed after arm’s length negotiation
between the parties with reference to the price list published by Kunshan Jiabao.
Moreover, the Directors consider as our business operations continue to grow, we will need
more staff quarters and office space to accommodate our expanding team of staff. Furthermore,
our Directors also consider that owning and providing our own staff quarters has the positive
effect of attracting more talents. After searching for possible sites, we believe the above
properties are suitable venues for such purpose as the area in which the properties is located will
be a mature residential and commercial area for our use. Regarding the details of the properties
acquired from Kunshan Jiabao, please refer to the section headed “Business – Properties –
Owned properties”.
As Ms. Ma had ceased to be the legal representative and director of Kunshan Jiabao in
August 2021, the balance of our prepayment to Kunshan Jiabao as of December 31, 2021 was no
longer recorded as balances with related parties. For details of the balance of prepayment to
Kunshan Jiabao as of December 31, 2022, please refer to the paragraph headed “– Discussion of
certain key items of consolidated statement of financial position – Other non-current assets” in
this section.
All non-trade balances with related parties will be fully settled upon Listing.
FINANCIAL INFORMATION
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--- page 480 ---
LIQUIDITY AND CAPITAL RESOURCES
During the Track Record Period and up to the Latest Practicable Date, we had historically
met our working capital and other capital requirements primarily through cash generated from
our operating activities and capital injection from our Shareholders. We had cash and cash
equivalents of RMB29.3 million, RMB121.0 million, RMB211.9 million and RMB182.6 million
as of December 31, 2019, 2020, 2021 and 2022, respectively.
The following table sets forth a summary of our cash flows for the years indicated:
Y ear ended December 31,
2019 2020 2021 2022
(in RMB thousands)
Operating cash flows before movements in
working capital 32,815 115,294 83,259 121,785
Movement in working capital (29,996) 223,688 (43,842) (98,760)
Cash generated from operations 2,819 338,982 39,417 23,025
Interest received 62 479 1,248 2,443
Income tax paid (1,245) (11,008) (49,950) (19,973)
Net cash inflow/(outflow) from operating
activities 1,636 328,453 (9,285) 5,495
Net cash outflow from investing activities (17,824) (197,722) (42,943) (24,863)
Net cash inflow/(outflow) from financing
activities 28,442 (39,030) 143,615 (11,387)
Net increase/(decrease) in cash and cash
equivalents 12,254 91,701 91,387 (30,755)
Cash and cash equivalents at beginning of the
year 17,044 29,298 120,962 211,873
Effect of exchange rate changes on cash and cash
equivalents – (37) (476) 1,515
Cash and cash equivalents at end of the year 29,298 120,962 211,873 182,633
FINANCIAL INFORMATION
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--- page 481 ---
Taking into account the financial resources available to us, including existing borrowings,
cash and cash equivalents, cash generated from operations and the estimated net proceeds from
the Global Offering, our Directors are of the view that we have sufficient working capital to
meet our present requirements and for the next 12 months from the date of this prospectus.
Net cash inflow/(outflow) from operating activities
Net cash inflow/(outflow) from operating activities reflected the (i) cash generated from
operations; (ii) interests received; and (iii) income tax paid.
For the year ended December 31, 2019, we had net cash flows inflowed from operating
activities of RMB1.6 million, which was the result of cash generated from operations of RMB2.8
million and income tax payment of RMB1.2 million.
The cash generated from operations of RMB2.8 million primarily represented profit before
tax of RMB31.8 million, adjusted for (i) certain non-cash gains, loss and expenses, mainly
included the depreciation of right-of-use assets of RMB0.8 million; and (ii) certain working
capital items that negatively affected operating cash flow, mainly included the increase in TV
program rights of RMB35.2 million and inventories of RMB9.1 million, being partially offset by
changes in certain working capital items that positively affected operating cash flow, mainly
included the increase in trade and other payables in the amount of RMB10.3 million.
For the year ended December 31, 2020, we had net cash flows inflowed from operating
activities of RMB328.5 million, which was the result of cash generated from operations of
RMB339.0 million and income tax payment of RMB11.0 million.
The cash generated from operations of RMB339.0 million primarily represented profit
before tax of RMB113.8 million, adjusted for (i) certain non-cash gains, loss and expenses,
mainly included other income from settlement of investment for J-Style Trip season one of
RMB9.4 million and net impairment losses on financial assets of RMB4.5 million; and (ii)
certain working capital items that positively affected operating cash flow, mainly included (a)
the realization of TV programs rights of RMB77.2 million resulting from the airing of J-Style
Trip season one on Zhejiang Satellite TV in March 2020; (b) the increase in trade and other
payables of RMB90.8 million primarily attributable to the disposal of Kunshan Tingshe; (c) the
increase of contract liabilities of RMB51.4 million mainly due to increase in prepayments made
by distributors for purchase of our coffee products which are received by our Distribution Agent
Kunshan Tingshe through the Jointly-controlled Accounts; and (d) decrease in trade and other
receivables of RMB31.3 million, which was partially offset by the increase in inventories of
RMB11.0 million which was in line with the increase in the stock of new products such as
Chaxiaojie and Dr .mg in preparation of the launch.
FINANCIAL INFORMATION
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--- page 482 ---
For the year ended December 31, 2021, we had net cash flows outflowed from operating
activities of RMB9.3 million, which was the result of cash generated from operations of
RMB39.4 million and income tax payment of RMB50.0 million.
The cash generated from operations of RMB39.4 million primarily represented profit before
tax of RMB64.7 million, adjusted for (i) certain non-cash gains, loss and expenses, mainly
included finance costs of RMB10.2 million and impairment losses on inventories in the amount
of RMB6.2 million; and (ii) certain working capital items that negatively affected operating cash
flow, mainly included (a) the decrease in trade and other payables of RMB23.9 million; (b)
increase in prepayments and other current assets of RMB17.8 million; and (c) increase in TV
program rights of RMB13.6 million; which was partially offset by the decrease of trade and
other receivables of RMB22.5 million. We had net cash outflows from operating activities of
RMB9.3 million for the year ended December 31, 2021 mainly due to (i) the settlement of
amounts due to related parties of RMB11.3 million; (ii) the increase in prepayments to suppliers
and services providers by RMB18.4 million; (iii) cash used in the production of Yue Lai Yue
Kuai Le (ᆀԸᆀҞᆀ ) and J-Style Trip season two; and (iv) the income tax paid during 2021.
For the year ended December 31, 2022, we recorded net cash inflow from operating
activities of RMB5.5 million, which was resulted from cash generated from operations of
RMB23.0 million, as adjusted by interest received of RMB2.4 million and income tax paid of
RMB20.0 million.
Our cash generated from operations of RMB23.0 million primarily represented profit before
tax of RMB93.1 million for 2022, adjusted for (i) certain non-cash gains, loss and expenses,
mainly included exchange loss of RMB13.7 million and net impairment losses on inventories of
RMB6.7 million; and (ii) certain working capital items that negatively affected operating cash
flow, mainly included increase in TV program rights of RMB76.0 million and decrease in
contract liabilities of RMB27.9 million.
Net cash outflow from investing activities
For the year ended December 31, 2019, we had net cash outflowed from investing activities
of RMB17.8 million, primarily due to the (i) loans to Jushi Creative and Jesports (Beijing) of
RMB11.0 million; and (ii) payments of deposit for purchase of office premises of RMB10.0
million, which was partially offset by repayment of loans by Jushi Creative of RMB4.4 million.
For the year ended December 31, 2020, we had net cash outflowed from investing activities
of RMB197.7 million, primarily due to (i) net of cash of disposed subsidiaries of RMB151.2
million; and (ii) payments for the purchase of a new office building, including the payments of
deposit, in the total amount of RMB56.0 million; which was partially offset by the (iii)
repayment of loans to Jushi Creative and Jesports (Beijing) of RMB10.5 million and (iv) the
refund of the deposit paid for the purchase of office premises of RMB10.0 million in 2019.
FINANCIAL INFORMATION
– 472 –


--- page 483 ---
For the year ended December 31, 2021, we had net cash outflowed from investing activities
of RMB42.9 million, primarily due to payments for property, plant and equipment of RMB53.9
million, which was partially offset by the decrease in restricted bank deposits of RMB11.0
million.
For the year ended December 31, 2022, we had net cash outflowed from investment
activities of RMB24.9 million, which was mainly attributable to cash used in payments for other
non-current assets and property, plant and equipment in the amount of RMB15.1 million and
RMB6.3 million, respectively.
Net cash inflow/(outflow) from financing activities
For the year ended December 31, 2019, our net cash inflowed from financing activities was
RMB28.4 million, primarily due to the (i) loans from related parties of RMB34.6 million; (ii)
proceeds from joint investors in production of J-Style Trip season one of RMB15.0 million;
which was partially offset by (iii) repayment of loans to related parties of RMB20.2 million.
For the year ended December 31, 2020, our net cash outflowed from financing activities
was RMB39.0 million, primarily due to the (i) repayment of loans to related parties of RMB19.0
million; (ii) cash paid to Shareholders for Reorganization of RMB12.0 million; and (iii)
settlement of financial liabilities in relation to J-Style Trip season one of RMB12.0 million since
it was released in 2020.
For the year ended December 31, 2021, we had net cash inflowed from financing activities
of RMB143.6 million, primarily attributable to (i) proceeds from issuance of Shares pursuant to
our Pre-IPO investment of RMB166.1 million; (ii) net proceeds from borrowings of RMB20.0
million, which was partially offset by (iii) dividend payments to Shareholders of RMB16.7
million; and (iv) repayment of loans to related parties of RMB11.5 million.
For the year ended December 31, 2022, we had net cash outflowed from financing activities
of RMB11.4 million, primarily attributable to cash used in the repayments of borrowings of
RMB5.0 million and lease payments of RMB3.1 million.
FINANCIAL INFORMATION
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--- page 484 ---
Current assets and current liabilities
The following table sets forth our current assets and liabilities as of the dates indicated:
As of December 31,
As of
April 30,
20232019 2020 2021 2022
(in RMB thousands)
(unaudited)
Current assets
Inventories 15,510 24,107 24,490 28,828 25,546
TV programs rights 77,247 – 13,594 89,602 106,339
Trade and other receivables 39,617 71,760 52,538 62,066 44,244
Prepayments and other current assets 16,601 31,278 53,677 53,070 46,199
Restricted bank deposits – 11,008 – – –
Cash and cash equivalents 29,298 120,962 211,873 182,633 188,247
Total current assets 178,273 259,115 356,172 416,199 410,575
Current liabilities
Trade and other payables 130,975 79,314 45,576 69,010 16,733
Contract liabilities 12,850 64,533 59,308 31,385 64,326
Current income tax liabilities 14,932 42,076 15,153 24,575 26,534
Lease liabilities 1,013 1,573 3,281 1,872 1,153
Financial instrument with redemption
rights – – 163,520 178,654 176,412
Borrowings – – 5,000 5,000 5,000
Total current liabilities 159,770 187,496 291,838 310,496 290,158
Net current assets 18,503 71,619 64,334 105,703 120,417
FINANCIAL INFORMATION
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--- page 485 ---
April 30, 2023 as compared to December 31, 2022
Our current assets decreased by RMB5.6 million from RMB416.2 million as of December
31, 2022 to RMB410.6 million as of April 30, 2023, which was mainly attributable to (i) the
decrease in trade and other receivables by RMB17.8 million; and (ii) the decrease in
prepayments and other current assets by RMB6.8 million, which was partially offset by the
increase in TV program rights by RMB16.7 million.
Our current liabilities decreased by RMB20.3 million from RMB310.5 million as of
December 31, 2022 to RMB290.2 million as of April 30, 2023, which was mainly attributable to
the decrease in trade and other payables by RMB52.3 million, which was partially offset by the
increase in contract liabilities by RMB32.9 million.
December 31, 2022 as compared to December 31, 2021
Our current assets increased by RMB60.0 million from RMB356.2 million as of December
31, 2021 to RMB416.2 million as of December 31, 2022, which was mainly attributable to (i)
the increase in TV programs rights by RMB76.0 million; and (ii) the increase in trade and other
receivables by RMB9.5 million, partially offset by the decrease in cash and cash equivalent by
RMB29.2 million.
Our current liabilities increased by RMB18.7 million from RMB291.8 million as of
December 31, 2021 to RMB310.5 million as of December 31, 2022, which was mainly
attributable to (i) the increase in trade and other payables by RMB23.4 million; and (ii) the
increase in the value of financial instrument with redemption rights by RMB15.1 million,
partially offset by the decrease in contract liabilities by RMB27.9 million.
December 31, 2021 as compared to December 31, 2020
Our current assets increased from RMB259.1 million as of December 31, 2020 to
RMB356.2 million as of December 31, 2021, which was primarily attributable to (i) an increase
in cash and cash equivalents from RMB121.0 million as of December 31, 2020 to RMB211.9
million as of December 31, 2021, which was primarily attributable to the injection of capital
from our Pre-IPO investment; (ii) the recognition of TV programs rights of RMB13.6 million in
connection with the production of J-Style Trip season two; and (iii) the increase of prepayments
and other current assets from RMB31.3 million as of December 31, 2020 to RMB53.7 million as
of December 31, 2021.
FINANCIAL INFORMATION
– 475 –


--- page 486 ---
Our current liabilities increased from RMB187.5 million as of December 31, 2020 to
RMB291.8 million as of December 31, 2021, which as primarily attributable to the recognition
of financial instrument with redemption rights of RMB163.5 million in connection with our
Pre-IPO investment, where the Company may be required to repurchase our Shares issued to one
of our Pre-IPO investors upon the occurrence of certain circumstances, and such contractual
obligation constituted financial liability under the prevailing accounting treatment. Please refer
to Note 30 to the Accountant’s Report in Appendix I to this Prospectus for details, which was
partially offset by the decrease of (i) trade and other payables from RMB79.3 million as of
December 31, 2020 to RMB45.6 million as of December 31, 2021; and (ii) decrease in current
income tax liabilities from RMB42.1 million as of December 31, 2020 to RMB15.2 million as of
December 31, 2021.
December 31, 2020 as compared to December 31, 2019
Our current assets increased from RMB178.3 million as of December 31, 2019 to
RMB259.1 million as of December 31, 2020. The increase was primarily attributable to (i) a
significant increase in trade and other receivables from RMB39.6 million as of December 31,
2019 to RMB71.8 million as of December 31, 2020, which was in line with the increase in sales
revenue in MODONG coffee in 2020; (ii) a significant increase in cash and cash equivalents
from RMB29.3 million as of December 31, 2019 to RMB121.0 million as of December 31, 2020,
which was primarily attributable to the cash collected from the sales of MODONG coffee; and
(iii) an increase in inventory from RMB15.5 million as of December 31, 2019 to RMB24.1
million as of December 31, 2020. The increase in current assets was partially offset by a
decrease of TV programs rights from RMB77.2 million as of December 2019 to nil as of
December 31, 2020, as J-Style Trip season one finished airing.
Our current liabilities increased from RMB159.8 million as of December 31, 2019 to
RMB187.5 million as of December 31, 2020. The increase was primarily attributable to a
significant increase in the contract liabilities from RMB12.9 million as of December 31, 2019 to
RMB64.5 million as of December 31, 2020, which was primarily attributable to the payment
made to us by distributors for MODONG coffee yet to be delivered and in line with the increase
in sales revenue.
FINANCIAL INFORMATION
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--- page 487 ---
INDEBTEDNESS
The following table shows our bank borrowings, lease liabilities and financial instrument
with redemption rights as of the dates indicated:
As of December 31,
As of
April 30,
20232019 2020 2021 2022
(in RMB thousands)
(unaudited)
Non-Current
Bank borrowings – – 15,000 10,000 8,333
Lease liabilities 1,484 1,409 1,035 220 98
Subtotal 1,484 1,409 16,035 10,220 8,431
Current
Bank borrowings – – 5,000 5,000 5,000
Lease liabilities 1,013 1,573 3,281 1,872 1,153
Financial instrument with redemption
rights – – 163,520 178,654 176,412
Subtotal 1,013 1,573 171,801 185,526 182,565
Total 2,497 2,982 187,836 195,746 190,996
FINANCIAL INFORMATION
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--- page 488 ---
Bank borrowings
We did not have any outstanding balance of bank borrowings as of December 31, 2019 and
2020. As of December 31, 2021 and 2022 and April 30, 2023, we had outstanding bank
borrowings in the amounts of RMB20.0 million, RMB15.0 million and RMB13.3 million,
respectively, which arose from the mortgage loan entered into in January 2021 for the purchase
of staff quarters from Kunshan Jiabao.
As at April 30, 2023, being the latest practicable date for the purpose of the indebtedness
statement, we did not have any unutilized banking facilities.
Lease liabilities
The following table shows the lease liabilities as of the dates indicated:
As of December 31,
As of
April 30,
20232019 2020 2021 2022
(in RMB thousands)
(unaudited)
Lease liabilities
Current 1,013 1,573 3,281 1,872 1,153
Non-current 1,484 1,409 1,035 220 98
Total 2,497 2,982 4,316 2,092 1,251
We recognized total lease liabilities of RMB2.5 million, RMB3.0 million, RMB4.3 million,
RMB2.1 million and RMB1.3 million as of December 31, 2019, 2020, 2021, 2022 and April 30,
2023, respectively. The continuous increase of lease liabilities from 2019 to 2021 was mainly
due to the new rental agreements that we entered into. Our lease liabilities decreased to RMB2.1
million and RMB1.3 million as of December 31, 2022 and April 30, 2023, respectively mainly
due to the early termination of one of our leases in 2022. For further information regarding our
lease liabilities, please refer to Note 26 to the Accountant’s Report in Appendix I to this
prospectus.
Financial instrument with redemption rights
Pursuant to the investment agreement entered into between Bradbury and us, we maybe
required by Bradbury to repurchase all our Shares held by Bradbury if, among others, our Shares
fail to list on the Stock Exchange on or before December 31, 2021. Should Bradbury decide to
exercise such redemption right, we will be required to repurchase such Shares at an aggregate
consideration of HK$200,000,000, being the consideration paid by Bradbury for the Pre-IPO
FINANCIAL INFORMATION
– 478 –


--- page 489 ---
Investment. As the repurchase option given to Bradbury is an unavoidable obligation of our
Group, the investment from Bradbury was regarded as financial instruments with redemption
rights instead of an equity. As of December 31, 2022 and April 30, 2023, the financial
instrument with redemption rights amounted to RMB178.7 million and RMB176.4 million,
respectively. The redemption rights of Bradbury was suspended immediately prior to the
submission of our Listing application and remained suspended as at the Latest Practicable Date.
For details, please refer to the section headed “History, Development and Reorganization –
Pre-IPO investments – Special rights granted to the Pre-IPO Investors” in this prospectus.
Our Directors confirm that, as of the Latest Practicable Date, there is no material changes
in our indebtedness since April 30, 2023.
CONTINGENT LIABILITIES
We are not currently involved in any material legal proceedings, nor are we aware of any
pending or potential material legal proceedings involving us. If we are involved in such material
legal proceedings, we would record any loss or contingency when, based on information then
available, it is likely that a loss has been incurred and the amount of the loss can be reasonably
estimated.
As of the Latest Practicable Date, we did not have any material contingent liabilities or
guarantees.
CAPITAL EXPENDITURES
Our capital expenditures mainly consisted of the payments for property, plant and
equipment and intangible assets. For the years ended December 31, 2019, 2020, 2021 and 2022,
our total capital expenditures amounted to RMB1.2 million, RMB56.1 million, RMB54.4 million
and RMB9.7 million, respectively. During the Track Record Period, we financed our capital
expenditures primarily with our cash and cash equivalents and cash flows from our operating
activities and financing activities, such as cash advance from related companies, bank
borrowings and proceeds from issuance of ordinary shares to a pre-IPO investor. We plan to
fund our planned capital expenditures using cash generated from operating activities and net
proceeds received from the Global Offering. Please refer to the section headed “Future plans and
use of proceeds” in this prospectus for more details. We will continue to make capital
expenditures to support the growth of our business. We may reallocate the funds to be utilized
on capital expenditures based on our ongoing business needs.
CONTRACTUAL OBLIGATIONS
Capital Commitments
We did not have any significant capital commitments outstanding as of December 31, 2019,
2020, 2021 and 2022.
FINANCIAL INFORMATION
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--- page 490 ---
OFF-BALANCE SHEET ARRANGEMENTS
As of the Latest Practicable Date, we had not entered into any off-balance sheet
arrangement.
QUALITATIVE AND QUANTITATIVE DISCLOSURE ABOUT MARKET RISKS
Generally, we are exposed to various types of financial risks, including foreign exchange
risk, cash flow and fair value interest rate risk, price risk, credit risk and liquidity risk.
Foreign exchange risk
Foreign exchange risk arises when future commercial transactions or recognized assets and
liabilities are denominated in a currency that is not our functional currency. The consolidated
financial statements are presented in Renminbi, which is our Company’s functional currency and
our presentation currency. We manage our foreign exchange risk by performing regular reviews
of our net foreign exchange exposures, wherever possible.
We operate mainly in the PRC with most of the transactions settled in Renminbi. Our
management considers that the business is not exposed to any significant foreign exchange risk
as we have no significant financial assets or liabilities denominated in currencies other than the
respective functional currencies of our operating entities. We did not hedge against any
fluctuation in foreign currency during the Track Record Period.
During the Track Record Period, we recognized total net foreign exchange gains of
RMB34,000 and RMB3.6 million for the years ended December 31, 2020 and 2021, respectively,
and net foreign loss of RMB9.9 million for the year ended December 31, 2022.
Cash flow and fair value interest rate risk
Our income and operating cash flows are substantially independent of changes in market
interest rates and we have no significant interest-bearing assets except for cash and cash
equivalents, details of which have been disclosed in Note 20 to the Accountant’s Report in
Appendix I to this prospectus. Our Directors do not anticipate there is any significant impact to
interest-bearing assets resulted from the changes in interest rates, because the interest rates of
interest-bearing assets are not expected to change significantly.
We closely monitor trend of interest rate and its impact on our interest rate risk exposure.
We currently have not used any interest rate swap arrangements.
FINANCIAL INFORMATION
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--- page 491 ---
Price risk
We are exposed to price risk in respect of the financial assets measured at fair value
through profit or loss, including investments in wealth management products. To manage its
price risk arising from the investments, we diversify its investment portfolio. The sensitivity
analysis is performed by our management, please refer to Note 3.3(a) to the Accountant’s Report
in Appendix I to this prospectus for details.
Credit risk
Credit risk is managed on a group basis. The credit risk of us mainly arises from financial
assets, cash and cash equivalents, restricted cash deposits and trade and other receivables. The
carrying amounts of these balances represent our maximum exposure to credit risk in relation to
these assets.
In order to minimize the credit risk, our management has delegated a team responsible for
determination of credit limits, credit approvals and other monitoring procedures to ensure that
follow-up action is taken to recover overdue debts. In addition, we review the recoverable
amount of each individual debt at the end of the reporting period to ensure that adequate
impairment losses are made for irrecoverable amounts. In this regard, our management considers
that our credit risk is significantly reduced.
We have two types of financial assets that are subject to HKFRS 9’s new expected credit
loss model, including trade receivables and long-term receivables and other receivables. While
cash and cash equivalents, other financial assets at amortized cost and bills receivables are also
subject to the impairment requirements of HKFRS 9, the identified impairment loss was
immaterial. Our management has assessed the expected credit losses based on the background
and reputation of the customers, historical settlement records and past experience. Our
management also considered the default rates and loss given default from external rating agency
report and forward-looking information that may impact the customers’ ability to repay the
outstanding balances. Trade receivables and relating to customers with known financial
difficulties or significant doubt on collection of receivables are considered to be subjected to
higher risk of default and are tested individually.
On that basis, the loss allowance as of December 31, 2019, 2020, 2021 and 2022 was
determined for trade receivables and other receivables.
FINANCIAL INFORMATION
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--- page 492 ---
Liquidity risk
To manage the liquidity risk, management monitors rolling forecasts of the Group’s
liquidity reserve and cash and cash equivalents on the basis of expected cash flow. The Group
expects to fund the future cash flow needs through internally generated cash flows from
operations.
The table below analyzes our financial liabilities into relevant maturity grouping based on
the remaining period at the statement of financial position date to the contractual maturity date.
The amounts disclosed in the table are the contractual undiscounted cash flows.
On demand
or less than
1 year
Between 1
and 2 years
Between 2
and 5 years Total
(in RMB thousands)
As of December 31, 2019
Trade and other payables (1) 122,416 – – 122,416
Lease liabilities 1,125 665 980 2,770
Total 123,541 665 980 125,186
As of December 31, 2020
Trade and other payables (1) 53,856 – – 53,856
Lease liabilities 1,843 981 377 3,201
Total 55,699 981 377 57,057
FINANCIAL INFORMATION
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--- page 493 ---
On demand
or less than
1 year
Between 1
and 2 years
Between 2
and 5 years Total
(in RMB thousands)
As of December 31, 2021
Trade and other payables (1) 30,378 – – 30,378
Borrowing and interest payables 6,023 5,734 10,603 22,360
Lease liabilities 3,694 1,203 – 4,897
Financial instrument with
redemption rights 163,520 – – 163,520
Total 203,615 6,937 10,603 221,155
As of December 31, 2022
Trade and other payables
(1) 45,952 – – 45,952
Borrowings and interest
payables 5,734 5,447 5,156 16,337
Lease liabilities 2,059 231 – 2,290
Financial instrument with
redemption rights 178,654 – – 178,654
Total 232,399 5,678 5,156 243,233
Note:
(1) Excluding salaries and staff welfare payable and other taxes payable.
FINANCIAL INFORMATION
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--- page 494 ---
PROPERTY V ALUATION
As at the Latest Practicable Date, we had interests in two properties located in Kunshan
City in Jiangsu Province of the PRC, which were being used or expected to be used as our staff
quarter and office premises. Jones Lang LaSalle Corporate Appraisal and Advisory Limited, an
independent property valuer, has valued our property interests as of March 31, 2023. For details,
please refer to the property valuation report in Appendix III to this prospectus.
The following table sets forth the reconciliation of the carrying values of our property
interests as of December 31, 2022 as reflected in our consolidated financial statements included
in Appendix I to this prospectus; and the market value of such property interests as of March 31,
2023 as disclosed in the property valuation report (the “ Valuation Report ”) in Appendix III to
this prospectus.
RMB’000
Net book value of our property interests as of December 31, 2022
(audited)
Buildings included in property, plant and equipment 53,399
Prepayments for purchase of office premises
(Note 1) 50,421
103,820
Movement during the period from December 31, 2022 to
March 31, 2023 (unaudited)
Less: Depreciation (unaudited) (409)
Net book value of our property interests as of March 31, 2023
(unaudited) 103,411
Add: Valuation surplus before tax 4,589
Market value of our property interests as of March 31, 2023
as set forth in the Valuation Report (Note 2) 108,000
Notes:
1. As of December 31, 2022, the properties to be used as our office premises (the “ Office Premises ”) have
not been delivered to us, therefore, the net book value of such properties were recorded as prepayments
under other non-current assets of our consolidated financial statements for 2022.
2. As of March 31, 2023, the title of the Office Premises has not been vested with us, and therefore, no
commercial value was attributable to the Office Premises in the Valuation Report. Based on the Valuation
Report, the market value of the Office Premises as of March 31, 2023 was estimated to be RMB52.0
million, on the assumption that the relevant title certificates have been obtained and we were entitled to
freely transfer, lease, mortgage or otherwise dispose of such property.
FINANCIAL INFORMATION
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--- page 495 ---
DIVIDEND POLICY AND DISTRIBUTABLE RESERVES
Dividend policy
We are a holding company incorporated under the laws of the Cayman Islands. As a result,
the payment and amount of any future dividend will also depend on the availability of dividends
received from our subsidiaries. The PRC laws require that dividends be paid only out of the
profit for the year calculated according to the PRC accounting principles, which differ in certain
aspects from the generally accepted accounting principles in other jurisdictions, including
HKFRS. PRC laws require foreign-invested enterprises to set aside at least 10% of its after-tax
profits as the statutory common reserve fund until the cumulative amount of the statutory
common reserve fund reaches 50% or more of such enterprises’ registered capital, if any, to fund
its statutory common reserves, which are not available for distribution as cash dividends.
Dividend distribution to our Shareholders is recognized as a liability in the period in which
the dividends are approved by our Shareholders or Directors, where appropriate. During the
Track Record Period, we declared dividends of HK$20,000,000 to our Shareholders. In addition,
on June 13, 2023, we declared a special dividend of HK$60.0 million to our then Shareholders
which is expected to be paid before the Listing. We do not have any dividend policy and, save
for the abovementioned special dividend, we have no present plan to pay any dividends to our
Shareholders in the foreseeable future. A decision to declare and pay any dividends would
require the approval of the Board and will be at their discretion. In addition, any final dividend
for a financial year will be subject to Shareholders’ approval. As advised by our legal advisors
on Cayman Islands law, under Cayman Islands law, dividends may be paid out of profits or the
credit standing in our share premium account, and a position of accumulated losses does not
necessarily restrict us to declare and pay dividends to our Shareholders, as dividends may still
be declared and paid out of the credit standing in our share premium account notwithstanding
our profitability, provided that immediately after payment of such dividends, the Company is
able to pay its debts as they fall due in the ordinary course of business.
The Board will take into account of the following factors when determining whether
dividends are to be declared and paid:
 our result of operations;
 our cash flows;
 our financial condition;
 our Shareholders’ interests;
 general business conditions and strategies;
 our capital requirements;
 relevant legal requirements; and
 other factors that the Board may deem relevant.
FINANCIAL INFORMATION
– 485 –


--- page 496 ---
Distributable reserves
Our Company was incorporated in the Cayman Islands as an exempted company with
limited liability on January 3, 2020. Please refer to Notes 24 and 25 to the Accountant’s Report
as set out in Appendix I to this prospectus for details of our Company’s reserves.
LISTING EXPENSES
Listing expenses represent professional fees, underwriting commissions and other fees
incurred in connection with the Listing and the Global Offering. Based on the Offer Price of
HK$4.25 per Offer Share, the total Listing expenses (including underwriting commissions)
estimated to be approximately RMB87.4 million, and represent approximately 18.4% of the
gross proceeds from the Global Offering. Among the total listing expenses, approximately
RMB78.4 million is expected to be borne by us and approximately RMB9.0 million is expected
to be borne by the Selling Shareholder. Listing expenses to be borne by us include (i)
underwriting commission of approximately RMB14.7 million, and (ii) non-underwriting related
expenses of approximately RMB63.7 million, which consist of (a) fees and expenses of the sole
sponsor, legal advisors and Reporting Accountant of approximately RMB40.9 million; and (b)
other fees and expenses of approximately RMB22.8 million.
Up to December 31, 2022, we have incurred RMB36.8 million as Listing expenses for the
Global Offering, of which RMB28.5 million was charged to our consolidated statements of
comprehensive income and RMB8.3 million was recorded as prepayment in the consolidated
statement of financial position will be accounted for as a deduction from our equity upon the
Listing. We estimate that an additional Listing expenses of RMB41.6 million (including
underwriting commissions of RMB14.7 million, assuming the Over-allotment Option is not
exercised), will be further incurred by us, of which RMB30.4 million is expected to be charged
to our consolidated statement of comprehensive income and RMB11.2 million is expected to be
charged against equity upon the Listing. Our Directors do not expect such expenses to materially
impact our results of operations.
UNAUDITED PRO FORMA ADJUSTED NET TANGIBLE ASSETS
The following unaudited pro forma statement of adjusted net tangible assets of the Group
prepared in accordance with Rule 4.29 of the Listing Rules is for illustrative purposes only, and
is set out below to illustrate the effect of the Global Offering on the net tangible assets of the
Group attributable to the Shareholders of the Company as of December 31, 2022 as if the Global
Offering had taken place on December 31, 2022, assuming the Over-allotment Option is not
exercised.
FINANCIAL INFORMATION
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--- page 497 ---
This unaudited pro forma statement of adjusted net tangible assets has been prepared for
illustrative purposes only, and because of its hypothetical nature, it may not give a true picture
of the consolidated net tangible assets of the Group as at December 31, 2022 or at any future
dates following the Global Offering. It is prepared based on the consolidated net assets of the
Group as at December 31, 2022 as set out in the Accountant’s Report of the Group, the text of
which is set out in Appendix I to this Prospectus, and adjusted as described below. The
unaudited pro forma statement of adjusted net tangible assets does not form part of the
Accountant’s Report.
Audited
consolidated
net tangible
assets of the
Group
attributable to
Shareholders
of the
Company as at
December 31,
2022
Estimated
impact to the
consolidated
net tangible
assets relating
to termination
of the
redemption
right upon the
Global
Offering
Estimated net
proceeds from
the Global
Offering
Unaudited pro
forma adjusted
net tangible
assets
attributable to
Shareholders
of the
Company as at
December 31,
2022
Unaudited pro forma adjusted
net tangible assets per Share
RMB’000 RMB’000 RMB’000 RMB’000 RMB HK$
(Note 1) (Note 2) (Note 3) (Note 4) (Note 5)
Based on an Offer
Price of HK$4.25
per Share 229,670 178,654 244,371 652,695 0.82 0.93
Notes:
(1) The audited consolidated net tangible assets attributable to Shareholders of the Company as at December
31, 2022 is extracted from the Accountant’s Report set out in Appendix I to this prospectus, which is based
on the audited consolidated net assets of the Group attributable to Shareholders of the Company as at
December 31, 2022 of RMB233,542,000 with an adjustment for the intangible assets attributable to
Shareholders of the Company as at December 31, 2022 of RMB3,872,000 (excluding the portion of the
intangible assets attributable to the non-controlling interests of the Group of RMB6,000).
(2) Under the pre-IPO investment agreement with Bradbury Private Investment III Inc. (“ Bradbury ”),
Bradbury was granted with a redemption right pursuant to which the Company shall repurchase all the
shares from Bradbury if our Shares fails to be listed on the Main Board of the Stock Exchange on or
before December 31, 2021. In accordance with the pre-IPO investment agreement, the redemption right
was suspended immediately prior to the Company’s submission of the listing application and would be
restored automatically upon the earlier of the withdrawal of the Company’s listing application, the
Company’s listing application being rejected, or the Company’s listing process being terminated or listing
application has lapsed for any reason. Such redemption right is recognized as a financial liability in the
consolidated statement of financial position as at December 31, 2022, as set out in Appendix I to this
prospectus. The redemption right will be terminated automatically upon the Global Offering. Accordingly,
for the purpose of the unaudited pro forma statement of adjusted net tangible assets, the unaudited pro
forma adjusted consolidated net tangible assets of the Group attributable to the Shareholders of the
Company have been increased by RMB178,654,000, being the carrying amount of the financial instrument
with redemption rights as at December 31, 2022.
FINANCIAL INFORMATION
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--- page 498 ---
(3) The estimated net proceeds from the Global Offering are based on the Offer Price of HK$4.25 per Share,
after deduction of the underwriting fees and other related expenses payable by the Company (exclude those
Listing expenses of approximately RMB28,487,000 which have been accounted for in the consolidated
statements of comprehensive income prior to December 31, 2022) and takes no account of any Shares
which may fall to be issued upon the exercise of the Over-allotment Option, any Shares which may be
issued under the Pre-IPO Share Option Scheme or any Shares which may be issued or repurchased by the
Company pursuant to the general mandate.
(4) The unaudited pro forma net tangible assets per Share is arrived at after the adjustments referred to in the
preceding paragraphs and on the basis that 800,000,000 Shares were in issue assuming that the
Capitalization Issue and the Global Offering have been completed on December 31, 2022 but takes no
account of any Shares which may fall to be issued upon the exercise of the Over-allotment Option, any
Shares which may be issued under the Pre-IPO Share Option Scheme or any Shares which may be issued
or repurchased by the Company pursuant to the general mandate.
(5) For the purpose of this unaudited pro forma adjusted net tangible assets per Share, the amounts stated in
Renminbi are converted into Hong Kong dollars at the rate of HK$1.00 to RMB0.8805. No representation
is made that Renminbi has been, could have been or may be converted to Hong Kong dollars, or vice
versa, at that rate.
(6) No adjustment has been made to reflect any trading result or other transactions of the Group entered into
subsequent to December 31, 2022. In particular, the above unaudited pro forma adjusted net tangible assets
have not been taken into account the special dividend of HK$60,000,000 declared by the Board of Director
of the Company on June 13, 2023. Had the special dividend of HK$60,000,000 been declared on December
31, 2022, the unaudited pro forma adjusted consolidated net tangible assets of the Group attributable to
equity holders of the Company as at December 31, 2022 would be approximately RMB599,865,000 while
the unaudited pro forma adjusted consolidated net tangible assets of the Group attributable to equity
holders of the Company per Share as at December 31, 2022 would be RMB0.75 (equivalent to HK$0.85).
DISCLOSURE REQUIRED UNDER RULES 13.13 TO 13.19 OF THE LISTING RULES
Our Directors have confirmed that as of the Latest Practicable Date, there were no
circumstances which, had we been required to comply with Rules 13.13 to 13.19 in Chapter 13
of the Listing Rules, would have given rise to a disclosure requirement under Rules 13.13 to
13.19 of the Listing Rules.
WORKING CAPITAL CONFIRMATION
Our Directors are of the opinion that, taking into consideration the financial resources
presently available to us, including existing borrowings, cash and cash equivalents, cash
generated from operations and the estimated net proceeds from the Global Offering, we have
sufficient working capital for our present requirements, that is, for at least in the next 12 months
from the date of this prospectus.
NO MATERIAL ADVERSE CHANGE
After due and careful consideration, our Directors confirm that, up to the date of this
prospectus, there has not been any material adverse change in our financial or trading position,
indebtedness, mortgage, contingent liabilities, guarantees or prospects since December 31, 2022,
being the end date of the periods reported in the Accountant’s Report included in Appendix I to
this prospectus, and there is no event since December 31, 2022 which would materially affect
the information as set out in the Accountant’s Report in Appendix I to this prospectus.
FINANCIAL INFORMATION
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FUTURE PLANS AND USE OF PROCEEDS
We intend to expand our business in line with the strategies set out in the section headed
“Business – Our strategies and future plans” of this prospectus.
USE OF PROCEEDS
We estimate that the net proceeds we will receive from the Global Offering, after deducting
the estimated underwriting fees and expenses payable by us in connection with the Global
Offering and based on the Offer Price of HK$4.25 per Offer Share, will be approximately
HK$245.2 million, assuming that the Over-allotment Option is not exercised.
The table below sets forth the expected implementation timetable of the planned use of our
proceeds:
For the years ending December 31,
2023 2024 2025 Total
(HKD in millions)
Diversification of product portfolio 5.0 24.2 29.2 58.4
Research and development of food and
beverages – 8.9 12.2 21.1
Research and development of skincare
products – 8.9 10.5 19.4
Research and development of other new
product lines 2.9 3.6 3.7 10.2
Research and development of products
associated with proprietary IPs 2.1 2.8 2.8 7.7
Increase brand exposure and product sales
on MCN 2.9 26.0 46.2 75.1
Cooperation with selected KOLs and/or
placement of sale-based advertisement in
KOLs’ E-commerce Livestreaming sessions – 14.3 28.6 42.9
Development of proprietary Livestreaming
programs and cultivation of KOLs and
KOCs 2.9 11.7 17.6 32.2
Creation of unique celebrity IPs and
associated IP contents – 34.1 34.0 68.1
IP content creation – 22.7 22.7 45.4
Event planning – 11.4 11.3 22.7
Upgrade of our IT infrastructure and
increase investment in IT development 3.6 9.6 17.0 30.2
Working capital 2.6 5.4 5.4 13.4
Total 14.1 99.3 131.8 245.2
FUTURE PLANS AND USE OF PROCEEDS
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--- page 500 ---
We intend to use such net proceeds that we will receive from the Global Offering for the
following purposes:
(1) Approximately HK$58.4 million (equivalent to approximately RMB51.4 million),
representing 23.8% of the net proceeds from the Global Offering, will be used to
diversify our product portfolio. During the Track Record Period, our revenue was
primarily generated from the sale of MODONG coffee, being our major product since
its nationwide distribution in 2019. Going forward, we believe that in order to further
strengthen our growth, our product offerings shall be diversified to appeal to a
broadening demographic of end consumers and distribution channels. With the
expansion in our R&D capabilities and collaboration with third party institutes, we
plan to further launch no fewer than 30 food and beverages and 30 skincare products
in the three years ending December 31, 2025. Please refer to the section headed
“Business – Our strategies and future plans” for further details. In particular, our plan
for the diversification of our product portfolio include:
 approximately HK$21.1 million (equivalent to approximately RMB18.6 million),
representing 8.6% of the net proceeds from the Global Offering will be used for
research and development of food and beverages, in particular health
management or low-carb food and beverages by strengthening our abilities in
basic research, applied research and product innovation through methods such as
cooperation with research institutes on the research and development of formulas,
ingredients, food processing techniques, and research on the nutritional and
health benefits of different ingredients or products, and expansion of in-house
research and development work force and equipment. In particular, we plan to:
(a) incur RMB9.7 million in aggregate for the coming three years to further
employ seven employees in 2023 focusing on our research and development
of food and drinks;
(b) spend approximately RMB1.5 million, RMB2.2 million and RMB3.7 million
to purchase equipment and raw materials in the years ending December 31,
2023, 2024 and 2025, respectively, such as sterilizers, centrifuge and
viscometer, which are equipment used in food applications; and
(c) continue our cooperation with Hengmei Group and other institutes for some
of our pipeline products and we expect to incur RMB1.5 million, RMB2.5
million and RMB3.4 million for each of the years ending December 31,
2023, 2024 and 2025, respectively, for such cooperations, quality testings
and other ancillary expenses. For example, we are in discussions with
universities that have food science and technology departments, which
possess technologies in developing ingredients for pre-packaged food and
other technologies related to our business that would enable us to enhance
our existing product offerings. With the assistance and input from such
institutes, we aim to develop food products which are competitive and
distinct in terms of taste and nutritional value or function, and such
characteristics would make us more differentiable and more difficult for our
FUTURE PLANS AND USE OF PROCEEDS
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--- page 501 ---
competitors or infringers to mimic our products. In cooperating with those
institutes, we will enter into both technology development and/or
technology service contracts with the respective institutes, whereby the fee
to be paid for such cooperations shall be determined on an arm’s length and
case-by-case basis, and the resulting technological outcomes developed
thereunder and the intellectual property rights contained therein would
either be co-owned by our Group and the institute, or owned by the institute
whereby we reserve the right to implement such technologies in our
products.
Our total spending in this connection during the year from 2023 to 2025 is
expected to be approximately HK$27.8 million, of which HK$21.1 million will
be met by the net proceeds and HK$6.7 million will be met by our internal
resources or external financing (if necessary). As of the Latest Practicable Date,
we commenced research and development of a variety of pipeline products which
will be gradually rolled out based on our business plans. For details about our
pipeline products, please refer to the section headed “Business – Our business –
New retail business – Pipeline products” in this prospectus;
 approximately HK$19.4 million (equivalent to approximately RMB17.1 million),
representing 7.9% of the net proceeds from the Global Offering will be used for
research and development of skincare products, including cooperation with
research institutes on the research and development of recipes or ingredients, and
expansion of in-house research and development work force and equipment. In
particular, we plan to:
(a) incur RMB9.1 million in aggregate for the coming three years to further
employ four and two employees in each of the years ending December 31,
2023 and 2024, respectively, focusing on our research and development of
skincare products;
(b) incur approximately RMB1.5 million to cooperate with well-known research
institutes, OEMs and other companies to develop active ingredients for our
skincare products which are more unique. For example, during the Track
Record Period, we cooperated with scientists and developed certain of our
skincare products under Dr .mg sub-brand, which used a type of collagen
produced through the recombinant method. We will continuously develop
and launch new products under our current brands Chaxiaojie and Dr .mg
and new brands that will be introduced in the future to encourage recurring
purchase by our customers and end consumers; and
(c) explore various opportunities with third party institutions such as
universities, cosmetics and beauty solution providers and testing
organizations in relation to research and development of formulas and
testing of cosmetics and beauty products. RMB2.5 million, RMB3.7 million
and RMB4.7 million is expected to be incurred in research and development
of new products, which include (i) preliminary development cost for
FUTURE PLANS AND USE OF PROCEEDS
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--- page 502 ---
research of market comparable, formula evaluation, and designing of
packaging material, (ii) research and test cost for trial production and
conducting surveys through consumer trial survey, (iii) testing cost, and (iv)
fees paid to third parties to verify the product’s efficacy such as toxicology
test, clinical trials and consumer survey and testing equipment of our
research and development department in each of the years ending December
31, 2023, 2024 and 2025, which are primarily used to measure, compare and
evaluate the properties of each product and to ensure that the skincare
products are safe and effective.
Our total spending in this connection during the year from 2023 to 2025 is
expected to be approximately HK$24.4 million, of which HK$19.4 million will
be met by the net proceeds and HK$5.0 million will be met by our internal
resources or external financing (if necessary);
 approximately HK$10.2 million (equivalent to approximately RMB9.0 million),
representing 4.2% of the net proceeds from the Global Offering will be used for
research and development of other new product lines. We plan to diversify our
product offerings to other categories, such as pet food, pet toys, early child
education and other related products. We will recruit four new employees in 2023
to explore our options for diversification, and the total costs for such new hires
will be RMB5.5 million in aggregate for the coming three years. Expenses of
RMB3.5 million will also be incurred for other expenses, including testing and
consumer survey, and sampling in the coming three years; and
 approximately HK$7.7 million (equivalent to approximately RMB6.8 million),
representing 3.1% of the net proceeds from the Global Offering will be used for
research and development of products associated with proprietary IPs. Based on
our existing IPs and resources, such as our cooperation with Mr. Fang and our
ownership of the ChouMate and Chaxiaojie trademarks, we plan to build on and
create new product varieties based on them, such as creative or cultural products
with strong traditional Chinese characteristics, including tea, pottery and
traditional Chinese clothing which are interlinked with poetry and calligraphy
created by Mr. Fang. We will recruit three new employees in 2023 to explore our
options for diversification, and the total cost for such new hires will be RMB3.9
million in aggregate for the three years ending December 31, 2025. Expenses of
RMB2.9 million will also be incurred for research and development and the
registration of IPs, sampling and marketing in the three years ending December
31, 2025.
(2) Approximately HK$75.1 million (equivalent to approximately RMB66.1 million),
representing 30.6% of the net proceeds from the Global Offering, will be used to
increase our brand awareness and drive product sales on MCN, in particular:
 approximately HK$42.9 million (equivalent to approximately RMB37.8 million),
representing 17.5% of the net proceeds from the Global Offering will be used for
cooperation with selected KOLs and/or placement of sale-based advertisement in
FUTURE PLANS AND USE OF PROCEEDS
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--- page 503 ---
KOLs’ E-commerce Livestreaming sessions. Following the introduction of
e-commerce features and one-stop online shopping businesses on online video
platforms, popular streamers and KOLs on these platforms can more effectively
introduce the products to a wider group of end consumers by providing them
with immersive shopping experience. We believe the recent tightening of
regulations on the Livestreaming market will improve the quality of its contents
and content providers and enhance its credibility among consumers. As such,
quality and law-biding influencers and streamers will benefit from such policy
changes in the long run.
We plan to spend approximately RMB25.2 million and RMB18.9 million to
cooperate with top-tier livestreamers (livestreamers with over 10 million
followers) and second-tier livestreamers (livestreamers with five to 10 million
followers), respectively. Our Directors are of the view that livestreamers in the
PRC typically charge a fixed fee for a “slot” on each E-commerce Livestreaming
sessions, plus a certain percentage commission fee from the total sale generated
from such slot. Each slot normally involve the promotion of one product and
there could be more than one slot in each E-commerce Livestreaming session.
Some livestreamers may also charge on hourly basis. In 2021, we have engaged a
famous fashion influencer in the PRC for a E-commerce Livestreaming session
for our products at a total cost of RMB380,000. Based on the preliminary
quotations obtained by us, fixed fees for one E-commerce Livestreaming slot
generally range from RMB100,000 to RMB350,000 for livestreamers with more
than 10 million followers and RMB50,000 to RMB100,000 with five to 10
million followers, respectively. For each of the years ending December 31, 2023,
2024 and 2025, we expect to incur RMB3.6 million, RMB7.2 million and
RMB14.4 million, respectively, to acquire not less than 30, 60 and 120
E-commerce Livestreaming slots, respectively, from top-tier livestreamers; and
we expect to incur RMB2.7 million, RMB5.4 million and RMB10.8 million,
respectively, to acquire not less than 30, 60 and 120 E-commerce Livestreaming
slots, respectively, from second-tier livestreamers. As each E-commerce
Livestreaming slot offered by the famous livestreamers normally only involve the
promotion of one product, assuming that, for illustrative purpose, we will
organize E-commerce Livestreaming sessions for the promotion of three to nine
products on a weekly basis, we expect to acquire around five to 20 E-commerce
Livestreaming slots in each month, and approximately 60 to 240 E-commerce
Livestreaming slots per year. The actual schedule of the upcoming Livestreaming
sessions would be subject to various factors. For example, we may arrange
additional E-commerce Livestreaming sessions when there are special events
such as launch of new products, festivals and other promotional activities.
Taking into account the expected expansion of our product offerings and the
number of new products to be introduced, and given the expected expansion of
our product offerings, we consider the estimated number of E-commerce
Livestreaming slots to be acquired by us in the coming three years to be fair and
reasonable and in line with our business growth. We may enter into regular
cooperation with the second-tier livestreamers by entering into long term
FUTURE PLANS AND USE OF PROCEEDS
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--- page 504 ---
framework agreements, which may set out the platform(s) and account(s) on
which E-commerce Livestreaming session will be held, the mechanism in
determining the fees payable by us for E-commerce Livestreaming slots to be
provided to our products, payment terms and other terms to be agreed between
the parties. We believe our close cooperation with such a large group of KOLs
can help us to increase marketing efficiency and effectiveness as well as our
brand value, and in return we can grant them license to use our celebrity IPs such
as ChouMate and/or provide them with opportunities to promote their channels in
association with the celebrities we collaborate with or our proprietary IPs to help
them sustain their popularity and attract more followers. We intend to increase
our efforts to drive product sales on MCN after our Listing as such strategy
requires substantial upfront cost within a short period of time. However, once we
are able to establish our presence in such marketing channels, we can strengthen
our positioning among existing consumers and attract new ones, especially young
people keen on such new shopping formats and experiences. Our total spending
in this connection during the year from 2024 to 2025 is expected to be
approximately HK$50.1 million, of which HK$42.9 million will be met by the
net proceeds and HK$7.2 million will be met by our internal resources or
external financing (if necessary); and
 approximately HK$32.2 million (equivalent to approximately RMB28.4 million),
representing 13.1% of the net proceeds from the Global Offering will be used for
developing our own Livestreaming programs, including operating Livestreaming
accounts and creating Livestreaming contents, and cultivating KOLs and KOCs
for product promotion purposes. We plan to:
(a) incur approximately RMB14.2 million to conduct Livestreaming through our
proprietary social media accounts. We intend to carry out such activities in
three, six and nine of our proprietary accounts in the next three years. Such
funds will be used to produce up to 40 videos and/or Livestreaming sessions
for each proprietary account each year, which is used to attract audience for
the marketing and promotion of our proprietary IPs and products; and
(b) spend approximately RMB14.2 million in aggregate to cultivate three new
proprietary KOL accounts in each of the next three years to amplify our
advertising messages and marketing and promotional effort. We plan to
incubate KOLs on our own through cooperation with celebrities or from our
existing distribution network as we are able to better understand their
previous behavior and activities on social media, making it easier for us to
identify those who are more popular among our target end consumers and
conform with our brand image. Based on the support, guidance and training
given to them, these KOLs and KOCs cultivated by us could host their own
E-commerce Livestreaming sessions to promote and sell our products and
those supplied by other business partners.
FUTURE PLANS AND USE OF PROCEEDS
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--- page 505 ---
(3) Approximately HK$68.1 million (equivalent to approximately RMB60.0 million),
representing 27.8% of the net proceeds from the Global Offering, will be used for the
creation of unique celebrity IPs and associated IP contents, and more specifically:
 approximately HK$45.4 million (equivalent to approximately RMB40.0 million),
representing 18.5% of the net proceeds from the Global Offering will be used for
IP content creations on various medias. It can be entertainment shows on
traditional media, including future seasons and episodes of J-Style Trip .W e
expect to spend approximately RMB30 million for each of the years ending
December 31, 2024 and 2025 on shooting one season of J-Style Trip or other
programs with similar cast or production budget each year, totaling RMB60.0
million in the next three years. Such amount was determined with reference to
the cost incurred by us in planning J-Style Trip season one which was
approximately RMB106 million, and was discounted as we identified certain
areas which could be more economical based on our previous experience and any
shortfall will be satisfied by our internal resources or external financing (if
necessary).
 approximately HK$22.7 million (equivalent to approximately RMB20.0 million),
representing 9.3% of the net proceeds from the Global Offering will be used for
event planning, including the planning of two Superstar Performance Mega
Nights each year in the years ending December 31, 2024 and 2025, which
typically require initial investment of up to RMB10 million per concert,
including pre-payments required to secure the performance of celebrities, venue,
audio and lighting equipment, and stage engineering operations. Such amount
was determined with reference to scale and the expenses incurred for the
Zhanjiang Superstar Concert and the Ningbo Superstar Performance Mega Night.
These concerts previously proved to be good opportunities for us to increase our
brands’ exposure and boost sales for our new retail operations. We can also
coordinate our own promotional activities in connection with these concerts. Our
total spending in this connection during the year from 2024 to 2025 is expected
to be approximately HK$46.4 million, of which HK$22.7 million will be met by
the net proceeds and HK$23.7 million will be met by our internal resources or
external financing (if necessary).
(4) Approximately HK$30.2 million (equivalent to approximately RMB26.6 million),
representing 12.3% of the net proceeds from the Global Offering will be used for
upgrading our IT infrastructure and increase investment in IT development. We plan to
spend:
(i) approximately RMB11.0 million to employ approximately six, three and one
additional IT professionals for our internal IT development team in each of the
three years ending December 31, 2025, who will be mainly responsible for the
development of our project management and database management software and
digital prototype designs. Such employment plans would be necessary in light of
the increased product offerings and the ancillary sales and marketing activities to
FUTURE PLANS AND USE OF PROCEEDS
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--- page 506 ---
be conducted by our Group, complementarily supporting the various IT technical
needs and requirements as demanded by these products and activities from time
to time;
(ii) approximately RMB14.0 million to be expensed in the three years ending
December 31, 2025, based on the fees quoted by third-party information
technology solutions providers for ERP system implementation, for the
implementation of an ERP system which will integrate our operational
management and financial management functions and improve our operational
efficiency, enhance our ability to perform information analysis to support our
business growth, monitor and control supply chain-related matters and improve
budget control and perform cost analysis. In light of our expansion plans, the
ERP system which facilitates a high-level systemic integration of our various
management systems would be necessary to enhance our future business
operations. With the expected increase of pipeline products to be sold and the
consequent increase of distributorship networks, the ERP system can enable an
accurate and synchronized aggregation of various data on an automatic basis,
therefore reducing inaccuracies which can promote our business sustainability in
the long term. The implementation of the ERP system will be completed in
phases and is expected to be completed in 2025; and
(iii) approximately RMB1.6 million in aggregate of the three years ending December
31, 2025 for the purchase of hardware such as computers and development and
testing equipment, software such as office automation system, customer service
system, data management system, financial management system and other daily
business resolution software, as well as other miscellaneous expenses.
We believe the above investments in hardware and software are essential to
accommodate our planned business expansion and expected increase in headcount,
taking into consideration our existing IT systems are relatively basic and may not be
able to support our expected expansion of distribution channels, increase in sales
orders and product diversity. We also expect the said investments to empower our
internal financial management to process a larger volume of transactions going
forward.
(5) Approximately HK$13.4 million (equivalent to approximately RMB11.8 million),
representing 5.5% of the net proceeds from the Global Offering, will be used for
working capital.
If the Over-allotment Option is exercised in full, the net proceeds we will receive from the
Global Offering will increase to approximately HK$321.9 million. We intend to apply the
additional net proceeds from the exercise of the Over-allotment Option to the above purposes on
a pro-rata basis.
FUTURE PLANS AND USE OF PROCEEDS
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--- page 507 ---
The net proceeds of the Sale Shares, being an aggregate of 48,000,000 Shares, based on the
Offer Price of HK$4.25 per Offer Share, would be approximately HK$193.8 million after
deducting the estimated underwriting commission. The net proceeds of the Sale Shares will be
attributable to the Selling Shareholder only and will not belong to the Company.
The implementation timeframe for our use of proceeds will be determined with reference to
(i) the capital needs of our various businesses; (ii) the development plans, nature and actual
progress of the relevant projects; and (iii) the stage of negotiation process of our investments
and acquisitions, and will be adjusted from time to time in accordance with our business needs.
To the extent that the net proceeds of the Global Offering are not immediately used for the
above purposes, or if we are unable to put into effect any part of our plan as intended, and to the
extent permitted by the relevant laws and regulations, we will only hold such funds in short term
interest-bearing deposits with authorized financial institutions and/or licensed banks (as defined
under the SFO or applicable laws and regulations in the PRC). In such event, we will comply
with the appropriate disclosure requirements under the Listing Rules.
FUTURE PLANS AND USE OF PROCEEDS
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--- page 508 ---
THE CORNERSTONE PLACING
We have entered into cornerstone investment agreements (each a “ Cornerstone Investment
Agreement ”, and together the “ Cornerstone Investment Agreements ”) with the cornerstone
investors set out below (each a “ Cornerstone Investor ”, and together the “ Cornerstone
Investors ”), pursuant to which the Cornerstone Investors agreed to, subject to certain conditions,
subscribe at the Offer Price for a certain number of Offer Shares (rounded down to the nearest
whole board lot of 500 Shares) that may be purchased for an aggregate amount of approximately
US$18.0 million (approximately HK$140.0 million) (exclusive of brokerage, SFC transaction
levy, AFRC transaction levy and Stock Exchange trading fee) (the “ Cornerstone Placing ”).
Assuming an Offer Price of HK$4.25, being the Offer Price, the total number of Offer
Shares to be subscribed by the Cornerstone Investors would be 26,061,500 Offer Shares,
representing approximately (i) 20.6% of the Offer Shares (assuming that the Over-allotment
Option is not exercised and without taking into account any Shares which may be issued
pursuant to the exercise of the Options under the Share Option Schemes), (ii) 17.9% of the Offer
Shares (assuming the Over-allotment Option is exercised in full and without taking into account
any Shares which may be issued pursuant to the exercise of the Options under the Share Option
Schemes), (iii) 3.3% of the Shares in issue immediately upon completion of the Global Offering
(assuming that the Over-allotment Option is not exercised and without taking into account any
Shares which may be issued pursuant to the exercise of the Options under the Share Option
Schemes), and (iv) 3.2% of the Shares in issue immediately upon completion of the Global
Offering and the full exercise of the Over-allotment Option (without taking into account any
Shares which may be issued pursuant to the exercise of the Options under the Share Option
Schemes).
Details of the actual number of Offer Shares to be allocated to the Cornerstone Investors
will be disclosed in the allotment results announcement of our Company to be published on or
around July 12, 2023.
The Cornerstone Placing will form part of the International Offering and the Cornerstone
Investors will not subscribe for any Offer Shares under the Global Offering (other than pursuant
to the Cornerstone Investment Agreements). The Offer Shares to be subscribed by the
Cornerstone Investors will rank pari passu in all respect with the fully paid Shares in issue and
will count towards the public float of our Company under Rule 8.08 of the Listing Rules.
Immediately following the completion of the Global Offering, the Cornerstone Investors will not
become a substantial shareholder of our Company, nor will the Cornerstone Investors have any
Board representation in our Company. Other than a guaranteed allocation of the relevant Offer
Shares at the final Offer Price, the Cornerstone Investors do not have any preferential rights in
the Cornerstone Investment Agreements as compared with other public Shareholders, and none
of the Cornerstone Investors, or any of their affiliates, directors, officers, employees, agents or
representatives, has accepted or entered into any agreement or arrangement to accept any direct
or indirect benefits by side letter or otherwise, from our Company, any member of our Group, or
any of their respective affiliates, directors, officers, employees, agents or representatives in the
Global Offering or otherwise has engaged in any conduct or activity inconsistent with, or in
CORNERSTONE INVESTORS
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--- page 509 ---
contravention of, Guidance Letter HKEX-GL51-13. As confirmed by each of the Cornerstone
Investors, (i) their respective subscription under the Cornerstone Placing would be financed by
its/his internal resources; and (ii) all necessary approvals have been obtained in connection with
its subscription of the relevant Offer Shares with respect to the Cornerstone Placing.
Pursuant to Rule 8.08(3) of the Listing Rules, no more than 50% of our Shares in public
hands on the Listing Date can be beneficially owned by the three largest public shareholders of
our Shares. Based on the Offer Price, the total number of Shares to be allocated to the
Cornerstone Investors, will be 26,061,500 Offer Shares, representing approximately 20.6% of the
Offer Shares (assuming the Over-allotment Option is not exercised) and approximately 3.3% of
our Shares in issue immediately upon completion of the Global Offering (assuming the
Over-allotment Option is not exercised), and therefore satisfying the requirement under
Rule 8.08(3) of the Listing Rules.
The total number of Offer Shares to be subscribed by the Cornerstone Investors may be
affected by reallocation of the Offer Shares between the International Offering and the Hong
Kong Public Offering as described in the paragraph headed “Structure of the Global Offering –
The Hong Kong Public Offering – Reallocation” in this prospectus. For details of the
Over-allotment Option, please refer to the paragraph headed “Structure of the Global Offering –
Over-allotment and Stabilization” in this prospectus.
There will not be delayed delivery or deferred settlement of Offer Shares to be subscribed
by the Cornerstone Investors pursuant to the Cornerstone Investment Agreements and payment
for the Offer Shares to be subscribed by the Cornerstone Investors will be settled on or before
the Listing.
The following table summarizes the details of the Cornerstone Placing:
Based on the Offer Price
Assuming the Over-allotment
Option is not exercised (without
taking into account any Shares which
may be issued pursuant to the
exercise of the Options under the
Share Option Schemes)
Assuming the Over-allotment
Option is exercised in full (without
taking into account any Shares which
may be issued pursuant to the
exercise of the Options under the
Share Option Schemes)
Investment
Amount
Number of Offer
Shares to be
subscribed (1)(2)
Percentage
of the Offer
Shares
Percentage of
Shares in issue
immediately upon
completion of the
Global Offering
Percentage
of the Offer
Shares
Percentage of
Shares in issue
immediately upon
completion of the
Global Offering
Blink Field US$15 million 20,570,000 (3) 16.2% 2.6% 14.1% 2.5%
NetDragon US$3 million 5,491,500 4.3% 0.7% 3.8% 0.7%
CORNERSTONE INVESTORS
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--- page 510 ---
Notes:
(1) Subject to rounding down to the nearest whole board lot of 500 Shares.
(2) Calculated based on the exchange rate of US$1.00:HK$7.78 as set out in the section headed “Information
about this prospectus and the Global Offering” in this prospectus.
(3) No more than 50% of our Shares in public hands on the Listing Date can be beneficially owned by our
three largest public Shareholders pursuant to Rule 8.08(3) of the Listing Rules. The total number of our
Shares upon Listing in public hands will be 212,139,002 Shares (assuming the Over-allotment Option is
not exercised and without taking into account the Shares which may be issued upon the exercise of the
Options under the Share Option Schemes), and since Mr. Ho and Bradbury who will be interested in
45,513,546 and 39,985,456 Shares upon Listing, respectively, will be our two largest public Shareholders,
hence, Blink Field, which is expected to be our third largest public Shareholder cannot subscribe more
than 20,570,000 Offer Shares (after rounding down to the nearest whole board lot of 500 Shares). As a
result, the number of Offer Shares allocated to Blink Field was adjusted by the Sole Sponsor, the Sole
Overall Coordinator and our Company according to their right under the Cornerstone Investment
Agreement. Based on the Offer Price, the final investment amount to be paid by Blink Field will be
adjusted downwards to approximately US$11.2 million (being the US dollar equivalent of approximately
HK$87.4 million), and surplus investment amount will be returned to Blink Field.
OUR CORNERSTONE INVESTORS
The information about the Cornerstone Investors set forth below has been provided by the
Cornerstone Investors in connection with the Cornerstone Placing.
1. Blink Field
Blink Field Limited (“ Blink Field ”) is a company established in the BVI with limited
liability and wholly-owned by Mr. Zhang Yuan. As confirmed by Blink Field, it has obtained all
necessary approvals to invest in our Company.
We became acquainted with Mr. Zhang Yuan in the ordinary course of business through our
business network.
Mr. Zhang Yuan has substantial investment experience and, among others, each of Jiangsu
Bubugao Properties Limited* (ʮ̡ ) (a company established in the PRC
with limited liability, the registered capital of which amounted to approximately RMB1,762
million as of the Latest Practicable Date), and Suzhou Bubugao Investment and Development
Limited* (ʮ̡ ) (a company established in the PRC with limited
liability, the registered capital of which amounted to RMB916 million as of the Latest
Practicable Date), being companies principally engaged in property development is a
30%-controlled company of Mr. Zhang Yuan.
2. NetDragon
NETDRAGON WEBSOFT INC. (“ NetDragon ”) is a company incorporated in the BVI with
limited liability and was founded in 2003. NetDragon is a wholly-owned subsidiary of
NetDragon Websoft Holdings Limited, a company listed on the Stock Exchange (stock code:
CORNERSTONE INVESTORS
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--- page 511 ---
777). NetDragon Websoft Holdings Limited is principally engaged in online and mobile games
development, including games design, programming and graphics and online and mobile games
operation, education business, mobile solution, products and marketing business and property
project business. As confirmed by NetDragon, NetDragon Websoft Holdings Limited does not
require approval from the Stock Exchange or its shareholders to invest in our Company.
We became acquainted with NetDragon in the ordinary course of business through our
business network.
We are of the view that, leveraging on the Cornerstone Investors’ background, the
Cornerstone Placing will help to raise the profile of our Company. We also believe it shows that
such investor has confidence in our business and prospect which will further strengthen the
confidence of our investors and customers in our business and prospectus.
To our best knowledge, (i) each of the Cornerstone Investors is an Independent Third Party
and is not our connected person; (ii) each of the Cornerstone Investors is not accustomed to
taking instructions in relation to, amongst others, the acquisition, disposal, voting or other
disposition of the Offer Shares from our Company or any of its subsidiaries, Directors, our chief
executive, Controlling Shareholders, substantial shareholders or existing Shareholders, or their
respective close associates; and (iii) none of the subscription of the Offer Shares by the
Cornerstone Investors is financed by our Company or its subsidiaries, Directors, our chief
executive, Controlling Shareholders, substantial shareholders or existing Shareholders, or their
respective close associates.
CLOSING CONDITIONS
The obligation of the Cornerstone Investors to subscribe for the Offer Shares under the
respective Cornerstone Investment Agreement is subject to, among other things, the following
closing conditions:
(a) the Hong Kong Underwriting Agreement and the International Underwriting
Agreement 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 Hong Kong Underwriting Agreement and the International
Underwriting Agreement having been terminated;
(b) the Offer Price having been agreed upon between the Company, the Selling
Shareholder and the Sole Overall Coordinator (for itself and on behalf of the
Underwriters);
(c) the Listing Committee having granted the approval for the listing of, and permission
to deal in, our Shares (including the Offer Shares agreed to be subscribed for by the
Cornerstone Investors as well as other applicable waivers and approvals) and such
approval, permission or waiver having not been revoked prior to the commencement
of dealings in the Shares on the Stock Exchange;
CORNERSTONE INVESTORS
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(d) no laws shall have been enacted or promulgated by any governmental authority which
prohibits the consummation of the transactions contemplated in the Global Offering or
therein and there shall be no orders or injunctions from a court of competent
jurisdiction in effect precluding or prohibiting consummation of such transactions; and
(e) the respective representations, warranties, undertakings, confirmations and
acknowledgement of the Company, the Cornerstone Investors and/or the Guarantor (as
the case may be) under the respective Cornerstone Investment Agreements are
accurate and true in all respects and not misleading and that there is no material
breach of the Cornerstone Investment Agreements on the part of the Company,
Cornerstone Investors and/or the Guarantor (as the case may be).
RESTRICTIONS ON DISPOSAL BY THE CORNERSTONE INVESTORS
Each of the Cornerstone Investors has agreed and undertakes to us, the Sole Overall
Coordinator and the Sole Sponsor that without the prior written consent of each of us, the Sole
Overall Coordinator and the Sole Sponsor that it/he will not, and will cause its/his affiliates not
to, whether directly or indirectly, at any time during the period of twelve months following the
Listing Date (the “ Lock-up Period Restriction ”), dispose of, in any way, any of the Offer
Shares it/he has subscribed pursuant to the Cornerstone Investment Agreements or any interest in
any company or entity holding the Offer Shares, save for certain limited circumstances as
provided under the Cornerstone Investment Agreements, such as transfers to any of its/his
wholly-owned subsidiaries who will be bound by the same obligations of the Cornerstone
Investors, including the Lock-up Period Restriction.
CORNERSTONE INVESTORS
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HONG KONG UNDERWRITERS
CMBC Securities Company Limited
Bradbury Securities Limited
SPDB International Capital Limited
First Shanghai Securities Limited
ABCI Securities Company Limited
Guotai Junan Securities (Hong Kong) Limited
BOCOM International Securities Limited
China Industrial Securities International Capital Limited
Valuable Capital Limited
Eddid Securities and Futures Limited
South China Securities Limited
Zhongtai International Securities Limited
China Everbright Securities (HK) Limited
Huafu International Securities Limited
Essence International Securities (Hong Kong) Limited
CCB International Capital Limited
Zheshang International Financial Holdings Co., Limited
Quam Securities Limited
Winbull Securities International (HK) Limited
uSmart Securities Limited
Futu Securities International (Hong Kong) Limited
China Demeter Securities Limited
I Win Securities Limited
SBI China Capital Financial Services Limited
Livermore Holdings Limited
UNDERWRITING ARRANGEMENTS AND EXPENSES
Hong Kong Public Offering
Hong Kong Underwriting Agreement
The Hong Kong Underwriting Agreement was entered into on June 28, 2023. Pursuant to
the Hong Kong Underwriting Agreement, we are offering 12,664,000 Hong Kong Offer Shares
for subscription by the public in Hong Kong at the Offer Price on the terms and subject to the
conditions of this prospectus, the relevant Application Forms and the Hong Kong Underwriting
Agreement.
Subject to the Listing Committee granting listing of, and permission to deal in, the Shares
in issue and to be issued as mentioned herein (including any additional Shares which may be
made available pursuant to the exercise of the Over-allotment Option), and to certain other
conditions set out in the Hong Kong Underwriting Agreement, the Hong Kong Underwriters
have agreed to subscribe or procure subscribers for their respective applicable proportions of the
UNDERWRITING
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Hong Kong Offer Shares which are being offered but are not taken up under the Hong Kong
Public Offering on the terms and subject to the conditions of this prospectus, the relevant
Application Forms and the Hong Kong Underwriting Agreement.
The Hong Kong Underwriting Agreement is conditional upon and subject to, amongst other
things, the International Underwriting Agreement having been signed and becoming
unconditional and not having been terminated in accordance with its terms.
Grounds for termination
The Sole Overall Coordinator (for itself and on behalf of the Hong Kong Underwriters)
shall be entitled in its sole and absolute discretion by giving notice in writing to our Company to
terminate the Hong Kong Underwriting Agreement with immediate effect if at any time prior to
8:00 a.m. on the Listing Date:
(a) that any statement contained in Offering Documents (as defined in the Hong Kong
Underwriting Agreement), the Operative Documents (as defined in the Hong Kong
Underwriting Agreement), the Preliminary Offering Circular (as defined in the Hong
Kong Underwriting Agreement), and/or any notices, announcements, advertisements,
communications or other documents (including any announcement, circular, document
or other communication pursuant to the Hong Kong Underwriting Agreement) issued
or used by or on behalf of the Company in connection with the Global Offering
(including any supplement or amendment thereto (the “ Offer-Related Documents ”)
was, when it was issued, or has become untrue or incorrect or incomplete in any
material respect or misleading in any respect, or that any estimate, forecast,
expression of opinion, intention or expectation contained in any of such documents in
any material respect is not fair and honest and based on reasonable assumptions with
reference to the facts and circumstances then subsisting; or
(b) any matter has arisen or has been discovered which would, had it arisen or been
discovered immediately before the date of this prospectus, constitute a material
omission from, or misstatement in, any of the Offer-Related Documents; or
(c) any matter, event, act or omission which gives or is likely to give rise to any liability
on the part of the Company or the executive Directors and the Controlling Shareholder
out of or in connection with any breach, inaccuracy and/or incorrectness of the
representations, warranties, and undertakings, or that any of the representations or
warranties is misleading and/or the indemnities given by the Company, the executive
Directors, and the Controlling Shareholder or any of them under the Hong Kong
Underwriting Agreement and/or the International Underwriting Agreement (or would if
repeated at that time); or
UNDERWRITING
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--- page 515 ---
(d) any material breach of the obligations or undertakings of parties to the Hong Kong
Underwriting Agreement, the International Underwriting Agreement, any of the
Cornerstone Agreements or any other Offer-Related Documents (other than those
imposed on any of the Sole Overall Coordinator, the Joint Global Coordinators, the
Joint Bookrunners, the Joint Lead Managers, the Sole Sponsor, the Hong Kong
Underwriters or the International Underwriters); or
(e) any material adverse change or any development involving a prospective material
adverse change in, or a materialization of any of, any of the risks set out in the
section headed “Risk Factors” in this prospectus; or
(f) that (A) any executive Director, chief executive officer or chief financial officer of the
Company seeks to resign or is removed from office, or (B) any certificate given by the
Company or any of its officers to the Sole Overall Coordinator under or in connection
with the Hong Kong Underwriting Agreement or the Global Offering is false or
misleading in any material respect, or (C) any executive Director is being charged
with an indictable offense or prohibited by operation of law or otherwise disqualified
from taking part in the management of a company, or (D) a regulatory, judicial,
governmental or administrative authority (including any stock exchange) or law
enforcement agency or a political body or organization in any jurisdiction
commencing any claim, proceedings, investigation or other action, or announcing an
intention to investigate or take other action, against any executive Director; or
(g) a contravention by any member of the Group of the Listing Rules or the Companies
Ordinance or any applicable laws or regulations which will or will be or is likely to be
materially adverse to, or materially affect, the business or financial position or
prospects of the Group taken as a whole; or
(h) any litigation, dispute, legal action or claim of any third party or regulatory,
administrative investigation or action being threatened or instigated against any
member of the Group, the executive Directors or the Controlling Shareholder which
will or will be or is likely to be materially adverse to, or materially affect, the
business or financial position or prospects of the Group taken as a whole; or
(i) any order or petition is presented for the winding-up or liquidation of any member of
the Group or any member of the Group 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 member of the Group or any resolution for the winding-up of any
member of the Group or a provisional liquidator, receiver or manager is appointed
over all or part of the assets or undertaking of any member of the Group or anything
analogous thereto occurs in respect of any member of the Group; or
(j) a prohibition on the Company for whatever reason from allotting or issuing the Offer
Shares (including the Shares to be allotted and issued pursuant to the exercise of the
Over-allotment Option) pursuant to the terms of the Global Offering; or
UNDERWRITING
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--- page 516 ---
(k) non-compliance of this prospectus (or any other documents used in connection with
the contemplated subscription of the Offer Shares) or any aspect of the Global
Offering with the Listing Rules or any other applicable law; or
(l) the Company withdraws this prospectus and/or the Application Forms and/or any other
documents issued or used in connection with the Global Offering; or
(m) approval by the Listing Committee for the listing of, and permission to deal in, the
Shares to be issued or sold (including the Options which may be granted under the
Share Option Schemes and the additional Shares which may be issued upon the
exercise of the Over-allotment Option) under the Global Offering is refused or not
granted, other than subject to customary conditions, on or before the date of approval
of the Listing, or if granted, the approval is subsequently withdrawn, qualified (other
than by customary conditions) or withheld;
(n) any of the experts (other than the Sole Sponsor) which are listed in the paragraph
headed “E. Other information – 5. Qualifications of Experts” in Appendix V to this
prospectus has withdrawn its consent to the issue of this prospectus with the inclusion
of its reports, letters and legal opinions (as the case may be) and references to its
name included in the form and context in which it appears in this prospectus; or
(o) a significant portion of the orders in the bookbuilding process at the time the
International Underwriting Agreement is entered into, or the investment commitments
by any corporate or cornerstone investors after signing of agreements with such
corporate or cornerstone investors, have been withdrawn, terminated or canceled or if
any corporate or cornerstone investors is unlikely to fulfill its obligation under the
respective agreement, or any Cornerstone Investment Agreement is terminated; or
(p) there is any change or any development or any prospective change or development
that has or will or may have a Material Adverse Effect; or
(q) there shall have developed, occurred, happened or come into effect:
(i) any event or series of events resulting in or representing a change or
development involving a prospective change, in local, national, regional or
international financial, political, military, industrial, economic, fiscal or market
conditions or sentiments (including, without limitation, conditions and sentiments
in stock and bond markets, money and foreign exchange markets, investment and
credit markets and inter-bank markets) in or affecting Hong Kong, the Cayman
Islands, the BVI, Taiwan, the PRC, the United States and the European Union (or
any member thereof), or any other jurisdiction relevant to any member of the
Group (collectively the “ Relevant Jurisdictions ”); or
UNDERWRITING
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--- page 517 ---
(ii) any new law or regulation or any change or development involving a prospective
change or any event or circumstance likely to result in a change or a
development involving a prospective change in any existing law or regulation, or
any change or development involving a prospective change in the interpretation
or application thereof by any court or other competent Governmental Authority
(as defined in the Hong Kong Underwriting Agreement) in or affecting any of the
Relevant Jurisdictions; or
(iii) any event or series of events in the nature of force majeure (including, without
limitation, any acts of government, declaration of a local, regional, national or
international emergency or war, calamity, crisis, epidemic, pandemic, large scale
outbreaks of diseases or its escalation, mutation or aggravation of diseases
(including, without limitation, COVID-19, Severe Acute Respiratory Syndrome
(SARS), swine or avian flu, H5N1, H1N1, H7N9, Ebola virus, Middle East
respiratory syndrome and such related/mutated forms), comprehensive sanctions,
strikes, labor disputes, lock-outs, other industrial actions, fire, explosion,
flooding, earthquake, tsunami, volcanic eruption, civil commotion, riots,
rebellion, public disorder, acts of war, acts of God, acts of terrorism (whether or
not responsibility has been claimed), paralysis in government operations,
interruptions or delay in transportation) in or affecting any of the Relevant
Jurisdictions; or
(iv) any local, national, regional or international outbreak or escalation of hostilities
(whether or not war is or has been declared), or other state of emergency or
calamity or crisis in or affecting any of the Relevant Jurisdictions; or
(v) the imposition or declaration of (A) any moratorium, suspension, restriction
(including, without limitation, any imposition of or requirement for any minimum
or maximum price limit or price range) or limitation on trading in shares or
securities generally on the Stock Exchange, the New York Stock Exchange, the
NASDAQ Global Market, the Shanghai Stock Exchange, the Shenzhen Stock
Exchange, the London Stock Exchange, the Singapore Stock Exchange or (B) any
moratorium on, or disruption in, banking activities (commercial or otherwise) or
foreign exchange trading or securities settlement or clearing services in or
affecting any of the Relevant Jurisdictions; or
(vi) any change or development involving a change or prospective change or
amendment in or affecting taxation or exchange controls (or the implementation
of any exchange control) or currency exchange rates or foreign investment
regulations in or affecting any of the Relevant Jurisdictions (including without
limitation any fluctuation in the Hong Kong dollars or Renminbi against any
foreign currencies) or affecting an investment in the Offer Shares; or
UNDERWRITING
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--- page 518 ---
(vii) the commencement by any Governmental Authority or other regulatory or
political body or law enforcement agency or organization of any action or
investigation against a Director or members of senior management or an
announcement by any Governmental Authority or regulatory or political body or
law enforcement agency or organization that it intends to take any such action; or
(viii) any imposition of comprehensive sanction under any sanctions laws or
regulations in, or withdrawal of trading privileges which existed on the date of
the Hong Kong Underwriting Agreement, in whatever form, directly or indirectly,
by, or for, the U.S. or the European Union (or any member thereof) on any of the
Relevant Jurisdictions; or
(ix) any change in the system under which the value of the Hong Kong dollar is
linked to that of the U.S. dollar or the value of the RMB is determined by
reference to a basket of world currencies or a material devaluation of Hong Kong
dollars, or the Renminbi against any foreign currency; or
(x) any change or development or event involving a prospective change in the
Group’s assets, liabilities, profit, losses, performance, condition, business,
financial, earnings, trading position or prospects, or any change in capital stock
or long-term debt of the Company or any other member of the Group, or any loss
or interference with the assets, operations or business of the Company or any
other member of the Group, which (in any such case) is not set forth in this
prospectus; or
(xi) save as disclosed this prospectus, a demand by any tax authority for payment for
any tax liability for any member of the Group that is likely to have a Material
Adverse Effect; or
(xii) a valid demand by any creditor for repayment or payment of any indebtednesses
of any member of the Group or in respect of which any member of the Group is
liable prior to its stated maturity; or
(xiii) other than with the prior written consent of the Sole Overall Coordinator, the
issue or requirement to issue by the Company of a supplemental prospectus or
amendment to this prospectus, any Application Forms, the Preliminary Offering
Circular, the Final Offering Circular (as defined in the Hong Kong Underwriting
Agreement) or other documents in connection with the offer and sale of the Offer
Shares pursuant to the Companies (Winding Up and Miscellaneous Provisions)
Ordinance or the Listing Rules or upon any requirement or request of the Stock
Exchange and/or the SFC,
and which, in any such case (whether individually or in the aggregate) and in the sole
and absolute opinion of the Sole Overall Coordinator (for itself and on behalf of the
Hong Kong Underwriters): (A) has or will or may have a Material Adverse Effect; or
(B) has or will or may have a material adverse effect on the success or marketability
of the Global Offering or the level of Offer Shares being applied for or accepted or
the distribution of the Offer Share under the Hong Kong Public Offering or the level
of interest under the International Offering; or (C) makes or will or may make it
UNDERWRITING
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--- page 519 ---
impracticable, inadvisable, inexpedient, incapable or not commercially viable (i) to
proceed with any part of the Hong Kong Underwriting Agreement, the Hong Kong
Public Offering and/or the Global Offering or (ii) for the delivery of Shares on the
terms and in the manner contemplated by the Prospectus or (iii) for any part of the
Hong Kong Underwriting Agreement or the Global Offering to be performed or
implemented as envisaged.
Undertakings to the Stock Exchange pursuant to the Listing Rules
By our Company
Pursuant to Rule 10.08 of the Listing Rules, we have undertaken to the Stock Exchange
that no further Shares or securities convertible into our equity securities of the Company
(whether or not of a class already listed) may be issued by us or form the subject of any
agreement or arrangement to such an issue by us within six months from the Listing Date (the
“First Six-Month Period ”) (whether or not such issue of Shares or securities of the Company
will be completed within six months from the Listing Date), except pursuant to the
Capitalization Issue, the Global Offering (including pursuant to the exercise of the
Over-allotment Option), the exercise of any Option granted or may be granted under the Share
Option Schemes, or any issue of Shares or securities of the Company in circumstances
prescribed by Rule 10.08 of the Listing Rules.
By our Controlling Shareholders
Pursuant to Rule 10.07(1) of the Listing Rules, each Controlling Shareholder has jointly
and severally undertaken to the Stock Exchange, the Sole Sponsor and the Company that, except
in compliance with the requirements of the Listing Rules or pursuant to the Global Offering
(including pursuant to the exercise of the Over-allotment Option) or the Stock Borrowing
Agreement, he, she or it shall not and shall procure that the relevant registered holder(s) shall
not, without the prior written consent of the Stock Exchange:
(a) in the period commencing on the date by reference to which disclosure of its, his or
her shareholding in our Company is made in this prospectus and ending on the
expiration date of the First Six-Month Period, either directly or indirectly, dispose of,
enter into any agreement to dispose of or otherwise create any options, rights,
interests or encumbrances in respect of any of those Shares or securities of our
Company in respect of which he, she or it is shown by this prospectus to be the
beneficial owner (as defined in Rule 10.07(1) of the Listing Rules, the “ Relevant
Securities ”) (save for a charge or a pledge of any Relevant Securities as security in
favor of an authorized institution (as defined in the Banking Ordinance (Chapter 155
of the Laws of Hong Kong)) for a bona fide commercial loan); and
(b) in the period of the following six months commencing on the date on which the First
Six-Month Period expires (the “ Second Six-Month Period ”, together with the First
Six-Month Period, the “ First Twelve-Month Period ”), either directly or indirectly,
dispose of, enter into any agreement to dispose of or otherwise create any options,
UNDERWRITING
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--- page 520 ---
rights, interests or encumbrances in respect of any of the Relevant Securities (save for
a charge or a pledge of any Relevant Securities as security in favor of an authorized
institution (as defined in the Banking Ordinance (Chapter 155 of the Laws of Hong
Kong)) for a bona fide commercial loan), if immediately following such disposal or
upon the exercise or enforcement of such options, rights, interests or encumbrances,
that person or group of persons would cease to be our controlling shareholder (as
defined in the Listing Rules).
Pursuant to Note (3) to Rule 10.07(2) of the Listing Rules, each Controlling Shareholder
has also jointly and severally undertaken to the Stock Exchange, the Sole Sponsor, and the
Company that, within the period commencing on the date by reference to which disclosure of
his/her/its shareholding in our Company is made in this prospectus and ending on the expiry of
the Second Six-Month Period, he, she or it will:
(a) when he, she or it pledges or charges any Relevant Securities in favor of an authorized
institution (as defined in the Banking Ordinance (Chapter 155 of the Laws of Hong
Kong)) for a bona fide commercial loan in accordance with Note (2) to Rule 10.07 of
the Listing Rules, immediately inform us and the Sole Sponsor and the Sole Overall
Coordinator in writing of such pledge or charge together with the number of Relevant
Securities so pledged or charged; and
(b) when he, she or it receives any indications, either verbal or written, from the pledgee
or chargee that any of the pledged or charged securities will be disposed of,
immediately inform us, the Sole Sponsor and the Sole Overall Coordinator in writing
of such indications.
We will inform the Stock Exchange as soon as we have been informed of the above matters
(if any) by any Controlling Shareholder and disclose such matters by way of an announcement
published in accordance with Rule 2.07C of the Listing Rules as soon as possible after being so
informed by the relevant Controlling Shareholder.
Undertakings to the Hong Kong Underwriters
Pursuant to the Hong Kong Underwriting Agreement, the Company and the Controlling
Shareholders have undertaken as follows.
Undertakings by our Company
Except for the Capitalization Issue, the offer or sale of the Offer Shares pursuant to the
Global Offering (including pursuant to the Over-allotment Option), and the grant of, and the
issue of Shares pursuant to, any Options which have been or may be granted under the Share
Option Schemes, during the period commencing from the date of the Hong Kong Underwriting
Agreement and ending on, and including, the expiry of the First Six-Month Period, the Company
undertakes to each of the Sole Sponsor, the Sole Overall Coordinator, the Joint Global
Coordinators, the Joint Bookrunners, the Joint Lead Managers, the Hong Kong Underwriters and
UNDERWRITING
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--- page 521 ---
the Capital Market Intermediaries not to, and to procure each other member of the Group not to,
without the prior written consent of the Sole Sponsor and the Sole Overall Coordinator (for
itself 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 or sell, contract or agree
to allot, issue or sell, mortgage, charge, pledge, hypothecate, lend, grant or sell any
option, warrant, contract or right to subscribe for or purchase, grant or purchase any
option, warrant, contract or right to allot, issue or sell, or otherwise transfer or dispose
of or create any mortgage, charge, pledge, lien, option, restriction, right of first
refusal, security interest, claim, equity interest, right of pre-emption, third-party right
or interest, or interests or rights of the same nature as the foregoing or other
encumbrance or security interest of any kind, or another type of preferential
arrangement (including, without limitation, retention arrangement) having similar
effect (the “ Encumbrance ”) over, or agree to transfer or dispose of or create an
Encumbrance over, either directly or indirectly, conditionally or unconditionally, or
repurchase, any legal or beneficial interest in any Shares, any other equity securities
of the Company, as applicable, or any interest in any of the foregoing (including,
without limitation, any securities which are 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 the Company, as applicable, or any interest
in any of the foregoing), or deposit any Shares or other securities of the Company or
any shares, as applicable, with a depositary in connection with the issue of depositary
receipts except where such transaction is made solely among members of the Group;
or
(b) enter into any swap or other arrangement that transfers to another, in whole or in part,
any of the economic consequences of subscription or ownership (legal or beneficial)
of any Shares or other securities of the Company, 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 the Company, as
applicable, or any interest in any of the foregoing); or
(c) enter into any transaction with the same economic effect as any transaction specified
in (a) or (b) above; or
(d) offer to, contract to or agree to or announce any intention to effect any transaction
specified in (a), (b) or (c) above,
in each case, whether any of the transactions specified in (a), (b), (c) and/or (d) above is to be
settled by delivery of Shares or other securities of the Company, as applicable, or in cash or
otherwise (whether or not the issue of the Shares or such other securities will be completed
within the First Six-Month Period). During the Second Six-Month Period, the Company shall not
enter into any of the transactions specified in (a), (b), (c) and/or (d) such that the Controlling
UNDERWRITING
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Shareholders, directly or indirectly, would cease to be a controlling shareholder (within the
meaning defined in the Listing Rules) of the Company without first having obtained the prior
written consent of the Sole Overall Coordinator and unless in compliance with the requirements
of the Listing Rules. In the event that, during the Second Six-Month Period, the Company enters
into any of the transactions specified in (a), (b), (c) or (d) above, the Company undertakes to
take all reasonable steps to ensure that such transaction will not create a disorderly or false
market in the Shares or any other securities of the Company.
Undertakings by our Controlling Shareholders
Each of the Controlling Shareholders undertakes to each of the Company, the Sole Sponsor,
the Sole Overall Coordinator, the Joint Global Coordinators, the Joint Bookrunners, the Joint
Lead Managers, the Hong Kong Underwriters and the Capital Market Intermediaries that,
without the prior written consent of the Sole Overall Coordinator (on behalf of the Hong Kong
Underwriters) and the Sole Sponsor and unless in compliance with the requirements of the
Listing Rules or pursuant to the Global Offering or the Over-allotment Option:
(a) he/she/it will not, and will procure that none of his/her/its affiliates will not, at any
time during the First Twelve-Month Period, (i) sell, offer to sell, contract or agree to
sell, mortgage, charge, pledge, hypothecate, hedge, lend, grant or sell any option,
warrant, contract or right to purchase, grant or purchase 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 (other than any
mortgage, pledge or charge in favor of an authorized institution (as defined in the
Banking Ordinance (Cap. 155 of the Laws of Hong Kong)) not involving a change of
legal ownership of such Shares other than on enforcement for a bona fide commercial
loan in compliance with the Listing Rules), either directly or indirectly, conditionally
or unconditionally, any Shares or other securities of the Company 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 any other securities of the Company, as
applicable) beneficially owned by him/her/it directly or indirectly through his/her/its
controlled entities as at the Listing Date (the “ Subject Securities ”), or deposit any
Subject Securities with a depositary in connection with the issue of depositary
receipts, or (ii) enter into any swap or other arrangement that transfers to another, in
whole or in part, any of the economic consequences of ownership of the Subject
Securities, or (iii) enter into or effect any transaction with the same economic effect
as any of the transactions specified in (i) or (ii) above, or (iv) offer to or, contract to
or agree to announce any intention to enter into or effect any of the transactions
specified in (i), (ii) or (iii) above, in each case, whether any of the foregoing
transactions specified in (i), (ii) or (iii) above is to be settled by delivery of Shares or
such other equity securities of the Company, or in cash or otherwise (whether or not
the transaction will be completed within the First Twelve-Month Period);
UNDERWRITING
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--- page 523 ---
(b) until the expiry of the First Twelve-Month Period, in the event that he/she/it enters
into any of the transactions specified in (a)(i), (ii) or (iii) above or offers to, contract
to or agrees to or announces any intention to effect any such transaction, he/she/it will
take all reasonable steps to ensure that any such transaction, offer, agreement or
announcement will not create a disorderly or false market in the Shares or any other
securities of the Company;
provided that, subject to strict compliance with any requirements of applicable laws
(including, without limitation, the requirements of the Stock Exchange), nothing above
shall prevent the Controlling Shareholders from (i) entering into, undertaking or
consummating the above arrangements or transactions pursuant to a requirement of a
governmental authority, regulatory body to which a Controlling Shareholder is subject,
a court of law, an arbitral tribunal or a requirement of any applicable law, rules and
regulations, or (ii) purchasing additional Shares or other securities of the Company
and disposing of such additional Shares or other securities of the Company after the
Listing Date; and
(c) he/she/it shall comply with all the restrictions and requirements under the Listing
Rules on the sale, transfer or disposal by him/her/it or by the registered holder(s) of
the Shares or any other securities of our Company at any time during the First
Twelve-Month Period.
Indemnity
We, our Controlling Shareholders and our executive and non-executive Directors, have
jointly and severally agreed and undertaken to indemnify each of the Sole Sponsor, the Sole
Overall Coordinator, the Joint Global Coordinators, the Joint Bookrunners, the Joint Lead
Managers, the Hong Kong Underwriters and the Capital Market Intermediaries for certain losses
which they may suffer, including, among other things, losses arising from their performance of
their obligations under the Hong Kong Underwriting Agreement or any breach by us of the Hong
Kong Underwriting Agreement.
The International Offering
In connection with the International Offering, it is expected that we, the Controlling
Shareholders and the Selling Shareholder will enter into the International Underwriting
Agreement with, among others, the Sole Overall Coordinator, and the International Underwriters.
Under the International Underwriting Agreement, subject to the conditions set forth therein, the
International Underwriters would severally but not jointly agree to procure purchasers for or
failing which to purchase, the International Offer Shares. It is expected that the International
Underwriting Agreement may be terminated on similar grounds as the Hong Kong Underwriting
Agreement. Potential investors shall be reminded that in the event that the International
Underwriting Agreement is not entered into, the Global Offering will not proceed.
UNDERWRITING
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Over-allotment Option
Under the International Underwriting Agreement, our Company is expected to grant to the
International Underwriters, exercisable by the Sole Overall Coordinator at its sole and absolute
discretion for itself and on behalf of the International Underwriters, the Over-allotment Option,
exercisable within 30 days from the last day for lodging applications under the Hong Kong
Public Offering (the last day for exercise of the Over-allotment Option being Friday, August 4,
2023) to require us to allot and issue up to an aggregate of 18,996,000 additional Shares,
representing approximately 15% of the initial number of Offer Shares available under the Global
Offering, at the same price per Offer Share to cover over-allocations in the International
Offering, if any, in the International Offering and/or to satisfy the obligations of the Stabilizing
Manager to return the borrowed securities under the Stock Borrowing Agreement.
Stabilization
In connection with the Global Offering, the Stabilizing Manager, on behalf of the
Underwriters, may, to the extent permitted by applicable laws of Hong Kong or elsewhere,
over-allocate Shares or effect transactions with a view to stabilizing or supporting the market
price of our Shares at a level higher than that which might otherwise prevail for a limited period
after the Listing Date. Please refer to the sections entitled “Structure of the Global Offering –
Over-Allotment and Stabilization” and “Structure of the Global Offering – Stock Borrowing
Arrangement” in this prospectus for details regarding stabilization, over-allocation and stock
borrowing arrangements in connection with the Global Offering.
Underwriting Commission and Expenses
The Underwriters and the Capital Market Intermediaries will receive an underwriting
commission of up to 3.0% on the aggregate Offer Price of the Offer Shares (including any Offer
Shares to be issued pursuant to the exercise of the Over-allotment Option) offered under the
Global Offering (the “ Fixed Fees ”), out of which they will pay any sub-underwriting
commission and other fees (if any). In addition, our Company may pay to the Underwriters a
discretionary incentive fee of up to 2.0% on the aggregate Offer Price of the Offer Shares
(including any Offer Shares to be issued pursuant to the exercise of the Over-allotment Option)
(the “ Discretionary Fees ”).
Assuming the Discretionary Fees are paid in full, the aggregate amount of fees payable by
our Company to all syndicate members will be 5.0% of the gross proceeds from the Global
Offering, and the ratio of Fixed Fees and Discretionary Fees payable is therefore 60:40.
For any unsubscribed Hong Kong Offer Shares reallocated to the International Offering, the
underwriting commission will not be paid to the Hong Kong Underwriters but will instead be
paid, at the rate applicable to the International Offering, to the relevant International
Underwriters.
UNDERWRITING
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The aggregate underwriting commissions and fees, together with listing fees, SFC
transaction levy, AFRC transaction levy and Stock Exchange trading fee, legal and other
professional fees and printing and other expenses relating to the Global Offering are estimated to
amount to approximately HK$99.2 million (based on the Offer Price of HK$4.25 per Offer Share
and assuming that the Over-allotment Option is not exercised) in total of which approximately
HK$89.0 million has been and shall be borne by us and approximately HK$10.2 million shall be
borne by the Selling Shareholder.
Stamp Taxes
Buyers of Offer Shares sold by the Underwriters may be required to pay stamp taxes and
other charges in accordance with the laws and practice of the country of purchase in addition to
the Offer Price.
Underwriters’ Interests in our Company
Save for their respective obligations under the Underwriting Agreements and as disclosed
in this prospectus, the Underwriters have no shareholding interests in our Company or any other
member of our Group or the right or option (whether legally enforceable or not) to subscribe for
or nominate persons to subscribe for securities in our Company or any other member of our
Group.
Following completion of the Global Offering, the Underwriters and their affiliated
companies may hold a certain portion of the Shares as a result of fulfilling their obligations
under the Underwriting Agreements.
Sole Sponsor’s Independence
The Sole Sponsor satisfies the independence criteria applicable to a sponsor as set out in
Rule 3A.07 of the Listing Rules.
ACTIVITIES BY SYNDICATE MEMBERS
The underwriters of the Hong Kong Public Offering and the International Offering
(together, the “ Syndicate Members ”) and their affiliates may each individually undertake a
variety of activities (as further described below) which do not form part of the underwriting or
stabilizing process.
The Syndicate Members and their affiliates are diversified financial institutions with
relationships in countries around the world. These entities engage in a wide range of commercial
and investment banking, brokerage, funds management, trading, hedging, investing and other
activities for their own account and for the account of others. In relation to the Shares, those
activities could include acting as agent for buyers and sellers of the Shares, entering into
transactions with those buyers and sellers in a principal capacity, proprietary trading in the
Shares, and entering into over-the-counter or listed derivative transactions or listed and unlisted
UNDERWRITING
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securities transactions (including issuing securities such as derivative warrants listed on a stock
exchange) which have as their underlying assets, assets including the Shares. Those activities
may require hedging activity by those entities involving, directly or indirectly, the buying and
selling of the Shares. All such activities could occur in Hong Kong and elsewhere in the world
and may result in the Syndicate Members and their affiliates holding long and/or short positions
in the Shares, in baskets of securities or indices including the Shares, in units of funds that may
purchase the Shares, or in derivatives related to any of the foregoing.
In relation to issues by Syndicate Members or their affiliates of any listed securities having
the Shares as their underlying securities, whether on the Stock Exchange or on any other stock
exchange, the rules of the relevant exchange may require the issuer of those securities (or one of
its affiliates or agents) to act as a market maker or liquidity provider in the security, and this
will also result in hedging activity in the Shares in most cases.
All such activities may occur both during and after the end of the stabilizing period
described in the section headed “Structure of the Global Offering – Over-allotment and
Stabilization” in this prospectus. Such activities may affect the market price or value of the
Shares, the liquidity or trading volume in the Shares and the volatility of the price of the Shares,
and the extent to which this occurs from day to day cannot be estimated.
It should be noted that when engaging in any of these activities, the Syndicate Members
will be subject to certain restrictions, including the following:
(a) the Syndicate Members (other than the Stabilizing Manager or its affiliates or any
person acting for them) must not, in connection with the distribution of the Offer
Shares, effect any transactions (including issuing or entering into any option or other
derivative transactions relating to the Offer Shares), whether in the open market or
otherwise, with a view to stabilizing or maintaining the market price of any of the
Offer Shares at levels other than those which might otherwise prevail in the open
market; and
(b) the Syndicate Members must comply with all applicable laws and regulations,
including the market misconduct provisions of the SFO, including the provisions
prohibiting insider dealing, false trading, price rigging and stock market manipulation.
UNDERWRITING
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THE GLOBAL OFFERING
This prospectus is published in connection with the Hong Kong Public Offering which
forms part of the Global Offering. The Global Offering comprises (assuming the Over-allotment
Option is not exercised):
 the Hong Kong Public Offering of initially 12,664,000 New Shares (subject to
adjustment and reallocation as mentioned below) (representing 10% of the initial total
number of Offer Shares) in Hong Kong as described in the subsection headed “The
Hong Kong Public Offering” in this section; and
 the International Offering of initially 113,976,000 Shares (initially comprising
65,976,000 New Shares and 48,000,000 Sale Shares, and subject to adjustment and
reallocation and the Over-allotment Option as mentioned below) (representing 90% of
the initial total number of Offer Shares) outside the United States (including to
professional and institutional investors within Hong Kong) in offshore transactions in
reliance on Regulation S.
Investors may apply for Hong Kong Offer Shares under the Hong Kong Public Offering or
apply for, or indicate an interest in, if qualified to do so, the International Offer Shares under
the International Offering, but may not do both. The Hong Kong Public Offering is open to the
public in Hong Kong. The International Offering will involve selective marketing of the
International Offer Shares to professional, institutional and other investors expected to have a
sizeable demand for such International Offer Shares in Hong Kong and other jurisdictions
outside of the United States in offshore transactions in reliance on Regulation S.
CMBC Securities Company Limited is the Sole Overall Coordinator, the Joint Global
Coordinator, the Joint Bookrunner, the Joint Lead Manager and the Capital Market Intermediary
for the Global Offering.
The number of Offer Shares to be offered under the Hong Kong Public Offering and the
International Offering, respectively, may be subject to reallocation and, in the case of the
International Offering only, the Over-allotment Option as described below in the subsection
headed “Over-Allotment and Stabilization” in this section.
The Hong Kong Public Offering is fully underwritten by the Hong Kong Underwriters
under the terms of the Hong Kong Underwriting Agreement. Our Company expects to enter into
the International Underwriting Agreement relating to the International Offering on or around
July 5, 2023. These underwriting arrangements, and the respective Underwriting Agreements, are
summarized in the section headed “Underwriting” in the prospectus.
STRUCTURE OF THE GLOBAL OFFERING
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CONDITIONS OF THE GLOBAL OFFERING
Acceptance of all applications for the Offer Shares pursuant to the Global Offering will be
conditional on:
(i) the Listing Committee granting the listing of, and permission to deal in, the Shares in
issue, the Shares to be issued pursuant to the Global Offering (including the Shares
which may be issued pursuant to the Capitalization Issue and upon the exercise of the
Over-allotment Option) and the Shares which may be issued upon the exercise of the
Options granted under the Pre-IPO Stock Incentive Plan and any Options which may
be granted under the Post-IPO Share Option Scheme, and such listing and permission
not subsequently having been revoked prior to the commencement of dealings in the
Shares on the Stock Exchange;
(ii) the execution and delivery of the International Underwriting Agreement and the Stock
Borrowing Agreement on or around July 5, 2023; and
(iii) 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,
in each case on or before the dates and times specified in the respective Underwriting Agreement
(unless and to the extent such conditions are validly waived on or before such dates and times)
and in any event no later than the date which is 30 days after the date of this prospectus.
The consummation of each of the Hong Kong Public Offering and the International
Offering is conditional upon, among other things, the other offering becoming and remaining
unconditional and not having been terminated in accordance with their respective terms.
If the above conditions are not fulfilled or waived prior to the times and dates specified,
the Global Offering will lapse, and the Stock Exchange will be notified immediately. We will
cause a notice of the lapse of the Hong Kong Public Offering to be published on the Stock
Exchange’s website at www.hkexnews.hk and our Company’s website at www.splegend.com on
the next business day following such lapse. In such eventuality, all application monies will be
returned, without interest, on the terms set out in “How to Apply for Hong Kong Offer Shares”.
In the meantime, all application monies will be held in separate bank account(s) with the
receiving bankers or other licensed bank(s) in Hong Kong licensed under the Banking Ordinance
(Chapter 155 of the Laws of Hong Kong) (as amended).
STRUCTURE OF THE GLOBAL OFFERING
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Share certificates for the Offer Shares will only become valid evidence of title at
8:00 a.m. on Thursday, July 13, 2023 provided that (i) the Global Offering has become
unconditional in all respects, and (ii) the right of termination as described in the section
headed “Underwriting – Underwriting Arrangements and Expenses – Hong Kong Public
Offering – Grounds for termination” has not been exercised.
THE HONG KONG PUBLIC OFFERING
Number of Shares Initially Offered
Under the Hong Kong Public Offering, our Company is initially offering 12,664,000 New
Shares at the Offer Price for subscription by the public in Hong Kong, representing 10% of the
total number of the Offer Shares initially available under the Global Offering. Subject to the
reallocation of Offer Shares between (i) the International Offering and (ii) the Hong Kong Public
Offering, the Hong Kong Offer Shares will represent approximately 1.6% of our Company’s
enlarged issued share capital immediately after completion of the Global Offering, assuming that
the Over-allotment Option is not exercised.
The Hong Kong Public Offering is open to members of the public in Hong Kong as well as
to institutional and professional investors. Professional investors generally include brokers,
dealers and companies (including fund managers) whose ordinary business involve 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
subsection headed “Conditions of the Global Offering” in this section.
Allocation
Allocation of Hong Kong Offer Shares to investors under the Hong Kong Public Offering
will be based solely on the level of valid applications received under the Hong Kong Public
Offering. The basis of allocation may vary, depending on the number of Hong Kong Offer
Shares validly applied for by applicants. Such allocation could, where appropriate, consist of
balloting, which would mean that some applicants may receive a higher allocation than others
who have applied for the same number of Hong Kong Offer Shares, and those applicants who
are not successful in the ballot may not receive any Hong Kong Offer Shares.
The total number of Offer Shares available under the Hong Kong Public Offering (after
taking account of any reallocation referred to below) is to be divided equally into two pools for
allocation purposes: pool A and pool B.
Pool A: The Hong Kong Offer Shares in pool A will be allocated on an equitable basis to
applicants who have applied for Hong Kong Offer Shares with an aggregate price of HK$5
million (excluding the brokerage, SFC transaction levy, AFRC transaction levy and Stock
Exchange trading fee payable) or less.
STRUCTURE OF THE GLOBAL OFFERING
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Pool B: The Hong Kong Offer Shares in pool B will be allocated on an equitable basis to
applicants who have applied for Hong Kong Offer Shares with an aggregate price of more than
HK$5 million (excluding the brokerage, SFC transaction levy, AFRC transaction levy and Stock
Exchange trading fee payable).
Investors should be aware that applications in pool A and applications in pool B may
receive different allocation ratios. If Hong Kong Offer Shares in one (but not both) of the 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. For the purpose of this paragraph
only, the “price” for the Shares means the price payable on application therefor (without regard
to the Offer Price).
Applicants can receive an allocation of Hong Kong Offer Shares from either pool A or pool
B but not from both pools. Multiple or suspected multiple applications within either pool or
between pools and any application for more than 6,332,000 Hong Kong Offer Shares (being 50%
of the 12,664,000 Hong Kong Offer Shares initially comprised in the Hong Kong Public
Offering) are liable to be rejected.
Reallocation
The allocation of the Offer Shares between the International Offering and the Hong Kong
Public Offering is subject to adjustment and reallocation on the following basis:
 if the number of the Offer Shares validly applied for under the Hong Kong Public
Offering represents 15 times or more but less than 50 times the number of the Offer
Shares initially available for subscription under the Hong Kong Public Offering, then
Offer Shares will be reallocated to the Hong Kong Public Offering from the
International Offering, so that the number of the Offer Shares available for
subscription under the Hong Kong Public Offering will be increased to 37,992,000
Shares, representing 30% of the Offer Shares initially available for subscription under
the Global Offering;
 if the number of the Offer Shares validly applied for under the Hong Kong Public
Offering represents 50 times or more but less than 100 times the number of the Offer
Shares initially available for subscription under the Hong Kong Public Offering, then
the number of Offer Shares will be reallocated to the Hong Kong Public Offering from
the International Offering, so that the number of the Offer Shares available for
subscription under the Hong Kong Public Offering will be increased to 50,656,000
Shares, representing 40% of the Offer Shares initially available for subscription under
the Global Offering; and
 if the number of the Offer Shares validly applied for under the Hong Kong Public
Offering represents 100 times or more the number of the Offer Shares initially
available for subscription under the Hong Kong Public Offering, then the number of
Offer Shares will be reallocated to the Hong Kong Public Offering from the
STRUCTURE OF THE GLOBAL OFFERING
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International Offering, so that the number of the Offer Shares available for
subscription under the Hong Kong Public Offering will be increased to 63,320,000
Shares, representing 50% of the Offer Shares initially available for subscription under
the Global Offering.
In each case, the additional Offer Shares reallocated to the Hong Kong Public Offering will
be allocated equally between pool A and pool B and the number of Offer Shares allocated to the
International Offering will be correspondingly reduced.
The Offer Shares to be offered in the Hong Kong Public Offering and the International
Offering may, in certain circumstances, be reallocated as between these offerings at the
discretion of the Sole Overall Coordinator. The Sole Overall Coordinator may in its 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. In addition, if the Hong Kong
Public Offering is not fully subscribed, the Sole Overall Coordinator may also in its discretion
reallocate to the International Offering all or any Hong Kong Offer Shares which are not
subscribed.
In the event of reallocation of Offer Shares between the International Offering and the
Hong Kong Public Offering in the circumstances where (a) the International Offer shares are
fully subscribed or oversubscribed and the Hong Kong Offer Shares are fully subscribed or
oversubscribed by less than 15 times, or (b) the International Offer Shares are undersubscribed
and the Hong Kong Offer Shares are fully subscribed or oversubscribed, irrespective of the
number of time of over-allocation, then up to 12,664,000 Offer Shares may be reallocated from
the International Offering to the Hong Kong Public Offering, so that the total number of Offer
Shares available for subscription under the Hong Kong Public Offering will increase up to
25,328,000 Shares, representing approximately 20% of the number of the Offer Shares initially
available under the Global Offering (before any exercise of the Over-allotment Option) in
accordance with Guidance Letter HKEx-GL91-18.
Applications
Each applicant under the Hong Kong Public Offering will also be required to give an
undertaking and confirmation in the application submitted by him or her that he or she, and any
person(s) for whose benefit he or she 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 said undertaking and/or confirmation is breached and/or untrue (as the case may be)
or if he or she has been or will be placed or allocated Offer Shares under the International
Offering.
STRUCTURE OF THE GLOBAL OFFERING
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Applicants under the Hong Kong Public Offering are required to pay, on application, the
Offer Price of HK$4.25 per Hong Kong Offer Share in addition to any brokerage of 1%, SFC
transaction levy of 0.0027%, AFRC transaction levy of 0.00015% and Stock Exchange trading
fee of 0.00565% payable on each Hong Kong Offer Share. Further details are set out below in
“How to Apply for Hong Kong Offer Shares”.
References in this prospectus to applications, Application Forms, application monies or the
procedure for application relate solely to the Hong Kong Public Offering.
THE INTERNATIONAL OFFERING
Number of Shares offered
Subject to reallocation as described above, the International Offering will consist of
113,976,000 Shares, representing 90% of the total number of Offer Shares initially available
under the Global Offering, initially, comprising 65,976,000 New Shares offered by our Company
and 48,000,000 Sale Shares offered by the Selling Shareholder, and assuming that the
Over-allotment Option is not exercised. Subject to the reallocation of the Offer Shares between
the International Offering and the Hong Kong Public Offering, the number of Offer Shares
initially offered under the International Offering will represent approximately 14.2% of our
Company’s enlarged issued share capital immediately after completion of the Global Offering,
assuming that the Over-allotment Option is not exercised.
Allocation
The International Offering will include selective marketing of Offer Shares to institutional
and professional investors and other investors anticipated to have a sizeable demand for such
Offer Shares in Hong Kong and other jurisdictions outside the United States in offshore
transactions in reliance on Regulation S. 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 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” 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 relevant
sector and whether or not it is expected that the relevant investor is likely to buy further Shares,
and/or hold or sell its Shares, after the listing of the Shares on the Stock Exchange. Such
allocation is intended to result in a distribution of the Shares on a basis which would lead to the
establishment of a solid professional and institutional shareholder base to the benefit, of our
Company and our Shareholders as a whole.
The Sole Overall Coordinator (for itself and on behalf of the Underwriters) may require any
investor who has been offered Offer Shares under the International Offering, and who has made
an application under the Hong Kong Public Offering to provide sufficient information to the
Sole Overall Coordinator so as to allow it to identify the relevant applications under the Hong
STRUCTURE OF THE GLOBAL OFFERING
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Kong Public Offering and to ensure that it is excluded from any application of Offer Shares
under the Hong Kong Public Offering.
Over-allotment Option
In connection with the Global Offering, our Company is expected to grant an
Over-allotment Option to the International Underwriters exercisable by the Sole Overall
Coordinator (for itself and on behalf of the International Underwriters).
Pursuant to the Over-allotment Option, the Sole Overall Coordinator (for itself and on
behalf of the International Underwriters) has the right, exercisable at any time, from the day on
which trading of the Shares commences on the Stock Exchange until 30 days after the last day
for the lodging of applications under the Hong Kong Public Offering, to require our Company to
issue up to 18,996,000 additional Shares, representing in aggregate approximately 15.0% of the
initial Offer Shares, at the same price per Offer Share under the International Offering, to cover
over-allocations in the International Offering, if any. If the Over-allotment Option is exercised in
full, the additional Shares will represent approximately 2.3% of our enlarged issued share capital
immediately following the completion of the Global Offering and the exercise of the
Over-allotment Option. In the event that the Over-allotment Option is exercised, a public
announcement will be made.
PRICING OF THE GLOBAL OFFERING
The International Underwriters will be soliciting from prospective investors indications of
interest in acquiring the Offer Shares in the International Offering. Prospective professional and
institutional investors will be required to specify the number of the 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.
The Offer Price will be HK$4.25 per Offer Share unless otherwise announced, not later
than the morning of the last day for lodging applications under the Hong Kong Public Offering,
and the number of Offer Shares to be allocated under various offerings will be determined
shortly thereafter.
The Sole Overall Coordinator (for itself and 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 our Company
and the Selling Shareholder, reduce the number of Offer Shares being offered under the Global
Offering and/or the Offer Price that stated in this prospectus at any time on or prior to the
morning of the last day for lodging applications under the Hong Kong Public Offering. In such
case, our Company will, as soon as practicable following the decision to make any 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 published on the
website of the Stock Exchange at www.hkexnews.hk and our Company at www.splegend.com ,
STRUCTURE OF THE GLOBAL OFFERING
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an announcement, or a supplemental prospectus (as appropriate), in connection with such
reduction. Upon issue of such an announcement or supplemental prospectus (as appropriate), the
revised number of Offer Shares and/or the revised Offer Price will be final and conclusive and
the revised Offer Price, if agreed upon by the Sole Overall Coordinator (for itself and on behalf
of the Underwriters), the Selling Shareholder and our Company, will be fixed at such revised
Offer Price. Applicants should have regard to the possibility that any announcement or
supplemental prospectus (as appropriate) in connection with any such reduction in the number of
Offer Shares being offered under the Global Offering and/or the revised Offer Price may not be
made until the day that is the last day for lodging applications under the Hong Kong Public
Offering. Such announcement or supplemental prospectus (as appropriate) will also include
confirmation or revision, as appropriate, of the working capital statement, the use of proceeds
and the Global Offering statistics as currently set out in this prospectus and any other financial
information which may change as a result of such reduction. If the number of Offer Shares
and/or the revised Offer Price is so reduced, applicant(s) who have already submitted an
application will be notified that they are required to confirm their applications. All applicant(s)
who have already submitted an application need to confirm their applications in accordance with
the procedures set out in the announcement or supplemental prospectus (as appropriate) and all
unconfirmed applications will not be valid. In the absence of any such notice or supplemental
prospectus (as appropriate) published in relation to the reduction in the Offer Price, the number
of Offer Shares will not be reduced and/or the Offer Price shall be HK$4.25.
The net proceeds of the Global Offering accruing to our Company (after deduction of
underwriting fees, SFC transaction levy, AFRC transaction levy and Stock Exchange trading fees
in relation to the Global Offering, assuming the Over-allotment Option is not exercised) are
estimated to be approximately HK$245.2 million based on the Offer Price per Offer Share of
HK$4.25.
The indications of interest in the Global Offering, the results of applications and the basis
of allotment of Hong Kong Offer Shares available under the Hong Kong Public Offering, are
expected to be announced on Wednesday, July 12, 2023 in the manner set out in the paragraph
“How to Apply for Hong Kong Offer Shares – 11. Publication of results” in this prospectus.
OVER-ALLOTMENT AND STABILIZATION
Stabilization is a practice used by underwriters in some markets to facilitate the distribution
of securities. To stabilize, the underwriters may bid for, or purchase, the newly issued securities
in the secondary market, during a specified period of time, to retard and, if possible, prevent a
decline in the market price of the securities below the offer price. It may be effected in
jurisdictions where it is permissible to do so and subject to all applicable laws and regulatory
requirements. In Hong Kong, the price at which stabilization is effected is not permitted to
exceed the offer price.
STRUCTURE OF THE GLOBAL OFFERING
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The Stabilizing Manager has been appointed by us for the purposes of the Global Offering
in accordance with the Securities and Futures (Price Stabilizing) Rules made under the SFO. In
connection with the Global Offering, the Stabilizing Manager, or any person acting for it, on
behalf of the Underwriters, may over-allocate or effect short sales or any other stabilizing
transactions with a view to stabilizing or maintaining the market price of the Shares at a level
higher than that which might otherwise prevail for a limited period after the issue date. Short
sales involve the sale by the Stabilizing Manager of a greater number of Shares than the
Underwriters are required to purchase in the Global Offering. “Covered” short sales are sales
made in amounts not greater than the Over-allotment Option. The Stabilizing Manager may close
out the covered short position by either exercising the Over-allotment Option to purchase
additional Offer Shares or purchasing Shares in the open market. In determining the source of
the Offer Shares to close out the covered short position, the Stabilizing Manager will consider,
among other things, the price of Offer Shares in the open market as compared to the price at
which they may purchase additional Offer Shares pursuant to the Over-allotment Option.
Stabilizing transactions consist of certain bids or purchases made for the purpose of preventing
or curbing a decline in the market price of the Offer Shares while the Global Offering is in
progress. Any market purchases of our Offer 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 Stabilizing Manager, or any person acting for it to conduct any such stabilizing
action. Such stabilization, if commenced, will be conducted at the absolute discretion of the
Stabilization Manager, its affiliates or any person acting for it and may be discontinued at any
time, and must 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 Shares that may be
over-allocated will not exceed the number of Shares which may be made available upon exercise
of the Over-allotment Option, being up to 18,996,000 Shares, which is in aggregate
approximately 15.0% of the Shares initially available under the Global Offering.
In Hong Kong, stabilizing activities must be carried out in accordance with the Securities
and Futures (Price Stabilizing) Rules. Stabilizing actions permitted pursuant to the Securities
and Futures (Price Stabilizing) Rules include:
(i) over-allocating for the purpose of preventing or minimizing any reduction in the
market price of our Shares;
(ii) selling or agreeing to sell the Shares so as to establish a short position in them for the
purpose of preventing or minimizing any reduction in the market price of the Shares;
(iii) purchasing or subscribing for, or agreeing to purchase or subscribe for, our Shares
pursuant to the Over-allotment Option in order to close out any position established
under (i) or (ii) above;
(iv) purchasing, or agreeing to purchase, any of the Shares for the sole purpose of
preventing or minimizing any reduction in the market price;
STRUCTURE OF THE GLOBAL OFFERING
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(v) selling, or agreeing to sell, any of our Shares in order to liquidate any position
established as a result of those purchases; and
(vi) offering or attempting to do anything as described in paragraphs (ii), (iii), (iv) or (v)
above.
Stabilizing actions by the Stabilizing Manager, or any person acting for it, will be entered
into in accordance with the laws, rules and regulations in place in Hong Kong on stabilization.
As a result of effecting transactions to stabilize or maintain the market price of the Shares,
the Stabilizing Manager or any person acting for it, may, in connection with the stabilizing
action, maintain a long position in the Shares, and there is no certainty as to the extent to which
and the time period for which it will maintain such a position. Investors should be warned of the
possible impact of any liquidation of the long position by the Stabilizing Manager or any person
acting for it, which may include a decline in the market price of the Shares.
Stabilization cannot be used to support the price of the Shares for longer than the
stabilization period, which begins on the day on which trading of the Shares commences on the
Stock Exchange and ends on the thirtieth day after the last day for lodging of applications under
the Hong Kong Public Offering. The stabilization period is expected to expire on Friday, August
4, 2023. As a result, demand for the Shares, and their market price, may fall after the end of the
stabilizing period. These activities by the Stabilizing Manager may stabilize, maintain or
otherwise affect the market price of the Shares. As a result, the price of the Shares may be
higher than the price that otherwise may exist in the open market. Any stabilizing action taken
by the Stabilizing Manager or any person acting for it, may not necessarily result in the market
price of the Shares staying at or above the Offer Price either during or after the stabilizing
period. Bids for or market purchases of the Shares by the Stabilizing 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 Shares by purchasers. A public announcement in compliance with the
Securities and Futures (Price Stabilizing) Rules will be made within seven days of the expiration
of the stabilizing period.
STOCK BORROWING ARRANGEMENT
For the purpose of covering any over-allocations, the Stabilizing Manager may borrow from
Mr. Lai up to 18,996,000 Shares, equivalent to the maximum number of Shares to be issued on a
full exercise of the Over-allotment Option, under the Stock Borrowing Agreement expected to be
entered into between the Stabilizing Manager and Mr. Lai. The loan of Shares from Mr. Lai
pursuant to the Stock Borrowing Agreement shall not be subject to the restrictions under Rule
10.07(1)(a) of the Listing Rules, provided that the requirements of Rule 10.07(3) of the Listing
Rules are complied with as follows:
(i) the Stock Borrowing Agreement is fully described in the prospectus and will be for
the sole purpose of covering any short position prior to the exercise of the
Over-allotment Option in connection with the International Offering;
STRUCTURE OF THE GLOBAL OFFERING
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--- page 537 ---
(ii) the maximum number of Shares which may be borrowed from Mr. Lai must not
exceed the maximum number of Shares which may be issued upon full exercise of the
Over-allotment Option;
(iii) the same number of Shares so borrowed must be returned to Mr. Lai or its nominees,
as the case may be, on or before the third business day following the earlier of (a) the
last day for exercising the Over-allotment Option, and (b) the date on which the
Over-allotment Option is exercised in full;
(iv) the borrowing of Shares pursuant to the Stock Borrowing Arrangement will be
effected in compliance with all applicable Listing Rules, laws and other regulatory
requirements; and
(v) no payment will be made to Mr. Lai by the Stabilizing Manager in relation to such
Stock Borrowing Agreement.
DEALING
Assuming that the Hong Kong Public Offering becomes unconditional at or before
8:00 a.m. in Hong Kong on Thursday, July 13, 2023, it is expected that dealings in the Shares on
the Stock Exchange will commence at 9:00 a.m. on Thursday, July 13, 2023.
The Shares will be traded in board lots of 500 Shares each.
STRUCTURE OF THE GLOBAL OFFERING
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IMPORTANT NOTICE TO INVESTORS:
FULLY ELECTRONIC APPLICATION PROCESS
We have adopted a fully electronic application process for the Hong Kong Public
Offering. We will not provide any printed copies of this prospectus or any printed copies of
any application forms for use by the public.
This prospectus is available at the website of the Hong Kong Stock Exchange at
www.hkexnews.hk under the “ HKEXnews > New Listings > New Listing Information ”
section, and our website at www.splegend.com. If you require a printed copy of this
prospectus, you may download and print from the website addresses above.
The contents of the electronic version of the 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.
Set out below are procedures through which you can apply for the Hong Kong Offer Shares
electronically. No physical channels to accept any application for the Hong Kong Offer Shares
by the public will be provided by the Company.
1. HOW TO APPLY
We will not provide any printed application forms for use by the public.
If you apply for Hong Kong Offer Shares, then you may not apply for, or indicate an
interest for, International Offer Shares.
To apply for Hong Kong Offer Shares, you may:
(1) apply online via the White Form eIPO service at www.eipo.com.hk ;o r
(2) apply through the CCASS EIPO service to electronically cause HKSCC Nominees to
apply on your behalf, including by:
(i) instructing your broker or custodian who is a CCASS Clearing Participant or a
CCASS Custodian Participant to give electronic application instructions via
CCASS terminals to apply for the Hong Kong Offer Shares on your behalf; or
(ii) (if you are an existing CCASS Investor Participant) giving electronic
application instructions through the CCASS Internet System
(https://ip.ccass.com ) or through the CCASS Phone System by calling
+852 2979 7888 (using the procedures in HKSCC’s “An Operating Guide for
HOW TO APPLY FOR HONG KONG OFFER SHARES
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Investor Participants” in effect from time to time). HKSCC can also input
electronic application instructions for CCASS Investor Participants through
HKSCC’s Customer Service Centre at 1/F, One & Two Exchange Square, 8
Connaught Place, Central, Hong Kong by completing an input request.
If you apply through channel (1) above, the Hong Kong Offer Shares successfully applied
for will be issued in your own name.
If you apply through channels (2)(i) or (2)(ii) above, the Hong Kong Offer Shares
successfully applied for will be issued in the name of HKSCC Nominees and deposited directly
into CCASS to be credited to your or a designated CCASS Participant’s stock account.
None of you or your joint applicant(s) may make more than one application, except where
you are a nominee and provide the required information in your application.
Our Company, the Sole Overall Coordinator, the White Form eIPO Service Provider and
their respective agents may reject or accept any application in full or in part for any reason at
their discretion.
2. WHO CAN APPLY
You can apply for Hong Kong Offer Shares if you or the person(s) for whose benefit you
are applying:
 are 18 years of age or older;
 have a Hong Kong address;
 are outside the United States, and are not a United States Person (as defined in
Regulation S); and
 are not a legal or natural person of the PRC.
If you are a firm, the application must be in the individual members’ names.
If an application is made by a person under a power of attorney, the Sole Overall
Coordinator may accept it at its discretion and on any conditions it thinks fit, including evidence
of the attorney’s authority.
The number of joint applicants may not exceed four, and they may not apply by means of
White Form eIPO service for the Hong Kong Offer Shares.
Unless permitted by the Listing Rules, you cannot apply for any Hong Kong Offer Shares if
you are:
 an existing beneficial owner of Shares in our Company and/or any of its subsidiaries;
HOW TO APPLY FOR HONG KONG OFFER SHARES
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 a Director or chief executive officer of our Company and/or any of its subsidiaries;
 a close associate (as defined in the Listing Rules) of any of the above; or
 have been allocated or have applied for any International Offer Shares or otherwise
participate in the International Offering.
3. TERMS AND CONDITIONS OF AN APPLICATION
By applying through the application channels specified in this prospectus, among other
things, you:
(i) undertake to execute all relevant documents and instruct and authorize the Company
and/or the Sole Overall Coordinator (or its agents or nominees), as agents of the
Company, 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 our Memorandum and Articles of
Association;
(ii) agree to comply with the Companies (Winding Up and Miscellaneous Provisions)
Ordinance, the Cayman Companies Act, and our Memorandum and Articles of
Association;
(iii) confirm that you have read the terms and conditions and application procedures set
out in this prospectus and agree to be bound by them;
(iv) confirm that you have received and read this prospectus and have only relied on the
information and representations contained in this prospectus in making your
application and will not rely on any other information or representations except those
in any supplement to this prospectus;
(v) confirm that you are aware of the restrictions on the Global Offering in this
prospectus;
(vi) agree that none of the Company, the Sole Sponsor, the Sole Overall Coordinator, the
Joint Global Coordinators, the Joint Bookrunners, the Joint Lead Managers, the
Underwriters, the Capital Market Intermediaries, their respective directors, officers,
employees, partners, agents, advisors and any other parties involved in the Global
Offering (the “ Relevant Persons ”) is, or will be liable for, any information and
representations not in this prospectus (and any supplement to it);
HOW TO APPLY FOR HONG KONG OFFER SHARES
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--- page 541 ---
(vii) undertake and confirm that you or the person(s) for whose benefit you have made 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 International Offer Shares under
the International Offering nor participated in the International Offering;
(viii) agree to disclose to the Company, our Hong Kong Share Registrar, the receiving
bank(s), the Sole Sponsor, the Sole Overall Coordinator, the Joint Global
Coordinators, the Joint Bookrunners, the Joint Lead Managers, the Underwriters, the
Capital Market Intermediaries and/or their respective advisors and agents and the
Relevant Persons any personal data which they may require about you and the
person(s) for whose benefit you have made the application;
(ix) agree and warrant that, if the laws of any place outside Hong Kong apply to your
application, you have complied with all such laws and none of the Company, the Sole
Sponsor, the Sole Overall Coordinator, the Joint Global Coordinators, the Joint
Bookrunners, the Joint Lead Managers, the Underwriters and the Capital Market
Intermediaries nor any of their respective officers or advisors nor the Relevant
Persons will breach any law 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 and the Application Form;
(x) agree that once your application has been accepted, you may not rescind it because of
an innocent misrepresentation;
(xi) agree that your application will be governed by the laws of Hong Kong;
(xii) represent, warrant and undertake that you understand that the Hong Kong Offer Shares
have not been and will not be registered under the U.S. Securities Act;
(xiii) you and any person for whose benefit you are applying for the Hong Kong Offer
Shares are outside the United States (as defined in Regulation S) and are not a United
States Person (as defined in Regulation S), and the purchaser is not an affiliate (as
defined in Regulation S) of our Company or a person acting on the behalf of our
Company or an affiliate of our Company;
(xiv) warrant that the information you have provided is true and accurate;
(xv) agree to accept the Hong Kong Offer Shares applied for, or any lesser number
allocated to you under the application;
(xvi) authorize the Company to place your name(s) or the name of the HKSCC Nominees,
on the Company’s register of members as the holder(s) of any Hong Kong Offer
Shares allocated to you, and the Company and/or its agents to send any share
certificate(s) and/or any e-Refund payment instructions and/or any refund cheque(s) to
HOW TO APPLY FOR HONG KONG OFFER SHARES
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you or the first-named applicant for joint application by ordinary post at your own
risk to the address stated on the application, unless you are eligible to collect the
share certificate(s) and/or refund cheque(s) in person;
(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) understand that the Company and the Sole Overall Coordinator will rely on your
declarations and representations in deciding whether or not to make any allotment of
any of the Hong Kong Offer Shares to you and that you may be prosecuted for making
a false declaration;
(xix) warrant (if the application is made for your own benefit) that no other application has
been or will be made for your benefit by giving electronic application instructions to
HKSCC or to the White Form eIPO Service Provider by you or by any one as your
agent or by any other person; and
(xx) warrant (if you are making the application as an agent for the benefit of another
person) that (i) 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 (ii) you
have due authority to give electronic application instructions on behalf of that other
person as their agent.
For the avoidance of doubt, the Company and all other parties involved in the preparation
of this prospectus acknowledge that each applicant and CCASS Participant who gives or causes
to give electronic application instructions is a person who may be entitled to compensation
under Section 40 of the Companies (Winding Up and Miscellaneous Provisions) Ordinance (as
applied by Section 342E of the Companies (Winding Up and Miscellaneous Provisions)
Ordinance).
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4. MINIMUM APPLICATION AMOUNT AND PERMITTED NUMBERS
Your application through White Form eIPO service or the CCASS EIPO service must be
for a minimum of 500 Hong Kong Offer Shares and in one of the numbers set out in the table
below. You are required to pay the amount next to the number you select.
No. of
Hong Kong
Offer Shares
applied for
Amount
payable on
application
No. of
Hong Kong
Offer Shares
applied for
Amount
payable on
application
No. of
Hong Kong
Offer Shares
applied for
Amount
payable on
application
No. of
Hong Kong
Offer Shares
applied for
Amount
payable on
application
HK$ HK$ HK$ HK$
500 2,146.43 7,000 30,050.02 50,000 214,643.07 700,000 3,005,002.88
1,000 4,292.86 8,000 34,342.89 60,000 257,571.68 800,000 3,434,289.00
1,500 6,439.29 9,000 38,635.75 70,000 300,500.29 900,000 3,863,575.13
2,000 8,585.72 10,000 42,928.61 80,000 343,428.90 1,000,000 4,292,861.26
2,500 10,732.16 15,000 64,392.92 90,000 386,357.51 1,500,000 6,439,291.88
3,000 12,878.58 20,000 85,857.23 100,000 429,286.13 2,000,000 8,585,722.50
3,500 15,025.01 25,000 107,321.53 200,000 858,572.26 2,500,000 10,732,153.13
4,000 17,171.45 30,000 128,785.83 300,000 1,287,858.38 3,000,000 12,878,583.76
4,500 19,317.88 35,000 150,250.14 400,000 1,717,144.50 4,000,000 17,171,445.00
5,000 21,464.30 40,000 171,714.46 500,000 2,146,430.63 5,000,000 21,464,306.26
6,000 25,757.17 45,000 193,178.76 600,000 2,575,716.76 6,332,000
(1) 27,182,397.44
(1) Maximum number of Hong Kong Offer Shares you may apply for.
No application for any other number of the Hong Kong Offer Shares will be considered and
any such application is liable to be rejected.
5. APPLYING THROUGH THE WHITE FORM eIPO SERVICE
General
Individuals who meet the criteria in “2. Who can apply” in this section, may apply
through the White Form eIPO service for the Offer Shares to be allotted and registered in
their own names through the designated website at www.eipo.com.hk .
Detailed instructions for application through the White Form eIPO service are on the
designated website. If you do not follow the instructions, your application may be rejected
and may not be submitted to our Company. If you apply through the designated website,
you authorize 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 the White
Form eIPO service.
HOW TO APPLY FOR HONG KONG OFFER SHARES
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Time for Submitting Applications under the White Form eIPO
You may submit your application to the White Form eIPO Service Provider at
www.eipo.com.hk (24 hours daily, except on the last application day) from 9:00 a.m. on
Friday, June 30, 2023 until 11:30 a.m. on Wednesday, July 5, 2023, and the latest time for
completing full payment of application monies in respect of such applications will be
12:00 noon on Wednesday, July 5, 2023 or such later time under “10. Effect of Bad
Weather and/or Extreme Conditions on the Opening of the Application Lists” in this
section.
No Multiple Applications
If you apply by means of White Form eIPO , once you complete payment in respect
of any electronic application instruction 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. For the avoidance of doubt, giving an
electronic application instruction under White Form eIPO 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 are suspected of submitting more than one application through the White Form
eIPO service or by any other means, all of your applications are liable to be rejected.
Section 40 of the Companies (Winding Up and Miscellaneous Provisions) Ordinance
For the avoidance of doubt, our Company and all other parties involved in the
preparation of this prospectus acknowledge that each applicant who gives, or causes to
give, electronic application instructions is a person who may be entitled to compensation
under Section 40 of the Companies (Winding Up and Miscellaneous Provisions) Ordinance
(as applied by Section 342E of the Companies (Winding Up and Miscellaneous Provisions)
Ordinance).
6. APPLYING BY GIVING ELECTRONIC APPLICATION INSTRUCTIONS TO HKSCC
VIA CCASS
General
You may instruct your broker or custodian who is a CCASS Clearing Participant or a
CCASS Custodian Participant to give electronic application instructions via CCASS
terminals to apply for the Hong Kong Offer Shares on your behalf. CCASS Participants
may give electronic application instructions to apply for the Hong Kong Offer Shares and
to arrange payment of the money due on application and payment of refunds under their
participant agreements with HKSCC and the General Rules of CCASS and the CCASS
Operational Procedures.
HOW TO APPLY FOR HONG KONG OFFER SHARES
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--- page 545 ---
If you are a CCASS Investor Participant, you may give these electronic application
instructions through the CCASS Phone System by calling +852 2979 7888 or through the
CCASS Internet System https://ip.ccass.com (using the procedures in HKSCC’s “An
Operating Guide for Investor Participants” in effect from time to time).
HKSCC can also input electronic application instructions for you if you go to:
Hong Kong Securities Clearing Company Limited
Customer Service Center
1/F, One & Two Exchange Square,
8 Connaught Place,
Central, Hong Kong
and complete an input request form.
If you are not a CCASS Investor Participant, you may instruct your broker or
custodian who is a CCASS Clearing Participant or a CCASS Custodian Participant to give
electronic application instructions via CCASS terminals to apply for the Hong Kong
Offer Shares on your behalf.
You will be deemed to have authorized HKSCC and/or HKSCC Nominees to transfer
the details of your application to our Company, the Sole Overall Coordinator and our Hong
Kong Share Registrar.
Giving Electronic Application Instructions to HKSCC via CCASS
Where you have given electronic application instructions to apply for the Hong
Kong Offer Shares (either indirectly through a broker or custodian or directly) by HKSCC
Nominees on your behalf:
(i) HKSCC Nominees will only be acting as a nominee for you and is not liable for
any breach of the terms and conditions of this prospectus;
(ii) HKSCC Nominees will do the following things on your behalf:
 agree that the Hong Kong Offer Shares to be allotted shall be issued in the
name of HKSCC Nominees and deposited directly into CCASS for the
credit of the CCASS Participant’s stock account on your behalf or your
CCASS Investor Participant’s stock account;
 agree to accept the Hong Kong Offer Shares applied for or any lesser
number allocated;
HOW TO APPLY FOR HONG KONG OFFER SHARES
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--- page 546 ---
 undertake and confirm that you have not applied for or taken up, will not
apply for or take up, or indicate an interest for, any Offer Shares under the
International Offering;
 (if the electronic application instructions are given for your benefit)
declare that only one set of electronic application instructions has been
given for your benefit;
 (if you are an agent for another person) declare that you have only given
one set of electronic application instructions for the other person’s benefit
and are duly authorized to give those instructions as their agent;
 confirm that you understand that the Company, the Directors and the Sole
Overall Coordinator will rely on your declarations and representations in
deciding whether or not to make any allotment of any of the Hong Kong
Offer Shares to you and that you may be prosecuted if you make a false
declaration;
 authorize the Company to place HKSCC Nominees’ name on the Company’s
register of members as the holder of the Hong Kong Offer Shares allocated
to you and to send share certificate(s) and/or refund monies under the
arrangements separately agreed between us and HKSCC;
 confirm that you have read the terms and conditions and application
procedures set out in this prospectus and agree to be bound by them;
 confirm that you have received and/or read a copy of this prospectus and
have relied only on the information and representations in this prospectus in
causing the application to be made, save as set out in any supplement to this
prospectus;
 agree that none of the Company, the Sole Overall Coordinator, the
Underwriters, the Capital Market Intermediaries, their respective directors,
officers, employees, partners, agents, advisors and any other parties
involved in the Global Offering, is or will be liable for any information and
representations not contained in this prospectus (and any supplement to it);
 agree to disclose your personal data to the Company, our Hong Kong Share
Registrar, receiving bank(s), the Sole Overall Coordinator, the Underwriters,
the Capital Market Intermediaries, and/or their respective advisors and
agents;
 agree (without prejudice to any other rights which you may have) that once
HKSCC Nominees’ application has been accepted, it cannot be rescinded for
innocent misrepresentation;
HOW TO APPLY FOR HONG KONG OFFER SHARES
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 agree that any application made by HKSCC Nominees on your behalf is
irrevocable before the fifth day after the time of the opening of the
application lists (excluding any day that is Saturday, Sunday or public
holiday in Hong Kong), such agreement to take effect as a collateral
contract with us and to become binding when you give the instructions and
such collateral contract to be in consideration of the Company agreeing that
it will not offer any Hong Kong Offer Shares to any person before the fifth
day after the time of the opening of the application lists (excluding any day
that is Saturday, Sunday or public holiday in Hong Kong), except by means
of one of the procedures referred to in this prospectus. However, HKSCC
Nominees may revoke the application before the fifth day after the time of
the opening of the application lists (excluding for this purpose any day
which is a Saturday, Sunday or public holiday in Hong Kong) if a person
responsible for this prospectus under Section 40 of the Companies (Winding
Up and Miscellaneous Provisions) Ordinance gives a public notice under
that section which excludes or limits that person’s responsibility for this
prospectus;
 agree that once HKSCC Nominees’ application is accepted, neither that
application nor your electronic application instructions can be revoked,
and that acceptance of that application will be evidenced by the Company’s
announcement of the Hong Kong Public Offering results;
 agree to the arrangements, undertakings and warranties under the participant
agreement between you and HKSCC, read with the General Rules of
CCASS and the CCASS Operational Procedures, for the giving electronic
application instructions to apply for Hong Kong Offer Shares;
 agree with the Company, for itself and for the benefit of each Shareholder
(and so that the Company will be deemed by its acceptance in whole or in
part of the application by HKSCC Nominees to have agreed, for itself and
on behalf of each of the Shareholders, with each CCASS Participant giving
electronic application instructions ) to observe and comply with the
Companies (Winding Up and Miscellaneous Provisions) Ordinance and our
Memorandum and Articles of Association; and
 agree that your application, any acceptance of it and the resulting contract
will be governed by the Laws of Hong Kong.
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Effect of Giving Electronic Application Instructions to HKSCC via CCASS
By giving electronic application instructions to HKSCC or instructing your broker
or custodian who is a CCASS Clearing Participant or a CCASS Custodian Participant to
give such instructions to HKSCC, you (or, if you are joint applicants, each of you jointly
and severally) are deemed to have done the following things, for which neither HKSCC or
HKSCC Nominees shall be liable to our Company or any other person:
 instructed and authorized HKSCC to cause HKSCC Nominees (acting as nominee
for the relevant CCASS Participants) to apply for the Hong Kong Offer Shares
on your behalf;
 instructed and authorized HKSCC to arrange payment of the Offer Price,
brokerage, SFC transaction levy, AFRC transaction levy and Stock Exchange
trading fee by debiting your designated bank account and, in the case of a wholly
or partially unsuccessful application refund of the application monies (including
brokerage, SFC transaction levy, AFRC transaction levy and Stock Exchange
trading fee) by crediting your designated bank account; and
 instructed and authorized HKSCC to cause HKSCC Nominees to do on your
behalf all the things stated in this prospectus.
Minimum Purchase Amount and Permitted Numbers
You may give or cause your broker or custodian who is a CCASS Clearing Participant
or a CCASS Custodian Participant to give electronic application instructions for a
minimum of 500 Hong Kong Offer Shares. Instructions for more than 500 Hong Kong Offer
Shares must be in one of the numbers set out in the table in the prospectus. No application
for any other number of Hong Kong Offer Shares will be considered and any such
application is liable to be rejected.
Time for Inputting Electronic Application Instructions
(1)
CCASS Clearing/Custodian Participants can input electronic application instructions
at the following times on the following dates:
 Friday, June 30, 2023 – 9:00 a.m. to 8:30 p.m.
 Monday, July 3, 2023 – 8:00 a.m. to 8:30 p.m.
 Tuesday, July 4, 2023 – 8:00 a.m. to 8:30 p.m.
 Wednesday, July 5, 2023 – 8:00 a.m. to 12:00 noon
(1) The times in this sub-section are subject to change as HKSCC may determine from time to time with prior
notification to CCASS Clearing/Custodian Participants and/or CCASS Investor Participants.
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CCASS Investor Participants can input electronic application instructions from
9:00 a.m. on Friday, June 30, 2023 until 12:00 noon on Wednesday, July 5, 2023 (24 hours
daily, except on Wednesday, July 5, 2023, the last application day).
The latest time for inputting your electronic application instructions will be
12:00 noon on Wednesday, July 5, 2023, the last application day or such later time as
described in the subsection headed “10. Effect of Bad Weather and/or Extreme Conditions
on the Opening of the Application Lists” in this section.
No Multiple Applications
If you are suspected of having made multiple applications, or if more than one
application is made for your benefit, the number of Hong Kong Offer Shares applied for by
HKSCC Nominees will be automatically reduced by the number of Hong Kong Offer
Shares for which you have given such instructions and/or for which such instructions have
been given for your benefit. Any electronic application instructions to make an
application for the Hong Kong Offer Shares given by you or for your benefit to HKSCC
shall be deemed to be an actual application for the purposes of considering whether
multiple applications have been made.
Section 40 of the Companies (Winding Up and Miscellaneous Provisions) Ordinance
For the avoidance of doubt, our Company and all other parties involved in the
preparation of this prospectus acknowledge that each CCASS Participant who gives, or
causes to give, electronic application instructions is a person who may be entitled to
compensation under Section 40 of the Companies (Winding Up and Miscellaneous
Provisions) Ordinance (as applied by Section 342E of the Companies (Winding Up and
Miscellaneous Provisions) Ordinance).
Personal Data
The following Personal Information Collection Statement applies to any personal data
held by our Company, the Hong Kong Share Registrar, the receiving banks, the Sole
Sponsor, the Sole Overall Coordinator, the Joint Global Coordinators, the Joint Lead
Managers, the Underwriters, the Capital Market Intermediaries, any of their respective
advisers and agents and the Relevant Persons about you in the same way as it applies to
personal data about applicants other than HKSCC Nominees. By applying through the
CCASS EIPO service, you agree to all of the terms of the Personal Information Collection
Statement below.
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Personal Information Collection Statement
This Personal Information Collection Statement informs applicant for, and holder of,
the Hong Kong Offer Shares, of the policies and practices of us and our Hong Kong Share
Registrar in relation to personal data and the Personal Data (Privacy) Ordinance (Chapter
486 of the Laws of Hong Kong).
Reasons for the collection of your personal data
It is necessary for applicants and registered holders of the Hong Kong Offer Shares to
supply correct personal data to our Company or our agents and the Hong Kong Share
Registrar when applying for the Hong Kong Offer Shares or transferring the Hong Kong
Offer Shares into or out of their names or in procuring the services of the Hong Kong
Share Registrar.
Failure to supply the requested data may result in your application for the Hong Kong
Offer Shares being rejected, or in delay or the inability of our Company or our Hong Kong
Share Registrar to effect transfers or otherwise render their services. It may also prevent or
delay registration or transfers of the Hong Kong Offer Shares which you have successfully
applied for and/or the dispatch of Share certificate(s) to which you are entitled.
It is important that the holders of the Hong Kong Offer Shares inform our Company
and the Hong Kong Share Registrar immediately of any inaccuracies in the personal data
supplied.
Purposes
Your personal data may be used, held, processed, and/or stored (by whatever means)
for the following purposes:
 processing your application and refund cheque, where applicable, verification of
compliance with the terms and application procedures set out in this prospectus
and announcing results of allocation of the Hong Kong Offer Shares;
 compliance with applicable laws and regulations in Hong Kong and elsewhere;
 registering new issues or transfers into or out of the names of the holders of our
Shares including, where applicable, HKSCC Nominees;
 maintaining or updating our Company’s Register of Members;
HOW TO APPLY FOR HONG KONG OFFER SHARES
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 verifying identities of the holders of our Company’s Shares;
 establishing benefit entitlements of holders of our Company’s Shares, such as
dividends, rights issues, bonus issues, etc.;
 distributing communications from our Company and our subsidiaries;
 compiling statistical information and profiles of the holder of our Company’s
Shares;
 disclosing relevant information to facilitate claims on entitlements; and
 any other incidental or associated purposes relating to the above and/or to enable
our Company and the Hong Kong Share Registrar to discharge our or their
obligations to holders of our Shares and/or regulators and/or any other purposes
to which the securities’ holders may from time to time agree.
Transfer of personal data
Personal data held by our Company and our Hong Kong Share Registrar relating to the
holders of the Hong Kong Offer Shares will be kept confidential but our Company and our
Hong Kong 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:
 our appointed agents such as financial advisers, receiving bankers and overseas
principal share registrar;
 where applicants for the Hong Kong Offer Shares request a deposit into CCASS,
HKSCC or HKSCC Nominees, who will use the personal data for the purposes of
operating CCASS;
 any agents, contractors or third-party service providers who offer administrative,
telecommunications, computer, payment or other services to our Company or the
Hong Kong 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; and
 any persons or institutions with which the holders of the Hong Kong Offer
Shares have or propose to have dealings, such as their bankers, solicitors,
accountants or stockbrokers etc.
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Retention of personal data
Our Company and our Hong Kong Share Registrar will keep the personal data of the
applicants and holders of the Hong Kong Offer Shares for as long as necessary to fulfill 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.
Access to and correction of personal data
Holders of the Hong Kong Offer Shares have the right to ascertain whether our
Company or the Hong Kong Share Registrar hold their personal data, to obtain a copy of
that data, and to correct any data that is inaccurate. Our Company and the Hong Kong
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 our
Company, at our registered address disclosed in the section headed “Corporate Information”
in this prospectus or as notified from time to time, for the attention of the secretary, or our
Hong Kong Share Registrar for the attention of the privacy compliance officer.
7. W ARNING FOR ELECTRONIC APPLICATIONS
The subscription of the Hong Kong Offer Shares by giving electronic application
instructions to HKSCC is only a facility provided to CCASS Participants. Similarly, the
application for Hong Kong Offer Shares through the White Form eIPO service is also only a
facility provided by the White Form eIPO Service Provider to public investors. Such facilities
are subject to capacity limitations and potential service interruptions and you are advised not to
wait until the last application day in making your electronic applications. Our Company, the
Directors, the Sole Sponsor, the Sole Overall Coordinator, the Joint Global Coordinators, the
Joint Bookrunners, the Joint Lead Managers, the Underwriters and the Capital Market
Intermediaries take no responsibility for such applications and provide no assurance that any
CCASS Participant or person applying through the White Form eIPO service will be allotted
any Hong Kong Offer Shares.
To ensure that CCASS Investor Participants can give their electronic application
instructions , they are advised not to wait until the last minute to input their instructions to the
systems. In the event that CCASS Investor Participants have problems in the connection to
CCASS Phone System/CCASS Internet System for submission of electronic application
instructions , they should go to HKSCC’s Customer Service Center to complete an input request
form for electronic application instructions before 12:00 noon on Wednesday, July 5, 2023.
HOW TO APPLY FOR HONG KONG OFFER SHARES
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8. HOW MANY APPLICATIONS CAN YOU MAKE
Multiple applications for the Hong Kong Offer Shares are not allowed except by nominees.
All of your applications will be rejected if more than one application through electronic
application instructions to HKSCC or through White Form eIPO service, is made for your
benefit (including the part of the application made by HKSCC Nominees acting on electronic
application instructions ). If an application is made by an unlisted company and:
 the principal business of that company is dealing in securities; and
 you exercise statutory control over that company,
then the application will be treated as being for your benefit.
“Unlisted company ” means a company with no equity securities listed on the 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).
9. HOW MUCH ARE THE HONG KONG OFFER SHARES
The Offer Price is HK$4.25 per Offer Share. You must also pay brokerage of 1.0%, SFC
transaction levy of 0.0027%, Hong Kong Stock Exchange trading fee of 0.00565% and AFRC
transaction levy of 0.00015%. This means that for one board lot of 500 Hong Kong Offer
Shares, you will pay HK$2,146.43.
You must pay the Offer Price, brokerage, SFC transaction levy, Stock Exchange trading fee
and AFRC transaction levy in full upon application for Shares. You may submit an application
through the White Form eIPO service in respect of a minimum of 500 Hong Kong Offer Shares.
Each application or electronic application instruction in respect of more than 500 Hong Kong
Offer Shares must be in one of the numbers set out in the table in “4. Minimum Purchase
Amount and Permitted Numbers” in this section, or as otherwise specified on the designated
website at www.eipo.com.hk .
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If your application is successful, brokerage will be paid to the Exchange Participants, and
the SFC transaction levy, Stock Exchange trading fee and AFRC transaction levy are paid to the
Stock Exchange (in the case of the SFC transaction levy, and AFRC transaction levy collected
by the Stock Exchange on behalf of the SFC and AFRC respectively).
For further details on the Offer Price, see the section headed “Structure of the Global
Offering – Pricing of the Global Offering.”
10. EFFECT OF BAD WEATHER AND/OR EXTREME CONDITIONS ON THE
OPENING OF THE APPLICATION LISTS
The application lists will not open if there is:
 a tropical cyclone warning signal number 8 or above; or
 a “black” rainstorm warning; and/or
 Extreme Conditions,
in force in Hong Kong at any time between 9:00 a.m. and 12:00 noon on Wednesday, July 5,
2023. Instead they will open between 11:45 a.m. and 12:00 noon on the next business day which
does not have either of those warnings in Hong Kong in force at any time between 9:00 a.m. and
12:00 noon.
If the application lists do not open and close on Wednesday, July 5, 2023 or if there is a
tropical cyclone warning signal number 8 or above or a “black” rainstorm warning signal and/or
Extreme Conditions in force in Hong Kong that may affect the dates mentioned in the section
headed “Expected Timetable,” we will make an announcement on our website at
www.splegend.com and the website of the Hong Kong Stock Exchange at www.hkexnews.hk .
11. PUBLICATION OF RESULTS
Our Company expects to announce the level of indication of interest in the International
Offering, the level of applications in the Hong Kong Public Offering and the basis of allocation
of the Hong Kong Offer Shares on Wednesday, July 12, 2023 on our Company’s website at
www.splegend.com and the website of the Stock Exchange at www.hkexnews.hk .
The results of allocations and the Hong Kong identity card/passport/Hong Kong business
registration numbers of successful applicants under the Hong Kong Public Offering will be
available at the times and date and in the manner specified below:
 in the announcement to be posted on our Company’s website at www.splegend.com
and the Stock Exchange’s website at www.hkexnews.hk by no later than 8:00 a.m. on
Wednesday, July 12, 2023;
HOW TO APPLY FOR HONG KONG OFFER SHARES
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 from the designated results of allocations website at www.iporesults.com.hk
(alternatively: English https://www.eipo.com.hk/en/Allotment ; Chinese
https://www.eipo.com.hk/zh-hk/Allotment ) with a “search by ID” function on a
24-hour basis from 8:00 a.m. on Wednesday, July 12, 2023 to 12:00 midnight on
Tuesday, July 18, 2023;
 from the allocation results telephone enquiry line by calling +852 2862 8555 between
9:00 a.m. and 6:00 p.m. from Wednesday, July 12, 2023 to Friday, July 14, 2023 and
Monday, July 17, 2023.
If our Company accepts your offer to purchase (in whole or in part), which it may do by
announcing the basis of allocations and/or making available the results of allocations publicly,
there will be a binding contract under which you will be required to purchase the Hong Kong
Offer Shares if the conditions of the Global Offering are satisfied and the Global Offering is not
otherwise terminated. Further details are contained in the section headed “Structure of the
Global Offering”.
You will not be entitled to exercise any remedy of rescission for innocent misrepresentation
at any time after acceptance of your application. This does not affect any other right you may
have.
12. CIRCUMSTANCES IN WHICH YOU WILL NOT BE ALLOTTED OFFER SHARES
You should note the following situations in which the Hong Kong Offer Shares will not be
allotted to you:
(i) If your application is revoked:
By applying through electronic application instructions to HKSCC or through White
Form eIPO Service Provider, you agree that your application, or the application made by
HKSCC Nominees on your behalf, cannot be revoked on or before the fifth day after the
time of the opening of the application lists (excluding for this purpose any day which is
Saturday, Sunday or public holiday in Hong Kong). This agreement will take effect as a
collateral contract with our Company.
Your application, or the application made by HKSCC Nominees on your behalf, may
only be revoked on or before such fifth day if a person responsible for this prospectus
under Section 40 of the Companies (Winding Up and Miscellaneous Provisions) Ordinance
(as applied by Section 342E of the Companies (Winding Up and Miscellaneous Provisions)
Ordinance) gives a public notice under that section which excludes or limits that person’s
responsibility for this prospectus.
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If any supplement to this prospectus is issued, applicants who have already submitted
an application will be notified that they are required to confirm their applications. If
applicants have been so notified, but have not confirmed their applications in accordance
with the procedure to be notified, all unconfirmed applications will be deemed revoked.
If your application, or the application made by HKSCC Nominees on your behalf, has
been accepted, it cannot be revoked. For this purpose, acceptance of applications which are
not rejected will be constituted by notification in the press of the results of allocation, and
where such basis of allocation is subject to certain conditions or provides for allocation by
ballot, such acceptance will be subject to the satisfaction of such conditions or results of
the ballot respectively.
(ii) If our Company or its agents exercise their discretion to reject your application:
Our Company, the Sole Overall Coordinator, the White Form eIPO Service Provider
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.
(iii) If the allotment of Hong Kong Offer Shares is void:
The allotment of Hong Kong Offer Shares will be void if the Listing Committee does
not grant permission to list the Shares either:
 within three weeks from the closing date of the application lists; or
 within a longer period of up to six weeks if the Listing Committee notifies our
Company of that longer period within three weeks of the closing date of the
application lists.
(iv) If:
 you make multiple applications or suspected 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 application is not completed in accordance with the stated instructions;
 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;
HOW TO APPLY FOR HONG KONG OFFER SHARES
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 your payment is not made correctly or the cheque or banker’s cashier order paid
by you is dishonored upon its first presentation;
 the Underwriting Agreements do not become unconditional or are terminated;
 our Company or the Sole Overall Coordinator believes that by accepting your
application, it or they 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.
13. REFUND OF APPLICATION MONIES
If an application is rejected, not accepted or accepted in part only, or if the conditions of
the Hong Kong Public Offering are not fulfilled in accordance with “Structure of the Global
Offering” in this prospectus or if any application is revoked, the application monies, or the
appropriate portion thereof, together with the related brokerage, SFC transaction levy, AFRC
transaction levy and Stock Exchange trading fee, will be refunded, without interest or the cheque
or banker’s cashier order will not be cleared.
Any refund of your application monies will be made on or before Wednesday, July 12,
2023.
14. DESPATCH/COLLECTION OF SHARE CERTIFICATES AND REFUND MONIES
You will receive one share certificate for all Hong Kong Offer Shares allotted to you under
the Hong Kong Public Offering (except pursuant to applications made via CCASS EIPO where
the share certificates will be deposited into CCASS as described below).
No temporary document of title will be issued in respect of the Shares. No receipt will be
issued for sums paid on application.
 refund cheque(s) crossed “Account Payee Only” in favor of the applicant (or, in the
case of joint applicants, the first-named applicant) for all or the surplus application
monies for the Hong Kong Offer Shares, wholly or partially unsuccessfully applied
for. Part of the Hong Kong identity card number/passport number, provided by you or
the first-named applicant (if you are joint applicants), may be printed on your refund
check, if any. Your banker may require verification of your Hong Kong identity card
number/passport number before encashment of your refund cheque(s). Inaccurate
completion of your Hong Kong identity card number/passport number may invalidate
or delay encashment of your refund cheque(s).
Subject to arrangement on despatch/collection of share certificates and refund monies as
mentioned below, any refund cheque and share certificates are expected to be posted on or
HOW TO APPLY FOR HONG KONG OFFER SHARES
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before Wednesday, July 12, 2023. The right is reserved to retain any share certificate(s) and any
surplus application monies pending clearance of cheque(s) or banker’s cashier’s order(s).
Share certificates will only become valid at 8:00 a.m. on Thursday, July 13, 2023 provided
that the Global Offering has become unconditional and the right of termination described in the
“Underwriting” section in this prospectus has not been exercised. Investors who trade shares
prior to the receipt of Share certificates or the Share certificates becoming valid do so at their
own risk.
Personal Collection
(i) If you apply through the White Form eIPO service
If you apply for 1,000,000 Hong Kong Offer Shares or more and your application is
wholly or partially successful, you may collect your Share certificate(s) from
Computershare Hong Kong Investor Services Limited at Shops 1712–1716, 17th Floor,
Hopewell Centre, 183 Queen’s Road East, Wan Chai, Hong Kong, from 9:00 a.m. to
1:00 p.m. on Wednesday, July 12, 2023, or such other date as notified by our Company in
the newspapers as the date of despatch/collection of Share certificates/e-Refund payment
instructions/refund checks.
If you do not collect your Share certificate(s) personally within the time specified for
collection, they will be sent to the address specified in your application instructions by
ordinary post at your own risk.
If you apply for less than 1,000,000 Hong Kong Offer Shares, your Share certificate(s)
(where applicable) will be sent to the address specified in your application instructions on
or before Wednesday, July 12, 2023 by ordinary post at your own risk.
If you apply and pay the application monies from a single bank account, any refund
monies will be despatched to that bank account in the form of e-Refund payment
instructions. If you apply and pay the application monies from multiple bank accounts, any
refund monies will be despatched to the address as specified in your application
instructions in the form of refund check(s) by ordinary post at your own risk.
(ii) If you apply via Electronic Application Instructions to HKSCC
Allocation of Hong Kong Offer Shares
For the purposes of allocating Hong Kong Offer Shares, HKSCC Nominees will
not be treated as an applicant. Instead, each CCASS Participant who gives electronic
application instructions or, each person for whose benefit instructions are given, will
be treated as an applicant.
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Deposit of Share Certificates into CCASS and Refund of Application Monies
 If your application is wholly or partially successful, your share certificate(s) will
be issued in the name of HKSCC Nominees and deposited into CCASS for the
credit of your designated CCASS Participant’s stock account or your CCASS
Investor Participant stock account on Wednesday, July 12, 2023, or, on any other
date determined by HKSCC or HKSCC Nominees.
 Our Company expects to publish the application results of CCASS Participants
(and where the CCASS Participant is a broker or custodian, our Company will
include information relating to the relevant beneficial owner), your Hong Kong
identity card number/passport number or other identification code (Hong Kong
business registration number for corporations) and the basis of allotment of the
Hong Kong Public Offering in the manner specified in “Publication of Results”
above on Wednesday, July 12, 2023. You should check the announcement
published by our Company and report any discrepancies to HKSCC before
5:00 p.m. on Wednesday, July 12, 2023 or such other date as determined by
HKSCC or HKSCC Nominees.
 If you have instructed your broker or custodian to give electronic application
instructions on your behalf, you can also check the number of Hong Kong Offer
Shares allotted to you and the amount of refund monies (if any) payable to you
with that broker or custodian.
 If you have applied as a CCASS Investor Participant, you can also check the
number of Hong Kong Offer Shares allotted to you and the amount of refund
monies (if any) payable to you via the CCASS Phone System and the CCASS
Internet System (under the procedures contained in HKSCC’s “An Operating
Guide for Investor Participants” in effect from time to time) on Wednesday, July
12, 2023. Immediately following the credit of the Hong Kong Offer Shares to
your stock account and the credit of refund monies to your bank account,
HKSCC will also make available to you an activity statement showing the
number of Hong Kong Offer Shares credited to your CCASS Investor Participant
stock account and the amount of refund monies (if any) credited to your
designated bank account.
 Refund of your application monies (if any) in respect of wholly and partially
unsuccessful applications will be credited to your designated bank account or the
designated bank account of your broker or custodian on Wednesday, July 12,
2023.
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15. ADMISSION OF THE SHARES INTO CCASS
If the Stock Exchange grants the listing of, and permission to deal in, the Shares 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 (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 CCASS and CCASS
Operational Procedures in effect from time to time.
Investors should seek the advice of their stockbroker or other professional advisor for
details of the settlement arrangement, as such arrangements may affect their rights and interests.
All necessary arrangements have been made enabling the Shares to be admitted into
CCASS.
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The following is the text of a report set out on pages I-1 to I-3, received from the
Company’ s reporting accountant, PricewaterhouseCoopers, Certified Public Accountants, Hong
Kong, for the purpose of incorporation in this prospectus. It is prepared and addressed to the
directors of the Company and to the Sponsor pursuant to the requirements of HKSIR 200
Accountants’ Reports on Historical Financial Information in Investment Circulars issued by the
Hong Kong Institute of Certified Public Accountants.
ACCOUNTANT’S REPORT ON HISTORICAL FINANCIAL INFORMATION TO THE
DIRECTORS OF STAR PLUS LEGEND HOLDINGS LIMITED AND CMBC
INTERNATIONAL CAPITAL LIMITED
Introduction
We report on the historical financial information of Star Plus Legend Holdings Limited (the
“Company”) and its subsidiaries (together, the “Group”) set out on pages I-4 to I-91, which
comprises the consolidated statements of financial position as at December 31, 2019, 2020, 2021
and 2022, the statements of financial position of the Company as at December 31, 2020, 2021
and 2022, and the consolidated statements of comprehensive income, the consolidated statements
of changes in equity and the consolidated statements of cash flows for each of the years ended
December 31, 2019, 2020, 2021 and 2022 (the “Track Record Period”) and a summary of
significant accounting policies and other explanatory information (together, the “Historical
Financial Information”). The Historical Financial Information set out on pages I-4 to I-91 forms
an integral part of this report, which has been prepared for inclusion in the prospectus of the
Company dated June 30, 2023 (the “Prospectus”) in connection with the initial listing of shares
of the Company on the Main Board of The Stock Exchange of Hong Kong Limited.
Directors’ responsibility for the 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 presentation and
preparation set out in Notes 1.3 and 2.1 to the Historical Financial Information, and for such
internal control as the directors determine is necessary to enable the preparation of Historical
Financial Information that is free from material misstatement, whether due to fraud or error.
APPENDIX I ACCOUNTANT’S REPORT
– I-1 –


--- page 562 ---
Reporting accountant’s 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 accountant’s judgment, 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 accountant considers 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 presentation and preparation set out in Notes 1.3 and 2.1 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 purposes of the
accountant’s report, a true and fair view of the financial position of the Company as at
December 31, 2020, 2021 and 2022 and the consolidated financial position of the Group as at
December 31, 2019, 2020, 2021 and 2022 and of its consolidated financial performance and its
consolidated cash flows for the Track Record Period in accordance with the basis of presentation
and preparation set out in Notes 1.3 and 2.1 to the Historical Financial Information.
Report on matters under the Rules Governing the Listing of Securities on The Stock
Exchange of Hong Kong Limited (the “Listing Rules”) 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.
APPENDIX I ACCOUNTANT’S REPORT
– I-2 –


--- page 563 ---
Dividends
We refer to Note 32 to the Historical Financial Information which contains information
about dividends declared or paid by Star Plus Legend Holdings Limited in respect of the Track
Record Period.
No statutory financial statements for the Company
No statutory financial statements have been prepared for the Company since its date of
incorporation.
PricewaterhouseCoopers
Certified Public Accountants
Hong Kong
June 30, 2023
APPENDIX I ACCOUNTANT’S REPORT
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I HISTORICAL FINANCIAL INFORMATION OF THE GROUP
Preparation of Historical Financial Information
Set out below is the Historical Financial Information which forms an integral part of this
accountant’s report.
The consolidated financial statements of the Group for the Track Record Period, on which
the Historical Financial Information is based, were audited by PricewaterhouseCoopers Zhong
Tian LLP in accordance with Hong Kong Standards on Auditing issued by the Hong Kong
Institute of Certified Public Accountants (“HKICPA”) (the “Underlying Financial Statements”).
The Historical Financial Information is presented in Renminbi (“RMB”) and all values are
rounded to the nearest thousand (“RMB’000”) except when otherwise indicated.
APPENDIX I ACCOUNTANT’S REPORT
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CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Y ear ended December 31,
2019 2020 2021 2022
Notes RMB’000 RMB’000 RMB’000 RMB’000
Revenue 5 86,585 456,944 365,345 344,157
Cost of revenue 7 (29,972) (224,155) (137,963) (121,329)
Gross profit 56,613 232,789 227,382 222,828
Selling and marketing
expenses 7 (14,393) (94,914) (93,809) (72,447)
General and administrative
expenses 7 (10,330) (31,563) (65,091) (64,094)
Reversal of/(provision for)
impairment losses on
financial assets 3.1(b) 73 (4,452) 922 (745)
Other income 6 151 1,692 234 21,844
Other expense 6 – – – (5,798)
Other (losses)/gains, net 6 (114) 10,254 3,956 (9,553)
Operating profit 32,000 113,806 73,594 92,035
Finance (costs)/income, net 9 (160) 35 (8,942) 1,103
Profit before income tax 31,840 113,841 64,652 93,138
Income tax expense 10 (9,121) (38,210) (21,761) (28,240)
Profit for the year 22,719 75,631 42,891 64,898
Profit/(loss) attributable to:
– Owners of the Company 23,559 78,064 43,649 60,389
– Non-controlling interests (840) (2,433) (758) 4,509
22,719 75,631 42,891 64,898
APPENDIX I ACCOUNTANT’S REPORT
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Y ear ended December 31,
2019 2020 2021 2022
Notes RMB’000 RMB’000 RMB’000 RMB’000
Profit for the year 22,719 75,631 42,891 64,898
Other comprehensive
(loss)/income:
Items that may be
subsequently reclassified to
profit or loss
Currency translation
differences (27) (1,150) (1,044) 1,803
Total comprehensive income
for the year 22,692 74,481 41,847 66,701
Total comprehensive
income/(loss) attributable
to:
– Owners of the Company 23,539 76,954 42,585 62,105
– Non-controlling interests (847) (2,473) (738) 4,596
22,692 74,481 41,847 66,701
Earnings per share for
profit attributable to
owners of the Company
(expressed in RMB per
share):
– Basic and Diluted 11 0.05 0.16 0.09 0.12
APPENDIX I ACCOUNTANT’S REPORT
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CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at December 31,
2019 2020 2021 2022
Notes RMB’000 RMB’000 RMB’000 RMB’000
ASSETS
Non-current assets
Property, plant and equipment 12 1,314 3,247 58,975 69,086
Right-of-use assets 13 2,469 2,786 3,893 1,878
Intangible assets 14 10 80 625 3,878
Deferred income tax assets 29 3,650 3,965 3,031 4,186
Trade and other receivables 18 – 2,421 – –
Other non-current assets 15 1,891 54,511 50,416 59,638
9,334 67,010 116,940 138,666
Current assets
Inventories 21 15,510 24,107 24,490 28,828
TV program rights 16 77,247 – 13,594 89,602
Trade and other receivables 18 39,617 71,760 52,538 62,066
Prepayment and other current
assets 19 16,601 31,278 53,677 53,070
Restricted bank deposits 20 – 11,008 – –
Cash and cash equivalents 20 29,298 120,962 211,873 182,633
178,273 259,115 356,172 416,199
Total assets 187,607 326,125 473,112 554,865
EQUITY AND LIABILITIES
Equity attributable to owners
of the Company
Share capital 22 – 36 38 38
Reserves 24 (2,197) 33,583 24,970 33,343
Retained earnings 25 28,726 104,690 144,213 200,161
26,529 138,309 169,221 233,542
Non-controlling interests (862) (3,289) (4,027) 569
Total equity 25,667 135,020 165,194 234,111
APPENDIX I ACCOUNTANT’S REPORT
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As at December 31,
2019 2020 2021 2022
Notes RMB’000 RMB’000 RMB’000 RMB’000
LIABILITIES
Non-current liabilities
Lease liabilities 26 1,484 1,409 1,035 220
Contract liabilities 28 686 – 45 38
Deferred income tax liabilities 29 – 2,200 – –
Borrowings 31 – – 15,000 10,000
2,170 3,609 16,080 10,258
Current liabilities
Trade and other payables 27 130,975 79,314 45,576 69,010
Contract liabilities 28 12,850 64,533 59,308 31,385
Current income tax liabilities 14,932 42,076 15,153 24,575
Lease liabilities 26 1,013 1,573 3,281 1,872
Financial instrument with
redemption rights 30 – – 163,520 178,654
Borrowings 31 – – 5,000 5,000
159,770 187,496 291,838 310,496
Total liabilities 161,940 191,105 307,918 320,754
Total equity and liabilities 187,607 326,125 473,112 554,865
Net current assets 18,503 71,619 64,334 105,703
Total assets less current
liabilities 27,837 138,629 181,274 244,369
APPENDIX I ACCOUNTANT’S REPORT
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STATEMENT OF FINANCIAL POSITION OF THE COMPANY
As at December 31,
2020 2021 2022
Notes RMB’000 RMB’000 RMB’000
ASSETS
Non-current assets
Amounts due from subsidiaries 36(e) 30,571 161,134 99,895
Investments in subsidiaries 1.2 25,507 29,076 23,667
56,078 190,210 123,562
Current assets
Prepayments and other current assets 19 445 5,514 13,867
Cash and cash equivalents – 18,744 85,950
445 24,258 99,817
Total assets 56,523 214,468 223,379
EQUITY AND LIABILITIES
Equity attributable to owners
of the Company
Share capital 22 36 38 38
Reserves 24 57,113 44,821 48,029
Accumulated losses 25 (3,441) (13,497) (39,137)
Total equity 53,708 31,362 8,930
LIABILITIES
Current liabilities
Amounts due to subsidiaries 36(e) 653 16,758 30,562
Financial instrument with redemption
rights 30 – 163,520 178,654
Trade and other payables 27 2,162 2,828 5,233
Total liabilities 2,815 183,106 214,449
Total equity and liabilities 56,523 214,468 223,379
APPENDIX I ACCOUNTANT’S REPORT
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CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Attributable to owners of the Company
Share
capital Reserves
Retained
earnings Sub-total
Non-
controlling
interests Total equity
Notes RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Balance at January 1, 2019 – (8,910) 7,900 (1,010) (15) (1,025)
Comprehensive income
Profit for the year – – 23,559 23,559 (840) 22,719
Other comprehensive loss
– Currency translation
differences – (20) – (20) (7) (27)
Total comprehensive income – (20) 23,559 23,539 (847) 22,692
Transactions with
shareholders in their
capacity as shareholders
Appropriation to statutory
reserves 24 – 2,733 (2,733) – – –
Deemed contribution from
shareholders 24 – 4,000 – 4,000 – 4,000
Total transactions with
shareholders in their
capacity as shareholders – 6,733 (2,733) 4,000 – 4,000
Balance at December 31, 2019 – (2,197) 28,726 26,529 (862) 25,667
APPENDIX I ACCOUNTANT’S REPORT
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Attributable to owners of the Company
Share
capital Reserves
Retained
earnings Sub-total
Non-
controlling
interests Total equity
Notes RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Balance at January 1, 2020 – (2,197) 28,726 26,529 (862) 25,667
Comprehensive income
Profit for the year – – 78,064 78,064 (2,433) 75,631
Other comprehensive loss
– Currency translation
differences – (1,110) – (1,110) (40) (1,150)
Total comprehensive income – (1,110) 78,064 76,954 (2,473) 74,481
Transactions with
shareholders in their
capacity as shareholders
Issuance of ordinary shares 22 36 32,950 – 32,986 – 32,986
Non-controlling interests on
disposal of subsidiaries 35 –––– 4 6 4 6
Equity-settled share-based
payment transactions 23 – 1,840 – 1,840 – 1,840
Appropriation to statutory
reserves 24 – 2,100 (2,100) – – –
Capital injection to Star Plus
Cultural (Kunshan)
Investment Company Limited
from shareholders 24 – 2,000 – 2,000 – 2,000
Deemed distribution to
shareholders 24 – (2,000) – (2,000) – (2,000)
Total transactions with
shareholders in their
capacity as shareholders 36 36,890 (2,100) 34,826 46 34,872
Balance at December 31, 2020 36 33,583 104,690 138,309 (3,289) 135,020
APPENDIX I ACCOUNTANT’S REPORT
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Attributable to owners of the Company
Share
capital Reserves
Retained
earnings Sub-total
Non-
controlling
interests Total equity
Notes RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Balance at January 1, 2021 36 33,583 104,690 138,309 (3,289) 135,020
Comprehensive income
Profit for the year – – 43,649 43,649 (758) 42,891
Other comprehensive loss
– Currency translation
differences – (1,064) – (1,064) 20 (1,044)
Total comprehensive income – (1,064) 43,649 42,585 (738) 41,847
Transactions with
shareholders in their
capacity as shareholders
Issuance of ordinary shares 22 2 159,841 – 159,843 – 159,843
Recognition of redemption
liability 30 – (158,180) – (158,180) – (158,180)
Equity-settled share-based
payment transactions 23 – 3,568 – 3,568 – 3,568
Appropriation to statutory
reserves 24 – 4,126 (4,126) – – –
Dividends declared and payable
by the Company 32 – (16,904) – (16,904) – (16,904)
Total transactions with
shareholders in their
capacity as shareholders 2 (7,549) (4,126) (11,673) – (11,673)
Balance at December 31, 2021 38 24,970 144,213 169,221 (4,027) 165,194
APPENDIX I ACCOUNTANT’S REPORT
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Attributable to owners of the Company
Share
capital Reserves
Retained
earnings Sub-total
Non-
controlling
interests Total equity
Notes RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Balance at January 1, 2022 38 24,970 144,213 169,221 (4,027) 165,194
Comprehensive income
Profit for the year – – 60,389 60,389 4,509 64,898
Other comprehensive income
– Currency translation
differences – 1,716 – 1,716 87 1,803
Total comprehensive income – 1,716 60,389 62,105 4,596 66,701
Transactions with
shareholders in their
capacity as shareholders
Equity-settled share-based
payment transactions 23 – 2,216 – 2,216 – 2,216
Appropriation to statutory
reserves 24 – 4,441 (4,441) – – –
Total transactions with
shareholders in their
capacity as shareholders – 6,657 (4,441) 2,216 – 2,216
Balance at December 31, 2022 38 33,343 200,161 233,542 569 234,111
APPENDIX I ACCOUNTANT’S REPORT
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CONSOLIDATED STATEMENT OF CASH FLOWS
Y ear ended December 31,
2019 2020 2021 2022
Notes RMB’000 RMB’000 RMB’000 RMB’000
Cash flows from operating
activities
Cash generated from operations 33 2,819 338,982 39,417 23,025
Interest received 62 479 1,248 2,443
Income tax paid (1,245) (11,008) (49,950) (19,973)
Net cash inflow/(outflow) from
operating activities 1,636 328,453 (9,285) 5,495
Cash flows from investing
activities
Payments for property, plant and
equipment (1,217) (56,028) (53,860) (6,339)
Payments for intangible assets – (83) (584) (3,397)
Payments for other non-current
assets – – – (15,127)
Increase in restricted bank
deposits – (112,966) (124,838) –
Decrease in restricted bank
deposits – 101,958 135,846 –
Payments for purchase of wealth
management products – – (80,000) –
Proceeds from redemption of
wealth management products – – 80,435 –
Payments for financial assets at
amortised cost – – (25,000) –
Proceeds from disposal of other
financial assets at amortised
cost – – 25,000 –
Investment income – – 58 –
Loans to related parties (11,040) – – –
Loans repaid by related parties 4,433 10,468 – –
Loans repaid by third parties – 100 – –
Payments of deposit for purchase
of property, plant and
equipment (10,000) – – –
Refund of deposit for purchase of
property, plant and equipment – 10,000 – –
Disposal of subsidiaries, net of
cash of disposed subsidiaries 35 – (151,171) – –
Net cash outflow from investing
activities (17,824) (197,722) (42,943) (24,863)
APPENDIX I ACCOUNTANT’S REPORT
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Y ear ended December 31,
2019 2020 2021 2022
Notes RMB’000 RMB’000 RMB’000 RMB’000
Cash flows from financing
activities
Proceeds from issuance of
ordinary shares 22 – – 166,120 –
Capital injections from
shareholders 24 – 2,000 – –
Payment of transaction costs for
issuance of ordinary shares 22 – – (5,932) –
Cash paid to shareholders for
reorganisation 24 – (12,000) – –
Cash received from shareholders
for reorganisation 24 – 4,000 – –
Dividends paid to shareholders – – (16,661) –
Payment for listing expenses – – (4,998) (2,230)
Proceeds from borrowings – – 25,000 –
Repayments of borrowings – – (5,000) (5,000)
Loans from a third party – – 13,160 –
Repayment of loans to a third
party – – (14,000) –
Proceeds from related parties 36 34,592 – 916 –
Repayment of loans to related
parties (20,154) (18,999) (11,470) –
Interest paid – – (1,245) (1,035)
Lease payments (996) (2,031) (2,275) (3,122)
Proceeds from investors for
investment of TV program 6 15,00 0–––
Settlement of financial liabilities
in relation to investment of TV
program 6 – (12,000) – –
Net cash inflow/(outflow) from
financing activities 28,442 (39,030) 143,615 (11,387)
Net increase/(decrease) in cash
and cash equivalents 12,254 91,701 91,387 (30,755)
Cash and cash equivalents at
beginning of the year 20(a) 17,044 29,298 120,962 211,873
Effect of exchange rate changes
on cash and cash equivalents – (37) (476) 1,515
Cash and cash equivalents at
end of the year 20(a) 29,298 120,962 211,873 182,633
APPENDIX I ACCOUNTANT’S REPORT
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II NOTES TO THE HISTORICAL FINANCIAL INFORMATION
1 GENERAL INFORMATION, REORGANISATION AND BASIS OF PRESENTATION
1.1 General information
Star Plus Legend Holdings Limited (formerly known as Star Plus (Group) Limited, the “Company”) was
incorporated in the Cayman Islands on January 3, 2020 as an exempted company with limited liability under the
Companies Act, Cap. 22 (Law 3 of 1961, as consolidated and revised) of the Cayman Islands. The address of its
registered office is P. O. Box 31119 Grand Pavilion, Hibiscus Way, 802 West Bay Road, Grand Cayman,
KY1-1205 Cayman Islands.
The Company is an investment holding company. The Company and the companies shown in Note 1.2
below now comprising the Group (together, the “Group”) are principally engaged in new retail business and IP
creation and operation business (the “Listing Business”) in the People’s Republic of China (the “PRC”).
The Company is controlled by Ms. Ma, Hsin-Ting (“Ms. Ma”), Mr. Yang, Chun-Jung (“Mr. Yang”), Ms.
Yeh, Hui-Mei (“Ms. Yeh”), Mr. Chen, Chung (“Mr. Chen”) through their investment holding companies.
Ms. Ma, Mr. Yang, Ms. Yeh and Mr. Chen have entered into a concert party agreement and therefore are
collectively referred as the controlling shareholders of the Company (the “Controlling Shareholders”).
1.2 Reorganisation
Prior to the incorporation of the Company and the completion of the reorganisation (the “Reorganisation”)
for the purpose of preparation for the listing of shares of the Company on the Main Board of the Stock Exchange
of Hong Kong Limited as described below, the Listing Business was carried out by Star Plus Cultural (Kunshan)
Investment Company Limited (“Star Plus (Kunshan)”), Secret Music (HK) Limited (“Secret Music (HK)”), Star
Plus Action (HK) Limited (“Star Plus Action (HK)”), Star Plus Development Limited (“Star Plus Development”),
Star Plus J Movie (HK) Limited (“Star Plus J Movie”), Star Plus Entertainment (HK) Limited (“Star Plus
Entertainment”) and their subsidiaries (collectively, the “Operating Companies”).
The Reorganisation mainly involved the following steps:
(i) On January 3, 2020, the Company was incorporated as an exempted company with limited liability
in the Cayman Islands with authorised share capital of US$50,000 divided into 50,000 shares of
US$1 each. Upon incorporation, the Company issued one ordinary share at par value to the initial
subscriber and transferred such share to Star Media Global Ltd. (“Star Media”), a company
incorporated in British Virgin Islands (“BVI”) and wholly owned by Mr. Lai, Kwok Fai Franki (“Mr.
Lai”). On the same day, Mr. Lai was entrusted to hold 70% and 15% of the Company’s beneficial
interest on behalf of the Controlling Shareholders and Mr. Ho Chi Sing Simon (“Mr. Ho”),
respectively, with the remaining 15% equity interest belongs to Mr. Lai.
(ii) On February 5, 2020, the Company acquired the entire equity interest of Star Plus Development at
cash considerations of US$1 from Great Essence Holdings Limited (“Great Essence”). Mr. Lai was
entrusted to hold 70% and 15% of Great Essence’s beneficial interest on behalf of the Controlling
Shareholders and Mr. Ho, respectively, and the remaining 15% equity interest belongs to Mr. Lai.
(iii) On February 5, 2020, the Company acquired the entire equity interest of Star Plus Entertainment at
cash considerations of Hong Kong Dollar (“HK$”) 1 from Great Essence.
(iv) On February 18, 2020, the Company acquired the entire equity interest of Star Plus Action (HK)
from Star Media at a cash consideration of HK$1.
APPENDIX I ACCOUNTANT’S REPORT
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(v) On February 18, 2020, Star Plus Action (HK) agreed to acquire the entire equity interest of Kunshan
Star Plus Action E-Commerce Company Limited at a cash consideration of RMB10,000,000 from
Star Plus (Kunshan).
(vi) On February 28, 2020, the Company acquired 50% of the equity interest in Secret Music (HK) at a
cash consideration of HK$50 from Great Essence.
(vii) On March 19, 2020, the Company acquired the entire equity interest of Star Plus J Movie at a
consideration of HK$1 from Great Essence.
(viii) On February 28, 2020, a wholly-owned subsidiary of Star Plus Entertainment acquired the entire
equity interest of Star Plus (Kunshan) from companies owned and controlled by the Controlling
Shareholders (as to 70%) and an independent third party on behalf of Mr. Lai and Mr. Ho (as to
30%) at a consideration of RMB2,000,000. Since then Star Plus (Kunshan) becomes a wholly owned
subsidiary of Star Plus Entertainment.
Upon completion of the above steps, each of the Controlling Shareholders of the Operating Companies
became the shareholders of the Company with substantially the same shareholding percentages in the Operating
Companies before and after the Reorganisation and the Company became the holding company of the companies
now comprising the Group and has direct or indirect interests in the subsidiaries of the Group.
On July 29, 2020, the authorised shares of the Company were subdivided from 50,000 shares of US$1 each
into 5,000,000,000 shares of US$0.00001 each. The one subscriber share of US$1 issued on incorporation
became 100,000 shares of US$0.00001 each. On August 4, 2020, the Company allotted and issued an aggregate
of 499,900,000 ordinary shares at par value to the investment holding companies owned by the Controlling
Shareholders. Upon completion of such issue, the Company is owned as to 30%, 30% and 10%, by Legend Key
International Limited (a wholly owned company by Mr. Yang and Ms. Yeh), Best Million Holdings Limited (a
wholly owned company by Ms. Ma) and Max One Ltd (a wholly owned company by Mr. Chen), respectively. The
remaining 15% and 15% of the Company’s equity interests are owned by Mr. Lai and Mr. Ho, respectively.
On September 30, 2020 and February 17, 2021, the Company allotted and issued 12,820,512 ordinary
shares at a consideration of HK$37,500,000 and 30,094,112 ordinary shares at a consideration of
HK$200,000,000 to two pre-IPO investors, namely Long Precise Limited (“Long Precise”) and Bradbury Private
Investment III Inc. (“Bradbury”), respectively. Please see Note 22 for further details.
As at the date of this report, the Company had direct or indirect interests in the following subsidiaries:
Company name
Place of incorporation and
kind of legal entity Date of incorporation Registered capital
Principal activities and place of
operation
Attributable equity interest of the Group
As at December 31,
As at the
date of
this report Notes2019 2020 2021 2022
Directly held by the Company:
Star Plus Development Limited British Virgin Islands, limited
liability company
December 31, 2017 US$1 IP planning, management and
licensing at the offshore level,
Hong Kong (“HK”)
100% 100% 100% 100% 100% (x)
Star Plus Action (HK) Limited HK, limited liability company December 5, 2019 HK$1 Investment holdings, HK 100% 100% 100% 100% 100% (xi)
Star Plus Entertainment (HK) Limited HK, limited liability company November 3, 2015 HK$1 Investment holdings, HK 100% 100% 100% 100% 100% (iii)
Star Plus J Movie (HK) Limited HK, limited liability company July 26, 2018 HK$1 Investment holdings, HK 100% 100% 100% 100% 100% (iii)
Secret Music (HK) Limited HK, limited liability company July 4, 2018 HK$100 Trading of pianos and online
music learning materials, HK
50% 50% 50% 50% 100% (iii), (vi)
Star Plus Creative Cultural Company
Limited (ʮ̡ )
Taiwan, limited liability
company
March 2, 2023 NT$20,000,000 IP creation and operation,
Taiwan
N/A N/A N/A N/A 100% (ii)
APPENDIX I ACCOUNTANT’S REPORT
– I-17 –


--- page 578 ---
Company name
Place of incorporation and
kind of legal entity Date of incorporation Registered capital
Principal activities and place of
operation
Attributable equity interest of the Group
As at December 31,
As at the
date of
this report Notes2019 2020 2021 2022
Indirectly held by the Company:
Beijing Star Plus Master Cultural
Communication Company Limited
(ၚರ˖ʷෂᅧ
ʮ̡ )
(i)
The PRC, limited liability
company
November 6, 2017 RMB3,000,000 Planning of television, online
programs and concerts, the
PRC
70% 70% 70% 70% 70% (ii)
Beijing Secret Music Cultural
Development Company Limited ( ̏ԯ।
ʮ̡ )
(i)
The PRC, limited liability
company
May 6, 2019 RMB10,000,000 Investment holdings,
the PRC
50% 50% 50% 50% 50% (ii), (vi)
Kunshan Secret Music Cultural
Development Company Limited
(࢝
ʮ̡ )
(i)
The PRC, limited liability
company
August 19, 2018 RMB10,000,000 Trading of pianos and online
music learning materials, the
PRC
50% 50% 50% 50% 50% (ii), (vi)
Beijing Star Plus Legend Cultural
Development Company Limited
(࢝
ʮ̡ )
(i)
The PRC, limited liability
company
June 2, 2020 RMB10,000,000 IP creation and operation, the
PRC
N/A 100% 100% 100% 100% (ii)
Beijing Star Plus Action E-Commerce
Company Limited (Бਗ
ʮ̡ )(i)
The PRC, limited liability
company
July 13, 2020 RMB10,000,000 Investment holdings,
the PRC
N/A 100% 100% 100% 100% (iv)
Kunshan Star Plus Action E-Commerce
Company Limited (Бਗ
ʮ̡ )(i)
The PRC, limited liability
company
March 17, 2016 RMB100,000,000 Product development, customer
service and order fulfilment
for new retail business, the
PRC
100% 100% 100% 100% 100% (v)
Talent Planet (HK) Limited (ಥ
ʮ̡ )
(i)
HK, limited liability company November 26, 2021 HK$10,000 Planning of online program and
concerts, HK
N/A N/A 100% 100% 100% (ii)
Star Plus IP (Shanghai) Creative Cultural
Company Limited (௴౽ᛆ௴จ˖
ʮ̡ )(i)
The PRC, limited liability
company
November 26, 2021 RMB500,000 Media and TV programme
production management, the
PRC
N/A N/A 100% 100% 100% (ii)
Talent Planet (Hangzhou) Limited (ψ˂
ʮ̡ )
(i)
The PRC, limited liability
company
January 14, 2022 RMB3,000,000 Planning of television, online
programmes and concerts, the
PRC
N/A N/A N/A 100% 100% (ii)
Kunshan JST One Management Centre
(Limited Partnership)
(͡Άุ၍ଣʕː (Υྫ ))
(i)
The PRC, limited partnership September 28, 2017 RMB1,000,000 Media and TV program
production management, the
PRC
99.25% 99.25% 99.25% 99.25% 99.25% (ii), (vii)
Kunshan JST Two Management Centre
(Limited Partnership)
(͊Άุ၍ଣʕː
(Υྫ ))
(i)
The PRC, limited partnership January 6, 2020 RMB1,000,000 Media and TV program
production management, the
PRC
N/A 99.25% 99.25% 99.25% 99.25% (ii)
Star Plus Cultural (Kunshan) Investment
Company Limited (˖௴ (ʆ)ҳ༟
ʮ̡ )
(i)
The PRC, limited liability
company
November 4, 2015 RMB2,000,000 IP planning, management and
licensing at the onshore level,
the PRC
100% 100% 100% 100% 100% (ix)
Star Plus JST Cultural Development
Company Limited (ʆ˖ʷ೯
ʮ̡ )
The PRC, limited liability
company
July 1, 2021 RMB10,000,000 Media and TV program
production management, the
PRC
N/A N/A 100% 100% 100% (ii)
Talent Planet (Kunshan) Limited (ʆ˂
ʮ̡ )
(i)
The PRC, limited liability
company
May 26, 2022 RMB10,000,000 Media and TV program
production management, the
PRC
N/A N/A N/A 100% 100% (ii)
Star Plus Entertainment (Hangzhou)
Creative Culture Company Limited (؄
ʮ̡ )
The PRC, limited liability
company
March 11, 2022 RMB10,000,000 Media and TV program
production management, the
PRC
N/A N/A N/A 100% 100% (ii)
APPENDIX I ACCOUNTANT’S REPORT
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--- page 579 ---
Company name
Place of incorporation and
kind of legal entity Date of incorporation Registered capital
Principal activities and place of
operation
Attributable equity interest of the Group
As at December 31,
As at the
date of
this report Notes2019 2020 2021 2022
Star Plus Aiyou (Kunshan) E-Commerce
Company Limited
(௴ฌᎴ (ʆ)ʮ̡ )
(i)
The PRC, limited liability
company
September 29, 2022 RMB5,000,000 Media and TV program
production management, the
PRC
N/A N/A N/A 100% 100% (ii)
Star Plus Meishang (Kunshan)
E-Commerce Company Limited
(֠ߕ( ʆ)ʮ̡ )
(i)
The PRC, limited liability
company
December 1, 2022 RMB5,000,000 On-line trading management, the
PRC
N/A N/A N/A 100% 100% (ii)
Star Plus Meiyou (Kunshan) E-Commerce
Company Limited
(Ꮄ (ʆ)ʮ̡ )
(i)
The PRC, limited liability
company
December 1, 2022 RMB5,000,000 On-line trading management, the
PRC
N/A N/A N/A 100% 100% (ii)
Star Plus Aijia (Kunshan) E-Commerce
Company Limited (௴ฌྗ (ʆ)
ʮ̡ )(i)
The PRC, limited liability
company
December 1, 2022 RMB5,000,000 On-line trading management, the
PRC
N/A N/A N/A 100% 100% (ii)
Star Plus IP (HK) Limited HK, limited liability company August 2, 2018 HK$1 Inactive, HK 100% 100% 100% 100% 100% (iii)
Star Plus Entertainment (Kunshan)
Company Limited (௴ᖵ(ʆ)
ʮ̡ )(i)
The PRC, limited liability
company
June 29, 2021 RMB1,000,000 Inactive, the PRC N/A N/A 100% 100% 100% (ii)
Star Plus Excellence (Kunshan)
E-Commerce Company Limited
(௴Ꮄ፯ (ʆ)ʮ̡ )
(i)
The PRC, limited liability
company
June 7, 2021 RMB1,000,000 Inactive, the PRC N/A N/A 100% 100% 100% (ii)
Star Plus IP (Kunshan) Creative Cultural
Company Limited (௴౽ᛆ (ʆ)
ʮ̡ )(i)
The PRC, limited liability
company
June 30, 2021 RMB1,000,000 On-line trading management, the
PRC
N/A N/A 100% 100% 100% (ii)
Horgos Star Plus Creative Information
Consulting Company Limited
(௴༟ৃፔ༔
ʮ̡ )
(i)
The PRC, limited liability
company
December 19, 2017 RMB2,000,000 TV program production advisory,
the PRC
100% 100% N/A N/A N/A (viii)
Notes:
(i) The official names of these subsidiaries are in Chinese. The English names are for identification
purpose only.
(ii) No statutory financial statements have been prepared for those subsidiaries during the Track Record
Period, as they are not subject to statutory audit requirements under the relevant rules and
regulations in the jurisdiction of incorporation, unless otherwise required by tax bureau.
(iii) The statutory financial statements of these subsidiaries for the year ended December 31 2019 were
audited by PricewaterhouseCoopers, Certified Public Accountants, Hong Kong. The statutory
financial statements for the years ended December 31, 2020 and 2021 were audited by
D & Partners CPA Limited.
(iv) The statutory financial statement of Beijing Star Plus Action E-Commerce Company Limited for the
year ended December 31, 2020 was audited by Beijing ZhongLinChengNuo Certified Public
Accountants Co., Ltd.
(v) The statutory financial statements of Kunshan Star Plus Action E-Commerce Company Limited for
the years ended December 31, 2019, 2020 and 2021 were audited by Beijing JinHaiLanTian
Certified Public Accountants (General Partnership).
(vi) The other 50% equity shares of Secret Music (HK) Limited were held by Sapphire Prismatic, which
is wholly owned by Mr. Chan, Yu-Hao. Since the Group owns more than half of the voting rights in
Secret Music (HK) Limited, the Group can control Secret Music (HK) and its subsidiaries, Beijing
Secret Music Cultural Development Company Limited and Kunshan Secret Music Cultural
Development Company Limited.
APPENDIX I ACCOUNTANT’S REPORT
– I-19 –


--- page 580 ---
(vii) During the Track Record Period, the Group acted as the general partner and appointed the managing
partner of Kunshan JST One Management Centre (Limited Partnership). The Group had control over
this entity throughout the Track Record Period.
(viii) The entity was deregistered on December 15, 2021.
(ix) The statutory financial statement of Star Plus Cultural (Kunshan) Investment Company Limited for
the years ended December 31, 2019 and 2020 were audited by Beijing ZhongLinChengNuo Certified
Public Accountants Co., Ltd.
(x) The statutory financial statements of Star Plus Development Limited for the years ended December
31, 2019, 2020 and 2021 were audited b y D & Partners CPA Limited.
(xi) The statutory financial statements of Star Plus Action (HK) Limited were audited by
PricewaterhouseCoopers, Certified Public Accountants, Hong Kong for the year ended December 31,
2019 an d D & Partners CPA Limited for the years ended December 31, 2020 and 2021.
All subsidiaries have adopted December 31 as their fiscal year end date.
1.3 Basis of presentation
The companies now comprising the Group, engaging in the new retail business and the IP creation and
operation business, were under common control of the Controlling Shareholders, immediately before and after
the Reorganisation. Accordingly, the Reorganisation is regarded as a business combination under common
control, and for the purpose of this report, the Historical Financial Information has been prepared using the
principles of merger accounting, as prescribed in Hong Kong Accounting Guideline 5 “Merger Accounting for
Common Control Combinations” issued by the Hong Kong Institute of Certified Public Accountants.
The Historical Financial Information has been prepared by including the historical financial information of
the companies now comprising the Group, under the common control of the Controlling Shareholders
immediately before and after the Reorganisation and now comprising the Group as if the current group structure
had been in existence throughout the periods presented, or since the date when the combining companies first
came under the control of the Controlling Shareholders, whichever is a shorter period.
The net assets of the combining companies were combined using the existing book values from the
Controlling Shareholders’ perspective. No amount is recognized in consideration for goodwill or excess of
acquirer’s interest in the net fair value of acquiree’s identifiable assets, liabilities and contingent liabilities over
cost at the time of business combination under common control, to the extent of the continuation of the
controlling party’s interest.
Inter-company transactions, balances and unrealised gains/losses on transactions between group companies
are eliminated on consolidation.
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This note provides a list of significant accounting policies adopted in the preparation of the Historical Financial
Information. These policies have been consistently applied to all the years presented, unless otherwise stated. The
Historical Financial Information is for the Group consisting of the Company and its subsidiaries.
2.1 Basis of preparation
The Historical Financial Information of the Company has been prepared in accordance with Hong Kong
Financial Reporting Standards (“HKFRS”) issued by Hong Kong Institute of Certified Public Accountants
(“HKICPA”) are set out below. The Historical Financial Information has been prepared on a historical cost basis
unless otherwise stated.
APPENDIX I ACCOUNTANT’S REPORT
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--- page 581 ---
The preparation of financial statements in conformity with HKFRSs requires the use of certain critical
accounting estimates. It also requires management to exercise its judgement in the process of applying the
Group’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where
assumptions and estimates are significant to the consolidated financial statements are disclosed in Note 4 below.
All relevant standards, amendments and interpretations to the existing standards that are effective during
the Track Record Period have been adopted by the Group consistently throughout the Track Record Period,
including HKFRS 9 Financial Instruments (“HKFRS 9”), HKFRS 15 Revenue from Contracts with Customers
(“HKFRS 15”) and HKFRS 16 Leases (“HKFRS 16”).
New standards and amendments to existing standards not yet adopted
The following new standards, amendments and interpretation to existing standards that have been
issued but not yet effective for the Track Record Period and have not been early adopted by the Group:
Effective for
reporting periods
beginning on or
after
HKFRS 16
(Amendments)
Lease Liability in a Sale and Leaseback January 1, 2024
HKAS 12
(Amendments)
Deferred Tax Related to Assets and Liabilities
Arising from a Single Transaction
January 1, 2023
HKAS 1 (Amendments) Classification of Liabilities as Current or
Non-current
January 1, 2024
HKAS 1 (Amendments) Non-current Liabilities with Governments January 1, 2024
HKAS 8 (Amendments) Definition of Accounting Estimates January 1, 2023
HKAS 1 and HKFRS
Practice Statement 2
(Amendments)
Disclosure of Accounting Policies January 1, 2023
HKFRS 17 Insurance Contracts January 1, 2023
Hong Kong
Interpretation 5
(2020)
Classification by the Borrower of a Term Loan
that Contains a Repayment on Demand Clause
January 1, 2023
HKFRS 10 and HKAS
28 (Amendments)
Sale or Contribution of Assets between an
Investor and its Associate or Joint Venture
To be determined
The Group will adopt the above new standards and amendments to standards when they become
effective. The Group has commenced an assessment and does not anticipate any significant impact on the
Group’s financial position and results of operations upon adopting these new standards and amendments to
standards.
2.2 Principles of consolidation
(a) Subsidiaries
Subsidiaries are all entities over which the Group has control. The Group controls an entity where
the Group 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 to direct the activities of the entity. Subsidiaries are fully
consolidated from the date on which control is transferred to the Group. They are deconsolidated from the
date that control ceases.
The acquisition method of accounting is used to account for business combinations not under
common control by the Group (refer to Note 2.3).
APPENDIX I ACCOUNTANT’S REPORT
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--- page 582 ---
Inter-company transactions, balances and unrealised gains on transactions between group companies
are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of an
impairment of the transferred asset. Accounting policies of subsidiaries have been changed where
necessary to ensure consistency with the policies adopted by the Group.
Non-controlling interests in the results and equity of subsidiaries are shown separately in the
Historical Financial Information.
(b) Changes in ownership interests
The Group treats transactions with non-controlling interests that do not result in a loss of control as
transactions with equity owners of the Group. A change in ownership interest results in an adjustment
between the carrying amounts of the controlling and non-controlling interests to reflect their relative
interests in the subsidiary. Any difference between the amount of the adjustment to non-controlling
interests and any consideration paid or received is recognized in a separate reserve within equity
attributable to owners of the Company.
(c) Disposal of subsidiaries
When the Group creases to have control, any retained interest in the entity is re-measured to its fair
value at the date when control is lost, with the change in carrying amount recognized in profit or loss. The
fair value is the initial carrying amount for the purposes of subsequently accounting for the retained
interest as an associate or financial asset. In addition, any amounts previously recognized in other
comprehensive income in respect of that entity are accounted for as if the Group had directly disposed of
the related assets or liabilities. This may mean that amounts previously recognized in other comprehensive
income are reclassified to profit or loss.
2.3 Business combinations
The acquisition method of accounting is used to account for all business combinations (other than business
combinations under common control), regardless of whether equity instruments or other assets are acquired. The
consideration transferred for the acquisition of a subsidiary comprises the:
 fair values of the assets transferred;
 liabilities incurred to the former owners of the acquired business;
 equity interests issued by the Group;
 fair value of any asset or liability resulting from a contingent consideration arrangement; and
 fair value of any pre-existing equity interest in the subsidiary.
Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are,
with limited exceptions, measured initially at their fair values at the acquisition date. The Group recognizes any
non-controlling interest in the acquired entity on an acquisition-by-acquisition basis either at fair value or at the
non-controlling interest’s proportionate share of the acquired entity’s net identifiable assets.
Acquisition-related costs are expensed as incurred.
The excess of the:
 consideration transferred;
 amount of any non-controlling interest in the acquired entity; and
 acquisition-date fair value of any previous equity interest in the acquired entity
APPENDIX I ACCOUNTANT’S REPORT
– I-22 –


--- page 583 ---
over the fair value of the net identifiable assets acquired is recorded as goodwill. If those amounts are less than
the fair value of the net identifiable assets of the business acquired, the difference is recognized directly in profit
or loss as a bargain purchase.
Where settlement of any part of cash consideration is deferred, the amounts payable in the future are
discounted to their present value as at the date of exchange. The discount rate used is the entity’s incremental
borrowing rate, being the rate at which a similar borrowing could be obtained from an independent financier
under comparable terms and conditions. Contingent consideration is classified either as equity or a financial
liability. Amounts classified as a financial liability are subsequently remeasured to fair value with changes in fair
value recognized in profit or loss.
If the business combination is achieved in stages, the acquisition date carrying value of the acquirer’s
previously held equity interest in the acquiree is remeasured to fair value at the acquisition date. Any gains or
losses arising from such remeasurement are recognized in profit or loss.
2.4 Separate financial statements
Investments in subsidiaries are accounted for at cost less impairment. Cost includes direct attributable
costs of investment. The results of subsidiaries are accounted for by the Company on the basis of dividend
received and receivable.
Impairment testing of the investments in subsidiaries is required upon receiving a dividend from these
investments if the dividend exceeds the total comprehensive income of the subsidiary in the period the dividend
is declared or if the carrying amount of the investment in the separate financial statements exceeds the carrying
amount in the consolidated financial statements of the investee’s net assets including goodwill.
2.5 Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief
operating decision-makers (“CODMs”). The CODMs, who are responsible for allocating resources and assessing
performance of the operating segments, have been identified as the Executive Directors that make strategic
decisions.
2.6 Foreign currency translation
(a) Functional and presentation currency
Items included in the Historical Financial Information of each of the companies comprising the
Group are measured using the currency of the primary economic environment in which these companies
operate (the “functional currency”). The functional currency of the Company and the companies outside of
PRC is Hong Kong dollar (“HK$”). The functional currency of the companies in PRC is RMB. The
Historical Financial Information are presented in RMB which is the Group’s presentation currency.
(b) Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates
prevailing at the dates of the transactions or valuation where items are re-measured. Foreign exchange
gains and losses resulting from the settlement of such transactions and from the translation at period-end
exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized in the
consolidated statement of comprehensive income within “other gains/(losses), net”.
Non-monetary items that are measured at fair value in a foreign currency are translated using the
exchange rates at the date when the fair value was determined. Translation differences on assets and
liabilities carried at fair value are reported as part of the fair value gain or loss. For example, translation
differences on non-monetary assets and liabilities such as equities held at fair value through profit or loss
are recognized in profit or loss as part of the fair value gain or loss.
APPENDIX I ACCOUNTANT’S REPORT
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--- page 584 ---
2.7 Property, plant and equipment
Property, plant and equipment are stated at historical cost less accumulated depreciation and accumulated
impairment losses, if any. Historical cost includes expenditure that is directly attributable to the acquisition of
the items.
Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as
appropriate, only when it is probable that future economic benefits associated with the item will flow to the
Group and the cost of the item can be measured reliably. The carrying amount of the replaced part is
derecognized. All other repairs and maintenance are charged to the consolidated statement of comprehensive
income during the financial period in which they are incurred.
Depreciation of property, plant and equipment is calculated using the straight-line method to allocate their
cost to their residual values over their estimated useful lives, as follows:
Land and buildings 30 years
Computers 5 years
Furniture, fixture and equipment 5–10 years
Leasehold improvements Over the shorter of their expected useful lives and the lease terms
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each financial
position date.
An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying
amount is greater than its estimated recoverable amount (Note 2.9).
Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are
recognized within “Other gains/(losses), net” in the consolidated statement of comprehensive income.
2.8 Intangible assets
Acquired software are capitalised on the basis of the costs incurred to acquire and bring to use the specific
software. These costs are amortised on a straight-line method over their estimated useful lives of 10 years. Based
on the current functionalities equipped by the acquired computer software and the Group’s daily operation needs,
the Group considers useful lives of 10 years are the best estimation under the current financial reporting needs.
2.9 Impairment of non-financial assets
Assets that are subject to amortisation are tested for impairment whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized for
the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the
higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets
are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely
independent of the cash inflows from other assets or groups of assets (cash-generating units). Non-financial
assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at the
end of each reporting period.
2.10 Financial assets
(a) Classification
The Group classifies its financial assets in the following measurement categories:
 those to be measured subsequently at fair value (either through other comprehensive income
(“OCI”) or through profit or loss); and
 those to be measured at amortised cost.
APPENDIX I ACCOUNTANT’S REPORT
– I-24 –


--- page 585 ---
The classification depends on the entity’s business model for managing the financial assets and the
contractual terms of the cash flows.
For assets measured at fair value, gains and losses will either be recorded in profit or loss or OCI.
For investments in equity instruments that are not held for trading, this will depend on whether the Group
has made an irrevocable election at the time of initial recognition to account for the equity investment at
fair value through other comprehensive income (“FVOCI”).
The Group reclassifies debt investments when and only when its business model for managing those
assets changes.
(b) Recognition and derecognition
Regular way purchases and sales of financial assets are recognized on trade-date, the date on which
the Group commits to purchase or sell the asset. Financial assets are derecognized when the rights to
receive cash flows from the financial assets have expired or have been transferred and the Group has
transferred substantially all the risks and rewards of ownership.
(c) Measurement
At initial recognition, the Group measures a financial asset at its fair value plus, in the case of a
financial asset not at fair value through profit or loss (“FVPL”), transaction costs that are directly
attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at fair
value through profit or loss are expensed in profit or loss.
Financial assets with embedded derivatives are considered in their entirety when determining
whether their cash flows are solely payment of principal and interest.
Debt instruments
Amortised cost: Assets that are held for collection of contractual cash flows where those cash
flows represent solely payments of principal and interest are measured at amortised cost. Interest
income from these financial assets is included in finance income using the effective interest rate
method. Any gain or loss arising on derecognition is recognized directly in profit or loss and
presented in “finance income” together with foreign exchange gains and losses. Impairment losses
are presented as separate line item in the statement of profit or loss.
FVOCI: Assets that are held for collection of contractual cash flows and for selling the
financial assets, where the assets’ cash flows represent solely payments of principal and interest, are
measured at FVOCI. Movements in the carrying amount are taken through OCI, except for the
recognition of impairment gains or losses, interest income and foreign exchange gains and losses
which are recognized in profit or loss. When the financial asset is derecognized, the cumulative gain
or loss previously recognized in OCI is reclassified from equity to profit or loss and recognized in
“other (losses)/gains, net”. Interest income from these financial assets is included in finance income
using the effective interest rate method. Foreign exchange gains and losses are presented in “other
(losses)/gains, net” and impairment expenses are presented as separate line item in the statement of
profit or loss.
FVPL: Assets that do not meet the criteria for amortised cost or FVOCI are measured at
FVPL. A gain or loss on a debt investment that is subsequently measured at fair value through profit
or loss is recognized in profit or loss and presented net in the consolidated statements of
comprehensive income within “Other (losses)/gains, net” in the period in which it arises.
APPENDIX I ACCOUNTANT’S REPORT
– I-25 –


--- page 586 ---
Equity instruments
The Group subsequently measures all equity instruments at fair value. Where the Group’s
management has elected to present fair value gains and losses on equity instruments in OCI, there is
no subsequent reclassification of fair value gains and losses to profit or loss following the
derecognition of the investment. Dividends from such investments continue to be recognized in
profit or loss as other income when the Group’s right to receive payments is established.
Changes in the fair value of financial assets at FVPL are recognized in “other (losses)/gains,
net” in the consolidated statements of comprehensive income as applicable. Impairment losses (and
reversal of impairment losses) on equity investments measured at FVOCI are not reported separately
from other changes in fair value.
(d) Impairment
The Group assesses on a forward looking basis the expected credit losses associated with its assets
carried at amortised cost. The impairment methodology applied depends on whether there has been a
significant increase in credit risk. Note 3.1 details how the Group determines whether there has been a
significant increase in credit risk.
Expected credit losses are a probability-weighted estimate of credit losses (i.e. the present value of
all cash shortfalls) over the expected life of the financial assets.
For trade receivables, the Group applies the simplified approach permitted by HKFRS 9, which
requires expected lifetime losses to be recognized from initial recognition of the assets, see Note 3.1(b) for
details.
In addition, management also reviews the credit risk of individual debtors by considering the
relationship with customers and their financial position to assess whether further provision was needed at
the end of the reporting period.
Impairment of other receivables are measured as either 12-month expected credit losses or lifetime
expected credit losses, depending on whether there has been a significant increase in credit risk since
initial recognition. If a significant increase in credit risk of a receivable has occurred since initial
recognition, impairment is measured as lifetime expected credit losses.
2.11 Offsetting financial instruments
Financial assets and liabilities are offset and the net amount reported in the consolidated statement of
financial position when there is a legally enforceable right to offset the recognized amounts and there is an
intention to settle on a net basis or realise the asset and settle the liability simultaneously. The legally
enforceable right must not be contingent on future events and must be enforceable in the normal course of
business and in the event of default, insolvency or bankruptcy of the Group or the counterparty.
2.12 Inventories
Inventories are stated at the lower of cost and net realisable value. Cost is determined using the weighted
average method. Costs of purchased inventory are determined after deducting rebates and discounts. Net
realisable value is the estimated selling price in the ordinary course of business, less the applicable variable
selling expense.
APPENDIX I ACCOUNTANT’S REPORT
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--- page 587 ---
2.13 TV program rights
TV program rights are stated at the lower of cost and net realisable value. Cost of TV program rights
under production includes all direct costs associated with the production of TV program rights. TV program
rights under production are transferred to “TV program rights completed” upon completion of production. Net
realisable value is the estimated selling price in the ordinary course of business, less the applicable variable
selling expense.
2.14 Trade and other receivables
Trade receivables are amounts due from customers for merchandise sold or services performed in the
ordinary course of business. Trade and other receivables are non-derivative financial assets with fixed or
determinable payments that are not quoted in an active market. They are classified as current assets, except for
those with maturities greater than twelve months after the financial position date are classified as non-current
assets.
Trade receivables are recognized initially at the amount of consideration that is unconditional unless they
contain significant financing components, when they are recognized at fair value. The Group holds the trade
receivables with the objective to collect the contractual cash flows and therefore measures them subsequently at
amortised cost using the effective interest method.
2.15 Cash and cash equivalents and time deposits
In the consolidated statement of cash flows, cash and cash equivalents includes cash on hand and deposits
held with banks with original maturities of three months or less that are readily convertible to known amounts of
cash and which are subject to an insignificant risk of changes in value. Time deposits represent deposits placed
with banks with original maturities more than three months but less than one year.
For cash subjected to restriction, assessment is made on the economic substance of the restriction and
whether they meet the definition of cash and cash equivalents.
2.16 Share capital
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares
or options are shown in equity as a deduction, net of tax, from the proceeds.
2.17 Trade and other payables
Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course
of business from suppliers. Trade and other payables are classified as current liabilities if payment is due within
one year or less (or in the normal operating cycle of the business if longer). If not, they are presented as
non-current liabilities.
Trade and other payables are recognized initially at fair value and subsequently measured at amortised cost
using the effective interest method.
2.18 Financial instrument with redemption rights
Redemption rights issued to investor represents an obligation by the Company to buy back the shares upon
occurrence of certain future events at a fixed redemption amount. Such redemption rights will be automatically
cancelled with the closing of a qualified initial public offering of the Company’s shares.
The potential cash payments related to the redemption right are accounted for as a financial liability. Such
liability is initially recognized at the present value of the redemption amount and would result in decrease of the
Company’s equity. The financial liability shall be subsequently measured at amortised cost.
APPENDIX I ACCOUNTANT’S REPORT
– I-27 –


--- page 588 ---
If the redemption rights expire without delivery, the carrying amount of the financial liability is
reclassified to equity. The financial liability is classified as a non-current liability if the redemption happens at
least 12 months after the end of the reporting period.
2.19 Borrowings and borrowing costs
Borrowings are initially recognized at fair value, net of transaction costs incurred. Borrowings are
subsequently measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the
redemption amount is recognized in profit or loss over the period of the borrowings using the effective interest
method. Fees paid on the establishment of loan facilities are recognized as transaction costs of the loan to the
extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until
the draw-down occurs. To the extent there is no evidence that it is probable that some or all of the facility will
be drawn down, the fee is capitalised as a prepayment for liquidity services and amortised over the period of the
facility to which it relates.
Borrowings are removed from the balance sheet when the obligation specified in the contract is
discharged, cancelled or expired. The difference between the carrying amount of a financial liability that has
been extinguished or transferred to another party and the consideration paid, including any non-cash assets
transferred or liabilities assumed, is recognized in profit or loss as finance costs.
Borrowings are classified as current liabilities unless the Group has an unconditional right to defer
settlement of the liability for at least 12 months after the reporting period.
General and specific borrowing costs that are directly attributable to the acquisition, construction or
production of a qualifying asset are capitalised during the period of time that is required to complete and prepare
the asset for its intended use or sale. Qualifying assets are assets that necessarily take a substantial period of
time to get ready for their intended use or sale.
Investment income earned on the temporary investment of specific borrowings pending their expenditure
on qualifying assets is deducted from the borrowing costs eligible for capitalization. Other borrowing costs are
expensed in the period in which they are incurred.
2.20 Current and deferred income tax
The tax expense for the Track Record Period comprises current and deferred tax. Tax is recognized in the
consolidated statements of comprehensive income, except to the extent that it relates to items recognized in other
comprehensive income or directly in equity. In this case, the tax is also recognized in other comprehensive
income or directly in equity, respectively.
(a) Current income tax
The current income tax charge is calculated on the basis of the tax laws enacted or substantively
enacted at the consolidated statement of financial position date in the country where the Group operates
and generates taxable income. Management periodically evaluates positions taken in tax returns with
respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions
where appropriate on the basis of amounts expected to be paid to the tax authorities.
(b) Deferred income tax
Deferred income tax is recognized, using the liability method, on temporary differences arising
between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial
statements. However, the deferred tax liabilities are not recognized if they arise from initial recognition of
goodwill, the deferred income tax is not accounted for if it is from initial recognition of an asset or
liability in a transaction other than a business combination that at the time of the transaction affects
neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws)
that have been enacted or substantially enacted by the consolidated statement of financial position date and
APPENDIX I ACCOUNTANT’S REPORT
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--- page 589 ---
are expected to apply when the related deferred income tax asset is realised or the deferred income tax
liability is settled.
Deferred tax assets are recognized only if it is probable that future taxable amounts will be available
to utilise those temporary differences and losses.
Deferred tax assets and liabilities are not recognized for temporary differences between the carrying
amount and tax bases of investments in foreign operations where the company is able to control the timing
of the reversal of the temporary differences and it is probable that the differences will not reverse in the
foreseeable future.
Deferred tax assets and liabilities are offset where there is a legally enforceable right to offset
current tax assets and liabilities and where the deferred tax balances relate to the same taxation authority.
Current tax assets and tax liabilities are offset where the entity has a legally enforceable right to offset and
intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.
2.21 Employee benefits
(a) Short-term obligations
Liabilities for wages and salaries, including non-monetary benefits and accumulating annual leave
that are expected to be settled wholly within 12 months after the end of the period in which the employees
render the related service are recognized in respect of employees’ services up to the end of the reporting
period and are measured at the amounts expected to be paid when the liabilities are settled. The liabilities
are presented as current employee benefit obligations in the statement of financial position.
(b) Post-employment obligations
A defined contribution plan is a pension plan under which the Group pays contributions to publicly
or privately administered pension insurance plans on a mandatory, contractual or voluntary basis. The
Group’s subsidiaries operating in the PRC have to make contribution to staff retirement scheme managed
by local government authorities in accordance with the relevant rules and regulations. The Group has no
further payment obligations once the contributions have been paid. The Group has no legal or constructive
obligations to pay further contributions if the fund does not hold sufficient assets to pay all employees the
benefits relating to employee service in the current and prior periods. The contributions are recognized as
employee benefit expense when they are due. Prepaid contributions are recognized as an asset to the extent
that a cash refund or a reduction in the future payments is available.
(c) Housing funds, medical insurances and other social insurances
PRC employees of the Group are entitled to participate in various government-supervised housing
funds, medical insurance and other social insurance plan. The Group contributes to these funds based on
certain percentages of the salaries of these employees on a monthly basis. The Group’s liability in respect
of these funds is limited to the contribution payable in each period. Contributions to the housing funds,
medical insurances and other social insurance are expensed as incurred.
(d) Equity-settled share-based payment
The fair value of the share options granted to employees is recognized as an employee benefits
expense with a corresponding increase in equity. The total amount to be expensed is determined by
reference to the fair value of the options granted:
– including any market performance conditions (e.g. the entity’s share price)
– excluding the impact of any service and non-market performance vesting conditions (e.g.
profitability, sales growth targets and remaining an employee of the entity over a specified
time period), and
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– including the impact of any non-vesting conditions (e.g. the requirement for employees to
save or hold shares for a specific period of time).
The total expense is recognized over the vesting period, which is the period over which all of the
specified vesting conditions are to be satisfied. At the end of each period, the entity revises its estimates of
the number of options that are expected to vest based on the non-market vesting and service conditions. It
recognizes the impact of the revision to original estimates, if any, in profit or loss, with a corresponding
adjustment to equity.
2.22 Provisions
Provisions are recognized when: the Group has a present legal or constructive obligation as a result of past
events; it is probable that an outflow of resources will be required to settle the obligation; and the amount has
been reliably estimated. Provisions are not recognized for future operating losses.
Where there are a number of similar obligations, the likelihood that an outflow will be required in
settlement is determined by considering the class of obligations as a whole. A provision is recognized even if the
likelihood of an outflow with respect to any one item included in the same class of obligations may be small.
Provisions are measured at the present value of management’s best estimate of the expenditures expected
to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time
value of money and the risks specific to the obligation. The increase in the provision due to passage of time is
recognized as finance cost expense.
2.23 Revenue recognition
Revenue is recognized when or as the control of goods or services is transferred to the customer.
Depending on the terms of the contract and the laws that apply to the contract, revenue may be recognized over
time or at a point in time.
Control of the good or service is transferred over time if the Group’s performance:
– provides all of the benefits received and consumed simultaneously by the customer;
– creates or enhances an asset that the customer controls as the Group performs; or
– does not create an asset with an alternative use to the Group and the Group has an enforceable right
to payment for performance completed to date.
If control of the goods and services transfers over time, revenue is recognized over the period of the
contract by reference to the progress towards complete satisfaction of that performance obligation. Otherwise,
revenue is recognized at a point in time when the customer obtains control of the goods and services.
The progress towards complete satisfaction of the performance obligation is measured based on time-based
measure of progress that best depicts the Group’s performance in satisfying the performance obligation.
Contracts with customers may include multiple performance obligations. For such arrangements, the Group
allocates revenue to each performance obligation based on its relative standalone selling price. The Group
generally determines standalone selling prices based on the prices charged to customers. If the standalone selling
price is not directly observable, it is estimated using expected cost plus a margin or adjusted market assessment
approach, depending on the availability of observable information. Assumptions and estimations have been made
in estimating the relative selling price of each distinct performance obligation, and changes in judgements on
these assumptions and estimates may impact the revenue recognition.
When either party to a contract has performed, the Group presents the contract in the consolidated
statement of financial position as a contract asset or a contract liability, depending on the relationship between
the entity’s performance and the customer’s payment.
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A contract asset is the Group’s right to consideration in exchange for goods and services that the Group
has transferred to a customer. A receivable is recorded when the Group has an unconditional right to
consideration. A right to consideration is unconditional if only the passage of time is required before payment of
the consideration is due.
If a customer pays consideration or the Group has a right to an amount of consideration that is
unconditional, before the Group transfers a good or service to the customer, the Group presents the contract
liability when the payment is made or a receivable is recorded (whichever is earlier). A contract liability is the
Group’s obligation to transfer goods or services to a customer for which the Group has received consideration (or
an amount of consideration is due from the customer).
The following is a description of the accounting policy for the principal revenue streams of the Group:
(a) Revenue from new retail business
Sales of health management and skincare products
Revenue from the sale of goods is recognized at the point in time when control of the asset is
transferred to the customer, generally upon the acceptance of the products. The Group recognizes
revenue in an amount equal to the contract sales prices less value-added tax, estimated sales
allowances for sales returns, volume discounts and incentives paid to distributors. Estimated sales
allowances for sales returns, volume discounts and incentives paid to distributors are made based on
contract terms and historical patterns.
The Group is regarded as the principal since in combination, that (a) the Group is the primary
obligator to provide the specified good or service to distributors; (b) the Group keeps all the
inventory risk and is responsible for delivery of products; (c) the Group has discretion in
establishing the pricing policy for the health management and skincare products and pre-determine
the discounts, incentives and fees required to promote the sales. Thus revenue from sales of health
management and skincare products is recognized on a gross basis.
(b) Revenue from IP creation and operation
Revenue from production of TV programs
Where the Group undertook the role of investor for the production of TV programs, it either:
 licenses the copyright and ancillary rights to such TV programs to the customers for
fixed fees in a period of time in designated geographical region. Revenue is recognized
at the point in time upon delivery and acceptance of the final product by the customers
as control of the TV programs is transferred so that the customers can direct the use
and obtain the associated benefits; or
 sells the copyright and ancillary rights of such TV programs to customers in exchange
for cash consideration calculated based on an agreed mechanism, e.g. advertisement
income for each episodes in designated geographical region. This constitutes a variable
consideration and such revenue is only recognized to the extent that it is highly
probable that there will be no significant reversal when the uncertainty is resolved.
Revenue from production and licensing of entertainment videos
The Group produces and licenses entertainment videos for customers’ specific events with
fixed considerations. Revenue is recognized at the point in time when the videos are available to the
customers, generally on delivery of the videos when the customers are provided with rights to use
the videos.
APPENDIX I ACCOUNTANT’S REPORT
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Revenue from event planning and management
Revenue from event planning and management where the Group undertook the role of concert
or Internet live broadcasting management, is recognized over the show or event period of a project
as customers have simultaneously received and consumed the benefits provided by the Group’s
services. Revenue is recognized using a straight-line basis over the term of the contract.
Licensing and royalty income
The Group licenses proprietary celebrity intellectual properties and created media content to
third parties. Any agreed upfront licensing fee is recognized on a straight-line basis over the period
of the license agreement. Royalty income from the licensing arrangements is recognized in
accordance with the terms of agreements.
Since the Group has the ability to determine the pricing of the TV programs and entertainment
videos licensing and the concerts or internet live broadcasting, and negotiate the service terms, and
bears the relevant costs including the self-production costs of TV programs, entertainment videos
and concerts, and take responsibility for managing the licensed libraries, the Group is regarded as
the principal and recognizes revenue from the above revenue streams on a gross basis and
recognizes production costs and other applicable fulfillment costs as cost of revenue.
Celebrity IP management income
Revenue from celebrity IP management arises from the service fee earned by the Group by
managing IP of certain celebrities and is recognized on a straight-line basis over the show or
broadcasting period.
Considering that the celebrities whose IP currently is managed by the Group has the discretion
to determine the basis of performances measurement and the service prices in the contract with
advertisers and bear majority of the service costs, the Group is regarded as an agent in such an
arrangement and, therefore, recognizes revenue from Celebrity IP management on a net basis.
2.24 Earning per share
(a) Basic earnings per share
Basic earnings per share is calculated by dividing:
 the profit attributable to owners of the company, excluding any costs of servicing equity other
than ordinary shares; and
 by the weighted average number of ordinary shares outstanding during the financial year,
adjusted for bonus elements in ordinary shares issued during the year and excluding treasury
stocks.
(b) Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share
to take into account:
 the after-income tax effect of interest and other financing costs associated with dilutive
potential ordinary shares, and
 the weighted average number of additional ordinary shares that would have been outstanding
assuming the conversion of all dilutive potential ordinary shares.
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2.25 Leases
The Group, as a lessee, leases offices premises with lease terms from 1 to 3 years. Leases are recognized
as a right-of-use asset and corresponding liability at the date of which the leased asset is available for use by the
Group. Assets and liabilities arising from a lease are initially measured on a present value basis.
Lease liabilities include the net present value of the following lease payments, where applicable:
(a) fixed payments (including in-substance fixed payments), less any lease incentives receivable;
(b) variable lease payment that are based on an index or a rate;
(c) amounts expected to be payable by the lessee under residual value guarantees;
(d) the exercise price of a purchase option if the lessee is reasonably certain to exercise that option; and
(e) payments of penalties for terminating the lease, if the lease term reflects the lessee exercising that
option.
The lease payments are discounted using the interest rate implicit in the lease, if that rate can be readily
determined, or the Group’s incremental borrowing rate. Each lease payment is allocated between the liability and
finance cost. The finance cost is charged to profit or loss over the lease period so as to produce a constant
periodic rate of interest on the remaining balance of the liability for each period.
Right-of-use assets are measured at cost comprising the following:
 the amount of the initial measurement of lease liability,
 any lease payments made at or before the commencement date less any lease incentives received,
 any initial direct costs, and
 restoration costs.
Right-of-use assets are generally depreciated over the shorter of the asset’s useful life and the lease term
on a straight-line basis. If the Group is reasonably certain to exercise a purchase option, the right-of-use asset is
depreciated over the underlying asset’s useful life.
Payments associated with short-term leases and all leases of low-value assets are recognized on a
straight-line basis as an expense in profit or loss. Short-term leases are leases with a lease term of 12 months or
less.
2.26 Dividend distribution
Dividend distribution to the equity holders of the companies comprising the Group is recognized as a
liability in the Historical Financial Information during the period in which the dividends are approved by the
equity holders or directors, where appropriate.
2.27 Government grants
Grants from the government are recognized at their fair value where there is a reasonable assurance that
the grant will be received and the Group will comply with all attached conditions.
Grants that compensate the Group for expenses incurred are recognized in the consolidated statements of
comprehensive income within “Other income” on a systematic basis in the same periods in which the expenses
are recognized.
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--- page 594 ---
2.28 Interest income
Interest income is presented as finance income where it is earned from financial assets that are held for
cash management purposes.
Interest income is calculated by applying the effective rate to the gross carrying amount of a financial
asset except for financial assets that subsequently become credit-impaired. For credit-impaired financial assets,
the effective interest rate is applied to the net carrying amount of the financial asset (after deduction of the loss
allowance).
3 FINANCIAL RISK MANAGEMENT
3.1 Financial risk factors
The Group’s activities expose it to a variety of financial risks: market risk (including foreign exchange
risk, cash flow and fair value interest rate risk and price risk), credit risk and liquidity risk. The Group’s overall
risk management program focuses on the unpredictability of financial markets and seeks to minimise potential
adverse effects on the Group’s financial performance.
Financial risk management is carried out by the finance department under the supervision of the board of
directors. The board provides principles for overall risk management.
(a) Market risk
(i) Foreign exchange risk
Foreign exchange risk arises when future commercial transactions or recognized assets and
liabilities are denominated in a currency that is not the Group entities’ functional currency.
The Group manages its foreign exchange risk by closely monitoring the movement of the
foreign currency rates. Cash repatriation from the PRC are subject to the rules and regulations of
foreign exchange control promulgated by the PRC government. The Group did not have other
significant exposure to foreign exchange risk.
The carrying amount of the Group’s foreign currency denominated monetary assets at the
respective dates of consolidated statements of financial position are as follows:
As at December 31,
2019 2020 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
Assets
RMB – – 105,753 109,558
US$ – 11,473 31,342 599
NT$ – – – 4,562
– 11,473 137,095 114,719
As at December 31, 2019, 2020, 2021 and 2022, the Group’s entities with functional currency
of HK$ had aggregate US$ net monetary assets of Nil, RMB11,473,000, RMB31,342,000 and
RMB599,000, respectively. Under the Linked Exchange Rate System in Hong Kong, HK$ is pegged
to US$, management therefore considers that there is no significant foreign exchange risk with
respect to US$.
APPENDIX I ACCOUNTANT’S REPORT
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As at December 31, 2021 and 2022, if RMB had strengthened/weakened by 5% against HK$
with all other variables held constant, the pre-tax profit would have been approximately
RMB5,288,000 and RMB5,478,000 higher/lower for the year ended December 31, 2021 and 2022,
respectively.
As at December 31, 2022, if RMB had strengthened/weakened by 5% against NT$ with all
other variables held constant, the pre-tax profit would have been approximately RMB228,000
higher/lower for the year ended December 31, 2022.
(ii) Cash flow and fair value interest rate risk
As the Group has no significant interest-bearing assets except for cash and cash equivalents
and restricted bank deposits, the Group’s income and operating cash flows are substantially
independent of changes in market interest rates.
The Group’s interest-rate risk mainly arises from borrowings. Borrowings obtained at variable
rates expose the Group to cash flow interest-rate risk. Borrowings obtained at fixed rates expose the
Group to fair value interest-rate risk. During the Track Record Period, the Group has not used any
financial instrument to hedge its exposure to interest rate risk.
The Group’s interest rate profile as monitored by management is set out as below:
As at December 31,
2019 2020 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
Financial
instruments with
fixed rate
Borrowings – – 20,000 15,000
(iii) Price risk
The Group is exposed to price risk in respect of the financial assets measured at fair value
through profit or loss, including investments in wealth management products (“WMPs”). To manage
its price risk arising from the investments, the Group diversifies its investment portfolio. The
sensitivity analysis is performed by management, see Note 3.3(a) for details.
(b) Credit risk
(i) Risk management
Credit risk is managed on a group basis. The credit risk of the Group mainly arises from
financial assets, cash and cash equivalents, restricted bank deposits and trade and other receivables.
The carrying amounts of these balances represent the Group’s maximum exposure to credit risk in
relation to these assets.
In order to minimise the credit risk, management has delegated a team responsible for
determination of credit limits, credit approvals and other monitoring procedures to ensure that
follow-up action is taken to recover overdue debts. Before accepting any new debtor, the Group
assesses the potential debtor’s credit quality and defines credit limits by debtor. Credit limits
granted to debtors are reviewed regularly. In addition, the Group reviews the recoverable amount of
each individual debt at the end of the reporting period to ensure that adequate impairment losses are
made for irrecoverable amounts. In this regard, management considers that the Group’s credit risk is
significantly reduced.
APPENDIX I ACCOUNTANT’S REPORT
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As at December 31, 2019, 2020, 2021 and 2022, all the bank deposits are deposited in or
managed by state-owned or reputable banks which are all high-credit-quality financial institutions
without significant credit risk.
(ii) Impairment of financial assets
The Group has two types of financial assets that are subject to HKFRS 9’s new expected
credit loss model.
 Trade and bill receivables
 Other receivables
While cash and cash equivalents are also subject to the impairment requirements of HKFRS 9,
the identified impairment loss was immaterial.
Trade receivables
The Group applies the simplified approach to provide for expected credit losses
prescribed by HKFRS 9, which permits the use of the lifetime expected credit loss provision
for all trade receivables. To measure the expected credit losses, trade receivables have been
grouped based on shared credit risk characteristics and the invoice dates.
Management has assessed the expected credit losses on individual basis or grouped
based on shared credit risk characteristics and the days past due. The assessment is based on
the background and reputation of the customers, historical settlement records and past
experience. Management also considered the default rates and loss given default from external
rating agency report and forward-looking information that may impact the customer’s ability
to repay the outstanding balances. Trade receivables with known financial difficulties or
significant doubt on collection of receivables are considered to be subjected to higher risk of
default and are tested individually.
APPENDIX I ACCOUNTANT’S REPORT
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--- page 597 ---
On that basis, the loss allowance as at December 31, 2019, 2020, 2021 and 2022 was
determined for trade receivables, and the expected credit losses below have incorporated
forward-looking information.
Not overdue
Overdue
1–30 days
Overdue
31–60 days
Overdue
61–90 days
Overdue
91–120 days
Overdue
over
121 days Total
Trade receivables
At December 31, 2019
Expected loss rate 0.69% –––––
Gross carrying amount (RMB’000) 2 5 4––––– 2 5 4
Loss allowance provision (RMB’000) ( 2 ) ––––– ( 2 )
At December 31, 2020
Expected loss rate 1.85% 11.59% – – – 46.43%
Gross carrying amount (RMB’000) 40,214 630 – – – 252 41,096
Loss allowance provision (RMB’000) (742) (73) – – – (117) (932)
At December 31, 2021
Expected loss rate 0.86% 7.43% – 13.40% – 54.17%
Gross carrying amount (RMB’000) 24,528 1,683 – 194 – 72 26,477
Loss allowance provision (RMB’000) (210) (125) – (26) – (39) (400)
At December 31, 2022
Expected loss rate 0.51% 5.80% 11.57% 16.43% 21.02% 26.09%
Gross carrying amount (RMB’000) 26,630 9,365 2,144 414 628 23 39,204
Loss allowance provision (RMB’000) (137) (543) (248) (68) (132) (6) (1,134)
As at December 31, 2022, the expected credit loss rate was lower because most of the
trade receivables from the IP creation and operation business (as defined in note 5 below) had
better credit ratings than prior years. In addition, the higher expected credit loss rates as at
December 31, 2020 and 2021 were due to the adverse impact of COVID-19 to the
macroeconomic environment on the forward-looking factor.
Impairment losses on trade receivables are separately presented as “Reversal
of/(provision for) impairment losses on financial assets” in the consolidated statements of
comprehensive income. Trade receivables are written off when there is no reasonable
expectation of recovery. Indicators that there is no reasonable expectation of recovery include,
amongst others, the failure of a debtor to engage in a repayment plan with the Group, and
indicators of severe financial difficulty.
Other receivables
Other receivables mainly include amounts due from related parties, deposits
receivables, loans to third parties and staff advances. The management of the Group makes
periodic collective assessments as well as individual assessment on the recoverability of
deposits and other receivables based on historical settlement records and past experiences.
The Group measures credit risk using Probability of Default (“PD”), Exposure at Default
(“EAD”) and Loss Given Default (“LGD”) for deposits and other receivables. This is the
approach used for the purposes of measuring Expected Credit Loss (“ECL”) under HKFRS.
 Other receivables that are not credit-impaired on initial recognition are classified
in ‘Stage 1’ and have their credit risk continuously monitored by the Group. The
expected credit loss is measured on a 12-month basis.
APPENDIX I ACCOUNTANT’S REPORT
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--- page 598 ---
 If a significant increase in credit risk (specifically, when the debtors is more than
30 days past due on its contractual payments) since initial recognition is
identified, the financial instrument is moved to ‘Stage 2’ but is not yet deemed to
be credit-impaired. The expected credit loss is measured on lifetime basis.
 If the financial instrument is credit-impaired, the financial instrument is then
moved to ‘Stage 3’. The expected credit loss is measured on lifetime basis. It
considers available reasonable and supportive forwarding-looking information.
Especially the following indicators are incorporated:
 the debtor is more than 90 days past due on its contractual payments,
 actual or expected significant adverse changes in business, financial or
economic conditions that are expected to cause a significant change to the
borrower’s ability to meet its obligations,
 actual or expected significant changes in the operating results of individual
property owner or the borrower.
The average loss rate applied as at the December 31, 2019, 2020, 2021 and 2022 was 0.22%,
10.13%, 0.70% and 0.84% respectively.
APPENDIX I ACCOUNTANT’S REPORT
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As at December 31, 2019, 2020, 2021 and 2022, the loss allowance provision for trade and
other receivables reconciles to the opening loss allowance for that provision as follows:
Trade receivables Other receivables Total
RMB’000 RMB’000 RMB’000
At January 1, 2019 121 40 161
(Reversal of)/provision for
impairment losses on
financial assets (119) 46 (73)
At December 31, 2019 28 68 8
At January 1, 2020 28 68 8
Provision for impairment
losses on financial assets 930 3,522 4,452
At December 31, 2020 932 3,608 4,540
At January 1, 2021 932 3,608 4,540
Reversal of impairment
losses on financial assets (532) (390) (922)
Receivables written off as
uncollectable – (3,032) (3,032)
At December 31, 2021 400 186 586
At January 1, 2022 400 186 586
Provision for impairment
losses on financial assets 734 11 745
At December 31, 2022 1,134 197 1,331
APPENDIX I ACCOUNTANT’S REPORT
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(c) Liquidity risk
To manage the liquidity risk, management monitors rolling forecasts of the Group’s liquidity reserve
and cash and cash equivalents on the basis of expected cash flow. The Group expects to fund the future
cash flow needs through internally generated cash flows from operations.
The table below analyses the Group’s financial liabilities into relevant maturity groupings based on
the remaining period at the statement of financial position date to the contractual maturity date. The
amounts disclosed in the table are the contractual undiscounted cash flows.
On demand
Less than
1 year
Between 1
and 2 years
Between 2
and 5 years Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
As at December 31, 2019
Trade and other payables* – 122,416 – – 122,416
Lease liabilities – 1,125 665 980 2,770
– 123,541 665 980 125,186
As at December 31, 2020
Trade and other payables* – 53,856 – – 53,856
Lease liabilities – 1,843 981 377 3,201
– 55,699 981 377 57,057
As at December 31, 2021
Trade and other payables* – 30,378 – – 30,378
Borrowing and interest
payables – 6,023 5,734 10,603 22,360
Lease liabilities – 3,694 1,203 – 4,897
Financial instrument with
redemption rights 163,52 0––– 163,520
163,520 40,095 6,937 10,603 221,155
As at December 31, 2022
Trade and other payables* – 45,952 – – 45,952
Borrowing and interest
payables – 5,734 5,447 5,156 16,337
Lease liabilities – 2,059 231 – 2,290
Financial instrument with
redemption rights 178,65 4––– 178,654
178,654 53,745 5,678 5,156 243,233
* Excluding salaries and staff welfare payable and other taxes payable.
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3.2 Capital risk management
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going
concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an
optimal capital structure to reduce the cost of capital.
In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to
shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.
The Group monitors capital on the basis of the gearing ratio. This ratio is calculated as net debt divided by
total capital. Net debt is calculated as total borrowings, financial instrument with redemption rights, lease
liabilities, amounts due to related parties and amounts due to third parties less cash and cash equivalents and
restricted bank deposits. Total capital is calculated as “equity” as shown in the consolidated statement of
financial position plus net debt.
The gearing ratios at December 31, 2019, 2020, 2021 and 2022 were as follows:
As at December 31,
2019 2020 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
Net debt/(cash) 35,702 (118,434) (24,037) 13,113
Total capital 61,369 16,586 141,157 247,224
Gearing ratio 58.18% N/A N/A 5.30%
3.3 Fair value estimation
This section explains the judgments and estimates made in determining the fair values of the financial
instruments that are recognized and measured at fair value in the financial statements. To provide an indication
about the reliability of the inputs used in determining fair value, the Group has categorised its financial
instruments into three levels as follows:
Level 1: The fair value of financial instruments traded in active markets (such as publicly traded
derivatives and equity securities) is based on quoted market prices at the end of the reporting period. The quoted
market price used for financial assets held by the Group is the current bid price. These instruments are included
in level 1.
Level 2: The fair value of financial instruments that are not traded in an active market (for example,
over-the-counter derivatives) is determined using valuation techniques which maximise the use of observable
market data and rely as little as possible on entity-specific estimates. If all significant inputs required to fair
value an instrument are observable, the instrument is included in level 2.
Level 3: If one or more of the significant inputs is not based on observable market data, the instrument is
included in level 3. This is the case for investment in certain WMPs without observable market data.
APPENDIX I ACCOUNTANT’S REPORT
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(a) Financial assets and liabilities
(i) Fair value measurements using significant unobservable inputs (Level 3)
During the year ended December 31, 2021, the Group purchased certain wealth management
products with floating returns from state-owned or reputable national banks in the PRC, all of which
were included in Level 3. As of December 31, 2021, all these WMPs have been redeemed.
The fair value assessment methods and related key assumptions and judgments adopted by the
Group’s management is income approach (specifically, discounted cash flow method): Uses
valuation techniques to convert future amounts (specifically, cash flows based on the expected rate
of return) to a present amount.
Y ear ended December 31,
2019 2020 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
Financial assets at
FVPL
At beginning of the
year ––––
Purchase of financial
assets at FVPL – – 80,000 –
Redemption – – (80,435) –
Change in fair value
through profit or
loss (Note 6) – – 435 –
At the end of the
year ––––
(ii) V aluation inputs and relationships to fair value
Description
Fair value
as at
December 31,
2021
Significant
unobservable
inputs
Range of
inputs as at
December 31,
2021
Relationship of
unobservable
inputs to fair value
RMB’000
Investment in
WMPs
– Expected rate of
return
3.30%–3.54% The higher the
expected rate of
return, the higher
the fair value
Discount rate 3.85% The higher the
discount rate, the
lower the fair value
A change in the expected rate of return or the discount rate by 1% does not have significant
impact on the fair value as at December 31, 2019, 2020, 2021 and 2022.
All of these WMPs are sponsored and managed by state-owned or reputable national banks in
the PRC. These WMPs are short-term investments which are denominated in RMB and redeemable
within three months. The expected rate of return of the WMPs are updated by the security
companies and banks periodically on a quarterly or more frequent basis. Management uses the
expected rate of return for approximation for cash flow assessment in evaluating the fair values of
the WMPs.
APPENDIX I ACCOUNTANT’S REPORT
– I-42 –


--- page 603 ---
4 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
Estimates and judgements are continually evaluated and are based on historical experience and other factors,
including expectations of future events that are believed to be reasonable under the circumstances.
The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by
definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing
a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed
below.
(a) Impairment of financial assets at amortised cost
The Group management determine the provision for impairment of trade and other receivables based on an
assessment of the expected credit losses of these receivables. The assessment is based on the historical loss
experience, adjusted to reflect the effects of current market conditions and forward-looking information, which
requires the use of judgements and estimates. Management reassess the provision at each reporting date.
(b) Net realisable value of inventories
Net realisable value of inventories is the estimated selling price in the ordinary course of business, less
estimated cost to 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. It could change significantly as
a result of changes in consumer preferences and competitor actions in response to severe industry cycles.
Management reassesses these estimations by each of the balance sheet date.
(c) Net realisable value of TV program rights
The Group’s management determines the impairment for the Group’s TV program rights with reference to
the estimated future economic benefits derived from the use of these assets. These estimates are based on the
current market condition and the historical experience of the economic benefits derived from the assets of similar
nature. The Group takes into consideration both internal and external market information, for example, the sales
forecasts, sales and distribution costs budget and the general economic condition of the relevant markets.
Management reassesses these estimations by each of the balance sheet date.
(d) Current and deferred income taxes
The Group is subject to income taxes in the PRC and other jurisdictions. Judgment is required in
determining the provision for income taxes in each of these jurisdictions. There are transactions and calculations
during the ordinary course of business for which the ultimate tax determination is uncertain. Where the final tax
outcome of these matters is different from the amounts that were initially recorded, such differences will impact
the income tax and deferred income tax provisions in the period in which such determination is made.
Deferred income tax assets relating to certain temporary differences and tax losses are recognized when
management considers it is probable that future taxable profits will be available against which the temporary
differences or tax losses can be utilised. When the expectation is different from the original estimate, such
differences will impact the recognition of deferred income tax assets and taxation charges in the period in which
such estimate is changed.
(e) Recognition of share-based compensation expenses
The fair value of options is determined using the Binomial option-pricing model at the grant date, and is
expected to be expensed over the respective vesting period.
APPENDIX I ACCOUNTANT’S REPORT
– I-43 –


--- page 604 ---
(f) Financial instrument with redemption rights
As mentioned in Note 30, the Company has issued ordinary shares with redemption rights to a pre-IPO
investor. The potential cash payments relating to the redemption rights are accounted for as a financial liability.
The liability is initially recognized at present value of the redemption amount, which is determined by
management in accordance with the terms under the investment agreement. Significant judgements and estimates
are involved in making assumptions, including discount rates, in determining the present value of the redemption
amount.
5 REVENUE AND SEGMENT INFORMATION
The chief operating decision-maker has been identified as the Board of Directors of the Company. Management
has determined the operating segments based on the information reviewed by the Board of Directors of the Company
for the purposes of allocating resources and assessing performance.
The Board of Directors of the Company considers the business from perspective of types of goods or services
delivered or provided. During the Track Record Period, the Group’s operating and reportable segments are as follows:
– New retail of healthcare and other products in the PRC (“New retail”); and
– IP creations, media content creation, event planning and Celebrity IP management (“IP creation and
operation”).
The Group derives revenue from the transfer of goods and services over time and at a point in time in the
following major product lines:
For the year ended December 31, 2019
New retail
IP creation and
operation Total
RMB’000 RMB’000 RMB’000
Segment revenue
– recognized at a point in time 80,797 353 81,150
– recognized over time – 5,435 5,435
Total segment revenue 80,797 5,788 86,585
For the year ended December 31, 2020
New retail
IP creation and
operation Total
RMB’000 RMB’000 RMB’000
Segment revenue
– recognized at a point in time 365,175 83,348 448,523
– recognized over time – 8,421 8,421
Total segment revenue 365,175 91,769 456,944
APPENDIX I ACCOUNTANT’S REPORT
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--- page 605 ---
For the year ended December 31, 2021
New retail
IP creation and
operation Total
RMB’000 RMB’000 RMB’000
Segment revenue
– recognized at a point in time 301,395 29,390 330,785
– recognized over time – 34,560 34,560
Total segment revenue 301,395 63,950 365,345
For the year ended December 31, 2022
New retail
IP creation and
operation Total
RMB’000 RMB’000 RMB’000
Segment revenue
– recognized at a point in time 240,099 2,600 242,699
– recognized over time – 101,458 101,458
Total segment revenue 240,099 104,058 344,157
(a) Segment revenue and results
For the year ended December 31, 2019
New retail
IP creation and
operation Total
RMB’000 RMB’000 RMB’000
Segment revenue 80,797 5,788 86,585
Segment results 55,136 1,477 56,613
Selling and marketing expenses (14,393)
General and administrative expenses (10,330)
Reversal of impairment losses on
financial assets 73
Other income 151
Other gains/(losses), net (114)
Finance income/(costs), net (160)
Profit before income tax 31,840
APPENDIX I ACCOUNTANT’S REPORT
– I-45 –


--- page 606 ---
For the year ended December 31, 2020
New retail
IP creation and
operation Total
RMB’000 RMB’000 RMB’000
Segment revenue 365,175 91,769 456,944
Segment results 254,488 (21,699) 232,789
Selling and marketing expenses (94,914)
General and administrative expenses (31,563)
Provision for impairment losses on
financial assets (4,452)
Other income 1,692
Other gains/(losses), net 10,254
Finance income/(costs), net 35
Profit before income tax 113,841
For the year ended December 31, 2021
New retail
IP creation and
operation Total
RMB’000 RMB’000 RMB’000
Segment revenue 301,395 63,950 365,345
Segment results 205,470 21,912 227,382
Selling and marketing expenses (93,809)
General and administrative expenses (65,091)
Reversal of impairment losses on
financial assets 922
Other income 234
Other gains/(losses), net 3,956
Finance income/(costs), net (8,942)
Profit before income tax 64,652
APPENDIX I ACCOUNTANT’S REPORT
– I-46 –


--- page 607 ---
For the year ended December 31, 2022
New retail
IP creation and
operation Total
RMB’000 RMB’000 RMB’000
Segment revenue 240,099 104,058 344,157
Segment results 150,746 72,082 222,828
Selling and marketing expenses (72,447)
General and administrative expenses (64,094)
Provision for impairment losses on
financial assets (745)
Other income 21,844
Other expense (5,798)
Other gains/(losses), net (9,553)
Finance income/(costs), net 1,103
Profit before income tax 93,138
During the years ended December 31, 2019, 2020, 2021 and 2022, all of the segment revenue reported
above was from external customers and there were no inter-segment sales.
Segment results represent the gross profit/(loss) generated by each segment. This is the measure reported
to the Board of Directors of the Company for the purpose of resource allocation and performance assessments.
Segment assets and liabilities are not regularly reported to the Board of Directors of the Company and
therefore information of separate segment assets and liabilities is not presented.
(b) Geographical information
Most of the Group’s segment revenues are derived from the PRC except certain revenue from the IP
creation and operation segment.
The amount of the Group’s revenue from external customers broken down by geographical locations and
revenue presented based on the location of the operations of the relevant business units are detailed below:
Y ear ended December 31,
2019 2020 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
Revenue
Mainland China 86,232 437,533 365,345 344,157
Others 353 19,411 – –
86,585 456,944 365,345 344,157
APPENDIX I ACCOUNTANT’S REPORT
– I-47 –


--- page 608 ---
(c) Disaggregation of revenue
Disaggregation of revenue from contracts with customers by major products or service is as follows:
Y ear ended December 31,
2019 2020 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
Sales of health management
products and skincare products 75,377 361,209 296,535 232,308
Revenue from production of TV
programs – 81,590 – –
Revenue from production and
licensing of entertainment
videos – – 24,867 5,660
Revenue from event planning and
management 4,761 4,977 29,532 47,658
Revenue from celebrity IP
management – – – 41,708
Licensing and royalty income 674 3,444 4,485 8,473
Sales of other products 5,773 5,724 9,926 8,350
86,585 456,944 365,345 344,157
(d) Information about major customers
The major customers which contributed more than 10% of the total revenue for the years ended December
31, 2019, 2020, 2021 and 2022 are listed as below:
Y ear ended December 31,
2019 2020 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
Customer A N/A* 62,409 N/A* N/A*
* Such amounts did not exceed 10% of the total revenue for the years ended December 31, 2019, 2021
and 2022.
APPENDIX I ACCOUNTANT’S REPORT
– I-48 –


--- page 609 ---
6 OTHER INCOME, EXPENSE AND OTHER (LOSSES)/GAINS – NET
Y ear ended December 31,
2019 2020 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
Other income
Forfeited deposit – 1,600 – –
Government grants (Note (a)) 123 1 116 16,471
Additional deduction of input V AT 28 91 118 289
Income from other activities (Note (b)) – – – 5,084
151 1,692 234 21,844
Other expense
Expenses from other activities (Note
(b)) – – – 5,798
Other (losses)/gains – net
Settlement of J-Style Trip ’s investment
(Note (c)) – 9,400 – –
Net foreign exchange gains/(losses) – 34 3,558 (9,855)
Fair value change on financial assets at
FVPL – – 435 –
Gains on disposal of subsidiaries (Note
35) – 8 2 9––
Losses on deregistration of a subsidiary – – (54) –
Others (114) (9) 17 302
(114) 10,254 3,956 (9,553)
Notes:
(a) Governments grants received in January and December 2022 primarily comprised financial subsidies from
the local government for maintain stability of employees and business during the COVID-19 pandemic and
a one-off awards from the government for our contribution to the business of Kunshan Huaqiao Economic
Development Zone. These grants were recognized in the consolidated statement of comprehensive income
upon receipt. There are no unfulfilled conditions or other contingencies attached to the grants.
(b) The Group awarded smartphones as incentives to their customers who achieved a certain level of orders of
specific products during the period from February 10, 2022 to March 31, 2022. Such arrangement with the
customers were identified as separate performance obligations in the relevant sales transactions.
Accordingly, a portion of the proceeds received from the customers was allocated as other income based
on the relative standalone market selling price of the smartphones with the related costs being recognized
as other expenses.
(c) In March 2018 and April 2019, an independent third party paid RMB21,400,000 to the Group as
investment in one of the Group’s TV programs, J-Style Trip (մ༷া). Under the agreement, the
independent third party would enjoy a return on investment representing 13.375% of the net profit to be
derived from this TV program. The fund from the third party was recorded as an other payable as at
December 31, 2019 (Note 27). In April 2020, in view of the uncertainty in the timing of the launch of the
program due to the outbreak of COVID-19, the independent third party and the Group reached a consensus
to early terminate the agreement with an agreed settlement of RMB12,000,000. The difference between
funding receipt and settlement payment amounting to RMB9,400,000 was recognized as gain during the
year ended December 31, 2020.
APPENDIX I ACCOUNTANT’S REPORT
– I-49 –


--- page 610 ---
7 EXPENSES BY NATURE
Expenses included in cost of revenue, selling and marketing expenses and general and administrative expenses
are analysed as follows:
Y ear ended December 31,
2019 2020 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
Cost of goods sold 24,239 102,223 86,504 76,590
Cost of TV program rights
(Note 16) – 106,024 – –
Advertising and marketing expenses 4,423 41,564 35,657 17,655
Employee benefit expense
(Note 8) 9,074 23,856 42,732 51,504
Commissions 3,290 38,026 40,122 32,309
Travelling and entertainment expenses 2,558 3,604 4,920 4,176
Legal and professional fees 1,721 6,029 9,663 6,202
Cost of event planning and management
services 3,901 5,414 36,311 29,529
Office expenses 1,067 3,470 2,583 3,252
Other tax and surcharges 749 3,273 2,374 2,008
Provision for impairment of inventories
(Note 21) – 3,029 6,189 6,725
Transportation and logistics expenses 818 2,250 6,238 5,039
Depreciation of right-of-use assets
(Note 13) 793 1,755 2,278 2,608
Donations – 1,494 – 500
Listing expenses – 2,893 15,535 10,059
Depreciation of property, plant and
equipment (Note 12) 94 591 1,554 3,606
Rental expenses for short-term leases
(Note 26) 304 423 655 1,011
Auditor’s remuneration 49 55 91 –
Amortisation of intangible assets
(Note 14) 11 33 9 1 4 4
Others 1,614 4,646 3,418 4,953
54,695 350,632 296,863 257,870
APPENDIX I ACCOUNTANT’S REPORT
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--- page 611 ---
8 EMPLOYEE BENEFIT EXPENSE
Y ear ended December 31,
2019 2020 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
Salaries, wages and bonuses 7,133 19,241 30,012 37,694
Share-based compensation expenses
(Note 23) – 1,840 3,568 2,216
Pension costs – defined contribution
plans (Note (a)) 999 108 3,222 4,486
Other social security costs, housing
benefits and other employee benefits 942 2,667 5,930 7,108
9,074 23,856 42,732 51,504
(a) Employees in the Group’s PRC subsidiaries are required to participate in a defined contribution retirement
scheme administrated and operated by the local municipal government. The Group’s PRC subsidiaries
contribute funds which are calculated on certain percentage of the employee salary to the scheme to fund
the retirement benefits of the employees.
According to policies issued by the Ministry of Human Resources and Social Security and local municipal
departments, affected by Coronavirus Disease 2019 (COVID-19), social security relief policies have been
successively implemented by local authorities. As such, the social insurance expenses for the period from
February 2020 to December 2020 have been reduced or exempted accordingly.
Also, the Group has arranged for its Hong Kong employees to join the Mandatory Provident Fund Scheme
(the “MPF Scheme”), a defined contribution scheme managed by an independent trustee. Under the MPF
Scheme, the Group and its employees make monthly contributions to the scheme at 5% of the employees’
earnings as defined under the Mandatory Provident Fund legislation. Both the Group’s and the employees’
contributions were subject to a monthly cap of HK$1,500 and thereafter contributions are voluntary.
No forfeited contributions is available to reduce the contributions payable in future years.
APPENDIX I ACCOUNTANT’S REPORT
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--- page 612 ---
(b) Five highest paid individuals
For the years ended December 31, 2019, 2020, 2021 and 2022, the five individuals whose emoluments
were the highest in the Group included nil, nil, 3 and 3 directors, respectively and their emoluments are reflected
in the analysis presented in directors’ emoluments. The emoluments payable to the remaining 5, 5, 2 and 2
individuals among the top five highest paid individuals were as follows:
Y ear ended December 31,
2019 2020 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
Salaries, wages and bonuses 1,669 2,766 1,496 2,609
Share-based compensation
expenses (Note 23) – 549 899 447
Pension costs – defined
contribution plans (Note (a)) 204 9 114 106
Other social security costs,
housing benefits and other
employee benefits 258 185 144 129
2,131 3,509 2,653 3,291
The five highest paid individuals fell within the following bands:
Y ear ended December 31,
2019 2020 2021 2022
Emolument band
Less than HK$1,000,000 54––
HK$1,000,001–HK$1,500,000 –11–
HK$1,500,001–HK$2,000,000 ––12
5522
APPENDIX I ACCOUNTANT’S REPORT
– I-52 –


--- page 613 ---
(c) Directors’ emoluments
No remuneration was paid or payable to the directors of the Company (including emoluments for services
as employee/directors of the group entities prior to becoming the directors of the Company) during the years
ended December 31, 2019, 2020, 2021 and 2022, except for the follows:Name
Salaries,
wages and
bonuses
Share-based
compensation
expenses
Pension
costs –
defined
contribution
plans
Other social
security costs,
housing
benefits and
other
employee
benefits Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Y ear ended December 31, 2020
Executive directors
Ms. Ma (Note (i)) – 371 – – 371
Y ear ended December 31, 2021
Executive directors
Ms. Ma (Note (i)) 1,254 720 – – 1,974
Dr. Qian, Sam Zhongshan (Note (i)) 1,354 – 15 – 1,369
Mr. Lai (Note (i)) 1,439 – 11 – 1,450
Y ear ended December 31, 2022
Executive directors
Ms. Ma (Note (i)) 1,119 447 – 35 1,601
Dr. Qian, Sam Zhongshan (Note (i)) 1,334 – 15 – 1,349
Mr. Lai (Note (i)) 1,497 – 15 – 1,512
Notes:
(i) The board of directors of the Company up to December 31, 2022 comprised:
Ms. Ma, Dr. Qian Sam Zhongshan and Mr. Lai who were appointed as executive directors of the
Company on September 13, 2021.
Mr. Yang and Mr. Chen who were appointed as non-executive directors of the Company on
September 13, 2021.
(ii) Directors’ retirement benefits
During the Track Record Period, no retirement benefits were paid to or receivable by any director in
respect of their other services in connection with the management of the affairs of the Company or
its subsidiaries undertaking.
(iii) Directors’ termination benefits
No payment was made to directors as compensation for early termination of the appointment during
the Track Record Period.
(iv) Consideration provided to third parties for making available directors’ services
No payment was made to third parties for making available directors’ services during the Track
Record Period.
APPENDIX I ACCOUNTANT’S REPORT
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--- page 614 ---
(v) Information about loans, quasi-loans and other dealings in favour of directors, bodies corporate
controlled by, and entities connected with, such directors
Save as disclosed in Note 36, there were no other loans, quasi-loans and other dealings in favour of
directors, controlled bodies corporate by and connected entities with such directors during the Track
Record Period.
(vi) Directors’ material interests in transactions, arrangements or contracts
No significant transactions, arrangements and contracts in relation to the Group’s business to which
the Company was a party and in which a director of the Company had a material interest, whether
directly or indirectly, subsisted at the end of the year or at any time during the Track Record Period.
9 FINANCE (COSTS)/INCOME, NET
Y ear ended December 31,
2019 2020 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
Finance income:
Interest income from time deposits – – 58 –
Interest income on bank deposits 62 479 1,248 2,443
62 479 1,306 2,443
Finance costs:
Interest expense on lease liabilities
(Note 26) (222) (444) (224) (305)
Interest expense on bank borrowings – – (1,245) (1,035)
Interest expense on loan from a third
party (Note) – – (840) –
Interest expense on financial instrument
with redemption rights (Note 30) – – (7,939) –
(222) (444) (10,248) (1,340)
Finance (costs)/income, net (160) 35 (8,942) 1,103
Note: On May 24, 2021, the Group entered into a loan agreement with an independent third party and obtained a
six-months loan of RMB14,000,000. The loan carried a fixed interest rate at 12% per annum. In August
2021, the loan was fully repaid by the Group.
APPENDIX I ACCOUNTANT’S REPORT
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--- page 615 ---
10 INCOME TAX EXPENSE
The income tax expenses of the Group for the Track Record Period are analysed as follows:
Y ear ended December 31,
2019 2020 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
Current income tax
– PRC corporate income tax 12,611 43,661 15,303 23,662
– Hong Kong profits tax – – 7,724 5,733
12,611 43,661 23,027 29,395
Deferred income tax (Note 29)
– PRC corporate income tax (3,490) (3,238) (3,475) (1,158)
– Hong Kong profits tax – (2,213) 2,209 3
(3,490) (5,451) (1,266) (1,155)
Income tax expense 9,121 38,210 21,761 28,240
The tax on the Group’s profit before income tax differs from the theoretical amount that would arise using the
standard tax rate applicable to profit to the respective companies of the Group as follows:
(a) Cayman Islands
Under the prevailing laws of the Cayman Islands, the Company is not subject to tax on income or capital
gains. In addition, no Cayman Islands withholding tax will be imposed on dividend payments by the Company to
its shareholders.
(b) Hong Kong
The Group’s entities incorporated in Hong Kong are subject to Hong Kong profits tax of 8.25% for the
first HK$2 million of the estimated assessable profits for one of the Group’s Hong Kong subsidiaries for the year
and 16.5% on the remaining estimated assessable profits during the Track Record Period.
(c) PRC Corporate Income Tax (“PRC CIT”)
PRC CIT provision was made on the estimated assessable profits of entities within the Group incorporated
in the PRC and was calculated in accordance with the relevant regulations of the PRC after considering the
available tax benefits from refunds and allowance. The general PRC CIT rate is 25% during the Track Record
Period.
(d) PRC withholding tax
Pursuant to the Detailed Implementation Regulations for Implementation of the Corporate Income Tax Law
issued on December 6, 2007, dividends distributed from the profits generated by the PRC companies after
January 1, 2008 to their foreign investors shall be subject to a withholding income tax of 5% or 10%. For the
Group, the applicable rate is 10%. The Group is therefore liable for withholding taxes on dividends distributed
by those foreign invested subsidiaries established in the PRC.
APPENDIX I ACCOUNTANT’S REPORT
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--- page 616 ---
(e) The taxation of the Group’s profit before taxation differs from the theoretical amount that would arise
using the rates prevailing in the jurisdictions in which the Group operates as follows:
Y ear ended December 31,
2019 2020 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
Profit before income tax 31,840 113,841 64,652 93,138
Tax calculated at domestic tax
rate applicable to profits in
PRC (25%) 7,960 28,460 16,163 23,285
Tax effects of:
– Effect of different tax rate 363 3,132 (1,211) (1,789)
– Expenses not deductible for
taxation purposes 179 3,074 5,878 6,412
– Income not subject to tax – (207) – (280)
– Tax losses not recognized for
deferred income tax 616 1,522 931 596
– Temporary differences not
recognized for deferred
income tax 3 29 – 16
– Withholding income tax on
undistributed profits – 2,200 – –
9,121 38,210 21,761 28,240
11 EARNINGS PER SHARE
(a) Basic earnings per share
Basic earnings per share is calculated by dividing the profit attributable to owners of the Company by the
weighted average number of ordinary shares outstanding during the Track Record Period.
In determining the weighted average number of ordinary shares in issue during the Track Record Period,
500,000,000 shares were deemed to have been in issue on January 1, 2019 as if the Company had been
incorporated and the share subdivision (Note 22) had been effective by then. In addition, the 30,094,112 shares
issued on February 17, 2021 to the pre-IPO investors were considered as treasury stocks (Note 22 (iv), Note 24
and Note 30) and were excluded from the calculation of earnings per share during the Track Record Period.
Y ear ended December 31,
2019 2020 2021 2022
Profit attributable to equity
owners of the Company
(RMB’000) 23,559 78,064 43,649 60,389
Weighted average number of
ordinary shares in issue 500,000,000 503,231,472 512,820,512 512,820,512
Basic earnings per share (in
RMB/share) 0.05 0.16 0.09 0.12
(b) Diluted earnings per share
Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares
outstanding assuming the conversion of all dilutive potential ordinary shares.
APPENDIX I ACCOUNTANT’S REPORT
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Diluted earnings per share is the same as the basic earnings per share as there were no potential dilutive
potential ordinary shares outstanding during the Track Record Period.
12 PROPERTY, PLANT AND EQUIPMENT
Land and
buildings Computers
Furniture,
fixture and
equipment
Leasehold
improvements Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
At January 1, 2019
Cost – 160 36 – 196
Accumulated depreciation – – (4) – (4)
Net book amount – 160 32 – 192
Y ear ended December 31,
2019
Opening net book value – 160 32 – 192
Additions – 105 1,112 – 1,217
Depreciation – (20) (74) – (94)
Exchange difference – – (1) – (1)
Closing net book amount – 245 1,069 – 1,314
At December 31, 2019
Cost – 265 1,148 – 1,413
Accumulated depreciation – (20) (79) – (99)
Net book amount – 245 1,069 – 1,314
Y ear ended December 31,
2020
Opening net book value – 245 1,069 – 1,314
Additions – 312 399 1,849 2,560
Depreciation – (51) (197) (343) (591)
Exchange difference – – (36) – (36)
Closing net book amount – 506 1,235 1,506 3,247
At December 31, 2020
Cost – 577 1,500 1,849 3,926
Accumulated depreciation – (71) (265) (343) (679)
Net book amount – 506 1,235 1,506 3,247
APPENDIX I ACCOUNTANT’S REPORT
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--- page 618 ---
Land and
buildings Computers
Furniture,
fixture and
equipment
Leasehold
improvements Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Y ear ended December 31,
2021
Opening net book value – 506 1,235 1,506 3,247
Additions 55,444 61 1,171 626 57,302
Depreciation (409) (117) (271) (757) (1,554)
Exchange difference – – (20) – (20)
Closing net book amount 55,035 450 2,115 1,375 58,975
At December 31, 2021
Cost 55,444 638 2,652 2,475 61,208
Accumulated depreciation (409) (188) (537) (1,100) (2,233)
Net book amount 55,035 450 2,115 1,375 58,975
Y ear ended December 31,
2022
Opening net book value 55,035 450 2,115 1,375 58,975
Additions 1,695 475 1,380 10,070 13,620
Depreciation (1,681) (166) (644) (1,115) (3,606)
Exchange difference – – 97 – 97
Closing net book amount 55,049 759 2,948 10,330 69,086
At December 31, 2022
Cost 57,139 1,113 4,128 12,545 74,925
Accumulated depreciation (2,090) (354) (1,180) (2,215) (5,839)
Net book amount 55,049 759 2,948 10,330 69,086
Depreciation expenses were charged to the following categories in the consolidated statements of comprehensive
income:
Y ear ended December 31,
2019 2020 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
Selling and marketing expenses 35 52 50 104
General and administrative expenses 59 539 1,504 3,502
94 591 1,554 3,606
APPENDIX I ACCOUNTANT’S REPORT
– I-58 –


--- page 619 ---
13 RIGHT-OF-USE ASSETS
Office premises
Y ear ended December 31,
2019 2020 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
Opening net book value 814 2,469 2,786 3,893
Additions 2,448 2,072 3,385 1,448
Depreciation charge (793) (1,755) (2,278) (2,608)
Early termination – – – (855)
Closing net book amount 2,469 2,786 3,893 1,878
At the end of the year
Cost 3,476 5,548 8,933 10,381
Accumulated depreciation (1,007) (2,762) (5,040) (7,648)
Early termination – – – (855)
Net book amount 2,469 2,786 3,893 1,878
The Group leased office premises in Kunshan, Guangzhou, Shanghai and Beijing under lease term of 2 to
4 years. Depreciation expenses of right-of-use assets were charged to selling and marketing expenses and general
and administrative expenses in the consolidated statements of comprehensive income (Note 26).
14 INTANGIBLE ASSETS
Software
Y ear ended December 31,
2019 2020 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
Opening net book value 11 10 80 625
Additions – 83 584 3,397
Amortisation (1) (13) (39) (144)
Closing net book amount 10 80 625 3,878
At the end of the year
Cost 12 95 679 4,076
Accumulated amortisation (2) (15) (54) (198)
Net book amount 10 80 625 3,878
Amortisation expenses of intangible assets were charged to general and administrative expenses in the
consolidated statements of comprehensive income.
APPENDIX I ACCOUNTANT’S REPORT
– I-59 –


--- page 620 ---
15 OTHER NON-CURRENT ASSETS
As at December 31,
2019 2020 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
Prepayments for staff quarter and office
premises (a) – 53,468 50,026 50,421
Prepayment for leasehold improvement – – – 1,044
Prepayment to a related party (Note 36) – – – 1,376
Prepayment for software development (b) – – – 4,800
Others 1,891 1,043 390 1,997
1,891 54,511 50,416 59,638
(a) In October 2020 and February 2021, the Group entered into agreements with Kunshan Jiabao Wangshang
Culture Investment Co., Ltd. (ʮ̡ ) (“Kunshan Jiabao”), a related party of the
Group up to August 16, 2021, for the purchase of staff quarter and office premises at considerations of
RMB53,468,000 and RMB50,026,000, respectively. The staff quarter had been delivered to the Group in
September 2021 (Note 12) and the office premises are expected to be delivered in mid year of 2023.
(b) In March 2022, the Group entered into an agreement with a third party vendor for the development of
certain mobile phone applications at a consideration of RMB4,800,000 which has been fully paid to this
vendor in September 2022.
16 TV PROGRAM RIGHTS
TV program
rights under
production
TV program
rights completed Total
RMB’000 RMB’000 RMB’000
At January 1, 2019 42,047 – 42,047
Additions 35,200 – 35,200
At December 31, 2019 77,247 – 77,247
At January 1, 2020 77,247 – 77,247
Additions 28,777 – 28,777
Transfer upon completion (106,024) 106,024 –
Recognized in cost of revenue (Note 7) – (106,024) (106,024)
At December 31, 2020 –––
At January 1, 2021 –––
Additions 13,594 – 13,594
At December 31, 2021 13,594 – 13,594
At January 1, 2022 13,594 – 13,594
Additions 74,750 – 74,750
Exchange differences 1,258 – 1,258
At December 31, 2022 89,602 – 89,602
APPENDIX I ACCOUNTANT’S REPORT
– I-60 –


--- page 621 ---
As at December 31, 2019, the TV program rights represented J-Style Trip (մ༷া). The rights were fully
recognized in cost of revenue in 2020 when J-Style Trip was broadcast. As at December 31, 2021, the rights
represented the production cost of J-Style Trip II (մ༷া2). As at December 31, 2022, the rights mainly represented
the production cost of J-Style Trip II (մ༷া2) and Yue Lai Yue Kuai Le (ᆀԸᆀҞᆀ ).
The Directors assessed the net realisable amount of the TV program rights as at each balance sheet date in order
to determine whether any impairment provision is required to be made. The net realisable amount is estimated by
reference to the advertising and other related income to be generated from the broadcast of the TV program based on
confirmed order and/or letter of intent received by the Group less cost of completion of the TV program. Based on the
Directors’ best estimate, as at each balance sheet date, the TV program rights are profit generating with income
exceeding related production cost, indicating that the net realisable amount should exceed the carrying value of the
relevant rights. Accordingly, no provision for impairment has been made.
17 FINANCIAL INSTRUMENTS BY CATEGORY
As at December 31,
2019 2020 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
Financial assets – amortised cost
– Trade and other receivables 39,617 74,181 52,538 62,066
– Restricted bank deposits – 11,008 – –
– Cash and cash equivalents 29,298 120,962 211,873 182,633
68,915 206,151 264,411 244,699
Financial liabilities – amortised cost
– Trade and other payables (excluding
salaries and staff welfare payable
and other taxes payable) 122,416 53,856 30,378 45,952
– Lease liabilities 2,497 2,982 4,316 2,092
– Financial instrument with redemption
rights – – 163,520 178,654
– Borrowings – – 20,000 15,000
124,913 56,838 218,214 241,698
APPENDIX I ACCOUNTANT’S REPORT
– I-61 –


--- page 622 ---
18 TRADE AND OTHER RECEIV ABLES
The Group
As at December 31,
2019 2020 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
Current assets:
Trade receivables (Note (a))
– related parties (Note 36) – 28,708 38 38
– third parties 254 918 26,439 39,166
– third parties (current portion of
long-term receivables) – 9,023 – –
254 38,649 26,477 39,204
Less: provision for impairment of trade
receivables (2) (906) (400) (1,134)
Trade receivables – net 252 37,743 26,077 38,070
Bill receivables – 2,000 – 1,000
Other receivables
– Amounts due from related parties
(Note 36) 29,219 4,087 – 3
– Deposits (Note (c)) 6,230 463 895 12,443
– Staff advances 553 1,020 50 200
– Amount due from third parties
(Note (b)) – 26,758 25,702 –
– Other receivables in respect of the
celebrity IP management business
(Note (d)) – – – 10,145
– Loan to third parties (Note (e)) 3,135 3,035 – –
– Others 314 262 – 402
39,451 35,625 26,647 23,193
Less: provision for impairment of other
receivables (86) (3,608) (186) (197)
Other receivables – net 39,365 32,017 26,461 22,996
39,617 71,760 52,538 62,066
Non-current assets:
Trade receivables due from third parties
(long-term receivables) – 11,470 – –
Less: current portion of long-term
receivables – (9,023) – –
– 2,447 – –
Less: provision for impairment of
long-term receivables – (26) – –
– 2,421 – –
APPENDIX I ACCOUNTANT’S REPORT
– I-62 –


--- page 623 ---
Notes:
(a) Trade receivables
For the sales of the Group’s new retail business products made to distributors through Kunshan Tingshe
E-Commerce Company Limited (“Kunshan Tingshe”), the Group receives advances from distributors and
no trade receivables were derived during the Track Record Period. Trade receivables mainly arise from the
Group’s new retail business products directly sold to Wei Peng Trading Limited and other distributors and
IP management business. The normal credit period granted to these customers are generally ranging from 5
days to 2 years.
The following is an ageing analysis of trade receivables based on revenue recognition date:
As at December 31,
2019 2020 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
Within 30 days – 26,115 23,909 27,802
31–90 days – 210 1,127 10,161
91–120 days 254 3,301 179 768
121–365 days – 11,470 1 473
Over 365 days – – 1,261 –
254 41,096 26,477 39,204
The Group applied the simplified approach to provide for expected credit losses prescribed by HKFRS 9.
Movements in the provision for impairment of trade receivables during the Track Record Period are
disclosed in Note 3.1(b).
The carrying amounts of trade receivables are denominated in the following currencies:
As at December 31,
2019 2020 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
RMB 254 29,626 25,216 39,204
US$ – 11,470 1,261 –
254 41,096 26,477 39,204
APPENDIX I ACCOUNTANT’S REPORT
– I-63 –


--- page 624 ---
(b) The amount due from third parties mainly represents receivables due from Kunshan Tingshe in relation to
customers’ advanced payments received by Kunshan Tingshe on behalf of the Group. Kunshan Tingshe acts
as the distributor of the major new retail business of the Group and receives payments from customers on
behalf of the Group. As at December 31, 2019, 2020, 2021 and 2022, the balance due from Kunshan
Tingshe amounted to nil, RMB26,758,000, RMB25,702,000 and nil.
(c) As at December 31, 2022, a deposit amounted to RMB11,200,000 was paid to a service provider in
relation to the commencement of production of a music talk show, Yue Lai Yue Kuai Le (ᆀԸᆀҞᆀ ).
(d) This represents other receivables from a multi-channel networking company and other brand owners for
the live broadcasting activities performed by Mr. Liu Keng-hung and W&V Limited, the artiste
management company of Mr. Liu Keng-hung, in relation to the celebrity IP management business of the
Group. The Group has the obligation to collect payments from the brand owners and the multi-channel
networking company on behalf of Mr. Liu Keng-hung and W&V Limited.
(e) This represents the balance due from a third party collection agent of the Group which was interest-free
and had been settled in 2021.
(f) As at December 31, 2019, 2020, 2021 and 2022, the carrying values of the trade and other receivables
approximated to their fair values.
19 PREPAYMENTS AND OTHER CURRENT ASSETS
The Group
As at December 31,
2019 2020 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
Prepayments to related parties (Note 36) 838 905 – 1,501
Prepayments to suppliers 15,012 28,997 47,444 40,216
Prepaid listing expenses – 445 5,079 8,260
Value-added tax recoverable 751 931 1,154 3,093
16,601 31,278 53,677 53,070
The Company
As at December 31,
2020 2021 2022
RMB’000 RMB’000 RMB’000
Prepaid listing expenses 445 5,079 8,260
Prepayments to suppliers – 435 5,607
445 5,514 13,867
APPENDIX I ACCOUNTANT’S REPORT
– I-64 –


--- page 625 ---
20 CASH AND BANK BALANCES
(a) Cash and cash equivalents
As at December 31,
2019 2020 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
Cash on hand – 3 17 5
Cash at banks 29,298 120,959 211,856 182,628
29,298 120,962 211,873 182,633
(b) Restricted bank deposits
As at December 31,
2019 2020 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
Restricted bank deposits
– current – 11,008 – –
In June 2020, due to the dispute with an ex-marketing agency, certain bank accounts of the Group were
frozen by Guangzhou People’s Court. As at December 31, 2020, the balance of the frozen funds was
RMB11,008,000 which was subsequently released in January 2021.
In May 2021, Xianning Municipal Administration for Market Regulation and Xianan People’s Court
(collectively, the “Xianan Authorities”) froze the bank accounts of the Group for suspected pyramid selling
which is prohibited under the Regulation on the Prohibition of Pyramid Selling ( ຫ˟ෂቖૢԷ ), with total funds
amounting to RMB144,838,000, comprising restricted bank deposits of RMB124,838,000 and financial assets at
FVPL of RMB20,000,000. In late July 2021, all of the funds frozen by the Xianan Authorities were released.
(c) Cash on hand and at banks (including restricted bank deposits of the Group) are denominated in the
following currencies:
As at December 31,
2019 2020 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
RMB 29,292 130,823 158,496 174,614
HK$ 6 1,144 23,296 2,858
US$ – 3 30,081 599
NT$ – – – 4,562
29,298 131,970 211,873 182,633
The carrying amounts of cash on hand and at banks approximated their fair values.
The conversion of RMB denominated balances into foreign currencies and the remittance of such foreign
currencies out of the PRC are subject to relevant rules and regulation of foreign exchange control
promulgated by the PRC government.
APPENDIX I ACCOUNTANT’S REPORT
– I-65 –


--- page 626 ---
21 INVENTORIES
As at December 31,
2019 2020 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
Raw and packaging materials 682 3,967 6,137 5,140
Finished goods 14,828 23,169 27,571 23,688
15,510 27,136 33,708 28,828
Less: provision for impairment – (3,029) (9,218) –
15,510 24,107 24,490 28,828
(a) The cost of inventories recognized as cost of goods sold amounted to approximately RMB24,239,000,
RMB102,223,000, RMB86,504,000, and RMB76,590,000 for the years ended December 31, 2019, 2020,
2021 and 2022, respectively.
(b) Provision for impairment was recognized for the amount by which the carrying amount of the inventories
exceeds the net realisable value and was recorded in “cost of revenue” in the consolidated statements of
comprehensive income. The provision for impairment of inventory recognized in cost of revenue amounted
to nil, RMB3,029,000, RMB6,189,000 and RMB6,725,000, for the years ended December 31, 2019, 2020,
2021 and 2022, respectively.
Movement of the provision for impairment of inventories is as follows:
Y ear ended December 31,
2019 2020 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
At beginning of the year – – 3,029 9,218
Provision for impairment of
inventories charged to profit or
loss (Note 7) – 3,029 6,189 6,725
Provision written-off – – – (15,943)
At the end of the year – 3,029 9,218 –
APPENDIX I ACCOUNTANT’S REPORT
– I-66 –


--- page 627 ---
22 SHARE CAPITAL
Number of
ordinary
shares
Nominal
value of
ordinary
shares Share capital
Share
premium Total
US$ RMB’000 RMB’000 RMB’000
Authorised:
Ordinary shares on January 3, 2020 (date
of incorporation) (i) 50,000 50,00 0–––
Effect of the share subdivision on July
29, 2020 (i) 4,999,950,00 0––––
At December 31, 2020, 2021 and 2022 5,000,000,000 50,00 0–––
Issued:
At January 3, 2020 (incorporation date of
the Company) 11–––
Share subdivision on July 29, 2020 (i) 99,99 9––––
Issuance of ordinary shares on August 4,
2020 (ii) 499,900,000 4,999 35 – 35
Issuance of ordinary shares to Long
Precise Limited (iii) 12,820,512 128 1 32,950 32,951
At December 31, 2020 512,820,512 5,128 36 32,950 32,986
At January 1, 2021 512,820,512 5,128 36 32,950 32,986
Issuance of ordinary shares to pre-IPO
investor (iv) 30,094,112 301 2 159,841 159,843
Dividends (v) – – – (16,904) (16,904)
At December 31, 2021 542,914,624 5,429 38 175,887 175,925
At January 1 and December 31, 2022 542,914,624 5,429 38 175,887 175,925
(i) The Company was incorporated in the Cayman Islands on January 3, 2020 with an authorised share capital
of US$50,000 divided into 50,000 shares with a par value of US$1 each. On July 29, 2020, the authorised
shares of the Company subdivided from 50,000 shares with a par value of US$1 each into 5,000,000,000
shares with a par value of US$0.00001.
(ii) Upon incorporation, the Company issued one ordinary share at a par value of US$1 to the initial
subscriber. On July 29, 2020, the one subscriber share of US$1 par value was subdivided into 100,000
shares at a par value of US$0.00001. On August 4, 2020, the Company allotted and issued an aggregated
of 499,900,000 ordinary shares to the investment holding companies, owned by the Controlling
Shareholders, Mr. Lai and Mr. Ho (Note 1.2).
(iii) On September 30, 2020, the Company allotted and issued 12,820,512 ordinary shares to Long Precise, a
pre-IPO investor (Note 1.2), at a consideration of HK$37,500,000.
(iv) On February 17, 2021, the Company allotted and issued 30,094,112 ordinary shares to Bradbury, a pre-IPO
investor (Note 1.2), at a consideration of HK$200,000,000 with a transaction cost of HK$7,500,000 (Note
30).
(v) Pursuant to Section 34 of the Cayman Companies Act (2023 Revision) and the Articles of Association of
the Company, share premium of the Company is available for distribution to shareholders subject to a
solvency test on the Company and the provision of the Articles of Association of the Company. Details of
the dividend declared are set out in Note 32.
APPENDIX I ACCOUNTANT’S REPORT
– I-67 –


--- page 628 ---
Investments in subsidiaries of the Company
As at December 31,
2020 2021 2022
RMB’000 RMB’000 RMB’000
Unlisted shares 25,507 29,076 23,667
Investments in subsidiaries of the Company represent the investments in the Company’s directly held
subsidiaries which are set out above, measured at their carrying values at the date of the completion of
reorganisation.
23 SHARE-BASED PAYMENTS
The share-based compensation expenses recognized are as follows:
Y ear ended December 31,
2019 2020 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
Share options (Note (a)) – 1,840 3,568 2,216
Note:
(a) Share options
In 2020, the Company adopted a 2020 share incentive plan (the “2020 Plan”), which allows selected
employees, directors of the Company, and consultants with certain vesting conditions being fulfilled, to acquire
ordinary shares of the Company pursuant to options granted. The maximum number of ordinary shares that
subject to the awards granted under the 2020 Plan was 25,000,000. On August 3, 2020 and November 16, 2020,
the Group granted 24,800,000 and 200,000 share options under the 2020 Plan to certain employees, a director,
and certain consultants of the Group. The exercise price of all options granted was HK$1.9 per share (to be
adjusted to HK$1.43 per share after the capitalization issue). The options granted would vest in equal annual
installments over a four-year period or upon an earlier change in control of the Company. The expiration date is
10 years after the grant date.
The following table summarizes information with respect to share options outstanding as of December 31,
2020, 2021 and 2022 and the weighted average exercise prices (“WAEP”).
December 31, 2020 December 31, 2021 December 31, 2022
Number WAEP Number WAEP Number WAEP
Opening at beginning – N/A 25,000,000 HK$1.9 25,000,000 HK$1.9
Granted 25,000,000 HK$1.9 – – – –
Outstanding at ending 25,000,000 HK$1.9 25,000,000 HK$1.9 25,000,000 HK$1.9
Exercisable at ending – N/A – N/A – N/A
APPENDIX I ACCOUNTANT’S REPORT
– I-68 –


--- page 629 ---
The fair value of incentive interests on the grant dates, being August 3, 2020 and November 16, 2020 were
determined by an external independent valuer using Binomial Option Pricing Model. The significant inputs into
the model were listed below:
Granted on
August 3, 2020
Granted on
November 16,
2020
Expected volatility 42.86% 42.86%
Risk-free interest rate 0.241% 0.241%
Forfeiture rate 27% 27%
Dividend yield 0.00% 0.00%
Exercise price HK$1.9 HK$1.9
APPENDIX I ACCOUNTANT’S REPORT
– I-69 –


--- page 630 ---
24 RESERVES
The Group
Share
Premium
Capital
reserves
Treasury
stocks
Statutory
reserves
Share-based
payment
reserves
Currency
translation
reserves Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Note (a)) (Note (b)) (Note (c)) (Note 23) (Note (d))
Balance at January 1, 2019 – (10,000) – 1,098 – (8) (8,910)
Currency translation differences ––––– (20) (20)
Appropriation to statutory reserves – – – 2,733 – – 2,733
Deemed contribution from
shareholders (Note (a)(ii)) – 4,00 0–––– 4,000
Balance at December 31, 2019 – (6,000) – 3,831 – (28) (2,197)
Balance at January 1, 2020 – (6,000) – 3,831 – (28) (2,197)
Issuance of new shares
(Note 22(iii)) 32,95 0––––– 32,950
Currency translation differences ––––– (1,110) (1,110)
Share-based payments –––– 1,840 – 1,840
Appropriation to statutory reserves – – – 2,100 – – 2,100
Capital injection from shareholders
(Note (a)(iii)) – 2,00 0–––– 2,000
Deemed distribution
to shareholders (Note 1.2(viii)) – (2,000) –––– (2,000)
Balance at December 31, 2020 32,950 (6,000) – 5,931 1,840 (1,138) 33,583
Balance at January 1, 2021 32,950 (6,000) – 5,931 1,840 (1,138) 33,583
Issuance of new shares
(Note 22(iv)) 159,84 1––––– 159,841
Recognition of redemption liability
(Note 30) – – (158,180) – – – (158,180)
Currency translation differences ––––– (1,064) (1,064)
Share-based payments –––– 3,568 – 3,568
Dividends declared and payable by
the Company (Note 32) (16,904) ––––– (16,904)
Appropriation to statutory reserves – – – 4,126 – – 4,126
Balance at December 31, 2021 175,887 (6,000) (158,180) 10,057 5,408 (2,202) 24,970
Balance at January 1, 2022 175,887 (6,000) (158,180) 10,057 5,408 (2,202) 24,970
Currency translation differences ––––– 1,716 1,716
Share-based payments –––– 2,216 – 2,216
Appropriation to statutory reserves – – – 4,441 – – 4,441
Balance at December 31, 2022 175,887 (6,000) (158,180) 14,498 7,624 (486) 33,343
APPENDIX I ACCOUNTANT’S REPORT
– I-70 –


--- page 631 ---
The Company
Share
Premium
Capital
reserves
Treasury
stock
Share-based
payment
reserves
Currency
translation
reserves Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Note 22) (Note (b)) (Note 23) (Note (d))
Balance at January 3, 2020
(Date of incorporation) ––––––
Issuance of new shares
(Note 22(iii)) 32,950 –––– 32,950
Share-based payments – – – 1,840 – 1,840
Currency translation differences –––– (1,344) (1,344)
Completion of reorganisation
(Note (e)) – 23,667 – – – 23,667
Balance at December 31, 2020 32,950 23,667 – 1,840 (1,344) 57,113
Balance at January 1, 2021 32,950 23,667 – 1,840 (1,344) 57,113
Issuance of new shares
(Note 22(iv)) 159,841 –––– 159,841
Share-based payments – – – 3,568 – 3,568
Recognition of redemption
liability (Note 30) – – (158,180) – – (158,180)
Dividends declared and payable
by the Company (Note 32) (16,904) –––– (16,904)
Currency translation differences –––– (617) (617)
Balance at December 31, 2021 175,887 23,667 (158,180) 5,408 (1,961) 44,821
Balance at January 1, 2022 175,887 23,667 (158,180) 5,408 (1,961) 44,821
Share-based payments – – – 2,216 – 2,216
Currency translation differences –––– 9 9 2 9 9 2
Balance at December 31, 2022 175,887 23,667 (158,180) 7,624 (969) 48,029
Notes:
(a) Capital reserve
i. On September 30, 2018, in preparation of the Reorganisation (Note 1.2), Star Plus (Kunshan), now a
subsidiary of the Group, acquired 100% of the equity shares of Kunshan Star Plus Action from Jushi
Creative (Kunshan) Asset Management Company Limited (“Jushi Creative”) at a consideration of
RMB10,000,000, which was regarded as deemed distribution to owners and recorded in reserves.
ii. Jushi Creative was a subsidiary of Star Plus (Kunshan) and not related to the Listing Business. It
was transferred out of the Group to the shareholders at a consideration of RMB4,000,000 on August
31, 2019, which was regarded as a deemed contribution from owners and recorded in reserves.
iii. In July 2020, Star Plus (Kunshan) received capital injection from shareholders, amounting to
RMB2,000,000.
APPENDIX I ACCOUNTANT’S REPORT
– I-71 –


--- page 632 ---
(b) Treasury stocks of the Group are related to the 30,094,112 ordinary shares issued to Bradbury with
redemption rights. The details of redemption liability related to the redemption rights are disclosed in Note
30. They do not represent shares that have been purchased and to be cancelled by the Company.
(c) In accordance with the relevant laws and regulations of the PRC, when distributing the net profit of each
year, the subsidiaries in the PRC shall appropriate 10% of its profit after income tax (based on the PRC
statutory financial statements and after offsetting accumulated losses from prior years) for the statutory
reserve fund (except where the reserve balance has reached 50% of the paid-in capital). The subsidiaries in
the PRC can cease appropriation when the statutory surplus reserve accumulated to more than 50% of the
registered capital and some of them have reached such ceilings.
Statutory reserve can be used to make up for the loss or increase the paid-in capital after approval from
the appropriate authorities.
(d) Foreign currency translation reserve represents the difference arising from the translation of the financial
statements of companies within the Group that have a functional currency different from the presentation
currency of RMB for the financial statements of the Group.
(e) As part of the Reorganisation, the Company acquired interests in subsidiaries from the shareholders. The
difference between the consideration paid and the net book value of all the subsidiaries were recorded by
the Company as investments in subsidiaries as capital reserves.
25 RETAINED EARNINGS
The Group
Y ear ended December 31,
2019 2020 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
At the beginning of the year 7,900 28,726 104,690 144,213
Profit for the year 23,559 78,064 43,649 60,389
Appropriation to statutory reserves (2,733) (2,100) (4,126) (4,441)
At the end of the year 28,726 104,690 144,213 200,161
The Company
Y ear ended December 31,
2020 2021 2022
RMB’000 RMB’000 RMB’000
At the beginning of the year – (3,441) (13,497)
Loss for the year (3,441) (10,056) (25,640)
At the end of the year (3,441) (13,497) (39,137)
APPENDIX I ACCOUNTANT’S REPORT
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26 LEASE LIABILITIES
As at December 31,
2019 2020 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
Lease liabilities
– Current 1,013 1,573 3,281 1,872
– Non-current 1,484 1,409 1,035 220
2,497 2,982 4,316 2,092
The Group leases office premises for its operations and lease liabilities were measured at the net present value of
the lease payments during the lease terms that are not yet paid. The respective right-of-use assets were recognized and
disclosed in Note 13 above.
The amounts of expenses recognized in the consolidated statement of comprehensive income in respect of leases
are set out below:
Y ear ended December 31,
2019 2020 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
Depreciation charge of right-of-use
assets (Note 13)
– Selling and marketing expenses 357 800 1,157 1,597
– General and administrative
expenses 436 955 1,121 1,011
793 1,755 2,278 2,608
Interest expense (included in finance
costs) (Note 9) 222 444 224 305
Short-term lease expenditure for office
premises, dormitories and equipment
(Note 7) 304 423 655 1,011
Cash outflow for lease payments 996 2,031 2,275 3,122
Cash outflow for short-term lease 282 567 981 1,011
1,278 2,598 3,256 4,133
APPENDIX I ACCOUNTANT’S REPORT
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27 TRADE AND OTHER PAYABLES
As at December 31,
2019 2020 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
Trade payables (Note (a))
– related parties (Note 36) 499 5,425 5,428 1,128
– third parties 8,130 5,241 16,072 8,556
8,629 10,666 21,500 9,684
Other payables
– Amounts due to related parties (Note
36) 72,788 11,307 – 15,946
– Amounts due to third parties (Note
(d)) – – – 10,176
– Funding received for J-Style Trip TV
Program (Note 6) 21,40 0–––
– Salaries and staff welfare payable 1,592 5,727 6,054 6,083
– Other taxes payables 6,967 19,731 9,144 16,975
– Accrued listing expenses – 1,780 781 3,580
– Accrued expenses 714 1,065 1,193 1,200
– Deposits from customers 11,553 5,829 6,815 4,328
– Sales commission payables 3,290 20,635 – –
– Refund liability 2,74 2–––
– Others 1,300 2,574 89 1,038
122,346 68,648 24,076 59,326
130,975 79,314 45,576 69,010
Notes:
(a) Ageing analysis of the trade payables based on invoice date at the end of each reporting dates is as
follows:
As at December 31,
2019 2020 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
0–60 days 7,710 2,510 19,927 8,190
60–120 days 107 6,947 753 43
121–365 days 186 372 753 66
Over 365 days 626 837 67 1,385
8,629 10,666 21,500 9,684
APPENDIX I ACCOUNTANT’S REPORT
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--- page 635 ---
(b) The carrying amounts of the Group’s trade and other payables were denominated in the following
currencies:
As at December 31,
2019 2020 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
RMB 94,246 76,280 41,441 48,059
HK$ 36,729 3,034 4,135 20,951
130,975 79,314 45,576 69,010
(c) As at December 31, 2019, 2020, 2021 and 2022, the carrying amounts of the trade and other payables of
the Group approximated their fair values.
(d) This represents the other payables due to Mr. Liu Keng-hung, and a multi-channel networking company in
relation to the live broadcasting activities performed by Mr. Liu Keng-hung to brand owners under the
Group’s celebrity IP management business.
The Company
As at December 31,
2020 2021 2022
RMB’000 RMB’000 RMB’000
Accrued listing expenses 1,780 781 3,580
Accrued other expenses 382 775 440
Salaries and staff welfare payable – 1,272 1,213
2,162 2,828 5,233
28 CONTRACT LIABILITIES
The Group has recognized the following revenue-related contract liabilities:
As at December 31,
2019 2020 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
Current liabilities
Sales of goods 11,559 63,056 54,863 24,414
Provision of IP creation and operation
service 1,291 1,477 4,445 6,971
12,850 64,533 59,308 31,385
Non-current liabilities
Provision of IP creation and operation
service 686 – 45 38
13,536 64,533 59,353 31,423
APPENDIX I ACCOUNTANT’S REPORT
– I-75 –


--- page 636 ---
(a) Significant changes in contract liabilities
Contract liabilities of the Group refer to the payments made by customers while the underlying goods or
services are yet to be provided. The increase in the contract liabilities is resulted from the increase in sales
orders.
(b) Revenue recognized in relation to contract liabilities
The following table shows the revenue recognized during the Track Record Period relates to
carried-forward contract liabilities.
Y ear ended December 31,
2019 2020 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
Revenue recognized that was
included in the contract
liabilities balance at the
beginning of the year
– Sale of goods 10,320 11,559 63,056 54,863
– Provision of IP creation and
operation service 201 1,291 1,477 4,490
10,521 12,850 64,533 59,353
(c) Unsatisfied performance obligations
The following table shows unsatisfied performance obligations resulting from long-term licensing
contracts:
Y ear ended December 31,
2019 2020 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
Aggregate amount of the
transaction price allocated to
long-term licensing contracts
that are partially unsatisfied 1,840 1,323 903 5,023
The Group selected to choose a practical expedient and omitted disclosure of remaining performance
obligations as all other related contracts have a duration of one year or less.
(d) Assets recognized from incremental costs to obtain a contract
During the Track Record Period, there was no significant incremental costs to obtain a contract.
APPENDIX I ACCOUNTANT’S REPORT
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29 DEFERRED INCOME TAX
The analysis of deferred income tax assets and liabilities is as follows:
As at December 31,
2019 2020 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
Deferred income tax assets:
– to be recovered within
12 months 3,772 4,199 3,494 4,137
– to be recovered after 12 months 34 130 306 457
3,806 4,329 3,800 4,594
Net off with deferred tax liabilities (156) (364) (769) (408)
3,650 3,965 3,031 4,186
Deferred income tax liabilities:
– to be recovered within
12 months 123 2,483 542 377
– to be recovered after 12 months 33 81 227 31
156 2,564 769 408
Net off with deferred income tax assets (156) (364) (769) (408)
– 2,200 – –
APPENDIX I ACCOUNTANT’S REPORT
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The movement in deferred income tax assets during the year is as follows:
Provision
for
impairment
Unused tax
losses
Lease
liabilities
Accrued
expense
and others Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
As at January 1, 2019 40 117 206 – 363
Credited/(charged) to the consolidated
statements of comprehensive
income (18) 803 (47) 2,705 3,443
As at December 31, 2019 22 920 159 2,705 3,806
As at January 1, 2020 22 920 159 2,705 3,806
Credited/(charged) to the consolidated
statements of comprehensive
income 1,706 1,272 250 4,631 7,859
Disposal of subsidiaries (Note 35) – – – (7,336) (7,336)
As at December 31, 2020 1,728 2,192 409 – 4,329
As at January 1, 2021 1,728 2,192 409 – 4,329
Credited/(charged) to the consolidated
statements of comprehensive
income 708 (1,718) 481 – (529)
As at December 31, 2021 2,436 474 890 – 3,800
As at January 1, 2022 2,436 474 890 – 3,800
Credited/(charged) to the consolidated
statements of comprehensive
income 1,221 3 (430) – 794
As at December 31, 2022 3,657 477 460 – 4,594
Deferred income tax assets were recognized for tax losses carry-forward to the extent that the realisation of the
related tax benefits through the future taxable profits is probable. For the years ended December 31, 2019, 2020, 2021
and 2022, the Group did not recognize deferred income tax assets on tax losses, amounting to RMB4,293,000,
RMB11,272,000, RMB44,342,000 and RMB49,297,000, respectively, due to the unpredictability of future assessable
profit amount, that can be utilised against the tax losses.
APPENDIX I ACCOUNTANT’S REPORT
– I-78 –


--- page 639 ---
The expiry year of the deductible tax losses that are not recognized for deferred income tax assets is analysed
below:
As at December 31,
2019 2020 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
2023 635 635 635 635
2024 1,522 1,522 1,522 1,522
2025 – 4,599 4,599 4,599
2026 – – 2,853 2,853
Indefinite 2,136 4,516 34,733 39,688
4,293 11,272 44,342 49,297
The movement in deferred income tax liabilities during the year is as follows:
Right-of-use
assets
Withholding
income tax on
undistributed
profits Total
RMB’000 RMB’000 RMB’000
As at January 1, 2019 203 – 203
Charged to the consolidated statements of
comprehensive income (47) – (47)
As at December 31, 2019 156 – 156
As at January 1, 2020 156 – 156
Debited to the consolidated statements of
comprehensive income 208 2,200 2,408
As at December 31, 2020 364 2,200 2,564
As at January 1, 2021 364 2,200 2,564
Debited/(charged) to the consolidated
statements of comprehensive income 405 (2,200) (1,795)
As at December 31, 2021 769 – 769
As at January 1, 2022 769 – 769
Charged to the consolidated statements of
comprehensive income (361) – (361)
As at December 31, 2022 408 – 408
APPENDIX I ACCOUNTANT’S REPORT
– I-79 –


--- page 640 ---
As at December 31, 2019, 2020, 2021 and 2022, the Group has unrecognized deferred income tax liabilities of
RMB3,463,000, RMB11,085,000, RMB14,096,000 and RMB15,624,000 in respect of the withholding income tax on the
unremitted earnings of the Group’s subsidiaries in the PRC amounted to RMB34,625,000, RMB110,848,000,
RMB140,961,000 and RMB156,238,000, respectively. No provision has been made in respect of such withholding tax
as the directors have confirmed that such profits will be permanently reinvested in mainland China and have no
intention to remit such earnings.
30 FINANCIAL INSTRUMENT WITH REDEMPTION RIGHTS
Total
RMB’000
As at January 1, 2019, 2020 and 2021 –
Recognition of financial instrument with redemption rights 158,180
Finance costs charged to consolidated statements of profit or loss (Note 9) 7,939
Exchange differences (2,599)
As at December 31, 2021 163,520
As at January 1, 2022 163,520
Exchange differences 15,134
As at December 31, 2022 178,654
Under a pre-IPO investment agreement entered into between the Company and Bradbury (Notes 1.2 and 22), the
Company shall repurchase all the shares from Bradbury if the shares of the Company failed to be listed on the Main
Board of The Stock Exchange of Hong Kong Limited on or before December 31, 2021. Bradbury would have the right
to exercise such redemption right at an aggregate consideration of HK$200,000,000, being the amount of pre-IPO
investment. In accordance with the investment agreement, the redemption right would be suspended immediately prior
to the Company’s submission of the listing application and would be restored automatically upon the earlier of the
withdrawal of the Company’s listing application, the Company’s listing application being rejected, or the Company’s
listing process being terminated or listing application being lapsed for any reason. As the repurchase option given to
Bradbury is an unavoidable obligation of the Group, the investment from Bradbury was regarded as financial
instrument with redemption rights instead of an equity. The amount of the financial liability was determined based on
the discounted value of the consideration of HK$200,000,000. The discount rate applied was 5.7% per annum which is
the Group’s cost of borrowings and the interest rate of the financial liability. According to the agreement, the financial
liability has become payable on demand since January 1, 2022. No interest expenses has been accounted for since
December 31, 2021 as the book value of the financial instrument has reached HK$200,000,000 (equivalent to
RMB178,654,000 as at December 31, 2022) since then, which represented the entire amount to be repaid to Bradbury.
APPENDIX I ACCOUNTANT’S REPORT
– I-80 –


--- page 641 ---
31 BORROWINGS
As at December 31,
2019 2020 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
Non-current
Non-current portion of a long-term bank
borrowings, secured – – 15,000 10,000
Current
Current portion of a long-term bank
borrowings, secured – – 5,000 5,000
Total borrowings – – 20,000 15,000
(a) In January 2021, the Group entered into a 5-year mortgage loan with Bank of Shanghai Co., Ltd, Suzhou
branch for the purchase of office premises under development by Kunshan Jiabao (Note 15). The mortgage
loan bears a fixed interest rate at 5.70% per annum and should be repaid on monthly installments.
(b) The amounts of repayment installments of the borrowings are as follows:
As at December 31,
2019 2020 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
Within 1 year – – 5,000 5,000
1 year to 2 years – – 5,000 5,000
2 year to 3 years – – 5,000 5,000
3 year to 4 years – – 5,000 –
– – 20,000 15,000
32 DIVIDEND
Pursuant to a resolution passed in the shareholders’ meeting of the Company on March 31, 2021, dividends of
HK$20,000,000 were declared to the Company’s shareholders, which were fully paid on September 28, 2021.
Pursuant to a resolution passed in the shareholders’ meeting of the Company on June 13, 2023, a special
dividend of HK$60,000,000 was declared to the shareholders of the Company which is expected to be paid before the
Listing.
APPENDIX I ACCOUNTANT’S REPORT
– I-81 –


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33 NOTES TO CONSOLIDATED STATEMENT OF CASH FLOWS
(a) Reconciliation of profit before income tax to cash generated from operations
For the year ended December 31,
2019 2020 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
Profit before income tax 31,840 113,841 64,652 93,138
Adjustments for:
– Finance income (Note 9) (62) (479) (1,306) (2,443)
– Fair value changes in financial
assets at FVPL (Note 6) – – (435) –
– Settlement of J-Style Trip’ s
investment (Note 6) – (9,400) – –
– Finance costs (Note 9) 222 444 10,248 1,340
– Depreciation of property, plant and
equipment
(Note 12) 94 591 1,554 3,606
– Depreciation of right-of-use assets
(Note 13) 793 1,755 2,278 2,608
– Amortisation of intangible assets
(Note 14) 11 33 9 1 4 4
– Net impairment losses on
inventories (Note 21) – 3,029 6,189 6,725
– Net impairment losses on financial
assets
(Note 3.1(b)) (73) 4,452 (922) 745
– Share-based payments
(Note 23) – 1,840 3,568 2,216
– Gains on disposal of subsidiaries
(Note 6) – (829) – –
– Losses on deregistration of a
subsidiary (Note 6) –– 5 4–
– Exchange loss/(gain) – net – 37 (2,660) 13,706
Operating cash flows before changes
in working capital 32,815 115,294 83,259 121,785
Changes in working capital:
– Inventories (9,045) (10,959) (5,919) (11,063)
– TV program rights (35,200) 77,247 (13,594) (76,008)
– Trade and other receivables 5,189 31,323 22,533 (11,119)
– Prepayments and other current
assets (4,282) (16,116) (17,764) 3,926
– Trade and other payables 10,327 90,793 (23,918) 23,434
– Contract liabilities 3,015 51,400 (5,180) (27,930)
Cash generated from operations 2,819 338,982 39,417 23,025
APPENDIX I ACCOUNTANT’S REPORT
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--- page 643 ---
(b) Non-cash financing activities
Y ear ended December 31,
2019 2020 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
Recognition of the financial
instrument with redemption
rights (Note 30) – – 158,180 –
Net off of a loan with issuance of
shares (i) – (32,951) – –
Settlement of J-Style Trip ’s
investment (Note 6) – (9,400) – –
– (42,351) 158,180 –
(i) On September 30, 2020, the Company allotted and issued 12,820,512 ordinary shares to Long
Precise, a pre-IPO investor (Note 1.2 and Note 22), at a consideration of HK$37,500,000 (the
“Consideration”). On the same day, the Company entered into a loan assignment agreement with
Great Essence and Long Precise, pursuant to which Long Precise transferred its loan receivable from
Great Essence of HK$37,500,000 (the “Loan”) to the Company and the Loan was used to offset with
the Consideration.
(c) Reconciliation of liabilities generated from financing activities
Borrowings
Financial
instrument
with
redemption
rights
Lease
liabilities
Amounts
due to
related
parties
Amounts
due to
third
parties
Investments
received
for J-Style
Trip Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Net debt as at January 1, 2019 – – 823 48,039 – 6,400 55,262
Cash flows – – (996) 14,438 – 15,000 28,442
Additions of leases – – 2,44 8––– 2,448
Interest accrual – – 22 2––– 2 2 2
Exchange differences – – – 26 – – 26
As of December 31, 2019 – – 2,497 62,503 – 21,400 86,400
Net debt as at January 1, 2020 – – 2,497 62,503 – 21,400 86,400
Cash flows – – (2,031) (18,999) – (12,000) (33,030)
Non-cash changes – – – (32,951) – (9,400) (42,351)
Additions of leases – – 2,07 2––– 2,072
Interest accrual – – 44 4––– 4 4 4
Exchange differences –––1––1
As of December 31, 2020 – – 2,982 10,554 – – 13,536
Net debt as at January 1, 2021 – – 2,982 10,554 – – 13,536
Cash flows 18,755 – (2,275) (10,554) (840) – 5,086
Non-cash changes – 158,18 0–––– 158,180
Additions of leases – – 3,38 5––– 3,385
Interest accrual 1,245 7,939 224 – 840 – 10,248
Exchange differences – (2,599) –––– (2,599)
As of December 31, 2021 20,000 163,520 4,31 6––– 187,836
Net debt as at January 1, 2022 20,000 163,520 4,31 6––– 187,836
Cash flows (6,035) – (3,122) – – – (9,157)
Additions of leases – – 59 3––– 5 9 3
Interest accrual 1,035 – 30 5––– 1,340
Exchange differences – 15,13 4–––– 15,134
As of December 31, 2022 15,000 178,654 2,09 2––– 195,746
APPENDIX I ACCOUNTANT’S REPORT
– I-83 –


--- page 644 ---
34 CONTINGENCIES
As of December 31, 2019, 2020, 2021 and 2022, the Group did not have any significant contingent liabilities.
35 DISPOSAL OF SUBSIDIARIES
On May 31, 2020, the Group disposed of its entire interests in Kunshan Tingshe, a then 80%-owned subsidiary,
at the consideration of RMB800.
On September 30, 2020, the Group disposed of its 100% interests in Kunshan Sidapu Commercial Management
Company Limited for zero consideration and disposed of its 100% interests in Shanghai Sidapu Commercial
Management Company Limited at the consideration of RMB1.
On October 31, 2020, the Group disposed of its 100% interests in Kunshan Xingmeng Chinese Medicine Clinic
Company Limited and Kunshan Moji Skin Management Company Limited, at the consideration of RMB1 each.
Details of the aforementioned disposals (in aggregate) are as follows:
As at the
respective dates
of the disposals
RMB’000
Consideration 1
Assets disposed of
Deferred income tax assets 7,336
Trade and other receivables 44,844
Prepayments and other current assets 1,769
Cash and cash equivalents 151,172
205,121
Liabilities disposed of
Trade and other payables (200,197)
Contract liabilities (404)
Current income tax liabilities (5,394)
(205,995)
Non-controlling interests 46
Net liabilities disposed (828)
Disposal gains 829
Cash consideration received 1
Less: cash and cash equivalents disposed (151,172)
Net cash outflow arising from disposal of subsidiaries (151,171)
APPENDIX I ACCOUNTANT’S REPORT
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36 RELATED PARTY TRANSACTIONS AND BALANCES
(a) Names and relationships with related parties
Below is the summary of the Group’s related parties during the Track Record Period:
Name of the related party Relationship with the Group
Ms. Ma Shareholder and director of the Company
Mr. Lai Shareholder and director of the Company
Mr. Yang Shareholder and director of the Company
Mr. Chen Shareholder and director of the Company
Mr. Chan, Yu-Hao Shareholder
Ms. Yeh Shareholder
Ms. Li, Ting The non-controlling shareholder of Kunshan Tingshe
from June 18, 2019 to May 31, 2020
Ms. Zhang, Jing Shareholder and the spouse of Dr. Qian, Sam
Zhongshan
Lhasa Economic and Technology Development
Zone Juchuang Investment Company
Limited) (“Lhasa Juchuang”)
Shareholder (ex-shareholder up to September 30, 2019)
JVR Music International Ltd. An entity controlled by Mr. Yang
Max One Ltd An entity controlled by Mr. Chen
Archstone Co., Ltd An entity controlled by Mr. Chen
Lu Yu Music Co., Ltd) (ʮ̡ )
(“Lu Yu Music”)
An entity controlled by Mr. Chan, Yu-Hao
Kunshan Jiabao An entity significantly influenced by Ms. Ma up to
August 16, 2021
Great Essence Holdings Limited An entity controlled by Mr. Lai
Jesports (Beijing) Cultural Development
Company Limited (ཥᘩ (̏ԯ)࢝
ʮ̡ ) (“Jesports Beijing”)
An entity controlled by Mr. Yang, Mr. Chen and Ms.
Yeh
Jtea (Kunshan) Dining Company Limited ( ᚭ
঩(ʆ)ʮ̡ ) (“Jtea
Kunshan”)
An entity controlled by Mr. Yang, Mr. Chen and Ms.
Yeh
Beijing Master Cultural Development
Company Limited ( ̏ԯၚರ˖௴˖ʷ
ʮ̡ ) (“Beijing Master”)
The non-controlling shareholder of Beijing Star Plus
Master Cultural Communication Company Limited
Yige Corporation Management Consulting
(Shanghai) Company Limited
(Άุ၍ଣፔ༔ (ɪऎ)ʮ̡ )
(“Shanghai Yige”)
An entity controlled by Mr. Yang, Mr. Chen and Ms.
Yeh
Kunshan Renben Cultural Consulting Agency
Company Limited (ʆɛ͉˖௴ፔ༔ᚥਪ
ʮ̡ ) (“Kunshan Renben”)
An entity controlled by Ms. Ma
Jushi Creative (Kunshan) Asset Management
Company Limited
(௴ (ʆ)ʮ̡ )
(“Jushi Creative”)
An entity significantly influenced by Ms. Ma
W&V Limited The non-controlling shareholder of Talent Planet (HK)
Limited
APPENDIX I ACCOUNTANT’S REPORT
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(b) Transactions with related parties
During the Track Record Period, the following is a summary of the significant transactions carried out
between the Group and its related parties.
Y ear ended December 31,
2019 2020 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
Continuing transactions
(i) Purchase of goods from:
Lu Yu Music 1,80 3–––
(ii) Services received from:
Archstone Co., Ltd. 6,985 7,374 18,231 7,093
JVR Music International
Ltd. – – 4,917 2,216
Max One Ltd 1,067 1,045 771 –
Kunshan Jiabao – – 354 –
Jesports Beijing – – 326 –
Jtea Kunshan – 125 27 25
W&V Limited – – – 1,437
8,052 8,544 24,626 10,771
(iii) Licensing fee paid to:
Archstone Co., Ltd. – 226 52 –
(iv) Agent services received
from:
Beijing Master – 558 – –
(v) Sales of goods to:
Jesports Beijing – 1,656 2,510 73
Jtea Kunshan – 902 1,643 23
Ms. Zhang, Jing – 39 32 128
Ms. Ma 8 37 – –
8 2,634 4,185 224
(vi) Service provided to:
Jesports Beijing – 266 382 –
APPENDIX I ACCOUNTANT’S REPORT
– I-86 –


--- page 647 ---
Y ear ended December 31,
2019 2020 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
Continuing transactions
(vii) Loans from related parties:
Kunshan Renben 23,060 600 – –
Great Essence Holdings
Limited 11,55 8–––
Jushi Creative ––––
Max One Ltd – – 916 –
34,618 600 916 –
(viii) Loans to related parties:
Jesports Beijing 2,00 0–––
Jushi Creative 9,04 0–––
11,04 0–––
(ix) Amounts received on
behalf of a related party
W&V Limited – – – 15,946
According to terms in contracts, the above loans from related parties and loans to related parties are
interest-free, payable on demand and with no collaterals.
Y ear ended December 31,
2019 2020 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
Discontinued transactions
(i) Services received from:
Ms. Li, Ting 3,290 N/A N/A N/A
Kunshan Jiabao – N/A N/A N/A
3,290 N/A N/A N/A
(ii) Sales of goods to:
Ms. Li, Ting – 95 N/A N/A
Discontinued transactions represented the transaction amounts up to the date upon which such counter
parties ceased to be the Group’s related parties.
APPENDIX I ACCOUNTANT’S REPORT
– I-87 –


--- page 648 ---
(c) Key management compensation
Key management includes directors (executive and non-executive), members of the Executive Committee
and respective department heads. The compensation paid or payable to key management for employee services is
shown below:
For the year ended December 31,
2019 2020 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
Salaries, bonuses and other
benefits 1,039 2,704 8,560 7,882
(d) Balance with related parties
Trade in nature:
As at December 31,
2019 2020 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
(i) Trade receivables
Jesports Beijing – 282 38 15
Beijing Master – 27,407 – –
Jtea Kunshan – 1,019 – 23
– 28,708 38 38
(ii) Amounts due to related
parties
W&V Limited – – – 15,946
(iii) Prepayments
Max One Ltd 838 905 – –
W&V Limited – – – 2,877
838 905 – 2,877
(iv) Trade payables
Archstone Co., Ltd. – 4,881 1,030 140
Lu Yu Music 49 9–––
JVR Music International
Ltd. – 494 4,190 984
Jtea Kunshan – 50 92 4
W&V Limited – – 116 –
499 5,425 5,428 1,128
(v) Contract liabilities
Jesports Beijing – 1,447 – –
Jtea Kunshan ––1–
– 1,447 1 –
The above balances with related parties are trade in nature and interest-free with no collaterals and
no fixed settlement date.
APPENDIX I ACCOUNTANT’S REPORT
– I-88 –


--- page 649 ---
Non-trade in nature:
As at December 31,
2019 2020 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
(i) Amounts due from related
parties
W&V Limited –––3
M a x O n e L t d –3––
Mr. Lai, Kwok Fai 4,670 3,907 – –
Kunshan Jiabao 10,000 – N/A N/A
Jushi Creative 8,468 177 – –
Lhasa Juchuang 1,08 0–––
Kunshan Renben 1,08 0–––
Shanghai Yige 1,84 0–––
Jesports Beijing 2,00 0–––
M s . M a 8 1–––
29,219 4,087 – 3
(ii) Amounts due to related
parties
Great Essence Holdings
Limited 35,76 2–––
Jushi Creative 10,00 0–––
Kunshan Jiabao – 531 N/A N/A
Kunshan Renben 26,742 7,742 – –
Jesports Beijing 3–––
M s . M a 5–––
Mr. Lai 276 3,034 – –
72,788 11,307 – –
(iii) Sales commission payables
Ms. Li, Ting (Note 27) 3,290 N/A N/A N/A
(iv) Prepayment for office
building and staff quarter
Kunshan Jiabao
(Note 15) – 53,468 N/A N/A
Amounts due from and due to related parties are non-trade in nature and interest-free with no collaterals
and no fixed settlement date. The amounts had been fully settled as the date of this report.
APPENDIX I ACCOUNTANT’S REPORT
– I-89 –


--- page 650 ---
(e) Amounts due from/(to) subsidiaries of the Company
As at December 31,
2020 2021 2022
RMB’000 RMB’000 RMB’000
Non-current assets
Amounts due from subsidiaries 30,571 161,134 99,895
Current liabilities
Amounts due to subsidiaries (653) (16,758) (30,562)
The amounts due from/(to) subsidiaries are unsecured, interest-free and repayable on demand. In respect of
the amounts due from subsidiaries which are not expected to be settled within 12 months, they are then classified
as non-current assets.
37 SUBSEQUENT EVENTS
Pursuant to the resolutions of the shareholders of the Company passed on June 19, 2023, the directors of the
Company were authorised to allot and issue a total of 178,445,376 shares credited as fully paid at par to the holders of
Shares whose names are entered on the principal register of members of the Company maintained in the Cayman
Islands prior to the capitalization issue in proportion to their respective shareholdings by way of capitalization.
Pursuant to a resolution passed in the shareholders’ meeting of the Company on June 13, 2023, special dividends
of HK$60,000,000 were declared to the Company’s shareholders.
There were no other material subsequent events took place after December 31, 2022.
APPENDIX I ACCOUNTANT’S REPORT
– I-90 –


--- page 651 ---
III SUBSEQUENT FINANCIAL STATEMENTS
No audited financial statements have been prepared by the Company or any of the
companies now comprising the Group in respect of any period subsequent to December 31, 2022
and up to the date of this report.
APPENDIX I ACCOUNTANT’S REPORT
– I-91 –


--- page 652 ---
The information set out in this Appendix does not form part of the Accountant’ s Report from
the reporting accountant, PricewaterhouseCoopers, Certified Public Accountants, Hong Kong, as
set out in Appendix I, and is included herein for illustrative purposes only. The unaudited pro
forma financial information should be read in conjunction with the section entitled “Financial
Information” in this prospectus and the Accountant’ s 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 the Group
prepared in accordance with Rule 4.29 of the Listing Rules is for illustrative purposes only, and
is set out below to illustrate the effect of the Global Offering on the net tangible assets of the
Group attributable to the owners of the Company as of December 31, 2022 as if the Global
Offering had taken place on December 31, 2022, assuming the Over-allotment Option is not
exercised.
This unaudited pro forma statement of adjusted net tangible assets has been prepared for
illustrative purposes only, and because of its hypothetical nature, it may not give a true picture
of the consolidated net tangible assets of the Group as at December 31, 2022 or at any future
dates following the Global Offering. It is prepared based on the consolidated net assets of the
Group as at December 31, 2022 as set out in the Accountant’s Report of the Group, the text of
which is set out in Appendix I to this prospectus, and adjusted as described below. The
unaudited pro forma statement of adjusted net tangible assets does not form part of the
Accountant’s Report.
Audited
consolidated
net tangible
assets of the
Group
attributable to
owners of the
Company as at
December 31,
2022
Estimated
impact to the
consolidated
net tangible
assets relating
to termination
of the
redemption
right upon the
Global
Offering
Estimated net
proceeds from
the Global
Offering
Unaudited pro
forma adjusted
net tangible
assets
attributable to
owners of the
Company as at
December 31,
2022
Unaudited pro forma adjusted
net tangible assets per Share
RMB’000 RMB’000 RMB’000 RMB’000 RMB HK$
(Note 1) (Note 2) (Note 3) (Note 4) (Note 5)
Based on an Offer
Price of HK$4.25
per Share 229,670 178,654 244,371 652,695 0.82 0.93
APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION
– II-1 –


--- page 653 ---
Notes:
(1) The audited consolidated net tangible assets attributable to owners of the Company as at December 31,
2022 is extracted from the Accountant’s Report set out in Appendix I to this prospectus, which is based on
the audited consolidated net assets of the Group attributable to owners of the Company as at December 31,
2022 of RMB233,542,000 with an adjustment for the intangible assets attributable to owners of the
Company as at December 31, 2022 of RMB3,872,000 (excluding the portion of the intangible assets
attributable to the non-controlling interests of the Group of RMB6,000).
(2) Under the pre-IPO investment agreement with Bradbury Private Investment III Inc. (“Bradbury”),
Bradbury was granted with a redemption right pursuant to which the Company shall repurchase all the
shares from Bradbury if shares of the Company fails to be listed on the Main Board of the Stock Exchange
of Hong Kong Limited on or before December 31, 2021. In accordance with the pre-IPO investment
agreement, the redemption right was suspended immediately prior to the Company’s submission of the
listing application and would be restored automatically upon the earlier of the withdrawal of the
Company’s listing application, the Company’s listing application being rejected, or the Company’s listing
process being terminated or listing application has lapsed for any reason. Such redemption right is
recognized as a financial liability in the consolidated statement of financial position as at December 31,
2022, as set out in Appendix I to this prospectus. The redemption right will be terminated automatically
upon the Global Offering. Accordingly, for the purpose of the unaudited pro forma statement of adjusted
net tangible assets, the unaudited pro forma adjusted consolidated net tangible assets of the Group
attributable to the owners of the Company have been increased by RMB178,654,000, being the carrying
amount of the financial instrument with redemption rights as at December 31, 2022.
(3) The estimated net proceeds from the Global Offering are based on the indicative Offer Price of HK$4.25
per Share, after deduction of the underwriting fees and other related expenses payable by the Company
(exclude those listing expenses of approximately RMB28,487,000 which have been accounted for in the
consolidated statements of comprehensive income prior to December 31, 2022) and takes no account of
any shares which may fall to be issued upon the exercise of the Over-allotment Option, any Shares which
may be issued under the Pre-IPO Share Option Scheme or any Shares which may be issued or repurchased
by the Company pursuant to the General Mandate.
(4) The unaudited pro forma net tangible assets per Share is arrived at after the adjustments referred to in the
preceding paragraphs and on the basis that 800,000,000 Shares were in issue assuming that the
Capitalization Issue and the Global Offering have been completed on December 31, 2022 but takes no
account of any shares which may fall to be issued upon the exercise of the Over-allotment Option, any
Shares which may be issued under the Pre-IPO Share Option Scheme or any Shares which may be issued
or repurchased by the Company pursuant to the General Mandate.
(5) For the purpose of this unaudited pro forma adjusted net tangible assets per Share, the amounts stated in
Renminbi are converted into Hong Kong dollars at the rate of HK$1.00 to RMB0.8805. No representation
is made that Renminbi has been, could have been or may be converted to Hong Kong dollars, or vice
versa, at that rate.
(6) No adjustment has been made to reflect any trading result or other transactions of the Group entered into
subsequent to December 31, 2022. In particular, the above unaudited pro forma adjusted net tangible assets
have not been taken into account the special dividend of HK$60,000,000 declared on June 13, 2023. Had
the special dividend of HK$60,000,000 been declared on December 31, 2022, the unaudited pro forma
adjusted consolidated net tangible assets of the Group attributable to equity holders of the Company as at
December 31, 2022 would be approximately RMB599,865,000 while the unaudited pro forma adjusted
consolidated net tangible assets of the Group attributable to equity holders of the Company per Share as at
December 31, 2022 would be RMB0.75 (equivalent to HK$0.85).
APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION
– II-2 –


--- page 654 ---
B. REPORT FROM THE REPORTING ACCOUNTANT ON UNAUDITED PRO FORMA
FINANCIAL INFORMATION
The following is the text of a report received from PricewaterhouseCoopers, Certified
Public Accountants, Hong Kong, for the purpose of incorporation in this prospectus.
INDEPENDENT REPORTING ACCOUNTANT’S ASSURANCE REPORT ON THE
COMPILATION OF UNAUDITED PRO FORMA FINANCIAL INFORMATION
To the Directors of Star Plus Legend Holdings Limited
We have completed our assurance engagement to report on the compilation of unaudited
pro forma financial information of Star Plus Legend Holdings 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 consolidated net tangible assets of the Group as at
December 31, 2022 and related notes (the “Unaudited Pro Forma Financial Information”) as set
out on pages II-1 to II-2 of the Company’s prospectus dated June 30, 2023, in connection with
the proposed initial public offering of the shares of the Company (the “Prospectus”). The
applicable criteria on the basis of which the Directors have compiled the Unaudited Pro Forma
Financial Information are described on pages II-1 to II-2 of the Prospectus.
The Unaudited Pro Forma Financial Information has been compiled by the Directors to
illustrate the impact of the proposed initial public offering on the Group’s financial position as
at December 31, 2022 as if the proposed initial public offering had taken place at December 31,
2022. As part of this process, information about the Group’s financial position has been
extracted by the Directors from the Group’s financial information for the year ended December
31, 2022, on which an accountant’s report has been published.
Directors’ Responsibility for the Unaudited Pro Forma Financial Information
The Directors are responsible for compiling the Unaudited 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”).
APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION
– II-3 –


--- page 655 ---
Our Independence and Quality Control
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 behavior.
Our firm applies Hong Kong Standard on Quality Control 1 issued by the HKICPA and
accordingly maintains a comprehensive system of quality control including documented policies
and procedures regarding compliance with ethical requirements, professional standards and
applicable legal and regulatory requirements.
Reporting Accountant’s Responsibilities
Our responsibility is to express an opinion, as required by paragraph 4.29(7) of the Listing
Rules, on the Unaudited 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 Unaudited Pro Forma Financial Information beyond
that owed to those to whom those reports were addressed by us at the dates of their issue.
We conducted our engagement in accordance with Hong Kong Standard on Assurance
Engagements 3420, Assurance Engagements to Report on the Compilation of Pro Forma
Financial Information Included in a Prospectus , issued by the HKICPA. This standard requires
that the reporting accountant plans and performs procedures to obtain reasonable assurance about
whether the Directors have compiled the Unaudited 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 purposes of this engagement, we are not responsible for updating or reissuing any
reports or opinions on any historical financial information used in compiling the Unaudited Pro
Forma Financial Information, nor have we, in the course of this engagement, performed an audit
or review of the financial information used in compiling the Unaudited Pro Forma Financial
Information.
The purpose of unaudited pro forma financial information included in a prospectus is solely
to illustrate the impact of a significant event or transaction on unadjusted financial information
of the entity 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 the proposed initial public offering at December 31, 2022 would have
been as presented.
A reasonable assurance engagement to report on whether the unaudited 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 unaudited pro forma financial information provide a reasonable basis for
APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION
– II-4 –


--- page 656 ---
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 unaudited pro forma financial information reflects the proper application of those
adjustments to the unadjusted financial information.
The procedures selected depend on the reporting accountant’s judgment, having regard to
the reporting accountant’s understanding of the nature of the company, the event or transaction
in respect of which the unaudited pro forma financial information has been compiled, and other
relevant engagement circumstances.
The engagement also involves evaluating the overall presentation of the unaudited pro
forma financial information.
We believe that the evidence we have obtained is sufficient and appropriate to provide a
basis for our opinion.
Our work has not been carried out in accordance with auditing standards or other standards
and practices generally accepted in the United States of America or auditing standards of the
Public Company Accounting Oversight Board (United States) or standards and practices of any
professional body in any other overseas jurisdiction and accordingly should not be relied upon
as if it had been carried out in accordance with those standards and practices.
Opinion
In our opinion:
(a) the Unaudited Pro Forma Financial Information has been properly compiled by the
Directors on the basis stated;
(b) such basis is consistent with the accounting policies of the Group; and
(c) the adjustments are appropriate for the purposes of the Unaudited Pro Forma Financial
Information as disclosed pursuant to paragraph 4.29(1) of the Listing Rules.
PricewaterhouseCoopers
Certified Public Accountants
Hong Kong
June 30, 2023
APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION
– II-5 –


--- page 657 ---
The following is the text of a letter and valuation certificate, prepared for the purpose of
incorporation in this prospectus received from Jones Lang LaSalle Corporate Appraisal and
Advisory Limited, an independent valuer and consultant, in connection with its valuation as at
March 31, 2023 of the property interests held or contracted to be acquired by Star Plus Legend
Holdings Limited and its subsidiaries.
Jones Lang LaSalle Corporate Appraisal and Advisory Limited
7/F One Taikoo Place
979 King’s Road Hong Kong
tel +852 2846 5000 fax +852 2169 6001
Company Licence No.: C-030171
June 30, 2023
Star Plus Legend Holdings Limited
P.O. Box 31119
Grand Pavilion
Hibiscus Way
802 West Bay Road
Grand Cayman
KY1-1205
Cayman Islands
Dear Sirs,
In accordance with your instructions to value the property interests held or contracted to be
acquired by Star Plus Legend Holdings Limited (the “ Company ”) and its subsidiaries
(hereinafter together referred to as the “ Group ”) in the People’s Republic of China (the “ PRC”),
we confirm that we have carried out inspections, made relevant enquiries and searches and
obtained such further information as we consider necessary for the purpose of providing you
with our opinion of the market value of the property interests as at March 31, 2023 (the
“valuation date ”).
Our valuation is carried out on a market value basis. Market value is defined as “the
estimated amount for which an asset or liability should exchange on the valuation date between
a willing buyer and a willing seller in an arm’s-length transaction, after proper marketing and
where the parties had each acted knowledgeably, prudently and without compulsion”.
We have valued the property interest in Group I which is held for self-occupation by the
Group by comparison approach assuming sale of the property interest in its existing state with
the benefit of immediate vacant possession and by making reference to comparable sales
transactions as available in the market.
APPENDIX III PROPERTY V ALUATION REPORT
– III-1 –


--- page 658 ---
In valuing the property interest in Group II which is contracted to be acquired by the
Group, we have attributed no commercial value to the property interest which has not been
assigned to the Group as at the valuation date, thus the title of the property is not vested in the
Group.
Our valuation has been made on the assumption that the seller sells the property interests in
the market without the benefit of a deferred term contract, leaseback, joint venture, management
agreement or any similar arrangement, which could serve to affect the value of the property
interests.
No allowance has been made in our report for any charge, mortgage or amount owing on
any of the property interests valued nor for any expense or taxation which may be incurred in
effecting a sale. Unless otherwise stated, it is assumed that the properties are free from
encumbrances, restrictions and outgoings of an onerous nature, which could affect their value.
In valuing the property interests, we have complied with all requirements contained in
Chapter 5 and Practice Note 12 of the Rules Governing the Listing of Securities issued by The
Stock Exchange of Hong Kong Limited; the RICS Valuation – Global Standards published by the
Royal Institution of Chartered Surveyors; the HKIS Valuation Standards published by the Hong
Kong Institute of Surveyors and the International Valuation Standards published by the
International Valuation Standards Council.
We have relied to a very considerable extent on the information given by the Company and
have accepted advice given to us on such matters as tenure, planning approvals, statutory
notices, easements, and particulars of occupancy, lettings, and all other relevant matters.
We have been shown copies of various title documents including Real Estate Title
Certificates, Commodity Property Sale & Purchase Contracts and other documents relating to the
property interests and have made relevant enquiries. We have relied considerably on the advice
given by the Company’s PRC Legal Advisors – Han Kun Law Offices, concerning the validity of
the property interests in the PRC.
We have not carried out detailed measurements to verify the correctness of the areas in
respect of the properties but have assumed that the areas shown on the title documents and
official site plans handed to us are correct. All documents and contracts have been used as
reference only and all dimensions, measurements and areas are approximations. No on-site
measurement has been taken.
The site inspection was carried out in August 2022 by Ms. Queena Qiao who has 6 years’
valuation experience in the real estate industry of the PRC. However, we have not carried out
investigation to determine the suitability of the ground conditions and services for any
development thereon. Our valuation has been prepared on the assumption that these aspects are
satisfactory. Moreover, no structural survey has been made, but in the course of our inspection,
APPENDIX III PROPERTY V ALUATION REPORT
– III-2 –


--- page 659 ---
we did not note any serious defect. We are not, however, able to report whether the properties
are free of rot, infestation or any other structural defect. No tests were carried out on any of the
services.
We have had no reason to doubt the truth and accuracy of the information provided to us by
the Company. We have also sought confirmation from the Company that no material factors have
been omitted from the information supplied. We consider that we have been provided with
sufficient information to arrive an informed view, and we have no reason to suspect that any
material information has been withheld.
Unless otherwise stated, all monetary figures stated in this report are in Renminbi (RMB).
Our summary of values and valuation certificates are attached.
Yours faithfully,
For and on behalf of
Jones Lang LaSalle Corporate Appraisal and Advisory Limited
Eddie T. W. Yiu
MRICS MHKIS RPS (GP)
Senior Director
Note: Eddie T.W. Yiu is a Chartered Surveyor who has 29 years’ experience in the valuation of properties in Hong
Kong and the PRC as well as relevant experience in the Asia-Pacific region.
APPENDIX III PROPERTY V ALUATION REPORT
– III-3 –


--- page 660 ---
SUMMARY OF V ALUES
Abbreviation:
Group I: Property interest held for self-occupation by the Group in the PRC
Group II: Property interest contracted to be acquired by the Group in the PRC
“–”: Not applicable
No. Property
Market value
in existing
state as at
March 31,
2023
Market value
in existing
state as at
March 31,
2023
The total
market value
in existing
state as at
March 31,
2023
RMB RMB RMB
Group I Group II
1. 69 units on Levels 13 to 15 of
Building No. 3-5# of Phase III of
Dream World located at
No. 1777 Lvdi Avenue
Huaqiao Town
Kunshan City
Jiangsu Province
The PRC
56,000,000 – 56,000,000
2. 48 units on Levels 18 to 20 of
Building No. 3-2# of Phase III of
Dream World located at
No. 1777 Lvdi Avenue
Huaqiao Town
Kunshan City
Jiangsu Province
The PRC
– No commercial
value
No commercial
value
Total 56,000,000
APPENDIX III PROPERTY V ALUATION REPORT
– III-4 –


--- page 661 ---
V ALUATION CERTIFICATE
G r o u pI–P r operty interest held for self-occupation by the Group in the PRC
No. Property Description and tenure
Particulars of
occupancy
Market value in
existing state as
at the valuation
date
RMB
1. 69 units on Levels
13 to 15 of
Building No. 3-5#
of Phase III of
Dream World
located at No.
1777 Lvdi Avenue
Huaqiao Town
Kunshan City
Jiangsu Province
The PRC
Dream World is located at No. 1777 Lvdi
Avenue, Huaqiao Town, Kunshan City. The
locality is a mature residential and commercial
area in the eastern part of Kunshan City.
As advised, Dream World occupies a parcel of
land with a site area of approximately 240 mu
(including the land use rights of the property),
which will be developed into a commercial
complex with a total planned gross floor area of
approximately 356,000 sq.m. upon completion.
The property comprises all the 69 units on
Levels 13 to 15 of Building No. 3-5#, Phase III
of Dream World. The subject building has 15
storeys and is also known as Dream World Film
and Video Centre Block No. 1 (ᅂൖʕː
1໮ᅽ).
The property has a total gross floor area of
approximately 3,507.63 sq.m. which was
completed in 2021.
The land use rights of the property have been
granted for a term expiring on March 31, 2052
for office use.
As at the
valuation date, the
property was
occupied by the
Group for staff
quarters use.
56,000,000
Notes:
1. Kunshan Star Plus Action E-Commerce Company Limited (“ Kunshan Star Plus Action ”,Бਗཥɿਠਕ
ʮ̡ , a wholly-owned subsidiary of the Company) has entered into 69 Commodity Property Sale & Purchase
Contracts dated December 31, 2020 with Kunshan Jiabao Netshang Culture Investment Co., Ltd. (“ Kunshan
Jiabao ”,ʮ̡ , an independent third party), to purchase all the 69 units on Levels 13
to 15 (Units 1301–1323, 1401–1423 and 1501–1523) of Building No. 3-5# of Phase III of Dream World at a
consideration of RMB53,562,260. As confirmed by the Group, the consideration has been fully paid.
2. Pursuant to 69 Real Estate Title Certificates, the property with a total gross floor area of approximately 3,507.63
sq.m. is owned by Kunshan Star Plus Action. The land use rights of the property have been granted for a term
expiring on March 31, 2052 for office use.
3. Our valuation has been made on the following basis and analysis:
In undertaking our valuation, we have identified and analyzed various relevant sales evidences in the locality
which have similar characteristics as the property. The unit price of these comparable properties ranges from
RMB12,000 to RMB17,000 per sq.m. for office units. Appropriate adjustments and analysis are considered to the
differences in location, size and other characters between the comparable properties and the property to arrive at
the assumed unit rate for the property.
APPENDIX III PROPERTY V ALUATION REPORT
– III-5 –


--- page 662 ---
4. We have been provided with a legal opinion regarding the property interest by the Company’s PRC Legal
Advisors, which contains, inter alia , the following:
a. Kunshan Star Plus Action has obtained the Real Estate Title Certificates, the building ownership rights and
the land use rights of the property;
b. Kunshan Star Plus Action is the sole owner of the property and legally in possession of the ownership
rights of the property;
c. Pursuant to a Real Estate Mortgage Contract dated October 11, 2021, the property is subject to mortgage
in favor of Bank of Shanghai Co., Ltd. Suzhou Sub-branch (the “Bank”) as security to guarantee the
obligation under a loan contract dated January 5, 2021 with the Bank; and
d. Save for the mortgage mentioned in note 4(c), Kunshan Star Plus Action can legally occupy, use, transfer,
lease, mortgage or otherwise dispose of the property.
APPENDIX III PROPERTY V ALUATION REPORT
– III-6 –


--- page 663 ---
V ALUATION CERTIFICATE
Group II – Property interest contracted to be acquired by the Group in the PRC
No. Property Description and tenure
Particulars of
occupancy
Market value in
existing state as
at the valuation
date
RMB
2. 48 units on Levels
18 to 20 of
Building No. 3-2#
of Phase III of
Dream World
located at No.
1777 Lvdi Avenue
Huaqiao Town
Kunshan City
Jiangsu Province
The PRC
Dream World is located at No. 1777 Lvdi
Avenue, Huaqiao Town, Kunshan City. The
locality is a mature residential and commercial
area in the eastern part of Kunshan City.
As advised, Dream World occupies a parcel of
land with a site area of approximately 240 mu
(including the land use rights of the property),
which will be developed into a commercial
complex with a total planned gross floor area of
approximately 356,000 sq.m. upon completion.
The property comprises all the 48 units on
Levels 18 to 20 of Building No. 3-2#, Phase III
of Dream World. The subject building is a
21-storey office building and is also known as
Dream World Film and Video Centre Block No.
10 (ᅂൖʕː 10໮ᅽ). The property has a
total gross floor area of approximately
3,166.26 sq.m. As advised by the Group,
construction work of the property was
completed in January 2023 and will be
delivered to the Group in mid-2023.
The land use rights of the land parcel on which
the property is erected thereon have been
granted for a term expiring on March 31, 2052
for office and ancillary commercial uses.
As at the
valuation date, the
property was
vacant.
No commercial
value
Notes:
1. Kunshan Star Plus Action has entered into 48 Commodity Property Sale & Purchase Contracts dated August 4,
2021 with Kunshan Jiabao to purchase 48 units on Levels 18 to 20 (Units 1801–1816, 1901–1916 and
2001–2016) of Building No. 3-2# of Phase III of Dream World with a total gross floor area of approximately
3,166.26 sq.m. at a total consideration of RMB50,023,440.
2. Our valuation has been made on the following basis and analysis:
In undertaking our valuation for reference purpose as mentioned in note 3, we have identified and analyzed
various relevant sales evidences in the locality which have similar characteristics as the property. The unit price
of these comparable properties ranges from RMB12,000 to RMB17,000 per sq.m. for office units. Appropriate
adjustments and analysis are considered to the differences in location, size and other characters between the
comparable properties and the property to arrive at the assumed unit rate for the property.
APPENDIX III PROPERTY V ALUATION REPORT
– III-7 –


--- page 664 ---
3. As at the valuation date, the property has not been assigned to the Group and thus the title of the property has
not been vested in the Group. Therefore, we have attributed no commercial value to the property. However, for
reference purpose, we are of the opinion that the market value of the property as at the valuation date would be
RMB52,000,000, on condition that the relevant title certificates have been obtained and Kunshan Star Plus
Action is entitled to freely transfer, lease, mortgage or otherwise dispose of the property.
4. As confirmed by the Group, the purchase price had been fully paid by the Group to purchase the property up to
the valuation date.
5. We have been provided with a legal opinion regarding the property interest by the Company’s PRC Legal
Advisors, which contains, inter alia , the following:
a. The aforesaid Commodity Property Sale & Purchase Contracts are legal and valid, legally binding and
enforceable under the applicable laws.
b. Kunshan Star Plus Action has the rights to claim contractual rights and require the other contracted party
to perform contractual obligations based on such contracts. However, due to the fact that Kunshan Star
Plus Action has not completed the application procedure of ownership rights registration and has not
obtained the ownership certificates, Kunshan Star Plus Action’s ownership of the property has not yet
become valid; and
c. There is no legal impediment for Kunshan Star Plus Action in obtaining title certificates for the property
after completion of construction of the property.
APPENDIX III PROPERTY V ALUATION REPORT
– III-8 –


--- page 665 ---
Set out below is a summary of certain provisions of the Memorandum and Articles of
Association of the Company and of certain aspects of the company laws of the Cayman Islands.
The Company was incorporated in the Cayman Islands as an exempted company with
limited liability on January 3, 2020 under the Cayman Companies Act. The Company’s
constitutional documents consist of its Memorandum and Articles of Association.
1. MEMORANDUM OF ASSOCIATION
1.1 The Memorandum provides, inter alia , that the liability of members of the Company is
limited and that the objects for which the Company is established are unrestricted (and
therefore include acting as an investment company), and that the Company shall have
and be capable of exercising any and all of the powers at any time or from time to
time exercisable by a natural person or body corporate whether as principal, agent,
contractor or otherwise and, since the Company is an exempted company, that the
Company will not trade in the Cayman Islands with any person, firm or corporation
except in furtherance of the business of the Company carried on outside the Cayman
Islands.
1.2 By special resolution the Company may alter the Memorandum with respect to any
objects, powers or other matters specified in it.
2. ARTICLES OF ASSOCIATION
The Articles were conditionally adopted on June 19, 2023 and will become effective on the
Listing Date. A summary of certain provisions of the Articles is set out below.
2.1 Shares
(a) Classes of shares
The share capital of the Company consists of ordinary shares.
(b) V ariation of rights of existing shares or classes of shares
Subject to the Cayman Companies Act, if at any time the share capital of the
Company is divided into different classes of shares, all or any of the special rights
attached to any class of shares may (unless otherwise provided for by the terms of
issue of the shares of that class) be varied, modified or abrogated with the consent in
writing of the holders of at least three-fourths of the issued Shares of that class, or
with the approval of a resolution passed by at least three-fourths of the votes cast by
the holders of the shares of that class present and voting in person or by proxy at a
separate meeting of such holders. The provisions of the Articles relating to general
meetings shall apply mutatis mutandis to every such separate general meeting,
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--- page 666 ---
provided that the necessary quorum shall be two persons together holding (or, in the
case of a shareholder being a corporation, by its duly authorized representative) or
representing by proxy at least one-third of the issued shares of that class. Every holder
of shares of the class shall be entitled on a poll to one vote for every such share held
by him, and any holder of shares of the class present in person or by proxy may
demand a poll.
Any special rights conferred upon the holders of any shares or class of shares
shall not, unless otherwise expressly provided in the rights attaching to the terms of
issue of such shares, be deemed to be varied by the creation or issue of further shares
ranking pari passu therewith.
(c) Alteration of capital
The Company may, by an ordinary resolution of its members: (a) increase its
share capital by the creation of new shares of such amount as it thinks expedient; (b)
consolidate or divide all or any of its share capital into shares of a larger or smaller
amount than its existing shares; (c) divide its unissued shares into several classes and
attach to such shares any preferential, deferred, qualified or special rights, privileges
or conditions; (d) subdivide its shares or any of them into shares of an amount smaller
than that fixed by the Memorandum; (e) cancel any shares which, at the date of the
resolution, have not been taken or agreed to be taken by any person and diminish the
amount of its share capital by the amount of the shares so canceled; (f) make
provision for the allotment and issue of shares which do not carry any voting rights;
(g) change the currency of denomination of its share capital; and (h) reduce its share
premium account in any manner authorized and subject to any conditions prescribed
by law.
(d) Transfer of shares
Subject to the Cayman Companies Act and the requirements of the Stock
Exchange, all transfers of shares shall be effected by an instrument of transfer in the
usual or common form or in such other form as the Board may approve and may be
under hand or, if the transferor or transferee is a Clearing House (as defined in the
Articles) or its nominee(s), under hand or by machine imprinted signature, or by such
other manner of execution as the Board may approve from time to time.
Execution of the instrument of transfer shall be by or on behalf of the transferor
and the transferee, provided that the Board may dispense with the execution of the
instrument of transfer by the transferor or transferee or accept mechanically executed
transfers. The transferor shall be deemed to remain the holder of a share until the
name of the transferee is entered in the register of members of the Company in respect
of that share.
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The Board may, in its absolute discretion, at any time and from time to time
remove any share on the principal register to any branch register or any share on any
branch register to the principal register or any other branch register.
Unless the Board otherwise agrees, no shares on the principal register shall be
removed to any branch register nor shall shares on any branch register be removed to
the principal register or any other branch register. All removals and other documents
of title shall be lodged for registration and registered, in the case of shares on any
branch register, at the relevant registration office and, in the case of shares on the
principal register, at the place at which the principal register is located.
The Board may, in its absolute discretion, decline to register a transfer of any
share (not being a fully paid up share) to a person of whom it does not approve or on
which the Company has a lien, or if the proposed transfer does not comply with the
Articles or any requirements of the Listing Rules. It may also decline to register a
transfer of any share issued under any share option scheme upon which a restriction
on transfer subsists or a transfer of any share to more than four joint holders.
The Board may decline to recognize any instrument of transfer unless a certain
fee, up to such maximum sum as the Stock Exchange may determine to be payable, is
paid to the Company, the instrument of transfer is properly stamped (if applicable), is
in respect of only one class of share and is lodged at the relevant registration office or
the place at which the principal register is located accompanied by the relevant share
certificate(s) and such other evidence as the Board may reasonably require is provided
to show the right of the transferor to make the transfer (and if the instrument of
transfer is executed by some other person on his behalf, the authority of that person so
to do).
The register of members may, subject to the Listing Rules, be closed in
accordance with the terms equivalent to the relevant section of the Companies
Ordinance at such time or for such period not exceeding in the whole 30 days in each
year as the Board may determine (or such longer period as the members of the
Company may by ordinary resolution determine, provided that such period shall not be
extended beyond 60 days in any year).
Fully paid shares shall be free from any restriction on transfer (except when
permitted by the Stock Exchange) and shall also be free from all liens.
(e) Power of the Company to purchase its own shares
The Company may purchase its own shares subject to certain restrictions and the
Board may only exercise this power on behalf of the Company subject to any
applicable requirement imposed from time to time by the Articles or any code, rules or
regulations issued from time to time by the Stock Exchange and/or the SFC.
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--- page 668 ---
Where the Company purchases for redemption a redeemable share, purchases not
made through the market or by tender shall be limited to a maximum price and, if
purchases are by tender, tenders shall be available to all members alike.
(f) Power of any subsidiary of the Company to own shares in the Company
There are no provisions in the Articles relating to the ownership of shares in the
Company by a subsidiary.
(g) Calls on shares and forfeiture of shares
The Board may, from time to time, make such calls as it thinks fit upon the
members in respect of any monies unpaid on the shares held by them respectively
(whether on account of the nominal value of the shares or by way of premium) and
not by the conditions of allotment of such shares made payable at fixed times. A call
may be made payable either in one sum or by installments. If the sum payable in
respect of any call or installment is not paid on or before the day appointed for
payment thereof, the person or persons from whom the sum is due shall pay interest
on the same at such rate not exceeding 20 per cent per annum as the Board shall fix
from the day appointed for payment to the time of actual payment, but the Board may
waive payment of such interest wholly or in part. The Board may, if it thinks fit,
receive from any member willing to advance the same, either in money or money’s
worth, all or any part of the money uncalled and unpaid or installments payable upon
any shares held by him, and in respect of all or any of the monies so advanced the
Company may pay interest at such rate (if any) not exceeding 20 per cent per annum
as the Board may decide.
If a member fails to pay any call or installment of a call on the day appointed for
payment, the Board may, for so long as any part of the call or installment remains
unpaid, serve not less than 14 days’ notice on the member requiring payment of so
much of the call or installment as is unpaid, together with any interest which may
have accrued and which may still accrue up to the date of actual payment. The notice
shall name a further day (not earlier than the expiration of 14 days from the date of
the notice) on or before which the payment required by the notice is to be made, and
shall also name the place where payment is to be made. The notice shall also state
that, in the event of non-payment at or before the appointed time, the shares in respect
of which the call was made will be liable to be forfeited.
If the requirements of any such notice are not complied with, any share in
respect of which the notice has been given may at any time thereafter, before the
payment required by the notice has been made, be forfeited by a resolution of the
Board to that effect. Such forfeiture will include all dividends and bonuses declared in
respect of the forfeited share and not actually paid before the forfeiture.
APPENDIX IV SUMMARY OF THE CONSTITUTION OF OUR COMPANY
AND THE CAYMAN COMPANIES ACT
–I V - 4–


--- page 669 ---
A person whose shares have been forfeited shall cease to be a member in respect
of the forfeited shares but shall, nevertheless, remain liable to pay to the Company all
monies which, as at the date of forfeiture, were payable by him to the Company in
respect of the shares together with (if the Board shall in its discretion so require)
interest thereon from the date of forfeiture until payment at such rate not exceeding 20
per cent per annum as the Board may prescribe.
2.2 Directors
(a) Appointment, retirement and removal
At any time or from time to time, the Board shall have the power to appoint any
person as a Director either to fill a casual vacancy on the Board or as an additional
Director to the existing Board subject to any maximum number of Directors, if any, as
may be determined by the members in general meeting or the Articles. Any Director
so appointed to fill a casual vacancy or as an addition to the existing Board shall hold
office only until the first annual general meeting of the Company after his
appointment and be eligible for re-election at such meeting. Any Director so appointed
by the Board shall not be taken into account in determining the Directors or the
number of Directors who are to retire by rotation at an annual general meeting.
At each annual general meeting, one-third of the Directors for the time being
shall retire from office by rotation. However, if the number of Directors is not a
multiple of three, then the number nearest to but not less than one-third shall be the
number of retiring Directors. Every Director (including those appointed for a specific
term) shall be subject to retirement by rotation at least once every three years. The
Directors to retire in each year shall be those who have been in office longest since
their last re-election or appointment but, as between persons who became or were last
re-elected Directors on the same day, those to retire shall (unless they otherwise agree
among themselves) be determined by lot.
No person, other than a retiring Director, shall, unless recommended by the
Board for election, be eligible for election to the office of Director at any general
meeting, unless notice in writing of the intention to propose that person for election as
a Director and notice in writing by that person of his willingness to be elected has
been lodged at the head office or at the registration office of the Company. The
Company shall include the particulars of such proposed person for election as a
Director in its announcement or supplementary circular, and shall give the
shareholders at least seven days to consider the relevant information disclosed in such
announcement or supplementary circular prior to the date of the meeting of the
election.
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AND THE CAYMAN COMPANIES ACT
–I V - 5–


--- page 670 ---
A Director is not required to hold any shares in the Company by way of
qualification nor is there any specified upper or lower age limit for Directors either
for accession to or retirement from the Board.
A Director may be removed by an ordinary resolution of the members of the
Company before the expiration of his term of office (but without prejudice to any
claim which such Director may have for damages for any breach of any contract
between him and the Company) and the Company may by ordinary resolution appoint
another in his place. Any Director so appointed shall be subject to the retirement by
rotation provisions. The number of Directors shall not be less than two.
The office of a Director shall be vacated if he:
(i) resigns;
(ii) dies;
(iii) is declared to be of unsound mind and the Board resolves that his office be
vacated;
(iv) becomes bankrupt or has a receiving order made against him or suspends
payment or compounds with his creditors generally;
(v) he is prohibited from being or ceases to be a director by operation of law;
(vi) without special leave, is absent from meetings of the Board for six
consecutive months, and the Board resolves that his office is vacated;
(vii) has been required by the stock exchange of the Relevant Territory (as
defined in the Articles) to cease to be a Director; or
(viii) is removed from office by no less than three-fourths in number of the
Directors pursuant to the Articles.
From time to time the Board may appoint one or more of its body to be
managing director, joint managing director or deputy managing director or to hold any
other employment or executive office with the Company for such period and upon
such terms as the Board may determine, and the Board may revoke or terminate any of
such appointments. The Board may also delegate any of its powers to committees
consisting of such Director(s) or other person(s) as the Board thinks fit, and from time
to time it may also revoke such delegation or revoke the appointment of and discharge
any such committees either wholly or in part, and either as to persons or purposes, but
every committee so formed shall, in the exercise of the powers so delegated, conform
to any regulations that may from time to time be imposed upon it by the Board.
APPENDIX IV SUMMARY OF THE CONSTITUTION OF OUR COMPANY
AND THE CAYMAN COMPANIES ACT
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--- page 671 ---
(b) Power to allot and issue shares and warrants
Subject to the provisions of the Cayman Companies Act, the Memorandum and
Articles and without prejudice to any special rights conferred on the holders of any
shares or class of shares, any share may be issued with or have attached to it such
rights, or such restrictions, whether with regard to dividend, voting, return of capital
or otherwise, as the Company may by ordinary resolution determine (or, in the
absence of any such determination or so far as the same may not make specific
provision, as the Board may determine). Any share may be issued on terms that, upon
the happening of a specified event or upon a given date and either at the option of the
Company or the holder of the share, it is liable to be redeemed.
The Board may issue warrants to subscribe for any class of shares or other
securities of the Company on such terms as it may from time to time determine.
Where warrants are issued to bearer, no certificate in respect of such warrants
shall be issued to replace one that has been lost unless the Board is satisfied beyond
reasonable doubt that the original certificate has been destroyed and the Company has
received an indemnity in such form as the Board thinks fit with regard to the issue of
any such replacement certificate.
Subject to the provisions of the Cayman Companies Act, the Articles and, where
applicable, the rules of any stock exchange of the Relevant Territory and without
prejudice to any special rights or restrictions for the time being attached to any shares
or any class of shares, all unissued shares in the Company shall be at the disposal of
the Board, which may offer, allot, grant options over or otherwise dispose of them to
such persons, at such times, for such consideration and on such terms and conditions
as it in its absolute discretion thinks fit, provided that no shares shall be issued at a
discount.
Neither the Company nor the Board shall be obliged, when making or granting
any allotment of, offer of, option over or disposal of shares, to make, or make
available, any such allotment, offer, option or shares to members or others whose
registered addresses are in any particular territory or territories where, in the absence
of a registration statement or other special formalities, doing so is or may, in the
opinion of the Board, be unlawful or impracticable. However, no member affected as a
result of the foregoing shall be, or be deemed to be, a separate class of members for
any purpose whatsoever.
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--- page 672 ---
(c) Power to dispose of the assets of the Company or any of its subsidiaries
While there are no specific provisions in the Articles relating to the disposal of
the assets of the Company or any of its subsidiaries, the Board may exercise all
powers and do all acts and things which may be exercised or done or approved by the
Company and which are not required by the Articles or the Cayman Companies Act to
be exercised or done by the Company in general meeting, but if such power or act is
regulated by the Company in general meeting, such regulation shall not invalidate any
prior act of the Board which would have been valid if such regulation had not been
made.
(d) Borrowing powers
The Board may exercise all the powers of the Company to raise or borrow
money, to mortgage or charge all or any part of the undertaking, property and uncalled
capital of the Company and, subject to the Cayman Companies Act, to issue
debentures, debenture stock, bonds and other securities of the Company, whether
outright or as collateral security for any debt, liability or obligation of the Company
or of any third party.
(e) Remuneration
The Directors shall be entitled to receive, as ordinary remuneration for their
services, such sums as shall from time to time be determined by the Board or the
Company in general meeting, as the case may be, such sum (unless otherwise directed
by the resolution by which it is determined) to be divided among the Directors in such
proportions and in such manner as they may agree or, failing agreement, either equally
or, in the case of any Director holding office for only a portion of the period in
respect of which the remuneration is payable, pro rata . The Directors shall also be
entitled to be repaid all expenses reasonably incurred by them in attending any Board
meetings, committee meetings or general meetings or otherwise in connection with the
discharge of their duties as Directors. Such remuneration shall be in addition to any
other remuneration to which a Director who holds any salaried employment or office
in the Company may be entitled by reason of such employment or office.
Any Director who, at the request of the Company, performs services which in the
opinion of the Board go beyond the ordinary duties of a Director may be paid such
special or extra remuneration as the Board may determine, in addition to or in
substitution for any ordinary remuneration as a Director. An executive Director
appointed to be a managing director, joint managing director, deputy managing
director or other executive officer shall receive such remuneration and such other
benefits and allowances as the Board may from time to time decide. Such
remuneration shall be in addition to his ordinary remuneration as a Director.
APPENDIX IV SUMMARY OF THE CONSTITUTION OF OUR COMPANY
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--- page 673 ---
The Board may establish, either on its own or jointly in concurrence or
agreement with subsidiaries of the Company or companies with which the Company is
associated in business, or may make contributions out of the Company’s monies to,
any schemes or funds for providing pensions, sickness or compassionate allowances,
life assurance or other benefits for employees (which expression as used in this and
the following paragraph shall include any Director or former Director who may hold
or have held any executive office or any office of profit with the Company or any of
its subsidiaries) and former employees of the Company and their dependents or any
class or classes of such persons.
The Board may also pay, enter into agreements to pay or make grants of
revocable or irrevocable, whether or not subject to any terms or conditions, pensions
or other benefits to employees and former employees and their dependents, or to any
of such persons, including pensions or benefits additional to those, if any, to which
such employees or former employees or their dependents are or may become entitled
under any such scheme or fund as mentioned above. Such pension or benefit may, if
deemed desirable by the Board, be granted to an employee either before and in
anticipation of, or upon or at any time after, his actual retirement.
(f) Compensation or payments for loss of office
Payments to any present Director or past Director of any sum by way of
compensation for loss of office or as consideration for or in connection with his
retirement from office (not being a payment to which the Director is contractually or
statutorily entitled) must be approved by the Company in general meeting.
(g) Loans and provision of security for loans to Directors
The Company shall not directly or indirectly make a loan to a Director or a
director of any holding company of the Company or any of their respective close
associates, enter into any guarantee or provide any security in connection with a loan
made by any person to a Director or a director of any holding company of the
Company or any of their respective close associates, or, if any one or more Directors
hold(s) (jointly or severally or directly or indirectly) a controlling interest in another
company, make a loan to that other company or enter into any guarantee or provide
any security in connection with a loan made by any person to that other company.
APPENDIX IV SUMMARY OF THE CONSTITUTION OF OUR COMPANY
AND THE CAYMAN COMPANIES ACT
–I V - 9–


--- page 674 ---
(h) Disclosure of interest in contracts with the Company or any of its subsidiaries
With the exception of the office of auditor of the Company, a Director may hold
any other office or place of profit with the Company in conjunction with his office of
Director for such period and upon such terms as the Board may determine, and may be
paid such extra remuneration for that other office or place of profit, in whatever form,
in addition to any remuneration provided for by or pursuant to any other Articles. A
Director may be or become a director, officer or member of any other company in
which the Company may be interested, and shall not be liable to account to the
Company or the members for any remuneration or other benefits received by him as a
director, officer or member of such other company. The Board may also cause the
voting power conferred by the shares in any other company held or owned by the
Company to be exercised in such manner in all respects as it thinks fit, including the
exercise in favor of any resolution appointing the Directors or any of them to be
directors or officers of such other company.
No Director or intended Director shall be disqualified by his office from
contracting with the Company, nor shall any such contract or any other contract or
arrangement in which any Director is in any way interested be liable to be avoided,
nor shall any Director so contracting or being so interested be liable to account to the
Company for any profit realized by any such contract or arrangement by reason only
of such Director holding that office or the fiduciary relationship established by it. A
Director who is, in any way, materially interested in a contract or arrangement or
proposed contract or arrangement with the Company shall declare the nature of his
interest at the earliest meeting of the Board at which he may practically do so.
There is no power to freeze or otherwise impair any of the rights attaching to any
share by reason that the person or persons who are interested directly or indirectly in
that share have failed to disclose their interests to the Company.
A Director shall not vote or be counted in the quorum on any resolution of the
Board in respect of any contract or arrangement or proposal in which he or any of his
close associate(s) has/have a material interest, and if he shall do so his vote shall not
be counted nor shall he be counted in the quorum for that resolution, but this
prohibition shall not apply to any of the following matters:
(i) the giving of any security or indemnity to the Director or his close
associate(s) in respect of money lent or obligations incurred or undertaken
by him or any of them at the request of or for the benefit of the Company or
any of its subsidiaries;
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AND THE CAYMAN COMPANIES ACT
– IV-10 –


--- page 675 ---
(ii) the giving of any security or indemnity to a third party in respect of a debt
or obligation of the Company or any of its subsidiaries for which the
Director or his close associate(s) has/have himself/themselves assumed
responsibility in whole or in part whether alone or jointly under a guarantee
or indemnity or by the giving of security;
(iii) any proposal concerning an offer of shares, debentures or other securities of
or by the Company or any other company which the Company may promote
or be interested in for subscription or purchase, where the Director or his
close associate(s) is/are or is/are to be interested as a participant in the
underwriting or sub- underwriting of the offer;
(iv) any proposal or arrangement concerning the benefit of employees of the
Company or any of its subsidiaries, including the adoption, modification or
operation of either: (i) any employees’ share scheme or any share incentive
or share option scheme under which the Director or his close associate(s)
may benefit; or (ii) any of a pension fund or retirement, death or disability
benefits scheme which relates to Directors, their close associates and
employees of the Company or any of its subsidiaries and does not provide
in respect of any Director or his close associate(s) any privilege or
advantage not generally accorded to the class of persons to which such
scheme or fund relates; and
(v) any contract or arrangement in which the Director or his close associate(s)
is/are interested in the same manner as other holders of shares, debentures
or other securities of the Company by virtue only of his/their interest in
those shares, debentures or other securities.
2.3 Proceedings of the Board
The Board may meet anywhere in the world for the despatch of business and may
adjourn and otherwise regulate its meetings as it thinks fit. Questions arising at any
meeting shall be determined by a majority of votes. In the case of an equality of votes, the
chairman of the meeting shall have a second or casting vote.
2.4 Alterations to the constitutional documents and the Company’s name
To the extent that the same is permissible under the Cayman Islands laws and subject
to the Articles, the Memorandum and Articles of the Company may only be altered or
amended, and the name of the Company may only be changed, with the sanction of a
special resolution of the Company.
APPENDIX IV SUMMARY OF THE CONSTITUTION OF OUR COMPANY
AND THE CAYMAN COMPANIES ACT
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--- page 676 ---
2.5 Meetings of members
(a) Special and ordinary resolutions
A special resolution of the Company must be passed by a majority of not less
than three-fourths of the voting rights held by such members as, being entitled so to
do, vote in person or by proxy or, in the case of members which are corporations, by
their duly authorized representatives or by proxy at a general meeting of which notice
specifying the intention to propose the resolution as a special resolution has been duly
given.
Under the Cayman Companies Act, a copy of any special resolution must be
forwarded to the Registrar of Companies in the Cayman Islands within 15 days of
being passed.
An ordinary resolution, by contrast, is a resolution passed by a simple majority
of the votes of such members of the Company as, being entitled to do so, vote in
person or, in the case of members which are corporations, by their duly authorized
representatives or by proxy at a general meeting of which notice has been duly given.
A resolution in writing signed by or on behalf of all members shall be treated as
an ordinary resolution duly passed at a general meeting of the Company duly
convened and held, and where relevant as a special resolution so passed.
(b) V oting rights and right to demand a poll
Subject to any special rights, restrictions or privileges as to voting for the time
being attached to any class or classes of shares at any general meeting: (a) on a poll
every member present in person or by proxy or, in the case of a member being a
corporation, by its duly authorized representative shall have one vote for every share
which is fully paid or credited as fully paid registered in his name in the register of
members of the Company, provided that no amount paid up or credited as paid up on a
share in advance of calls or installments is treated for this purpose as paid up on the
share; and (b) on a show of hands every member who is present in person (or, in the
case of a member being a corporation, by its duly authorized representative) or by
proxy shall have one vote. Where more than one proxy is appointed by a member
which is a Clearing House or its nominee(s), each such proxy shall have one vote on a
show of hands. On a poll, a member entitled to more than one vote need not use all
his votes or cast all the votes he does use in the same way.
APPENDIX IV SUMMARY OF THE CONSTITUTION OF OUR COMPANY
AND THE CAYMAN COMPANIES ACT
– IV-12 –


--- page 677 ---
At any general meeting a resolution put to the vote of the meeting is to be
decided by poll save that the chairman of the meeting may, pursuant to the Listing
Rules, allow a resolution to be voted on by a show of hands. Where a show of hands
is allowed, before or on the declaration of the result of the show of hands, a poll may
be demanded by (in each case by members present in person or by proxy or by a duly
authorized corporate representative):
(i) at least two members;
(ii) any member or members representing not less than one-tenth of the total
voting rights of all the members having the right to vote at the meeting; or
(iii) a member or members holding shares in the Company conferring a right to
vote at the meeting on which an aggregate sum has been paid equal to not
less than one-tenth of the total sum paid up on all the shares conferring that
right.
Should a Clearing House or its nominee(s) be a member of the Company, it may
appoint proxies or authorize such person or persons as it thinks fit to act as its
representative(s), who enjoy rights equivalent to the rights of other members, at any
meeting of the Company (including but not limited to general meetings and creditors
meetings) or at any meeting of any class of members of the Company provided that, if
more than one person is so authorized, the authorisation shall specify the number and
class of shares in respect of which each such person is so authorized. A person
authorized in accordance with this provision shall be deemed to have been duly
authorized without further evidence of the facts and be entitled to exercise the same
rights and powers on behalf of the Clearing House or its nominee(s) as if such person
were an individual member including the right to speak and vote individually on a
show of hands or on a poll.
All Shareholders of the Company (including a Shareholder which is a Clearing
House (or its nominee(s))) shall have the right to (a) speak at a general meeting and
(b) vote at a general meeting except where a Shareholder is required by the Listing
Rules to abstain from voting to approve the matter under consideration. Where any
member is, under the Listing Rules, required to abstain from voting on any particular
resolution or restricted to voting only for or only against any particular resolution, any
votes cast by or on behalf of such member in contravention of such requirement or
restriction shall not be counted.
(c) Annual general meetings
The Company must hold an annual general meeting in each financial year. Such
meeting must be held within six months after the end of the Company’s financial year.
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(d) Notices of meetings and business to be conducted
An annual general meeting of the Company shall be called by at least 21 days’
notice in writing, and any other general meeting of the Company shall be called by at
least 14 days’ notice in writing. The notice shall be exclusive of the day on which it is
served or deemed to be served and of the day for which it is given, and must specify
the time, place and agenda of the meeting and particulars of the resolution(s) to be
considered at that meeting and, in the case of special business, the general nature of
that business.
Except where otherwise expressly stated, any notice or document (including a
share certificate) to be given or issued under the Articles shall be in writing, and may
be served by the Company on any member personally, by post to such member’s
registered address or (in the case of a notice) by advertisement in the newspapers. Any
member whose registered address is outside Hong Kong may notify the Company in
writing of an address in Hong Kong which shall be deemed to be his registered
address for this purpose. Subject to the Cayman Companies Act and the Listing Rules,
a notice or document may also be served or delivered by the Company to any member
by electronic means.
Although a meeting of the Company may be called by shorter notice than as
specified above, if permitted by the Listing Rules, such meeting may be deemed to
have been duly called if it is so agreed:
(i) in the case of an annual general meeting, by all members of the Company
entitled to attend and vote thereat; and
(ii) in the case of any other meeting, by a majority in number of the members
having a right to attend and vote at the meeting holding not less than 95 per
cent of the total voting rights in the Company.
All business transacted at an extraordinary general meeting shall be deemed
special business. All business shall also be deemed special business where it is
transacted at an annual general meeting, with the exception of certain routine matters
which shall be deemed ordinary business.
(e) Quorum for meetings and separate class meetings
No business shall be transacted at any general meeting unless a quorum is
present when the meeting proceeds to business, and continues to be present until the
conclusion of the meeting.
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The quorum for a general meeting shall be two members present in person (or in
the case of a member being a corporation, by its duly authorized representative) or by
proxy and entitled to vote. In respect of a separate class meeting (other than an
adjourned meeting) convened to sanction the modification of class rights, the
necessary quorum shall be two persons holding or representing by proxy not less than
one-third in nominal value of the issued shares of that class.
(f) Proxies
Any member of the Company entitled to attend and vote at a meeting of the
Company is entitled to appoint another person as his proxy to attend and vote instead
of him. A corporation which is a member may execute a form of proxy under the hand
of a duly authorized officer. A member who is the holder of two or more shares may
appoint more than one proxy to represent him and vote on his behalf at a general
meeting of the Company or at a class meeting. A proxy need not be a member of the
Company and shall be entitled to exercise the same powers on behalf of a member
who is an individual and for whom he acts as proxy as such member could exercise.
In addition, a proxy shall be entitled to exercise the same powers on behalf of a
member which is a corporation and for which he acts as proxy as such member could
exercise as if it were an individual member present in person at any general meeting.
On a poll or on a show of hands, votes may be given either personally (or, in the case
of a member being a corporation, by its duly authorized representative) or by proxy.
The instrument appointing a proxy shall be in writing under the hand of the
appointor or of his attorney duly authorized in writing, or if the appointor is a
corporation, either under seal or under the hand of a duly authorized officer or
attorney. Every instrument of proxy, whether for a specified meeting or otherwise,
shall be in such form as the Board may from time to time approve, provided that it
shall not preclude the use of the two-way form. Any form issued to a member for
appointing a proxy to attend and vote at an extraordinary general meeting or at an
annual general meeting at which any business is to be transacted shall be such as to
enable the member, according to his intentions, to instruct the proxy to vote in favor
of or against (or, in default of instructions, to exercise his discretion in respect of)
each resolution dealing with any such business.
(g) Members’ requisition for meetings
One or more members holding, as at the date of deposit of the requisition, in
aggregate not less than one-tenth of the voting rights (on a one vote per share basis)
in the share capital of the Company may also make a requisition to convene an
extraordinary general meeting and/or add resolutions to the agenda of a meeting. Such
requisition shall be made in writing to the Board or the secretary of the Company for
the purpose of requiring an extraordinary general meeting to be called by the Board
for the transaction of any business specified in such requisition. Such meeting shall be
held within two months after the deposit of such requisition. If within 21 days of such
deposit, the Board fails to proceed to convene such meeting, the requisitionist(s)
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--- page 680 ---
himself (themselves) may do so in the same manner, and all reasonable expenses
incurred by the requisitionist(s) as a result of the failure of the Board shall be
reimbursed to the requisitionist(s) by the Company.
2.6 Accounts and audit
The Board shall cause proper books of account to be kept of the sums of money
received and expended by the Company, and of the assets and liabilities of the Company
and of all other matters required by the Cayman Companies Act (which include all sales
and purchases of goods by the Company) necessary to give a true and fair view of the state
of the Company’s affairs and to show and explain its transactions.
The books of accounts of the Company shall be kept at the head office of the
Company or at such other place or places as the Board decides and shall always be open to
inspection by any Director. No member (other than a Director) shall have any right to
inspect any account, book or document of the Company except as conferred by the Cayman
Companies Act or ordered by a court of competent jurisdiction or authorized by the Board
or the Company in general meeting.
The Board shall from time to time cause to be prepared and laid before the Company
at its annual general meeting balance sheets and profit and loss accounts (including every
document required by law to be annexed thereto), together with a copy of the Directors’
report and a copy of the auditors’ report, not less than 21 days before the date of the annual
general meeting. Copies of these documents shall be sent to every person entitled to receive
notices of general meetings of the Company under the provisions of the Articles together
with the notice of annual general meeting, not less than 21 days before the date of the
meeting.
Subject to the rules of the stock exchange of the Relevant Territory, the Company may
send summarized financial statements to shareholders who have, in accordance with the
rules of the stock exchange of the Relevant Territory, consented and elected to receive
summarized financial statements instead of the full financial statements. The summarized
financial statements must be accompanied by any other documents as may be required
under the rules of the stock exchange of the Relevant Territory, and must be sent to those
shareholders that have consented and elected to receive the summarized financial
statements not less than 21 days before the general meeting.
The members shall appoint auditor(s) to hold office by an ordinary resolution of the
members until the conclusion of the next annual general meeting on such terms and with
such duties as may be agreed with the Board. The auditors’ remuneration shall be fixed by
the members in general meeting by an ordinary resolution of the members or by the Board
if authority is so delegated by the members. The members may, at any general meeting
convened and held in accordance with the Articles, remove the auditors by ordinary
resolution at any time before the expiration of the term of office and shall, by ordinary
resolution, at that meeting appoint new auditors in its place for the remainder of the term.
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--- page 681 ---
The auditors shall audit the financial statements of the Company in accordance with
generally accepted accounting principles of Hong Kong, the International Accounting
Standards or such other standards as may be permitted by the Stock Exchange.
2.7 Dividends and other methods of distribution
The Company in general meeting may declare dividends in any currency to be paid to
the members but no dividend shall be declared in excess of the amount recommended by
the Board.
Except in so far as the rights attaching to, or the terms of issue of, any share may
otherwise provide:
(a) all dividends shall be declared and paid according to the amounts paid up on the
shares in respect of which the dividend is paid, although no amount paid up on a
share in advance of calls shall for this purpose be treated as paid up on the share;
(b) all dividends shall be apportioned and paid pro rata in accordance with the
amount paid up on the shares during any portion(s) of the period in respect of
which the dividend is paid; and
(c) the Board may deduct from any dividend or other monies payable to any member
all sums of money (if any) presently payable by him to the Company on account
of calls, installments or otherwise.
Where the Board or the Company in general meeting has resolved that a dividend
should be paid or declared, the Board may resolve:
(i) that such dividend be satisfied wholly or in part in the form of an allotment of
shares credited as fully paid up, provided that the members entitled to such
dividend will be entitled to elect to receive such dividend (or part thereof) in
cash in lieu of such allotment; or
(ii) that the members entitled to such dividend will be entitled to elect to receive an
allotment of shares credited as fully paid up in lieu of the whole or such part of
the dividend as the Board may think fit.
Upon the recommendation of the Board, the Company may by ordinary resolution in
respect of any one particular dividend of the Company determine that it may be satisfied
wholly in the form of an allotment of shares credited as fully paid up without offering any
right to members to elect to receive such dividend in cash in lieu of such allotment.
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--- page 682 ---
Any dividend, bonus or other sum payable in cash to the holder of shares may be paid
by cheque or warrant sent through the post. Every such cheque or warrant shall be made
payable to the order of the person to whom it is sent and shall be sent at the holder’s or
joint holders’ risk and payment of the cheque or warrant by the bank on which it is drawn
shall constitute a good discharge to the Company. Any one of two or more joint holders
may give effectual receipts for any dividends or other monies payable or property
distributable in respect of the shares held by such joint holders.
Whenever the Board or the Company in general meeting has resolved that a dividend
be paid or declared, the Board may further resolve that such dividend be satisfied wholly or
in part by the distribution of specific assets of any kind.
The Board may, if it thinks fit, receive from any member willing to advance the same,
and either in money or money’s worth, all or any part of the money uncalled and unpaid or
installments payable upon any shares held by him, and in respect of all or any of the
monies so advanced may pay interest at such rate (if any) not exceeding 20 per cent per
annum, as the Board may decide, but a payment in advance of a call shall not entitle the
member to receive any dividend or to exercise any other rights or privileges as a member in
respect of the share or the due portion of the shares upon which payment has been
advanced by such member before it is called up.
All dividends, bonuses or other distributions unclaimed for one year after having been
declared may be invested or otherwise used by the Board for the benefit of the Company
until claimed and the Company shall not be constituted a trustee in respect thereof. All
dividends, bonuses or other distributions unclaimed for six years after having been declared
may be forfeited by the Board and, upon such forfeiture, shall revert to the Company.
No dividend or other monies payable by the Company on or in respect of any share
shall bear interest against the Company.
The Company may exercise the power to cease sending cheques for dividend
entitlements or dividend warrants by post if such cheques or warrants remain uncashed on
two consecutive occasions or after the first occasion on which such a cheque or warrant is
returned undelivered.
2.8 Inspection of corporate records
For so long as any part of the share capital of the Company is listed on the Stock
Exchange, any member may inspect any register of members of the Company maintained in
Hong Kong (except when the register of members is closed in accordance with the terms
equivalent to the relevant section of the Companies Ordinance) without charge and require
the provision to him of copies or extracts of such register in all respects as if the Company
were incorporated under and were subject to the Companies Ordinance.
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--- page 683 ---
2.9 Rights of minorities in relation to fraud or oppression
There are no provisions in the Articles concerning the rights of minority members in
relation to fraud or oppression. However, certain remedies may be available to members of
the Company under the Cayman Islands laws, as summarized in paragraph 3.6 of this
Appendix.
2.10 Procedures on liquidation
A resolution that the Company be wound up by the court or be wound up voluntarily
shall be a special resolution.
Subject to any special rights, privileges or restrictions as to the distribution of
available surplus assets on liquidation for the time being attached to any class or classes of
shares:
(a) if the Company is wound up and the assets available for distribution among the
members of the Company are more than sufficient to repay the whole of the
capital paid up at the commencement of the winding up, then the excess shall be
distributed pari passu among such members in proportion to the amount paid up
on the shares held by them respectively; and
(b) if the Company is wound up and the assets available for distribution among the
members as such are insufficient to repay the whole of the paid-up capital, such
assets shall be distributed so that, as nearly as may be, the losses shall be borne
by the members in proportion to the capital paid up on the shares held by them,
respectively.
If the Company is wound up (whether the liquidation is voluntary or compelled by the
court), the liquidator may, with the sanction of a special resolution and any other sanction
required by the Cayman Companies Act, divide among the members in specie or kind the
whole or any part of the assets of the Company, whether the assets consist of property of
one kind or different kinds, and the liquidator may, for such purpose, set such value as he
deems fair upon any one or more class or classes of property to be so divided and may
determine how such division shall be carried out as between the members or different
classes of members and the members within each class. The liquidator may, with the like
sanction, vest any part of the assets in trustees upon such trusts for the benefit of members
as the liquidator thinks fit, provided that no member shall be compelled to accept any
shares or other property upon which there is a liability.
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--- page 684 ---
2.11 Subscription rights reserve
Provided that it is not prohibited by and is otherwise in compliance with the Cayman
Companies Act, if warrants to subscribe for shares have been issued by the Company and
the Company does any act or engages in any transaction which would result in the
subscription price of such warrants being reduced below the par value of the shares to be
issued on the exercise of such warrants, a subscription rights reserve shall be established
and applied in paying up the difference between the subscription price and the par value of
such shares.
3. COMPANY LA WS OF THE CAYMAN ISLANDS
The Company was incorporated in the Cayman Islands as an exempted company on January
3, 2020 subject to the Cayman Companies Act. Certain provisions of the company laws of the
Cayman Islands are set out below but this section does not purport to contain all applicable
qualifications and exceptions or to be a complete review of all matters of the company laws of
the Cayman Islands, which may differ from equivalent provisions in jurisdictions with which
interested parties may be more familiar.
3.1 Company operations
An exempted company such as the Company must conduct its operations mainly
outside the Cayman Islands. An exempted company is also required to file an annual return
each year with the Registrar of Companies of the Cayman Islands and pay a fee which is
based on the amount of its authorized share capital.
3.2 Share capital
Under the Cayman Companies Act, a Cayman Islands company may issue ordinary,
preference or redeemable shares or any combination thereof. Where a company issues
shares at a premium, whether for cash or otherwise, a sum equal to the aggregate amount or
value of the premiums on those shares shall be transferred to an account, to be called the
share premium account. At the option of a company, these provisions may not apply to
premiums on shares of that company allotted pursuant to any arrangements in consideration
of the acquisition or cancellation of shares in any other company and issued at a premium.
The share premium account may be applied by the company subject to the provisions, if
any, of its memorandum and articles of association, in such manner as the company may
from time to time determine including, but without limitation, the following:
(a) paying distributions or dividends to members;
(b) paying up unissued shares of the company to be issued to members as fully paid
bonus shares;
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--- page 685 ---
(c) any manner provided in section 37 of the Cayman Companies Act;
(d) writing-off the preliminary expenses of the company; and
(e) writing-off the expenses of, or the commission paid or discount allowed on, any
issue of shares or debentures of the company.
Notwithstanding the foregoing, no distribution or dividend may be paid to members
out of the share premium account unless, immediately following the date on which the
distribution or dividend is proposed to be paid, the company will be able to pay its debts as
they fall due in the ordinary course of business.
Subject to confirmation by the court, a company limited by shares or a company
limited by guarantee and having a share capital may, if authorized to do so by its articles of
association, by special resolution reduce its share capital in any way.
3.3 Financial assistance to purchase shares of a company or its holding company
There are no statutory prohibitions in the Cayman Islands on the granting of financial
assistance by a company to another person for the purchase of, or subscription for, its own,
its holding company’s or a subsidiary’s shares. Therefore, a company may provide financial
assistance provided the directors of the company, when proposing to grant such financial
assistance, discharge their duties of care and act in good faith, for a proper purpose and in
the interests of the company. Such assistance should be on an arm’s-length basis.
3.4 Purchase of shares and warrants by a company and its subsidiaries
A company limited by shares or a company limited by guarantee and having a share
capital may, if so authorized by its articles of association, issue shares which are to be
redeemed or are liable to be redeemed at the option of the company or a member and, for
the avoidance of doubt, it shall be lawful for the rights attaching to any shares to be varied,
subject to the provisions of the company’s articles of association, so as to provide that such
shares are to be or are liable to be so redeemed. In addition, such a company may, if
authorized to do so by its articles of association, purchase its own shares, including any
redeemable shares; an ordinary resolution of the company approving the manner and terms
of the purchase will be required if the articles of association do not authorize the manner
and terms of such purchase. A company may not redeem or purchase its shares unless they
are fully paid. Furthermore, a company may not redeem or purchase any of its shares if, as
a result of the redemption or purchase, there would no longer be any issued shares of the
company other than shares held as treasury shares. In addition, a payment out of capital by
a company for the redemption or purchase of its own shares is not lawful unless,
immediately following the date on which the payment is proposed to be made, the company
shall be able to pay its debts as they fall due in the ordinary course of business.
APPENDIX IV SUMMARY OF THE CONSTITUTION OF OUR COMPANY
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--- page 686 ---
Shares that have been purchased or redeemed by a company or surrendered to the
company shall not be treated as canceled but shall be classified as treasury shares if held in
compliance with the requirements of Section 37A(1) of the Cayman Companies Act. Any
such shares shall continue to be classified as treasury shares until such shares are either
canceled or transferred pursuant to the Cayman Companies Act.
A Cayman Islands company may be able to purchase its own warrants subject to and
in accordance with the terms and conditions of the relevant warrant instrument or
certificate. Thus there is no requirement under the Cayman Islands laws that a company’s
memorandum or articles of association contain a specific provision enabling such
purchases. The directors of a company may under the general power contained in its
memorandum of association be able to buy, sell and deal in personal property of all kinds.
A subsidiary may hold shares in its holding company and, in certain circumstances,
may acquire such shares.
3.5 Dividends and distributions
Subject to a solvency test, as prescribed in the Cayman Companies Act, and the
provisions, if any, of the company’s memorandum and articles of association, a company
may pay dividends and distributions out of its share premium account. In addition, based
upon English case law which is likely to be persuasive in the Cayman Islands, dividends
may be paid out of profits.
For so long as a company holds treasury shares, no dividend may be declared or paid,
and no other distribution (whether in cash or otherwise) of the company’s assets (including
any distribution of assets to members on a winding up) may be made, in respect of a
treasury share.
3.6 Protection of minorities and shareholders’ suits
It can be expected that the Cayman Islands courts will ordinarily follow English case
law precedents (particularly the rule in the case of Foss vs. Harbottle and the exceptions to
that rule) which permit a minority member to commence a representative action against or
derivative actions in the name of the company to challenge acts which are ultra vires,
illegal, fraudulent (and performed by those in control of the Company) against the minority,
or represent an irregularity in the passing of a resolution which requires a qualified (or
special) majority which has not been obtained.
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--- page 687 ---
Where a company (not being a bank) is one which has a share capital divided into
shares, the court may, on the application of members holding not less than one-fifth of the
shares of the company in issue, appoint an inspector to examine the affairs of the company
and, at the direction of the court, to report on such affairs. In addition, any member of a
company may petition the court, which may make a winding up order if the court is of the
opinion that it is just and equitable that the company should be wound up.
In general, claims against a company by its members must be based on the general
laws of contract or tort applicable in the Cayman Islands or be based on potential violation
of their individual rights as members as established by a company’s memorandum and
articles of association.
3.7 Disposal of assets
There are no specific restrictions on the power of directors to dispose of assets of a
company, however, the directors are expected to exercise certain duties of care, diligence
and skill to the standard that a reasonably prudent person would exercise in comparable
circumstances, in addition to fiduciary duties to act in good faith, for proper purpose and in
the best interests of the company under English common law (which the Cayman Islands
courts will ordinarily follow).
3.8 Accounting and auditing requirements
A company must cause proper records of accounts to be kept with respect to: (i) all
sums of money received and expended by it; (ii) all sales and purchases of goods by it; and
(iii) its assets and liabilities.
Proper books of account shall not be deemed to be kept if there are not kept such
books as are necessary to give a true and fair view of the state of the company’s affairs and
to explain its transactions.
If a company keeps its books of account at any place other than at its registered office
or any other place within the Cayman Islands, it shall, upon service of an order or notice
by the Tax Information Authority pursuant to the Tax Information Authority Act (2021
Revision) of the Cayman Islands, make available, in electronic form or any other medium,
at its registered office copies of its books of account, or any part or parts thereof, as are
specified in such order or notice.
3.9 Exchange control
There are no exchange control regulations or currency restrictions in effect in the
Cayman Islands.
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--- page 688 ---
3.10 Taxation
The Cayman Islands currently levy no taxes on individuals or corporations based upon
profits, income, gains or appreciations and there is no taxation in the nature of inheritance
tax or estate duty. There are no other taxes likely to be material to the Company levied by
the Government of the Cayman Islands save for certain stamp duties which may be
applicable, from time to time, on certain instruments.
3.11 Stamp duty on transfers
No stamp duty is payable in the Cayman Islands on transfers of shares of Cayman
Islands companies save for those which hold interests in land in the Cayman Islands.
3.12 Loans to directors
There is no express provision prohibiting the making of loans by a company to any of
its directors. However, the company’s articles of association may provide for the
prohibition of such loans under specific circumstances.
3.13 Inspection of corporate records
The members of a company have no general right to inspect or obtain copies of the
register of members or corporate records of the company. They will, however, have such
rights as may be set out in the company’s articles of association.
3.14 Register of members
A Cayman Islands exempted company may maintain its principal register of members
and any branch registers in any country or territory, whether within or outside the Cayman
Islands, as the company may determine from time to time. There is no requirement for an
exempted company to make any returns of members to the Registrar of Companies in the
Cayman Islands. The names and addresses of the members are, accordingly, not a matter of
public record and are not available for public inspection. However, an exempted company
shall make available at its registered office, in electronic form or any other medium, such
register of members, including any branch register of member, as may be required of it
upon service of an order or notice by the Tax Information Authority pursuant to the Tax
Information Authority Act (2021 Revision) of the Cayman Islands.
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--- page 689 ---
3.15 Register of directors and officers
Pursuant to the Cayman Companies Act, the Company is required to maintain at its
registered office a register of directors, alternate directors and officers. The Registrar of
Companies shall make available the list of the names of the current directors of the
Company (and, where applicable, the current alternate directors of the Company) for
inspection by any person upon payment of a fee by such person. A copy of the register of
directors and officers must be filed with the Registrar of Companies in the Cayman Islands,
and any change must be notified to the Registrar of Companies within 30 days of any
change in such directors or officers, including a change of the name of such directors or
officers.
3.16 Winding up
A Cayman Islands company may be wound up by: (i) an order of the court; (ii)
voluntarily by its members; or (iii) under the supervision of the court.
The court has authority to order winding up in a number of specified circumstances
including where, in the opinion of the court, it is just and equitable that such company be
so wound up.
A voluntary winding up of a company (other than a limited duration company, for
which specific rules apply) occurs where the company resolves by special resolution that it
be wound up voluntarily or where the company in general meeting resolves that it be
wound up voluntarily because it is unable to pay its debt as they fall due. In the case of a
voluntary winding up, the company is obliged to cease to carry on its business from the
commencement of its winding up except so far as it may be beneficial for its winding up.
Upon appointment of a voluntary liquidator, all the powers of the directors cease, except so
far as the company in general meeting or the liquidator sanctions their continuance.
In the case of a members’ voluntary winding up of a company, one or more liquidators
are appointed for the purpose of winding up the affairs of the company and distributing its
assets.
As soon as the affairs of a company are fully wound up, the liquidator must make a
report and an account of the winding up, showing how the winding up has been conducted
and the property of the company disposed of, and call a general meeting of the company
for the purposes of laying before it the account and giving an explanation of that account.
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When a resolution has been passed by a company to wind up voluntarily, the
liquidator or any contributory or creditor may apply to the court for an order for the
continuation of the winding up under the supervision of the court, on the grounds that: (i)
the company is or is likely to become insolvent; or (ii) the supervision of the court will
facilitate a more effective, economic or expeditious liquidation of the company in the
interests of the contributories and creditors. A supervision order takes effect for all
purposes as if it was an order that the company be wound up by the court except that a
commenced voluntary winding up and the prior actions of the voluntary liquidator shall be
valid and binding upon the company and its official liquidator.
For the purpose of conducting the proceedings in winding up a company and assisting
the court, one or more persons may be appointed to be called an official liquidator(s). The
court may appoint to such office such person or persons, either provisionally or otherwise,
as it thinks fit, and if more than one person is appointed to such office, the court shall
declare whether any act required or authorized to be done by the official liquidator is to be
done by all or any one or more of such persons. The court may also determine whether any
and what security is to be given by an official liquidator on his appointment; if no official
liquidator is appointed, or during any vacancy in such office, all the property of the
company shall be in the custody of the court.
3.17 Reconstructions
Reconstructions and amalgamations may be approved by (i) 75% in value of the
members or class of members or (ii) a majority in number representing 75% in value of the
creditors or class of creditors, in each case depending on the circumstances, as are present
at a meeting called for such purpose and thereafter sanctioned by the courts. Whilst a
dissenting member has the right to express to the court his view that the transaction for
which approval is being sought would not provide the members with a fair value for their
shares, the courts are unlikely to disapprove the transaction on that ground alone in the
absence of evidence of fraud or bad faith on behalf of management, and if the transaction
were approved and consummated, the dissenting member would have no rights comparable
to the appraisal rights (that is, the right to receive payment in cash for the judicially
determined value of their shares) ordinarily available, for example, to dissenting members
of a United States corporation.
APPENDIX IV SUMMARY OF THE CONSTITUTION OF OUR COMPANY
AND THE CAYMAN COMPANIES ACT
– IV-26 –


--- page 691 ---
3.18 Take-overs
Where an offer is made by a company for the shares of another company and, within
four months of the offer, the holders of not less than 90 per cent of the shares which are
the subject of the offer accept, the offeror may, at any time within two months after the
expiration of that four-month period, by notice require the dissenting members to transfer
their shares on the terms of the offer. A dissenting member may apply to the Cayman
Islands courts within one month of the notice objecting to the transfer. The burden is on the
dissenting member to show that the court should exercise its discretion, which it will be
unlikely to do unless there is evidence of fraud or bad faith or collusion as between the
offeror and the holders of the shares who have accepted the offer as a means of unfairly
forcing out minority members.
3.19 Indemnification
The Cayman Islands laws do not limit the extent to which a company’s articles of
association may provide for indemnification of officers and directors, save to the extent any
such provision may be held by the court to be contrary to public policy, for example, where
a provision purports to provide indemnification against the consequences of committing a
crime.
3.20 Economic substance
The Cayman Islands enacted the International Tax Co-operation (Economic Substance)
Act (2021 Revision), which became effective on January 1, 2019, together with the
Guidance Notes published by the Cayman Islands Tax Information Authority from time to
time. The Company is required to comply with the economic substance requirements from
July 1, 2019 and make an annual report in the Cayman Islands as to whether or not it is
carrying on any relevant activities and if it is, it must satisfy an economic substance test.
4. GENERAL
Harney Westwood & Riegels, the Company’s legal advisors on Cayman Islands law, have
sent to the Company a letter of advice summarizing certain aspects of the Cayman Companies
Act. This letter, together with a copy of the Cayman Companies Act, is available for inspection
as referred to in the paragraph headed “Documents Delivered to the Registrar of Companies and
Available on Display” in Appendix VI. Any person wishing to have a detailed summary of the
Cayman Companies Act or advice on the differences between it and the laws of any jurisdiction
with which he is more familiar is recommended to seek independent legal advice.
APPENDIX IV SUMMARY OF THE CONSTITUTION OF OUR COMPANY
AND THE CAYMAN COMPANIES ACT
– IV-27 –


--- page 692 ---
A. FURTHER INFORMATION ABOUT OUR GROUP
1. Incorporation of our Company
Our Company was established in the Cayman Islands under the Cayman Companies
Act as an exempted company with limited liability on January 3, 2020. We have established
a principal place of business in Hong Kong at Unit 2310–11, 23rd Floor, Tower Two, Lippo
Centre, 89 Queensway, Hong Kong and have been registered with the Registrar of
Companies in Hong Kong as a non-Hong Kong company under Part 16 of the Companies
Ordinance on January 28, 2021. Mr. Lai has been appointed as the authorized representative
of our Company for the acceptance of service of process and notices in Hong Kong.
As our Company was established in the Cayman Islands, our corporate structure and
Memorandum and Articles of Association are subject to the relevant laws and regulations of
the Cayman Islands. A summary of the relevant laws and regulations of the Cayman Islands
and of the Memorandum and Articles of Association is set out in the section headed
“Summary of the constitution of our Company and the Cayman Companies Act” in
Appendix IV to this prospectus.
2. Changes in the share capital of our Company
On the date of incorporation, the authorized share capital of our Company was
US$50,000 divided into 50,000 ordinary shares of a par value of US$1.00 each. One
ordinary share of a par value of US$1.00 was allotted and issued to the initial subscriber
and was subsequently transferred to Star Media.
The following changes in the share capital of our Company have taken place since the
date of incorporation of our Company:
(i) On July 29, 2020, the authorized share capital of our Company was changed from
US$50,000 divided into 50,000 ordinary shares of a par value of US$1.00 each to
US$50,000 divided into 5,000,000,000 Shares of a par value of US$0.00001
each;
(ii) On August 4, 2020, our Company allotted and issued 150,000,000 Shares,
150,000,000 Shares, 74,900,000 Shares, 75,000,000 Shares and 50,000,000
Shares at par value to Best Million, Legend Key, Star Media, Lake Ranch and
Max One, respectively;
(iii) On January 10, 2021, our Company allotted and issued 12,820,512 Shares at a
consideration of HK$37.5 million to Long Precise; and
(iv) On February 17, 2021, our Company allotted and issued 30,094,112 Shares at a
consideration of HK$200 million to Bradbury.
APPENDIX V STATUTORY AND GENERAL INFORMATION
–V - 1–


--- page 693 ---
Immediately following the completion of the Capitalization Issue and the Global
Offering (assuming the Over-allotment Option is not exercised and without taking into
account any Shares which may be issued pursuant to the Share Option Schemes), the
authorized share capital of our Company will be US$50,000, divided into 5,000,000,000
Shares of a par value of US$0.00001 each, of which 800,000,000 Shares will be in issue
and are fully paid or credited as fully paid and 4,200,000,000 Shares will remain unissued.
Save as disclosed above and in the paragraph headed “– A. Further information about
our Group – 3. Resolutions of our Shareholders” below in this appendix, there has been no
alteration in the share capital of our Company since our incorporation.
3. Resolutions of our Shareholders
Written resolutions were passed by the Shareholders on June 19, 2023, pursuant to
which, among other things:
(i) conditional on (1) the Listing Committee granting the listing of, and permission
to deal in, the Shares in issue and to be issued as mentioned in this prospectus;
(2) the price per Offer Share having been determined; and (3) the obligations of
the Underwriters under the Underwriting Agreements becoming unconditional
and not being terminated in accordance with the terms therein or otherwise, in
each case on or before such dates as may be specified in the Underwriting
Agreements:
(a) the Memorandum and Articles of Association was adopted with effect from
the Listing Date;
(b) the Global Offering was approved and our Directors were authorized to allot
and issue new Shares pursuant to the Global Offering;
(c) the granting of the Over-allotment Option was approved;
(d) the proposed Listing was approved and our Directors were authorized to
implement the Listing;
APPENDIX V STATUTORY AND GENERAL INFORMATION
–V - 2–


--- page 694 ---
(e) subject to and conditional upon the share premium account of our Company
being credited as a result of the issue of Offer Shares pursuant to the Global
Offering, our Directors were authorized to allot and issue a total of
178,445,376 Shares credited as fully paid at par to the holders of Shares
whose names are entered on the principal register of members of the
Company maintained in the Cayman Islands prior to the Capitalization Issue
(or as they may direct) in proportion to their respective shareholdings by
way of capitalization of the sum of approximately US$1,784.45 standing to
the credit of the share premium account of our Company, and the Shares to
be allotted and issued pursuant to this resolution shall rank pari passu in all
respects with the then existing issued Shares;
(f) a general unconditional mandate was granted to the Directors to allot, issue
and deal with Shares or securities convertible into Shares or options,
warrants or similar rights to subscribe for Shares or such convertible
securities and to make or grant offers, agreements or options which would
or might require the exercise of such powers, provided that the aggregate
nominal value of Shares allotted or agreed to be allotted by our Directors
other than pursuant to (a) a rights issue, (b) any scrip dividend scheme or
similar arrangement providing for the allotment of Shares in lieu of the
whole or part of a dividend on Shares in accordance with the Articles of
Association, (c) the exercise of Options granted under the Pre-IPO Stock
Incentive Plan and any Options which may be granted under the Post-IPO
Share Option Scheme, (d) the exercise of any subscription or conversion
rights attaching to any warrants or securities which are convertible into
Shares or in issue prior to the date of passing the relevant resolution, or (e)
a specific authority granted by the Shareholders in general meeting, shall
not exceed the aggregate of (1) 20% of the total number of the issued
Shares in issue immediately following the completion of the Capitalization
Issue and the Global Offering (but excluding any Shares which may be
issued pursuant to the exercise of the Over-allotment Option and the
Options granted under the Pre-IPO Stock Incentive Plan or any Options
which may be granted under the Post-IPO Share Option Scheme) and (2) the
total number of Shares repurchased by our Company (if any) under the
general mandate to repurchase Shares referred to in paragraph (g) below,
such mandate to remain in effect during the period from the passing of the
resolution until the earliest of the conclusion of our next annual general
meeting, the end of the period within which we are required by any
applicable law or the Articles of Association to hold our next annual general
meeting and the date on which the resolution is varied or revoked by an
ordinary resolution of the Shareholders in general meeting (the “ Applicable
Period ”);
APPENDIX V STATUTORY AND GENERAL INFORMATION
–V - 3–


--- page 695 ---
(g) a general unconditional mandate was granted to the Directors to exercise all
powers of our Company to repurchase on the Stock Exchange or on any
other stock exchange on which the securities of our Company may be listed
and which is recognized by the SFC and the Stock Exchange for this
purpose Shares of not more than 10% of the number of issued Shares
immediately following completion of the Capitalization Issue and the Global
Offering (but excluding any Shares which may be issued upon the exercise
of the Over-allotment Option and the Options granted under the Pre-IPO
Stock Incentive Plan or any Options which may be granted under the
Post-IPO Share Option Scheme), such mandate to remain in effect during
the Applicable Period; and
(h) the general unconditional mandate mentioned in paragraph (f) above be
extended by the addition to the aggregate number of Shares which may be
allotted or agreed conditionally or unconditionally to be allotted by the
Directors pursuant to such general mandate of an amount representing the
aggregate number of Shares repurchased by our Company pursuant to the
mandate to repurchase Shares referred to in paragraph (g) above, provided
that such extended amount shall not exceed 10% of the aggregate nominal
amount of the Company’s share capital in issue immediately following
completion of the Capitalization Issue and the Global Offering (but
excluding any Shares which may be issued upon the exercise of the
Over-allotment Option and the Options granted under the Pre-IPO Stock
Incentive Plan or any Options which may be granted under the Post-IPO
Share Option Scheme); and
(ii) conditional on (a) the Listing Committee granting the listing of, and permission
to deal in, the Shares in issue and to be issued pursuant to the exercise of any
Options which were granted under the Pre-IPO Stock Incentive Plan and any
Options which may be granted pursuant to the Post-IPO Share Option Scheme
and (b) the commencement of trading of the Shares on the Main Board of the
Stock Exchange, (1) the adoption of the Post-IPO Share Option Scheme was
approved and (2) our Board was authorized to allot, issue and deal with Shares
pursuant to the exercise of any Options which may be granted pursuant to the
Post-IPO Share Option Scheme.
4. Our corporate reorganization
The companies comprising our Group underwent a reorganization to rationalize our
Group’s structure in preparation for the listing of the Shares on the Stock Exchange. Please
see the section headed “History, development and reorganization” in this prospectus for
details.
APPENDIX V STATUTORY AND GENERAL INFORMATION
–V - 4–


--- page 696 ---
5. Changes in the share capital of our subsidiaries
Our subsidiaries are listed in the section headed “Accountant’s Report” in Appendix I
to this prospectus. The following alterations in the share capital of our subsidiaries have
taken place within two years immediately preceding the date of this prospectus:
Name of
subsidiary Date of change
Registered capital
before change
Registered capital
after change
Star Plus
Entertainment
(Kunshan)
July 14, 2021 RMB1,000,000 RMB10,000,000
Star Plus
Excellence
July 14, 2021 RMB1,000,000 RMB10,000,000
Star Plus JM
(Kunshan)
July 14, 2021 RMB1,000,000 RMB10,000,000
Star Plus IP
(Kunshan)
July 15, 2021 RMB1,000,000 RMB10,000,000
Kunshan Star
Plus Action
November 19, 2021 RMB10,000,000 RMB100,000,000
Save as disclosed above, there have been no alteration in the share capital of our
subsidiaries within two years immediately preceding the date of this prospectus.
6. Repurchases of our own securities
(i) Provisions of the Listing Rules
The Listing Rules permit companies with a primary listing on the Stock
Exchange to repurchase their own securities on the Stock Exchange subject to certain
restrictions, the more important of which are summarized below:
(a) Shareholders’ approval
All proposed repurchases of securities (which must be fully paid up in the
case of shares) by a company with a primary listing on the Stock Exchange must
be approved in advance by an ordinary resolution of the shareholders in general
meeting, either by way of general mandate or by specific approval of a particular
transaction.
APPENDIX V STATUTORY AND GENERAL INFORMATION
–V - 5–


--- page 697 ---
Pursuant to a resolution passed by our then Shareholders on June 19, 2023,
a general unconditional mandate (the “ Repurchase Mandate ”) was given to the
Directors authorizing any repurchase by our Company of Shares on the Stock
Exchange or on any other stock exchange on which the securities of our
Company may be listed and which is recognized by the SFC and the Stock
Exchange for this purpose, of not more than 10% of the number of issued Shares
immediately following the completion of the Capitalization Issue and the Global
Offering (assuming the Over-allotment Option is not exercised and without
taking into account any Shares which may be issued upon the exercise of the
Options granted under the Pre-IPO Stock Incentive Plan and the Post-IPO Share
Option Scheme), such mandate to expire at the conclusion of our next annual
general meeting, the date by which our next annual general meeting is required
by the Cayman Companies Act or by our Articles of Association or any other
applicable laws of the Cayman Islands to be held or when revoked or varied by
an ordinary resolution of the Shareholders in general meeting, whichever first
occurs.
(b) Trading restrictions
The total number of shares which a listed company may repurchase on the
Stock Exchange is the number of shares representing up to a maximum of 10% of
the number of issued Shares of our Company. A company may not issue or
announce a proposed issue of new securities for a period of 30 days immediately
following a repurchase (other than an issue of securities pursuant to an exercise
of warrants, share options or similar instruments requiring the company to issue
securities which were outstanding prior to such repurchase) without the prior
approval of the Stock Exchange. In addition, a listed company is prohibited from
repurchasing its shares on the Stock Exchange if the purchase price is 5% or
more than the average closing market price for the five preceding trading days on
which its shares were traded on the Stock Exchange. The Listing Rules also
prohibit a listed company from repurchasing its securities if the repurchase would
result in the number of listed securities which are in the hands of the public
falling below the relevant prescribed minimum percentage as required by the
Stock Exchange. A listed company is required to procure that the broker
appointed by it to effect a repurchase of securities discloses to the Stock
Exchange such information with respect to the repurchase as the Stock Exchange
may require.
(c) Status of repurchased Shares
All repurchased securities (whether effected on the Stock Exchange or
otherwise) will be automatically canceled and the certificates for those securities
must be canceled and destroyed.
APPENDIX V STATUTORY AND GENERAL INFORMATION
–V - 6–


--- page 698 ---
(d) Suspension of repurchase
A listed company may not make any repurchase of securities at any time
after inside information has come to its knowledge until the information has been
made publicly available. In particular, during the period of one month
immediately preceding the earlier of (a) the date of the board meeting (as such
date is first notified to the Stock Exchange in accordance with the Listing Rules)
for the approval of a listed company’s results for any year, half-year, quarterly or
any other interim period (whether or not required under the Listing Rules) and
(b) the deadline for publication of an announcement of a listed company’s results
for any year or half-year under the Listing Rules, or quarterly or any other
interim period (whether or not required under the Listing Rules), and ending on
the date of the results announcement, the listed company may not repurchase its
shares on the Stock Exchange other than in exceptional circumstances. In
addition, the Stock Exchange may prohibit a repurchase of securities on the
Stock Exchange if a listed company has breached the Listing Rules.
(e) Reporting requirements
Certain information relating to repurchases of securities made by a listed
company on the Stock Exchange or otherwise must be reported to the Stock
Exchange not later than 30 minutes before the earlier of the commencement of
the morning trading session or any pre-opening session on the following business
day. In addition, a listed company’s annual report is required to disclose details
regarding repurchases of securities made during the year, including a monthly
analysis of the number of securities repurchased, the purchase price per share or
the highest and lowest price paid for all such repurchases, where relevant, and
the aggregate prices paid. The directors’ report shall contain reference to the
purchases made during the year and the directors’ reasons for making such
purchases.
(f) Connected persons
A listed company is prohibited from knowingly repurchasing securities on
the Stock Exchange from a “core connected person,” that is, a director, chief
executive or substantial shareholder of the company or any of its subsidiaries or
their close associates and a core connected person is prohibited from knowingly
selling his or her securities to the listed company.
APPENDIX V STATUTORY AND GENERAL INFORMATION
–V - 7–


--- page 699 ---
(ii) Reasons for repurchases
The Directors believe that the ability to repurchase Shares is in the interests of
our Company and the Shareholders. Repurchases may, depending on the
circumstances, result in an increase in the net assets and/or earnings per Share. The
Directors sought the grant of a general mandate to repurchase Shares to give our
Company the flexibility to do so if and when appropriate. The number of Shares to be
repurchased on any occasion and the price and other terms upon which the same are
repurchased will be decided by the Directors at the relevant time having regard to the
circumstances then pertaining.
(iii) Funding of repurchases
Repurchases must be funded out of funds legally available for the purpose in
accordance with the Memorandum and the Articles of Association of our Company and
the Listing Rules and the applicable laws of the Cayman Islands.
A listed company may not repurchase its own securities on the Stock Exchange
for a consideration other than cash or for settlement otherwise than in accordance with
the trading rules of the Stock Exchange. Any repurchases of Shares by our Company
must be made out of the profits of our Company, the sum standing to the credit of the
share premium account of our Company or out of a fresh issue of Shares made for the
purpose of the repurchase or, subject to the Cayman Companies Act, out of capital.
Any premium payable on a repurchase must be provided for out of the profits of our
Company or from sums standing to the credit of the share premium account of our
Company or, subject to the Cayman Companies Act, out of capital.
There could be a material adverse impact on the working capital or gearing
position of our Company (as compared with the position disclosed in this prospectus)
in the event that the Repurchase Mandate were to be carried out in full at any time
during the share repurchase period. However, the Directors do not propose to exercise
the general mandate to such extent as would, in the circumstances, have a material
adverse effect on the working capital requirements of our Company or the gearing
levels which in the opinion of the Directors are from time to time appropriate for our
Company.
(iv) General
The exercise in full of the Repurchase Mandate, on the basis of 800,000,000
Shares in issue immediately following the completion of the Capitalization Issue and
the Global Offering and assuming the Over-allotment Option is not exercised and
without taking into account any Shares which may be issued upon the exercise of the
Options granted under the Pre-IPO Stock Incentive Plan or any Options which may be
APPENDIX V STATUTORY AND GENERAL INFORMATION
–V - 8–


--- page 700 ---
granted under the Post-IPO Share Option Scheme, could accordingly result in up to
80,000,000 Shares being repurchased by our Company during the period prior to:
(i) the conclusion of our next annual general meeting; or
(ii) the end of the period within which we are required by any applicable law or
our Articles of Association to hold our next annual general meeting; or
(iii) the date when the Repurchase Mandate is varied or revoked by an ordinary
resolution of our Shareholders in general meeting,
whichever is the earliest.
None of the Directors nor, to the best of their knowledge having made all
reasonable enquiries, any of their close associates currently intends to sell any Shares
to our Company.
The Directors have undertaken to the Stock Exchange that, so far as the same
may be applicable, they will exercise the Repurchase Mandate in accordance with the
Listing Rules and the applicable laws in the Cayman Islands.
No core connected person of our Company has notified our Company that he or
she has a present intention to sell Shares to our Company, or has undertaken not to do
so, if the Repurchase Mandate is exercised.
If, as a result of any repurchase of Shares, a Shareholder’s proportionate interest
in the voting rights of our Company is increased, such increase will be treated as an
acquisition for the purposes of the Takeovers Codes. Accordingly, a Shareholder or a
group of Shareholders acting in concert (as defined in the Takeovers Codes),
depending on the level of interests held by such Shareholder(s), could obtain or
consolidate control of our Company and become obliged to make a mandatory offer in
accordance with Rule 26 of the Takeovers Codes. Save as aforesaid, the Directors are
not aware of any consequences which would arise under the Takeovers Codes as a
consequence of any repurchases pursuant to the Repurchase Mandate.
Any repurchase of Shares that results in the number of Shares held by the public
being reduced to less than 25% (or a higher percentage upon completion of the
exercise of the Over-allotment Option) of the Shares then in issue could only be
implemented if the Stock Exchange agreed to waive the Listing Rules requirements
regarding the public shareholding referred to above. It is believed that a waiver of this
provision would not normally be given other than in exceptional circumstances.
APPENDIX V STATUTORY AND GENERAL INFORMATION
–V - 9–


--- page 701 ---
B. FURTHER INFORMATION ABOUT OUR BUSINESS
1. Summary of material contracts
The following contracts (not being contracts entered into the ordinary course of
business) were entered into by our Company or its subsidiaries within the two years
preceding the date of this prospectus and are or may be material:
(i) the cornerstone investment agreement dated May 22, 2023 entered into among
Star Plus Legend Holdings Limited, Blink Field Limited, Zhang Yuan, CMBC
International Capital Limited (ʮ̡ ) and CMBC Securities
Company Limited (ʮ̡ ), pursuant to which Blink Field Limited
agreed to subscribe for Shares at the Offer Price in the aggregate amount of
Hong Kong dollar equivalent of US$15,000,000 (excluding brokerage and
levies);
(ii) the cornerstone investment agreement dated May 24, 2023 entered into among
Star Plus Legend Holdings Limited, NetDragon Websoft Inc., NetDragon Websoft
Holdings Limited, CMBC International Capital Limited and CMBC Securities
Company Limited, pursuant to which NetDragon Websoft Inc. agreed to
subscribe for Shares at the Offer Price in the aggregate amount of Hong Kong
dollar equivalent of US$3,000,000 (excluding brokerage and levies);
(iii) the Deed of Non-competition;
(iv) the Deed of Indemnity; and
(v) the Hong Kong Underwriting Agreement.
APPENDIX V STATUTORY AND GENERAL INFORMATION
– V-10 –


--- page 702 ---
2. Intellectual property rights of the Group
(i) Trademarks
As of the Latest Practicable Date, we had registered the following trademarks
which are material to our business:
Trademark Class
Place of
registration
Registration
number Date of registration
Date of
expiry Registered owner
14 PRC 49027883A May 28, 2021 May 27, 2031 Star Plus
Development
38 PRC 49358417 April 28, 2021 April 27, 2031 Star Plus
Development
9 PRC 49031444A May 28, 2021 May 27, 2031 Star Plus
Development
35 PRC 49027887A July 7, 2021 July 6, 2031 Star Plus
Development
14 PRC 49027882 April 7, 2021 April 6, 2031 Star Plus
Development
38 PRC 50093621 June 14, 2021 June 13, 2031 Star Plus
Development
15 PRC 46675461 January 28, 2021 January 27, 2031 Star Plus
Development
and JVR Music
9 PRC 46645002 April 7, 2021 April 6, 2031 Star Plus
Development
and JVR Music
APPENDIX V STATUTORY AND GENERAL INFORMATION
–V - 1 1–


--- page 703 ---
Trademark Class
Place of
registration
Registration
number Date of registration
Date of
expiry Registered owner
28, 12,
23, 44,
22, 36,
39, 5,
34, 25,
38, 24,
21, 11,
27, 2, 42
PRC 46683884,
46683797,
46683494,
46676159,
46675415,
46668211,
46668196,
46665145,
46663272,
46663252,
46663236,
46661444,
46656965,
46656933,
46656813,
46652674,
46646693
January 21, 2021 January 20, 2031 Star Plus
Development
and JVR Music
30, 43,
32, 29,
35
PRC 46242938,
46234639,
46220968,
46220958,
46212460
February 14, 2021 February 13, 2031 Star Plus
Development
and JVR Music
APPENDIX V STATUTORY AND GENERAL INFORMATION
– V-12 –


--- page 704 ---
Trademark Class
Place of
registration
Registration
number Date of registration
Date of
expiry Registered owner
25 PRC 45895098 March 28, 2021 March 27, 2031 Star Plus
Development
and JVR Music
28 PRC 45890835 January 21, 2021 January 20, 2031 Star Plus
Development
and JVR Music
42 PRC 45866826A February 14, 2021 February 13, 2031 Star Plus
Development
and JVR Music
36 PRC 45867600 March 21, 2021 March 20, 2031 Star Plus
Development
and JVR Music
23 PRC 45877779 January 28, 2020 January 27, 2030 Star Plus
Development
and JVR Music
44, 22,
34, 14,
5, 3, 21,
43, 30,
20, 12,
2, 41, 32
PRC 45894112,
45891314,
45890913,
45887059,
45885859,
45885853,
45885161,
45883759,
45883475,
45883165,
45883090,
45882979,
45878855,
45861112
December 28, 2020 December 27, 2030 Star Plus
Development
and JVR Music
APPENDIX V STATUTORY AND GENERAL INFORMATION
– V-13 –


--- page 705 ---
Trademark Class
Place of
registration
Registration
number Date of registration
Date of
expiry Registered owner
35, 26,
27, 11
PRC 45861203,
45869255,
45869278,
45869742
January 7, 2021 January 6, 2031 Star Plus
Development
and JVR Music
38, 24 PRC 45877989,
45862091
January 14, 2021 January 13, 2031 Star Plus
Development
and JVR Music
31, 15 PRC 45877895,
45877456
January 28, 2021 January 27, 2031 Star Plus
Development
and JVR Music
33, 9,
10, 39,
18
PRC 45899793,
45897307,
45866665,
45871651,
45874934
February 7, 2021 February 6, 2031 Star Plus
Development
and JVR Music
29, 16 PRC 45899604A,
45877481A
March 7, 2021 March 6, 2031 Star Plus
Development
and JVR Music
42 PRC 40550370 April 7, 2020 April 6, 2030 Star Plus
Development
and JVR Music
30 PRC 43929045 January 14, 2021 January 13, 2031 Star Plus
Development
and JVR Music
11 PRC 40562622 April 14, 2020 April 13, 2030 Star Plus
Development
and JVR Music
9 PRC 40555064A May 14, 2020 May 13, 2030 Star Plus
Development
and JVR Music
APPENDIX V STATUTORY AND GENERAL INFORMATION
– V-14 –


--- page 706 ---
Trademark Class
Place of
registration
Registration
number Date of registration
Date of
expiry Registered owner
34, 39,
15, 24,
44, 35,
25, 27,
12, 18,
31, 38,
28, 29,
21, 14,
5, 22,
23, 43,
26, 2,
36, 10, 3
PRC 40579206,
40578436,
40577400,
40575859,
40575797,
40575563,
40573609,
40570161,
40570143,
40566767,
40566480,
40566472,
40560959,
40559718,
40559665,
40559654,
40559634,
40559445,
40558158,
40556652,
40556626,
40556435,
40555072,
40550556,
40550510
April 7, 2020 April 6, 2030 Star Plus
Development
and JVR Music
20, 30 PRC 40572667,
40561277
June 7, 2020 June 6, 2030 Star Plus
Development
and JVR Music
16, 9 PRC 40556704,
40555064
March 21, 2021 March 20, 2031 Star Plus
Development
and JVR Music
14 PRC 29582679 January 21, 2019 January 20, 2029 Star Plus
(Kunshan)
APPENDIX V STATUTORY AND GENERAL INFORMATION
– V-15 –


--- page 707 ---
Trademark Class
Place of
registration
Registration
number Date of registration
Date of
expiry Registered owner
2, 27,
15, 24,
34, 33,
10, 5,
26, 23,
12, 3, 20
PRC 29582644,
29582360,
29580913,
29579365,
29576838,
29574820,
29573477,
29573472,
29571843,
29571821,
29571778,
29567819,
29562213
January 14, 2019 January 13, 2029 Star Plus
(Kunshan)
32, 21,
44, 11,
31, 30,
29
PRC 29582413,
29582321,
29580992,
29580889,
29577747,
29576963,
29568829
April 28, 2019 April 27, 2029 Star Plus
(Kunshan)
5, 2, 24,
10, 20,
15, 33
PRC 29582656,
29582641,
29582342,
29578017,
29576236,
29568761,
29568308
January 21, 2019 January 20, 2029 Star Plus
(Kunshan)
27, 14,
23, 12,
26, 34, 3
PRC 29582358,
29576216,
29573232,
29571776,
29568808,
29568327,
29566243
January 14, 2019 January 13, 2029 Star Plus
(Kunshan)
APPENDIX V STATUTORY AND GENERAL INFORMATION
– V-16 –


--- page 708 ---
Trademark Class
Place of
registration
Registration
number Date of registration
Date of
expiry Registered owner
30, 29,
44, 31,
32, 11
PRC 29573281,
29571563,
29571475,
29563780,
29562607,
29561982
April 28, 2019 April 27, 2029 Star Plus
(Kunshan)
35 PRC 43376906 February 21, 2021 February 20, 2031 Star Plus
(Kunshan)
9 PRC 43373399 December 21, 2020 December 20, 2030 Star Plus
(Kunshan)
9 PRC 53786529 November 28, 2021 November 27, 2031 Star Plus
(Kunshan)
30 PRC 53775249 December 7, 2021 December 6, 2031 Star Plus
(Kunshan)
39, 28,
41
PRC 44960959,
44957269,
44957237
December 14, 2020 December 13, 2030 Star Plus
(Kunshan)
5, 9 PRC 44975365,
44971153
December 28, 2020 December 27, 2030 Star Plus
(Kunshan)
3 PRC 44971177 December 21, 2020 December 20, 2030 Star Plus
(Kunshan)
16 PRC 44964663 March 7, 2021 March 6, 2031 Star Plus
(Kunshan)
35 PRC 44946519 February 21, 2021 February 20, 2031 Star Plus
(Kunshan)
32 PRC 44656457 December 7, 2020 December 6, 2030 Kunshan Star Plus
Action
30, 25 PRC 38817990,
36963704
February 7, 2020 February 6, 2030 Kunshan Star Plus
Action
APPENDIX V STATUTORY AND GENERAL INFORMATION
– V-17 –


--- page 709 ---
Trademark Class
Place of
registration
Registration
number Date of registration
Date of
expiry Registered owner
5, 5 PRC 36970723,
36969410
February 21, 2020 February 20, 2030 Kunshan Star Plus
Action
3 PRC 36968771 December 14, 2019 December 13, 2029 Kunshan Star Plus
Action
32 PRC 36966089 December 21, 2019 December 20, 2029 Kunshan Star Plus
Action
11, 35 PRC 36966039,
36949190
November 14, 2019 November 13, 2029 Kunshan Star Plus
Action
44, 36,
28, 18
PRC 36959038,
36958885,
36955717,
36949215
November 21, 2019 November 20, 2029 Kunshan Star Plus
Action
5 PRC 48938992A April 21, 2021 April 20, 2031 Kunshan Star Plus
Action
29 PRC 45854154 April 14, 2021 April 13, 2031 Kunshan Star Plus
Action
31 PRC 45838923 December 28, 2020 December 27, 2030 Kunshan Star Plus
Action
5 PRC 48938992 October 28, 2021 October 27, 2031 Kunshan Star Plus
Action
25 PRC 50118591 June 7, 2021 June 6, 2031 Star Plus
Development
9 PRC 48634121 March 21, 2021 March 20, 2031 Star Plus
Development
42 PRC 45821157 April 7, 2020 April 6, 2030 Star Plus
Development
25 PRC 45821036 February 7, 2021 February 6, 2031 Star Plus
Development
APPENDIX V STATUTORY AND GENERAL INFORMATION
– V-18 –


--- page 710 ---
Trademark Class
Place of
registration
Registration
number Date of registration
Date of
expiry Registered owner
16 PRC 45831490 March 7, 2021 March 6, 2031 Star Plus
Development
44 PRC 45834952 February 14, 2021 February 13, 2031 Star Plus
Development
43, 35 PRC 47158269,
47153150
July 28, 2021 July 27, 2031 Star Plus
Development
21, 14,
23, 45,
6, 24,
27, 7,
36, 39,
13, 34,
1, 12,
17, 26,
40, 22,
31, 4, 2,
8, 10,
11, 18,
15, 37,
20, 38,
19
PRC 45825966,
45825837,
45825991,
45827260,
45827314,
45827437,
45827486,
45829908,
45830022,
45830056,
45830309,
45834887,
45835562,
45835903,
45836024,
45837090,
45837192,
45837709,
45842701,
45844365,
45844925,
45845234,
45845248,
45845278,
45849055,
45851217,
45851494,
45855960,
45858869,
45859615
December 14, 2020 December 13, 2030 Star Plus
Development
APPENDIX V STATUTORY AND GENERAL INFORMATION
– V-19 –


--- page 711 ---
Trademark Class
Place of
registration
Registration
number Date of registration
Date of
expiry Registered owner
43 PRC 54655269 October 28, 2021 October 27, 2031 Star Plus
Development
35 PRC 54643098 December 21, 2021 December 20, 2031 Star Plus
Development
3 PRC 49986129 July 28, 2021 July 27, 2031 Star Plus
Development
3 PRC 54643110 October 28, 2021 October 27, 2031 Star Plus
Development
15 PRC 49023401 March 28, 2021 March 27, 2031 Star Plus
Development
31 PRC 49017025 March 21, 2021 March 20, 2031 Star Plus
Development
3, 11, 20 PRC 49809580A,
49034417,
49017771
July 7, 2021 July 6, 2031 Star Plus
Development
10, 24, 8 PRC 49017389,
49013525,
49012064
June 7, 2021 June 6, 2031 Star Plus
Development
28, 29,
44
PRC 49016174A,
49009192A,
49007226A
May 14, 2021 May 13, 2031 Star Plus
Development
32, 13 PRC 49015862,
49005555
April 7, 2021 April 6, 2031 Star Plus
Development
43 PRC 49365906 May 28, 2021 May 27, 2031 Star Plus
Development
18, 8,
10, 16
PRC 46246257,
46234037,
46221368,
46214067
February 14, 2021 February 13, 2031 Star Plus
Development
APPENDIX V STATUTORY AND GENERAL INFORMATION
– V-20 –


--- page 712 ---
Trademark Class
Place of
registration
Registration
number Date of registration
Date of
expiry Registered owner
39, 29,
24, 22,
14, 11,
23, 26,
31, 15
PRC 49371924,
49371314,
49365729,
49363248,
49363226,
49363216,
49358859,
49358531,
49349124,
49348984
April 7, 2021 April 6, 2031 Star Plus
Development
5 PRC 55439758 November 21, 2021 November 20, 2031 Star Plus
Development
21 PRC 55417401 November 28, 2021 November 27, 2031 Star Plus
Development
3 PRC 55447305 December 7, 2021 December 6, 2031 Star Plus
Development
44 PRC 49035762 June 7, 2021 June 6, 2031 Star Plus
Development
43 PRC 49035752A May 14, 2021 May 13, 2031 Star Plus
Development
27 PRC 49015458 April 7, 2021 April 6, 2031 Star Plus
Development
26, 13,
12, 8,
31, 3,
10, 15,
14, 11
PRC 49035732,
49034428,
49027937,
49027905,
49015846,
49015421,
49012071,
49010624,
49010618,
49010592
March 28, 2021 March 27, 2031 Star Plus
Development
APPENDIX V STATUTORY AND GENERAL INFORMATION
– V-21 –


--- page 713 ---
Trademark Class
Place of
registration
Registration
number Date of registration
Date of
expiry Registered owner
29, 30 PRC 49026416,
49013633
July 7, 2021 July 6, 2031 Star Plus
Development
21 PRC 48312104 April 14, 2021 April 13, 2031 Star Plus
Development
7 PRC 48309648 April 28, 2021 April 27, 2031 Star Plus
Development
19 PRC 48294515 June 7, 2021 June 6, 2031 Star Plus
Development
16 PRC 48252643 June 21, 2021 June 20, 2031 Star Plus
Development
26, 37,
31, 40,
22, 42,
24
PRC 48317143,
48312549,
48312512,
48312168,
48312108,
48297828,
48290423
March 21, 2021 March 20, 2031 Star Plus
Development
6, 14,
1 1 ,1 ,2 ,
12, 4
PRC 48272307,
48267535,
48266798,
48259072,
48255864,
48254276,
48247340
March 7, 2021 March 6, 2031 Star Plus
Development
20, 13 PRC 48302205,
48254497
April 7, 2021 April 6, 2031 Star Plus
Development
5, 25 PRC 48267208,
48293655
July 7, 2021 July 6, 2031 Star Plus
Development
27, 23,
34, 18
PRC 48305708,
48296317,
48290479,
48276563
March 14, 2021 March 13, 2031 Star Plus
Development
APPENDIX V STATUTORY AND GENERAL INFORMATION
– V-22 –


--- page 714 ---
Trademark Class
Place of
registration
Registration
number Date of registration
Date of
expiry Registered owner
28, 9 PRC 48309527,
48284947
August 7, 2021 August 6, 2031 Star Plus
Development
41, 33 PRC 48309622,
48290109
July 28, 2021 July 27, 2031 Star Plus
Development
3 PRC 40031049 June 21, 2020 June 20, 2030 Star Plus
Development
30 PRC 36955805 November 21, 2019 November 20, 2029 Star Plus
Development
5 PRC 30519605 February 21, 2019 February 20, 2029 Star Plus
Development
14 PRC 30518732 July 7, 2019 July 6, 2029 Star Plus
Development
26, 36,
30, 8
PRC 30535097,
30533255,
30522397,
30518721
February 14, 2019 February 13, 2029 Star Plus
Development
32, 18,
3, 42
PRC 30533242,
30526253,
30523603,
30520856
May 21, 2019 May 20, 2029 Star Plus
Development
3 PRC 26709499 September 21, 2018 September 20, 2028 Star Plus
Development
3 PRC 26584802 September 21, 2018 September 20, 2028 Star Plus
Development
3 PRC 41936218 October 28, 2020 October 27, 2030 Star Plus
Development
5 PRC 41918133 June 28, 2021 June 27, 2031 Star Plus
Development
APPENDIX V STATUTORY AND GENERAL INFORMATION
– V-23 –


--- page 715 ---
Trademark Class
Place of
registration
Registration
number Date of registration
Date of
expiry Registered owner
3, 5 PRC 41936222,
41913744
October 28, 2020 October 27, 2030 Star Plus
Development
9, 41,
43, 32,
33, 35,
28
PRC 40705662,
40705650,
40703876,
40698151,
40694220,
40685208,
40682143
April 14, 2020 April 13, 2030 Star Plus
Development
41 PRC 44233847 November 14, 2020 November 13, 2030 Kunshan Star Plus
Action
26 PRC 30522107 May 21, 2019 May 20, 2029 Kunshan Star Plus
Action
3 PRC 35576017 September 7, 2019 September 6, 2029 Kunshan Star Plus
Action
41, 35 PRC 35570798,
35567564
September 21, 2019 September 20, 2029 Kunshan Star Plus
Action
26, 25,
42
PRC 35567555,
35561564,
35556635
September 14, 2019 September 13, 2029 Kunshan Star Plus
Action
9 PRC 35564872 September 7, 2019 September 6, 2029 Kunshan Star Plus
Action
45 PRC 54214094 October 28, 2021 October 27, 2031 Kunshan Star Plus
Action
42, 9, 35 PRC 50142917,
50127716,
50126313
June 7, 2021 June 6, 2031 Star Plus
Development
35 PRC 47225684A March 28, 2021 March 27, 2031 Kunshan Star Plus
Action
APPENDIX V STATUTORY AND GENERAL INFORMATION
– V-24 –


--- page 716 ---
Trademark Class
Place of
registration
Registration
number Date of registration
Date of
expiry Registered owner
9 PRC 47213301A April 7, 2021 April 6, 2031 Kunshan Star Plus
Action
42 PRC 47205258A March 21, 2021 March 20, 2031 Kunshan Star Plus
Action
3 PRC 36964511 December 7, 2019 December 6, 2029 Kunshan Star Plus
Action
29, 30,
5, 36,
14, 35,
11, 25
PRC 36963630,
36963491,
36963481,
36961257,
36954416,
36954361,
36951006,
36948779
November 21, 2019 November 20, 2029 Kunshan Star Plus
Action
28 PRC 36948401 November 14, 2019 November 13, 2029 Kunshan Star Plus
Action
33 PRC 50104472 June 14, 2021 June 13, 2031 Kunshan Star Plus
Action
43 PRC 50098225 May 28, 2021 May 27, 2031 Kunshan Star Plus
Action
31 PRC 50090238 June 7, 2021 June 6, 2031 Kunshan Star Plus
Action
30 PRC 54182349 September 28, 2021 September 27, 2031 Kunshan Star Plus
Action
18 PRC 54207614 October 28, 2021 October 27, 2031 Kunshan Star Plus
Action
5, 11 PRC 27763316,
27758433
November 7, 2018 November 6, 2028 Kunshan Star Plus
Action
APPENDIX V STATUTORY AND GENERAL INFORMATION
– V-25 –


--- page 717 ---
Trademark Class
Place of
registration
Registration
number Date of registration
Date of
expiry Registered owner
36, 28,
25, 3,
30, 29,
14
PRC 27758451,
27754005,
27753673,
27753614,
27747579,
27747558,
27747536
October 28, 2018 October 27, 2028 Kunshan Star Plus
Action
35 PRC 27757776 November 21, 2018 November 20, 2028 Kunshan Star Plus
Action
30 PRC 43917767 January 28, 2021 January 27, 2031 Kunshan Star Plus
Action
29, 33,
35, 31
PRC 48182273,
48176970,
48162720,
48162692
March 7, 2021 March 6, 2031 Kunshan Star Plus
Action
43 PRC 48164783 April 7, 2021 April 6, 2031 Kunshan Star Plus
Action
3, 35,
41, 44
PRC 52374836
52383488
52383560
52392864
August 14, 2021 August 13, 2031 Kunshan Star Plus
Action
38, 42 PRC 52388219
52361168
August 21, 2021 August 20, 2031 Kunshan Star Plus
Action
16 PRC 52373951 August 28, 2021 August 27, 2031 Kunshan Star Plus
Action
9 PRC 52381191 September 7, 2021 September 6, 2031 Kunshan Star Plus
Action
9, 42 PRC 52376920
52363923
August 14, 2021 August 13, 2031 Kunshan Star Plus
Action
35, 38 PRC 52375567
52375587
August 21, 2021 August 20, 2031 Kunshan Star Plus
Action
APPENDIX V STATUTORY AND GENERAL INFORMATION
– V-26 –


--- page 718 ---
Trademark Class
Place of
registration
Registration
number Date of registration
Date of
expiry Registered owner
10, 31 PRC 52511808
52492013
August 21, 2021 August 20, 2031 Kunshan Star Plus
Action
29, 32,
33, 35,
44
PRC 52486484
52501221
52487413
52484478
52511820
August 28, 2021 August 27, 2031 Kunshan Star Plus
Action
42 PRC 51454068 October 21, 2021 October 20, 2031 Kunshan Star Plus
Action
30 PRC 52481023 September 21, 2021 September 20, 2031 Kunshan Star Plus
Action
5 PRC 52363847A September 28, 2021 September 27, 2031 Kunshan Star Plus
Action
26 PRC 52487775 October 21, 2021 October 20, 2031 Kunshan Star Plus
Action
9 PRC 53668354 December 21, 2021 December 20, 2031 Kunshan Star Plus
Action
14 PRC 52500290 September 14, 2022 September 13, 2032 Kunshan Star Plus
Action
42 PRC 53668382 September 28, 2021 September 27, 2031 Kunshan Star Plus
Action
45 PRC 54224000 October 28, 2021 October 27, 2031 Kunshan Star Plus
Action
3, 31, 33 PRC 56919602,
56909120,
56916366
January 7, 2022 January 6, 2032 Kunshan Star Plus
Action
42 PRC 47205258 December 28, 2021 December 27, 2031 Kunshan Star Plus
Action
APPENDIX V STATUTORY AND GENERAL INFORMATION
– V-27 –


--- page 719 ---
Trademark Class
Place of
registration
Registration
number Date of registration
Date of
expiry Registered owner
26, 24,
18, 21,
8, 20
PRC 52676433,
52674889,
52674814,
52673269,
52672165,
52669408
August 21, 2021 August 20, 2031 Star Plus
Development
3, 43,
31, 44,
5, 32, 33
PRC 46627639,
46623392,
46622608,
46621143,
46618284,
46617052,
46604810
February 7, 2021 February 6, 2031 Star Plus
Development
29 PRC 46621540 July 7, 2021 July 6, 2031 Star Plus
Development
30 PRC 52093082 August 14, 2021 August 13, 2031 Star Plus
Development
30 PRC 46604731 August 21, 2021 August 20, 2031 Star Plus
Development
3 PRC 52073433 August 21, 2021 August 20, 2031 Star Plus
Development
3 PRC 50123093 August 21, 2021 August 20, 2031 Star Plus
Development
3 PRC 50120305 September 28, 2021 September 27, 2031 Star Plus
Development
3 PRC 50119938 September 21, 2021 September 20, 2031 Star Plus
Development
35, 9, 38 PRC 53452850,
53477060,
53456933
October 7, 2021 October 6, 2031 Star Plus
Development
APPENDIX V STATUTORY AND GENERAL INFORMATION
– V-28 –


--- page 720 ---
Trademark Class
Place of
registration
Registration
number Date of registration
Date of
expiry Registered owner
41 PRC 53455223 December 28, 2021 December 27, 2031 Star Plus
Development
3, 8, 15,
26, 16
PRC 53873259,
53881890,
53864250,
53863860,
53873908
September 14, 2021 September 13, 2031 Star Plus
Development
29, 28,
36, 21,
14
PRC 53865372,
53880592,
53856624,
53856983,
53865429
September 21, 2021 September 20, 2031 Star Plus
Development
30, 44, 5 PRC 53880619,
53880695,
53873279
December 7, 2021 December 6, 2031 Star Plus
Development
24, 2,
42, 39,
12, 10,
25
PRC 53880557,
53856206,
53856640,
53862457,
53873860,
53857759,
53875076
September 14, 2021 September 13, 2031 Star Plus
Development
18, 11,
31, 33,
20
PRC 53855441,
53857771,
53880641,
53873534,
53880525
September 21, 2021 September 20, 2031 Star Plus
Development
32 PRC 53878100 December 21, 2021 December 20, 2031 Star Plus
Development
38 PRC 56715545 February 21, 2022 February 20, 2032 Star Plus
(Kunshan)
38 PRC 52498229 March 14, 2022 March 13, 2032 Star Plus
(Kunshan)
APPENDIX V STATUTORY AND GENERAL INFORMATION
– V-29 –


--- page 721 ---
Trademark Class
Place of
registration
Registration
number Date of registration
Date of
expiry Registered owner
9 PRC 56148107 March 14, 2022 March 13, 2032 Kunshan Star Plus
Action
16 PRC 59024019 March 14, 2022 March 13, 2032 Kunshan Star Plus
Action
36 PRC 57537360 March 21, 2022 March 20, 2032 Kunshan Star Plus
Action
1, 2, 4,
6, 8, 9,
10, 11,
12, 13,
14, 15,
16, 17,
18, 19,
20, 21,
22, 23,
24, 26,
31, 32,
33, 34,
37, 38,
39, 40,
41, 42,
43, 44,
45
PRC 61021649,
61004626,
61012015,
61018229,
61007538,
61017951,
61033992,
61029932,
61000003,
61022285,
61035437,
61026997,
61028570,
61006670,
61011426,
61032128,
61004535,
61000119,
61015538,
61034041,
61007824,
61023834,
61032815,
61017642,
61032856,
61019016,
61014354,
61033187,
61025770,
61006239,
61046310,
61009701,
61015567,
61045780,
61027290
May 14, 2022 May 13, 2032 Kunshan Star Plus
Action
APPENDIX V STATUTORY AND GENERAL INFORMATION
– V-30 –


--- page 722 ---
Trademark Class
Place of
registration
Registration
number Date of registration
Date of
expiry Registered owner
30 PRC 58291564 May 21, 2022 May 20, 2032 Star Plus
(Kunshan)
5, 21, 3 PRC 46241849,
46241894,
46224936
February 14, 2021 February 13, 2031 Star Plus
Development
11 PRC 58915525 March 7, 2022 March 6, 2032 Star Plus
Development
29 PRC 45827497 April 14, 2022 April 13, 2032 Star Plus
Development
29 PRC 60086244 April 14, 2022 April 13, 2032 Star Plus
Development
21 PRC 60651692 May 7, 2022 May 6, 2032 Star Plus
Development
14 PRC 49027883 March 14, 2022 March 13, 2032 Star Plus
Development
5 PRC 57100850 March 28, 2022 March 27, 2032 Star Plus
Development
29 PRC 48284920 April 14, 2022 April 13, 2032 Star Plus
Development
9 PRC 60015248 April 21, 2022 April 20, 2032 Star Plus
Development
21 PRC 59765213 March 28, 2022 March 27, 2032 Star Plus
Development
and JVR Music
29 PRC 60441487 April 28, 2022 April 27, 2032 Star Plus
Development
and JVR Music
30 PRC 57613493 April 21, 2022 April 20, 2032 Star Plus
Development
APPENDIX V STATUTORY AND GENERAL INFORMATION
– V-31 –


--- page 723 ---
Trademark Class
Place of
registration
Registration
number Date of registration
Date of
expiry Registered owner
10 PRC 57625041 April 28, 2022 April 27, 2032 Star Plus
Development
3, 9, 16,
29, 32,
41
PRC 60205952,
60217605,
60210834,
60197814,
60215362,
60191916
April 28, 2022 April 27, 2032 Star Plus
Development
35 PRC 60187847 May 7, 2022 May 6, 2032 Star Plus
Development
30 PRC 60191905 May 14, 2022 May 13, 2032 Star Plus
Development
43 PRC 49035752 May 7, 2022 May 6, 2032 Star Plus
Development
29 PRC 60441472 May 7, 2022 May 6, 2032 Star Plus
Development
and JVR Music
3 PRC 60621181 May 21, 2022 May 20, 2032 Star Plus
Development
29, 30,
32
PRC 61006341,
61021234,
61048987
May 28, 2022 May 27, 2032 Star Plus
Development
and JVR Music
9 PRC 49020225 September 7, 2022 September 6, 2032 Star Plus
Development
30 PRC 53655579 October 14, 2022 October 13, 2032 Star Plus
Development
44 PRC 63049060 September 7, 2022 September 6, 2032 Talent Planet
3, 5 PRC 63427471,
63428041
September 14, 2022 September 13, 2032 Talent Planet
APPENDIX V STATUTORY AND GENERAL INFORMATION
– V-32 –


--- page 724 ---
Trademark Class
Place of
registration
Registration
number Date of registration
Date of
expiry Registered owner
10 PRC 63426376 September 14, 2022 September 13, 2032 Star Plus
Development
18, 25,
28, 31,
32, 33,
41, 44
PRC 63401368,
63405781,
63410221,
63412669,
63422347,
63409400,
63402611,
63405888
September 14, 2022 September 13, 2032 Talent Planet
35 PRC 62311228 September 21, 2022 September 20, 2032 Star Plus
Development
29 PRC 58020891 September 28, 2022 September 27, 2032 Star Plus
Development
5 PRC 62311278 September 28, 2022 September 27, 2032 Star Plus
Development
30 PRC 63648902 September 28, 2022 September 27, 2032 Talent Planet
45 PRC 63968080 October 7, 2022 October 6, 2032 Star Plus
Development
29 PRC 63410752A October 14, 2022 October 13, 2032 Star Plus
Development
35 PRC 63410396A October 14, 2022 October 13, 2032 Star Plus
Development
30 PRC 61426217 October 14, 2022 October 13, 2032 Star Plus
Development
43 PRC 64145752 October 21, 2022 October 20, 2032 Star Plus
Development
25 PRC 61173305 September 14, 2022 September 13, 2032 Star Plus
Development
and JVR Music
APPENDIX V STATUTORY AND GENERAL INFORMATION
– V-33 –


--- page 725 ---
Trademark Class
Place of
registration
Registration
number Date of registration
Date of
expiry Registered owner
25 PRC 61175975 October 7, 2022 October 6, 2032 Star Plus
Development
and JVR Music
25 PRC 53234526 September 14, 2021 September 13, 2031 Talent Planet
25, 3, 5,
9, 10,
12, 18
PRC 64222810,
64227489,
64227511,
64233924,
64233933,
64226154,
64244190
October 14, 2022 October 13, 2032 Talent Planet
27 PRC 64222053 October 21, 2022 October 20, 2032 Talent Planet
(ii) Copyrights
As of the Latest Practicable Date, our Group had registered the following
copyrights which are material to our business:
Copyright name
Place of
registration Registration number
First
publication date Registration date
Registered
owner
մ༷া PRC GZDZ-2018-L-00515076*
(਷Ъ೮ο -2018-L-00515076)
– March 23, 2018 Star Plus
(Kunshan)
մ༷া PRC GZDZ-2020-F-00994755*
(਷Ъ೮ο -2020-F-00994755)
February 10, 2020 April 9, 2020 Star Plus
(Kunshan)
݋Eኪ৫ PRC GZDZ-2020-F-01157287*
(਷Ъ೮ο -2020-F-01157287)
June 4, 2020 November 5, 2020 Kunshan Star
Plus Action
Бਗ LOGO PRC GZDZ-2020-F-01155137*
(਷Ъ೮ο -2020-F-01155137)
February 6, 2018 November 2, 2020 Kunshan Star
Plus Action
఍ʔPANGࡴPRC GZDZ-2020-F-01030616*
(਷Ъ೮ο -2020-F-01030616)
September 9, 2019 May 25, 2020 Kunshan Star
Plus Action
ఀʔPANG̲঩ PRC GZDZ-2020-F-01030618*
(਷Ъ೮ο -2020-F-01030618)
September 9, 2019 May 25, 2020 Kunshan Star
Plus Action
APPENDIX V STATUTORY AND GENERAL INFORMATION
– V-34 –


--- page 726 ---
Copyright name
Place of
registration Registration number
First
publication date Registration date
Registered
owner
ᚭঋԣᅁդਥ
ঐඎ̍
PRC GZDZ-2020-F-00994485*
(਷Ъ೮ο -2020-F-00994485)
April 30, 2019 March 30, 2020 Kunshan Star
Plus Action
ᚭঋԣᅁդਥ
و
PRC GZDZ-2020-F-00994682*
(਷Ъ೮ο -2020-F-00994682)
March 22, 2020 April 7, 2020 Kunshan Star
Plus Action
ᚭঋԣᅁդਥ PRC GZDZ-2020-F-00994684*
(਷Ъ೮ο -2020-F-00994684)
April 30, 2019 April 7, 2020 Kunshan Star
Plus Action
ᚭঋԣᅁդਥ
ঐඎ̍(و)
PRC GZDZ-2020-F-01039637*
(਷Ъ೮ο -2020-F-01039637)
April 5, 2019 June 19, 2020 Kunshan Star
Plus Action
ᚭঋԣᅁդਥ
ྡ
PRC GZDZ-2021-F-00014938*
(਷Ъ೮ο -2021-F-00014938)
March 22, 2020 January 21, 2021 Kunshan Star
Plus Action
ᚭঋԣᅁդਥ
ྡ
PRC GZDZ-2021-F-00014941*
(਷Ъ೮ο -2021-F-00014941)
April 30, 2019 January 21, 2021 Kunshan Star
Plus Action
մΝኪ PRC GZDZ-2021-F-00014943*
(਷Ъ೮ο -2021-F-00014943)
October 2, 2019 January 21, 2021 Star Plus
Development;
JVR Music
ஔӻΐ
ɧʘౢྡᗳ
PRC GZDZ -2021-F-00261339*
(਷Ъ೮ο -2021-F-00261339)
– November 12,
2021
Star Plus
Development;
JVR Music
ஔӻΐ
ɧʘҖ൥ᗳ
PRC GZDZ-2021-F-00261337*
(਷Ъ೮ο -2021-F-00261337)
December 18,
2020
November 12,
2021
Star Plus
Development;
JVR Music
ஔӻΐ
ɧʘҖ൥ᗳ
PRC GZDZ-2021-F-00261338*
(਷Ъ೮ο -2021-F-00261338)
December 18,
2020
November 12,
2021
Star Plus
Development;
JVR Music
ஔӻΐ
ɧʘౢྡᗳ
PRC GZDZ-2021-F-00261336*
(਷Ъ೮ο -2021-F-00261336)
December 18,
2020
November 12,
2021
Star Plus
Development;
JVR Music
ஔӻΐ
̬
PRC GZDZ-2022-F-10008085*
(਷Ъ೮ο -2022-F-10008085)
– January 13, 2022 Star Plus
Development;
JVR Music
APPENDIX V STATUTORY AND GENERAL INFORMATION
– V-35 –


--- page 727 ---
Copyright name
Place of
registration Registration number
First
publication date Registration date
Registered
owner
ஔӻΐ
ʞ
PRC GZDZ-2021-F-00264203*
(਷Ъ೮ο -2021-F-00264203)
– November 16,
2021
Star Plus
Development;
JVR Music
ජੀ –
иᖵஔ
ӻΐɓ
PRC GZDZ-2022-F-10016310*
(਷Ъ೮ο -2022-F-10016310)
September 21,
2021
January 24, 2022 Star Plus
Development
ජੀ –
иᖵஔ
ӻΐɚ
PRC GZDZ-2022-F-10016311*
(਷Ъ೮ο -2022-F-10016311)
– January 24, 2022 Star Plus
Development
ஔӻΐ
ʬ –մ
PRC GZDZ-2021-F-00294337*
(਷Ъ೮ο -2021-F-00294337)
– December 23,
2021
Star Plus
Development;
JVR Music
ஔӻΐ
ɖ – մΝኪ
อϋ – Җ൥ᗳ
PRC GZDZ-2022-F-10014612*
(਷Ъ೮ο -2022-F-10014612)
– January 20, 2022 Star Plus
Development;
JVR Music
ஔӻΐ
ɖ – մΝኪ
อϋ – ౢྡᗳ
PRC GZDZ-2022-F-10014611*
(਷Ъ೮ο -2022-F-10014611)
– January 20, 2022 Star Plus
Development;
JVR Music
௴จɛ྅਒ᅂ PRC GZDZ-2022-F-10054997*
(਷Ъ೮ο -2022-F-10054997)
April 1, 2017 March 11, 2022 Star Plus
Development
ஔӻΐ
ۜ– ӻΐɞ
˚
Έዚ – Җ൥ᗳ
PRC GZDZ-2022-F-10127433*
(਷Ъ೮ο -2022-F-10127433)
– June 28, 2022 Star Plus
Development
and JVR
Music
ஔӻΐ
ۜ– ӻΐɞ
˚
Έዚ –
ౢྡᗳ
PRC GZDZ-2022-F-10127435*
(਷Ъ೮ο -2022-F-10127435)
– June 28, 2022 Star Plus
Development
and JVR
Music
ஔӻΐ
ۜ– ӻΐɞ
˚
Έዚ – ౢྡᗳ
PRC GZDZ-2022-F-10127434*
(਷Ъ೮ο -2022-F-10127434)
– June 28, 2022 Star Plus
Development
and JVR
Music
APPENDIX V STATUTORY AND GENERAL INFORMATION
– V-36 –


--- page 728 ---
Copyright name
Place of
registration Registration number
First
publication date Registration date
Registered
owner
ஔӻΐ
ۜ– ӻΐɘ
մ༷া2ࢫ–
ౢྡᗳ
PRC GZDZ-2022-F-10108393*
(਷Ъ೮ο -2022-F-10108393)
– May 27, 2022 Star Plus
Development
and JVR
Music
ஔӻΐ
ۜ– ӻΐɘ
մ༷া2ࢫ–
ଡ଼Υྡᗳ
PRC GZDZ-2022-F-10108395*
(਷Ъ೮ο -2022-F-10108395)
– May 27, 2022 Star Plus
Development
and JVR
Music
ஔӻΐ
ۜ– ӻΐɘ
մ༷া2ࢫ–
ලͣྡᗳ
PRC GZDZ-2022-F-10108394*
(਷Ъ೮ο -2022-F-10108394)
– May 27, 2022 Star Plus
Development
and JVR
Music
ɛ
IP-Bonggie ӻΐ
঩४
PRC GZDZ-2022-F-10112068*
(਷Ъ೮ο -2022-F-10112068)
– June 6, 2022 Talent Planet
(HK) Limited
ᅙЄ௹ɻӻΐ –
௹ɻӻΐ
ࢫ1
PRC GZDZ-2022-F-10122384*
(਷Ъ೮ο -2022-F-10122384)
– June 16, 2022 Star Plus
Development
ᅙЄ௹ɻӻΐ –
௹ɻӻΐ
ࢫ1
PRC GZDZ-2022-F-10122385*
(਷Ъ೮ο -2022-F-10122385)
– June 16, 2022 Star Plus
Development
ஔӻΐ
ۜ– ӻΐɘ
մ༷া2ࢫ–
Җ൥ᗳ
PRC GZDZ-2022-F-10125718*
(਷Ъ೮ο -2022-F-10125718)
– June 22, 2022 Star Plus
Development
and JVR
Music
ஔӻΐ
ۜ– ӻΐɘ
մ༷া2ࢫ–
Җ൥ᗳ
PRC GZDZ-2022-F-10125713*
(਷Ъ೮ο -2022-F-10125713)
– June 22, 2022 Star Plus
Development
and JVR
Music
ஔӻΐ
ۜ– ӻΐɘ
մ༷া2ࢫ–
Җ൥ᗳ
PRC GZDZ-2022-F-10125719*
(਷Ъ೮ο -2022-F-10125719)
– June 22, 2022 Star Plus
Development
and JVR
Music
APPENDIX V STATUTORY AND GENERAL INFORMATION
– V-37 –


--- page 729 ---
Copyright name
Place of
registration Registration number
First
publication date Registration date
Registered
owner
ஔӻΐ
ۜ– ӻΐɘ
մ༷া2ࢫ–
Җ൥ᗳ
PRC GZDZ-2022-F-10125717*
(਷Ъ೮ο -2022-F-10125717)
– June 22, 2022 Star Plus
Development
and JVR
Music
ஔӻΐ
ۜ– ӻΐɘ
մ༷া2ࢫ–
Җ൥ᗳ
PRC GZDZ-2022-F-10125714*
(਷Ъ೮ο -2022-F-10125714)
– June 22, 2022 Star Plus
Development
and JVR
Music
ஔӻΐ
ۜ– ӻΐɘ
մ༷া2ࢫ–
Җ൥ᗳ
PRC GZDZ-2022-F-10125715*
(਷Ъ೮ο -2022-F-10125715)
– June 22, 2022 Star Plus
Development
and JVR
Music
ஔӻΐ
ۜ– ӻΐɘ
մ༷া2ࢫ–
Җ൥ᗳ
PRC GZDZ-2022-F-10125716*
(਷Ъ೮ο -2022-F-10125716)
– June 22, 2022 Star Plus
Development
and JVR
Music
ɛҖ൥ PRC GZDZ-2022-F-10206966*
(਷Ъ೮ο -2022-F-10206966)
– September 29,
2022
Talent Planet
ฌΦᒻᅙɛ
Җ൥
PRC GZDZ-2022-F-10164907*
(਷Ъ೮ο -2022-F-10164907)
– August 12, 2022 Talent Planet
ஔӻΐ
ɤɧ –
ႋӛմ
PRC GZDZ-2022-F-10210108*
(਷Ъ೮ο -2022-F-10210108)
– October 10, 2022 Star Plus
Development
and JVR
Music
CHOUCHOU PRC GZDZ-2022-F-10210107*
(਷Ъ೮ο -2022-F-10210107)
– October 10, 2022 Star Plus
Development
and JVR
Music
ஔӻΐ
ɤɚ –
մ 3D
PRC GZDZ-2022-F-10204155*
(਷Ъ೮ο -2022-F-10204155)
– September 27,
2022
Star Plus
Development
and JVR
Music
APPENDIX V STATUTORY AND GENERAL INFORMATION
– V-38 –


--- page 730 ---
Copyright name
Place of
registration Registration number
First
publication date Registration date
Registered
owner
ஔӻΐ
ɤɚ –
մ 2D
PRC GZDZ-2022-F-10204157*
(਷Ъ೮ο -2022-F-10204157)
– September 27,
2022
Star Plus
Development
and JVR
Music
ஔӻΐ
ۜ–ӻΐɤɓ
– ̚Պ፻ೞմ
PRC GZDZ-2022-F-10164908*
(਷Ъ೮ο -2022-F-10164908)
– August 12, 2022 Star Plus
Development
and JVR
Music
ஔӻΐ
ʬ–մ
ౢྡ
PRC GZDZ-2022-F-10204156*
(਷Ъ೮ο -2022-F-10204156)
– September 27,
2022
Star Plus
Development
and JVR
Music
ฌΦᒻᅙɛ PRC GZDZ-2022-F-10213060*
(਷Ъ೮ο -2022-F-10213060)
July 1, 2022 October 24, 2022 Talent Planet
ᄎ䊿܀
ۜ2D ӻ
ΐ–༶ਗ਄Ԓɓ
PRC GZDZ-2022-F-10226365*
(਷Ъ೮ο -2022-F-10226365)
– November 3, 2022 Talent Planet
ۜ
2D ӻΐ–༶ਗ
਄Ԓɓ
PRC GZDZ-2022-F-10226363*
(਷Ъ೮ο -2022-F-10226363)
– November 3, 2022 Talent Planet
VIVIۜ–
2D ӻΐ–༶ਗ
਄Ԓɓ
PRC GZDZ-2022-F-10226364*
(਷Ъ೮ο -2022-F-10226364)
– November 3, 2022 Talent Planet
ஔӻΐ
ɤ̬ –ԑଢ
ӻΐ
PRC GZDZ-2022-F-10231235*
(਷Ъ೮ο -2022-F-10231235)
– November 8, 2022 Star Plus
Development
and JVR
Music
ۜ
̍ༀ
PRC GZDZ-2022-F-10236923*
(਷Ъ೮ο-2022-F-10236923)
May 20, 2022 November 11,
2022
Star Plus
Development
APPENDIX V STATUTORY AND GENERAL INFORMATION
– V-39 –


--- page 731 ---
(iii) Software Copyrights
As of the Latest Practicable Date, our Group was the registered owner of the
following software copyrights:
Software
copyright
Place of
registration Registration number
First
publication date Registration date
Registered
owner
ᚭঋ਄ੰழ΁
V1.0.0
PRC 2020SR1110558 August 30, 2020 September 16,
2020
Kunshan Star
Plus Action
Бਗ঩ʃ֎
ಬ༸ӻ୕ V1.0
PRC 2021SR0730981 – May 20, 2021 Kunshan Star
Plus Action
ਗజΤ
ӻ୕V1.0
PRC 2021SR0727636 – May 20, 2021 Kunshan Star
Plus Action
Бਗ९ҿ
ӻ୕ V1.0
PRC 2021SR0727626 – May 20, 2021 Kunshan Star
Plus Action
Бਗᚭঋդਥ
ಬ༸ӻ୕ V1.0
PRC 2021SR0724109 – May 20, 2021 Kunshan Star
Plus Action
БਗᅙЄ௹ɻ
ಬ༸ӻ୕ V1.0
PRC 2021SR0722332 – May 19, 2021 Kunshan Star
Plus Action
Бਗਠኪ৫
ӻ୕V1.0
PRC 2021SR0721652 – May 19, 2021 Kunshan Star
Plus Action
۬
ӻ୕V1.0
PRC 2021SR0714816 – May 19, 2021 Kunshan Star
Plus Action
Бਗ൴᎖
ᎉᄃӻ୕ V1.0
PRC 2021SR0719972 – May 19, 2021 Kunshan Star
Plus Action
Ꮄ፯ழ΁
V1.0.0
PRC 2021SR0686007 – May 13, 2021 Kunshan Star
Plus Action
ၽ၍ଣ
ӻ୕V1.0.0
PRC 2021SR0596924 – April 26, 2021 Kunshan Star
Plus Action
પᑥӻ୕
V1.0.0
PRC 2021SR0591492 – April 25, 2021 Kunshan Star
Plus Action
APPENDIX V STATUTORY AND GENERAL INFORMATION
– V-40 –


--- page 732 ---
Software
copyright
Place of
registration Registration number
First
publication date Registration date
Registered
owner
ᚭঋჀ᜗ᒄ၍ଣ
ӻ୕V1.0.0
PRC 2021SR0591500 – April 25, 2021 Kunshan Star
Plus Action
ӻ୕
V1.0.0
PRC 2021SR0587472 – April 23, 2021 Kunshan Star
Plus Action
ᚭঋરЗᒄӻ୕
V1.0.0
PRC 2021SR0573537 – April 22, 2021 Kunshan Star
Plus Action
ਸ਼ӻ୕
V1.0.0
PRC 2021SR0573603 – April 22, 2021 Kunshan Star
Plus Action
ᚭঋ९ҿӻ୕
V1.0.0
PRC 2021SR0570871 – April 21, 2021 Kunshan Star
Plus Action
ᚭঋ͂̔ӻ୕
V1.0.0
PRC 2021SR0566091 – April 21, 2021 Kunshan Star
Plus Action
ᅙЄ௹ɻ͂̔ӻ୕
V1.0.0
PRC 2021SR0566092 – April 21, 2021 Kunshan Star
Plus Action
ਠኪ৫ӻ୕
V1.0.0
PRC 2021SR0564485 – April 21, 2021 Kunshan Star
Plus Action
Ꮄ፯ਠ˒ӻ୕
V1.0.0
PRC 2021SR0570822 – April 21, 2021 Kunshan Star
Plus Action
ᚭঋ᜗ইफ़ӻ୕
V1.0.0
PRC 2021SR0560781 – April 20, 2021 Kunshan Star
Plus Action
၍ଣӻ୕
V1.0.0
PRC 2021SR0560543 February 20, 2020 April 20, 2021 Kunshan Star
Plus Action
၍ଣ
ӻ୕V1.0.0
PRC 2021SR0559736 – April 20, 2021 Kunshan Star
Plus Action
ʾӻ୕
V1.0.0
PRC 2021SR0551265 – April 19, 2021 Kunshan Star
Plus Action
ਜ၍ଣ
ӻ୕V1.0.0
PRC 2021SR0551795 – April 19, 2021 Kunshan Star
Plus Action
APPENDIX V STATUTORY AND GENERAL INFORMATION
– V-41 –


--- page 733 ---
Software
copyright
Place of
registration Registration number
First
publication date Registration date
Registered
owner
ਗ၍ଣ
ӻ୕V1.0.0
PRC 2021SR0556231 – April 19, 2021 Kunshan Star
Plus Action
ᆠርӻ୕
V1.0.0
PRC 2021SR0542694 February 20, 2020 April 15, 2021 Kunshan Star
Plus Action
ᚭঋ਄ੰ၍ଣӻ୕
V1.0.0
PRC 2021SR0542209 – April 15, 2021 Kunshan Star
Plus Action
ᅙЄ௹ɻ᜗᜕ӻ୕
V1.0.0
PRC 2021SR0542830 – April 15, 2021 Kunshan Star
Plus Action
(iv) Domain names
As of the Latest Practicable Date, our Group had registered the following domain
names which were material to our business:
Domain name Registered owner Date of expiry
starpluslegend.cn Star Plus (Kunshan) April 23, 2024
starplusholdings.cn Star Plus (Kunshan) January 28, 2024
jstarplus.cn Star Plus (Kunshan) January 28, 2024
splegend.cn Kunshan Star Plus Action December 17, 2023
splegend.net.cn Kunshan Star Plus Action December 17, 2023
splegend.com.cn Kunshan Star Plus Action December 17, 2023
star-action.cn Kunshan Star Plus Action January 28, 2024
j-xcyx.cn Kunshan Star Plus Action July 27, 2024
j-jxxd.cn Kunshan Star Plus Action July 21, 2024
APPENDIX V STATUTORY AND GENERAL INFORMATION
– V-42 –


--- page 734 ---
C. FURTHER INFORMATION ABOUT OUR DIRECTORS AND SUBSTANTIAL
SHAREHOLDERS
1. Disclosure of interests
(a) Interests of the Directors and chief executive of our Company
Immediately following the completion of the Capitalization Issue and the Global
Offering (assuming the Over-allotment Option is not exercised and without taking into
account any Shares which may be issued pursuant to the Share Option Schemes), the
interests or short positions of the Directors and chief executive of our Company in the
shares, underlying shares and debentures of our Company or our associated
corporations (within the meaning of Part XV of the SFO) which will be required to be
notified to our Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part
XV of the SFO (including interests or short positions which they were taken or
deemed to have under such provisions of the SFO) or which will be required, pursuant
to Section 352 of the SFO, to be entered in the register referred to in that section, or
which will be required, pursuant to the Model Code for Securities Transactions by
Directors of Listed Issuers as set out in Appendix 10 to the Listing Rules, to be
notified to our Company and the Stock Exchange, once the Shares are listed, will be
as follows:
(i) Interests in our Company
Name of
Director Nature of interest
Shares held immediately
following the completion
of the Capitalization Issue
and the Global Offering
Number Percentage
Ms. Ma (3) Interest in a controlled
corporation/interest of
party acting in concert
465,038,126 (L) 58.1%
Mr. Yang
(3)(4) Interest in a controlled
corporation/interest of
party acting in concert
465,038,126 (L) 58.1%
Mr. Chen
(3) Interest in a controlled
corporation/interest of
party acting in concert
465,038,126 (L) 58.1%
Mr. Lai Beneficial interest 99,651,027 (L) 12.5%
Dr. Qian
(5) Beneficial interest/interest
of spouse
23,171,845 (L) 2.9%
APPENDIX V STATUTORY AND GENERAL INFORMATION
– V-43 –


--- page 735 ---
Notes:
(1) The letter “L” denotes the person’s long position in our Shares.
(2) The calculation is based on the total number of 800,000,000 Shares in issue
immediately following the completion of the Capitalization Issue and the Global
Offering (assuming the Over-allotment Option is not exercised and without taking into
account any Shares which may be issued pursuant to the Share Option Schemes).
(3) Pursuant to the Concert Party Agreement, Ms. Ma, Mr. Yang, Ms. Yeh, and Mr. Chen
have agreed, among other things, that they shall act in concert in respect of their voting
rights and actively cooperate to consolidate control over voting rights of our Company.
Accordingly, Ms. Ma, Mr. Yang, Ms. Yeh and Mr. Chen are parties acting in concert
(having the meaning ascribed to it under the Takeovers Codes); and each of Ms. Ma,
Mr. Yang, Ms. Yeh and Mr. Chen is deemed to be interested in all the Shares in which
each of them is interested under the SFO. For further details, please refer to the
paragraph headed “Relationship with our Controlling Shareholders – Concert Party
Agreement” in this prospectus.
(4) Mr. Yang holds 50% shares of Legend Key, which in turn directly holds 199,302,054 of
our Shares immediately following the completion of the Capitalization Issue and the
Global Offering (assuming the Over-allotment Option is not exercised and without
taking into account any Shares which may be issued pursuant to the Share Option
Schemes). As such, Mr. Yang is deemed to be interested in all the Shares held by
Legend Key under the SFO.
(5) Dr. Qian is the spouse of Ms. Zhang, who is interested in 13,206,742 of our Shares
immediately following the completion of the Capitalization Issue and the Global
Offering (assuming the Over-allotment Option is not exercised and without taking into
account any Shares which may be issued pursuant to the Share Option Schemes). As
such, Dr. Qian is deemed to be interested in all the Shares in which Ms. Zhang is
interested under the SFO.
(ii) Interests in our associated corporations
Name of
Director
Name of our
associated
corporation Nature of interest
Interest in our
associated corporation
Number Percentage
Ms. Ma Harmony Culture Beneficial interest 1 100%
Mr. Yang Legend Key Beneficial interest 500,000 50%
Mr. Chen Max One Beneficial interest 2,000,000 100%
APPENDIX V STATUTORY AND GENERAL INFORMATION
– V-44 –


--- page 736 ---
(b) Interests of the Substantial Shareholders
Save as disclosed in the section headed “Substantial Shareholders” in this
prospectus, immediately following the completion of the Capitalization Issue and the
Global Offering (assuming the Over-allotment Option is not exercised and without
taking into account any Shares which may be issued pursuant to the Share Option
Schemes), our Directors are not aware of any other person (other than a Director or
chief executive of our Company) who will have an interest or short position in the
Shares or the underlying Shares which would fall to be disclosed to our Company
under the provisions of Divisions 2 and 3 of Part XV of the SFO, or are, directly or
indirectly, interested in 10% or more of the issued voting Shares of our Company.
(c) Interests of Substantial Shareholders in our members of our Group
As of the Latest Practicable Date, so far as is known to our Directors, the
following persons were interested in 10% or more of the issued voting shares of
members of our Group (other than our Company):
Name of shareholder Nature of interest
Name of our
Group company
Percentage of
shareholding
Sapphire Prismatic Limited Beneficial interest Secret Music (HK) 50%
Chan Yu-hao (1) Interest in a controlled
corporation
Secret Music (HK) 50%
Beijing Master Beneficial interest Beijing Star Plus Master 30%
Tianjin Baihong Movie
Production Centre
(Limited Partnership)
(ϵᒿᅂൖႡЪ
Υྫ )
(“Tianjin Baihong ”)
(2)
Interest in a controlled
corporation
Beijing Star Plus Master 30%
Shenzhen Master Cultural
Media Company Limited
(ଉέၚರ˖௴˖ʷ
ʮ̡ )
(“Shenzhen Master ”)
(2)
Interest in a controlled
corporation
Beijing Star Plus Master 30%
Zhang, Shuming
(׼ࣣ2)
Interest in a controlled
corporation
Beijing Star Plus Master 30%
W&V(3) Beneficial interest Talent Planet 30%
MENG Ching-Jung Interest in a controlled
corporation
Talent Planet 30%
APPENDIX V STATUTORY AND GENERAL INFORMATION
– V-45 –


--- page 737 ---
Notes:
(1) Sapphire Prismatic Limited is beneficially and wholly owned by Chan, Yu-hao. As such,
Chan, Yu-hao is deemed to be interest in the shares of Secret Music (HK) held by Sapphire
Prismatic under the SFO.
(2) To the knowledge of our Company, Tianjin Baihong and Zhang, Shu Ming is interested in
76% and 24% of the equity interest in Beijing Master, respectively. The general partner of
Tianjin Baihong is Shenzhen Master, which is beneficially and wholly owned by Zhang,
Shuming. Shenzhen Master and Zhang, Shuming contributed approximately 66% and 30% of
the capital of Tianjin Baihong, respectively. As such, each of Tianjin Baihong, Shenzhen
Master and Zhang, Shuming is deemed to be interested in the equity interest of Beijing Star
Plus Master held by Beijing Master under the SFO.
(3) W&V is beneficially and owned as to 95% by MENG Ching-Jung. As such, MENG
Ching-Jung is deemed to be interest in the shares of Talent Planet held by W&V under the
SFO.
2. Directors’ service contracts
Each of our executive Directors and non-executive Directors has entered into a service
contract with our Company on April 18, 2023, and we signed letters of appointment with
each of our independent non-executive Directors. The service contracts with each of our
executive Directors and non-executive Directors are for an initial fixed term of three years
commencing from April 18, 2023. The letters of appointment with each of our independent
non-executive Directors are for an initial fixed term of three years. The service contracts
and the letters of appointment are subject to termination in accordance with their respective
terms. The service contracts may be renewed in accordance with our Articles of Association
and the applicable Listing Rules.
Save as disclosed above, none of our Directors has entered, or has proposed to enter, a
service contract with any member of the Group (other than contracts expiring or
determinable by the employer within one year without the payment of compensation (other
than statutory compensation)).
3. Directors’ remuneration
The aggregate remuneration (including salaries and bonuses, contribution to retirement
scheme, medical insurances and other social insurance and share-based compensation) paid
to the Directors for each of the four years ended December 31, 2022 were nil, RMB0.4
million, RMB4.8 million and RMB4.5 million, respectively. Save as disclosed above, no
other payments had been made or were payable by any of member of our Group to any of
our Directors for each of the four years ended December 31, 2022.
Our independent non-executive Directors have been appointed for a term of three
years. We intend to pay a director’s fee of HK$240,000 per annum to each of the
independent non-executive Directors, respectively. Save for the director’s fees, none of our
independent non-executive Directors is expected to receive any other remuneration for
holding his or her office as an independent non-executive Director.
APPENDIX V STATUTORY AND GENERAL INFORMATION
– V-46 –


--- page 738 ---
Under the arrangements currently in force, the aggregate amount of remuneration,
excluding share-based payments and discretionary bonuses, payable to our Directors for the
year ending December 31, 2023 is estimated to approximately RMB3.6 million.
There was no arrangement under which a Director has waived or agreed to waive any
emoluments for each of the three financial years immediately preceding the issue of this
prospectus.
For further details of the terms of the above service contracts, please refer to the
paragraph headed “– C. Further information about our Directors and Substantial
Shareholders – 2. Directors’ service contracts” in this Appendix.
4. Directors’ Competing Interests
Save as disclosed in the sections headed “Directors and Senior Management” and
“Relationship with our Controlling Shareholders” in this prospectus, none of our Directors
are interested in any business apart from our Group’s business which competes or is likely
to compete, directly or indirectly, with the business of our Group.
5. Disclaimer
Save as disclosed the section headed “Substantial Shareholders” in this prospectus and
“Further information about our Directors and substantial Shareholders” in this appendix in
this prospectus:
(i) none of our Directors or chief executive of our Company has any interests or
short positions in the shares, underlying shares and debentures of our Company
or our associated corporations (within the meaning of Part XV of the SFO) which
will be required to be notified to our Company and the Stock Exchange pursuant
to Divisions 7 and 8 of Part XV of the SFO (including interests or short positions
which he is taken or deemed to have taken under such provisions of the SFO) or
which will be required, pursuant to Section 352 of the SFO, to be entered in the
register referred to in that section, or which will be required, pursuant to the
Model Code for Securities Transactions by Directors of Listed Issuers, to be
notified to our Company and the Stock Exchange, once the Shares are listed on
the Stock Exchange;
(ii) so far as is known to any Director or chief executive of our Company, no person
has an interest or short position in the Shares and underlying Shares which would
fall to be disclosed to our Company and the Stock Exchange under the provisions
of Divisions 2 and 3 of Part XV of the SFO, or is, directly or indirectly,
interested in 10% or more of the issued voting shares of any other members of
our Group;
APPENDIX V STATUTORY AND GENERAL INFORMATION
– V-47 –


--- page 739 ---
(iii) none of the Directors nor any of the persons listed in the paragraph headed “– E.
Other information – 5. Qualification of experts” in this Appendix is interested in
the promotion of, or in any assets which have been, within the two years
immediately preceding the issue of this prospectus, acquired or disposed of by or
leased to any member of the Group, or are proposed to be acquired or disposed
of by or leased to any member of the Group;
(iv) none of the Directors nor any of the persons listed in the paragraph headed “– E.
Other information – 5. Qualification of experts” in this Appendix is materially
interested in any contract or arrangement with the Group subsisting at the date of
this prospectus which is unusual in its nature or conditions or which is
significant in relation to the business of the Group as a whole;
(v) save in connection with Underwriting Agreements, none of the persons listed in
the paragraph headed “– E. Other information – 5. Qualification of experts” in
this Appendix has any shareholding in any member of the Group or the right
(whether legally enforceable or not) to subscribe for or to nominate persons to
subscribe for securities in any member of the Group;
(vi) none of the Directors has entered or has proposed to enter into any service
agreements with our Company or any member of the Group (other than contracts
expiring or determinable by the employer within one year without payment of
compensation other than statutory compensation); and
(vii) save as contemplated under the Underwriting Agreements, none of our Directors,
their respective associates (as defined under the Listing Rules), or Shareholders
who are interested in more than 5% of the issued share capital of our Company
has any interest in our Company’s top five customers and top five suppliers.
D. SHARE OPTION SCHEMES
1. Pre-IPO Stock Incentive Plan
Pursuant to the resolution passed by our Shareholders on August 3, 2020, we approved
and adopted the rules of the Pre-IPO Stock Incentive Plan. The terms of the Pre-IPO Stock
Incentive Plan are not subject to the provisions of Chapter 17 of Listing Rules as it does
not involve the grant of options or share awards by our Company after the Listing. The
principal terms of the Pre-IPO Stock Incentive Plan are as follows:
(i) Purpose
To attract and retain the best available personnel, to provide additional incentives
to Eligible Persons and to promote the success of our Company’s business.
APPENDIX V STATUTORY AND GENERAL INFORMATION
– V-48 –


--- page 740 ---
(ii) Who may participate
Awards (as defined below) under the Pre-IPO Stock Incentive Plan may be
granted to those persons that the Administrator (as defined below) determines to be
Eligible Persons. An “ Eligible Person ” means:
(a) any person, including a director, who is in the employment of the Company
or any Related Entity (as defined in the Pre-IPO Stock Incentive Plan),
subject to the control and direction of the Company or any Related Entity as
to both the work to be performed and the manner and method of
performance;
(b) a member of the Board or the board of directors of any Related Entity; or
(c) any person (other than those mentioned above, solely with respect to
rendering services in such person’s capacity as an employee or director)
who is engaged by the Company or any Related Entity to render consulting
or advisory services to the Company or such Related Entity (“ service
provider ”).
Subject to the provisions of the Pre-IPO Stock Incentive Plan, the Administrator
may, from time to time, select from among all Eligible Persons to whom Awards in the
form of, among other things, options, share appreciation rights, dividend equivalent
rights, restricted shares, restricted share units (collectively, “ Awards ”) shall be
granted and shall determine the nature and amount of each Award.
An Award may consist of one or more such security or benefit. No Awards had
been granted to directors and employees of the holding companies, fellow subsidiaries
or associated companies of our Company, or service providers.
(iii) Maximum number of Shares in respect of which Awards may be granted
25,000,000 Shares, subject to any adjustment pursuant to the provisions of the
Pre-IPO Stock Incentive Plan.
(iv) Administration
The Pre-IPO Stock Incentive Plan is administered by the Administrator, who may
authorize one or more officers or directors to grant such Awards and may limit such
authority as the Administrator determines from time to time. The “ Administrator ”
means the Director designated by the Board to administer the Pre-IPO Stock Incentive
Plan.
APPENDIX V STATUTORY AND GENERAL INFORMATION
– V-49 –


--- page 741 ---
Subject to applicable laws and the provisions of the Pre-IPO Stock Incentive
Plan, and except as otherwise provided by the Board, the Administrator shall have the
authority, in its discretion:
(a) to select the Eligible Persons to whom Awards may be granted from time to
time thereunder;
(b) to determine whether and to what extent Awards are granted thereunder;
(c) to determine the type or the number of Awards to be granted, the number of
Shares or the amount of consideration to be covered by each Award granted
thereunder;
(d) to approve forms of Award Agreements (as defined below) for use under the
Pre-IPO Stock Incentive Plan, to amend terms of the Award Agreements;
(e) to determine or alter the terms and conditions of any Award granted
thereunder (including without limitation the vesting schedule and exercise
price set out in the notice of stock option award and the Award
Agreements);
(f) to amend the terms of any outstanding Award granted under the Pre-IPO
Stock Incentive Plan, provided that any amendment that would adversely
affect the grantee’s rights under an outstanding Award in material aspects
shall not be made without the grantee’s written consent;
(g) to construe and interpret the terms of the Pre-IPO Stock Incentive Plan and
Awards, including without limitation, any notice of award or Award
Agreement, granted pursuant to the Pre-IPO Stock Incentive Plan;
(h) to require the grantee to provide representation or evidence that any
currency used to pay the exercise price of any Award was legally acquired
and taken out of the jurisdiction in which the grantee resides in accordance
with the applicable laws; and
(i) to take such other action, not inconsistent with the terms of the Pre-IPO
Stock Incentive Plan and the applicable laws, as the Administrator deems
appropriate.
(v) Grant of Awards
(a) The Administrator is authorized to award any type of arrangement to an
Eligible Person that is not inconsistent with the provisions of the Pre-IPO
Stock Incentive Plan and that by its terms involves or might involve the
issuance of (a) Shares, (b) cash or (c) options, share appreciation rights, or
APPENDIX V STATUTORY AND GENERAL INFORMATION
– V-50 –


--- page 742 ---
similar rights with a fixed or variable price related to the Fair Market Value
(as defined in the Pre-IPO Stock Incentive Plan) of the Shares and with
exercise or conversion privileges related to the passage of time, the
occurrence of one or more events, or the satisfaction of performance criteria
or other conditions.
(b) The Administrator may issue Awards under the Pre-IPO Stock Incentive
Plan in settlement, assumption or substitution for, outstanding awards or
obligations to grant future awards in connection with the Company or a
Related Entity acquiring another entity, an interest in another entity or an
additional interest in a Related Entity whether by merger, share purchase,
asset purchase or other form of transaction.
(c) Each Award shall be designated in an award agreement (“ Award
Agreement ”). Subject to the terms of the Pre-IPO Stock Incentive Plan, the
Administrator shall determine the provisions, terms, and conditions of each
Award. Each Award shall be subject to the terms of an Award Agreement
approved by the Administrator.
(vi) Term of Awards
The term of each Award shall be the term stated in the Award Agreement.
Notwithstanding the foregoing, the specified term of any Award shall not include any
period for which the Grantee has elected to defer the receipt of the Shares or cash
issuable pursuant to the Award.
(vii) Exercise or Purchase Price
The exercise or purchase price, if any, for an Award shall be determined by the
Administrator; provided (a) in the case of options or share appreciation rights granted
to U.S. taxpayers, shall not be less than 100% of the Fair Market Value of a Share as
of the date of grant; and (b) in the case of an Incentive Stock Option granted to an
U.S. taxpayer, who, at the time the Incentive Stock Option is granted, owns (or,
pursuant to Section 424(d) of the U.S. Code, is deemed to own) Shares representing
more than 10% of the total combined voting power of all classes of shares of the
Company or any Subsidiary (as defined in the pre-IPO Stock Incentive Plan) or
Affiliate (as defined in the pre-IPO Stock Incentive Plan), the per Share exercise price
will be no less than 110% of the Fair Market Value per Share on the date of grant.
Notwithstanding the foregoing, in the case of an Award issued pursuant to the
paragraph (v)(b) above, the exercise or purchase price for the Award shall be
determined in accordance with the provisions of the relevant instrument evidencing
the agreement to issue such Award.
APPENDIX V STATUTORY AND GENERAL INFORMATION
– V-51 –


--- page 743 ---
(viii) Method of payment
Subject to applicable laws, the consideration to be paid for the Shares to be
issued upon exercise or purchase of an Award including the method of payment, shall
be determined by the Administrator. In addition to any other types of consideration the
Administrator may determine, the Administrator is authorized to accept as
consideration for Shares issued under the Pre-IPO Stock Incentive Plan the following:
(a) cash;
(b) check;
(c) if the exercise or purchase occurs on or after the Registration Date (as
defined in the pre-IPO Stock Incentive Plan), or as otherwise permitted by
the Administrator, surrender of Shares or delivery of a properly executed
form of attestation of ownership of Shares as the Administrator may require
which have a Fair Market Value on the date of surrender or attestation equal
to the aggregate exercise price of the Shares as to which said Award shall be
exercised;
(d) with respect to options, if the exercise occurs on or after the Registration
Date, payment through a broker-dealer sale and remittance procedure
pursuant to which the grantee (A) shall provide written instructions to a
Company designated brokerage firm to effect the immediate sale of some or
all of the purchased Shares and remit to the Company sufficient funds to
cover the aggregate exercise price payable for the purchased Shares; and (B)
shall provide written directives to the Company to deliver the certificates
for the purchased Shares directly to such brokerage firm in order to
complete the sale transaction; or
(e) any combination of the foregoing methods of payment.
The Administrator may at any time or from time to time, grant Awards which do
not permit all of the foregoing forms of consideration to be used in payment for the
Shares or which otherwise restrict one or more forms of consideration.
(a) No Shares shall be delivered under the Pre-IPO Stock Incentive Plan to any
grantee or other person until such grantee or other person has made
arrangements acceptable to the Administrator for the satisfaction of any
income and employment tax withholding obligations under any applicable
laws. The grantee shall be responsible for all taxes associated with the
receipt, vest, exercise, transfer and disposal of the Awards and the Shares.
Upon exercise of an Award, the Company and/or the Related Entity which is
an employer of the grantee shall have the right to withhold or collect from
grantee an amount sufficient to satisfy such tax obligations.
APPENDIX V STATUTORY AND GENERAL INFORMATION
– V-52 –


--- page 744 ---
(ix) Exercise
(a) Any Award granted thereunder shall be exercisable at such times and under
such conditions as determined by the Administrator under the terms of the
Pre-IPO Stock Incentive Plan and specified in the Award Agreement. An
Award shall be deemed to be exercised when written notice of such exercise
has been given to the Company in accordance with the terms of the Award
by the Eligible Person entitled to exercise the Award and full payment for
the Shares with respect to which the Award is exercised, including, use of
the broker-dealer sale and remittance procedure to pay the purchase price.
(b) An Award may not be exercised after the termination date of such Award set
forth in the Award Agreement and may be exercised following the
termination of a grantee’s continuous service only to the extent provided in
the Award Agreement. Where the Award Agreement permits a grantee to
exercise an Award following the termination of the grantee’s continuous
service for a specified period, the Award shall terminate to the extent not
exercised on the last day of the specified period or the last day of the
original term of the Award, whichever occurs first.
(c) Notwithstanding the foregoing, the Award shall not be exercised if the
Administrator (in its sole discretion) determines that an exercise would
violate any applicable laws.
(d) Notwithstanding the foregoing, the Administrator may determine that the
Award shall not be exercised before the consummation of (i) an IPO of the
Company; or (ii) a Corporate Transaction (as defined in the Pre-IPO Stock
Incentive Plan) or a Change in Control (as defined in the Pre-IPO Stock
Incentive Plan), except as permitted by the applicable Award Agreement.
The options shall vest in four (4) years. The options representing 25% of the
Shares shall vest on the first anniversary of the vesting commencement date, with
remaining portions vesting in equal annual installments over next three (3) years.
(x) Transferability of Awards
Subject to the applicable laws, Awards shall be transferable (i) by will and by the
laws of descent and distribution; and (ii) during the lifetime of the grantee, only to the
extent and in the manner approved by the Administrator. Notwithstanding the
foregoing, the grantee may designate one or more beneficiaries of the grantee’s Award
in the event of the grantee’s death on a beneficiary designation form provided by the
Administrator.
APPENDIX V STATUTORY AND GENERAL INFORMATION
– V-53 –


--- page 745 ---
(xi) Company’s Repurchase Right
Upon termination of the grantee’s continuous service for any reason, all unvested
Awards shall be terminated immediately without further effect. To the extent any
vested Award is not terminated, following termination of the grantee’s continuous
service for any reason, the Company shall have the right (but not the obligation) to
repurchase (the “ Repurchase Right ”) from the grantee all or any portion of the vested
Awards or the Shares obtained by the grantee upon exercise of any Awards. The
Repurchase Right may be exercised by the Company at any time within two years
after termination of the grantee’s continuous service.
(xii) Adjustments
Subject to any required action by the shareholders of the Company, the number
of Shares covered by each outstanding Award, the number of Shares which have been
authorized for issuance under the Pre-IPO Stock Incentive Plan but as to which no
Awards have yet been granted or which have been returned to the Pre-IPO Stock
Incentive Plan, the exercise or purchase price of each such outstanding Award, the
maximum number of Shares with respect to which Awards may be granted to any
grantee in any fiscal year of the Company, as well as any other terms that the
Administrator determines require adjustment shall be proportionately adjusted for (a)
any increase or decrease in the number of issued Shares resulting from a share split,
reverse share split, share dividend, combination or reclassification of the Shares, or
similar transaction affecting the Shares; (b) any other increase or decrease in the
number of issued Shares effected without receipt of consideration by the Company; or
(c) as the Administrator may determine in its discretion, any other transaction with
respect to the Shares including a corporate merger, consolidation, acquisition of
property or equity, separation (including a spin-off or other distribution of shares or
property), reorganization, liquidation (whether partial or complete) or any similar
transaction; provided, however that conversion of any convertible securities of the
Company shall not be deemed to have been “effected without receipt of
consideration.” Such adjustment shall be made by the Administrator and its
determination shall be final, binding and conclusive. Except as the Administrator
determines, no issuance by the Company of shares of any class, or securities
convertible into shares of any class, shall affect, and no adjustment by reason hereof
shall be made with respect to, the number or price of Shares subject to an Award. In
the event of a spin-off transaction, the Administrator may in its discretion make such
adjustments and take such other action as it deems appropriate with respect to
outstanding Awards under the Pre-IPO Stock Incentive Plan, including but not limited
to: (a) adjustments to the number and kind of Shares, the exercise or purchase price
per Share and the vesting periods of outstanding Awards; (b) prohibit the exercise of
Awards during certain periods of time prior to the consummation of the spin-off
transaction; or (c) the substitution, exchange or grant of Awards to purchase securities
of the Subsidiary (as defined in the Pre-IPO Stock Incentive Plan); provided that the
Administrator shall not be obligated to make any such adjustments or take any such
action thereunder.
APPENDIX V STATUTORY AND GENERAL INFORMATION
– V-54 –


--- page 746 ---
(xiii) Acceleration
(a) Except as provided otherwise in any written agreement between the
Company and a grantee, in the event of a Corporate Transaction (other than
a Corporate Transaction which also is a Change in Control), each Award can
be assumed or replaced immediately prior to the specified effective date of
such Corporate Transaction, for the portion of each Award that is neither
assumed nor replaced, such portion of the Award shall automatically become
fully vested and exercisable and be released from any repurchase or
forfeiture rights (other than repurchase rights exercisable at Fair Market
Value) for all of the Shares at the time represented by such portion of the
Award, immediately prior to the specified effective date of such Corporate
Transaction, provided that the grantee’s continuous service has not
terminated prior to such date. The portion of the Award that is not assumed
or replaced shall terminate under sub-paragraph (c) below to the extent not
exercised prior to the consummation of such Corporate Transaction.
(b) Except as provided otherwise in any written agreement between the
Company and a grantee, in the event of a Change in Control (other than a
Change in Control which also is a Corporate Transaction), each Award
which is at the time outstanding under the Pre-IPO Stock Incentive Plan
shall automatically become fully vested and exercisable and be released
from any repurchase or forfeiture rights (other than repurchase rights
exercisable at Fair Market Value) for all of the Shares at the time
represented by such Award, immediately prior to the specified effective date
of such Change in Control, provided that the grantee’s continuous service
has not terminated prior to such date.
(c) Effective upon the consummation of a Corporate Transaction, all
outstanding Awards under the Pre-IPO Stock Incentive Plan shall terminate,
provided however that, all such Awards shall not terminate to the extent
they are assumed or replaced in connection with the Corporate Transaction.
(d) Except as provided otherwise in any written agreement between the
Company and a grantee, and subject to applicable laws, in the event of a
Corporate Transaction or a Change in Control, the Administrator may
provide for other mechanisms, such as (1) termination and payment of any
Awards in cash based on the value of the Shares on the date of the
Corporate Transaction or the Change in Control (as the case may be); or (2)
allowing any grantee the right to exercise any outstanding Awards during a
specified period of time determined by the Administrator.
APPENDIX V STATUTORY AND GENERAL INFORMATION
– V-55 –


--- page 747 ---
(xiv) Duration
The Pre-IPO Stock Incentive Plan shall continue in effect for a term of ten (10)
years after the date of adoption by the Board, unless sooner terminated. Subject to
applicable laws, Awards may be granted under the Pre-IPO Stock Incentive Plan upon
its becoming effective.
(xv) Amendment, suspension or termination
The Board may at any time amend (including extend the term of the Pre-IPO
Stock Incentive Plan), suspend or terminate the Pre-IPO Stock Incentive Plan;
provided, however, that no such amendment, suspension or termination shall be made
without the approval of the Company’s shareholders to the extent such approval is
required by applicable laws (including the Listing Rules) or if such amendment would
change any of the Administrator’s authority.
No Award may be granted during any suspension of the Pre-IPO Stock Incentive
Plan or after termination of the Pre-IPO Stock Incentive Plan. Unless otherwise
determined by the Administrator in good faith, the suspension or termination of the
Pre-IPO Stock Incentive Plan (including termination of the Pre-IPO Stock Incentive
Plan under paragraph (j) above) shall not materially adversely affect any rights under
Awards already granted to a grantee.
(xvi) Outstanding share options granted
As of the Latest Practicable Date, an aggregate of 25,000,000 Shares (to be
adjusted to 33,217,009 Shares upon the Capitalization Issue), representing 4.2% of the
issued share capital of our Company immediately following the completion of the
Capitalization Issue and the Global Offering (assuming the Over-allotment Option is
not exercised and without taking into account any Shares which may be issued
pursuant to the Over-allotment Option and the Post-IPO Share Option Scheme) were
granted to 34 grantees under the Pre-IPO Stock Incentive Plan. Each grantee is
required to pay HK$1.90 per Share (to be adjusted to HK$1.43 per Share after the
Capitalization Issue) as consideration for the acceptance of the grant of the Pre-IPO
Stock Incentive Plan. Our Company will not grant further options under the Pre-IPO
Stock Incentive Plan after the Listing.
APPENDIX V STATUTORY AND GENERAL INFORMATION
– V-56 –


--- page 748 ---
The table below sets out the details of the outstanding options which were
granted under the Pre-IPO Stock Incentive Plan as of the Latest Practicable Date:
Grantee
Position(s)
held in the
Group Address Date of Grant
Number of
Shares subject to
the options (as
adjusted after
the
Capitalization
Issue)
Exercise Price
HK$
(as adjusted
after the
Capitalization
Issue)
Underlying
Shares of
outstanding and
unexercised
options as a
percentage of
issued Shares
following
completion of
the Global
Offering
(1)
Ms. Ma Executive
Director and
Chairperson
of the Board
2/F
No. 48, Lane 939
Zhonghua 5th Road
Kaohsiung
Taiwan
August 3, 2020 6,640,004 1.43 0.83%
Zhou, Peimin Chief operating
officer
Room 701, No. 32
Lane 650 Liuying Road
Shanghai
August 3, 2020 6,640,005 1.43 0.83%
Jiang, Xiuhong Operation
director
Flat A, 8/F, Cheong Lee Building
443–445 Castle Peak Road
Shamshuipo, Kowloon
Hong Kong
August 3, 2020 2,657,500 1.43 0.33%
Wang, Ying Financial
director
No. 45, Building 23
North Bajiao Road
Shijingshan District, Beijing
August 3, 2020 1,661,000 1.43 0.21%
Wang Siqiong Compliance
director
Unit 401, No. 3
700 Xianxiaxilu
Changning District
Shanghai
August 3, 2020 1,661,000 1.43 0.21%
Chang,
Chih-Peng
Chief program
officer
1807, 71 Floor
Balizhuangxili
Zhaoyang District
Beijing
August 3, 2020 1,329,000 1.43 0.17%
Xu, Jing Design director Unit 401 Yiyuan Building
No. 132 Donghuan Road
Panyu District
Guangzhou
August 3, 2020 1,329,000 1.43 0.17%
Zhang, Yusheng Vice president
of social
e-commerce
Unit 601 Building 1
No. 6 Nanfang 1st Cross Road
Chikan District
Zhanjiang City
Guangdong
August 3, 2020 1,329,000 1.43 0.17%
Li, Yinfeng Director of
system
development
Room 802, No. 11 Junjie Street
Tianhe District, Guangzhou
Guangdong Province
August 3, 2020 1,329,000 1.43 0.17%
Lu, Fang Senior product
development
manager
Room 2407, Building 2, No. 1988
Tongda Road, Guoxiang Street,
Wuzhong District, Suzhou, Jiangsu
Province
August 3, 2020 664,500 1.43 0.08%
Li, Chundan Training
manager
No. 80, He Dong Village,
Chang’an, Liangguang Town,
Huazhou, Guangdong Province
August 3, 2020 664,500 1.43 0.08%
APPENDIX V STATUTORY AND GENERAL INFORMATION
– V-57 –


--- page 749 ---
Grantee
Position(s)
held in the
Group Address Date of Grant
Number of
Shares subject to
the options (as
adjusted after
the
Capitalization
Issue)
Exercise Price
HK$
(as adjusted
after the
Capitalization
Issue)
Underlying
Shares of
outstanding and
unexercised
options as a
percentage of
issued Shares
following
completion of
the Global
Offering
(1)
Zhang, Weihui Marketing
manager
No.71, Hantian Village, Da’an
Town, Lufeng, Guangdong
Province
August 3, 2020 664,500 1.43 0.08%
Chen, Wanchun Logistics and
warehousing
manager
No. 2, Block 8, Gaolouyuan,
Hong’er Village, Yanhong Town,
Chenghai District, Shantou
August 3, 2020 664,500 1.43 0.08%
Hsu, Yi-Ching Program
supervisor
3rd Floor, No. 6, Alley 11
Lane 147, Jinghua Street
20 Xingfu Li, Wenshan District
Taipei City
August 3, 2020 664,500 1.43 0.08%
Lee, Ying-Sung Post-production
supervisor
No. 235, Zhongshan Road
15 Jinmeili, Jinshan District
New Taipei City
August 3, 2020 664,500 1.43 0.08%
Wang, Lei Operation and
maintenance
supervisor
Unit 2104
No. 63 Jiangnan East Road
Haizhu District
Guangzhou
August 3, 2020 664,500 1.43 0.08%
Qi, Wen Marketing
superintendent
26-1-17, Jiangwan Road
Changyi District, Jilin City
Jilin Province
August 3, 2020 332,500 1.43 0.04%
Shi, Wenjuan Internal control
specialist
Room 201A, No.1, Lane 730,
Zhong Hua Xin Road, Jing’an
District, Shanghai
August 3, 2020 266,000 1.43 0.03%
Yan, Chih-Chi Rights
protection
manager
No. 1, 10th Floor, No. 3 Alley 1
Lane 969 Zhonghua 5th Road,
4 Chungchung Lane
Qianzhen District, Kaohsiung City
August 3, 2020 266,000 1.43 0.03%
Li, Shanshan Assistant to
president
No. 1956 Nanerhuan Road, Nanshi
District, Baoding, Hebei Province
August 3, 2020 266,000 1.43 0.03%
Chang, Xiaoyu Product
development
director
3-2-2
28-5 Shenzhou Road
Shenhe District
Shenyang City
Liaoning Province
August 3, 2020 266,000 1.43 0.03%
Song, Weiwei Operation and
maintenance
superintendent
Public Security Bureau Dormitory,
Changfeng Community Committee,
Shuihu Town, Changfeng County,
Anhui Province
August 3, 2020 266,000 1.43 0.03%
Song, Meng System
development
project
manager
No. 114, Zhaili Village, Wengjiang
Town, Pingjiang County, Hunan
Province
August 3, 2020 266,000 1.43 0.03%
APPENDIX V STATUTORY AND GENERAL INFORMATION
– V-58 –


--- page 750 ---
Grantee
Position(s)
held in the
Group Address Date of Grant
Number of
Shares subject to
the options (as
adjusted after
the
Capitalization
Issue)
Exercise Price
HK$
(as adjusted
after the
Capitalization
Issue)
Underlying
Shares of
outstanding and
unexercised
options as a
percentage of
issued Shares
following
completion of
the Global
Offering
(1)
Shi, Lingtao Legal director Unit 303, 4th Floor
Landuolang Apartment
Youyi Road
Economic and Technological
Development Zone
Langfang City
Hebei Province
August 3, 2020 266,000 1.43 0.03%
Guo, Zhijiang Finance manager Unit 1607, Building No. 29
199 Lu Di Da Dao
Huaqiao Town
Kunshan
Jiangsu Province
August 3, 2020 199,500 1.43 0.02%
Yang, Zixuan Brand promotion
manager
Unit 403, Building No. 16
Shuidian New Village
Chun Cheng Town
Yangchun City
Guangdong
August 3, 2020 199,500 1.43 0.02%
Li, Zhongbo Java
development
engineer
No. 34, Team 14, State-owned
Warrior Farm (ɻ༵ఙ ),
Xiaqiao Town, Xuwen County,
Guangdong Province
August 3, 2020 199,500 1.43 0.02%
Chen, Kuan-Yun Director of
cultural
products
Room 2505, No.3,
Xiangyuducheng (۬Jinjie
Road, Huaqiao Town
August 3, 2020 199,500 1.43 0.02%
Tao, Zhiheng Investor
relations
director
Flat C, 10/F, Supernova Stand
28 Mercury Road, North Point,
HK
August 3, 2020 199,500 1.43 0.02%
Fang, Xialu Finance
customer
service
superintendent
No. 3-5, Sanzhi Alley, Meisan
Gaocheng, Huicheng Town, Huilai
County, Guangdong Province
August 3, 2020 133,000 1.43 0.02%
Cheung, Shuk
Fong
Finance manager G/F., 17A Shui Tsan Tin Village
Pak Heung, Yuen Long
New Territories, Hong Kong
August 3, 2020 133,000 1.43 0.02%
Chen, Rongjin Legal counsel Room 1702, Gate 1, Building 2
Chunxiao Garden, Suti Road
Nankai District
Tianjin
August 3, 2020 133,000 1.43 0.02%
Ni, Houchun Legal counsel Room 203, Building 20
Tinglin New Village, Yushan Town
Kunshan City
Jiangsu Province
August 3, 2020 133,000 1.43 0.02%
APPENDIX V STATUTORY AND GENERAL INFORMATION
– V-59 –


--- page 751 ---
Grantee
Position(s)
held in the
Group Address Date of Grant
Number of
Shares subject to
the options (as
adjusted after
the
Capitalization
Issue)
Exercise Price
HK$
(as adjusted
after the
Capitalization
Issue)
Underlying
Shares of
outstanding and
unexercised
options as a
percentage of
issued Shares
following
completion of
the Global
Offering
(1)
Wong, Chun Yin Director of
strategic
investment
and finance
Room 2505, Lung Wan House
Lung Poon Court, Diamond Hill
Kowloon, HK
November 16,
2020
266,000 1.43 0.03%
Total 33,217,009 4.2%
Note:
1. Calculated as the number of Shares subject to the options granted to a grantee and divided by the total number of
Shares in issue immediately upon completion of the Global Offering, assuming the Over-allotment Option is not
exercised and none of the options granted under the Pre-IPO Stock Incentive Plan are exercised.
Application has been made to the Listing Committee for the listing of and
permission to deal in the 33,217,009 Shares (as adjusted after the Capitalization Issue)
that may be allotted and issued pursuant to the options granted under the Pre-IPO
Stock Incentive Plan.
2. Post-IPO Share Option Scheme
The following is a summary of the principal terms of the Post-IPO Share Option
Scheme conditionally approved and adopted by our Shareholders on June 19, 2023 and its
implementation is conditional on the Listing.
(i) Purpose
The purpose of the Post-IPO Share Option Scheme is to incentivize and reward
an Eligible Person (as defined below) for their contribution to our Group and to align
their interests with that of our Company so as to encourage them to work towards
enhancing the value of our Company.
APPENDIX V STATUTORY AND GENERAL INFORMATION
– V-60 –


--- page 752 ---
(ii) Who may participate
The Board (including any committee or delegate of the Board appointed by the
Board to perform any of its functions pursuant to the rules of the Post-IPO Share
Option Scheme) may, at its absolute discretion, offer to grant an option to subscribe
for such number of Shares as the Board may determine to any of the following classes
of participants:
(i) any director and employee of any member of our Group;
(ii) any director or employee of any of the holding companies, fellow
subsidiaries or associated companies of our Company; and
(iii) any person (including an entity) that provides services to us on a continuing
or recurring basis in its ordinary and usual course of business which are in
the interests of our long term growth (the “ Service Provider(s) ”).
The basis of eligibility of any of the participants shall be determined by the
Board from time to time. In assessing the eligibility of any participant, the Board will
consider all relevant factors as appropriate, including, among others, (i) work
performance; (ii) years of service; and (iii) potential or actual contribution to the
business of the Group (if the participant is an employee or a director of any member
of our Group), the actual degree of involvement in and/or cooperation with us and
length of business relationship with the participant (if the participant is a Service
Provider). The basis of eligibility of any of the Service Provider participants to the
grant of any options shall be determined by us from time to time on the basis of their
contribution to our development and growth, the degree of involvement in and/or
cooperation with our Group and length of our business relationship with the Service
Provider, and the actual or potential support, advice, efforts and contributions the
Service Provider participant has exerted and given towards our success.
For the avoidance of doubt, the grant of any options by our Company for the
subscription of Shares or other securities of our Group to any person who falls within
any of these classes of participants shall not, by itself, unless our Directors otherwise
so determine, be construed as a grant of option under the Post-IPO Share Option
Scheme.
(iii) Scheme Mandate Limit and the Service Provider Sublimit
The maximum number of Shares which may be issued upon exercise of all
options to be granted under the Post-IPO Share Option Scheme must not in aggregate
exceed 10% of the total number of Shares in issue as of the Listing Date, being
80,000,000 Shares, or such higher limit as the Stock Exchange may allow pursuant to
a waiver granted at the Stock Exchange’s discretion (the “ Scheme Mandate Limit ”).
Options lapsed in accordance with the terms of the Post-IPO Share Option Scheme
APPENDIX V STATUTORY AND GENERAL INFORMATION
– V-61 –


--- page 753 ---
and any Other Scheme of our Company will not be counted for the purpose of
calculating the Scheme Mandate Limit.
Subject to above, within the Scheme Mandate Limit, the total number of Shares
which may be issued upon exercise of all options to be granted to Service Providers
shall not exceed 8,000,000 Shares, representing 1% of the total number of Shares in
issue on the Listing Date (the “ Service Provider Sublimit ”).
The Service Provider Sublimit was determined with reference to the potential
dilution effect arising from grants to Service Providers, the actual or expected
improvement of our financial performance is attributable to Service Providers and the
time for using the Service Provider in the activities of the Group. Considering the fact
that the individual limit under Rule 17.03D(1) of the Listing Rules is also 1%, there is
no other share schemes involving grant of new options over our Shares, our hiring
practice and organizational structures and that Service Providers have contributed or is
expected to contribute to our long-term growth of the Company’s business, the Board
is of the view that the Service Provider Sublimit is appropriate and reasonable.
The Board may, with the approval of the Shareholders in general meeting refresh,
the Scheme Mandate Limit and the Service Provider Sublimit once every three years
provided that the total number of Shares which may be issued upon the exercise of all
options to be granted under the Post-IPO Share Option Scheme and any other share
option schemes (“ Other Schemes ”) of our Company as refreshed must not exceed
10% of the Shares in issue as at the date of approval of the refreshment of the Scheme
Mandate Limit and the Service Provider Sublimit. Refreshments of Scheme Mandate
Limit (and the Service Provider Sublimit) to be made within a three-year period must
be approved by the Shareholders (other than our Controlling Shareholders and their
associates, or if there is no Controlling Shareholder, other than the Directors
(excluding independent non-executive Directors), and the chief executive of our
Company and their respective associates) pursuant to Listing Rule 17.03C(1). The
Board may, with the approval of the Shareholders in general meeting, grant options to
any Eligible Person specifically identified by them which would cause the Scheme
Mandate Limit and/or the Service Provider Sublimit to be exceeded. Our Company
shall send to the Shareholders a circular containing the information required under the
Listing Rules for the purpose of seeking the approval of the Shareholders.
At any time, the maximum number of Shares which may be issued upon exercise
of all outstanding options granted and not yet exercised under the Post-IPO Share
Option Scheme and any Other Schemes of our Company to the Eligible Persons must
not exceed 30% of the total number of Shares in issue from time to time.
The maximum number of Shares in respect of which options may be granted shall
be adjusted, in such manner as the auditors of our Company or independent financial
adviser appointed by the Board shall certify in writing to the Board to be fair and
reasonable, in the event of any alteration in the capital structure of our Company
APPENDIX V STATUTORY AND GENERAL INFORMATION
– V-62 –


--- page 754 ---
whether by way of capitalization of profits or reserves, rights issue, consolidation or
subdivision of shares, or reduction of the share capital of our Company provided that
no such adjustment shall be made in the event of an issue of Shares as consideration
in respect of a transaction.
The Company may grant options under the Post-IPO Share Option Scheme and
any Other Schemes of our Company beyond any of the limits as set out above to such
extent as may be permitted under the Listing Rules from time to time.
(iv) Maximum entitlement of each individual
No options shall be granted to any Eligible Person under the Post-IPO Share
Option Scheme and any Other Schemes of our Company which, if exercised, would
result in such Eligible Person becoming entitled to subscribe for such number of
Shares as, when aggregated with the total number of Shares already issued or to be
issued to him under all options granted to him (including exercised, canceled and
outstanding Options) in the 12-month period up to and including the date of offer of
such options, exceeds 1% of the Shares in issue at such date or such higher limit as
the Stock Exchange may allow pursuant to a waiver granted at the Stock Exchange’s
discretion.
Any further grant of options to an Eligible Person in excess of this 1% limit or
such higher limit as the Stock Exchange may allow pursuant to a waiver granted at the
Stock Exchange’s discretion shall be subject to the approval of the Shareholders in
general meeting with such Eligible Person and his close associates (or if such Eligible
Person is a connected person of our Company, his associates abstaining from voting).
Our Company must send a circular to the Shareholders disclosing the identity of the
Eligible Person, the number and terms of the options to be granted (and options
previously granted to such Eligible Person in the 12-month period) and such other
information required under the Listing Rules.
The number and terms (including the Option Price) of the options to be granted
to such Eligible Person must be fixed before the Shareholders’ approval and the date
of the Board meeting for proposing such further grant shall be taken as the date of
grant for the purpose of calculating the exercise price under Rule 17.03E of the
Listing Rules.
(v) Grant of options to connected persons
Each grant of options to a Director (including an independent non-executive
Director), chief executive or substantial shareholder of our Company, or any of their
respective associates, under the Post-IPO Share Option Scheme must be approved by
the independent non-executive Directors (excluding any independent non-executive
Director who is the proposed grantee of the options).
APPENDIX V STATUTORY AND GENERAL INFORMATION
– V-63 –


--- page 755 ---
Where any grant of options to a substantial shareholder or an independent
non-executive Director of our Company, or any of their respective associates, would
result in the Shares issued and to be issued upon exercise of all options already
granted and to be granted under the Post-IPO Share Option Scheme (including options
exercised, canceled and outstanding) to such person in the 12-month period up to and
including the date of such grant:
(a) representing in aggregate over 0.1% of the Shares in issue; and
(b) having an aggregate value, based on the closing price of the Shares at the
date of each grant, in excess of HK$5 million,
such further grant of options by the Board must be approved by the Shareholders in
general meeting. Such grantee, his associates and all core connected persons of our
Company must abstain from voting on the resolution to approve such further grant of
options. Our Company shall send to the Shareholders a circular containing the
information required under the Listing Rules for the purpose of seeking the approval
of the Shareholders.
(vi) Acceptance of an offer of options
An offer of options shall be open for acceptance for such period (not exceeding
30 days inclusive of, and from, the date of offer) as the Board may determine and
notify to the Eligible Person concerned provided that no such offer shall be open for
acceptance after the expiry of the duration of the Post-IPO Share Option Scheme. An
offer of options not accepted within this period shall lapse. An amount of HK$1.00 is
payable upon acceptance of the grant of an option and such payment shall not be
refundable and shall not be deemed to be a part payment of the Option Price.
(vii) Option Price
Subject to any adjustment made as described in sub-paragraph (xxi) below, the
Option Price shall be such price as determined by the Board and shall not be less than
the higher of:
(a) the closing price of the Shares as stated in the Stock Exchange’s daily
quotations sheet on the date of offer of the option;
(b) the average closing price of the Shares as stated in the Stock Exchange’s
daily quotations sheets for the five trading days immediately preceding the
date of offer of the option; and
(c) the nominal value of the Shares.
APPENDIX V STATUTORY AND GENERAL INFORMATION
– V-64 –


--- page 756 ---
(viii) Duration of Post-IPO Share Option Scheme
The Post-IPO Share Option Scheme shall be valid and effective for a period of
10 years commencing on the Listing Date, after which period no further options will
be granted but the provisions of the Post-IPO Share Option Scheme shall remain in
full force and effect to the extent necessary to give effect to the exercise of any
options granted prior thereto which are at that time or become thereafter capable of
exercise under the Post-IPO Share Option Scheme, or otherwise to the extent as may
be required in accordance with the provisions of the Post-IPO Share Option Scheme.
(ix) Time of vesting and exercise of options
Any option shall be vested on an Option-holder immediately upon his acceptance
of the offer of options provided that if any vesting schedule and/or conditions are
specified in the offer of the option, such option shall only be vested on an
Option-holder according to such vesting schedule and/or upon the fulfillment of the
vesting conditions (as the case may be). Any vested option which has not lapsed and
which conditions have been satisfied or waived by the Board in its sole discretion
may, unless the Board determines otherwise in its absolute discretion, be exercised at
any time from the next business day after the offer of options has been accepted. Any
option which remain unexercised shall lapse upon the expiry of the option period,
which period shall be determined by the Board and shall not exceed 10 years from the
offer date of the option or such longer period as the Stock Exchange may allow
pursuant to a waiver granted at the Stock Exchange’s discretion (the “ Option
Period ”).
An option shall be subject to such terms and conditions (if any) as may be
determined by the Board and specified in the offer of the option, including any vesting
schedule and/or conditions, any minimum period for which any option must be held
before it can be exercised and/or any performance target which need to be achieved by
an Option-holder before the option can be exercised. Such terms and conditions
determined by the Board must not be contrary to the purpose of the Post-IPO Share
Option Scheme and must be consistent with such guidelines (if any) as may be
approved from time to time by the Shareholders.
No option may be exercised in circumstances where such exercise would, in the
opinion of the Board, be in breach of a statutory or regulatory requirement.
APPENDIX V STATUTORY AND GENERAL INFORMATION
– V-65 –


--- page 757 ---
(x) Restriction on the time of grant of options
A grant of options may not be made after inside information has come to our
knowledge until (and including) the trading day after which such inside information
has been announced as required under the Listing Rules. In particular, no option may
be granted during the period commencing one month immediately preceding the
earlier of:
(a) the date of the Board meeting (as such date is first notified to the Stock
Exchange in accordance with the Listing Rules) for the approval of our
Company’s results for any year, half-year, quarterly or other interim period
(whether or not required under the Listing Rules); and
(b) the deadline for our Company to publish an announcement of the results for
any year, or half-year under the Listing Rules, or quarterly or any other
interim period (whether or not required under the Listing Rules),
and ending on the date of the results announcement. The period during which no
option may be granted will cover any period of delay in the publication of a results
announcement.
(xi) Ranking of the Shares
No dividends (including distributions made upon the liquidation of our Company)
will be payable and no voting rights will be exercisable in relation to an option that
has not been exercised. Shares allotted and issued on the exercise of an option will
rank pari passu in all respects with the Shares in issue on the date of allotment. They
will not rank for any rights attaching to Shares by reference to a record date preceding
the date of allotment.
(xii) Restrictions on transfer
Except for the transmission of an option on the death of an Option-holder to his
personal representatives, neither the option nor any rights in respect of it may be
transferred, assigned or otherwise disposed of by any Option-holder to any other
person or entity. If an Option-holder transfers, assigns or disposes of any such option
or rights, whether voluntarily or involuntarily, then the relevant option will
immediately lapse.
(xiii) Rights on voluntary resignation
If an Option-holder ceases to be an Eligible Person by reason of his voluntary
resignation (other than in circumstances where he is constructively dismissed), any
outstanding offer of options shall continue to be open for acceptance for such period
as determined by the Board at its absolute discretion and notified to such Eligible
APPENDIX V STATUTORY AND GENERAL INFORMATION
– V-66 –


--- page 758 ---
Person, and all options (to the extent vested but not already exercised) will continue
to be exercisable for such period as the Board may determine at its absolute discretion
and notify to such Eligible Person on the date of cessation of employment of such
Eligible Person.
(xiv) Rights on termination of employment
If an Option-holder ceases to be an Eligible Person by reason of (a) his employer
terminating his contract of employment in accordance with its terms or any right
conferred on his employer by law, or (b) his contract of employment, being a contract
for a fixed term, expiring and not being renewed, or (c) his employer terminating his
contract for serious or gross misconduct, then any outstanding offer of an option and
all options, vested or unvested, will lapse on the date the Option-holder ceases to be
an Eligible Person.
(xv) Rights on death, disability, retirement and transfer
If an Option-holder ceases to be an Eligible Person by reason of:
(a) his death; or
(b) his serious illness or injury which in the opinion of the Board renders the
Option-holder concerned unfit to perform the duties of his employment and
which in the normal course would render the Option-holder unfit to
continue performing the duties under his contract of employment for the
following 12 months provided such illness or injury is not self-inflicted; or
(c) his retirement in accordance with the terms of an Option-holder’s contract
of employment; or
(d) his early retirement by agreement with the Option-holder’s employer; or
(e) his employer terminating his contract of employment by reason of
redundancy; or
(f) his employer ceasing to be a member of the Group or an associated
company or under the control of our Company; or
(g) a transfer of the business, or the part of the business, in which the
Option-holder works to a person who is neither under the control of our
Company nor a member of the Group or associated companies of our
Company; or
APPENDIX V STATUTORY AND GENERAL INFORMATION
– V-67 –


--- page 759 ---
(h) if the Board determines in its absolute discretion that circumstances exist
which mean that it is appropriate and consistent with the purpose of the
Post-IPO Share Option Scheme to treat an Option-holder whose options
would otherwise lapse so that such options do not lapse but continue to
subsist in accordance with (and subject to) the provisions of the Post-IPO
Share Option Scheme,
then, any outstanding offer of an option which has not been accepted and any
unvested option will lapse and the Option-holder or his personal representatives (if
appropriate) may exercise all his options (to the extent vested but not already
exercised) within a period of one months of the date of cessation of employment. Any
option not exercised prior to the expiry of this period shall lapse.
If the Board determines that an Option-holder who ceases to be an Eligible
Person in circumstances such that his options continue to subsist in accordance with
(h) above:
(a) is guilty of any misconduct which would have justified the termination of
his contract of employment for cause but which does not become known to
our Company until after he has ceased employment with any member of the
Group or associated companies of our Company; or
(b) is in breach of any material term of contract of employment (or other
contract or agreement related to his contract of employment), without
limitation, any confidentiality agreement or agreement containing
non-competition or non-solicitation restrictions between him and any
member of the Group or associated companies of our Company; or
(c) has disclosed trade secrets or confidential information of any member of the
Group or associated companies of our Company; or
(d) has entered into competition with any member of the Group or associated
companies of our Company or breached any non-solicitation provisions in
his contract of employment,
then it may, in its absolute discretion, determine that any unexercised options, vested
or not vested, held by the Option-holder shall immediately lapse upon the Board
resolving to make such determination (whether or not the Option-holder has been
notified of the determination).
(xvi) Rights on cessation to be a director
In the event that any director ceases to be a director of any member of the Group
or associated companies of our Company, our Company shall, as soon as practicable
thereafter, give notice to the relevant Option-holder who as a result ceases to be an
APPENDIX V STATUTORY AND GENERAL INFORMATION
– V-68 –


--- page 760 ---
Eligible Person. Any outstanding offer of an option which has not been accepted and
any unvested option will lapse on the date the Option-holder ceases to be an Eligible
Person. The Option-holder (or his personal representative) may exercise all his options
(to the extent vested but not already exercised) within a period of one month of the
date of the notification by the Board. Any option not exercised prior to the expiry of
this period shall lapse.
(xvii) Rights on a general offer
If as a result of any general offer made to the holders of Shares, the Board
becomes aware that the right to cast more than 50% of the votes which may ordinarily
be cast on a poll at a general meeting of our Company has or will become vested in
the offeror, any company controlled by the offeror and any person associated with or
acting in concert with the offeror, the Board will notify every Option-holder of this
within 14 days of becoming so aware or as soon as practicable after any legal or
regulatory restriction on such disclosure no longer applies. Each Option-holder will be
entitled to exercise his options (to the extent vested but not already exercised) during
the period of one month starting on the date of the Board’s notification to the
Option-holders. All options, vested or unvested, not exercised before the end of such
period will lapse.
(xviii) Rights on company reconstructions
In the event of a compromise or arrangement, our Company shall give notice to
all Option-holders on the same date as it gives notice of the meeting to the
Shareholders or creditors to consider such a compromise or arrangement and each
Option-holder (or his personal representative) may at any time thereafter, but before
such time as shall be notified by our Company, exercise all or any of his options (to
the extent vested but not already exercised), and subject to our Company receiving the
exercise notice and the Option Price, our Company shall as soon as possible and in
any event no later than the business day immediately prior to the date of the proposed
general meeting, allot, issue and register under the name of the Option-holder such
number of fully paid Shares which fall to be issued on exercise of such options. Any
options, vested or not unvested, not so exercised will lapse.
(xix) Rights on winding up
In the event a notice is given by our Company to the Shareholders to convene a
general meeting for the purpose of considering and, if thought fit, approving a
resolution to voluntarily wind up our Company, our Company shall on the same date
as or soon after we dispatch such notice to the Shareholders give notice thereof to all
Option-holders and each Option-holder shall be entitled to exercise all or any of his
options (to the extent vested but not already exercised) at any time no later than seven
days prior to the proposed general meeting of our Company, and subject to our
Company receiving the exercise notice and the Option Price, our Company shall as
soon as possible and, in any event, no later than the business day immediately prior to
APPENDIX V STATUTORY AND GENERAL INFORMATION
– V-69 –


--- page 761 ---
the date of the proposed general meeting, allot, issue and register under the name of
the Option-holder such number of fully paid Shares which fall to be issued on exercise
of such options. Any options, vested or not unvested, not so exercised will lapse.
(xx) Lapse of option
An option will lapse on the earlier of:
(a) the expiry of the option period as determined by the Board; or
(b) the date when any circumstance referred to in paragraph (xii) above occurs;
or
(c) the expiry of the time provided for in the applicable rule where any of the
circumstances provided in paragraphs (xiii) to (xix) above apply.
(xxi) Effect of alteration to share capital
In the event of any alteration in the capital structure of the Company whilst any
option remains exercisable, whether by way of capitalization of profits or reserves,
further rights issues of Shares, consolidation or subdivision of shares, or reduction of
the share capital of our Company in accordance with applicable laws and regulatory
requirements (other than an issue of any share capital as consideration in respect of a
transaction), such corresponding adjustments (if any) shall be made to the number of
Shares, the subject matter of the option (insofar as it is unexercised) and/or the price
at which the options are exercisable, as the auditors of our Company or an
independent financial adviser appointed by the Board shall certify in writing to the
Board to be in their opinion fair and reasonable.
Any such adjustments shall be made on the basis that an Option-holder shall
have the same proportion of the issued share capital of our Company as that to which
he was entitled before such adjustment. No such adjustment shall be made the effect
of which would be to enable any Share to be issued at less than its nominal value, or
to increase the proportion of the issued share capital of our Company for which any
Option-holder would have been entitled to subscribe had he exercised all the options
held by him immediately prior to such adjustments.
The auditors of our Company or the independent financial adviser appointed by
the Board (as appropriate) must confirm to the Board in writing that the adjustment
satisfies the requirements of the Note to paragraph 17.03(13) of the Listing Rules and
such applicable guidance and/or interpretation of the Listing Rules from time to time
issued by the Stock Exchange, except where such adjustment is made on a
capitalization issue.
APPENDIX V STATUTORY AND GENERAL INFORMATION
– V-70 –


--- page 762 ---
The capacity of the auditors or independent financial advisers mentioned above is
that of experts and not of arbitrators and their certification shall be final and binding
on our Company and the Option-holders in the absence of fraud or manifest error. The
costs of the auditors or independent financial advisers shall be borne by our Company.
(xxii) Cancelation of option
Unless the Option-holder agrees, the Board may only cancel an option (which has
been granted but not yet exercised) if, at the election of the Board, either:
(a) our Company pays to the Option-holder an amount equal to the fair market
value of the option at the date of cancelation as determined by the Board at
its absolute discretion, after consultation with the auditors of our Company
or an independent financial adviser appointed by the Board; or
(b) the Board offers to grant the Option-holder replacement options (or options
under any other share option scheme of any Member of the Group) or makes
such arrangements as the Option-holder may agree to compensate him for
the loss of the option; or
(c) the Board makes such arrangements as the Option-holder may agree to
compensate him for the cancelation of the option.
Where our Company cancels options granted to a participant and makes a new
grant to the same participant, such new grant may only be made under the Post-IPO
Share Option Scheme with available Scheme Mandate Limit approved by the
Shareholders. The options canceled will be regarded as utilized for the purpose of
calculating the Scheme Mandate Limit.
(xxiii) Termination of the Post-IPO Share Option Scheme
The Post-IPO Share Option Scheme will expire automatically on the day
immediately preceding the tenth anniversary of the Listing Date. The Board may
terminate the Post-IPO Share Option Scheme at any time without Shareholders’
approval by resolving that no further options shall be granted under the Post-IPO
Share Option Scheme and in such case, no new offers to grant options under the
Post-IPO Share Option Scheme will be made and any options which have been granted
but not yet exercised shall either (a) continue subject to the Post-IPO Share Option
Scheme, or (b) be canceled in accordance with paragraph (xxii).
(xxiv) Amendments to the Post-IPO Share Option Scheme
The Board may amend any of the provisions of the Post-IPO Share Option
Scheme (including amendments in order to comply with changes in legal or regulatory
requirements) at any time (but not so as to affect adversely any rights which have
accrued to any Option-holder at that date), except that any amendments to the terms
APPENDIX V STATUTORY AND GENERAL INFORMATION
– V-71 –


--- page 763 ---
and conditions of the Post-IPO Share Option Scheme which are of a material nature or
any amendments to the advantage of present or future Option-holders in respect of
matters contained in Rule 17.03 of the Listing Rules may only be made with the
approval of the shareholders of our Company save where the amendments take effect
automatically under the existing terms of the Post-IPO Share Option Scheme.
Any amendments to the terms of options granted to an Option-holder who is a
substantial shareholder of our Company or an independent non-executive Director, or
any of their respective associates, must be approved by the Shareholders in general
meeting. The resolution to approve the amendment must be taken on a poll and any
connected person of our Company must abstain from voting on the resolution to
approve such amendment, except that such a connected person may vote against such
resolution.
Any change to the authority of the Board in relation to any amendment of the
rules of the Post-IPO Share Option Scheme may only be made with the approval of
the Shareholders in general meeting.
(xxv) Conditions of the Post-IPO Share Option Scheme
The adoption of the Post-IPO Share Option Scheme is conditional on:
(a) the Listing Committee granting (or agreeing to grant) approval (subject to
such conditions as the Stock Exchange may impose) for the listing of, and
permission to deal in, the Shares which may fall to be issued pursuant to the
exercise of any options which may be granted under the Post-IPO Share
Option Scheme; and
(b) the commencement of the dealings in the Shares on the Stock Exchange.
If the condition above are not satisfied on or before the date following six
months after the date the Post-IPO Share Option Scheme was conditionally adopted:
(a) the Post-IPO Share Option Scheme shall forthwith determine;
(b) any option granted or agreed to be granted pursuant to the Post-IPO Share
Option Scheme and any offer of such a grant shall be of no effect; and
(c) no person shall be entitled to any rights or benefits or be under any
obligation under or in respect of the Post-IPO Share Option Scheme or any
option.
An application has been made to the Listing Committee to the Stock Exchange
for the listing of, and permission to deal in, the new Shares which may be issued
pursuant to the exercise of the options which may be granted pursuant to the Post-IPO
Share Option Scheme.
APPENDIX V STATUTORY AND GENERAL INFORMATION
– V-72 –


--- page 764 ---
(xxvi) Performance targets
Our Directors shall have absolute discretion to determine the performance targets
that must be achieved by a grantee before any options granted under the Post-IPO
Share Option Scheme can be exercised.
(xxvii) Rights are personal to the grantee
An option is personal to the grantee and shall not be transferable or assignable
and no grantee shall in any way sell, transfer, charge, mortgage, encumber or
otherwise dispose of or create any interest (legal or beneficial) in favor of or enter
into any agreement with any other person over or in relation to any option, except for
the transmission of an option on the death of the grantee to his personal
representative(s) on the terms of this Post-IPO Share Option Scheme, or, subject to the
Stock Exchange granting a waiver, on a case-by-case basis, transfer to vehicle (such
as a trust or a private company) for the benefit of the participant and any family
members of such participant (for example, for estate planning or tax planning
purposes) that would continue to meet the purpose of the Post-IPO Share Option
Scheme and comply with the requirements under Chapter 17 of the Listing Rules.
(xxviii) V alue of options
Our Directors consider it inappropriate to disclose the value of options which
may be granted under the Post-IPO Share Option Scheme as if they had been granted
as of the Latest Practicable Date. Any such valuation will have to be made on the
basis of a certain option pricing model or other method that depends on various
assumptions including the exercise price, the exercise period, interest rate, expected
volatility and other variables. As no options have been granted, certain variables are
not available for calculating the value of options. Our Directors believe that any
calculation of the value of options granted as of the Latest Practicable Date would be
based on a number of speculative assumptions that are not meaningful and would be
misleading to investors.
As of the Latest Practicable Date, no option had been granted or agreed to be
granted by our Company pursuant to the Post-IPO Share Option Scheme.
Details of the Post-IPO Share Option Scheme, including particulars and
movements of the options granted during each financial year of our Company, and our
employee costs arising from the grant of the options will be disclosed in our annual
report.
APPENDIX V STATUTORY AND GENERAL INFORMATION
– V-73 –


--- page 765 ---
E. OTHER INFORMATION
1. Tax and other indemnities
The Controlling Shareholders entered into the Deed of Indemnity with and in favor of
our Company (for itself and as trustees for its subsidiaries) to provide indemnities in
respect of, among other matters, taxation or taxation claims resulting from income, profits
or gains earned, accrued or received to which any member of our Group may be subject on
or before the date when the Global Offering becomes unconditional.
The Deed of Indemnity shall become effective on the Listing Date and shall continue
in full force and effect until it is terminated.
2. Litigation
As of the Latest Practicable Date, no member of our Group was engaged in any
litigation, arbitration or claim of material importance, and no litigation, arbitration or claim
of material importance was known to the Directors to be pending or threatened by or
against the Group, that would have a material adverse effect on its business, financial
condition or results of operations.
3. Sole Sponsor
The Sole Sponsor has made an application on behalf of our Company to the Listing
Committee for the listing of, and permission to deal in, the Shares in issue, the Shares to be
issued pursuant to the Global Offering (including the additional Shares which may be
issued pursuant to the Capitalization Issue and the exercise of the Over-allotment Option),
and the Shares which may be issued pursuant to the Share Option Schemes. All necessary
arrangements have been made to enable such Shares to be admitted into CCASS.
The Sole Sponsor satisfies the independence criteria applicable to sponsors set out in
Rule 3A.07 of the Listing Rules. Please refer to the section headed “Underwriting –
Underwriting arrangements and expenses – Sole Sponsor’s independence” in this prospectus
for details regarding the independence of the Sole Sponsor.
Our Company has entered into an engagement agreement with the Sole Sponsor,
pursuant to which our Company agreed to pay the Sole Sponsor a fee of HK$9.0 million to
act as sponsor to our Company in the Global Offering.
4. No material adverse change
The Directors confirm that there has been no material adverse change in the financial
or trading position or prospects of our Group since December 31, 2022 (being the date to
which the latest audited consolidated financial statements of the Group were prepared) and
up to the date of this prospectus.
APPENDIX V STATUTORY AND GENERAL INFORMATION
– V-74 –


--- page 766 ---
5. Qualification of experts
The following are the qualifications of the experts (as defined under the Listing Rules
and the Companies (Winding Up and Miscellaneous Provisions) Ordinance) who have given
opinions or advice which are contained in this prospectus:
Name Qualification
CMBC International Capital
Limited
Licensed to conduct type 1 (dealing in securities)
and type 6 (advising on corporate finance)
regulated activities as defined under the SFO
Han Kun Law Offices Legal advisors as to PRC laws
Harney Westwood & Riegels Legal advisors as to Cayman Islands laws
ELLALAN Legal advisors as to Hong Kong intellectual
property laws
LCS & Partners Legal advisors as to Taiwan laws
PricewaterhouseCoopers Certified Public Accountants under Professional
Accountants Ordinance (Cap. 50) and Registered
Public Interest Entity Auditor under Accounting
and Financial Reporting Council Ordinance (Cap.
588)
China Insights Industry
Consultancy Limited
Industry consultant
Jones Lang LaSalle Corporate
Appraisal and Advisory
Limited
Property valuer
6. Consents of experts
Each of the above experts has given and has not withdrawn its consent to the issue of
this prospectus with the inclusion of its report and/or letter and/or legal opinion (as the
case may be) and references to its name included in the form and context in which it
respectively appears.
None of the experts named above has any shareholding in our Company or any of our
subsidiaries or any right (whether legally enforceable or not) to subscribe for or to
nominate persons to subscribe for securities in our Company or any of our subsidiaries.
APPENDIX V STATUTORY AND GENERAL INFORMATION
– V-75 –


--- page 767 ---
7. Promoter
Our Company has no promoter for the purpose of the Listing Rules. 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 are any proposed to
be paid, allotted or given to any promoters in connection with the Global Offering and the
related transactions described in this prospectus.
8. Preliminary expenses
The preliminary expenses incurred by our Company were approximately RMB34,000
and were payable by us.
9. Binding effect
This prospectus shall have the effect, if an application is made in pursuance of this
prospectus, of rendering all persons concerned bound by all of the provisions (other than
the penal provisions) of Sections 44A and 44B of the Companies (Winding Up and
Miscellaneous Provisions) Ordinance insofar as applicable.
10. Particulars of the Selling Shareholder
The particulars of the Selling Shareholder are set out as follows:
Name : Lake Ranch Limited
Description : Corporation
Registered office : Vistra Corporation Services Centre, Wickhams Cay II,
Road Town, Tortola, VG1110, British Virgin Islands
Nature of business : Investment holding
Number of Sale
Shares to be sold
: 48,000,000
APPENDIX V STATUTORY AND GENERAL INFORMATION
– V-76 –


--- page 768 ---
11. 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).
12. Miscellaneous
(a) Save as disclosed in the sections headed “History, development and
Reorganization”, “Underwriting – Underwriting arrangements and expenses –
Underwriting commissions and expenses” in this prospectus and the paragraphs
headed “Further information about our Group” in this Appendix to this
prospectus:
(i) within the two years immediately preceding the date of this prospectus,
neither we nor any of our subsidiaries has issued or agreed to issue any
share or debenture fully or partly paid up either for cash or for a
consideration other than cash;
(ii) no share or debenture of our Company or any of our subsidiaries is under
option or is agreed conditionally or unconditionally to be put under option;
(iii) within the two years immediately preceding the date of this prospectus, no
commissions, discounts, brokerage or other special terms have been granted
in connection with the issue or sale of any shares or debenture of any
member of our Group;
(iv) within the two years immediately preceding the date of this prospectus, no
commission has been paid or payable (except commission to Underwriters
and sub-underwriters) to any persons for subscription, agreeing to subscribe,
procuring subscription or agreeing to procure subscription of any shares of
our Company or any of our subsidiaries;
(v) no founder, management or deferred shares of our Company or any of our
subsidiaries have been issued or agreed to be issued;
(vi) our Company has no outstanding convertible debt securities or debentures;
and
(vii) there is no arrangement under which future dividends are waived or agreed
to be waived.
APPENDIX V STATUTORY AND GENERAL INFORMATION
– V-77 –


--- page 769 ---
(b) Our Directors confirm that there has not been any interruption in the business of
our Company which may have or have had a significant effect on the financial
position of our Company in the 12 months immediately preceding the date of this
prospectus.
(c) None of the equity and debt securities of our Company, if any, is listed or dealt
with in any other stock exchange nor is any listing or permission to deal being or
proposed to be sought.
APPENDIX V STATUTORY AND GENERAL INFORMATION
– V-78 –


--- page 770 ---
DOCUMENTS DELIVERED TO THE REGISTRAR OF COMPANIES
The documents attached to the copy of this prospectus delivered to the Registrar of
Companies in Hong Kong for registration were:
(i) a copy of GREEN Application Form;
(ii) the written consents referred to in “Statutory and general information – E. Other
information – 6. Consents of experts” in Appendix V to this prospectus;
(iii) a copy of each of the material contracts referred to in “Statutory and general
information – B. Further information about our business – 1. Summary of material
contracts” in Appendix V to this prospectus; and
(iv) a statement of the particulars of the Selling Shareholder referred to in “Statutory and
general information – E. Other information – 10. Particulars of the Selling
Shareholder” in Appendix V to this prospectus.
DOCUMENTS A V AILABLE ON DISPLAY
Copies of the following documents will be available on display on the website of the Stock
Exchange at www.hkexnews.hk and our website at www.splegend.com during a period of 14
days from the date of this prospectus:
(i) the Memorandum and Articles of Association;
(ii) the Cayman Companies Act;
(iii) the accountant’s report issued by PricewaterhouseCoopers, the text of which is set out
in Appendix I to this prospectus;
(iv) the report from PricewaterhouseCoopers in respect of the unaudited pro forma
financial information, the text of which is set out in Appendix II to this prospectus;
(v) the audited consolidated financial statements of our Group for the Track Record
Period;
(vi) the letter of advice issued by Harney Westwood & Riegels, our Cayman Islands legal
advisors, summarizing the constitution of our Company and certain aspects of Cayman
Companies Act in Appendix IV to this prospectus;
(vii) the PRC legal opinion issued by Han Kun Law Offices, our PRC Legal Advisors, in
respect of certain corporate matters and property interests of our Group;
APPENDIX VI DOCUMENTS DELIVERED TO THE REGISTRAR OF
COMPANIES AND A V AILABLE ON DISPLAY
– VI-1 –


--- page 771 ---
(viii) the legal opinion issued by LCS & Partners, our legal counsel as to certain aspects of
Taiwan laws;
(ix) the legal opinion issued by ELLALAN, our legal counsel as to certain aspects of Hong
Kong intellectual property laws;
(x) the industry report issued by China Insights Industry Consultancy Limited, the
summary of which is set forth in the section headed “Industry overview” in this
prospectus;
(xi) the property valuation report prepared by Jones Lang LaSalle Corporate Appraisal and
Advisory Limited, the text of which is set out in Appendix III to this prospectus;
(xii) the material contracts referred to in the section headed “Statutory and general
information – B. Further information about our business – 1. Summary of material
contract” in Appendix V to this prospectus;
(xiii) service contracts and letters of appointment with our Directors referred to in the
section headed “Statutory and general information – C. Further information about our
Directors and Substantial Shareholders – 2. Directors’ service contracts” in Appendix
V to this prospectus;
(xiv) the written consents referred to in the section headed “Statutory and general
information – E. Other information – 6. Consents of experts” in Appendix V to this
prospectus;
(xv) the terms of the Pre-IPO Stock Incentive Plan and a list of grantees thereunder, and
terms of the Post-IPO Share Option Scheme; and
(xvi) a statement of the particulars of the Selling Shareholder referred in “E. Other
information – 10. Particulars of the Selling Shareholder” in Appendix V to this
prospectus.
APPENDIX VI DOCUMENTS DELIVERED TO THE REGISTRAR OF
COMPANIES AND A V AILABLE ON DISPLAY
– VI-2 –


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