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GLOBAL OFFERING
长久股份有限公司
Changjiu Holdings Limited
(Incorporated in the Cayman Islands with limited liability)
Stock Code : 6959
Joint Sponsors, Overall Coordinators, Joint Global Coordinators, Joint Bookrunners and Joint Lead Managers
长久股份有限公司
Changjiu Holdings Limited
Joint Bookrunners and Joint Lead Managers


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IMPORTANT: If you are in any doubt about any of the contents of this prospectus, you should seek independent professional advice.
Changjiu Holdings Limited
ʮ̡
(Incorporated in the Cayman Islands with limited liability)
GLOBAL OFFERING
Number of Offer Shares under
the Global Offering
: 50,540,000 Shares
Number of Hong Kong Offer Shares : 5,054,000 Shares (subject to reallocation)
Number of International Offer Shares : 45,486,000 Shares (subject to
reallocation)
Maximum Offer Price : HK$7.90 per Share, plus brokerage of
1.0%, SFC transaction levy of
0.0027%, Stock Exchange trading fee
of 0.00565% and AFRC transaction
levy of 0.00015% (payable in full on
application in Hong Kong dollars and
subject to refund)
Nominal Value : US$0.00000066667 per Share
Stock Code : 6959
Joint Sponsors, Overall Coordinators, Joint Global Coordinators,
Joint Bookrunners and Joint Lead Managers
Joint Bookrunners and Joint Lead Managers
Hong Kong Exchanges and Clearing Limited, The Stock Exchange of Hong Kong Limited and Hong Kong Securities Clearing Company Limited take no responsib ility for the contents of this
prospectus, make no representation as to its accuracy or completeness, and expressly disclaim any liability whatsoever for any loss howsoever arisi ng 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 “Appendix V—Documents Delivered to the Registrar of Companies in Hong K ong and on Display” to this prospectus,
has been registered by the Registrar of Companies in Hong Kong as required by section 342C of the Companies (Winding Up and Miscellaneous Provisions) O rdinance (Chapter 32 of the Laws
of Hong Kong). The Securities and Futures Commission and the Registrar of Companies in Hong Kong take no responsibility for the contents of this prospe ctus or any other document referred
to above.
The Offer Price is expected to be fixed by agreement by the Overall Coordinators (for themselves and on behalf of the Underwriters) and us on the Price De termination Date. The Price
Determination Date is expected to be on or around Friday, January 5, 2024 (Hong Kong time). The Offer Price will be not more than HK$7.90 per Offer Share a nd is currently expected to be
not less than HK$5.95 per Offer Share, unless otherwise announced. Applicants for Hong Kong Offer Shares may be required to pay, on application (subje ct to application channels), the maximum
Offer Price of HK$7.90 per Offer Share for each Hong Kong Offer Share together with brokerage fee of 1%, SFC transaction levy of 0.0027%, Stock Exchange trading fee of 0.00565% and AFRC
transaction levy of 0.00015%, subject to refund if the Offer Price as finally determined is less than HK$7.90 per Offer Share. If, for any reason, the Of fer Price is not agreed by 12:00 noon on
Friday, January 5, 2024 (Hong Kong time) by the Overall Coordinators (for themselves and on behalf of the Underwriters) and us, the Global Offering wil l not proceed and will lapse.
The Overall Coordinators (for themselves and on behalf of the Underwriters) may, with the consent of our Company, reduce the number of Offer Shares and /or the indicative Offer Price range
stated in this prospectus (which is HK$5.95 to HK$7.90) at any time prior to the morning of the last day for lodging applications under the Hong Kong Publ ic Offering. In such a case, a notice
of the reduction in the number of Offer Shares and/or the indicative Offer Price range will be published on our website at www.99digtech.com and the Stock Exchange’s website at
www.hkexnews.hk not later than the morning of the last day for lodging applications under the Hong Kong Public Offering. Further details are set forth in “Structure of t he Global Offering”
and “How to Apply for Hong Kong Offer Shares” in this prospectus. If applications for Hong Kong Offer Shares have been submitted prior to the day which is the last day for lodging applications
under the Hong Kong Public Offering, then such applications can be subsequently withdrawn if the number of Offer Shares and/or the indicative Offer Pr ice range are so reduced.
The obligations of the Hong Kong Underwriters under the Hong Kong Underwriting Agreement to subscribe for, and to procure applicants for the subscrip tion for, the Hong Kong Offer
Shares, are subject to termination by the Overall Coordinators (on behalf of the Hong Kong Underwriters) if certain grounds arise prior to 8:00 a.m. on the day that trading in the
Shares commences on the Stock Exchange. Such grounds are set out in the section headed “Underwriting—Underwriting Arrangements and Expenses—Hong K ong Public
Offering—Grounds for termination” in this prospectus. It is important that you refer to that section for further details.
Prior to making an investment decision, prospective investors should consider carefully all the information set forth in this prospectus, includin g but not limited to the risk factors set forth in
“Risk Factors” in this prospectus.
The Offer Shares have not been and will not be registered under the U.S. Securities Act or any state securities law in the United States and may not be offe red, sold, pledged or transferred within
the United States, except in transactions exempt from, or not subject to, the registration requirements of the U.S. Securities Act. The Offer Shares a re being offered and sold outside the United
States in offshore transactions in reliance on Regulation S under the U.S. Securities Act.
ATTENTION
We have adopted a fully electronic application process for the Hong Kong Public Offering. We will not provide printed copies of this prospectus to the p ublic in relation to the Hong Kong
Public Offering.
This prospectus is available at the websites of the Stock Exchange ( www.hkexnews.hk ) and our Company (www.99digtech.com ). If you require a printed copy of this prospectus, you may
download and print from the website addresses above.
IMPORTANT
December 29, 2023


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IMPORTANT NOTICE TO INVESTORS:
FULLY ELECTRONIC APPLICATION PROCESS
We have adopted a fully electronic application process for the Hong Kong Public
Offering. We will not provide printed copies of this prospectus to the public in relation to the
Hong Kong Public Offering.
This prospectus is available at the website of the Stock Exchange at www.hkexnews.hk
under the “ HKEXnews > New Listings > New Listing Information ” section, and our website
at www.99digtech.com . If you require a printed copy of this prospectus, you may download
and print from the website addresses above.
To apply for the Hong Kong Offer Shares, you may use one of the following application
channels:
Application
Channel Platform Target Investors Application Time
HK eIPO White
Form service
Online application via the HK eIPO
White Form service in the IPO
App (which can be downloaded by
searching “ IPO App ” in App Store
or Google Play or download at
www.hkeipo.hk/IPOApp or
www.tricorglobal.com/IPOApp )o r
at the designated website at
www.hkeipo.hk .
Investors who would like to
receive a physical Share
certificate. Hong Kong
Offer Shares successfully
applied for will be
allotted and issued in
your own name.
From 9:00 a.m. on Friday,
December 29, 2023 to
11:30 a.m. on Thursday,
January 4, 2024, Hong
Kong time.
The latest time for
completing full payment
of application monies
will be 12:00 noon on
Thursday, January 4,
2024, Hong Kong time.
HKSCC EIPO
channel
Y our broker or custodian who is a
HKSCC Participant will submit a
HKSCC EIPO application on your
behalf through HKSCC’s FINI
system in accordance with your
instruction.
Investors who would not
like to receive a physical
Share certificate. Hong
Kong Offer Shares
successfully applied for
will be allotted and
issued in the name of
HKSCC Nominees,
deposited directly into
CCASS and credited to
your designated HKSCC
Participant’s stock
account.
Contact your broker or
custodian for the earliest
and latest time for giving
such instructions, as this
may vary by broker or
custodian.
We will not provide any physical channels to accept any application for the Hong Kong
Offer Shares by the public. The contents of the electronic version of this prospectus are
identical to the printed document as registered with the Registrar of Companies in Hong Kong
pursuant to Section 342C of the Companies (Winding Up and Miscellaneous Provisions)
Ordinance.
If you are an intermediary , broker or agent , please remind your customers, clients or
principals, as applicable, that this prospectus is available online at the website addresses above.
Please refer to the section headed “How to Apply for Hong Kong Offer Shares” 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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Y our application through the HK eIPO White Form service or the HKSCC EIPO channel
must be for a minimum of 500 Hong Kong Offer Shares and in one of the numbers set out in
the table below. If you are applying through the HK eIPO White Form service, you may refer
to the table below for the amount payable for the number of Shares you have selected. Y ou must
pay the respective maximum amount payable on application in full upon application for Hong
Kong Offer Shares. If you are applying through the HKSCC EIPO channel, you are required
to prefund your application based on the amount specified by your broker or custodian, as
determined based on the applicable laws and regulations in Hong Kong.
No. of
Hong Kong
Offer Shares
applied for
Maximum
Amount
payable
(2)
on
application/
successful
allotment
No. of
Hong Kong
Offer Shares
applied for
Maximum
Amount
payable
(2)
on
application/
successful
allotment
No. of
Hong Kong
Offer Shares
applied for
Maximum
Amount
payable
(2)
on
application/
successful
allotment
No. of
Hong Kong
Offer Shares
applied for
Maximum
Amount
payable
(2)
on
application/
successful
allotment
HK$ HK$ HK$ HK$
500 3,989.84 7,000 55,857.69 50,000 398,983.58 700,000 5,585,770.06
1,000 7,979.67 8,000 63,837.37 60,000 478,780.29 800,000 6,383,737.20
1,500 11,969.51 9,000 71,817.05 70,000 558,577.00 900,000 7,181,704.36
2,000 15,959.34 10,000 79,796.71 80,000 638,373.72 1,000,000 7,979,671.50
2,500 19,949.18 15,000 119,695.08 90,000 718,170.44 1,500,000 11,969,507.26
3,000 23,939.02 20,000 159,593.44 100,000 797,967.16 2,000,000 15,959,343.00
3,500 27,928.85 25,000 199,491.79 200,000 1,595,934.30 2,527,000
(1) 20,164,629.88
4,000 31,918.69 30,000 239,390.15 300,000 2,393,901.46
4,500 35,908.52 35,000 279,288.50 400,000 3,191,868.60
5,000 39,898.36 40,000 319,186.85 500,000 3,989,835.76
6,000 47,878.03 45,000 359,085.22 600,000 4,787,802.90
Notes:
(1) Maximum number of Hong Kong Offer Shares you may apply for and this is 50% of the Hong Kong Offer
Shares initially offered.
(2) The amount payable is inclusive of brokerage, SFC transaction levy, the Stock Exchange trading fee and AFRC
transaction levy. If your application is successful, brokerage will be paid to the Exchange Participants (as
defined in the Listing Rules) or to the HK eIPO White Form Service Provider (for applications made through
the application channel of the HK eIPO White Form Service Provider) while the SFC transaction levy, the
Stock Exchange trading fee and the AFRC transaction levy will be paid to the SFC, the Stock Exchange and
the AFRC, respectively.
No application for any other number of Hong Kong Offer Shares will be considered and
any such application is liable to be rejected.
IMPORTANT


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If there is any change in the following expected timetable of the Global Offering, we
will issue an announcement on the website of our Company at www.99digtech.com and
the website of the Stock Exchange at www.hkexnews.hk .
Hong Kong Public Offering commences .............................. .9:00 a.m. on
Friday, December 29, 2023
Latest time for completing electronic applications via the
HK eIPO White Form service through one of the
below ways (2):
(1) the IPO App , which can be downloaded by searching
“IPO App ” in App Store or Google Play or downloaded
at www.hkeipo.hk/IPOApp or www.tricorglobal.com/IPOApp
(2) the designated website www.hkeipo.hk .......................... 1 1:30 a.m. on
Thursday, January 4, 2024
Application lists of the Hong Kong Public
Offering open (3) .............................................. 1 1:45 a.m. on
Thursday, January 4, 2024
Latest time for (a) completing full payment of
application monies via
the HK eIPO White Form service,
or; (b) giving electronic application instructions to HKSCC
(4) ........ .12:00 noon on
Thursday, January 4, 2024
If you are instructing your broker or custodian who is a HKSCC Participant to submit
HKSCC EIPO applications on your behalf through HKSCC’s FINI system in accordance with
your instruction, 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
Thursday, January 4, 2024
Expected Price Determination Date (5) ....................... o no r before 12:00 noon
Friday, January 5, 2024
EXPECTED TIMETABLE (1)
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Announcement of:
 the final Offer Price;
 the level of indications of interest in the International Offering;
 the level of applications in the Hong Kong Public Offering; and
 the basis of allocations of the Hong Kong Offer Shares
to be published on the website of our Company at
www.99digtech.com
(6) and the website of
the Stock Exchange at www.hkexnews.hk ........... n o later than 11:00 p.m. Monday,
January 8, 2024
Results of allocations in the Hong Kong Public Offering (with successful applicants’
identification document numbers, where appropriate) to be available through the HK eIPO
White Form service or HKSCC EIPO channel:
 from the “IPO Results” function in the IPO App or
the designated results of allocations website at
www.tricor.com.hk/ipo/result or
www.hkeipo.hk/IPOResult with a
“search by ID” function from (7) ................ 1 1:00 p.m. on Monday, January 8,
2024 to 12:00 midnight Sunday,
January 14, 2024
 The Stock Exchange’s website at www.hkexnews.hk
and our website at www.99digtech.com (6) which will
provide links to the above mentioned websites of the
Hong Kong Share Registrar ................. n o later than 11:00 p.m. on Monday,
January 8, 2024
 from the allocation results telephone enquiry line by
calling +852 3691 8488 between 9:00 a.m. and
6:00 p.m. from ................................. T uesday, January 9, 2024 to
Friday, January 12, 2024
on a business day
 For those applying through HKSCC EIPO channel,
you may also check with your broker or
custodian from ...................................... .6:00 p.m. on Friday,
January 5, 2024
EXPECTED TIMETABLE (1)
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For applications through the HK eIPO White Form service:
 Share certificates to be collected in person at
the Hong Kong Share Registrar, Tricor Investor
Services Limited, at 17/F, Far East Finance
Centre, 16 Harcourt Road, Hong Kong for
application of 1,000,000 Hong Kong
Offer Shares or more from
(8)(9) ...................... .9:00 a.m. to 1:00 p.m. on
Tuesday, January 9, 2024
 Share certificates to be sent for application of
less than 1,000,000 Hong Kong
Offer Shares
(8)(9) .................................. .Monday, January 8, 2024
For applications through HKSCC EIPO channel, Share certificate(s) will be issued in the
name of HKSCC Nominees, deposited into CCASS and credited to your designated HKSCC
Participant’s stock account.
(8)(9)
e-Auto Refund payment instructions/refund
cheque(s) via the HK eIPO White Form service to
be dispatched (10) ....................................T uesday, January 9, 2024
Dealings in the Shares on the Stock Exchange expected
to commence at (9) ............................................ . 9:00 a.m. on
Tuesday, January 9, 2024
Notes:
(1) Unless otherwise stated, all times and dates refer to Hong Kong local times and dates.
(2) Y ou will not be permitted to submit your application under the HK eIPO White Form service through the IPO
App or the designated website at www.hkeipo.hk after 11:30 a.m. on the last day for submitting applications.
If you have already submitted your application and obtained an application reference number from the
designated website prior to 11:30 a.m., you will be permitted to continue the application process (by
completing payment of application monies) until 12:00 noon on the last day for submitting applications, when
the application lists close.
(3) If there is a “black” rainstorm warning or a tropical cyclone warning signal number 8 or above and/or Extreme
Conditions (collectively, “Severe Weather Signal”) in force in Hong Kong at any time between 9:00 a.m. and
12:00 noon on Thursday, January 4, 2024, the application lists will not open or close on that day. For further
details, see “How to Apply for Hong Kong Offer Shares—E. Severe Weather Arrangements.”
(4) Applicants who apply via HKSCC EIPO channel shall contact their broker or custodian for the earliest and
latest time for giving such instructions, as this may vary by broker or custodian.
(5) The Price Determination Date is expected to be on or about Friday, January 5, 2024. If, for any reason, the
Offer Price is not agreed between the Overall Coordinators (for themselves and on behalf of the other
Underwriters) and us by 12:00 noon on Friday, January 5, 2024, the Global Offering will not proceed and will
lapse.
(6) Neither of the websites nor any of the information contained on the websites forms part of this prospectus.
EXPECTED TIMETABLE (1)
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(7) The full list of (i) wholly or partially successful applicants using the HK eIPO White Form service and
HKSCC EIPO channel, and (ii) the number of Hong Kong Offer Shares conditionally allotted to them, among
other things, will be displayed at www.hkeipo.hk/IPOResult or www.tricor.com.hk/ipo/result .
(8) 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 “Underwriting—Underwriting
Arrangements—Hong Kong Public Offering—Grounds for Termination” has not been exercised. Investors who
trade the Shares on the basis of publicly available allocation details prior to the receipt of Share certificates
or prior to the Share certificates becoming valid evidence of title do so entirely at their own risk.
(9) If a Severe Weather Signal in force is hoisted on Monday. January 8, 2024, the Hong Kong Share Registrar
will make appropriate arrangements for the delivery of the Share certificates to the HKSCC Depository’s
service counter so that they would be available for trading on Tuesday, January 9, 2024.
(10) Refund mechanism for surplus application monies paid by application via HKSCC EIPO channel is subject to
the arrangement between applicants and their broker or custodian.
Applicants who have applied for Hong Kong Offer Shares through the HKSCC EIPO channel should refer to
“How to Apply for Hong Kong Offer Shares—D. Dispatch/Collection of Share Certificates and Refund of
Application Monies” for details.
Applicants who have applied through the HK eIPO White Form service and paid their applications monies
through single bank accounts may have refund monies (if any) dispatched to the designated bank account in
the form of e-Auto Refund payment instructions. Applicants who have applied through the HK eIPO White
Form service and paid their application monies through multiple bank accounts may have refund monies (if
any) dispatched to the address as specified in their application instructions in the form of refund cheques in
favour of the applicant (or, in the case of joint applications, the first-named applicant) by ordinary post at their
own risk.
Further information is set out in “How to Apply for Hong Kong Offer Shares—D. Dispatch/Collection of Share
Certificates and Refund of Application Monies.”
The above expected timetable is a summary only. For further details of the structure of
the Global Offering, including its conditions, and the procedures for applications for Hong
Kong Offer Shares, see “Structure of the Global Offering” and “How to Apply for Hong Kong
Offer Shares” in this prospectus.
If the Global Offering does not become unconditional or is terminated in accordance with
its terms, the Global Offering will not proceed. In such case, our Company will make an
announcement as soon as practicable thereafter.
EXPECTED TIMETABLE (1)
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IMPORTANT NOTICE TO INVESTORS
This prospectus is issued by us solely in connection with the Hong Kong Public
Offering and does not constitute an offer to sell or a solicitation of an offer to buy any
security other than the Hong Kong Offer Shares offered by this prospectus pursuant to
the Hong Kong Public Offering. This prospectus may not be used for the purpose of,
and does not constitute, an offer or a solicitation of an offer to subscribe for or buy,
any security in any other jurisdiction or in any other circumstances. No action has been
taken to permit a public offering of the Offer Shares or the distribution of this
prospectus in any jurisdiction other than Hong Kong. The distribution of this
prospectus and the offering and sale of the Offer Shares in other jurisdictions are
subject to restrictions and may not be made except as permitted under the applicable
securities laws of such jurisdictions pursuant to registration with or authorization by
the relevant securities regulatory authorities or an exemption therefrom.
Y ou should rely only on the information contained in this prospectus to make your
investment decision. We have not authorized anyone to provide you with information
that is different from what is contained in this prospectus. Any information or
representation not made in this prospectus must not be relied on by you as having been
authorized by us, the Joint Sponsors, the Joint Global Coordinators, the Overall
Coordinators, the Capital Market Intermediaries, the Joint Bookrunners, the Joint
Lead Managers, any of the Underwriters, any of our or their respective directors,
officers, employees, agents or representatives, or any other person or party involved in
the Global Offering.
Page
EXPECTED TIMETABLE ............................................ i
CONTENTS ....................................................... v
SUMMARY ....................................................... 1
DEFINITIONS AND ACRONYMS ..................................... 3 2
GLOSSARY OF TECHNICAL TERMS ................................. 4 4
FORW ARD-LOOKING STATEMENTS ................................. 4 8
RISK FACTORS ................................................... 5 0
W AIVERS FROM STRICT COMPLIANCE WITH THE LISTING RULES .... 8 0
CONTENTS
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INFORMATION ABOUT THIS PROSPECTUS AND THE GLOBAL
OFFERING ...................................................... 8 4
DIRECTORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING ..... 8 8
CORPORATE INFORMATION ....................................... 9 6
INDUSTRY OVERVIEW ............................................. 9 9
REGULATORY OVERVIEW ......................................... 1 1 6
HISTORY, REORGANIZATION AND CORPORATE STRUCTURE .......... 1 3 9
BUSINESS ........................................................ 1 5 0
RELATIONSHIP WITH OUR CONTROLLING SHAREHOLDERS .......... 2 2 8
CONNECTED TRANSACTIONS ...................................... 2 4 1
DIRECTORS AND SENIOR MANAGEMENT ............................ 2 5 0
SUBSTANTIAL SHAREHOLDERS ..................................... 2 6 4
SHARE CAPITAL .................................................. 2 6 6
FINANCIAL INFORMATION ......................................... 2 6 9
FUTURE PLANS AND USE OF PROCEEDS ............................. 3 2 5
UNDERWRITING .................................................. 3 3 0
STRUCTURE OF THE GLOBAL OFFERING ............................ 3 4 3
HOW TO APPLY FOR HONG KONG OFFER SHARES ................... 3 5 3
APPENDIX I ACCOUNTANTS’ REPORT ........................ I - 1
APPENDIX II UNAUDITED PRO FORMA FINANCIAL
INFORMATION ................................ II-1
APPENDIX III SUMMARY OF THE CONSTITUTION OF THE
COMPANY AND CAYMAN ISLANDS COMPANY
LA W ......................................... III-1
APPENDIX IV STATUTORY AND GENERAL INFORMATION ........ I V - 1
APPENDIX V DOCUMENTS DELIVERED TO THE REGISTRAR OF
COMPANIES IN HONG KONG AND ON DISPLAY ... V - 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. Y ou should read this prospectus in its entirety before you decide to
invest in the Offer Shares. There are risks associated with any investment. Some of the
particular risks in investing in the Offer Shares are set out in “Risk Factors” of this
prospectus. Y ou should read that section carefully before you decide to invest in the
Offer Shares.
OVERVIEW
Who We Are
We provide pledged vehicle monitoring services and automobile dealership operation
management services in China. According to CIC, we were the largest pledged vehicle
monitoring service provider in China’s automobile sales and distribution industry both in terms
of revenue in 2022, with a market share of 47.9%, and in terms of the number of automobile
dealership users as of December 31, 2022. We achieved such dominant position in the pledged
vehicle monitoring service market and outcompeted our peers primarily through (i) our 17
years of operation history; (ii) our nationwide presence with operation in over 500 cities across
31 provinces in China; and (iii) our VFS system that collects, processes and analyzes data from
pledged vehicles and our continuous improvement of the VFS system to meet evolving market
demands.
We offer pledged vehicle monitoring services primarily to (i) financial institutions that
provide secured financing to automobile dealerships for their purchase of vehicles; and (ii)
automobile dealerships with pledged vehicles. As of June 30, 2023, we provided pledged
vehicle monitoring services to (i) approximately 200 branches of 18 commercial banks,
including all of China’s “Big Six” national state-owned commercial banks and 12 joint-stock
commercial banks; (ii) 27 automobile finance companies; and (iii) 11,152 automobile
dealerships.
Through our provision of pledged vehicle monitoring services over the years, we have
accumulated insights regarding China’s automobile sales and distribution industry. As a natural
extension, we endeavored to expand our business in China’s automobile sales and distribution
industry and began offering operation management services to automobile dealerships that seek
more optimal business and financial performance in April 2022. In order to optimize our
services before expanding our offering to the wider market and in light of our strategic business
relationship with Changjiu Group, we have initially focused on providing operation
management services to automobile dealerships owned by Changjiu Group. Through this
arrangement with Changjiu Group, we are able to get feedbacks and enhance our service
quality. Given that we commenced this business line relatively recently and additional time is
required for us to promote our operation management services to broader industry participants,
SUMMARY
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automobile dealerships owned by Changjiu Group have accounted for substantially all of our
customers for this business line. As of June 30, 2023, we managed a total of 75 automobile
dealerships, among which 74 were owned by Changjiu Group and one was owned by an
Independent Third Party.
Our Value Propositions
We believe our success is based on the value that we provide to our users:
 Financial institutions . We provide efficient pledged vehicle monitoring services to
financial institutions and enable them to better safeguard the vehicles pledged to
them.
 Automobile dealerships . By facilitating more effective and cost-efficient
monitoring of pledged vehicles and reducing counterparty risks for financial
institutions, our pledged vehicle monitoring services may enhance chances for
automobile dealerships to obtain loans from financial institutions. Through our
automobile dealership operation management services, we recommend and select
experienced staff to automobile dealerships and provide operational support, data
system and managerial services that aim to enhance their business and financial
performance.
Our Performance
We achieved stable growth during the Track Record Period. In 2020, 2021 and 2022, our
revenue amounted to RMB430.6 million, RMB477.7 million and RMB547.9 million,
respectively, representing a CAGR of 12.8%. Our revenue also increased from RMB258.7
million in the six months ended June 30, 2022 to RMB309.4 million in the six months ended
June 30, 2023. The number of automobile dealerships that were using our pledged vehicle
monitoring services increased from 8,316 as of December 31, 2020 to 9,205 as of December
31, 2021, then to 10,684 as of December 31, 2022, and further to 11,152 as of June 30, 2023.
OUR BUSINESS LINES
We operate two business lines: (i) pledged vehicle monitoring services and (ii)
automobile dealership operation management services.
Pledged Vehicle Monitoring Services
We offer pledged vehicle monitoring services primarily to (i) financial institutions,
mainly including commercial banks and automobile finance companies, that provide secured
financing to automobile dealerships for their purchase of vehicles; and (ii) automobile
dealerships with pledged vehicles. Although automobile dealerships pledge their vehicles to
obtain secured financing from financial institutions and generally have a contractual obligation
to provide storage places to safeguard the pledged vehicles, the automobile dealerships retain
SUMMARY
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possession of such pledged vehicles. Therefore, it is essential for financial institutions to
monitor the pledged vehicles to prevent them from theft, damage or automobile dealerships’
embezzlement from a risk management perspective. An effective way to mitigate against such
risk is for the financial institutions to enter into tripartite agreements with automobile
dealerships and third-party service providers, under which the third-party service providers
monitor the pledged vehicles on behalf of the financial institutions.
According to CIC, financial institutions tend to rely on third-party service providers
rather than their in-house personnel to provide pledged vehicle monitoring services, primarily
because of third-party service providers’ cost-efficiency and service quality. According to CIC,
as of December 31, 2022, approximately 80% of the financial institutions in China that
provided secured financing to automobile dealerships engaged third-party service providers to
monitor pledged vehicles. Third-party service providers generally have a team of professional
service personnel who are equipped with specialized digital monitoring systems, which enable
them to reduce reliance on manpower and identify and report potential risk events in a more
comprehensive and cost-effective manner as compared to financial institutions’ in-house
personnel. A financial institution typically enters into a tripartite agreement with an automobile
dealership and third-party pledged vehicle monitoring service provider for such services, under
which the financial institution engages the service provider to monitor the dealership’s pledged
vehicles. Under a typical tripartite agreement, the automobile dealership is primarily
responsible for purchasing insurance for and providing a safe place for the storage of the
pledged vehicles, and the pledged vehicle monitoring service provider is primarily responsible
for monitoring the pledged vehicles, managing the vehicle conformity certificates as well as
car keys and notifying the financial institution of risk events in a timely manner.
We cater for this business need from financial institutions by offering our professional
pledged vehicle monitoring services supported by our digital monitoring systems and
complementary hardware. We provide our users with any one or any combination of the
following services: (i) pledged vehicle monitoring and lockbox services, under which we hold
and keep vehicle conformity certificates and car keys of pledged vehicles in our traditional and
electronic lockboxes placed on automobile dealerships’ sites or in the locations mutually
agreed upon by the financial institutions and automobile dealerships; (ii) collective
management of vehicle conformity certificates; (iii) counting of pledged vehicles, vehicle
conformity certificates and car keys; and (iv) other ancillary services. Financial institutions and
automobile dealerships can choose the service(s) that best suit their needs. For our pledged
vehicle monitoring services, we primarily use a cost-plus pricing model: (i) costs of our
pledged vehicle monitoring services may vary depending on the average local salary and the
manpower required; and (ii) markup on the costs may vary depending on the city tier of the
automobile dealerships and their pledged vehicles, and the scope of our services. Our service
fees are typically paid by financial institutions. Nevertheless, either financial institution or
automobile dealership may pay for our services under the tripartite service agreement,
depending on the negotiation between them. See “Business—Pledged V ehicle Monitoring
Services—Scope of Services.”
SUMMARY
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We provide our pledged vehicle monitoring services through our pledged vehicle
monitoring system that consists of the VFS system and V ehicle Connect mobile application,
and the integrated complementary hardware that include the RFID labels, PDAs, OBD devices
and lockboxes. Our VFS system is a multifunctional IT solution with online operation,
automatic alert and pledged vehicle monitoring modules and a pool of over 20,000 preset
commands, which allows users to readily choose the settings that best suit their risk
management needs without having to create the commands from scratch. Our V ehicle Connect
is a mobile application that allows financial institutions and automobile dealerships to access
the information collected by our VFS system on mobile devices. See “Business—Pledged
V ehicle Services—Pledged V ehicle Monitoring System—VFS System and V ehicle Connect”
for more details. Our customers’ confidence in us and our technological advantages were
manifested by our market share in terms of revenue of 47.9% in 2022, which was significantly
higher than that of the other market participant with an information system, being 25.2%.
Considering the information system that we use to facilitate real-time pledged vehicle
monitoring for our customers, and our expertise and in-depth knowledge of the automobile
sales and distribution industry as well as the practicable difficulties faced by financial
institutions in pledged vehicle monitoring, we believe we have distinguished ourselves from
our competitors.
Automobile Dealership Operation Management Services
According to CIC, medium- and small-sized automobile dealerships in China generally
lack managerial expertise, technological capabilities and sophisticated human resources
system. In light of the fierce competition in the industry, these medium- and small-sized
automobile dealerships are driven to improve their operational efficiency by adjusting their
business plans and upgrading their technologies to cope with the constantly evolving business
environment. However, as the competition for each dealership’s performance intensifies and
medium- and small-sized automobile dealerships lack the necessary managerial expertise or
technological capacities, the need for specialized and professional management arises. To cater
to such need, we offer management services to medium- and small-sized automobile
dealerships that seek more optimal business and financial performance. Our automobile
dealership operation management services consist of automobile dealerships operational
support, data system and managerial services. We grant automobile dealerships access to our
automobile dealership operation management system, namely Smart Star (“݋߅allowing
them to categorize, process and visualize their operational data, such as inventory level, sales
and number of customers. Leveraging our insights in the automobile sales and distribution
industry and automobile dealership operations, we also (i) formulate development plans for
automobile dealerships; (ii) review and supervise the implementation of automobile
dealerships’ annual business plan; (iii) provide guidance to automobile dealerships to improve
their operation and management capabilities, including consultation based on our interpretation
of the operational data collected and processed by Smart Star, and guidance relating to
systematic improvement on automobile dealerships’ management capabilities and operational
efficiency; and (iv) assist automobile dealerships to integrate their internal and external
corporate resources.
SUMMARY
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We strive to help automobile dealerships that procure our operation management services,
improve their operational as well as financial performance through operational support, data
system and managerial services, and become more competitive in the market, ultimately
contributing to the healthy and sustainable development of the automobile sales and
distribution industry.
We typically charge automobile dealerships an annual management fee according to the
following schedule: (i) 0.1% of the automobile dealership’s expected annual revenue payable
within 15 days following the signing date of the automobile dealership operation management
service agreement; and (ii) 0.4% of the actual quarterly revenue payable within seven days
following the end of each of the subsequent quarters. We may also raise our fees subject to
market price fluctuations and the scope of services we provide after negotiations with our
customers.
During the Track Record Period, we primarily generated revenue from pledged vehicle
monitoring services. In April 2022, we started to provide operation management services to
automobile dealerships. In 2022 and the six months ended June 30, 2023 the majority of our
revenue from our operation management services was derived from automobile dealerships
owned by Changjiu Group. The following table sets forth a breakdown of our revenue by
business line for the periods indicated.
For the year ended December 31, For the six months ended June 30,
2020 2021 2022 2022 2023
(RMB’000) (%) (RMB’000) (%) (RMB’000) (%) (RMB’000) (%) (RMB’000) (%)
(unaudited)
Pledged vehicle monitoring services 430,587 100.0 477,697 100.0 505,049 92.2 245,760 95.0 279,067 90.2
Automobile dealership operation
management services – – – – 42,818 7.8 12,892 5.0 30,364 9.8
Total 430,587 100.0 477,697 100.0 547,867 100.0 258,652 100.0 309,431 100.0
The following table sets forth a breakdown of our gross profit and gross profit margin by
business line for the periods indicated.
SUMMARY
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For the year ended December 31, For the six months ended June 30,
2020 2021 2022 2022 2023
Gross
profit
Gross
profit
margin
Gross
profit
Gross
profit
margin
Gross
profit
Gross
profit
margin
Gross
profit
Gross
profit
margin
Gross
profit
Gross
profit
margin
(RMB’000) (%) (RMB’000) (%) (RMB’000) (%) (RMB’000) (%) (RMB’000) (%)
(unaudited)
Pledged vehicle
monitoring services 168,958 39.2 182,296 38.2 209,690 41.5 99,172 40.4 121,464 43.5
Automobile dealership
operation management
services – – – – 15,349 35.8 7,076 54.9 11,939 39.3
Total gross
profit/overall gross
profit margin 168,958 39.2 182,296 38.2 225,039 41.1 106,248 41.1 133,403 43.1
Our overall gross profit margin remained stable in 2020 and 2021. Our overall gross profit
margin increased from 38.2% in 2021 to 41.1% in 2022 and increased from 41.1% for the six
months ended June 30, 2022 to 43.1% for the same period in 2023, which was primarily
attributable to an increase in gross profit margin of pledged vehicle monitoring services as our
business continued to grow, we realized economies of scale with the support of our
technologies, which enabled our subcontractors to supervise multiple automobile dealerships
at the same time.
Our gross profit margin for pledged vehicle monitoring services decreased from 39.2% in
2020 to 38.2% in 2021, primarily because our cost of sales for such services increased by
12.9% from RMB261.6 million in 2020 to RMB295.4 million in 2021, which was primarily due
to an RMB32.7 million increase in subcontracting costs for supervising the pledged vehicles
across regions as a result of our business expansion. Our gross profit margin for pledged
vehicle monitoring services increased from 38.2% in 2021 to 41.5% in 2022 and increased
from 40.4% for the six months ended June 30, 2022 to 43.5% for the same period in 2023,
primarily because our business continued to grow and we realized economies of scale with the
support of our technologies, which enabled our subcontractors to supervise multiple
automobile dealerships at the same time.
Our gross profit margin for automobile dealership operation management services
decreased from 54.9% for the six months ended June 30, 2022 to 39.3% for the same period
in 2023, primarily due to (i) the expansion of our service team for automobile dealership
operation management services and the related increase in staff costs and (ii) the share-based
payment incurred in the six months ended June 30, 2023 in connection with the grant of certain
share options. See “History, Reorganization and Corporate Structure – Pre-IPO Share Incentive
Plans” for more details of the grant of share options.
SUMMARY
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KEY OPERATING METRICS
The table below sets forth the movement of the number of our pledged vehicle monitoring
service agreements during the Track Record Period.
For the year ended December 31,
For the six months
ended June 30,
2020 2021 2022 2022 2023
At the beginning of the
period 9,631 10,963 12,271 12,271 14,503
New engagement 4,752 5,319 6,411 2,708 3,615
Termination (3,420) (4,011) (4,179) (2,233) (2,659)
At the end of the
period 10,963 12,271 14,503 12,746 15,459
We recorded termination of 3,420, 4,011, 4,179, 2,233 and 2,659 pledged vehicle
monitoring service agreements, respectively, in 2020, 2021, 2022 and the six months ended
June 30, 2022 and 2023, primarily because after automobile dealerships have sold all the
pledged vehicles or repaid the secured financing, the relevant financial institutions would
typically send us a notice to terminate the pledged vehicle monitoring service agreements with
us as required by the relevant contractual terms. According to CIC, in the automobile sales and
distribution industry in China, after an automobile dealership sells all the pledged vehicles or
repaid its secured financing, it is common for the financial institution to send a termination
notice to the relevant pledged vehicle monitoring service provider instead of continuing to use
its monitoring services to cover the dealership’s new pledged vehicles, or wait till the pledged
vehicle monitoring service agreement expires.
The following table sets forth the expiration schedule of our existing pledged vehicle
monitoring service agreements as of the Latest Practicable Date.
As of the Latest
Practicable Date
Service agreements without fixed terms 13,000
Service agreements with fixed terms expiring in:
– Y ear ending December 31, 2023 332
– Y ear ending December 31, 2024 2,794
– Y ear ending December 31, 2025 690
– Y ear ending December 31, 2026 and beyond 253
Total 17,069
SUMMARY
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The number of pledged vehicle monitoring service agreements that we entered into
continued to grow after the Track Record Period, increasing from 15,459 as of June 30, 2023
to 17,069 as of the Latest Practicable Date. Although 3,126 among these 17,069 agreements
would expire by the end of 2024, we will negotiate with the financial institutions and
automobile dealerships for renewal at least a month before the expiration dates of the relevant
agreements, and our Directors do not expect that these expiring agreements would adversely
affect our business, financial condition and operating results.
The following table sets forth (i) the average and the range of monthly service fees that
we charged for our pledged vehicle monitoring services; and (ii) the average and the range of
duration of our pledged vehicle monitoring service agreements in 2020, 2021, 2022 and the six
months ended June 30, 2023.
For the year ended December 31,
For the
six months
ended
June 30,
2020 2021 2022 2023
Average service fee
(RMB/month/service
agreement)
(1) 3,564 3,527 3,252 3,206
Range of service fee
(RMB/month/service
agreement)
(2)
1,459-
14,500
1,800-
11,600
1,800-
8,100
1,600-
10,800
Average agreement duration
(days) (3)(4) 636 716 722 713
Range of agreement duration
(days) (3)(5) 1-4,400 1-5,145 1-5,214 1-5,562
Notes:
(1) Average service fee per month is calculated by dividing our revenue from pledged vehicle monitoring
services in a period by (i) the number of pledged vehicle monitoring service agreements that we had
entered into as of the end of that period, and by (ii) the number of months in the relevant period.
(2) The service fees that we charged varied by service agreements during the Track Record Period, primarily
because our customers could choose any one or any combination of the pledged vehicle monitoring
services that we provide, and the corresponding service fees varied depending on multiple factors, such
as the type and number of services chosen and the location of automobile dealerships. See
“Business—Pricing—Pricing Models—Pledged V ehicle Monitoring Services” for more information.
(3) Agreement duration refers to the actual length of time that we provided our pledged vehicle monitoring
services, including those that we were entrusted to provide under the Unassigned Agreements, to an
automobile dealership that obtained secured financing from a particular financial institution without
interruption.
(4) Average agreement duration is calculated by dividing the sum of agreement duration for agreements that
were terminated in a period by the number of agreements that were terminated in that period.
(5) During the Track Record Period, some of our pledged vehicle monitoring service agreements had a
one-day duration, primarily because, to the best of our knowledge based on our experience, in some
instances automobile dealerships of certain car brands might sell the pledged vehicles that they
purchased with secured financing from financial institutions to customers within one to two days; once
the customers placed their orders, the automobile dealerships would repay the secured financing and
deliver the pledged vehicles to the customers, after which our monitoring services were not needed at
the moment, and the financial institutions would terminate our services to avoid incurring additional
costs.
SUMMARY
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The average monthly service fee per service agreement that we charged for our pledged
vehicle monitoring services remained relatively stable between 2020 and 2021, and
subsequently decreased by 7.8% from RMB3,527 in 2021 to RMB3,252 in 2022, and further
decreased slightly to RMB3,206 in the six months ended June 30, 2023, primarily because as
we expanded our business operation, the number of service agreements under which our onsite
staff provided services increased, which lowered the subcontracting costs per service
agreement and led to lower average monthly service fee per service agreement. See
“Business—Pricing—Pricing Models—Pledged V ehicle Monitoring Services” for more
information. Nevertheless, since the number of our pledged vehicle monitoring service
agreements increased by 18.2% from 12,271 as of December 31, 2021 to 14,503 as of
December 31, 2022, and increased by 18.2% from 12,746 as of June 30, 2022 to 15,459 as of
June 30, 2023, our revenue continued to grow throughout this period. During the Track Record
Period, the average duration of the pledged vehicle monitoring service agreements that we
entered into remained relatively stable.
As of December 31, 2020, 2021 and 2022 and June 30, 2022 and 2023, we monitored
approximately 636,100, 525,500, 710,400, 580,400 and 786,700 pledged vehicles, respectively.
The number of pledged vehicles that we monitored decreased from 636,100 as of December 31,
2020 to 525,500 as of December 31, 2021, primarily due to a decrease in the demand for new
vehicles and a slowdown in automobile transactions at automobile dealerships as a result of the
COVID-19 pandemic. As the market recovered and the sales volume of new vehicles increased
in 2022, the number of pledged vehicles we monitored increased to 710,400 as of December
31, 2022.
In 2020, 2021, 2022 and the six months ended June 30, 2023, the average number of
pledged vehicles underlying each of our pledged vehicle monitoring service agreement was 58,
43, 49 and 51, respectively, which fell within the range of the number of pledged vehicles
underlying each pledged vehicle monitoring service agreement among the market participants
in the industry that was between 40 and 70 during the Track Record Period, as advised by CIC.
We typically enter into tripartite agreements with financial institutions and automobile
dealerships for such services. Although our pledged vehicle monitoring services are designed
to help financial institutions manage secured financing provided to automobile dealerships, we
consider the paying party under such tripartite agreements as our customer, which may be
either financial institutions or automobile dealerships, depending on the negotiation among the
contracting parties, and we consider both financial institutions and automobile dealerships as
our users. To the best of our knowledge, the negotiations regarding the paying party of our
pledged vehicle monitoring services may take into consideration (i) financial institutions’ past
experience with automobile dealerships, or automobile dealerships’ track record; and (ii) the
amount of secured financing. If an automobile dealership is a regular borrower with a decent
track record as manifested by timely interest payment and principal repayment, or if the
secured financing that an automobile dealership borrows is sufficiently large, the financial
institution may be the paying party of our services after negotiations with the dealership. See
“Business—Pledged V ehicle Monitoring Services—Key Terms of Pledged V ehicle Monitoring
Service Agreements” for more details.
SUMMARY
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The following table sets forth the number of users of our pledged vehicle monitoring
services as of the dates indicated.
As of December 31, As of June 30,
2020 2021 2022 2022 2023
Financial institutions 211 206 219 206 223
– Commercial bank
branches 183 179 195 180 196
– Automobile finance
companies 28 27 24 26 27
Automobile dealerships 8,316 9,205 10,684 9,700 11,152
The following table sets forth the user-based net expansion rate of our pledged vehicle
monitoring services by type of users for the periods indicated. To calculate the user-based net
expansion rate for a given period, we divide the difference between the number of our users
as of the end and as of the beginning of that period by the corresponding number as of the
beginning of the given period.
For the year ended December 31,
For the six months
ended June 30,
2020 2021 2022 2022 2023
(%)
Financial institutions (3.7) (2.4) 6.3 0.0 1.8
– Commercial bank
branches (4.7) (2.2) 8.9 0.6 0.5
– Automobile finance
companies 3.7 (3.6) (11.1) (3.7) 12.5
Automobile dealerships 10.5 10.7 16.1 5.4 4.4
Overall 6.8 10.4 15.9 5.3 4.3
The change in the number of users during the Track Record Period was primarily due to
changes in demand for our pledged vehicle monitoring services, which was mainly attributable
to (i) expansion or contraction of the automobile sales market as a result of the ongoing
macroeconomy and/or industry development; and (ii) competition from other market
participants.
Our user-based net expansion rate of commercial bank branches increased from a net
contraction rate of 2.2% in 2021 to a net expansion rate of 8.9% in 2022, and our user-based
net expansion rate of automobile dealerships increased from 10.7% in 2021 to 16.1% in 2022,
primarily due to the rapid growth of the NEV market in 2022. As the NEV market expanded,
automobile dealerships’ demand for secured financing to purchase NEVs increased, and
commercial bank branches’ demand for our pledged vehicle monitoring services to monitor
SUMMARY
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pledged NEVs increased in tandem. Our user-based net expansion rate of automobile finance
companies increased from a net contraction of 3.7% in the six months ended June 30, 2022 to
a net expansion rate of 12.5% in the six months ended June 30, 2023, primarily because our
automobile finance company users slightly decreased from 27 as of December 31, 2021 to 26
as of June 30, 2022, then decreased to 24 as of December 31, 2022 and subsequently increased
back to 27 as of June 30, 2023, which was a normal fluctuation during the course of our
business.
The following table sets forth the retention rate of our pledged vehicle monitoring
services by type of users for the years indicated. To calculate the retention rate for a given year,
we divide the number of users as of the end of that year who were also our users as of the end
of the previous year by the number of users as of the end of the previous year.
For the year ended December 31,
2020 2021 2022
(%)
Financial institutions 66.8 83.9 92.4
Automobile dealerships 81.7 82.4 84.9
During the Track Record Period, our retention rate of financial institutions steadily
increased from 66.8% in 2020 to 83.9% in 2021, then to 92.4% in 2022, primarily because we
(i) continuously upgraded our VFS system and V ehicle Connect to facilitate the monitoring of
pledged vehicles for financial institutions; and (ii) improved our services and products based
on financial institutions’ demands and feedbacks. During the Track Record Period, our
retention rate of automobile dealerships remained relatively high and stable, primarily due to
(i) our national service coverage; (ii) the various financial institutions that we served; and (iii)
our VFS system and V ehicle Connect that facilitate the whole process of secured financing.
In each of the years ended December 31, 2020, 2021 and 2022 and the six months ended
June 30, 2023, the average revenue contribution by our top ten customers in that period was
RMB12.3 million, RMB13.5 million, RMB17.6 million and RMB10.4 million, respectively.
Market Demand and Competitive Landscape
V alue chain of the automobile sales and distribution industry
Automobile sales and distribution is a crucial step in the automobile industry that bridges
automobile manufacturers and automobile end users. Participants in the automobile sales and
distribution industry mainly include automobile manufacturers, automobile dealerships,
general automobile trading stores, financial institutions and third-party service providers.
Automobile manufacturers mainly focus on vehicle design, production and manufacturing, and
are the upstream suppliers of passenger automobiles. Automobile dealerships and general
automobile trading stores primarily engage in the sale of passenger vehicles. They also provide
SUMMARY
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automobile repair and maintenance services, automobile financing services, insurance services
and other after-sales services to downstream users. Financial institutions mainly provide
financial services to automobile dealerships and automobile end users, such as vehicle
inventory financing and vehicle purchase financing. Third-party service providers in the
automobile sales and distribution industry mainly provide (i) transaction services, such as
consumer auto finance services; (ii) software services, such as enterprise resource planning
(ERP), customer relationship management (CRM), material required planning (MRP) and
warehouse management system (MRS); and (iii) operation-related services, such as vehicle
distribution, transportation and retail services, to automobile manufacturers, automobile
dealerships, financial institutions and other enterprise users. Some participants in the industry
also provide specialized services such as pledged vehicle monitoring services and automobile
dealership operation management services. The following diagram demonstrates the
relationship of participants in the automobile sales and distribution industry.
Main services provided by
third-party service providers
SoftwareTransaction Operation support
Automobile
dealerships
General
automobile
trading stores*
Financial
Institutions
Pledged vehicle
monitoring and
automobile dealership
operation
management services
Pledged
vehicle monitoring
services
End users
Individual
users
Enterprise
users
Direct sales
Dealership
auto finance
Consumer
auto finance
Vehicle distribution,
transportation and
retail services
Automobile
manufacturers
Vehicles Vehicles
Source: CIC
Note:
* During the Track Record Period, our major customers did not include general automobile trading stores.
SUMMARY
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Pledged vehicle monitoring services
Market demand . Pledged vehicle monitoring services are provided in connection with
automobile financing services in China’s automobile sales and distribution industry. The
demand for pledged vehicle monitoring services arises from financial institutions’ difficulty in
keeping track of the pledged vehicles after providing secured financing to automobile
dealerships. The market demand for pledged vehicle monitoring services in China remains
stable. The size of the market grew from RMB873.1 million in 2018 to RMB1,054.0 million
in 2022, representing a CAGR of approximately 4.8%. In 2022, with the emphasis on risk
management by financial institutions, standardization of operation and increase in the
penetration of secured finance, the total addressable market of pledged vehicle monitoring
services for automobile dealerships and general automobile trading stores in China was
approximately RMB6.1 billion, as calculated by multiplying the number of potential
automobile dealership users and general automobile trading store users by the average service
fee of the industry, assuming that the demand of all potential automobile dealership users and
general automobile trading store users is fully addressed. In particular, in 2022, approximately
RMB1.9 billion of the total addressable market was attributable to potential automobile
dealership users and approximately RMB4.2 billion of the total addressable market was
attributable to potential general automobile trading store users.
Competitive landscape and our competitive advantages . The pledged vehicle monitoring
service market in China is highly concentrated, mainly due to the fact that leading market
participants have already established entry barriers in terms of technological capabilities,
customer relationships and economies of scale. According to CIC, as of December 31, 2022,
the top five market participants had a total market share of approximately 90.3% in terms of
revenue, while the remaining market participants were typically small regional service
providers. According to CIC, leading market participants have nationwide service networks
and can meet financial institutions’ demand for the monitoring of pledged vehicles across the
country and are, therefore, more likely to gain a higher market share. For more information,
see “Industry Overview—Overview of China’s Pledged V ehicle Monitoring Services
Market—The Company is the largest provider of pledged vehicle monitoring services in
China’s automobile sales and distribution industry.” As advised by CIC, as of the Latest
Practicable Date, the Company was one of the only two market participants in the pledged
vehicle monitoring service market that had established a comprehensive pledged vehicle
monitoring system with data storage and analytics capabilities. As the largest service provider
in the pledged vehicle monitoring service market in China, we have been providing pledged
vehicle monitoring services to a large number of financial institutions and automobile
dealerships and achieved digitalization of our services, which allows us to identify, address and
alert financial institutions regarding risk incidents more efficiently.
Although certain new vehicles, such as NEVs, are equipped with technologies such as
built-in GPS, our Directors are of the view that the application of such emerging technologies
would not replace or render our pledged vehicle monitoring services obsolete, primarily
because to protect vehicle owners’ privacy, typically only the manufacturers and ultimate
consumers have the system permission to access data generated by the built-in GPS, unless the
vehicles are under repair or maintenance, need emergency assistance (such as police assistance
in traffic accidents) or otherwise required by law. As a result, financial institutions and
SUMMARY
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automobile dealerships still need to rely on pledged vehicle monitoring service providers with
alternative means, such as our RFID labels and OBD devices, to track pledged vehicles’
locations and vehicular activities for monitoring purposes.
Although a substantial majority of our revenue and number of pledged vehicle monitoring
service agreements during the Track Record Period were attributable to ICEs and to a much
less extent to NEVs, our Directors are of the view that the increasing sales of NEVs in the PRC
would not adversely affect the competitive landscape of the pledged vehicle monitoring service
market, considering that (i) regardless of whether the pledged vehicles are NEVs or ICEs, so
long as the automobile dealerships acquire them with secured financing from financial
institutions, the business need from financial institutions for professional pledged vehicle
monitoring services from third-party service providers is expected to remain; and (ii) as
advised by CIC, although certain NEVs are directly sold by their manufacturers, automobile
dealerships are still the dominant passenger vehicle sales channel in the PRC, through which
over 90% of the total vehicles and over 70% of the NEVs were sold between 2020 and 2022.
Market practice . As advised by CIC, the frequency that financial institutions, automobile
dealerships and pledged vehicle monitoring service providers enter into tripartite service
agreements typically depends on (i) financial institutions’ internal risk management policies
and commercial relations with automobile dealerships; and (ii) the vehicle inventory level
maintained by automobile dealerships that seek secured financing, which ranged between 40
and 70 among the market participants in the industry during the Track Record Period. Due to
the variability of these factors, the frequency that financial institutions, automobile dealerships
and pledged vehicle monitoring service providers typically enter into tripartite service
agreements is not a common industry metric and could vary significantly from time to time.
Automobile dealership operation management services
Market demand . The automobile dealership operation management service market in
China has not yet formed a stable competitive landscape. However, the demand is expected to
increase in the future as competition among automobile dealerships in the automobile sales and
distribution industry intensifies and more automobile dealerships are expected to seek
professional management services from external service providers to optimize their business
operations, according to CIC. The current market size is relatively small. In 2022, the market
size of automobile dealership operation management services in China was approximately
RMB47.6 million as measured by service revenue, with a penetration rate of less than 0.5%,
calculated by dividing the number of automobile dealerships served by the total number of
automobile dealerships in China, according to CIC.
Competitive landscape and our competitive advantages . The main participants currently
expanding into the automobile dealership operation management service market include startup
software companies, internet platform companies and large automobile dealerships with strong
management capabilities, according to CIC. Automobile dealership operation management
services generally require service suppliers to have a deep understanding of the limitations of
automobile dealerships’ operation management and have the ability to penetrate into
automobile dealerships’ daily operations to offer optimization adjustments. Leveraging our
experience in providing pledged vehicle monitoring services to financial institutions and
automobile dealerships, national service network and insights in the automobile sales and
SUMMARY
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distribution industry, we began offering management services to automobile dealerships that
seek more optimal business and financial performance in April 2022. Our automobile
dealership operation management services consist of automobile dealerships operational
support, data system and managerial services.
Business Transfer of Pledged Vehicle Monitoring Services from Changjiu Industrial
Prior to our establishment in September 2016, Changjiu Industrial had provided pledged
vehicle monitoring services to financial institutions and automobile dealerships since 2006.
Since September 2016 when Changjiu Jinfu was established, Changjiu Industrial has been
gradually transferring its existing pledged vehicle monitoring service agreements to us and
moving the operation team in charge of such services into our Group, and we have begun to
enter into new pledged vehicle monitoring service agreements with financial institutions and
automobile dealerships upon the expiration of the agreements between them and Changjiu
Industrial. As of November 30, 2021, the entire operation team and all related personnel of the
pledged vehicle monitoring services had been transferred into our Group from Changjiu
Industrial. For more information, see “History, Reorganization and Corporate
Structure—Reorganization—Onshore Reorganization—Business transfer of pledged vehicle
monitoring services.”
On November 30, 2021, Changjiu Industrial and we entered into a business transfer
agreement, pursuant to which Changjiu Industrial agreed to assign to us all of its rights and
obligations under its then existing pledged vehicle monitoring service agreements for a total
consideration of RMB45.5 million with reference to their contract value as of November 30,
2021. Such consideration had been fully settled as of the Latest Practicable Date.
As of the Latest Practicable Date, the rights and obligations of Changjiu Industrial under
a certain number of its then existing pledged vehicle monitoring service agreements (the
“Unassigned Agreements”) had not been transferred to us. The Unassigned Agreements
involved 23 financial institution customers and 524 automobile dealership customers and had
an aggregate contract value of RMB21.4 million as of the Latest Practicable Date. All of the
rights and obligations of Changjiu Industrial under the Unassigned Agreements are expected to
be transferred to us or the Unassigned Agreements will expire by December 31, 2024, after
when we expect to enter into new pledged vehicle monitoring service agreements with the
relevant parties to such Unassigned Agreements. Although Changjiu Industrial continued to
assume its rights and obligations under the Unassigned Agreements, it has exclusively
entrusted us to provide pledged vehicle monitoring services pursuant to an entrustment
agreement dated April 26, 2023 between Changjiu Industrial and us. See “Connected
Transactions—Non-exempt Continuing Connected Transactions—(4) Entrustment Agreement”
for details.
During the Track Record Period, our revenue from pledged vehicle monitoring services
was primarily derived from Independent-Third-Party users, whereas our revenue from
automobile dealership operation management services was primarily derived from related-
party users. The following table sets forth a breakdown of the number of our service
agreements and our total revenue by business line and by user ownership as of the dates and
for the periods indicated.
SUMMARY
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As of/For the year ended December 31, As of/For the six months ended June 30,
2020 2021 2022 2022 2023
Number of
agreements Revenue
Number of
agreements Revenue
Number of
agreements Revenue
Number of
agreements Revenue
Number of
agreements Revenue
% (RMB’000) % % (RMB’000) % % (RMB’000) % % (RMB’000) % % (RMB’000) %
(unaudited)
Pledged Vehicle Monitoring Services
– Related-party users 10 0.1 1,729 0.4 9 0.1 5,793 1.2 12 0.1 1,284 0.2 7 0.1 1,024 0.4 8 0.1 157 0.1
– Independent-Third-Party users 10,953 99.9 428,858 99.6 12,262 99.9 471,904 98.8 14,491 99.4 503,765 92.0 12,739 99.4 244,736 94.6 15,451 99.4 278, 910 90.1
Subtotal 10,963 100.0 430,587 100.0 12,271 100.0 477,697 100.0 14,503 99.5 505,049 92.2 12,746 99.5 245,760 95.0 15,459 99.5 279,067 90.2
Automobile Dealership Operation
Management Services
– Related-party users – – – – – – – – 73 0.5 42,785 7.8 73 0.5 12,892 5.0 73
(1) 0.5 30,281 9.8
– Independent-Third-Party user – – – – – – – – 1 0.0 33 0.0 – – – – 1 0.0 83 0.0
Subtotal – – – – – – – – 74 0.5 42,818 7.8 73 0.5 12,892 5.0 74 0.5 30,364 9.8
Total 10,963 100.0 430,587 100.0 12,271 100.0 477,697 100.0 14,577 100.0 547,867 100.0 12,819 100.0 258,652 100.0 15,533 100.0 309,431 100.0
Notes:
(1) One of the automobile dealership operation management service agreements that we entered into with related-party users was for our management of two dealerships.
SUMMARY
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The following table sets forth a breakdown of our total revenue by business line and by
type of paying customer for the periods indicated.
For the year ended December 31, For the six months ended June 30,
2020 2021 2022 2022 2023
(RMB’000) % (RMB’000) % (RMB’000) % (RMB’000) % (RMB’000) %
(unaudited)
Pledged Vehicle
Monitoring Services
– Related parties 1,729 0.4 9,342 (1) 2.0 39,033 (1) 7.1 21,601 (1) 8.3 19,240 (1) 6.2
– Independent Third
Parties 428,858 99.6 468,355 (2) 98.0 466,016 (2) 85.1 224,159 (2) 86.7 259,827 (2) 84.0
Subtotal 430,587 100.0 477,697 100.0 505,049 92.2 245,760 95.0 279,067 90.2
Automobile Dealership
Operation Management
Services
– Related parties – – – – 42,785 7.8 12,892 5.0 30,281 9.8
– Independent Third Party – – – – 33 0.0 – – 83 0.0
Subtotal – – – – 42,818 7.8 12,892 5.0 30,364 9.8
Total 430,587 100.0 477,697 100.0 547,867 100.0 258,652 100.0 309,431 100.0
Notes:
(1) Including revenue derived from (i) one, two, two and two Unassigned Agreements from Changjiu Group as of
December 31, 2021 and 2022 and June 30, 2022 and 2023, respectively; and (ii) 1,059, 794, 1,137 and 649
Unassigned Agreements from Independent Third Parties as of December 31, 2021 and 2022 and June 30, 2022
and 2023, respectively. The revenue generated from automobile dealerships under Unassigned Agreements and
Entrustment Agreement was RMB3.6 million, RMB37.8 million, RMB20.6 million and RMB19.1 million in
2021 and 2022 and in the six months ended June 30, 2022 and 2023, respectively, accounting for 0.8%, 6.9%,
8.0% and 6.2% of our total revenue during the same periods, respectively.
(2) Excluding revenue derived from 1,059, 794, 1,137 and 649 Unassigned Agreements from Independent Third
Parties as of December 31, 2021 and 2022 and June 30, 2022 and 2023, respectively, which amounted to
RMB3.5 million, RMB37.7 million, RMB20.6 million and RMB19.1 million in 2021 and 2022 and in the six
months ended June 30, 2022 and 2023, respectively.
COMPETITIVE STRENGTHS
We believe the following competitive strengths have contributed to our success and
differentiated us from our competitors:
 Largest automobile pledged vehicle monitoring service provider in China
 Early mover in automobile dealership operation management services
 Quality user base
 Technologies and R&D capabilities
 Experienced management team
SUMMARY
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OUR STRATEGIES
To achieve our mission and further solidify our leadership, we intend to implement the
following business strategies:
 Enrich service offering and improve technology capabilities
 Grow and diversify user base and expand ecosystem
 Capitalize on growth trends in NEV market in China’s lower-tier cities
 Refine human resource management and enlarge talent pool
OUR CUSTOMERS AND SUPPLIERS
Our customers primarily consist of financial institutions, which mainly include
commercial banks and automobile finance companies, as well as automobile dealerships.
Changjiu Industrial is also our customer. See “Business—Customers.” Changjiu Industrial, a
company set up by our Ultimate Controlling Shareholders and the holding company of
Changjiu Group, is a automobile industry service provider that primarily engages in
automobile sales and distribution, automobile transportation and vehicle manufacturing. See
“Relationship with Our Controlling Shareholders—Delineation of Business.” Our transactions
with Changjiu Industrial as one of our customers primarily include (i) providing pledged
vehicle monitoring services to certain financial institutions and automobile dealerships on
behalf of Changjiu Industrial pursuant to an entrustment agreement dated April 26, 2023
between Changjiu Industrial and us, see “Connected Transactions—Non-exempt Continuing
Connected Transactions—(4) Entrustment Agreement” for details; and (ii) providing
automobile dealership operation management services to automobile dealerships owned by
Changjiu Group, see “Business—Automobile Dealership Operation Management Services” for
details. During the Track Record Period, our major customers did not include general
automobile trading stores.
During the Track Record Period, revenue derived from sales to our five largest customers
in that year/period amounted to RMB143.6 million in 2020, RMB167.9 million in 2021,
RMB279.3 million in 2022 and RMB173.9 million in the six months ended June 30, 2023,
which accounted for 33.3%, 35.1%, 51.0% and 56.2% of our total revenue, respectively.
During the Track Record Period, revenue derived from sales to our single largest customer in
that year/period amounted to RMB38.8 million in 2020, RMB62.2 million in 2021, RMB89.8
million in 2022 and RMB56.5 million in the six months ended June 30, 2023, which accounted
for 9.0%, 13.0%, 16.4% and 18.3% of our total revenue, respectively. In 2020, 2021, 2022 and
the six months ended June 30, 2023, revenue derived from Changjiu Industrial, our related
party and second largest customer in 2022 and the six months ended June 30, 2023, and its
subsidiaries amounted to RMB0.7 million, RMB8.7 million, RMB81.1 million and RMB49.5
million, respectively, accounting for 0.2%, 1.8%, 14.8% and 16.0% of our total revenue,
respectively. Please refer to “Business—Customers” for further details.
SUMMARY
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Our suppliers primarily include subcontractors who provide onsite supervision services,
including pledged vehicle monitoring services, collective vehicle conformity certificate
management services and counting services, and manufacturers of RFID labels, PDAs, OBD
devices and lockboxes. During the Track Record Period, purchases from our five largest
suppliers in that year/period amounted to RMB255.3 million in 2020, RMB286.6 million in
2021, RMB302.3 million in 2022 and RMB157.2 million in the six months ended June 30,
2023, which accounted for 97.6%, 97.0%, 93.6% and 89.4% of our total cost of sales,
respectively. During the Track Record Period, purchases from our single largest supplier in that
year/period amounted to RMB223.3 million in 2020, RMB211.4 million in 2021, RMB119.1
million in 2022 and RMB154.0 million in the six months ended June 30, 2023, which
accounted for 85.4%, 71.6%, 36.9% and 87.5% of our total cost of sales, respectively. Please
refer to “Business—Suppliers” for further details.
Except as disclosed in “History, Reorganization and Corporate
Structure—Reorganization—Business transfer of pledged vehicle monitoring services” and
“Connected Transactions Non-exempt Continuing Connected Transactions—(4) Entrustment
Agreement,” Changjiu Group did not refer any other customer or supplier to us.
SUMMARY OF HISTORICAL FINANCIAL INFORMATION
The following tables set forth a summary of our consolidated financial statements for the
Track Record Period, extracted from the Accountants’ Report set out in Appendix I. The
summary of consolidated financial data set forth below should be read together with, and is
qualified in its entirety by reference to, the consolidated financial statements contained
elsewhere in this prospectus, including the related notes. Our consolidated financial statements
have been prepared in accordance with IFRSs.
Selected Items of Consolidated Statements of Profit or Loss
For the year ended December 31, For the six months ended June 30,
2020 2021 2022 2022 2023
Amount
%o f
revenue Amount
%o f
revenue Amount
%o f
revenue Amount
%o f
revenue Amount
%o f
revenue
(RMB’000) (%) (RMB’000) (%) (RMB’000) (%) (RMB’000) (%) (RMB’000) (%)
(unaudited)
Revenue 430,587 100.0 477,697 100.0 547,867 100.0 258,652 100.0 309,431 100.0
Gross profit 168,958 39.2 182,296 38.2 225,039 41.1 106,248 41.1 133,403 43.1
Profit from operations 110,798 25.7 96,203 20.1 130,899 23.9 64,121 24.8 56,958 18.4
Profit before taxation 109,834 25.5 93,149 19.5 127,626 23.3 62,884 24.3 55,472 17.9
Profit for the year/
period 114,105 26.5 83,731 17.5 95,912 17.5 48,088 18.6 35,291 11.4
SUMMARY
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For the year ended December 31, For the six months ended June 30,
2020 2021 2022 2022 2023
Amount
%o f
revenue Amount
%o f
revenue Amount
%o f
revenue Amount
%o f
revenue Amount
%o f
revenue
(RMB’000) (%) (RMB’000) (%) (RMB’000) (%) (RMB’000) (%) (RMB’000) (%)
(unaudited)
Attributable to:
Equity shareholders of
the Company 114,105 26.5 83,731 17.5 95,877 17.5 48,053 18.6 35,291 11.4
Non-controlling
interests – – – – 35 0.0 35 0.0 – –
Our total revenue increased by 14.7% from RMB477.7 million in 2021 to RMB547.9
million in 2022, which was primarily due to (i) a 5.7% increase in our revenue generated from
pledged vehicle monitoring services from RMB477.7 million in 2021 to RMB505.0 million in
2022, primarily attributable to an increase in the number of our service agreements from 12,271
as of December 31, 2021 to 14,503 as of December 31, 2022 as the number of automobile
dealerships in China increased during this period, which drove up the demand for pledged
vehicle monitoring services, and we were able to obtain the new service agreements from
financial institutions and automobile dealerships by leveraging our technological capabilities,
experience in the industry and credibility among our user base; and (ii) an RMB42.8 million
revenue generated from automobile dealership operation management services in 2022, as we
started to provide such services in April 2022. Our total revenue increased from RMB258.7
million in the six months ended June 30, 2022 to RMB309.4 million in the six months ended
June 30, 2023, which was primarily due to (i) an RMB33.3 million increase in our revenue
generated from pledged vehicle monitoring services, as the pledged vehicle monitoring
services market recovered after the COVID-19 pandemic and demand for our services
increased, resulting in us obtaining 2,713 more service agreements in the six months ended
June 30, 2023 as compared to the same period in 2022; and (ii) an RMB17.5 million increase
in revenue generated from automobile dealership operation management services, as we started
to provide such services in April 2022 and generated revenue from this business for the full six
months in the first half of 2023.
Our overall gross profit margin remained stable in 2020 and 2021. Our overall gross profit
margin increased from 38.2% in 2021 to 41.1% in 2022 and from 41.1% in the six months
ended June 30, 2022 to 43.1% in the six months ended June 30, 2023, primarily attributable
to an increase in gross profit margin of pledged vehicle monitoring services as our business
continued to grow, we realized economies of scale with the support of our technologies, which
enabled the staff from our subcontractors to supervise multiple automobile dealerships at the
same time.
SUMMARY
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Our profit from operations decreased by 13.2% from RMB110.8 million in 2020 to
RMB96.2 million in 2021, primarily due to an RMB28.5 million, or 67.0%, increase in general
and administrative expenses, which was in turn primarily attributable to (i) an RMB10.6
million increase in staff costs as a result of the expansion of our pledged vehicle monitoring
services, which led to an increase in the number of staff performing related tasks such as
business process formulation and customer communication, and (ii) an RMB10.0 million
non-refundable earnest money we paid for a potential investment in an automobile-related
e-commerce platform in 2021 that did not consummate after negotiation and due diligence,
which was one-off and non-recurring because such payment was not associated with the routine
operations of our core business but rather tied to the specific circumstances leading to the
occurrence and final non-consummation of a particular investment opportunity. Our profit for
the year decreased by 26.6% from RMB114.1 million in 2020 to RMB83.7 million in 2021,
primarily because our income tax expenses amounted to RMB9.4 million in 2021 while we
recorded income tax benefit of RMB4.3 million in 2020 as a result of recognition of deferred
tax assets mainly from deductible accumulative losses in 2020, and due to an increase in
general and administrative expenses.
Our profit from operations increased from RMB96.2 million in 2021 to RMB130.9
million in 2022 and our profit for the year increased from RMB83.7 million in 2021 to
RMB95.9 million in 2022, primarily because our total revenue increased by 14.7% from
RMB477.7 million in 2021 to RMB547.9 million in 2022.
Our profit from operations decreased from RMB64.1 million in the six months ended June
30, 2022 to RMB57.0 million in the six months ended June 30, 2023 and our profit for the
period decreased from RMB48.1 million for the six months ended June 30, 2022 to RMB35.3
million for the same period in 2023, primarily due to an RMB29.8 million increase in general
and administrative expenses, which was in turn primarily attributable to an RMB12.0 million
non-recurring listing expenses associated with this Global Offering, an RMB9.9 million
non-operation related share-based payment expenses associated with the grant of certain
restricted shares and share options in the period and an RMB6.8 million increase in staff costs
as a result of our business expansion.
Selected Items of Consolidated Statements of Financial Position
As of December 31,
As of
June 30,
2020 2021 2022 2023
(RMB’000)
Total non-current assets 13,864 12,217 13,543 25,849
Total current assets 188,803 206,702 247,621 263,839
Total current liabilities (169,134) (200,347) (248,975) (221,310)
Net current assets/(liabilities) 19,669 6,355 (1,354) 42,529
Total non-current liabilities (397) (2,359) (64) (7,308)
Net assets 33,136 16,213 12,125 61,070
SUMMARY
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Our net current assets decreased from RMB19.7 million as of December 31, 2020 to
RMB6.4 million as of December 31, 2021, which was primarily due to (i) an RMB16.8 million
increase in contract liabilities arising from advance payments from customers for the provision
of pledged vehicle monitoring services; (ii) an RMB8.9 million increase in accrued expenses
and other current liabilities; and (iii) an RMB3.7 million increase in current tax liabilities,
partially offset by an RMB19.9 million increase in trade receivables.
We recorded net current liabilities of RMB1.4 million as of December 31, 2022, which
was primarily due to the RMB101.0 million consideration paid in 2022 to acquire the 100%
equity interest in Changjiu Jinfu as part of the Reorganization. See “History, Reorganization
and Corporate Structure—Reorganization—Onshore Reorganization—Acquisition of Changjiu
Jinfu by Shanghai Bozhong” for details.
Our net current liabilities of RMB1.4 million as of December 31, 2022 turned to net
current assets of RMB42.5 million as of June 30, 2023, which was primarily due to an increase
of RMB78.5 million in trade receivables, and a decrease of RMB40.0 million in bank loans,
partially offset by a decrease of RMB46.9 million in cash and cash equivalents and an increase
of RMB13.8 million in accrued expenses and other current liabilities.
Our net assets decreased from RMB33.1 million as of December 31, 2020 to RMB16.2
million as of December 31, 2021, which was primarily attributable to (i) the impact of the
Reorganization associated with the transfer of pledged vehicle monitoring services business
from Changjiu Industrial to Chanjiu Jinfu for a consideration of RMB45.5 million; (ii) the
deemed distribution reflecting the net amount of cash transactions relating to the transferred
pledged vehicle monitoring services business of RMB33.1 million; and (iii) a distribution to
shareholders of RMB22.0 million, partially offset by the RMB83.7 million net profit recorded
for the year.
Our net assets further decreased from RMB16.2 million as of December 31, 2021 to
RMB12.1 million as of December 31, 2022, which was primarily due to the RMB101.0 million
consideration paid in 2022 to acquire the 100% equity interest in Changjiu Jinfu as part of the
Reorganization, partially offset by the RMB95.9 million net profit recorded for the year.
Our net assets increased from RMB12.1 million as of December 31, 2022 to RMB61.1
million as of June 30, 2023, which was primarily due to the net profit of RMB35.3 million
recorded for the period and a share-based compensation of RMB13.7 million granted during the
period.
SUMMARY
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Selected Items of Consolidated Statements of Cash Flows
For the year ended December 31,
For the six months
ended June 30,
2020 2021 2022 2022 2023
(RMB’000)
(unaudited)
Net cash generated
from/(used in) operating
activities 124,227 114,732 82,030 (9,127) (20,755)
Net cash (used in)/generated
from investing activities (74,508) (52,935) 118,584 (20,036) 12,406
Net cash (used in)/generated
from financing activities (67,981) (60,353) (82,806) 38,337 (38,768)
Net (decrease)/increase in
cash and cash equivalents (18,262) 1,444 117,808 9,174 (47,117)
Cash and cash equivalents at
the beginning of the period 18,351 89 1,533 1,533 119,341
Effect of foreign exchange
rate changes –––– 1 7 1
Cash and cash equivalents as
of the end of the period 89 1,533 119,341 10,707 72,395
During the six months ended June 30, 2023, our net cash used in operating activities was
RMB20.8 million, which was primarily due to profit before tax of RMB55.5 million, as
adjusted for non-cash and non-operating items, which was further adjusted by negative changes
in working capital of RMB84.1 million and income tax paid of RMB15.3 million. The negative
changes in working capital were mainly due to (i) an RMB82.4 million increase in trade
receivables; and (ii) an RMB8.3 million decrease in contract liabilities, partially offset by an
RMB9.5 million increase in accrued expenses and other liabilities. During the six months
ended June 30, 2022, our net cash used in operating activities was RMB9.1 million, which was
primarily due to profit before tax of RMB62.9 million, as adjusted for non-cash and
non-operating items, which was further adjusted by negative changes in working capital of
RMB75.1 million and income tax paid of RMB2.7 million. The negative changes in working
capital were mainly due to (i) an RMB68.8 million increase in trade receivables; and (ii) an
RMB16.4 million decrease in contract liabilities, partially offset by an RMB10.1 million
increase in accrued expenses and other liabilities. See “Risk Factors—Risks Relating to Our
Business and Industry—We had negative operating cash flows in the six months ended June 30,
2022 and 2023.”
SUMMARY
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KEY FINANCIAL RATIOS
The following table sets forth our key financial ratios as of the dates or for the periods
indicated.
As of/For the year ended
December 31,
As of/For the
six months ended
June 30,
2020 2021 2022 2022 2023
(unaudited)
Return on equity (1)(%) 344.3 339.3 676.9 (493.5) (6) 96.4
Return on asset (2)(%) 56.3 39.7 40.0 17.9 12.8
Current ratio (3) 1.1 1.0 1.0 0.9 1.2
Liabilities to assets
ratio (4) 0.8 0.9 1.0 1.1 0.8
Gearing ratio (5)(%) 150.9 308.4 618.6 (248.5) (6) 57.3
Notes:
(1) Equals profit for the period divided by average balance of total equity at the beginning and the end of
that period and multiplied by 100%.
(2) Equals profit for the period divided by average balance of total assets at the beginning and the end of
that period and multiplied by 100%.
(3) Current ratio represents current assets divided by current liabilities as of the same date.
(4) Liabilities to assets ratio represents total liabilities divided by total assets as of the same date.
(5) Gearing ratio represents the sum of interest-bearing bank loans divided by total equity as of the same
dates and multiplied by 100%.
(6) As of June 30, 2022, our return on equity and gearing ratio were negative primarily because we recorded
net liabilities as of the same date.
Our gearing ratio increased from 150.9% as of December 31, 2020 to 308.4% as of
December 31, 2021, primarily due to a decrease in our equity from RMB33.1 million as of
December 31, 2020 to RMB16.2 million as of December 31, 2021, which was primarily
attributable to a deemed distribution in relation to cash transferred to Changjiu Industrial in
2021 and a dividend distribution by Changjiu Jinfu to its then shareholders in 2021. Our
gearing ratio increased from 308.4% as of December 31, 2021 to 618.6% as of December 31,
2022, primarily due to an increase in our bank loans from RMB50.0 million as of December
31, 2021 to RMB75.0 million as of December 31, 2022, as well as a decrease in our equity from
RMB16.2 million as of December 31, 2021 to RMB12.1 million as of December 31, 2022,
which was primarily attributable to the consideration paid in 2022 to acquire the 100% equity
interest in Changjiu Jinfu as part of the Reorganization. Our gearing ratio decreased from
618.6% as of December 31, 2022 to 57.3% as of June 30, 2023, primarily due to the decrease
SUMMARY
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in our bank loans from RMB75.0 million as of December 31, 2022 to RMB35.0 million as of
June 30, 2023, as well as the increase in our total equity from RMB12.1 million as of December
31, 2022 to RMB61.1 million as of June 30, 2023, primarily as a result of the recorded net
profit.
See “Financial Information—Key financial ratios” for a detailed discussion on our
financial ratios.
We recorded an opening balance of accumulated loss of RMB65.7 million as of January 1,
2020 primarily arising from the Reorganization. Prior to the Reorganization, part of the
pledged vehicle monitoring services was operated by a division of Changjiu Industrial and the
related cash and bank accounts were centrally managed by Changjiu Industrial, therefore the
cash generated from the division was periodically transferred to Changjiu Industrial and the net
cash transaction amounts were treated as deemed distribution to Changjiu Industrial. See Note
1 to the Accountants’ Report in Appendix I to this prospectus for further details. The total
deemed distribution to Changjiu Industrial exceeded the accumulated net profits generated
from the pledged vehicle monitoring services as of January 1, 2020, leading to an accumulated
loss of RMB65.7 million as of the same date.
OUR CONTROLLING SHAREHOLDERS
Pursuant to a concert party confirmation dated March 1, 2023 entered into between Ms.
Li and Mr. Bo, they have confirmed that they are parties acting in concert in respect of their
voting rights in our Company. For details, please see “History, Reorganization and Corporate
Structure—Concert Party Confirmation.” Therefore, Ms. Li, Mr. Bo and the entities controlled
by them, namely Brighht Limited, Brightio Limited, Advancey Limited, Advancd Limited,
Creationn Limited and CreateCube Limited, shall be regarded as a group of Controlling
Shareholders. Immediately upon completion of the Global Offering (without taking into
account any Shares which may be allotted and issued pursuant to the exercise of the Pre-IPO
Share Options), our Controlling Shareholders will be collectively interested in and will control
an aggregate of 74.20% of the voting power of our Company and will remain as our Controlling
Shareholders upon Listing. For details, see “Relationship with Our Controlling Shareholders.”
PRE-IPO SHARE INCENTIVE PLANS
Our Company adopted the Pre-IPO Restricted Share Plan on March 7, 2023. On the same
day, we allotted and issued 1,620,000 Shares at par value to the Restricted Share SPV , the
limited partners of which are the participants of our Pre-IPO Restricted Share Plan. As of the
Latest Practicable Date, a total of 1,620,000 restricted shares, representing all the Restricted
Shares issuable under the Pre-IPO Restricted Share Plan, had been conditionally granted to five
officers of our Group. No further restricted shares may be granted under the Pre-IPO Restricted
Share Plan after the Listing. See “Appendix IV—Statutory and General Information—D.
Pre-IPO Share Incentive Plans—1. Pre-IPO Restricted Share Plan” for further details.
SUMMARY
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Our Company also adopted the Pre-IPO Share Option Plan on March 7, 2023. Following
the adoption of the Pre-IPO Share Option Plan and as of the Latest Practicable Date,
10,199,730 Pre-IPO Share Options, representing approximately 5.05% of the issued share
capital of our Company immediately after the Global Offering (without taking into account any
Shares which may be allotted and issued pursuant to the exercise of the Pre-IPO Share
Options), had been conditionally granted to 48 grantees, including a Director, senior
management members and employees of our Group. Pursuant to the terms of the Pre-IPO Share
Option Plan, the grantees shall not exercise the outstanding options granted to them under the
Pre-IPO Share Option Plan prior to the Listing. No further options may be granted under the
Pre-IPO Share Option Plan after the Listing. For details, see “Appendix IV—Statutory and
General Information—D. Pre-IPO Share Incentive Plans—2. Pre-IPO Share Option Plan.”
USE OF PROCEEDS
We estimate that the net proceeds from the Global Offering which we will receive,
assuming an Offer Price of HK$6.93 per Offer Share (being the mid-point of the Offer Price
range stated in this prospectus), will be approximately HK$313.0 million, after deduction of
underwriting fees and commissions and estimated expenses payable by us in connection with
the Global Offering. We intend to use the net proceeds from the Global Offering for the
following purposes:
 35.0%, or approximately HK$109.6 million, will be used to improve our pledged
vehicle monitoring services;
 30.0%, or approximately HK$93.9 million, will be used to develop an integrated
supporting system for the automobile sales and distribution industry;
 15.0%, or approximately HK$47.0 million, will be used to expand our automobile
dealership operation management capacity;
 10.0%, or approximately HK$31.3 million, will be used to expand our sales and
marketing capacity; and
 10.0%, or approximately HK$31.3 million, will be used for general business
operations and working capital.
For further details, see “Future Plans and Use of Proceeds” in this prospectus.
LISTING EXPENSES
Our listing expenses include underwriting commission, professional fees and other fees
incurred in connection to the Listing and the Global Offering. Listing expenses to be borne by
us are estimated to be RMB46.8 million (including underwriting commission and fees of
approximately RMB16.8 million, and non-underwriting related expenses of approximately
RMB30.0 million, which consist of accounting and legal fees and expenses of approximately
SUMMARY
–2 6–


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RMB17.3 million and other fees and expenses of approximately RMB12.7 million, assuming
an Offer Price of HK$6.93 per Offer Share, being the mid-point of the indicative Offer Price
range of HK$5.95 to HK$7.90 per Offer Share), of which RMB17.7 million is expected to be
accounted for as a deduction from equity upon the Listing. Listing expenses accounted for
14.7% of our gross proceeds. During the Track Record Period, the listing expenses charged to
profit or loss were RMB14.1 million (HK$15.5 million). RMB15.0 million is expected to be
charged to our consolidated statements of profit or loss for the remaining period ending
December 31, 2023. The listing expenses above are the latest practicable estimate for reference
only, and the actual amount may differ from this estimate.
GLOBAL OFFERING STATISTICS
Based on the
minimum Offer Price
of HK$5.95 per Offer
Share
Based on the
maximum Offer
Price of HK$7.90
per Offer Share
Market capitalization of our Shares (1) (in millions) HK$1,202.9 HK$1,597.1
Unaudited pro forma adjusted net tangible assets per Share (2) HK$1.62 HK$2.09
Notes:
(1) The calculation of market capitalization is based on 202,160,000 Shares expected to be in issue
immediately upon completion of the Global Offering.
(2) The unaudited pro forma adjusted net tangible assets of the Company attributable to the shareholders
of the Company per Share was calculated based on the assumption that 200,540,000 Shares were in issue
as of June 30, 2023 and after adjustments as specified in “Appendix II—Unaudited Pro Forma Financial
Information.” The difference between the number of Shares used in market capitalization calculation
202,160,000 and 200,540,000 is 1,620,000, which is the number of restricted shares issued by the
Company under the Pre-IPO Restricted Share Plan in March 2023 and accounted for as treasury shares
as shown in Note 23 to the Accountants’ Report in Appendix I to this prospectus.
DIVIDENDS
During the Track Record Period, our Company did not declare or pay any dividend. In
2021, Changjiu Jinfu, a wholly owned subsidiary of our Company, declared and paid dividends
of RMB22.0 million to its then shareholders.
We do not have a specific dividend policy or a predetermined dividend payout ratio. The
decision to pay dividends in the future will be made at the discretion of our Board and will be
based on our profits, cash flows, financial condition, capital requirements and other conditions
that our Board deems relevant. The payment of dividends may be limited by other legal
restrictions and agreements that we may enter into in the future.
SUMMARY
–2 7–


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EFFECT OF THE COVID-19 PANDEMIC
According to CIC, the passenger automobile market in China in general had been
adversely affected in the short term as the COVID-19 pandemic shrank production material
supplies, slowed down automobile production, curbed onsite sales, adversely affected
consumers’ willingness and purchase power, and resulted in the government’s epidemic
prevention measures, such as quarantine and order to delay resumption of service and mass
production. In 2021, the number of pledged vehicles that we monitored decreased due to a
decrease in the demand for new vehicles and a slowdown in automobile transactions at
automobile dealerships as a result of the COVID-19 pandemic.
Nevertheless, the passenger automobile market in China has gradually recovered since
2021 in line with the recovery of the national economy. In particular, according to CIC, the
sales volume of new passenger automobiles increased by 8.8% to 24.0 million in 2022 as
compared to 2021. Despite the outbreak of COVID-19, we achieved growth during the Track
Record Period. The number of automobile dealerships to which we provided pledged vehicle
monitoring services increased by 28.5% from 8,316 as of December 31, 2020 to 10,684 as of
December 31, 2022, and our revenue increased from RMB430.6 million in 2020 to RMB547.9
million in 2022, representing a CAGR of 12.8% between 2020 and 2022.
For more information, see “Business—Effect of the COVID-19 Pandemic.”
RECENT DEVELOPMENTS
Financial Performance
Based on our unaudited management accounts, our total revenue increased by 17.5% in
the ten months ended October 31, 2023 as compared to the same period in 2022, which was
primarily attributable to an increase in revenue from our pledged vehicle monitoring services.
Despite the recent difficult macroeconomic conditions, the pledged vehicle monitoring services
market in general recovered after the COVID-19 pandemic, according to CIC, and demand for
our services increased in line with market recovery, which resulted in the increase in revenue
from our pledged vehicle monitoring services.
In the ten months ended October 31, 2023, our gross profit increased by 27.0% and our
gross profit margin was 3.3 percentage points higher, as compared to the same period in 2022,
primarily attributable to increases in the gross profit and gross profit margin of pledged vehicle
monitoring services as our business continued to grow, the staff from our subcontractors are
able to supervise multiple automobile dealerships at the same time with the support of our
technologies (such as the VFS system and the complementary hardware), thereby reducing the
required manpower for our pledged vehicle monitoring services and we are able to curb the
increase in subcontracting costs and realize economies of scale.
SUMMARY
–2 8–


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Primarily due to increases in our listing expenses associated with the Global Offering and
share-based compensation expenses associated with the issuance of certain restricted shares
and options, we expect to experience a significant decrease in our profit for the year of 2023
as compared to 2022.
Recent Development in Our Business Operations
As of October 31, 2023, we provided pledged vehicle monitoring services to 227 financial
institutions and 16,569 automobile dealerships in over 500 cities across 31 provinces in China.
As of October 31, 2023 and since the inception of our automobile dealership operation
management services, we had entered into five automobile dealership operation management
service agreements with automobile dealerships owned by Independent Third Parties, and had
commenced our operation management services under three of them. For the remaining two
operation management service agreements, we expect to commence our services after the
relevant automobile dealerships completed their internal corporate adjustments. As of
October 31, 2023, we had also entered into 144 non-legally binding letters of intent for our
automobile dealership operation management services with automobile dealerships owned by
Independent Third Parties.
Trial Operation of Automobile Supply Chain Service Mobile Application
Our automobile supply chain service mobile application commenced trial operation in
April 2023. The mobile application is designed to connect NEV manufacturers with automobile
dealerships to facilitate the sales, delivery and other supply chain services of NEVs in our
mobile application, and enable NEV manufacturers to expand their business reach with our
supply chain service capability in lower-tier cities. For more information, see “Business—Our
Strategies—Capitalize on growth trends in NEV market in China’s lower-tier cities.”
Cybersecurity and Data Privacy Related Regulations
On November 14, 2021, the CAC released the Regulations on the Administration of Cyber
Data Security (Draft for Comments) ( ၣഖᅰኽτΌ၍ଣૢԷ(ᅄӋจԈᇃ)) (the “Draft
Regulations”). See “Regulatory Overview—Regulations on Internet Information Security and
Privacy Protection.” Although the Draft Regulations have not been formally adopted, we had
taken relevant measures to comply with the Draft Regulations. See “Business—Data Security
and Privacy.”
On December 28, 2021, the CAC, together with other relevant departments, jointly
promulgated the Cybersecurity Review Measures (), which became
effective on February 15, 2022. See “Regulatory Overview—Regulations on Internet
Information Security and Privacy Protection.”
SUMMARY
–2 9–


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On July 30, 2021, the State Council promulgated the Critical Information Infrastructure
Protection Regulations (ᚐૢԷ) (the “CII Regulations”), which
came into effect on September 1, 2021. During the Track Record Period and up to the Latest
Practicable Date, we had not received any notice or order from any government authority that
identified or might identify us as a critical information infrastructure operator. Therefore, our
PRC Legal Advisors are of the view that it is unlikely that we would be identified as a critical
information infrastructure operator.
On April 17, 2023, our PRC Legal Advisors conducted a real-name telephone consultation
with the China Cybersecurity Review Technology and Certification Center (ݟ
ҦஔၾႩᗇʕː) and confirmed that (i) listing on the Hong Kong Stock Exchange is not
treated as listing abroad under the Cybersecurity Review Measures; and (ii) the government
authorities would notify us before initiating a cybersecurity review if we were deemed to be
associated with national security risks, and we would not be required to conduct self-
assessment on our association with national security risks. Based on the foregoing, our PRC
Legal Advisors are of the view that our proposed listing on the Hong Kong Stock Exchange
will not trigger mandatory application for cybersecurity review under the Cybersecurity
Review Measures.
During the Track Record Period and up to the Latest Practicable Date, we had not
received any interview requests or inquiries from the PRC government in relation to
cybersecurity review. However, we cannot rule out the possibility that we would be subject to
cybersecurity review, and we cannot assure you that the relevant government authorities will
not interpret the regulations in ways that may negatively affect our business operations in the
future.
Regulations Related to Overseas Listing
On February 17, 2023, the CSRC released the Trial Administrative Measures of Overseas
Securities Offering and Listing by Domestic Companies ( ྤʫΆุྤ̮೯БᗇՎձɪ̹၍ଣ
) (the “Overseas Listing Trial Measures”) and five supporting guidelines
(collectively, the “Trial Measures and Supporting Guidelines”), which came into effect on
March 31, 2023. For more details, please refer to “Regulatory Overview—Regulations on
M&A and Overseas Listings.” Based on the foregoing, our PRC Legal Advisors are of the view
that we need to complete the filing procedures with the CSRC in connection with the Listing
pursuant to the Overseas Listing Trial Measures. We submitted a filling to the CSRC for
application of the Listing and the Global Offering on May 19, 2023. As of the Latest
Practicable Date, we had completed such filing procedures.
NO MATERIAL ADVERSE CHANGE
Our Directors confirm that there has been no material adverse change in our financial,
trading position or prospects since June 30, 2023, being the latest date of our consolidated
financial statements, up to the date of this prospectus.
SUMMARY
–3 0–


--- page 41 ---
SUMMARY OF MATERIAL RISK FACTORS
There are certain risks relating to an investment in the Offer Shares. Some of the
particular risks in investing in the Offer Shares are further described in the section entitled
“Risk Factors” in this prospectus. Y ou should read that section carefully before you decide to
invest in the Offer Shares. We believe some of the more significant risk factors include: (i) we
may not be able to maintain growth in our business and may not be able to successfully carry
out our business expansion and growth strategy; (ii) we rely on staff designated by our
subcontractors to perform certain onsite supervision services and subcontracting costs account
for substantially all of our cost of sales; (iii) the transfer of pledged vehicle monitoring service
business from Changjiu Industrial to us has not completed and may not complete in the near
future or at all; (iv) we have a limited operating history in automobile dealership operation
management services and our efforts to provide automobile dealership operation management
services to Independent Third Parties may not succeed; and (v) our initiatives to develop new
services may not succeed as planned, which may make it difficult to assess our prospects.
SUMMARY
–3 1–


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In this prospectus, unless the context otherwise requires, the following terms shall
have the meanings set out below. Certain other terms are explained in the section
headed “Glossary of Technical Terms” in this prospectus.
“Accountants’ Report” the accountants’ report of our Company for the Track
Record Period, the text of which is set out in Appendix I
to this prospectus
“affiliate” with respect to any specified person, any other person,
directly or indirectly, controlling or controlled by or
under direct or indirect common control with such
specified person
“AFRC” the Accounting and Financial Reporting Council of Hong
Kong
“Articles of Association” or
“Articles”
the third amended and restated articles of association of
our Company, conditionally adopted on December 11,
2023 and will come into effect upon Listing, a summary
of which is set out in Appendix III to this prospectus, as
amended, supplemented or otherwise modified from time
to time
“associate(s)” has the meaning ascribed thereto under the Listing Rules
“Board” or “Board of Directors” the board of Directors of our Company
“Business Day” or
“business day”
a 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
“BVI” the British Virgin Islands
“CAC” the Cyberspace Administration of China (ʝᑌ
܃)
CADA” China Automobile Dealers Association (ஷ՘
ึ)
“CAGR” compounded annual growth rate
DEFINITIONS AND ACRONYMS
–3 2–


--- page 43 ---
“Capital Market
Intermediary(ies)” or
“CMI(s)”
the capital market intermediary(ies) named in the section
headed “Directors and Parties Involved in the Global
Offering” of this prospectus
“Cayman Companies Act” or
“Companies Act”
the Companies Act, Cap 22 (As Revised) of the Cayman
Islands
“CBIRC” the China Banking and Insurance Regulatory
Commission (ึ)
“CCASS” the Central Clearing and Settlement System established
and operated by HKSCC
“CFLP” China Federation of Logistics & Purchasing (ၾ
મᒅᑌΥึ)
“Changjiu HK” Hong Kong Changjiu Digital Technology Limited (ಥ
ʮ̡), a limited company incorporated
in Hong Kong on July 15, 2021 and a wholly-owned
subsidiary of our Company
“Changjiu Group” Changjiu Industrial and its subsidiaries, excluding our
Group
“Changjiu Industrial” Jilin Changjiu Industrial Group Co., Ltd. (ɮྼ
ʮ̡), a limited liability company established
in the PRC on March 30, 1999 and owned as to
approximately 82.46% by Mr. Bo and approximately
17.54% by Ms. Li
“Changjiu Jinfu” Changjiu Jinfu Enterprise Management Consultation
(Shenzhen) Co., Ltd. (ѿΆุ၍ଣፔ༔(ଉέ)ࠢ
ʮ̡), a limited liability company established in the PRC
on September 9, 2016 and an indirect wholly-owned
subsidiary of our Company
“China” or “PRC” the People’s Republic of China, but for the purpose of
this prospectus and for geographical reference only and
except where the context requires otherwise, references
in this prospectus to “China” and the “PRC” do not apply
to Hong Kong, the Macao Special Administrative Region
or Taiwan
DEFINITIONS AND ACRONYMS
–3 3–


--- page 44 ---
“CIC” or “Industry Consultant” China Insights Industry Consultancy Limited, an
Independent Third Party, and a market research firm
engaged by our Company to prepare an industry report,
the details of which are set out in “Industry Overview”
“CIC Report” an independent market research report commissioned by
our Company and prepared by CIC for the purpose of this
prospectus
“close associate(s)” has the meaning ascribed to it under the Listing Rules
“Code” or “Corporate
Governance Code”
the Corporate Governance Code set out in Appendix 14 to
the Listing Rules
“Companies Ordinance” the Companies Ordinance (Chapter 622 of the Laws of
Hong Kong) as amended, supplemented or otherwise
modified from time to time
“Companies (Winding Up and
Miscellaneous Provisions)
Ordinance”
the Companies (Winding Up and Miscellaneous
Provisions) Ordinance (Chapter 32 of the Laws of Hong
Kong) as amended, supplemented or otherwise modified
from time to time
“Company,” “our Company” or
“the Company”
Changjiu Holdings Limited (ʮ̡),
formerly known as Changjiu Digital Technology Limited
(ʮ̡), an exempted company
incorporated in the Cayman Islands with limited liability
on June 16, 2021
“connected person(s)” has the meaning ascribed thereto under the Listing Rules
“Controlling Shareholder(s)” has the meaning ascribed to it under the Listing Rules,
and unless the context otherwise requires, refers to Ms.
Li, Mr. Bo, Brighht Limited, Brightio Limited, Advancey
Limited, Advancd Limited, Creationn Limited and
CreateCube Limited
“core connected person(s)” has the meaning ascribed thereto under the Listing Rules
“COVID-19” an infectious disease caused by the severe acute
respiratory syndrome coronavirus 2, first reported in
December 2019
“CPCA” China Passenger Car Association (ࢹڦ
ึ)
DEFINITIONS AND ACRONYMS
–3 4–


--- page 45 ---
“CSRC” the China Securities Regulatory Commission ( ʕ਷ᗇՎ
ึ)
“Customer Service Centre” the location specified by HKSCC from time to time at
which Investor Participants may give instructions (in
such form as HKSCC may require) in connection with the
HKSCC services available to them to HKSCC
“Deed of Non-competition” a deed of non-competition undertakings dated December
11, 2023 entered into by our Controlling Shareholders in
favor of our Company (for itself and as trustee for the
benefit of each of our subsidiaries from time to time),
particulars of which are summarized in “Relationship
with Our Controlling Shareholders”
“Director(s)” the director(s) of our Company
“EIT” enterprise income tax
“EIT Law” the Enterprise Income Tax Law of the PRC ( ʕശɛ͏
), as enacted by the NPC on
March 16, 2007, effective on January 1, 2008, and latest
amended on December 29, 2018, as amended,
supplemented or otherwise modified from time to time
“Extreme Conditions” the occurrence of “extreme conditions” as announced by
any government authority of Hong Kong due to serious
disruption of public transport services, extensive
flooding, major landslides, large-scale power outage or
any other adverse conditions before Typhoon Signal No.
8 or above is replaced with Typhoon Signal No. 3 or
below
“FINI” “Fast Interface for New Issuance,” an online platform
operated by HKSCC that is mandatory for admission to
trading and, where applicable, the collection and
processing of specified information on subscription in
and settlement for new listings in Hong Kong
“Global Offering” the Hong Kong Public Offering and the International
Offering
DEFINITIONS AND ACRONYMS
–3 5–


--- page 46 ---
“Group,” “our Group,” “we,”
“our” or “us”
our Company, its subsidiaries, where the context so
requires, in respect of the period prior to our Company
becoming the holding company of its present
subsidiaries, the business operated by such subsidiaries
or their predecessors (as the case may be)
“HK eIPO White Form ” the application for Hong Kong Offer Shares to be issued
in the applicant’s own name, submitted online through
the IPO App or on designated website at www.hkeipo.hk
“HK eIPO White Form Service
Provider”
the HK eIPO White Form service provider designated
by our Company as specified in the IPO App and on the
designated website at www.hkeipo.hk
“HKSCC” Hong Kong Securities Clearing Company Limited, a
wholly owned subsidiary of Hong Kong Exchanges and
Clearing Limited
“HKSCC EIPO” the arrangement in these HKSCC Operational Procedures
for instructions to be given electronically to HKSCC by
HKSCC Participants via FINI for applications to be made
on their behalf for new issue shares and for the payment
of application moneys, and for those instructions to be
acted upon
“HKSCC Nominees” HKSCC Nominees Limited, a wholly-owned subsidiary
of HKSCC
“HKSCC Operational
Procedures”
the Operational Procedures of HKSCC, containing the
practices, procedures and administrative or other
requirements relating to HKSCC’s services and the
operations and functions of the Systems, as from time to
time in force
“HKSCC Participant(s)” a participant admitted to participate in CCASS as a direct
clearing participant, a general clearing participant or a
custodian participant
“Hong Kong” or “HK” the Hong Kong Special Administrative Region of the
PRC
“Hong Kong dollars” or “HK$” Hong Kong dollars, the lawful currency of Hong Kong
DEFINITIONS AND ACRONYMS
–3 6–


--- page 47 ---
“Hong Kong Offer Shares” the 5,054,000 Offer Shares (subject to reallocation as
described in “Structure of the Global Offering”) being
initially offered by our Company for subscription
pursuant to the Hong Kong Public Offering
“Hong Kong Public Offering” the offer of the Hong Kong Offer Shares for subscription
by the public in Hong Kong (subject to reallocation) at
the Offer Price (plus brokerage of 1%, SFC transaction
levy of 0.0027%, Stock Exchange trading fee of
0.00565% and AFRC transaction levy of 0.00015%) on
the terms and subject to the conditions described in this
prospectus as further described in the section headed
“Structure of the Global Offering—The Hong Kong
Public Offering”
“Hong Kong Share Registrar” Tricor Investor Services Limited
“Hong Kong Stock Exchange” or
“Stock Exchange”
The Stock Exchange of Hong Kong Limited
“Hong Kong Underwriters” the underwriters of the Hong Kong Public Offering listed
in “Underwriting—Hong Kong Underwriters”
“Hong Kong Underwriting
Agreement”
the underwriting agreement dated December 28, 2023
relating to the Hong Kong Public Offering and entered
into by our Company, our Controlling Shareholders, the
Joint Sponsors, the Overall Coordinators and the
Hong Kong Underwriters, as further described in
“Underwriting”
“IASB” International Accounting Standards Board
“IFRS(s)” International Financial Reporting Standards, and related
amendments and interpretations issued by the IASB
“Independent Third Party(ies)” individual(s) or company(ies) who or which, to the best
of our Directors’ knowledge, information, and belief,
having made all due and careful enquiries, is/are not a
connected person(s) of our Company under the Listing
Rules
“International Offer Shares” the 45,486,000 Offer Shares being initially offered for
subscription under the International Offering, subject to
reallocation as described in “Structure of the Global
Offering”
DEFINITIONS AND ACRONYMS
–3 7–


--- page 48 ---
“International Offering” the conditional placing of the International Offering
Shares at the Offer Price in offshore transactions outside
the United States in reliance on Regulation S or any other
available exemption from the registration requirement
under the U.S. Securities Act, as further described in
“Structure of the Global Offering”
“International Underwriters” the group of international underwriters expected to enter
into the International Underwriting Agreement relating to
the International Offering
“International Underwriting
Agreement”
the international underwriting agreement relating to the
International Offering and expected to be entered into by
our Company, the Controlling Shareholders, the Joint
Sponsors, the Overall Coordinators, and the International
Underwriters on or about the Price Determination Date,
as further described in “Underwriting—Underwriting
Arrangements and Expenses—The International
Offering—International Underwriting Agreement”
“IPO App ” the mobile application for the HK eIPO White
Form service which can be downloaded by
searching “ IPO App ” in the App Store or Google Play
or downloaded at www.hkeipo.hk/IPOApp or
www.tricorglobal.com/IPOApp
“Joint Bookrunners” the joint bookrunners as named in “Directors and Parties
Involved in the Global Offering”
“Joint Global Coordinators” the joint global coordinators as named in “Directors and
Parties Involved in the Global Offering”
“Joint Lead Managers” the joint lead managers as named in “Directors and
Parties Involved in the Global Offering”
“Joint Sponsors” CITIC Securities (Hong Kong) Limited and ICBC
International Capital Limited
“Latest Practicable Date” December 20, 2023, being the latest practicable date for
the purpose of ascertaining certain information contained
in this prospectus prior to its publication
“Listing” the listing of our Shares on the Main Board
DEFINITIONS AND ACRONYMS
–3 8–


--- page 49 ---
“Listing Date” the date, expected to be on or about January 9, 2024, on
which dealings in our Shares first commence on the Main
Board
“Listing Rules” the Rules Governing the Listing of Securities on The
Stock Exchange of Hong Kong Limited, as amended,
supplemented or otherwise modified from time to time
“M&A Rules” the Regulations on Mergers and Acquisitions of Domestic
Companies by Foreign Investors (Իᒅ
), which were jointly promulgated by
MOFCOM, the State-owned Assets Supervision and
Administration Commission, the STA, the SAIC, the
CSRC, and the SAFE on August 8, 2006, and came into
effect on September 8, 2006 and subsequently amended
on June 22, 2009, as amended, supplemented or
otherwise modified from time to time
“Main Board” the stock exchange (excluding the option market)
operated by the Stock Exchange which is independent
from and operated in parallel with Growth Enterprise
Market of the Stock Exchange
“Memorandum” or
“Memorandum of Association”
the third amended and restated memorandum of
association, conditionally adopted on December 11, 2023
which will come into effect upon Listing, a summary of
which is set out in the Appendix III to this prospectus, as
amended, supplemented or otherwise modified form time
to time
“MIIT” the Ministry of Industry and Information Technology of
the PRC (ʷ௅)
“MOF” the Ministry of Finance of the PRC (݁
௅)
“MOFCOM” or “Ministry of
Commerce”
the Ministry of Commerce of the PRC ( ʕശɛ͏΍ձ਷
ਠਕ௅)
“Mr. Bo” Mr. Bo Shijiu ( ᑛ˰ɮ), the founder of our Group, our
chief executive officer, an executive Director, the spouse
of Ms. Li and one of our Controlling Shareholders
DEFINITIONS AND ACRONYMS
–3 9–


--- page 50 ---
“Ms. Li” Ms. Li Guiping (܈࣭the founder of our Group,
chairwoman of our Board, an executive Director, the
spouse of Mr. Bo and one of our Controlling Shareholders
“NBS” National Bureau of Statistics of China (҅)
“NDRC” the National Development and Reform Commission of
the PRC (ึ)
“NPC” the National People’s Congress of the PRC ( ʕശɛ͏΍
ɽึ)
“ODI” overseas direct investments
“Offer Price” the final offer price per Offer Share (exclusive of
brokerage fee of 1.0%, SFC transaction levy of 0.0027%,
Stock Exchange trading fee of 0.00565% and AFRC
transaction levy of 0.00015%) of not more than HK$7.90
and expected to be not less than HK$5.95, 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, as further detailed in “Structure of the Global
Offering—Pricing and Allocation”
“Offer Shares” the Hong Kong Offer Shares and the International Offer
Shares
“Overall Coordinators” the overall coordinators as named in “Directors and
Parties Involved in the Global Offering”
“PBOC” the People’s Bank of China ( ʕ਷ɛ͏ვБ), the central
bank of the PRC
“PRC Company Law” Company Law of the PRC ()
enacted by the Standing Committee of the Eighth
National People’s Congress on December 29, 1993 and
effective on July 1, 1994, and latest amended on October
26, 2018, as amended, supplemented or otherwise
modified from time to time
“PRC Legal Advisors” JunHe LLP , the legal advisors to our Company on PRC
laws in connection with the Global Offering
DEFINITIONS AND ACRONYMS
–4 0–


--- page 51 ---
“Pre-IPO Restricted Share Plan” the pre-IPO restricted share plan approved and adopted
by our Company on March 7, 2023, the principal terms of
which are summarized in “Appendix IV—Statutory and
General Information—D. Pre-IPO Share Incentive
Plans—1. Pre-IPO Restricted Share Plan”
“Pre-IPO Share Option Plan” the pre-IPO share option plan approved and adopted by
our Company on March 7, 2023, the principal terms of
which are summarized in “Appendix IV—Statutory and
General Information—D. Pre-IPO Share Incentive
Plans—2. Pre-IPO Share Option Plan”
“Pre-IPO Share Options” the share options granted under the Pre-IPO Share Option
Plan
“Price Determination Agreement” the agreement to be entered into between our Company
and the Overall Coordinators (for themselves and on
behalf of the Underwriters) on the Price Determination
Date to record and fix the Offer Price
“Price Determination Date” the date, expected to be on or about January 5, 2024, on
which the Offer Price is to be fixed by agreement
between our Company and the Overall Coordinators (for
themselves and on behalf of the Underwriters)
“Province” or “province” each being a province or, where the context requires, a
provincial level autonomous region or municipality under
the direct supervision of the PRC government
“Regulation S” Regulation S under the U.S. Securities Act
“Renminbi” or “RMB” the lawful currency of the PRC
“Reorganization” the reorganization of our Group in preparation of
the Listing, details of which are described in
“History, Reorganization and Corporate Structure—
Reorganization”
“Restricted Share SPV” Y uanshenghe (Shanghai) Enterprise Management
Partnership (Limited Partnership) ( ʩ໋ͫ(ɪऎ)Άุ၍
ଣΥྫΆุ(Υྫ)), a limited partnership established
in the PRC on February 22, 2023, the limited partners of
which are the participants of our Pre-IPO Restricted
Share Plan
DEFINITIONS AND ACRONYMS
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“Restricted Shares” the restricted shares granted under the Pre-IPO Restricted
Share Plan
“SAFE” the State Administration of Foreign Exchange of the PRC
(̮ි၍ଣ҅)
“SAIC” State Administration for Industry and Commerce (ʈ
၍ଣᐼ҅)
“SAMR” the State Administration for Market Regulation (̹
ఙ္ຖ၍ଣᐼ҅)
“SCNPC” the Standing Committee of the National People’s
Congress of the PRC (ึ)
“Securities and Futures
Commission” or “SFC”
the Securities and Futures Commission of Hong Kong
“SFO” the Securities and Futures Ordinance (Chapter 571 of the
Laws of Hong Kong), as amended, supplemented or
otherwise modified from time to time
“Shanghai Bozhong” or “WFOE” Shanghai Bozhong Digital Technology Co., Ltd. ( ɪऎཔ
ʮ̡), a limited liability company
established in the PRC on September 6, 2021 and an
indirect wholly-owned subsidiary of our Company
“Share(s)” ordinary share(s) with nominal value of
US$0.00000066667 each in the share capital of our
Company
“Shareholder(s)” holder(s) of our Share(s)
“STA” the State Taxation Administration of the PRC ( ʕശɛ͏
೼ਕᐼ҅)
“State Council” the State Council of the PRC ( ʕശɛ͏΍ձ਷਷ਕ৫)
“subsidiary(ies)” has the meaning ascribed to it under the Listing Rules
“substantial shareholder(s)” has the meaning ascribed to it under the Listing Rules
“System” CCASS, FINI or any other platform, facility or system
established, operated and/or otherwise provided by or
through HKSCC
DEFINITIONS AND ACRONYMS
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“Takeovers Code” the Code on Takeovers and Mergers and Share Buy-backs
issued by the SFC
“Track Record Period” the period comprising the three years ended December
31, 2020, 2021 and 2022 and six months ended June 30,
2023
“Ultimate Controlling
Shareholder(s)”
Ms. Li and Mr. Bo
“Underwriter(s)” the Hong Kong Underwriters and the International
Underwriters
“Underwriting Agreements” the Hong Kong Underwriting Agreement and the
International Underwriting Agreement
“U.S.” or “United States” the United States of America, its territories, its
possessions and all areas subject to its jurisdiction
“U.S. persons” U.S. persons as defined in Regulation S
“U.S. Securities Act” the United States Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder
“US$” or “U.S. dollars” United States dollars, the lawful currency of the United
States
“V A T” the PRC value-added tax
“WFOE” wholly foreign-owned enterprise within the meaning
prescribed under PRC laws
Unless the content otherwise requires, references to “2020,” “2021” and “2022” in this
prospectus refer to our financial year ended December 31 of such year , respectively.
Certain amounts and percentage figures included in this prospectus were subjected to
rounding adjustments. Accordingly, figures shown as totals in certain tables may not be an
arithmetic aggregation of the figures preceding them.
The English translation of PRC entities, enterprises, nationals, facilities and regulations
in Chinese or another language in this prospectus is for identification purposes only. To the
extent that there is any inconsistency between the Chinese names of PRC entities, enterprises,
nationals, facilities and regulations and their English translations, the Chinese names shall
prevail.
DEFINITIONS AND ACRONYMS
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In this prospectus, unless the context otherwise requires, explanations and
definitions of certain terms used in this prospectus in connection with our Group 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.
“application” application software designed to run on mobile and
computer devices
“automobile dealerships” businesses primarily including manufacturer-authorized
automobile dealerships
“automobile finance companies” companies engaged in automobile finance businesses in
China, including but not limited to those licensed and
regulated by the CBIRC
“‘Big Six’ national state-owned
commercial banks”
the Bank of China, the China Construction Bank, the
Industrial and Commercial Bank of China, the
Agricultural Bank of China, the Bank of Communications
and the Postal Savings Bank of China
“car parc” the number of registered cars within a defined geographic
region or market
“DevOps” a methodology in the software development and IT
industry that integrates and automates the work of
software development (“Dev”) and IT operations (“Ops”)
as a means for improving and shortening the systems
development life cycle
“ERP” enterprise resource planning, the integrated management
of main business processes, often in real time and
mediated by software and technology
“first-tier cities” Beijing, Shanghai, Guangzhou and Shenzhen, according
to the National Bureau of Statistics of the PRC
“general automobile trading
stores”
businesses that sell vehicles obtained from various
sources, including automobile dealerships and other
types of dealers, as well as automobile manufacturers,
and may also provide automobile repair and maintenance
services, automobile financing services, insurance
services and other after-sales services
GLOSSARY OF TECHNICAL TERMS
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“GFA” gross floor area
“GPS” Global Positioning System, an accurate worldwide
navigational and surveying facility based on the reception
of signals from an array of orbiting satellites
“GSM” Global System for Mobile communication, a digital
cellular network standard widely used by mobile devices
“ICE” internal combustion engine, a heat engine in which the
combustion of a fuel occurs with an oxidizer (usually air)
in a combustion chamber that is an integral part of the
working fluid flow circuit
“IT” information technology, the use of computers to create,
process, store, retrieve and exchange all kinds of data and
information
“lower-tier cities” cities other than first-tier cities
“NEV(s)” new energy vehicles, including pure, or battery-powered,
electric vehicles, plug-in hybrid electric vehicles and
extended range electric vehicles
“OA” office automation, the varied computer machinery and
software used to digitally create, collect, store,
manipulate and relay office information needed for
accomplishing basic tasks
“OBD” on-board diagnostics, which refers to a vehicle’s self-
diagnostic and reporting capability
“PDAs” personal digital assistants, handheld radio frequency
transmitting and receiving devices that can read
information from and write information on our RFID
labels
“PIN” personal identification number, a numeric passcode used
in the process of authenticating a user accessing a system
“RFID” radio-frequency identification, the use of electromagnetic
fields to automatically identify and track tags attached to
objects
GLOSSARY OF TECHNICAL TERMS
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“R&D” research and development
“SaaS” software as a service, a software licensing and delivery
model in which software is centrally hosted and licensed
on a subscription basis
“Smart Star (“݋߅an operation management system tailored for managing
the daily operations of automobile dealerships that
consists of a customer relationship management
(“CRM”) software-as-a-service (“SaaS”) system and an
enterprise resource planning (“ERP”) system; Smart Star
was developed by Xunruida Technology (Beijing) Co.,
Ltd., a wholly-owned subsidiary of Changjiu Industrial,
and the copyright of Smart Star was transferred to
Shanghai Bozhong, an indirect wholly-owned subsidiary
of our Company, by Xunruida Technology (Beijing) Co.,
Ltd. in April 2023
“TAM” or “total addressable
market”
total addressable market, the total market demand for a
product or service assuming that the demand from
customers is fully addressed
“V ehicle Connect” a mobile application that allows (i) financial institutions
and automobile dealerships to access our VFS system on
their mobile terminal; and (ii) financial institutions to
choose and apply the settings that best suit their risk
management needs
“VFS system” a multifunctional IT solution with online operation,
automatic alert and pledged vehicle monitoring modules
and a pool of over 20,000 preset commands which allows
financial institutions to readily choose the settings that
best suit their risk management needs without having to
create the commands from scratch, developed by us, and
together with V ehicle Connect, allows financial
institutions to (i) access the location and activities
information of pledged vehicles collected by our PDAs
and OBD devices; (ii) process certain requests and
documentations, such as granting automobile dealerships
permissions to access car keys that are held in our
custody for customers’ test drives, from automobile
dealerships online; (iii) customize rules and permissions
governing automobile dealerships’ rights over the
pledged vehicles; and (iv) tailor risk alert triggers based
on their own risk management needs
GLOSSARY OF TECHNICAL TERMS
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“VIN” vehicle identification number, a unique code assigned to
an individual vehicle by its manufacturer that
distinguishes it from all other vehicles
“Wi-Fi” a wireless networking technology that is commonly used
to provide high-speed Internet access, allowing nearby
digital devices to exchange data by radio waves
GLOSSARY OF TECHNICAL TERMS
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We have included in this prospectus forward-looking statements. Statements that
are not historical facts, including statements about our intentions, beliefs, expectations
or predictions for the future, are forward-looking statements.
This prospectus contains certain forward-looking statements and information relating to
our Company and its 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,” “could,” “expect,” “going forward,”
“intend,” “may,” “ought to,” “plan,” “project,” “seek,” “should,” “will,” “would” and the
negative of these words and other similar expressions, as they relate to our Group or our
management, are intended to identify forward-looking statements. 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. Y ou 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 strategies, plans, objectives and goals and our ability to successfully implement
these strategies, plans, objectives and goals;
 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
market in which we operate;
 our financial condition and operating results and performance;
 the effects of the global financial markets and economic environment;
 our ability to reduce costs and offer competitive prices;
 our ability to attract customers and build our brand image;
 our dividend policy;
FORW ARD-LOOKING STATEMENTS
–4 8–


--- page 59 ---
 our ability to attract and retain senior management and key employees;
 the amount and nature of, and potential for, future development of our business;
 capital market developments;
 the actions and developments of our competitors;
 change or volatility in interest rates, foreign exchange rates, equity prices, volumes,
operations, margins, risk management and overall market trends;
 certain statements in the sections headed “Business” and “Financial Information” of
this prospectus with respect to trends in prices, operations, margins, overall market
trends, and risk management; and
 other statements in this prospectus that are not historical facts.
This prospectus also contains market data and projections that are based on a number of
assumptions. The markets may not grow at the rates projected by the market data, or at all. The
failure of the markets to grow at the projected rates may materially and adversely affect our
business and the market price of our Shares. In addition, due to the rapidly changing nature of
the PRC economy and China’s automobile sales and distribution industry, projections or
estimates relating to the growth prospects or future conditions of the markets are subject to
significant uncertainties. If any of the assumptions underlying the market data prove to be
incorrect, actual results may differ from the projections based on these assumptions. Y ou
should not place undue reliance on these forward-looking statements.
We do not guarantee that the transactions and events described in the forward-looking
statements in this prospectus will happen as described, or at all. Actual outcomes may differ
materially from the information contained in the forward-looking statements as a result of a
number of factors, including, without limitation, the risks and uncertainties set forth in “Risk
Factors” in this prospectus. Y ou should read this prospectus in its entirety and with the
understanding that actual future results may be materially different from what we expect. The
forward-looking statements made in this prospectus relate only to events as of the date on
which the statements are made or, if obtained from third-party studies or reports, the dates of
the respective studies or reports. Since we operate in an evolving environment where new risks
and uncertainties may emerge from time to time, you should not rely on forward-looking
statements as predictions of future events. We undertake no obligation, beyond what is required
by law, to update any forward-looking statement to reflect events or circumstances after the
date on which the statement is made, even when our situation may have changed.
FORW ARD-LOOKING STATEMENTS
–4 9–


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You should carefully consider all of the information set out in this prospectus,
including the risks and uncertainties described below, before making an investment in our
Shares. Our business, financial condition and results of operations may be materially and
adversely affected by any of these risks and uncertainties. The trading price of our Shares
could decline due to any of these risks, and you may lose all or part of your investment.
Additional risks and uncertainties not presently known to us, or not expressed or implied
below, or that we deem immaterial, could also harm our business, financial condition and
results of operations. You should seek professional advice from relevant advisors
regarding your prospective investment in the context of your particular circumstances.
RISKS RELATING TO OUR BUSINESS AND INDUSTRY
We may not be able to maintain growth in our business and may not be able to
successfully carry out our business expansion and growth strategy.
During the Track Record Period, we generated substantially all of our revenue from
pledged vehicle monitoring services provided to financial institutions and automobile
dealerships. Our pledged vehicle monitoring services experienced stable growth during the
Track Record Period. However, our historical growth rates may not be indicative of our future
growth rates, and we may not be able to generate similar growth rates in the future. According
to CIC, in 2022, the market size of China’s pledged vehicle monitoring services was
approximately RMB1,054.0 million and we were the largest provider of such services, with a
market share of 47.9% in terms of revenue. As a result, there is limited growth potential for
our pledged vehicle monitoring services. Our revenue growth rate may decline for a variety of
reasons, including but not limited to increasing competition and emergence of alternative
business models, which could result in a decrease in customer demand for our services. We
cannot assure you that we will grow at the same rate as we did in the past or avoid any decline
in the future.
Our future growth may be affected by a number of factors, most of which are beyond our
control. Such factors include but are not limited to (i) changes to China’s economic and social
conditions in general; (ii) changes to China’s automobile sales and distribution industry and
automobile dealership industry; (iii) changes in China’s policies and regulations, especially in
respect of the automobile sales and distribution industry and related automobile finance
industry; and (iv) changes in our relationships with customers. As a result, we cannot assure
you that we will be able to manage our future growth effectively.
RISK FACTORS
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We rely on staff designated by our subcontractors to perform certain onsite supervision
services and subcontracting costs account for substantially all of our cost of sales.
We outsource certain services, primarily including pledged vehicle monitoring services,
collective vehicle conformity certificate management services and counting services, to
subcontractors. During the Track Record Period, our subcontracting costs constituted
substantially all of our cost of sales. For the years ended December 31, 2020, 2021 and 2022
and the six months ended June 30, 2022 and 2023, our subcontracting costs recorded in cost
of sales amounted to RMB252.8 million, RMB285.5 million, RMB290.2 million, RMB143.9
million and RMB155.4 million, respectively, representing 96.6%, 96.6%, 89.9%, 94.4% and
88.3% of our total cost of sales during the same periods, respectively. In addition, as our
subcontracting agreements typically have a term of approximately two years and may be
renewed upon mutual consent, any significant change in subcontracting fees may result in a
surge in subcontracting costs, which in turn may impact our profitability.
Although we regularly monitor and evaluate the performance of the subcontractors and
may require the subcontractors to take necessary rectification measures when their services do
not meet the agreed standards, we may not be able to directly and effectively monitor the
service quality of the subcontractors. Any non-performance, delayed performance or
substandard performance by the subcontractors may result in deterioration of our service
quality, which could damage our reputation, lead to additional expenses and business
disruptions and expose us to litigation and damage claims. While we have the right to recover
damages or penalties for substandard performance and failure to take necessary rectification
measures from the subcontractors pursuant to subcontracting agreements, there can be no
assurance that we will be able to recover any amount, or at all.
Furthermore, if the subcontractors terminate their current subcontracting agreements with
us, or when our current subcontracting agreements with the subcontractors expire, there can be
no assurance that we will be able to find suitable replacements in a timely manner on terms
acceptable to us, or at all. Any failure by the subcontractors to meet our safety and data
protection requirements could also affect our compliance with applicable government rules and
regulations, which may have a material and adverse effect on our business, financial condition
and results of operations.
The transfer of pledged vehicle monitoring service business from Changjiu Industrial to
us has not completed and may not complete in the near future or at all.
Since September 2016 when Changjiu Jinfu was established, Changjiu Industrial has been
gradually transferring its existing pledged vehicle monitoring service agreements to us and
moving the operation team in charge of such services into our Group, and we have begun to
enter into new pledged vehicle monitoring service agreements with financial institutions and
automobile dealerships upon the expiration of the agreements between them and Changjiu
Industrial. On November 30, 2021, Changjiu Industrial and we entered into a business transfer
agreement, pursuant to which Changjiu Industrial agreed to assign to us all of its rights and
obligations under its then existing pledged vehicle monitoring service agreements for a total
consideration of RMB45.5 million. For more information, see “History, Reorganization and
Corporate Structure—Reorganization—Onshore Reorganization—Business transfer of pledged
vehicle monitoring services.”
RISK FACTORS
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As of the Latest Practicable Date, the rights and obligations of Changjiu Industrial under
a certain number of its then existing pledged vehicle monitoring service agreements the
(“Unassigned Agreements”) had not been transferred to us. All of the rights and obligations of
Changjiu Industrial under the Unassigned Agreements are expected to be transferred to us or
the Unassigned Agreements will expire by December 31, 2024, after when we expect to enter
into new pledged vehicle monitoring service agreements with the relevant parties to such
Unassigned Agreements. Although Changjiu Industrial continued to assume its rights and
obligations under the Unassigned Agreements, it has exclusively entrusted us to provide
pledged vehicle monitoring services pursuant to an entrustment agreement dated April 26, 2023
between Changjiu Industrial and us. See “Connected Transactions—Non-exempt Continuing
Connected Transactions—(4) Entrustment Agreement” for details.
We cannot assure you that our business transfer agreement with Changjiu Industrial will
be implemented as planned. If Changjiu Industrial breaches the business transfer agreement or
the entrustment agreement, we may not be able to provide pledged vehicle monitoring services
to certain financial institutions and automobile dealerships, which may adversely affect our
relationships with them and our chances of entering into new pledged vehicle monitoring
service agreements with them upon expiration of their contracts with Changjiu Industrial.
Furthermore, we cannot assure you that Changjiu Industrial’s pledged vehicle monitoring
service business will be fully transferred to us in accordance with the estimated timeline, or at
all. If certain Unassigned Agreements are not transferred to us by December 31, 2024, we may
fail to enter into new pledged vehicle monitoring service agreements with the relevant financial
institutions and automobile dealerships after such Unassigned Agreements expire on December
31, 2024. Any delay or failure in the process of such business transfer may have a material and
adverse effect on our business, financial condition, results of operations and growth prospects.
In addition, since we entered into an entrustment agreement with Changjiu Industrial, we
undertook its rights and assumed its obligations under its existing pledged vehicle monitoring
service agreements with financial institutions and automobile dealerships. If Changjiu
Industrial breaches its obligations under its existing pledged vehicle monitoring service
agreements, we may be held liable for damages under the entrustment agreement.
We have a limited operating history in automobile dealership operation management
services and our efforts to provide automobile dealership operation management services
to Independent Third Parties may not succeed.
We launched our automobile dealership operation management services in April 2022.
Our limited operating history in automobile dealership operation management services may
make it difficult to accurately evaluate our current business and reliably predict our future
performance. Any predictions you make about our future success or viability in this business
line may be subject to uncertainty and may not be as accurate as they could be if we had a
longer operating history in this business line. In particular, we cannot assure you that the
application of our experience and technology from our pledged vehicle monitoring services to
our automobile dealership operation management services will turn out to be successful. While
we have formed a customer base through the provision of pledged vehicle monitoring services,
there is no assurance that our existing customers will have a demand for our automobile
RISK FACTORS
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--- page 63 ---
dealership operation management services or introduce new customers to us. In addition,
substantially all of our revenue from this business line during the Track Record Period was
generated from services provided to automobile dealerships owned by Changjiu Group.
Although we have expanded and plan to further expand our business by providing automobile
dealership operation management services to Independent Third Parties, we cannot assure you
that we will be able to acquire service agreements from Independent Third Parties in a timely
manner or on favorable terms. As of June 30, 2023, we had entered into five automobile
dealership operation management service agreements for this business line with automobile
dealerships owned by Independent Third Parties. In 2022 and the six months ended June 30,
2022 and 2023, we recorded gross loss of approximately RMB1.8 million, nil and RMB3.8
million, respectively, attributable to an Independent Third Party, primarily because we were at
the early stage of business development for such services and incurred related costs,
especially staff costs, in preparation for future demand of our services. See “Financial
Information—Description of Certain Consolidated Statements of Profit or Loss Items—Gross
Profit and Gross Profit Margin” for details. Furthermore, we may encounter risks and
difficulties frequently experienced by businesses providing new services, such as unforeseen
expenses, difficulties, complications, delays and other known and unknown factors. If we do
not address these risks and difficulties successfully, our business may suffer.
Our initiatives to develop new services may not succeed as planned, which may make it
difficult to assess our prospects.
The success of our business depends, in part, on our ability to develop new services and
introduce new business models. We expect to continue to expand into new types of business
operations when we see business opportunities. We are developing an automobile supply chain
service mobile application where we could facilitate sales, delivery and other supply chain
services of NEVs in our mobile application. Our automobile supply chain service mobile
application commenced trial operation in April 2023. These business initiatives are based on
our assessment of market prospects, and there is no assurance that our assessment will prove
to be correct or that we will grow our business as planned. These new business initiatives may
not be well received by the market and we may determine to cease new initiatives from time
to time.
Furthermore, we cannot assure you that our initiatives to develop new services and
introduce new business models will achieve the success we expect, in which case we may not
be able to recoup the resources we invest to develop, optimize and expand our new business
initiatives. We cannot assure you that our new business initiatives, which are based upon our
forward-looking assessment of market prospects and customer preferences, will always turn
out to be successful. A number of factors beyond our control may also affect our plan for the
development of diversified services, including changes in the PRC’s economic conditions in
general, government policies and regulations on relevant industries, and changes in demand for
our services. Our business, financial condition, results of operations and growth prospects may
be materially and adversely affected if any of our new business initiatives are not successful.
RISK FACTORS
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We face intense competition, particularly with respect to our pledged vehicle monitoring
services, and if we fail to compete effectively, our business, prospects and results of
operations may be materially and adversely affected.
The markets for our services are competitive. Factors affecting competition primarily
include relationships with customers, technological innovation, experience in and familiarity
with the market, pricing and quality of services. With respect to pledged vehicle monitoring
services, our primary competitors are service providers with long operating history and
experience in the automobile sales and distribution industry, automobile finance industry,
automobile logistics industry, and/or automobile insurance industry. Our existing market
position may be adversely affected if we fail to compete effectively against our existing
competitors or new entrants. Furthermore, the emergence of new or alternative technology
could potentially replace or reduce the demand for our pledged vehicle monitoring services or
render our existing technologies and services obsolete or unattractive. For example, financial
institutions may directly access the location information of pledged vehicles through built-in
GPS before the vehicles are sold to vehicle owners, if permitted by law. Other service providers
may also develop new or alternative technology to monitor pledged vehicles, which could
potentially render our existing technologies, such as our RFID labels and OBD devices,
obsolete or unattractive. If we fail to keep up with new technological developments in an
efficient and cost-effective manner, our business, financial condition and results of operations
may be materially and adversely affected. Moreover, a substantial majority of our revenue and
number of pledged vehicle monitoring service agreements related to ICE vehicles during the
Track Record Period. In light of the increasing sales of NEVs in the PRC, the demand for our
pledged vehicle monitoring services may decline if more NEV manufacturers adopt the direct
sales model rather than sell NEVs through automobile dealerships. In the future, if we fail to
obtain pledged vehicle monitoring service agreements for NEVs sold under the direct sales
model, our business, financial condition and results of operations may be materially and
adversely affected. In addition, we cannot assure you that our market share will not decline in
the future as a result of adverse economic or regulatory developments.
For our automobile dealership operation management services, our potential competitors
are startup software companies, internet platform companies and large automobile dealerships
with strong management capabilities, according to CIC. Some of our competitors may have
better access to automobile manufacturers, more services networks, stronger technological
capacities or larger customer base.
Intense competition in our markets may reduce our service fees and revenue, increase our
operating expenses and capital expenditures and lead to departures of our qualified employees.
We may, in the future, encounter disputes with our competitors, including lawsuits involving
claims asserted under intellectual property laws and unfair competition laws which may
adversely affect our business and reputation. Failure to compete with current and potential
competitors could materially harm our business, financial condition and our results of
operations.
RISK FACTORS
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Our efforts to upgrade existing technology and develop new technology may not succeed.
We depend, to a large extent, on our ability to upgrade and develop technology relating
to the provision of our services. In order to increase efficiency and accuracy in our pledged
vehicle monitoring services and respond to user demand, we will continue to develop and
refine our integrated digital information infrastructure and devices. In addition, we will
continue to enhance our data processing capabilities and improve our integrated digital
information system by means of designing lightweight algorithms in the underlying cloud
infrastructure and developing scalable modules in the data, technology and business supporting
systems. However, there is no assurance that we could successfully develop new technology.
Moreover, the development of new technology may not lead to commercially successful
products. The new products we develop may not be commercially viable and may not reach the
industry standards or meet customers’ needs. As a result, we cannot assure you that our efforts
in research and development will translate into commercial success. If we fail to successfully
update our existing technology or develop new technology, our business, financial condition,
results of operations and growth plans may be materially and adversely affected.
Our information systems and technologies may be disrupted by defects, errors, system
failures, security breaches, server disruptions and network interruptions.
We rely on our pledged vehicle monitoring system, including VFS system and V ehicle
Connect, radio-frequency identification (“RFID”) labels, personal digital assistants (“PDAs”),
on-board diagnostics (“OBD”) devices and lockboxes to deliver our pledged vehicle
monitoring services to financial institutions and automobile dealerships, and we utilize our
operation management system, namely Smart Star (“݋߅for the provision of automobile
dealership operation management services. We may encounter technical problems, security
issues and operational issues that may prevent our information systems and technologies from
functioning properly and our customers from receiving desired services, which could damage
our customers’ business and, in turn, hurt our reputation. Real or perceived defects, errors,
failure or bugs in our information systems and technologies could result in negative publicity,
loss or delay in market acceptance of our services, loss of competitive position, lower customer
retention or claims by customers for losses sustained by them. In such an event, we may be
required, or may choose, for customer relations or other reasons, to expend additional
resources in order to rectify the defects or errors and compensate for losses sustained by our
customers. If we are unable to resolve such problems in a timely manner, or at all, we may lose
our existing customers or face lower customer engagement. In addition, we may not be able to
recruit sufficient qualified personnel to support the operation and growth of our information
systems and technologies.
In addition, breaches to our security measures, including computer viruses and hacking,
may result in significant damage to our hardware and software systems, disruptions to our
business activities, inadvertent disclosure of confidential or sensitive information,
interruptions in access to our information systems and technologies and other material adverse
effects on our operations. Our systems may be subject to infiltration as a result of third-party
action, employee error, malfeasance or otherwise, during transfer of data or at any time, and
result in persons obtaining unauthorized access to our systems and data. If our security
measures are breached and unauthorized access to our systems and database is obtained, our
services may be perceived as insecure and customers may curtail or stop using our services
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altogether and we may incur significant legal and financial exposure and liabilities. We may
incur significant costs to protect our systems and equipment against the threat of, and to repair
any damage caused by, computer viruses and hacking. Moreover, if a computer virus or hacking
affects our systems and is highly publicized, our reputation may be materially damaged and use
of our services may decrease.
Furthermore, we cannot assure you that damages or interruptions caused by power
outages, computer viruses, hardware and software failures, telecommunication failures, fires,
natural disasters, security breaches and other similar occurrences relating to our information
systems and technologies will not occur going forward. We may incur significant costs in
restoring any damaged devices and systems. Failures in or disruptions to our information
systems and technologies and loss or leakage of confidential information could cause
transaction errors, processing inefficiencies and the loss of customers. We may thus experience
material adverse effects on our business and operating results. Future development of and
investment in these devices and systems may be subject to PRC laws and regulations governing
license approvals and renewals and we cannot assure you that we can obtain or renew our
license on time, if at all. In addition, we do not carry insurance to compensate us for any losses
that may result from claims arising from defects or errors in our information systems and
technologies. Any of the foregoing may materially and adversely affect our reputation,
business, financial condition and operating results.
Our services may be affected by restrictions imposed by automobile manufacturers on
automobile dealerships.
We provide automobile dealership operation management services to automobile
dealerships. Automobile dealerships are generally subject to restrictions imposed by dealership
authorization agreements between automobile dealerships and automobile manufacturers, such
as restrictions on retail price, restrictions on vehicle makes and/or models that could be sold
and restrictions regarding the provision of after-sales services, according to CIC. Any increase
in the level of restrictions or the enforcement by the automobile manufacturers on the business
and operations of the automobile dealerships under our management may limit our ability to
timely respond to changes in market conditions or to appropriately implement the operation
strategies designed for such automobile dealerships. For instance, if there is a decrease in the
demand for a particular vehicle model, and the automobile dealership under our management
is restricted from selling other vehicle models, the business performance of such automobile
dealership may be negatively impacted, which in return could adversely affect our business and
results of operations.
In addition, our pledged vehicle monitoring services may be affected by restrictions
imposed by automobile manufacturers on automobile dealerships. If there is a decrease in the
demand for a particular vehicle make or model, and automobile dealerships primarily selling
such vehicles are restricted from selling other vehicle makes or models, such automobile
dealerships may purchase fewer automobiles through secured financing, leading to a decrease
in the demand for pledged vehicle monitoring services, which in turn could adversely affect our
business and results of operations.
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Government policies and regulations concerning China’s automobile sales and
distribution industry may materially affect the demand for our services.
We operate in China’s automobile sales and distribution industry. We cannot predict how
this industry will develop in the future, as it may be affected by various government policies
and regulations, in particular, regulations on the purchase of new automobiles and government
policies on NEVs.
In order to deal with traffic congestion and carbon dioxide emissions in China, the PRC
government has implemented various rules and regulations on new gasoline-powered
automobile purchases and ownership by limiting the number of new license plates to be issued
each year. In particular, automobile purchases, ownership and sales may be affected by quotas,
emission standards or other measures implemented by local governments to control the number
of automobiles.
Furthermore, local governments have been required to invigorate the NEV market to
promote the sales and distribution of NEVs and not to impose restrictions on the sales and
distribution of NEVs. They have been required to take measures to simplify the registration
procedures for NEVs, optimize the vehicle registration system and facilitate the transaction
parties to complete the registration procedures at the location of the vehicles. From January 1,
2021 to the end of 2023, NEVs purchases are exempt from vehicle acquisition tax.
The favorable policies and competitive pricing for trading NEVs may lead to decreased
demand for new gasoline-powered automobiles in China, which in turn may materially and
adversely affect demand for our services provided to financial institutions and automobile
dealerships, which still primarily transact gasoline-powered automobiles. In addition, if the
PRC government increases automobile purchase and consumption tax rates or impose an
automobile luxury tax or other additional restrictions or taxes, our business, financial
condition, results of operations and growth prospects may also be materially and adversely
affected. The PRC government may also introduce policies, guidelines, rules and regulations
from time to time to regulate automobile-related businesses. We may incur substantial costs in
order to be in compliance with the applicable regulations, and any changes in these policies and
regulations may have an adverse effect on our business, growth prospects and profitability.
Our pledged vehicle monitoring services may be affected by changes in government
policies and regulations relating to China’s banking and automobile finance industries.
We provide pledged vehicle monitoring services primarily to financial institutions, which
mainly include commercial banks and automobile finance companies. Since China’s banking
and automobile finance industries are highly regulated, demand for our pledged vehicle
monitoring services may be affected by changes in government policies and regulations
relating to these industries. Commercial banks and automobile finance companies are subject
to stringent regulatory requirements and guidelines set forth by the PRC regulatory authorities,
which include but are not limited to the CBIRC, PBOC, MOF, NDRC, SAMR, STA, CSRC,
SAFE and their respective local branches. Some of these regulatory authorities carry out
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periodic and ad hoc inspections, examinations and inquiries on our customers’ business and
compliance with their laws, regulations and guidelines, and some have the authority to impose
sanctions, penalties or remediation actions. These laws, regulations and guidelines impose
regulatory requirements on, among other things, banking products and services, market entry,
automobile finance business operations, establishment of new branches or institutions, capital
structure, tax and accounting policies, corporate governance, risk management, pricing and
provision policies.
The CBIRC, as the primary banking industry and automobile finance industry regulator,
has promulgated a series of regulations and guidelines aimed at improving the operations and
risk management of Chinese commercial banks and automobile finance companies. In
particular, since late 2017, in line with the policy to mitigate potential risks in the PRC
financial markets, the CBIRC has promulgated a series of rules and regulations, such as the
Measures for the Management of Auto Loans (2017 Revision) (ج2017ࡌ
ࠈ)), to enhance supervision and add restrictions on various business operations of
commercial banks and automobile finance companies. These regulations encourage banking
institutions and other financial institutions to improve their risk management systems, enhance
supervision on business operations and adopt more stringent corporate governance measures,
which contributed to an increase in the demand for our pledged vehicle monitoring services.
Policies, laws and regulations governing the banking and automobile finance industries or
interpretations thereof may change in the future. If the demand for our services decreases as
a result of changes in government policies and regulations, our business, financial condition
and results of operations may be materially and adversely affected.
Failure to properly collect, store, use and protect personal data of our customers could
harm our reputation and deter customers from engaging our services.
During the ordinary course of our business, we primarily collect and process four types
of business data, namely (i) data related to pledged vehicles; (ii) dealership-related data; (iii)
dealership operational data; and (iv) service-fee-related data. For more details, see
“Business—Pledged V ehicle Monitoring Services—Data Security and Privacy.” We also
collect, store and use personal data of staff from subcontractors and employees of commercial
banks, automobile finance companies and automobile dealerships. Personal data we collect
from subcontractors who provide onsite supervision services primarily include their names,
dates of birth, phone numbers, ID numbers, addresses, work experience, education background
and facial recognition data. We also collect personal data from employees of commercial
banks, automobile finance companies and automobile dealerships when they register with our
systems, such as names, phone numbers, job titles and work emails. Although we have spent
significant resources to protect data against security breaches, our internal control mechanism
may not be sufficient and our security measures may be compromised. Any failure or perceived
failure to maintain the security of personal and other confidential data that are provided to or
collected by us could harm our reputation, and may expose us to legal proceedings and
potential liabilities, any of which could adversely affect our business and results of operations.
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Failure to attract new customers or retain existing customers could reduce or slow the
growth of our customer base.
In order to maintain and strengthen our position in China’s pledged vehicle monitoring
service industry, we must strive to attract and retain customers, which requires us to provide
high-quality and responsive customer services. In addition, in order to develop our automobile
dealership operation management services, we must proactively attract new customers by
entering into service agreements with Independent Third Parties. We must also innovate and
introduce new information systems and technologies that enhance customer experience.
However, we may not succeed in attracting new customers or retaining existing customers for
a variety of reasons, including price competition, superior services and technologies from our
competitors and changes in China’s automobile sales and distribution industry. If we fail to
attract or retain customers, our business and results of operations may be materially and
adversely affected.
Our reliance on suppliers could adversely affect our ability to manage our business
effectively.
During the Track Record Period, we primarily (i) outsourced our onsite supervision
services; and (ii) procured from third-party manufacturers of our RFID labels, patented PDAs
and OBD devices for our pledged vehicle monitoring services, and patented lockboxes for our
lockbox services. We may experience inventory shortage, delay in delivery or termination of
agreements as a result of increase in market demand, natural disasters or lack of sufficient
rights of our suppliers to provide the services or devices.
During the Track Record Period, purchases from our five largest suppliers in that
year/period amounted to RMB255.3 million in 2020, RMB286.6 million in 2021, RMB302.3
million in 2022 and RMB157.2 million in the six months ended June 30, 2023, which
accounted for 97.6%, 97.0%, 93.6% and 89.4% of our total cost of sales, respectively. During
the Track Record Period, purchases from our single largest supplier in that year/period
amounted to RMB223.3 million in 2020, RMB211.4 million in 2021, RMB119.1 million in
2022 and RMB154.0 million in the six months ended June 30, 2023, which accounted for
85.4%, 71.6%, 36.9% and 87.5% of our total cost of sales, respectively . Our reliance on these
suppliers may subject us to concentration and counterparty risks from these suppliers. We
cannot assure you that we will be able to maintain our relationships with our suppliers in the
future. We generally do not have any long-term agreements guaranteeing supply with these
suppliers. If our supply of certain services or devices is disrupted or delayed, there can be no
assurance that additional supplies can serve as adequate replacements or that supplies will be
available on terms that are favorable to us, if at all. Moreover, even if we can identify adequate
replacements on substantially similar terms, our business may be adversely affected. Any
disruption in the supply of services or devices may delay the provision of our services or cause
other constraints on our business that could damage our customer relationships.
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Furthermore, defects or errors may be found in the devices provided by our suppliers,
which may cause damage to our internal system and hardware and also to the services we
provide to our customers. In addition, any failure by our suppliers to meet our standards may
have a material and adverse effect on our business, results of operations and financial
condition, as well as our reputation and growth prospects.
Our risk management framework, policies and procedures and internal controls may not
fully protect us against various risks inherent in our business.
We have established an internal risk management framework, with various policies and
procedures in place to manage our risk exposures with respect to credit, operations, IT, legal
and compliance. Our risk management policies and procedures are based upon regulations and
policies issued by administrative authorities, industry practice, our financial condition and our
operational experience. However, our policies may not be adequate or effective in managing
all future risk exposures or protecting us against unidentified or unanticipated risks, which
could be significantly greater than those indicated by our internal assessments and operational
experience. Although we are continuously updating these policies and procedures, they may
fail to predict future risks due to rapid changes in the market and regulatory conditions.
In addition, fraud or other misconduct by employees, customers, automobile dealerships
we work with and other third parties or business partners may be difficult to detect and prevent.
For example, our employees may engage in fraudulent business transactions or violate our
internal policies and procedures. In addition, customers and automobile dealerships we work
with may on their own or collectively use fake identification, forged documentation and/or
engage in other fraudulent transactions. Fraud or other misconduct committed by our
employees, customers, automobile dealerships or other third parties could subject us to
financial loss and penalties imposed by governmental and regulatory authorities. We could also
suffer from negative publicity, reputational damage, monetary losses or litigation costs as a
result of the misconduct of our employees. Our risk management systems, IT systems and
internal control procedures are designed to monitor our operations and overall compliance.
However, we may be unable to identify non-compliance or suspicious transactions in a timely
manner or at all. Furthermore, the precautions we take to prevent and detect such activities may
not be effective. It is possible that fraud or other misconduct may have previously occurred but
were undetected and that such fraud or misconduct could occur in the future.
Our internal controls may not effectively prevent the occurrence of any of the foregoing,
which may have a material and adverse effect on our business, financial condition and results
of operations.
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We may fail to retain our senior management team or to attract and retain qualified and
experienced employees.
We rely on the leadership of our senior management team, in particular, our chief
executive officer and executive Director, Mr. Bo Shijiu. Our success also depends on the
experience and skills of other members of our senior management team. We do not maintain
key person insurance for members of our senior management team and we have not entered into
non-compete agreements with key members of our senior management team. The loss of
services of any member of our senior management team could significantly affect our ability
to effectively manage our operations and implement our expansion plan and as a result, our
competitiveness may decrease. This may in turn materially and adversely affect our business,
financial condition, results of operations and growth prospects. We cannot assure you that we
will be able to retain our senior management team or find suitable or comparable replacements
on a timely basis or at all.
Our success also depends on our ability to retain and hire additional qualified and
experienced employees, in particular, employees for our pledged vehicle monitoring group,
information technology group and automobile dealership operation management group. In
addition, competitors may seek to hire away our key employees as competition for experienced
and qualified personnel is intense. If we are unable to attract and retain the necessary personnel
to grow and develop our business, our business, financial condition, results of operations and
growth plans may be materially and adversely affected.
We have granted restricted shares and share options, and we may continue to incur
share-based payment expenses, which may cause dilution to our existing Shareholders and
may have an adverse effect on our results of operations.
On March 7, 2023, we granted a total of 1,620,000 restricted shares and a total of
10,199,730 share options to certain of our employees and Directors. See “History,
Reorganization and Corporate Structure—Pre-IPO Share Incentive Plans” for more details. We
recorded RMB13.7 million in share-based compensation expenses for the six months ended
June 30, 2023. See Note 6 to the Accountants’ Report in Appendix I to this prospectus for
further details. In the future, we may adopt new share incentive plans and issue shares and
options to our Directors, members of our senior management team and/or key employees to
incentivize their performance and align their interests with ours. As a result, we may continue
to incur share-based payment expenses and/or our expenses associated with share-based
compensation may increase in the future, which may have an adverse effect on our net profits.
Furthermore, the grant of restricted shares and share options may result in an immediate and
potential dilution to our existing Shareholders and could result in a decline in the value of our
Shares.
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Our future acquisitions, strategic alliances and investments may not be successful and we
may face difficulties in integrating acquired businesses with our existing business.
We may selectively consider opportunities to enter into acquisitions, investments and
strategic alliances in order to expand our business. These transactions involve inherent risks,
including:
 the failure to achieve the expected benefits of the acquisition, investment or
alliance;
 difficulties in, and the cost of, integrating operations, technologies, services and
personnel;
 write-offs of investments or acquired assets;
 non-performance by, or conflicts of interest with, the parties with whom we enter
into investments or alliances;
 limited ability to monitor or control the actions of other parties with whom we enter
into investments or alliances;
 misuse of proprietary information shared in connection with an acquisition,
investment or alliance; and
 depending on the nature of the acquisition, investment or alliance, exposure to new
regulatory risks.
The realization of any of these risks may materially and adversely affect our business.
Furthermore, we may fail to identify or secure suitable acquisition, investment and other
strategic opportunities, or our competitors may capitalize on such opportunities before we do,
which could impair our ability to compete with our competitors and adversely affect our growth
prospects and results of operations. As of the Latest Practicable Date, we did not have any
potential acquisition or investment target or enter into any definitive agreement for investment
or acquisition.
We may need additional funding to achieve our business targets, finance our operations
and respond to market opportunities.
We may need to secure additional funding for our future business expansion and growth
strategy. There can be no assurance that we will be able to secure funding on terms acceptable
to us or at all. If our internal capital reserve and cash generated from our business operations
are insufficient to finance our business expansion and growth strategy, we may have to seek
additional financing from third parties, including banks. We may also consider raising funds
through the issuance of equity or convertible debt securities, which would lead to the dilution
of our existing Shareholders’ interests in the Company. If we are unable to obtain financing in
a timely manner, at a reasonable cost and on acceptable terms, we may be forced to delay our
expansion plans, or downsize or abandon such plans, which may adversely affect our business,
financial condition and operating results, as well as our future prospects.
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We had negative operating cash flows in the six months ended June 30, 2022 and 2023.
We recorded negative cash flow from operating activities of RMB9.1 million and
RMB20.8 million in the six months ended June 30, 2022 and 2023, respectively. For more
details, please see “Financial Information—Liquidity and Capital Resources—Cash Flow.”
Negative net operating cash flows may require us to obtain sufficient liquidity to meet our
financial needs and obligations and we may be forced to seek external financing, which may
not be available at commercially reasonable terms or at all. If we are unable to do so, we may
be in default of our payment obligations and may not be able to develop our business as
planned or meet our capital expenditure requirements. As a result, our business, financial
condition and results of operations may be materially and adversely affected.
We are subject to credit risks and recoverability risks relating to our trade receivables.
Our trade receivables represent outstanding amounts due from automobile dealerships and
financial institutions. As of December 31, 2020, 2021 and 2022 and June 30, 2023, we had
trade receivables of RMB40.0 million, RMB59.9 million, RMB101.3 million and RMB179.8
million, respectively. If automobile dealership and financial institutions’ cash flows, working
capital, financial condition or results of operations deteriorate, they may be unable, or they may
otherwise be unwilling, to pay trade receivables owed to us promptly or at all. Any substantial
defaults or delays may materially and adversely affect our cash flows and our relationships
with automobile dealerships and financial institutions. In addition, we may grant credit terms
to financial institutions, which could prolong our receipt of service fees under our tripartite
pledged vehicle monitoring service agreements. The delay in payment by financial institutions
may negatively affect our cash flow and increase our liquidity risks.
Our failure to honor our obligations in respect of our contract liabilities may lead to our
refund obligation, customer dissatisfaction, or even customer disputes with us, which may
adversely affect our reputation, business, results of operations and financial condition.
As of December 31, 2020, 2021 and 2022 and June 30, 2023, our contract liabilities
amounted to RMB52.7 million, RMB69.4 million, RMB58.9 million and RMB50.7 million,
respectively. Our contract liabilities primarily represent advance payments from customers for
the provision of pledged vehicle monitoring services. If we fail to fulfill our obligations under
our contracts with customers, we may not be able to convert such contract liabilities into
revenue, and our customers may also require us to refund their payment we have received,
which may adversely affect our cash flow and liquidity condition and our ability to meet our
working capital requirements and, in turn, our results of operations and financial condition. In
addition, if we fail to fulfill our obligations under our contracts with customers, it may also
adversely affect our relationships with such customers, which may in turn affect our reputation
and results of operations in the future.
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We recorded net current liabilities as of December 31, 2022 and we cannot assure you that
we will not record net current liabilities in the future.
We recorded net current liabilities of RMB1.4 million as of December 31, 2022, which
was primarily due to the RMB101.0 million consideration paid in 2022 to acquire the 100%
equity interest in Changjiu Jinfu as part of the Reorganization. See “History, Reorganization
and Corporate Structure—Reorganization—Onshore Reorganization—Acquisition of Changjiu
Jinfu by Shanghai Bozhong” for details. We cannot assure you that we will not record net
current liabilities in the future due to other reasons. If we have net current liabilities in the
future, our working capital may be constrained, we may be unable to repay our short-term debts
and we may be forced to seek external financing, which may not be available at commercially
reasonable terms or at all. Any such development may materially and adversely affect our
business, financial condition and results of operations.
Our policies and procedures relating to anti-corruption, anti-bribery, anti-money
laundering, financial and economic sanctions and similar legislation may not be sufficient.
We are required to comply with the laws and regulations relating to anti-corruption,
anti-bribery, anti-money laundering, financial and economic sanctions and similar legislations.
We have direct or indirect interactions with officials and employees of state-owned financial
institutions in the ordinary course of business. These interactions subject us to an increasing
level of compliance-related concerns. We have implemented and will continue to implement
policies and procedures for the purpose of ensuring the compliance with applicable laws and
regulations relating to anti-corruption, anti-bribery, anti-money laundering, financial and
economic sanctions and similar legislation by us and our Directors, senior management,
employees, suppliers, agents, customers or other business partners. In particular, we enter into
anti-bribery agreements with our suppliers as part of our anti-bribery policy. However, our
policies and procedures may not be sufficient and our Directors, senior management,
employees, suppliers, agents, customers or other business partners may participate in
misconduct which could subject us to whistleblower complaints, adverse media coverage,
investigations, and severe administrative, civil and criminal sanctions, collateral consequences,
remedial measures, and legal expenses, all of which may materially and adversely affect our
business, reputation, financial condition, and results of operations.
If we experience material delays in obtaining the relevant government certificates, our
business may be adversely affected.
We are required by PRC law to obtain and maintain certain certificates for our services.
For more details, see “Business—Certificates, Licenses and Permits.” There can be no
assurance that we will not encounter material delays or difficulties in fulfilling the necessary
conditions to obtain and/or renew the necessary certificates for our operations in a timely
manner, or at all, in the future. Therefore, in the event that we experience material delays in
obtaining or maintaining the necessary certificates, our business, financial condition and
operating results may be adversely affected.
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We may be subject to late payment fines or other penalties for our failure to fully
contribute to social insurance and housing provident funds for some of our employees.
During the Track Record Period, one of our PRC subsidiaries did not fully contribute to
social insurance and housing provident funds for its employees. We have made provisions in
the amounts of RMB0.5 million and RMB0.8 million to our consolidated statements of profit
or loss in respect of such potential liabilities for the years ended December 31, 2020 and 2021,
respectively.
As advised by our PRC Legal Advisors, according to the relevant PRC laws and
regulations, if we fail to make contributions to social insurance funds on time and in full, the
relevant government authority can require us to rectify the shortfall in our contributions within
a prescribed period, and we may be liable for a late payment fee equal to 0.05% of the shortfall
in our contributions for each day of delay. If we fail to make the payments within the prescribed
period, we may be liable for a penalty of one to three times the amount of the shortfall in our
contributions. If we fail to make contributions to housing provident funds in full when due, the
relevant government authority can require us to rectify the shortfall in our contributions within
a prescribed period, and where the payment has not been made within the prescribed period,
the relevant government authority can apply to a court for compulsory enforcement.
We cannot assure you that the relevant government authorities will not require us to
rectify such incidents or impose late payment fines or other penalties on us. If we are required
to rectify the shortfall in our contributions or are imposed severe penalties, our business,
financial condition and results of operations may be adversely affected. For more details, see
“Business—Legal Proceedings and Compliance—Historical Non-Compliance
Incidents—Social Insurance and Housing Provident Funds.”
Our landlord failed to provide to us relevant title certificate with respect to one of our
leased properties in the PRC.
During the Track Record Period, the landlord of one of our leased properties in the PRC
failed to provide the relevant title certificate with respect to the property. Please refer to
“Business—Properties” in this prospectus. If the landlord is not the owner or not authorized by
the real owner to lease the property to us, we might need to seek alternative properties and
incur additional costs relating to such relocation. Any dispute or claim in relation to the rights
to use or lease of the property occupied by us, including any litigation involved allegations of
illegal or unauthorized use of the property, may require us to relocate our business premises.
If our lease were terminated as a result of any challenge by third-parties or any failures of our
landlord to renew the leases or obtain relevant legal title or the requisite government approval
or consent to lease the relevant property, we may need to seek alternatives premises and incur
additional costs for relocation.
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Our lease agreement was not registered with the relevant government authorities, which
may expose us to potential fines .
Pursuant to relevant PRC regulations, parties to lease agreements are required to file the
lease agreements for registration and obtain property leasing filing certificates for their leases.
As of the Latest Practicable Date, we failed to register one lease agreement under which we
are the tenant. As advised by our PRC Legal Advisors, the failure to register the lease
agreement does not affect the validity of the lease agreement under the relevant PRC laws and
regulations. However, we may be required by relevant government authorities to file the lease
agreement to complete the registration formalities and may be subject to a fine for
non-registration within the prescribed time limit, which may range from RMB1,000 to
RMB10,000 per lease agreement. The imposition of the above fines could require us to make
additional efforts and/or incur additional expenses, any of which may materially and adversely
impact our business, financial condition and results of operations. We cannot assure you that
the other parties to our lease agreement will be cooperative and that we can complete the
registration of this lease agreement and any other lease agreements that we may enter into in
the future.
We may be subject to penalties relating to labor dispatch.
On December 28, 2012, the Labor Contract Law of the PRC ( ʕശɛ͏΍ձ਷௶ਗΥ
) was amended to impose more stringent requirements on labor dispatch and such
amendments became effective on July 1, 2013. For example, dispatched workers may only
engage in temporary, auxiliary or substitute work. In addition, the number of dispatched
workers engaged by an employer may not exceed a certain percentage of its total number of
workers, to be decided by the Ministry of Human Resources and Social Security. Pursuant to
the Interim Provisions on Labor Dispatch () (the “Interim Provisions on
Labor Dispatch”) which has become effective since March 1, 2014, an employer shall strictly
control the number of dispatched workers engaged, which shall not exceed 10% of the total
number of its workers (the “Limit”). The total number of workers refers to the sum of (i) the
number of employees who have entered into employment agreements with the employer; and
(ii) the number of dispatched workers engaged by such employer.
In the event a company violates the Interim Provisions on Labor Dispatch, the relevant
labor department would order the company to rectify such violation. If the company fails to
rectify within a prescribed period, it would be imposed a fine of RMB5,000 to RMB10,000 for
each dispatched worker over the Limit. In addition, the company would not be permitted to
engage additional dispatched workers until the number of its existing dispatched workers has
been reduced below the Limit.
During the Track Record Period, we engaged dispatched workers for positions of
temporary, auxiliary or substitute nature. However, we cannot assure you that the relevant
government authorities would determine that the dispatched workers was engaged to perform
temporary, auxiliary or substitute work. During the Track Record Period, the number of
dispatched workers engaged by one of our subsidiaries exceeded the Limit. As of the Latest
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Practicable Date, we had taken rectification measures to reduce the number of dispatched
workers to below the Limit, and none of our subsidiaries had received any notice or been
subject to any administrative penalties or other disciplinary actions relating to labor dispatch
from the relevant government authorities. See “Business—Legal Proceedings and
Compliance—Historical Non-Compliance Incidents—Labor Dispatch.” However, we cannot
assure you that the relevant government authorities will not impose penalties on our subsidiary
for its historical non-compliance, which may adversely affect our business, profitability and
reputation.
We may be involved in legal and other disputes and claims that arise from our operations
from time to time.
We may be subject to legal proceedings from time to time in the ordinary course of our
business, which could have a material adverse effect on our business, results of operations and
financial condition. Claims arising out of actual or alleged violations of law could be asserted
against us by customers and businesses that utilize our services, by competitors, or by
governmental entities in civil or criminal investigations and proceedings or by other entities.
These claims could be asserted under a variety of laws, including but not limited to product
liability laws, consumer protection laws, intellectual property laws, unfair competition laws,
privacy laws, labor and employment laws, securities laws, tort laws, contract laws, property
laws and employee benefit laws.
In particular, we are subject to litigation risks relating to our tripartite pledged vehicle
monitoring service agreements. Such agreements typically provide that if we fail to duly fulfill
our obligations under these agreements, and such failure results in the damage or loss of the
pledged vehicles, vehicle conformity certificates or car keys, we should compensate the
relevant financial institutions for its losses resulted from such damage or loss.
There is no guarantee that we will be successful in defending ourselves in legal and
administrative actions or in asserting our rights under various laws. Even if we are successful
in our attempt to defend ourselves in legal and administrative actions or to assert our rights
under various laws, enforcing our rights against the various parties involved may be expensive,
time-consuming and ultimately futile. These actions could expose us to negative publicity,
which might adversely affect our reputation, goodwill and relationships with customers. In
addition, these actions could also expose us to substantial monetary damages and legal defense
costs, injunctive relief and criminal and civil fines and penalties, including but not limited to
suspension or revocation of licenses to conduct business. In addition, we may need to spend
a significant amount to settle claims or pay damages if we lose a lawsuit, which may have a
material and adverse effect on our business, financial condition and results of operations.
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Accidents or injuries suffered by our employees, visitors, customers or other personnel at
the automobile dealerships under our management may subject us to liability.
In the course of the day to day operations at automobile dealerships under our
management, automobiles frequently need to be moved around. Consequently, there are
inherent risks of accidents and injuries among our employees and the staff designated by our
subcontractors staffed to the dealerships, and, to a certain extent, other visitors and customers,
at each of the automobile dealerships under our management. If accidents or injuries occur at
any of the automobile dealerships under our management, we may be held liable for damages,
be subject to fines, and suffer from negative publicity, which could adversely affect our safety
reputation among current and potential employees, visitors and customers. The current
property and liability insurance policies of our customers may not provide adequate or any
coverage for such losses and the occurrence of any accidents or injuries would significantly
impact our ability to meet the milestones under our service agreements with our automobile
dealership customers.
We may not be able to detect and prevent fraud, negligence or other misconduct
committed by our employees or third parties in a timely manner.
We are exposed to fraud or other misconduct committed by our employees, agents,
customers or other third parties that could subject us to financial losses and sanctions imposed
by government authorities as well as seriously harm our reputation. Our information systems
and internal control procedures are designed to monitor our operations and overall compliance.
However, they may be unable to identify non-compliance and/or suspicious transactions in a
timely manner, or at all. Furthermore, it is not always possible to identify and deter misconduct
or errors by employees, and the precautions we take to detect and prevent potential
misconducts and human errors may not be effective in controlling risks or losses.
If any of our employees take, convert or misuse funds, documents or data or fail to follow
protocol when interacting with customers and among themselves, we could be liable for
damages and subject to regulatory actions and penalties. We could also be perceived to have
facilitated or participated in the illegal misappropriation of funds, documents or data, or the
failure to follow protocol, and therefore be subject to civil or criminal liability. Our employees
may also engage in improper business practices and other fraudulent conduct with third parties.
As a result of these potential damaging activities, we could incur significant losses, which
could have a material adverse effect on our results of operations and financial condition.
We may be subject to intellectual property infringement claims by third parties, which
may disrupt and affect our business, results of operations and prospects.
As a provider of pledged vehicle monitoring services and automobile dealership operation
management services, we are subject to risks of allegations of infringement of intellectual
property rights. We cannot assure you that our operations do not or will not infringe upon or
otherwise violate the intellectual property rights or other rights held by third parties. Also, we
have developed mobile applications that are primarily used to monitor automobiles in our
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pledged vehicle monitoring services. Third parties may submit intellectual property
infringement claims against us to the app stores where our mobile applications are available.
In such cases, our mobile applications may be taken down by the relevant app stores until such
claims have been resolved, which could restrict our users from downloading or updating our
mobile applications and thus adversely affect our business and results of operations. In
addition, we may be subject to legal proceedings and claims from time to time relating to the
intellectual property of others in the ordinary course of our business. Intellectual property
claims and litigation are expensive and time-consuming to investigate and defend and may
divert resources and management attention from the operation of our websites and mobile
applications. Such claims, even if they do not result in liability, may harm our reputation. Any
resulting liability or expenses, or changes required to our websites and mobile applications to
reduce the risk of future liability, may have a material adverse effect on our business, financial
condition and results of operations.
Failure to adequately protect our intellectual property rights and proprietary information
could have a negative impact on our business and competitive position.
We believe our patents, trademarks, software copyrights, trade secrets and other
intellectual property rights and proprietary information are critical to our success. Any
unauthorized use of intellectual property rights and proprietary information could harm our
business, reputation and competitive advantages. We rely on a combination of patents,
trademark, copyright and trade secret protection laws in China to protect our intellectual
property rights.
Legal protection may not always be effective. Historically, the legal system and courts of
the PRC have not protected intellectual property rights to the same extent as the legal system
and courts of other jurisdictions, and companies operating in the PRC continue to face an
increased risk of intellectual property infringement. Furthermore, the validity, application,
enforceability and scope of protection of intellectual property rights for many Internet-related
activities, such as Internet commercial methods patents, are uncertain and still evolving in
China and abroad, which may make it more difficult for us to protect our intellectual property.
In the event that we have to resort to litigation and other legal proceedings to enforce our
intellectual property rights, such action, litigation or other legal proceedings could result in
substantial costs and diversion of our management’s attention and resources and could disrupt
our business. There is no assurance that we will be able to enforce our intellectual property
rights effectively or otherwise prevent others from the unauthorized use of our intellectual
property.
Competitors may adopt service names or trademarks similar to ours, thereby harming our
ability to build brand identity and possibly leading to user confusion. Our competitors may also
independently develop software substantially similar to ours and may even apply for software
copyright protection. If our competitors succeed in obtaining such protections, the use of our
intellectual property rights could be limited, and our financial condition and operating results
may be adversely affected.
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Negative publicity, including negative news, regulatory issues or litigation on the Internet,
about us, Changjiu Group and its affiliates, our Directors and senior management, our
affiliates, business partners and services that we provide may have a material adverse
effect on our business and reputation.
Negative publicity about us, our shareholders, Directors and senior management, our
affiliates, business partners and services provided by us, including, but not limited to, negative
news, regulatory issues, disputes, litigation or proceedings, may arise from time to time.
Negative comments on the pledged vehicle monitoring services provided by us and the
automobile dealerships managed by us may appear in Internet postings and other media sources
from time to time and there can be no assurance that other types of negative publicity will not
arise in the future. For example, disputes with visitors or customers of the automobile
dealerships we manage may lead to negative publicity that could adversely affect our
reputation. In addition, non-compliance with any laws or regulations by our employees and
business partners and the existence of potential litigation against us, our Directors and senior
management or our affiliates may expose us to negative publicity or damage our reputation or
cause our business to be materially and adversely affected. Any negative publicity, regardless
of its validity, could have a material adverse effect on our business and reputation. In addition,
any negative publicity about Changjiu Group and its affiliates may adversely affect our
reputation in light of the fact that we share the “Changjiu” name. We may need to spend
significant time and incur additional expenses in responding to allegations and negative
publicity, and may not be able to mitigate the effects of such negative publicity to a level that
our investors and customers are satisfied with.
Occurrences of natural disaster, widespread health epidemic and acts of terrorism, war or
other calamities could have a material and adverse effects on our business, financial
condition and operating results.
We are vulnerable to natural disasters, widespread health epidemics and acts of terrorism,
war or other calamities. Any of such occurrences could cause severe disruption to our daily
operations, and may even require a temporary closure of our offices and automobile dealerships
under our management, which may disrupt our business operations and adversely affect our
results of operations. In addition, our results of operations may be adversely affected to the
extent that any of these catastrophic events harms the Chinese economy in general.
Natural disasters may also cause shortages in production capacity of the relevant
automobile manufacturers or delays in transportation of the automobiles, spare parts or
accessories from the automobile manufacturers to automobile dealerships under our
management, which in turn may have a material and adverse effect on our business, financial
condition, results of operations and growth prospects. In addition, our network infrastructure
and information technology systems are potentially vulnerable to damages or interruptions as
a result of natural disasters such as earthquakes, floods, fires and extreme temperatures.
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Our business performance, financial condition and results of operations may be adversely
affected by the COVID-19 pandemic.
During the Track Record Period, the general economy of China and the automobile sales
and distribution industry had been negatively impacted by the COVID-19 pandemic. In
particular, the COVID-19 pandemic had a significant adverse impact on automobile sales in
China, during which automobile production and the number of purchasers declined due to
supply shortages of raw materials, precautionary government-imposed closures of certain
travel and business, the government’s order to delay resumption of service and mass production
and the related quarantine measures. While we consider the impact of the COVID-19 pandemic
on our pledged vehicle monitoring services to be relatively limited, our automobile dealership
operation management services have been negatively impacted by the COVID-19 pandemic. In
particular, the number of pledged vehicles that we monitored decreased from 636,100 as of
December 31, 2020 to 525,500 as of December 31, 2021, primarily due to a decrease in the
demand for new vehicles and a slowdown in automobile transactions at automobile dealerships
as a result of the COVID-19 pandemic. In addition, some automobile dealerships under our
management were temporarily closed from May to June 2022 due to the resurgence of
COVID-19 pandemic in China.
Although the World Health Organization has declared that the COVID-19 pandemic is no
longer a global health emergency and the PRC government has gradually lifted restrictions and
quarantine measures in China due to the fact that the pandemic is being contained, we cannot
assure you that the business volume for our automobile dealership operation management
services will fully recover in the near future. There is still great uncertainty as to the future
development of the COVID-19 pandemic, which may adversely affect the growth prospects of
China’s automobile sales and distribution industry and, in turn, reduce demand for automobiles
and automobile-related services. Should there be an a resurgence of the COVID-19 pandemic,
the PRC government may again take stringent measures to combat the spread of the pandemic,
including travel restrictions, mandatory cessations of business operations, mandatory
quarantine, work-from-home and other alternative working arrangements, limitations on social
and public gatherings and lockdowns of cities or regions, which may negatively impact our
business. Although we are continuously monitoring the status of the COVID-19 pandemic, it
is affected by factors beyond our control. If there is a recurrence of the COVID-19 pandemic,
our business, results of operations and financial condition may be negatively affected.
Our insurance may not sufficiently cover, or may not cover at all, the losses and liabilities
we may encounter.
Insurance companies in China offer limited business insurance products. We do not carry
business liability insurance that extends coverage to all potential liabilities that may arise in
the ordinary course of our business, neither do we maintain any insurance coverage for
business interruption or litigation. As a result, we may have to pay out of our own resources
for any uninsured financial or other losses, damages and liabilities, litigation or business
disruption. The occurrence of certain incidents, including earthquake, tsunami, fire, severe
weather, war, floods, power outages, terrorist attacks or other disruptive events and the
consequences, damages and disruptions resulting from such events may materially and
adversely affect our business, financial condition and results of operations.
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We face uncertainties with respect to the interpretation and implementation of the
Anti-monopoly Law.
The Anti-monopoly Law of the People’s Republic of China ( ʕശɛ͏΍ձ਷ˀᕹᓙ
) (the “Anti-monopoly Law”) was first promulgated on August 30, 2007 and became
effective on August 1, 2008. On September 11, 2020, the SAMR issued the Anti-monopoly
Compliance Guideline for Operators (), which requires, under the
Anti-monopoly Law, operators to establish anti-monopoly compliance management systems to
prevent anti-monopoly compliance risks. On November 18, 2021, the National Anti-monopoly
Bureau was officially established to formulate anti-monopoly institutional measures and
guidelines, implement anti-monopoly law enforcement and provide guidance to enterprises in
responding to anti-monopoly actions abroad. The Anti-monopoly Law, which was amended on
June 24, 2022, and became effective on August 1, 2022, prohibits undertakings from engaging
in monopolistic conducts such as (i) entering into monopolistic agreements; (ii) abuse of
dominant market position; and (iii) concentration of undertakings, which has or may have the
effect of eliminating or restricting competition. See “Regulatory Overview—Regulations on
Anti-unfair Competition and Anti-monopoly.”
Recently, the National Anti-monopoly Bureau imposed administrative penalties in a
number of anti-monopoly cases and the regulatory environment of anti-monopoly is tightening.
During the Track Record Period and up to the Latest Practicable Date, we had not been subject
to any administrative penalties or regulatory actions in connection with anti-monopoly.
However, due to the substantial uncertainty with respect to the interpretation and
implementation of the anti-monopoly laws and regulations, we may face challenges in making
necessary changes to our policies and practices, which may result in significant costs and
expenses, regulatory investigations, enforcement actions, litigation or claims against us and
may materially and adversely affect our business, financial condition and results of operations.
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 Rules on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors
() (the “M&A Rules”), adopted by six PRC
regulatory agencies in 2006 and amended in 2009, and other regulations and rules concerning
mergers and acquisitions established procedures and requirements that could make merger and
acquisition activities by foreign investors more time-consuming and complex, including
requirements in some instances that the anti-monopoly law enforcement agency be notified in
advance of any change-of-control transactions in which a foreign investor takes control of a
PRC domestic enterprise.
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In addition, the Circular of the General Office of the State Council on the Establishment
of Security Review System for the Merger and Acquisition of Domestic Enterprises by Foreign
Investors () that
became effective in March 2011 and the Rules on Implementation of Security Review System
for the Merger and Acquisition of Domestic Enterprises by Foreign Investors (٫
) 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 the transaction through a proxy or
contractual control arrangement. We believe that our business is not in an industry related to
national security. However, we cannot preclude the possibility that the MOFCOM or other
government agencies may publish interpretations contrary to our understanding or broaden the
scope of such security review in the future.
In the future, we may grow our business by acquiring complementary businesses.
Complying with the requirements of the abovementioned regulations and other relevant rules
to complete such transactions could be time-consuming, and any required approval processes,
including obtaining approval from the SAMR, the MOFCOM or its local counterparts may
delay or inhibit our ability to complete such transactions, which could affect our ability to
expand our business or maintain our market share.
We may be subject to fines and other legal or administrative sanctions relating to our
share incentive plans.
In February 2012, SAFE promulgated the Notices on Issues Concerning the Foreign
Exchange Administration for Domestic Individuals Participating in Stock Incentive Plan of
Overseas Publicly Listed Companies (“SAFE Circular 7”), replacing earlier rules promulgated
in 2007. Pursuant to SAFE Circular 7, PRC citizens and non-PRC citizens who reside in China
for a continuous period of not less than one year who participate in any stock incentive plan
of an overseas publicly listed company, subject to a few exceptions, are required to register
with SAFE through a domestic qualified agent, which could be the PRC subsidiaries of such
overseas-listed company, and complete certain other procedures. 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. We and our executive officers
and other employees who are PRC citizens or who reside in the PRC for a continuous period
of not less than one year and who have been granted options will be subject to these regulations
when our Company becomes an overseas listed company upon the completion of the Global
Offering. Failure to complete the SAFE registrations may subject them to fines and legal
sanctions, there may be additional restrictions on the ability of them to exercise their stock
options or remit proceeds gained from the sale of their stock into the PRC. We also face
regulatory uncertainties that could restrict our ability to adopt incentive plans in the future for
our Directors, executive officers and employees under PRC law.
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Furthermore, SAFE Circular 37 stipulates that PRC residents who participate in a share
incentive plan of an overseas non-publicly listed special purpose company may register with
SAFE or its local branches before they exercise the share options. We and our PRC employees
who have been granted share options and restricted shares will be subject to these regulations
upon the completion of the Global Offering. Failure of our PRC share option holders or
restricted Shareholders to complete their SAFE registrations may subject these PRC residents
to fines of up to RMB300,000 for entities and up to RMB50,000 for individuals, and legal
sanctions and may also limit our ability to contribute additional capital into our PRC
subsidiary, limit our PRC subsidiary’s ability to distribute dividends to us, or otherwise
materially adversely affect our businesses.
In addition, the STA 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 of 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 government authorities.
RISKS RELATING TO THE GLOBAL OFFERING
There has been no prior public market for our Shares on the Stock Exchange and an
active trading market for our Shares might not develop or be sustained.
No public market currently exists for our Shares. The Offer Price for our Shares to the
public will be the result of negotiations between our Company and the Overall Coordinators,
and the Offer Price may differ significantly from the market price of the Shares following the
Global Offering. We have applied to the Stock Exchange for the listing of, and permission to
deal in, the Shares. However, a listing on the Stock Exchange does not guarantee that an active
and liquid trading market for our Shares will develop, or if it does develop, that it will be
sustained following the Global Offering, or that the market price of the Shares will rise
following the Global Offering. If an active public market for our Shares does not develop after
the Global Offering, the Shares could trade at a price lower than the Offer Price and you may
not be able to resell your Shares for an extended period of time, or at all.
The price and trading volume of our Shares may be volatile, which could lead to
substantial losses to you.
The price and trading volume of our Shares may be highly volatile and could fluctuate
widely in response to factors beyond our control, including general market conditions of the
securities 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 similar business
operations located mainly in China that have listed their securities in Hong Kong may affect
the volatility in the price of and trading volume for our Shares. In addition, factors such as
RISK FACTORS
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variations in our revenue, earnings and cash flow, changes in the pricing of our services as a
result of the presence of competitors, announcements of new automobile dealerships under our
management, strategic alliances or acquisitions by us or our competitors, industrial or
environmental accidents, changes in our senior management personnel, changes in our ratings
by financial analysts and credit rating agencies, litigation, or fluctuations in the market prices
for our services could cause large and sudden changes in the volume and price at which our
Shares will trade. Moreover, shares of other companies listed on the Stock Exchange with
significant operations and assets in China have experienced price volatility in the past. As a
result, it is possible that our Shares may be subject to changes in price not directly related to
our performance and as a result, investors in our Shares may suffer substantial losses.
In addition, the securities markets have from time to time experienced significant price
and volume fluctuations that are not related or disproportionate to the operating performance
of particular companies. While it is difficult to predict how long these conditions will last, they
could continue to present risks for an extended period of time, in interest expenses on our bank
borrowings, or reduction of the amount of banking facilities currently available to us. If we
experience such fluctuations, results of operations and financial condition may be materially
and adversely affected. Moreover, market fluctuations may also materially and adversely affect
the market price of our Offer Shares.
Since there will be a gap of several days between the pricing and trading of our Shares,
holders of our Shares are subject to the risk that the price of our Shares could fall during
the period before the trading of our Shares begins.
The initial price to the public of our Shares sold in the Global Offering is expected to be
determined on the Price Determination Date. However, the Shares will not commence trading
on the Stock Exchange until they are delivered, which is expected to be several business days
after the Price Determination Date. 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.
Purchasers of our Shares in the Global Offering will experience immediate dilution and
you may experience further dilution if we issue additional Shares in the future.
The initial Public Offer Price of our Shares in Hong Kong is higher than the net tangible
assets per share of the outstanding Shares issued to our existing Shareholders immediately
prior to the Global Offering. Therefore, all investors and purchasers of our Shares in the Global
Offering will experience an immediate dilution and existing holders of our Shares will receive
an increase in net tangible asset value.
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In spite of our current cash and cash equivalents and the net proceeds from the Global
Offering, we may require additional funds due to changes in business conditions or other future
developments relating to, inter alia, our existing operations or any future expansions. The
amount and timing of such additional financing needs will vary depending on the timing
investments in and/or acquisitions of new businesses from third-parties, and the amount of cash
flow from our operations. If our resources are insufficient to satisfy our cash requirements, we
may seek additional financing through selling additional equity or debt securities or obtaining
a credit facility.
The sale of additional equity securities could result in additional dilution to our
Shareholders. If additional funds are raised by way of issuance of new Shares or equity linked
securities other than on a pro rata basis to existing Shareholders, the percentage of ownership
of our existing Shareholders in our Company, the earnings per Share and the net asset value
per Share may be reduced.
Our Controlling Shareholders may exert substantial influence over us and may not act in
the best interests of our other Shareholders.
Upon completion of the Global Offering (without taking into account any Shares which
may be allotted and issued pursuant to the exercise of the Pre-IPO Share Options), our
Controlling Shareholders will be entitled to exercise the voting rights attached to
approximately 74.20% of the total issued share capital of our Company. Subject to our
Memorandum and Articles of Association and applicable laws and regulations, our Controlling
Shareholders will continue to have the ability to exercise controlling influence on our
management, policies and business by controlling the composition of our Board, determining
the timing and amount of our dividend payments, approving significant corporate transactions,
including mergers and acquisitions, approving our annual budgets and taking other actions that
require our Shareholders’ approvals. The interests of our Controlling Shareholders may not
necessarily be aligned with the interests of our other Shareholders, and this concentration of
ownership may also have the effect of delaying, deferring or preventing a change in control of
our Company.
Our Controlling Shareholders may from time to time be involved in disputes with and
subjected to claims by other parties, including the investors of our Controlling Shareholders.
All such disputes and claims may in turn lead to legal or other proceedings or cause negative
publicity against us, thereby resulting in damage to our reputation, substantial costs and
diversion of resources from our business activities. Any such dispute, claim or litigation may
have material and adverse effect on our business, financial condition and operating results.
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Whether and when the dividends will be declared and paid cannot be assured.
Our ability to declare future dividends will depend on the availability of dividends, if any,
received from our WFOE. Under applicable laws and the constitutional documents of our
WFOE, the payment of dividends may be subject to certain limitations. The calculation of
profit of certain subsidiaries under applicable accounting standards differs in certain respects
from the calculation under IFRSs. As a result, our WFOE may not be able to pay a dividend
in a given year even if our Group has profit as determined under IFRSs. Accordingly, since we
derive all of our earnings and cash flows from dividends paid by our WFOE, we may not have
sufficient distributable profit to pay dividends to our Shareholders. In addition, any future
dividend declaration and distribution will be at the discretion of our Directors and will depend
on our future operations and earnings, capital requirements and surplus, general financial
condition, contractual restrictions and other factors that our Directors deem relevant. Any
declaration and payment as well as the amount of dividends will also be subject to our Articles
of Association and PRC laws, including, where required, the approvals from our Shareholders
and our Directors. Our Shareholders at a general meeting must approve any declaration of
dividends, which must not exceed the amount recommended by our Board.
Moreover, our Directors may from time to time pay such interim dividends as our Board
considers to be justified by our profits and overall financial requirements, or special dividends
of such amounts and on such dates as they think appropriate. As a result, we cannot assure you
that we will make any dividend payments on our Shares in the future. For details about our
dividend policy, see “Financial Information—Dividends.”
We are a Cayman Islands company and, because judicial precedent 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.
We are an exempted company incorporated in the Cayman Islands with limited liability,
and the law of the Cayman Islands differ in some respects from those of Hong Kong or other
jurisdictions where investors may be located. Our corporate affairs are governed by our
Memorandum and Articles of Association, the Cayman Companies Act and the common law of
the Cayman Islands. The rights of our Shareholders to take legal action against us and our
Directors, 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 precedent 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 rights of our
Shareholders and the fiduciary responsibilities of our Directors under Cayman Islands law may
not be as clearly established as they would be under statutes or judicial precedents in Hong
Kong, the United States or other jurisdictions where investors may be located. In particular, the
Cayman Islands has a less developed body of securities law. As a result, our Shareholders may
have more difficulty in protecting their interests in the face of actions taken by our
management, Directors or major Shareholders than they would as shareholders of a Hong Kong
company, a United States company or companies incorporated in other jurisdictions.
RISK FACTORS
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We cannot guarantee the accuracy of facts, forecasts and other statistics obtained from
official government sources contained in this prospectus.
Certain facts, forecasts and other statistics contained in this prospectus relating to the
PRC and the industries in which we operate have been derived from various official
government publications. Such information has not been prepared or independently verified by
us, the Joint Sponsors, the Overall Coordinators, the Joint Global Coordinators, the Joint
Bookrunners, the Joint Lead Managers, the Underwriters, any of our or their respective
directors, officers, employees, advisors or agents or any other persons or parties involved in the
Global Offering.
Therefore, we make no representation as to the accuracy of such facts, forecasts and
statistics, which may not be consistent with other information compiled within or outside the
PRC. Due to possibly flawed or ineffective collection methods or discrepancies between
published information and market practice, the statistics herein may be inaccurate or
incomparable to statistics produced with respect to other economies and should not be relied
upon. Furthermore, we cannot assure you that they are stated or compiled on the same basis
or with the same degree of accuracy, as similar statistics presented elsewhere. In all cases, you
should give due consideration as to how much weight or importance you should attach to or
place on such facts, forecasts or statistics.
Forward-looking statements contained in this prospectus are subject to risks and
uncertainties and there can be no assurance of the accuracy or completeness of some facts,
forecasts and other statistics obtained from various independent third-party sources,
including the industry expert reports, with respect to the PRC, the PRC economy and the
industries in which we operate.
This prospectus contains forward-looking statements and information relating to us and
our business and prospects that are based on our current beliefs and assumptions as well as
information currently available to us. When used in this prospectus, the words “aim,”
“anticipate,” “believe,” “can,” “continue,” “could,” “estimate,” “expect,” “going forward,”
“intend,” “ought to,” “may,” “might,” “plan,” “potential,” “predict,” “project,” “seek,”
“should,” “will,” “would” and similar expressions, as they relate to us or our business, are
intended to identify forward-looking statements. Such statements reflect our current views with
respect to future events and are subject to risks, uncertainties and various assumptions,
including the risk factors described in this prospectus. Should one or more of these risks or
uncertainties materialize, or if any of the underlying assumptions prove incorrect, actual results
may diverge significantly from the forward-looking statements in this prospectus. Whether
actual results will conform with our expectations and predictions is subject to a number of risks
and uncertainties, many of which are beyond our control, and reflect future business decisions
that are subject to change. In light of these and other uncertainties, the inclusion of
forward-looking statements in this prospectus should not be regarded as representations that
our plans or objectives will be achieved, and investors should not place undue reliance on such
forward-looking statements. All forward looking statements contained in this prospectus are
qualified by reference to the cautionary statements set out in this section. We do not intend to
update these forward-looking statements in addition to our ongoing disclosure obligations
pursuant to the Listing Rules or other requirements of the Stock Exchange.
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Y ou should read the entire prospectus carefully and we strongly caution you not to place
any reliance on any information contained in press articles or other media regarding us
and the Global Offering.
Subsequent to the date of this prospectus but prior to the completion of the Global
Offering, there may be press and media coverage regarding us and the Global Offering, which
may contain, among other things, certain financial information, projections, valuations and
other forward- looking information about us and the Global Offering. We have not authorized
the disclosure of any such information in the press or media and do not accept responsibility
for the accuracy or completeness of such press articles or other media coverage. We make no
representation as to the appropriateness, accuracy, completeness or reliability of any of the
projections, valuations or other forward-looking information about us. To the extent such
statements are inconsistent with, or conflict with, the information contained in this prospectus,
we disclaim responsibility for them. Accordingly, prospective investors are cautioned to make
their investment decisions on the basis of the information contained in this prospectus only and
should not rely on any other information.
Y ou should rely solely upon the information contained in this prospectus, the Global
Offering and any formal announcements made by us in Hong Kong in making your investment
decision regarding our Shares. We do not accept any responsibility for the accuracy or
completeness of any information reported by the press or other media, nor the fairness or
appropriateness of any forecasts, views or opinions expressed by the press or other media
regarding our Shares, the Global Offering or us. We make no representation as to the
appropriateness, accuracy, completeness or reliability of any such data or publication.
Accordingly, prospective investors should not rely on any such information, reports or
publications in making their decisions as to whether to invest in our Global Offering. By
applying to purchase our Shares in the Global Offering, you will be deemed to have agreed that
you will not rely on any information other than that contained in this prospectus and the Global
Offering.
RISK FACTORS
–7 9–


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In preparation for the Listing, our Company has applied for the following waivers from
strict compliance with the relevant provisions of the Listing Rules:
W AIVER IN RELATION TO MANAGEMENT PRESENCE IN HONG KONG
Pursuant to Rule 8.12 of the Listing Rules, we must have a sufficient management
presence in Hong Kong. This normally means that at least two of our executive Directors must
be ordinarily resident in Hong Kong. Since substantially all of our business operations are
managed and conducted outside of Hong Kong, and all of our executive Directors ordinarily
reside in the PRC, we do not have, and for the foreseeable future will not have, sufficient
management presence in Hong Kong for the purpose of satisfying the requirement under Rule
8.12 of the Listing Rules. Accordingly, we have applied for, and the Stock Exchange has
granted, a waiver from strict compliance with the requirements under Rule 8.12 of the Listing
Rules. One of our authorized representatives is ordinarily resident in Hong Kong, and we will
ensure that there are adequate and efficient arrangements to achieve regular and effective
communication between us and the Stock Exchange as well as compliance with the Listing
Rules by way of the following arrangements:
(a) we have appointed Ms. Li Guiping (܈࣭one of our executive Directors, and Ms.
Tang King Yin ( ቎౻ሬ) (“Ms. Tang”), one of our joint company secretaries who is
ordinarily resident in Hong Kong, as our authorized representatives for the purpose
of Rule 3.05 of the Listing Rules to serve as our principal channel of communication
with the Stock Exchange. We have provided the Stock Exchange with their contact
details, and they will be available to meet with the Stock Exchange within a
reasonable period of time upon the request of the Stock Exchange and will be readily
contactable by telephone, facsimile and email;
(b) as and when the Stock Exchange wishes to contact our Directors on any matters,
each of our authorized representatives will have means to contact all of our
Directors promptly at all times. We will implement measures such that (i) each
Director must provide his or her mobile phone number, office phone number,
facsimile number and email address to our authorized representatives and the Stock
Exchange; and (ii) in the event that a Director expects to travel or otherwise be out
of office, he or she will provide the phone number of the place of his or her
accommodation to our authorized representatives. We have provided the Stock
Exchange with the contact details of each Director to facilitate communication with
the Stock Exchange;
(c) each Director who is not ordinarily resident in Hong Kong possesses or can apply
for valid travel documents to visit Hong Kong and can meet with the Stock
Exchange within a reasonable period of time, if required;
W AIVERS FROM STRICT COMPLIANCE WITH THE LISTING RULES
–8 0–


--- page 91 ---
(d) we have appointed Zhongtai International Capital Limited as our compliance
advisor pursuant to Rule 3A.19 of the Listing Rules, which will act as our additional
and alternative channel of communication with the Stock Exchange for a period
commencing on the Listing Date and ending on the date on which our Company
complies with Rule 13.46 of the Listing Rules in respect of its financial results for
the first full financial year commencing after the Listing Date, and its
representative(s) will be fully available to answer enquiries from the Stock
Exchange. The compliance advisor will advise our Company on on-going
compliance requirements and other issues arising under the Listing Rules and other
applicable laws and regulations in Hong Kong after the Listing, and will have access
at all times to our authorized representatives, our Directors and the other senior
management of our Company to ensure that it is in a position to provide prompt
responses to any queries or requests from the Stock Exchange in respect of our
Company; and
(e) any meeting between the Stock Exchange and our Directors will be arranged through
our authorized representatives or compliance advisor or directly with our Directors
within a reasonable time frame. We will inform the Stock Exchange promptly in
respect of any changes in our authorized representatives and compliance advisor.
W AIVER IN RELATION TO APPOINTMENT OF JOINT COMPANY SECRETARIES
Pursuant to Rule 8.17 of the Listing Rules, our company must appoint a company
secretary who satisfies the requirements under Rule 3.28 of the Listing Rules. Rule 3.28 of the
Listing Rules provides that our company secretary must be an individual who, by virtue of his
or her academic or professional qualifications or relevant experience, is, in the opinion of the
Stock Exchange, capable of discharging the functions of company secretary. Note 1 to Rule
3.28 of the Listing Rules further provides that the Stock Exchange considers the following
academic or professional qualifications to be acceptable:
(a) a member of The Hong Kong Chartered Governance Institute;
(b) a solicitor or barrister as defined in the Legal Practitioners Ordinance (Chapter 159
of the Laws of Hong Kong); or
(c) a certified public accountant as defined in the Professional Accountants Ordinance
(Chapter 50 of the Laws of Hong Kong).
Pursuant to Note 2 to Rule 3.28 of the Listing Rules, in assessing “relevant experience,”
the Stock Exchange will consider the individual’s:
(a) length of employment with the listing applicant and other issuers and the roles
he/she played;
W AIVERS FROM STRICT COMPLIANCE WITH THE LISTING RULES
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(b) familiarity with the Listing Rules and other relevant law and regulations including
the SFO, the Companies Ordinance, Companies (Winding Up and Miscellaneous
Provisions) Ordinance, and the Takeovers Code;
(c) relevant training taken and/or to be taken in addition to the minimum requirement
under Rule 3.29 of the Listing Rules; and
(d) professional qualifications in other jurisdictions.
We have appointed Ms. Zhang Y exi ( ੵ⮶᷊) (“Ms. Zhang”) as one of the joint company
secretaries in April 2023. Ms. Zhang joined our Group as the securities representative and then
served as the secretary to the board in December 2021, primarily responsible for capital
financing, investor relations maintenance, daily operation of the office of the board and the
company secretarial matters of our Group. Ms. Zhang has accumulated abundant knowledge
about the business operations and governance of corporations with a strong recognition of the
corporate culture of our Group. By virtue of her position, industry experience and familiarity
with our Group, Ms. Zhang has worked closely with our Directors and thus possessed a
thorough understanding of matters concerning the Board and its operations. As such, our
Directors believe that Ms. Zhang is a suitable person to act as the company secretary of our
Company.
However, Ms. Zhang has not possessed the specified qualifications strictly required by
Rule 3.28 of the Listing Rules. Therefore, we have also appointed Ms. Tang, who meets the
requirements under Rule 3.28 of the Listing Rules, to act as the joint company secretary. For
more details of Ms. Zhang’s and Ms. Tang’s biographies, see “Directors and Senior
Management.”
Over the initial period of the three years from the Listing Date, we will implement the
following measures to assist Ms. Zhang to satisfy the requisite qualifications as prescribed in
Rules 3.28 and 8.17 of the Listing Rules:
(a) Ms. Tang will assist Ms. Zhang to enable her to discharge her duties and
responsibilities as the company secretary of our Company. Given Ms. Tang’s
relevant experience, Ms. Tang will be able to advise Ms. Zhang and us on the
relevant requirements of the Listing Rules as well as other applicable laws and
regulations of Hong Kong;
(b) Ms. Zhang will be assisted by Ms. Tang for an initial period of three years
commencing from the Listing Date, which should be sufficient for Ms. Zhang to
acquire the requisite knowledge and experience under Rule 3.28 of the Listing
Rules;
W AIVERS FROM STRICT COMPLIANCE WITH THE LISTING RULES
–8 2–


--- page 93 ---
(c) we will ensure that Ms. Zhang has access to the relevant trainings and support to
enable her to familiarize herself with the Listing Rules and the duties required of
company secretaries of a Hong Kong listed company, and Ms. Zhang has undertaken
to attend such trainings;
(d) Ms. Tang will communicate with Ms. Zhang on a regular basis regarding matters in
relation to corporate governance, the Listing Rules as well as other applicable laws
and regulations in Hong Kong which are relevant to our operations and affairs.
Ms. Tang will work closely with and provide assistance to Ms. Zhang with a view
to discharging her duties and responsibilities as the company secretary, including
but not limited to organizing the Board meetings and Shareholders’ meetings; and
(e) pursuant to Rule 3.29 of the Listing Rules, Ms. Zhang and Ms. Tang will also attend
no less than 15 hours of relevant professional training courses in each financial year
to familiarize themselves with the requirements of the Listing Rules and other legal
and regulatory requirements of Hong Kong. Both of Ms. Zhang and Ms. Tang will
be advised by our legal advisors as to Hong Kong laws and our compliance advisor
as and when appropriate and required.
Accordingly, we have applied for, and the Stock Exchange has granted, a waiver from
strict compliance with the requirements under Rules 3.28 and 8.17 of the Listing Rules for an
initial period of three years from the Listing Date, in accordance with the Guidance Letter
HKEX-GL108-20, on the conditions that (i) we engage Ms. Tang as one of our joint company
secretaries, who possesses the qualifications and experience as required under Rule 3.28 of the
Listing Rules, and will provide assistance to Ms. Zhang during this period; and (ii) the waiver
will be revoked if Ms. Tang, during the three-year waiver period, ceases to provide assistance
to Ms. Zhang, or if there are material breaches of the Listing Rules by our Company. Prior to
the expiry of the three-year period, we will conduct a further evaluation of the qualification and
experience of Ms. Zhang to determine whether the requirements as stipulated in Rules 3.28 and
8.17 of the Listing Rules can be satisfied, and we will liaise with the Stock Exchange to assess
whether Ms. Zhang, having had the benefit of Ms. Tang’s assistance for three years, would have
acquired the relevant experience within the meaning of Note 2 to Rule 3.28 of the Listing Rules
such that there is no need to further apply for a waiver.
W AIVER IN RELATION TO CONTINUING CONNECTED TRANSACTIONS
We have entered into, and expect to continue, certain transactions which would constitute
continuing connected transactions of our Company under the Listing Rules upon Listing. We
have applied for, and the Stock Exchange has granted, a waiver from strict compliance with
certain requirements set out in Chapter 14A of the Listing Rules for certain continuing
connected transactions. For details of such continuing connected transactions and the waiver,
see “Connected Transactions.”
W AIVERS FROM STRICT COMPLIANCE WITH THE LISTING RULES
–8 3–


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DIRECTORS’ RESPONSIBILITY FOR THE CONTENTS OF THIS PROSPECTUS
This prospectus includes particulars given in compliance with the Companies (Winding
Up and Miscellaneous Provisions) Ordinance, the Securities and Futures (Stock Market
Listing) Rules (Chapter 571V of the Laws of Hong Kong) and the Listing Rules for the purpose
of giving information to the public with regards to our Group. Our Directors (including any
proposed Director who is named as such in this prospectus) collectively and individually
accept full responsibility for the accuracy of the information contained in this prospectus. Our
Directors, having made all reasonable enquiries, confirm that to the best of their knowledge
and belief, the information contained in this prospectus is accurate and complete in all material
respects and not misleading or deceptive, and there are no other matters the omission of which
would make any statement in this prospectus misleading.
INFORMATION ON THE GLOBAL OFFERING, STRUCTURE AND CONDITIONS OF
THE GLOBAL OFFERING AND PROCEDURES FOR APPLICATION FOR HONG
KONG OFFER SHARES
The Hong Kong Offer Shares are offered solely on the basis of the information contained,
representations made, and on and subject to the terms and conditions set out, in this prospectus.
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 in this prospectus must not be relied upon as having been
authorized by our Company, the Joint Sponsors, the Overall Coordinators, the Joint Global
Coordinators, the Joint Bookrunners, the Joint Lead Managers, the Underwriters, the Capital
Market Intermediaries any of their respective directors, agents, employees or advisors or any
other party involved in the Global Offering.
Neither the delivery of this prospectus nor any offering, sale or delivery made in
connection with the Offer Shares should, under any circumstances, constitute a representation
that there has been no change or development reasonably likely to involve a change in our
affairs since the date of this prospectus or imply that the information contained in this
prospectus is correct as of any date subsequent to the date of this prospectus.
Details of the structure of the Global Offering, including its conditions, are set out in
“Structure of the Global Offering” and the procedures for applying for the Hong Kong Offer
Shares are set out in “How to Apply for Hong Kong Offer Shares.”
UNDERWRITING
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 set out the terms and conditions of the Hong Kong Public Offering.
INFORMATION ABOUT THIS PROSPECTUS AND THE GLOBAL OFFERING
–8 4–


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The Listing is sponsored by the Joint Sponsors and the Global Offering is managed by the
Overall Coordinators. The Hong Kong Public Offering is fully underwritten by the Hong Kong
Underwriters under the terms of the Hong Kong Underwriting Agreement and is subject to us
and the Overall Coordinators (for themselves and on behalf of the other Underwriters) agreeing
on the Offer Price. The International 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 the Price
Determination Date.
If, for any reason, our Company and the Overall Coordinators (for themselves and on
behalf of the other Underwriters) are unable to reach an agreement on the Offer Price by 12:00
noon on Friday, January 5, 2024, the Global Offering will not proceed and will lapse. For full
information about the Underwriters and the underwriting arrangements, see “Underwriting” in
this prospectus.
RESTRICTIONS ON OFFER AND SALE OF THE 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 the 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 in any
jurisdiction other than in Hong Kong, or the distribution of this prospectus in any jurisdiction
other than Hong Kong. Accordingly, this prospectus may not be used for the purpose of, and
does not constitute, an offer or invitation in any jurisdiction or in any circumstances in which
such an offer or invitation is not authorized or to any person to whom it is unlawful to make
such an offer or invitation. The distribution of this prospectus and the Global Offering of the
Offer Shares in other jurisdictions are subject to restrictions and may not be made except as
permitted under the applicable securities laws of such jurisdictions pursuant to registration
with or authorization by the relevant securities regulatory authorities or an exemption
therefrom.
APPLICATION FOR LISTING ON THE STOCK EXCHANGE
We have applied to the Stock Exchange for the granting of the listing of, and permission
to deal in, the additional Shares in issue and to be issued pursuant to the Global Offering
(including the additional Shares which may be issued pursuant to the exercise of the Pre-IPO
Share Options).
No part of our Company’s Shares or loan capital is listed on or dealt in on any other stock
exchange and no such listing or permission to list is being or proposed to be sought in the near
future. All the Shares will be registered on the Hong Kong register of members of our Company
in order to enable them to be traded on the Stock Exchange.
INFORMATION ABOUT THIS PROSPECTUS AND THE GLOBAL OFFERING
–8 5–


--- page 96 ---
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 our Company by the
Stock Exchange.
COMMENCEMENT OF DEALINGS IN THE SHARES
Dealings in the Shares on the Stock Exchange are expected to commence at 9:00 a.m. on
Tuesday, January 9, 2024. The Shares will be traded in board lots of 500 Shares each. The stock
code of the Shares will be 6959.
ADMISSION OF THE SHARES INTO CCASS
Subject to the granting of the listing of, and permission to deal in, our Shares on the Stock
Exchange and our compliance with the stock admission requirements of HKSCC, our Shares
will be accepted as eligible securities by HKSCC for deposit, clearance and settlement in
CCASS with effect from the Listing Date 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 HKSCC and HKSCC Operational Procedures in effect from
time to time. Investors should seek the advice of their stockbroker or other professional
advisors for details of the settlement arrangements as such arrangements may affect their rights
and interests.
All necessary arrangements have been made enabling the Shares to be admitted into
CCASS.
REGISTER OF MEMBERS AND STAMP DUTY
Our Company’s principal register of members will be maintained by our principal
registrar, Harneys Fiduciary (Cayman) Limited, in the Cayman Islands, and our Company’s
Hong Kong register of members will be maintained by our Hong Kong Share Registrar, Tricor
Investor Services Limited, in Hong Kong.
All Offer Shares issued pursuant to applications made in the Hong Kong Public Offering
and the International Offering will be registered on the Hong Kong register of members.
Dealings in the Shares registered on our Hong Kong register of members will be subject to
Hong Kong stamp duty. For further details of Hong Kong stamp duty, please seek professional
tax advice.
INFORMATION ABOUT THIS PROSPECTUS AND THE GLOBAL OFFERING
–8 6–


--- page 97 ---
PROFESSIONAL TAX ADVICE RECOMMENDED
Potential investors in the Global Offering are recommended to consult their professional
advisors if they are in any doubt as to the taxation implications of subscribing for, purchasing,
holding or disposal of, and dealing in our Shares (or exercising rights attached to them). None
of us, the Joint Sponsors, the Overall Coordinators, the Joint Global Coordinators, the Joint
Bookrunners, the Joint Lead Managers, the Underwriters, the Capital Market Intermediaries,
any of their respective directors or any other person or party involved in the Global Offering
accepts responsibility for any tax effects on, or liabilities of, any person resulting from the
subscription, purchase, holding or disposal of, dealing in, or the exercise of any rights in
relation to, our Shares.
EXCHANGE RATE CONVERSION
Solely for your convenience, this prospectus contains translations among certain amounts
denominated in Renminbi, Hong Kong dollars and U.S. dollars.
Unless otherwise specified, amounts denominated in Hong Kong dollars and Renminbi
have been translated, for the purpose of illustration only, into U.S. dollars in this prospectus
at the following exchange rates:
HK$1.00 to
RMB0.90999
(being the prevailing exchange rate on December 20, 2023 set by
the PBOC)
US$1.00 to
RMB7.09660
(being the prevailing exchange rate on December 20, 2023 set by
the PBOC)
No representation is made that any amounts in Renminbi, Hong Kong dollars or U.S.
dollars can be or could have been at the relevant dates converted at the above rates or any other
rates or at all.
LANGUAGE
If there is any inconsistency between this prospectus and the Chinese translation of this
prospectus, this prospectus shall prevail. Translated English names of Chinese laws and
regulations, governmental authorities, departments, entities, enterprises (including certain of
our subsidiaries), institutions, natural persons, facilities, certificates, titles and the like
included in this prospectus and for which no official English translation exists are unofficial
translations for identification purposes only. In the event of any inconsistency, the Chinese
names (as appropriate) will prevail.
ROUNDING
Certain amounts and percentage figures included in this prospectus have been subject to
rounding adjustments, or have been rounded to a set number of decimal places.
Any discrepancies in any table or chart between totals and sums of amounts listed therein
are due to rounding.
INFORMATION ABOUT THIS PROSPECTUS AND THE GLOBAL OFFERING
–8 7–


--- page 98 ---
DIRECTORS
Executive Directors
Name Address Nationality
Ms. Li Guiping ( Flat 201, Unit 3, Building 8
No. 1 Sijixinghe Middle Road
Chaoyang District
Beijing
China
Chinese
Mr. Bo Shijiu ( ᑛ˰ɮ) Flat 201, Unit 22, Building 13
Y angzhouxinyuan Block 2
Shunyi District
Beijing
China
Chinese
Ms. Jia Hui ( ༠౉) Flat 701, Unit 2, Building 2
No. 1 Huangchangnanli
Chaoyang District
Beijing
China
Chinese
Non-executive Director
Name Address Nationality
Ms. Jin Ting ( ◽ణ) Flat 221
No. 40 Shashi Road
Heping District
Tianjin
China
Chinese
DIRECTORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING
–8 8–


--- page 99 ---
Independent Non-executive Directors
Name Address Nationality
Mr. Shen Jinjun (ࠏFlat 6, Unit 3, Building 12
Baiwanzhuangzhongli
Xicheng District
Beijing
China
Chinese
Mr. Dong Y ang ( ໨౮) Flat 2202, Building 1
Mantingfangyuan
Qingyunli
Haidian District
Beijing
China
Chinese
Mr. Wang Fukuan ( ˮ၅ᄱ) No. 27-35, Bei’erhutong
Jiefang Road
Nanguan District
Changchun
China
Chinese
For further information about our Directors and members of our senior management,
please refer to “Directors and Senior Management” of this prospectus.
DIRECTORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING
–8 9–


--- page 100 ---
PARTIES INVOLVED IN THE GLOBAL OFFERING
Joint Sponsors CITIC Securities (Hong Kong) Limited
18/F, One Pacific Place
88 Queensway
Hong Kong
ICBC International Capital Limited
37/F, ICBC Tower
3 Garden Road
Hong Kong
Sponsor-Overall Coordinator ICBC International Securities Limited
37/F, ICBC Tower
3 Garden Road
Hong Kong
Overall Coordinators CLSA Limited
18/F, One Pacific Place
88 Queensway
Hong Kong
ICBC International Securities Limited
37/F, ICBC Tower
3 Garden Road
Hong Kong
Joint Global Coordinators CLSA Limited
18/F, One Pacific Place
88 Queensway
Hong Kong
ICBC International Securities Limited
37/F, ICBC Tower
3 Garden Road
Hong Kong
Joint Bookrunners and
Joint Lead Managers
CLSA Limited
18/F, One Pacific Place
88 Queensway
Hong Kong
DIRECTORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING
–9 0–


--- page 101 ---
ICBC International Securities Limited
37/F, ICBC Tower
3 Garden Road
Hong Kong
CEB International Capital Corporation Limited
22/F, AIA Central
1 Connaught Road Central
Hong Kong
BOCOM International Securities Limited
9/F, Man Y ee Building
68 Des V oeux Road Central
Hong Kong
SPDB International Capital Limited
33/F, SPD Bank Tower
1 Hennessy Road
Hong Kong
Patrons Securities Limited
Unit 3214, 32/F, Cosco Tower
183 Queen’s Road Central
Sheung Wan
Hong Kong
CMB International Capital Limited
45/F, Champion Tower
3 Garden Road
Central, Hong Kong
Zhongtai International Securities Limited
19 Floor, Li Po Chun Chambers
189 Des V oeux Road Central
Hong Kong
UOB Kay Hian (Hong Kong) Limited
6/F, Harcourt House
39 Gloucester Road
Hong Kong
DIRECTORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING
–9 1–


--- page 102 ---
Tiger Brokers (HK) Global Limited
1/F, FWD Financial Centre
308 Des V oeux 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
Valuable Capital Limited
RM 3601-06 & 3617-19, 36/F
China Merchants Tower, Shun Tak Centre
168-200 Connaught Road Central
Hong Kong
DIRECTORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING
–9 2–


--- page 103 ---
Capital Market Intermediaries CLSA Limited
18/F, One Pacific Place
88 Queensway
Hong Kong
ICBC International Securities Limited
37/F, ICBC Tower
3 Garden Road
Hong Kong
CEB International Capital Corporation Limited
22/F, AIA Central
1 Connaught Road Central
Hong Kong
BOCOM International Securities Limited
9/F, Man Y ee Building
68 Des V oeux Road Central
Hong Kong
SPDB International Capital Limited
33/F, SPD Bank Tower
1 Hennessy Road
Hong Kong
Patrons Securities Limited
Unit 3214, 32/F, Cosco Tower
183 Queen’s Road Central
Sheung Wan
Hong Kong
CMB International Capital Limited
45/F, Champion Tower
3 Garden Road
Central, Hong Kong
Zhongtai International Securities Limited
19 Floor, Li Po Chun Chambers
189 Des V oeux Road Central
Hong Kong
UOB Kay Hian (Hong Kong) Limited
6/F, Harcourt House
39 Gloucester Road
Hong Kong
DIRECTORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING
–9 3–


--- page 104 ---
Tiger Brokers (HK) Global Limited
1/F, FWD Financial Centre
308 Des V oeux 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
Valuable Capital Limited
RM 3601-06 & 3617-19, 36/F
China Merchants Tower, Shun Tak Centre
168-200 Connaught Road Central
Hong Kong
Legal advisors to our Company As to Hong Kong law:
Tian Yuan Law Firm LLP
Suites 3304-3309, 33/F
Jardine House
One Connaught Place
Central
Hong Kong
As to PRC law:
JunHe LLP
20/F, China Resources Building
8 Jianguomenbei Avenue
Beijing
China
As to Cayman Islands law:
Conyers Dill and Pearman
29/F, One Exchange Square
8 Connaught Place
Central
Hong Kong
DIRECTORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING
–9 4–


--- page 105 ---
Legal advisors to
the Joint Sponsors
and the Underwriters
As to Hong Kong law:
Sidley Austin
39/F, Two International Finance Centre
8 Finance Street
Central
Hong Kong
As to PRC law:
Beijing DHH Law Firm
11-12/F, Tower C, Yintai Centre
No. 2 Jianguomenwai Avenue
Chaoyang District
Beijing
China
Auditor and Reporting
Accountants
KPMG
Certified Public Accountants
8th Floor, Prince’s Building
10 Chater Road
Central, Hong Kong
Industry consultant China Insights Industry Consultancy Limited
10/F, Block B
Jing’an International Center
88 Puji Road
Jing’an District
Shanghai
China
Receiving bank Bank of China (Hong Kong) Limited
Bank of China Tower
1 Garden Road
Central
Hong Kong
DIRECTORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING
–9 5–


--- page 106 ---
Registered office 4th Floor, Harbour Place
103 South Church Street
P .O. Box 10240
Grand Cayman KY1-1002
Cayman Islands
Principal place of business and
headquarters in the PRC
Changjiu Building
No. 99 Shigezhuang Road
Chaoyang District
Beijing
China
Principal place of business in Hong Kong 5/F, Manulife Place
348 Kwun Tong Road
Kowloon
Hong Kong
Joint company secretaries Ms. Zhang Y exi ( ੵ⮶᷊)
Changjiu Building
No. 99 Shigezhuang Road
Chaoyang District
Beijing
China
Ms. Tang King Yin ( ቎౻ሬ)
(ACG, HKACG)
5/F, Manulife Place
348 Kwun Tong Road
Kowloon
Hong Kong
Company’s website www.99digtech.com
CORPORATE INFORMATION
–9 6–


--- page 107 ---
Authorized representatives Ms. Li Guiping (܈࣭)
Flat 201, Unit 3, Building 8
No. 1 Sijixinghe Middle Road
Chaoyang District
Beijing
China
Ms. Tang King Yin ( ቎౻ሬ)
5/F, Manulife Place
348 Kwun Tong Road
Kowloon
Hong Kong
Audit Committee Mr. Wang Fukuan ( ˮ၅ᄱ)( Chairman )
Ms. Jin Ting ( ◽ణ)
Mr. Dong Y ang ( ໨౮)
Remuneration Committee Mr. Shen Jinjun (ࠏ()Chairman )
Mr. Bo Shijiu ( ᑛ˰ɮ)
Mr. Dong Y ang ( ໨౮)
Nomination Committee Ms. Li Guiping (܈࣭()Chairwoman )
Mr. Shen Jinjun (ࠏ)
Mr. Dong Y ang ( ໨౮)
Principal Share Registrar and transfer
office in the Cayman Islands
Harneys Fiduciary (Cayman) Limited
4th Floor, Harbour Place
103 South Church Street
P .O. Box 10240
Grand Cayman KY1-1002
Cayman Islands
Hong Kong Share Registrar Tricor Investor Services Limited
17/F, Far East Finance Centre
16 Harcourt Road
Hong Kong
Compliance Advisor Zhongtai International Capital Limited
19/F Li Po Chun Building
189 Des V oeux Road Central
Hong Kong
CORPORATE INFORMATION
–9 7–


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Principal banks China Merchants Bank Co., Ltd.
Shenzhen Huaqiaocheng Branch
No. 9015-3, Shennan Boulevard
Nanshan District
Shenzhen
China
Shanghai Pudong Development
Bank Limited
Shanghai Pilot Free Trade Zone Branch
22/F No. 588, Pudong South Road
Pudong New District
Shanghai
China
CORPORATE INFORMATION
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Certain information and statistics (including quantitative and market trend
information) set out in this section have been extracted from various official government
publications, market data providers and a report commissioned by us and prepared by
our industry consultant, CIC. The information from official government sources has not
been independently verified by us, the Joint Sponsors, the Overall Coordinators, the Joint
Global Coordinators, the Joint Bookrunners, the Joint Lead Managers, the Underwriters,
any of our or their respective directors, officers, employees, advisors or agents or any
other persons or parties involved in the Global Offering, and no representation is given
as to its accuracy.
SOURCES OF INFORMATION
We commissioned CIC, an independent market research and consulting company and an
Independent Third Party, to conduct research and analysis of, and to produce a report on, the
pledged vehicle monitoring services market and the automobile dealership operation
management services market in China. CIC’s services include industry consultancy services,
commercial due diligence and strategic consulting. The CIC Report has been prepared by CIC
independent of the influence of our Group and other interested parties. We have agreed to pay
a fee of RMB630,000 to CIC in connection with the preparation of the CIC Report. We have
extracted certain information from the CIC Report in this section and elsewhere in this
prospectus to provide our potential investors with a more comprehensive presentation of the
industries where we operate.
During the preparation of the CIC Report, CIC performed both primary and secondary
research, and obtained knowledge, statistics, information and industry insights on the industry
trends of the target market in China. Primary research included interviews with key industry
experts and leading industry participants from the automobile sales and distribution industry,
who are identified by CIC to have professional knowledge and experience relating to China’s
pledged vehicle monitoring service market and China’s automobile dealership operation
management service market as a result of their current and previous roles in the industry. The
views they shared with CIC were based on their work experience and ongoing communications
with market participants in the automobile sales and distribution industry. Secondary research
involved analyzing data from various publicly available data sources, such as the PRC National
Bureau of Statistics and various industry associations. The information and data collected by
CIC have been analyzed, assessed and validated using CIC’s in-house analysis models and
techniques.
The CIC Report was compiled based on the following assumptions: (i) the overall social,
economic and political environment in China is expected to remain stable during the forecast
period; (ii) the related key industry drivers are likely to facilitate continued growth in the target
market during the forecast period, including the steady increase of per capita disposable
income, the constant growth of urbanization rate and the continued implementation of
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favorable policies for China’s passenger automobile market; and (iii) there is no extreme force
majeure events or unforeseen industry regulations, which may dramatically or fundamentally
affect the market during the forecast period.
Our Directors confirm that after making reasonable inquiries and exercising reasonable
care, there is no adverse change in the market information since the date of publication of the
CIC Report, which may qualify, contradict or impact the information in this section.
OVERVIEW OF CHINA’S PASSENGER AUTOMOBILE MARKET
China is the world’s largest passenger automobile market as measured by new passenger
automobile sales volume, with 24.0 million new passenger automobiles sold in 2022. However,
from the perspective of per capita car parc, there is still room for growth in China compared
to developed countries. As of December 31, 2022, China’s per capita car parc was
approximately 194 per 1,000 people, significantly lower than that of the U.S. and the European
Union, which was 769 and 563 per 1,000 people, respectively. In particular, the per capita car
parc is still relatively low in China’s lower-tier cities, which include second-tier and below
cities. As of December 31, 2022, the per capita car parc of passenger automobiles in China’s
first-tier cities was approximately 217 per 1,000 people, while the number in lower-tier cities
was only approximately 193 per 1,000 people. The consumption potential of China’s passenger
automobile market, especially the lower-tier cities, is expected to be unleashed due to the
increase in residents’ income and purchasing power, relaxed vehicle license plate restrictions
and favorable policies for China’s passenger automobile market. For more information, see
“—Future Opportunities for China’s Pledged V ehicle Monitoring Service Market and
Automobile Dealership Operation Management Service Market—Further increase in demand
in lower-tier cities.” Furthermore, it is expected that automobile dealerships will have
increasing financing needs to cater for the potential growth of China’s passenger automobile
market.
According to CIC, certain medium and large cities in China have adopted policies
limiting the purchase of new passenger automobiles, which may cause consumers in a
particular region to delay or adjust their new passenger automobile purchase plans. However,
these policies do not materially affect the overall demand in China’s passenger automobile
market because these policies do not apply on a national basis, and thus have less indirect
impact on China’s pledged vehicle monitoring service market and automobile dealership
operation management service market. In addition, the MIIT and six other administrative
agencies jointly promulgated the Announcement on the Issuance of Work Program for
Stabilizing Growth in the Automobile Industry (2023-2024) (ʈ
ࣩ2023-2024 ϋ)) in August 2023, which stipulated that local authorities shall
not adopt new measures to limit the purchase of automobiles.
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In recent years, in light of the macro development strategies of “carbon peaking” and
“carbon neutral,” the sale of NEVs has become a significant trend in China’s passenger
automobile market, and the sales volume of NEVs is rising rapidly. China’s NEV sales volume
surged from approximately 1.0 million units in 2018 to approximately 6.5 million units in
2022, representing a CAGR of 58.2%, and its share in new passenger automobile sales volume
also increased rapidly from approximately 4.3% in 2018 to approximately 27.2% in 2022.
OVERVIEW OF CHINA’S AUTOMOBILE SALES AND DISTRIBUTION INDUSTRY
Value chain of the automobile sales and distribution industry
Automobile sales and distribution is a crucial step in the automobile industry that bridges
automobile manufacturers and automobile end users. Participants in the automobile sales and
distribution industry mainly include automobile manufacturers (including ICE vehicle
manufacturers and NEV manufacturers), automobile dealerships, general automobile trading
stores, financial institutions and third-party service providers. Automobile manufacturers
mainly focus on vehicle design, production and manufacturing, and are the upstream suppliers
of passenger automobiles. Automobile dealerships and general automobile trading stores
primarily engage in the sale of passenger vehicles. They also provide automobile repair and
maintenance services, automobile financing services, insurance services and other after-sales
services to downstream users. Financial institutions mainly provide financial services to
automobile dealerships and automobile end users, such as vehicle inventory financing and
vehicle purchase financing. Third-party service providers in the automobile sales and
distribution industry mainly provide transaction, software and operation-related services to
automobile manufacturers, automobile dealerships, financial institutions and other enterprise
users. Some participants in the industry also provide specialized services such as pledged
vehicle monitoring services and automobile dealership operation management services.
The increase in the sales volume of NEVs has brought incremental market opportunities
for market participants, as well as innovations to their business models. The direct sales model
adopted by NEV manufacturers has brought competition and challenges to automobile
dealerships. Under the direct sales model, NEV manufacturers directly provide NEV sales and
after-sales services through their stores. These stores are usually located in the central business
districts of first-tier cities to attract potential customers. While some NEV manufacturers have
adopted a direct sales model, automobile dealerships are still the primary channels for the sale
of new passenger automobiles, including NEVs, due to mature sales and distribution channels
that integrate sales, logistics, warehousing, spare parts, repair and maintenance services. In
addition, NEV manufacturers that adopt a direct sales model need to bear the cost of building
stores as well as inventory and operating costs. Therefore, NEV manufacturers face the risk of
reduced efficiency if they aim to reach lower-tier cities with relatively dispersed demand. As
a result, NEV manufacturers may still need to rely on the mature sales and distribution
channels of automobile dealerships in their continuous expansion, and automobile dealerships
are expected to purchase more NEVs through secured financing, leading to an increase in the
demand for pledged vehicle monitoring services.
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In addition, automobile dealerships face numerous opportunities and challenges with
regard to the sale, repair, maintenance, charging and battery replacement of NEVs. To capture
these opportunities and overcome these challenges, automobile dealerships need to adjust their
business strategies accordingly. Medium- and small-sized automobile dealerships, especially
those with relatively weak operational capabilities, may fail to do so due to lack of market
insights and professional management teams. The emergence of automobile dealership
operation management services can help connect automobile dealerships with NEV
manufacturers, and at the same time improve the operational efficiency of automobile
dealerships.
LIMITATIONS OF MARKET PARTICIPANTS
Limitations of automobile dealerships and general automobile trading stores
Fragmented market with fierce competition
As of December 31, 2022, there were over 30,000 automobile dealerships and
approximately 120,000 general automobile trading stores in China. The top 100 automobile
dealership groups in China in terms of new passenger automobile sales had over 6,600
automobile dealerships, accounting for approximately 22.0% of the total number of automobile
dealerships, indicating a market with relatively low concentration rate and a large number of
medium- and small-sized enterprise participants who have limited overall strength. In addition,
the profit margins of the main business segments of automobile dealerships are under varying
degrees of pressure.
High working capital pressure
Automobile dealerships and general automobile trading stores must pre-purchase new
passenger automobile inventory, which requires significant working capital. However,
automobile dealerships and general automobile trading stores commonly face problems such as
limited access to financing sources and high financing costs. Therefore, once new passenger
automobile sales are under pressure, the payback cycle is likely to be extended, affecting the
daily operation of all businesses. In order to reduce inventory pressure and effectively manage
cash flow, some automobile dealerships and general automobile trading stores chose to
increase discounts on new passenger automobiles, reducing their profit margin and leading to
a vicious circle.
Lack of professional management team
Currently, there are a large number of medium- and small-sized enterprises in China’s
automobile sales and distribution industry. These enterprises generally lack managerial
expertise, technological capabilities and sophisticated human resources system. The core
management team members face problems such as a lack of energy, sloppy management and
unprofessionalism.
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Lack of digital capabilities
In terms of sales and marketing, automobile dealerships and general automobile trading
stores lack the ability to continuously manage and market to their customers with digital
systems, resulting in unsatisfactory customer conversion and retention. In terms of
management, the lack of digital management capabilities makes it difficult for management
team to obtain comprehensive, reliable and accurate data and information, which can easily
lead to mistakes in decision-making or other problems.
Limitations of financial institutions
High pledged vehicle monitoring workload
When financial institutions provide secured financing to automobile dealerships and
general automobile trading stores, financial institutions have relatively onerous and specialized
requirements for pledged vehicle monitoring, requiring regular and irregular stocktaking and
continuous monitoring of inventory status. With the rise of business volume, financial
institutions need to manage an increasing number of automobile dealerships and general
automobile trading stores covering a wide geographical area with limited resources, making it
difficult for financial institutions to rely entirely on internal resources to accomplish pledged
vehicle monitoring.
Cumbersome offline process with limited data availability and reliability
In the traditional pledged vehicle monitoring model of automobile financing, pledged
vehicle monitoring processes, such as stocktaking, data recording and status auditing, rely
heavily on manual operations, which are inefficient and subject to operational risks such as
human errors and improper management. Financial institutions have been improving their
pledged vehicle monitoring capabilities to meet increasingly refined pledged vehicle
monitoring standards and thus putting forward higher requirements for service providers. In
addition, since different financial institutions have varying pledged vehicle monitoring
systems, a higher demand is placed on external service providers’ customization and
development capabilities.
Traditional pledged vehicle monitoring leaves room for risks and lacks efficiency
Under traditional pledged vehicle monitoring mode, the quality of pledged vehicle
monitoring depends on the supervisors’ ability and the personnel’s level of responsibility,
leading to operational and moral risks. Meanwhile, due to the lagging and opaque collection
of inventory and automobile dealership management information, it is difficult for financial
institutions to perceive the status of assets in real-time, which could negatively impact the
effectiveness and timeliness of pledged vehicle monitoring.
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OVERVIEW OF CHINA’S PLEDGED VEHICLE MONITORING SERVICES MARKET
Pledged vehicle monitoring services can help financial institutions improve pledged
vehicle monitoring efficiency and break down information barriers
Inventory-based loans are one of the main financing channels for the automobile sales and
distribution industry, and financial institutions are limited by personnel and resource
constraints, and face challenges on directly monitoring and managing pledged vehicles. In this
model, pledged vehicle monitoring service providers mainly act as third-party supervisors,
helping financial institutions monitor automobile dealerships’ inventory and operating
conditions through technologies.
Pledged vehicle monitoring services can provide objective and independent monitoring of
pledged vehicles for financial institutions, thereby enhancing the quality and authenticity of
monitoring while promoting the efficiency of pledged vehicle monitoring for financial
institutions to support their business expansions. Service providers’ digital capacity can also
help break down the information barrier between automobile dealerships and financial
institutions, and thus realize early perception and intervention of potential risks.
According to CIC, as of December 31, 2022, approximately 80% of the financial
institutions in China that provided secured financing to automobile dealerships engaged
third-party service providers to monitor pledged vehicles. Financial institutions tend to rely on
third-party service providers, rather than their in-house personnel, to perform these services,
primarily out of cost-efficiency and service quality. Third-party service providers generally
have a team of professional service personnel who are equipped with specialized digital
monitoring systems, which generally enable them to reduce reliance on manpower and identify
and report potential risk events in a more comprehensive and cost-effective manner, as
compared to financial institutions’ in-house personnel.
Demand for pledged vehicle monitoring services in China is stable
Pledged vehicle monitoring service providers in China provide services primarily to (i)
financial institutions that provide secured financing to automobile dealerships for their
purchase of vehicles; and (ii) automobile dealerships with pledged vehicles. As of December
31, 2022, there were over 200,000 branches of financial institutions in China, and
approximately 750 branches of financial institutions were providing secured financing to
automobile dealerships, among which approximately 600 branches of such financial
institutions, including all of China’s “Big Six” national state-owned commercial banks, 12
joint-stock commercial banks and 25 automobile finance companies, were users of pledged
vehicle monitoring services, according to CIC. As of December 31, 2022, there were over
30,000 automobile dealerships in China, and approximately 79.9% of them were users of
pledged vehicle monitoring services, according to CIC. In 2022, with the emphasis on pledged
vehicle monitoring by financial institutions, standardization of operation and increase in the
penetration of secured finance, the total addressable market of pledged vehicle monitoring
services for automobile dealerships and general automobile trading stores in China was
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approximately RMB6.1 billion, as calculated by multiplying the number of potential
automobile dealership users and general automobile trading store users by the average service
fee
(1) of the industry, assuming that the demand of all potential automobile dealership users and
general automobile trading store users is fully addressed. In particular, in 2022, approximately
RMB1.9 billion of the total addressable market was attributable to potential automobile
dealership users and approximately RMB4.2 billion of the total addressable market was
attributable to potential general automobile trading store users.
General automobile trading stores are considered as potential customers for pledged
vehicle monitoring services, and therefore are included in the calculation of the total
addressable market for the following reasons.
 General automobile trading stores and automobile dealerships share a similar
business model, which requires a substantial level of automobile inventory to meet
their daily sales demands. General automobile trading stores need financial support
in order to maintain a substantial level of automobile inventory, and thus, also have
strong demand for secured financing. Similar to automobile dealerships, general
automobile trading stores seeking secured financing from financial institutions also
need to pledge their automobile inventory. In the past, it was difficult for general
automobile trading stores to obtain secured financing from financial institutions
directly. Once general automobile trading stores are able to obtain secured financing
from financial institutions, they are expected to pay for pledged vehicle monitoring
services to monitor their pledged vehicles.
 Financial institutions have started to provide secured financing to general
automobile trading stores. In the past, secured financing generally existed among
financial institutions, automobile dealerships and automobile manufacturers
primarily because financing institutions generally required automobile
manufacturers to provide credit support for automobile dealerships in order for
automobile dealerships to obtain secured financing. Currently, financial institutions
are changing this landscape by launching new secured financing products targeting
general automobile trading stores. For example, one national commercial bank in
China has launched a new secured financing product targeting general automobile
trading stores, which is similar to secured financing products generally provided to
automobile dealerships.
Note:
(1) According to CIC, the average service fee of the industry is based on actual service fees charged by service
providers in 2022, which range from RMB40,000 to RMB60,000 per year per pledged vehicle monitoring
service agreement.
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 Based on research conducted by CIC, in developed markets such as the United
States, it is common for financial institutions to provide secured financing to general
automobile trading stores. As the market in China develops, it is reasonable to
expect that more financial institutions will provide secured financing to general
automobile trading stores in the future.
The market size of China’s pledged vehicle monitoring services for automobile
dealerships in terms of revenue grew from RMB873.1 million in 2018 to RMB1,054.0 million
in 2022, representing a CAGR of approximately 4.8%. As demand for such services increases,
the market size is expected to reach RMB1,451.9 million in 2027, primarily based on an
estimated increase in penetration rate of such services in line with the development of China’s
passenger automobile market.
0
250
500
750
1000
1250
1500
2018
873.1 911.1 918.7
1,008.3 1,054.0
1,140.2
1,225.5
1,308.8
1,389.0 1,451.9
2019 2020 2021 2022 2023E 2024E 2025E 2026E 2027E
RMB Million
CAGR
Market size of China’s pledged vehicle monitoring services for automobile
dealerships, 2018-2027E
2018-2022 2022-2027E
4.8% 6.6%
Source: CPCA, CADA, NBS, CIC
The Company is the largest provider of pledged vehicle monitoring services in China’s
automobile sales and distribution industry
The pledged vehicle monitoring services market for China’s automobile sales and
distribution industry is highly concentrated, mainly due to the fact that leading market
participants have already formed entry barriers in terms of technological capabilities, customer
relationships and economies of scale. As of December 31, 2022, the top five market
participants had a total market share of approximately 90.3% in terms of revenue, while most
of the remaining market participants were typically small regional service providers. Leading
market participants have nationwide service networks and can meet financial institutions’
demand for the monitoring of pledged vehicles across the country and are, therefore, more
likely to gain a higher market share. At the same time, financial institutions have stringent
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requirements for third-party institutions’ professionalism, reliability, timeliness and other
service capabilities. The leading service providers have formed stable partnerships with
financial institutions, creating high barriers to entry for new market entrants. In addition,
leading market participants have accumulated certain technological capabilities. They can
enhance the efficiency of monitoring, reduce costs and improve the effectiveness of pledged
vehicle monitoring with the help of technologies, which further reduce the marginal cost, so
leading companies can enjoy economies of scale and capture greater market share.
In 2022, the Company was the largest pledged vehicle monitoring service provider in
China’s automobile sales and distribution industry, with a market share of 47.9% in terms of
revenue in 2022. The Company’s market position is primarily attributable to a combination of
industry experience, technology capabilities and nationwide service network. As one of the
first movers in the market, the Company has formed guidelines and know-how on pledged
vehicle monitoring based on its industry insights.
In 2022, there were approximately 50 pledged vehicle monitoring service providers in
China, among which approximately 10 service providers had formed nationwide service
networks. The following table sets forth the ranking of major pledged vehicle monitoring
service providers in China’s automobile sales and distribution industry in terms of revenue
generated from pledged vehicle monitoring services in 2022 and the number of automobile
dealership users as of December 31, 2022. While the other four service providers provide other
services in addition to pledged vehicle monitoring services, their pledged vehicle monitoring
services are comparable to the Company’s, primarily due to the similarity in service scope,
pricing model and business model. In addition, while some of the other service providers did
not have a comprehensive digital system to facilitate their services, they also use technology
to monitor pledged vehicles and compete directly with the Company in the pledged vehicle
monitoring services market.
Ranking Company
Revenue (5)
in 2022
Market Share
in terms of
revenue (5) in
2022
Number
of automobile
dealership
users as of
December 31,
2022
(RMB in
millions)
1 Our Company 505.0 47.9% 10,684
2 Company A (1) ~265.0 25.2% ~3,600
3 Company B (2) ~115.0 10.9% ~2,500
4 Company C (3) ~46.0 4.4% ~780
5 Company D (4) ~20.0 1.9% ~440
Source: CIC
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Notes:
(1) Company A, a private company established in 2013 and headquartered in Tianjin, mainly provides
automobile logistics services, pledged vehicle monitoring services and other automobile-related
services.
(2) Company B, a private company established in 2002 and headquartered in Changchun, Jilin Province,
mainly provides automobile transportation services, automobile warehousing services, logistics
financial services, automobile spare parts transportation services, pledged vehicle monitoring services
and other automobile-related services.
(3) Company C, a private company established in 2008 and headquartered in Beijing, mainly provides
automobile warehousing and logistics services, and also provides pledged vehicle monitoring services.
(4) Company D, a private company established in 2006 and headquartered in Guangzhou, Guangdong
Province, mainly provides insurance brokerage services for consumers, and also provides pledged
vehicle monitoring services.
(5) Represents revenue generated from pledged vehicle monitoring services.
Entry barriers for China’s pledged vehicle monitoring services
 Technological capabilities. Developing and maintaining pledged vehicle monitoring
services require market participants to enhance their technology, infrastructure and data
security. New entrants need to have sufficient access to funding to cover the costs of
developing relevant technologies and infrastructure and recruiting qualified employees to
develop and maintain these technologies.
 Customer relationships. China’s pledged vehicle monitoring services industry is
characterized by long-term customer relationships with financial institutions and
automobile dealerships. New entrants need to attract customers from other service
providers and obtain trust from these customers by providing high-quality services with
competitive pricing.
 Economies of scale. Existing market participants have achieved large economies of scale
by serving a wide range of clients across different regions. They have also invested
heavily in developing and maintaining their digital systems, data analytics tools,
cybersecurity, customer service capabilities and human resources. These factors enable
them to offer high-quality services with competitive pricing compared with new entrants,
who would need to incur high fixed and variable costs to create their presence in the
market.
Risks and challenges to China’s pledged vehicle monitoring services market
China’s pledged vehicle monitoring services market faces certain risks and challenges.
The slowdown of China’s economic growth may result in a decrease in residents’ income and
their ability to purchase new passenger automobiles, which may reduce the demand for new
passenger automobiles and the demand for such services. In addition, favorable PRC
regulations and policies for pledged vehicle monitoring services, as well as the business
models of financial institutions, may change, thus affecting the demand for such services.
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Furthermore, changes in the automobile sales and distribution industry, such as changes in the
demand of new passenger automobiles, could also affect the demand for such services. If there
is an increase in the demand for new passenger automobiles, automobile dealerships are
expected to purchase more passenger automobiles through secured financing, leading to an
increase in the demand for pledged vehicle monitoring services. Similarly, if there is a decrease
in the demand for new passenger automobiles, the demand for pledged vehicle monitoring
services is expected to decrease.
Service providers also face risks and challenges from (i) changes in China’s general
economy and automobile sales and distribution industry; (ii) fluctuations in labor and
subcontracting costs; and (iii) intensified competition in the pledged vehicle monitoring
service market. See “Risk Factors—Risks Relating to Our Business and Industry” for details.
OVERVIEW OF CHINA’S AUTOMOBILE DEALERSHIP OPERATION
MANAGEMENT SERVICES MARKET
Automobile dealership operation management service providers can help automobile
dealerships reduce costs, increase efficiency and improve competitiveness
Automobile dealership operation management services are designed to help automobile
dealerships reduce costs and increase efficiency by introducing professional management
teams and concepts, comprehensive management and accounting systems and intelligent
marketing and customer management tools. In particular, professional management teams can
help automobile dealerships optimize their staff resources through comprehensive management
systems by gathering staff utilization data and allocating staff resources effectively, thereby
reducing labor costs. In addition, accounting systems can help automobile dealerships improve
their financial management efficiency by reducing in-person and offline procedures, and at the
same time help automobile dealerships gather financial data more efficiently. Furthermore,
intelligent marketing tools can provide accurate delivery of marketing information, evaluate
the effectiveness of advertisement and improve the content management of advertising, which
will improve the overall efficiency of marketing efforts of automobile dealerships. At the same
time, customer relationship management tools can accumulate sales information and customer
communication records, which can help strengthen contact between sales staff from automobile
dealerships and potential customer groups, and thus increase the efficiency of automobile
dealerships.
China’s automobile dealership operation management services market has not yet formed
a stable competitive landscape
While certain market participants have already been exploring viable business models for
automobile dealership operation management services in light of the increase in market size for
such services from RMB13.2 million in 2021 to RMB47.6 million in 2022, China’s automobile
dealership operation management services market has not yet formed a stable competitive
landscape. Market participants typically enter into individual service agreements with
automobile dealerships. According to CIC, as of December 31, 2022, the penetration rate of
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automobile dealership operation management services in China was less than 0.5%, as
calculated by dividing the number of automobile dealerships served by the total number of
automobile dealerships in China. In addition, there are currently only approximately 10 market
participants expanding into this area, including third-party service providers in the automobile
sales and distribution industry, startup software companies, internet platform companies and
large automobile dealerships with strong management capabilities, and most of these market
participants are still at the stage of analyzing customer demand and service scope, and have not
been able to actually provide such services or generate substantial revenue from such services.
The competitive landscape could undergo significant changes depending on the willingness of
automobile dealerships to obtain such services, the promotion efforts by service providers and
the development of successful management cases.
The demand for automobile dealership operation management services in China is
expected to increase in the future as competition among automobile dealerships in the
automobile sales and distribution industry intensifies
The future growth of China’s automobile dealership operation management services
market depends on the potential demand from automobile dealerships, recovery from the
COVID-19 pandemic and development of successful management cases. In 2022, there were
approximately 30,000 automobile dealerships in China and approximately 70% of these
automobile dealerships were unable to make a profit, according to CADA. According to CIC,
automobile dealerships that were unable to make a profit will have demand for professional
management services that could help them reduce costs and improve operation efficiency, such
as automobile dealership operation management services. In addition, the automobile sales and
distribution industry has been negatively affected by the COVID-19 pandemic over the past
three years, which delayed market participants’ efforts to expand their businesses and provide
such services. According to CIC, the market is expected to grow in the future as more market
participants start to provide such services after the recovery from the COVID-19 pandemic, and
with the help of service providers, non-profitable automobile dealerships may increase their
paces to improve their operation efficiency so as to become profitable. These market
participants are actively expanding their business and implementing promotional policies such
as offering discounts on fixed management fees, accommodating flexible payment cycles,
providing free software and other services, and demonstrating their advantages in helping
automobile dealerships achieve their performance targets. In addition, the development
successful management cases by service providers can help potential automobile dealerships
understand the value of such services, which will aid the promotion of such services.
The market size of China’s automobile dealership operation management services in
terms of revenue grew from RMB25.6 million in 2018 to RMB29.7 million in 2019. However,
the market size declined from RMB29.7 million in 2019 to RMB13.2 million in 2021, primarily
because startup companies that provide such services experienced difficulties in their
operations in 2020 when the market was negatively impacted by the COVID-19 pandemic. As
market conditions improved, the market size increased from RMB13.2 million in 2021 to
RMB47.6 million in 2022. The Company started to provide such services in 2022, with a
market share of approximately 90% in 2022. Revenue generated by the Company from such
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services was RMB42.8 million in 2022. Based on the reasons for the expected growth set out
above, the market size is expected to reach RMB89.6 million in 2027, according to CIC.
According to CIC, the Company’s market share in 2027 is expected to be lower than that in
2022, primarily due to the entry of other market participants. These market participants are
expected to capture a portion of the market share while contributing to the growth of the overall
market size.
0
10
20
30
40
50
60
70
80
90
100
110
2018
25.6 29.7
15.1 13.2
47.6
55.7
63.8
71.8
80.3
89.6
2019 2020 2021 2022 2023E 2024E 2025E 2026E 2027E
RMB Million
CAGR
Market size of China’s automobile dealership operation management servicesɼ
2018-2027E
2018-2022 2022-2027E
16.7% 13.5%
Source: CPCA, CADA, NBS, CIC
Entry barriers for China’s automobile dealership operation management services
 Industry expertise. Automobile dealership operation management services require service
providers to have a deep understanding of the limitations of automobile dealerships and
scrutinize the daily operations and management of automobile dealerships to offer
customized services. Therefore, startup software companies and internet platform
companies that do not have a deep understanding of the limitations of automobile
dealerships may not be successful in this industry.
 Technological capabilities. The technological capabilities of the automobile dealership
operation management service providers are also improving. With the digitalization of
automobile dealerships, automobile dealership operation management service providers
are expected to develop and utilize technologies to develop automobile dealership
operation management systems, optimize their services and improve efficiency and
effectiveness.
 Access to industry resources. Automobile dealership operation management service
providers rely on effective distribution channels and other industry resources to help
automobile dealerships manage orders from their customers, deliver vehicles to their
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customers and provide high-quality after-sales services with enhanced efficiency. New
entrants may have limited access to these distribution channels and resources, which may
negatively affect their ability to offer high-quality services with competitive pricing to
customers.
Risks and challenges to China’s automobile dealership operation management services
market
China’s automobile dealership operation management services market faces certain risks
and challenges. Service providers face risks and challenges from changes in China’s general
economy and automobile sales and distribution industry, which could negatively affect service
providers’ promotional efforts relating to such services. In addition, if more consumers
purchase automobiles from internet platforms or other means and no longer rely on automobile
dealerships, the automobile dealership operation management services market could be
negatively affected. Furthermore, service providers may be unable to develop successful
management cases or meet the expectations of automobile dealerships, which may cause them
to lose automobile dealership users. Moreover, service providers may also be unable to retain
key employees.
FUTURE OPPORTUNITIES FOR CHINA’S PLEDGED VEHICLE MONITORING
SERVICE MARKET AND AUTOMOBILE DEALERSHIP OPERATION
MANAGEMENT SERVICE MARKET
Further increase in demand in lower-tier cities
Driven by favorable policies, increased purchasing power of residents and development
of road, fuel and electric-charging infrastructures, which will increase the convenience of
driving automobiles, the demand for new passenger automobiles in lower-tier cities is expected
to increase and will become one of the key drivers of market growth. Favorable policies
include (i) the Opinion on Further Unleashing Consumption Potential and Promoting Sustained
Recovery of Consumption (จԈ) issued by
the General Office of the State Council in April 2022, aimed at promoting the consumption of
automobiles in China; (ii) the Announcement on the Reduction of Purchase Tax for Certain
Passenger Automobiles (ʮѓ) jointly issued by the
MOF and the STA in May 2022, aimed at stimulating the sale of passenger automobiles in
China; and (iii) the Notice on Measures to Invigorate Automobile Sales and Distribution and
Promote Automobile Consumption ()
jointly promulgated by the MOFCOM and 16 other administrative agencies in July 2022, aimed
at stimulating the sale of passenger automobiles and NEVs and encouraging financial
institutions to provide automobile secured financing in China.
According to CIC, these favorable policies are expected to continue to promote the sale
of passenger automobiles, and automobile dealerships are expected to purchase more passenger
automobiles through secured financing, leading to an increase in the demand for pledged
vehicle monitoring services. At the same time, in light of the expected increase in passenger
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automobiles sales, automobile dealerships are expected to optimize their business operations
through professional management teams. As a result, the demand for automobile dealership
operation management services is expected to further increase.
Further increase in business volume and target customers of financial institutions
Financial institutions, which primarily include commercial banks and automobile finance
companies, provide secured financing to automobile dealerships. Driven by favorable policies
for China’s passenger automobile market, financial institutions have launched new online
secured financing products typically with higher credit limit and simplified application
procedure attempting to cover automobile dealerships, general automobile trading stores and
used car dealers. For example, one national commercial bank in China has launched a new
secured financing product targeting general automobile trading stores, which is similar to
secured financing products generally provided to automobile dealerships. The amount of
secured financing provided by automobile finance companies has doubled in the past decade.
With the increase of secured financing provided to automobile dealerships and general
automobile trading stores, the business volume of pledged vehicle monitoring services is
expected to rise, driving the growth of the pledged vehicle monitoring services market.
Further increase in demand for secured financing of automobile dealerships and general
automobile trading stores
With the further development of China’s passenger automobile market, automobile
dealerships and general automobile trading stores are expected to increase their inventory level
to expand their geographic coverage and diversify their vehicle brands and models. Therefore,
the demand for secured financing of automobile dealerships and general automobile trading
stores is expected to further increase, which could generate more demand for pledged vehicle
monitoring services and related services.
Fiercer competition in the automobile sales and distribution industry
The target customers of automobile dealership operation management services are
medium- and small-sized automobile dealerships, which include automobile dealerships that
have 5 to 20 automobile dealership stores, and the number of these customers is growing
steadily. These customers generally have a certain scale of business and thus have greater
potential for business growth. However, they face problems such as lack of professional
management teams due to the retirement of their original management personnel, as well as
inefficiencies due to lack of technological capabilities. In this market adjustment period,
automobile dealerships who rely on such services will have a better chance to expand their
market share and consolidate their dominant position to stand out in the competition.
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FUTURE DEVELOPMENT FOR CHINA’S PLEDGED VEHICLE MONITORING
SERVICE MARKET AND AUTOMOBILE DEALERSHIP OPERATION
MANAGEMENT SERVICE MARKET
Development of technology
With the development of technologies, data relating to automobile dealerships’ inventory
can be dynamically transmitted back to the system and connected directly with financial
institutions’ pledged vehicle monitoring systems and thus significantly improving regulatory
efficiency, accuracy and timeliness. Such development of technology could enable service
providers to monitor pledged vehicles more efficiently, and thus reduce the marginal cost of
pledged vehicle monitoring services.
Development of third-party service providers
Automobile dealerships face issues that need to be handled by professionals, such as
inventory management, capital management, channel optimization and team building. The
requirements for refinement and specialization of management have increased significantly.
With rich experience in the automobile dealership industry, mature management systems and
strong industry resources, automobile dealership operation management service providers can
provide integrated professional services, including capital, sales, human resources, finance and
brand building services.
Development of diversified services
According to CIC, new passenger automobile sales volume in China increase from 2013
to 2017, representing a CAGR of approximately 8.5%. However, new passenger automobile
sales volume in China decreased from 2018 to 2022, representing a negative CAGR of
approximately 0.4%, which was due to the decrease in the demand for new passenger
automobiles as a result of the COVID-19 pandemic. In addition, the average age of passenger
automobiles increased from 4.9 years in 2019 to 6.2 years in 2022. With the slowdown in new
passenger automobile sales and the increase in average vehicle age in China’s passenger
automobile market, the business focus of automobile dealerships is gradually shifting. The
service scope of suppliers is expected to change accordingly, with some suppliers establishing
new service models focusing on NEV trading, as well as other automobile services. These
market trends will provide market participants with more opportunities to address market
demand.
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KEY SUCCESS FACTORS
Industry know-how
The digital transformation of the automobile sales and distribution industry is rooted in
its traditional business model, supplemented by sufficient data and information technology to
ultimately achieve the upgrade of service quality and management efficiency. Therefore, it is
vital to understand the automobile dealership industry and the accumulation of operational
capabilities.
Customer and branding capabilities
Through the accumulation of customer resources and experience, service providers can
build up their industry reputation and their own brands, which will help expand the scope of
their services and procure new customers and thus increasing revenue and further enhancing
their market shares.
Integrated service capabilities
The automobile sales and distribution industry involves many businesses and participants,
including various vehicle brands, automobile logistics companies, financial institutions,
after-sales service workshops and automobile parts suppliers. Therefore, companies with rich
and comprehensive ecological resources and service capabilities can better grasp automobile
dealerships’ needs and accumulate competitive advantages.
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REGULATIONS ON FOREIGN INVESTMENT
The establishment, operation, and management of corporate entities in the PRC is
governed by the PRC Company Law (), which was promulgated by
the SCNPC, on December 29, 1993, and came into effect on July 1, 1994. The PRC Company
Law was most recently amended on October 26, 2018. A foreign invested company is also
subject to the PRC Company Law, unless otherwise provided by the foreign investment laws.
On March 15, 2019, the NPC promulgated the Foreign Investment Law of the PRC ( ʕ
) (the “Foreign Investment Law”), which came into effect on
January 1, 2020 and replaced the trio of laws regulating foreign investment in China, namely,
the Sino-foreign Equity Joint V enture Enterprise Law ( ʕശɛ͏΍ձ਷ʕ̮Υ༟຾ᐄΆุ
), the Sino-foreign Cooperative Joint V enture Enterprise Law ( ʕശɛ͏΍ձ਷ʕ̮ΥЪ
) and the Wholly Foreign-invested Enterprise Law ( ʕശɛ͏΍ձ਷̮༟Άุ
), together with their implementation rules and ancillary regulations. Existing foreign-
invested enterprises established prior to the effective of the Foreign Investment Law may keep
their corporate forms for five years. The Implementing Rules of the Foreign Investment Law
(ૢԷ) were promulgated by the State Council on
December 26, 2019 and came into effect on January 1, 2020. Pursuant to the Foreign
Investment Law, “foreign investors” means natural person, enterprise, or other organization of
a foreign country, “foreign-invested enterprises”, (the “FIEs”), means any enterprise
established under PRC law that is wholly or partially invested by foreign investors and “foreign
investment” means any foreign investor’s direct or indirect investment in China, including: (i)
establishing FIEs in China either individually or jointly with other investors; (ii) obtaining
stock shares, stock equity, property shares, or other similar interests in Chinese domestic
enterprises; (iii) investing in new projects in China either individually or jointly with other
investors; and (iv) making investment through other means provided by laws, administrative
regulations, or State Council provisions.
The Foreign Investment Law stipulates that China implements the management system of
pre-establishment national treatment plus a negative list to foreign investment and the
government generally will not expropriate foreign investment, except under special
circumstances, in which case it will provide fair and reasonable compensation to foreign
investors. Foreign investors are barred from investing in prohibited industries on the negative
list and must comply with the specified requirements when investing in restricted industries on
that list. When a license is required to enter a certain industry, the foreign investor must apply
for one, and the government must treat the application the same as one by a domestic
enterprise, except where laws or regulations provide otherwise. In addition, foreign investors
or FIEs are required to file information reports and foreign investment shall be subject to
national security review.
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The Provisions on Guiding the Orientation of Foreign Investment (ኬ̮ਠҳ༟˙Σ
), which was promulgated by the State Council on February 11, 2002, and became
effective on April 1, 2002, categorizes all foreign-invested projects into encouraged, permitted,
restricted, and prohibited projects. The Special Administrative Measures (Negative List) for
Foreign Investment Access (2021 Edition) (݄(૶ఊ) (2021
وwas promulgated by the NDRC and the MOFCOM on December 27, 2021, and became
effective on January 1, 2022, and lists the categories of restricted and prohibited foreign-
invested projects. Those not listed are permitted foreign-invested projects.
On December 30, 2019, MOFCOM and the State Administration for Market Regulation
(the “SAMR”), jointly promulgated the Measures for Information Reporting on Foreign
Investment (), which became effective on January 1, 2020.
Pursuant to the Measures for Information Reporting on Foreign Investment, where a foreign
investor carries out investment activities in China directly or indirectly, the foreign investor or
the foreign-invested enterprise shall submit the investment information to the competent
commerce department.
On December 19, 2020, the NDRC and the MOFCOM jointly promulgated the Measures
on the Security Review of Foreign Investment (), effective on
January 18, 2021, which sets forth the provisions concerning the security review mechanism
on foreign investment, including, amongst others, the types of investments subject to review,
review scopes and procedures. The Office of the Working Mechanism of the Security Review
of Foreign Investment (܃the “Office of the Working
Mechanism”) will be established under the NDRC which will lead the task together with the
MOFCOM. Foreign investor or relevant parties in China must declare the security review to
the Office of the Working Mechanism prior to (i) the investments in the military industry,
military industrial supporting and other fields relating to the security of national defense, and
investments in areas surrounding military facilities and military industry facilities; and (ii)
investments in important agricultural products, important energy and resources, important
equipment manufacturing, important infrastructure, important transport services, important
cultural products and services, important information technology and Internet products and
services, important financial services, key technologies and other important fields relating to
national security, and to obtain control in the target enterprise. “Control” as contemplated in
item (ii) of the preceding sentence exists when the foreign investor (a) holds over 50% equity
interests in the target enterprise, (b) has voting rights that can have material influence on the
resolutions of the board of directors or shareholders meeting of the target enterprise even when
it holds less than 50% equity interests in the target enterprise, or (c) has material influence on
the target enterprise’s business decisions, human resources, accounting and technology.
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REGULATIONS ON NEVS
On June 22, 2022, the CBIRC promulgated the Notice of Encouraging Non-banking
Institutions to Support the Development of New Energy V ehicles (อ
) (the “Non-banking Institutions Notice”), which regulates non-banking
institutions such as automobile finance companies, finance companies of enterprise groups and
financial leasing companies. The Non-banking Institutions Notice aims to promote the sale of
NEVs and the availability of financial services with respect to the sale of NEVs. The
Non-banking Institutions Notice encourages non-banking institutions to enhance the
application of financial technologies, optimize the use of big data and credit ratings and
improve the intelligence and precision level of loan approval when they provide loans and
financial leasing services in relation to the sale of NEVs. In addition, the CBIRC paid close
attention to the development of NEVs, which was reflected in the Guiding Opinions on
Strengthening Industry-finance Cooperation to Promote Industrial Green Development (׵
ኬจԈ), which was promulgated and became
effective on May 6, 2022, and the Guiding Opinions on Strengthening Industry-finance
Cooperation to Promote Industrial Green Development (̋੶ପፄΥЪપਗʈุၠЍ೯
ኬจԈ), which was promulgated and became effective on September 3, 2021.
REGULATIONS ON INTERNET INFORMATION SECURITY AND PRIV ACY
PROTECTION
The PRC government has enacted Laws with respect to internet information security and
protection of personal information from any abuse or unauthorized disclosure. Internet
information in China is regulated and restricted from a national security standpoint. The
SCNPC enacted the Decision on the Maintenance of Internet Security (ၪᚐʝᑌၣτΌ
) on December 28, 2000, which was amended on August 27, 2009 and may subject
persons to criminal liabilities in the PRC for any attempt to: (i) gain improper entry into a
computer or system of strategic importance; (ii) disseminate politically disruptive information;
(iii) leak state secrets; (iv) spread false commercial information; or (v) infringe intellectual
property rights. In addition, on December 16, 1997, the Ministry of Public Security (the
“MPS”), issued the Administration Measures on the Security Protection of Computer
Information Network with International Connections (ᚐ၍
), which took effect on December 30, 1997 and were amended by the State Council
on January 8, 2011, and which prohibits using the internet in ways which, among others, result
in a leakage of state secrets or a spread of socially destabilizing content. The MPS has
supervision and inspection powers in this regard, and relevant local security bureaus may also
have jurisdiction. If an internet information service provider violates any of these measures,
competent authorities may revoke its operating license and shut down its websites. The
Administrative Measures for the Graded Protection of Information Security (τΌഃॴ
) that was issued and took effect on June 22, 2007 requires entities that operate
and use information systems to fulfil the obligation of protection of the information system at
multi-level. Entities that operate the information systems at Grade II or above shall, within 30
days after the date when its security protection grade is determined, handle the record-filing
procedures at the local public security authority.
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Under the Several Provisions on Regulating the Market Order of Internet Information
Services (), issued by the MIIT in 2011, an internet
information service provider may not collect any personal information of a user or provide any
such information to third parties without the user’s consent. It must expressly inform the user
of the method, content and purpose of the collection and processing of such user’s personal
information and may only collect information to the extent necessary to provide its services.
An internet information service provider is also required to properly maintain users’ personal
information, and in case of any leak or likely leak of such information, it must take immediate
remedial measures and, in the event of a serious leak, report to the telecommunications
regulatory authority immediately.
Pursuant to the Decision on Strengthening the Protection of Online Information (׵
), issued by the SCNPC in 2012, and the Provisions on Protection
of Personal Information of Telecommunication and Internet Users (ɛ
), issued by the MIIT in 2013, any collection and use of a user’s personal
information must be subject to the consent of the user, be legal, rational and necessary and be
limited to specified purposes, methods and scopes. An internet information service provider
must also keep such information strictly confidential, and is further prohibited from divulging,
tampering with or destroying any such information, or selling or providing such information
to other parties. An internet information service provider is required to take technical and other
measures to prevent the collected personal information from any unauthorized disclosure,
damage or loss. Any violation of these laws may subject the internet information service
provider to warnings, fines, confiscation of illegal gains, revocation of licenses, cancellation
of filings, closure of websites or even criminal liabilities.
Pursuant to the Ninth Amendment to the Criminal Law (ࣩ
(ɘ)) issued by the SCNPC in August 2015 and which became effective in November 2015,
any internet service provider that fails to fulfil the obligations related to the internet
information security administration as required by applicable laws and refuses to rectify such
failures when ordered, shall be subject to criminal penalty. Pursuant to the Notice of the
Supreme People’s Court, the Supreme People’s Procuratorate and the MPS on Legally
Punishing Criminal Activities Infringing upon the Personal Information of Citizens ( ௰৷ɛ
), issued
in 2013, and the Interpretation of the Supreme People’s Court and the Supreme People’s
Procuratorate on Several Issues regarding Legal Application in Criminal Cases Infringing upon
the Personal Information of Citizens (ࡈ
༆ᙑ), which was issued on May 8, 2017 and took
effect on June 1, 2017, the following activities may constitute the crime of infringing upon a
citizen’s personal information: (i) providing a citizen’s personal information to specified
persons or releasing a citizen’s personal information online or through other methods in
violation of relevant national provisions; (ii) providing legitimately collected information
relating to a citizen to others without such citizen’s consent (unless the information is
processed, not traceable to a specific person and not recoverable); (iii) collecting a citizen’s
personal information in violation of applicable rules and regulations when performing a duty
or providing services; or (iv) obtaining a citizen’s personal information by purchasing,
accepting or exchanging such information in violation of applicable rules and regulations.
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The PRC Cyber Security Law (), which was promulgated
by the SCNPC in November 2016 and took effect on June 1, 2017, reaffirmed certain basic
principles and requirements on personal information protection previously specified in other
existing Laws, including those described above. It also requires a network operator, including
internet information service providers among others, to adopt technical measures and other
necessary measures in accordance with applicable Laws as well as compulsory national and
industrial standards to safeguard the safety and stability of network operations, effectively
respond to network security incidents, prevent illegal and criminal activities, and maintain the
integrity, confidentiality and availability of network data. Any individuals and organisations
that use networks must not endanger network security or use networks to engage in unlawful
activities, such as those endangering national security, economic order and the social order or
infringing the reputation, privacy, intellectual property rights and other lawful rights and
interests of others. Violations of the provisions and requirements under the PRC Cyber Security
Law may subject an internet information service provider to warnings, fines, confiscation of
illegal gains, revocation of licenses, cancellation of filings, closure of websites or even
criminal liabilities.
On 23 January 2019, the Office of the Central Cyberspace Affairs Commission (the
“OCCAC”), the MIIT, and the MPS, and the SAMR jointly issued the Notice on Special
Governance of Illegal Collection and Use of Personal Information via Apps (࢝App
ʮѓ), which restates the requirement of legal
collection and use of personal information, encourages APP operators to conduct security
certifications, and encourages search engines and APP stores to clearly mark and recommend
those certified APPs.
The Method for Identifying the Illegal Collection and Use of Personal Information by
Apps ( APP), promulgated jointly by the MIIT,
the MPS, the OCCAC and the SAMR in November 2019 specifies the practices of illegal
collection and use of personal information, providing reference for regulatory authorities and
offering guidance for App operators’ self-examination and self-correction under the current
regulatory environment. We have strictly complied with the aforesaid regulations and have not
received any inquiries or been asked for correction from the regulatory authorities so far.
The PRC Civil Code (Պ) that was issued by the NPC on May
28, 2020 and was effective on January 1, 2021 provides that natural persons’ personal
information shall be protected by law, and the processing of personal information shall be
subject to the principle of legitimacy, rightfulness and necessity, with no excessive processing.
On June 10, 2021, the SCNPC issued the Data Security Law of the PRC ( ʕശɛ͏΍
) to regulate data processing activities and security supervision in the PRC,
which took effect on September 1, 2021. According to the Data Security Law of the PRC, data
processing activities shall be carried out in accordance with PRC laws and regulations,
establishing and improving the data security management system of the whole process,
organizing and carrying out data security education and training, and taking corresponding
technical measures and other necessary measures to guarantee data security. Where data
processing activities are carried out through the Internet and other information networks, the
above-mentioned data security protection obligations shall be fulfilled on the basis of the
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hierarchical network security protection system. In carrying out data processing activities, risk
monitoring shall be strengthened, and remedial measures shall be taken immediately when data
security defects, loopholes and other risks are found. In the event of a data security incident,
the processors of data shall take immediate measures to deal with it, inform the user in time
and report to the competent authorities in accordance with relevant provisions. The processors
of important data shall, in accordance with relevant provisions, carry out regular risk
assessments of their data processing activities and submit risk assessment reports to the
competent authorities. The Data Security Law of the PRC provides a national data security
review system, under which data processing activities that affect or may affect national security
shall be reviewed. Any organization or individual carrying out data processing activities that
violates the Data Security Law of the PRC shall bear the corresponding civil, administrative
or criminal liability depending on the specific circumstances.
On August 20, 2021, the SCNPC promulgated the Personal Information Protection Law
() (the “PIPL”), which took effect on November 1, 2021.
Pursuant to the PIPL, a personal information processor may process the personal information
of an individual only under the following circumstances: (i) where consent is obtained from the
individual; (ii) where it is necessary for the execution or performance of a contract to which
the individual is a party, or where it is necessary for carrying out human resource management
pursuant to employment rules legally adopted or a collective contract legally concluded; (iii)
where it is necessary for performing a statutory responsibility or statutory obligation; (iv)
where it is necessary in response to a public health emergency, or for protecting the life, health
or property safety of a natural person in the case of an emergency; (v) where the personal
information is processed within a reasonable scope to carry out any news reporting, supervision
by public opinions or any other activity for public interest purposes; (vi) where the personal
information, which has already been disclosed by an individual or otherwise legally disclosed,
is processed within a reasonable scope; or (vii) any other circumstance as provided by laws or
administrative regulations. In principle, the consent of an individual must be obtained for the
processing of his or her personal information, except under the circumstances of the
aforementioned items (ii) to (vii). Where personal information is to be processed based on the
consent of an individual, such consent shall be a voluntary and explicit indication of intent
given by such individual on a fully informed basis. If laws or administrative regulations
provide that the processing of personal information shall be subject to the separate consent or
written consent of the individual concerned, such provisions shall prevail.
On November 14, 2021, the CAC released the Regulations on the Administration of Cyber
Data Security (Draft for Comments) ( ၣഖᅰኽτΌ၍ଣૢԷ(ᅄӋจԈᇃ)) (the “Draft
Regulations”), which stipulated that a data processor would be subject to mandatory
cybersecurity review under relevant rules and regulations if such data processor (i) engages in
the merger, reorganization or division of internet platform operators that have gathered a large
number of data resources related to national security, economic development and public
interests, which affects or may affect national security; (ii) processes personal information of
more than one million users and seeks to be listed abroad; (iii) seeks to be listed on the Hong
Kong Stock Exchange and such listing affects or may affect national security; or (iv) engages
in other data processing activities that affect or may affect national security. However, the
Draft Regulations did not provide further clarification on “affect or may affect national
security.” As of the Latest Practicable Date, the Draft Regulations had not been formally
adopted, and it remains uncertain when and in what form the Draft Regulations will be enacted.
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On December 28, 2021, the CAC, together with other relevant departments, jointly
promulgated the Cybersecurity Review Measures (), which became
effective on February 15, 2022. According to the Cybersecurity Review Measures, (i) the
purchase of network products and services by a critical information infrastructure operator, or
the data processing activities of a network platform operator that affect or may affect national
security shall be subject to cybersecurity review; (ii) a network platform operator who
possesses personal information of more than one million users are subject to mandatory
cybersecurity review before it could be listed abroad; and (iii) the relevant government
authorities may also initiate cybersecurity review if such government authorities determine a
network product, service or data processing activity affects or may affect national security. We
possess the personal information of more than one million individuals, which were collected
primarily by automobile dealerships that procured our operation management services from
their customers and stored on our Smart Star system. Nevertheless, our PRC Legal Advisors are
of the view that our proposed listing on the Hong Kong Stock Exchange would not trigger
mandatory application for cybersecurity review since listing on the Hong Kong Stock
Exchange is not treated as listing abroad under the Cybersecurity Review Measures based on
our PRC Legal Advisors’ consultation with the China Cybersecurity Review Technology and
Certification Center (ҦஔၾႩᗇʕː) on April 17, 2023.
Our PRC Legal Advisors are also of the view that we were in compliance with the
Cybersecurity Review Measures and the Draft Regulations (if implemented in their current
forms) in all material aspects, considering that (i) we have implemented various internal
control measures and policies to ensure data security and privacy protection to comply with
applicable cybersecurity and data privacy laws and regulations as disclosed in
“Business—Pledged V ehicle Monitoring Services—Data Security and Privacy;” (ii) during the
Track Record Period and up to the Latest Practicable Date, we had not experienced any
material data or personal information leakage or loss, infringement of data or personal
information, or information security incident; (iii) during the Track Record Period and up to
the Latest Practicable Date, we had not been subject to any fines, administrative penalties, or
other sanctions by any relevant regulatory authorities in the PRC in relation to violation of
cybersecurity, data security and personal data protection laws and regulations; (iv) we had not
been notified by any Chinese government authorities of being classified as a critical
information infrastructure operator in accordance with the CII Regulations, nor had we been
involved in any 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 and have not been
inquired, investigated, warned or penalized by any Chinese government authorities in this
respect; and (v) we will continually monitor our compliance status in accordance with the latest
changes in applicable regulatory requirements regarding cybersecurity and data privacy laws,
and enhance our data processing practices in a timely manner.
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REGULATIONS ON ANTI-MONEY LAUNDERING
The PRC Anti-money Laundering Law (), which became
effective in 2007, sets forth the principal anti-money laundering requirements applicable to
financial institutions as well as non-financial institutions with anti-money laundering
obligations, including the adoption of precautionary and supervisory measures, establishment
of various systems for client identification, retention of clients’ identification information and
transactions records, and reports on large transactions and suspicious transactions. Financial
institutions subject to the PRC Anti-money Laundering Law include banks, credit unions, trust
investment companies, stock brokerage companies, futures brokerage companies, insurance
companies, fund management companies and other financial institutions as listed and
published by the PBOC, while the list of the non-financial institutions with anti-money
laundering obligations will be jointly published by the PBOC and other related authorities of
the State Council. The PBOC and other government authorities issued a series of administrative
rules and regulations to specify the antimony laundering obligations of financial institutions
and certain non-financial institutions, such as fund sales institutions. However, the State
Council has not yet promulgated a list of the non-financial institutions subject to anti-money
laundering obligations.
REGULATIONS ON ANTI-CORRUPTION
The Interim Provisions on the Prohibition of Commercial Bribery Behavior issued by the
State Administration for Industry and Commerce (ຫ˟ਠุ༡༤Б
) which came into effect on November 15, 1996, further stipulated the
constitution and legal liabilities of commercial bribery. The United Nations Convention against
Corruption () was adopted by the General Assembly of the United
Nations on October 31, 2003. The convention aims to promote and enhance various measures
for preventing and combating corruption in a more effective and powerful way, and to
promote,facilitate and support international cooperation and technical assistance in preventing
and combating corruption, including asset recovery, encouraging integrity, accountability and
proper management of public affairs and properties. The PRC government ratified this
convention in 2005 with reservations.
REGULATIONS ON ANTI-UNFAIR COMPETITION AND ANTI-MONOPOLY
According to the Anti-Unfair Competition Law of the PRC ( ʕശɛ͏΍ձ਷ˀʔ͍຅
) (the “Anti-Unfair Competition Law”), which was adopted by the SCNPC on
September 2, 1993, became effective as of December 1, 1993, and last amended on April 23,
2019, unfair competition refers to that the operator disrupts the market competition order and
damages the legitimate rights and interests of other operators or consumers in violation of the
provisions of the Anti-unfair Competition Law in the production and operating activities.
Pursuant to the Anti-unfair Competition Law, operators shall abide by the principle of
voluntariness, equality, impartiality, integrity and adhere to laws and business ethics during
market transactions. Operators in violation of the Anti-unfair Competition Law shall bear
corresponding civil, administrative or criminal liabilities depending on the specific
circumstances.
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The Anti-monopoly Law of the PRC () promulgated by the
Standing Committee of the National People’s Congress, or the Anti-monopoly Law, which
became effective on August 1, 2022, prohibits undertakings from monopolistic conducts such
as:
 Entering into monopolistic agreements, which means agreements or concerted
practices to eliminate or restrict competition. For example, agreements for fixing or
altering prices of goods, limiting the output or sales volume of goods, fixing the
price of goods for resale to third parties, among others, unless such agreements
satisfy the specific exemptions prescribed therein, such as improving technologies
or increasing the efficiency and competitiveness of medium- and small-sized
undertakings. Relevant conducts may lead to an order to cease the relevant
activities, and confiscation of illegal gains and fines (from 1% to 10% of sales
revenue in the preceding year, or a fine up to RMB5,000,000 if the intended
monopolistic agreement has not been performed);
 Abuse of dominant market position. For example, selling goods at unfairly high
prices or purchasing goods at unfairly low prices, selling goods at prices below cost
or refusing to trade with a trading party without any justifiable cause. Relevant
conducts may lead to an order to cease the relevant activities, confiscation of the
illegal gains and fines (from 1% to 10% of sales revenue in the preceding year); and
 Concentration of undertakings which has or may have an effect of eliminating or
restricting competition. Pursuant to the Anti-monopoly Law and the Rules of the
State Council on Declaration Threshold for Concentration of Undertakings ( ਷ਕ
) as amended on September 18, 2018, require
that the anti-monopoly enforcement agency (i.e., the State Administration for
Market Regulation) shall be notified in advance of any concentration of undertaking
if certain filing thresholds (i.e., during the previous fiscal year, (i) the total global
turnover of all operators participating in the transaction exceeded RMB10 billion in
the preceding fiscal year and at least two of these operators each had a turnover of
more than RMB400 million within China in the preceding fiscal year, or (ii) the total
turnover within China of all the operators participating in the concentration
exceeded RMB2 billion in the preceding fiscal year, and at least two of these
operators each had a turnover of more than RMB400 million within China in the
preceding fiscal year) are triggered, and no concentration shall be implemented until
the anti-monopoly enforcement agency clears the anti-monopoly filing.
In March 2018, the SAMR was formed as a new regulatory agency to take over, among
other things, the anti-monopoly enforcement functions from the relevant departments under the
MOFCOM, the NDRC and the SAIC, respectively. Since its inception, the SAMR has
continued to strengthen its anti-monopoly enforcement. The SAMR issued the Notice
on Anti-monopoly Enforcement Authorization ()o n
December 28, 2018, which grants authorizations to the SAMR’s province-level branches for
anti-monopoly enforcement within their respective jurisdictions, and issued the Anti-monopoly
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Compliance Guideline for Operators () on September 11, 2020,
which applies to operators under the Anti-monopoly Law for establishing an anti-monopoly
compliance management system and preventing anti-monopoly compliance risks. On
November 18, 2021, the National Anti-monopoly Bureau was officially established to
formulate anti-monopoly institutional measures and guidelines, implement anti-monopoly law
enforcement, undertake the guidance for enterprises’ anti-monopoly action responding abroad
and so on.
According to the Anti-monopoly Guidelines of the Anti-monopoly Commission under the
State Council in the Field of Intellectual Property Rights (ᗆପ
), which was promulgated and became effective on January 4, 2019, or
the Anti-monopoly IP Rights Guidelines, the Anti-monopoly Law is applicable when the
operator abuses intellectual property rights and conducts acts that exclude or restrict
competition. Pursuant to the Anti-monopoly IP Rights Guidelines, analysis of whether the
operator has abused intellectual property rights to exclude or restrict competition shall follow
the following basic principles: (i) the same regulatory standards for other forms of property
rights shall be adopted and the relevant provisions of the Anti-monopoly Law of the PRC shall
be followed; (ii) the characteristics of intellectual property rights shall be taken into account;
(iii) the operator shall not be presumed to have a dominant market position in the relevant
market because of its ownership of intellectual property rights; and (iv) the positive impact of
relevant behaviors on efficiency and innovation shall be considered on a case-by-case basis.
On June 26, 2019, the SAMR issued the Interim Provisions on the Prohibitions of Acts
of Abuse of Dominant Market Positions (), which
took effect on September 1, 2019 and was amended on March 24, 2022 to further prevent and
prohibit the abuse of dominant market positions.
On June 24, 2022, the Decision of the Standing Committee of the National People’s
Congress to Amend the Anti-monopoly Law of the People’s Republic of China ( Ό਷ɛ͏˾
ҷ<ج>), or the Decision to Amend
the Anti-monopoly Law, was adopted and became effective on August 1, 2022. The Decision
to Amend the Anti-monopoly Law strengthens the regulation on the internet platforms,
requiring that undertakings shall not use data and algorithms, technologies, capital advantages,
platform rules, and other means to engage in monopolistic conduct; and also escalates in full
scale the administrative penalties for monopolistic conducts, for the failure to notify the
anti-monopoly enforcement agency on the proposed concentration of undertakings, the State
Council Anti-monopoly Enforcement Agency may order to reinstate the original status prior to
the concentration and impose a fine up to ten percent of the operator’s last year’s sales revenue,
provided that the concentration of undertakings has or may have an effect on excluding or
limiting competition; if the concentration does not have the effect on excluding or limiting
competition, a fine up to RMB5,000,000 may be imposed on operators. Since such provisions
are relatively new, uncertain still remains as to the interpretation and implementation of such
laws and regulations.
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As advised by our PRC Legal Advisors and based on confirmation from our Directors,
during the Track Record Period and up to the Latest Practicable Date, we had never (i) entered
into any monopolistic agreements; (ii) abused our dominant market position; or (iii) engaged
in illegal concentration of undertakings, which are prohibited under the Anti-monopoly Law
and relevant laws and regulations. Based on the foregoing, our PRC Legal Advisors are of the
view that we had not been involved in any material non-compliance with relevant anti-
monopoly laws and regulations during the Track Record Period and up to the Latest Practicable
Date.
REGULATIONS ON FOREIGN EXCHANGE
Regulation on foreign currency exchange
The principal regulations governing foreign currency exchange in the PRC are the
Foreign Exchange Administration Regulations of the PRC ( ʕശɛ͏΍ձ਷̮ි၍ଣૢ
Է), most recently amended in 2008. Under PRC foreign exchange regulations, payments of
current account items, such as profit distributions, interest payments and 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. By contrast, approval
from or registration with appropriate government authorities is required where RMB is to be
converted into foreign currency and remitted out of China to pay capital account items, such
as direct investments, repayment of foreign currency-denominated loans, repatriation of
investments and investments in securities outside of China.
In 2012, SAFE promulgated the Circular of Further Improving and Adjusting Foreign
Exchange Administration Policies on Foreign Direct Investment (ٜ
) (the “Circular 59”), which substantially amends and simplifies
the current foreign exchange procedure. Pursuant to Circular 59, the opening of various special
purpose foreign exchange accounts, such as pre-establishment expenses accounts, foreign
exchange capital accounts and guarantee accounts, the reinvestment of RMB proceeds derived
by foreign investors in the PRC, and the remittance of foreign exchange profits and dividends
by a foreign-invested enterprise to its foreign shareholders no longer require the approval or
verification of SAFE, and multiple capital accounts for the same entity may be opened in
different provinces, which was not possible previously. In 2013, SAFE specified that the
administration by SAFE or its local branches over direct investment by foreign investors in the
PRC must be conducted by way of registration and banks must process foreign exchange
business relating to the direct investment in the PRC based on the registration information
provided by SAFE and its local branches. In February 2015, SAFE promulgated the Notice on
Further Simplifying and Improving the Administration of the Foreign Exchange Concerning
Direct Investment (). Instead of
applying for approvals regarding foreign exchange registrations of foreign direct investment
and overseas direct investment from SAFE, entities and individuals may apply for such foreign
exchange registrations from qualified banks. The qualified banks, under the supervision of
SAFE, may directly review the applications and conduct the registration.
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In March 2015, SAFE promulgated the Circular of the SAFE on Reforming the
Management Approach regarding the Settlement of Foreign Capital of Foreign-invested
Enterprise () (the
“Circular 19”), which expands a pilot reform of the administration of the settlement of the
foreign exchange capitals of foreign-invested enterprises nationwide. Circular 19 replaced both
the Circular of the SAFE on Issues Relating to the Improvement of Business Operations with
Respect to the Administration of Foreign Exchange Capital Payment and Settlement of
Foreign-invested Enterprises (˕˹ഐි
) (the “Circular 142”), and the Circular of the SAFE on
Issues concerning the Pilot Reform of the Administrative Approach Regarding the Settlement
of the Foreign Exchange Capitals of Foreign-invested Enterprises in Certain Areas (̮
ஷ
) (the “Circular 36”). Circular 19 allows all foreign-invested enterprises established in the
PRC to settle their foreign exchange capital on a discretionary basis according to the actual
needs of their business operation, provides the procedures for foreign invested companies to
use RMB converted from foreign currency-denominated capital for equity investments and
removes certain other restrictions that had been provided in Circular 142. However, Circular
19 continues to prohibit foreign-invested enterprises from, among other things, using RMB
funds converted from their foreign exchange capital for expenditure beyond their business
scope and providing entrusted loans or repaying loans between non-financial enterprises. SAFE
promulgated the Notice of the SAFE on Reforming and Standardising the Foreign Exchange
Settlement Management Policy of Capital Account (ձ஝ᇍ༟͉ධ
) (the “Circular 16”), effective June 2016, which reiterates some of
the rules set forth in Circular 19. Circular 16 provides that discretionary foreign exchange
settlement applies to foreign exchange capital, foreign debt offering proceeds and remitted
foreign listing proceeds, and the corresponding RMB capital converted from foreign exchange
may be used to extend loans to related parties or repay inter-company loans (including
advances by third parties). However, there are substantial uncertainties with respect to Circular
16’s interpretation and implementation in practice. Circular 19 or Circular 16 may delay or
limit us from using the proceeds of offshore offerings to make additional capital contributions
to our PRC subsidiaries and any violations of these circulars could result in severe monetary
or other penalties.
In January 2017, SAFE promulgated the Circular on Further Improving Reform of
Foreign Exchange Administration and Optimising Genuineness and Compliance V erification
() (the “Circular 3”), which
stipulates several capital control measures with respect to the outbound remittance of profits
from domestic entities to offshore entities, including (i) banks must check whether the
transaction is genuine by reviewing board resolutions regarding profit distribution, original
copies of tax filing records and audited financial statements, and (ii) domestic entities must
retain income to account for previous years’ losses before remitting any profits. Moreover,
pursuant to Circular 3, domestic entities must explain in detail the sources of capital and how
the capital will be used, and provide board resolutions, contracts and other proof as a part of
the registration procedure for outbound investment.
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Regulations on foreign exchange registration of overseas investment by PRC residents
In 2014, SAFE issued the SAFE Circular on Relevant Issues Concerning Foreign
Exchange Control on Domestic Residents’ Offshore Investment and Financing and Roundtrip
Investment Through Special Purpose V ehicles (ٙ
) (the “Circular 37”), replacing the
SAFE Circular on Issues Concerning the Regulation of Foreign Exchange in Equity Finance
and Return Investments by Domestic Residents through Offshore Special Purpose V ehicles
(ஷ
). Circular 37 regulates foreign exchange matters in relation to the use of special purpose
vehicles by PRC residents or entities to seek offshore investment and financing or conduct
round trip investment in China. Under Circular 37, a “special purpose vehicle” refers to an
offshore entity established or controlled, directly or indirectly, by PRC residents or entities for
the purpose of seeking offshore financing or making offshore investment, using legitimate
onshore or offshore assets or interests, while “round trip investment” refers to direct
investment in China by PRC residents or entities through special purpose vehicles, namely,
establishing foreign invested enterprises to obtain ownership, control rights and management
rights. Circular 37 provides that, before making a contribution into a special purpose vehicle,
PRC residents or entities are required to complete foreign exchange registration with SAFE or
its local branch.
In 2015, SAFE promulgated the Notice on Further Simplifying and Improving the
Administration of the Foreign Exchange Concerning Direct Investment (ආɓӉᔊʷձ
). This notice has amended Circular 37 by requiring PRC
residents or entities to register with qualified banks rather than SAFE or its local branch in
connection with their establishment or control of an offshore entity established for the purpose
of overseas investment or financing. PRC residents or entities who had contributed legitimate
onshore or offshore interests or assets to special purpose vehicles but had not registered as
required before the implementation of the Circular 37 must register their ownership interests
or control in the special purpose vehicles with qualified banks. An amendment to the
registration is required if there is a material change with respect to the special purpose vehicle
registered, such as any change of basic information (including change of the PRC resident,
name and operation term), increases or decreases in investment amount, transfers or exchanges
of shares, and mergers or divisions. Failure to comply with the registration procedures set forth
in Circular 37 and the subsequent notice, or making misrepresentations or failing to disclose
the control of the foreign-invested enterprise that is established through round-trip investment,
may result in restrictions being imposed on the foreign exchange activities of the relevant
foreign-invested enterprise, including payment of dividends and other distributions, such as
proceeds from any reduction in capital, share transfer or liquidation, to its offshore parent or
affiliate, and the capital inflow from the offshore parent, and may also subject relevant PRC
residents or entities to penalties under PRC foreign exchange administration regulations.
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Regulations on stock incentive plans
SAFE promulgated the Circular of the SAFE on Issues concerning the Administration of
Foreign Exchange Used for Domestic Individuals’ Participation in Equity Incentive Plans of
Companies Listed Overseas (ྌ
) (the “Stock Option Rules”), in February 2012. Under the Stock
Option Rules and other relevant rules and regulations, PRC residents who participate in a stock
incentive plan in an overseas publicly listed company are required to register with SAFE or its
local branches and complete certain other procedures. Participants in a stock incentive plan
who are PRC residents must retain a qualified PRC agent, which could be a PRC subsidiary of
the overseas publicly listed company or another qualified institution selected by the PRC
subsidiary, to conduct the SAFE registration and other procedures with respect to the stock
incentive plan on behalf of the participants. In addition, the PRC agent is required to amend
the SAFE registration with respect to the stock incentive plan if there is any material change
to the stock incentive plan or the PRC agent or any other material changes. The PRC agent must
apply to SAFE or its local branches on behalf of the PRC residents who have the right to
exercise the employee share options for an annual quota for the payment of foreign currencies
in connection with the PRC residents’ exercise of the employee share options. The foreign
exchange proceeds received by the PRC residents from the sale of shares under the stock
incentive plans granted and dividends distributed by the overseas listed companies must be
remitted into the bank accounts in the PRC opened by the applicable PRC agent before
distribution to such PRC residents.
Regulations on dividend distribution
The principal regulations governing distribution of dividends of wholly foreign-invested
enterprises include the PRC Company Law, the Foreign Investment Law and the Implementing
Rules of the Foreign Investment Law. Under these laws, foreign-invested enterprises in the
PRC may pay dividends only out of their accumulated after-tax profits, if any, determined in
accordance with PRC accounting standards and regulations. In addition, foreign-invested
enterprises in the PRC are required to allocate at least 10% of their respective accumulated
profits each year, if any, to fund certain reserve funds until these reserves have reached 50%
of the registered capital of the enterprises. A PRC company shall not 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. Foreign-invested
enterprises may, at their discretion, allocate a portion of their after-tax profits based on PRC
accounting standards to staff welfare and bonus funds. These reserves are not distributable as
cash dividends.
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REGULATIONS ON INTELLECTUAL PROPERTY
Copyright
The PRC Copyright Law () was last amended on February
26, 2010 and came into effect on April 1, 2010. A new Copyright Law was published on
November 11, 2020, and will become effective on June 1, 2021. Copyrights include personal
rights such as the right of publication and that of attribution, as well as property rights such
as the right of production and that of distribution. Reproducing, distributing, performing,
projecting, broadcasting or compiling a work or communicating the same to the public via an
information network without permission from the owner of the copyright therein, unless
otherwise provided in the Copyright Law, shall constitute infringements of copyrights. The
infringer shall, according to the circumstances of the case, undertake to cease the infringement,
take remedial action, and offer an apology, pay damages, etc.
The Measures for the Registration of Computer Software Copyright (ၑዚழ΁ഹЪ
) (the “Software Copyright Measures”), promulgated by the NCA on February
20, 2002, regulates registrations of software copyright, exclusive licensing contracts for
software copyright and transfer contracts. The NCA shall be the competent authority for the
nationwide administration of software copyright registration, and the Copyright Protection
Centre of China (the “CPCC”) is designated as the software registration authority. The CPCC
shall grant registration certificates to the Computer Software Copyrights applicants which
conforms to the provisions of both the Software Copyright Measures and the Regulations on
Computer Software Protection (Revised in 2013) (ᚐૢԷ(2013ࠈࡌ.))
Trademark
Pursuant to the PRC Trademark Law (), which was last
revised on April 23, 2019 and came into effect on November 1, 2019, the right to exclusive use
of a registered trademark shall be limited to trademarks which have been approved for
registration and to goods for which the use of trademark has been approved. The period of
validity of a registered trademark shall be ten years from the day the registration is approved.
Using a trademark that is identical with or similar to a registered trademark in connection with
the same or similar goods without the authorization of the owner of the registered trademark
constitutes an infringement of the exclusive right to use a registered trademark. The infringer
shall undertake to cease the infringement, take remedial action, and pay damages, etc.
Patent
Patents are protected by the Patent Law of the PRC () which
was promulgated on March 12, 1984 and last amended on October 17, 2020 with effect from
June 1, 2021. A patentable invention or utility model must meet three conditions: novelty,
inventiveness and practical applicability. Patents cannot be granted for scientific discoveries,
rules and methods for intellectual activities, methods used to diagnose or treat diseases, animal
and plant breeds, methods of nuclear transformation or substances obtained by means of
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nuclear transformation. The Patent Office under the National Intellectual Property
Administration is responsible for receiving, examining and approving patent applications. A
patent is valid for a twenty-year term for an invention, a ten-year term for a utility model and
a fifteen-year term for a design. Except under certain specific circumstances provided by law,
any third-party user must obtain consent or a proper license from the patent owner to use the
patent, or else the use will constitute an infringement of the rights of the patent holder.
Domain name
Pursuant to the Measures for the Administration of Internet Domain Names ( ʝᑌၣਹ
), which was promulgated on August 24, 2017 and came into effect on November
1, 2017, “domain name” shall refer to the character mark of hierarchical structure, which
identifies and locates a computer on the internet and corresponds to the Internet protocol
address of that computer. The principle of “first come, first serve” is followed for the domain
name registration service. After completing the domain name registration, the applicant
becomes the holder of the domain name registered by them. Furthermore, the holder shall pay
operation fees for registered domain names on schedule. If the domain name holder fails to pay
the corresponding fees as required, the original domain name registrar shall write it off and
notify the holder of the domain name in written form.
REGULATIONS ON TAX
Enterprise Income Tax
The Law of the PRC on Enterprise Income Tax () and
The Regulations for the Implementation of the Law on Enterprise Income Tax ( ʕശɛ͏΍
ૢԷ) (collectively, the “EIT Laws”) were promulgated on March 16,
2007 and December 6, 2007, respectively and were most recently amended on December 29,
2018 and April 23, 2019, respectively. According to the EIT Laws, taxpayers consist of resident
enterprises and non-resident enterprises. Resident enterprises are defined as enterprises that are
established in the PRC in accordance with PRC laws, or that are established in accordance with
the laws of foreign countries but whose actual or de facto control is administered from within
the PRC. Non-resident enterprises are defined as enterprises that are set up in accordance with
the laws of foreign countries and whose actual administration is conducted 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 Laws
and relevant implementing regulations, a uniform EIT rate of 25% is applicable. However, if
non-resident enterprises have not formed permanent establishments or premises in the PRC, or
if they have formed permanent establishment institutions or premises in the PRC but there is
no actual relationship between the relevant income derived in the PRC and the established
institutions or premises set up by them, the enterprise income tax is, in that case, set at the rate
of 10% for their income sourced from inside the PRC.
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Notice Regarding the Determination of Chinese-Controlled Offshore Incorporated
Enterprises as the PRC Tax Resident Enterprises on the Basis of De Facto Management
Bodies (ஷ
) (the “Circular 82”) promulgated by the STA on 22 April 2009 and amended on January
29, 2014 and December 29, 2017, sets out the standards and procedures for determining
whether the “de facto management body” of an enterprise registered outside of the PRC and
controlled by PRC enterprises or PRC enterprise groups is located within the PRC.
According to Circular 82, a Chinese-controlled offshore incorporated enterprise will be
regarded as a PRC tax resident by virtue of having a “de facto management body” in the PRC
and will be subject to PRC EIT on its worldwide income only if all of the following criteria
are met: (i) the primary location of the day-to-day operation 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, and board and shareholders meeting
minutes are located or maintained in the PRC; and (iv) 50% or more of voting board members
or senior executives habitually reside in the PRC.
The EIT Laws permit certain High and New Technologies Enterprises, or HNTEs, to
enjoy a reduced 15% EIT rate subject to these HNTEs meeting certain qualification criteria. In
addition, the relevant EIT laws and regulations also provide that entities recognized as
Software Enterprises are able to enjoy a tax holiday consisting of a two-year-exemption
commencing from their first profitable calendar year and a 50% reduction in ordinary tax rate
for the following three calendar years, while entities qualified as key software enterprises can
enjoy a preferential EIT rate of 10%.
The Announcement on Issues of Enterprise Income Tax on Indirect Transfers of Assets by
Non-PRC Resident Enterprises (ʮ
ѓ) (the “Announcement 7”) was issued by the STA on February 3, 2015 and most recently
amended pursuant to the Announcement on Issues Concerning the Withholding of Enterprise
Income Tax at Source on Non-PRC Resident Enterprises, which was issued by the STA on
October 17, 2017 and became effective as of 1 December 2017. Pursuant to Announcement 7,
an “indirect transfer” of assets, including equity interests in a PRC resident enterprise, by
non-PRC resident enterprises may be recharacterized and treated as a direct transfer of PRC
taxable assets, if the arrangement does not have a reasonable commercial purpose and was
established for the purpose of avoiding payment of PRC EIT. As a result, gains derived from
an indirect transfer may be subject to PRC EIT. According to Announcement 7, “PRC taxable
assets” include assets attributed to an establishment or a place of business in the PRC,
immovable properties in the PRC, and equity investments in PRC resident enterprises. In
respect of an indirect offshore transfer of assets of a PRC establishment or place of business,
the relevant gain is to be regarded as effectively connected with the PRC establishment or a
place of business and therefore included in its EIT filing, and would consequently be subject
to PRC EIT at a rate of 25%. Where the underlying transfer relates to the immovable properties
in the PRC or to equity investments in a PRC resident enterprise, which is not effectively
connected to a PRC establishment or a place of business of a non-resident enterprise, a PRC
EIT at 10% would apply, subject to available preferential tax treatment under applicable tax
treaties or similar arrangements, and the party who is obligated to make the transfer payments
has the withholding obligation. There is uncertainty as to the implementation details of
Announcement 7.
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V AT and Business Tax
Before August 2013 and pursuant to applicable PRC tax regulations, any entity or
individual conducting business in the service industry is generally required to pay a business
tax at the rate of 5% on the revenue generated from providing services. However, if the services
provided are related to technology development and transfer, the business tax may be exempted
subject to approval by the relevant tax authorities.
In November 2011, the MOF and the STA promulgated the Pilot Plan for Imposition of
V alue-Added Tax to Replace Business Tax (). In May and
December 2013, April 2014, March 2016 and July 2017, the MOF and the STA promulgated
five circulars to further expand the scope of services that are to be subject to V A T instead of
business tax. Pursuant to these tax rules, from August 1, 2013, a V A T was imposed to replace
the business tax in certain service industries, including technology services and advertising
services, and from May 1, 2016, V A T replaced business tax in all industries, on a nationwide
basis. On November 19, 2017, the State Council further amended the Interim Regulation of the
PRC on V alue Added Tax (೼ᅲБૢԷ) to reflect the normalization
of the pilot program. The V A T rates generally applicable are simplified as 17%, 11%, 6% and
0%, and the V A T rate applicable to the small-scale taxpayers is 3%. Unlike business tax, a
taxpayer is allowed to offset the qualified input V A T paid on taxable purchases against the
output V A T chargeable on the revenue from services provided.
On April 4, 2018, the MOF and the STA issued the Notice on Adjustment of V A T Rates
(), which came into effect on May 1, 2018. According to the
abovementioned notice, the taxable goods previously subject to V A T rates of 17% and 11%
respectively become subject to lower V A T rates of 16% and 10%, respectively starting from
May 1, 2018.
On March 20, 2019, the MOF, the STA and the General Administration of Customs issued
the Announcement on Policies for Deepening the V A T Reform (݁
ʮѓ) (the “Announcement 39”), which came into effect on April 1, 2019, to further
slash V A T rates. According to Announcement 39, (i) for general V A T payers’ sales activities or
imports previously subject to V A T at an existing applicable rate of 16% or 10%, the applicable
V A T rate is adjusted to 13% or 9% respectively; (ii) for the agricultural products purchased by
taxpayers to which an existing 10% deduction rate is applicable, the deduction rate is adjusted
to 9%; (iii) for the agricultural products purchased by taxpayers for production or
commissioned processing, which are subject to V A T at 13%, the input V A T will be calculated
at a 10% deduction rate; (iv) for the exportation of goods or labor services that are subject to
V A T at 16%, with the applicable export refund at the same rate, the export refund rate is
adjusted to 13%; and (v) for the exportation of goods or cross-border taxable activities that are
subject to V A T at 10%, with the export refund at the same rate, the export refund rate is
adjusted to 9%.
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REGULATIONS ON EMPLOYMENT AND SOCIAL WELFARE
The Labor Contract Law
According to the Labor Law of the PRC () promulgated on
July 5, 1994 and last amended on December 29, 2018, enterprises and institutions shall
establish and improve their system of workplace safety and sanitation, strictly abide by state
rules and standards on workplace safety, educate laborers in labor safety and sanitation in the
PRC. Labor safety and sanitation facilities shall comply with state-fixed standards. Enterprises
and institutions shall provide laborers with a safe workplace and sanitation conditions which
are in compliance with state stipulations and the relevant articles of labor protection. The PRC
Labor Contract Law (), which was implemented on January 1,
2008 and amended on December 28, 2012, is primarily aimed at regulating employee/employer
rights and obligations, including matters with respect to the establishment, performance and
termination of labor contracts. Pursuant to the PRC Labor Contract Law, labor contracts shall
be concluded in writing if labor relationships are to be or have been established between
enterprises or institutions and the laborers. Enterprises and institutions are forbidden to force
laborers to work beyond the time limit and employers shall pay laborers for overtime work in
accordance with the laws and regulations. In addition, labor wages shall not be lower than local
standards on minimum wages and shall be paid to laborers in a timely manner.
Social Insurance and Housing Fund
As required under the Regulation of Insurance for Labor Inury (ᎈૢԷ)
implemented on 1 January 2004 and amended on December 20, 2010, the Provisional Measures
for Maternity Insurance of Employees of Corporations ()
implemented on January 1, 1995, the Decisions on the Establishment of a Unified Program for
Basic Old-Aged Pension Insurance for Employees of Corporations of the State Council ( ਷
) issued on July 16, 1997, the
Decisions on the Establishment of the Medical Insurance Program for Urban Workers of the
State Council () promulgated on
December 14, 1998, the Unemployment Insurance Measures (ᎈૢԷ) promulgated
on January 22, 1999 and the Social Insurance Law of the PRC (ᎈ
) implemented on July 1, 2011 and amended on December 29, 2018, enterprises are
obliged to provide their employees in the PRC with welfare schemes covering pension
insurance, unemployment insurance, maternity insurance, labor injury insurance and medical
insurance. These payments are made to local administrative authorities and any employer that
fails to contribute may be fined and ordered to make up within a prescribed time limit.
In accordance with the Regulations on the Management of Housing Funds (ʮጐ
၍ଣૢԷ) which was promulgated by the State Council on 3 April 1999 and last amended
on March 24, 2019, enterprises must register at the competent managing center for housing
funds and upon the examination by such managing center of housing funds, 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.
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REGULATIONS ON CONSUMERS PROTECTION
Under the Law of the PRC on Protection of Consumer Rights and Interests ( ʕശɛ͏
) (the “Consumer Law”) issued on 31 October 1993 and recently
amended on 25 October 2013, “consumer” is defined as any person who purchases or uses
commodities or receives services for the purpose of consumption, and all manufacturers,
distributors and service providers are required to guarantee that their provided commodities or
services meet the requirements on personal and property safety. According to the Consumer
Law, consumers whose lawful rights and interests are infringed upon the purchase or use of
commodities may claim compensation from sellers, which shall, after paying compensation,
have the right to be reimbursed by manufacturers or other sellers that are liable for supplying
the commodities to them.
REGULATIONS ON OUTBOUND DIRECT INVESTMENT
According to the Measures for the Administration of Overseas Investment ( ྤ̮ҳ༟၍
) promulgated by the MOFCOM on September 6, 2014 which became effective on
October 6, 2014, overseas investment means establishing non-financial enterprises or obtaining
ownership, control, operation management rights and other interests of existing non-financial
enterprises in foreign countries through incorporation, merger and acquisition and other means
by enterprises that are legally incorporated in the PRC. MOFCOM and the provincial
commercial administration authorities are responsible for the management and supervision of
overseas investments. MOFCOM and the provincial commercial administration authorities will
implement filing administration and approval respectively according to the different types of
overseas investments.
According to the Administrative Measures for Overseas Investment by Enterprises ( Ά
) promulgated by the NDRC on December 26, 2017, which became
effective on March 1, 2018, overseas investment means any investment activity in which a
domestic enterprise of the PRC obtains overseas ownership, control, operation and
management rights and other relevant interests directly or through its controlled overseas
enterprise by way of contributing asset, interest or providing financing and guarantee. To
conduct overseas investment, certain procedures (such as approval and record-filing of
overseas investment project) shall be complied with according to the relevant circumstances of
the overseas investment project.
On July 13, 2009, the SAFE issued Provisions on the Foreign Exchange Administration
of the Overseas Direct Investment of Domestic Institutions (೯б<ྤʫ
֛>). Pursuant to this, domestic institutions may make
overseas direct investment with their own foreign exchange funds, domestic foreign exchange
loans meeting the relevant requirements, foreign exchange purchased with RMB funds,
tangible assets, intangible assets and other sources of foreign exchange assets approved by the
foreign exchange authorities. Domestic institutions may retain the profits made from overseas
direct investment outside China for their overseas direct investment. In addition, a domestic
institution shall, after obtaining the approval of its overseas direct investment from the
competent administrative department of overseas direct investment, handle the foreign
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exchange registration formalities for its overseas direct investment at the local foreign
exchange authority. The Notice of the State Administration of Foreign Exchange on Further
Improving and Adjusting Foreign Exchange Administration Policies for Direct Investment
() was issued by
SAFE on November 19, 2012 and amended on May 4, 2015, October 10, 2018 and December
30, 2019 respectively, under which PRC enterprises must register for overseas direct
investment with local banks. The shareholders or beneficial owners who are PRC entities are
required to be in compliance with the related overseas investment regulations. If they fail to
complete the filings or registrations required by overseas direct investment regulations, the
relevant authority may order them to suspend or cease the implementation of such investment
and make corrections within a specified time, as well as issuing a warning to such investor and
the relevant responsible persons; where a crime is constituted, criminal liability shall be
investigated in accordance with the law.
REGULATIONS ON M&A AND OVERSEAS LISTINGS
On August 8, 2006, six PRC regulatory agencies (namely the MOFCOM, SASAC, the
SA T, the SAMR, the CSRC and the SAFE), issued the Regulations on Mergers and Acquisitions
of Domestic Enterprises by Foreign Investors (the “M&A Rules”) (Իᒅྤʫ
), which took effect on September 8, 2006 and was amended on June 22, 2009.
Foreign investors shall comply with the M&A Rules: when they purchase equity interests of a
domestic company or subscribe to the increased capital of a domestic company, and thus
changing the nature of the domestic company into a foreign-invested enterprise; or when the
foreign investors establish a foreign-invested enterprise in the PRC, purchase the assets of a
domestic company and operate the assets; or when the foreign investors purchase the asset of
a domestic company, establish a foreign-invested enterprise by injecting such assets and
operate the assets. The M&A Rules purport, among other things, to require offshore special
purpose vehicles formed for overseas listing purposes through acquisitions of PRC domestic
companies and controlled by PRC companies or individuals, to obtain the approval of CSRC
prior to publicly listing their securities on an overseas stock exchange.
On February 17, 2023, the CSRC issued the Trial Measures and Supporting Guidelines,
which came into effect on March 31, 2023. The Trial Measures and Supporting Guidelines shall
apply to the following overseas issuance: (i) direct overseas offerings and listings of PRC
domestic companies, and (ii) indirect overseas offering and listing of a foreign company with
major business operations and/or assets located in the PRC. The Trial Measures and Supporting
Guidelines provide that if the issuer both meets the following criteria, the overseas offering and
listing shall be determined as an indirect overseas offering and listing by a PRC 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; and (ii) its major operational activities are carried out in the PRC or its main places of
business are located in the PRC, or the senior managers in charge of operation and management
of the issuer are mostly Chinese citizens or are domiciled in the PRC.
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According to the Trial Measures and Supporting Guidelines, an issuer shall submit
required filing documents to the CSRC within three business days after the overseas listing
application has been submitted to the relevant overseas regulator or listing venue. In addition,
following the listing on an overseas market, the issuer shall submit a report to the CSRC within
three business days after the occurrence and public disclosure of the following events involving
the issuer: (i) change of control; (ii) investigations or sanctions imposed by overseas
regulators; (iii) change of listing status or transfer of listing segment; and (iv) voluntary or
involuntary delisting. Besides, if any material change in the principal business and operation
of the issuer after its overseas offering and listing takes place and results in the issuer no longer
within the scope of record-filing under the Trial Measures and Supporting Guidelines, the
issuer shall submit a special report and a legal opinion issued by a PRC law firm to the CSRC
within three business days after the occurrence of such change in order to provide an
explanation of the relevant situation.
The Trial Measures and Supporting Guidelines also stipulate the circumstances where the
overseas offering and listing is explicitly prohibited, including: (i) offerings and listings are
explicitly prohibited by specific laws and regulations; (ii) offerings and listings constitute
threat to or endanger national security; (iii) the PRC domestic company, its controlling
shareholder(s), or its 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 listing is under investigations for
suspicion of criminal offenses or is involved in major violations of laws and regulations and
no conclusion of the investigation has yet been made; or (v) there are material ownership
disputes over equity interests held by the controlling shareholder(s) (or by other shareholder
who is controlled by the controlling shareholder(s) or the actual controller).
Based on the foregoing, our PRC Legal Advisors are of the view that we need to complete
the filing procedures with the CSRC in connection with the Listing pursuant to the Overseas
Listing Trial Measures. As of the Latest Practicable Date, we had completed such filing
procedures.
On February 24, 2023, the CSRC published the revised Provisions on Strengthening
Confidentiality and Archives Administration of Overseas Securities Offering and Listing by
Domestic Companies (ٙ
) (the “Archives Rules”), which becomes effective from March 31, 2023. The Archives
Rules require that, in relation to the overseas listing activities of domestic enterprises, such
domestic enterprises, as well as securities companies and securities service institutions
providing relevant securities services, are required to strictly comply with the relevant
requirements on confidentiality and archives management, establish a sound confidentiality
and archives system, and take necessary measures to implement their confidentiality and
archives management responsibilities. Under the Archives Rules, the “domestic enterprises”
refer to the domestic joint stock limited companies listing overseas directly and the domestic
operation entities of a non-PRC company listing overseas. According to the Archives Rules,
during the course of an overseas offering and listing, if a domestic enterprise needs to publicly
disclose or provide to securities companies, accounting firms or other securities service
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providers and overseas regulators, any materials that contain relevant state secrets, government
work secrets or that have a sensitive impact (i.e. be detrimental to national security or the
public interest if divulged), the domestic enterprise should complete the relevant
approval/filing and other regulatory procedures. However, there remain uncertainties regarding
the further interpretation and implementation of the Archives Rules.
REGULATIONS ON STRICTLY COMBATING ILLEGAL SECURITIES ACTIVITIES
On July 6, 2021, the General Office of the CPC Central Committee and the General Office
of the State Council jointly promulgated the Opinions on Strictly Combating Illegal Securities
Activities in Accordance with the Law (จԈ), which
called for the enhanced administration and supervision of overseas-listed China-based
companies, proposed to revise the relevant regulation governing the overseas issuance and
listing of shares by such companies and clarified the responsibilities of competent domestic
industry regulators and government authorities.
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OVERVIEW
We provide pledged vehicle monitoring services and automobile dealership operation
management services in China. Changjiu Industrial, a company set up by our Ultimate
Controlling Shareholders, started to provide pledged vehicle monitoring services in 2006. With
the expansion of the business of pledged vehicle monitoring services, in 2016, Changjiu Jinfu
was established by Changjiu Industrial and Ms. Li and the business of pledged vehicle
monitoring services of Changjiu Industrial was transferred into Changjiu Jinfu gradually.
Changjiu Jinfu became an indirect wholly-owned subsidiary of our Company upon completion
of the Reorganization. As our Ultimate Controlling Shareholders have experience in the
pledged vehicle monitoring and operation management service industry, Ms. Li is serving as
our executive Director and chairwoman of our Board and Mr. Bo is serving as our executive
Director and chief executive officer, respectively. See “Directors and Senior Management” for
more details.
According to CIC, we were the largest pledged vehicle monitoring service provider in
China’s automobile sales and distribution industry both in terms of revenue in 2022, with a
market share of 47.9%, and in terms of the number of automobile dealership users as of
December 31, 2022. As of June 30, 2023, we provided pledged vehicle monitoring services to
(i) approximately 200 branches of 18 commercial banks, including all of China’s “Big Six”
national state-owned commercial banks and 12 joint-stock commercial banks; (ii) 27
automobile finance companies; and (iii) 11,152 automobile dealerships.
KEY MILESTONES
Our key business milestones are summarized below:
Y ear Event
2016 ..... Changjiu Jinfu was established and started using PDAs and RFID labels.
2017 ..... W e completed the development of the second generation of our VFS.
2018 ..... W e developed and launched the first generation of GPS OBD devices.
We obtained the patent certification for the first generation of Bluetooth
OBD devices we developed and used before, which were Bluetooth
compatible and capable of short-range wireless transmission.
We launched the mobile application of V ehicle Connect, which allows
financial institutions and automobile dealerships to access the information
collected by our VFS system on their mobile phones and tablets.
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Y ear Event
2020 ..... Changjiu Jinfu was accredited 2020 Excellent Business Service Award for
the contribution in onsite supervision service by BMW Group Financial
Services Greater China Region.
Changjiu Jinfu was accredited China Logistics and Supply Chain Finance
Excellent Case by Logistics and Supply Chain Finance Branch (ၾԶ
ፄʱึ) of CFLP in 2020.
2021 ..... Changjiu Jinfu was accredited 2021 Excellent Supplier Award by Genius
Auto Finance Co., Ltd.
Changjiu Jinfu was recognized as a standing member ( ੬ਕଣԫఊЗ) from
January 2021 to January 2025 by Logistics and Supply Chain Finance
Branch of CFLP .
2022 ..... W e began to provide automobile dealership operation management
services.
The number of automobile dealerships that were using our pledged vehicle
monitoring services increased to over 10,000 as of December 31, 2022.
We obtained the patent certification for the second generation of Bluetooth
OBD devices we developed before, which contained the VIN automatic
reading system.
OUR MAJOR SUBSIDIARIES
We carry out our business through our operating subsidiaries in the PRC. During the
Track Record Period and up to the Latest Practicable Date, we conducted our business
activities primarily through the following major operating subsidiaries:
Name of Major
Operating Subsidiaries Principal Business Activities
Date and Place of
Establishment
Changjiu Jinfu ........ Pledged vehicle monitoring services September 9, 2016,
PRC
Shanghai Bozhong ..... Automobile dealerships operation
management services
September 6, 2021,
PRC
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Changjiu Jinfu
Changjiu Jinfu was established in the PRC as a limited liability company on September 9,
2016 with an initial registered capital of RMB100,000,000. Prior to the Reorganization,
Changjiu Jinfu was owned as to 95% by Changjiu Industrial and 5% by Ms. Li.
Shanghai Bozhong
Shanghai Bozhong was established in the PRC as a limited liability company on
September 6, 2021 with an initial registered capital of RMB3,000,000. Upon its establishment,
Shanghai Bozhong has been a wholly-owned subsidiary of Changjiu HK.
REORGANIZATION
Immediately prior to the Reorganization, the pledged vehicle monitoring services were
operated by Changjiu Industrial and Changjiu Jinfu. Set out below is the corporate structure of
Changjiu Industrial and Changjiu Jinfu immediately prior to the Reorganization:
Mr. Bo Ms. Li
Changjiu
Industrial
82.46% 17.54% 5%
95% Changjiu
Jinfu
In order to optimize our corporate structure to further develop our business and to more
readily access the international capital markets, we underwent a corporate and business
reorganization to consolidate the pledged vehicle monitoring services of Changjiu Industrial
into our Group in preparation for the Global Offering and the Listing. The following sets out
the key steps of the Reorganization.
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Offshore Reorganization
Incorporation of shareholders’ SPVs
Each of our Ultimate Controlling Shareholders incorporated wholly-owned investment
holding companies in the BVI, details of which are set out below:
Company name
Date of
incorporation Shareholder(s) Equity interest
Brightio Limited April 8, 2021 Ms. Li 100%
Advancd Limited April 8, 2021 Mr. Bo 100%
CreateCube Limited April 8, 2021 Mr. Bo 100%
Brighht Limited April 21, 2021 Brightio Limited 100%
Advancey Limited April 20, 2021 Advancd Limited 100%
Creationn Limited April 20, 2021 CreateCube Limited 100%
Incorporation of our Company
On June 16, 2021, our Company was incorporated as an exempted company with limited
liability in the Cayman Islands with an authorized share capital of US$50,000 divided into
50,000 shares with a par value of US$1.00 each. Immediately thereafter, (i) one share was
allotted and issued at par value to the initial subscriber, and was subsequently transferred to
Advancey Limited; and (ii) 54 shares, 40 shares and 5 shares were allotted and issued at par
value to Advancey Limited, Brighht Limited and Creationn Limited, respectively. Upon
completion, our Company was held by Advancey Limited, Brighht Limited and Creationn
Limited as to 55%, 40% and 5%, respectively.
Incorporation of Changjiu HK
On July 15, 2021, Changjiu HK was incorporated in Hong Kong with a total issued share
capital of US$1.00. On the same day, one ordinary share was allotted and issued to our
Company at a consideration of US$1.00, and Changjiu HK became a wholly-owned subsidiary
of our Company.
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Share subdivision and increase of authorized share capital of our Company
On February 15, 2023, our Company’s issued and unissued 50,000 shares of a par value
of US$1.00 each were subdivided into 75,000,000,000 shares with a par value of
US$0.00000066666• each which is rounded up to US$0.00000066667 each. As a result, (i) the
authorized share capital of our Company increased from US$50,000 to US$50,000.25 divided
into 75,000,000,000 shares of US$0.00000066667 par value each, and (ii) the issued share
capital of our Company became 150,000,000 Shares of US$0.00000066667 par value each.
Upon completion, the then shareholding structure of our Company is set out as below:
Name of Shareholder Number of Shares
Percentage of
shareholding
Advancey Limited 82,500,000 55%
Brighht Limited 60,000,000 40%
Creationn Limited 7,500,000 5%
Total 150,000,000 100%
Onshore Reorganization
Conversion of Changjiu Jinfu into foreign-invested enterprise
Pursuant to a capital increase agreement dated May 18, 2022, Mr. Song, a Hong Kong
investor and Independent Third Party, subscribed for 1% equity interest in Changjiu Jinfu at a
consideration of RMB1,010,100. Such consideration was determined with reference to the
appraisal value of the entire equity interest in Changjiu Jinfu as of April 30, 2022 based on a
valuation report issued by an Independent Third Party valuer (the “V aluation Report”), and had
been fully settled as of the Latest Practicable Date. Upon completion of such capital increase,
Changjiu Jinfu became a foreign-invested enterprise, and was held by Changjiu Industrial, Ms.
Li and Mr. Song as to 94.05%, 4.95% and 1%, respectively.
Establishment of Shanghai Bozhong
On September 6, 2021, Shanghai Bozhong was established in the PRC as a wholly
foreign-owned enterprise with limited liability with a registered capital of RMB3 million.
Since its establishment and up to the Latest Practicable Date, Shanghai Bozhong had been
wholly owned by Changjiu HK.
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Business transfer of pledged vehicle monitoring services
Changjiu Industrial had provided pledged vehicle monitoring services to financial
institutions and automobile dealerships since 2006. In 2016, Changjiu Jinfu was established by
Changjiu Industrial and Ms. Li. After that, the pledged vehicle monitoring service business of
Changjiu Industrial was gradually restructured into Changjiu Jinfu, and Changjiu Jinfu entered
into new pledged vehicle monitoring service agreements with the relevant financial institutions
and automobile dealerships upon the expiration of their original agreements with Changjiu
Industrial.
As of November 30, 2021, the entire operation team and all related personnel in
connection with the pledged vehicle monitoring service business had been transferred from
Changjiu Industrial to Changjiu Jinfu. On the same date, Changjiu Industrial and Changjiu
Jinfu entered into a business transfer agreement, pursuant to which Changjiu Industrial agreed
to assign to Changjiu Jinfu all its rights and obligations under its then existing pledged vehicle
monitoring service agreements at a total consideration of RMB45,510,000 with reference to the
contract value of such agreements as of November 30, 2021. Such consideration had been fully
settled as of the Latest Practicable Date.
As of the Latest Practicable Date, the rights and obligations of Changjiu Industrial under
524 pledged vehicle monitoring service agreements with certain financial institutions and
automobile dealerships had not been transferred from Changjiu Industrial to Changjiu Jinfu,
primarily because, to our Directors’ best knowledge and belief, it is extremely time-consuming
and cumbersome for such users to approve such transfer or a change of signing parties to
existing contracts pursuant to their strict internal control policies and procedures. By December
31, 2024, either the rights and obligations of Changjiu Industrial under such unassigned
agreements will all be transferred to us, or such unassigned agreements will expire. Although
Changjiu Industrial continued to assume its rights and obligations under these agreements, it
no longer provides any pledged vehicle monitoring service to the relevant users and has
exclusively entrusted us to provide all such services under these agreements pursuant to the
Entrustment Agreement entered into between Changjiu Industrial and Changjiu Jinfu on April
26, 2023. See “Business—Our Strategic Business Relationship with Changjiu Group,”
“Relationship with Our Controlling Shareholders—Delineation of Business” and “Connected
Transactions—Non-exempt Continuing Connected Transactions—(4) Entrustment Agreement”
for further details. Save for the aforesaid, Changjiu Industrial no longer engages in the
provision of pledged vehicle monitoring services.
Acquisition of Changjiu Jinfu by Shanghai Bozhong
Pursuant to an equity transfer agreement dated May 30, 2022, Shanghai Bozhong acquired
the entire equity interest in Changjiu Jinfu from its then shareholders at a total consideration
of RMB101,010,100. Such consideration was determined with reference to the appraisal value
of the entire equity interest in Changjiu Jinfu as of April 30, 2022 based on the V aluation
Report, and had been fully settled as of the Latest Practicable Date. Upon completion of such
equity transfer, Changjiu Jinfu became a wholly-owned subsidiary of Shanghai Bozhong.
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Compliance with PRC Laws and Regulations
Our PRC Legal Advisors have confirmed that (i) the establishment of our subsidiaries in
the PRC and their subsequent shareholding changes have complied with the relevant laws and
regulations in all material respects; and (ii) the Reorganization has complied with relevant
applicable PRC laws and regulations in all material respects.
CONCERT PARTY CONFIRMATION
Pursuant to a concert party confirmation dated March 1, 2023 entered into between our
Ultimate Controlling Shareholders, they have acknowledged and agreed that, (i) since they
became interested, either directly or indirectly, in each of Changjiu Industrial and any member
of our Group, they had been parties acting in concert by aligning their votes at the
shareholders’ meetings of these companies, and (ii) for so long as they remain interested, either
directly or indirectly, in Changjiu Industrial or any member of our Group, they would continue
to be parties acting in concert by aligning their votes at the shareholders’ meetings of these
companies.
PRE-IPO SHARE INCENTIVE PLANS
On March 7, 2023, our Company adopted the Pre-IPO Restricted Share Plan. On the same
day, we allotted and issued 1,620,000 Shares, representing approximately 0.80% of the total
issued share capital of our Company immediately after the Global Offering (without taking into
account any Shares which may be allotted and issued pursuant to the exercise of the Pre-IPO
Share Options), to the Restricted Share SPV at a total consideration of RMB4,325,400.
The limited partners of the Restricted Share SPV are the participants of our Pre-IPO
Restricted Share Plan holding their respective Restricted Shares granted by the Company
through the Restricted Share SPV . Such granted Restricted Shares are not subject to vesting
conditions but lock-up restrictions. Once granted with the Restricted Shares, the limited
partners of the Restricted Share SPV are exclusively entitled to participate in the distribution
of profit and to receive the economic interests of the Restricted Shares held by the Restricted
Share SPV in proportion to their subscribed capital contributions in the Restricted Share SPV
pursuant to the limited partnership agreement of the Restricted Share SPV . The general partner
of the Restricted Share SPV is Li Qian (࠺an employee of our Group and the niece of
Ms. Li, one of our Controlling Shareholders. Li Qian has been designated with the voting rights
attaching to the Restricted Shares held by the Restricted Share SPV , but is not entitled to
participate in the distribution of profit of the Restricted Share SPV .
As of the Latest Practicable Date, a total of 1,620,000 Restricted Shares, representing all
the Restricted Shares issuable under the Pre-IPO Restricted Share Plan, had been conditionally
granted to five officers of our Group through the Restricted Share SPV . As all Restricted Shares
under the Pre-IPO Restricted Share Plan have already been issued to the Restricted Share SPV ,
the Restricted Shares will not have any dilution effect on the shareholding of the Company
upon Listing. From accounting aspects, the Restricted Shares are recognized as treasury shares
in the statements of financial position considering the specific service conditions and the
respective repurchase obligations. For details, see Note 23 to the Accountants’ Report in
Appendix I to this prospectus. Assuming full unlock of the Restricted Shares at the same time,
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the dilution impact on the earnings per share of the Company would be 0.80%. No further
Restricted Shares may be granted under the Pre-IPO Restricted Share Plan after the Listing.
See “Appendix IV—Statutory and General Information—D. Pre-IPO Share Incentive Plans—1.
Pre-IPO Restricted Share Plan” for further details. As all five limited partners are officers and
employees of our Group, and Ms. Jia Hui, our executive Director and a core connected person
of our Company, contributed more than one third of the capital of the Restricted Share SPV ,
the Restricted Share SPV is a close associate of Ms. Jia Hui. In addition, a portion of the total
consideration of the Shares subscribed by the Restricted Share SPV was financed by Ms. Jia
Hui. Therefore, the Restricted Share SPV will be a core connected person of our Company, and
the Shares held by the Restricted Share SPV will not be counted towards the public float for
the purpose of Rule 8.08 of the Listing Rules upon the Listing.
On March 7, 2023, our Company also adopted the Pre-IPO Share Option Plan. As of the
Latest Practicable Date, a total of 10,199,730 Pre-IPO Share Options, representing
approximately 5.05% of the total issued share capital of our Company immediately after the
Global Offering (without taking into account any Shares which may be allotted and issued
pursuant to the exercise of the Pre-IPO Share Options), had been conditionally granted to 48
grantees, including a Director, senior management members and employees of our Group.
Pursuant to the terms of the Pre-IPO Share Option Plan, the grantees shall not exercise the
outstanding options granted to them prior to the Listing. No further options may be granted
under the Pre-IPO Share Option Plan after the Listing. As of the Latest Practicable Date, save
as the Pre-IPO Share Options to subscribe for 1,041,855 Shares granted to four grantees had
been forfeited following their resignation, the remaining Pre-IPO Share Options to subscribe
for 9,157,875 Shares were not exercised and remained outstanding. Assuming full vesting and
exercise of the outstanding Pre-IPO Share Options, the shareholding percentage of our
Shareholders immediately following the Listing would be diluted by approximately 4.33% as
calculated based on 211,317,875 Shares then in issue and the dilution effect on our earnings
per Share would be 4.33%. See “Appendix IV—Statutory and General Information—D.
Pre-IPO Share Incentive Plans—2. Pre-IPO Share Option Plan” for further details.
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CORPORATE STRUCTURE
Corporate Structure before the Global Offering
The following chart sets forth the corporate structure of our Group after the
Reorganization and immediately before the Global Offering:
Our Company
Changjiu HK
100%
100%
100%
offshore
onshore
Shanghai
Bozhong
Changjiu
Jinfu
Ms. Li Mr. Bo
Brightio Limited
Brighht Limited
Advancd Limited
Advancey Limited
CreateCube
Limited
Creationn Limited
100%100%100%
100%100%100%
4.95%54.41%39.57%
1.07%
Restricted
Share SPV
Corporate Structure immediately following the Global Offering
The following chart set forth the corporate structure of our Group immediately following
the Global Offering (without taking into account any Shares which may be allotted and issued
pursuant to the exercise of the Pre-IPO Share Options):
Ms. Li Mr. Bo
Brightio Limited
Brighht Limited
Advancd Limited
Advancey Limited
CreateCube
Limited
Creationn Limited
Our Company
Changjiu HK
100%
100%100%100%
100%100%100%
29.68% 40.81% 3.71%
100%
100%
offshore
onshore
Shanghai
Bozhong
Changjiu
Jinfu
0.80%
Restricted
Share SPV
25.00%
Public
Shareholders
HISTORY, REORGANIZATION AND CORPORATE STRUCTURE
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PRC REGULATORY REQUIREMENTS
SAFE Circular 37
Pursuant to the Circular of the SAFE on Foreign Exchange Administration of Overseas
Investment, Financing and Round-trip Investments Conducted by Domestic Residents through
Special Purpose V ehicles (೻ҳ༟̮ි၍ଣ
) (the “SAFE Circular 37”) effective on July 4, 2014, a PRC resident must
register with the local SAFE branch before he or she contributes assets or equity interests to
an overseas special purpose vehicle that is directly established or indirectly controlled by the
PRC resident for the purpose of conducting investment or financing. Pursuant to the Notice on
Further Simplifying and Improving Policies for the Foreign Exchange Administration of Direct
Investment (), the power to accept
such registration was delegated from local SAFE branch to local banks where the assets or
interests in the domestic entity are located.
As advised by our PRC Legal Advisors, as of June 4, 2021, Mr. Bo and Ms. Li have
completed the required registration under the SAFE Circular 37 in relation to their equity
interest in our Company.
Overseas Direct Investment Registrations
On 13 July 2009, the SAFE issued Provisions on the Foreign Exchange Administration of
the Overseas Direct Investment of Domestic Institutions (ટҳ༟̮ි၍ଣ஝
) (the “ODI Provisions”). Pursuant to this, domestic institutions may make overseas direct
investment with their own foreign exchange funds, domestic foreign exchange loans meeting
the relevant requirements, foreign exchange purchased with RMB funds, tangible assets,
intangible assets and other sources of foreign exchange assets approved by the foreign
exchange authorities. Domestic institutions may retain the profits made from overseas direct
investment outside China for their overseas direct investment. In addition, a domestic
institution shall, after obtaining the approval of its overseas direct investment from the
competent administrative department of overseas direct investment, handle the foreign
exchange registration formalities for its overseas direct investment at the local foreign
exchange authority. Pursuant to the Notice of the State Administration of Foreign Exchange on
Further Improving and Adjusting Foreign Exchange Administration Policies for Direct
Investment () and
Guidelines for Foreign Exchange Business under Capital Accounts (ܸ
ˏ) issued by SAFE, the power to accept such registration was delegated from local SAFE
branch to local banks.
As advised by our PRC Legal Advisors, as of April 28, 2023, the PRC shareholder of our
Company, namely the Restricted Share SPV , has completed the overseas direct investment
registration as required under the ODI Provisions.
HISTORY, REORGANIZATION AND CORPORATE STRUCTURE
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M&A Rules
On August 8, 2006, six PRC regulatory agencies, including the MOFCOM, the State
Assets Supervision and Administration Commission, the STA, the SAIC, the CSRC and the
SAFE, jointly issued the Provisions on the Merger and Acquisition of Domestic Enterprises by
Foreign Investors () (the “M&A Rules”), which
became effective on September 8, 2006, and was amended on June 22, 2009.
The M&A Rules requires an overseas special purpose vehicle formed for listing purposes
through acquisitions of PRC domestic companies and controlled by PRC persons or entities to
obtain the approval of the CSRC prior to the listing and trading of such special purpose
vehicle’s securities on an overseas stock exchange. The interpretation and application of the
regulations remain unclear, and this offering may ultimately require approval of the CSRC.
Our PRC Legal Advisors have advised us that, based on their understanding of the PRC
laws and regulations currently in effect, we will not be required to submit an application to the
CSRC for the approval under the M&A Rules of this offering because the WFOE was not
established through a merger or requisition of the equity or assets of a “PRC domestic
company” as such term is defined under the M&A Rules. However, our PRC Legal Advisors
further advised that there is uncertainty as to how the M&A Rules will be interpreted or
implemented, and new rules or regulations promulgated in the future may impose additional
requirement on us.
HISTORY, REORGANIZATION AND CORPORATE STRUCTURE
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OVERVIEW
Who We Are
We provide pledged vehicle monitoring services and automobile dealership operation
management services in China. According to CIC, we were the largest pledged vehicle
monitoring service provider in China’s automobile sales and distribution industry both in terms
of revenue in 2022, with a market share of 47.9%, and in terms of the number of automobile
dealership users as of December 31, 2022. We achieved such dominant position in the pledged
vehicle monitoring service market and outcompeted our peers primarily through (i) our 17
years of operation history; (ii) our nationwide presence with operation in over 500 cities across
31 provinces in China; and (iii) our VFS system that collects, processes and analyzes data from
pledged vehicles and our continuous improvement of the VFS system to meet evolving market
demands.
We offer pledged vehicle monitoring services primarily to (i) financial institutions that
provide secured financing to automobile dealerships for their purchase of vehicles; and (ii)
automobile dealerships with pledged vehicles. As of June 30, 2023, we provided pledged
vehicle monitoring services to (i) approximately 200 branches of 18 commercial banks,
including all of China’s “Big Six” national state-owned commercial banks and 12 joint-stock
commercial banks; (ii) 27 automobile finance companies; and (iii) 11,152 automobile
dealerships.
Through our provision of pledged vehicle monitoring services over the years, we have
accumulated insights regarding China’s automobile sales and distribution industry. As a natural
extension, we endeavored to expand our business in China’s automobile sales and distribution
industry and began offering operation management services to automobile dealerships that seek
more optimal business and financial performance in April 2022. In order to optimize our
services before expanding our offering to the wider market and in light of our strategic business
relationship with Changjiu Group, we have initially focused on providing operation
management services to automobile dealerships owned by Changjiu Group. Through this
arrangement with Changjiu Group, we are able to get feedbacks and enhance our service
quality. Given that we commenced this business line relatively recently and additional time is
required for us to promote our operation management services to broader industry participants,
automobile dealerships owned by Changjiu Group have accounted for substantially all of our
customers for this business line. As of June 30, 2023, we managed a total of 75 automobile
dealerships, among which 74 were owned by Changjiu Group and one was owned by an
Independent Third Party.
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Our Technologies
Our service capabilities are supported by our digital information infrastructure. We use
cloud-based technologies to support our digital information infrastructure, on top of which we
built systems for data management, data analysis and business operations based on our industry
expertise and customer insights. We have also applied our VFS system and V ehicle Connect
mobile application, RFID labels, PDAs, OBD devices and lockboxes as well as data analytics
to optimize our pledged vehicle monitoring services. To better support our provision of
automobile dealership operation management services, we have adopted an automobile
dealership operation management system, namely Smart Star (“݋߅that is tailored for
managing the daily operations of automobile dealerships.
Our Value Propositions
We believe our success is based on the value that we provide to our users:
 Financial institutions . We provide efficient pledged vehicle monitoring services to
financial institutions and enable them to better safeguard the vehicles pledged to
them.
 Automobile dealerships . By facilitating more effective and cost-efficient
monitoring of pledged vehicles and reducing counterparty risks for financial
institutions, our pledged vehicle monitoring services may enhance chances for
automobile dealerships to obtain loans from financial institutions. Through our
automobile dealership operation management services, we recommend and select
experienced staff to automobile dealerships and provide know-how and technology
that aim to enhance their business and financial performance.
Our Performance
We achieved stable growth during the Track Record Period. In 2020, 2021 and 2022, our
revenue amounted to RMB430.6 million, RMB477.7 million and RMB547.9 million,
respectively, representing a CAGR of 12.8%. Our revenue also increased from RMB258.7
million in the six months ended June 30, 2022 to RMB309.4 million in the six months ended
June 30, 2023. The number of automobile dealerships that were using our pledged vehicle
monitoring services increased from 8,316 as of December 31, 2020 to 9,205 as of December
31, 2021, then to 10,684 as of December 31, 2022, and further to 11,152 as of June 30, 2023.
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COMPETITIVE STRENGTHS
Largest automobile pledged vehicle monitoring service provider in China
According to CIC, we were the largest pledged vehicle monitoring service provider in
China’s automobile sales and distribution industry in terms of revenue in 2022, with a market
share of 47.9%, and in terms of the number of automobile dealership users as of December 31,
2022. We believe such achievement is principally due to our continuous focus on our
dedication to the development of technology, which is crucial to our pledged vehicle
monitoring services. For more information on key milestones of our development of
technology, see “History, Reorganization and Corporate Structure—Key Milestones.” Through
our commitment to the advancement of technology, together with our accumulated industry
insights on the automobile sales and distribution industry in China, our customers have
confidence in our services, which enables us to become the largest player in the pledged
vehicle monitoring service market in China. In addition, we provide digitalized, internet-based
and automated pledged vehicle monitoring services in China’s automobile sales and
distribution industry, according to CIC.
We believe we have the following comparative advantages that have contributed to our
success in the area of pledged vehicle monitoring services:
 Industry experience . According to CIC, we were one of the first movers to provide
pledged vehicle monitoring services in China’s automobile sales and distribution
industry. Over the years since our beginning, we have accumulated industry insights.
We have comprehensive and detailed guidelines and know-how on pledged vehicle
monitoring based on our industry insights.
 R&D capabilities . We have been constantly optimizing our services with
technologies to cater to user needs and enhance operational efficiency.
o At the early stage of our pledged vehicle monitoring services, when we were
part of Changjiu Industrial, we introduced our pledged vehicle monitoring
services. Although we used manual inspection to deliver most of the solutions
at the time, it was the beginning of our commitment of using digital services
to transform pledged vehicle monitoring in China’s automobile sales and
distribution industry.
o We were among the first in China in offering pledged vehicle monitoring
services, according to CIC. Technology now delivers most of the services and
our inspectors only play a supporting role. These technologies are still widely
applied to our pledged vehicle monitoring services today. The three key
components are:
 Our VFS system stores and analyzes pledged vehicles’ data that we
collect from automobile dealerships via our radio-frequency
identification (“RFID”) labels, PDAs and on-board diagnostics (“OBD”)
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devices. The financial institutions to which we provide pledged vehicle
monitoring services have access to such data via our VFS system or
V ehicle Connect; automobile dealerships could also access such data via
V ehicle Connect. The digitalized and internet-based VFS system could
produce automated early warnings and facilitate decision-making on
potential risks for financial institutions with an accurate transmission and
approval process.
 Our hardware primarily consisted of radio-frequency identification RFID
labels and OBD devices, could locate and monitor the pledged vehicles
more accurately and avoid manual errors.
 We use the data collected to better analyze and report the potential risk
events of automobile dealerships.
We will continue to upgrade our services to cover more service scenarios in our
pledged vehicle monitoring services based on evolving market demand and enrich
our pledged vehicle monitoring services with more advanced technologies and
monitoring models.
 Experience in lowering incidence rate of risk events . Our competence in pledged
vehicle monitoring is manifested by a relatively lower incidence rate of risk events.
Risk events refer to unforeseeable and abrupt events, including but limited to
unauthorized transfer of pledged vehicles, default in loan payment, repeated pledges
and other events that would endanger the interest of financial institutions. In 2020,
2021, 2022 and the six months ended June 30, 2023, we identified and reported to
financial institutions 35, 28, 27 and 14 risk events that occurred in automobile
dealerships, respectively. As a result, the incidence rate of risk events in the
automobile dealerships supported by our pledged vehicle monitoring services
declined to 0.44%, 0.32%, 0.27% and 0.13% in the same periods, respectively. The
incidence rate of risk events is calculated as the sum of automobile dealerships that
experience actual at-risk transactions divided by the total number of automobile
dealerships during a specified period of time.
Early mover in automobile dealership operation management services
Automobile dealerships in China continued to evolve in recent years. According to CIC,
the current market size of automobile dealership operation management services in China is
relatively small as the market is still in its infancy with limited service providers; and
traditional dealerships, which do not adopt refined management, embrace digital systems and
establish comprehensive talent training programs, are likely to have inefficient business
operations and lower profitability. Automobile dealerships face increasingly intense
competition and have strong demand for refined management and higher profitability, resulting
in an unmet need for professional operation management services. It is expected that the
potential business opportunities on this aspect become more prominent in the short coming
future.
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We are well positioned to meet such demand. We have 17 years of experience in China’s
automobile sales and distribution industry. With industry expertise and customer insights
accumulated over the years since our beginning, we are able to keep abreast of the latest trends
of the industry and have a better understanding of the various limitations and needs of
participants in the industry. Our industry experience, technology capabilities and user base,
coupled with a dedicated management team, have laid a solid foundation for us to expand our
business into digital automobile dealership operation management services.
In April 2022, we became an early mover in China’s automobile sales and distribution
industry to offer operation management services to automobile dealership owners. Our
automobile dealership operation management services analyze the operation results and offer
advices to automobile dealerships, in order to improve their operational efficiency and reduce
management costs through technology. We provide automobile dealerships with systematic,
standardized and workflow-driven management services that help them with customer-facing
activities, including marketing, sales, after-sales repair and customer relationships, and
back-office operations, including human resource, financial, tax and inventory management.
Our digital information infrastructure that is embedded in our management services can
generate visualized operation results and offer automobile dealerships comprehensive services
based on automated results analysis.
For the year ended December 31, 2022, automobile dealerships using our automobile
dealership operation management services had an average gross profit margin of 7.2%, which
was higher than the average performance of automobile dealerships with similar scale, brand
position and geographical layout, according to CIC. As of June 30, 2023, we managed a total
of 75 automobile dealerships, among which one was owned by an Independent Third Party. As
of the Latest Practicable Date, we had entered into non-legally binding letters of intent with
144 automobile dealerships, all of which are owned by Independent Third Parties.
Quality user base
As of June 30, 2023, we provided pledged vehicle monitoring services to (i)
approximately 200 branches of 18 commercial banks, including all of China’s “Big Six”
national state-owned commercial banks and 12 joint-stock commercial banks; (ii) 27
automobile finance companies; and (iii) 11,152 automobile dealerships. As of the same date,
92 automobile dealership group companies among the top 100 automobile dealership group
companies in China were using our pledged vehicle monitoring services. In addition, as of June
30, 2023, we provided access to our mobile application V ehicle Connect, on a complimentary
basis, to approximately 50,000 general automobile trading stores in China to keep track of the
pledged vehicles and thus expand our service coverage to the downstream of the industry.
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We have a nationwide service network to support our high-quality and responsive user
services. Leveraging our service network, we are able to engage with our users closely, stay
close to the business changes and operation results of our users and continue to optimize our
services to enhance user satisfaction.
Leveraging our user base together with our market reputation, we are building an
ecosystem around our digital information infrastructure that connects participants in the
automobile sales and distribution industry, including automobile dealerships, general
automobile trading stores, financial institutions and automobile manufacturers, and
continuously generate value with participants in the industry. Through our efficient pledged
vehicle monitoring services, we enable financial institutions to better safeguard and monitor
vehicles pledged to them. Our pledged vehicle monitoring services also may enhance chances
for automobile dealerships to obtain loans from financial institutions. Through our automobile
dealership operation management services, we recommend and select experienced staff to
automobile dealerships and provide know-how and technology that aim to enhance their
business and financial performance. As our ecosystem attracts more participants and continues
to expand, it generates self-reinforcing network effects, which leads to greater user engagement
on our digital information infrastructure and increasing demand for our services.
Technologies and R&D capabilities
Our digital information infrastructure offers systematic and digital support for our
business operation. Our digital information infrastructure is critical to providing our pledged
vehicle monitoring services, ensuring operational efficiency and helping users manage risks
and reduce costs. Our pledged vehicle monitoring system is composed of (i) the VFS system
and V ehicle Connect, which is a mobile application that provides access to the information
collected by the VFS system; (ii) RFID labels; (iii) PDAs; (iv) OBD devices; and (v) the
traditional and electronic lockboxes. We continuously monitor and analyze pledged vehicles’
data on our digital information infrastructure for the purpose of enriching and optimizing our
services. The wide spectrum of data accumulated through our information infrastructure
together with our data analysis capabilities provide strong support for our business expansion
and prospects.
The scalable nature of our information infrastructure enables us to provide tailor-made
automobile dealership operation management services to our customers by deploying different
combinations of predesigned business intelligence analysis modules that meet customers’
requirements. As of June 30, 2023, our digital information infrastructure could offer various
types of business intelligence analysis module combinations and support more than 80
application modules to further support our automobile dealership operation management
services. Based on our digital information infrastructure, we have adopted an automobile
dealership operation management system, namely Smart Star (“݋߅that is tailored for
managing the daily operations of automobile dealerships.
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We strengthen our core technology R&D capabilities by making persistent R&D efforts
and enhance underlying infrastructure and technology for our digital information
infrastructure. We procure cloud services from robust industry service providers and use their
technologies to support our digital information infrastructure. On top of the cloud
infrastructure, we have built three digital “supporting systems,” including (i) a data supporting
system, which specializes in data collection and data mining; (ii) a technology supporting
system, which specializes in managing and invoking underlying technologies; and (iii) a
business supporting system, which helps mobilize the resources in the data supporting system
and technology supporting system in order to quickly respond to users’ needs and tailor our
services to their actual requirements. Furthermore, we deploy a “DevOps” development model,
an automated and efficient development, testing and maintenance tool, into our supporting
systems to increase our R&D efficiency by reducing the reliance on manpower.
Our R&D capabilities are supported by our continuous initiatives in our R&D activities.
As of the Latest Practicable Date, we had 21 registered copyrights and 11 registered patents in
China.
Experienced management team
Our founder, Mr. Bo has over 30 years of experience in the automotive and logistics
industry and has profound and unique insights on reshaping the management of automobile
dealerships in China. Mr. Bo has additional practical experience in international trade,
automobile investment and automobile sales. He was appointed as the vice president of China
Federation of Logistics & Purchasing (ၾમᒅᑌΥึ) in the PRC and the president of
China Automotive Logistics Association of CFLP (ʱึ)i n
September 2011 and November 2010, respectively. Mr. Bo is responsible for the Group’s
overall operational management.
We have a stable and experienced senior management team. Our senior management team
has an average of over 15 years of professional experience cross industries including but not
limited to automobile sales and distribution industry and information technology industry.
Their wealth of industry knowledge and professional experience in their respective fields are
essential to our long-term success. Their experience in corporate management and corporate
strategic planning have proven to be valuable by allowing us to seize market opportunities and
optimize strategic planning in response to the changing market.
We have a sizable team of experienced mid-level management personnel with a good
sense of teamwork spirits. Most of them have rich practical experience in the industry and are
able to maintain good customer relationships and retain new ones. Our experienced and
motivated mid-level management personnel is important for our business expansion as well as
strategy implementation.
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OUR STRATEGIES
Enrich service offering and improve technology capabilities
We believe product innovation and technology capabilities are key to our success. We
intend to continuously explore the limitations and needs of industry participants and
continually enrich and upgrade our service offering to cater to their evolving needs and
preferences.
We also plan to continue to invest in technology, particularly in underlying technologies
and infrastructure related to our user-end systems. We will continue to develop and refine our
integrated digital information infrastructure to make it more accessible and scalable with more
service features and data analytics functions to meet user demand and enhance user experience.
Furthermore, we will continue to enhance our data processing capabilities and enrich our
integrated digital information infrastructure to cover a variety of service scenarios and
optimize our digital information infrastructure through designing lightweight algorithms in the
underlying cloud infrastructure and developing scalable modules in the data, technology and
business supporting systems. We expect the continuous improvement of technology capabilities
will enable us to quickly respond to customer needs, increase operational efficiency in a variety
of service scenarios, and adapt to the evolving market.
We intend to use approximately 35.0% of the net proceeds to improve our pledged vehicle
monitoring services by upgrading devices and enriching the features of our software products,
and approximately 30.0% of the net proceeds to develop an integrated supporting system for
the automobile sales and distribution industry. For further details, please see “Future Plans and
Use of Proceeds.”
Grow and diversify user base and expand ecosystem
We are building a vibrant ecosystem around our digital information infrastructure that
connects participants in the automobile sales and distribution industry, including automobile
dealerships, general automobile trading stores, financial institutions and automobile
manufacturers, and continuously generate value with participants in the industry. We plan to
expand the ecosystem to involve more participants to grow and diversify our user base and
provide long-term value to our customers.
We plan to further expand our automobile dealership operation management capacity by
increasing our service capabilities and improving service quality. Through automobile
dealership operation management services, we will continue to formulate strategies for
medium- and small-sized automobile dealership companies and use information technologies
to improve their performance. We plan to enhance our brand awareness by advertising
successful cases, which in turn will expose us to more business opportunities from
industry-leading automobile leadership companies.
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We also expect that our proposed launch of the automobile supply chain service
application will bring NEV manufacturers and more used car dealers to our ecosystem, thereby
further enlarge and diversify our user base. Furthermore, we plan to allow selected third-party
service providers to have access to our digital information infrastructure with an aim to make
our system an integrated ecosystem that connects masses of participants in the automobile sales
and distribution industry. Automobile dealerships can directly use third-party services such as
insurance services, financing services, supplies of spare parts, logistics services and marketing
services on the system we offer.
We intend to enhance our close relationship with existing customers and business partners
and obtain new customers by interactions among participants in the ecosystem, ultimately
benefiting from a self-reinforcing effect in our ecosystem.
We intend to use approximately 15.0% of the net proceeds to expand our automobile
dealership operation management capacity and approximately 10.0% of the net proceeds to
expand our sales and marketing capacities. For further details, please see “Future Plans and
Use of Proceeds.”
Capitalize on growth trends in NEV market in China’s lower-tier cities
China is the world’s largest passenger automobile market in terms of total car parc, with
great untapped potential especially in lower-tier cities. The consumption potential of China’s
passenger automobile market, especially the potential of lower-tier cities, is expected to be
unleashed due to the increase in residents’ income and purchasing power, and favorable
policies regarding the sale of automobiles in rural areas. In particular, the growth rate of the
sales volume of NEVs in China’s lower-tier cities is expected to surpass that of
gasoline–powered automobiles in the next five years, according to CIC.
Against the backdrop of increasing demand, the sales model of NEVs market in China has
been undergoing dramatic changes. The increasing market demand for NEVs in China has led
to a corresponding rise in the demand for NEVs’ sales network, delivery capacity and
after-sales services. Typically, most of the NEV manufacturers do not have sufficient sales
channels in lower-tier cities.
To capture these industry trends, we have formulated our “bring automobiles to rural
areas ( ӛԓɨඊ)” strategy and plan to enable NEV manufacturers to expand their business
reach with our supply chain service capability in lower-tier cities. In particular, we will connect
NEV manufacturers with automobile dealerships through our existing nationwide service
network. We plan to provide automobile supply chain services to NEV manufacturers to further
enhance user engagement, which primarily include license plate registration services and
predelivery preparation services. Further, we intend to provide supply chain services to the up-
and downstream business partners of NEV manufacturers, such as the suppliers of lithium,
electrolytes, separators and other raw material, manufacturers of battery, motor and other
vehicle parts, and service providers specializing in NEV charging equipment, battery recycling,
vehicle financing, vehicle rental, used car trading as well as repair and maintenance services,
which are complementary to our existing services.
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Most of the NEV manufacturers do not have sufficient sales channels in China’s
lower-tier cities and NEV manufacturers and automobile dealerships also face numerous
challenges with regard to the sale, repair and maintenance of NEVs in large volumes, leading
to an increasing market demand for related services in lower-tier cities, according to CIC. We
are developing an automobile supply chain service mobile application where we could
facilitate sales, delivery and other supply chain services of NEVs. Our automobile supply chain
service mobile application commenced trial operation in April 2023. Via this mobile
application, NEV manufacturers can authorize us to select and cooperate with downstream
automobile dealerships and service providers for sales and services in areas that the NEV
manufacturers do not have direct business coverage. We plan to monetize such mobile
application in the future by potentially charging commissions from NEV manufacturers for
facilitating sales, delivery and other supply chain services of NEVs. The services we plan to
provide via our mobile application are “asset-light” and will not subject us to inventory risk.
This business initiative is based on our current assessment of market prospects and is at an
incubation stage. As the development of NEVs has brought incremental market opportunities
for market participants, we believe that the landscape for such services, especially in China’s
lower-tier cities, will become increasingly competitive in the future. Through our mobile
application and services, we aim to support sales growth of NEVs and improve the quality of
services provided by NEV manufacturers.
We expect that our expansion in the NEV market will provide us with more “touch points”
with our existing and potential user base, thereby leading to a potential increase in our market
share for pledged vehicle monitoring services and automobile dealership operation
management services.
Refine human resource management and enlarge talent pool
Our talented and experienced employees are essential to our business development and
expansion. To support our long-term business development, we plan to implement a series of
human resource polices to strengthen our human resource system so as to attract and retain
talents, enhance their competencies and keep them competitive.
We intend to further improve our internal growth systems. We customize the training
programs for employees based on their career paths and help them grow. Our promotion
channels also offer employees fair chances to compete and further facilitate their career
progression.
We plan to optimize our remuneration incentive systems to further incentivize our
employees’ performance. The incentive systems are set up to provide competitive welfare
packages to our employees and offer timely promotions and bonuses in recognition of our
employee’s hard work and outstanding performance. Our incentive systems are designed in line
with our business strategies, which is expected to align the interests of our employees with our
business prospects.
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OUR BUSINESS LINES
We operate two business lines: (i) pledged vehicle monitoring services; and (ii)
automobile dealership operation management services.
During the Track Record Period, we primarily generated revenue from pledged vehicle
monitoring services, which accounted for 100.0%, 100.0%, 92.2% and 90.2% of our revenue
in 2020, 2021, 2022 and the six months ended June 30, 2023, respectively. In April 2022, we
started to provide operation management services to automobile dealerships. In 2022 and the
six months ended June 30, 2023, 7.8% and 9.8% of our revenue was generated from automobile
dealership operation management services, respectively.
We typically enter into tripartite agreements with financial institutions and automobile
dealerships for our pledged vehicle monitoring services. Although our pledged vehicle
monitoring services are designed to help financial institutions manage secured financing
provided to automobile dealerships, we consider the paying party under the tripartite
agreements as our customer, which may be either financial institutions or automobile
dealerships, depending on the negotiation among the contracting parties, and we consider both
financial institutions and automobile dealerships as our users. See “—Pledged V ehicle
Monitoring Services—Key Terms of Pledged V ehicle Monitoring Service Agreements” for
more details.
As of December 31, 2020, 2021 and 2022 and June 30, 2023, we had entered into 10,963,
12,271, 14,577 and 15,537 agreements, respectively, with our users for our pledged vehicle
monitoring services and automobile dealership operation management services. The following
table sets forth a breakdown of the number of our service agreements and our total revenue by
business line and by user ownership as of the dates and for the periods indicated.
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As of/For the year ended December 31, As of/For the six months ended June 30,
2020 2021 2022 2022 2023
Number of
agreements Revenue
Number of
agreements Revenue
Number of
agreements Revenue
Number of
agreements Revenue
Number of
agreements Revenue
% (RMB’000) % % (RMB’000) % % (RMB’000) % % (RMB’000) % % (RMB’000) %
(unaudited)
Pledged Vehicle
Monitoring Services
– Related-party users 10 0.1 1,729 0.4 9 0.1 5,793 1.2 12 0.1 1,284 0.2 7 0.1 1,024 0.4 8 0.1 157 0.1
– Independent-Third-Party users 10,953 99.9 428,858 99.6 12,262 99.9 471,904 98.8 14,491 99.4 503,765 92.0 12,739 99.4 244,736 94.6 15,451 99.4 278, 910 90.1
Subtotal 10,963 100.0 430,587 100.0 12,271 100.0 477,697 100.0 14,503 99.5 505,049 92.2 12,746 99.5 245,760 95.0 15,459 99.5 279,067 90.2
Automobile Dealership Operation
Management Services
– Related-party users – – – – – – – – 73 0.5 42,785 7.8 73 0.5 12,892 5.0 73
(1) 0.5 30,281 9.8
– Independent-Third-Party user – – – – – – – – 1 0.0 33 0.0 – – – – 1 0.0 83 0.0
Subtotal – – – – – – – – 74 0.5 42,818 7.8 73 0.5 12,892 5.0 74 0.5 30,364 9.8
Total 10,963 100.0 430,587 100.0 12,271 100.0 477,697 100.0 14,577 100.0 547,867 100.0 12,819 100.0 258,652 100.0 15,533 100.0 309,431 100.0
Note:
(1) One of the automobile dealership operation management service agreements that we entered into with related-party users was for our management of two dealerships.
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The following table sets forth a breakdown of our total revenue by business line and by
type of paying customer for the periods indicated.
For the Y ear ended December 31, For the six months ended June 30,
2020 2021 2022 2022 2023
Revenue Revenue Revenue Revenue Revenue
(RMB’000) % (RMB’000) % (RMB’000) % (RMB’000) % (RMB’000) %
(unaudited)
Pledged Vehicle
Monitoring Services
– Related parties 1,729 0.4 9,342 (1) 2.0 39,033 (1) 7.1 21,601 (1) 8.3 19,240 (1) 6.2
– Independent Third
Parties 428,858 99.6 468,355 (2) 98.0 466,016 (2) 85.1 224,159 (2) 86.7 259,827 (2) 84.0
Subtotal 430,587 100.0 477,697 100.0 505,049 92.2 245,760 95.0 279,067 90.2
Automobile
Dealership
Operation
Management
Services
– Related parties – – – – 42,785 7.8 12,892 5.0 30,281 9.8
– Independent Third
Party – – – – 33 0.0 – – 83 0.0
Subtotal – – – – 42,818 7.8 12,892 5.0 30,364 9.8
Total 430,587 100.0 477,697 100.0 547,867 100.0 258,652 100.0 309,431 100.0
Notes:
(1) Including revenue derived from (i) one, two, two and two Unassigned Agreements from Changjiu Group as of
December 31, 2021 and 2022 and June 30, 2022 and 2023, respectively; and (ii) 1,059, 794, 1,137 and 649
Unassigned Agreements from Independent Third Parties as of December 31, 2021 and 2022 and June 30, 2022
and 2023, respectively. The revenue generated from automobile dealerships under Unassigned Agreements and
Entrustment Agreement was RMB3.6 million, RMB37.8 million, RMB20.6 million and RMB19.1 million in
2021 and 2022 and in the six months ended June 30, 2022 and 2023, respectively, accounting for 0.8%, 6.9%,
8.0% and 6.2% of our total revenue during the same periods, respectively.
(2) Excluding revenue derived from 1,059, 794, 1,137 and 649 Unassigned Agreements from Independent Third
Parties as of December 31, 2021 and 2022 and June 30, 2022 and 2023, respectively, which amounted to
RMB3.5 million, RMB37.7 million, RMB20.6 million and RMB19.1 million in 2021 and 2022 and in the six
months ended June 30, 2022 and 2023, respectively.
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PLEDGED VEHICLE MONITORING SERVICES
Overview
According to CIC, automobile dealerships in China typically adopt an asset-heavy
business model under which they need to order and pay for vehicles in advance to maintain a
certain inventory level. To improve their working capital turnover, it is market practice for
automobile dealerships to purchase vehicles with secured financing from financial institutions,
which primarily include commercial banks and automobile finance companies. The secured
financing is typically secured by the vehicles that automobile dealerships are purchasing.
However, according to CIC, financial institutions historically faced multiple challenges in
managing the pledged vehicles under their secured financing arrangements with automobile
dealerships, including (i) a financial institution might provide secured financing to multiple
automobile dealerships that are not only geographically apart from the financial institution but
also scattered across the country, making it time-consuming for financial institutions to
monitor and conduct inventory taking of the pledged vehicles for each automobile dealership
in a timely manner, and as a result, (a) the pledged vehicles may be stolen, damaged or sold
without the financial institutions’ authorization; and (b) the vehicle conformity certificates of
the pledged vehicles may be mortgaged without the financial institutions’ knowledge; (ii) the
vast number of pledged vehicles, which are time-consuming, costly and inefficient to count
manually; and (iii) the scarce technological capacity to continuously launch new features based
on changing market demands. This gives rise to a need by the financial institutions to keep
track of the pledged vehicles accurately and efficiently from a pledged vehicle monitoring
perspective. Our pledged vehicle monitoring services facilitate the effective and cost-efficient
monitoring of pledged vehicles, enabling financial institutions to manage automobile
dealerships’ secured financing more seamlessly.
The table below sets forth (i) the services we provide; and (ii) the information systems
and technologies we use to provide our services throughout the whole process during which
financial institutions provide secured financing to automobile dealerships.
Services that we provide  Pledged vehicle monitoring and lockbox services
(periodic/real-time)
 Collective management of vehicle conformity
certificate
 Counting service
Information systems and
technologies that we use
 VFS system & V ehicle Connect
 RFID labels
 PDAs
 OBD devices
 Lockboxes (traditional/electronic)
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For a description of the nature and the function of each of the information systems and
technologies that we use to provide our services in each stage, please see “—Pledged V ehicle
Monitoring Services—Pledged V ehicle Monitoring System.”
In addition to possessing in-depth industry knowledge, we have two primary competitive
advantages in comparison with our peers: (i) our pledged vehicle monitoring system enables
us to monitor pledged vehicles and use the data collected to analyze and report potential risk
events of automobile dealerships through our VFS system based on pledged vehicles’ data
collected from automobile dealerships via our RFID labels, PDAs and OBD devices; and (ii)
V ehicle Connect, a mobile application that we launched and integrated into our pledged vehicle
monitoring system, allows both financial institutions and automobile dealerships to access the
location and activities information of pledged vehicles as well as obtain market information of
the automobile industry, which help reduce communication costs and human errors. As advised
by CIC, as of the Latest Practicable Date, certain of our peers, including two of the top five
pledged vehicle monitoring service providers in the industry, did not have a comprehensive
digital system to facilitate their services, and relied heavily on manual monitoring and counting
of pledged vehicles. Considering the comprehensive information system that we use to
facilitate real-time pledged vehicle monitoring for our customers, and our expertise and
in-depth knowledge of the automobile sales and distribution industry as well as the practicable
difficulties faced by financial institutions in pledged vehicle monitoring, we believe we have
distinguished ourselves from our competitors.
Users of our pledged vehicle monitoring services consist of financial institutions, which
primarily include commercial banks and automobile finance companies, and automobile
dealerships with pledged vehicles. As of June 30, 2023, we provided pledged vehicle
monitoring services to (i) approximately 200 branches of 18 commercial banks, including all
of China’s “Big Six” national state-owned commercial banks and 12 joint-stock commercial
banks; (ii) 27 automobile finance companies; and (iii) 11,152 automobile dealerships.
Typically, we enter into tripartite pledged vehicle monitoring service agreements with both
financial institutions and automobile dealerships. A single automobile dealership may enter
into tripartite pledged vehicle monitoring service agreements with us and multiple financial
institutions for different secured financing. The decisions to engage us to provide pledged
vehicle monitoring services under tripartite agreements are results of the negotiations among
the contracting parties and the mutual consents between financial institutions and automobile
dealerships. Typically neither the financial institutions nor the automobile dealerships are in a
dominant position or bear the ultimate responsibility to make such decisions.
Although our pledged vehicle monitoring services are designed to help financial
institutions manage secured financing provided to automobile dealerships and our service fees
are typically paid by financial institutions, we consider the paying party under the tripartite
agreements as our customer, which may be either financial institutions or automobile
dealerships, depending on the negotiation between them, and we consider both financial
institutions and automobile dealerships as our users. To the best of our knowledge, the
negotiations regarding the paying party of our pledged vehicle monitoring services may take
into consideration (i) financial institutions’ past experience with automobile dealerships, or
automobile dealerships’ track record; and (ii) the amount of secured financing. If an
automobile dealership is a regular borrower with a decent track record as manifested by timely
interest payment and principal repayment, or if the secured financing that an automobile
dealership borrows is sufficiently large, the financial institution may be the paying party of our
services after negotiations with the dealership. Such practice is in line with the industry norm
as advised by CIC. As of June 30, 2023, we provided pledged vehicle monitoring services to
over 10,000 automobile dealerships in over 500 cities across 31 provinces in China.
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Key Operating Metrics
The table below sets forth the movement of the number of our pledged vehicle monitoring
service agreements during the Track Record Period.
For the years ended December 31,
For the six months
ended June 30,
2020 2021 2022 2022 2023
At the beginning of the
period 9,631 10,963 12,271 12,271 14,503
New engagement 4,752 5,319 6,411 2,708 3,615
Termination (3,420) (4,011) (4,179) (2,233) (2,659)
At the end of the
period 10,963 12,271 14,503 12,746 15,459
We recorded termination of 3,420, 4,011, 4,179, 2,233 and 2,659 pledged vehicle
monitoring service agreements, respectively, in 2020, 2021, 2022 and the six months ended
June 30, 2022 and 2023, primarily because after automobile dealerships have sold all the
pledged vehicles or repaid the secured financing, the relevant financial institutions would
typically send us a notice to terminate the pledged vehicle monitoring service agreements with
us as required by the relevant contractual terms. According to CIC, in the automobile sales and
distribution industry in China, after an automobile dealership sells all the pledged vehicles or
repaid its secured financing, it is common for the financial institution to send a termination
notice to the relevant pledged vehicle monitoring service provider instead of continuing to use
its monitoring services to cover the dealership’s new pledged vehicles, or wait till the pledged
vehicle monitoring service agreement expires.
The following table sets forth the expiration schedule of our existing pledged vehicle
monitoring service agreements as of the Latest Practicable Date.
As of the Latest
Practicable Date
Service agreements without fixed terms 13,000
Service agreements with fixed terms expiring in:
– Y ear ending December 31, 2023 332
– Y ear ending December 31, 2024 2,794
– Y ear ending December 31, 2025 690
– Y ear ending December 31, 2026 and beyond 253
Total 17,069
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The number of pledged vehicle monitoring service agreements that we entered into
continued to grow after the Track Record Period, increasing from 15,459 as of June 30, 2023
to 17,069 as of the Latest Practicable Date. Although 3,126 among these 17,069 agreements
would expire by the end of 2024, we will negotiate with the financial institutions and
automobile dealerships for renewal at least a month before the expiration dates of the relevant
agreements, and our Directors do not expect that these expiring agreements would adversely
affect our business, financial condition and operating results.
The following table sets forth (i) the average and the range of monthly service fees that
we charged for our pledged vehicle monitoring services; and (ii) the average and the range of
duration of our pledged vehicle monitoring service agreements in 2020, 2021, 2022 and the six
months ended June 30, 2023.
For the years ended December 31,
For the
six months
ended
June 30,
2020 2021 2022 2023
Average service fee
(RMB/month/service
agreement)
(1) 3,564 3,527 3,252 3,206
Range of service fee
(RMB/month/service
agreement)
(2)
1,459-
14,500
1,800-
11,600
1,800-
8,100
1,600-
10,800
Average agreement duration
(days) (3)(4) 636 716 722 713
Range of agreement duration
(days) (3)(5) 1-4,400 1-5,145 1-5,214 1-5,562
Notes:
(1) Average service fee per month is calculated by dividing our revenue from pledged vehicle monitoring
services in a period by (i) the number of pledged vehicle monitoring service agreements that we had
entered into as of the end of that period, and by (ii) the number of months in the relevant period.
(2) The service fees that we charged varied by service agreements during the Track Record Period, primarily
because our customers could choose any one or any combination of the pledged vehicle monitoring
services that we provide, and the corresponding service fees varied depending on multiple factors, such
as the type and number of services chosen and the location of automobile dealerships. See
“—Pricing—Pricing Models—Pledged V ehicle Monitoring Services” for more information.
(3) Agreement duration refers to the actual length of time that we provided our pledged vehicle monitoring
services, including those that we were entrusted to provide under the Unassigned Agreements, to an
automobile dealership that obtained secured financing from a particular financial institution without
interruption.
(4) Average agreement duration is calculated by dividing the sum of agreement duration for agreements that
were terminated in a period by the number of agreements that were terminated in that period.
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(5) During the Track Record Period, some of our pledged vehicle monitoring service agreements had a
one-day duration, primarily because, to the best of our knowledge based on our experience, in some
instances automobile dealerships of certain car brands might sell the pledged vehicles that they
purchased with secured financing from financial institutions to customers within one to two days; once
the customers placed their orders, the automobile dealerships would repay the secured financing and
deliver the pledged vehicles to the customers, after which our monitoring services were not needed at
the moment, and the financial institutions would terminate our services to avoid incurring additional
costs.
The average monthly service fee per service agreement that we charged for our pledged
vehicle monitoring services remained relatively stable between 2020 and 2021, and
subsequently decreased by 7.8% from RMB3,527 in 2021 to RMB3,252 in 2022, and further
decreased slightly to RMB3,206 in the six months ended June 30, 2023, primarily because as
we expanded our business operation, the number of service agreements under which our onsite
staff provided services increased, which lowered the subcontracting costs per service
agreement and led to lower average monthly service fee per service agreement. See
“—Pricing—Pricing Models—Pledged V ehicle Monitoring Services” for more information.
Nevertheless, since the number of our pledged vehicle monitoring service agreements
increased by 18.2% from 12,271 as of December 31, 2021 to 14,503 as of December 31, 2022,
and increased by 18.2% from 12,746 as of June 30, 2022 to 15,459 as of June 30, 2023, our
revenue continued to grow throughout this period. During the Track Record Period, the average
duration of the pledged vehicle monitoring service agreements that we entered into remained
relatively stable.
As of December 31, 2020, 2021 and 2022 and June 30, 2022 and 2023, we monitored
approximately 636,100, 525,500, 710,400, 580,400 and 786,700 pledged vehicles, respectively.
The number of pledged vehicles that we monitored decreased from 636,100 as of December 31,
2020 to 525,500 as of December 31, 2021, primarily due to a decrease in the demand for new
vehicles and a slowdown in automobile transactions at automobile dealerships as a result of the
COVID-19 pandemic. As the market recovered and the sales volume of new vehicles increased
in 2022, the number of pledged vehicles we monitored increased to 710,400 as of December
31, 2022.
In 2020, 2021, 2022 and the six months ended June 30, 2023, the average number of
pledged vehicles underlying each of our pledged vehicle monitoring service agreement was 58,
43, 49 and 51, respectively, which fell within the range of the number of pledged vehicles
underlying each pledged vehicle monitoring service agreement among the market participants
in the industry that was between 40 and 70 during the Track Record Period, as advised by CIC.
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The following table sets forth the number of users of our pledged vehicle monitoring
services as of the dates indicated.
As of December 31, As of June 30,
2020 2021 2022 2022 2023
Financial institutions 211 206 219 206 223
– Commercial bank
branches 183 179 195 180 196
– Automobile
finance
companies 28 27 24 26 27
Automobile
dealerships 8,316 9,205 10,684 9,700 11,152
During the Track Record Period, we generally won pledged vehicle monitoring service
engagements through our market reputation, backed by our application of technology to
monitor pledged vehicles. In addition, we proactively explore new business opportunities by
reaching out to local branches of financial institutions and automobile dealerships.
Our pledged vehicle monitoring service agreements have either a fixed term of one year
or an unfixed term until our services are no longer needed by financial institutions. Financial
institutions and automobile dealerships may renew their pledged vehicle monitoring service
agreements with us prior to their expiration.
The following table sets forth the user-based net expansion rate of our pledged vehicle
monitoring services by type of users which primarily consist of financial institutions, including
commercial bank branches and automobile finance companies, and automobile dealerships, for
the periods indicated. To calculate the user-based net expansion rate for a given period, we
divide the difference between the number of our users as of the end and as of the beginning
of that period by the corresponding number as of the beginning of the given period.
For the year ended December 31,
For the six months
ended June 30,
2020 2021 2022 2022 2023
(%)
Financial institutions (3.7) (2.4) 6.3 0.0 1.8
– Commercial bank
branches (4.7) (2.2) 8.9 0.6 0.5
– Automobile
finance
companies 3.7 (3.6) (11.1) (3.7) 12.5
Automobile
dealerships 10.5 10.7 16.1 5.4 4.4
Overall 6.8 10.4 15.9 5.3 4.3
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Our user-based net expansion rate of commercial bank branches increased from a net
contraction rate of 2.2% in 2021 to a net expansion rate of 8.9% in 2022, and our user-based
net expansion rate of automobile dealerships increased from 10.7% in 2021 to 16.1% in 2022,
primarily due to the rapid growth of the NEV market in 2022. As the NEV market expanded,
automobile dealerships’ demand for secured financing to purchase NEVs increased, and
commercial bank branches’ demand for our pledged vehicle monitoring services to monitor
pledged NEVs increased in tandem. Our user-based net expansion rate of automobile finance
companies increased from a net contraction of 3.7% in the six months ended June 30, 2022 to
a net expansion rate of 12.5% in the six months ended June 30, 2023, primarily because our
automobile finance company users slightly decreased from 27 as of December 31, 2021 to 26
as of June 30, 2022, and subsequently increased back to 27 as of June 30, 2023, which was a
normal fluctuation during the course of our business.
The following table sets forth the retention rate of our pledged vehicle monitoring
services by type of users for the years indicated. To calculate the retention rate for a given year,
we divide the number of users as of the end of that year who were also our users as of the end
of the previous year by the number of users as of the end of the previous year.
For the years ended December 31,
2020 2021 2022
(%)
Financial institutions 66.8 83.9 92.4
Automobile dealerships 81.7 82.4 84.9
During the Track Record Period, our retention rate of financial institutions steadily
increased from 66.8% in 2020 to 83.9% in 2021, then to 92.4% in 2022, primarily because we
(i) continuously upgraded our VFS system and V ehicle Connect to facilitate our pledged
vehicle monitoring services for financial institutions; and (ii) improved our services and
products based on financial institutions’ demands and feedbacks. During the Track Record
Period, our retention rate of automobile dealerships remained relatively stable.
In each of the years ended December 31, 2020, 2021 and 2022 and the six months ended
June 30, 2023, the average revenue contribution by our top ten customers in that period was
RMB12.3 million, RMB13.5 million, RMB17.6 million and RMB10.4 million, respectively.
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Pledged Vehicle Monitoring System
We utilize a pledged vehicle monitoring system that leverages to enhance our capabilities
to improve customer experience, reduce reliance on manual labor, and lower operating costs.
Our pledged vehicle monitoring system is composed of (i) the VFS system and V ehicle
Connect, which is a mobile application that provides access to the information collected by the
VFS system; (ii) RFID labels; (iii) PDAs; (iv) OBD devices; and (v) traditional and electronic
lockboxes. We own the copyrights of our VFS system and V ehicle Connect. We also own the
patents of the PDAs, the OBD devices and the lockboxes, and engage independent third parties
to manufacture them.
The following diagram illustrates our pledged vehicle monitoring system and how it
integrates and creates synergy with our services, allowing us to monitor pledged vehicles and
assess automobile dealerships across China from our headquarters.
Engagement Monitoring Service
Conclusion
Financial
Institution/
Automobile
Dealership
Receipt of Subjects
Under Monitor
Counting  of Subjects
Under Monitor
Release of  Subjects
Under Monitor
Moving of Pledged
Vehicles/Replacement
of Vehicle Conformity
Certificates
Notification from
financial institution
regarding service
termination
Notify dealerships of
the upcoming service
termination
Service termination
upon expiration of
service agreement
Entering Into
Service
Agreement
The Group
Engage
subcontractors
to provide onsite
supervision
services
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VFS System and V ehicle Connect
Our VFS system is a multifunctional IT solution with online operation, automatic alert
and pledged vehicle monitoring modules and a pool of over 20,000 preset commands, which
allows financial institutions to readily choose the settings that best suit their risk management
needs without having to create the commands from scratch. Our VFS system was developed
based on our industry insights and interactions with both financial institutions and automobile
dealerships. V ehicle Connect is a mobile application that allows (i) financial institutions and
automobile dealerships to access our VFS system on their mobile terminal; and (ii) financial
institutions to choose and apply the aforementioned settings. The screenshots below show the
main user interface of V ehicle Connect.
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Through our VFS system and V ehicle Connect, financial institutions can (i) access the
location and activities information of pledged vehicles collected by our PDAs and OBD
devices; (ii) process certain requests and documentations, such as granting automobile
dealerships permissions to access car keys that are held in our custody for customers’ test
drives, from automobile dealerships online; (iii) customize rules and permissions governing
automobile dealerships’ rights over the pledged vehicles; and (iv) tailor risk alert triggers based
on their own risk management needs.
The second generation of our VFS system and V ehicle Connect was launched in 2018. We
have been continuously upgrading them through iteration developments to incorporate modules
that help facilitate automobile dealerships’ secured financings from financial institutions and
reflect our industry insights. During the Track Record Period and up to the Latest Practicable
Date, only we and the users of our pledged vehicle monitoring services had access to our VFS
system and/or V ehicle Connect; we had not licensed our VFS system or V ehicle Connect to any
other players in the automobile sales and distribution industry.
RFID Labels
Our RFID labels, which are typically affixed on vehicles’ windshields, are economical
means to automate the periodic monitoring of pledged vehicles, which gives financial
institutions and automobile dealerships a snapshot of the static information of the pledged
vehicles, such as the total count as well as their respective makes and models. Each of our
RFID labels has (i) a microchip that contains certain information of the vehicle on which the
RFID label is affixed, such as the vehicle identification number (“VIN”); and (ii) an antenna
that transmits signals at certain frequencies, allowing information stored on the microchip to
be read by our patented PDAs held by staff designated by our subcontractors at an automobile
dealership, which allows the dealership to readily record and synchronize information of its
pledged vehicles to our VFS system. Our RFID labels also have an anti-removal feature. When
the pledged vehicles are under our monitoring, any unauthorized attempt to remove our RFID
label without following a specific procedure will result in its breaking into pieces with the
microchip and RFID antenna still adhered to the windshield, allowing us to continue our
periodic monitoring of the pledged vehicle by reading the signals transmitted by its RFID
antenna with our PDAs; if the microchip and RFID antenna are removed by force, no signal
could be transmitted or picked up by our PDAs during periodic monitoring, and our VFS
system will detect such missing signal and send a risk alert to the relevant financial institution.
After the pledged vehicles are sold and no longer under our monitoring, the RFID labels could
be properly removed by the dealership.
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PDAs
Our PDAs are handheld radio frequency transmitting and receiving devices that can read
information from and write information on our RFID labels. When automobile dealerships’
employees or staff designated by our subcontractors who provided onsite supervision services
hold the PDAs and approach the pledged vehicles, the PDAs will take inventory by
simultaneous reading the signals transmitted from the RFID labels and identifying pledged
vehicles within a short distance. Afterwards, when automobile dealerships’ employees or staff
designated by our subcontractors who provided onsite supervision services bring the PDAs into
a Wi-Fi environment or connect the PDAs to their mobile devices via Bluetooth, our PDAs are
capable of synchronizing the information they have read from the RFID labels to our VFS
system via either Wi-Fi or the mobile devices’ cellular network.
OBD Devices
Our OBD devices, which are typically plugged in ports beneath vehicles’ dashboards,
enable the effective monitoring of pledged vehicles in real time. We offer our customers two
types of OBD devices: (i) our Global Positioning System (“GPS”) OBD devices are equipped
with GPS and are capable of Global System for Mobile (“GSM”) transmission, which record
and transmit information most accurately; and (ii) our Bluetooth OBD devices are Bluetooth
compatible and are capable of short-range wireless transmission. When a pledged vehicle is
under our monitoring, once our OBD device is plugged in, it automatically records details
about the pledged vehicle at all times, whether the engine is on or off, and transmits such
information to our VFS system. The information we record primarily include lengths of time
a vehicle is moving or stationary during a journey, speeds at which it is driven, the distance
it travels between stops, the time, date and route of a journey and its VIN. If the OBD device
is removed without our authorization, our VFS system will detect a gap in the information
recording, and will send a risk alert to the relevant financial institution. After the pledged
vehicles are sold and no longer under our monitoring, automobile dealerships will remove the
OBD devices plugged in the pledged vehicles.
Lockboxes
Historically we provided our lockbox services through traditional lockboxes, which
constituted the majority of the lockboxes that we placed on automobile dealerships’ sites or in
the locations mutually agreed upon by the financial institutions and automobile dealerships. To
enhance the security of the vehicle conformity certificates and car keys that we hold in custody,
facilitate automation as well as increase the efficiency of our lockbox services, and enhance
customer experience, we completed the development of the fifth generation of electronic
lockboxes in 2022, and plan to launch it in 2024. We also plan to continuously upgrade and
promote the use of our electronic lockboxes among our customers. See “Future Plans and Use
of Proceeds—Use of Proceeds.” During the Track Record Period, substantially all of our
lockbox services were provided via traditional lockboxes.
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Our electronic lockboxes are Wi-Fi- and Bluetooth-compatible safes that help store and
secure vehicle conformity certificates and car keys that we hold in custody. Our electronic
lockboxes can be connected to our VFS system, through which we are able to remotely assign
and reset PIN codes that are used to unlock them, providing an extra layer of security to the
vehicle conformity certificates and car keys held therein. Our electronic lockboxes are
typically placed on automobile dealerships’ sites or in the locations mutually agreed upon by
the financial institutions and automobile dealerships. Each access to our electronic lockboxes
is traceable, and it can be readily verified whether a PIN code has been used to open a
electronic lockbox.
Scope of Services
We provide our users with any one or any combination of the following services: (i)
pledged vehicle monitoring and lockbox services; (ii) collective management of vehicle
conformity certificates; (iii) counting of pledged vehicles, vehicle conformity certificates and
car keys; and (iv) other ancillary services, such as providing financial institutions additional
risk alerts to report regional and market emergencies and other events that might prevent the
automobile dealerships or us from fulfilling our respective contractual obligations under the
tripartite service agreements, which is not a standard service under a typical tripartite service
agreement. Financial institutions and automobile dealerships can choose the service(s) that best
suit their needs. Our service fees are typically paid by financial institutions. Nevertheless,
either financial institutions or automobile dealerships may pay for our services under the
tripartite service agreements, depending on the negotiation between them. To the best of our
knowledge, the negotiations regarding the paying party of our pledged vehicle monitoring
services may take into consideration (i) financial institutions’ past experience with automobile
dealerships, or automobile dealerships’ track record; and (ii) the amount of secured financing.
If an automobile dealership is a regular borrower with a decent track record as manifested by
timely interest payment and principal repayment, or if the secured financing that an automobile
dealership borrows is sufficiently large, the financial institution may be the paying party of our
services after negotiations with the dealership. Such practice is in line with the industry norm
as advised by CIC. For description of the pricing of our services, please see
“—Pricing—Pricing Models—Pledged V ehicle Monitoring Services.”
For our pledged vehicle monitoring and lockbox services : We provide two types of
monitoring services: periodic and real-time. In 2020, 2021, 2022 and the six months ended June
30, 2023, in terms of the revenue we generated from pledged vehicle monitoring services,
95.4%, 96.8%, 97.2% and 94.3% of our pledged vehicle monitoring services, respectively,
were performed under the periodic method, and 4.6%, 3.2%, 2.8% and 5.7% of our pledged
vehicle monitoring services, respectively, were performed under the real-time method.
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Periodic . We help facilitate the periodic monitoring of pledged vehicles through our RFID
labels, PDAs and VFS system at contractually agreed intervals. Our PDAs allow automobile
dealerships’ employees or the onsite staff designated by our subcontractors to (i) count pledged
vehicles within a certain parameter by simultaneously scanning and recording the signals
transmitted by the RFID label affixed on each inventory vehicle; and (ii) synchronize the
information recorded, such as the total number and the VINs of pledged vehicles, to our VFS
system. Since our periodic pledged vehicle monitoring services give financial institutions and
automobile dealerships a mere snapshot of the static information of the pledged vehicles, such
as the total number of vehicles as well as their respective brands and models, at the time of
inventory counting, it is a relatively economical option in comparison to our real-time pledged
vehicle monitoring services. We typically recommend periodic pledged vehicle monitoring
services to financial institutions to whom cost efficiency is a priority.
Real-time . We help monitor the locations and various activities of automobile
dealerships’ pledged vehicles through our OBD devices, VFS system and the onsite staff
designated by our subcontractors who provide onsite supervision services. Pledged vehicles’
operation information is recorded in realtime by our OBD devices and synchronized to our VFS
system. Our OBD devices produce, and our VFS system allows a financial institution to access,
a continuous record of vehicle operation, allowing instant and automatic detection when any
pledged vehicle is stolen or driven out of the automobile dealership’s lot without permission
from the financial institution in its capacity as creditor. Since our real-time pledged vehicle
monitoring services offer financial institutions and automobile dealerships the most up-to-date
information while enabling them to interact with data through data analytics, such as extracting
or generating the sales trends of pledged vehicles as well as visualizing automobile
dealerships’ inventory level by region, brand and model through data analytics, it is a more
effective option and a more dynamic decision-making resource in comparison to our periodic
pledged vehicle monitoring services. We typically recommend real-time pledged vehicle
monitoring services to financial institutions with lower risk acceptance.
Please see “—Employees” for more details regarding the respective duties of our
employees under the our pledged vehicle monitoring service department and the onsite staff
designated by our subcontractors.
We also provide lockbox service, under which we hold the vehicle conformity certificates
and car keys of pledged vehicles designated by the financial institution in its capacity as
creditor. We use both traditional lockboxes, which use lockbox keys without Wi-Fi or
Bluetooth connectivity for remote PIN code reset or assignment, and electronic lockboxes,
which can connect to our VFS system and require a PIN code assigned by us to access. Unless
authorized by the financial institution, which typically happens when a customer of the
automobile dealership needs to test drive or has bought a pledged vehicle, no one shall be able
to open, move, take control or damage the lockboxes. Typically we place our lockboxes on
automobile dealerships’ sites or in the locations mutually agreed upon by the financial
institutions and automobile dealerships.
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For our collective management services of vehicle conformity certificates : Our staff
collectively keep the vehicle conformity certificates of an automobile dealership’s pledged
vehicles in custody in the cities where it locates. A vehicle conformity certificate is a document
issued by the manufacturer of a vehicle that contains information about the vehicle and certifies
that it has been manufactured in conformity with the relevant safety and environmental
regulations. A vehicle conformity certificate is required for the transfer of title and registration
of a vehicle. We typically receive, verify, scan and release the vehicle conformity certificates
per financial institutions’ instructions and upon their authorization, which helps not only
cross-check the number of pledged vehicles but also prevent automobile dealerships’
unauthorized sales of pledged vehicles.
For our counting service : On financial institutions’ demand, we deploy staff designated
by our subcontractors who provide onsite supervision services to count the automobile
dealerships’ pledged vehicles as well as their vehicle conformity certificates and car keys to
ensure they match the information recorded on our VFS system via our RFID labels, PDAs and
OBD devices. In 2020, 2021, 2022 and the six months ended June 30, 2023, our counting
services were performed by the onsite staff designated by our subcontractors either manually
or with the assistance of our RFID labels and PDAs (the “Onsite Counting Services”) at
10,602, 12,022, 14,134 and 15,066 automobile dealerships, respectively, and our counting
services were performed by OBD devices (the “Remote Counting Services”) at 361, 249, 369
and 393 automobile dealerships, respectively. In 2020, 2021, 2022 and the six months ended
June 30, 2023, the ratio of Onsite Counting Services versus Remote Counting Services in terms
of the number of automobile dealerships where we performed counting services was 96.7% to
3.3%, 98.0% to 2.0%, 97.5% to 2.5% and 97.5% to 2.5%, respectively. Our Directors also
confirmed that during the Track Record Period and up to the Latest Practicable Date, in terms
of the number of automobile dealerships where we performed counting services, only 2.0% or
less of our Onsite Counting Services were performed manually.
Typically, before we commence our monitoring services, we will (i) create an account for
the financial institution and the automobile dealership on our VFS system; and (ii) dispatch
onsite staff with the necessary equipment and hardware, including our lockboxes, to the
designated dealership. Upon the arrival of the pledged vehicles at the dealership’s store or
showroom, the onsite staff designated by our subcontractors will (i) affix RFID labels or install
OBD devices on the pledged vehicles according to the relevant tripartite pledged vehicle
monitoring service agreement; and (ii) collect and keep the vehicle conformity certificates as
well as the car keys of the pledged vehicles in our lockbox. Afterwards, the onsite staff
designated by our subcontractors will use our PDAs to count the pledged vehicles periodically,
or our OBD devices will continuously record vehicle information. Such counting records and
vehicle information will be synchronized to our VFS system, which will produce reports and
sent risk alerts to the financial institution. We could also collectively manage the vehicle
conformity certificates of a dealership’s pledged vehicles by taking the certificates in custody
in the cities where it locates. If a financial institution would like to ensure the accuracy of the
information recorded on the VFS system or verify the actual condition of the pledged vehicles
at a dealership, we will dispatch designated staff to perform counting of the pledged vehicles,
vehicle conformity certificates and car keys as required.
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Key Terms of Pledged Vehicle Monitoring Service Agreements
We typically enter into tripartite agreements with (i) financial institutions that provide
secured financing; and (ii) automobile dealerships that pledge their vehicles. The tripartite
agreements typically include the following key terms:
 Scope of services . The agreements set out the objects to be monitored, which
typically include motor vehicles, vehicle conformity certificates and car keys, the
types or combination of services to be provided and specific service requirements.
 Performance standards . The agreements set forth specific standards and frequency
for our main services. Typically we are obliged to keep the objects we monitor from
unauthorized access, damage and loss.
 Pledged vehicle monitoring service fees . The agreements set forth the amount as
well as the payment method of the fees that we charge for our services.
For our pledged vehicle monitoring services and lockbox services : Payments for
our services in the next quarter are typically made in advance within at least five
working days from the start of the current quarter. We also charge a late fee for
overdue pledged vehicle monitoring services and lockbox service fees, which is
typically 0.1% to 0.5% of the overdue amount.
For our collective vehicle conformity certificate management services : Payments
for our services in the next quarter are typically made in advance within five
working days from the start of the current quarter. We also charge a late fee for
overdue collective vehicle conformity certificate management service fees, which is
typically 0.5% of the overdue amount.
For our counting service : We offer flexible service and payment options to our
customers, who can choose to pay us per number of counting service we provide.
If automobile dealerships are paying for our services, we typically collect
prepayments for our pledged vehicle monitoring services, lockbox services and
collective vehicle conformity certificate management services. If financial
institutions are paying for our services, we might grant them a credit term of 15 to
60 days upon separate commercial negotiations on a case-by-case basis before we
enter into service agreements.
See “—Pricing—Pricing Models—Pledged V ehicle Monitoring Services” for more
details.
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 Financial institutions’ rights and obligations . Financial institutions are entitled to
supervise our services according to the standards included in the agreement. If
onsite supervision services are needed, financial institutions are responsible for
coordinating with automobile dealerships on the provision of office supplies and
equipment. After financial institutions provide secured financing to automobile
dealerships, financial institutions are typically responsible for sending us a list of
pledged vehicles.
 Automobile dealerships’ rights and obligations . Each tripartite agreement
corresponds to one automobile dealership and designates one location where the
pledged vehicles should be stored, which is typically the dealership’s store or
showroom. Automobile dealerships are primarily responsible for (i) providing a safe
place for the storage of pledged vehicles; (ii) purchasing both property insurance
and theft insurance for their pledged vehicles; (iii) ensuring that they purchased the
pledged vehicles from legitimate sources and have ownership and disposal rights
over such vehicles; and (iv) cooperating with us when we provide our services.
 Our rights and obligations . We are entitled to receive pledged vehicle monitoring
service fees according to the relevant provisions in the agreement. We are
responsible for (i) providing the services and equipment, where applicable,
necessary for the provision of such services, including RFID labels, OBD devices
and lockboxes, included in the agreement; (ii) cooperating with the supervision by
our customers; (iii) notifying the financial institutions in a timely manner upon our
discovery of any (a) damage or loss of the pledged vehicles, car keys or vehicle
conformity certificates; or (b) accident that happened to the pledged vehicles; and
(iv) offering relevant records and materials as necessary. A tripartite pledged vehicle
monitoring service agreement typically does not stipulate that we shall bear joint
and several liability with the automobile dealership in the event of its default in
repayment of secured financing. However, if we fail to duly fulfill our obligations,
such as timely reporting risk events to the relevant financial institutions, and such
failure results in the damage or loss of the pledged vehicles, vehicle conformity
certificates or car keys, we would be liable to compensate the relevant financial
institution for its losses resulted from such damage or loss. During the Track Record
Period and up to the Latest Practicable Date, we were involved in certain disputes
alleging that we failed to fulfill our contractual obligations under tripartite service
agreements, but we were not held liable in any dispute or incident and we did not
pay financial institutions any such compensation. To prevent risk events, we have
formulated the Management Measures of Risk Events (ᎈԫ΁၍ଣ፬
), which covers the procedures for the feedback, verification, early warning and
on-site handling of risk events. Upon the discovery or identification of a risk event,
our onsite staff typically reports such incident to his supervisor and concurrently
notifies our employees in the pledged vehicle monitoring department of the
incident’s details; our employees will then begin to collect information from
relevant parties and verify the incident, and send out a risk alert to the financial
institution as soon as practicable via our VFS system.
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 Term and termination of service . The agreement term either has a fixed term of one
year or an unfixed term until our services are no longer needed by financial
institutions. We typically begin our monitoring services upon our receipt of a five-
to ten-day commencement notice, and stop our services upon our receipt of a five-
to ten-day termination notice, from financial institutions. Typically, financial
institutions send us (i) the commencement notice immediately before or after they
provide secured financing to automobile dealerships or the pledged vehicles arrive
at the automobile dealerships; and (ii) the termination notice after automobile
dealerships sell all the pledged vehicles or repaid the secured financing. Within the
period prior to the termination of an agreement, we are typically responsible for
continuing to provide our services while transitioning duties to our successor or the
automobile dealership. Any of financial institutions, automobile dealerships and us
have the right to terminate the tripartite agreements prior to the expiration of the
agreement term for causes listed in the agreement. Such causes primarily include our
failure to offer satisfactory services pursuant to the service standards included in the
agreement and our customers’ failure to pay for our services.
 Data confidentiality . Except for the information that we are authorized to collect,
including but not limited to pledged vehicles’ brands, models, VINs, status and
movement, we do not collect any other information through our RFID labels and
OBD devices.
 Dispute resolution . Parties are typically required to resolve any contractual dispute
through negotiations first, failing which the dispute is to be resolved through court
proceedings or other legal proceedings.
Data Security and Privacy
We primarily collect and process four types of business data, namely (i) data related to
pledged vehicles, which mainly consists of the number, price, VIN, brand, model and
manufacturing year of pledged vehicles; (ii) dealership-related data, which mainly consists of
the names, location, contact information and brands of automobile dealerships; (iii) dealership
operational data, which mainly consists of the sales prices of the pledged vehicles; and (iv)
service-fee-related data, which mainly consists of the types of services, payment methods,
billing cycles, amount receivable, actual amount collected, and receipt number of the services
provided. During the Track Record Period and up to the Latest Practicable Date, we had not
entered into any agreement to share these business data we collect with any party other than
those which are parties to the relevant pledged vehicle monitoring service agreements.
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In addition to the above business data, we collect, store and use personal data of staff
from subcontractors and employees of commercial banks, automobile finance companies and
automobile dealerships. Personal data we collect from subcontractors who provide onsite
supervision services primarily include their names, dates of birth, phone numbers, ID numbers,
addresses, work experience, education background and facial recognition data. The personal
data we collect from employees of commercial banks, automobile finance companies and
automobile dealerships when they register in our systems to use our services primarily include
their names, phone numbers, job titles and work emails.
We have adopted various internal control measures and policies to ensure data security
and privacy protection in relation to our internal operational data, as well as external data, such
as customer data obtained through our information systems. Access to our information systems
requires (i) the requisite level of permission; and (ii) identity authentication, including
password. Certain sensitive data are encrypted and can only be accessed or desensitized for
display with the authorization of a business segment manager of the relevant business unit. We
have explained the terms and conditions to our users and have also gained their prior consent
to the privacy policies of our systems before collecting their data. We implement strict access
control to our physical server rooms and various online applications and systems, and only
grant access to employees with legitimate business needs at the appropriate with designated
password requirement. All unnecessary access to our database is prohibited. Customer-related
data and company confidential information are not allowed to be distributed to external parties
or uploaded to the Internet. Customer-related data also cannot be discarded at will unless
approved by appropriate authority and in accordance with our internal data management
policies. We also continuously monitor the operation status of our various information systems,
analyze alarm records on a regular basis, and take necessary countermeasures as needed. We
have created an information security management center to centrally monitor information
leakage, malicious malware, patch upgrades and security audits. During the Track Record
Period and up to the Latest Practicable Date, we had not experienced any information leakage
or loss of user data, nor had we been subject to any fines, administrative penalties, or other
sanctions by any relevant regulatory authorities in the PRC in relation to violation of
cybersecurity, data security and personal data protection laws and regulations. Based on the
foregoing, our PRC Legal Advisors are of the view that we are in compliance with the
applicable PRC laws and regulations on cybersecurity, data security and personal data
protection in all material respects.
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AUTOMOBILE DEALERSHIP OPERATION MANAGEMENT SERVICES
Overview
According to CIC, medium- and small-sized automobile dealerships in China generally
lack managerial expertise, technological capabilities and sophisticated human resources
system. Such dealerships face problems such as sloppy management and unprofessionalism. In
light of the increasingly competitive nature of the automobile sales and distribution industry,
medium- and small-sized automobile dealerships may find it difficult to rely solely on their
own capabilities to achieve efficient operations, leading to an increasing need for specialized
and professional management services. See “Industry Overview—Overview of China’s
Automobile Dealership Operation Management Services Market.” To cater to such need, we
began offering management services to medium- and small-sized automobile dealerships that
seek more optimal business and financial performance in April 2022.
Our automobile dealership operation management services consist of automobile
dealerships operational support, data system and managerial services. We initially launched our
automobile dealership operation management services in some of Changjiu Group’s
automobile dealerships, primarily because (i) we intended to optimize our services before
expanding our offering to the wider market in light of our business relationship with Changjiu
Group; and (ii) in the post-COVID-19 era, Changjiu Group sought to be the first mover in
strategically improving the overall management and operational efficiency of over 70
automobile dealerships that it owned through digitalization. See “—Our Strategic Business
Relationship with Changjiu Group” for more information. We believe our experience in
providing pledged vehicle monitoring services to financial institutions and automobile
dealerships, our national service network and our insights in the automobile sales and
distribution industry yield us a comparative advantage over our competitors in the relatively
early stage of the automobile dealership operation management market.
Since we commenced providing automobile dealership operation management services in
April 2022, we had expanded our presence to 31 cities across 14 provinces in China. As of June
30, 2023, we had entered into 5 automobile dealership operation management service
agreements with dealerships owned by Independent Third Parties. The table below sets forth
information on these five dealerships owned by Independent Third Parties.
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Dealership A (2) Dealership B (2) Dealership C (3) Dealership D (3) Dealership E
Location Shouguang,
Shandong
Shouguang,
Shandong
Hengyang, Hunan Hengyang, Hunan Jinan, Shandong
Scale of operations
(registered capital)
RMB10.0 million RMB10.0 million RMB7.0 million RMB10.0 million RMB50.0 million
Financial standing
(revenue in 2022) (1)
RMB162.7
million
RMB107.2
million
RMB143.7
million
RMB122.8
million
N/A(4)
Y ears of
establishment
2010 2017 2000 2002 2017
Business
acquaintance
Through business development
Term of service
agreement
18 months 18 months 15 months Five years 12 months
Scope of services Professional services on business strategy and operation management; access to Smart Star; and
support from the auto parts and supply procurement channels
Whether we have
recognized revenue
No No No Y es No
Notes:
(1) Source of data: Due diligence report prepared by an Independent Third Party business information company
that we engaged.
(2) The ultimate beneficial owner of Dealership A is also one of the ultimate beneficial owners of Dealership B
and an Independent Third Party.
(3) Dealerships C and D are owned by the same ultimate beneficial owner who is an Independent Third Party.
(4) Dealership E is a private enterprise, and its financial standing is not publicly available.
Our Directors confirmed that none of our Group, our directors, shareholders or senior
management, or any of their respective associates, had any past or present relationship,
transaction or arrangement with any of the aforementioned five automobile dealerships or their
respective associates during the Track Record Period and up to the Latest Practicable Date.
As of the Latest Practicable Date, we had also entered into non-legally binding letters of
intent for our automobile dealership operation management services with 144 automobile
dealerships, all of which are owned by Independent Third Parties. After signing the letters of
intent, we typically (i) engage in further communication and negotiation with the automobile
dealerships; (ii) commence evaluation of the automobile dealerships; and (iii) decide whether
to enter into formal agreements with the automobile dealerships based on the evaluation
reports, subject to market condition, our capacity and other commercial considerations.
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Operation Management System
To better support our provision of automobile dealership operation management services,
we utilized an operation management system tailored for managing the daily operations of
automobile dealerships, namely Smart Star (“݋߅that consists of a customer relationship
management (“CRM”) software-as-a-service (“SaaS”) system and an enterprise resource
planning (“ERP”) system.
The following diagram illustrates our operation management system and how it facilitates
our automobile dealership operation management services and enables us to manage
automobile dealerships of different sizes and locations.
Automobile Dealership Operation Management System (Smart Star)
CRM SaaS System
Marketing campaigns and
media content management
Order, warehouse and
logistics management
Vehicle sales After-sales services
Financing and
insurance servicesUsed car services
Supplies and auto
parts services
Establishment and
management of
membership system
Discovering repeat
purchase needs from
previous customers
ERP system
Our CRM SaaS system leverages data analytics for customer sourcing, sales management,
marketing and promotions, and after-sales management. It helps automobile dealerships attract
and retain customers by (i) launching marketing campaigns and managing media content; (ii)
managing orders, warehouse and logistics of vehicles sales; (iii) creating user profiles and
discovering repeat purchase needs from previous customers; and (iv) establishment and
management of membership system.
Our ERP system is equipped with business planning and tax management modules. It
supports automobile dealerships’ (i) vehicle sales services through integrated management of
prospective and potential customers, business process and orders for new vehicles; (ii)
after-sales services through management of appointment, service provision and payment; (iii)
financing and insurance services through management of customers’ automobile loans,
automobile insurances and warranties; (iv) supplies and auto parts services through collective
procurement of spare auto parts and inventory management; and (v) used car services through
integrated management of purchase, storage, refurbishment, evaluation, pricing, consignment
or replacement of used cars.
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Scope of Services
Operation Management Services
Before providing operation management services, we typically develop an understanding
of prospective customers’ needs through onsite visits, interviews and preliminary data analysis.
If we uncover any issues that might be risky or detrimental to the operation of an automobile
dealership, we might decide not to provide our operation management services to such
automobile dealership. Once we on-board an automobile dealership, we provide services that
assist automobile dealerships’ marketing, sales of vehicles and automobile insurance,
maintenance and regulatory inspection, such as compliance with relevant fire safety and
environmental laws and regulations; grant automobile dealerships access to our operation
management system, namely Smart Star (“݋߅allowing them to categorize, process and
visualize their operational data, such as inventory level, sales and number of customers; and
provide automobile dealerships technology and human resource support, and help optimize and
standardize their financial and accounting systems.
As the number of automobile dealerships under our management increases, we would be
able to collect and analyze more samples, and our capability and efficiency of tailoring services
to automobile dealerships in different regions under different market conditions grow in
tandem.
Key Terms of Operation Management Service Agreements
Our operation management service agreements with automobile dealerships typically
include the following key terms:
 Dealerships serviced. The agreements specify the entities to which we will be
providing automobile dealership operation management services.
 Scope of services . The agreements set out the scope of our services, which typically
includes our provision of (i) both onsite and remote professional services on
business strategy, operation management and professional training of management
teams; (ii) access to our digital system; and (iii) support from the auto parts and
supply procurement channels, which we could recommend and refer to automobile
dealership customers based on our operation team’s previous supplier resources
which we understand from historical business development, as well as our business
connections with financial institutions. The professional services on business
strategy and support from auto parts and supply procurement channels that we
provide are primarily based on (i) years of experience that our employees cultivated
from the automobile sales and distribution industry; and (ii) our experience from our
provision of pledged vehicle monitoring services as well as interactions with
automobile dealerships.
 Term of service . The agreement term is typically three years from the date of
signing. The agreements may be renewed upon both parties’ mutual consent in
writing at least a month before the expiration dates of the agreements. Otherwise,
the agreements will be automatically terminated after their expiration dates.
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 Payment methods and pricing . We typically charge an annual management
fee according to a schedule. Automobile dealerships are typically responsible for
paying us a fixed management fee according to the following schedule: (i) 0.1% of
their expected annual revenue payable within 15 days following the signing date of
the automobile dealership operation management service agreements; and (ii) 0.4%
of their actual quarterly revenue payable within seven days following the end of
each of the subsequent quarters. See “—Pricing—Pricing Models—Automobile
Dealership Operation Management Services.” We also charge a late fee for overdue
operation management service fees, which is typically 0.05% of the overdue
amount, compounded daily.
 Performance standards . The agreements set forth specific standards and
expectations for our main services. We are typically responsible for assisting
automobile dealerships to (i) formulate annual business objectives, work plans and
marketing strategies; (ii) determine operating budgets; (iii) streamline the operation
process and improve the financial internal control systems of automobile
dealerships; and (iv) provide trainings to their employees.
 Automobile dealerships’ rights and obligations . The automobile dealerships retain
the right to make material decisions with respect to their business operations, and
are entitled to supervise our services according to the standards included in the
agreement. The automobile dealerships are typically responsible for cooperating
with our work, coordinating with the local government and regulatory agencies, and
providing water, electricity, gas, telecommunication and other utilities. The
automobile dealerships also bear all operating costs and expenses, including but not
limited to purchase, marketing and sales expenses of vehicles, purchase and
installation expenses of equipment and facility, interior decoration expenses and
wages.
 Our rights and obligations . We are entitled to receive operation management service
fees according to the relevant provisions in the agreement. We are responsible for
providing the services included in the agreement, cooperating with the supervision
by automobile dealerships and offering relevant records and materials as necessary.
 Intellectual property. Automobile dealerships shall not use our trademarks, logos,
trade names, trade secrets or other intellectual property without our authorization.
Except as stipulated in the agreement or otherwise agreed in writing by us,
automobile dealerships do not have any right in any of our intellectual property. In
addition, automobile dealership shall not copy or imitate the products or services
provided by us.
 Dispute resolution . Parties are typically required to resolve any contractual dispute
through negotiation first, failing which the dispute is to be resolved through court
proceedings or other legal proceedings.
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PRICING
Pricing Models
Pledged V ehicle Monitoring Services
For our pledged vehicle monitoring services, we primarily use a cost-plus pricing model.
Costs of our pledged vehicle monitoring services may vary depending on the average local
salary and the manpower required. Markup may vary depending on (i) the city tier of the
automobile dealerships and their pledged vehicles; and (ii) the scope of our services. We charge
our related parties and Independent Third Parties for our pledged vehicle monitoring services
according to the same fee schedule.
The monthly fees that we charge for our pledged vehicle monitoring services and lockbox
services primarily depend on (i) city tiers, which takes into consideration the difference in
labor costs in different cities; (ii) management model, which takes into consideration the time
that the staff designated by our subcontractors is needed onsite and the difference in
assignment of obligations; and (iii) service model, which takes into consideration the number
of automobile dealerships to which a staff provides services and the corresponding
subcontracting costs per dealership. Typically, all else being equal, the higher the city tier, the
higher the subcontracting costs, which leads to higher monthly service fee per dealership; and
the more dealerships a staff provides services to, the lower the subcontracting costs per
dealership, which leads to lower monthly service fee per dealership. During the Track Record
Period, the average service fee for our pledged vehicle monitoring services and lockbox
services was approximately RMB3,400 per month/per service agreement, which aligns with the
industry average according to CIC.
The monthly fees that we charge for our collective vehicle conformity certificate
management services primarily depend on (i) the number of automobile dealerships for which
we collectively manage their vehicle conformity certificates; and (ii) the number of vehicle
conformity certificates that we take custody of. Also, due to the physical limit of the storage
space in our lockboxes, we might need to arrange for additional lockboxes to accommodate for
the vehicle conformity certificates which exceed the storage capacity of our existing
lockboxes. During the Track Record Period, the service fee for our collective vehicle
conformity certificate management services was (i) RMB400.0 per month per pledged vehicle
monitoring service agreement when we collectively managed vehicle conformity certificates
under ten service agreements or more; and (ii) RMB800.0 per month per pledged vehicle
monitoring service agreement when we collectively managed vehicle conformity certificates
under less than ten service agreements, which falls within the industry range according to CIC.
We charged RMB400.0 per month per service agreement when we managed vehicle conformity
certificates under ten service agreements or more, and RMB800.0 per month per service
agreement when we managed vehicle conformity certificates under less than ten service
agreements, primarily base on the commercial rationale and industry experience that when
providing vehicle conformity management services under ten or more service agreements, we
could realize greater economies of scale, more fully utilize our onsite staff and further reduce
the unit cost for managing vehicle conformity certificates for each dealership.
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During the Track Record Period, the service fee for our counting services ranged from
RMB100.0 to RMB1,000.0 per counting service, depending on various factors, such as (i) the
respective locations of our onsite counting staff and the automobile dealerships; (ii) the objects
to be counted, which include pledged vehicles, vehicle conformity certificates and car keys;
and (iii) whether reports and photographs are needed, which falls within the industry range
according to CIC.
The service fees for, and the revenue from, our pledged vehicle monitoring services relate
to the number of automobile dealerships to which we provide services instead of the number
of pledged vehicles underlying the service agreements, primarily because we use our VFS
system and hardware, including the RFID labels, PDAs and OBD devices, to monitor and
collect data on a large number of pledged vehicles simultaneously, and our Directors are of the
view that we only incur marginal cost for monitoring additional pledged vehicles.
Automobile Dealership Operation Management Services
During the Track Record Period, we charged automobile dealerships owned by Changjiu
Group, which constituted the majority of customers of our automobile dealership operation
management services, an annual management fee according to the following schedule: (i) 0.1%
of the automobile dealership’s expected annual revenue payable within 15 days following the
signing date of the automobile dealership operation management service agreement; and (ii)
0.4% of the actual quarterly revenue payable within seven days following the end of each of
the subsequent quarters.
However, due to the relatively early stage of automobile dealership operation
management services, service providers, including us, are still exploring other pricing models
and fee structures, such as variable management fee or incentive fee, that could better facilitate
automobile dealership operation management services. For instance, in 2022 and the six
months ended June 30, 2023, we adopted a combination of service fees in the five operation
management service agreements that we entered into with the automobile dealerships owned
by Independent Third Parties. As such, our pricing model and service fee are subject to
negotiation with automobile dealerships on a case-by-case basis and may vary depending on
our service scope and costs. Despite the different fee structures, the overall pricing and major
terms of the five operation management service agreements were comparable with those of the
operation management service agreements that we entered into with automobile dealerships
owned by Changjiu Group.
Based on the automobile dealership operation management service agreements that we
had entered into as of June 30, 2023, the management fees that we charge principally range
from 0.3% to 0.5% of a dealership’s annual revenue, subject to adjustment with respect to a
predetermined profit target. According to CIC, our pricing falls within the industry range,
which was between 0.2% and 0.5% of an automobile dealership’s annual revenue. See
“Industry Overview—Sources of Information.”
We issue demand notes to our customers prior to payment due dates, and typically receive
payments for our services after the issuance of the demand note. We primarily accept payments
for service fees through online payment platforms and bank transfers.
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OUR STRATEGIC BUSINESS RELATIONSHIP WITH CHANGJIU GROUP
Overview
We have a longstanding strategic relationship with Changjiu Group, which can be traced
back to 2006 when we were part of Changjiu Industrial. In 2020, 2021, 2022 and the six months
ended June 30, 2023, our revenue generated from Changjiu Group amounted to RMB0.7
million, RMB8.7 million, RMB81.1 million and RMB49.5 million, respectively, accounting for
0.2%, 1.8%, 14.8% and 16.0% of our total revenue, respectively. For our pledged vehicle
monitoring services, the revenue that we derived from automobile dealerships of Changjiu
Group regardless of the paying parties amounted to RMB0.4 million, RMB0.5 million,
RMB0.4 million and RMB0.2 million, respectively, accounting for 0.1%, 0.1%, 0.1% and 0.1%
of our total revenue, respectively, in 2020, 2021, 2022 and the six months ended June 30, 2023.
In April 2022, leveraging our experience in providing pledged vehicle monitoring services to
financial institutions and automobile dealerships, national service network and insights in the
automobile sales and distribution industry, we began offering automobile dealership operation
management services to diversify our services and revenue sources. In order to optimize our
services before expanding our offering to the wider market and in light of our strategic business
relationship with Changjiu Group, we initially launched our automobile dealership operation
management services through Changjiu Group’s automobile dealerships. As of June 30, 2023,
we were contracted to manage 74 of Changjiu Group’s automobile dealerships, and derived
substantially all of revenue from automobile dealership operation management services from
them.
Business Transfer of Pledged Vehicle Monitoring Services from Changjiu Industrial
Prior to our establishment in September 2016, Changjiu Industrial had provided pledged
vehicle monitoring services to financial institutions and automobile dealerships since 2006.
Since September 2016 when Changjiu Jinfu was established, Changjiu Industrial has been
gradually transferring its existing pledged vehicle monitoring service agreements to us and
moving the operation team in charge of such services into our Group, and we have begun to
enter into new pledged vehicle monitoring service agreements with financial institutions and
automobile dealerships upon the expiration of the agreements between them and Changjiu
Industrial. As of November 30, 2021, the entire operation team and all related personnel of the
pledged vehicle monitoring services had been transferred into our Group from Changjiu
Industrial. For more information, see “History, Reorganization and Corporate
Structure—Reorganization—Onshore Reorganization—Business transfer of pledged vehicle
monitoring services.”
On November 30, 2021, Changjiu Industrial and we entered into a business transfer
agreement, pursuant to which Changjiu Industrial agreed to assign to us all of its rights and
obligations under its then existing pledged vehicle monitoring service agreements for a total
consideration of RMB45.5 million with reference to their contract value as of November 30,
2021. Such consideration had been fully settled as of the Latest Practicable Date. Apart from
the service agreements that were transferred to us from Changjiu Industrial, we procured 3,198,
4,433, 5,943 and 3,443 new pledged vehicle monitoring service agreements in 2020, 2021,
2022 and the six months ended June 30, 2023, respectively, from both new customers that had
not used, and returning customers that had previously used, the pledged vehicle monitoring
services provided by either Changjiu Group or us.
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In December 2021, the year ended December 31, 2022 and the six months ended June 30,
2023, the number of new contracts that we entered into with customers who were not customers
of Changjiu Industrial was 519, 5,653 and 3,382, respectively, accounting for 93.3%, 88.2%
and 98.2% of the total new contracts that we procured, respectively, with contract value
(1) of
RMB21.2 million, RMB230.6 million and RMB138.0 million, respectively.
As of the Latest Practicable Date, the rights and obligations of Changjiu Industrial under
a certain number of its then existing pledged vehicle monitoring service agreements (the
“Unassigned Agreements”) had not been transferred to us. The Unassigned Agreements
involved 23 financial institution customers and 524 automobile dealership customers, and had
an aggregate contract value
(1) of RMB21.4 million as of the Latest Practicable Date. All of the
rights and obligations of Changjiu Industrial under the Unassigned Agreements are expected to
be transferred to us or the Unassigned Agreements will expire by December 31, 2024, after
when we expect to enter into new pledged vehicle monitoring service agreements with the
relevant parties to such Unassigned Agreements. Although Changjiu Industrial continued to
assume its rights and obligations under the Unassigned Agreements, it has exclusively
entrusted us to provide pledged vehicle monitoring services pursuant to an entrustment
agreement dated April 26, 2023 between Changjiu Industrial and us.
The entrustment agreement also lays out that (i) Changjiu Industrial will transfer all the
pledged vehicle monitoring service fees that it collects under the Unassigned Agreements to us
on a monthly basis; (ii) Changjiu Industrial undertakes that it will not enter into new pledged
vehicle monitoring service agreements with other financial institutions or automobile
dealerships after the effective date of the entrustment agreement; (iii) if any term of the
entrustment agreement violates or conflicts with the Listing Rules, we will first try to correct
the violation or resolve the conflict through negotiation with Changjiu Industrial and
amendment of the entrustment agreement; if negotiation and amendment of the entrustment
agreement fail to correct the violation or resolve the conflict, we have the right to cease
upholding our contractual obligations under the relevant terms of the entrustment agreement;
and (iv) if the Stock Exchange rejects, revokes or changes the waiver granted to the continuing
connected transactions under the entrustment agreement, whether or not for reasons arising
from the Listing Rules, both parties undertake that we will modify and re-execute the
entrustment agreement to ensure both parties’ interests remain unaffected. See “Connected
Transactions—Non-exempt Continuing Connected Transactions—(4) Entrustment Agreement”
for details. As of the Latest Practicable Date, there were 524 Unassigned Agreements,
involving 23 financial institution customers and 524 automobile dealership customers.
Note:
(1) Contract value is estimated and calculated by multiplying (i) the average service fee of our pledged vehicle
monitoring services of approximately RMB3,400 per month per automobile dealership during the Track
Record Period by (ii) the number of new contracts independently procured by us, or the number of Unassigned
Agreements, as the case may be, during the relevant period and by (iii) 12 months.
The average service fee of our pledged vehicle monitoring services is calculated by dividing (i) the average
revenue that we generated from pledged vehicle monitoring services and lockbox services per month during
the Track Record Period by (ii) the average number of automobile dealerships at the beginning and the end of
each period during the Track Record Period.
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Considering that (i) Changjiu Industrial also entrusts Changjiu Jinfu to process data
relating to the pledged vehicles and its customers, such as their contact information, to
facilitate our provision of the entrusted pledged vehicle monitoring services; and (ii) such data
collected and stored by Changjiu Jinfu have been used exclusively for our provision of the
entrusted pledged vehicle monitoring services under the Unassigned Agreements, our PRC
Legal Advisors are of the view that Changjiu Jinfu is an entrusted data processor when
processing data for the purpose of providing the entrusted services under the Unassigned
Agreements, and the Personal Information Protection Law of the PRC does not require
Changjiu Industrial to obtain the customers’ prior consent to Changjiu Jinfu’s entrusted data
processing activities for the purpose of providing pledged vehicle monitoring services.
To provide the entrusted pledged vehicle monitoring services, we have adopted and
implemented necessary internal policies and technical measures to protect the security of the
data collected and stored by Changjiu Jinfu. Changjiu Jinfu has also completed a cybersecurity
multi-level protection scheme for the VFS system in accordance with the applicable
cybersecurity and data security laws to strengthen its data security capabilities. During the
Track Record Period and up to the Latest Practicable Date, we have not received any notice,
inquiry or warning from relevant government authorities for violation of data security
requirements. Based on the foregoing, our PRC Legal Advisors are of the view that our
entrusted data processing activities under the Unassigned Agreements are in compliance with
applicable data security law and regulations in all material aspects.
Mutually Beneficial and Complementary Relationship with Changjiu Group
Our Directors are of the view that the business relationship between us and Changjiu
Group is mutually beneficial and complementary, and presents a sustainable business model,
primarily because (i) before the Reorganization, we were part of Changjiu Industrial and
provided pledged vehicle monitoring services to financial institutions and automobile
dealerships in such capacity for ten years; (ii) we were the largest pledged vehicle monitoring
service provider in China’s automobile sales and distribution industry based on revenue in
2022 and the number of automobile dealership users as of December 31, 2022, and have
accumulated vast experience dealing with automobile dealerships as well as profound industry
insight; and (iii) our long-standing relationship and track record have led to our familiarity
with the standards and requirements of Changjiu Group, enabling us to reduce communication
costs, build mutual trust and constantly provide high quality services that meet Changjiu
Group’s demand and requirements for automobile dealership operation management services,
which in turn allows us to reinforce our market position and enhance our competitiveness in
the emerging automobile dealership operation management industry.
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As it is commercially beneficial for both Changjiu Group and our Group to maintain a
stable business relationship, our Directors consider that our business relationship with
Changjiu Group is unlikely to be terminated or materially or adversely changed. Going
forward, in light of such mutually beneficial and complementary business relationship, and
considering our longstanding cooperation with Changjiu Group, few service providers that are
capable of offering automobile dealership operation management services and the amount of
time and efforts required to identify and engage a new service provider with comparable
experience and ability to provide services to comparable standard and scope, we believe our
automobile dealership operation management services distinguish us from our competitors and
we will continue to secure future engagements from Changjiu Group, and it would be difficult
for Changjiu Group to select and engage a new operation management service provider to
replace us.
Our Cooperation with Independent Third Parties
During the Track Record period, we had been proactively sourcing projects and generated
the majority of our revenue from Independent Third Parties. In 2020, 2021, 2022 and the six
months ended June 30, 2022 and 2023, revenue contribution from Independent Third Parties
was RMB428.9 million, RMB468.4 million, RMB466.0 million, RMB224.2 million and
RMB259.8 million, respectively, which accounted for 99.6%, 98.0%, 85.1%, 86.7% and 84.0%
of our total revenue, respectively. In particular, in our pledged vehicle monitoring services
segment, a vast majority of our pledged vehicle monitoring service agreements we procured
during each year of the Track Record Period were with Independent Third Parties.
By contrast, we started the automobile dealership management services business segment
in April 2022, and procured only one, or 1.4%, of our automobile dealership operation
management service agreements from an Independent Third Party that year. To further
diversify the customer base of our automobile dealership operation management services, we
set up a business development team in 2022 to (i) formulate a standardized business outreach
process; (ii) design business development tools, such as assessment models and due diligence
questionnaires; and (iii) prepare relevant legal documents. As of the Latest Practicable Date,
our business development team under the automobile dealership operation management
segment consisted of eight members.
Due to the relatively early stage of our automobile dealership operation management
services, it took time to complete preliminary business negotiations and due diligence. As of
June 30, 2023, we had commenced our services under one of the five operation management
service agreements that we had entered into with automobile dealerships owned by
Independent Third Parties. In 2022 and the six months ended June 30, 2023, we recorded gross
loss from the operation management services that we provided to such automobile dealership
owned by an Independent Third Party, primarily due to certain upfront costs that we incurred
before our service provision in preparation for the expansion of this business segment, such as
staff costs for preliminary dealership evaluation and due diligence. For more information,
please see “Financial Information—Description of Certain Consolidated Statements of Profit
or Loss Items—Gross Profit and Gross Profit Margin.” Nevertheless, our experience dealing
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with automobile dealerships from our provision of pledged vehicle monitoring services and our
understanding of the automobile sales and distribution industry in China yield us a comparative
advantage over our competitors, such as startup software companies and internet platform
companies which may lack the in-depth understanding of the automobile sales and distribution
industry. As of September 30, 2023, we had entered into five automobile dealership operation
management service agreements and 144 non-legally binding letters of intent for our
automobile dealership operation management services with automobile dealerships owned by
Independent Third Parties.
Given that we have been optimizing our automobile dealership operation management
services since we launched it in April 2022, we intend to conduct marketing activities prudently
to maximize cost-efficiency. As such, we plan to gradually diversify the customer base of our
automobile dealership operation management services without engaging excessive manpower
through (i) targeted business development via our dedicated personnel; and (ii) broader
marketing efforts to enhance our customer reach. Our business development department
primarily targets automobile dealerships that seek to improve their business operations and
financial performance. It has formulated ten standard service procedures for business
development, including discovery of potential customers, customer visits and negotiation of
letters of intent, data collection and profit forecasting, evaluations of potential customers,
negotiation and signing of official service agreements, as well as due diligence and budgeting,
to ensure effective customer acquisition, and is establishing an annual business development
plan to compete with other market participants, including the number of new potential
automobile dealerships that we target to visit and convert to our customers in each month. We
will also enhance customer reach and incentivize business inquiries through broader marketing
efforts. We plan to enrich the description of our services on various online channels to lay out
our (i) industry experience; (ii) service offering; (iii) the technologies, such as our information
system and hardwares, that support our services; (iv) the value we could create for our
customers; and (v) our competitive advantages as compared to other market participants.
Considering (i) that the members in our business development department have an
average of over ten years of industry experience and in depth understanding of the managerial
services that we are capable of providing; and (ii) the comprehensiveness of our services and
track record of our performance, our Directors are of the view that setting up a business
development department and enriching descriptions of our services online are effective means
for diversifying our customer base at this stage. Our Directors will also keep monitoring the
effectiveness of our marketing approach and adjust it as needed in response to market
development and customer feedback. Through the aforesaid marketing plan, we anticipate that
more automobile dealerships will procure our services, and we will continually strive to
materialize the letters of intent that we entered with automobile dealerships.
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SALES AND MARKETING
The sales and marketing team at our headquarter is responsible for (i) developing our
overall marketing strategies and objectives; (ii) conducting market research and organizing our
sales and marketing events; (iii) maintaining customer relationships with financial institutions
and third-party automobile dealerships; and (iv) communicating with other companies in the
automobile sales and distribution industry and taking initiative to participate in industry events
to learn from the advanced marketing strategy in the industry.
We implement our sales and marketing strategies primarily through the staff designated
by our subcontractors that provide onsite supervision services, who also assist us with local
ground marketing. These staff are expected to explore and seize business opportunities within
their respective localities for business development and market research purposes by way of (i)
establishing contact with automobile dealerships that may need our services; (ii) promoting our
services; (iii) communicating with our regional headquarters regarding any potential business
opportunity; and (iv) assisting the signing of service agreements.
We actively strive to form new and maintain existing business relationships with potential
customers. From time to time we also organized events, such as press conferences, to promote
or showcase our products and service offerings.
CUSTOMERS
We have a large and growing customer base primarily consisting of financial institutions,
which mainly include commercial banks and automobile finance companies, and automobile
dealerships. For our pledged vehicle monitoring services, we typically enter into tripartite
agreements with financial institutions and automobile dealerships. Although our pledged
vehicle monitoring services are designed to help financial institutions manage secured
financing provided to automobile dealerships, we consider the paying party under such
tripartite agreements as our customer, which may be either financial institutions or automobile
dealerships, depending on the negotiation among the contracting parties, and we consider both
financial institutions and automobile dealerships as our users. See “—Pledged V ehicle
Monitoring Services—Key Terms of Pledged V ehicle Monitoring Service Agreements” for
more details.
Our customers also include Changjiu Industrial. Since September 2016 when Changjiu
Jinfu was established, Changjiu Industrial has been gradually transferring its existing pledged
vehicle monitoring service agreements to us and moving the operation team in charge of such
services into our Group, and we have begun to enter into new pledged vehicle monitoring
service agreements with financial institutions and automobile dealerships upon the expiration
of the agreements between them and Changjiu Industrial. On November 30, 2021, Changjiu
Industrial and we entered into a business transfer agreement, pursuant to which Changjiu
Industrial agreed to assign to us all of its rights and obligations under its then existing pledged
vehicle monitoring service agreements for a total consideration of RMB45.5 million. For more
information, see “History, Reorganization and Corporate Structure—Reorganization—Onshore
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Reorganization—Business transfer of pledged vehicle monitoring services.” As of the Latest
Practicable Date, Changjiu Industrial had entrusted us to provide pledged vehicle monitoring
services under its then existing pledged vehicle monitoring service agreements that had not
been transferred to us. See “Connected Transactions—Non-exempt Continuing Connected
Transactions—(4) Entrustment Agreement.”
Except as disclosed in “History, Reorganization and Corporate Structure” and “Connected
Transactions,” Changjiu Group did not refer any other customer to us.
The following table sets forth the types of our major customers for each of our two
business lines.
Business line Major customers
Pledged vehicle monitoring services Financial institutions, which mainly include
commercial banks and automobile finance
companies, automobile dealerships and
Changjiu Industrial
Automobile dealership operation
management services
Automobile dealerships
During the Track Record Period, our major customers did not include general automobile
trading stores.
During the Track Record Period, revenue from sales to our five largest customers in that
year/period amounted to RMB143.6 million in 2020, RMB167.9 million in 2021, RMB279.3
million in 2022 and RMB173.9 million in the six months ended June 30, 2023, which
accounted for 33.3%, 35.1%, 51.0% and 56.2% of our total revenue, respectively. During the
Track Record Period, revenue derived from sales to our single largest customer in that
year/period amounted to RMB38.8 million in 2020, RMB62.2 million in 2021, RMB89.8
million in 2022 and RMB56.5 million in the six months ended June 30, 2023, which accounted
for 9.0%, 13.0%, 16.4% and 18.3% of our total revenue, respectively. In 2022 and the six
months ended June 30, 2023, revenue derived from Changjiu Industrial, our related party and
second largest customer for those periods, amounted to RMB81.1 million and RMB49.5
million, respectively, accounting for 14.8% and 16.0% of our total revenue, respectively. We
accept payments through bank transfers.
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Since we are the largest service provider in the pledged vehicle monitoring service market
in China, we typically established relationship and subsequently became acquainted with our
five largest customers who valued our national service coverage and industry experience in
each of the years ended December 31, 2020, 2021 and 2022 and the six months ended June 30,
2023. The following tables set out certain details of our five largest customers during the Track
Record Period.
Six months ended June 30, 2023
Ranking Customer (1) Customer type
Major services
provided by us
Y ear of
commencement
of business
relationship
Transaction
amount
Percentage
of our total
revenue
Relationship
with us
RMB’000 %
1 Customer A
(3) Commercial bank Pledged vehicle
monitoring services
2012 56,483 18.3 Independent
Third Party
2 Changjiu
Industrial (11)
Automobile sales
and distribution
service
provider
Pledged vehicle
monitoring services
and automobile
dealership operation
management services
2016 49,522 16.0 Related Party
3 Customer B
(5) Commercial bank Pledged vehicle
monitoring services
2006 34,228 11.1 Independent
Third Party
4 Customer C (6) Commercial bank Pledged vehicle
monitoring services
2015 18,696 6.0 Independent
Third Party
5 Customer G (10) Commercial bank Pledged vehicle
monitoring services
2018 14,977 4.8 Independent
Third Party
173,906 56.2
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2022
Ranking Customer (1) Customer type
Major services
provided by us
Y ear of
commencement
of business
relationship
(2)
Transaction
amount
Percentage
of our total
revenue
Relationship
with us
RMB’000 %
1 Customer A (3) Commercial bank Pledged vehicle
monitoring services
2012 89,801 16.4 Independent
Third Party
2 Changjiu
Industrial (11)
Automobile sales
and distribution
service
provider
Pledged vehicle
monitoring services
and automobile
dealership operation
management services
2016 81,147
(4) 14.8 Related party
3 Customer B (5) Commercial bank Pledged vehicle
monitoring services
2006 61,483 11.2 Independent
Third Party
4 Customer C (6) Commercial bank Pledged vehicle
monitoring services
2015 26,852 4.9 Independent
Third Party
5 Customer D (7) Automobile
dealership and
automobile
finance
company
Pledged vehicle
monitoring services
2014 20,057 3.7 Independent
Third Party
279,340 51.0
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2021
Ranking Customer (1) Customer type
Major services
provided by us
Y ear of
commencement
of business
relationship
(2)
Transaction
amount
Percentage
of our total
revenue
Relationship
with us
RMB’000 %
1 Customer A (3) Commercial bank Pledged vehicle
monitoring services
2012 62,195 13.0 Independent
Third Party
2 Customer B (5) Commercial bank Pledged vehicle
monitoring services
2006 39,467 8.3 Independent
Third Party
3 Customer D (7) Automobile
dealership and
automobile
finance
company
Pledged vehicle
monitoring services
2014 27,851 5.8 Independent
Third Party
4 Customer E
(8) Automobile
dealership,
automobile
finance
company and
automobile
manufacturer
Pledged vehicle
monitoring services
2016 27,300 5.7 Independent
Third Party
5 Customer C
(6) Commercial bank Pledged vehicle
monitoring services
2015 11,125 2.3 Independent
Third Party
167,938 35.1
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2020
Ranking Customer (1) Customer type
Major services
provided by us
Y ear of
commencement
of business
relationship
(2)
Transaction
amount
Percentage
of our total
revenue
Relationship
with us
RMB’000 %
1 Customer D (7) Automobile
dealership and
automobile
finance
company
Pledged vehicle
monitoring services
2014 38,767 9.0 Independent
Third Party
2 Customer B
(5) Commercial bank Pledged vehicle
monitoring services
2006 37,656 8.7 Independent
Third Party
3 Customer A (3) Commercial bank Pledged vehicle
monitoring services
2012 37,043 8.6 Independent
Third Party
4 Customer E (8) Automobile
dealership,
automobile
finance
company and
automobile
manufacturer
Pledged vehicle
monitoring services
2016 22,616 5.3 Independent
Third Party
5 Customer F
(9) Automobile
dealership
Pledged vehicle
monitoring services
2014 7,486 1.7 Independent
Third Party
143,568 33.3
Notes:
(1) The transaction amounts of each of our top five customers and its branches or subsidiaries are combined on
a group basis.
(2) Certain customers commenced their business relationship with us prior to 2016 when we were part of Changjiu
Industrial.
(3) Customer A is a commercial bank established in 1987 with a strong position in the banking industry in
mainland China and business operations in major cities across the world, such as Hong Kong, New Y ork, Los
Angeles, Singapore and London. Customer A’s services primarily include retail banking, corporate banking,
private banking, wealth management, savings and personal loans. As of the Latest Practicable Date, Customer
A’s size of operation measured by market capitalization was approximately RMB226.6 billion.
(4) The transaction amount was composed of (i) fees for our pledged vehicle monitoring services under the
entrustment arrangements between Changjiu Industrial and us; and (ii) fees for our automobile dealership
operation management services.
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(5) Customer B is a Chinese joint-stock commercial bank headquartered in Shenzhen and established in 1987 with
primary operations in mainland China and a representative branch in Hong Kong. Customer B’s services
primarily include retail banking and corporate banking. As of the Latest Practicable Date, Customer B’s size
of operation measured by market capitalization was approximately RMB175.2 billion.
(6) Customer C is a Chinese commercial bank based in Fuzhou, Fujian Province established in 1988. Customer
C’s services primarily include retail banking, corporate banking and institutional banking. As of the Latest
Practicable Date, Customer C’s size of operation measured by market capitalization was approximately
RMB297.7 billion.
(7) Customer D is a Chinese state-owned automobile manufacturer established in 1955 headquartered in Shanghai
and the controlling shareholder of certain automobile dealerships and automobile finance companies to which
we provided pledged vehicle monitoring services. Customer D is currently the largest state-owned automobile
manufacturer in China, and produces and sells both traditional vehicles and NEVs under its own brand as well
as joint ventures with foreign brands. The transaction amount of such automobile dealerships and automobile
finance companies under common control have been combined. As of the Latest Practicable Date,
Customer D’s size of operation measured by market capitalization was approximately RMB155.2 billion.
(8) Customer E is a holding company established in 1984 and the controlling shareholder of certain automobile
dealerships, automobile finance companies and automobile manufacturers to which we provided pledged
vehicle monitoring services. The transaction amount of such automobile dealerships, automobile finance
companies and automobile manufacturers under common control have been combined.
(9) Customer F is an automobile dealership established in 1999 headquartered in Liaoning. Customer F primarily
sells luxury vehicles, used vehicle and auto parts, and provides vehicle maintenance and financial leasing
services. As of the Latest Practicable Date, Customer F’s size of operation measured by market capitalization
was approximately RMB13.8 billion.
(10) Customer G is a commercial bank headquartered in Beijing and established in 1992. Customer G’s services
primarily include personal banking, corporate banking and institutional banking. As of the Latest Practicable
Date, Customer G’s size of operation measured by market capitalization was approximately RMB157.8 billion.
(11) Representing Changjiu Industrial itself and its subsidiaries.
As of the Latest Practicable Date, none of our Directors, their close associates or any
Shareholders who, to the knowledge of our Directors, owned more than 5.0% of our issued
share capital had any interest in any of our five largest customers during the Track Record
Period (other than Changjiu Industrial).
SUPPLIERS
During the Track Record Period, we (i) outsourced certain services, primarily including
pledged vehicle monitoring services, collective vehicle conformity certificate management
services and counting services, to subcontractors; and (ii) procured from third-party
manufacturers of our RFID labels, patented PDAs and OBD devices for our pledged vehicle
monitoring services, and patented electronic lockboxes for our lockbox services.
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The following table sets forth the types of our major suppliers for our two business lines.
Business line Major suppliers
Pledged vehicle monitoring services Subcontractors who provide onsite
supervision services (including pledged
vehicle monitoring services, collective
vehicle conformity certificate management
services and counting services) and
manufacturers of RFID labels, PDAs, OBD
devices and lockboxes
Automobile dealership operation
management services
N/A
(1)
Note:
(1) We generally provide automobile dealership operation management services through our own employees.
During the Track Record Period, purchases from our five largest suppliers in that
year/period amounted to RMB255.3 million in 2020, RMB286.6 million in 2021, RMB302.3
million in 2022 and RMB157.2 million in the six months ended June 30, 2023, which
accounted for 97.6%, 97.0%, 93.6% and 89.4% of our total cost of sales, respectively. During
the Track Record Period, purchases from our largest supplier in that year/period amounted to
RMB223.3 million in 2020, RMB211.4 million in 2021, RMB119.1 million in 2022 and
RMB154.0 million in the six months ended June 30, 2023, which accounted for 85.4%, 71.6%,
36.9% and 87.5% of our total cost of sales, respectively.
Except as disclosed in “History, Reorganization and Corporate Structure” and “Connected
Transactions,” Changjiu Group did not refer any other supplier to us.
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The following tables set out details of our five largest suppliers during the Track Record
Period.
Six months ended June 30, 2023
Ranking Supplier
Major
services/products
provided to us
Y ear of
commencement
of business
relationship
Transaction
amount
Percentage of
our total cost
of sales
Relationship with
us
RMB’000 %
1 Supplier A Outsourcing service 2022 154,019 87.5 Independent Third
Party
2 Supplier D Electronic tag 2020 1,051 0.6 Independent Third
Party
3 Supplier H
(9) Outsourcing service 2021 987 0.6 Independent Third
Party
4 Supplier I (10)(12) Online ticket booking
service
2023 631 0.4 Independent Third
Party
5 Supplier J (11)(12) Online ticket booking
service
2023 490 0.3 Independent Third
Party
157,178 89.4
2022
Ranking Supplier
Major
services/products
provided to us
Y ear of
commencement
of business
relationship
Transaction
amount
Percentage of
our total cost
of sales
Relationship with
us
RMB’000 %
1 Supplier A
(1) Outsourcing service 2022 119,113 36.9 Independent Third
Party
2 Supplier B (2) Outsourcing service 2016 112,489 34.8 Independent Third
Party
3 Supplier C (3) Outsourcing service 2017 56,046 17.4 Independent Third
Party
4 Xunruida
Technology
(Beijing) Co.,
Ltd.
(4)
Technology service 2020 11,761 3.6 Related party
5 Supplier D (5) Electronic tag 2020 2,918 0.9 Independent Third
Party
302,327 93.6
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2021
Ranking Supplier
Major
services/products
provided
Y ear of
commencement
of business
relationship
Transaction
amount
Percentage of
our total cost
of sales
Relationship with
us
RMB’000 %
1 Supplier B
(2) Outsourcing service 2016 211,427 71.6 Independent Third
Party
2 Supplier C (3) Outsourcing service 2017 69,241 23.4 Independent Third
Party
3 Supplier D (5) Electronic tag 2020 2,783 0.9 Independent Third
Party
4 Supplier E (6) Outsourcing service 2019 2,219 0.8 Independent Third
Party
5 Supplier F (7) OBD device 2020 902 0.3 Independent Third
Party
286,572 97.0
2020
Ranking Supplier
Major
services/products
provided
Y ear of
commencement
of business
relationship
Transaction
amount
Percentage of
our total cost
of sales
Relationship with
us
RMB’000 %
1 Supplier B
(2) Outsourcing service 2016 223,310 85.4 Independent Third
Party
2 Supplier C (3) Outsourcing service 2017 21,691 8.3 Independent Third
Party
3 Supplier E (6) Outsourcing service 2019 5,339 2.0 Independent Third
Party
4 Supplier D (5) Electronic tag 2020 2,549 1.0 Independent Third
Party
5 Supplier G (8) Outsourcing service 2019 2,373 0.9 Independent Third
Party
255,262 97.6
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Notes:
(1) Supplier A is a human resource company established in 2020 and headquartered in Guangzhou. Its services
primarily include catering management, project management and public relations, human resources, labor
services (such as labor outsourcing) and business management consulting.
(2) Supplier B is a management consulting company established in 2011 and headquartered in Beijing. Its services
primarily include human resources and labor services (such as labor outsourcing).
(3) Supplier C is an information technology company established in 2010 and headquartered in Beijing. Its
services primarily include flexible employment, production outsourcing, management consulting and personal
agency.
(4) Xunruida Technology (Beijing) Co., Ltd. is a wholly-owned subsidiary of Changjiu Industrial, which was our
second largest customer in 2022.
(5) Supplier D is a technology company established in 2012 and headquartered in Ningbo. It is a leading provider
of RFID products and solutions.
(6) Supplier E is a human resource consulting company established in 2008 and headquartered in Beijing. Its
services primarily include human resources services (such as labor outsourcing) and information consultation.
(7) Supplier F is a R&D-oriented electronics company established in 2019 and headquartered in Shenzhen. It
focuses on providing high-precision positioning products that utilize the BeiDou Navigation Satellite System
and other applications.
(8) Supplier G is a technical consulting company established in 2003 and headquartered in Beijing. Its services
primarily include technical consulting, training, import and export of goods and sale of computers, softwares
and electronic products.
(9) Supplier H is a human resource company established in 2021 and headquartered in Hunan. Its primarily
provides Internet services and professional human resource services to corporations.
(10) Supplier I is a travel agency established in 2015 and headquartered in Shanghai. It primarily provides
domestic, inbound and outbound touring services and airline ticketing services.
(11) Supplier J is a travel technology company established in 2015 and headquartered in Beijing. It primarily
provides one-stop enterprise business travel solutions, intelligent administrative office solutions and digital
employee benefit solutions.
(12) We launched a new expense control system in 2023 to collectively manage our employees’ booking of air
tickets through centralized procurement, and engaged Supplier I and Supplier J as our primary travel service
providers.
During the Track Record Period, our largest suppliers were typically a primary
subcontractor that we engaged to provide human resource support, which we believe expedited
the communication of our business needs and facilitated our evaluation and management of
subcontractors. In 2020 and 2021, Supplier B, a management consulting company based in
Beijing, was our largest supplier and primary subcontractor, and we engaged it mainly for
onsite human resource support relating to our pledged vehicle monitoring services. Our
transaction amount with Supplier B in 2020 and 2021 was RMB223.3 million and RMB211.4
million, respectively, accounting for 85.4% and 71.6% of our total cost of sales, respectively.
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Nevertheless, we by no means relied on, and it is unlikely that we would be materially
and adversely affected by the change of, our largest suppliers or primary subcontractors,
considering that (i) we select suitable subcontractors pursuant to our internal procurement
standards and procedures; typically there are multiple subcontractors that we could choose
from, and we engaged different primary subcontractors during the Track Record Period; and
(ii) the staff designated by our subcontractors primarily provide basic onsite tasks, which are
highly and readily substitutable. For instance, absent any dispute with Supplier B, we began
replacing it with Supplier A, a human resource company in Guangzhou, as our primary
subcontractor in the second half of 2022, mainly because our Directors are of the view that
Supplier A had (i) a wider range of value-added service offering, such as having a more
digitalized system that could connect to our VFS system, allowing us to better monitor the
onsite staff it designates; (ii) higher service satisfaction score; and (iii) competitive pricing as
compared to Supplier B. As a result, our transaction amount with Supplier B decreased from
RMB211.4 million in 2021 to RMB112.5 million in 2022, which accounted for only 34.8% of
our total cost of sales, whereas our transaction amount with Supplier A increased from
RMB119.1 million, which accounted for 36.9% of our total cost of sales in 2022, to RMB154.0
million, which accounted for 87.5% of our total cost of sales in the six months ended June 30,
2023.
During the Track Record Period and up to the Latest Practicable Date, we did not
experience any material delay, supply shortages or disruptions in our operations relating our
suppliers, or any material product claims attributable to our suppliers. As of the Latest
Practicable Date, save for Xunruida Technology (Beijing) Co., Ltd., none of our Directors,
their close associates or any Shareholders who, to the knowledge of our Directors, owned more
than 5.0% of our issued share capital had any interest in any of our five largest suppliers during
the Track Record Period. We typically enter into two-year agreements with our suppliers and
renew them after negotiations. Payments to suppliers are typically settled within 30 days after
our receipt of suppliers’ invoices via bank transfers.
SUBCONTRACTING
In our pledged vehicle monitoring business, we engage outside subcontractors to perform
certain onsite tasks, primarily including pledged vehicle monitoring services, collective vehicle
conformity certificate management services and counting services. The staff designated by the
subcontractors act on our instructions to perform discrete tasks according to the service
standards set forth in the relevant subcontracting agreements, and report to our regional
managers as needed when they identify potential risk events of automobile dealerships. We
regularly monitor and evaluate the performance of our subcontractors, and are solely
responsible vis-à-vis our users. We believe such subcontracting arrangements allow us to
provide onsite supervision services across China with relatively high cost-efficiency, leverage
the human resources of the subcontractors and enhance our profitability. In 2020, 2021, 2022
and the six months ended June 30, 2022 and 2023, subcontracting costs amounted to
RMB252.8 million, RMB285.5 million, RMB290.2 million, RMB143.9 million and RMB155.4
million, respectively, which accounted for 96.6%, 96.6%, 89.9%, 94.4% and 88.3% of our total
cost of sales, respectively.
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As of the Latest Practicable Date, none of our Directors, their close associates or any
Shareholders which, to the knowledge of our Directors, owned more than 5.0% of our share
capital had any interest in any of our five largest subcontractors during the Track Record
Period.
Selection and Management of Subcontractors
We typically select qualified subcontractors that meet our service standards through open
tendering. Besides the service quality and standards that we explicitly set forth in our
subcontracting agreements, we also regularly monitor and evaluate the performance of our
subcontractors and may require the subcontractors to take necessary rectification measures
when their services do not meet the agreed standards. For more information, see “—Quality
Control—Quality Control over Subcontractors.”
Key Terms of Our Subcontracting Agreements
Subcontracting agreements between subcontractors and us typically include the following
key terms:
 Term. Subcontracting agreements typically have a term of two years and may be
renewed upon mutual consent.
 Our responsibilities . We are typically responsible for providing the personnel
designated by the subcontractor with necessary materials, guidance and access
permissions. We are also responsible for supervising and providing feedback on the
work performed by the personnel designated by the subcontractor.
 Obligations of the subcontractor . The subcontractors are typically responsible for (i)
counting pledged vehicles and their vehicle conformity certificates and car keys; (ii)
keeping records of the pledged vehicles that we monitor as well as the vehicle
conformity certificates and car keys that we manage, and ensuring such records
match those on our VFS system; and (iii) releasing vehicle conformity certificates
and car keys per financial institutions’ instructions in accordance with the standards
prescribed in the relevant subcontracting agreements and in compliance with all
applicable laws and regulations. In the event of sub-standard performance, the
subcontractors are required to take necessary rectification measures, failing which
we have the right to claim damages and penalties, or terminate the agreement. The
subcontractors are required to manage their personnel providing the contracted
services. The agreements also specify that there is no employment relationship
between us and the personnel of the subcontractor.
 Risk allocation . The subcontractors are typically required to pay all social insurance
and housing provident funds contributions for their personnel in accordance with
PRC laws and regulations and bear the liabilities and responsibilities for any
non-compliance.
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 Subcontracting fee . Subcontracting fees are typically payable by us in or by the
middle of every month, including labor costs, tax expenses and other miscellaneous
costs incurred by the subcontractor. The subcontractors may also charge a late fee
for overdue subcontracting fees, which is typically 0.5% of the overdue amount.
 Confidentiality. The subcontractors are not allowed to disclose the content of the
agreement to third parties or use the agreement for the promotion of their
businesses.
 Termination . The subcontracting agreements typically terminate upon the earlier of
the expiration date of the employment agreements of all subcontractors’ personnels
who provide the subcontracted services or the expiration date of the subcontracting
agreements. We may terminate the subcontracting agreements if the subcontractors
fail to perform to the agreed standards and fail to rectify upon notices. The
subcontractors may terminate the agreements if the subcontracting fees payable by
us remain unsettled for one month.
QUALITY CONTROL
We believe quality control is crucial to our long-term success. We have a professional
quality control team which primarily focuses on maintaining service standards, standardizing
service procedures and supervising service quality throughout our operational processes.
Quality Control over Our Services
To ensure that we can provide our services in an effective and consistent manner, we have
various procedures and systems to monitor and maintain the quality of our services across our
businesses. For instance, we codified our personnel’s conducts in dealing with automobile
dealerships of different scales in our “Administrative Measures for Digital Risk Control
Business Agreements” and “Managerial Measures for
Dealership Classification. We expect all employees to carefully study
and understand the requirements of the manual to ensure that our daily operations not only
meet the relevant requirements on the manual but exceed customer expectations. In addition,
we maintain regular and close supervision of our service quality. For our pledged vehicle
monitoring services, we have quality control personnel at the dealership-, regional- and
headquarter-levels. Automobile dealerships are sampled and inspected by our quality control
personnel periodically. We also conduct monthly evaluation of our services. For our automobile
dealership operation management services, we primarily carry out periodic quality check on
the services that we provide to each automobile dealerships.
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Quality Control over Subcontractors
We typically include in the subcontracting agreements the quality and standards for the
services to be provided by subcontractors. We regularly monitor and evaluate the performance
of our subcontractors and may require the subcontractors to take necessary rectification
measures when their services do not meet the agreed standards. Our employees in the pledged
vehicle monitoring service department will input rules regarding the frequency and methods to
monitor the pledged vehicles into our VFS system, which will then automatically generate and
send tasks and instructions via our VFS system to the onsite staff designated by our
subcontractors. Our VFS system will record relevant data to confirm whether the onsite staff
has completed the tasks. If a task is not completed within the prescribed timeframe, our VFS
system will send an alert to our employees in the pledged vehicle monitoring service
department, who will then follow up on the overdue task and reach out to the regional manager
for further assistance if needed.
We also conduct annual surveys among commercial banks, retail banks and dealerships
regarding the quality of services provided by our subcontractors. We have the contractual right
to decide whether to continue our subcontracting agreement depending on the outcomes of such
surveys.
Quality Control over Third-Party Vendors
We typically conduct assessment on our vendors in respect of transaction volume, service
quality and after-sales services during the agreement term. We also have the right to replace
a third-party vendor in the event of substandard performance.
Enhanced Hygiene and Precautionary Measures Against the COVID-19 Pandemic
In response to the COVID-19 pandemic, we adopted enhanced hygiene and precautionary
measures between January 2020 and December 2022. The additional costs for implementing
these enhanced measures primarily represent increased costs for purchasing protective
materials such as face masks, ethanol hand wash, disinfectants, and infrared thermometers. See
“—Effect of the COVID-19 Pandemic.”
Feedback and Complaint Management
During the ordinary course of our business, we receive feedback, suggestions and
complaints via our customer service hotline and email from banks and third-party automobile
dealerships from time to time regarding our services. We have internal procedures to record,
process and respond to the feedback, suggestions and complaints and conduct follow-up
reviews of the results of our responses.
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We keep track of our customers’ feedbacks during our daily business operations on our
service quality. Customers may provide us with opinions, suggestions and complaints by
calling our service hotline or communicating directly with staff designated by our
subcontractors who provided onsite supervision services, and we have enacted a set of internal
policies and procedures to promptly respond to and record customer feedbacks. These internal
policies and procedures require our employees to (i) record all the customer feedbacks into our
customer service system within one hour of receipt; (ii) obtain customers’ contact information
and follow up within the same day regarding their feedback; (iii) record and archive all
communications with customers in writing; and (iv) propose preliminary solutions to the
customer within one working day if the customer feedback is complaint. After a customer
complaint is handled, our headquarters will follow up with our customers regarding our service
quality. If our customers express dissatisfaction with the way their complaints are handled, our
headquarters will ask our employees to revisit the case until the customers are satisfied.
We strive to earn trust, confidence and loyalty from our customers. During the Track
Record Period and up to the Latest Practicable Date, we did not experience any customer
complaints about our services or products that would have a material adverse impact on our
operations or financial results.
RESEARCH AND DEVELOPMENT
We believe our R&D capabilities is key to our accomplishment and future success. We
have an information technology group to focus on the development, enhancement and
maintenance of our software and hardware products and to explore new business opportunities
through mobile technology. As of June 30, 2023, our information technology group had a total
of 57 R&D personnel. As of the Latest Practicable Date, we had 21 registered copyrights and
11 registered patents in China.
Since our establishment, we were among the first in China in offering pledged vehicle
monitoring services, and launched various software and hardware products with our in-house
R&D capacity. Our VFS system is a digitalized and internet-based system that stores and
analyzes pledged vehicles’ data collected from automobile dealerships via our RFID labels,
PDAs and OBD devices. Financial institutions to which we provide pledged vehicle monitoring
services have access to such data. Our RFID labels, PDAs and OBD devices can locate and
monitor the pledged vehicles more accurately and avoid manual errors. We also use the data
collected to better analyze and report the potential risk events of automobile dealerships.
We constantly upgrade our services by building in various features to keep up with both
technological advancement and customer demand. To facilitate our provision of automobile
dealership operation management services that commenced in 2022 in an integrated
framework, we also utilized our Smart Star system, which consists of a CRM SaaS system and
an ERP system. In 2020, 2021, 2022 and the six months ended June 30, 2023, our R&D
expenses amounted to RMB10.3 million, RMB9.4 million, RMB9.0 million and RMB6.7
million.
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The following diagram illustrates our digital information infrastructure that supports our
two business lines and their respective systems:
System
Products
Processing
Center
Integrated automobile sales and distribution system
Application
Supporting
System
Cloud
Infrastructure
Automobile dealership
Operation management
module
Modules
R&D
Maintenance
DevOps
Monitoring
Cybersecurity
<,9 <KNOIRK
)UTTKIZ
Pledged vehicle
monitoring services
)839GG96RGZLUXS +86Y_YZKS
Automobile dealership
Operation management services
Pledged vehicle
monitoring module Other modules
Data SystemFoundation
Systems Technology System Business System
Cloud Services
The building blocks of the digital information infrastructure we developed are the three
digital supporting systems, including (i) a data supporting system, which supports our
collection and analysis of data from the pledged vehicles that we monitor and the automobile
dealerships that we manage; (ii) a technology supporting system, which allows us to monitor
the operation and ensure the proper functioning of our systems, such as our VFS system and
Smart Star; and (iii) a business supporting system, which helps with the management of
commercial and business documents, such as service agreements and receipts. We deploy a
“DevOps” development model, an automated and efficient development, testing and
maintenance tool, into our supporting systems to increase our R&D efficiency by reducing the
reliance on manpower. Based on these three supporting systems, we created different
specialized modules, such as the pledged vehicle monitoring module and the automobile
dealership operation management module, to facilitate our service provision and internal
management. Among these modules, the pledged vehicle monitoring module provides the
underlying data processing support for our VFS and V ehicle Connect systems by sorting,
processing and summarizing the data collected from the pledged vehicles that we monitor,
whereas the automobile dealership operation management module provides the underlying data
processing support for our CRM SaaS system and ERP systems by sorting, processing and
summarizing the data collected from the automobile dealerships under our management. Our
digital information infrastructure leverages cloud computing technologies and uses both public
cloud, which we subscribe from third-party cloud service providers, and private cloud, the
servers and storage of which are provided by us.
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To solidify our market position, we plan to further increase our investment in R&D,
particularly in the underlying technologies and infrastructure related to our user-end system
and strengthening our ability to deliver services responsive to our users’ needs. To this end, we
will (i) continue to attract and cultivate talents; and (ii) partner with researchers in other
institutions and universities in the fields of big data and other technological frontiers, and will
continue to invest in R&D to further improve our user engagement, monetization capabilities
and operational efficiencies. We are also developing an automobile supply chain service mobile
application to further enlarge our user base. Through our R&D capability and industry
expertise, we expect our application to match the supply and demand of NEVs. For more
details, see “Summary—Recent Development—Trial Operation of Automobile Supply Chain
Service Mobile Application.”
INTELLECTUAL PROPERTY
We primarily rely on laws and regulations on trademarks and trade secrets and our
employees’ and third parties’ contractual commitments to confidentiality to protect our
intellectual property rights. As of the Latest Practicable Date, we had 17 registered trademarks,
21 registered copyrights, 11 registered patents and two registered domain names in China.
Among our 21 registered copyrights, the copyright of Smart Star operation management system
was transferred to us in April 2023.
During the Track Record Period and up to the Latest Practicable Date, we were not aware
of any infringement which could have a material adverse effect on our business operations by
our Group against any intellectual property rights of any third party or by any third party
against any intellectual property rights of our Group, or any disputes with third parties with
respect to intellectual property rights.
A W ARDS
The following table sets forth a selection of the notable awards and accreditations we
received during the Track Record Period.
Awarding Y ear Award/Recognition Awarding Entity
2021 Deputy Directing Unit Logistics and Supply Chain Finance
Branch of the China Federation of
Logistics & Purchasing
2021 Excellent Supplier of 2021 Genius Auto Finance Co., Ltd.
2020 Exemplary Case of Logistics
and Supply Chain Finance
in China
Logistics and Supply Chain Finance
Branch of the China Federation of
Logistics & Purchasing
2020 Annual Excellent Service
Award
BMW Auto Finance (China) Co., Ltd.
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COMPETITION
According to CIC, the pledged vehicle monitoring services market in China’s automobile
sales and distribution industry is highly concentrated, mainly due to the fact that leading
market participants have already established barriers in terms of scale, service and
technological capabilities. In 2022, top five market participants had a combined market share
of approximately 90.3% in terms of revenue.
The current market size of automobile dealership operation management services in
China, on the other hand, is relatively small as the market is still in its infancy with a limited
number of service providers. Nevertheless, automobile dealership operation management
services have vast potential since the automobile dealership industry is becoming increasingly
competitive, and a large number of automobile dealerships with certain scale of operation are
potential customers of automobile dealership operation management services.
For more information on the industry and the markets that we operate in, see “Industry
Overview” and “Risk Factors—Risks Relating to Our Business and Industry—We face intense
competition, particularly with respect to our pledged vehicle monitoring services, and if we fail
to compete effectively, our business, prospects and results of operations may be materially and
adversely affected.”
ENVIRONMENTAL, SOCIAL AND GOVERNANCE
Governance
We are fully aware of our responsibilities to promote corporate social responsibility and
integrating it into all major aspects of our business operations. We are committed to comply
with environmental, social and governance (“ESG”) reporting requirements and we strive to
carry out our business in a manner that protects the environment and the health and safety of
our employees. Our ESG policy outlined (i) the principles and framework of our ESG
initiative; (ii) ESG training for and periodic assessment of our employees; (iii) internal
reporting procedures; and (iv) ESG monitoring and disclosure.
Our ESG policy also sets out the organizational structure and the respective
responsibilities of different parties in managing ESG matters. Our Board will be responsible for
formulating our ESG strategies, framework and policies. The Board has delegated the
implementation of ESG practices to three teams:
 The leadership team composed of our senior management team and led by a general
manager will be primarily responsible for (i) creating and updating a framework and
indicators for ESG assessment; (ii) reviewing our ESG report; and (iii) determining
and supervising steps to be taken to improve our ESG practices.
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 The working team composed of department heads and led by a designated senior
manager will be primarily responsible for (i) conducting research on international
and domestic ESG policies and standards, which serve as benchmarks and references
when our leadership team update our ESG framework and indicators; (ii) preparing
our annual ESG report; (iii) diagnosing our ESG practices and putting forward
suggestions for improvement to the leadership group; (iv) implementing the steps
that the leadership group sets to improve our ESG practices; (v) providing guidance
to relevant departments regarding ESG practices; and (vi) communicating with
rating agencies and assisting stakeholders in responding to ESG issues.
 The internal audit team will be primarily responsible for auditing the
implementation of our ESG practices.
Measures to Identify, Assess and Manage ESG-related Risks
We have adopted various strategies and measures to identify, assess and manage
ESG-related risks that are material to us, from which we can set ESG targets and strategize our
action plan. We have communication channels with our internal stakeholders in order to take
into consideration their opinion to understand ESG-related concerns and how our ESG and
climate-related performance would impact different stakeholders. We also engaged external
stakeholders, such as suppliers, after examining their qualifications to identify external
stakeholders that take ESG responsibilities seriously.
We are aware of potentially severe and chronic physical risks arising from climate
change, especially extreme weather, which could have potential impact on our business
operations and financial positions. Extreme weather such as earthquakes, floods and
storms may cause interruption to our network infrastructure and information technology
systems. In addition, the transition to a low-carbon economy involving changes in climate-
related regulations and policies may bring us potential transition risks. Tightening
environmental regulations may require us to make significant investments so as to operate our
business in a more environmentally responsible manner. Any failure to respond to the public’s
growing environmental concerns could result in a damaged reputation and loss of customers.
To mitigate the potential risks and impacts from climate change, we have adopted a series
of measures. For instance, we have multiple emergency backup plans for our network
infrastructure and information technology systems, which are potentially vulnerable to damage
or interruption as a result of earthquakes, floods, fires, extreme temperatures, power loss,
telecommunications failures, technical error, computer viruses, hacking or similar events. We
also integrate climate change risk identification, adaptation, and mitigation into our corporate
decision-making process. To support sustainable development, we have formulated measures,
such as launching economical procurement policies, organizing environmental protection
public welfare activities and promoting environmental protection awareness among our
employees, to reduce our own resource consumption and emissions.
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We are also aware of risks arising from ineffective human resource management, which
may lead to difficulty in recruiting and retaining qualified employees, resulting in high
recruiting costs and low productivity.
To mitigate the potential risks from ineffective human resource management, we (i) adopt
a fair and open recruiting procedure and provide employees with attractive welfare and
benefits, including but not limited to public holidays, annual leave, marriage leave, maternity
leave, funeral leave, social insurance and housing provident fund, so as to create a harmonious
and supportive working environment and further incentivize our employees’ performance; (ii)
offer a competitive remuneration package, bonuses and promotion opportunities, which are
determined, reviewed and adjusted with reference to employees’ performance and the market
situation, to offer employees fair chances to compete and further facilitate their career
progression; and (iii) establish internal growth systems and provide customized training
programs for employees based on their career paths and help them grow.
Metrics and Targets
We are in the business of providing pledged vehicle monitoring services and automobile
dealership operation management services. While we do not produce emissions or consume
resources significantly, we believe in the importance of caring for our planet and strive to strike
a balance between our role as a for-profit company and our effort to protect the environment
of our planet. Although relevant industry standards are not available, we have adopted various
metrics to measure the impact of our business on the environment with reference to the
environment protection laws and regulations in the PRC. Such metrics primarily include the
amount of resource consumed. The following table sets forth our resource consumption
indicators in 2021, 2022 and the six months ended June 30, 2023.
For the years ended
December 31,
For the six
months
ended
June 30,
2021 2022 2023
Resource consumption
Electricity
—Total amount (kWh) 75,567 214,426 127,422
—Intensity* (kWh/sq.m.) 67.5 57.6 34.3
Water
—Total amount (m
3) 2,774 7,603 4,607
—Intensity* (m 3/sq.m.) 2.5 2.0 1.2
* Calculated as the total amount of resource consumption divided by the gross floor area of our office
premises
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Power Usage
We endeavor to proactively conserve energy in response to government’s initiatives. For
the year ended December 31, 2022, our electricity consumption level was approximately
214,426 kWh
(1). While our power usage will not have any actual or potential impact on our
business operations or financial performance, we intend to reduce the level of our power usage
over the next three years. We have implemented or will implement the following measures:
 requiring employees to switch off electronic devices and lights when they are not in
use;
 evaluating the lighting effect in our office area scientifically, and replacing
traditional bulbs with LED lights or other energy-saving lights without affecting our
business operations;
 switching off all air conditioners after normal business hours and during non-
working days;
 clearing up refrigerators regularly in order to enhance air circulation and increase
their efficiency;
 cleaning filters and fan coil units of the air conditioners regularly in order to
increase their efficiency; and
 strengthening training relating to energy saving for all employees.
Note:
(1) We leased property and received property management and general supporting services, including power usage
and water usage, from a close associate of our Controlling Shareholders. See “Relationship with Our
Controlling Shareholders—Independence from Our Controlling Shareholders—Operational
Independence—Other connected transactions with Changjiu Group.” The expenses incurred from our power
usage and water usage were included in the rent we paid to the lessor and cannot be separately ascertained.
Therefore, the consumption levels were calculated based on the proportion of the GFA of our leased property
to the GFA of the entire property of the lessor.
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Water Usage
We are dedicated to promote water conservation. For the year ended December 31, 2022,
our water consumption level was approximately 7,603 m 3(1) . While our water usage will not
have any actual or potential impact on our business operations or financial performance, we
intend to reduce the level of our water usage over the next three years. We have implemented
or will implement the following measures:
 putting up water saving reminder labels in toilets to raise the employee’s awareness
of saving water;
 requiring employees to close faucets after use; and
 inspecting water tanks and faucets periodically to prevent water leakage and
promptly informing the property management company for maintenance if there is
a water leakage.
Solid Waste
General office waste is the major non-hazardous waste generated by us, which primarily
included office supplies, office equipment, such as calculators and TV mount, and postal boxes.
In 2020, 2021, 2022 and the six months ended June 30, 2023, the value of general office waste
that we generated amounted to approximately RMB1.5 million, RMB2.4 million, RMB1.9
million and RMB1.2 million, respectively. The unit volume and unit amount of such
non-hazardous waste were trivial, and were collectively insignificant to our business operation.
Notwithstanding the minimal non-hazardous waste generated by us, which will not have any
actual or potential impact on our business operations or financial performance, we have set
long-term targets to reduce waste generation by encouraging waste recycling. We strive to
promote green office by adopting numerous measures on reducing waste generation as well as
raising employee’s environmental awareness, including but not limited to:
 providing recycling bins at easily accessible points;
 encouraging double-side printing and reusing of wastepaper;
 promoting the idea of paperless workplace; and
 evaluating the demand for office equipment before procurement to avoid overstock.
Note:
(1) We leased property and received property management and general supporting services, including power usage
and water usage, from a close associate of our Controlling Shareholders. See “Relationship with Our
Controlling Shareholders—Independence from Our Controlling Shareholders—Operational
Independence—Other connected transactions with Changjiu Group.” The expenses incurred from our power
usage and water usage were included in the rent we paid to the lessor and cannot be separately ascertained.
Therefore, the consumption levels were calculated based on the proportion of the GFA of our leased property
to the GFA of the entire property of the lessor.
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RFID Labels, PDAs and OBD Devices
The PDAs and OBD devices that we use to facilitate our pledged vehicle monitoring
services are typically uninstalled from the pledged vehicles and reused after the pledged
vehicles are sold. Our RFID labels are typically removed and disposed of in the trash bin by
the automobile dealerships after the pledged vehicles are sold. The RFID labels primarily have
three components: (i) the plastic tag; (ii) antennas, which are made of copper; and (iii)
microchips, which are made of silicon. Although the used RFID labels are non-hazardous
waste, given that they contain copper which cannot be directly disposed of in regular trash bins
or recycle bins, we typically instructed and required the onsite staff from our subcontractors
to dispose of used RFID labels to trash bins designated for hazardous waste.
Targets
To reduce our consumption of electricity and water, we have designed and implemented
energy and water management measures, including (i) putting up environmental protection
signs in prominent locations on our office premises; (ii) promoting the reduction of electricity
and water consumption among our employees; and (iii) inspecting our office premises to ensure
that power on our office premises is turned off after work.
With the expansion of our business, we will endeavor to curb the increase in our resource
consumption and aim to keep it relatively stable. By December 31, 2024, we plan to reduce our
consumption of electricity and water by 5.0% in comparison to our total consumption of
electricity and water in 2023. We also plan to adopt a wide range of environment conservation
measures to limit our resource consumption, such as (i) installing energy efficient facility for
our daily office operation; (ii) cultivating a corporate culture of environmental protection
through employee training and office policies; and (iii) setting a target for our total annual
amount and intensity of resource consumption at the beginning of each financial year. The
relevant resource consumption target will be reviewed on an annual basis to ensure that it
remains appropriate to the needs of our Group. In setting such target, we will take into account
(i) our respective historical consumption or discharge levels; (ii) our future business expansion;
and (iii) the relevant metrics and/or practice of our peers in the automobile sales and
distribution industry, such as (a) the total amount of greenhouse gas emissions in tons; (b) the
intensity of greenhouse gas emissions in tons/sq.m.; (c) the total amount of non-hazardous
waste in tons; and (d) the total amount of disposed packaging in tons in a thorough and prudent
manner with a view of balancing business growth and environmental protection to achieve
sustainable development.
Social Responsibility
Since our inception, we have been dedicated to serving the communities where we operate
and have implemented relevant measures to fulfill our social responsibilities. We hire
employees based on their merits and it is our corporate policy to offer equal opportunities to
our employees regardless of gender, age, race, religion or any other social or personal
characteristics. During the Track Record Period and up to the Latest Practicable Date, we had
complied with PRC laws in relation to workplace safety in all material respects and had not had
any incidents which have materially and adversely affected our operations. In addition, we
truly appreciate the services of our employees, and care about their wellbeing. To that end, we
offer employee benefits such as free meals, shuttle buses, medical examinations, birthday
benefits and holiday benefits.
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We also have an effective supply chain management as we have enacted detailed internal
rules governing the selection of suppliers. We select suppliers based on a variety of factors
including qualifications, business reputation, quality management capabilities and price.
Suppliers should comply with all relevant laws and regulations regarding anti-bribery,
anti-corruption and other unethical business practices.
Furthermore, to uphold our business integrity, we have set up a whistleblowing policy. To
encourage employees to report unethical behaviors, such as disseminating misleading
information, leakage of customers’ private information, discrimination, bribery and corruption,
we will keep the identity of the whistleblower confidential. Furthermore, we include
anti-corruption clauses in our agreements with external parties. In case of any unethical
practices discovered, the engagement will be terminated at once. During the Track Record
Period and up to the Latest Practicable Date, there was no legal action against us and our
employees regarding corruption, and we were not aware of any material non-compliance with
the relevant laws and regulations of bribery, extortion, fraud and money laundering. For more
details, see “—Risk Management and Internal Control.”
EMPLOYEES
We believe that the expertise, experience and professional development of our employees
is critical to our growth. Our human resources department manages, trains and hires
employees.
We uphold our corporate culture of “customer-centric, trust-based, open and innovative,
and hardworking-driven” (΋,Їɪ,௴อ,͉) and value fine qualities of
being diligent, innovative, reliable, cooperative, dedicated and honest, and hence create senses
of identity and belonging among our employees.
The following table sets forth a breakdown of our employees by function as of June 30,
2023.
Function
Number of
employees
% of our total
employees
Pledged vehicle monitoring 256 57.7
Automobile dealership operation management 61 13.7
Research and development 57 12.8
Human resource 20 4.5
Financial management 19 4.3
Enterprise management 18 4.1
Automobile supply chain service mobile
application 7 1.6
Office of the board of directors 4 0.9
Auditing center 2 0.5
Total 444 100.0
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During the Track Record Period, in addition to the employees in our pledged vehicle
monitoring department, we outsourced certain tasks to subcontractors and labor dispatch
companies. Since 2022, we outsourced such tasks primarily to subcontractors, and used 6,730
and 6,973 staff designated by the subcontractors, respectively, in 2022 and the six months
ended June 30, 2023, primarily because (i) our pledged vehicle monitoring services covered
more than 10,000 automobile dealerships in over 500 cities across 31 provinces in China; and
(ii) we need onsite staff to monitor possible risk events and help provide certain supervision
services at these automobile dealerships per financial institutions’ request. Our employees in
the pledged vehicle monitoring department and staff from our subcontractors served different
roles and functions. The staff from the subcontractors were primarily responsible for
performing onsite tasks, including pledged vehicle monitoring, collective vehicle conformity
certificate management and counting services.
Our employees in the pledged vehicle monitoring department were primary responsible
for (i) formulating and streamlining business processes and assessment mechanisms; (ii)
liaising with customers, which includes communicating with financial institutions and
understanding as well as catering to their needs; (iii) undertaking new projects; (iv) giving
instructions to subcontractors and their staff for onsite monitoring of pledged vehicles and
using the data collected to analyze and report potential risk events of automobile dealerships
through our VFS system based on pledged vehicles’ data collected from automobile dealerships
via our RFID labels, PDAs and OBD devices; and (v) cooperating with the research and
development department to improve the pledged vehicle monitoring system, including the VFS
system and V ehicle Connect. Typically, each employee in the pledged vehicle monitoring
department liaises with multiple financial institutions and manages multiple automobile
dealerships.
Our employees in the automobile dealership operation management department were
primary responsibility for (i) formulating development plans for automobile dealerships;
(ii) reviewing and supervising the implementation of automobile dealerships’ annual business
plan; (iii) providing guidance to automobile dealerships to improve their operation and
management capabilities; and (iv) assisting automobile dealerships to integrate their internal
and external corporate resources. Although our customers have access to Smart Star, our
employees provide customers with tailored services to help them fully utilize the functions of
our services, which primarily include (i) consultation based on their interpretation of the
operational data collected and processed by Smart Star; and (ii) guidance relating to systematic
improvement on automobile dealerships’ management capabilities and operational efficiency.
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The following table sets forth a breakdown of our employees by geographic location as
of June 30, 2023.
Geographic location
Number of
employees
% of our total
employees
Beijing 347 78.2
Changchun 17 3.8
Wuhan 17 3.8
Zhengzhou 16 3.6
Xi’an 15 3.4
Chengdu 10 2.3
Others
(1) 22 4.9
Total 444 100.0
Note:
(1) Others include 19 other cities such as Shijiazhuang, Nanjing, Lanzhou and Guangzhou.
During the Track Record Period and up to the Latest Practicable Date, our employees did
not negotiate their terms of employment through any labor union or by way of collective
bargaining agreements, and we did not experience any material labor disputes or shortages that
may have a material adverse effect on our business, financial position and results of operations.
We endeavor to hire talents by offering competitive wages and benefits and internal
upward mobility. We conduct monthly and quarterly performance appraisals and annual
evaluations of our employees. Those who meet or exceed their performance expectation will
be rewarded discretionary bonuses. We also provide systematic training programs to our
employees to improve and enhance their technical and service skills, as well as to supplement
their knowledge of industry quality standards and work place safety standards.
INSURANCE
During the Track Record Period and up to the Latest Practicable Date, we did not
purchase any business insurance, which, as advised by CIC, was not an uncommon practice in
the industry in China. Our lack of commercial insurance coverage may not adequately protect
us against certain operating risks and other hazards, such as claims that arise from our tripartite
pledged vehicle monitoring service agreements, which may result in adverse effects on our
business. For more details, see “Risk Factors—Risks Relating to Our Business and
Industry—Our insurance may not sufficiently cover, or may not cover at all, the losses and
liabilities we may encounter.”
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CERTIFICATES, LICENSES AND PERMITS
As advised by our PRC Legal Advisors, during the Track Record Period and up to the
Latest Practicable Date, we had obtained all necessary licenses and certificates, including our
business license and electronic data interchange (EDI) certificate, and we did not need any
other permit, from relevant authorities for our operations in the PRC. We are required to renew
such licenses from time to time. We do not expect any difficulties in obtaining such renewals
as long as we meet the applicable requirements and conditions set by relevant laws and
regulations.
PROPERTIES
As of the Latest Practicable Date, we did not own any property, and save for three
properties for company registration purposes, we leased a property in Beijing (the “Beijing
Office”) with an aggregated GFA of approximately 3,720 sq.m. and a property in Shenzhen
with a GFA of 25 sq.m. for use primarily as offices.
As of the Latest Practicable Date, we had not filed the lease agreement for the Beijing
Office with the local housing administration authorities as required under PRC law, primarily
because the landlord was unable to provide title certificate of the Beijing Office, which was
beyond our control. We were advised by our PRC Legal Advisors that such non-filing of lease
agreement would not affect the validity of such lease, but we might be ordered to rectify this
non-compliance by competent authorities and if we do not rectify within a prescribed period,
a penalty of RMB1,000 to RMB10,000 may be imposed on us as a result of such non-filing.
See “Risk Factors—Risks Relating to Our Business and Industry—Our lease agreement was
not registered with the relevant government authorities, which may expose us to potential
fines.” As of the Latest Practicable Date, (i) our Directors confirm that we had not received any
notice from any regulatory authority with respect to potential administrative penalties or
enforcement actions as a result of our failure to file the lease agreement described above; and
(ii) the landlord had undertaken that it would indemnify and hold us harmless against any
losses arising from (a) administrative penalties imposed, or demolition of the leased property,
by relevant government authorities; and (b) claims from other obligees due to the landlord’s
failure to provide relevant title certificate of the leased property. As such, our Directors are of
the view that such non-filing would not have a material impact on our business operations.
Also, considering that it is not difficult to find properties in Beijing with similar GFA and
levels of monthly rent available for leasing that could be used for our office premises, and we
are able to relocate to a different site at relatively low costs if necessary, our Directors do not
expect any practical difficulty in identifying alternative premises subject to the lease agreement
that has not been filed.
We had no single property with a carrying amount of 15% or more of our total assets as
of June 30, 2023 and, therefore, we did not need 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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RISK MANAGEMENT AND INTERNAL CONTROL
We have implemented various risk management policies and measures to identify, assess
and manage risks arising from our operations. Details on the types of risk identified by our
management, internal and external reporting mechanism, remedial measures and contingency
management have been codified in our policies. For details of the major risks identified by our
management, see “Risk Factors—Risks Relating to Our Business and Industry.” In addition, we
face various financial risks, including credit and liquidity risks that arise during our ordinary
course of business. See “Financial Information—Quantitative and Qualitative Disclosure about
Financial Risk.”
To monitor the ongoing implementation of our risk management policies and corporate
governance measures after the Global Offering, we have adopted or will adopt the following
risk management and internal control measures:
 the establishment of an audit committee responsible for overseeing our financial
records, internal control procedures and risk management systems. See “Directors
and Senior Management—Board Committees—Audit committee” for the
qualifications and experience of these committee members as well as a detailed
description of the responsibility of our audit committee;
 the appointment of Ms. Zhang Y exi and Ms. Tang King Yin as our joint company
secretaries to ensure the compliance of our operation with relevant laws and
regulations. For their biographical details, see “Directors and Senior Management;”
 the appointment of Zhongtai International Capital Limited as our compliance
advisor upon the Listing to advise us on compliance with the Listing Rules; and
 the engagement of external legal advisors to advise us on compliance with the
Listing Rules and to ensure our compliance with relevant regulatory requirements
and applicable laws, where necessary.
We embed a culture of compliance in the daily work routine of our employees through
regular compliance trainings, and set various expectations on our employees’ work
performance in terms of compliance.
Finally, we have adopted various internal regulations against corrupt and fraudulent
activities, which include measures against bribes and kickbacks, and misuse of company assets.
Major measures and procedures to implement such regulations include:
 authorizing our audit department to assume responsibility for daily execution of our
anti-fraud, anti-bribery and anti-corruption measures, including supervising in
prevention of corrupt and fraudulent activities, handling workplace complaints,
conducting internal investigations, compiling enforcement reports and proposing
disciplinary actions;
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 providing anti-fraud and anti-corruption compliance trainings and special trainings
to our senior management and employees to enhance their knowledge and
compliance with applicable laws and regulations; and
 establishing and enhancing relevant internal control measures to reduce the
occurrence of fraud, bribery and corruption, such as adopting approval procedures
for the disbursement of company funds.
Our Directors are of the view that such controls and measures would be effective to avoid
the occurrence of corruption, bribery, or other improper conduct of our employees. During the
Track Record Period and up to the Latest Practicable Date, we were not subject to any
government investigation or litigation with respect to claims or allegations of monetary and
non-monetary bribery activities.
EFFECT OF THE COVID-19 PANDEMIC
According to CIC, the passenger automobile market in China in general had been
adversely affected in the short term as the COVID-19 pandemic shrank production material
supplies, slowed down automobile production, curbed onsite sales, adversely affected
consumers’ willingness and purchase power, and resulted in the government’s order to delay
resumption of service and mass production and the related quarantine measures. In 2020, the
total number of new passenger automobiles sold in China was 20.8 million, representing a
decrease of 6.3% as compared to 2019, according to CIC. The number of pledged vehicles that
we monitored also decreased in 2021 due to a decrease in the demand for new vehicles and a
slowdown in automobile transactions at automobile dealerships as a result of the COVID-19
pandemic.
Nevertheless, according to CIC, China’s passenger automobile market has gradually
recovered since 2021 in line with the recovery of the national economy. In particular, according
to CIC, the sales volume of new passenger automobiles increased by 8.8% to 24.0 million in
2022 as compared to 2021.
Despite the outbreak of COVID-19, we achieved growth during the Track Record Period.
The number of automobile dealerships to which we provided pledged vehicle monitoring
services increased by 28.5% from 8,316 as of December 31, 2020 to 10,684 as of December 31,
2022, and our revenue increased from RMB430.6 million in 2020 to RMB547.9 million in
2022, representing a CAGR of 12.8% between 2020 and 2022. The outbreak of COVID-19 did
not have a material adverse impact on our pledged vehicle monitoring services, primarily
because (i) while the amount of secured financing that financial institutions provided to
automobile dealerships remained relatively stable during the Track Record Period, according
to CIC, financial institutions were increasingly vigilant and more inclined to use our
monitoring services to prevent the pledged vehicles from damage or loss in light of the
uncertainties with respect to the macro-economy and the slight downturn of the passenger
automobile market; and (ii) the restrictive government measures, such as lockdown, quarantine
and the requirement to present individual health code, reduced the flow of people and the risks
of pledged vehicles being damaged, stolen or moved without financial institutions’
authorization. The outbreak of COVID-19 did not have a material adverse impact on our
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automobile dealership operation management services either, primarily because we launched
our services in April 2022, and at that time, (i) local governments and communities had
developed systematic and targeted pandemic control measures with relatively minor
interruptions of economic activities; and (ii) the operation of automobile dealerships had
basically returned to normal.
To comply with government regulations and measures to combat the COVID-19
pandemic, we adopted various enhanced hygiene and precautionary measures across our office
premises between January 2020 and December 2022, such as (i) checking the health status of
our employees and timely reporting potential issues to the relevant authorities; (ii) encouraging
our employees to abide by government and community COVID-19 prevention policies and
maintain social distance; (iii) reducing business trips; and (iv) purchasing protective materials,
such as face masks and COVID-19 testing kits. The costs associated with such measures were
insignificant and did not have any material impact on our business, financial position or results
of operations during the Track Record Period.
LEGAL PROCEEDINGS AND COMPLIANCE
Legal Proceedings
We may be involved in legal proceedings or disputes in the ordinary course of business
from time to time. During the Track Record Period and up to the Latest Practicable Date, there
were no litigation or arbitration proceedings or administrative proceedings pending or
threatened against us or any of our Directors which would have a material adverse effect on
our business, financial position or results of operation.
2022 Changchun Lawsuit
On November 11, 2022, a commercial bank initiated a civil lawsuit against an automobile
dealership and Changjiu Industrial, alleging that (i) the automobile dealership failed to repay
the principal and pay the interests of the secured financing provided by the commercial bank,
and sold certain pledged vehicles without the commercial bank’s authorization; and (ii)
Changjiu Industrial failed to fulfill its contractual obligations to monitor the pledged vehicles
under the tripartite pledged vehicle monitoring service agreement (the “Agreement in
Dispute”) among the commercial bank, the automobile dealership and Changjiu Industrial,
resulting in the automobile dealership’s unauthorized sale of pledged vehicles and the total
value of the pledged vehicles dropping below the amount of the secured financing. Since we
entered into the Entrustment Agreement with Changjiu Industrial, we undertook its rights and
assumed its obligations under its existing pledged vehicle monitoring service agreements,
including the Agreement in Dispute. On June 30, 2023, the People’s Court of the Changchun
Automobile Economic and Technological Development Zone held that Changjiu Industrial was
not jointly and severally liable for the automobile dealership’s failure to repay the principal
and pay the interests of the secured financing, considering Changjiu Industrial had fulfilled all
of its contractual obligations under, and did not breach, the Agreement in Dispute given that
it had notified the commercial bank of the automobile dealership’s unauthorized sales of
pledged vehicles through daily alerts multiple times. As such, we would not bear any
responsibility for damage payment under the Entrustment Agreement either.
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2023 Changchun Lawsuit
On May 19, 2023, another commercial bank initiated a separate civil lawsuit against us,
alleging that we failed to fulfill our contractual obligations to monitor the pledged vehicles
under a tripartite pledged vehicle monitoring service agreement, resulting in the automobile
dealership’s unauthorized sale of pledged vehicles and the total value of the pledged vehicles
dropping below the amount of the secured financing. On August 18, 2023, the Changchun
Chaoyang District People’s Court ruled against the commercial bank. On September 7, 2023,
the commercial bank appealed to the Changchun Intermediate People’s Court, which was still
hearing the case and had not yet entered into a judgment as of the Latest Practicable Date. On
November 28, 2023, the Changchun Intermediate People’s Court held that we were not liable
for the automobile dealership’s unauthorized sale of pledged vehicles, considering that we had
fulfilled all of our contractual obligations under, and did not breach, the tripartite pledged
vehicle monitoring service agreement given that we had notified the commercial bank of the
automobile dealership’s unauthorized sales of pledged vehicles through daily alerts multiple
times.
Historical Non-Compliance Incidents
As advised by our PRC Legal Advisors, we had not been subject to significant fines or
administrative penalties involving non-compliances with any PRC laws or regulations relating
to our business which would have a material adverse effect on our business during the Track
Record Period and up to the Latest Practicable Date. The summary below sets out incident of
historical non-compliance with applicable regulations during the Track Record Period. Our
Directors believe that below non-compliance incident will not have any material operational or
financial impact on us.
Labor Dispatch
Pursuant to the Interim Provisions on Labor Dispatch () (the
“Interim Provisions on Labor Dispatch”) which has become effective since March 1, 2014, an
employer shall strictly control the number of dispatched workers engaged, which shall not
exceed 10% of the total number of its workers (the “Limit”). The total number of workers
refers to the sum of (i) the number of employees who have entered into employment
agreements with the employer; and (ii) the number of dispatched workers engaged by such
employer.
In the event a company violates the Interim Provisions on Labor Dispatch, the relevant
labor department would order the company to rectify such violation. If the company fails to
rectify within a prescribed period, it would be imposed a fine of RMB5,000 to RMB10,000 for
each dispatched worker over the Limit. In addition, the company would not be permitted to
engage additional dispatched workers until the number of its existing dispatched workers has
been reduced below the Limit.
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We assessed that the number of dispatched workers engaged by one of our subsidiaries
exceeded the Limit by 6,161, 6,302 and 28, respectively, as of December 31, 2020, 2021 and
2022, primarily due to insufficient understanding of the relevant PRC labor laws and
regulation. Since the discovery of our use of dispatched workers over the Limit in February
2022, we have proactively taken rectification measures to reduce our use of dispatched
workers. In particular, we have entered into agreements with certain subcontractors instead of
using dispatched workers. We set forth below the major differences between labor dispatch and
subcontracting arrangements:
Labor dispatch Subcontracting
Type of agreement Labor dispatch service
agreement
Subcontracting agreement
Task assignment We directly assign tasks to and
instruct the dispatched
workers
We assign tasks and give high-
level instructions to
subcontractors, which then
assign specific tasks and give
separate instructions to their
staff
Supervision We directly supervise the
dispatched labor by taking
daily attendance, conducting
performance assessment and
binding dispatched workers
by our internal rules and
policies
The subcontractors supervise
their staff, and we evaluate
the subcontractors
Service fees Primarily depend on the
number of dispatched
workers
Primarily depend on the type,
scope and quality of the
tasks we outsource
Wage payment We pay service fees to the
labor dispatching companies,
which pay wages to the
dispatched workers
We pay services fees to our
subcontractors, which pay
wages to their staff
Labor law obligations We owe labor law obligations
to our dispatched workers
We do not owe labor law
obligations to the staff from
our subcontractors
Vicarious liability We bear vicarious liability for
our dispatched workers’ fault
because they carry out work
in our name
Depends on the duty allocation
set forth in the relevant
subcontracting agreements
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Our human resource department is also responsible for monitoring the number and
proportion of dispatched workers that we use to ensure compliance with the relevant laws and
regulations. As of June 30, 2023 and the Latest Practicable Date, we had reduced the number
of dispatched workers to three, respectively, which was well below the Limit.
As advised by our PRC Legal Advisors, considering that (i) we had obtained a certificate
from the relevant government authority which confirms that we had not been subject to any
administrative penalty for violation of PRC labor laws and regulations; (ii) the relevant
government authority confirmed that it would not impose on us any administrative penalty for
our historical engagement of dispatched workers that exceeded the Limit; and (iii) we have
taken rectification measures to reduce the number of dispatched workers to below the Limit,
our PRC Legal Advisors are of the view that the risk that we would be subject to any
administrative penalty as a result of our historical use of dispatched labor is remote. Based on
the above, our Directors are of the view that the noncompliance discussed above would not
have a material adverse impact on our business, financial performance or results of operations.
Social Insurance and Housing Provident Funds
During the Track Record Period, one of our PRC subsidiaries did not fully contribute to
social insurance and housing provident funds for its employees, primarily due to insufficient
understanding of the relevant PRC laws and regulations. We have made provisions for the
relevant shortfall in the amounts of RMB0.5 million and RMB0.8 million to our consolidated
statements of profit or loss in respect of such potential liabilities for the years ended December
31, 2020 and 2021, respectively. We have started to make full contributions to social insurance
and housing provident funds based on actual salaries of our employees since July 2021.
As advised by our PRC Legal Advisors, according to the relevant PRC laws and
regulations, if we fail to make contributions to social insurance funds on time and in full, the
relevant government authority can require us to rectify the shortfall in our contributions within
a prescribed period, and we may be liable for a late payment fee equal to 0.05% of the shortfall
in our contributions for each day of delay. If we fail to make the payments within the prescribed
period, we may be liable for a penalty of one to three times the amount of the shortfall in our
contributions. If we fail to make contributions to housing provident funds in full when due, the
relevant government authority can require us to rectify the shortfall in our contributions within
a prescribed period, and where the payment has not been made within the prescribed period,
the relevant government authority can apply to a court for compulsory enforcement.
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Considering that (i) we have made provisions for the shortfall in our contribution to social
insurance and housing provident funds; (ii) our Directors confirmed that we will rectify our
underpayment to the social insurance and housing provident funds within a prescribed period
if we receive a notice from the relevant government authorities; (iii) we have obtained
confirmations from the relevant local government authorities, which, as confirmed by our PRC
Legal Advisors, have the authority and are competent to provide such confirmations, stating
that no administrative penalties had been imposed on us with respect to social insurance and
housing provident funds during the Track Record Period and up to the date of the confirmation;
and (iv) we have been making full contributions to social insurance and housing provident
funds based on actual salaries of our employees since July 2021, our PRC Legal Advisors are
of the view that the risk that the relevant government authorities would impose on us
administrative penalties for our historical underpayment to the social insurance and housing
provident funds is remote if we rectify our historical underpayment within a prescribed period
upon our receipt of notice from the relevant local government authorities.
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OUR CONTROLLING SHAREHOLDERS
Immediately upon completion of the Global Offering (without taking into account any
Shares which may be allotted and issued pursuant to the exercise of the Pre-IPO Share
Options), (i) Ms. Li will be entitled to exercise the voting rights attaching to approximately
29.68% of the total issued share capital of our Company through Brighht Limited and Brightio
Limited, both being investment holding companies wholly owned by Ms. Li, and (ii) Mr. Bo
will be entitled to exercise the voting rights attaching to approximately 44.52% of the total
issued share capital of our Company through Advancey Limited, Advancd Limited, Creationn
Limited and CreateCube Limited, all being investment holding companies wholly owned by
Mr. Bo.
Pursuant to a concert party confirmation dated March 1, 2023 entered into between Ms.
Li and Mr. Bo, they have confirmed that they are parties acting in concert in respect of their
voting rights in our Company. See “History, Reorganization and Corporate Structure—Concert
Party Confirmation” for details. Therefore, Ms. Li, Mr. Bo and their wholly-owned companies,
being Brighht Limited, Brightio Limited, Advancey Limited, Advancd Limited, Creationn
Limited and CreateCube Limited, will together be entitled to exercise the voting rights
attaching to approximately 74.20% of our enlarged total issued share capital upon completion
of the Global Offering (without taking into account any Shares which may be allotted and
issued pursuant to the exercise of the Pre-IPO Share Options), and shall be regarded as a group
of Controlling Shareholders after the Listing for the purpose of the Listing Rules.
DELINEATION OF BUSINESS
Changjiu Industrial is the holding company of Changjiu Group and held by Mr. Bo and
Ms. Li as to approximately 82.46% and 17.54%, respectively, as of the Latest Practicable Date.
Changjiu Group is an automobile industry service provider comprising over 150 companies as
of June 30, 2023. The principal business of Changjiu Group includes: (i) automobile sales and
distribution (“Automobile Sales and Distribution Business”), including whole vehicle sales,
used vehicle brokerage, automobile leasing and automobile insurance sales; (ii) automobile
transportation (“Automobile Transportation Business”); and (iii) vehicle manufacturing
(“V ehicle Manufacturing Business”), including center mounted axle trailers and commercial
vehicles manufacturing. The principal business of Changjiu Group is substantially operated by
the respective principal operating companies, where (i) Automobile Sales and Distribution
Business is mainly operated by approximately 100 subsidiaries of Changjiu Industrial,
including 74 automobile dealerships in operation as of June 30, 2023 owned by Guangxi
Changjiu Automobile Investment Co., Ltd. (ʮ̡) (“Changjiu
Automobile”) with a revenue of over RMB100 million for the year ended December 31, 2022
and total assets of approximately RMB5 billion as of December 31, 2022, which is in turn
owned by Changjiu Industrial as to 82.63%; (ii) Automobile Transportation Business is mainly
operated by over 40 subsidiaries of Beijing Changjiu Logistics Corp. (ࠢ
ʮ̡) (“Changjiu Logistics”), a company listed on the Shanghai Stock Exchange (stock code:
603569) with a revenue of RMB4.0 billion for the year ended December 31, 2022 and total
assets of over RMB5.4 billion as of December 31, 2022 according to its 2022 annual report,
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which is in turn owned by Changjiu Industrial as to 71.64%; and (iii) V ehicle Manufacturing
Business is mainly operated by Changjiu Auto Mobile Manufacturing Co., Ltd. (ɮӛԓႡி
ʮ̡) and Jilin Changjiu Special V ehicle Co., Ltd. (ʮ̡), both of
which are wholly-owned subsidiaries of Changjiu Industrial with an aggregate total revenue of
approximately RMB200 million for the year ended December 31, 2022 and aggregate total
assets of over RMB1 billion as of December 31, 2022.
Our business was built on the success of the pledged vehicle monitoring service business
previously operated by Changjiu Industrial since 2006. Changjiu Jinfu, one of our principal
subsidiaries, was established in September 2016 and had gradually undertaken the pledged
vehicle monitoring service business from Changjiu Industrial since then. As of the Latest
Practicable Date, the rights and obligations of Changjiu Industrial under 524 pledged vehicle
monitoring service agreements with certain financial institutions and automobile dealerships had
not been transferred from Changjiu Industrial to Changjiu Jinfu, primarily because, to our
Directors’ best knowledge and belief, it is extremely time-consuming and cumbersome for such
users to approve such transfer or a change of signing parties to existing contracts pursuant to their
strict internal control policies and procedures. However, pursuant to the Entrustment Agreement
entered into between Changjiu Industrial and Changjiu Jinfu, Changjiu Industrial has exclusively
entrusted us to provide all pledged vehicle monitoring service under these agreements and
Changjiu Industrial no longer provides such service to the relevant users. See “History,
Reorganization and Corporate Structure—Reorganization—Onshore Reorganization—Business
transfer of pledged vehicle monitoring services” and “Connected Transactions—Non-exempt
Continuing Connected Transactions—(4) Entrustment Agreement” for further details.
Our Directors are of the view that there is clear delineation and no material competition
between the business operated by Changjiu Group and our Group on the basis that (i) the
principal business of Changjiu Group includes Automobile Sales and Distribution Business,
Automobile Transportation Business and V ehicle Manufacturing Business, which is
fundamentally different from the principal business of our Group; (ii) Changjiu Industrial does
not provide any service to the financial institutions or automobile dealerships under its existing
pledged vehicle monitoring service agreements and has exclusively entrusted us to provide all
such services to the relevant users; and (iii) these agreements bear limited contract value and
will expire or be transferred to Changjiu Jinfu by December 2024 at the latest, and Changjiu
Industrial has confirmed and undertaken to us that it shall not enter into any new pledged
vehicle monitoring service agreements.
Our Controlling Shareholders have confirmed that, as of the Latest Practicable Date, save
as disclosed above in “—Delineation of Business,” none of them is interested in any business,
other than our business, which competes or is likely to compete, either directly or indirectly,
with our business, which requires disclosure pursuant to Rule 8.10 of the Listing Rules.
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INDEPENDENCE FROM OUR CONTROLLING SHAREHOLDERS
Having considered the following factors, our Directors are satisfied that we are capable
of carrying out our business independently of our Controlling Shareholders and their respective
close associates after the Listing.
Operational Independence
We engage in our operations independently, making and implementing operational
decisions independently. We do not share operation team, facilities and equipment with our
Controlling Shareholders and their respective associates. We possess all relevant licenses,
approvals and permits from the relevant regulatory authorities that are necessary to carry out
and operate our business and we have sufficient operational capacity in terms of capital and
employees to operate independently. Our Group have established our own organizational
structure with independent departments, and each department is assigned to specific areas of
responsibilities. Our operating functions, such as cash and accounting management, invoices
and bills, operate independently of our Controlling Shareholders and their respective close
associates. We have independent access to a large and diversified base of suppliers and
customers and are not dependent on our Controlling Shareholders and their respective close
associates with respect to supplies for our business operations. We also maintain a set of
comprehensive internal control procedures to facilitate the effective operation of our business.
During the Track Record Period, our Group conducted certain transactions with our
Controlling Shareholders’ close associates on a recurring basis which are expected to continue
after the Listing and will constitute continuing connected transactions of our Group under the
Listing Rules. Based on the reasons as set out below, our Directors are of the view that we are
able to operate independently from our Controlling Shareholders and their respective close
associates.
Business of pledged vehicle monitoring services
We provide pledged vehicle monitoring services to the automobile dealerships of
Changjiu Group under the Pledged V ehicle Monitoring Service Framework Agreement, and we
are also entrusted by Changjiu Industrial to provide pledged vehicle monitoring services to
financial institutions and automobile dealerships under the Entrustment Agreement as a
transitional arrangement. For the years ended December 31, 2020, 2021 and 2022 and the six
months ended June 30, 2023, our revenue generated from these transactions with Changjiu
Group merely accounted for 0.16%, 1.80%, 7.60% and 6.89% of our total revenue generated
from our business segment of pledged vehicle monitoring services and 0.16%, 1.80%, 7.00%
and 6.22% of our total consolidated revenue, respectively.
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The scale of our transactions with Changjiu Group for pledged vehicle monitoring
services is expected to remain limited and gradually decrease considering that (i) we have
maintained stable and independent business relationship with the Independent Third Party
users throughout the Track Record Period, and our transactions with Independent Third Party
users are expected to grow steadily; (ii) the transaction amounts under the Pledged V ehicle
Monitoring Service Framework Agreement have been and will be at a minimal level; and (iii)
the relevant agreements under the entrustment arrangement pursuant to the Entrustment
Agreement bear limited contract value and will expire or be transferred to Changjiu Jinfu by
December 2024 at the latest, and Changjiu Industrial has confirmed and undertaken to us that
it shall not enter into any new pledged vehicle monitoring service agreements. Therefore, we
believe our transactions with Changjiu Group for the pledged vehicle monitoring services do
not materially affect our operational independence.
Business of automobile dealership operation management services
We started to provide automobile dealership operation management services to Changjiu
Group in April 2022 under the Automobile Dealership Operation Management Services
Framework Agreement. For the year ended December 31, 2022 and the six months ended June
30, 2023, our revenue generated from such transactions with Changjiu Group accounted for
substantially all of our total revenue generated from our business segment of automobile
dealership operation management services but only accounted for 7.81% and 9.79% of our total
consolidated revenue, respectively.
We believe that our relationship with Changjiu Group for the automobile dealership
operation management services are mutually beneficial and complementary. On the one hand,
our long-standing relationship with Changjiu Group and our established track record have
enabled us to provide high quality services that meet Changjiu Group’s demands, and on the
other hand, our service to Changjiu Group has promoted the high-quality image and laid a solid
foundation for our future market expansion. See “Business—Our Strategic Business
Relationship with Changjiu Group—Mutually Beneficial and Complementary Relationship
with Changjiu Group” for further details.
In light of the massive automobile dealerships resources of Changjiu Group, it is
inevitable that most of our revenue under such business segment for the financial year of 2022
and for the first half of 2023 were derived from our transactions with Changjiu Group.
Nonetheless, we have been proactively exploring potential business opportunities with
Independent Third Parties and started to manage automobile dealership owned by Independent
Third Party. As of the Latest Practicable Date, we had entered into non-binding letters of intent
for our automobile dealership operation management services with 144 automobile dealerships,
all of which were owned by Independent Third Parties. It is expected that we will continue to
capture new contracts from Independent Third Parties and our revenue generated from
operation management services provided to Independent Third Parties will continue to
increase.
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Based on the abovementioned, we believe our transactions with Changjiu Group for the
automobile dealership operation management services do not materially affect our operational
independence.
Other connected transactions with Changjiu Group
We leased properties with a total GFA of 3,720.17 sq.m. and received property
management and general supporting services from a close associate of our Controlling
Shareholders. As our Group has been using such properties and services historically, we believe
that, compared to relocating to alternative properties, it is in the interest of our Group in terms
of cost, time, efficiency and operational stability to continue such lease and service
arrangement. Meanwhile, we believe that, even if the above agreements are terminated, we
would be able to find suitable alternatives from Independent Third Parties lessors in the
locality without undue delay, inconvenience or material costs incurred to the operation of our
business. Accordingly, we believe our leasing of properties from Changjiu Group do not
materially affect our operational independence.
Save for the transactions disclosed in “Connected Transactions” and Note 26 “Related
Party Transactions” to the Accountants’ Report in Appendix I to this prospectus, and other than
(i) our history with Changjiu Industrial as disclosed in “History, Reorganization and Corporate
Structure,” and (ii) financial services obtained in the ordinary course of business of Changjiu
Group from financial institutions who are our customers, to our Directors’ best knowledge and
belief, Changjiu Group does not have any other past or present business relationship or
association with our Group or our customers or suppliers during the Track Record Period and
up to the Latest Practicable Date.
Based on the above, our Directors are of the view that we are able to operate
independently from our Controlling Shareholders and their respective close associates.
Management Independence
Our business is managed and conducted by our Board and senior management. Our Board
comprises three executive Directors, one non-executive Director and three independent
non-executive Directors, among whom Ms. Li, the chairwoman of our Board and an executive
Director, and Mr. Bo, an executive Director and the chief executive officer of our Company,
are members of our Controlling Shareholders. For further details, see “Directors and Senior
Management.”
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Save as disclosed below, none of our Directors or members of our senior management
serves as a director or member of senior management in our Controlling Shareholders or their
close associates (other than members of our Group):
Major positions held in our Controlling Shareholders and their close
associates (other than members of our Group)
Name
Position in our
Company Name of company Position
Ms. Li Chairwoman of the
Board and
executive Director
Changjiu Logistics Director
Changjiu Automobile Chairwoman of the
board
Derong International Finance Leasing Co., Ltd.
(ʮ̡)
Chairwoman of the
board
Mr. Bo
(1)(2) Executive Director and
chief executive officer
Changjiu Industrial Executive director and
general manager
Changjiu Logistics Chairman of the board
Ms. Jin Ting
(◽ణ)
Non-executive Director Changjiu Logistics Finance director
(ৌਕᐼ္)
Notes:
(1) Mr. Bo also serves as a director and/or the chairman of the board in four subsidiaries of Changjiu Industrial.
The directorships held by Mr. Bo in these companies are non-executive in nature and he has not been and will
not be involved in their day-to-day management.
(2) Mr. Bo also serves as a director and/or the chairman of the board in three subsidiaries of Changjiu Logistics.
The directorships held by Mr. Bo in these companies are non-executive in nature and he has not been and will
not be involved in their day-to-day management.
Our Directors are of the view that our Board and senior management team are able to
manage our business independently from our Controlling Shareholders and their close
associates for the following reasons:
(i) our Board will comprise seven Directors, four of whom (including one executive
Director) will have no ongoing roles with, and are therefore independent from our
Controlling Shareholders and their close associates;
(ii) as confirmed by Ms. Li, the directorship she held at each of Changjiu Logistics,
Changjiu Automobile and Derong International Finance Leasing Co., Ltd. is
non-executive in nature and she has not been and will not be involved in their
day-to-day management. Her primary responsibilities in these companies are
providing strategic advice and making recommendations on their corporate
operation. Therefore, Ms. Li will have sufficient time and resources to serve on our
Board and as a senior management member, and her officeholding in the
aforementioned companies will not affect her discharge of her duties and
responsibilities to our Group;
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(iii) Changjiu Industrial had no material business operation as of the Latest Practicable
Date except for being a signing party to certain pledged vehicle monitoring service
agreement which have all been entrusted to us under the Entrustment Agreement and
the provision of property lease and comprehensive services to us under the Property
Lease and Comprehensive Service Agreement with limited scale. See “Connected
Transactions” for further details. As confirmed by Mr. Bo, he does not have any
senior management role at Beijing Changjiu Logistics Corp. and his directorship is
non-executive in nature. His primary responsibilities are providing strategic advice
and making recommendations on its corporate operation and he will not be involved
in its daily management. Therefore, Mr. Bo will have sufficient time and resources
to serve on our Board and as a senior management member, and his officeholding
in the aforementioned entities will not affect his discharge of his duties and
responsibilities to our Group;
(iv) despite the directorships held at the aforementioned companies, Ms. Jin Ting is our
non-executive Director and therefore not involved in the daily management and
operation of our Company;
(v) save for Mr. Bo, all members of our senior management are our full-time employees
and are independent from our Controlling Shareholders and their close associates;
(vi) pursuant to the Articles of Association of our Company, in the event that a Director
or his/her close associates has a material interest in any contract or arrangement to
be entered into with our Group, the interested Director(s) shall, save in certain
circumstances provided by the Articles of Association, abstain from voting on any
Board resolutions approving such contract, arrangement or any other proposal and
shall not be counted in the quorum present at the relevant Board meeting;
(vii) we have appointed three independent non-executive Directors (accounting for more
than one-third of our Board) to balance the number of potentially interested
Directors with a view to promote the interests of our Company and the Shareholders
as a whole. The independent non-executive Directors will be entitled to engage
professional advisers at our cost for advice on matters relating to any potential
conflict of interest arising out of any transaction to be entered into between our
Company and another company or entity to which a Director or senior management
member holds office. We believe our independent non-executive Directors have the
depth and breadth of experience which will enable them to bring sound independent
and impartial judgment to the decision-making process of our Board;
(viii) each of our Directors is aware of his/her fiduciary duties as a Director, which require
him/her to act for the benefit and in the interests of our Company and the
Shareholders as a whole and do not allow any conflict between his/her duties as a
Director and his/her personal interests; and
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(ix) we have adopted corporate governance measures to manage conflicts of interest, if
any, between our Group and our Controlling Shareholders and their respective close
associates which would support our independent management. See “—Corporate
Governance Measures” below for further information.
Based on the above, our Directors are satisfied that the Board as a whole, together with
our senior management team, is able to perform their roles in our Company in managing our
business independently.
Financial Independence
We have established a finance department which operates entirely independently of the
Controlling Shareholders with a team of independent financial staff. In addition, our Company
has established a sound and independent financial system and makes financial decisions
according to our Company’s business needs, which are independent of our Controlling
Shareholders.
As of June 30, 2023, our non-trade outstanding balances due from our related parties
amounted to RMB5.3 million. See “Financial Information—Related Party Transactions” and
Note 26 to the Accountants’ Report in Appendix I to this prospectus for details. All such
balances had been fully settled as of the Latest Practicable Date.
As of the Latest Practicable Date, there were no outstanding loans, advances or non-trade
balances due to or from our Controlling Shareholders or their respective close associates, nor
were there any outstanding pledges or guarantees provided for our benefit by our Controlling
Shareholders or their respective close associates and vice versa.
Based on the above, our Directors are satisfied that we are able to maintain financial
independence from our Controlling Shareholders and their respective close associates.
DEED OF NON-COMPETITION
To safeguard the interest of our Group, our Controlling Shareholders (each a
“Covenantor”, collectively the “Covenantors”) have executed the Deed of Non-competition in
favor of our Company on December 11, 2023. Pursuant to the Deed of Non-competition, each
of the Covenantors has unconditionally and irrevocably undertakes, jointly and severally, to
our Company (for itself and as trustee for the benefit of each of the members of our Group from
time to time) that, save for Changjiu Industrial being the signing party of certain pledged
vehicle monitoring service agreements and the transactions contemplated under the
Entrustment Agreement between Changjiu Jinfu and Changjiu Industrial, as detailed in
“Connected Transactions—Non-exempt Continuing Connected Transactions—(4) Entrustment
Agreement,” he/she/it will not, and will use his/her/its best endeavors to procure that his/her/its
respective close associates will not, directly or indirectly, at any time during the Relevant
Period (as defined below), carry on, engage in, invest in, participate in, attempt to participate
in, render any services to, provide any financial support to or otherwise be involved in or
interested (economically or otherwise) in, whether alone or jointly with another person and
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whether directly or indirectly or on behalf of or to assist or act in concert with any other person,
any business which is the same as, similar to or in competition or will compete or may compete
with the business carried on or contemplated to be carried on by any member of our Group
from time to time (the “Restricted Business”).
The above restrictions do not prohibit the Covenantors and their respective close
associates (other than members of our Group) from holding securities of any company which
conducts or is engaged in any Restricted Business, provided that the conditions set out in
paragraphs (i), (ii) and (iii) below are satisfied:
(i) the aggregate number of shares or equity interests held by the Covenantors and their
respective close associates (other than members of our Group) is less than 10% of
any class of the issued shares or the entire equity interests of such company;
(ii) the Covenantors or their respective close associates (other than members of our
Group) do not own, by any means, any right to control the composition of the board
of directors or managers of such Restricted Business nor any right to participate,
directly or indirectly, in such Restricted Business; and
(iii) none of the Covenantors and their respective close associates (other than members
of our Group) is the controlling shareholder of such company.
In addition, where it is resolved by the Board or a Shareholders’ meeting that it is
appropriate for the Covenantors and/or their respective close associates (other than members
of our Group) and our Group to jointly invest in, conduct, operate or participate in any business
opportunity relating to the Restricted Business (the “New Business Opportunity”), and if our
Group gives written invitation, the Covenantors and/or their respective close associates (other
than members of our Group) may together with our Group, jointly invest in, conduct, operate
or participate in such New Business Opportunity subject to the provisions of the Listing Rules
and any requirement from the Stock Exchange (including but not limited to the obtaining of
approval from the independent non-executive Directors and/or independent Shareholders).
Further Undertakings from the Covenantor
Under the Deed of Non-competition, each of the Covenantors has further undertaken to
us the following:
(i) it shall provide, and shall procure its close associates (other than members of our
Group) to provide, during the Relevant Period (as defined below), where necessary
and at least on an annual basis, all information necessary for the review by the
independent non-executive Directors, subject to any relevant laws, rules and
regulations or any contractual obligations, to enable them to review the
Covenantor’s and its close associates’ (other than members of our Group)
compliance with the Deed of Non-competition, and to enable the independent
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non-executive Directors to enforce the Deed of Non-competition, including but not
limited to any decision described in paragraph (v) below or in relation to the
pre-emptive right to restrict the transfer;
(ii) the Covenantor (and on behalf of its close associates (other than members of our
Group) from time to time) shall provide to us annually with an annual declaration
for inclusion in our annual report, in respect of compliance with the terms of the
Deed of Non-competition;
(iii) the Covenantor has agreed and authorized the Company to disclose decisions on
matters reviewed by the independent non-executive Directors relating to the
compliance and enforcement of the Deed of Non-competition, either through our
annual report or by way of announcement;
(iv) during the Relevant Period (as defined below), in the event that the Covenantor or
its close associates (other than members of our Group) are given any business
opportunity relating to the New Business Opportunity, the Covenantor shall, and
shall procure that its close associates (other than members of our Group), inform us
of such New Business Opportunity in writing with all available information as soon
as practicable and shall use its best endeavor to assist us in obtaining such New
Business Opportunity on the same or more favorable terms;
(v) when there is any New Business Opportunity, all independent non-executive
Directors but excluding any independent non-executive Directors with conflicted
interests will form a committee (the “Independent Board Committee”) and the
Independent Board Committee shall consider and approve whether to pursue or
decline the New Business Opportunity. If appropriate, the Independent Board
Committee may appoint independent financial advisors to advise on the terms of the
transaction in the subject New Business Opportunity;
(vi) in the event that the Independent Board Committee decides that our Group should
not take up such New Business Opportunity as referred to in paragraph (iv) above
within a commercially reasonable period and undertake by written notice, the
Covenantor and its close associates (other than members of our Group) may take up
such New Business Opportunity and the involvement in the business derived from
such New Business Opportunity shall not be regarded as a breach of the Deed of
Non-competition; and
(vii) since the effective date of the Deed of Non-competition, the Covenantor agrees to
indemnify us from and against any and all losses, damages, claims, liabilities, costs
and expenses (including legal costs and expenses) where we may suffer or incur as
a result of or in connection with any failure to comply with the terms of the Deed
of Non-competition by the Covenantor or its close associates (other than members
of our Group).
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Where the Covenantors and/or their respective close associates (other than members of
our Group) acquire the Restricted Business pursuant to paragraph (vi) above, the Covenantors
and/or their respective close associates (other than members of our Group) shall provide our
Group with pre-emptive right (the “Pre-emptive Right”) to acquire any such Restricted
Business under the same circumstances. Where the Independent Board Committee decides to
waive our Pre-emptive Right by way of written notice, the Covenantors and/or their respective
close associates (other than members of our Group) may offer to sell such Restricted Business
(as defined below) to other third parties on such terms which are no more favorable than those
made available to our Group.
Where the Covenantors and/or their respective close associates (other than members of
our Group) acquire the Restricted Business pursuant to paragraph (vi) above, the Covenantors
and/or their respective close associates (other than members of our Group) has undertaken to
grant us the option (the “Options for Acquisition”) which is exercisable at any time during the
term of the Relevant Period (as defined below), to purchase at one or more times any equity
interest, assets or other interests which form part/or all of such Restricted Business as
described above, or to operate the Restricted Business by way of, including but not limited to,
management outsourcing, lease or subcontracting. However, if a third party has the
pre-emptive rights in accordance with applicable laws and regulations and/or any legally
binding document, the Options for Acquisition shall be subject to such third-party rights. In
these circumstances, the Covenantors will use their best endeavors to procure the third party
to waive such pre-emptive rights.
The Covenantors and/or their respective close associates (other than members of our
Group) have further unconditionally and irrevocably undertaken that they and/or their
respective close associates (other than members of our Group) will not take advantage of their
connections with our Group and/or our Shareholders, or their position as a shareholder of any
member of our Group, to participate or be engaged in any activities which may be detrimental
to the interests of our Group and our other Shareholders.
The Covenantors have further unconditionally and irrevocably undertaken that except
with the prior written consent of our Group, the Covenantors shall not, and shall procure their
respective close associates (other than members of our Group) will not, directly or indirectly:
(i) any time induce or attempt to induce any director, manager or consultant of any
member of our Group to terminate his or her employment or consultancy (as
applicable) with our Group, whether or not such act of that person would constitute
a breach of that person’s contract of employment or consultancy (as applicable); or
(ii) alone or jointly with any other person through or as director, manager, adviser,
consultant, employee of or agent for or shareholder in any person, firm or company,
in competition with any member of our Group, canvass, solicit or accept orders from
or do business with any person with whom any member of our Group has done
business or solicit or persuade any person who has dealt with our Group or is in the
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process of negotiating with our Group in relation to the Restricted Business to cease
to deal with our Group or reduce the amount of business which the person would
normally do with our Group or seek to improve their terms of trade with any member
of our Group.
Our Company will disclose the decisions on matters reviewed by the independent
non-executive Directors relating to the compliance with and enforcement of the Deed of
Non-competition either in the annual report of our Company or by way of announcement(s) to
the public. For the purposes of the above, the “Relevant Period” means the period commencing
from the date on which the Deed of Non-competition becomes effective and shall expire on the
earlier of (a) the date when each of the Covenantors and, as the case may be, any of their
respective close associates collectively, cease to hold, or otherwise hold, beneficially in
aggregate whether directly or indirectly, 30% or more (or such other percentage of
shareholding as stipulated in the Listing Rules to constitute a controlling shareholder) of the
issued share capital of our Company and is not in a position to control the composition of a
majority of the Board; or (b) the date on which the Shares cease to be listed on the Stock
Exchange (except for temporary suspension of trading of the Shares).
CORPORATE GOVERNANCE MEASURES
Our Directors recognize the importance of good corporate governance to protect the
interest of our minority Shareholders. We will adopt the following corporate governance
measures to manage potential conflict of interests between our Group and the Controlling
Shareholders:
(i) where a Shareholders’ meeting is held for considering proposed transaction in which
any of the Controlling Shareholders has a material interest, the Controlling
Shareholder(s) shall abstain from voting on the resolutions and shall not be counted
in the quorum for the voting;
(ii) where a Board meeting is held for the matters in which a Director has a material
interest, such Director shall abstain from voting on the resolutions and shall not be
counted in the quorum for the voting;
(iii) an Independent Board Committee comprising all independent non-executive
Directors will be given the authority to decide and be responsible for deciding,
without attendance by any Directors with beneficial or conflicting interest, the New
Business Opportunities referred to our Group by our Controlling Shareholders (or
their respective close associates other than members of our Group) and the exercise
of the Pre-emptive Right under the Deed of Non-competition. The Independent
Board Committee, taken as a whole, has the relevant expertise and experience in
deciding the New Business Opportunities or the exercise of the Pre-emptive Right.
For more details of the biographies of our independent non-executive Directors, see
“Directors and Senior Management.” In addition, the Independent Board Committee
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may, at the costs of our Company and from time to time, engage independent
financial advisers and other external professional advisers as they may consider
necessary to advise them on the issues which relate to the above matters;
(iv) any transaction between (or proposed to be made between) our Group and the
connected persons shall comply with the relevant requirements of Chapter 14A of
the Listing Rules, including, where applicable, the announcement, reporting, annual
review, circular (including independent financial advice) and independent
shareholders’ approval requirements and with those conditions imposed by the Stock
Exchange for the granting of waiver from strict compliance with relevant
requirements under the Listing Rules;
(v) in the event that our independent non-executive Directors are requested to review
any conflict of interests between our Group and the Controlling Shareholders, the
Controlling Shareholders shall provide the independent non-executive Directors
with all necessary information and our Company shall disclose the decisions of the
independent non-executive Directors either in its annual report or by way of
announcements to the public;
(vi) our Company has appointed Zhongtai International Capital Limited as our
compliance advisor, which will provide advice and guidance to our Group in respect
of compliance with the applicable laws and Listing Rules including various
requirements relating to Directors’ duties and corporate governance; and
(vii) we have established the Audit Committee, the Remuneration Committee and the
Nomination Committee with written terms of reference in compliance with the
Listing Rules and the Code of Corporate Governance and Corporate Governance
Report in Appendix 14 to the Listing Rules. The majority of the members of the
aforementioned committees are independent non-executive Directors.
RELATIONSHIP WITH OUR CONTROLLING SHAREHOLDERS
– 240 –


--- page 251 ---
We have entered into certain agreements with our connected person, the details of which
are set out below. Upon Listing, the transactions contemplated under such agreements will
constitute our continuing connected transactions under Chapter 14A of the Listing Rules.
OUR CONNECTED PERSON
The table below sets forth the party who will become our connected person upon Listing
and the nature of its relationship with our Group:
Connected person Connected relationship
Changjiu Industrial a company owned by Ms. Li and Mr. Bo as to
approximately 17.54% and 82.46%, respectively, and
hence an associate of our Controlling Shareholders
SUMMARY OF OUR CONTINUING CONNECTED TRANSACTIONS
Proposed annual cap for the
years ending December 31,
Continuing connected
transactions
Applicable
Listing Rules Waiver sought 2023 2024 2025
(RMB in thousands)
Fully-exempt Continuing Connected Transactions
(1) Pledged V ehicle
Monitoring Service
Framework Agreement
Rule 14A.76(1)(c) N/A 614 614 614
(2) Property Lease and
Comprehensive Service
Agreement
Rule 14A.76(1)(c) N/A 2,300 2,300 N/A
(1)
Non-exempt Continuing Connected Transactions
(3) Automobile Dealership
Operation Management
Service Framework
Agreement
Rule 14A.35-36
Rule 14A.49
Rule 14A.105
Announcement,
circular and
independent
Shareholders’
approval
72,000 85,000 95,000
(4) Entrustment Agreement Rule 14A.35-36
Rule 14A.49
Rule 14A.105
Announcement,
circular and
independent
Shareholders’
approval
31,000 20,000 N/A
(2)
CONNECTED TRANSACTIONS
– 241 –


--- page 252 ---
Notes:
(1) The initial term of the Property Lease and Comprehensive Service Agreement is one year commencing
from January 1, 2023 and would automatically renew for another year unless there are other
arrangements between the relevant parties. Therefore, the Property Lease and Comprehensive Service
Agreement is reasonably expected to last for two years considering the option to extend the lease
according to IFRS 16.
(2) The term of the Entrustment Agreement will expire on December 31, 2024.
FULLY-EXEMPT CONTINUING CONNECTED TRANSACTIONS
(1) Pledged Vehicle Monitoring Service Framework Agreement
On December 11, 2023, our Company and Changjiu Industrial, for themselves and on
behalf of their respective subsidiaries, entered into a pledged vehicle monitoring service
framework agreement (the “Pledged V ehicle Monitoring Service Framework Agreement”),
pursuant to which our Group shall provide pledged vehicle monitoring services and other
ancillary services to Changjiu Group in exchange for service fees payable by Changjiu Group.
Separate underlying agreements will be entered into among the parties to set out the
detailed terms, including details of service scope, service fees and payment methods, based on
the principles and within the parameters provided under the Pledged V ehicle Monitoring
Service Framework Agreement. The definitive terms of each of such underlying agreements
will be determined on a case-by-case basis and on fair and reasonable basis after arm’s length
negotiation among the parties.
The initial term of the Pledged V ehicle Monitoring Service Framework Agreement will
commence on the Listing Date and expire on December 31, 2025. Such term would
automatically renew for a term of three years unless we serve written notice to cease
cooperation.
For the years ended December 31, 2020, 2021 and 2022 and the six months ended June
30, 2023, the historical amounts of service fees in respect of the Pledged V ehicle Monitoring
Service Framework Agreement were approximately RMB0.7 million, RMB5.1 million,
RMB0.5 million and RMB0.1 million, respectively.
The proposed annual caps for the transactions under the Pledged V ehicle Monitoring
Service Framework Agreement for the three years ending December 31, 2023, 2024 and 2025
are approximately RMB0.6 million for each year.
The transactions contemplated under the Pledged V ehicle Monitoring Service Framework
Agreement have been and will be entered into in the ordinary and usual course of business of
our Group and on normal commercial terms or better.
CONNECTED TRANSACTIONS
– 242 –


--- page 253 ---
As each of the applicable percentage ratios (other than the profit ratio) under the Listing
Rules in respect of this transaction is expected to be, on an annual basis, less than 5% and the
total annual amount receivable by our Group is expected to be less than HK$3 million, such
transaction will be fully exempt from the reporting, annual review, announcement, circular and
independent shareholders’ approval requirements under Chapter 14A of the Listing Rules.
(2) Property Lease and Comprehensive Service Agreement
On January 1, 2023, Shanghai Bozhong, Changjiu Jinfu and Changjiu Industrial entered
into a property lease and comprehensive service agreement (the “Property Lease and
Comprehensive Service Agreement”), pursuant to which Changjiu Industrial agreed to (i) lease
certain properties owned by it located at Changjiu Building, No. 99, Shigezhuang Road,
Chaoyang District, Beijing, the PRC to Shanghai Bozhong and Changjiu Jinfu for office use;
and (ii) provide us with comprehensive services, including property management, security and
cleaning, IT, shuttle bus and staff canteen services.
The principal terms of the Property Lease and Comprehensive Service Agreement include
the property rents, the scope and category of comprehensive services and relevant service fees,
payment schedules and payment methods.
The Property Lease and Comprehensive Service Agreement is for an initial term of one
year commencing from January 1, 2023 and would automatically renew for another year unless
there are other arrangements between the relevant parties.
Accounting implications of the Property Lease and Comprehensive Service Agreement
In accordance with the IFRSs applicable to our Group, the payments by our Group under
the Property Lease and Comprehensive Service Agreement comprise different components,
hence different accounting treatments will be applied. The rent and comprehensive service fees
(excluding staff canteen service) of RMB5.95/sq.m./day paid by our Group are capital in nature
and were recognized, among others, as assets of our Group at the commencement date of the
lease. Our Group as the lessee applies the practical expedient to account for lease component
and associated non-lease components as a single lease component. Therefore, the rent and
comprehensive service fees (excluding staff canteen service) will be regarded as an acquisition
of a capital asset and a one-off connected transaction of the Company for the purpose of the
Listing Rules. Under IFRS 16, our Group shall recognize (i) depreciation charge over the life
of the right-of-use asset, and (ii) interest expense as calculated based on lease liability balance
using the effective interest rate method. Staff canteen service fees paid by our Group were
recognized as expenses in profit or loss.
Pursuant to the Property Lease and Comprehensive Service Agreement, we shall pay
Changjiu Industrial staff canteen service fees of RMB27.4/person/day multiplied by the actual
number of diners, which are determined based on arm’s length negotiations between the parties
with reference to (i) historical service fees; and (ii) the number of our staff consumed in the
CONNECTED TRANSACTIONS
– 243 –


--- page 254 ---
canteen. The transactions contemplated under the Property Lease and Comprehensive Service
Agreement have been and will be entered into in the ordinary and usual course of business of
our Group and on normal commercial terms or better.
For the years ended December 31, 2020, 2021 and 2022 and the six months ended June
30, 2023, (i) the depreciation of right-of-use assets and interest expense on lease liabilities in
relation to the lease of properties and comprehensive service fees (excluding staff canteen
service) were RMB2.5 million, RMB3.2 million, RMB4.5 million and RMB3.6 million,
respectively; and (ii) the aggregate service fees in respect of staff canteen service were
RMB0.9 million, RMB1.4 million, RMB1.5 million and RMB1.1 million, respectively.
The proposed annual caps for the staff canteen service under the Property Lease and
Comprehensive Service Agreement for the two years ending December 31, 2023 and 2024 are
set out below:
Proposed annual caps for the
years ending December 31,
2023 2024 (1)
(RMB in thousands)
Staff canteen service fees 2,300 2,300
Note:
(1) The initial term of the Property Lease and Comprehensive Service Agreement is one year commencing
from January 1, 2023 and would automatically renew for another year unless there are other
arrangements between the relevant parties. Therefore, the Property Lease and Comprehensive Service
Agreement is reasonably expected to last for two years considering the option to extend the lease
according to IFRS 16.
The proposed annual caps are estimated primarily based on (i) the historical transaction
amounts in relation to staff canteen services; and (ii) the estimated increase in number of staffs
along with our business expansion in the next two years.
Listing Rules implications
As the highest applicable percentage ratio (other than the profit ratio) under the Listing
Rules in respect of the payment of staff canteen service fees under the Property Lease and
Comprehensive Service Agreement is expected to be, on an annual basis, less than 5% and the
total annual amount payable by our Group is expected to be less than HK$3 million, such
transaction will be fully exempt from the reporting, annual review, announcement, circular and
independent shareholders’ approval requirements under Chapter 14A of the Listing Rules.
CONNECTED TRANSACTIONS
– 244 –


--- page 255 ---
NON-EXEMPT CONTINUING CONNECTED TRANSACTIONS
(3) Automobile Dealership Operation Management Service Framework Agreement
Principal terms
On December 11, 2023, our Company and Changjiu Industrial, for themselves and on
behalf of their respective subsidiaries, entered into an automobile dealership operation
management service framework agreement (the “Automobile Dealership Operation
Management Service Framework Agreement”), pursuant to which our Group shall provide
operation management services to automobile dealerships owned by Changjiu Group in
exchange for service fees payable by Changjiu Group.
Separate underlying agreements will be entered into between the parties to set out the
detailed terms, including scope and duration of services, service fees, payment schedules and
payment methods, based on the principles and within the parameters provided under the
Automobile Dealership Operation Management Service Framework Agreement. The definitive
terms of each of such underlying agreements will be determined on a case-by-case basis and
on fair and reasonable basis after arm’s length negotiation between the parties.
The initial term of the Automobile Dealership Operation Management Service Framework
Agreement will commence on the Listing Date and expire on December 31, 2025, such term
would automatically renew for a term of three years unless we serve written notice to cease
cooperation.
Reasons for and benefits of the transactions
We make profit from providing management systems to automobile dealerships
leveraging our management experience and insight in the automobile dealership industry.
Changjiu Group, with its national presence of automobile dealerships, has secured a place in
automobile dealership industry. As such, our services provided to Changjiu Group under the
Automobile Dealership Operation Management Service Framework Agreement are in the
ordinary and usual course of our business. Given that Changjiu Group has abundant automobile
dealership store resources, offering our automobile dealership operation management services
to Changjiu Group would consolidate our revenue sources and hedge the operational risks
resulting from the evolving market. In addition, the terms we offered to Changjiu Group are
no less favorable to us than those offered to our other customer which is an Independent Third
Party. Therefore, our automobile dealership operation management services provided to
Changjiu Group are profitable and are in the interests of our Group and the Shareholders as a
whole.
CONNECTED TRANSACTIONS
– 245 –


--- page 256 ---
Pricing policy
The management service fees payable by Changjiu Group to us are generally determined
by a pre-determined percentage of the pre-tax annual operating revenue (or the revenue during
the term of the management agreement if such term is less than one year) of the automobile
dealership stores. The aforesaid pricing policies are no less favorable to us than those available
to our other Independent Third Party customer.
Historical transaction amounts
We began offering operation management services to automobile dealerships in April
2022. For the years ended December 31, 2020, 2021 and 2022 and the six months ended June
30, 2023, the aggregate fees generated from Changjiu Group for the automobile dealership
operation management services were nil, nil, RMB42.8 million and RMB30.3 million,
respectively.
Annual caps
The proposed annual caps for the operation management service fees payable by Changjiu
Group to our Group under the Automobile Dealership Operation Management Service
Framework Agreement for the three years ending December 31, 2023, 2024 and 2025 are set
out below:
Proposed annual caps for the years ending December 31,
2023 2024 2025
(RMB in thousands)
72,000 85,000 95,000
The proposed annual caps above for the three years ending December 31, 2025 are
determined with reference to:
 the historical transaction amounts of our automobile dealership operation
management services for the year ended December 31, 2022 after our
commencement of such services in April 2022;
 the expected average number of automobile dealerships owned by Changjiu Group
to be managed by us of approximately 72, 92 and 102 in 2023, 2024 and 2025,
respectively, with reference to the number of existing automobile dealerships
managed by us, the business development plan of Changjiu Group and the potential
growth trend of the automobile industry;
 our expected revenue sharing percentage of 0.5% of the automobile dealership’s
revenue; and
CONNECTED TRANSACTIONS
– 246 –


--- page 257 ---
 our estimation on the growth in operating results and profitability of the automobile
dealerships after the recovery from the COVID-19 pandemic. The existing
automobile dealerships of Changjiu Group are generally expected to experience a
revenue growth of 3% to 15% from 2023 to 2025 after the recovery from the
COVID-19 pandemic with reference to the industry trend of China’s passenger car
market. The new automobile dealerships which are expected to begin operations in
2024 and 2025 are estimated to have a revenue growth of 80% to 150% in the second
year since their commencement of operations, with reference to the vehicles selling
price and Changjiu Group’s past experience and cooperation mode with automobile
manufacturers. According to CIC, it is not uncommon for automobile dealerships to
achieve the above performance growth by strengthening cooperation relationships
with automobile manufacturers, improving customer satisfaction, and strengthening
after-sales service coverage.
Listing Rules implications
As the highest applicable percentage ratio (other than the profit ratio) under the Listing
Rules in respect of this transaction is expected to, on an annual basis, exceed 5%, such
transaction will, upon Listing, constitute continuing connected transaction of the Company
subject to the reporting, annual review, announcement, circular and independent shareholders’
approval requirements under Chapter 14A of the Listing Rules.
(4) Entrustment Agreement
Principal terms
On April 26, 2023, Changjiu Jinfu and Changjiu Industrial entered into a pledged vehicle
monitoring service entrustment agreement (the “Entrustment Agreement”). Pursuant to the
Entrustment Agreement, Changjiu Jinfu was exclusively entrusted by Changjiu Industrial to
provide the pledged vehicle monitoring services under the Unassigned Agreements (as defined
below) previously entered into between Changjiu Industrial and relevant financial institutions
and automobile dealerships. In exchange for the services provided by Changjiu Jinfu under
such entrustment arrangement, Changjiu Industrial shall pay Changjiu Jinfu service fees.
The term of the Entrustment Agreement commenced from November 30, 2021 and will
expire on December 31, 2024, being the projected date of completing the assignment of the
Unassigned Agreements from Changjiu Industrial to Changjiu Jinfu at the latest.
Reasons for and benefits of the transactions
Since the establishment of Changjiu Jinfu in September 2016, Changjiu Industrial has
been gradually restructuring the pledged vehicle monitoring service business into Changjiu
Jinfu. As of the Latest Practicable Date, the rights and obligations of Changjiu Industrial under
524 pledged vehicle monitoring service agreements (the “Unassigned Agreements”)
with certain financial institutions and automobile dealerships had not been transferred from
CONNECTED TRANSACTIONS
– 247 –


--- page 258 ---
Changjiu Industrial to Changjiu Jinfu. See “History, Reorganization and Corporate
Structure—Reorganization—Onshore Reorganization—Business transfer of pledged vehicle
monitoring services” for further details of the business transfer. As a transitional arrangement,
as well as to maintain clear delineation and avoid material competition between the business
operated by Changjiu Group and our Group, we entered into the Entrustment Agreement with
Changjiu Industrial to ensure that Changjiu Industrial does not provide any pledged vehicle
monitoring services to the users under the Unassigned Agreements. See “Relationship with Our
Controlling Shareholders—Delineation of Business” for details. Furthermore, as we are the
largest pledged vehicle monitoring service provider in China’s automobile sales and
distribution industry, our services provided to Changjiu Industrial under the Entrustment
Agreement are in the ordinary and usual course of our business. Therefore, the transactions
contemplated under the Entrustment Agreement are profitable and in the interests of our Group
and the Shareholders as a whole.
Pricing policy
The entrusted pledged vehicle monitoring service fees payable by Changjiu Industrial to
Changjiu Jinfu shall equal to the service fees payable by the relevant users to Changjiu
Industrial under the Unassigned Agreements, which are determined after arm’s length
negotiation between such users and Changjiu Industrial on a cost-plus basis taking into
consideration the average local salary and the manpower required. The service fees payable by
Changjiu Industrial are no less favorable to us than those we receive from the Independent
Third Party customers.
Historical transaction amounts
For the years ended December 31, 2020, 2021 and 2022 and the six months ended
June 30, 2023, the aggregate fees generated from Changjiu Industrial for the entrusted pledged
vehicle monitoring services were nil, RMB3.6 million, RMB37.8 million and RMB19.1
million, respectively.
Annual caps
The proposed annual caps for the entrusted pledged vehicle monitoring service fees
payable by Changjiu Industrial to Changjiu Jinfu under the Entrustment Agreement for the two
years ending December 31, 2023 and 2024 are set out below:
Proposed annual caps for the years ending December 31,
2023 2024
(RMB in thousands)
31,000 20,000
CONNECTED TRANSACTIONS
– 248 –


--- page 259 ---
The proposed annual caps above for the two years ending December 31, 2024 are
determined with reference to (i) the contract value, the remaining period of the Unassigned
Agreements and the projected date of completing the assignment of the Unassigned
Agreements from Changjiu Industrial to Changjiu Jinfu; and (ii) the historical transaction
amounts under the Entrustment Agreement. As Changjiu Industrial has confirmed and
undertaken to us that it shall not enter into any new pledged vehicle monitoring service
agreements, the scale of the transactions under the Entrustment Agreement is expected to
remain limited and gradually decrease.
Listing Rules implications
As the highest applicable percentage ratio (other than the profit ratio) under the Listing
Rules in respect of this transaction is expected to, on an annual basis, exceed 5%, such
transaction will, upon Listing, constitute continuing connected transaction of the Company
subject to the reporting, annual review, announcement, circular and independent shareholders’
approval requirements under Chapter 14A of the Listing Rules.
W AIVERS APPLICATIONS FOR NON-EXEMPT CONTINUING CONNECTED
TRANSACTIONS
In respect of the Automobile Dealership Operation Management Service Framework
Agreement and the Entrustment Agreement, we have applied for, and the Stock Exchange has
granted, a waiver from strict compliance with the announcement, circular and independent
Shareholders’ approval requirements under Chapter 14A of the Listing Rules in respect of the
transactions contemplated thereunder pursuant to Rule 14A.105 of the Listing Rules.
CONFIRMATION FROM OUR DIRECTORS
Our Directors (including the independent non-executive Directors) are of the view that
the continuing connected transactions as set out above have been and will continue to be
entered into in the ordinary and usual course of our business on normal commercial terms or
better that are fair and reasonable and in the interests of our Company and the Shareholders as
a whole, and that the proposed annual caps for these transactions are fair and reasonable and
in the interests of our Company and our Shareholders as a whole.
CONFIRMATION FROM THE JOINT SPONSORS
The Joint Sponsors are of the view that (i) the continuing connected transactions
described in “—Non-exempt Continuing Connected Transactions” in this section have been and
will be entered into in the ordinary and usual course of our business, on normal commercial
terms or better, that are fair and reasonable and in the interests of our Company and our
Shareholders as a whole; and (ii) the proposed annual caps of such continuing connected
transactions are fair and reasonable and in the interests of our Company and our Shareholders
as a whole.
CONNECTED TRANSACTIONS
– 249 –


--- page 260 ---
BOARD OF DIRECTORS
Our Board currently consists of seven Directors comprising three executive Directors, one
non-executive Director and three independent non-executive Directors.
The following table sets forth information in respect of our Directors:
Members of our Board
Name Age
Existing
position(s) in
our Group
Roles and
responsibilities in
our Group
Date of joining
our Group
Date of
appointment as
Director
Li Guiping
(1)
(܈࣭.....)
52 Chairwoman of our
Board and
executive
Director
Overall strategic
planning, business
policy development
and major
operational
decisions making of
our Group
September 9,
2016
June 16, 2021
Bo Shijiu
(1)
(ᑛ˰ɮ) ......
59 Chief executive
officer and
executive
Director
Overall operational
management of our
Group
September 9,
2016
June 16, 2021
Jia Hui ( ༠౉) . . . 47 Executive Director
and vice
president
Management of
pledged vehicle
monitoring services
of our Group
November 1,
2017
April 12, 2023
Jin Ting ( ◽ణ) . . . 40 Non-executive
Director
Providing insights for
financial
management and
business
development of our
Group
April 12, 2023 April 12, 2023
Shen Jinjun
(ࠏ......)
66 Independent non-
executive
Director
Providing independent
advice on the
operation and
management of our
Group
December 11,
2023
December 11,
2023
DIRECTORS AND SENIOR MANAGEMENT
– 250 –


--- page 261 ---
Name Age
Existing
position(s) in
our Group
Roles and
responsibilities in
our Group
Date of joining
our Group
Date of
appointment as
Director
Dong Y ang
(໨౮).......
67 Independent non-
executive
Director
Providing independent
advice on the
operation and
management of our
Group
December 11,
2023
December 11,
2023
Wang Fukuan
(ˮ၅ᄱ) ......
50 Independent non-
executive
Director
Providing independent
advice on the
operation and
management of our
Group
December 11,
2023
December 11,
2023
Note:
(1) Mr. Bo Shijiu and Ms. Li Guiping are spouse.
Executive Directors
Ms. Li Guiping (܈࣭)aged 52, our founder and was appointed as our Director on
June 16, 2021 and was re-designated as our executive Director and appointed as the
chairwoman of our Board on April 12, 2023. Since September 2016, she has been serving as
the executive director and general manager in Changjiu Jinfu. Ms. Li is responsible for the
overall strategic planning, business policy development and major operational decision-making
of our Group.
Prior to joining our Group, from April 2003 to November 2014, Ms. Li served as the
president in Changjiu Industrial. From July 2007 to November 2014, she also served as the
president and chairman of the board of directors in Guangxi Changjiu Automobile Investment
Co., Ltd. (ʮ̡), a subsidiary of Changjiu Industrial. Since September
2016, Ms. Li has been serving as a director in Beijing Changjiu Logistics Corp. (ي
ʮ̡), a company listed in Shanghai Stock Exchange (stock code: 603569).
Ms. Li graduated from China University of Political Science and Law Graduate School
(Ӻ͛৫) in the PRC in August 1990 with a major in enterprise management.
She completed automobile marketing executive management program in business
administration (EMBA) from Shanghai Hong Kong University – Fudan University School of
Continuing Professional Education (ಥɽኪ – ూ͇ɽኪਖ਼ุᘱᚃ઺ԃኪ৫) in the PRC
in December 2004. She completed advanced development course of market capitalization
management of listed companies from PBC School of Finance, Tsinghua University ( ૶ശɽኪ
ፄኪ৫) in April 2015.
DIRECTORS AND SENIOR MANAGEMENT
– 251 –


--- page 262 ---
Mr. Bo Shijiu ( ᑛ˰ɮ), aged 59, our founder and was appointed as our Director on June
16, 2021 and was re-designated as our executive Director and appointed as the chief executive
officer on April 12, 2023. He is responsible for the overall operational management of our
Group.
Mr. Bo has over 30 years of experience in the automotive and logistics industry and
corporate management. Owing to Mr. Bo’s in-depth knowledge and network connections in the
automotive logistics industry in China, Mr. Bo has been a key driver of our business strategies
and achievements to date. From February 1993 to December 2003, Mr. Bo was the chairman
of Fada Automobile Delivery Service Department of First Automobile Work Factory ( ୋɓӛ
ਕஈ). In March 1999, Changjiu Industrial was established and Mr.
Bo has been its chairman of the board of directors since then. Since September 2003, Mr. Bo
has been the chairman of the board of directors in Beijing Changjiu Logistics Corp. (ڗ
ʮ̡). Under Mr. Bo’s leadership, Beijing Changjiu Logistics Corp.
successfully completed the listing on the Shanghai Stock Exchange (stock code: 603569) in
August 2016. Mr. Bo was appointed as the vice president of China Federation of Logistics &
Purchasing (ၾમᒅᑌΥึ) in the PRC and the president of China Automotive
Logistics Association of CFLP (ʱึ) in September 2011 and
November 2010 respectively.
Mr. Bo obtained his bachelor degree in business management from Jilin University (؍
ɽኪ) in the PRC in July 1997. Mr. Bo obtained the qualification as a certified international
logistics specialist (ࢪݴيissued by the Ministry of Labour and Social Security of the
PRC in June 2009.
Ms. Jia Hui ( ༠౉), aged 47, joined our Group and served as the vice president of
Changjiu Jinfu on November 1, 2017, and was appointed as our vice president on March 23,
2023. She was appointed as our executive Director on April 12, 2023. She is responsible for
management of pledged vehicle monitoring services of our Group.
Ms. Jia has over 20 years of experience in automobile dealership operation management
services and pledged vehicle monitoring services. Prior to joining our Group, from February
2002 to April 2004, Ms. Jia served as an operating director of brand business department in
Henan Fuda Holdings Co., Ltd. (ʮ̡). From May 2004 to January 2007,
Ms. Jia served as vice president in Henan Changjiang Modern Sales Company (Ϫତ˾
ቖਯʮ̡). From January 2007 to April 2011, she served as a senior manager of operation
control department and assistant to president in Changjiu Industrial. From April 2011 to
November 2017, she served as a chief operating officer and vice president in Beijing
Consultation Branch of Changjiu Industrial (ʮ̡̏ԯፔ༔ʱʮ̡).
Since November 2017, Ms. Jia has been the head of smart business group of our Group.
Ms. Jia received her bachelor degree in business administration from China Agricultural
University ( ʕ਷ุ༵ɽኪ) in the PRC in July 2018 through long distance learning. She
completed advanced development course of integration of industry and finance from PBC
School of Finance, Tsinghua University (ፄኪ৫) in October 2017. In 2023,
DIRECTORS AND SENIOR MANAGEMENT
– 252 –


--- page 263 ---
Ms. Jia was admitted to the executive management program in business administration
(EMBA) provided by Peking University Guanghua School of Management ( ̏ԯɽኪΈശ၍ଣ
ኪ৫). She was qualified as a specially-invited expert in China Automobile Dealers Association
Research Institute (Ӻ৫) in September 2016. She obtained the title of
2018 supply chain e-commerce leading flag bearer from China E-commerce Innovation
Promotion Alliance ( ʕ਷ཥɿਠਕ௴อપආᑌຑ) in June 2018.
Non-executive Directors
Ms. Jin Ting ( ◽ణ), aged 40, joined our Group and was appointed as our non-executive
Director on April 12, 2023. She is primarily responsible for providing insights for financial
management and business development of our Group.
From June 2006 to October 2017, Ms. Jin served in Beijing Caissa International Travel
Agency Co., Ltd. (ப΂ʮ̡), where Ms. Jin was the financial
manager, business director of financial management center and manager of corporate
development department. From November 2017 to March 2020, Ms. Jin served as the assistant
president and financial controller in Caissa Tongsheng Travel Agency (Group) Co., Ltd. ( ௱ᅥ
ٟ(ණྠ)ʮ̡). From June 2017 to October 2019, she was also the deputy finance
director in Caissa Tosun Development Co., Ltd. (ʮ̡) (formerly
known as Hna-Caissa Travel Group Co., Ltd. (ʮ̡)), a company
listed in Shenzhen Stock Exchange (stock code: 000796) and the controlling shareholder of
both Beijing Caissa International Travel Agency Co., Ltd. and Caissa Tongsheng Travel
Agency (Group) Co., Ltd.. Ms. Jin has been the vice president and financial controller in
Beijing Changjiu Logistics Corp. (ʮ̡), a company listed in Shanghai
Stock Exchange (stock code: 603569) since November 2020.
Ms. Jin obtained a bachelor degree of accounting from Heilongjiang Institute of
Technology ( ලᎲϪʈ೻ኪ৫) in the PRC in July 2004 and a master’s degree of science in
applied accounting and finance from Hong Kong Baptist University (ಥऍึɽኪ)i n
November 2019.
Independent non-executive Directors
Mr. Shen Jinjun (ࠏ)aged 66, was appointed as our independent non-executive
Director on December 11, 2023. He is primarily responsible for providing independent advice
on the operation and management of our Group.
From October 2005 to September 2014, Mr. Shen served as the vice president and
secretary-general in China Automobile Dealers Association (ஷ՘ึ), and has been
the president since October 2014. Mr. Shen was appointed as an independent non-executive
director of China Grand Automotive Services Group Co., Ltd. (΅ʮ̡), a
company listed in Shanghai Stock Exchange (stock code: 600297) from July 2015 to August
2021. He has been appointed as an independent non-executive director of Zhongsheng Group
Holdings Ltd. (ʮ̡), a company listed in the Stock Exchange (stock code:
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0881) since November 2009. He has also been appointed as an independent non-executive
director of Beijing Changjiu Logistics Corp. (ʮ̡), a company listed in
Shanghai Stock Exchange (stock code: 603569) from December 2013 to February 2023.
Mr. Shen obtained his bachelor degree in electronics from Beijing Open University ( ̏
ɽኪ) (formerly known as Beijing Radio and Television University ( ̏ԯᄿᅧཥൖɽ
ኪ)) in June 1982.
Mr. Dong Y ang ( ໨౮), aged 67, was appointed as our independent non-executive
Director on December 11, 2023. He is primarily responsible for providing independent advice
on the operation and management of our Group.
From April 2000 to August 2007, Mr. Dong was the deputy secretary of the party
committee, general manager and director of Beijing Automotive Group Co., Ltd. ( ̏ԯӛԓණ
ʮ̡) (formerly known as Beijing Automotive Industry Holding Co., Ltd. ( ̏ԯӛԓʈ
ப΂ʮ̡)). From July 2007, Mr. Dong started to serve as the executive vice
president and secretary general at China Association of Automobile Manufacturers ( ʕ਷ӛԓ
ʈุ՘ึ). Since April 2020, Mr. Dong has been the managing partner and chairman of the
board of directors of Beijing Virtue Capital Investment Management Center (Limited
Partnership) (ҳ༟၍ଣʕː(Υྫ)).
Mr. Dong has been appointed as an independent non-executive director of Brilliance
China Automotive Holdings Limited (ʮ̡), a company listed in the
Stock Exchange (stock code: 1114) since May 2021. From May 2009 to March 2016, Mr. Dong
was an independent non-executive director of Chongqing Changan Automobile Co., Ltd. (ᅅ
ʮ̡), a company listed in the Shenzhen Stock Exchange (stock code:
000625).
Mr. Dong obtained his bachelor and master degree in automotive from Tsinghua
University ( ૶ശɽኪ) in the PRC in July 1982 and November 1984, respectively. He was
certificated as the senior engineer of researcher’s grade (ࢪby China
Academy of Machinery Science and Technology (Ӻᐼ৫) in September 2008.
Mr. Wang Fukuan ( ˮ၅ᄱ), aged 50, was appointed as our independent non-executive
Director on December 11, 2023. He is primarily responsible for providing independent advice
on the operation and management of our Group.
From July 1994 to December 1996, Mr. Wang served as an accountant in Jilin Gold
Company (ʮ̡). From January 1997 to March 2000, Mr. Wang was the finance
department accountant and accountant in charge in Changchun North China Wuhuan Industrial
Co., Ltd. (ʮ̡). From April 2000 to August 2003, he served as the
financial officer in Beijing Dongjiao Minxiang Hotel Co., Ltd. (ʮ̡).
From September 2003 to December 2008, Mr. Wang was the financial officer in Zhongjun
Insurance Broker (Beijing) Co., Ltd. (ߏ(̏ԯ)ʮ̡) (formerly known as
Hongfu Insurance Brokers (Beijing) Co., Ltd. (ߏ(̏ԯ)ʮ̡)). From January
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2012 to July 2022, he was the project manager and audit department manager in Beijing
Zhongqingrui Certified Public Accountants Co., Ltd. (ʮ̡). Mr.
Wang has been the audit project partner in Beijing Xingye Certified Public Accountants Co.,
Ltd. (ʮ̡) since September 2022.
Mr. Wang obtained his diploma of accounting in Jilin University (ɽኪ) in the PRC
in July 1994. He obtained the intermediate professional qualification in accounting (ʕॴ
ᔖ၈) from Ministry of Finance of the PRC (௅) in May 1999 and the
senior accountant (ࢪࠇfrom Jilin Province Department of Finance (ᝂ)i n
January 2007. He obtained the practicing qualification of tax agent from the Ministry of Human
Resources and Social Security of the PRC (ღ௅) and State
Taxation Administration of the PRC (೼ਕᐼ҅) in June 2009. He also obtained the
Chinese Certified Public Accountant Certificate (ࣣfrom Beijing Institute
of Certified of Public Accountants (՘ึ) in July 2019.
Save as disclosed in this section, each of our Directors had no other relationship with any
Directors, senior management, substantial shareholders or controlling shareholders of our
Company and none of our Directors have held any other directorships in listed companies
during the three years immediately preceding the date of this prospectus.
Mr. Bo was: (i) a legal representative of Guangxi Changjiu Transportation Co., Ltd. ( ᄿ
ப΂ʮ̡)( “ Changjiu Transportation ”), a company established in the PRC
with limited liability principally engaged in highway passenger transportation services, whose
business license was revoked on May 28, 2016 because it ceased its business operation and
failed to conduct annual inspection on a timely basis under PRC laws; (ii) a responsible person
of Jilin Changjiu Industrial Group Co., Ltd., Nong’an Branch (ʮ̡༵τ
ʱʮ̡)( “ Changjiu Industrial Nong’an Branch ”), the branch office of Changjiu Industrial
principally engaged in automotive wholesale and retail, whose business license was revoked on
September 9, 2005 because it ceased its business operation and failed to conduct annual
inspection on a timely basis under PRC laws. Mr. Bo confirmed that the failure of conducting
annual inspection on a timely basis for Changjiu Transportation and Changjiu Industrial
Nong’an Branch was due to the employees who were in charge of this matter were negligent
in timely filing of inspection documents. Moreover, such companies were solvent when their
business licenses being revoked and were not involved in any material non-compliance that led
to the revocation of their business licenses. Mr. Bo further confirmed that, as of the Latest
Practicable Date, no claims had been made against him and he was not aware of any threatened
or potential claims made against him and there was no outstanding claims and/or liabilities as
a result of the revocation of the business licenses of such companies.
Mr. Bo was a legal representative, an executive director and a general manager of Dalian
Bonded Zone Changjiu Logistics Limited Company (ʮ̡)( “ Dalian
Changjiu Logistics ”), a company established in the PRC with limited liability principally
engaged in warehousing and logistics agency services. Ms. Li was a supervisor of Dalian
Changjiu Logistics. According to the PRC laws, the PRC company’s supervisor will not be
liable for the revocation of its business license. The business license of Dalian Changjiu
Logistics was revoked on June 29, 2006 because it ceased its business operation and failed to
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conduct annual inspection on a timely basis under PRC laws. Mr. Bo confirmed that the failure
of conducting annual inspection on a timely basis for Dalian Changjiu Logistics was due to the
employees who were in charge of this matter were negligent in timely filing of inspection
documents. Moreover, Dalian Changjiu Logistics was solvent when its business license being
revoked and was not involved in any material non-compliance that led to the revocation of its
business license. Each of Mr. Bo and Ms. Li further confirmed that, as of the Latest Practicable
Date, no claims had been made against him/her and he/she was not aware of any threatened or
potential claims made against him/her and there was no outstanding claims and/or liabilities as
a result of the revocation of the business license of such company.
Each of our Directors has confirmed that there are no other matters relating to his/her
appointment as a Director that need to be brought to the attention of our Shareholders and there
was no other information relating to his/her appointment which is required to be disclosed
pursuant to Rule 13.51(2) of the Listing Rules.
SENIOR MANAGEMENT
Our senior management comprises our executive Directors, namely Mr. Bo Shijiu and Ms.
Jia Hui, and the following members:
Name Age
Existing
position(s) in
our Group
Roles and
responsibilities in
our Group
Date of joining
our Group
Date of
appointment as
senior
management
Xu Zhengran
(್) ......
45 Vice president Responsible for
business segment
information system
construction,
promotion and
ecological
construction of the
automobile logistics
service platform,
and new energy
innovation business
of our Group
March 1, 2023 March 23, 2023
Wang Y uanbin
(ˮʩ੸) .....
40 Vice president Responsible for the
management of
automobile
dealership operation
management
services of our
Group
April 1, 2022 February 1,
2023
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Name Age
Existing
position(s) in
our Group
Roles and
responsibilities in
our Group
Date of joining
our Group
Date of
appointment as
senior
management
Tan Zhengyang
(ሔ͍ජ) ......
44 Vice president and
financial
controller
Responsible for
financial accounting
management and
economic
accounting of our
Group
May 25, 2022 May 25, 2022
Our executive Directors and members of our senior management are responsible for the
day-to-day operations and management of the business of our Group. For the biographical
details of our executive Directors, please refer to “Executive Directors” in this section.
Mr. Xu Zhengran (್), aged 45, joined our Group on March 1, 2023, and was
appointed as our vice president on March 23, 2023. He is primarily responsible for business
segment information system construction, promotion and ecological construction of the
automobile logistics service platform, and the new energy innovation business of our Group.
Mr. Xu has over 23 years of industry experience in information technology construction
and industrial Internet. Prior to joining our Group, from January 2001 to October 2004, Mr. Xu
served as a software engineer and project manager in V enustech Group Inc. (Ҧ
ʮ̡), a company listed in Shenzhen Stock Exchange (stock code: 002439).
From April 2005 to October 2008, Mr. Xu was the director of research and development
department at Beijing Star Softcomm Co., Ltd. (ப΂ʮ̡). From October
2009 to May 2013, Mr. Xu was the director of research and development department at G-Net
Cloud Service Co., Ltd. (ʮ̡). From September 2013 to November
2013, he served as a senior architect responsible at Tencent Technology (Shenzhen) Co., Ltd.
(Ҧ(ଉέ)ʮ̡), a company listed in the Stock Exchange (stock code: 0700). From
August 2015, Mr. Xu started to work as a tech director at Kelly Services (Singapore) Pte. Ltd.
From May 2019, he started to work as chief technology officer and vice president at Lonnic
Technology Sdn. Bhd. From March 2021 to December 2021, he was the chief technology
officer and vice president at the Hebei branch of China United Network Communications
Group Co., Ltd. (ʱʮ̡). From April 2022 to October
2022, he was the chief technology officer at Beijing Changjiu Logistics Corp. (ݴي
ʮ̡), a company listed in Shanghai Stock Exchange (stock code: 603569). From
October 2022 to February 2023, Mr. Xu was the vice president at Xunruida Technology
(Beijing) Co., Ltd. (Ҧ(̏ԯ)ʮ̡), a wholly-owned subsidiary of Changjiu
Industrial.
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Mr. Xu obtained his bachelor degree of textile engineering and minored in computer
application and maintenance from Dalian Polytechnic University ( ɽஹʈุɽኪ) (formerly
known as Dalian College of Light Industry ( ɽஹჀʈุኪ৫)) in the PRC in July 2000. He
obtained his master degree of software engineering from Beijing University of Posts and
Telecommunications ( ̏ԯඉཥɽኪ) in the PRC in December 2008.
Mr. Wang Yuanbin ( ˮʩ੸), aged 40, joined our Group on April 1, 2022, and was
appointed as our vice president on February 1, 2023. He is primarily responsible for the
management of automobile dealership operation management services of our Group.
Mr. Wang has over 10 years of experience in the automobile dealership operation
management. Prior to joining our Group, from March 2011 to November 2016, he served as the
general manager and a sales manager in Henan Changjiu Jisheng Automobile Sales & Service
Co., Ltd. (ʮ̡). From December 2016 to September 2019,
Mr. Wang served as the general manager in Zhengzhou Y uhua Toyota Automobile Sales &
Service Co., Ltd. (ʮ̡). From October 2019 to April 2022, he
served as the general manager of the third business division in Beijing branch of Guangxi
Changjiu Automobile Investment Co., Ltd. (ʮ̡̏ԯʱʮ̡).
Mr. Wang graduated from Henan University of Animal Husbandry and Economy (ىیئ
ุ຾᏶ኪ৫) (formerly known as Henan Commercial Higher College (ࣧ))
in the PRC in July 2007 with a major in e-commerce. He was qualified as a used car appraiser
(ࢪby Henan Automobile Industry Association Practicing Skills Appraisal
Station (१) and Henan Practicing Skills Appraisal
Guidance Center (ኬʕː) in June 2014. He completed advanced master
of business administration (MBA) courses for professional managers of Changjiu Group from
Xi’an Jiaotong University School of Management ( Гτʹஷɽኪ၍ଣኪ৫) in the PRC in
October 2017.
Mr. Tan Zhengyang ( ሔ͍ජ), aged 44, joined our Group and served as our vice president
and financial controller on May 25, 2022. Mr. Tan is responsible for financial accounting
management and economic accounting of our Group.
Prior to joining our Group, from September 2005 to November 2010, Mr. Tan worked at
AviChina Industry & Technology Company Limited (ʮ̡), a
company listed in the Stock Exchange (stock code: 2357). From December 2010 to May 2022,
Mr. Tan served in Avic Automobile Industry Holding Co., Ltd (ʮ
̡)( “Avic Automobile Industry ”), where he was the deputy chief accountant and the financial
accounting department director general. During his tenure in AviChina Automobile Industry,
Mr. Tan was assigned to serve as the finance and auditor commissioner of board of director of
Nexteer Automotive Group Limited (ʮ̡), a company listed in Hong
Kong Stock Exchange (stock code: 1316) and a subsidiary of Avic Automobile Industry. From
November 2015 to December 2019, he served as vice president and corporate secretary of
Henniges Automotive Holdings, Inc, a subsidiary of Avic Automobile Industry.
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Mr. Tan obtained his bachelor degree and master degree in accounting in Central
University of Finance and Economic ( ʕ̯ৌ຾ɽኪ) in the PRC in June 2001 and June 2007,
respectively. Mr. Tan obtained the CPA qualification (ࢪࠇfrom Beijing CPA Institute
in September 2010. He obtained the qualification of intermediate accountant (ࢪࠇ)
issued by the Beijing Municipal Human Resources and Social Security Bureau ( ̏ԯ̹ɛɢ༟
ღᝂ) in October 2014. He was also recognized as senior accountant by Avic
Corporation of China, Ltd. (ʮ̡) in 2018.
JOINT COMPANY SECRETARIES
Ms. Zhang Y exi ( ੵ⮶᷊), aged 34, was appointed as the joint company secretary of our
Company on April 12, 2023. Ms. Zhang joined our Group as the securities representative on
December 1, 2021, and then was appointed as the secretary to the board on March 23, 2023.
She is responsible for capital financing, investor relations maintenance, daily operation of the
office of the board and the company secretarial matters of our Group.
Prior to joining our Group, from November 2013 to June 2015, Ms. Zhang was the audit
manager in Beijing Xingzhonghai Accountant Firm Co., Ltd. (ʮ
̡). From June 2015 to June 2019, she was the securities affairs representative in Beijing
Changjiu Logistics Corp. (ʮ̡), a company listed in Shanghai Stock
Exchange (stock code: 603569). From July 2019 to December 2021, she served in Beijing
Yingpu Technology Co., Ltd. (ʮ̡), where she was an investment
director.
Ms. Zhang obtained a bachelor degree of accounting from Shanxi University of
Finance and Economics ( ʆГৌ຾ɽኪ) in the PRC in October 2011. She also obtained a
bachelor degree major in business administration and a master degree major in management
(accounting & finance) in Hochschule für Oekonomie und Management (ಌ຾᏶ၾ၍ଣ
৷ഃኪ৫) in September 2011 and July 2013 respectively. Ms. Zhang obtained the qualification
of Director Secretary Qualification Certificate (ࣣfrom Shanghai Stock Exchange
in April 2018. She also passed the qualification examinations of fund practitioner (੽ุ
Ͻ༊) from Asset Management Association of China (ุ՘ึ)i n
October 2021.
Ms. Tang King Yin ( ቎౻ሬ), aged 37, was appointed as the joint company secretary of
our Company on April 12, 2023.
Ms. Tang is a senior manager of corporate services of Tricor Services Limited, a global
professional services provider specializing in integrated business, corporate and investor
services. Ms. Tang has over 10 years of experience in the corporate secretarial field. She has
been providing professional corporate services to Hong Kong listed companies as well as
multinational, private and offshore companies.
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Ms. Tang is currently serving as the company secretary or joint company secretary of four
companies listed on the Stock Exchange of Hong Kong, namely, Tuya Inc. ( ෩ኃ౽ঐ) (stock
code: 2391), Y um China Holdings, Inc. (ʮ̡) (stock code: 9987), Leading
Holdings Group Limited (ʮ̡) (stock code: 6999) and Ling Y ue Services
Group Limited (ʮ̡) (stock code: 2165).
Ms. Tang obtained a bachelor degree of business administration from Hong Kong Shue
Y an University in July 2011 and a master degree of corporate governance and compliance from
the Hong Kong Baptist University in November 2021. Ms. Tang is a Chartered Secretary, a
Chartered Governance Professional and an Associate of both The Hong Kong Chartered
Governance Institute and The Chartered Governance Institute in the United Kingdom,
respectively.
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
Our Group has established the audit committee pursuant to Rule 3.21 of the Listing Rules
with written terms of reference in compliance with paragraph D.3 of the Corporate Governance
Code (the “ CG Code ”) as set out in Appendix 14 to the Listing Rules. The audit committee
consists of three members, namely, Mr. Wang Fukuan, Ms. Jin Ting and Mr. Dong Y ang. Mr.
Wang Fukuan has been appointed as the chairman of the audit committee, and Mr. Wang has
the appropriate professional qualifications or related financial management expertise as
required under Rule 3.10(2) of the Listing Rules.
The primary duties of the audit committee include, but are not limited to: (i) assisting our
Board by providing an independent view of the effectiveness of the financial reporting process,
internal control and risk management systems of our Group; (ii) overseeing the audit process
and performing other duties and responsibilities as assigned by our Board.
Remuneration committee
Our Group has established the remuneration committee pursuant to Rule 3.25 of the
Listing Rules with written terms of reference in compliance with paragraph E.1 of Part 2 of the
CG Code as set out in Appendix 14 to the Listing Rules. The remuneration committee consists
of three members, namely Mr. Bo Shijiu, Mr. Shen Jinjun and Mr. Dong Y ang. Mr. Shen Jinjun
has been appointed as the chairman of the remuneration committee.
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The primary duties of the remuneration committee include, but are not limited to: (i)
making recommendations to our Board on our policy and structure for all remuneration of
Directors and senior management and on the establishment of a formal and transparent
procedure for developing policy on such remuneration; (ii) determining the specific
remuneration packages of all Directors and senior management; and (iii) reviewing and
approving performance-based remuneration by reference to corporate goals and objectives
resolved by our Board from time to time.
Nomination committee
Our Group has established the nomination committee pursuant to Rule 3.27A of the
Listing Rules with written terms of reference in compliance with paragraph B.3 of Part 2 of the
CG Code as set out in Appendix 14 to the Listing Rules. The nomination committee consists
of three members, namely Ms. Li Guiping, Mr. Shen Jinjun and Mr. Dong Y ang. Ms. Li has
been appointed as the chairwoman of the nomination committee.
The primary duties of the nomination committee include, but are not limited to: (i)
reviewing the structure, size and composition of our Board; (ii) assessing the independence of
independent non-executive Directors; and (iii) making recommendations to our Board on
matters relating to the appointment of Directors.
CORPORATE GOVERNANCE
Our Directors recognize the importance of incorporating elements of good corporate
governance in the management structures and internal control procedures of our Group so as
to achieve effective accountability.
Our Company has adopted the code provisions stated in the CG Code. Our Company is
committed to the view that our Board should include a balanced composition of executive
Directors, non-executive Directors and independent non-executive Directors so that there is a
strong independent element on our Board, which can effectively exercise independent
judgment. It is expected that our Group will be able to continue to comply with the code
provisions in the CG Code upon the Listing.
BOARD DIVERSITY POLICY
Our Board has adopted a board diversity policy which sets out the objective and approach
to achieve diversity of our Board. Our Group recognizes the benefits of having a diversified
Board and sees increasing diversity at the Board level as an essential element in supporting the
attainment of our Group’s strategic objectives and sustainable development. Our Group seeks
to achieve diversity of our Board through the consideration of a number of factors, including
but not limited to professional experience, skills, knowledge, gender and age. Our Directors
have a balanced mix of experiences, including operation and management of technology
companies, investment, corporate retail, risk management, finance and funding, auditing and
tax. Furthermore, the ages of our Directors range from 40 years old to 67 years old. In terms
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of gender diversity, three of our seven Directors are female. Our Directors recognize the
particular importance of gender diversity and we will continue to maintain the current gender
ratio for our Board after Listing. Taking into account our existing business model and specific
needs as well as the diversified background of our Directors, our Directors consider that the
composition of our Board upon the Listing satisfies our board diversity policy.
After Listing, the nomination committee will review the board diversity policy and its
implementation from time to time to ensure its implementation and monitor its continued
effectiveness, and the same will be disclosed in our corporate governance report in accordance
with the Listing Rules, including any measurable objectives set for implementing the board
diversity policy and the progress on achieving these objectives on an annual basis.
Nevertheless, with a view to developing a pipeline of potential successors to our Board
that can maintain our gender diversity, our Group will (i) continue to apply the principle of
appointments based on merits with reference to board diversity as a whole; (ii) take steps to
promote gender diversity at all levels of our Group by recruiting staff at a mid to senior level
with regard to the benefits of gender diversity; and (iii) engage more resources in training
female staff who we consider having the suitable experience, skills and knowledge for our
business to equip themselves with the attributes and competencies required to serve as
members of our Board in light of our strategic needs and the industry in which we operate with
the aim of promoting them to our Board in a few years’ time.
COMPENSATION OF DIRECTORS AND SENIOR MANAGEMENT
Our Directors and members of our senior management receive compensation from our
Company in the form of salaries, bonuses and contributions to retirement benefit and scheme.
The aggregate remuneration (including fees, salaries, bonus, retirement benefits scheme,
allowance and other benefits in kind) for our Directors for each of the years ended December
31, 2020, 2021, 2022 and the six months ended June 30, 2023 was RMB0.7 million, RMB1.4
million, RMB1.5 million and RMB3.6 million, respectively. Save as disclosed above, no other
amounts have been paid or are payable by any member of our Group to our Directors during
the Track Record Period.
The aggregate amount of salaries, bonuses and contributions to retirement benefit and
scheme for our five highest paid individuals for each of the years ended December 31, 2020,
2021, 2022 and the six months ended June 30, 2023 was RMB2.9 million, RMB4.4 million,
RMB5.0 million and RMB7.5 million, respectively.
No remuneration was paid by us to our Directors or the five highest paid individuals as
an inducement to join or upon joining us or as a compensation for loss of office in respect of
each of the years ended December 31, 2020, 2021, 2022 and the six months ended June 30,
2023. Further, none of our Directors had waived or agreed to waive any remuneration during
the same periods.
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Under the arrangement currently in force, the aggregate remuneration (inclusive of
benefits in kind and estimated share-based payment expense in relation to the Restricted Shares
and Pre-IPO Share Options granted to our Director to be recognized in our Group’s profit or
loss for the year ending December 31, 2023, but exclusive of any discretionary bonuses) of our
Directors for the year ending December 31, 2023 is estimated to be approximately RMB9.4
million. Our Board will review and determine the remuneration and compensation packages of
our Directors and senior management and, following the Listing, will receive recommendation
from the remuneration committee which will take into account salaries paid by comparable
companies, time commitment and responsibilities of our Directors and performance of our
Group.
COMPLIANCE ADVISOR
Our Company has appointed Zhongtai International Capital Limited as our compliance
advisor pursuant to Rule 3A.19 of the Listing Rules. Pursuant to Rule 3A.23 of the Listing
Rules, our compliance advisor will advise our Company in the following circumstances:
 before the publication of any regulatory announcement, circular or financial report;
 where a transaction, which might be a notifiable or connected transaction, is
contemplated, including shares issues and share repurchases;
 where our Company proposes to use the proceeds from 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
 where the Stock Exchange makes an inquiry of our Company under Rule 13.10 of
the Listing Rules.
The term of the appointment of our compliance advisor shall commence on the Listing
Date and end on the date on which our Company distribute our annual report in respect of our
financial results for the first full financial year commencing after the Listing Date.
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So far as our Directors are aware, immediately following the completion of the Global
Offering (without taking into account any Shares which may be allotted and issued pursuant to
the exercise of the Pre-IPO Share Options), the following persons will have or be deemed or
taken to have an interest and/or short positions in the Shares or the underlying Shares of our
Company which would fall to be disclosed to our Company and the Stock Exchange under the
provisions of Divisions 2 and 3 of Part XV of the SFO, or will be, directly or indirectly,
interested in 10% or more of the nominal value of any class of share capital carrying rights to
vote in all circumstances at general meetings of our Company:
Shares held as of the Latest
Practicable Date
Shares held immediately
following the completion of the
Global Offering (without
taking into account the Shares
which may be issued upon the
exercise of the Pre-IPO Share
Options)
Name of
Shareholder Nature of interest Number
Approximate
percentage Number
Approximate
percentage
Ms. Li Interest in controlled
corporation (1)
60,000,000 39.57% 60,000,000 29.68%
Interest of spouse/
Interest of concert
parties
(2)(3)
90,000,000 59.36% 90,000,000 44.52%
Brightio Limited Interest in controlled
corporation (1)
60,000,000 39.57% 60,000,000 29.68%
Brighht Limited Beneficial interest (1) 60,000,000 39.57% 60,000,000 29.68%
Mr. Bo Interest in controlled
corporation (4)(5)
90,000,000 59.36% 90,000,000 44.52%
Interest of spouse/
Interest of concert
parties
(2)(3)
60,000,000 39.57% 60,000,000 29.68%
Advancd Limited Interest in controlled
corporation (4)
82,500,000 54.41% 82,500,000 40.81%
Advancey Limited Beneficial interest (4) 82,500,000 54.41% 82,500,000 40.81%
Notes:
(1) Brighht Limited is indirectly wholly owned by Ms. Li through Brightio Limited. Therefore, each of Ms.
Li and Brightio Limited is deemed to be interested in all the Shares directly held by Brighht Limited
by virtue of the SFO.
(2) Ms. Li and Mr. Bo are the spouse of one another. Therefore, each of them is deemed to be interested
in all the Shares the other party is interested in by virtue of the SFO.
SUBSTANTIAL SHAREHOLDERS
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(3) Pursuant to a concert party confirmation dated March 1, 2023 entered into between Ms. Li and Mr. Bo,
they have confirmed that they had and would continue to, for so long as they remain interested in the
Shares, directly or indirectly, act in concert by aligning their votes at the shareholders’ meetings of the
Company. See “History, Reorganization and Corporation Structure—Concert Party Confirmation” for
details. As such, Ms. Li and Mr. Bo, together with their wholly-owned companies, are all deemed to be
interested in the total Shares directly held by Brighht Limited, Advancey Limited and Creationn Limited
by virtue of the SFO.
(4) Advancey Limited is wholly owned by Mr. Bo through Advancd Limited. Therefore, each of Mr. Bo and
Advancd Limited is deemed to be interested in all the Shares directly held by Advancey Limited by
virtue of the SFO.
(5) Creationn Limited is wholly owned by Mr. Bo through CreateCube Limited. Therefore, Mr. Bo is
deemed to be interested in all the Shares directly held by Creationn Limited by virtue of the SFO.
Save as disclosed in the table above and in “Appendix IV—Statutory and General
Information—C. Further Information about Our Directors and Substantial Shareholders,” our
Directors are not aware of any person who will, immediately following the completion of the
Global Offering (without taking into account any Shares which may be allotted and issued
pursuant to the exercise of the Pre-IPO Share Options), have an interest or short position in the
Shares or underlying Shares which will be required to be disclosed to our Company and the
Stock Exchange under the provisions of Division 2 and 3 of Part XV of the SFO or will be,
directly or indirectly, interested in 10% or more of the nominal value of any class of share
capital carrying rights to vote in all circumstances at general meetings of our Company.
We are currently not aware of any arrangement which may result in any change of control
in our Company at any subsequent date.
SUBSTANTIAL SHAREHOLDERS
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The following is a description of the authorized and issued share capital of our Company
in issue and to be issued as fully paid or credited as fully paid immediately before and
following the Global Offering (without taking into account any Shares which may be allotted
and issued pursuant to the exercise of the Pre-IPO Share Options):
Nominal value
(US$)
Authorized share capital:
75,000,000,000 Shares of US$0.00000066667 each 50,000.25
Issued and to be issued, fully paid or credited as fully paid:
151,620,000 Shares in issue as of the date of this prospectus 101.0805054
50,540,000 Shares to be issued under the Global Offering 33.6935018
202,160,000 Total 134.7740072
ASSUMPTIONS
The above table assumes that the Global Offering becomes unconditional and the issue of
Shares pursuant to the Global Offering are made. It takes no account of any Shares which may
be issued pursuant to the exercise of the Pre-IPO Share Options or any Shares that may be
issued or bought back by us pursuant to the general mandates granted to our Directors to issue
or buyback Shares as described below.
RANKINGS
The Offer Shares will be ordinary shares in the share capital of our Company and will
carry the same rights in all respects with all Shares in issue or to be issued as mentioned in this
prospectus and, in particular, will rank in full for all dividends or other distributions declared,
made or paid on the Shares in respect of a record date which falls after the date of this
prospectus.
SHARE CAPITAL
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GENERAL MANDATE TO ALLOT AND ISSUE SHARES
Subject to the Global Offering becoming unconditional, our Directors have been granted
a general mandate to allot, issue and deal with Shares in the share capital of our Company with
a total number of issued shares of not more than the sum of:
(1) 20% of the total number of Shares in issue immediately following the Global
Offering (without taking into account any Shares which may be issued pursuant to
the exercise of the Pre-IPO Share Options); and
(2) the total number of Shares bought back by our Company (if any) pursuant to the
general mandate to buyback Shares granted to our Directors referred to below.
Our Directors may, in addition to the Shares which they are authorized to issue under this
general mandate, allot, issue or deal with Shares under a rights issue, scrip dividend scheme
or similar arrangement.
This general mandate will remain in effect until the earliest of:
(i) the conclusion of the next annual general meeting of our Company; or
(ii) the expiration of the period within which the next annual general meeting of our
Company is required by the Articles or any applicable laws to be held; or
(iii) the date on which such general mandate is varied or revoked by an ordinary
resolution of our Shareholders in general meeting.
Further information on this general mandate is set out in “Statutory and General
Information—A. Further Information about Our Company and Our Subsidiaries—3.
Resolutions in Writing of Our Shareholders Passed on December 11, 2023” in Appendix IV to
this prospectus.
GENERAL MANDATE TO BUYBACK SHARES
Subject to the Global Offering becoming unconditional, our Directors have been granted
a general mandate to exercise all the powers of our Company to buy back Shares with a total
number of Shares of not more than 10% of the total number of Shares in issue immediately
following the Global Offering (excluding Shares which may be allotted and issued pursuant to
the exercise of the Pre-IPO Share Options).
SHARE CAPITAL
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This mandate only relates to buybacks made on the Stock Exchange or any other stock
exchange on which the Shares are listed (and which is recognized by the SFC and the Stock
Exchange for this purpose), and which are in accordance with the Listing Rules. A summary
of the relevant Listing Rules is set out in “Statutory and General Information—A. Further
Information about our Company and Our Subsidiaries—6. Repurchase of Shares by Our
Company” in Appendix IV to this prospectus.
This general mandate will remain in effect until the earliest of:
(i) the conclusion of the next annual general meeting of the Company; or
(ii) the expiration of the period within which the next annual general meeting of our
Company is required by the Articles or any applicable laws to be held; or
(iii) the date on which such general mandate is varied or revoked by an ordinary
resolution of our Shareholders in general meeting.
Further information on this general mandate is set out in “Statutory and General
Information—A. Further information about Our Company and Our Subsidiaries—3.
Resolutions in Writing of Our Shareholders Passed on December 11, 2023” in Appendix IV to
this prospectus.
CIRCUMSTANCES UNDER WHICH GENERAL MEETING AND CLASS MEETING
ARE REQUIRED
Our Company will have only one class of Shares, namely ordinary shares, each of which
carries the same rights as the other Shares upon the Global Offering.
As a matter of the Cayman Companies Act, an exempted company is not required by law
to hold any general meeting or class meeting. The holding of general meeting or class meeting
is prescribed under the articles of association of a company. Accordingly, our Company will
hold general meetings as prescribed under the Articles, a summary of which is set out in
“Summary of the Constitution of the Company and Cayman Islands Company Law” in
Appendix III to this prospectus.
SHARE CAPITAL
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You should read the following discussion and analysis in conjunction with our
consolidated financial statements and the accompanying notes included in the
Accountants’ Report in Appendix I to this prospectus. Our consolidated financial
statements have been prepared in accordance with IFRSs.
The following discussion and analysis contain forward-looking statements that
reflect the current views with respect to future events and financial performance. These
statements are based on assumptions and analyses made by us in light of our experience
and perception of historical trends, current conditions and expected future developments,
as well as other factors that we believe are appropriate under the circumstances.
However , whether the actual outcome and developments will meet our expectations and
predictions depends on a number of risks and uncertainties over which we do not have
control. See “Forward-looking Statements” and “Risk Factors.”
Unless the context otherwise requires, financial information described in this
section is described on a consolidated basis.
OVERVIEW
We provide pledged vehicle monitoring services and automobile dealership operation
management services in China. According to CIC, we were the largest pledged vehicle
monitoring service provider in China’s automobile sales and distribution industry both in terms
of revenue in 2022, with a market share of 47.9%, and in terms of the number of automobile
dealership users as of December 31, 2022.
During the Track Record Period, we primarily generated revenue from pledged vehicle
monitoring services, which accounted for 100.0%, 100.0%, 92.2%, 95.0% and 90.2% of our
revenue for the years ended December 31, 2020, 2021 and 2022 and the six months ended June
30, 2022 and 2023, respectively. We offer pledged vehicle monitoring services primarily to (i)
financial institutions, mainly including commercial banks and automobile finance companies,
that provide secured financing to automobile dealerships for their purchase of vehicles; and (ii)
automobile dealerships with pledged vehicles.
In April 2022, we started to provide operation management services to automobile
dealerships by offering automobile dealership operational support, data system and managerial
solutions. For the year ended December 31, 2022, 7.8% of our revenue was generated from
automobile dealership operation management services. For the six months ended June 30, 2022
and 2023, 5.0% and 9.8%, respectively, of our revenue was generated from automobile
dealership operation management services.
FINANCIAL INFORMATION
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For the years ended December 31, 2020, 2021 and 2022, our revenue amounted to
RMB430.6 million, RMB477.7 million and RMB547.9 million, respectively, representing a
CAGR of 12.8%; our profit for the year amounted to RMB114.1 million, RMB83.7 million and
RMB95.9 million, respectively. Our revenue amounted to RMB258.7 million and RMB309.4
million for the six months ended June 30, 2022 and 2023, respectively. Our profit for the period
amounted to RMB48.1 million and RMB35.3 million for the six months ended June 30, 2022
and 2023, respectively.
BASIS OF PREPARATION
Our historical financial information has been prepared in accordance with IFRSs and
interpretations issued by IASB applicable to companies reporting under IFRSs. Please see Note
1 to the Accountants’ Report in Appendix I to this prospectus for more information on the basis
of preparation of our financial information included herein.
The preparation of the historical financial information in conformity with IFRSs requires
the use of certain material accounting estimates. It also requires management to exercise its
judgment in the 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 historical financial information, are disclosed in Note 3 to the Accountants’ Report in
Appendix I to this prospectus.
KEY FACTORS AFFECTING OUR RESULTS OF OPERATIONS
Our results of operations are affected by general factors affecting the automobile sales
and distribution industry and the broader passenger automobile market in China, which include
China’s overall economic growth and level of per capita disposable income; the penetration of
NEVs in China particularly in lower-tier cities; the increase in the car parc of passenger
automobiles; and governmental policies and initiatives affecting automobile sales in China.
Unfavorable changes in any of these factors could negatively affect demand for our
services and materially and adversely affect our results of operations.
Our results of operations are also affected by certain company-specific factors, including
the following:
Our Ability to Grow Our User Base
During the Track Record Period, substantially all of our revenue was generated from
pledged vehicle monitoring services. Our business depends to a significant extent on our ability
to grow our user base for pledged vehicle monitoring services, which is primarily comprised
of (i) financial institutions that provide secured financing to automobile dealerships for their
purchase of vehicles; and (ii) automobile dealerships with pledged vehicles. As of June 30,
2023, we provided pledged vehicle monitoring services to (i) approximately 200 branches of
18 commercial banks, including all of China’s “Big Six” national state-owned commercial
banks and 12 joint-stock commercial banks; (ii) 27 automobile finance companies; and (iii)
11,152 automobile dealerships.
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We strive to continuously grow our user base for pledged vehicle monitoring services,
which is a key component of our operations. We have built a nationwide service network to
support our high-quality and responsive services. Leveraging our marketing and service
network, we are able to engage with our users closely, stay close to the business changes and
operation results of our users and continue to optimize our services and solutions to enhance
user satisfaction. The number of active users, their level of engagement and satisfaction affect
our revenue from our pledged vehicle monitoring services.
Our Ability to Capitalize on Emerging Opportunities
Over the years through our frequent interactions with automobile dealerships, we have
accumulated an in-depth understanding of their limitations, which primarily include
competition, working capital pressure, lack of professional management personnel and lack of
digital capabilities. According to CIC, automobile dealerships in China’s automobile sales and
distribution industry face increasingly intense competition and have strong demand for better
management and higher profitability, resulting in an unmet need for professional operation and
management solutions.
We started to provide operation management services to automobile dealerships in April
2022 and expect to expand our operations for this business line. For the year ended December
31, 2022 and the six months ended June 30, 2022 and 2023, 7.8%, 5.0% and 9.8%, respectively,
of our revenue was generated from automobile dealership operation management services. Our
ability to successfully expand our automobile dealership operation management services will
affect our results of operations.
In addition, we intend to capitalize on the growth potential of China’s NEV market.
According to CIC, the growth rate of NEVs sales volume is gradually surpassing the growth
of gasoline-powered new automobiles in China. Demand for NEVs in China in recent years has
been fast-growing, leading to a corresponding rise in the demand for NEVs’ sales network,
delivery capacity and after-sales services. To capture the envisioned growth trends in NEVs in
China, particularly in the lower-tier cities, we are developing an automobile supply chain
service mobile application which will connect NEV manufacturers with automobile dealerships
to facilitate the sales, delivery and other supply chain services of NEVs in our mobile
application. Our automobile supply chain service mobile application commenced trial
operation in April 2023. See “Business—Our Strategies” for details. Our ability to execute
these strategies will affect our results.
Our Ability to Manage Costs and Expenses
Our results of operations depend on our ability to manage costs and expenses. Our cost
of sales during the Track Record Period consisted primarily of subcontracting costs, which
represented the services fees we paid in connection with the outsourcing of onsite supervision
services for our pledged vehicle monitoring services. For the years ended December 31, 2020,
2021 and 2022 and the six months ended June 30, 2022 and 2023, our subcontracting costs
recorded in cost of sales amounted to RMB252.8 million, RMB285.5 million, RMB290.2
million, RMB143.9 million and RMB155.4 million, respectively, representing 96.6%, 96.6%,
89.9%, 94.4% and 88.3% of our cost of sales during the same periods. Our ability to efficiently
FINANCIAL INFORMATION
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control our subcontracting costs will impact our profitability. For illustration purpose, we set
out below a sensitivity analysis of our profit before taxation with reference to the fluctuation
of our subcontracting costs during the Track Record Period. The below table demonstrates the
impact of a hypothetical increase in our subcontracting costs on our profit before taxation,
while all other factors remain unchanged.
For the year ended
December 31,
For the six months
ended June 30,
2020 2021 2022 2022 2023
(RMB’000)
Profit before taxation 109,834 93,149 127,626 62,884 55,472
Assuming 10% increase
in our subcontracting
costs
Hypothetical impact on our
profit before taxation (25,278) (28,546) (29,024) (14,389) (15,537)
Assuming 20% increase
in our subcontracting
costs
Hypothetical impact on our
profit before taxation (50,557) (57,091) (58,048) (28,777) (31,075)
We have implemented technology initiatives and digitalization efforts in the upfront
automobile dealerships store to reduce our reliance on manpower to cope with rising
subcontracting costs. Our subcontractors were able to supervise multiple automobile
dealerships for our pledged vehicle monitoring services during the Track Record Period and
thus realized economies of scale as our business expanded. We expect our cost structure to
evolve as our business expands and as we develop and launch new services in the future. In
particular, we expect to incur additional costs relating to selling and marketing, and research
and development. Going forward, we will continue to endeavor to further improve operating
efficiency and enhance our profit margin.
The cost of sales for newly commenced automobile dealership operation management
services consisted primarily of staff costs. For the year ended December 31, 2022 and the six
months ended June 30, 2022 and 2023, our staff costs recorded in the costs of sales under
automobile dealership operation management services amounted to RMB14.0 million, RMB3.3
million and RMB12.7 million, representing 4.3%, 2.1% and 7.2% of our cost of sales during
the same periods, respectively. The monthly average cost per staff under this business segment
during the Track Record Period was approximately RMB26,000, which was primarily due to
the higher education and experience requirement of the relevant staff (as their responsibilities
involved high level managerial tasks, such as formulating and supervising the implementation
of business development plans for automobile dealerships), and were generally comparable to
average salaries with similar educational background and years of experience according to
CIC. We expect our staff costs for automobile dealership operation management to increase in
the future to support business expansion and expect our cost structure to evolve as we continue
to develop and expand this new business line.
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Our Ability to Price Competitively
Our results of operations are affected by our ability to price our pledged vehicle
monitoring services competitively, which is influenced by (i) the location of the automobile
dealerships and their pledged vehicles; and (ii) the scope of our services. We primarily use a
cost-plus pricing model to price our pledged vehicle monitoring services, which may vary
depending on the average local salary and the manpower required. For the years ended
December 31, 2020, 2021 and 2022 and the six months ended June 30, 2022 and 2023, the
average annual pledged vehicle monitoring fee per service agreement was approximately
RMB39,300, RMB38,900, RMB34,800, RMB38,600 and RMB36,100, respectively. As our
business continued to grow, we realized economies of scale and reduced the manpower
required for pledged vehicle monitoring services, therefore our average annual pledged vehicle
monitoring fee per service agreement became more competitive and decreased from
RMB38,900 in 2021 to RMB34,800 in 2022 and from RMB38,600 in the six months
ended June 30, 2022 to RMB36,100 in the same period in 2023. Despite the fact that our
average annual pledged vehicle monitoring fees per service agreement decreased during such
periods, our gross profit margin of pledged vehicle monitoring services increased from 38.2%
in 2021 to 41.5% in 2022 and from 40.4% in the six months ended June 30, 2022 to 43.5% in
the same period in 2023 as we gradually reduced our reliance on manpower and realized
economies of scale.
We face competition from other market participants that provide similar services and
expect that competition will become more intensive as more market participants commence
similar business. See “Industry Overview” and “Business—Competition.” We believe our
ability to price our services competitively will help expand our business and contribute to our
future revenue growth.
Impact of COVID-19 on Our Operations
Our results of operations and financial condition during the Track Record Period were
affected by the spread of COVID-19. Especially during the early stage of the COVID-19
outbreak, the automotive industry in China was negatively impacted, as automobile production
and the number of purchasers declined due to precautionary government-imposed closures of
certain travel and business, the government’s order to delay resumption of service and mass
production and the related quarantine measures. The containment efforts led by the government
also caused delay in the near-term marketing demand of our automaker and dealer customers.
Going forward, as countries around the world have gradually lifted the precautionary measures
and implemented stimulating policies, the automobile-related industries are expected to
recover and continue to grow, according to CIC.
Despite the impact of the COVID-19 outbreak, our revenue increased at a CAGR of
12.8% from RMB430.6 million in 2020 to RMB547.9 million in 2022. Our revenue increased
by 19.6% from RMB258.7 million in the six months ended June 30, 2022 to RMB309.4 million
in the same period 2023. As of June 30, 2023, we had cash and cash equivalents of RMB72.4
million. We believe our liquidity is sufficient for us to successfully navigate an extended period
of uncertainty.
FINANCIAL INFORMATION
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Business Transfer of Pledged Vehicle Monitoring Services
Since September 2016 when Changjiu Jinfu was established, Changjiu Industrial has been
gradually transferring its existing pledged vehicle monitoring service agreements to us and
moving the operation team in charge of such services into our Group, and we have begun to
enter into new pledged vehicle monitoring service agreements with financial institutions and
automobile dealerships upon the expiration of the agreements between them and Changjiu
Industrial. On November 30, 2021, Changjiu Industrial and we entered into a business transfer
agreement, pursuant to which Changjiu Industrial agreed to assign to us all of its rights and
obligations under its then existing pledged vehicle monitoring service agreements for a total
consideration of RMB45.5 million. For more information, see “History, Reorganization and
Corporate Structure—Reorganization—Onshore Reorganization—Business transfer of pledged
vehicle monitoring services.” As of the Latest Practicable Date, Changjiu Industrial had
entrusted us to provide pledged vehicle monitoring services under its then existing pledged
vehicle monitoring service agreements (the “Unassigned Agreements”) that had not been
transferred to us. See “Connected Transactions—Non-exempt Continuing Connected
Transactions—(4) Entrustment Agreement.” The revenue generated from automobile
dealerships under Unassigned Contracts and Entrustment Agreement was RMB3.6 million,
RMB37.8 million, RMB20.6 million and RMB19.1 million in 2021 and 2022 and the six
months ended June 30, 2022 and 2023, respectively, accounting for 0.8%, 6.9%, 8.0% and
6.2% of our total revenue during the same periods, respectively.
We recognize revenue from the Unassigned Contracts and the entrustment agreement
dated April 26, 2023 between Changjiu Industrial and us (the “Entrustment Agreement”) as
revenue from the provision of services to related parties. See “—Related Party Transactions.”
MATERIAL ACCOUNTING POLICIES AND ESTIMATES
The preparation of our Group’s consolidated financial information requires management
to make significant estimates and assumptions that affect the reported amounts of revenues,
expenses, assets and liabilities, and their accompanying disclosures, and the disclosure of
contingent liabilities. Uncertainty about these assumptions and estimates could result in
outcomes that could require a material adjustment to the carrying amounts of the assets or
liabilities affected in the future. We continually evaluate these estimates based on our own
historical experience, knowledge and assessment of current business and other conditions, our
expectations regarding the future based on available information and our best assumptions,
which together form our basis for making judgments about matters that are not readily apparent
from other sources. Since the use of estimates is an integral component of the financial
reporting process, our actual results could differ from those estimates and expectations. Our
material accounting policies and estimates are set forth in detail in Note 2 and Note 3 to the
Accountants’ Report in Appendix I to this prospectus.
FINANCIAL INFORMATION
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Revenue Recognition
We recognize revenue when control over a product or service is transferred to the
customer, at the amount of promised consideration to which we are expected to be entitled,
excluding those amounts collected on behalf of third parties. Revenue excludes value-added
tax or other sales taxes and is after deduction of any trade discounts.
We provide pledged vehicle monitoring services to customers, primarily including
monitoring of the pledged vehicles and management of pledged vehicles’ vehicle conformity
certificates as well as car keys, to protect the interest of financial institutions that entered into
financing credit arrangements with automobile dealerships. We recognize revenue from
pledged vehicle monitoring services on a straight-line basis over time as the customers
simultaneously receive and consume the benefits throughout the period when services are
provided. Additionally, certain of our services, such as vehicles sales invoice check and
physical check, pledged vehicle counting, are provided through staff from subcontractors, the
revenue of which is recognized at the point in time when the service is rendered.
We provide operation management services to automobile dealerships that seek more
optimal business and financial performance, and receives management service fee which is
determined based on a percentage of operation income or operation profit generated by
automobile dealerships during the services period. The percentage is based on the terms
specific in the service contract with automobile dealerships. As a result, the management
service fee includes variable consideration. We estimate variable consideration based on our
current and future performance expectations and all information that is reasonably available.
This estimated amount is included in the transaction price to the extent it is highly probable
that a significant reversal of cumulative revenue recognized will not occur when the
uncertainty associated with the variable consideration is resolved. We recognized revenue from
operation management services over time as the customers simultaneously receives and
consumes the benefits throughout the period during the services are provided.
Property, Plant and Equipment
Property, plant and equipment are stated at cost less accumulated depreciation and
impairment losses. Gains or losses arising from the retirement or disposal of an item of
property, plant and equipment are determined as the difference between the net disposal
proceeds and the carrying amount of the item and are recognized in profit or loss on the date
of retirement or disposal.
Depreciation is calculated to write off the cost of items of property, plant and equipment,
less their estimated residual value, if any, using the straight-line method over their estimated
useful lives are as follows:
– Office equipment 1-5 years
– Electronic equipment 1-5 years
FINANCIAL INFORMATION
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Where parts of an item of property, plant and equipment have different useful lives, the
cost of the item is allocated on a reasonable basis between the parts and each part is depreciated
separately. We review both the useful life of an asset and its residual value annually, if any.
Impairment of Trade Receivables
We apply the IFRS 9 simplified approach to measuring expected credit losses which uses
a lifetime expected loss allowance for all trade receivables. To measure the expected credit
losses of trade receivables, trade receivables have been grouped based on shared credit risk
characteristics and the aging. The Directors consider the probability of default upon initial
recognition of asset and whether there has been significant increase in credit risk on an ongoing
basis during the relevant periods.
We review regularly the recoverable amount of trade receivable to ensure that adequate
impairment losses are made for irrecoverable amounts.
Income Tax
Income tax for the period comprises current tax and movements in deferred tax assets and
liabilities. Current tax and movements in deferred tax assets and liabilities are recognized in
profit or loss except to the extent that they relate to and items recognized in other
comprehensive income or directly in equity, in which case the relevant amounts of tax are
recognized in other comprehensive income or directly in equity, respectively.
Current tax is the expected tax payable on the taxable income for the period, using tax
rates enacted or substantively enacted at the end of the reporting period, and any adjustment
to tax payable in respect of previous period.
Deferred tax assets and liabilities arise from deductible and taxable temporary differences
respectively, being the differences between the carrying amounts of assets and liabilities for
financial reporting purposes and their tax bases. Deferred tax assets also arise from unused tax
losses and unused tax credits.
Leases
Right-of-use Assets
We recognize right-of-use asset when a lease is capitalized and is initially measured at
cost, which comprises the initial amount of the lease liability plus any lease payments made at
or before the commencement date, and any initial direct costs incurred. Where applicable, the
cost of the right-of-use assets also includes an estimate of costs to dismantle and remove the
underlying asset or to restore the underlying asset or the site on which it is located, discounted
to their present value, less any lease incentives received. The right-of-use asset is subsequently
stated at cost less accumulated depreciation and impairment losses. The right-of-use asset is
subsequently depreciated using the straight-line method from the commencement date to the
earlier of the end of the useful life of the right-of-use asset or the end of the lease term. The
estimated useful lives of right-of-use asset are determined on the same basis as those of
property, plant and equipment.
FINANCIAL INFORMATION
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Lease liabilities
Where the lease is capitalized, we recognize the lease liability initially at the present
value of the lease payments payable over the lease term, discounted using the interest rate
implicit in the lease or, if that rate cannot be readily determined, using a relevant incremental
borrowing rate. After initial recognition, we measure the lease liability at amortized cost and
calculate interest expense using the effective interest method. V ariable lease payments that do
not depend on an index or rate are not included in the measurement of the lease liability and
hence are charged to profit or loss in the accounting period in which they are incurred.
DESCRIPTION OF CERTAIN CONSOLIDATED STATEMENTS OF PROFIT OR LOSS
ITEMS
The following table sets forth a summary of our consolidated statements of profit or loss
for the periods indicated. Our historical results presented below are not necessarily indicative
of the results that may be expected for any future period.
For the year ended December 31, For the six months ended June 30,
2020 2021 2022 2022 2023
Amount
%o f
revenue Amount
%o f
revenue Amount
%o f
revenue Amount
%o f
revenue Amount
%o f
revenue
(RMB’000) (%) (RMB’000) (%) (RMB’000) (%) (RMB’000) (%) (RMB’000) (%)
(unaudited)
Revenue 430,587 100.0 477,697 100.0 547,867 100.0 258,652 100.0 309,431 100.0
Cost of sales (261,629) (60.8) (295,401) (61.8) (322,828) (58.9) (152,404) (58.9) (176,028) (56.9)
Gross profit 168,958 39.2 182,296 38.2 225,039 41.1 106,248 41.1 133,403 43.1
Net other income 554 0.1 441 0.1 1,552 0.3 545 0.2 823 0.3
Impairment
(losses)/reversal (770) (0.1) 110 0.0 (2,555) (0.5) (2,011) (0.8) (3,650) (1.2)
Research and
development
expenses (10,296) (2.4) (9,413) (2.0) (9,027) (1.6) (4,379) (1.7) (6,721) (2.2)
General and
administrative
expenses (42,579) (9.9) (71,101) (14.9) (76,984) (14.1) (33,608) (13.0) (63,400) (20.5)
Sales and marketing
expenses (5,069) (1.2) (6,130) (1.3) (7,126) (1.3) (2,674) (1.0) (3,497) (1.1)
Profit from
operations 110,798 25.7 96,203 20.1 130,899 23.9 64,121 24.8 56,958 18.4
Net finance expense (964) (0.2) (3,054) (0.6) (3,273) (0.6) (1,237) (0.5) (1,486) (0.5)
Profit before taxation 109,834 25.5 93,149 19.5 127,626 23.3 62,884 24.3 55,472 17.9
FINANCIAL INFORMATION
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For the year ended December 31, For the six months ended June 30,
2020 2021 2022 2022 2023
Amount
%o f
revenue Amount
%o f
revenue Amount
%o f
revenue Amount
%o f
revenue Amount
%o f
revenue
(RMB’000) (%) (RMB’000) (%) (RMB’000) (%) (RMB’000) (%) (RMB’000) (%)
(unaudited)
Income tax
benefit/(expense) 4,271 1.0 (9,418) (2.0) (31,714) (5.8) (14,796) (5.7) (20,181) (6.5)
Profit for the
year/period 114,105 26.5 83,731 17.5 95,912 17.5 48,088 18.6 35,291 11.4
Attributable to:
Equity shareholders of
the Company 114,105 26.5 83,731 17.5 95,877 17.5 48,053 18.6 35,291 11.4
Non-controlling
interests – – – – 35 – 35 – – –
Revenue
Revenue by Business Line
During the Track Record Period, we primarily generated revenue from pledged vehicle
monitoring services, which accounted for 100.0%, 100.0%, 92.2%, 95.0% and 90.2% of our
revenue for the years ended December 31, 2020, 2021 and 2022 and the six months ended June
30, 2022 and 2023, respectively. In April 2022, we started to provide operation management
services to automobile dealerships. For the year ended December 31, 2022 and the six months
ended June 30, 2022 and 2023, 7.8%, 5.0% and 9.8% of our revenue was generated from
automobile dealership operation management services, respectively. The following table sets
forth our revenue by business line for the periods indicated.
For the year ended December 31, For the six months ended June 30,
2020 2021 2022 2022 2023
(RMB’000) (%) (RMB’000) (%) (RMB’000) (%) (RMB’000) (%) (RMB’000) (%)
(unaudited)
Pledged vehicle monitoring services 430,587 100.0 477,697 100.0 505,049 92.2 245,760 95.0 279,067 90.2
Automobile dealership operation
management services – – – – 42,818 7.8 12,892 5.0 30,364 9.8
Total 430,587 100.0 477,697 100.0 547,867 100.0 258,652 100.0 309,431 100.0
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Revenue by User Ownership
We typically enter into tripartite agreements with financial institutions and automobile
dealerships for such services. Although our pledged vehicle monitoring services are designed
to help financial institutions manage secured financing provided to automobile dealerships, we
consider the paying party under such tripartite agreements as our customer, which may be
either financial institutions or automobile dealerships, depending on the negotiation among the
contracting parties, and we consider both financial institutions and automobile dealerships as
our users. See “Business—Pledged V ehicle Monitoring Services—Key Terms of Pledged
V ehicle Monitoring Service Agreements” for more details.
During the Track Record Period, our revenue from pledged vehicle monitoring services
was primarily derived from Independent-Third-Party users. The following table sets forth our
revenue by business line and by user ownership for the periods indicated.
For the year ended December 31, For the six months ended June 30,
2020 2021 2022 2022 2023
(RMB’000) (%) (RMB’000) (%) (RMB’000) (%) (RMB’000) (%) (RMB’000) (%)
(unaudited)
Pledged vehicle
monitoring services
– Related-party users 1,729 0.4 5,793 1.2 1,284 0.2 1,024 0.4 157 0.1
– Independent-Third-Party
users 428,858 99.6 471,904 98.8 503,765 92.0 244,736 94.6 278,910 90.1
Sub-total 430,587 100.0 477,697 100.0 505,049 92.2 245,760 95.0 279,067 90.2
Automobile dealership
operation management
services
– Related-party users – – – – 42,785 7.8 12,892 5.0 30,281 9.8
– Independent-Third-Party
user – – – – 33 0.0 – – 83 0.0
Sub-total – – – – 42,818 7.8 12,892 5.0 30,364 9.8
Total 430,587 100.0 477,697 100.0 547,867 100.0 258,652 100.0 309,431 100.0
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Revenue by Paying Customer
The following table sets forth a breakdown of our total revenue by business line and by
type of paying customer for the periods indicated.
For the year ended December 31, For the six months ended June 30,
2020 2021 2022 2022 2023
(RMB’000) % (RMB’000) % (RMB’000) % (RMB’000) % (RMB’000) %
(unaudited)
Pledged Vehicle
Monitoring Services
– Related parties 1,729 0.4 9,342 (1) 2.0 39,033 (1) 7.1 21,601 (1) 8.3 19,240 (1) 6.2
– Independent Third
Parties 428,858 99.6 468,355 (2) 98.0 466,016 (2) 85.1 224,159 (2) 86.7 259,827 (2) 84.0
Subtotal 430,587 100.0 477,697 100.0 505,049 92.2 245,760 95.0 279,067 90.2
Automobile Dealership
Operation Management
Services
– Related parties – – – – 42,785 7.8 12,892 5.0 30,281 9.8
– Independent Third Party – – – – 33 0.0 – – 83 0.0
Subtotal – – – – 42,818 7.8 12,892 5.0 30,364 9.8
Total 430,587 100.0 477,697 100.0 547,867 100.0 258,652 100.0 309,431 100.0
Notes:
(1) Including revenue derived from (i) one, two, two and two Unassigned Agreements from Changjiu Group as of
December 31, 2021 and 2022 and June 30, 2022 and 2023, respectively; and (ii) 1,059, 794, 1,137 and 649
Unassigned Agreements from Independent Third Parties as of December 31, 2021 and 2022 and June 30, 2022
and 2023, respectively. The revenue generated from automobile dealerships under Unassigned Agreements and
Entrustment Agreement was RMB3.6 million, RMB37.8 million, RMB20.6 million and RMB19.1 million in
2021 and 2022 and in the six months ended June 30, 2022 and 2023, respectively, accounting for 0.8%, 6.9%,
8.0% and 6.2% of our total revenue during the same periods, respectively.
(2) Excluding revenue derived from 1,059, 794, 1,137 and 649 Unassigned Agreements from Independent Third
Parties as of December 31, 2021 and 2022 and June 30, 2022 and 2023, respectively, which amounted to
RMB3.5 million, RMB37.7 million, RMB20.6 million and RMB19.1 million in 2021 and 2022 and in the six
months ended June 30, 2022 and 2023, respectively.
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We recognize revenue from the Unassigned Contracts and the Entrustment Agreement as
revenue from the provision of services to related parties. See “—Related Party Transactions.”
The revenue generated from automobile dealerships under the Unassigned Contracts and the
entrustment agreement dated April 26, 2023 between Changjiu Industrial and us was
RMB3.6 million,RMB37.8 million, RMB20.6 million and RMB19.1 million in 2021 and 2022
and in the six months ended June 30, 2022 and 2023, respectively, accounting for 0.8%, 6.9%,
8.0% and 6.2% of our total revenue during the same years, respectively. See “Connected
Transactions—Non-exempt Continuing Connected Transactions—(4) Entrustment Agreement”
and “Relationship with Our Controlling Shareholders—Independence from Our Controlling
Shareholders—Operational Independence—Business of pledged vehicle monitoring services”
for further details.
Revenue from Pledged V ehicle Monitoring Services by Major Regions
During the Track Record Period, we provided pledged vehicle monitoring services in, and
generated relatively even and stable revenue from, major regions in the PRC. The table below
sets forth a breakdown of our revenue from pledged vehicle monitoring services by major
regions in the PRC for the periods indicated.
For the year ended December 31, For the six months ended June 30,
2020 2021 2022 2022 2023
(RMB‘000) (%) (RMB‘000) (%) (RMB‘000) (%) (RMB‘000) (%) (RMB‘000) (%)
(unaudited)
Southern region (1) 112,601 26.2 107,693 22.5 119,463 23.7 57,310 23.3 68,718 24.6
Eastern region (2) 96,741 22.5 110,186 23.1 118,219 23.4 55,453 22.6 65,534 23.5
Central region (3) 100,190 23.3 104,372 21.9 108,637 21.5 54,411 22.1 60,191 21.6
Northern region (4) 67,998 15.8 82,248 17.2 78,435 15.5 40,314 16.4 42,127 15.1
Western region (5) 53,057 12.3 73,198 15.3 80,295 15.9 38,272 15.6 42,497 15.2
Total 430,587 100.0 477,697 100.0 505,049 100.0 245,760 100.0 279,067 100.0
Notes:
(1) Includes Guangdong, Guizhou, Hainan, Sichuan, Chongqing and Guangxi according to our internal
business division.
(2) Includes Henan, Jiangsu, Shandong and Shanghai according to our internal business division.
(3) Includes Anhui, Fujian, Hubei, Hunan, Jiangxi and Zhejiang according to our internal business division.
(4) Includes Beijing, Hebei, Heilongjiang, Jilin, Liaoning and Tianjin according to our internal business
division.
(5) Includes Gansu, Qinghai, Shanxi, Shaanxi, Y unnan, Inner Mongolia, Ningxia, Tibet and Xinjiang
according to our internal business division.
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Cost of Sales
Our cost of sales mainly consists of (i) subcontracting costs, representing service fees for
third-party service providers for onsite supervision services in connection with our pledged
vehicle monitoring services; (ii) staff costs; (iii) consulting service fees, primarily representing
technical service fees for testing and implementation of an enterprise resource planning system
tailored for our automobile dealership operation management services (the “North Star
System”) provided by our related party to meet the need of our newly commenced automobile
dealership operation management service segment, which were one-off and non-recurring in
nature; (iv) travel and entertainment expenses; (v) hardware costs, representing procurement
costs for RFID labels and scanners; (vi) depreciation and amortization; (vii) share-based
payment expenses in connection with the grant of certain share options to certain employees;
and (viii) others. Given the nationwide layout of our services, we outsourced certain services,
primarily including pledged vehicle monitoring services, collective vehicle conformity
certificate management services and counting services, to subcontractors to achieve the
nationwide business coverage while maintaining high operational efficiency. The onsite
supervision services provided by Independent Third Parties on a daily basis are basic and
standard services. See “Business—Subcontracting” and “Business—Quality Control” for more
information on our subcontracting arrangement and quality control measures. The following
table sets forth a breakdown of our cost of sales by nature for the periods indicated.
For the year ended December 31, For the six months ended June 30,
2020 2021 2022 2022 2023
(RMB’000) (%) (RMB’000) (%) (RMB’000) (%) (RMB‘000) (%) (RMB‘000) (%)
(unaudited)
Subcontracting costs 252,783 96.6 285,455 96.6 290,239 89.9 143,886 94.4 155,373 88.3
Staff costs – – – – 14,017 4.3 3,271 2.1 12,701 7.2
Consulting service fees – – – – 11,761 3.6 2,509 1.6 382 0.2
Travel and entertainment
expenses – – – – 1,585 0.5 36 0.1 2,397 1.4
Hardware costs 4,075 1.6 3,704 1.3 3,031 0.9 1,556 1.0 1,413 0.8
Depreciation and
amortization 2,480 0.9 1,637 0.6 1,035 0.3 532 0.4 554 0.3
Share-based payment
expenses – – – – – – – – 2,635 1.5
Others
(1) 2,291 0.9 4,605 1.5 1,160 0.5 614 0.4 573 0.3
Total 261,629 100.0 295,401 100.0 322,828 100.0 152,404 100.0 176,028 100.0
Note:
(1) Mainly included telecommunication expenses and office expenses.
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The following table sets forth a breakdown of our cost of sales by business line for the
periods indicated.
For the year ended December 31, For the six months ended June 30,
2020 2021 2022 2022 2023
(RMB’000) (%) (RMB’000) (%) (RMB’000) (%) (RMB‘000) (%) (RMB‘000) (%)
(unaudited)
Pledged vehicle
monitoring services
Subcontracting costs 252,783 96.6 285,455 96.6 290,239 89.9 143,886 94.4 155,373 88.3
Hardware costs 4,075 1.6 3,704 1.3 3,031 0.9 1,556 1.0 1,413 0.8
Depreciation and
amortization 2,480 0.9 1,637 0.6 1,035 0.3 532 0.4 460 0.2
Others 2,291 0.9 4,605 1.5 1,054 0.4 614 0.4 357 0.2
Sub-total 261,629 100.0 295,401 100.0 295,359 91.5 146,588 96.2 157,603 89.5
Automobile dealership
operation management
services
Staff costs – – – – 14,017 4.3 3,271 2.1 12,701 7.2
Consulting service fees – – – – 11,761 3.6 2,509 1.6 382 0.2
Travel and entertainment
expenses – – – – 1,585 0.5 36 0.1 2,397 1.4
Depreciation and
amortization – – – – – – – – 94 0.1
Share-based payment
expenses – – – – – – – – 2,635 1.5
Others – – – – 106 0.1 – – 216 0.1
Sub-total – – – – 27,469 8.5 5,816 3.8 18,425 10.5
Total 261,629 100.0 295,401 100.0 322,828 100.0 152,404 100.0 176,028 100.0
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For pledged vehicle monitoring services, we generally outsource onsite services to
subcontractors, while our own employees carry out other related work, primarily consisting of
marketing (such as liaising with customers and undertaking new projects), operation
management (such as administrative work related to financial institutions and subcontractors)
and risk management (such as reporting potential risk events through our IT systems). As such
tasks are not directly related to the provision of pledged vehicle monitoring services, the
corresponding staff costs were recorded under general and administrative expenses or selling
and marketing expenses, rather than cost of sales. For automobile dealership operation
management services, we generally utilize our own employees to manage such services.
The following table sets forth the average subcontracting cost per pledged vehicle
monitoring service agreement per month for the periods indicated.
2020 2021 2022
Six months
ended
June 30,
2023
Subcontracting costs
(RMB’000) 252,783 285,455 290,239 155,373
Number of service
agreements as of
December 31/June 30 10,963 12,271 14,503 15,459
Average subcontracting cost
per service agreement per
month (RMB’000) 1.92 1.94 1.67 1.68
We incurred all subcontracting costs under our pledged vehicle monitoring service
segment. The average subcontracting cost per automobile dealership per month remained stable
in 2020 and 2021. The average subcontracting cost decreased from RMB1,940 in 2021 to
RMB1,670 in 2022, which was primarily attributable to the economies of scale we had
achieved as our business continued to grow. With the support of our technologies, our
subcontractors were able to supervise multiple automobile dealerships at the same time. The
average subcontracting cost remained relatively stable at RMB1,680 in the six months ended
June 30, 2023.
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Gross Profit and Gross Profit Margin
The following table sets forth a breakdown of our gross profit and gross profit margin by
business line for the periods indicated.
For the year ended December 31, For the six months ended June 30,
2020 2021 2022 2022 2023
Gross
profit
Gross
profit
margin
Gross
profit
Gross
profit
margin
Gross
profit
Gross
profit
margin
Gross
profit
Gross
profit
margin
Gross
profit
Gross
profit
margin
(RMB’000) (%) (RMB’000) (%) (RMB’000) (%) (RMB’000) (%) (RMB’000) (%)
(unaudited)
Pledged vehicle
monitoring services 168,958 39.2 182,296 38.2 209,690 41.5 99,172 40.4 121,464 43.5
Automobile dealership
operation management
services – – – – 15,349 35.8 7,076 54.9 11,939 39.3
Total gross
profit/overall gross
profit margin 168,958 39.2 182,296 38.2 225,039 41.1 106,248 41.1 133,403 43.1
Our overall gross profit increased during the Track Record Period primarily as a result of
business expansion of our pledged vehicle monitoring services. In addition, we started to
provide automobile dealership operation management services and generated gross profit under
this business line in 2022. Specifically, in 2022 and the six months ended June 30, 2022 and
2023, we recorded under this business line (i) gross profit of RMB17.1 million, RMB7.1
million and RMB15.8 million, respectively, attributable to related parties and (ii) gross loss of
RMB1.8 million, nil and RMB3.8 million, respectively, attributable to an Independent Third
Party. During the Track Record Period, we recorded gross loss from an Independent Third Party
under this business line, primarily because we were at the early stage of business development
for our automobile dealership operation management services with limited customer base (only
one operation management service agreement with an automobile dealership owned by an
Independent Third Party started to generated revenue during the Track Record Period). The
increase in gross loss from RMB1.8 million in 2022 to RMB3.8 million in the six months ended
June 30, 2023 was primarily because we incurred more staff costs from the additional staff we
hired in preparation to serve more Independent-Third-Party customers in the future. In the
meantime, to deliver high quality services and prepare for future demand from Independent-
Third-Party customers, we need to be equipped with sufficient staffing. Therefore, we had set
up a service team of experienced professionals with strong operation management skills and
incurred relatively significant staff costs. These experience professionals from the automobile
sales and distribution industry are expected to have capabilities in customer communication.
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Given that the revenue generated by automobile dealership operation management services
provided to Changjiu Group is larger than that provided to an Independent-Third-Party, we
recorded gross profit for such services provided to Changjiu Group while we recorded gross
loss for such services provided to an Independent-Third-Party in 2022 and the six months
ended June 30, 2023 due to limited revenue generated with significant staff costs as the team
serving Changjiu Group may not have enough capacity to serve Independent-Third-Party
customers.
To improve the profitability of our automobile dealership operation management services,
we will continue to adhere to our business strategy to grow and diversify our Independent-
Third-Party customer base, including, among others: (a) setting up key project advancement
teams to focus on high priority customers, (b) establishing project initiation mechanisms to
handle prospective clients and review the operational status and requirements of automobile
dealerships that have entered into letters of intent with us to formulate preliminary
development plans and (c) seeking references through automobile manufacturers for potential
dealerships for collaboration. Expanding customer base would enable us to generate more
revenue from automobile dealership operation management services without incurring extra
costs, especially staff costs, on the same scale due to the service team we set up in the early
stage of our business development. In addition, we will focus on improving the operational
results of our clients by leveraging our professional service team consisting of professionals
from the automobile sales and distribution industry to, among others, optimize the dealerships’
business plans and provide guidance to dealership staff to enhance their practical management
skills, and our automobile dealership operation management system, Smart Star, to provide
technical support in the daily operation of automobile dealerships and collect and process
operational data for further analysis by our service team. Improved operational results of our
clients could lead to performance-based/incentive fee in addition to our management fee and
thereby improve profitability. Furthermore, we will aim to streamline our service process
through our Smart Star system and thereby reduce the time, and the related staff costs, required
for business improvement with respect to a specific client, through, for example, further
improving the functions of our Smart Star system and integrating the operational data of
automobile dealerships on the system to offer better support to our service team. In particular,
our employees provide customers with tailored services to help them fully utilize the functions
of our services, which primarily include (i) consultation based on their interpretation of the
operational data collected and processed by Smart Star; and (ii) guidance relating to systematic
improvement on automobile dealerships’ management capabilities and operational efficiency.
Our gross profit margin was mainly affected by subcontracting costs, which were the
major component of our cost of sales during the Track Record Period. We have implemented
technology initiatives and digitalization efforts in the upfront automobile dealerships store to
reduce our reliance on manpower to cope with rising subcontracting costs.
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Our overall gross profit margin remained stable in 2020 and 2021. Our overall gross profit
margin increased from 38.2% in 2021 to 41.1% in 2022 and increased from 41.1% for the six
months ended June 30, 2022 to 43.1% for the same period in 2023, which was primarily
attributable to an increase in gross profit margin of pledged vehicle monitoring services as our
business continued to grow, we realized economies of scale with the support of our
technologies, which enabled our subcontractors to supervise multiple automobile dealerships
at the same time.
Net Other Income
Our net other income primarily consists of (i) government grants, representing subsidies
we received from local governments for the purpose of stabilizing employment and promoting
vocational and social insurance training activities, which were one-off and non-recurring; (ii)
extra deduction of input V A T for our services in accordance with relevant policies; (iii) OBD
related compensation, representing indemnification payment we received from customers for
losses of OBD devices which were used for pledged vehicle monitoring services; (iv) net
exchange gains; and (v) others. The following table sets forth a breakdown of our net other
income for the periods indicated.
For the year ended December 31, For the six months ended June 30,
2020 2021 2022 2022 2023
(RMB’000) (%) (RMB’000) (%) (RMB’000) (%) (RMB’000) (%) (RMB’000) (%)
(unaudited)
Government grants 191 34.5 34 7.7 416 26.8 256 47.0 13 1.6
Extra deduction of input
V A T 210 37.9 192 43.5 843 54.3 62 11.4 504 61.2
OBD related compensation 191 34.5 178 40.4 176 11.3 113 20.7 89 10.8
Net exchange gains – – – – – – – – 171 20.8
Others (38) (6.9) 37 8.4 117 7.6 114 20.9 46 5.6
Total 554 100.0 441 100.0 1,552 100.0 545 100.0 823 100.0
Impairment (Losses)/Reversal
Our impairment losses primarily consist of impairment of trade receivables. We recorded
impairment losses of RMB0.8 million, RMB2.6 million, RMB2.0 million and RMB3.7 million
in 2020 and 2022 and the six months ended June 30, 2022 and 2023, respectively, which was
primarily due to allowance for expected credit losses of trade receivables. We recorded reversal
of impairment losses of RMB0.1 million in 2021, which was primarily due to the overall
improvement of our trade receivables aging as of December 31, 2021.
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Research and Development Expenses
Our research and development activities were primarily related to continuous
development and upgrade of our VFS system and integrated digital information infrastructure.
Our research and development expenses primarily consist of (i) staff costs for our research and
development personnel; (ii) third-party R&D and related costs for developing systems and
devices and procurement of related tools; and (iii) share-based payment expenses in connection
with the grant of certain share options to certain employees. The following table sets forth a
breakdown of our research and development expenses for the periods indicated.
For the year ended December 31, For the six months ended June 30,
2020 2021 2022 2022 2023
(RMB’000) (%) (RMB’000) (%) (RMB’000) (%) (RMB‘000) (%) (RMB‘000) (%)
(unaudited)
Staff costs 4,590 44.6 9,191 97.6 8,941 99.0 4,379 100.0 5,989 89.1
Third-party R&D and
related costs 5,706 55.4 222 2.4 86 1.0 – – 233 3.5
Share-based payment
expenses – – – – – – – – 499 7.4
Total 10,296 100.0 9,413 100.0 9,027 100.0 4,379 100.0 6,721 100.0
General and Administrative Expenses
Our general and administrative expenses primarily consist of (i) staff costs for our
administrative and other staff; (ii) professional service fees, mainly representing service fees
for technology services provided by related parties for IT infrastructure improvement to
increase management efficiency and general audit and legal consulting services in the ordinary
course of business; (iii) depreciation and amortization; (iv) listing expenses; (v) share-based
payment expenses in connection with the grant of certain restricted shares and share options
to certain employees; (vi) tax and surcharges; (vii) travel expenses; (viii) office expenses; (ix)
non-refundable earnest money for an investment; and (x) others. We were interested in making
a potential investment in a target company, an Independent Third Party, for its complementary
technologies and automobile-related e-commerce platform, which we believed would create
potential business synergy with our businesses. We paid an amount of RMB10.0 million as
earnest money to the target company for this potential investment in June 2021 but the
investment did not consummate after negotiation and due diligence in the same year. However,
the earnest money was not refundable as stipulated in the relevant agreement. Such payment
was one-off and non-recurring because it was not associated with the routine operations of our
core business, but rather tied to the specific circumstances leading to the occurrence and final
non-consummation of a particular investment opportunity. To the knowledge of our Directors,
except for (i) the chief executive officer and one of the founders of the target company, who
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was a former employee of Changjiu Group from May 2010 to December 2014; (ii) the vice
president and one of the founders of the target company, who was also a former employee of
Changjiu Group from December 2013 to December 2014; (iii) aforementioned potential
investment and provision of the loans to one of the subsidiaries of the Target, see “—Prepaid
Expenses and Other Current Assets” for details on the loans we lent to a third party, there were
no other past or present relationship, transaction or arrangement (family, shareholding, trust,
financing, sharing of personnel, premises or other resources, or otherwise) between the target
company and its related parties (including of their respective associates) and us or our
subsidiaries, Directors, shareholders or senior management, or any of their respective
associates, during the Track Record Period and up to the Latest Practicable Date. The following
table sets forth a breakdown of our general and administrative expenses for the periods
indicated.
For the year ended December 31, For the six months ended June 30,
2020 2021 2022 2022 2023
(RMB’000) (%) (RMB’000) (%) (RMB’000) (%) (RMB’000) (%) (RMB’000) (%)
(unaudited)
Staff costs 26,904 63.2 37,455 52.7 46,593 60.5 21,947 65.3 28,789 45.4
Professional service fees 513 1.2 6,771 9.5 11,822 15.4 4,250 12.6 3,766 5.9
Depreciation and
amortization 2,771 6.5 3,366 4.7 5,551 7.2 2,069 6.1 3,899 6.2
Listing expenses – – – – 2,132 2.8 – – 11,966 18.9
Share-based payment
expenses – – – – – – – – 9,912 15.6
Tax and surcharges 3,212 7.5 3,763 5.3 4,244 5.5 1,970 5.9 1,243 2.0
Travel expenses 4,382 10.3 5,328 7.5 3,433 4.5 1,837 5.5 1,467 2.3
Office expenses 2,845 6.7 3,305 4.6 2,569 3.3 1,164 3.5 1,772 2.8
Non-refundable earnest
money for an investment – – 10,000 14.1 – – – – – –
Other
(1) 1,952 4.6 1,113 1.6 640 0.8 371 1.1 586 0.9
Total 42,579 100.0 71,101 100.0 76,984 100.0 33,608 100.0 63,400 100.0
Note:
(1) Mainly included entertainment expense, conference organization fees and other miscellaneous expenses.
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Selling and Marketing Expenses
Our selling and marketing expenses primarily consist of (i) staff costs for our sales and
marketing personnel; (ii) marketing and entertainment expenses we incurred to maintain and
expand our service network; (iii) share-based payment expenses in connection with the grant
of certain share option to certain employees; and (iv) others. The following table sets forth a
breakdown of our selling and marketing expenses for the periods indicated.
For the year ended December 31, For the six months ended June 30,
2020 2021 2022 2022 2023
(RMB’000) (%) (RMB’000) (%) (RMB’000) (%) (RMB’000) (%) (RMB’000) (%)
(unaudited)
Staff costs 3,377 66.6 4,160 67.9 4,341 60.9 1,744 65.2 2,322 66.4
Marketing and
entertainment expenses 1,388 27.4 1,802 29.4 2,615 36.7 880 32.9 288 8.2
Share-based payment
expenses – – – – – – – – 608 17.4
Other (1) 304 6.0 168 2.7 170 2.4 50 1.9 279 8.0
Total 5,069 100.0 6,130 100.0 7,126 100.0 2,674 100.0 3,497 100.0
Note:
(1) Mainly included office, travel and other miscellaneous expenses.
Net Finance Expenses
Our net finance expenses primarily represent interest expenses on bank loans and lease
liabilities, and other financial expenses and income. See “—Indebtedness” for details on bank
loans and “—Prepaid Expenses and Other Current Assets” for details on the loans we lent to
a third party. The following table sets forth a breakdown of our net finance expenses for the
periods indicated.
For the year ended December 31,
For the six months
ended June 30,
2020 2021 2022 2022 2023
(RMB’000)
(unaudited)
Interest expense
on bank loans 817 2,712 3,174 1,274 1,219
Interest expense
on lease
liabilities 79 271 298 117 321
Other financial
expenses/(income) 68 71 (199) (154) (54)
Total 964 3,054 3,273 1,237 1,486
FINANCIAL INFORMATION
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Income Tax Benefit/(Expenses)
We recorded income tax benefit of RMB4.3 million in 2020. Our income tax expenses
amounted to RMB9.4 million, RMB31.7 million, RMB14.8 million and RMB20.2 million in
2021 and 2022 and the six months ended June 30, 2022 and 2023, respectively.
In 2021 and 2022 and the six months ended June 30, 2022 and 2023, our effective income
tax rates, calculated as our income tax expenses divided by profit before tax, were 10.1%,
24.8%, 23.5% and 36.4%, respectively. Our effective income tax rate in the six months ended
June 30, 2023 was higher than the statutory income tax rate of 25%, primarily as a result of
the non-deductible share-based payment expenses connected with the grant of certain restricted
shares and share options during this period and the loss incurred by our Cayman company due
to listing expenses, which reduced our Group’s overall profit before tax, while the profits from
our operating entities that are subject to statutory income tax remained unaffected. The
following table sets forth a reconciliation of tax expenses applicable to profit before tax at the
statutory rate in the PRC, where our operating entities are domiciled, to the tax expenses at the
effective income tax rates, and a reconciliation of the applicable tax rate to the effective income
tax rate for the periods indicated.
For the year ended December 31,
For the six months
ended June 30,
2020 2021 2022 2022 2023
(RMB’000)
(unaudited)
Profit before
tax 109,834 93,149 127,626 62,884 55,472
Tax calculated
at statutory
tax rates
applicable to
profits in the
respective
jurisdictions 27,459 23,287 31,906 15,721 16,819
Tax effect of:
Income not
subject to
tax
(1) (30,453) (13,442) – – –
Non-deductible
expenses and
loss 239 1,241 1,601 44 717
Super deduction
for research
and
development
expenses (1,516) (1,668) (1,793) (969) (768)
FINANCIAL INFORMATION
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For the year ended December 31,
For the six months
ended June 30,
2020 2021 2022 2022 2023
(RMB’000)
(unaudited)
Non-deductible
share-based
payments
expenses –––– 3,413
Actual income
tax
(benefit)/expense (4,271)
(2) 9,418 31,714 14,796 20,181
Notes:
(1) Refers to income from the pledged vehicle monitoring services provided by Changjiu Industrial during
the relevant years. During the Track Record Period prior to the completion of the Reorganization, which
is the year ended December 31, 2020 and the eleven months ended November 30, 2021, our pledged
vehicle monitoring business segment was operated by both a division of Changjiu Industrial and
Changjiu Jinfu. Regarding the portion of income from services operated by the division of Changjiu
Industrial, income tax liability was determined with respect to Changjiu Industrial as a whole. During
such periods, Changjiu Industrial as a whole was loss-making after tax adjustment and therefore had no
income tax charges. Therefore, in our financial statements, the relevant income is recorded in this line
item as “not subject to tax.”
(2) Even though we recorded a net profit on a consolidated basis in 2020, it was attributable to the profit
derived from the pledged vehicle monitoring services provided by the division of Changjiu industrial,
the income tax liability on which was determined with respect to Changjiu Industrial as a whole (see
note 1 above). Excluding such profit, the remainder of our business provided by Changjiu Jinfu, after
tax adjustment, had a net tax loss in that year. Since the net tax loss can be carried forward to be
deductible from future taxable profit in the next five years and it is probable that future taxable profit
will be available against which the net tax loss can be utilized, the deductible net tax loss is recognized
as a benefit to Changjiu Jinfu from tax perspective. A tax benefit and deferred tax assets were recognized
in 2020 accordingly. Changjiu Jinfu, at the earlier stage of its business development in 2020, incurred
higher costs and operating expenses, therefore experienced a net loss position. The business provided
by Changjiu Jinfu turned around the loss position and achieved net profit in 2021.
Taxation
Cayman Islands
Under the current laws of the Cayman Islands, we are not subject to tax on either income
or capital gain, the Cayman Islands does not impose a withholding tax on payments of
dividends to shareholders.
Hong Kong
Our Hong Kong subsidiary, incorporated in July 2021, is subject to a profits tax rate of
8.25% for the first HKD2,000,000 of assessable profit and 16.5% for profit exceeding
HKD2,000,000. No provision for Hong Kong profits tax was made as we had no estimated
assessable profit that was subject to Hong Kong profits tax for the years ended December 31,
2020, 2021 and 2022 and the six months ended June 30, 2023.
FINANCIAL INFORMATION
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Mainland China
Our subsidiaries established in the Mainland China are subject to an income tax rate of
25% pursuant to relevant PRC laws and regulations.
RESULTS OF OPERATIONS
Six Months Ended June 30, 2023 Compared to Six Months Ended June 30, 2022
Revenue
Our revenue increased by 19.6% from RMB258.7 million for the six months ended June
30, 2022 to RMB309.4 million for the same period in 2023.
Revenue generated from pledged vehicle monitoring services increased by 13.5% from
RMB245.8 million for the six months ended June 30, 2022 to RMB279.1 million for the same
period in 2023, which was primarily attributable to an increase in the number of our service
agreements from 12,746 as of June 30, 2022 to 15,459 as of June 30, 2023 as the pledged
vehicle monitoring services market recovered after the COVID-19 pandemic and demand for
our services increased. We were able to obtain the new service agreements from financial
institutions and automobile dealerships by leveraging our technological capabilities,
experience in the industry and credibility among our user base. Our average annualized
pledged vehicle monitoring fees per service agreement was approximately RMB38,600 and
RMB36,100 for the six months ended June 30, 2022 and 2023, respectively, as we realized
economies of scale and reduced the manpower required for pledged vehicle monitoring
services, which enabled us to provide our services at a more competitive service fee level.
We commenced automobile dealership operation management services in April 2022.
Revenue generated from automobile dealership operation management services increased by
135.7% from RMB12.9 million for the six months ended June 30, 2022, which reflected
revenue for the three months during which we provided such services, to RMB30.4 million for
the same period in 2023, which reflected revenue for the full six months during this period.
Cost of Sales
Our cost of sales increased by 15.5% from RMB152.4 million for the six months ended
June 30, 2022 to RMB176.0 million for the same period in 2023, which was primarily due to
increases in (i) subcontracting costs for our pledged vehicle monitoring services as a result of
our business expansion and (ii) staff costs and share-based payment expenses for our
automobile dealership operation management services, as (a) we recorded such costs for the
full six months in the first half of 2023 as opposed to only three months in the same period in
2022, given that we started to provide automobile dealership operation management services
in April 2022, (b) the number of our staff increased as a result of business expansion and (c)
we incurred share-based payment expenses with respect to certain employees associated with
the grant of certain share options in this period.
FINANCIAL INFORMATION
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Gross Profit and Gross Profit Margin
Our gross profit increased by 25.6% from RMB106.2 million for the six months ended
June 30, 2022 to RMB133.4 million for the same period in 2023, which was primarily
attributable to an increase in the gross profit of pledged vehicle monitoring services.
Our gross profit margin increased from 41.1% for the six months ended June 30, 2022 to
43.1% for the same period in 2023, which was primarily attributable to an increase in gross
profit margin of pledged vehicle monitoring services. As our business continued to grow, we
realized economies of scale with the support of our technologies, which enabled our
subcontractors to supervise multiple automobile dealerships at the same time. The gross profit
margin for our automobile dealership operation management services was 39.3% for the six
months ended June 30, 2023, lower than that of 54.9% for the same period in 2022, primarily
as a result of (i) the expansion of our service team for automobile dealership operation
management services and the related increase in staff costs and (ii) the share-based payment
incurred in the six months ended June 30, 2023 in connection with the grant of certain share
options. See “History, Reorganization and Corporate Structure—Pre-IPO Share Incentive
Plans” for more details of the grant of share options.
Net Other Income
Our net other income increased from RMB0.5 million for the six months ended June 30,
2022 to RMB0.8 million for the same period in 2023, primarily due to an RMB0.4 million
increase in extra deduction of input V A T from our subcontracting costs, partially offset by an
RMB0.2 million decrease in government grants.
Impairment Reversal/(Losses)
Our impairment losses increased from RMB2.0 million for the six months ended June 30,
2022 to RMB3.7 million for the same period in 2023, which was primarily due to an increase
in loss allowance recognized as a result of the increase in trade receivables.
Research and Development Expenses
Our research and development expenses increased by 52.3% from RMB4.4 million for the
six months ended June 30, 2022 to RMB6.7 million for the same period in 2023, which was
primarily due to an RMB1.6 million increase in our staff costs as a result of an increase in the
number our research and development related employees and an RMB0.5 million share-based
payment expenses associated with the grant of share options to certain employees in this
period.
FINANCIAL INFORMATION
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General and Administrative Expenses
Our general and administrative expenses increased by 88.7% from RMB33.6 million for
the six months ended June 30, 2022 to RMB63.4 million for the same period in 2023, which
was primarily due to (i) an RMB12.0 million listing expenses associated with this Global
Offering; (ii) an increase of RMB6.8 million in staff costs as a result of an increase in the
number of our administrative staff due to business expansion; and (iii) an RMB9.9 million
share-based payment expenses associated with the grant of certain restricted shares and share
options to certain employees in this period.
Selling and Marketing Expenses
Our selling and marketing expenses increased by 29.6% from RMB2.7 million for the six
months ended June 30, 2022 to RMB3.5 million for the same period in 2023, which was
primarily due to our business expansion, which caused an increase in the number of our selling
and marketing staff and related staff costs.
Net Finance Expenses
Our net finance expenses increased by 25.0% from RMB1.2 million for the six months
ended June 30, 2022 to RMB1.5 million for the same period in 2023, which was primarily due
to an increase in interest expenses on lease liabilities.
Income Tax Expense
Our income tax expense increased by 36.5% from RMB14.8 million for the six months
ended June 30, 2022 to RMB20.2 million for the same period in 2023, which was primarily due
to an increase in profit generated by Changjiu Jinfu as a result of the business expansion of our
pledged vehicle monitoring services.
Profit for the Period
For the foregoing reasons, our profit for the period decreased from RMB48.1 million for
the six months ended June 30, 2022 to RMB35.3 million for the same period in 2023.
2022 Compared to 2021
Revenue
Our revenue increased by 14.7% from RMB477.7 million in 2021 to RMB547.9 million
in 2022.
FINANCIAL INFORMATION
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Revenue generated from pledged vehicle monitoring services increased by 5.7% from
RMB477.7 million in 2021 to RMB505.0 million in 2022, which was primarily attributable to
an increase in the number of our service agreements from 12,271 as of December 31, 2021 to
14,503 as of December 31, 2022 as the number of automobile dealerships in China increased
during this period, which drove up the demand for pledged vehicle monitoring services, and we
were able to obtain the new service agreements from financial institutions and automobile
dealerships by leveraging our technological capabilities, experience in the industry and
credibility among our user base, despite the fact that our average annual pledged vehicle
monitoring fees per service agreement decreased from RMB38,900 in 2021 to RMB34,800 in
2022. As our business continued to grow, we realized economies of scale and reduced the
manpower required for pledged vehicle monitoring services therefore our average annual
pledged vehicle monitoring fee per service agreement became more competitive and decreased
from RMB38,900 in 2021 to RMB34,800 in 2022.
We commenced automobile dealership operation management services in 2022. Revenue
generated from automobile dealership operation management services increased from nil in
2021 to RMB42.8 million in 2022.
Cost of Sales
Our cost of sales increased by 9.3% from RMB295.4 million in 2021 to RMB322.8
million in 2022, which was primarily due to an increase of RMB27.5 million in cost of sales
relating to the newly commenced automobile dealership operation management services. Our
cost of sales for pledged vehicle monitoring services remained stable at RMB295.4 million in
2021 and 2022.
Gross Profit and Gross Profit Margin
Our gross profit increased by 23.4% from RMB182.3 million in 2021 to RMB225.0
million in 2022, which was primarily attributable to an increase in the gross profit of pledged
vehicle monitoring services.
Our gross profit margin increased from 38.2% in 2021 to 41.1% in 2022, which was
primarily attributable to an increase in gross profit margin of pledged vehicle monitoring
services as our business continued to grow, we realized economies of scale with the support of
our technologies, which enabled our subcontractors to supervise multiple automobile
dealerships at the same time.
Net Other Income
We had net other income of RMB0.4 million and RMB1.6 million in 2021 and 2022,
respectively. The increase in net other income was primarily attributable to (i) an increase of
RMB0.7 million in extra deduction of input V A T as a result of an increase in expenses that were
subject to deduction; and (ii) an increase of RMB0.4 million in government grants primarily
for vocational and social insurance training activities.
FINANCIAL INFORMATION
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Impairment Reversal/(Losses)
We recorded reversal of impairment losses of RMB0.1 million in 2021, which was
primarily due to the overall improvement of our trade receivables aging as of December 31,
2021. We recorded impairment losses of trade receivables of RMB2.6 million in 2022, which
was primarily due to an increase in loss allowance recognized as a result of the increase in trade
receivables.
Research and Development Expenses
Our research and development expenses remained relatively stable in 2021 and 2022.
General and Administrative Expenses
Our general and administrative expenses increased by 8.3% from RMB71.1 million in
2021 to RMB77.0 million in 2022, which was primarily due to (i) an increase of RMB9.1
million in staff costs as a result of our business expansion; (ii) an increase in professional
service fees of RMB5.1 million mainly due to the increase in technology services provided by
related parties for IT infrastructure improvement to increase management efficiency; and (iii)
listing expenses of RMB2.1 million in 2022, which partially offset the effect of non-refundable
earnest money of RMB10.0 million in 2021.
Selling and Marketing Expenses
Our selling and marketing expenses increased by 16.2% from RMB6.1 million in 2021 to
RMB7.1 million in 2022, which was primarily due to an increase of RMB0.8 million in
marketing and entertainment expenses we incurred to maintain and expand our service
network.
Net Finance Expenses
Our net finance expenses increased by 6.5% from RMB3.1 million in 2021 to RMB3.3
million in 2022, which was primarily due to an increase in interest expenses on bank loans.
Income Tax Expense
Our income tax expense increased significantly from RMB9.4 million in 2021 to
RMB31.7 million in 2022, which was primarily due to the Reorganization in 2021. During the
eleven months prior to the completion of the Reorganization on November 30, 2021, our
pledged vehicle monitoring business line was operated by both a division of Changjiu
Industrial and Changjiu Jinfu. During the same period, Changjiu Industrial incurred losses after
tax adjustment, and no income tax charges, and therefore the profit for the pledged vehicle
monitoring business operated by Changjiu Industrial was not subject to tax prior to the
Reorganization in 2021. Only the remaining profit generated by Changjiu Jinfu was subject to
tax based on its statutory tax rate of 25%, which lead to relatively low income tax expense in
FINANCIAL INFORMATION
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--- page 308 ---
2021. After the Reorganization in 2021, the entire pledged vehicle monitoring service business
segment was operated by us. All profits generated from pledged vehicle monitoring services in
2022 were subject to tax based on the statutory tax rate of Changjiu Jinfu, therefore there is
a significant increase in EIT provision in the same year while our financial performance
remained relatively stable during the Track Record Period. Accordingly, our effective income
tax rate, calculated as our income tax expenses divided by profit before tax, of 10.1% in 2021
was lower than our effective income tax rate of 24.8% in 2022.
Profit for the Y ear
For the foregoing reasons, our profit for the year increased by 14.6% from RMB83.7
million in 2021 to RMB95.9 million in 2022.
2021 Compared to 2020
Revenue
Our revenue increased by 10.9% from RMB430.6 million in 2020 to RMB477.7 million
in 2021, which was primarily attributable to an increase in revenue generated from pledged
vehicle monitoring services.
Revenue generated from pledged vehicle monitoring services increased by 10.9% from
RMB430.6 million in 2020 to RMB477.7 million in 2021, which was primarily attributable to
an increase in the number of our service agreements from 10,963 as of December 31, 2020 to
12,271 as of December 31, 2021 as the number of automobile dealerships in China increased
during this period, which drove up the demand for pledged vehicle monitoring services, and we
were able to obtain the new service agreements from financial institutions and automobile
dealerships by leveraging our technological capabilities, experience in the industry and
credibility among our user base. The average annual pledged vehicle monitoring fees per
service agreement remained stable in 2020 and 2021.
Cost of Sales
Our cost of sales increased by 12.9% from RMB261.6 million in 2020 to RMB295.4
million in 2021, which was primarily due to an RMB32.7 million increase in subcontracting
costs for supervising the pledged vehicles across regions as a result of our business expansion.
Gross Profit and Gross Profit Margin
Our gross profit increased by 7.9% from RMB169.0 million in 2020 to RMB182.3 million
in 2021, which was attributable to an increase in the gross profit of pledged vehicle monitoring
services. Our overall gross profit margin remained stable in 2020 and 2021.
FINANCIAL INFORMATION
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Net Other Income
We had net other income of RMB0.6 million and RMB0.4 million in 2020 and 2021,
respectively. The slight decrease in net other income was primarily attributable to a decrease
of RMB0.2 million in government grants.
Impairment (Losses)/Reversal
We recorded impairment losses of RMB0.8 million in 2020, which was primarily due to
allowance for expected credit losses of trade receivables. We recorded reversal of impairment
losses of RMB0.1 million in 2021, which was primarily due to the overall improvement of our
trade receivables aging as of December 31, 2021.
Research and Development Expenses
Our research and development expenses decreased by 8.6% from RMB10.3 million in
2020 to RMB9.4 million in 2021, primarily due to an RMB5.5 million decrease in third-party
R&D costs as we started to develop the business-related features of VFS system and maintain
this system in house, which was partially offset by an increase of RMB4.6 million in staff costs
for our research and development personnel as a result of an increased number of personnel.
General and Administrative Expenses
Our general and administrative expenses increased by 67.0% from RMB42.6 million in
2020 to RMB71.1 million in 2021, which was primarily due to (i) an RMB10.6 million increase
in staff costs as a result of the expansion of our pledged vehicle monitoring services, which led
to an increase in the number of staff performing related tasks such as business process
formulation and customer communication; (ii) an RMB10.0 million non-refundable earnest
money we paid for a potential investment in an automobile-related e-commerce platform in
2021, which did not consummate after negotiation and due diligence in the same year; and (iii)
an RMB6.3 million increase in professional service fees mainly due to the increase in audit and
legal consulting services. The RMB10.0 million non-refundable earnest money for such
investment in 2021 was one-off and non-recurring.
Selling and Marketing Expenses
Our selling and marketing expenses increased by 20.9% from RMB5.1 million in 2020 to
RMB6.1 million in 2021, which was primarily due to an RMB0.8 million increase in staff costs
for our sales and marketing personnel and an RMB0.4 million increase in marketing and
entertainment expenses to maintain and expand our service network, which were generally in
line with our business expansion.
FINANCIAL INFORMATION
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Net Finance Expenses
Our net finance expenses increased significantly from RMB1.0 million in 2020 to
RMB3.1 million in 2021, which was primarily due to an increase in interest expenses of
RMB1.9 million on a bank loan. See “—Indebtedness.”
Income Tax Benefit/(Expense)
We recorded income tax benefit of RMB4.3 million in 2020 as a result of recognition of
deferred tax assets mainly from deductible accumulative losses in 2020. Even though we
recorded a net profit on a consolidated basis in 2020, it was attributable to the profit derived
from the pledged vehicle monitoring services provided by the division of Changjiu industrial,
the income tax liability on which was determined with respect to Changjiu Industrial as a
whole. Excluding such profit, the remainder of our business provided by Changjiu Jinfu, after
tax adjustment, had a net tax loss in that year. Since the net tax loss can be carried forward to
be deductible from future taxable profit in the next five years and it is probable that future
taxable profit will be available against which the net tax loss can be utilized, the deductible net
tax loss is recognized as a benefit to Changjiu Jinfu from tax perspective. A tax benefit and
deferred tax assets were recognized in 2020 accordingly.
Our income tax expenses amounted to RMB9.4 million in 2021. Our effective income tax
rate, calculated as our income tax expenses divided by profit before tax, of 10.1% in 2021 was
lower than the statutory tax rate in the PRC, which was primarily due to the Reorganization in
2021, where Changjiu Industrial incurred losses after tax adjustment and therefore the profit
for the pledged vehicle monitoring business operated by Changjiu Industrial was not subject to
tax prior to the Reorganization.
Profit for the Y ear
For the foregoing reasons, our profit for the year decreased by 26.6% from RMB114.1
million in 2020 to RMB83.7 million in 2021.
FINANCIAL INFORMATION
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DESCRIPTION OF CERTAIN CONSOLIDATED STATEMENTS OF FINANCIAL
POSITION ITEMS
The following table sets forth a summary of our consolidated statements of financial
position as of the dates indicated.
As of December 31,
As of
June 30,
20232020 2021 2022
(RMB’000)
Non-current assets
Property, plant and equipment 3,743 3,042 2,790 2,428
Intangible assets 5,064 4,204 3,412 8,586
Right-of-use assets 664 4,640 5,829 10,180
Deferred tax assets 4,393 331 1,512 4,655
Total non-current assets 13,864 12,217 13,543 25,849
Current assets
Trade receivables 39,964 59,861 101,311 179,783
Prepaid expenses and other
current assets 148,750 145,308 26,969 11,661
Cash and cash equivalents 89 1,533 119,341 72,395
Total current assets 188,803 206,702 247,621 263,839
Current liabilities
Bank loans 50,000 50,000 75,000 35,000
Trade payables 25,741 25,469 28,507 26,488
Accrued expenses and other
current liabilities 40,518 49,406 58,012 71,800
Contract liabilities 52,657 69,426 58,923 50,668
Lease liabilities 218 2,334 6,353 7,120
Current tax liabilities – 3,712 22,180 30,234
Total current liabilities 169,134 200,347 248,975 221,310
Net current
assets/(liabilities) 19,669 6,355 (1,354) 42,529
Non-current liabilities
Lease liabilities 397 2,359 64 7,308
Total non-current liabilities 397 2,359 64 7,308
Net assets 33,136 16,213 12,125 61,070
FINANCIAL INFORMATION
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Intangible Assets
Our intangible assets amounted to RMB5.0 million, RMB4.2 million and RMB3.4 million
as of December 31, 2020, 2021 and 2022, respectively, primarily reflecting the book value of
our VFS system. Our intangible assets increased from RMB3.4 million as of December 31,
2022 to RMB8.6 million as of June 30, 2023, primarily due to the purchase of the North Star
System and related software copyright from certain related party for our automobile dealership
operation management services.
Right-of-use assets
Our right-of-use assets consisted primarily of leases for offices and apartments for our
staff, which amounted to RMB0.7 million, RMB4.6 million and RMB5.8 million as of
December 31, 2020, 2021 and 2022, respectively. Our right-of-use assets increased from
RMB5.8 million as of December 31, 2022 to RMB10.2 million as of June 30, 2023, primarily
due to the extension and rent increase on the lease for our office in Beijing.
Trade Receivables
Our trade receivables primarily represent outstanding amounts due from financial
institutions and related parties. The following table sets forth the details of our trade
receivables as of the dates indicated and trade receivable turnover days for the periods
indicated.
As of December 31,
As of
June 30,
20232020 2021 2022
(RMB’000)
Trade receivables
– Third parties 40,714 56,902 94,948 170,319
– Related parties 243 3,860 9,284 16,335
Sub-total 40,957 60,762 104,232 186,654
Less: loss allowance (993) (901) (2,921) (6,871)
Net trade receivables 39,964 59,861 101,311 179,783
FINANCIAL INFORMATION
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As of December 31,
As of
June 30,
20232020 2021 2022
(RMB’000)
Trade receivable turnover days (1)
– Third parties 35 38 59 92
– Related parties 51 29 29 47
– Overall 35 39 55 85
Note:
(1) Calculated by dividing the arithmetic mean of the opening and ending balance of trade receivables in
that period by revenue for the corresponding period and then multiplying by 365 days for a full year
period or 180 days for a six-month period.
As of December 31, 2020, 2021 and 2022 and June 30, 2023, we had trade receivables
of RMB40.0 million, RMB59.9 million, RMB101.3 million and RMB179.8 million,
respectively. The increase of our trade receivables was primarily attributable to the growth of
our business and revenue during the Track Record Period.
Our overall trade receivable turnover days was 35 days, 39 days, 55 days and 85 days in
2020, 2021 and 2022 and the six months ended June 30, 2023, respectively. The increase in our
trade receivable turnover days in 2022 was mainly due to prolonged internal settlement review
processes of financial institutions as a result of periodic resurgence of the COVID-19
pandemic. The increase in our trade receivable turnover days in the six months ended June 30,
2023 was primarily attributable to (i) an increase in the number of pledged vehicle monitoring
service agreements where the financial institutions (instead of automobile dealerships) bear the
payment obligation, which often make payments of relevant service fees after the services are
provided, whereas automobile dealerships typically make advance payments for our services;
and (ii) prolonged settlement process by financial institutions due to their internal review.
We periodically perform an impairment analysis using a provision matrix to measure
expected credit losses and assess our credit risk exposure. As of December 31, 2020, 2021 and
2022 and June 30, 2023, we recorded loss allowance of RMB1.0 million, RMB0.9 million,
RMB2.9 million and RMB6.9 million, respectively.
FINANCIAL INFORMATION
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The following table sets forth an aging analysis, based on the transaction date and net of
loss allowance, of our trade receivables as of the dates indicated.
As of December 31,
As of
June 30,
20232020 2021 2022
(RMB’000)
Within three months 33,122 53,055 82,032 98,566
Three months to six months 4,202 4,558 11,190 57,382
Six months to one year 1,656 1,625 7,862 22,251
Over one year 1,977 1,524 3,148 8,455
Sub-total 40,957 60,762 104,232 186,654
Less: loss allowance (993) (901) (2,921) (6,871)
Total 39,964 59,861 101,311 179,783
To measure the expected credit losses of trade receivables, trade receivables have been
grouped based on shared credit risk characteristics and the aging. We use a provision matrix
to calculate expected credit loss for our trade receivables taking account historical observed
default rates and forward-looking information.
We believe there is no recoverability issue for our trade receivables and there is a
sufficient provision given: (i) our periodic performance of impairment analysis using a
provision matrix to measure expected credit losses and assessment of our credit risk exposure;
and (ii) we have been exerting efforts to enhance the management and collection of trade
receivables, in particular, we closely monitor the status of our trade receivables, we hold
periodic meetings to discuss the status of trade receivables, and we timely communicate with
relevant parties and remind them of due payments through various channels. We have
monitoring procedures to ensure that follow-up action is taken to recover overdue debts. In
addition, we review regularly the recoverable amount of trade receivables to ensure that
adequate impairment losses are made for irrecoverable amounts.
As of October 31, 2023, 71.4%, or RMB133.3 million, of our trade receivables as of June
30, 2023 had been subsequently settled.
FINANCIAL INFORMATION
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Prepaid Expenses and Other Current Assets
Our prepaid expenses and other current assets primarily consist of (i) amounts due from
related parties; (ii) loans to a third party; (iii) deposits, primarily representing deposits paid for
business tendering; (iv) prepaid expenses, primarily representing the capitalized listing
expenses and prepaid expenses related to the purchase of certain IT systems for office
management; and (v) prepaid income tax. The following table sets forth the details of prepaid
expenses and other current assets as of the dates indicated.
As of December 31,
As of
June 30,
20232020 2021 2022
(RMB’000)
Amounts due from related
parties 148,303 139,813 25,179 5,265
Loans to a third party – 4,800 – –
Deposits 791 1,103 287 307
Prepaid expenses 96 14 605 5,191
Prepaid income tax – – 898 898
Less: loss allowance (440) (422) – –
Total 148,750 145,308 26,969 11,661
As of December 31, 2020, 2021 and 2022 and June 30, 2023, our amounts due from
related parties amounted to RMB148.3 million, RMB139.8 million, RMB25.2 million and
RMB5.3 million, respectively, all of which were of a non-trade nature. The non-trade amounts
due from related parties were attributable to (i) the fund management between Changjiu Group
and us and (ii) the services fees collected by Changjiu Group on our behalf in connection with
certain pledged vehicle monitoring service agreements transferred to Changjiu Jinfu. The
non-trade amounts due from related parties as of June 30, 2023 had been fully settled as of the
Latest Practicable Date. See “—Related Party Transactions” for details.
Our prepaid expenses and other current assets decreased from 2020 to 2021, primarily due
to a decrease in amounts due from related parties, which was partially offset by loans we lent
to an Independent Third Party in November 2021 to supplement its working capital. The loans
had an annual interest rate of 6% and a term of 12 months. The Independent Third Party was
the target company for our potential investment in an automobile-related e-commerce platform.
The potential investment did not consummate after negotiation and due diligence in December
2021, following which the loans and related interests were repaid to us in full, in June 2022.
FINANCIAL INFORMATION
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Under the General Lending Provisions (), only financial institutions may
legally engage in the business of extending loans, and loans between companies that are not
financial institutions are prohibited. The PBOC may impose penalties on the lender equivalent
to one to five times of the income generated (being interests charged) from loan advancing
activities. However, pursuant to the Provisions of the Supreme People’s Court on Several
Issues concerning the Application of Law in the Trial of Private Lending Cases ( ௰৷ɛ͏
), or the Provisions, promulgated on
August 6, 2015, effective on September 1, 2015 and amended on August 20, 2020 and
December 29, 2020, loans among companies are valid if extended for purposes of financing
production or business operations, except for circumstances resulting in a void agreement
stipulated in the Civil Code of the PRC and the Provisions. The PRC courts will also support
a company’s claim for interest in respect of such a loan as long as the annual interest rate does
not exceed four times the one-year loan prime rate, at the time when the agreement is entered
into, published every month by National Interbank Funding Center (ʕː)
with the authorization from PBOC. Our PRC Legal Advisors are of the view that our financing
arrangement with the third party does not violate the applicable provisions of the Civil Code
of the PRC or the Provisions, after taking into consideration that our financing arrangement
with the third party was extended for purposes of financing business operations and in
compliance with the requirements of the Provisions above.
Our prepaid expenses and other current assets further decreased from 2021 to 2022, which
was primarily due to a decrease in amounts due from related parties and the repayment of the
loans by the Independent Third Party. Our prepaid expenses and other current assets further
decreased from December 31, 2022 to June 30, 2023, primarily due to a decrease in amounts
due from related parties, which was partially offset by an increase in prepaid expenses,
primarily reflecting increased capitalized listing expenses of RMB1.8 million and prepaid
expenses of RMB1.7 million for the purchase of certain IT systems for office management.
Cash and Cash Equivalents
As of December 31, 2020, 2021 and 2022 and June 30, 2023, we had cash and cash
equivalents of RMB89,000, RMB1.5 million, RMB119.3 million and RMB72.4 million,
respectively. The low cash balances as of December 31, 2020 and 2021 were primarily due to
the deemed distribution in relation to cash transferred to Changjiu Industrial prior to the
Reorganization in 2021. Our cash and cash equivalents decreased from December 31, 2022 to
June 30, 2023, primarily as a result of the repayment of certain bank loans.
Bank Loans
As of December 31, 2020, 2021 and 2022, we had bank loans of RMB50.0 million,
RMB50.0 million, and RMB75.0 million, respectively. The bank loans bore annual interest
rates of 5.66%, 4.60%, and 4.60% as of December 31, 2020, 2021 and 2022, respectively, and
were guaranteed by the Ultimate Controlling Shareholders and Changjiu Industrial, which are
related parties of the Group. The bank loans as of December 31, 2022 were fully repaid, and
the related guarantees were released, in April 2023. As of June 30, 2023, we had bank loans
of RMB35.0 million, which bore an annual interest rate of 4.60% and was secured by the
pledge of certain trade receivables from financial institutions. See “—Indebtedness” for
details.
FINANCIAL INFORMATION
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Trade Payables
Our trade payables primarily consist of payments due to our subcontracting service
providers. In general, we are required to settle subcontracting service fees on a monthly basis.
The following table sets forth the details of our trade payables as of the dates indicated.
As of December 31,
As of
June 30,
20232020 2021 2022
(RMB’000)
Trade payables
– Third parties 25,071 25,469 28,507 26,488
– A related party 67 0–––
Total 25,741 25,469 28,507 26,488
The following table sets forth an aging analysis of trade payables based on the invoice
dates as of the dates indicated and trade payable turnover days for the periods indicated.
As of/For the year ended
December 31,
As of/
For the six
months ended
June 30,
20232020 2021 2022
(RMB’000)
Within six months 25,728 25,469 28,507 26,488
Six months to one year 13 – – –
Total 25,741 25,469 28,507 26,488
Trade payable turnover
days (1) 36 32 31 28
Note:
(1) Calculated by dividing the arithmetic mean of the opening and ending balance of trade payables in that
period by cost of sales for the corresponding period and then multiplying by 365 days for a full year
period or 180 days for a six-month period.
Our trade payables remained stable as of December 31, 2020 and 2021. Our trade
payables increased from RMB25.5 million as of December 31, 2021 to RMB28.5 million as of
December 31, 2022 as a result of our business expansion. Our trade payables decreased from
RMB28.5 million as of December 31, 2022 to RMB26.5 million as of June 30, 2023 as a result
of settlement of certain payments due. Our trade payable turnover days was generally in line
with the credit term granted by our subcontractors throughout the Track Record Period.
FINANCIAL INFORMATION
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As of October 31, 2023, RMB23.9 million, or 90.1%, of our trade payables as of June 30,
2023 had been subsequently settled.
Our Directors confirm that we had no material defaults in payment of our trade or
non-trade payables during the Track Record Period and up to the Latest Practicable Date.
Accrued Expenses and Other Current Liabilities
Our accrued expenses and other current liabilities consist of (i) other payables to
customers, primarily representing advance payments we received from automobile dealerships,
which subsequently terminated their financing relationship (typically after the pledged vehicles
were sold or the secured financings were paid off) with the relevant financial institutions or
where financial institutions took over the obligation to pay service fees under the tripartite
pledged vehicle monitoring service agreements during the service period; (ii) accrued payroll
and welfare; (iii) value-added tax and surcharges payables; (iv) deposits we received from
automobile dealerships for our devices; (v) amounts due to related parties; (vi) restricted shares
repurchase liability; (vii) accrued listing expenses and (viii) others. The following table sets
forth the details of our accrued expenses and other current liabilities as of the dates indicated.
As of December 31,
As of
June 30,
20232020 2021 2022
(RMB’000)
Other payables to customers 13,983 20,167 26,634 34,880
Accrued payroll and welfare 5,838 9,152 15,209 12,429
V alue-added tax and
surcharges payable 15,757 13,837 10,168 10,174
Deposit received from third
parties 3,179 2,933 2,603 2,535
Amounts due to related
parties 1,301 1,301 1,301 2,391
Restricted shares repurchase
liability – – – 4,325
Accrued listing expenses – – – 4,043
Others
(1) 460 2,016 2,097 1,023
Total 40,518 49,406 58,012 71,800
Note:
(1) Mainly included payables for professional service fees and staff reimbursement.
FINANCIAL INFORMATION
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Our accrued expenses and other current liabilities increased from RMB40.5 million as of
December 31, 2020 to RMB49.4 million as of December 31, 2021, which was primarily due
to an RMB6.2 million increase in other payables to customers and an increase of RMB3.3
million in accrued payroll and welfare. Our accrued expenses and other current liabilities
increased from RMB49.4 million as of December 31, 2021 to RMB58.0 million as of December
31, 2022, which was primarily due to an RMB6.5 million increase in other payables to
customers and an increase of RMB6.1 million in accrued payroll and welfare. Our accrued
expenses and other current liabilities increased from RMB58.0 million as of December 31,
2022 to RMB71.8 million as of June 30, 2023, which was primarily due to (i) an increase of
RMB8.2 million in other payables to customers, (ii) an RMB4.3 million of restricted shares
repurchase liability associated with the grant of certain restricted shares in March 2023 and (iii)
an RMB4.0 million of accrued listing expenses associated with this Global Offering.
Other payables to customers increased throughout the Track Record Period, which was
primarily due to the accumulation of prepaid service fees to be refunded to automobile
dealerships when (i) the automobile dealerships terminated their financing relationship
(typically after the pledged vehicles were sold or the secured financings were paid off) with the
relevant financial institutions and the related pledged vehicle monitoring service agreements
with us pursuant to the relevant contractual terms, which, according to CIC, this is a common
practice in the automobile sales and distribution industry in China; or (ii) there was a change
in settlement party from the automobile dealerships to the financial institutions under certain
of our pledged vehicle monitoring service agreements. We typically received advance
payments from automobile dealerships prior to the provision of our pledged vehicle monitoring
services, but financial institutions may choose to take over the obligation to pay for the same
services under the service agreements and paid the relevant service fees during the service
period. The advances payment of services fees we received from automobile dealerships then
becomes the amount of payables back to them. Financial institutions may choose to take over
the obligation to pay service fees following further negotiation with automobile dealerships,
which we believe is based on their internal requirements and their evaluation of evolving
customer needs and competition landscape in an effort to improve their competitiveness and
increase the attractiveness of their products. We are typically indifferent to the arrangement of
paying party, primarily because (i) we provide the same services to financial institutions and
automobile dealerships regardless of who is the paying party under the tripartite agreements;
and (ii) based on our experience, both financial institutions and automobile dealerships were
creditworthy and had no material defaults on their service payments during the Track Record
Period. See “Business—Pledged V ehicle Monitoring Services—Overview” for a detailed
discussion on payment negotiation factors. Our Directors confirm that the other payables to
customers during the Track Record Period did not have a material adverse effect on our
business, financial position or results of operations.
As of December 31, 2020, 2021 and 2022 and June 30, 2023, our amounts due to related
parties amounted to RMB1.3 million, RMB1.3 million, RMB1.3 million and RMB2.4 million,
respectively, all of which were of a trade nature. See “—Related Party Transactions” for
details.
FINANCIAL INFORMATION
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Contract Liabilities
Our contract liabilities primarily represent advance payments from customers for the
provision of pledged vehicle monitoring services. Our contract liabilities amounted to
RMB52.7 million, RMB69.4 million, RMB58.9 million and RMB50.7 million as of December
31, 2020, 2021 and 2022 and June 30, 2023, respectively. During the Track Record Period,
some of the automobile dealerships prepay the service fees in advance on a monthly or
quarterly basis, while other customers, particularly financial institutions, may be granted credit
terms by us for our pledged vehicle monitoring services. Our contract liabilities fluctuated
during the Track Record Period because of changes in the mix of paying customers.
The following table sets forth an aging analysis of our contract liabilities as of the dates
indicated.
As of December 31,
As of
June 30,
20232020 2021 2022
(RMB’000)
Within three months 45,494 56,468 47,649 38,129
Three months to six months 4,676 7,718 8,203 9,774
Six months to one year 1,715 3,564 1,320 2,551
More than one year 772 1,676 1,751 214
Total 52,657 69,426 58,923 50,668
As of October 31, 2023, 77.1%, or RMB39.1 million, of our contract liabilities as of June
30, 2023 had been subsequently recognized as revenue.
LIQUIDITY AND CAPITAL RESOURCES
Our primary uses of cash during the Track Record Period were to fund our subcontracting
costs, employee compensation, research and development, sales and marketing of our services,
as well as other working capital needs. Historically, we have financed our operations and other
capital requirements primarily through cash generated from our operations and proceeds from
bank loans.
Our anticipated cash needs primarily include costs associated with business operations.
We expect to fund our future working capital and other cash requirements with cash generated
from our operations, the net proceeds from Global Offering and, when necessary, bank loans
and other borrowings. Taking into account our internal resources, our cash flow from
operations, proceeds from bank loans and the estimated net proceeds from the Global Offering,
our Directors are of the view, and the Joint Sponsors concur, that the working capital available
to us is sufficient at present and for at least the next 12 months from the date of this prospectus.
FINANCIAL INFORMATION
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Net Current Assets
The following table sets forth a summary of our current assets and liabilities as of the
dates indicated.
As of December 31,
As of
June 30,
2023
As of
October 31,
20232020 2021 2022
(RMB’000)
(unaudited)
Current assets
Trade receivables 39,964 59,861 101,311 179,783 181,457
Prepaid expenses and
other current assets 148,750 145,308 26,969 11,661 27,548
Cash and cash
equivalents 89 1,533 119,341 72,395 94,407
Total current assets 188,803 206,702 247,621 263,839 303,412
Current liabilities
Bank loan 50,000 50,000 75,000 35,000 35,000
Trade payables 25,741 25,469 28,507 26,488 26,362
Accrued expenses and
other current
liabilities 40,518 49,406 58,012 71,800 62,453
Contract liabilities 52,657 69,426 58,923 50,668 42,303
Lease liabilities 218 2,334 6,353 7,120 7,184
Current tax liabilities – 3,712 22,180 30,234 30,725
Total current
liabilities 169,134 200,347 248,975 221,310 204,027
Net current
assets/(liabilities) 19,669 6,355 (1,354) 42,529 99,385
Our net current assets decreased from RMB19.7 million as of December 31, 2020 to
RMB6.4 million as of December 31, 2021, which was primarily due to (i) an RMB16.8 million
increase in contract liabilities arising from advance payments from customers for the provision
of pledged vehicle monitoring services; (ii) an RMB8.9 million increase in accrued expenses
and other current liabilities; and (iii) an RMB3.7 million increase in current tax liabilities,
partially offset by an RMB19.9 million increase in trade receivables.
FINANCIAL INFORMATION
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We recorded net current liabilities of RMB1.4 million as of December 31, 2022, which
was primarily due to the RMB101.0 million consideration paid in 2022 to acquire the 100%
equity interest in Changjiu Jinfu as part of the Reorganization. See “History, Reorganization
and Corporate Structure—Reorganization—Onshore Reorganization—Acquisition of Changjiu
Jinfu by Shanghai Bozhong” for details.
Our net current liabilities of RMB1.4 million as of December 31, 2022 turned to net
current assets of RMB42.5 million as of June 30, 2023, which was primarily due to an increase
of RMB78.5 million in trade receivables and a decrease of RMB40.0 million in bank loans,
partially offset by a decrease of RMB46.9 million in cash and cash equivalents and an increase
of RMB13.8 million in accrued expenses and other current liabilities.
Our net current assets increased from RMB42.5 million as of June 30, 2023 to RMB99.4
million as of October 31, 2023, which was primarily attributable to an RMB22.0 million
increase in cash and cash equivalents, an RMB15.9 million increase in prepaid expenses and
other current assets and an RMB9.3 million decrease in accrued expenses and other current
liabilities.
Cash Flows
The following table sets forth a summary of our consolidated cash flow statements for the
periods indicated.
For the year ended
December 31,
For the six months
ended June 30,
2020 2021 2022 2022 2023
(RMB’000)
(unaudited)
Operating profit
before changes in
working capital 116,739 111,023 139,986 68,636 78,574
Changes in working
capital 7,488 5,353 (42,631) (75,082) (84,059)
Income tax paid – (1,644) (15,325) (2,681) (15,270)
Net cash generated
from/(used in)
operating activities 124,227 114,732 82,030 (9,127) (20,755)
Net cash (used
in)/generated from
investing activities (74,508) (52,935) 118,584 (20,036) 12,406
Net cash (used in)/
generated from
financing activities (67,981) (60,353) (82,806) 38,337 (38,768)
FINANCIAL INFORMATION
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--- page 323 ---
For the year ended
December 31,
For the six months
ended June 30,
2020 2021 2022 2022 2023
(RMB’000)
(unaudited)
Net
(decrease)/increase
in cash and cash
equivalents (18,262) 1,444 117,808 9,174 (47,117)
Cash and cash
equivalents at the
beginning of the
year/period 18,351 89 1,533 1,533 119,341
Effect of foreign
exchange rate
changes –––– 1 7 1
Cash and cash
equivalents at the
end of the
year/period 89 1,533 119,341 10,707 72,395
Operating Activities
In the six months ended June 30, 2023, our net cash used in operating activities was
RMB20.8 million, which was primarily the result of our profit before tax of RMB55.5 million,
as adjusted for non-cash and non-operating items, which was further adjusted by negative
changes in working capital of RMB84.1 million and income tax paid of RMB15.3 million. The
negative changes in working capital were mainly due to (i) an RMB82.4 million increase in
trade receivables; and (ii) an RMB8.3 million decrease in contract liabilities, partially offset
by an RMB9.5 million increase in accrued expenses and other liabilities. Our cash outflow was
primarily due to an increase in trade receivables for the six months ended June 30, 2023. To
address our cash outflow position, we intend to enhance our efforts in the collection of trade
receivables and maintain strict control over our trade receivables and overdue balances on an
ongoing basis, in particular, we closely monitor the status of our trade receivables, we hold
periodic meetings to discuss the status of trade receivables, and we timely communicate with
relevant parties and remind them of due payments through various channels. In addition, we
intend to further enhance our cost control measures, such as implementing technological
initiatives and digitalization efforts to reduce our reliance on manpower.
In the six months ended June 30, 2022, our net cash used in operating activities was
RMB9.1 million, which was primarily the result of our profit before tax of RMB62.9 million,
as adjusted for non-cash and non-operating items, which was further adjusted by negative
changes in working capital of RMB75.1 million and income tax paid of RMB2.7 million. The
FINANCIAL INFORMATION
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--- page 324 ---
negative changes in working capital were mainly due to (i) an RMB68.8 million increase in
trade receivables; and (ii) an RMB16.4 million decrease in contract liabilities, partially offset
by an RMB10.1 million increase in accrued expenses and other liabilities. Our cash outflow
was primarily due to an increase in trade receivables for the six months ended June 30, 2022.
In 2022, we had net cash generated from operating activities of RMB82.0 million,
primarily attributable to our profit before tax of RMB127.6 million, as adjusted for non-cash
and non-operating items, which was further adjusted by negative changes in working capital
and income tax paid of RMB15.3 million. The negative changes in working capital were mainly
due to (i) an RMB43.7 million increase in trade receivables as a result of the growth of our
business and revenue; and (ii) an RMB10.5 million decrease in contract liabilities arising from
advance payments from customers for the provision of pledged vehicle monitoring services,
partially offset by an RMB8.6 million increase in accrued expenses and other liabilities as a
result of an increase in other payables to customers and accrued payroll and welfare, and an
RMB3.0 million increase in trade payable.
In 2021, we had net cash generated from operating activities of RMB114.7 million,
primarily attributable to our profit before tax of RMB93.1 million, as adjusted for non-cash and
non-operating items, which was further adjusted by positive changes in working capital and
income tax paid of RMB1.6 million. The positive changes in working capital were mainly
attributable to (i) an RMB16.8 million increase in contract liabilities arising from advance
payments from customers for the provision of pledged vehicle monitoring services; and (ii) an
RMB8.9 million increase in accrued expenses and other liabilities, partially offset by an
RMB19.8 million increase in trade receivables as a result of the growth of our business and
revenue.
In 2020, we had net cash generated from operating activities of RMB124.2 million,
primarily attributable to our profit before tax of RMB109.8 million, as adjusted for non-cash
and non-operating items, which was further adjusted by positive changes in working capital.
The positive changes in working capital were mainly attributable to (i) an RMB3.3 million
decrease in trade receivables; (ii) an RMB2.7 million increase in contract liabilities arising
from advance payments from customers for the provision of pledged vehicle monitoring
services; and (iii) an RMB2.2 million increase in trade payables as a result of our business
expansion, partially offset by an RMB1.9 million decrease in accrued expenses and other
liabilities.
Investing Activities
In the six months ended June 30, 2023, our net cash generated from investing activities
was RMB12.4 million, primarily attributable to net receipt from related parties of RMB14.3
million, partially offset by prepayment for acquisition of intangible assets of RMB1.7 million.
In 2022, our net cash generated from investing activities was RMB118.6 million,
primarily attributable to net receipts from related parties of RMB114.6 million and loan of
RMB4.8 million.
FINANCIAL INFORMATION
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In 2021, our net cash used in investing activities was RMB52.9 million, primarily
attributable to (i) net payments to related parties of RMB37.0 million; (ii) non-refundable
earnest money we paid for an unconsummated investment of RMB10.0 million; and (iii) loans
to a third party of RMB4.8 million.
In 2020, our net cash used in investing activities was RMB74.5 million, attributable to (i)
net payments to related parties of RMB73.5 million; and (ii) purchase of property, plant and
equipment of RMB1.0 million.
Financing Activities
In the six months ended June 30, 2023, our net cash used in financing activities was
RMB38.8 million, primarily attributable to repayment of bank loans of RMB75.0 million,
partially offset by proceeds from bank loans of RMB35.0 million.
In 2022, our net cash used in financing activities was RMB82.8 million, primarily
attributable to the RMB101.0 million consideration paid in 2022 to acquire the 100% equity
interest in Changjiu Jinfu as part of the Reorganization and repayment of bank loans of
RMB50.0 million, partially offset by proceeds from bank loans of RMB75.0 million.
In 2021, our net cash used in financing activities was RMB60.4 million, primarily
attributable to repayment of bank loans of RMB50.0 million, deemed distribution in relation
to cash transferred to Changjiu Industrial of RMB33.1 million and dividend paid by Changjiu
Jinfu to its then shareholders of RMB22.0 million, partially offset by proceeds from bank loans
of RMB50.0 million.
In 2020, our net cash used in financing activities was RMB68.0 million, primarily
attributable to deemed distribution in relation to cash transferred to Changjiu Industrial of
RMB115.2 million, partially offset by proceeds from bank loans of RMB50.0 million.
INDEBTEDNESS
The following table sets forth a summary of our indebtedness as of the dates indicated.
As of December 31,
As of
June 30,
2023
As of
October 31,
20232020 2021 2022
(RMB’000)
(unaudited)
Bank loans 50,000 50,000 75,000 35,000 35,000
Lease
liabilities 615 4,693 6,417 14,428 14,629
Total 50,615 54,693 81,417 49,428 49,629
FINANCIAL INFORMATION
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As of December 31, 2020, 2021 and 2022, June 30, 2023 and October 31, 2023, we had
bank loans of RMB50.0 million, RMB50.0 million, RMB75.0 million, RMB35.0 million and
RMB35.0 million, respectively, representing short-term working capital loans from reputable
PRC commercial banks, which was primarily used to fund our business operation. The bank
loans outstanding as of October 31, 2023 were secured by a pledge of certain of our trade
receivables from financial institutions.
As of December 31, 2020, 2021 and 2022, June 30, 2023 and October 31, 2023, we
recorded lease liabilities of RMB0.6 million, RMB4.7 million, RMB6.4 million, RMB14.4
million and RMB14.6 million, respectively, which were primarily in relation to the properties
we leased for our office premises. The lease liabilities increased during the Track Record
Period as we renewed our leases from time to time and leased more spaces for our office
premises during the Track Record Period.
As of December 31, 2020, 2021 and 2022 and June 30, 2023, October 31, 2023 and the
Latest Practicable Date, we did not have any contingent liabilities. We confirm that there had
been no material changes or arrangements to our contingent liabilities as of the Latest
Practicable Date.
We had unutilized banking facilities of RMB50.0 million as of the Latest Practicable
Date.
As of December 31, 2020, 2021 and 2022 and June 30, 2023 and October 31, 2023, except
as disclosed above, we did not have any outstanding mortgages, charges, debentures, other
issued debt capital, bank overdrafts, borrowings, liabilities under acceptance or other similar
indebtedness, acceptance credits, hire purchase commitments, any guarantees or other material
contingent liabilities. Since October 31, 2023 and up to the Latest Practicable Date, our
Directors confirm there had been no adverse change to our indebtedness. Our Directors further
confirm that during the Track Record Period and up to the Latest Practicable Date, our Group
did not experience any material difficulties in obtaining or repaying bank loans or other
borrowings and they were not aware of any breach of covenants contained in our banking or
other borrowing facilities constituting any events of default.
CAPITAL EXPENDITURE AND COMMITMENTS
Capital Expenditure
Our capital expenditure during the Track Record Period related to purchases of property,
plant and equipment and intangible assets. In 2020, 2021 and 2022 and the six months ended
June 30, 2023, the total amount of purchase of property, plant and equipment were RMB1.0
million, RMB1.1 million, RMB1.0 million and RMB0.1 million, respectively. In the six months
ended June 30, 2023, we recorded prepayment for acquisition of intangible assets of RMB1.7
million, related to the purchase of certain IT systems for office management. During the Track
Record Period, we financed our capital expenditures primarily through cash flow from
operations.
FINANCIAL INFORMATION
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We expect our capital expenditure in 2023 to remain at similar level, subject to any future
changes in our business plan, market conditions, and the economic and regulatory environment.
We plan to finance such expenditure primarily through cash flow from operating activities and
the net proceeds from the Global Offering.
Commitments
As of December 31, 2020, 2021 and 2022, we did not have any material capital
commitment. As of June 30, 2023, we had capital commitments of RMB14.8 million associated
with the acquisition of certain software for office management.
CONTINGENT LIABILITIES
As of the Latest Practicable Date, we did not have any contingent liabilities. We confirm
that there had been no material changes or arrangements to our contingent liabilities as of the
Latest Practicable Date.
RELATED PARTY TRANSACTIONS
During the Track Record Period, our transactions with related parties primarily include (i)
payment of remuneration to key management personnel; (ii) transactions with related parties
for provision of services and purchase of intangible asset; (iii) advance to and repayment from
related parties; and (iv) transactions with related parties for lease arrangements, as described
in Note 26 to the Accountants’ Report in Appendix I to this prospectus.
Provisions of Services
We provided pledged vehicle monitoring services and automobile dealership operation
management services to related parties, including a company controlled by Ms. Li, during the
Track Record Period. In 2020, 2021 and 2022 and the six months ended June 30, 2022 and
2023, revenue recorded for providing services to related parties, including the aforementioned
company controlled by Ms. Li, amounted to RMB1.7 million, RMB9.3 million, RMB81.8
million, RMB34.5 million and RMB49.5 million, respectively, representing for 0.4%, 2.0%,
14.9%, 13.3% and 16.0% of our total revenue for the same periods. In 2020, 2021 and 2022
and the six months ended June 30, 2022 and 2023, the revenue recorded for providing pledged
vehicle monitoring services to the aforementioned company controlled by Ms. Li amounted to
RMB1.1 million, RMB0.7 million, RMB0.7 million, RMB0.6 million and nil, respectively. The
revenue recorded for providing services to related parties significantly increased from 2021 to
2022 and the six months ended June 30, 2023, which was primarily attributable to the fact that
we started to provide automobile dealership operation management services to related parties
in April 2022 and the derived revenue under the entrustment arrangements between Changjiu
Industrial and us.
FINANCIAL INFORMATION
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Services Received from Related Parties
During the Track Record Period, we received technology and operational services from
related parties. In 2020, 2021 and 2022 and the six months ended June 30, 2022 and 2023, the
expenses of services received from related parties amounted to RMB6.3 million, RMB2.4
million, RMB20.1 million, RMB6.5 million and RMB1.1 million, respectively. The expenses
increased from 2021 to 2022, which was primarily due to the technical service fees of
RMB11.8 million we incurred for testing and implementation of our North Star System for our
automobile dealership operation management services. Such services were provided by our
related party in 2022 and were one-off in nature. See “—Description of Certain Consolidated
Statements of Profit or Loss—Cost of Sales” for details.
Purchase of Intangible Asset from Related Parties
In the six months ended June 30, 2023, we made a purchase of RMB5.7 million from a
related party for the North Star System for the provision of our automobile dealership operation
management services. Such purchase was one-off and non-recurring in nature and the amount
was settled by offsetting the amount due from the related party.
Lease Payments
In 2020, 2021 and 2022 and the six months ended June 30, 2022 and 2023, our lease
payment to related parties amounted to RMB1.9 million, RMB2.5 million, RMB4.2 million, nil
and nil, respectively.
Net Change of Non-trade Related Amounts Due from Related Parties
When we were part of Changjiu Group, there were fund transfers among related parties
as a result of the fund management between Changjiu Group and us. The net change of
non-trade related amounts due from related parties was RMB73.5 million, negative RMB8.5
million, negative RMB114.6 million, RMB24.7 million and negative RMB19.9 million in
2020, 2021 and 2022 and the six months ended June 30, 2022 and 2023, respectively.
FINANCIAL INFORMATION
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Balances with Related Parties
The following table sets for a breakdown of our amounts due from and due to related
parties as of the dates indicated.
As of December 31,
As of
June 30,
20232020 2021 2022
(RMB’000)
Amounts due from related
parties 148,546 143,673 33,378 20,515
– Trade related 243 3,860 8,199 15,250
– Non-trade related 148,303 139,813 25,179 5,265
Amounts due to related
parties 1,971 1,301 1,301 2,391
– Trade related 1,971 1,301 1,301 2,391
Contract liabilities – 6,723 5,732 4,031
– Trade related – 6,723 5,732 4,031
The amounts due from and due to related parties of a non-trade nature are non-interest-
bearing and unsecured. Our Directors are of the view that the transactions with related parties
were conducted on an arm’s-length basis.
The contract liabilities arose primarily from the Unassigned Agreements under the
business transfer of pledged vehicle monitoring services from Changjiu Industrial to us as part
of the Reorganization. Despite that Changjiu Industrial is still a signing party of the
Unassigned Agreements, Changjiu Industrial does not directly provide any pledged vehicle
monitoring services to the users under such agreements and has entirely and exclusively
entrusted such services to us. See “History, Reorganization and Corporate
Structure—Reorganization—Onshore Reorganization—Business transfer of pledged vehicle
monitoring services” and “Connected Transactions—Non-exempt Continuing Connected
Transaction—(4) Entrustment Agreement” for further details of the business transfer and the
entrustment arrangements between Changjiu Industrial and us.
The amounts due from related parties of a non-trade nature had been fully settled as of
the Latest Practicable Date.
FINANCIAL INFORMATION
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KEY FINANCIAL RATIOS
The following table sets forth our key financial ratios as of the dates or for the periods
indicated.
As of/For the year ended
December 31,
As of/For the
six months ended
June 30,
2020 2021 2022 2022 2023
(unaudited)
Return on equity (1)(%) 344.3 339.3 676.9 (493.5) (6) 96.4
Return on asset (2)(%) 56.3 39.7 40.0 17.9 12.8
Current ratio (3) 1.1 1.0 1.0 0.9 1.2
Liabilities to assets
ratio (4) 0.8 0.9 1.0 1.1 0.8
Gearing ratio (5) (%) 150.9 308.4 618.6 (248.5) (6) 57.3
Notes:
(1) Equals profit for the period divided by average balance of total equity at the beginning and the end of
that period and multiplied by 100%.
(2) Equals profit for the period divided by average balance of total assets at the beginning and the end of
that period and multiplied by 100%.
(3) Current ratio represents current assets divided by current liabilities as of the same date.
(4) Liabilities to assets ratio represents total liabilities divided by total assets as of the same date.
(5) Gearing ratio represents the sum of interest-bearing bank loans divided by total equity as of the same
dates and multiplied by 100%.
(6) As of June 30, 2022, our return on equity and gearing ratio were negative primarily because we recorded
net liabilities as of the same date.
Return on Equity
Our return on equity remained stable in 2020 and 2021. Our return on equity increased
from 339.3% in 2021 to 676.9% in 2022, primarily attributable to a decrease in our equity from
RMB33.1 million as of December 31, 2020 to RMB16.2 million as of December 31, 2021, and
further to RMB12.1 million as of December 31, 2022, which was primarily attributable to a
deemed distribution in relation to cash transferred to Changjiu Industrial in 2021, a dividend
distribution by Changjiu Jinfu to its then shareholders in 2021, and the consideration paid in
2022 to acquire the 100% equity interest in Changjiu Jinfu as part of the Reorganization.
Our return on equity decreased from 676.9% in 2022 to 96.4% in the six months ended
June 30, 2023, primarily attributable to (i) the increase in our total equity from RMB12.1
million as of December 31, 2022 to RMB61.1 million as of June 30, 2023, primarily as a result
of the net profit of RMB35.3 million recorded for the period; and (ii) the fact that only profit
for the first half of 2023 was taken into account in our calculation of return on equity for the
six months ended June 30, 2023 as compared to the full year effect in 2022.
FINANCIAL INFORMATION
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Return on Asset
Our return on assets decreased from 56.3% in 2020 to 39.7% in 2021, which was
primarily due to the fact that the profit for the year decreased while total assets also increased
from 2020 to 2021. Our return on assets remained stable in 2021 and 2022.
Our return on asset decreased from 40.0% in 2022 to 12.8% in the six months ended June
30, 2023, primarily attributable to the fact that only profit for the first half of 2023 was taken
into account in our calculation of return on asset for the six months ended June 30, 2023 as
compared to the full year effect in 2022.
Current Ratio
Our current ratio remained relatively stable during the Track Record Period.
Liabilities to Assets Ratio
Our liabilities to assets ratio increased slightly from 0.8 as of December 31, 2020 to 0.9
as of December 31, 2021, and further increased to 1.0 as of December 31, 2022 as the increase
in total liabilities outpaced the increase in total assets. Our liabilities to assets ratio decreased
from 1.0 as of December 31, 2022 to 0.8 as of June 30, 2023, as our total liabilities decreased
from December 31, 2022 to June 30, 2023, while our total assets increased during the same
period.
Gearing Ratio
Our gearing ratio increased from 150.9% as of December 31, 2020 to 308.4% as of
December 31, 2021, primarily due to a decrease in our equity from RMB33.1 million as of
December 31, 2020 to RMB16.2 million as of December 31, 2021, which was primarily
attributable to a deemed distribution in relation to cash transferred to Changjiu Industrial in
2021 and a dividend distribution by Changjiu Jinfu to its then shareholders in 2021. Our
gearing ratio increased from 308.4% as of December 31, 2021 to 618.6% as of December 31,
2022, primarily due to an increase in our bank loans from RMB50.0 million as of December
31, 2021 to RMB75.0 million as of December 31, 2022, as well as a decrease in our equity from
RMB16.2 million as of December 31, 2021 to RMB12.1 million as of December 31, 2022,
which was primarily attributable to the consideration paid in 2022 to acquire the 100% equity
interest in Changjiu Jinfu as part of the Reorganization, which in turn contributed to a
relatively high gearing ratio as of December 31, 2022. Our gearing ratio decreased from
618.6% as of December 31, 2022 to 57.3% as of June 30, 2023, primarily due to the decrease
in bank loans from RMB75.0 million as of December 31, 2022 to RMB35.0 million as of June
30, 2023, and the significant increase in our total equity in the same period primarily as a result
of the recorded net profit.
FINANCIAL INFORMATION
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OFF-BALANCE SHEET COMMITMENTS AND ARRANGEMENTS
As of the Latest Practicable Date, we had not entered into any off-balance sheet
transactions.
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT FINANCIAL RISK
We are exposed to a variety of financial risks, including credit risk, liquidity risk, interest
rate risk and foreign exchange risk, as set out below. We manage and monitor these exposures
to ensure appropriate measures are implemented on a timely and effective manner. See Note 25
to the Accountants’ Report in Appendix I to this prospectus for further details.
Credit Risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations
resulting in a financial loss to our Group. Our credit risk is primarily attributable to trade
receivables. For trade receivables, we have policies in place to ensure that provisions of
services are made to customers with an appropriate credit history. We also have other
monitoring procedures to ensure that follow-up action is taken to recover overdue debts. In
addition, we review regularly the recoverable amount of trade receivable to ensure that
adequate impairment losses are made for irrecoverable amounts. The exposure to credit risk
arising from cash and cash equivalents is limited because the counterparties are banks for
which we consider to have low credit risk. We do not provide any guarantees which would
expose us to credit risk.
Liquidity Risk
Our policy is to regularly monitor our liquidity requirements and our compliance with
lending covenants, to ensure that we maintain sufficient reserves of cash to meet our liquidity
requirements in the short and longer term.
Interest Rate Risk
Our interest rate risk arises primarily from interest-bearing bank loans. The majority of
our interest-bearing financial instruments at fixed interest rates as of December 31, 2020, 2021
and 2022 and June 30, 2023 are bank loans and lease liabilities, and the change of interest rate
does not expose us to significant interest risk.
Foreign Exchange Risk
We were not exposed to significant foreign exchange risk as of December 31, 2020, 2021
and 2022. As of June 30, 2023, our foreign exchange risk primarily arose from cash and cash
equivalents denominated in Hong Kong dollars of approximately HK$4.9 million associated
with the grant of certain restricted shares.
FINANCIAL INFORMATION
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DIVIDENDS
During the Track Record Period, our Company did not declare or pay any dividend. In
2021, Changjiu Jinfu, a wholly owned subsidiary of our Company, declared and paid dividends
of RMB22.0 million to its then shareholders.
We do not have a specific dividend policy or a predetermined dividend payout ratio. The
decision to pay dividends in the future will be made at the discretion of our Board and will be
based on our profits, cash flows, financial condition, capital requirements and other conditions
that our Board deems relevant. The payment of dividends may be limited by other legal
restrictions and agreements that we may enter into in the future.
DISTRIBUTABLE RESERVES
As of June 30, 2023, our Company did not have any distributable reserves.
LISTING EXPENSES
Our listing expenses include underwriting commission, professional fees and other fees
incurred in connection to the Listing and the Global Offering. Listing expenses to be borne by
us are estimated to be RMB46.8 million (including underwriting commission and fees of
approximately RMB16.8 million, and non-underwriting related expenses of approximately
RMB30.0 million, which consist of accounting and legal fees and expenses of approximately
RMB17.3 million and other fees and expenses of approximately RMB12.7 million, assuming
an Offer Price of HK$6.93 per Offer Share, being the mid-point of the indicative Offer Price
range of HK$5.95 to HK$7.90 per Offer Share), of which RMB17.7 million is expected to be
accounted for as a deduction from equity upon the Listing. Listing expenses accounted for
approximately 14.7% of our gross proceeds. During the Track Record Period, the listing
expenses charged to profit or loss were RMB14.1 million (HK$15.5 million). RMB15.0 million
is expected to be charged to our consolidated statements of profit or loss for the remaining
period ending December 31, 2023. The listing expenses above are the latest practicable
estimate for reference only, and the actual amount may differ from this estimate.
UNAUDITED PRO FORMA STATEMENT OF ADJUSTED NET TANGIBLE ASSETS
The unaudited pro forma statement of adjusted net tangible assets of our Group prepared
in accordance with Rule 4.29 of the Listing Rules is to illustrate the effect of the Global
Offering on the net tangible assets of our Group attributable to owners of our Company as of
June 30, 2023 as if the Global Offering had taken place on that date.
The unaudited pro forma statement of adjusted net tangible assets of our Group has been
prepared for illustrative purposes only and, because of its hypothetical nature, it may not
provide a true picture of the net tangible assets attributable to owners of our Company had the
Global Offering been completed as of June 30, 2023 or at any future date. No adjustment has
FINANCIAL INFORMATION
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been made to reflect any trading results or other transactions of our Group entered into
subsequent to June 30, 2023. See Appendix II to this prospectus for the details about the
unaudited pro forma statement of adjusted net tangible assets of our Group.
NO MATERIAL ADVERSE CHANGE
Our Directors confirm that there has been no material adverse change in our financial,
trading position or prospects since June 30, 2023, being the latest date of our consolidated
financial statements, up to the date of this prospectus.
DISCLOSURE REQUIRED UNDER THE LISTING RULES
Our Directors have confirmed that, as of the Latest Practicable Date, they were not aware
of any circumstance that would give rise to a disclosure requirement under Rules 13.13 to
13.19 of the Listing Rules.
FINANCIAL INFORMATION
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FUTURE PLANS AND PROSPECTS
See “Business—Our Strategies” for a detailed description of our future plans.
USE OF PROCEEDS
We estimate that we will receive net proceeds of approximately HK$313.0 million from
the Global Offering, after deducting the underwriting commissions and other estimated
expenses payable by us in connection with the Global Offering, assuming an Offer Price of
HK$6.93 per Share (being the mid-point of the indicative Offer Price range set forth on the
cover page of this prospectus). We intend to use such net proceeds from the Global Offering
for the purposes and in the amounts set forth below:
Major Categories
%o f
Total
Proceeds Amount (1) Sub-categories
%o f
Total
Proceeds
Timeframe
2024 2025 2026
Improve our pledged vehicle
monitoring services
35.0% HK$109.6
million
Upgrade and promote our
hardware and equipment
25.0% 22.4% 29.9% 47.7%
Increase the features of
our software products
10.0% 32.5% 33.3% 34.2%
Develop an integrated
supporting system for the
automobile sales and
distribution industry
30.0% HK$93.9
million
Recruit R&D staff 10.0% 25.0% 35.0% 40.0%
Deepen our cooperation
with third-party vendors
and enhance our R&D
capabilities
10.0% 30.0% 30.0% 40.0%
Continue to improve our
digital information
infrastructure
10.0% 28.5% 32.0% 39.5%
Expand our automobile
dealership operation
management capacity
15.0% HK$47.0
million
Improve our automobile
dealership operation
management services
11.5% 24.5% 32.0% 43.5%
Improve the quality of our
automobile dealership
operation management
services
3.5% 24.3% 31.8% 43.9%
Expand our sales and
marketing capacity
10.0% HK$31.3
million
Expand our ground
marketing teams
5.8% 13.0% 35.8% 51.2%
Expand our online
marketing and
promotion capacity
4.2% 30.5% 33.8% 35.7%
General business operations
and working capital
10.0% HK$31.3
million
N/A 10.0% N/A N/A N/A
Note:
(1) We plan to use these net proceeds over a term of three years from 2024 to 2026.
FUTURE PLANS AND USE OF PROCEEDS
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Plans to Improve Our Pledged Vehicle Monitoring Services
Upgrade and Promote Our Hardware and Equipment
We plan to continuously upgrade our hardware products, such as our lockboxes and OBD
devices, to improve efficiency and reduce human errors. We plan to upgrade our lockbox by
improving its shape and volume, optimizing the methods to access the certificate and keys to
increase efficiency, enhancing features with respect to anti-counterfeiting, authenticity
identification and watermark recognition in order to increase products’ security and protect
against changing fraud and counterfeiting technologies, and adjusting the function composition
on a single lockbox to contain a different combination of service features to meet customized
needs from customers. We plan to update OBD devices by simplifying the device structure,
improving the volume and weight of the device, and enlarging its vehicle identification range
to tackle with a larger number of and more kinds of vehicle. We also plan to promote our
upgraded hardware products among our customers across the country through enhanced
marketing means by focusing high-end automobile brands and regions where the brands that
we are working with are located and get timely feedback from customers to improve the quality
of our pledged vehicle monitoring services, enhance customer experience and expand our
market share.
Increase the Features of Our Software Products
We plan to continue to (i) upgrade the pledged vehicle monitoring functions and pool of
preset commands in our VFS system by means of introducing monitoring modules for external
vehicles to expand our service coverage, purchasing used-car assessment systems from
used-car trading platforms and adopting classified pledged vehicle monitoring functions at
different dealership levels in order to meet the evolving market condition and customers’ need;
and (ii) enhance the connectivity of our software and hardware devices, including our VFS
system, V ehicle Connect system, RFIDs and OBDs, to optimize financial institutions’ access
to our system, streamline the monitoring process and improve operational efficiency by means
of upgrading servers, expanding the storage space, increasing the uploading speed and
recruiting approximately 16 experienced engineers by the end of 2026.
We believe there will be sufficient market demand for pledged vehicle monitoring
services to accommodate our improvement plan. According to CIC, the total addressable
market of pledged vehicle monitoring services for automobile dealerships and general
automobile trading stores in China was approximately RMB6.1 billion in 2022. See “Industry
Overview—Overview of China’s Pledged V ehicle Monitoring Services Market” for further
details. By upgrading hardware and software for pledged vehicle monitoring services, we can
position ourselves to capitalize on the potential opportunities in the market, enhance our
service offerings and meet the evolving needs of the industry, which could not by fully
captured by the current forecast of the relevant market. For example, the upgrading of our
lockboxes/OBD devices and improvement of our software modules could potentially lead to
increases in our services fees and expansion to new user base, such as general automobile
trading stores, for which secured financing is expected to become more widely available in the
FUTURE PLANS AND USE OF PROCEEDS
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future as financial institutions begin to provide new secured financing products with lower
credit support requirement targeting such customers. Both the potential increase in service fee
and the potential new user base are not reflected by the estimated market size and could drive
market expansion beyond the current expectation.
Plans to Develop an Integrated Supporting System for the Automobile Sales and
Distribution Industry
Recruit R&D Staff
We plan to recruit approximately 63, 87 and 98 experienced researchers, programmers
and engineers by the end of 2024, 2025 and 2026, respectively, who specialize in big data
analytics, artificial intelligence and software development with competitive salaries. Through
our R&D team, we plan to develop a series of supporting systems to analyze data relating to
automobile brands and models to improve our data analysis capabilities to cope with our
growing data volume, new business needs and diversified customer demands.
Deepen Our Cooperation with Third-party V enders and Enhance Our R&D Capabilities
We plan to (i) cooperate with and procure data analytics from third-party data service
providers to improve our capabilities of data acquisition and analysis; and (ii) acquire
professional software and other products to improve the functions of our Smart Star system to
further improve the operation management solutions we provide to automobile dealerships. We
plan to select and screen third-party vendors based on our internal criteria, including but not
limited to service quality, qualifications, track record and price. We plan to explore
opportunities with software, hardware and/or technology service vendors for each cooperation
matter and the expected timeframe of cooperation will be between 2024 to 2026 and the details
of which will be determined based on the capabilities of the vendors and on a case-by-case
basis.
Continue to Improve Our Digital Information Infrastructure
We plan to (i) continue to improve the capabilities of our supporting system by
establishing an integrated financial information system with financial information, data and
budget management and analysis capabilities; (ii) cooperate with third-party data service
providers to improve our analysis capabilities by improving the capabilities of our customer
relationship management, operation analysis, decision-making and smart data analysis; (iii)
improve our data processing and computing capabilities by uploading and integrating
automobile-related data to servers of multiple providers, building enhanced firewall, and
plugging in vulnerability/viruses scanning and discovering features; and (iv) procure advanced
project management system with performance management, automated testing and code
optimization tools from software companies to improve the development efficiency of our
supporting system.
FUTURE PLANS AND USE OF PROCEEDS
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Considering that (i) the technology involved in the improvement of information
infrastructure is well developed in the technology industry; (ii) the estimated potential costs for
the proposed improvement are within the acceptable budget range; and (iii) our prior
experience and accumulated resources in technology development, we believe that our plan to
improve our digital information infrastructure is feasible.
Plans to Expand Our Automobile Dealership Operation Management Capacity
Improve Our Automobile Dealership Operation Management Services
We plan to (i) expand our business development team with approximately 7 additional
staff members by the end of 2026 that will be primarily responsible for business outreach,
business promotion, data collection and profit forecasting, research and evaluation of business
opportunities and potential customers, commercial negotiations, contract signing, due
diligence and budgeting to ensure effective customer acquisition; (ii) build an operation team
with approximately 29 additional staff members by the end of 2026 that will be primarily
responsible for consulting and counseling automobile dealerships with respect to performance
and management improvement; and (iii) build a project support team with approximately 51
additional staff members by the end of 2026 that will be primarily responsible for monitoring
the overall service quality of our automobile dealership operation management services and
supporting the operation team. All of the aforementioned teams will be potentially based in
Beijing.
Improve the Quality of Our Automobile Dealership Operation Management Services
We plan to provide our customers across the country with an upgraded automobile
dealership operation management system, which can further and deeply integrate the financial
and operational data on the system and concurrently solve business, financial and operation
problems with more accuracy, to improve automobile dealerships’ profitability and operational
efficiency.
We believe there will be sufficient market demand for automobile dealership operation
management services to accommodate our expansion plan. According to CIC, approximately
70% of the 30,000 automobile dealerships in China were operating at a loss or barely
breaking-even in 2022, primarily due to operational or management deficiencies, such as a lack
of mature business plan and training system and limited technology capabilities. These
challenges present a growing demand for proficient management teams, with comprehensive
operational experience and sophisticated business insight. According to CIC, the market size
of such services is expected to reach RMB89.6 million in 2027. See “Industry
Overview—Overview of China’s Automobile Dealership Operation Management Services
Market” for further details. Therefore, we believe the expansion plan for our automobile
dealership operation management services, especially the hiring of additional staff members
focused on the business development and operation of automobile dealerships will help create
a solid foundation for our long-term business growth and we intend to deploy a total of
approximately HK$47.0 million on our plans to expand our automobile dealership operation
management capacity over the three years ending December 31, 2024, 2025 and 2026.
FUTURE PLANS AND USE OF PROCEEDS
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Plans to Expand Our Sales and Marketing Capacity
Expand Our Ground Marketing Teams
We plan to expand our ground marketing teams by recruiting approximately 76 staff
members to provide on-site marketing services covering northern region, eastern region,
southern region, western region and central region of China; business and product teams by
recruiting approximately 10 staff members to provide user engagement services, user demand
analysis and product research; and branding teams by recruiting approximately 35 staff
members to offer content production, service promotion and new media services.
Expand our Online Marketing and Promotion Capacity
We aim to reach a wider group of customers through high-quality online marketing
content, such as text advertising, videos and live broadcasts.
General Business Operations and Working Capital
We expect to have increasing needs for working capital as a result of our expected organic
growth, service diversification and more automobile dealerships under management.
If the Offer Price is determined at HK$7.90 per Offer Share, being the high end of the
indicative Offer Price range stated in this prospectus, we will receive additional net proceeds
of approximately HK$47.4 million. If the Offer Price is fixed at HK$5.95 per Offer Share,
being the low end of the indicative Offer Price range stated in this prospectus, the net proceeds
we receive will be reduced by approximately HK$47.7 million. If the Offer Price is set above
the mid-point of the indicative Offer Price range, we intend to apply the additional amounts to
the purposes stated above in the same proportions. If the Offer Price is set below the mid-point
of the indicative Offer Price range, we intend to reduce the allocation of the net proceeds to
the purposes stated above on a pro rata basis.
To the extent that the net proceeds from the Global Offering are not immediately applied
to the purposes stated above, and to the extent permitted by applicable laws and regulations,
we intend to only place such proceeds in short-term interest-bearing accounts at licensed banks
or authorized financial institutions (as defined under the Securities and Futures Ordinance or
applicable laws in the relevant jurisdictions for non-Hong Kong based deposits). We will make
a formal announcement in the event that there is any change in our use of net proceeds from
the purposes stated above or in our allocation of the net proceeds in the proportions stated
above.
FUTURE PLANS AND USE OF PROCEEDS
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HONG KONG UNDERWRITERS
CLSA Limited
ICBC International Securities Limited
CEB International Capital Corporation Limited
BOCOM International Securities Limited
SPDB International Capital Limited
Patrons Securities Limited
CMB International Capital Limited
Zhongtai International Securities Limited
UOB Kay Hian (Hong Kong) Limited
Tiger Brokers (HK) Global Limited
Livermore Holdings Limited
V aluable Capital Limited
UNDERWRITING ARRANGEMENTS AND EXPENSES
Hong Kong Public Offering
Hong Kong Underwriting Agreement
Pursuant to the Hong Kong Underwriting Agreement, our Company has agreed to offer
the Hong Kong Offer Shares for subscription by the public in Hong Kong on and subject to the
terms and conditions of the Hong Kong Underwriting Agreement and this prospectus.
Subject to (a) the Stock Exchange granting the listing of, and permission to deal in, our
Shares in issue and to be issued pursuant to the Global Offering on the Main Board as
mentioned in this prospectus (including any additional Shares which may be allotted and issued
pursuant to the exercise of the Pre-IPO Share Options) and such approval not having been
withdrawn; and (b) certain other conditions set out in the Hong Kong Underwriting Agreement,
the Hong Kong Underwriters have agreed, severally but not jointly, to subscribe, or procure
subscribers to subscribe, for the Hong Kong Offer Shares which are being offered but are not
taken up under the Hong Kong Public Offering on the terms and subject to the conditions set
out in this prospectus, and the Hong Kong Underwriting Agreement.
The Hong Kong Underwriting Agreement is conditional on and subject to, among other
things, the International Underwriting Agreement having been executed and becoming
unconditional and not having been terminated in accordance with its terms.
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Grounds for Termination
The obligations of the Hong Kong Underwriters to subscribe or procure subscribers for
the Hong Kong Offer Shares under the Hong Kong Underwriting Agreement are subject to
termination by written notice from the Joint Sponsors and the Overall Coordinators (for
themselves and on behalf of the Hong Kong Underwriters), at any time prior to 8:00 a.m. on
the Listing Date if:
(1) there develops, occurs, exists or comes into force:
(a) any local, national, regional, or international event or circumstance in the
nature of force majeure (including, without limitation, any acts of government,
declaration of a national or international emergency or war, calamity, crisis,
epidemic, pandemic, outbreak of infectious disease (including contagious
coronavirus (COVID-19), SARS, swine or avian flu, H5N1, H1N1, H7N9 or
such related/mutated forms, strikes, lock-outs, fire, explosion, flooding,
earthquake, volcanic eruption, civil commotion, riots, public disorder, acts of
war, outbreak or escalation of hostilities (whether or not war is declared), acts
of God or acts of terrorism (whether or not responsibility has been claimed) in
or affecting the Cayman Islands, Hong Kong, the PRC, the United States, the
United Kingdom, the European Union as a whole or any other jurisdiction
relevant to any member of our Group or the Global Offering (collectively, the
“Relevant Jurisdictions ” and each, a “ Relevant Jurisdiction ”); or
(b) any change, or any development involving a prospective change or
development in (whether or not permanent), or any event or series of events
resulting or likely to result in any change or development, or a prospective
change or development, in any local, national, regional or international
financial, political, military, industrial, fiscal, economic, regulatory, currency,
credit, or market conditions, or any monetary or trading settlement system or
other financial markets (including, but not limited to, a change in the
conditions in stock and bond markets, money and foreign exchange markets,
the interbank markets and credit markets or a change in the system under which
the value of the Hong Kong dollar is linked to the U.S. dollar or Renminbi is
linked to any foreign currency or currencies) in or affecting any of the Relevant
Jurisdictions; or
(c) any moratorium, suspension or restriction (including, without limitation, any
imposition of or requirement for any minimum or maximum price limit or price
range) in or on trading in securities generally on the Stock Exchange, the
London Stock Exchange, the Shanghai Stock Exchange, the Shenzhen Stock
Exchange, the New Y ork Stock Exchange or the NASDAQ Global Market; or
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(d) any general moratorium on commercial banking activities in or affecting Hong
Kong (imposed by the Financial Secretary or the Hong Kong Monetary
Authority or other competent Authority (as defined in the Hong Kong
Underwriting Agreement)), New Y ork (imposed at the U.S. Federal or New
Y ork State level or by other competent Authority (as defined in the Hong Kong
Underwriting Agreement)), London or any other Relevant Jurisdictions
(declared by the relevant Authorities), or any disruption in commercial banking
or foreign exchange trading or securities settlement or clearance services,
procedures or matters in or affecting any of the Relevant Jurisdictions; or
(e) any new Laws (as defined in the Hong Kong Underwriting Agreement), or any
change or any development involving a prospective change in existing Laws,
or in the interpretation or application by any competent Authorities, in each
case, in or affecting any Relevant Jurisdiction; or
(f) any imposition of economic sanctions, in whatever form, directly and
indirectly, by, or for, any Relevant Jurisdictions; or
(g) any (i) change or prospective change in exchange control, currency exchange
rates or foreign investment regulations (including, without limitation, a
material devaluation of the U.S. dollar, Euro, Hong Kong dollar or the
Renminbi against any foreign currencies), or (ii) any change or prospective
change in Taxation (as defined in the Hong Kong Underwriting Agreement) in
any of the Relevant Jurisdictions adversely affecting an investment in the
Shares; or
(h) any litigation or claim being threatened or instigated against any member of
our Group or any Director; or
(i) an Authority in any Relevant Jurisdiction commencing any investigation or
other action, or announcing an intention to investigate or take other action,
against any member of our Group or any Director; or
(j) any Director or senior management member of our Company as named in this
prospectus being charged with or found guilty of an indictable offence or
prohibited by operation of law or otherwise disqualified from taking part in the
management of a company or taking directorship of a company; or
(k) any Director or chief executive officer of our Company vacating his or her
office; or
(l) save as disclosed in this prospectus, any contravention by any member of our
Group or any Director of any applicable Laws (including, without limitation,
the Listing Rules or the Companies (Winding Up and Miscellaneous
Provisions) Ordinance); or
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(m) any change or development involving a prospective change which has the
effect of materialization of, any of the risks set out in the section headed “Risk
Factors” in this prospectus; or
(n) non-compliance of this prospectus, the CSRC Filings (as defined in the Hong
Kong Underwriting Agreement) (or any other documents used in connection
with the contemplated subscription and sale of the Offer Shares) or any aspect
of the Global Offering with the Listing Rules, the CSRC Rules (as defined in
the Hong Kong Underwriting Agreement) or any other applicable Laws; or
(o) any breach or any event or circumstance rendering untrue, misleading or
incorrect in any respect, any of the Warranties (as defined in the Hong Kong
Underwriting Agreement); or
(p) the issue or requirement to issue by our Company of any supplement or
amendment to this prospectus, (or to any other documents in connection with
the contemplated offer, subscription and sale of the Offer Shares) pursuant to
the Companies Ordinance and the Companies (Winding Up and Miscellaneous
Provisions) Ordinance or the Listing Rules or any requirement or request of the
Stock Exchange, the SFC and/or the CSRC, unless such supplemental or
amendment has been issued with the prior written consent of the Joint Sponsors
and the Overall Coordinators; or
(q) an order or a petition is presented for the winding up or liquidation of any
member of our Group or any member of our Group makes any composition,
compromise 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
our Group or a provisional liquidator, receiver or manager is appointed over all
or part of the assets or undertaking of any member of our Group or anything
analogous thereto occurs in respect of any member of our Group; or
(r) a valid demand by any creditor for repayment or payment of any indebtedness
of any member of our Group or in respect of which any member of our Group
is liable prior to its stated maturity,
which, individually or in the aggregate, in the sole and absolute opinion of the Joint
Sponsors and the Overall Coordinators (for themselves and on behalf of the Hong
Kong Underwriters),
(A) has or will have or is likely to have a material adverse effect or change, or any
development involving a prospective material adverse effect or change, in or
affecting the assets, liabilities, business, general affairs, management,
prospects, shareholders’ equity, revenue, profits, losses, results of operations,
position or condition, financial or otherwise, or performance of our Group,
taken as a whole (the “ Material Adverse Effect ”); or
UNDERWRITING
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(B) has or will have or is likely to have a material adverse effect on the success of
the Global Offering or the level of applications under the Hong Kong Public
Offering or the level of interest under the International Offering; or
(C) makes or will make or is likely to make it inadvisable or inexpedient or
impracticable for the Global Offering to proceed or to be performed or
implemented as envisaged or to market the Global Offering, or to deliver the
Offer Shares on the terms and in the manner contemplated by this prospectus,
the formal notice, the preliminary offering circular or the final offering
circular; or
(D) has or will have or is likely to have the effect of (i) making any part of the
Hong Kong Underwriting Agreement (including underwriting) incapable of
performance in accordance with its terms or (ii) preventing processing of
applications and/or payments pursuant to the Global Offering or pursuant to
the underwriting thereof; or
(2) there has come to the notice of the Joint Sponsors and the Overall Coordinators as
at or after the date of the Hong Kong Underwriting Agreements:
(a) that any statement contained in any of the Offering Documents (as defined in
the Hong Kong Underwriting Agreement) and/or in any public notices,
announcements, advertisements, communications or other documents issued or
used by our Company in connection with the Hong Kong Public Offering
(including any supplement or amendment thereto, but excluding information in
relation to the Underwriters, consisting only of the name, logo, address and
qualification of each of the Joint Sponsors, the Sponsor-overall Coordinator,
the Overall Coordinators, the Joint Global Coordinators, the Joint
Bookrunners, the Joint Lead Managers, the Capital Market Intermediaries)
(collectively, the “ Offer Related Documents ”) was, when it was issued, or has
become, untrue, incorrect, inaccurate, incomplete or misleading or deceptive in
any respect, or that any forecast, estimate, expression of opinion, intention or
expectation expressed or contained in any of the Offer Related Documents is
not fair and honest, not made on reasonable grounds or, where appropriate, not
based on reasonable assumptions with reference to the facts and circumstances
then subsisting, when taken as a whole; or
(b) that any matter has arisen or has been discovered which would, had it arisen
or been discovered immediately before the date of this prospectus, not have
been disclosed in the Offering Documents, constitute a material omission
therefrom; or
UNDERWRITING
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(c) a prohibition by a relevant Authority on our Company for whatever reason
from allotting or issuing the Shares (including the Shares which may be
allotted and issued pursuant to the exercise of the Pre-IPO Share Options)
pursuant to the terms of the Global Offering; or
(d) that any material breach of the obligations or undertakings imposed upon any
party to, the Hong Kong Underwriting Agreement or the International
Underwriting Agreement (other than upon any of the Overall Coordinators, the
Joint Global Coordinators, the Joint Bookrunners, the Joint Lead Managers, the
Capital Market Intermediaries, the Joint Sponsors, Hong Kong Underwriters or
the International Underwriters); or
(e) any event, act or omission which gives rise to or is likely to give rise to any
material liability of the Indemnifying Parties (as defined in the Hong Kong
Underwriting Agreement) under the Hong Kong Underwriting Agreement; or
(f) that there is any Material Adverse Effect; or
(g) that the Admission (as defined in the Hong Kong Underwriting Agreement) is
refused or not granted, other than subject to customary conditions, on or before
the Listing Date, or if granted, the Admission is subsequently withdrawn,
cancelled, qualified (other than by customary conditions), revoked or withheld;
or
(h) that our Company withdraws any of the Hong Kong Public Offering Document
(as defined in the Hong Kong Underwriting Agreement) or the Global
Offering; or
(i) any of the experts specified in this prospectus (other than any of the Joint
Sponsors) has withdrawn its respective consent to the issue of this prospectus
with the inclusion of its reports, letters and/or legal opinions (as the case may
be) and references to its name included in the form and context in which it
respectively appears; or
(j) a material portion of the orders placed in the book-building process have been
withdrawn, terminated or cancelled,
then the Joint Sponsors and the Overall Coordinators (for themselves and on behalf of the Hong
Kong Underwriters), shall be entitled, in their sole and absolute discretion, by giving a written
notice to our Company and our Controlling Shareholders, to terminate the Hong Kong
Underwriting Agreement with immediate effect if prior to 8:00 a.m. on the Listing Date.
UNDERWRITING
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Undertakings to the Stock Exchange Pursuant to the Listing Rules
(A) Undertakings by our Company
Pursuant to Rule 10.08 of the Listing Rules, our Company has undertaken to the Stock
Exchange, that within six months from the Listing Date no further Shares or securities
convertible into equity securities of our Company (whether or not of a class already listed)
shall be issued by our Company or form the subject of any agreement to such issue (whether
or not such issue of Shares or securities of our Company will be completed within six months
from the Listing Date), except pursuant to the Global Offering, the Pre-IPO Share Options or
under any of the circumstances provided under Rule 10.08 of the Listing Rules.
(B) Undertakings by our Controlling Shareholders
By virtue of Rule 10.07 of the Listing Rules, each of our Controlling Shareholders has
undertaken to the Stock Exchange and to our Company that, except pursuant to the Global
Offering and the Pre-IPO Share Options, it will not and will procure that the relevant registered
holder(s) (if any) of our Shares in which any of them has a beneficial interest will not, without
the prior written consent of the Stock Exchange or unless otherwise in compliance with the
requirements of the Listing Rules:
(i) in the period commencing from the date by reference to which disclosure of its
shareholdings in our Company is made in this prospectus and ending on the date
which is six months from the Listing Date, either directly or indirectly, dispose of,
nor enter into any agreement to dispose of or otherwise create any options, rights,
interests or encumbrances in respect of, any of the Shares in respect of which they
are shown to be the beneficial owner in this prospectus (the “ Relevant Shares ”);
and
(ii) in the period of six months commencing on the date on which the period referred to
in paragraph (i) above expires, either directly or indirectly, dispose of, nor enter into
any agreement to dispose of or otherwise create any options, rights, interests or
encumbrances in respect of, any of the Relevant Shares to such extent that,
immediately following such disposal, or upon the exercise or enforcement of such
options, rights, interests or encumbrances, it will cease to be a controlling
shareholder (as defined in the Listing Rules) of our Company or a member of a
group of our Controlling Shareholders or would together with the other Controlling
Shareholders cease to be a controlling shareholder (as defined in the Listing Rules).
UNDERWRITING
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Pursuant to Note 3 to Rule 10.07(2) of the Listing Rules, each of our Controlling
Shareholders has undertaken to the Stock Exchange and to our Company that within the period
commencing from the date by reference to which disclosure of their shareholdings in our
Company is made in this prospectus and ending on the date which is 12 months from the
Listing Date, it will:
(i) when it pledges or charges any Relevant Shares in favor of an authorized institution
(as defined in the Banking Ordinance (Chapter 155 of the Laws of Hong Kong))
pursuant to Note 2 to Rule 10.07(2) of the Listing Rules, immediately inform our
Company in writing of such pledge or charge together with the number of Shares so
pledged or charged; and
(ii) when it receives indications, either verbal or written, from the pledgee or chargee of
any Shares that any of the pledge or charged Relevant Shares will be disposed of,
immediately inform our Company in writing of such indications.
Our Company will inform the Stock Exchange in writing as soon as we have been
informed of matters referred in above by any of our Controlling Shareholders and disclose such
matters by way of announcement pursuant to the requirements under the Listing Rules as soon
as possible.
Undertakings pursuant to the Hong Kong Underwriting Agreement
(A) Undertakings by our Company
Our Company has undertaken to each of the Joint Sponsors, the Overall Coordinators, the
Joint Global Coordinators, the Joint Bookrunners, the Joint Lead Managers, the Hong Kong
Underwriters and the Capital Market Intermediaries, that except for the offer, allotment, issue
and sale of the Offer Shares pursuant to the Global Offering and the issue of shares under the
Pre-IPO Share Options, at any time after the date of the Hong Kong Underwriting Agreement
up to and including the date falling six months after the Listing Date (the “ First Six-Month
Period ”), our Company will not, without the prior written consent of the Joint Sponsors and
the Overall Coordinators (for themselves and on behalf of the Hong Kong Underwriters) and
unless in compliance with the requirements of the Listing Rules:
(i) offer, 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 an Encumbrance (as defined in the Hong Kong
Underwriting Agreement) over, or agree to transfer or dispose of or create an
Encumbrance over, either directly or indirectly, conditionally or unconditionally,
any Shares or other equity securities of our 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
UNDERWRITING
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or other rights to purchase, any Shares or other equity securities of our Company or
deposit any Shares or other equity securities of our Company with a depositary in
connection with the issue of depositary receipts; or
(ii) enter into any swap or other arrangement that transfers to another, in whole or in
part, any of the economic consequences of ownership (legal or beneficial) of any
Shares or other equity securities of our 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 equity securities of our Company);
or
(iii) enter into any transaction with the same economic effect as any transaction specified
in (i) or (ii) above; or
(iv) offer to or agree to or announce any intention to enter into any transaction specified
in (i), (ii) or (iii) above,
in each case, whether any of the transactions specified in (i), (ii) or (iii) above is to be settled
by delivery of Shares or other equity securities of our Company, or in cash or otherwise
(whether or not the issue of such Shares or other equity securities of our Company will be
completed within the First Six-month Period).
Our Company further agrees that, in the event our Company is allowed to enter into any
of the transactions specified in (i), (ii) or (iii) above or offers to or agrees to or announces any
intention to enter into any such transaction during the period of six months commencing on the
date on which the First Six-Month Period expires (the “ Second Six-Month Period ”), our
Company shall take all reasonable steps to ensure that it will not, and no other act of our
Company will, create a disorderly or false market in the securities of the Company.
(B) Undertakings by our Controlling Shareholders
Each of our Controlling Shareholders has jointly and severally agreed and undertaken to
each of the Company, the Joint Sponsors, the Overall Coordinators, the Joint Global
Coordinators, the Joint Bookrunners, the Joint Lead Managers, the Hong Kong Underwriters
and the Capital Market Intermediaries that, except as pursuant to the Global Offering and save
for any pledge or charge to authorized institutions (as defined in the Banking Ordinance
(Chapter 155 of the Laws of Hong Kong)) for a bona fide commercial loan, to the extent
permitted by applicable Laws, without the prior written consent of the Joint Sponsors and the
Overall Coordinators (for themselves and on behalf of the Hong Kong Underwriters) and
unless in compliance with the requirements of the Listing Rules:
(i) it/he/she will not, at any time during the First Six-Month Period, (a) sell, offer to
sell, contract or agree to sell, assign, mortgage, charge, pledge, hypothecate, lend,
grant or sell any option, warrant, contract or right to purchase, grant or purchase any
UNDERWRITING
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option, warrant, contract or right to sell, or otherwise transfer or dispose of or create
an Encumbrance over, or agree to transfer or dispose of or create an Encumbrance
over, either directly or indirectly, conditionally or unconditionally, any Shares or
other securities of our Company or any interest therein (including, without
limitation, any securities convertible into or exchangeable or exercisable for or that
represent the right to receive, or any warrants or other rights to purchase, any Shares
or any such other securities of our Company, as applicable), or deposit any Shares
or other securities of our Company with a depositary in connection with the issue of
depositary receipts, or (b) enter into any swap or other arrangement that transfers to
another, in whole or in part, any of the economic consequences of ownership of any
Shares or other securities of our Company or any interest therein (including, without
limitation, any securities convertible into or exchangeable or exercisable for or that
represent the right to receive, or any warrants or other rights to purchase, any Shares
or any such other securities of our Company, as applicable), or (c) enter into any
transaction with the same economic effect as any transaction specified in (a) or (b)
above, or (d) offer to or contract to or agree to or announce any intention to enter
into any transaction specified in (a), (b) or (c) above, in each case, whether any of
the transactions specified in (a), (b) or (c) above is to be settled by delivery of
Shares or other securities of our Company or in cash or otherwise (whether or not
the settlement or delivery of such Shares or other securities will be completed within
the First Six-Month Period); and
(ii) until the expiry of the Second Six-Month Period, it/he/she will not enter into any of
the transactions specified in (a), (b) or (c) above or offer to or agree to or announce
any intention to enter into any such transaction, if, immediately following such
transaction, it/he/she will cease, to be a “Controlling Shareholder” (as defined in the
Listing Rules) of our Company. In the event that it/he/she enters into any of the
transactions specified in (a), (b) or (c) above or offers to or agrees to or announces
any intention to enter into any such transaction after the expiry of the Second
Six-Month Period, it/he/she will take all reasonable steps to ensure that it will not
create a disorderly or false market in the securities of our Company,
provided that nothing in the undertakings above shall prevent our Controlling Shareholders
from purchasing additional Shares or other securities of our Company and disposing of such
additional Shares or other securities of our Company.
Indemnity
We and our Controlling Shareholders have agreed to indemnify, among others, the Joint
Sponsors, the Overall Coordinators, the Joint Global Coordinators, the Joint Bookrunners, the
Joint Lead Managers, the Hong Kong Underwriters and the Capital Market Intermediaries for
certain losses which they may suffer, including, among others, losses arising from the
performance of their obligations under the Hong Kong Underwriting Agreement and any
breach by our Company and our Controlling Shareholders of the Hong Kong Underwriting
Agreement.
UNDERWRITING
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The International Offering
International Underwriting Agreement
In connection with the International Offering, it is expected that our Company and our
Controlling Shareholders will enter into the International Underwriting Agreement with the
Joint Sponsors, the Overall Coordinators and the International Underwriters. Under the
International Underwriting Agreement, subject to the conditions set forth therein, the
International Underwriters would severally and not jointly agree to purchase, or procure
purchasers to purchase, the Offer Shares being offered pursuant to the International Offering
(subject to, among others, any reallocation between the International Offering and the Hong
Kong Public Offering). It is expected that the International Underwriting Agreement may be
terminated on similar grounds as the Hong Kong Underwriting Agreement. Potential investors
are reminded that in the event that the International Underwriting Agreement is not entered
into, or is terminated, the Global Offering will not proceed.
It is expected that each of our Controlling Shareholders will undertake to the International
Underwriters not to dispose of, or enter into any agreement to dispose of, or otherwise create
any options, rights, interest or encumbrances in respect of any of the Shares held by it in our
Company for a period similar to such undertakings given by them pursuant to the Hong Kong
Underwriting Agreement, which is described in “—Underwriting Arrangements and
Expenses—Undertakings pursuant to the Hong Kong Underwriting Agreement—(B)
Undertakings by our Controlling Shareholders” above.
Commission and Expenses
Our Company will pay an underwriting commission of 2.5% of the aggregate Offer Price
of all the Offer Shares (the “ Fixed Fees ”). Our Company may also in our sole and absolute
discretion pay any one or all of the Underwriters an additional incentive fee in aggregate of up
to 1.0% of the aggregate Offer Price for all of the Offer Shares (the “ Discretionary Fees ”). The
ratio of Fixed Fees and Discretionary Fees payable is therefore approximately 71.4%:28.6%
(on the basis that the Discretionary Fees will be fully paid). For any unsubscribed Hong Kong
Offer Shares reallocated to the International Offering, we will pay an underwriting commission
at the rate applicable to the International Offering and such commission will be paid to the
relevant International Underwriters and not the Hong Kong Underwriters.
The aggregate commissions and fees, together with Stock Exchange listing fees, SFC
transaction levy of 0.0027%, Stock Exchange trading fee of 0.00565%, AFRC transaction levy
of 0.00015%, legal and other professional fees and printing and all other expenses payable by
us relating to the Global Offering are currently estimated to amount in aggregate to
approximately HK$51.4 million (assuming an Offer Price of HK$6.93 per Offer Share, being
the mid-point of the indicative Offering Price range stated in this prospectus).
UNDERWRITING
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INDEPENDENCE OF THE JOINT SPONSORS
As members of the sponsor group (as defined in the Listing Rules) of CITIC Securities
(Hong Kong) Limited have current business relationships with the Group, CITIC Securities
(Hong Kong) Limited does not satisfy the independence criteria applicable to sponsor set out
in Rule 3A.07 of the Listing Rules.
ICBC International Capital Limited satisfies the independence criteria applicable to
sponsor set out in Rule 3A.07 of the Listing Rules.
UNDERWRITERS’ INTERESTS IN OUR COMPANY
Save for the obligations under the Hong Kong Underwriting Agreement and the
International Underwriting Agreement and as disclosed in this prospectus, as at the Latest
Practicable Date, none of the Underwriters has any shareholding or beneficial interests in any
member of our Group nor has any right or option (whether legally enforceable or not) to
subscribe for or purchase or to nominate persons to subscribe for or purchase securities in any
member of our Group nor any interest in the Global Offering.
Following the completion of the Global Offering, the Hong Kong Underwriters and their
affiliated companies may hold a certain portion of the Shares as a result of fulfilling their
obligations under the Hong Kong Underwriting Agreement.
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.
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 the
ordinary course of their various business activities, the Syndicate Members and their respective
affiliates may purchase, sell or hold a broad array of investments and actively trade securities,
derivatives, loans, commodities, currencies, credit default swaps and other financial
instruments for their own account and for the accounts of their customers. Such investment and
trading activities may involve or relate to assets, securities and/or instruments our Company
and/or persons and entities with relationships with our Company and may also include swaps
and other financial instruments entered into for hedging purposes in connection with our
Group’s loans and other debt.
UNDERWRITING
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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 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.
Such activities may affect the market price or value of our Shares, the liquidity or trading
volume in our Shares and the volatility of the price of our 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 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 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.
Certain of the Syndicate Members or their respective affiliates have provided from time
to time, and expect to provide in the future, investment banking and other services to our
Company and our affiliates for which such Syndicate Members or their respective affiliates
have received or will receive customary fees and commissions.
UNDERWRITING
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THE GLOBAL OFFERING
This prospectus is published in connection with the Hong Kong Public Offering as part
of the Global Offering. The Global Offering comprises:
(a) the Hong Kong Public Offering of initially 5,054,000 Offer Shares (subject to
reallocation) in Hong Kong, as described in “—The Hong Kong Public Offering”
below; and
(b) the International Offering of initially 45,486,000 Offer Shares (subject to
reallocation) outside the United States in offshore transactions in reliance on
Regulation S, as described in “—The International Offering” below.
The 50,540,000 Offer Shares initially being offered in the Global Offering will represent
25% of the total number of issued Shares immediately after completion of the Global Offering,
without taking into account any Shares which may be allotted and issued pursuant to the
exercise of the Pre-IPO Share Options. The underwriting arrangements, and the respective
Underwriting Agreements, are summarized in “Underwriting” in this prospectus.
Investors may apply for Hong Kong Offer Shares under the Hong Kong Public Offering,
or, if qualified to do so, apply for or indicate an interest in International Offer Shares under the
International Offering, but may not do both.
References in this prospectus to applications, application monies or the procedure for
application relate solely to the Hong Kong Public Offering.
THE HONG KONG PUBLIC OFFERING
Number of Shares Initially Offered
We are initially offering 5,054,000 Hong Kong Offer Shares, representing 10% of the
total number of Offer Shares initially available under the Global Offering, at the Offer Price
for subscription by the public in Hong Kong. Subject to the reallocation of Shares between (i)
the International Offering, and (ii) the Hong Kong Public Offering, the Hong Kong Offer
Shares will represent 10% of the total number of Offer Shares initially available under the
Global Offering.
The Hong Kong Public Offering is open to members of the public in Hong Kong as well
as to institutional and professional investors. Professional investors generally include brokers,
dealers and companies (including fund managers) whose ordinary business involves dealing in
shares and other securities, and corporate entities which regularly invest in shares and other
securities.
STRUCTURE OF THE GLOBAL OFFERING
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--- page 354 ---
The Hong Kong Public Offering is fully underwritten by the Hong Kong Underwriters on
a several basis under the terms of the Hong Kong Underwriting Agreement and is subject to
our Company and the Overall Coordinators (for themselves and on behalf of the Underwriters)
agreeing on the Offer Price. Completion of the Hong Kong Public Offering is subject to the
conditions as set out in “—Conditions of the Global Offering” below.
Allocation
Allocation of the 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.
For allocation purposes only, the total number of the Offer Shares initially available under
the Hong Kong Public Offering (after taking account of any reallocation in the number of Offer
Shares allocated between the Hong Kong Public Offering and the International Offering
referred to below) will be divided equally into two pools (with any odd lots being allocated to
pool A): pool A and pool B. Pool A will comprise 2,527,000 Hong Kong Offer Shares and pool
B will comprise 2,527,000 Hong Kong Offer Shares initially. Both of which are available on
a equitable basis to successful applicants. All valid applications that have applied for Hong
Kong Offer Shares with a total price (excluding brokerage of 1.0%, SFC transaction levy of
0.0027%, Stock Exchange trading fee of 0.00565% and AFRC transaction levy of 0.00015%
payable) of HK$5 million or below will fall into pool A. All valid applications that have
applied for Hong Kong Offer Shares with a total price (excluding brokerage of 1.0%, SFC
transaction levy of 0.0027%, Stock Exchange trading fee of 0.00565% and AFRC transaction
levy of 0.00015% payable) of over HK$5 million and up to the total value of pool B will fall
into pool B.
For the purpose of this sub-section only, the “price” for Offer Shares means the price
payable on application therefor (without regard to the Offer Price as finally determined).
Applicants should be aware that applications in Pool A and applications in Pool B may
receive different allocation ratios. If Hong Kong Offer Shares in one (but not both) of the two
pools are undersubscribed, the surplus Hong Kong Offer Shares will be transferred to the other
pool to satisfy demand in that other pool and be allocated accordingly.
Applicants can only receive an allocation of Hong Kong Offer Shares from either Pool A
or Pool B, but not from both pools. Multiple or suspected multiple applications and any
application for more than 2,527,000 Hong Kong Offer Shares (being 50% of the 5,054,000
Offer Shares initially available under the Hong Kong Public Offering) will be rejected.
STRUCTURE OF THE GLOBAL OFFERING
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--- page 355 ---
Reallocation
The allocation of the Offer Shares between the Hong Kong Public Offering and the
International Offering is subject to reallocation on the following basis:
(a) where the International Offer Shares are fully subscribed or oversubscribed and:
(i) if the Hong Kong Offer Shares are undersubscribed, the Overall Coordinators
(for themselves and on behalf of the Underwriters) have the authority (but not
the obligation) in their sole and absolute discretion to reallocate all or any
unsubscribed Hong Kong Offer Shares to the International Offering, in such
proportions as the Overall Coordinators deem appropriate to satisfy demand
under the International Offering;
(ii) if the number of Offer Shares validly applied for under the Hong Kong Public
Offering represents less than 15 times the number of the Offer Shares initially
available for subscription under the Hong Kong Public Offering, then up to
5,054,000 Offer Shares may be reallocated to the Hong Kong Public Offering
from the International Offering in accordance with Chapter 4.14 of the Guide
for New Listing Applicants issued by the Stock Exchange, so that the number
of the Offer Shares available under the Hong Kong Public Offering will be
increased to 10,108,000 Offer Shares, representing 20% of the number of the
Offer Shares initially available under the Global Offering;
(iii) if the number of 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 10,108,000 Offer Shares will be reallocated to the Hong Kong
Public Offering from the International Offering, so that the total number of the
Offer Shares available under the Hong Kong Public Offering will be increased
to 15,162,000 Offer Shares, representing 30% of the number of the Offer
Shares initially available under the Global Offering;
(iv) if the number of 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 15,162,000 Offer Shares will be reallocated to the Hong Kong
Public Offering from the International Offering, so that the number of the Offer
Shares available under the Hong Kong Public Offering will be increased to
20,216,000 Offer Shares, representing 40% of the number of the Offer Shares
initially available under the Global Offering; and
(v) if the number of 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
STRUCTURE OF THE GLOBAL OFFERING
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--- page 356 ---
20,216,000 Offer Shares will be reallocated to the Hong Kong Public Offering
from the International Offering, so that the number of the Offer Shares
available under the Hong Kong Public Offering will be increased to 25,270,000
Offer Shares, representing 50% of the number of the Offer Shares initially
available under the Global Offering.
(b) where the International Offer Shares are undersubscribed and:
(i) if the Hong Kong Offer Shares are undersubscribed, the Global Offering will
not proceed unless fully underwritten by the Underwriters; and
(ii) if the Hong Kong Offer Shares are oversubscribed, irrespective of the number
of times the number of Offer Shares initially available for subscription under
the Hong Kong Public Offering, then up to 5,054,000 Offer Shares may be
reallocated to the Hong Kong Public Offering from the International Offering,
so that the total number of the Offer Shares available under the Hong Kong
Public Offering will be increased to 10,108,000 Offer Shares, representing
20% of the number of the Offer Shares initially available under the Global
Offering.
The Offer Shares to be offered in the Hong Kong Public Offering and the International
Offering may, in certain circumstances, be reallocated as between these offerings at the sole
and absolute discretion of the Overall Coordinators. If either the Hong Kong Public Offering
or the International Offering is not fully subscribed for, the Overall Coordinators have the
authority (but not the obligation) in their sole and absolute discretion to reallocate all or any
unsubscribed Offer Shares from such offering to the other, in such proportion as the Overall
Coordinators deem appropriate.
In addition, to any mandatory reallocation required as described above, the Overall
Coordinators (for themselves and on behalf of the Underwriters) may reallocate the Offer
Shares from the International Offering to the Hong Kong Public Offering. In accordance with
Chapter 4.14 of the Guide for New Listing Applicants issued by the Stock Exchange, if such
reallocation is done other than pursuant to Practice Note 18 of the Listing Rules, (i) the
maximum total number of Offer Shares that may be reallocated to the Hong Kong Public
Offering following such reallocation shall be not more than double the initial allocation to the
Hong Kong Public Offering (i.e. 10,108,000 Offer Shares), and (ii) the final Offer Price shall
be fixed at HK$5.95 per Offer Share, the low-end of the Offer Price range stated in this
prospectus.
In the event of a reallocation of the Offer Shares from the International Offering to the
Hong Kong Public Offering in the circumstances under paragraphs (a)(ii), (a)(iii), (a)(iv) or
(b)(ii) above, the number of Offer Shares allocated to the International Offering will be
correspondingly reduced.
STRUCTURE OF THE GLOBAL OFFERING
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--- page 357 ---
Applications
The Overall Coordinators (for themselves and on behalf of the Underwriters) may require
any investor who has been offered Shares under the International Offering, and who has made
an application under the Hong Kong Public Offering, to provide sufficient information to the
Overall Coordinators so as to allow it to identify the relevant applications under the Hong
Kong Public Offering and to ensure that it is excluded from any application for Shares under
the Hong Kong Public Offering.
Each applicant under the Hong Kong Public Offering will also be required to give an
undertaking and confirmation in the application submitted by him/her/it that he/she/it and any
person(s) for whose benefit he/she/it is making the application has not applied for or taken up,
or indicated an interest in, and will not apply for or take up, or indicate an interest in, any
International Offer Shares under the International Offering, and such applicant’s application is
liable to be rejected if the said undertaking and/or confirmation is breached and/or untrue (as
the case may be) or it has been or will be placed or allocated International Offer Shares under
the International Offering.
Applicants under the Hong Kong Public Offering may be required to pay, on application
(subject to application channels), the maximum price of HK$7.90 per Offer Share in addition
to the brokerage, SFC transaction levy, Stock Exchange trading fee and AFRC transaction levy
payable on each Offer Share. If the Offer Price, as finally determined in the manner described
in “—Pricing and Allocation” below, is less than the maximum price of HK$7.90 per Offer
Share, appropriate refund payments (including the brokerage, SFC transaction levy, Stock
Exchange trading fee and AFRC transaction levy attributable to the surplus application monies)
will be made to successful applicants, without interest. Further details are set out in “How to
Apply for Hong Kong Offer Shares.”
References in this prospectus to applications, application monies or the procedure for
application relate solely to the Hong Kong Public Offering.
THE INTERNATIONAL OFFERING
Number of Offer Shares Offered
Subject to the reallocation as described above, the number of Offer Shares to be initially
offered under the International Offering will be 45,486,000, representing 90% of the total
number of Offer Shares initially available under the Global Offering. The International
Offering is expected to be fully underwritten by the International Underwriters subject to the
terms and conditions of the International Underwriting Agreement, and is subject to the Hong
Kong Public Offering becoming unconditional.
STRUCTURE OF THE GLOBAL OFFERING
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--- page 358 ---
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. The International Offering is subject to the Hong Kong Public Offering
being unconditional.
Allocation of Offer Shares pursuant to the International Offering will be effected in
accordance with the “book-building” process described in “—Pricing and Allocation” below
and based on a number of factors, including the level and timing of demand, total size of the
relevant investor’s invested assets or equity assets in the relevant sector and whether or not it
is expected that the relevant investor is likely hold or sell, Shares, after the Listing. Such
allocation is intended to result in a distribution of the Shares on a basis which would lead to
the establishment of a solid shareholder base to the benefit of our Company and our
Shareholders as a whole.
The Overall Coordinators (for themselves and on behalf of the Underwriters) may require
any investor who has been offered Offer Shares under the International Offering and who has
made an application under the Hong Kong Public Offering, to provide sufficient information
to the Overall Coordinators (for themselves and on behalf of the Underwriters) so as to allow
them to identify the relevant applications under the Hong Kong Public Offering and to ensure
that they are excluded from any application of Offer Shares under the Hong Kong Public
Offering.
Reallocation
The total number of Offer Shares to be issued pursuant to the International Offering may
change as a result of the reallocation arrangement described in “—The Hong Kong Public
Offering—Reallocation” above and any reallocation of unsubscribed Offer Shares originally
included in the Hong Kong Public Offering.
PRICING AND ALLOCATION
Determining the Offer Price
The International Underwriters will be soliciting from prospective investors’ indications
of interest in acquiring Offer Shares in the International Offering. Prospective professional and
institutional investors will be required to specify the number of Offer Shares under the
International Offering they would be prepared to acquire either at different prices or at a
particular price. This process, known as “book-building,” is expected to continue up to, and to
cease on or around, the last day for lodging applications under the Hong Kong Public Offering.
STRUCTURE OF THE GLOBAL OFFERING
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--- page 359 ---
Pricing for the Offer Shares for the purpose of the various offerings under the Global
Offering will be fixed on the Price Determination Date, which is expected to be on or about
Friday, January 5, 2024 and in any event, no later than 12:00 noon on Friday, January 5, 2024,
by agreement between the Overall Coordinators (for themselves and on behalf of the
Underwriters) and our Company and the number of Offer Shares to be allocated under the
various offerings will be determined shortly thereafter.
Offer Price Range
The Offer Price per Offer Share under the Hong Kong Public Offering will be identical
to the Offer Price per Offer Share under the International Offering based on the Hong Kong
dollar price per Offer Share, as determined by the Overall Coordinators (for themselves and on
behalf of the Underwriters) and our Company.
The Offer Price will not be more than HK$7.90 per Offer Share and is expected to be not
less than HK$5.95 per Offer Share, unless otherwise announced by our Company no later than
the morning of the last day for lodging applications under the Hong Kong Public Offering,
which is Thursday, January 4, 2024 as further explained below. Prospective investors should
be aware that the Offer Price to be determined on the Price Determination Date may be,
but is not expected to be, lower than the indicative Offer Price range stated in this
prospectus.
If, for any reason, our Company and the Overall Coordinators (for themselves and on
behalf of the Underwriters) are unable to reach agreement on the Offer Price on or before 12:00
noon on Friday, January 5, 2024, the Global Offering will not proceed and will lapse.
Reduction in Indicative Offer Price Range and/or Number of Offer Shares
The Overall Coordinators (for themselves and on behalf of the other 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, reduce the number of Offer Shares and/or the indicative Offer Price range as
stated in this prospectus at any time on or prior to the morning of the last day for lodging
applications under the Hong Kong Public Offering. In such case, we will, as soon as practicable
following the decision to make such reduction, and in any event not later than the morning of
the day which is the last day for lodging applications under the Hong Kong Public Offering,
cause to be announced on the website of our Company at www.99digtech.com and the website
of the Stock Exchange at www.hkexnews.hk , notices of the reduction, and the cancellation of
the Global Offering and relaunch of the offer at the revised number of Offer Shares and/or the
revised Offer Price.
STRUCTURE OF THE GLOBAL OFFERING
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--- page 360 ---
As soon as practicable after such reduction of the number of Offer Shares and/or the Offer
Price, we will also issue a supplemental prospectus or a new prospectus updating investors of
the change in the number of Offer Shares being offered under the Global Offering and/or the
Offer Price, and giving investors at least three business days to consider the new information.
The supplemental or new prospectus should include at least the following: updated (i) Offer
Price and market capitalization; (ii) listing timetable and underwriting obligations; (iii)
price/earning multiple, unaudited pro forma and adjusted net tangible assets; and (iv) use of
proceeds and working capital adequacy confirmation based on the revised proceeds.
Before submitting applications for the Hong Kong Offer Shares, applicants should have
regard to the possibility that any announcement of a reduction in the number of Offer Shares
and/or the indicative Offer Price range may not be made until the day which is the last day for
lodging applications under the Hong Kong Public Offering, which is Thursday, January 4,
2024. In the absence of any such supplemental or new prospectus so published, the number of
Offer Shares will not be reduced and/or the Offer Price, if agreed upon by the Overall
Coordinators (for themselves and on behalf of the Underwriters) and our Company, will under
no circumstances be set outside the Offer Price range as stated in this prospectus.
If there is any change to the offer size due to change in the number of Offer Shares offered
in the Global Offering (other than pursuant to the reallocation mechanism as disclosed in this
prospectus), or change to the Offer Price which leads to the resulting price falling outside the
indicative Offer Price range as stated in this prospectus, or if the Company becomes aware that
there has been a significant change affecting any matter contained in this prospectus or a
significant new matter has arisen, the inclusion of information in respect of which would have
been required to be in this prospectus if it had arisen before this prospectus was issued, after
the issue of this prospectus and before the commencement of dealings in our Offer Shares as
prescribed under Rule 11.13 of the Listing Rules, our Company is required to cancel the Global
Offering and issue a supplemental prospectus or a new prospectus and subsequently relaunched
on FINI pursuant to the supplemental prospectus.
In the event of a reduction in the number of Offer Shares, the Overall Coordinators (for
themselves and on behalf of the Underwriters) may, at its discretion, reallocate the number of
Offer Shares to be offered in the Hong Kong Public Offering and the International Offering,
provided that the number of Offer Shares comprised in the Hong Kong Public Offering shall
not be less than 10% of the total number of Offer Shares available under the Global Offering.
The Offer Shares to be offered in the Hong Kong Public Offering and the Offer Shares to be
offered in the International Offering may, in certain circumstances, be reallocated between
these offerings at the discretion of the Overall Coordinators (for themselves and on behalf of
the Underwriters).
Announcement of Offer Price and Basis of Allocations
The final Offer Price, the level of indications of interest in the International Offering, the
results of applications in the Hong Kong Public Offering, the basis of allocations of the Hong
Kong Offer Shares and the results of allocations are expected to be announced on Monday,
January 8, 2024 on the website of our Company at www.99digtech.com and the website of the
Stock Exchange at www.hkexnews.hk .
STRUCTURE OF THE GLOBAL OFFERING
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--- page 361 ---
UNDERWRITING
The Hong Kong Public Offering is fully underwritten by the Hong Kong Underwriters
under the terms of the Hong Kong Underwriting Agreement and is subject to our Company and
the Overall Coordinators (for themselves and on behalf of the Underwriters) agreeing on the
Offer Price.
We expect to enter into the International Underwriting Agreement relating to the
International Offering on or around the Price Determination Date.
These underwriting arrangements under the Hong Kong Underwriting Agreement and the
International Underwriting Agreement are summarized in “Underwriting” in this prospectus.
CONDITIONS OF THE GLOBAL OFFERING
Acceptances of all applications for Offer Shares pursuant to the Global Offering will be
conditional on, among others:
(a) the Stock Exchange granting approval for the listing of, and permission to deal in,
the Shares in issue and the Shares to be issued pursuant to the (i) Global Offering,
and (ii) the exercise of the Pre-IPO Share Options, and such approval not
subsequently having been revoked prior to the commencement of dealings in the
Shares on the Stock Exchange;
(b) the Offer Price having been duly agreed between our Company and the Overall
Coordinators (for themselves and on behalf of the Underwriters) on the Price
Determination Date;
(c) the execution and delivery of the International Underwriting Agreement on or
around the Price Determination Date; and
(d) the obligations of the Underwriters under 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
Agreements (unless and to the extent such conditions are validly waived on or before such
dates and times).
If, for any reason, the Offer Price is not agreed between our Company and the Overall
Coordinators (for themselves and on behalf of the Underwriters) by 12:00 noon on Friday,
January 5, 2024, the Global Offering will not proceed and will lapse immediately.
The consummation of each of the Hong Kong Public Offering and the International
Offering is conditional upon, among other things, the other offering becoming unconditional
and not having been terminated in accordance with their respective terms.
STRUCTURE OF THE GLOBAL OFFERING
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--- page 362 ---
If the above conditions are not fulfilled or waived prior to the times and dates specified,
the Global Offering will lapse and the Stock Exchange will be notified immediately. Notice of
the lapse of the Hong Kong Public Offering will be published by our Company on the website
of the Stock Exchange at www.hkexnews.hk and the website of our Company at
www.99digtech.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—D. Dispatch/Collection of Share Certificates and Refund of
Application Monies.” In the meantime, all application monies will be held in separate bank
account(s) with the receiving bankers or other bank(s) in Hong Kong licensed under the
Banking Ordinance (Chapter 155 of the Laws of Hong Kong) (as amended).
Share certificates will only become valid evidence of title at 8:00 a.m. on the Listing Date
provided that (i) the Global Offering has become unconditional in all respects, and (ii) the right
of termination as described in “Underwriting—Underwriting Arrangements and Expenses –
Hong Kong Public Offering—Grounds for Termination” has not been exercised.
APPLICATION FOR LISTING ON THE STOCK EXCHANGE
We have applied to the Stock Exchange for the listing of, and permission to deal in, the
Shares in issue and to be issued by us pursuant to the Global Offering (including the Shares
which may be allotted and issued pursuant to the exercise of the Pre-IPO Share Options).
No part of our Company’s share or loan capital is listed on or dealt in on any other stock
exchange and no such listing or permission to deal is being or proposed to be sought in the near
future.
SHARES WILL BE ELIGIBLE FOR CCASS
Subject to the granting of the listing of, and permission to deal in, the Shares on the Stock
Exchange and compliance 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 on the Stock Exchange
or any other date HKSCC chooses. Settlement of transactions between participants of the Stock
Exchange (as defined in the Listing Rules) is required to take place in CCASS on the second
settlement day after any trading day. All activities under CCASS are subject to the General
Rules of HKSCC and HKSCC Operational Procedures in effect from time to time. Investors
should seek the advice of their stockbroker or other professional advisors for details of the
settlement arrangements as such arrangements may affect their rights and interests.
All necessary arrangements have been made enabling our Shares to be admitted into
CCASS.
DEALING ARRANGEMENTS
Assuming that the Hong Kong Public Offering becomes unconditional at or before 8:00
a.m. in Hong Kong on Tuesday, January 9, 2024, it is expected that dealings in the Shares on
the Stock Exchange will commence at 9:00 a.m. on Tuesday, January 9, 2024. The Shares will
be traded in board lots of 500 Shares. The stock code of the Shares will be 6959.
STRUCTURE OF THE GLOBAL OFFERING
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--- page 363 ---
IMPORTANT NOTICE TO INVESTORS
OF HONG KONG OFFER SHARES
FULLY ELECTRONIC APPLICATION PROCESS
We have adopted a fully electronic application process for the Hong Kong
Public Offering and below are the procedures for application.
This prospectus is available at the website of the Stock Exchange at
www.hkexnews.hk under the “HKEXnews > New Listings > New Listing
Information” section, and our website at www.99digtech.com.
The contents of this prospectus are identical to the prospectus as registered with the
Registrar of Companies in Hong Kong pursuant to Section 342C of the Companies
(Winding Up and Miscellaneous Provisions) Ordinance.
A. APPLICATION FOR HONG KONG OFFER SHARES
1. Who Can Apply
Y ou can apply for Hong Kong Offer Shares if you or the person(s) for whose benefit you
are applying for:
 are 18 years of age or older; and
 have a Hong Kong address (for the HK eIPO White Form service only).
Unless permitted by the Listing Rules or a waiver and/or consent has been granted by the
Stock Exchange to us, you cannot apply for any Hong Kong Offer Shares if you or the
person(s) for whose benefit you are applying for:
 are an existing Shareholder or its close associates; or
 are a Director or any of his/her close associates.
HOW TO APPLY FOR HONG KONG OFFER SHARES
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--- page 364 ---
2. Application Channels
The Hong Kong Public Offering period will begin at 9:00 a.m. on Friday, December
29, 2023 and end at 12:00 noon on Thursday, January 4, 2024 (Hong Kong time).
To apply for Hong Kong Offer Shares, you may use one of the following application
channels:
Application
Channel Platform Target Investors Application Time
HK eIPO
White Form
service
Online application via the
HK eIPO White Form
service in the IPO App
(which can be
downloaded by
searching “ IPO App ”i n
App Store or Google
Play or download at
www.hkeipo.hk/IPOApp
or
www.tricorglobal.com/
IPOApp )o ra tt h e
designated website at
www.hkeipo.hk .
Investors who would like
to receive a physical
Share certificate. Hong
Kong Offer Shares
successfully applied for
will be allotted and
issued in your own
name.
From 9:00 a.m. on Friday,
December 29, 2023 to
11:30 a.m. on Thursday,
January 4, 2024, Hong
Kong time.
The latest time for
completing full payment
of application monies
will be 12:00 noon on
Thursday, January 4,
2024, Hong Kong time.
HKSCC EIPO
channel
Y our broker or custodian
who is a HKSCC
Participant will submit a
HKSCC EIPO
application on your
behalf through
HKSCC’s FINI system
in accordance with your
instruction.
Investors who would not
like to receive a
physical Share
certificate. Hong Kong
Offer Shares
successfully applied for
will be allotted and
issued in the name of
HKSCC Nominees,
deposited directly into
CCASS and credited to
your designated HKSCC
Participant’s stock
account.
Contact your broker or
custodian for the
earliest and latest time
for giving such
instructions, as this may
vary by broker or
custodian .
HOW TO APPLY FOR HONG KONG OFFER SHARES
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--- page 365 ---
The HK eIPO White Form service and the HKSCC EIPO channel are facilities subject
to capacity limitations and potential service interruptions and you are advised not to wait until
the last day of the application period to apply for Hong Kong Offer Shares.
For those applying through the HK eIPO White Form service, once you complete
payment in respect of any application instructions given by you or for your benefit through the
HK eIPO White Form service to make an application for Hong Kong Offer Shares, an actual
application shall be deemed to have been made. If you are a person for whose benefit the
electronic application instructions are given, you shall be deemed to have declared that only
one set of electronic application instructions has been given for your benefit. If you are an
agent for another person, you shall be deemed to have declared that you have only given one
set of electronic application instructions for the benefit of the person for whom you are an
agent and that you are duly authorized to give those instructions as an agent.
For the avoidance of doubt, giving an application instruction under the HK eIPO White
Form service more than once and obtaining different payment reference numbers without
effecting full payment in respect of a particular reference number will not constitute an actual
application.
If you apply through the HK eIPO White Form service, you are deemed to have
authorized the HK eIPO White Form Service Provider to apply on the terms and conditions
in this prospectus, as supplemented and amended by the terms and conditions of the HK eIPO
White Form service.
By instructing your broker or custodian to apply for the Hong Kong Offer Shares on
your behalf through the HKSCC EIPO Channel, you (and, if you are joint applicants, each of
you jointly and severally) are deemed to have instructed and authorized HKSCC to cause
HKSCC Nominees (acting as nominee for the relevant HKSCC Participants) to apply for Hong
Kong Offer Shares on your behalf and to do on your behalf all the things stated in this
prospectus and any supplement to it.
For those applying through HKSCC EIPO channel, an actual application will be deemed
to have been made for any application instructions given by you or for your benefit to HKSCC
(in which case an application will be made by HKSCC Nominees on your behalf) provided such
application instruction has not been withdrawn or otherwise invalidated before the closing time
of the Hong Kong Public Offering.
HKSCC Nominees will only be acting as a nominee for you and neither HKSCC nor
HKSCC Nominees shall be liable to you or any other person in respect of any actions taken by
HKSCC or HKSCC Nominees on your behalf to apply for Hong Kong Offer Shares or for any
breach of the terms and conditions of this prospectus.
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--- page 366 ---
3. Information Required to Apply
Y ou must provide the following information with your application:
For Individual Applicants For Corporate Applicants
 Full name(s) 2 as shown on your
identity document
 Identity document’s issuing country or
jurisdiction
 Identity document type, with order of
priority:
i. HKID card; or
ii. National identification document;
or
iii. Passport; and
 Identity document number
 Full name(s)
2 as shown on your
identity document
 Identity document’s issuing country or
jurisdiction
 Identity document type, with order of
priority:
i. LEI registration document; or
ii. Certificate of incorporation; or
iii. Business registration certificate; or
iv. Other equivalent document; and
 Identity document number
Notes:
1. If you are applying through the HK eIPO White Form service, you are required to provide a valid
e-mail address, a contact telephone number and a Hong Kong address. Y ou are also required to declare
that the identity information provided by you follows the requirements as described in Note 2 below. In
particular, where you cannot provide a HKID number, you must confirm that you do not hold a HKID
card. The number of joint applicants may not exceed four. If you are a firm, the applicant must be in
the individual members’ names.
2. The applicant’s full name as shown on their identity document must be used. If an applicant’s identity
document contains both an English and Chinese name, both English and Chinese names must be used.
Otherwise, either English or Chinese names will be accepted. The order of priority of the applicant’s
identity document type must be strictly followed and where an individual applicant has a valid HKID
card, the HKID number must be used when making an application to subscribe for shares in a public
offer. Similarly for corporate applicants, a LEI number must be used if an entity has a LEI certificate.
3. If the applicant is a trustee, the client identification data (“ CID”) of the trustee, as set out above, will
be required. If the applicant is an investment fund (i.e. a collective investment scheme, or CIS), the CID
of the asset management company or the individual fund, as appropriate, which has opened a trading
account with the broker will be required, as above.
4. The maximum number of joint account holders on FINI is capped at four
(1) in accordance with market
practice.
5. If you are applying as a nominee, you must provide: (i) the full name (as shown on the identity
document), the identity document’s issuing country or jurisdiction, the identity document type; and (ii),
the identity document number, for each of the beneficial owners or, in the case(s) of joint beneficial
owners, for each joint beneficial owner. If you do not include this information, the application will be
treated as being made for your benefit.
6. If you are applying as an unlisted company and (i) the principal business of that company is dealing in
securities; and (ii) you exercise statutory control over that company, then the application will be treated
as being for your benefit and you should provide the required information in your application as stated
above.
(1) Subject to change, if the Company’s Articles of Incorporation and applicable company law prescribe a lower
cap.
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“Unlisted company” means a company with no equity securities listed on the Stock Exchange or any
other stock exchange.
“Statutory control” means you:
 control the composition of the board of directors of the company;
 control more than half of the voting power of the company; or
 hold more than half of the issued share capital of the company (not counting any part of it which
carries no right to participate beyond a specified amount in a distribution of either profits or
capital).
For those applying through HKSCC EIPO channel, and making an application under a
power of attorney, we and the Overall Coordinators, as our agents, have discretion to consider
whether to accept it on any conditions we think fit, including evidence of the attorney’s
authority.
Failing to provide any required information may result in your application being rejected.
4. Permitted Number of Hong Kong Offer Shares for Application
Board lot size : 500 Shares
Permitted
number of
Hong Kong
Offer Shares
for application
and amount
payable on
application/
successful
allotment
: Hong Kong Offer Shares are available for application in specified
board lot sizes only. Please refer to the amount payable associated
with each specified board lot size in the table below.
The maximum Offer Price is HK$7.90 per Share.
If you are applying through the HKSCC EIPO channel, you are
required to pre-fund your application based on the amount specified
by your broker or custodian , as determined based on the applicable
laws and regulations in Hong Kong.
By instructing your broker or custodian to apply for the Hong
Kong Offer Shares on your behalf through the HKSCC EIPO
Channel, you (and, if you are joint applicants, each of you jointly
and severally) are deemed to have instructed and authorized HKSCC
to cause HKSCC Nominees (acting as nominee for the relevant
HKSCC Participants) to arrange payment of the final Offer Price,
brokerage, SFC transaction levy, the Stock Exchange trading fee and
the AFRC transaction levy by debiting the relevant nominee bank
account at the designated bank for your broker or custodian .
If you are applying through the HK eIPO White Form service, you
may refer to the table below for the amount payable for the number
of Shares you have selected. Y ou must pay the respective amount
payable on application in full upon application for Hong Kong Offer
Shares.
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--- page 368 ---
No. of
Hong Kong
Offer Shares
applied for
Maximum
Amount
payable
(2)
on
application/
successful
allotment
No. of
Hong Kong
Offer Shares
applied for
Maximum
Amount
payable
(2)
on
application/
successful
allotment
No. of
Hong Kong
Offer Shares
applied for
Maximum
Amount
payable
(2)
on
application/
successful
allotment
No. of
Hong Kong
Offer Shares
applied for
Maximum
Amount
payable
(2)
on
application/
successful
allotment
HK$ HK$ HK$ HK$
500 3,989.84 7,000 55,857.69 50,000 398,983.58 700,000 5,585,770.06
1,000 7,979.67 8,000 63,837.37 60,000 478,780.29 800,000 6,383,737.20
1,500 11,969.51 9,000 71,817.05 70,000 558,577.00 900,000 7,181,704.36
2,000 15,959.34 10,000 79,796.71 80,000 638,373.72 1,000,000 7,979,671.50
2,500 19,949.18 15,000 119,695.08 90,000 718,170.44 1,500,000 11,969,507.26
3,000 23,939.02 20,000 159,593.44 100,000 797,967.16 2,000,000 15,959,343.00
3,500 27,928.85 25,000 199,491.79 200,000 1,595,934.30 2,527,000
(1) 20,164,629.88
4,000 31,918.69 30,000 239,390.15 300,000 2,393,901.46
4,500 35,908.52 35,000 279,288.50 400,000 3,191,868.60
5,000 39,898.36 40,000 319,186.85 500,000 3,989,835.76
6,000 47,878.03 45,000 359,085.22 600,000 4,787,802.90
Notes:
(1) Maximum number of Hong Kong Offer Shares you may apply for and this is 50% of the Hong Kong Offer
Shares initially offered.
(2) The amount payable is inclusive of brokerage, SFC transaction levy, the Stock Exchange trading fee and AFRC
transaction levy. If your application is successful, brokerage will be paid to the Exchange Participants (as
defined in the Listing Rules) or to the HK eIPO White Form Service Provider (for applications made through
the application channel of the HK eIPO White Form Service Provider) while the SFC transaction levy, the
Stock Exchange trading fee and the AFRC transaction levy will be paid to the SFC, the Stock Exchange and
the AFRC, respectively.
5. Multiple Applications Prohibited
Y ou or your joint applicant(s) shall not make more than one application for your own
benefit, except where you are a nominee and provide the information of the underlying investor
in your application as required under the paragraph headed “ —A. Application for Hong Kong
Offer Shares—3. Information Required to Apply ” in this section. If you are suspected of
submitting or cause to submit more than one application, all of your applications will be
rejected.
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Multiple applications made either through (i) the HK eIPO White Form service, (ii)
HKSCC EIPO channel, or (iii) both channels concurrently are prohibited and will be rejected.
If you have made an application through the HK eIPO White Form service or HKSCC EIPO
channel, you or the person(s) for whose benefit you have made the application shall not apply
further for any Offer Shares.
The Hong Kong Share Registrar would record all applications into its system and identify
suspected multiple applications with identical names, identification document numbers and
reference numbers according to the Best Practice Note on Treatment of Multiple/Suspected
Multiple Applications (“ Best Practice Note ”) issued by the Federation of Share Registrars
Limited.
Since applications are subject to personal information collection statements,
identification document numbers displayed are redacted.
6. Terms and Conditions of An Application
By applying for Hong Kong Offer Shares through the HK eIPO White Form service or
HKSCC EIPO channel, you (or as the case may be, HKSCC Nominees will do the following
things on your behalf):
(i) undertake to execute all relevant documents and instruct and authorise us and/or the
Overall Coordinators, as our agents, to execute any documents for you and to do on
your behalf all things necessary to register any Hong Kong Offer Shares allocated
to you in your name or in the name of HKSCC Nominees as required by the Articles
of Association, and (if you are applying through the HKSCC EIPO channel) to
deposit the allotted Hong Kong Offer Shares directly into CCASS for the credit of
your designated HKSCC Participant’s stock account on your behalf;
(ii) confirm that you have read and understand the terms and conditions and application
procedures set out in this prospectus, the IPO App and the designated website of the
HK eIPO White Form service (or as the case may be, the agreement you entered
into with your broker or custodian), and agree to be bound by them;
(iii) (if you are applying through the HKSCC EIPO channel) agree to the arrangements,
undertakings and warranties under the participant agreement between your broker
or custodian and HKSCC and observe the General Rules of HKSCC and the
HKSCC Operational Procedures for giving application instructions to apply for
Hong Kong Offer Shares;
(iv) confirm that you are aware of the restrictions on offers and sales of shares set out
in this prospectus and they do not apply to you, or the person(s) for whose benefit
you have made the application;
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--- page 370 ---
(v) confirm that you have read this prospectus and any supplement to it and have relied
only on the information and representations contained therein in making your
application (or as the case may be, causing your application to be made) and will not
rely on any other information or representations;
(vi) agree that our Company, the Joint Sponsors, the Overall Coordinators, the Joint
Global Coordinators, the Joint Bookrunners, the Joint Lead Managers, the
Underwriters, the Capital Market Intermediaries, and any of their or our Company’s
respective directors, officers, employees, partners, agents, advisers, and
representatives, and any other parties involved in the Global Offering (collectively,
the “ Relevant Persons ”), the Hong Kong Share Registrar and HKSCC will not be
liable for any information and representations not in this prospectus and any
supplement to it;
(vii) agree to disclose the details of your application and your personal data and any other
personal data which may be required about you and the person(s) for whose benefit
you have made the application to us, the Relevant Persons, the Hong Kong Share
Registrar, HKSCC, HKSCC Nominees, the Stock Exchange, the SFC and any other
statutory regulatory or governmental bodies or otherwise as required by laws, rules
or regulations, for the purposes under the paragraph headed “ —G. Personal
Data—3. Purposes and 4. Transfer of personal data ” in this section;
(viii) agree (without prejudice to any other rights which you may have once your
application (or as the case may be, HKSCC Nominees’ application) has been
accepted) that you will not rescind it because of an innocent misrepresentation;
(ix) agree that subject to Section 44A(6) of the Companies (Winding Up and
Miscellaneous Provisions) Ordinance, any application made by you or HKSCC
Nominees on your behalf cannot be revoked once it is accepted, which will be
evidenced by the notification of the result of the ballot by the Hong Kong Share
Registrar by way of publication of the results at the time and in the manner as
specified in the paragraph headed “ —B. Publication of Results ” in this section;
(x) confirm that you are aware of the situations specified in the paragraph headed “ —C.
Circumstances In Which You Will Not Be Allocated Hong Kong Offer Shares ” in this
section;
(xi) agree that your application or HKSCC Nominees’ application, any acceptance of it
and the resulting contract will be governed by and construed in accordance with the
laws of Hong Kong;
(xii) agree to comply with the Companies Ordinance, the Companies (Winding Up and
Miscellaneous Provisions) Ordinance, the Articles of Association and laws of any
place outside Hong Kong that apply to your application and that neither we nor the
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--- page 371 ---
Relevant Persons will breach any law inside and/or outside Hong Kong as a result
of the acceptance of your offer to purchase, or any action arising from your rights
and obligations under the terms and conditions contained in this prospectus;
(xiii) confirm that (a) your application or HKSCC Nominees’ application on your behalf
is not financed directly or indirectly by our Company, any of the directors, chief
executives, substantial Shareholder(s) or existing shareholder(s) of our Company or
any of our subsidiaries or any of their respective close associates; and (b) you are
not accustomed or will not be accustomed to taking instructions from our Company,
any of the directors, chief executives, substantial shareholder(s) or existing
shareholder(s) of our Company or any of our subsidiaries or any of their respective
close associates in relation to the acquisition, disposal, voting or other disposition
of the Shares registered in your name or otherwise held by you;
(xiv) warrant that the information you have provided is true and accurate;
(xv) confirm that you understand that we and the Overall Coordinators will rely on your
declarations and representations in deciding whether or not to allocate any Hong
Kong Offer Shares to you and that you may be prosecuted for making a false
declaration;
(xvi) agree to accept Hong Kong Offer Shares applied for or any lesser number allocated
to you under the application;
(xvii) declare and represent that this is the only application made and the only application
intended by you to be made to benefit you or the person for whose benefit you are
applying;
(xviii) (if the application is made for your own benefit) warrant that no other application
has been or will be made for your benefit by giving electronic application
instructions to HKSCC directly or indirectly or through the application channel of
the HK eIPO White Form Service Provider or by any one as your agent or by any
other person; and
(xix) (if you are making the application as an agent for the benefit of another person)
warrant that (1) no other application has been or will be made by you as agent for
or for the benefit of that person or by that person or by any other person as agent
for that person by giving electronic application instructions to HKSCC and the
HK eIPO White Form Service Provider and (2) you have due authority to give
electronic application instructions on behalf of that other person as its agent.
HOW TO APPLY FOR HONG KONG OFFER SHARES
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--- page 372 ---
B. PUBLICATION OF RESULTS
Results of Allocation
Y ou can check whether you are successfully allocated any Hong Kong Offer Shares
through:
Platform Date/Time
Applying through the HK eIPO White Form service or HKSCC EIPO channel:
Website From the “IPO Results” function
in the IPO App or at
www.tricor.com.hk/ipo/result
or www.hkeipo.hk/IPOResult
with a “search by ID Number”
function.
The full list of (i) wholly or
partially successful applicants
using the HK eIPO White
Form service and HKSCC
EIPO channel, and (ii) the
number of Hong Kong Offer
Shares conditionally allotted to
them, among other things,
will be displayed at
www.hkeipo.hk/IPOResult or
www.tricor.com.hk/ipo/result .
24 hours, from 11:00 p.m. on
Monday, January 8, 2024 to
12:00 midnight Sunday, January
14, 2024 (Hong Kong time).
The Stock Exchange’s website at
www.hkexnews.hk and our
website at www.99digtech.com
which will provide links to the
above mentioned websites of
the Hong Kong Share Registrar.
No later than 11:00 p.m. on
Monday, January 8, 2024 (Hong
Kong time).
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Platform Date/Time
Telephone +852 3691 8488—the allocation
results telephone enquiry line
provided by the Hong Kong
Share Registrar.
Between 9:00 a.m. and 6:00 p.m.,
from Tuesday, January 9, 2024
to Friday, January 12, 2024
(Hong Kong time) on a
business day.
For those applying through HKSCC EIPO channel, you may also check with your
broker or custodian from 6:00 p.m. on Friday, January 5, 2024
HKSCC Participants can log into FINI and review the allotment result from 6:00 p.m. on
Friday, January 5, 2024 (Hong Kong time) on a 24-hour basis and should report any
discrepancies on allotments to HKSCC as soon as practicable.
Allocation Announcement
We expect to announce the results of the final Offer Price, the level of indications of
interest in the International Offering, the level of applications in the Hong Kong Public
Offering and the basis of allocations of Hong Kong Offer Shares on the Stock Exchange’s
website at www.hkexnews.hk and our website at www.99digtech.com by no later than
11:00 p.m. on Monday, January 8, 2024 (Hong Kong time).
C. CIRCUMSTANCES IN WHICH YOU WILL NOT BE ALLOCATED HONG KONG
OFFER SHARES
Y ou should note the following situations in which Hong Kong Offer Shares will not be
allocated to you or the person(s) for whose benefit you are applying for:
1. If your application is revoked:
Y our application or the application made by HKSCC Nominees on your behalf may be
revoked pursuant to Section 44A(6) of the Companies (Winding Up and Miscellaneous
Provisions) Ordinance.
2. If we or our agents exercise our discretion to reject your application:
We, the Overall Coordinators, the Hong Kong Share Registrar and their respective agents
and nominees have full discretion to reject or accept any application, or to accept only part of
any application, without giving any reasons.
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3. If the allocation of Hong Kong Offer Shares is void:
The allocation of Hong Kong Offer Shares will be void if the Stock Exchange does not
grant permission to list the Shares either:
 within three weeks from the closing date of the application lists; or
 within a longer period of up to six weeks if the Stock Exchange notifies us of that
longer period within three weeks of the closing date of the application lists.
4. If:
 you make multiple applications or suspected multiple applications. Y ou may refer to
the paragraph headed “ —A. Application for Hong Kong Offer Shares—5. Multiple
Applications Prohibited ” in this section on what constitutes multiple applications;
 your application instruction is incomplete;
 your payment (or confirmation of funds, as the case may be) is not made correctly;
 the Underwriting Agreements do not become unconditional or are terminated; or
 we or the Overall Coordinators believe that by accepting your application, it or we
would violate applicable securities or other laws, rules or regulations.
5. If there is money settlement failure for allotted Shares:
Based on the arrangements between HKSCC Participants and HKSCC, HKSCC
Participants will be required to hold sufficient application funds on deposit with their
designated bank before balloting. After balloting of Hong Kong Offer Shares, the Receiving
Bank will collect the portion of these funds required to settle each HKSCC Participant’s actual
Hong Kong Offer Share allotment from their designated bank.
There is a risk of money settlement failure. In the extreme event of money settlement
failure by a HKSCC Participant (or its designated bank), who is acting on your behalf in
settling payment for your allotted Shares, HKSCC will contact the defaulting HKSCC
Participant and its designated bank to determine the cause of failure and request such
defaulting HKSCC Participant to rectify or procure to rectify the failure.
However, if it is determined that such settlement obligation cannot be met, the affected
Hong Kong Offer Shares will be reallocated to the International Offering. Hong Kong Offer
Shares applied for by you through the broker or custodian may be affected to the extent of
the settlement failure. In the extreme case, you will not be allocated any Hong Kong Offer
Shares due to the money settlement failure by such HKSCC Participant. None of us, the
Relevant Persons, the Hong Kong Share Registrar and HKSCC is or will be liable if Hong
Kong Offer Shares are not allocated to you due to the money settlement failure.
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--- page 375 ---
D. DISPATCH/COLLECTION OF SHARE CERTIFICATES AND REFUND OF
APPLICATION MONIES
Y ou 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 through the
HKSCC EIPO channel where the Share certificates will be deposited into CCASS as described
below).
No temporary document of title will be issued in respect of the Shares. No receipt will
be issued for sums paid on application.
Share certificates will only become valid at 8:00 a.m. on 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” has not been exercised. Investors who trade the
Shares on the basis of publicly available allocation details prior to the receipt of Share
certificates or prior to the Share certificates becoming valid evidence of title do so entirely at
their own risk.
The right is reserved to retain any Share certificate(s) and (if applicable) any surplus
application monies pending clearance of application monies.
The following sets out the relevant procedures and time:
HK eIPO White Form service HKSCC EIPO channel
Dispatched/collection of Share certificate 1
For application of
1,000,000 Hong
Kong Offer Shares
or more
Collection in person at the Hong Kong
Share Registrar, Tricor Investor Services
Limited, at 17/F, Far East Finance
Centre, 16 Harcourt Road, Hong Kong.
Time: from 9:00 a.m. to 1:00 p.m.
on Tuesday, January 9, 2024
(Hong Kong time).
Share certificate(s) will be issued in the
name of HKSCC Nominees, deposited
into CCASS and credited to your
designated HKSCC Participant’s stock
account.
No action by you is required.
If you are an individual, you must not
authorise any other person to collect
for you. If you are a corporate applicant,
your authorised representative must bear
a letter of authorization from your
corporation stamped with your
corporation’s chop.
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--- page 376 ---
HK eIPO White Form service HKSCC EIPO channel
Both individuals and authorised
representatives must produce, at the time
of collection, evidence of identity
acceptable to the Hong Kong Share
Registrar.
Note: If you do not collect your Share
certificate(s) personally within the time
above, it/they will be sent to the address
specified in your application instructions
by ordinary post at your own risk.
For application of less
than 1,000,000
Hong Kong Offer
Shares
Y our Share certificate(s) will be sent to the
address specified in your application
instructions by ordinary post at your
own risk.
Date: Monday, January 8, 2024
Refund mechanism for surplus application monies paid by you
Date Tuesday, January 9, 2024 Subject to the arrangement between you
and your broker or custodian .
Responsible party Hong Kong Share Registrar. Y our broker or custodian .
Application monies
paid through single
bank account
HK eIPO White Form e-Auto Refund
payment instructions to your designated
bank account.
Y our broker or custodian will arrange
refund to your designated bank account
subject to the arrangement between you
and it.
Application monies
paid through
multiple bank
accounts
Refund cheque(s) will be dispatched to the
address as specified in your application
instructions by ordinary post at your
own risk.
1 Except in the event of a tropical cyclone warning signal number 8 or above, a black rainstorm warning
and/or Extreme Conditions in the morning on Monday, January 8, 2024 rendering it impossible for the
relevant Share certificates to be dispatched to HKSCC in a timely manner, the Company shall procure
the Hong Kong Share Registrar to arrange for delivery of the supporting documents and Share
certificates in accordance with the contingency arrangements as agreed between them. Y ou may refer to
“– E. Severe Weather Arrangements” in this section.
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--- page 377 ---
E. SEVERE WEATHER ARRANGEMENTS
The Opening and Closing of the Application Lists
The application lists will not open or close on Thursday, January 4, 2024 if, there is/are:
 a tropical cyclone warning signal number 8 or above;
 a black rainstorm warning; and/or
 Extreme Conditions,
(collectively, “ Severe Weather Signals ”),
in force in Hong Kong at any time between 9:00 a.m. and 12:00 noon on Thursday, January 4,
2024.
Instead they will open between 11:45 a.m. and 12:00 noon and/or close at 12:00 noon on
the next business day which does not have Severe Weather Signals in force at any time between
9:00 a.m. and 12:00 noon.
Prospective investors should be aware that a postponement of the opening/closing of the
application lists may result in a delay in the listing date. Should there be any changes to the
dates mentioned in the section headed “Expected Timetable” in this prospectus, an
announcement will be made and published on the Stock Exchange’s website at
www.hkexnews.hk and our website at www.99digtech.com of the revised timetable.
If a Severe Weather Signal is hoisted on Monday, January 8, 2024, the Hong Kong Share
Registrar will make appropriate arrangements for the delivery of the Share certificates to the
HKSCC Depository’s service counter so that they would be available for trading on Tuesday,
January 9, 2024.
If a Severe Weather Signal is hoisted on Monday, January 8, 2024, the despatch of
physical Share certificates of less than 1,000,000 Offer Shares issued under your own name
will be made by ordinary post when the post office re-opens after the Severe Weather Signal
is lowered or cancelled (e.g. in the afternoon of Monday, January 8, 2024 or on Tuesday,
January 9, 2024).
If a Severe Weather Signal is hoisted on Tuesday, January 9, 2024, physical Share
certificates of 1,000,000 Offer Shares or more issued under your own name are available for
collection in person at the Hong Kong Share Registrar’s office after the Severe Weather Signal
is lowered or cancelled (e.g. in the afternoon of Tuesday, January 9, 2024 or on Wednesday,
January 10, 2024).
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--- page 378 ---
Prospective investors should be aware that if they choose to receive physical Share
certificates issued in their own name, there may be a delay in receiving the Share
certificates.
F. ADMISSION OF THE SHARES INTO CCASS
If the Stock Exchange grants the listing of, and permission to deal in, the Shares on the
Stock Exchange and we comply with the stock admission requirements of HKSCC, the Shares
will be accepted as eligible securities by HKSCC for deposit, clearance and settlement in
CCASS with effect from the date of commencement of dealings in the Shares or any other date
HKSCC chooses. Settlement of transactions between Exchange Participants is required to take
place in CCASS on the second settlement day after any trading day.
All activities under CCASS are subject to the General Rules of HKSCC and HKSCC
Operational Procedures in effect from time to time.
All necessary arrangements have been made enabling the Shares to be admitted into
CCASS.
Y ou should seek the advice of your broker or other professional advisor for details of the
settlement arrangement as such arrangements may affect your rights and interests.
G. PERSONAL DATA
The following Personal Information Collection Statement applies to any personal data
collected and held by our Company, the Hong Kong Share Registrar, the receiving bank and
the Relevant Persons about you in the same way as it applies to personal data about applicants
other than HKSCC Nominees. This personal data may include client identifier(s) and your
identification information. By giving application instructions to HKSCC, you acknowledge
that you have read, understood and agree to all of the terms of the Personal Information
Collection Statement below.
1. Personal Information Collection Statement
This Personal Information Collection Statement informs the applicant for, and holder of,
Hong Kong Offer Shares, of the policies and practices of our Company and the Hong Kong
Share Registrar in relation to personal data and the Personal Data (Privacy) Ordinance (Chapter
486 of the Laws of Hong Kong).
2. Reasons for the collection of your personal data
It is necessary for applicants and registered holders of Hong Kong Offer Shares to ensure
that personal data supplied to our Company or its agents and the Hong Kong Share Registrar
is accurate and up-to-date when applying for Hong Kong Offer Shares or transferring Hong
Kong Offer Shares into or out of their names or in procuring the services of the Hong Kong
Share Registrar.
HOW TO APPLY FOR HONG KONG OFFER SHARES
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Failure to supply the requested data or supplying inaccurate data may result in your
application for Hong Kong Offer Shares being rejected, or in the delay or the inability of our
Company or the Hong Kong Share Registrar to effect transfers or otherwise render their
services. It may also prevent or delay registration or transfers of Hong Kong Offer Shares
which you have successfully applied for and/or the dispatch of Share certificate(s) to which
you are entitled.
It is important that applicants for and holders of Hong Kong Offer Shares inform our
Company and the Hong Kong Share Registrar immediately of any inaccuracies in the personal
data supplied.
3. Purposes
Y our personal data may be used, held, processed, and/or stored (by whatever means) for
the following purposes:
 processing your application and refund cheque and HK eIPO White Form e-Auto
Refund payment instruction(s), where applicable, verification of compliance with
the terms and application procedures set out in this prospectus and announcing
results of allocation of Hong Kong Offer Shares;
 compliance with applicable laws and regulations in Hong Kong and elsewhere;
 registering new issues or transfers into or out of the names of the holders of the
Shares including, where applicable, HKSCC Nominees;
 maintaining or updating the register of members of our Company;
 verifying identities of applicants for and holders of the Shares and identifying any
duplicate applications for the Shares;
 facilitating Hong Kong Offer Shares balloting;
 establishing benefit entitlements of holders of the 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 the Shares;
 disclosing relevant information to facilitate claims on entitlements; and
 any other incidental or associated purposes relating to the above and/or to enable our
Company and the Hong Kong Share Registrar to discharge their obligations to
applicants and holders of the Shares and/or regulators and/or any other purposes to
which applicants and holders of the Shares may from time to time agree.
HOW TO APPLY FOR HONG KONG OFFER SHARES
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4. Transfer of personal data
Personal data held by our Company and the Hong Kong Share Registrar relating to the
applicants for and holders of Hong Kong Offer Shares will be kept confidential but our
Company and the 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 Company’s appointed agents such as financial advisers, receiving bank and
overseas principal share registrar;
 HKSCC or HKSCC Nominees, who will use the personal data and may transfer the
personal data to the Hong Kong Share Registrar, in each case for the purposes of
providing its services or facilities or performing its functions in accordance with its
rules or procedures and operating FINI and CCASS (including where applicants for
the Hong Kong Offer Shares request a deposit into CCASS);
 any agents, contractors or third-party service providers who offer administrative,
telecommunications, computer, payment or other services to 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, including for the
purpose of the Stock Exchange’s administration of the Listing Rules and the SFC’s
performance of its statutory functions; and
 any persons or institutions with which the holders of Hong Kong Offer Shares have
or propose to have dealings, such as their bankers, solicitors, accountants or brokers
etc.
5. Retention of personal data
Our Company and the Hong Kong Share Registrar will keep the personal data of the
applicants and holders of Hong Kong Offer Shares for as long as necessary to fulfil the
purposes for which the personal data were collected. Personal data which is no longer required
will be destroyed or dealt with in accordance with the Personal Data (Privacy) Ordinance
(Chapter 486 of the Laws of Hong Kong).
6. Access to and correction of personal data
Applicants for and holders of Hong Kong Offer Shares have the right to ascertain whether
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 and the
Hong Kong Share Registrar, at their registered address disclosed in the section headed
“Corporate information” in this prospectus or as notified from time to time, for the attention
of our joint company secretaries, or the Hong Kong Share Registrar for the attention of the
privacy compliance officer.
HOW TO APPLY FOR HONG KONG OFFER SHARES
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The following is the text of a report set out on page sI–1t oI–6 0 ,r eceived from the
Company’ s reporting accountants, KPMG, Certified Public Accountants, Hong Kong, for the
purpose of incorporation in this prospectus.
ACCOUNTANTS’ REPORT ON HISTORICAL FINANCIAL INFORMATION TO THE
DIRECTORS OF CHANGJIU HOLDINGS LIMITED AND CITIC SECURITIES (HONG
KONG) LIMITED AND ICBC INTERNATIONAL CAPITAL LIMITED
Introduction
We report on the historical financial information of Changjiu Holdings Limited (the
“Company”) and its subsidiaries (together, the “Group”) set out on pages I-4 to I-60, which
comprises the consolidated statements of financial position of the Group as of December 31,
2020, 2021 and 2022 and June 30, 2023, and the statements of financial position of the
Company as of December 31, 2021 and 2022 and June 30, 2023, and the consolidated
statements of profit or loss, the consolidated statements of profit or loss and other
comprehensive income, the consolidated statements of changes in equity and the consolidated
statements of cash flows, for each of the years ended December 31, 2020, 2021 and 2022 and
for the six months ended June 30, 2023 (the “Track Record Period”), and material accounting
policy information and other explanatory information (together, the “Historical Financial
Information”). The Historical Financial Information set out on pages I-4 to I-60 forms an
integral part of this report, which has been prepared for inclusion in the prospectus of the
Company dated December 29, 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 the Historical
Financial Information that gives a true and fair view in accordance with the basis of preparation
and presentation set out in Note 1 to the Historical Financial Information, and for such internal
control as the directors of the Company determine is necessary to enable the preparation of the
Historical Financial Information that is free from material misstatement, whether due to fraud
or error.
Reporting accountants’ responsibility
Our responsibility is to express an opinion on the Historical Financial Information and to
report our opinion to you. We conducted our work in accordance with Hong Kong Standard on
Investment Circular Reporting Engagements 200 “Accountants’ Reports on Historical
Financial Information in Investment Circulars” issued by the Hong Kong Institute of Certified
Public Accountants (“HKICPA”). This standard requires that we comply with ethical standards
and plan and perform our work to obtain reasonable assurance about whether the Historical
Financial Information is free from material misstatement.
Our work involved performing procedures to obtain evidence about the amounts and
disclosures in the Historical Financial Information. The procedures selected depend on the
reporting accountants’ judgement, including the assessment of risks of material misstatement
of the Historical Financial Information, whether due to fraud or error. In making those risk
assessments, the reporting accountants consider internal control relevant to the entity’s
preparation of Historical Financial Information that gives a true and fair view in accordance
APPENDIX I ACCOUNTANTS’ REPORT
– I-1 –


--- page 382 ---
with the basis of preparation and presentation set out in Note 1 to the Historical Financial
Information in order to design procedures that are appropriate in the circumstances, but not for
the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Our
work also included evaluating the appropriateness of accounting policies used and the
reasonableness of accounting estimates made by the directors, as well as evaluating the overall
presentation of the Historical Financial Information.
We believe that the evidence we have obtained is sufficient and appropriate to provide a
basis for our opinion.
Opinion
In our opinion, the Historical Financial Information gives, for the purpose of the
accountants’ report, a true and fair view of the Group’s financial position as of December 31,
2020, 2021 and 2022 and June 30, 2023 and the Company’s financial position as of December
31, 2021 and 2022 and June 30, 2023 and of the Group’s financial performance and cash flows
for the Track Record Period in accordance with the basis of preparation and presentation set
out in Note 1 to the Historical Financial Information.
Review of stub period corresponding financial information
We have reviewed the stub period corresponding financial information of the Group
which comprises the consolidated statement of profit or loss, the consolidated statement of
profit or loss and other comprehensive income, the consolidated statement of changes in equity
and the consolidated statement of cash flows for the six months ended June 30, 2022 and other
explanatory information (the “Stub Period Corresponding Financial Information”). The
directors of the Company are responsible for the preparation and presentation of the Stub
Period Corresponding Financial Information in accordance with the basis of preparation and
presentation set out in Note 1 to the Historical Financial Information. Our responsibility is to
express a conclusion on the Stub Period Corresponding Financial Information based on our
review. We conducted our review in accordance with Hong Kong Standard on Review
Engagements 2410 “Review of Interim Financial Information Performed by the Independent
Auditor of the Entity” issued by the HKICPA. A review consists of making enquiries, primarily
of persons responsible for financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an audit conducted in
accordance with Hong Kong Standards on Auditing and consequently does not enable us to
obtain assurance that we would become aware of all significant matters that might be identified
in an audit. Accordingly, we do not express an audit opinion. Based on our review, nothing has
come to our attention that causes us to believe that the Stub Period Corresponding Financial
Information, for the purpose of the accountants’ report, is not prepared, in all material respects,
in accordance with the basis of preparation and presentation set out in Note 1 to the Historical
Financial Information.
Report on matters under the Rules Governing the Listing of Securities on The Stock
Exchange of Hong Kong Limited and the Companies (Winding Up and Miscellaneous
Provisions) Ordinance
Adjustments
In preparing the Historical Financial Information, no adjustments to the Underlying
Financial Statements as defined on page I-4 have been made.
APPENDIX I ACCOUNTANTS’ REPORT
– I-2 –


--- page 383 ---
Dividends
We refer to Note 24(c) to the Historical Financial Information which states that no
dividends have been paid by the Company in respect of the Track Record Period.
No historical financial statements for the Company
No financial statements have been prepared for the Company since its incorporation.
KPMG
Certified Public Accountants
8th Floor, Prince’s Building
10 Chater Road
Central, Hong Kong
December 29, 2023
APPENDIX I ACCOUNTANTS’ REPORT
– I-3 –


--- page 384 ---
HISTORICAL FINANCIAL INFORMATION
Set out below is the Historical Financial Information which forms an integral part of this
accountants’ report.
The consolidated financial statements of the Group for the Track Record Period, on which
the Historical Financial Information is based, were audited by KPMG Huazhen LLP in
accordance with Hong Kong Standards on Auditing issued by the 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 where otherwise indicated.
APPENDIX I ACCOUNTANTS’ REPORT
– I-4 –


--- page 385 ---
CONSOLIDATED STATEMENTS OF PROFIT OR LOSS
Expressed in RMB
Y ear ended December 31,
Six months
ended June 30,
Note 2020 2021 2022 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(unaudited)
Revenue 4(a)(i) 430,587 477,697 547,867 258,652 309,431
Cost of sales (261,629) (295,401) (322,828) (152,404) (176,028)
Gross profit 168,958 182,296 225,039 106,248 133,403
Net other income 5 554 441 1,552 545 823
Impairment (losses)/reversals (770) 110 (2,555) (2,011) (3,650)
Research and development expenses (10,296) (9,413) (9,027) (4,379) (6,721)
General and administrative expenses (42,579) (71,101) (76,984) (33,608) (63,400)
Sales and marketing expenses (5,069) (6,130) (7,126) (2,674) (3,497)
Profit from operations 110,798 96,203 130,899 64,121 56,958
Net finance expense 6(a) (964) (3,054) (3,273) (1,237) (1,486)
Profit before taxation 6 109,834 93,149 127,626 62,884 55,472
Income tax benefit/(expense) 7 4,271 (9,418) (31,714) (14,796) (20,181)
Profit for the year/period 114,105 83,731 95,912 48,088 35,291
Attributable to:
Equity shareholders of the Company 114,105 83,731 95,877 48,053 35,291
Non-controlling interests – – 35 35 –
Profit for the year/period 114,105 83,731 95,912 48,088 35,291
Earnings per share
Basic and diluted (RMB) 10 0.76 0.56 0.64 0.32 0.23
The accompanying notes form part of the Historical Financial Information.
APPENDIX I ACCOUNTANTS’ REPORT
– I-5 –


--- page 386 ---
CONSOLIDATED STATEMENTS OF PROFIT OR LOSS AND OTHER
COMPREHENSIVE INCOME
Expressed in RMB
Y ear ended December 31,
Six months
ended June 30,
2020 2021 2022 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(unaudited)
Profit for the year/period 114,105 83,731 95,912 48,088 35,291
Other comprehensive
income for the
year/period –––––
Total comprehensive
income for the
year/period 114,105 83,731 95,912 48,088 35,291
Attributable to:
Equity shareholders of the
Company 114,105 83,731 95,877 48,053 35,291
Non-controlling interests – – 35 35 –
Total comprehensive
income for the
year/period 114,105 83,731 95,912 48,088 35,291
The accompanying notes form part of the Historical Financial Information.
APPENDIX I ACCOUNTANTS’ REPORT
– I-6 –


--- page 387 ---
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
Expressed in RMB
As of December 31,
As of
June 30,
Note 2020 2021 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000
Non-current assets
Property, plant and equipment 11 3,743 3,042 2,790 2,428
Intangible assets 12 5,064 4,204 3,412 8,586
Right-of-use assets 13 664 4,640 5,829 10,180
Deferred tax assets 22(b) 4,393 331 1,512 4,655
13,864 12,217 13,543 25,849--------- --------- --------- ---------
Current assets
Trade receivables 15 39,964 59,861 101,311 179,783
Prepaid expenses and other
current assets 16 148,750 145,308 26,969 11,661
Cash and cash equivalents 17(a) 89 1,533 119,341 72,395
188,803 206,702 247,621 263,839--------- --------- --------- ---------
Current liabilities
Bank loans 18 50,000 50,000 75,000 35,000
Trade payables 19 25,741 25,469 28,507 26,488
Accrued expenses and other
current liabilities 20 40,518 49,406 58,012 71,800
Contract liabilities 4(a)(ii) 52,657 69,426 58,923 50,668
Lease liabilities 21 218 2,334 6,353 7,120
Current tax liability 22(a) – 3,712 22,180 30,234
169,134 200,347 248,975 221,310---------
--------- --------- ---------
Net current
assets/(liabilities) 19,669 6,355 (1,354) 42,529--------- --------- --------- ---------
Total assets less current
liabilities 33,533 18,572 12,189 68,378--------- --------- --------- ---------
Non-current liabilities
Lease liabilities 21 397 2,359 64 7,308
397 2,359 64 7,308--------- --------- --------- ---------
NET ASSETS 33,136 16,213 12,125 61,070
Equity
Share capital 24(a) –111
Treasury shares 23 – – – (4,325)
Reserves 24(b) 33,136 16,212 12,124 65,394
Total equity attributable to
shareholders of the
Company 33,136 16,213 12,125 61,070
Non-controlling interests ––––
TOTAL EQUITY 33,136 16,213 12,125 61,070
The accompanying notes form part of the Historical Financial Information.
APPENDIX I ACCOUNTANTS’ REPORT
– I-7 –


--- page 388 ---
STATEMENTS OF FINANCIAL POSITION OF THE COMPANY
Expressed in RMB
As of December 31,
As of
June 30,
Note 2021 2022 2023
RMB’000 RMB’000 RMB’000
Non-current assets
Investment in subsidiaries 14 – – 13,654
Current assets
Prepaid expenses and other current
assets 16 1 525 2,866
Cash and cash equivalents 17(a) – – 4,536
1 525 7,402----------- ----------- -----------
Current liabilities
Accrued expenses and other current
liabilities 20 – 2,656 21,333
Net current assets/(liabilities) 1 (2,131) (13,931)----------- ----------- -----------
Total assets less current liabilities 1 (2,131) (277)
NET ASSETS/(LIABILITIES) 1 (2,131) (277)
Equity
Share capital 24(a) 111
Treasure shares 23 – – (4,325)
Reserves – (2,132) 4,047
TOTAL EQUITY/(DEFICIT) 1 (2,131) (277)
The accompanying notes form part of the Historical Financial Information.
APPENDIX I ACCOUNTANTS’ REPORT
– I-8 –


--- page 389 ---
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Expressed in RMB
Attributable to equity shareholders of the Company
Note
Share
capital
Treasury
shares
Capital
reserves
PRC
Statutory
reserves
Accumulated
(loss)/
earnings Total
Non-
controlling
interest
Total
equity
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Note 24(a) Note 23 Note 24(b) Note 24(b) Note 24(c)
Balance as of January 1, 2020 – – 100,000 – (65,736) 34,264 – 34,264
Net profit – – – – 114,105 114,105 – 114,105
Deemed distribution 1 – – – – (115,233) (115,233) – (115,233)
Balance as of December 31,
2020 and January 1, 2021 – – 100,000 – (66,864) 33,136 – 33,136
Net profit – – – – 83,731 83,731 – 83,731
Issue of ordinary shares 1 – – – –1–1
Impact of the Reorganization 1 – – – – (45,510) (45,510) – (45,510)
Distribution to shareholders 24(c) – – – – (22,000) (22,000) – (22,000)
Deemed distribution 1 – – – – (33,145) (33,145) – (33,145)
Balance as of December 31,
2021 and January 1, 2022 1 – 100,000 – (83,788) 16,213 – 16,213
Net profit – – – – 95,877 95,877 35 95,912
Capital injection from non-
controlling shareholder – – 49 – – 49 961 1,010
Impact of the Reorganization 1 – – (100,014) – – (100,014) (996) (101,010)
Appropriation to statutory
reserves – – – 1,868 (1,868) – – –
Balance as of December 31,
2022 and January 1, 2023 1 – 35 1,868 10,221 12,125 – 12,125
Net profit – – – – 35,291 35,291 – 35,291
Shares issued under Pre-IPO
Restricted Share Plan 23 * (4,325) 4,325 – ––––
Share-based compensation 23 – – 13,654 – – 13,654 – 13,654
Balance as of June 30, 2023 1 (4,325) 18,014 1,868 45,512 61,070 – 61,070
(Unaudited)
Balance as of December 31,
2021 and January 1, 2022 1 – 100,000 – (83,788) 16,213 – 16,213
Net profit – – – – 48,053 48,053 35 48,088
Capital injection from non-
controlling shareholder – – 49 – – 49 961 1,010
Impact of the Reorganization 1 – – (100,014) – – (100,014) (996) (101,010)
Balance as of June 30, 2022 1 – 35 – (35,735) (35,699) – (35,699)* less than RMB500.
The accompanying notes form part of the Historical Financial Information.
APPENDIX I ACCOUNTANTS’ REPORT
– I-9 –


--- page 390 ---
CONSOLIDATED STATEMENTS OF CASH FLOWS
Expressed in RMB
Y ear ended December 31,
Six months
ended June 30,
Note 2020 2021 2022 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(unaudited)
Cash flows from operating activities
Net cash generated from/(used in) operations 17(b) 124,227 116,376 97,355 (6,446) (5,485)
Income taxes paid – (1,644) (15,325) (2,681) (15,270)
Net cash generated from/(used in)
operating activities 124,227 114,732 82,030 (9,127) (20,755)------ ------ ------ ------ ------
Cash flows from investing activities
Purchase of property, plant and equipment (959) (1,113) (1,024) (293) (147)
Net (payment)/receipt from related parties (73,549) (37,022) 114,634 (24,717) 14,251
Prepayment for acquisition of intangible
assets –––– (1,698)
Loan to a third party – (4,800) – – –
Receipt of loan to a third party – – 4,800 4,800 –
Interest received – – 174 174 –
Payment for non-refundable earnest money
for an unconsummated investment – (10,000) – – –
Net cash (used in)/generated from
investing activities (74,508) (52,935) 118,584 (20,036) 12,406------ ------ ------ ------ ------
Cash flows from financing activities
Proceed from bank loans 17(c) 50,000 50,000 75,000 38,699 35,000
Repayment of bank loans 17(c) – (50,000) (50,000) – (75,000)
Interest paid 17(c) (817) (2,712) (3,174) (1,274) (1,219)
Issuance of restricted shares 23 –––– 4,325
Payment of lease liabilities 17(c) (1,931) (2,496) (4,108) (98) (92)
Capital injection from non-controlling
shareholder – – 1,010 1,010 –
Cash paid in connection with the
Reorganization – – (101,010) – –
Deemed distribution to shareholders (Note i) (115,233) (33,145) – – –
Dividend paid to shareholders – (22,000) – – –
Listing expenses paid – – (524) – (1,782)
Net cash (used in)/generated from
financing activities (67,981) (60,353) (82,806) 38,337 (38,768)------
------ ------ ------ ------
Net (decrease)/increase in cash and cash
equivalents (18,262) 1,444 117,808 9,174 (47,117)
Cash and cash equivalents at the
beginning of the year/period 18,351 89 1,533 1,533 119,341
Effect of foreign exchange rate changes –––– 1 7 1
Cash and cash equivalents at the end of
the year/period 89 1,533 119,341 10,707 72,395
Note (i): Deemed distribution represents the cash transferred to Jilin Changjiu Industrial Group Co., Ltd. for the
periods ended December 31, 2020 and November 30, 2021. Further details of the basis of preparation of
Historical Financial Information are set out in Note 1.
The accompanying notes form part of the Historical Financial Information.
APPENDIX I ACCOUNTANTS’ REPORT
– I-10 –


--- page 391 ---
NOTE TO THE HISTORICAL FINANCIAL INFORMATION
Expressed in RMB unless otherwise indicated
1 BASIS OF PREPARATION AND PRESENTATION OF HISTORICAL FINANCIAL INFORMATION
Changjiu Holdings Limited (the “Company”), formerly known as Changjiu Digital Technology Limited, was
incorporated in the Cayman Islands on June 16, 2021 as an exempted company with limited liability under the
Companies Act (Revised) of the Cayman Islands. On September 19, 2023, the Company changed its name from
Changjiu Digital Technology Limited to Changjiu Holdings Limited.
The Company and its subsidiaries (together as the “Group”) are principally engaged in the provision of pledged
vehicle monitoring service and automobile dealership operation management service (the “Listing Businesses”)
across Mainland China.
To rationalize the corporate structure in preparation of the listing of the Company’s shares on The Stock
Exchange of Hong Kong Limited (the “Listing”), the Group underwent a reorganization, as detailed in the section
headed “History, Reorganization and Corporate Structure” in the Prospectus (the “Reorganization”).
Throughout the Track Record Period, the above-mentioned principal activities were carried out by Jilin
Changjiu Industrial Group Co., Ltd (“Changjiu Industrial”) and its subsidiaries, Changjiu Jinfu Enterprise
Management Consultation (Shenzhen) Co., Ltd (“Changjiu Jinfu”) and Shanghai Bozhong Digital Technology Co.,
Ltd (“Shanghai Bozhong”). In particular, the pledged vehicle monitoring services business was initially carried out
by a separate division of Changjiu Industrial (the “Division”) and then later transferred to Changjiu Jinfu as part of
the Reorganization. On November 30, 2021, Changjiu Jinfu purchased the portion of pledged vehicle monitoring
services business carried out by the Division (the “Relevant Business”) from Changjiu Industrial to complete the
transfer at a consideration of RMB45.5 million. Since then, the pledged vehicle monitoring services business is solely
carried out by Changjiu Jinfu.
Historically, the Division maintained separate accounting records for the Relevant Business and was managed
separately from the other businesses of Changjiu Industrial. In preparing the Historical Financial Information,
transactions and balances relating to the Relevant Business have been identified from such separate accounting
records of the Division and are included in the Historical Financial Information. As cash and bank accounts were
centrally managed and controlled by Changjiu Industrial, the net amount of cash transactions relating to the Relevant
Business amounting to RMB115.2 million and RMB33.1 million for the years ended December 31, 2020 and 2021,
respectively, are presented as deemed distribution in the consolidated statements of changes in equity and statements
of cash flows. Income tax charges have been allocated to the Relevant Business to reflect the proportion of the overall
Changjiu Industrial tax charges attributable to the Relevant Business. The consideration RMB45.5 million payable
to Changjiu Industrial for the acquisition of the Relevant Business has been adjusted directly in retained earnings in
the consolidated statements of changes in equity.
The directors of the Company believe the basis of preparation described above results in a faithful
representation of the assets, liabilities and economic activities associated with the pledged vehicle monitoring
services business that has been under common control during the Track Record Period. However, as the Relevant
Business did not operate as a stand-alone entity during certain periods within the Track Record Period, the Historical
Financial Information may not necessarily reflect what its results of operations, financial position, and cash flows
would have been had the Relevant Business operated as a separate entity throughout the Track Record Period.
As part of the Reorganization, in May 2022, Shanghai Bozhong acquired the pledged vehicle monitoring
service business through the purchase of the 100% shares of Changjiu Jinfu at a cash consideration of RMB101.0
million. Since then, Shanghai Bozhong becomes the sole shareholder of Changjiu Jinfu.
Upon completion of the Reorganization on May 30, 2022, the Company became the holding company of the
subsidiaries now comprising the Group.
The Listing Businesses are under the common control of Mr. Bo Shijiu and his spouse, Ms. Li Guiping
(together, the “Ultimate Controlling Shareholders”) before and after the Reorganization and the control is not
transitory. As such, there has been a continuation of risks and benefits to the Ultimate Controlling Shareholders that
existed prior to the Reorganization. Accordingly, the Reorganization has been accounted for as business combination
involving entities under common control. The Historical Financial Information has been prepared and presented using
the merger accounting principles.
APPENDIX I ACCOUNTANTS’ REPORT
– I-11 –


--- page 392 ---
The Historical Financial Information has been prepared by including the historical financial information of
companies now comprising the Group as if the current group structure had been in existence throughout the Track
Record Period, or since the date when the combining companies first came under the control of the Ultimate
Controlling Shareholders, whichever is a shorter period. The assets and liabilities of the companies taking part in the
Reorganization are combined using the existing book values from the Ultimate Controlling Shareholders’ perspective.
There is no recognition of any additional goodwill or excess of the acquirer’s interest in the net fair value of the
acquiree’s identifiable assets, liabilities and contingent liabilities over cost at the time of the Reorganization to the
extent of the continuation of the Ultimate Controlling Shareholders’ interests. Intra-group balances, transactions and
unrealised gains/losses on intra-group transactions are eliminated in full in preparing the Historical Financial
Information.
Upon the completion of the Reorganization and as of the date of this report, the Company has direct or indirect
interest in the following principal subsidiaries, all of which are private companies:
Company names
Place
and date of
incorporation
Particulars
of issued and
Registered
Capital
Proportion
of ownership interest
Principal
activities
Held by
the
Company
Held by
the
Subsidiary
Directly held
Hong Kong Changjiu
Digital Technology
Limited
(Note (ii))
Hong Kong
July 15, 2021
1 ordinary share
USD1
100% – Investing
holding
company
Indirectly held
Shanghai Bozhong
(ʮ
̡) (Note (i)(iii))
Shanghai, PRC
September 6,
2021
RMB 3,000,000 – 100% Automobile
dealership
operation
management
service
Changjiu Jinfu
(ѿΆุ၍ଣፔ༔
(ଉέ)ʮ̡)
(Note (i)(iv))
Shenzhen, PRC
September 9,
2016
RMB
101,010,100
– 100% Pledged
vehicle
monitoring
services
Notes:
(i) The official names of these entities are in Chinese. The English names are for identification purpose only.
(ii) The entity prepared the financial statements for the period from the date of incorporation to December 31, 2022
in accordance with the Hong Kong Small and Medium-sized Entity Financial Reporting Standard issued by the
HKICPA and have been properly prepared in compliance with the Hong Kong Companies Ordinance. The
financial statements were audited by LINKERS CPA LIMITED.
(iii) No statutory audited financial statements have been prepared for the period from the date of incorporation to
December 31, 2021. The statutory financial statements for the year ended December 31, 2022 was audited by
Beijing Dongshen Certified Public Accountants LLP (ה(౷ஷΥྫ)).
(iv) The entity prepared the financial statements in accordance with the Accounting Standards for Business
Enterprises applicable to the enterprises in the PRC. The financial statements for the year ended December 31,
2020, 2021 and 2022 were audited by Beijing Dongshen Dingli International Certified Public Accountants Co.,
Ltd (ப΂ʮ̡), Shenzhen Nanshen Certified Public Accountants
(General Partnership) (ה(౷ஷΥྫ)), and Beijing Dongshen Certified Public
Accountants LLP (ה(౷ஷΥྫ)), respectively.
APPENDIX I ACCOUNTANTS’ REPORT
– I-12 –


--- page 393 ---
All companies now comprising the Group have adopted December 31 as their financial year end date.
The Historical Financial Information has been prepared in accordance with all applicable International
Financial Reporting Standards (“IFRSs”) which collective term includes all applicable individual International
Financial Reporting Standards, International Accounting Standards and Interpretations issued by the International
Accounting Standards Board (“IASB”). Further details of the material accounting policies adopted are set out in
Note 2.
The IASB has issued a number of new and revised IFRSs. For the purpose of preparing and presenting
Historical Financial Information, the Group has consistently applied all applicable new and revised IFRSs, which are
effective for the accounting period beginning on January 1, 2023 throughout the Track Record Period, including
Amendments to IAS 12, Income taxes: Deferred tax related to assets and liabilities arising from a single transaction
but except for any new standards or interpretations that are not yet effective for an annual period beginning on
January 1, 2023. The revised and new accounting standards and interpretations issued but not yet effective for an
annual period beginning on January 1, 2023 are set out in Note 29.
The Historical Financial Information also complies with the applicable disclosure provisions of the Rules
Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Stock Exchange”).
The accounting policies set out below have been applied consistently to all periods presented in the Historical
Financial Information.
The Stub Period Corresponding Financial Information has been prepared in accordance with the same basis of
preparation and presentation adopted in respect of the Historical Financial Information.
2 MATERIAL ACCOUNTING POLICY INFORMATION
(a) Basis of measurement
The Historical Financial Information is presented in RMB, rounded to the nearest thousands, except for
earnings per share information. RMB is the functional currency of the Group.
The measurement basis used in the preparation of the Historical Financial Information is the historical cost
basis.
(b) Use of estimates and judgements
The preparation of the Historical Financial Information in conformity with IFRSs requires management to
make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets,
liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and
various other factors that are believed to be reasonable under the circumstances, the results of which form the basis
of making the judgements about carrying values of assets and liabilities that are not readily apparent from other
sources. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting
estimates are recognized in the period in which the estimate is revised if the revision affects only that period, or in
the period of the revision and future periods if the revision affects both current and future periods.
Judgements made by management in the application of IFRSs that have significant effect on the Historical
Financial Information and major sources of estimation uncertainty are discussed in Note 3.
(c) Consolidation
(i) Business combination involving entities under common control
A business combination involving entities under common control is a business combination in which all
the combining entities are ultimately controlled by the same party or parties both before and after the business
combination, and that control is not transitory. In determining whether a particular set of activities and assets
is a business, the Group assesses whether the set of assets and activities acquired includes, at a minimum, an
input and substantive process and whether the acquired set has the ability to produce outputs.
APPENDIX I ACCOUNTANTS’ REPORT
– I-13 –


--- page 394 ---
The assets acquired and liabilities assumed are measured based on their carrying amounts in the
consolidated financial statements of the ultimate controlling party at the combination date. The difference
between the carrying amounts of the net assets acquired and the consideration paid for the combination is
adjusted to equity. Any costs directly attributable to the combination are recognized in profit or loss when
incurred. The combination date is the date on which one combining entity obtains control of other combining
entities.
(ii) Subsidiaries and non-controlling interests
Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed, or
has rights, to variable returns from its involvement with the entity and has the ability to affect those returns
through its power over the entity. When assessing whether the Group has power, only substantive rights (held
by the Group and other parties) are considered.
An investment in a subsidiary is consolidated into the Historical Financial Information from the date
that control commences until the date that control ceases. Intra-group balances, transactions and cash flows and
any unrealized profits arising from intra-group transactions are eliminated in full in preparing the Historical
Financial Information. Unrealized losses resulting from intra-group transactions are eliminated in the same
way as unrealized gains but only to the extent that there is no evidence of impairment.
Non-controlling interests represent the equity in a subsidiary not attributable directly or indirectly to the
Company, and in respect of which the Group has not agreed any additional terms with the holders of those
interests which would result in the Group as a whole having a contractual obligation in respect of those
interests that meets the definition of a financial liability. For each business combination, the Group can elect
to measure any non-controlling interests either at fair value or at the non-controlling interests’ proportionate
share of the subsidiary’s net identifiable assets.
Non-controlling interests are presented in the consolidated statement of financial position within equity,
separately from equity attributable to the equity shareholders of the Company. Non-controlling interests in the
results of the Group are presented on the face of the consolidated statement of profit or loss and the
consolidated statement of profit or loss and other comprehensive income as an allocation of the total profit or
loss and total comprehensive income for the year between non-controlling interests and the equity shareholders
of the Company. Loans from holders of non-controlling interests and other contractual obligations towards
these holders are presented as financial liabilities in the consolidated statement of financial position depending
on the nature of the liability.
Changes in the Group’s interests in a subsidiary that do not result in a loss of control are accounted for
as equity transactions, whereby adjustments are made to the amounts of controlling and non-controlling
interests within consolidated equity to reflect the change in relative interests, but no adjustments are made to
goodwill and no gain or loss is recognized.
When the Group loses control of a subsidiary, it is accounted for as a disposal of the entire interest in
that subsidiary, with a resulting gain or loss being recognized in profit or loss. Any interest retained in that
former subsidiary at the date when control is lost is recognized at fair value and this amount is regarded as
the fair value on initial recognition of a financial asset or, when appropriate, the cost on initial recognition of
an investment in an associate or joint venture.
In the Company’s statement of financial position, an investment in a subsidiary is stated at cost less
impairment losses (see Note 2(g)(ii)), unless the investment is classified as held for sale (or included in a
disposal group that is classified as held for sale).
(d) Property, plant, and equipment
Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses (see Note
2(g)(ii)).
Gains or losses arising from the retirement or disposal of an item of property, plant and equipment are
determined as the difference between the net disposal proceeds and the carrying amount of the item and are
recognized in profit or loss on the date of retirement or disposal.
APPENDIX I ACCOUNTANTS’ REPORT
– I-14 –


--- page 395 ---
Depreciation is calculated to write off the cost of items of property, plant, and equipment, less their estimated
residual value, if any, using the straight-line method over their estimated useful lives are as follows:
– Office equipment 1-5 years
– Electronic equipment 1-5 years
Where parts of an item of property, plant and equipment have different useful lives, the cost of the item is
allocated on a reasonable basis between the parts and each part is depreciated separately. Both the useful life of an
asset and its residual value, if any, are reviewed annually.
(e) Intangible assets
Intangible assets that are acquired by the Group are stated at cost less accumulated amortization (where the
estimated useful life is finite) and impairment losses (see Note 2(g)(ii)). Expenditure on internally generated goodwill
and brands is recognized as an expense in the period in which it is incurred.
Amortization of intangible assets with finite useful lives is charged to profit or loss on a straight-line basis over
the assets’ estimated useful lives. The following intangible assets with finite useful life are amortized from the date
they are available for use and their estimated useful lives are as follows:
– Software 3-10 years
The estimates and associated assumptions of useful life determined by the Group are based on technical and
commercial obsolescence, legal or contractual limits on the use of the asset and other relevant factors. Based on the
current functionalities equipped by the software and the daily operation needs, the Group considers a useful life of
3-10 years to be their best estimation.
Both the period and method of amortization are reviewed annually.
Expenditure on research activities is recognized as an expense in the period in which it is incurred. Expenditure
on development activities is capitalized if the product or process is technically and commercially feasible and the
Group has sufficient resources and the intention to complete development. The expenditure capitalized includes the
costs of materials, direct labor, and an appropriate proportion of overheads and borrowing costs, where applicable.
Capitalized development costs are stated at cost less accumulated amortization and impairment losses (see Note
2(g)(ii)). Other development expenditure is recognized as an expense in the period in which it is incurred. There were
no development expenditure capitalized as intangible assets as of December 31, 2020, 2021, 2022 and June 30, 2023.
(f) Lease
At inception of a contract, the Group assesses whether the contract is, or contains, a lease. A contract is, or
contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in
exchange for consideration. Control is conveyed where the customer has both the right to direct the use of the
identified asset and to obtain substantially all the economic benefits from that use.
As a lessee
Where the contract contains lease component(s) and non-lease component(s), the Group has elected not to
separate non-lease components and accounts for each lease component and any associated non-lease components as
a single lease component for all leases.
At the lease commencement date, the Group recognizes a right-of-use asset and a lease liability, except for
short-term leases that have a lease term of 12 months or less and leases of low-value assets. When the Group enters
into a lease in respect of a low-value asset, the Group decides whether to capitalize the lease on a lease-by-lease basis.
The lease payments associated with those leases which are not capitalized are recognized as an expense on a
systematic basis over the lease term.
APPENDIX I ACCOUNTANTS’ REPORT
– I-15 –


--- page 396 ---
Where the lease is capitalized, the lease liability is initially recognized at the present value of the lease
payments payable over the lease term, discounted using the interest rate implicit in the lease or, if that rate cannot
be readily determined, using a relevant incremental borrowing rate. After initial recognition, the lease liability is
measured at amortized cost and interest expense is calculated using the effective interest method. V ariable lease
payments that do not depend on an index or rate are not included in the measurement of the lease liability and hence
are charged to profit or loss in the accounting period in which they are incurred.
The right-of-use asset recognized when a lease is capitalized is initially measured at cost, which comprises the
initial amount of the lease liability plus any lease payments made at or before the commencement date, and any initial
direct costs incurred. Where applicable, the cost of the right-of-use assets also includes an estimate of costs to
dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located,
discounted to their present value, less any lease incentives received. The right-of-use asset is subsequently stated at
cost less accumulated depreciation and impairment losses (see Note 2(g)(ii)). The right-of-use asset is subsequently
depreciated using the straight-line method from the commencement date to the earlier of the end of the useful life
of the right-of-use asset or the end of the lease term. The estimated useful lives of right-of-use asset are determined
on the same basis as those of property, plant and equipment.
The lease liability is remeasured when there is a change in future lease payments arising from a change in an
index or rate, or there is a change in the Group’s estimate of the amount expected to be payable under a residual value
guarantee, or there is a change arising from the reassessment of whether the Group will be reasonably certain to
exercise a purchase, extension, or termination option. When the lease liability is remeasured in this way, a
corresponding adjustment is made to the carrying amount of the right-of-use asset or is recorded in profit or loss if
the carrying amount of the right-of-use asset has been reduced to zero.
The lease liability is also remeasured when there is a change in the scope of a lease or the consideration for
a lease that is not originally provided for in the lease contract (“lease modification”) that is not accounted for as a
separate lease. In this case the lease liability is remeasured based on the revised lease payments and lease term using
a revised discount rate at the effective date of the modification.
The Group presents right-of-use assets that do not meet the definition of investment property and lease
liabilities separately in the statement of financial position. In the consolidated statements of financial position, the
current portion of long-term lease liabilities is determined as the present value of contractual payments that are due
to be settled within twelve months after the reporting period.
(g) Credit losses and impairment of assets
(i) Credit losses from financial instruments
The Group recognizes a loss allowance for expected credit losses (ECLs) on financial assets measured
at amortized cost (including trade receivables and other receivables).
Other financial assets measured at fair value are not subject to the ECL assessment.
Measurement of ECLs
ECLs are a probability-weighted estimate of credit losses. Credit losses are measured as the present
value of all expected cash shortfalls (i.e. the difference between the cash flows due to the Group in accordance
with the contract and the cash flows that the Group expects to receive).
The expected cash shortfalls are discounted using the following discount rates where the effect of
discounting is material:
– fixed-rate financial assets and trade and other receivables: effective interest rate determined at
initial recognition or an approximation thereof;
– variable-rate financial assets: current effective interest rate;
The maximum period considered when estimating ECLs is the maximum contractual period over which
the Group is exposed to credit risk.
APPENDIX I ACCOUNTANTS’ REPORT
– I-16 –


--- page 397 ---
In measuring ECLs, the Group takes into account reasonable and supportable information that is
available without undue cost or effort. This includes information about past events, current conditions, and
forecasts of future economic conditions.
ECLs are measured on either of the following bases:
– 12-month ECLs: these are losses that are expected to result from possible default events within
the 12 months after the reporting date; and
– lifetime ECLs: these are losses that are expected to result from all possible default events over
the expected lives of the items to which the ECL model applies.
Loss allowances for trade receivables are always measured at an amount equal to lifetime ECLs. ECLs
on these financial assets are estimated using a provision matrix based on the Group’s historical credit loss
experience, adjusted for an assessment of both the current and forecast general economic conditions at the
reporting date.
For all other financial instruments, the Group recognizes a loss allowance equal to 12-month ECLs
unless there has been a significant increase in credit risk of the financial instrument since initial recognition,
in which case the loss allowance is measured at an amount equal to lifetime ECLs.
Significant increases in credit risk
In assessing whether the credit risk of a financial instrument has increased significantly since initial
recognition, the Group compares the risk of default occurring on the financial instrument assessed at the
reporting date with that assessed at the date of initial recognition. In making this reassessment, the Group
considers that a default event occurs when (i) the borrower is unlikely to pay its credit obligations to the Group
in full, without recourse by the Group to actions such as realizing security (if any is held); or (ii) the financial
asset is 90 days past due. The Group considers both quantitative and qualitative information that is reasonable
and supportable, including historical experience and forward-looking information that is available without
undue cost or effort.
In particular, the following information is taken into account when assessing whether credit risk has
increased significantly since initial recognition:
– failure to make payments of principal or interest on their contractually due dates;
– an actual or expected significant deterioration in a financial instrument’s external or internal
credit rating (if available);
– an actual or expected significant deterioration in the operating results of the debtor; and
– existing or forecast changes in the technological, market, economic or legal environment that
have a significant adverse effect on the debtor’s ability to meet its obligation to the Group.
Depending on the nature of the financial instruments, the assessment of a significant increase in credit
risk is performed on either an individual basis or a collective basis. When the assessment is performed on a
collective basis, the financial instruments are grouped based on shared credit risk characteristics, such as past
due status and credit risk ratings.
ECLs are remeasured at each reporting date to reflect changes in the financial instrument’s credit risk
since initial recognition. Any change in the ECL amount is recognized as an impairment gain or loss in profit
or loss. The Group recognizes an impairment gain or loss for all financial instruments with a corresponding
adjustment to their carrying amount through a loss allowance account, except for investments in debt securities
that are measured at FVOCI (recycling), for which the loss allowance is recognized in other comprehensive
income and accumulated in the fair value reserve (recycling).
APPENDIX I ACCOUNTANTS’ REPORT
– I-17 –


--- page 398 ---
Basis of calculation of interest income
Interest income recognized is calculated based on the gross carrying amount of the financial asset unless
the financial asset is credit-impaired, in which case interest income is calculated based on the amortized cost
(i.e., the gross carrying amount less loss allowance) of the financial asset.
At each reporting date, the Group assesses whether a financial asset is credit-impaired. A financial asset
is credit-impaired when one or more events that have a detrimental impact on the estimated future cash flows
of the financial asset have occurred.
Evidence that a financial asset is credit-impaired includes the following observable events:
– significant financial difficulties of the debtor;
– a breach of contract, such as a default or delinquency in interest or principal payments;
– it becoming probable that the borrower will enter into bankruptcy or other financial
reorganization;
– significant changes in the technological, market, economic or legal environment that have an
adverse effect on the debtor; or
– the disappearance of an active market for a security because of financial difficulties of the issuer.
Write-off policy
The gross carrying amount of a financial asset is written off (either partially or in full) to the extent that
there is no realistic prospect of recovery. This is generally the case when the Group determines that the debtor
does not have assets or sources of income that could generate sufficient cash flows to repay the amounts
subject to the write-off.
Subsequent recoveries of an asset that was previously written off are recognized as a reversal of
impairment in profit or loss in the period in which the recovery occurs.
(ii) Impairment of other non-current assets
Internal and external sources of information are reviewed at the end of each reporting period to identify
indications that the following assets may be impaired or, except in the case of goodwill, an impairment loss
previously recognized no longer exists or may have decreased:
– property, plant and equipment;
– intangible assets;
– right-of-use assets;
– other non-current assets;
If any such indication exists, the asset’s recoverable amount is estimated. In addition, for goodwill,
intangible assets that are not yet available for use and intangible assets that have indefinite useful lives, the
recoverable amount is estimated annually whether or not there is any indication of impairment.
– Calculation of recoverable amount
The recoverable amount of an asset is the greater of its fair value less costs of disposal and value in use.
In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax
discount rate that reflects current market assessments of the time value of money and the risks specific to the
asset. Where an asset does not generate cash inflows largely independent of those from other assets, the
recoverable amount is determined for the smallest Group of assets that generates cash inflows independently
(i.e., a cash-generating unit).
APPENDIX I ACCOUNTANTS’ REPORT
– I-18 –


--- page 399 ---
– Recognition of impairment losses
An impairment loss is recognized in profit or loss if the carrying amount of an asset, or the
cash-generating unit to which it belongs, exceeds its recoverable amount. Impairment losses recognized in
respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to
the cash-generating unit (or Group of units) and then, to reduce the carrying amount of the other assets in the
unit (or Group of units) on a pro rata basis, except that the carrying value of an asset will not be reduced below
its individual fair value less costs of disposal (if measurable) or value in use (if determinable).
– Reversals of impairment losses
In respect of assets other than goodwill, an impairment loss is reversed if there has been a favourable
change in the estimates used to determine the recoverable amount. An impairment loss in respect of goodwill
is not reversed.
A reversal of an impairment loss is limited to the asset’s carrying amount that would have been
determined had no impairment loss been recognized in prior years. Reversals of impairment losses are credited
to profit or loss in the year in which the reversals are recognized.
(h) Contract assets and contract liabilities
A contract asset is recognized when the Group recognizes revenue (see Note 2(p)) before being unconditionally
entitled to the consideration under the payment terms set out in the contract. Contract assets are assessed for expected
credit losses (ECLs) in accordance with the policy set out in Note 2(g)(i) and are reclassified to receivables when
the right to the consideration has become unconditional (see Note 2(i)).
A contract liability is recognized when the customer pays non-refundable consideration before the Group
recognizes the related revenue (see Note 2(p)). A contract liability would also be recognized if the Group has an
unconditional right to receive non-refundable consideration before the Group recognizes the related revenue. In such
cases, a corresponding receivable would also be recognized (see Note 2(i)).
For a single contract with the customer, either a net contract asset or a net contract liability is presented. For
multiple contracts, contract assets and contract liabilities of unrelated contracts are not presented on a net basis.
When the contract includes a significant financing component, the contract balance includes interest accrued
under the effective interest method (see Note 2(p)(ii)).
(i) Trade and other receivables
A receivable is recognized when the Group has an unconditional right to receive consideration. A right to
receive consideration is unconditional if only the passage of time is required before payment of that consideration
is due. If revenue has been recognized before the Group has an unconditional right to receive consideration, the
amount is presented as a contract asset (see Note 2(h)).
Receivables are stated at amortized cost using the effective interest method less allowance for credit losses (see
Note 2(g)(i)).
(j) Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and on hand, demand deposits with banks and other financial
institutions, and short-term, highly liquid investments that are readily convertible into known amounts of cash and
which are subject to an insignificant risk of changes in value, having been within three months of maturity at
acquisition. Cash and cash equivalents are assessed for expected credit losses (ECLs) in accordance with the policy
set out in Note 2(g)(i).
(k) Trade and other payables
Trade and other payables are initially recognized at fair value. Subsequent to initial recognition, trade and
other payables are stated at amortized cost unless the effect of discounting would be immaterial, in which case they
are stated at invoice amounts.
APPENDIX I ACCOUNTANTS’ REPORT
– I-19 –


--- page 400 ---
(l) Interest-bearing borrowings
Interest-bearing borrowings are measured initially at fair value less transaction costs. Subsequent to initial
recognition, interest-bearing borrowings are stated at amortized cost using the effective interest method. Interest
expense is recognized in accordance with the Group’s accounting policy for borrowing costs (see Note 2(r)).
(m) Employee benefits
(i) Short-term employee benefits and contributions to defined contribution retirement plans
Salaries, annual bonuses, paid annual leave, contributions to defined contribution retirement plans and
the cost of non-monetary benefits are accrued in the year in which the associated services are rendered by
employees. Where payment or settlement is deferred and the effect would be material, these amounts are stated
at their present values.
(ii) Termination benefits
Termination benefits are recognized at the earlier of when the Group can no longer withdraw the offer
of those benefits and when it recognizes restructuring costs involving the payment of termination benefits.
(iii) Share-based compensation
The Company adopts share incentive plan, under which it receives services from director and employees
as consideration for equity instruments (including share options and restricted shares) of the Company. The fair
value of the services received in exchange for the grant of the equity instruments (share options and restricted
shares) is recognized as an expense in the consolidated statements of profit or loss.
Share options
For grant of share options, the total amount to be expensed is determined by reference to the fair value
of the options granted by using option-pricing models:
– including any market performance conditions;
– excluding the impact of any service and non-market performance vesting conditions; and
– including the impact of any non-vesting conditions.
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 reporting period, the Group 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.
Restricted shares
For grant of restricted shares, the total amount to be expensed is determined by reference to the fair
value of the Company’s shares at the grant date.
The total expense is recognized over the lock-up period, which is the period over which all of the
specified vesting conditions are to be satisfied. At the end of each reporting period, the Group revises its
estimates of the number of restricted shares that are expected to unlock based on service condition. It
recognizes the impact of the revision to original estimates, if any, in profit or loss, with a corresponding
adjustment to equity.
Share-based compensation transaction among group entities
The grant by the Company of share incentive plan over its equity instruments to the employees of
subsidiaries undertakings in the Group is treated as a capital contribution. The fair value of employee services
received, measured by reference to the grant date fair value, is recognized over the vesting period as an
increase to investment in subsidiaries undertakings, with a corresponding credit to equity in separate financial
statements of the Company.
APPENDIX I ACCOUNTANTS’ REPORT
– I-20 –


--- page 401 ---
Modifications and Cancellations
The Group may modify the terms and conditions on which share incentive awards were granted. If a
modification increases the fair value of the equity instruments granted, the incremental fair value granted is
included in the measurement of the amount recognized for the services received over the remainder of the
vesting period.
A grant of share incentive awards, that is cancelled or settled during the vesting period, is treated as an
acceleration of vesting. The Group immediately recognizes the amount that otherwise would have been
recognized for services received over the remainder of the vesting period.
(n) Income tax
Income tax for the year comprises current tax and movements in deferred tax assets and liabilities. Current tax
and movements in deferred tax assets and liabilities are recognized in profit or loss except to the extent that they
relate to items recognized in other comprehensive income or directly in equity, in which case the relevant amounts
of tax are recognized in other comprehensive income or directly in equity, respectively.
Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or
substantively enacted at the end of reporting period, and any adjustment to tax payable in respect of previous years.
Deferred tax assets and liabilities arise from deductible and taxable temporary differences respectively, being
the differences between the carrying amounts of assets and liabilities for financial reporting purposes and their tax
bases. Deferred tax assets also arise from unused tax losses and unused tax credits.
Apart from certain limited exceptions, all deferred tax liabilities, and all deferred tax assets to the extent that
it is probable that future taxable profits will be available against which the asset can be utilized, are recognized.
Future taxable profits that may support the recognition of deferred tax assets arising from deductible temporary
differences include those that will arise from the reversal of existing taxable temporary differences, provided those
differences relate to the same taxation authority and the same taxable entity, and are expected to reverse either in the
same period as the expected reversal of the deductible temporary difference or in periods into which a tax loss arising
from the deferred tax assets can be carried back or forward. The same criteria are adopted when determining whether
existing taxable temporary differences support the recognition of deferred tax assets arising from unused tax losses
and credit, that is, those differences are taken into account if they relate to the same taxation authority and the same
taxable entity, and are expected to reverse in a period, or periods, in which the tax loss or credit can be utilized.
The limited exceptions to recognition of deferred tax assets and liabilities are those temporary differences
arising from goodwill not deductible for tax purposes, the initial recognition of assets or liabilities that affect neither
accounting nor taxable profit (provided they are not part of a business combination), and temporary differences
relating to investments in subsidiaries to the extent that, in the case of taxable differences, the Group controls the
timing of the reversal and it is probable that the differences will not reverse in the foreseeable future, or in the case
of deductible differences, unless it is probable that they will reverse in the future.
The amount of deferred tax recognized is measured based on the expected manner of realization or settlement
of the carrying amount of the assets and liabilities, using tax rates enacted or substantively enacted at the end of
reporting period. Deferred tax assets and liabilities are not discounted.
For leasing transactions in which the tax deductions are attributable to the lease liabilities, the Group applies
IAS 12 “Income Taxes” requirements to recognize a deferred tax asset (to the extent that it is probable that taxable
profit will be available against which the deductible temporary difference can be utilized) and a deferred tax liability
for all deductible and taxable temporary differences associated with the lease liabilities and the right-of-use assets.
The carrying amount of a deferred tax asset is reviewed at the end of each reporting period and is reduced to
the extent that it is no longer probable that sufficient taxable profits will be available to allow the related tax benefit
to be utilized. Any such reduction is reversed to the extent that it becomes probable that sufficient taxable profits will
be available.
APPENDIX I ACCOUNTANTS’ REPORT
– I-21 –


--- page 402 ---
Additional income taxes that arise from the distribution of dividends are recognized when the liability to pay
the related dividends is recognized.
Current tax balances and deferred tax balances, and movements therein, are presented separately from each
other and are not offset. Current tax assets are offset against current tax liabilities, and deferred tax assets against
deferred tax liabilities, if the Company and the Group has the legally enforceable right to set off current tax assets
against current tax liabilities and the following additional conditions are met:
– in the case of current tax assets and liabilities, the Company and the Group intends either to settle on
a net basis, or to realize the asset and settle the liability simultaneously; or
– in the case of deferred tax assets and liabilities, if they relate to income taxes levied by the same taxation
authority on either:
– the same taxable entity; or
– different taxable entities, which, in each future period in which significant amounts of deferred tax
liabilities or assets are expected to be settled or recovered, intend to realize the current tax assets and
settle the current tax liabilities on a net basis or realize and settle simultaneously.
(o) Provisions and contingent liabilities
Provisions are recognized when the Group has a legal or constructive obligation arising as a result of a past
event, it is probable that an outflow of economic benefits will be required to settle the obligation and a reliable
estimate can be made. Where the time value of money is material, provisions are stated at the present value of the
expenditure expected to settle the obligation.
Where it is not probable that an outflow of economic benefits will be required, or the amount cannot be
estimated reliably, the obligation is disclosed as a contingent liability, unless the probability of outflow of economic
benefits is remote. Possible obligations, whose existence will only be confirmed by the occurrence or non-occurrence
of one or more future events are also disclosed as contingent liabilities unless the probability of outflow of economic
benefits is remote.
(p) Revenue and other income
Income is classified by the Group as revenue when it arises from the provision of services or the use by others
of the Group’s assets under leases in the ordinary course of the Group’s business.
Revenue is recognized when control over a product or service is transferred to the customer, at the amount of
operations promised consideration to which the Group is expected to be entitled, excluding those amounts collected
on behalf of third parties. Revenue excludes value-added tax or other sales taxes and is after deduction of any trade
discounts.
Further details of the Group’s revenue and other income recognition policies are as follows:
(i) Revenue from contracts with customers
Revenue from contracts with customers is recognized when control of goods or services is transferred
to the customers at an amount that reflects the consideration to which the Group expects to be entitled in
exchange for those goods or services.
The Group transfers control of goods or services and recognizes revenue over time, if one of the
following criteria is met:
– The customer simultaneously receives and consumes the benefits provided by the Group’s
performance as the Group performs;
– The Group’s performance creates or enhances an asset that the customer controls as the asset is
created or enhanced; or
– The Group’s performance 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.
APPENDIX I ACCOUNTANTS’ REPORT
– I-22 –


--- page 403 ---
If control of the goods or 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 or services.
The Group principally generates its revenue from rendering of pledged vehicle monitoring service and
automobile dealership operation management service.
(a) Pledged vehicle monitoring service
The Group provides pledged vehicle monitoring services to its customers, primarily monitoring of
pledged vehicles and keeping vehicle conformity certificates and car keys, to protect the interest of financial
institutions that have entered into financing credit arrangements with automobile dealerships. The Group
recognizes revenue from pledged vehicle monitoring services on a straight-line basis over time as the
customers simultaneously receives and consumes the benefits throughout the period during the services are
provided. Additionally, the Group provides on-site supervision services, such as vehicles sales invoices check
and physical check, such revenue is recognized at point in time when the service is rendered.
(b) Automobile dealership operation management service
The Group provides operation management service to automobile dealerships that seek more optimal
business and financial performance and receives management service fee which is determined based on a
percentage of operation income or operation profit generated by automobile dealerships during the services
period. The percentage is based on the terms specific in the service contract with automobile dealerships. As
a result, the management service fee includes variable consideration. The Group estimates variable
consideration based on the Group’s current and future performance expectations and all information that is
reasonably available. This estimated amount is included in the transaction price to the extent it is highly
probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty
associated with the variable consideration is resolved. The Group recognized revenue from operation
management services over time as the customers simultaneously receives and consumes the benefits
throughout the period during the services are provided.
(ii) Interest income
Interest income is recognized as it accrues under the effective interest method using the rate that exactly
discounts estimated future cash receipts through the expected life of the financial asset to the gross carrying
amount of the financial asset. For financial assets measured at amortized cost are not credit-impaired, the
effective interest rate is applied to the gross carrying amount of the asset. For credit-impaired financial assets,
the effective interest rate is applied to the amortized cost (i.e., gross carrying amount net of loss allowance)
of the asset (see Note 2(g)(i)).
(iii) Government grants
Government grants are recognized in the statement of financial position initially when there is
reasonable assurance that they will be received and that the Group will comply with the conditions attaching
to them. Grants that compensate the Group for expenses incurred are recognized as income in profit or loss
on a systematic basis in the same periods in which the expenses are incurred. Grants that compensate the Group
for the cost of an asset are deducted from the carrying amount of the asset and consequently are effectively
recognized in profit or loss over the useful life of the asset by way of reduced depreciation expense.
(q) Translation of foreign currencies
Foreign currency transactions during the year are translated at the foreign exchange rates ruling at the
transaction dates. Monetary assets and liabilities denominated in foreign currencies are translated at the foreign
exchange rates ruling at the end of the reporting period. Exchange gains and losses are recognized in profit or loss
except those arising from foreign currency borrowings used to hedge a net investment in a foreign operation which
are recognized in other comprehensive income.
APPENDIX I ACCOUNTANTS’ REPORT
– I-23 –


--- page 404 ---
Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are
translated using the foreign exchange rates ruling at the transaction dates. The transaction date is the date on which
the Company initially recognizes such non-monetary assets or liabilities. Non-monetary assets and liabilities
denominated in foreign currencies that are stated at fair value are translated using the foreign exchange rates ruling
at the dates the fair value was measured.
The results of foreign operations are translated into RMB at the exchange rates approximating the foreign
exchange rates ruling at the dates of the transactions. Statement of financial position items are translated into RMB
at the closing foreign exchange rates at the end of the reporting period. The resulting exchange differences are
recognized in other comprehensive income and accumulated separately in equity in the exchange reserve.
(r) Borrowing costs
Borrowing costs are expensed in the period in which they are incurred.
(s) Related parties
(a) A person, or a close member of that person’s family, is related to the Group if that person:
(i) has control or joint control over the Group;
(ii) has significant influence over the Group; or
(iii) is a member of the key management personnel of the Group or the Group’s parent.
(b) An entity is related to the Group if any of the following conditions applies:
(i) The entity and the Group are members of the same group (which means that each parent,
subsidiary and fellow subsidiary is related to the others);
(ii) One entity is an associate or joint venture of the other entity (or an associate or joint venture of
a member of a group of which the other entity is a member);
(iii) Both entities are joint ventures of the same third party;
(iv) One entity is a joint venture of a third entity and the other entity is an associate of the third entity;
(v) The entity is a post-employment benefit plan for the benefit of employees of either the Group or
an entity related to the Group;
(vi) The entity is controlled or jointly controlled by a person identified in (a);
(vii) A person identified in (a)(i) has significant influence over the entity or is a member of the key
management personnel of the entity (or of a parent of the entity); or
(viii) The entity, or any member of a group of which it is a part, provides key management personnel
services to the Group or to the Group’s parent.
Close members of the family of a person are those family members who may be expected to influence, or be
influenced by, that person in their dealings with the entity.
(t) Segment reporting
Operating segments, and the amounts of each segment item reported in the Historical Financial Information,
are identified from the financial information provided regularly to the Group’s most senior executive management
for the purposes of allocating resources to, and assessing the performance of, the Group’s various lines of business
and geographical locations.
APPENDIX I ACCOUNTANTS’ REPORT
– I-24 –


--- page 405 ---
Individually material operating segments are not aggregated for financial reporting purposes unless the
segments have similar economic characteristics and are similar in respect of the nature of products and services, the
nature of production processes, the type or class of customers, the methods used to distribute the products or provide
the services, and the nature of the regulatory environment. Operating segments which are not individually material
may be aggregated if they share a majority of these criteria.
3 ACCOUNTING JUDGEMENT AND ESTIMATES
In the process of applying the Group’s accounting policies, management has made the following accounting
judgements:
(a) Recognition of deferred tax assets
Deferred tax assets in respect of tax losses carried forward and deductible temporary differences are
recognized and measured based on the expected manner of realization or settlement of the carrying amount of the
relevant assets and liabilities, using tax rates enacted or substantively enacted at the end of each reporting date. In
determining the carrying amounts of deferred tax assets, expected taxable profits are estimated which involves a
number of assumptions relating to the operating environment of the Group and require a significant level of
judgement exercised by the directors. Any change in such assumptions and judgement would affect the carrying
amounts of deferred tax assets to be recognized and hence the net profit in future years.
(b) Provision for expected credit losses on trade receivables
The Group uses a provision matrix to calculate ECLs for trade receivables. The provision rates are based on
ageing of trade receivables. The provision matrix is initially based on the Group’s historical observed default rates.
The Group will calibrate the matrix to adjust the historical credit loss experience with forward-looking information.
The assessment of the correlation among historical observed default rates and ECLs is a significant estimate.
The amount of ECLs is sensitive to changes in circumstances and forecast economic conditions. The Group’s
historical credit loss experience and forecast of economic conditions may also not be representative of customer’s
actual default in the future.
(c) Fair value of share-based payments
As mentioned in Note 23, the Group has granted restricted shares and shares options to one director and certain
employees. The Group has used discounted cash flow method to determine underlying equity value of the Group, then
discount for lack of marketability is estimated to determine the fair value of restricted shares. The Group has used
binomial option-pricing model to determine the total fair value of the options granted to one director and certain
employees. Significant estimate on assumptions, such as the underlying equity value, risk-free interest rate, expected
volatility and dividend yield, is required to be made by the Group in applying the binomial option-pricing model.
4 REVENUE AND SEGMENT REPORTING
(a) Revenue
The principal activities of the Group are providing pledged vehicle monitoring service and automobile
dealership operation management service in Mainland China.
(i) The amount of each significant category of revenue is as follows:
Y ear ended December 31, Six months ended June 30,
2020 2021 2022 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(unaudited)
Revenue from
contracts with
customers within
the scope of
IFRS 15
Pledged vehicle
monitoring service 430,587 477,697 505,049 245,760 279,067
Automobile
dealership
operation
management
service – – 42,818 12,892 30,364
430,587 477,697 547,867 258,652 309,431
APPENDIX I ACCOUNTANTS’ REPORT
– I-25 –


--- page 406 ---
During the Track Record Period, the Group’s customers with whom transactions have exceeded 10% of
the Group’s revenue in the respective year/period are set out below:
Y ear ended December 31, Six months ended June 30,
2020 2021 2022 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(unaudited)
Customer A * 62,195 89,801 40,636 56,483
Customer B * * 81,147 33,884 49,522
Customer C * * 61,483 27,299 34,228
* Transactions with these customers did not exceed 10% of the Group’s revenue in the respective
year/period.
Disaggregation of the Group’s revenue from contracts with customers by the timing of revenue
recognition is set out below:
Y ear ended December 31, Six months ended June 30,
2020 2021 2022 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(unaudited)
Point-in-time 12,647 20,875 16,317 8,933 6,648
Over-time 417,940 456,822 531,550 249,719 302,783
430,587 477,697 547,867 258,652 309,431
Remaining Performance Obligation
The Group has elected the practical expedient not to disclose the value of remaining performance
obligations for contracts in which the Group recognizes revenue at the amount to which the Group has the right
to invoice.
(ii) Contract Liabilities
The Group collected payments in advance from customers primarily for providing pledged vehicle
monitoring services and automobile dealership operation management services. The Group has recognized the
following liabilities related to contracts with customers under “contract liabilities”:
As of December 31,
As of
June 30,
Note 2020 2021 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000
Contract Liabilities
– third parties 52,657 62,703 53,191 46,637
– related parties 26(d) – 6,723 5,732 4,031
52,657 69,426 58,923 50,668
As of January 1, 2020, contract liabilities amounted to RMB50.0 million.
The balance of contract liabilities with related parties is trade in nature.
APPENDIX I ACCOUNTANTS’ REPORT
– I-26 –


--- page 407 ---
Movements in contract liabilities
Y ear ended December 31,
Six months
ended
June 30,
2020 2021 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000
Balance at January 1 49,962 52,657 69,426 58,923
Decrease in contract liabilities as a
result of recognising revenue
during the year/period that were
included in the contract liabilities
at the beginning of the year/period (46,216) (47,791) (54,978) (46,912)
Increase in contract liabilities during
the year/period 55,043 75,332 59,337 49,551
Decrease in contract liabilities as a
result of transfer to other payables
to customers (6,132) (10,772) (14,862) (10,894)
Balance at December 31/June 30 52,657 69,426 58,923 50,668
(b) Segment reporting
The Group manage its businesses by business line. In a manner consistent with the way in the purpose of
resource allocation and performance assessment, the Group has presented the following two reportable segments:
pledged vehicle monitoring service and automobile dealership operation management service.
For the purpose of assessing segment performance and allocating between segments, the Group’s senior
executive management monitors the revenue and gross profit attributable to each reportable segment. Other items in
profit or loss are not allocated to reportable segment.
Revenue and cost are allocated to the reportable segment with reference to sales generated by those segments
and the cost incurred by those segments.
Other information, together with the segment information, provided to the Group’s senior executive
management, is measured in a manner consistent with that applied in these financial statements. There were no
separate segment assets and segment liabilities information provided to the Group’s senior executive management,
as they do not use this information to allocate resources to or evaluate the performance of the operating segments.
The amount of each significant category of revenue recognized during the Track Record Period is as follows:
Y ear ended December 31, 2020
Pledged vehicle
monitoring
service
Automobile
dealership
operation
management
service Total
RMB’000 RMB’000 RMB’000
Segment revenue 430,587 – 430,587
Segment cost (261,629) – (261,629)
Gross profit 168,958 – 168,958
APPENDIX I ACCOUNTANTS’ REPORT
– I-27 –


--- page 408 ---
Y ear ended December 31, 2021
Pledged vehicle
monitoring
service
Automobile
dealership
operation
management
service Total
RMB’000 RMB’000 RMB’000
Segment revenue 477,697 – 477,697
Segment cost (295,401) – (295,401)
Gross profit 182,296 – 182,296
Y ear ended December 31, 2022
Pledged vehicle
monitoring
service
Automobile
dealership
operation
management
service Total
RMB’000 RMB’000 RMB’000
Segment revenue 505,049 42,818 547,867
Segment cost (295,359) (27,469) (322,828)
Gross profit 209,690 15,349 225,039
Six months ended June 30, 2023
Pledged vehicle
monitoring
service
Automobile
dealership
operation
management
service Total
RMB’000 RMB’000 RMB’000
Segment revenue 279,067 30,364 309,431
Segment cost (157,603) (18,425) (176,028)
Gross profit 121,464 11,939 133,403
Six months ended June 30, 2022 (unaudited)
Pledged vehicle
monitoring
service
Automobile
dealership
operation
management
service Total
RMB’000 RMB’000 RMB’000
Segment revenue 245,760 12,892 258,652
Segment cost (146,588) (5,816) (152,404)
Gross profit 99,172 7,076 106,248
APPENDIX I ACCOUNTANTS’ REPORT
– I-28 –


--- page 409 ---
All of the Group’s operating assets are located in Mainland China and all of the Company’s revenue and
operating profits are derived from Mainland China during the Track Record Period. Accordingly, no segment analysis
based on geographical locations is provided.
The reconciliation of segment gross profit to profit before taxation for the years ended December 31, 2020,
2021 and 2022 and for the six months ended June 30, 2022 and 2023 are presented in the consolidated statements
of profit or loss of the Group.
5 NET OTHER INCOME
Y ear ended December 31, Six months ended June 30,
2020 2021 2022 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(unaudited)
Government grants 191 34 416 256 13
Extra deduction of input
V A T 210 192 843 62 504
Net exchange gains –––– 1 7 1
Others 153 215 293 227 135
554 441 1,552 545 823
6 PROFIT BEFORE TAXATION
Profit before taxation is arrived at after charging/(crediting):
(a) Net finance expense
Y ear ended December 31, Six months ended June 30,
2020 2021 2022 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(unaudited)
Interest expense on bank
loan 817 2,712 3,174 1,274 1,219
Interest expense on lease
liabilities 79 271 298 117 321
Other financial
expenses/(income) 68 71 (199) (154) (54)
Subtotal 964 3,054 3,273 1,237 1,486
APPENDIX I ACCOUNTANTS’ REPORT
– I-29 –


--- page 410 ---
(b) Staff cost
Y ear ended December 31,
Six months ended
June 30,
Note 2020 2021 2022 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(unaudited)
Salaries, wages,
and other
benefits 34,403 46,694 64,912 28,717 43,559
Contributions to
defined
contribution
retirement plan (i) 287 4,093 8,615 2,624 5,120
Share-based
compensation
expenses –––– 13,654
Termination
benefits 181 19 364 – 1,122
Subtotal 34,871 50,806 73,891 31,341 63,455
Note (i): Employees of the Group’s subsidiaries in the Mainland China are required to participate in a defined
contribution retirement scheme administered and operated by the local municipal government. The
Group’s subsidiaries in Mainland China contribute funds which are calculated on certain percentages
of the average employee salary as agreed by the local municipal government to the scheme to fund
the retirement benefits of the employees.
(c) Other items
Y ear ended December 31, Six months ended June 30,
2020 2021 2022 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(unaudited)
Subcontracting costs 252,783 285,455 290,239 143,886 155,373
Technology and
professional service fees 6,210 7,856 20,360 6,752 4,350
Depreciation and
amortization charges
– property, plant, and
equipment 2,626 1,814 1,276 611 509
– right-of-use assets 1,803 2,327 4,439 1,517 3,431
– intangible assets 810 860 792 396 489
Impairment
losses/(reversals)
– trade receivables 330 (92) 2,213 2,036 3,950
– other receivables 440 (18) 342 (25) (300)
Auditors’ remuneration 7 13 7 7 31
Listing expenses – – 2,132 – 11,966
APPENDIX I ACCOUNTANTS’ REPORT
– I-30 –


--- page 411 ---
7 INCOME TAX IN THE CONSOLIDATED STATEMENTS OF PROFIT OR LOSS
(a) Taxation in the consolidated statements of profit or loss:
Y ear ended December 31,
Six months ended
June 30,
Note 2020 2021 2022 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(unaudited)
Current tax
– PRC Enterprise
Income Tax
(“EIT”)
Provision for
the year/period 22(a) – 5,356 32,895 15,672 23,324
Deferred tax
– (Origination)/
Reversal of
temporary
differences 22(b) (4,271) 4,062 (1,181) (876) (3,143)
(4,271) 9,418 31,714 14,796 20,181
(b) Reconciliation between tax (benefit)/expense and accounting profit at applicable tax rates:
Y ear ended December 31,
Six months ended
June 30,
2020 2021 2022 2022 2023
Note RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(unaudited)
Profit before
taxation 109,834 93,149 127,626 62,884 55,472
Tax calculated at
statutory tax
rates applicable
to profits in the
respective
jurisdictions 27,459 23,287 31,906 15,721 16,819
Tax effect of:
Income not
subject to tax (i) (30,453) (13,442) – – –
Non-deductible
other expenses
and loss 239 1,241 1,601 44 717
Super deduction
for research and
development
expenses (1,516) (1,668) (1,793) (969) (768)
Non-deductible
share-based
compensation
expenses –––– 3,413
Actual income
tax
(benefit)/expense (4,271) 9,418 31,714 14,796 20,181
APPENDIX I ACCOUNTANTS’ REPORT
– I-31 –


--- page 412 ---
Note:
(i) Prior to the completion of the Reorganization within the Track Record Period, which is the year ended
December 31, 2020 and the eleven months ended November 30, 2021, pledged vehicle monitoring
service was operated by both the Division of Changjiu Industrial and Changjiu Jinfu. Regarding the
portion of income arising from services operated by the Division of Changjiu Industrial, income tax
liability was determined with respect to Changjiu Industrial as a whole. During such periods, Changjiu
Industrial as a whole was loss-making after tax adjustments and therefore the relevant income generated
by the Division of Changjiu industrial is “not subject to tax.”
Notes:
Cayman Islands
Under the current laws of the Cayman Islands, the Company is not subject to tax on either income or
capital gain, the Cayman Islands does not impose a withholding tax on payments of dividends to shareholders.
Hong Kong
The Company’s Hong Kong subsidiary, incorporated in July 2021, is subject to a profits tax rate of
8.25% for the first HKD2,000,000 of assessable profit and 16.5% for profit exceeding HKD2,000,000. No
provision for Hong Kong profits tax was made as the Group had no estimated assessable profit that was subject
to Hong Kong profits tax for the period from date of incorporation to December 31, 2021, the year ended
December 31, 2022 and for the six months ended June 30, 2022 and 2023.
Mainland China
All subsidiaries established in Mainland China are subject to an income tax rate of 25%, according to
the PRC Enterprise Income Tax Law (the “EIT Law”) for the years ended December 31, 2020, 2021 and 2022
and for the six months ended June 30, 2022 and 2023.
Withholding tax on undistributed dividends
The EIT law also imposes a withholding income tax of 10% on dividends distributed by a foreign investment
enterprise (“FIE”) to its immediate holding company outside of Mainland China, if such immediate holding company
is considered as a non-resident enterprise without any establishment or place within Mainland China or if the received
dividends have no connection with the establishment or place of such immediate holding company within Mainland
China, unless such immediate holding company’s jurisdiction of incorporation has a tax treaty with China that
provides for a different withholding arrangement. According to the arrangement between Mainland China and Hong
Kong Special Administrative Region on the Avoidance of Double Taxation and Prevention of Fiscal Evasion in
August 2006, dividends paid by an FIE in Mainland China to its immediate holding company in Hong Kong will be
subject to withholding tax at a rate of no more than 5% (if the foreign investor owns directly at least 25% of the shares
of the FIE). The Company has not declared or paid, or planned to declare, any dividend to its shareholders from the
profits generated during the years ended December 31, 2020, 2021 and 2022 and for the six months ended June 30,
2022 and 2023. Therefore, the Company has not recorded any withholding tax on any profits generated by the PRC
Operation Entities.
8 DIRECTORS’ EMOLUMENTS
Directors’ emoluments during the Track Record Period are as follows:
Y ear ended December 31, 2020
Directors’
fees
Salaries,
allowances
and benefits
in kind
Discretionary
bonuses
Retirement
scheme
contributions
Share-based
compensation
expenses Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Executive
directors
Bo Shijiu ––––––
Li Guiping ––––––
Jia Hui – 570 144 3 – 717
– 570 144 3 – 717
APPENDIX I ACCOUNTANTS’ REPORT
– I-32 –


--- page 413 ---
Y ear ended December 31, 2021
Directors’
fees
Salaries,
allowances
and benefits
in kind
Discretionary
bonuses
Retirement
scheme
contributions
Share-based
compensation
expenses Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Executive
directors
Bo Shijiu ––––––
Li Guiping ––––––
Jia Hui – 934 412 48 – 1,394
– 934 412 48 – 1,394
Y ear ended December 31, 2022
Directors’
fees
Salaries,
allowances
and benefits
in kind
Discretionary
bonuses
Retirement
scheme
contributions
Share-based
compensation
expenses Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Executive
directors
Bo Shijiu ––––––
Li Guiping ––––––
Jia Hui – 900 560 58 – 1,518
– 900 560 58 – 1,518
Six months ended June 30, 2023
Directors’
fees
Salaries,
allowances
and benefits
in kind
Discretionary
bonuses
Retirement
scheme
contributions
Share-based
compensation
expenses Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Executive
directors
Bo Shijiu – 1,025 – 26 – 1,051
Li Guiping – 211 – 20 – 231
Jia Hui – 447 280 31 1,605 2,363
Non-
executive
directors
J i n T i n g ––––––
– 1,683 280 77 1,605 3,645
APPENDIX I ACCOUNTANTS’ REPORT
– I-33 –


--- page 414 ---
Six months ended June 30, 2022 (unaudited)
Directors’
fees
Salaries,
allowances
and benefits
in kind
Discretionary
bonuses
Retirement
scheme
contributions
Share-based
compensation
expenses Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Executive
directors
Bo Shijiu ––––––
Li Guiping ––––––
Jia Hui – 449 280 27 – 756
– 449 280 27 – 756
Notes:
(i) Mr. Bo Shijiu and Ms. Li Guiping are the founders and key management personnel of the Group during
the Track Record Period and were appointed as directors of the Company in June 2021. No remuneration
had been paid to them for the periods from January 1, 2020 to December 31, 2022.
(ii) Ms. Jia Hui is a key management personnel of the Group during the Track Record Period and was
appointed as a director of the Company in April 2023. The remuneration disclosed above represented
the compensation for her services as key management personnel.
(iii) Jin Ting was appointed as non-executive director of the Company in April 2023. During the Track
Record Period, no remuneration had been paid to her.
(iv) During the Track Record Period, no emoluments were paid by the Group to the director as an
inducement to join or upon joining the Group or as compensation for loss of office. No director of the
Group waived or agreed to waive any emoluments during the Track Record Period.
9 INDIVIDUALS WITH HIGHEST EMOLUMENTS
The number of directors and non-directors included in the five highest paid individuals for the years ended
December 31, 2020, 2021 and 2022 and for the six months ended June 30, 2022 and 2023 are set forth below:
Y ears ended December 31, Six months ended June 30
2020 2021 2022 2022 2023
(unaudited)
Director 11111
Non-directors 44444
55555
APPENDIX I ACCOUNTANTS’ REPORT
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--- page 415 ---
The emoluments of the directors are disclosed in Note 8. The aggregate of the emoluments in respect of the
remaining highest paid individuals are as follows:
Y ear ended December 31, Six months ended June 30,
2020 2021 2022 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(unaudited)
Salaries, allowances, and
benefits in kind 1,404 2,214 3,090 1,545 1,462
Discretionary bonuses 768 623 175 88 124
Share-based compensation
expenses –––– 3,448
Retirement scheme
contributions 15 186 191 95 112
Total 2,187 3,023 3,456 1,728 5,146
The emoluments of the other individuals with the highest emoluments are all within the following bands:
Y ear ended December 31, Six months ended June 30,
2020 2021 2022 2022 2023
Number of
individuals
Number of
individuals
Number of
individuals
Number of
individuals
Number of
individuals
(unaudited)
Nil – HKD1,000,000 4324–
HKD1,000,001 –
HKD1,500,000 –12–3
HKD1,500,001 –
HKD2,000,000 ––––1
10 EARNINGS PER SHARE
(a) Basic earnings per share
The basic earnings per share is calculated by dividing the profit attributable to ordinary equity shareholders
of the Company by the weighted average number of ordinary shares in issue or deemed to be in issue during the Track
Record Period. The profit attributable to restricted shares held for the Pre-IPO Restricted Share Plan (see Note 23)
and the number of such shares have been excluded from the calculation of basic earnings per share.
For the purpose of calculating earnings per share, the weighted average number of ordinary shares in issue or
deemed to be in issue were determined as if the Reorganization as described in Note 1 and share subdivision on
February 15, 2023 whereby each ordinary share was subdivided into 1,500,000 ordinary shares as described in Note
24(a) had occurred on January 1, 2020.
APPENDIX I ACCOUNTANTS’ REPORT
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Y ear ended December 31, Six months ended June 30,
2020 2021 2022 2022 2023
(unaudited)
Profit attributable to equity
shareholders of the
Company (RMB’000) 114,105 83,731 95,877 48,053 35,291
Less: profit attributable to
grantees of the Pre-IPO
Restricted Share Plan –––– (242)
Profit attributable to
ordinary equity
shareholders of the
Company (RMB’000) 114,105 83,731 95,877 48,053 35,049
Weighted average number
of ordinary shares in
issue or deemed to be in
issue (Note 24(a)) 150,000,000 150,000,000 150,000,000 150,000,000 150,000,000
Basic earnings per share
attributable to ordinary
equity shareholders of
the Company (in RMB
per share) 0.76 0.56 0.64 0.32 0.23
(b) Diluted earnings per share
There were no dilutive potential ordinary shares in issue during the Track Record Period. Therefore, diluted
earnings per share for the years ended December 31, 2020, 2021 and 2022 and the six months ended June 30, 2022
and 2023 were the same as basic earnings per share of the respective periods.
APPENDIX I ACCOUNTANTS’ REPORT
– I-36 –


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11 PROPERTY, PLANT AND EQUIPMENT
Electronic
equipment
Office
equipment Total
RMB’000 RMB’000 RMB’000
Cost:
As of January 1, 2020 16,506 8,082 24,588
Additions 516 443 959
Disposals (1,303) (122) (1,425)
As of December 31, 2020/January 1, 2021 15,719 8,403 24,122
Additions 784 329 1,113
Disposals (2) – (2)
As of December 31, 2021/January 1, 2022 16,501 8,732 25,233
Additions 419 605 1,024
As of December 31, 2022/January 1, 2023 16,920 9,337 26,257
Additions 146 1 147
As of June 30, 2023 17,066 9,338 26,404 ------------ ------------ ------------
Accumulated depreciation:
As of January 1, 2020 (13,525) (5,595) (19,120)
Charge for the year (1,694) (932) (2,626)
Disposals 1,263 104 1,367
As of December 31, 2020/January 1, 2021 (13,956) (6,423) (20,379)
Charge for the year (993) (821) (1,814)
Disposals 2 – 2
As of December 31, 2021/January 1, 2022 (14,947) (7,244) (22,191)
Charge for the year (717) (559) (1,276)
As of December 31, 2022/January 1, 2023 (15,664) (7,803) (23,467)
Charge for the period (295) (214) (509)
As of June 30, 2023 (15,959) (8,017) (23,976) ------------
------------ ------------
Net book value:
As of December 31, 2020 1,763 1,980 3,743
As of December 31, 2021 1,554 1,488 3,042
As of December 31, 2022 1,256 1,534 2,790
As of June 30, 2023 1,107 1,321 2,428
APPENDIX I ACCOUNTANTS’ REPORT
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12 INTANGIBLE ASSETS
Note Software
RMB’000
Cost:
As of January 1, 2020 7,459
Additions –
As of December 31, 2020/January 1, 2021 7,459
Additions –
As of December 31, 2021/January 1, 2022 7,459
Additions –
As of December 31, 2022/January 1, 2023 7,459
Additions (i) 5,663
As of June 30, 2023 13,122--------------
Accumulated amortization:
As of January 1, 2020 (1,585)
Charge for the year (810)
As of December 31, 2020/January 1, 2021 (2,395)
Charge for the year (860)
As of December 31, 2021/January 1, 2022 (3,255)
Charge for the year (792)
As of December 31, 2022/January 1, 2023 (4,047)
Charge for the period (489)
As of June 30, 2023 (4,536)--------------
Net book value:
As of December 31, 2020 5,064
As of December 31, 2021 4,204
As of December 31, 2022 3,412
As of June 30, 2023 8,586
Note (i): The addition of intangible asset with amount of RMB5.7 million is purchased from a related party
and settled by offsetting the amount due from the related party.
APPENDIX I ACCOUNTANTS’ REPORT
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13 RIGHT-OF-USE ASSETS
As of December 31
As of
June 30,
2020 2021 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000
Cost:
As of January 1, 2,067 2,467 8,770 12,297
Inception of leases 400 6,303 9,830 7,844
Expiration of leases – – (6,303) (62)
As of December 31/June 30, 2,467 8,770 12,297 20,079----------- ----------- ----------- -----------
Accumulated depreciation:
As of January 1, – (1,803) (4,130) (6,468)
Charge for year/period (1,803) (2,327) (4,439) (3,431)
Expiration of leases – – 2,101 –
As of December 31/June 30, (1,803) (4,130) (6,468) (9,899)-----------
----------- ----------- -----------
Net book value:
As of December 31/June 30, 664 4,640 5,829 10,180
14 INVESTMENT IN SUBSIDIARIES
As of December 31,
As of
June 30,
Note 2021 2022 2023
RMB’000 RMB’000 RMB’000
Investment in a subsidiary (i) –––
Deemed investment arising from
share- based compensation (ii) – – 13,654
Total – – 13,654
Note:
(i): The share capital of the subsidiary directly held by the Company was not paid up as of June 30, 2023.
(ii): The amount represents share-based compensation expenses arising from the grant of share options and
restricted shares of the Company to certain employees of the subsidiaries in exchange for their services
provided to these subsidiaries, which were deemed to be investments made by the Company into these
subsidiaries.
APPENDIX I ACCOUNTANTS’ REPORT
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15 TRADE RECEIV ABLES
As of December 31,
As of
June 30,
Note 2020 2021 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000
Trade receivables
– third parties 40,714 56,902 94,948 170,319
– related parties 26(d) 243 3,860 9,284 16,335
Less: loss allowance (993) (901) (2,921) (6,871)
Trade receivables, net 39,964 59,861 101,311 179,783
The balance of trade receivables with related parties is trade in nature.
The Group’s trade receivable from financial institutions with carrying values of approximately RMB165.1
million as of June 30, 2023 were pledged to secure certain bank loans granted to the Group (Note 18).
Ageing analysis
As of the end of each reporting period, the ageing analysis of trade receivables, based on the transaction date
and net of loss allowance, is as follows:
As of December 31,
As of
June 30
2020 2021 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000
Within 3 months (inclusive) 33,122 53,055 82,032 98,566
3 months to 6 months (inclusive) 4,202 4,558 11,190 57,382
6 months to 1 year (inclusive) 1,656 1,625 7,862 22,251
Over 1 year 1,977 1,524 3,148 8,455
Less: loss allowance (993) (901) (2,921) (6,871)
Trade receivables, net 39,964 59,861 101,311 179,783
Further details on the Group’s credit policy and credit risk arising from trade receivables are set out in Note
25(a).
16 PREPAID EXPENSES AND OTHER CURRENT ASSETS
The Group
As of December 31,
As of
June 30,
Note 2020 2021 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000
Amounts due from related
parties 26(d) 148,303 139,813 25,179 5,265
Prepaid expenses 96 14 605 5,191
Deposits 791 1,103 287 307
Prepaid income tax – – 898 898
Loan to a third party (i) – 4,800 – –
Less: loss allowance (440) (422) – –
Total 148,750 145,308 26,969 11,661
Note (i): Represents a loan to a third party with interest rate of 6.000% per annum in 2021, and the loan was
fully repaid in June 2022.
The balance of amount due from related parties is non-trade in nature and was settled in November 2023.
APPENDIX I ACCOUNTANTS’ REPORT
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Movement in the loss allowance account in respect of financial assets measured at amortized cost during the
year/period is as follows:
Y ear ended December 31,
Six months
ended
June 30,
2020 2021 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000
Balance at January 1, – 440 422 –
Loss allowance
recognized/(reversed)
during the year/period 440 (18) 342 (300)
Written off – – (764) –
Recovery – – – 300
Balance as of December 31/June 30 440 422 – –
The Company
As of June 30, 2023, the prepaid expenses and other current assets primarily consists of capitalized
amount of the listing expenses and will be deducted from equity upon the Listing.
17 CASH AND CASH EQUIV ALENTS
(a) Cash and cash equivalents comprise:
The Group
As of December 31,
As of
June 30,
2020 2021 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000
Cash at banks 89 1,533 119,341 72,395
The Company
As of December 31,
As of
June 30,
2021 2022 2023
RMB’000 RMB’000 RMB’000
Cash at banks – – 4,536
APPENDIX I ACCOUNTANTS’ REPORT
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(b) Reconciliation of profit before taxation to cash generated from operations:
Y ear ended December 31,
Six months
ended June 30,
Note 2020 2021 2022 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(unaudited)
Profit before taxation 109,834 93,149 127,626 62,884 55,472
Adjustments for:
Depreciation of property,
plant, and equipment 2,626 1,814 1,276 611 509
Depreciation of right-of-use
assets 1,803 2,327 4,439 1,517 3,431
Amortization of intangible
assets 810 860 792 396 489
Net exchange gains –––– (171)
Impairment losses/(reversals) 770 (110) 2,555 2,011 3,650
Finance cost 896 2,983 3,298 1,217 1,540
Non-refundable earnest money
for an unconsummated
investment (i) – 10,000 – – –
Share-based compensation
expenses 23 –––– 13,654
Operating profit before
changes in working capital 116,739 111,023 139,986 68,636 78,574
Changes in working capital
Decrease/(increase) in trade
receivables 3,254 (19,805) (43,663) (68,805) (82,422)
Decrease/(increase) in prepaid
expenses and other current
assets 1,229 (227) (109) (537) (826)
Increase/(decrease) in trade
payables 2,204 (272) 3,038 602 (2,019)
Increase/(decrease) in contract
liabilities 2,695 16,769 (10,503) (16,436) (8,255)
(Decrease)/increase in accrued
expenses and other
liabilities (1,894) 8,888 8,606 10,094 9,463
Net cash generated
from/(used in) operations 124,227 116,376 97,355 (6,446) (5,485)
Note (i): Changjiu Jinfu entered an investment contract with third parties in 2021 and paid RMB10.0 million
as performance deposit. The transaction was subsequently cancelled by Changjiu Jinfu and the
performance deposit was non-refundable according to the contract.
APPENDIX I ACCOUNTANTS’ REPORT
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(c) Reconciliation of liabilities arising from financing activities
The table below details changes in the Group’s liabilities from financing activities, including both cash and
non-cash changes. Liabilities arising from financing activities are liabilities for which cash flows were, or future cash
flows will be, classified in the Group’s consolidated statements of cash flows as cash flows from financing activities.
Bank loans
Lease
liabilities Total
RMB’000 RMB’000 RMB’000
As of January 1, 2020 – 2,067 2,067
Changes from financing cash flows:
Proceed from bank loans 50,000 – 50,000
Interest paid (817) – (817)
Payment of lease liabilities – (1,931) (1,931)
Other changes:
Increase in lease liabilities – 400 400
Interest expenses 817 79 896
As of December 31, 2020/January 1, 2021 50,000 615 50,615
Changes from financing cash flows:
Proceed from bank loans 50,000 – 50,000
Repayment of bank loans (50,000) – (50,000)
Interest paid (2,712) – (2,712)
Payment of lease liabilities – (2,496) (2,496)
Other changes:
Increase in lease liabilities – 6,303 6,303
Interest expenses 2,712 271 2,983
As of December 31, 2021/January 1, 2022 50,000 4,693 54,693
Changes from financing cash flows:
Proceed from bank loans 75,000 – 75,000
Repayment of bank loans (50,000) – (50,000)
Interest paid (3,174) – (3,174)
Payment of lease liabilities – (4,108) (4,108)
Other changes:
Increase in lease liabilities – 9,830 9,830
Expiration of leases – (4,296) (4,296)
Interest expenses 3,174 298 3,472
As of December 31, 2022 75,000 6,417 81,417
As of January 1, 2023 75,000 6,417 81,417
Changes from financing cash flows:
Proceed from bank loans 35,000 – 35,000
Repayment of bank loans (75,000) – (75,000)
Interest paid (1,219) – (1,219)
Payment of lease liabilities – (92) (92)
Other changes:
Increase in lease liabilities – 7,844 7,844
Expiration of leases – (62) (62)
Interest expenses 1,219 321 1,540
As of June 30, 2023 35,000 14,428 49,428
APPENDIX I ACCOUNTANTS’ REPORT
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(Unaudited) Bank loans
Lease
liabilities Total
RMB’000 RMB’000 RMB’000
As of January 1, 2022 50,000 4,693 54,693
Changes from financing cash flows:
Proceed from bank loans 38,699 – 38,699
Interest paid (1,274) – (1,274)
Payment of lease liabilities – (98) (98)
Other changes:
Increase in lease liabilities – 9,830 9,830
Expiration of leases – (4,296) (4,296)
Interest expenses 1,274 117 1,391
As of June 30, 2022 88,699 10,246 98,945
18 BANK LOANS
As of December 31,
As of
June 30,
2020 2021 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000
Bank loans 50,000 50,000 75,000 35,000
The Group borrowed short-term loans of RMB50.0 million, RMB50.0 million and RMB75.0 million under
facility agreements at the interest rate of 5.655% per annum, 4.600% per annum and 4.600% per annum, respectively
as of December 31, 2020, 2021 and 2022. The loans are all guaranteed by Ultimate Controlling Shareholders and
Changjiu Industrial, which are related parties of the Group. The bank loans as of December 31, 2022 were fully repaid
and guarantee was released in April 2023.
The Group entered into a new facility agreement with a commercial bank in the PRC for a line of credit of
RMB60.0 million for one year in April 2023. The agreement is pledged by the Group’s trade receivables from
financial institutions with an initial amount of RMB89.2 million and changed from time to time. The Group borrowed
RMB35.0 million under the agreement at the interest rate of 4.600% per annum as of June 30, 2023.
19 TRADE PAYABLES
As of December 31,
As of
June 30,
Note 2020 2021 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000
Trade payables
– third parties 25,071 25,469 28,507 26,488
– related party 26(d) 6 7 0–––
25,741 25,469 28,507 26,488
The balance of trade payables with related parties is trade in nature.
APPENDIX I ACCOUNTANTS’ REPORT
– I-44 –


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As of the end of each reporting period, the ageing analysis of trade payables based on the invoice date, is as
follows:
As of December 31,
As of
June 30,
2020 2021 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000
Within 6 months 25,728 25,469 28,507 26,488
6 months to 1 year 1 3–––
25,741 25,469 28,507 26,488
All of the trade payables are expected to be settled within one year or are repayable on demand.
20 ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
The Group
As of December 31,
As of
June 30,
Note 2020 2021 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000
Other payables to customers (i) 13,983 20,167 26,634 34,880
Accrued payroll and welfare 5,838 9,152 15,209 12,429
V alue-Added Tax and
surcharges payable 15,757 13,837 10,168 10,174
Deposit received from third
parties 3,179 2,933 2,603 2,535
Amounts due to related
parties 26(d) 1,301 1,301 1,301 2,391
Restricted shares repurchase
liability 23 – – – 4,325
Accrued listing expenses – – – 4,043
Others 460 2,016 2,097 1,023
Total 40,518 49,406 58,012 71,800
Note (i): Other payables to customers primarily represent advance payment of pledged vehicle monitoring
service received from automobile dealerships which had terminated their financing relationship with
financial institutions or automobile dealerships whose obligation to pay service fee has been
transferred to financial institutions during the service period. The Group is obligated to refund the
amounts when demanded.
The balance of amounts due to related parties is trade in nature.
All of the accrued expenses and other current liabilities are expected to be settled within one year or are
repayable on demand.
APPENDIX I ACCOUNTANTS’ REPORT
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The Company
As of December 31,
As of
June 30,
Note 2021 2022 2023
RMB’000 RMB’000 RMB’000
Amounts due to subsidiaries – 2,656 12,965
Restricted shares repurchase liability 23 – – 4,325
Accrued listing expenses – – 4,043
Total – 2,656 21,333
The amounts due to subsidiaries are non-trade nature, which are unsecured and repayable on demand.
21 LEASE LIABILITIES
The following table shows the remaining contractual maturities of the Group’s lease liabilities at the end of
each reporting period:
As of December 31,
As of
June 30,
2020 2021 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000
Maturity analysis-contractual
undiscounted cash flows
Within 1 year or on demand 247 2,500 6,515 7,609
More than 1 year but less than 2
years 250 2,356 65 7,475
More than 2 years but less than 5
years 171 65 – –
Total undiscounted lease liabilities 668 4,921 6,580 15,084
Less: total future interest expenses (53) (228) (163) (656)
Present value of lease liabilities 615 4,693 6,417 14,428
Lease liabilities included in the
consolidated statements of
financial position
Current 218 2,334 6,353 7,120
Non-current 397 2,359 64 7,308
Present value of lease liabilities 615 4,693 6,417 14,428
APPENDIX I ACCOUNTANTS’ REPORT
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Y ear ended December 31, Six months ended June 30,
2020 2021 2022 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(unaudited)
Amounts recognized in
profit or loss
Interest on lease liabilities 79 271 298 117 321
Amounts recognized in
the consolidated
statements of cash
flows
Total cash flow for leases 1,931 2,496 4,108 98 92
22 INCOME TAX IN THE CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(a) Current taxation in the consolidated statements of financial position represents:
Reconciliation to the consolidated statements of financial position:
Y ear ended December 31,
Six months
ended
June 30,
2020 2021 2022 2023
Note RMB’000 RMB’000 RMB’000 RMB’000
Balance as of January 1 – – 3,712 22,180
Provision for current
income tax for the
year/period 7(a) – 5,356 32,895 23,324
Payment during the
year/period – (1,644) (14,427) (15,270)
Balance as of
December 31/June 30 – 3,712 22,180 30,234
(b) Deferred tax assets and liabilities recognized
(i) Movement of each component of deferred tax assets and liabilities
The components of deferred tax assets/(liabilities) recognized in the consolidated statements of financial
position and the movements during the year/period are as follows:
Deferred tax arising from:
Deductible
accumulative
losses
Impairment
losses
Lease
liabilities
and others
Total
deferred tax
assets
Depreciation
of right of
use assets
Total
deferred tax
liabilities Net
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
As of January 1, 2020 – 122 – 122 – – 122
Credited/(charged) to profit or loss
(Note 7(a)) 4,146 137 154 4,437 (166) (166) 4,271
As of December 31, 2020 and
January 1, 2021 4,146 259 154 4,559 (166) (166) 4,393------- ------- ------- ------- ------- ------- - -----
APPENDIX I ACCOUNTANTS’ REPORT
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Deferred tax arising from:
Deductible
accumulative
losses
Impairment
losses
Lease
liabilities
and others
Total
deferred tax
assets
Depreciation
of right of
use assets
Total
deferred tax
liabilities Net
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Credited/(charged) to profit or loss
(Note 7(a)) (4,146) 71 1,007 (3,068) (994) (994) (4,062)
As of December 31, 2021 and
January 1, 2022 – 330 1,161 1,491 (1,160) (1,160) 331------- ------- ------- ------- ------- ------- - -----
Credited/(charged) to profit or loss
(Note 7(a)) 668 366 444 1,478 (297) (297) 1,181
As of December 31, 2022
and January 1, 2023 668 696 1,605 2,969 (1,457) (1,457) 1,512------- ------- ------- ------- ------- ------- - -----
Credited/(charged) to profit or loss
(Note 7(a)) 1,364 864 2,003 4,231 (1,088) (1,088) 3,143
As of June 30, 2023 2,032 1,560 3,608 7,200 (2,545) (2,545) 4,655
(ii) Reconciliation to the consolidated statements of financial position
As of December 31,
As of
June 30,
2020 2021 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000
Total deferred tax assets 4,559 1,491 2,969 7,200
Total deferred tax liabilities (166) (1,160) (1,457) (2,545)
Net deferred tax assets
recognized in the
consolidated statement of
financial position 4,393 331 1,512 4,655
23 Share-based compensation
During the Track Record Period, the Group has the following share-based compensation arrangements:
(i) Pre-IPO Restricted Share Plan
The Company adopted a restricted share plan (“Pre-IPO Restricted Share Plan”) and granted a total number
of 1,620,000 restricted shares to one director and certain employees at a purchase price of RMB2.67 per share on
March 7, 2023 through issuing shares to Y uanshenghe (Shanghai) Enterprise Management Partnership (Limited
Partnership) (“the Restricted Share SPV”), which is a limited partnership with the grantees of the Pre-IPO Restricted
Share Plan as the limited partners. The restricted shares would become unlocked in tranches from the grant date on
specific service condition that the grantees remain in service and scheduled to be unlocked over four years without
any performance condition requirements. Based on the schedules of the Pre-IPO Restricted Share Plan, 25% of
restricted shares shall become unlocked upon each anniversary from the grant date thereafter of completed service.
APPENDIX I ACCOUNTANTS’ REPORT
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--- page 429 ---
For the locked restricted shares, if the service conditions are not fulfilled and the corresponding tranche of
restricted shares granted cannot be unlocked, unlocked restricted shares will be repurchased at the initial purchase
price paid by the grantees, or plus interest in an amount equal to 6% of the initial purchase price in certain condition.
For the unlocked restricted shares, if the grantee’s employment is terminated by the Group, the unlocked restricted
shares held prior to the listing of the Company will be repurchased at the initial purchase price paid by the grantees.
Movements in the number of restricted shares granted and the weighted average grant date fair value as follows:
Number of
restricted
shares
Weighted
average grant
date fair value
per share
Remaining
lock-up
periods
RMB Year
Outstanding as of January 1, 2023 – – –
Granted during the period 1,620,000 10.17
Outstanding as of June 30, 2023 1,620,000 10.17 2.19
Share-based compensation expenses related to Pre-IPO Restricted Share Plan is based on the grant date fair
value of the restricted shares, and is recognized on a straight-line basis over the lock-up period of each tranches. The
fair value of restricted shares at the grant date are determined by reference to the fair value of the underlying ordinary
shares of the Company on the grant date, taking into account of the discount for lack of marketability and the
purchase price. Discounted cash flow method was applied to determine the underlying equity value of the Company
and the fair value of underlying ordinary shares. The grant date fair value of the restricted shares was determined with
the assistance of an independent valuation firm.
(ii) Pre-IPO Share Option Plan
The Company adopted a share option plan (“Pre-IPO Share Option Plan”) and granted a total number of
10,199,730 options to one director and certain employees with an exercise price of RMB6.67 pursuant to the Pre -IPO
Share Option Plan on March 7, 2023. The grantees of the Pre-IPO Share Option Plan are required to satisfy certain
vesting service and non-market performance conditions for the entitlements, and a maximum of 25% of the granted
options are vested on each anniversary from the grant date subject to fulfilment of the respective vesting criteria.
Options granted typically expire in 10 years from the grant date. The options may be exercised at any time after
they have vested subject to the terms of the award agreement and are exercisable for a maximum period of 10 years
after the date of grant.
Share-based compensation expenses related Pre-IPO Share Option Plan is based on the grant date fair value
of the share options and awards ultimately expected to vest, and is recognized on a straight-line basis over the vesting
period of each tranches.
A summary of activities of the share options is presented as follows:
Number of
share options
Weighted
average
exercise price
Weighted
average
remaining
contractual
term
RMB Year
Outstanding as of January 1, 2023 – – –
Granted during the period 10,199,730 6.67
Forfeited during the period (96,075) 6.67
Outstanding as of June 30, 2023 10,103,655 6.67 9.69
Exercisable as of June 30, 2023 – – –
APPENDIX I ACCOUNTANTS’ REPORT
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Fair value of share options
The fair value of share options was estimated using the binomial option-pricing model. The determination of
estimated fair value of share options on the grant date is affected by the fair value of the Company’s ordinary shares
as well as assumptions regarding a number of complex and subjective variables. These variables include the expected
volatility of the shares of the Company over the expected term of the awards, projected employee share option
exercise behaviors, a risk-free interest rate and expected dividends, if any. The grant date fair values of the share
options were determined with the assistance of an independent valuation firm.
Based on fair value of the underlying ordinary shares, the Group has used binomial option-pricing model to
determine the fair value of the share options as of the grant date. Key assumptions are set as below:
As of grant date
Risk-free interest rates 2.9%
Expected term – years 10
Expected volatility 43.4%
Exercise multiple 2.2-2.8
Fair value of ordinary shares (RMB) 12.84
Exercise price (RMB) 6.67
Expected dividend yield 0.00%
The expected volatility was referenced to the average of daily historical share price volatility of comparable
companies operating in similar industry of the Company. The valuation was based on the assumption that no
dividends will be distributed.
The table below sets forth share-based compensation expenses recognized as staff costs in the consolidated
statements of profit or loss for the Track Record Period:
Y ear ended December 31, Six months ended June 30,
2020 2021 2022 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(unaudited)
Pre-IPO Restricted Share Plan –––– 2,568
Pre-IPO Share Option Plan –––– 1 1,086
Total –––– 13,654
As of June 30, 2023, the Company had received a total cash consideration of RMB4,325,400 of capital
contribution from the grantees of Pre-IPO Restricted Share Plan, including RMB7 of new share capital and
RMB4,325,393 of capital reserve. As the Company has the obligation to repurchase the granted restricted shares
under above mentioned conditions, the Company recognizes a liability in full for the repurchase obligation and treats
such restricted shares as treasury shares, recorded under the items of “Accrued expenses and other current liabilities”
and “Treasury Shares” in the statements of financial position, respectively.
APPENDIX I ACCOUNTANTS’ REPORT
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24 CAPITAL AND RESERVES
Movements in components of equity
The changes of each component of the Group’s consolidated equity during the Track Record Period is set out
in the consolidated statements of changes in equity. Details of changes in the Company’s individual components of
equity since its date of incorporation to June 30, 2023 are set out below:
Share
capital
Treasury
shares
Capital
reserve
Accumulated
loss Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Note 23
Balance as of June 16,
2021 (Date of
incorporation),
December 31, 2021
and January 1, 2022 1–––1
Net loss – – – (2,132) (2,132)
Balance as of December
31, 2022 and
January 1, 2023 1 – – (2,132) (2,131)
Net loss – – – (11,800) (11,800)
Share-based compensation – – 13,654 – 13,654
Shares issued under
Pre-IPO Restricted
Share Plan * (4,325) 4,325 – –
Balance as of
June 30, 2023 1 (4,325) 17,979 (13,932) (277)
* less than RMB500.
(a) Share capital
The Company was incorporated in the Cayman Islands in June 2021 with an authorized share capital of
USD50,000 divided into 50,000 shares with a par value of USD1.0 each. Upon incorporation, the Company issued
100 ordinary shares.
On February 15, 2023, the Company’s issued and unissued 50,000 shares of a par value of USD1.0 each were
subdivided into 75,000,000,000 shares with a par value of USD0.00000066667 each. As a result, the issued share
capital of the Company became 150,000,000 shares of USD0.00000066667 par value each.
On March 7, 2023, the Company adopted the Pre-IPO Restricted Share Plan and granted a total number of
1,620,000 restricted shares with a par value of USD0.00000066667 each to one director and certain employees. As
of June 30, 2023, the Company had received the capital contributions.
(b) Nature and purpose of Reserves
(i) Capital reserves
The capital reserves as of January 1, 2020, December 31, 2020 and 2021 represents the paid-in capital
of Changjiu Jinfu prior to the completion of Reorganization. As of June 30, 2023, it primarily consisted of
share-based compensation and capital premium arising from issuance of restricted shares (see Note 23).
APPENDIX I ACCOUNTANTS’ REPORT
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(ii) PRC statutory reserves
According to the PRC Company Law, the PRC subsidiaries of the Group are required to transfer 10%
of their profit after taxation (after offsetting the losses in the previous years), as determined under the People’s
Republic of China Generally Accepted Accounting Principles (PRC GAAP), to the statutory reserves until the
reserve balance reaches 50% of their registered capital.
The transfer to this reserve must be made before distribution of a dividend to shareholders.
Statutory reserves fund can be used to cover previous years’ losses, if any, and may be converted into
share capital by the issue of new shares to shareholders in proportion to their existing shareholdings, provided
that the balance after such issue is not less than 25% of the registered capital.
(c) Dividends
No dividends have been declared or paid by the Company during the Track Record Period.
During the years ended December 31, 2020, 2021 and 2022 and six months ended June 30, 2023, Nil, RMB22.0
million, nil and nil were declared and paid by Changjiu Jinfu to its shareholders.
As described in Note 1, deemed distribution amounted to RMB115.2 million and RMB33.1 million for the year
ended December 31, 2020 and 2021, respectively, represents the cash transferred to Changjiu Industrial.
(d) Capital management
The Group’s primary objectives when managing capital are to safeguard the Group’s ability to continue as a
going concern, so that it can continue to provide returns for shareholders and benefits for other stakeholders, by
pricing products and services commensurately with the level of risk and by securing access to finance at a reasonable
cost.
The Group actively and regularly reviews and manages its capital structure to maintain a balance between the
higher shareholder returns that might be possible with higher levels of borrowings and the advantages and security
afforded by a sound capital position and makes adjustments to the capital structure in light of changes in economic
conditions.
Neither the Company nor any of its subsidiaries are subject to externally imposed capital requirements.
25 FINANCIAL RISK MANAGEMENT
Exposure to credit risk, liquidity risk, interest rate risk and foreign exchange risk arises in the normal course
of the Group’s business. The Group’s exposure to these risks and the financial risk management policies and practice
used by the Group to manage these risks are described below.
(a) Credit risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in a
financial loss to the Group. The Group’s credit risk is primarily attributable to trade receivables. The Group’s
exposure to credit risk arising from cash and cash equivalents is limited because the counterparties are banks for
which the Group considers having low credit risk.
The Group does not provide any guarantees which would expose the Group to credit risk.
Trade receivables
For trade receivables, the Group has policies in place to ensure that provision of service are made to customers
with an appropriate credit history. The Group performs credit evaluation on individual customer based on various
factors, including but not limited to: duration of business relationship with the customer, its past history of making
payment, its current ability to pay and its financial position. It also has other monitoring procedures to ensure that
follow-up action is taken to recover overdue debts, such as holding periodic meetings to discuss the status of trade
receivables and timely communicating with relevant parties, and taking actions to collect due payments through
various ways. Trade receivables collection ratio is also taken into account in the performance review of relevant
staffs. In addition, the Group reviews regularly the recoverable amount of trade receivables to ensure that adequate
impairment losses are made for irrecoverable amounts.
APPENDIX I ACCOUNTANTS’ REPORT
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The Group’s exposure to credit risk is influenced mainly by the individual characteristics of each customer
rather than the industry or country in which the customers operate and therefore significant concentrations of credit
risk primarily arise when the Group has significant exposure to individual customers. As of December 31, 2020, 2021
and 2022 and June 30, 2023, 34%, 34%, 32% and 34% of the total trade receivables was due from the Group’s five
largest customers.
To measure the expected credit losses (“ECLs”) of trade receivables, trade receivables have been grouped
based on shared credit risk characteristics and the aging. The directors of the Company consider the probability of
default upon initial recognition of asset and whether there has been significant increase in credit risk on an ongoing
basis during the Track Record Period. The Group applies the IFRS 9 simplified approach to measuring expected credit
losses which uses a lifetime expected loss allowance for all trade receivables.
The following table provides information about the Group’s exposure to credit risk and ECLs for trade
receivables as of December 31, 2020, 2021 and 2022 and June 30, 2023:
As of December 31, 2020
Weighted
average loss
rate
Gross carrying
amount Loss allowance
RMB’000 RMB’000
Up to 3 months 0.44% 33,122 145
3 to 6 months 2.02% 4,202 85
6 to 12 months 10.81% 1,656 179
Over 1 year 29.54% 1,977 584
40,957 993
As of December 31, 2021
Weighted
average loss
rate
Gross carrying
amount Loss allowance
RMB’000 RMB’000
Up to 3 months 0.32% 53,055 172
3 to 6 months 1.43% 4,558 65
6 to 12 months 13.05% 1,625 212
Over 1 year 29.66% 1,524 452
60,762 901
As of December 31, 2022
Weighted
average loss
rate
Gross carrying
amount Loss allowance
RMB’000 RMB’000
Up to 3 months 0.47% 82,032 384
3 to 6 months 1.84% 11,190 206
6 to 12 months 9.91% 7,862 779
Over 1 year 49.30%
(i) 3,148 1,552
104,232 2,921
APPENDIX I ACCOUNTANTS’ REPORT
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As of June 30, 2023
Weighted
average loss
rate
Gross carrying
amount Loss allowance
RMB’000 RMB’000
Up to 3 months 0.66% 98,566 654
3 to 6 months 1.85% 57,382 1,060
6 to 12 months 6.92% 22,251 1,539
Over 1 year 42.79% 8,455 3,618
186,654 6,871
Expected loss rates are based on actual loss experience over the past recent years since January 1, 2020. These
rates are adjusted to reflect differences between economic conditions during the period over which the historical data
has been collected, current conditions and the Group’s view of economic conditions over the expected lives of the
receivables.
Note (i): Since the credit risk of one customer increased significantly in 2022, the trade receivables due from
such customer aged over 1 year as of December 31, 2022 with amount of RMB 0.7 million was
individually assessed to be fully impaired. The impairment was made based on the Group’s
assessment on the deteriorated business and operation performance of such customer.
Movement in the loss allowance account in respect of trade receivables during the year/period is as follows:
Y ear ended December 31,
Six months
ended
June 30,
2020 2021 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000
Balance as of January 1, 663 993 901 2,921
Losses allowance
recognized/(reversed) during the
year/period 330 (92) 2,213 3,950
Written off – – (193) –
Balance as of December 31/June 30 993 901 2,921 6,871
(b) Liquidity risk
The Group’s policy is to regularly monitor its liquidity requirement and its compliance with lending covenants,
to ensure that it maintains sufficient reserves of cash and adequate committed lines of funding from major financial
institutions to meet its liquidity requirements in the short and longer term.
APPENDIX I ACCOUNTANTS’ REPORT
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The following tables show the remaining contractual maturities at the end of each of the reporting period of
the Group’s financial liabilities and lease liabilities, which are based on contractual undiscounted cash flows
(including interest payments computed using contractual rates or, if floating, based on rates current at the end of each
of the reporting period) and the earliest date the Group can be required to pay:
As of December 31, 2020 contractual undiscounted cash outflow
Within
1 year or
on demand
More than
1 year but
less than
2 years
More than
2 years but
less than
5 years
More than
5 years Total
Carrying
amounts
in the
consolidated
statement
of financial
position
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Bank loans 51,932 – – – 51,932 50,000
Trade payables 25,741 – – – 25,741 25,741
Financial liability
included in accrued
expenses and other
current liabilities 18,923 – – – 18,923 18,923
Lease liabilities 247 250 171 – 668 615
96,843 250 171 – 97,264 95,279
As of December 31, 2021 contractual undiscounted cash outflow
Within
1 year or
on demand
More than
1 year but
less than
2 years
More than
2 years but
less than
5 years
More than
5 years Total
Carrying
amounts
in the
consolidated
statement
of financial
position
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Bank loans 51,559 – – – 51,559 50,000
Trade payables 25,469 – – – 25,469 25,469
Financial liability
included in accrued
expenses and other
current liabilities 26,417 – – – 26,417 26,417
Lease liabilities 2,500 2,356 65 – 4,921 4,693
105,945 2,356 65 – 108,366 106,579
APPENDIX I ACCOUNTANTS’ REPORT
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As of December 31, 2022 contractual undiscounted cash outflow
Within
1 year or
on demand
More than
1 year but
less than
2 years
More than
2 years but
less than
5 years
More than
5 years Total
Carrying
amounts
in the
consolidated
statement
of financial
position
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Bank loans 76,751 – – – 76,751 75,000
Trade payables 28,507 – – – 28,507 28,507
Financial liability
included in accrued
expenses and other
current liabilities 32,635 – – – 32,635 32,635
Lease liabilities 6,515 65 – – 6,580 6,417
144,408 65 – – 144,473 142,559
As of June 30, 2023 contractual undiscounted cash outflow
Within
1 year or
on demand
More than
1 year but
less than
2 years
More than
2 years but
less than
5 years
More than
5 years Total
Carrying
amounts
in the
consolidated
statement
of financial
position
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Bank loans 36,377 – – – 36,377 35,000
Trade payables 26,488 – – – 26,488 26,488
Financial liability
included in accrued
expenses and other
current liabilities 49,197 – – – 49,197 49,197
Lease liabilities 7,609 7,475 – – 15,084 14,428
119,671 7,475 – – 127,146 125,113
(c) Interest rate risk
The Group’s interest-bearing financial instruments at variable rates as of December 31, 2020, 2021 and 2022
and June 30, 2023 are the cash at banks, and the cash flow interest risk arising from the change of market interest
rate on these balances of relatively short maturity is not considered significant. The Group’s majority interest-bearing
financial instruments at fixed interest rates as of December 31, 2020, 2021 and 2022 and June 30, 2023 are bank loans
and lease liabilities that are measured at amortized cost, and the change of market interest rate does not expose the
Group to significant interest risk.
Overall speaking, the Group’s exposure to interest rate risk is not significant.
APPENDIX I ACCOUNTANTS’ REPORT
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(d) Foreign exchange risk
As of December 31, 2020, 2021 and 2022, the Group is not exposed to significant foreign exchange risk since
the Group doesn’t have any financial assets or liabilities denominated in currencies other than the functional
currencies.
As of June 30, 2023, the Group is exposed to foreign exchange risk primarily from cash and cash equivalents
denominated in Hong Kong dollars (“HKD”) with amount of RMB4.6 million. The following table indicates the
instantaneous change in the Group’s profit before taxation that would arise if foreign exchange rates which the Group
has significant exposure at the end of each reporting period had changed at that date, assuming all other risk variables
remained constant.
Six months ended
June 30, 2023
RMB’000
5% appreciation of RMB
(Decrease)/increase in profit before taxation for the period (228)
5% depreciation of RMB
Increase/(decrease) in profit before taxation for the period 228
(e) Fair value measurement
The Group does not have any financial instruments measured at fair value as of December 31, 2020, 2021 and
2022 and June 30, 2023.
The carrying amounts of the Group’s financial instruments carried at cost or amortized cost are not materially
different from their fair values as of December 31, 2020, 2021 and 2022 and June 30, 2023.
26 RELATED PARTY TRANSACTIONS
The following significant transactions are carried out between the Group and its related parties during the
Track Record Period.
(a) Names and relationships with related parties
The following individuals/companies are significant related parties of the Group that had transactions and/or
balances with the Group during the Track Record Period.
Name of related parties Relationship
Mr. Bo Shijiu and Ms. Li Guiping Ultimate Controlling Shareholders of the Company
Changjiu Industrial (ʮ̡) Entity controlled by Ultimate Controlling
Shareholders
Jinjiu Y awei (Tianjin) Financial Leasing Co., Ltd
(۾(ݵ)ʮ̡)
Entity controlled by Ultimate Controlling
Shareholders
Derong International Finance Leasing Co., Ltd
(ʮ̡)
Entity controlled by Ultimate Controlling
Shareholders
Guangxi Changjiu V ehicle Investment Co., Ltd. and
its subsidiaries (ʮ̡)
Entities controlled by Ultimate Controlling
Shareholders
Lingdong Qiheng Data Technology (Beijing)
Co., Ltd (Ҧ(̏ԯ)ʮ̡)
Entity controlled by Ms. Li Guiping
Xunruida Technology (Beijing) Co., Ltd
(Ҧ(̏ԯ)ʮ̡)
Entity controlled by Ultimate Controlling
Shareholders
The official names of all entities above are in Chinese. The English names are for identification purpose only.
APPENDIX I ACCOUNTANTS’ REPORT
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(b) Key management personnel remuneration
Remuneration for key management personnel of the Group, including amounts paid to the Company’s directors
as disclosed in Note 8 and certain of the highest paid employees as disclosed in Note 9, is as follows:
Y ear ended December 31, Six months ended June 30,
2020 2021 2022 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(unaudited)
Salaries, allowances, and
benefits in kind 570 934 2,201 1,099 3,145
Discretionary bonuses 144 412 728 364 364
Retirement scheme
contributions 3 48 195 96 189
Share-based compensation
expenses –––– 5,053
Key management
personnel remuneration 717 1,394 3,124 1,559 8,751
Total remuneration are included in “staff costs” (see Note 6(b)).
(c) Related parties’ transactions
Y ear ended December 31,
Six months
ended June 30,
Note 2020 2021 2022 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(unaudited)
Technology service received from
related parties 4,603 222 18,647 5,952 –
Operation service received from
related parties 1,686 2,217 1,463 589 1,090
Automobile dealership operation
management service provided
to related parties – – 42,785 12,892 30,281
Pledged vehicle monitoring
service provided to related
parties i 1,729 9,342 39,033 21,601 19,240
Impairment losses – – 1,085 – –
Lease payment 1,942 2,453 4,205 – –
Purchase intangible asset from a
related party ii –––– 5,663
Net change of non-trade related
amounts due from related
parties 73,549 (8,490) (114,634) 24,717 (19,914)
Notes
(i): As the rights and obligations under some agreements with some counterparties of the Relevant Business
as described in Note 1 have not been transferred to the Group, then Changjiu Industrial entirely and
exclusively entrusted such required service under all the above mentioned outstanding agreements with
these counterparties to Changjiu Jinfu. Therefore, the related revenue was disclosed as related parties
transactions.
(ii): Such purchase is settled by offsetting the amount due from the related party.
APPENDIX I ACCOUNTANTS’ REPORT
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(d) Balance with Related parties:
As of December 31,
As of
June 30,
Note 2020 2021 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000
Amounts due from related
parties 148,546 143,673 33,378 20,515
– Trade related 15 243 3,860 8,199 15,250
– Non-trade related 16 148,303 139,813 25,179 5,265
Amounts due to related
parties 1,971 1,301 1,301 2,391
– Trade related 19, 20 1,971 1,301 1,301 2,391
Contract Liabilities – 6,723 5,732 4,031
– Trade related 4(a)(ii) – 6,723 5,732 4,031
The non-trade related amounts due from related parties as of June 30, 2023, which are non-interest bearing and
repayable on demand and was settled in November 2023.
(e) Guarantee provided by related party
As disclosed in Note 18, the bank loan of RMB50.0 million, RMB50.0 million and RMB75.0 million as of
December 31, 2020, 2021 and 2022, respectively, were guaranteed by Mr. Bo Shijiu, Ms. Li Guiping and Changjiu
Industrial. The guarantee was released in April 2023.
27 CAPITAL COMMITMENTS
As of June 30,
2023
RMB’000
Contracted but not provided for in the Historical Financial Information
Commitments in respect of
– development/acquisition of intangible assets 14,750
28 IMMEDIATE AND ULTIMATE CONTROLLING PARTY
As of June 30, 2023, the directors consider the immediate parent of the Company to be Advanced Limited,
which is incorporated in the British Virgin Islands, and the ultimate controlling parties of the Company to be Mr. Bo
Shijiu and Ms. Li Guiping.
29 POSSIBLE IMPACT OF AMENDMENTS, NEW STANDARDS AND INTERPRETATIONS ISSUED
BUT NOT YET EFFECTIVE FOR AN ANNUAL PERIOD BEGINNING ON JANUARY 1, 2023
Up to the date of issue of the Historical Financial Information, the IASB has issued a number of amendments,
new standards and interpretations which are not yet for an annual period beginning on January 1, 2023 and which
have not been adopted in the Historical Financial Information. These include the following:
Effective for
accounting
periods beginning
on or after
Amendments to IAS 1, Non-current Liabilities with Covenants 1 January 2024
Amendments to IAS 1, Classification Of Liabilities as Current or Non-current 1 January 2024
Amendments IFRS 16, Lease Liability a Sale and Leaseback 1 January 2024
Amendments to IAS 7, Statement of cash flows and IFRS 7, Financial instruments:
disclosures “Supplier finance arrangements”
1 January 2024
Amendments to IAS 21, Lack of Exchangeability 1 January 2025
Amendments to IFRS 10 and IAS 28, Sales and contribution of Assets between an
investor and its Associate or Joint V enture
To be determined
APPENDIX I ACCOUNTANTS’ REPORT
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The Group is in the process of making an assessment of what the impact of these amendments is expected to
be in the period of initial application. So far the Group has concluded that the adoption of them is unlikely to have
a significant impact on the Group’s results of operations and financial position.
30 SUBSEQUENT EVENTS
No significant subsequent events have occurred subsequent to June 30, 2023.
SUBSEQUENT FINANCIAL STATEMENTS
No audited financial statements have been prepared by the Company or any of its
subsidiaries comprising the Group in respect of any period subsequent to June 30, 2023.
APPENDIX I ACCOUNTANTS’ REPORT
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The information set out in this Appendix does not form part of the Accountants’ Report
from KPMG, Certified Public Accountants, Hong Kong, the reporting accountants of the
Company, as set out in Appendix I in this prospectus, and is included herein for illustrative
purposes only.
The unaudited pro forma financial information should be read in conjunction with the
section headed “Financial Information” in this prospectus and the Accountants’ Report set out
in Appendix I to this prospectus.
A. UNAUDITED PRO FORMA STATEMENT OF ADJUSTED NET TANGIBLE
ASSETS
The following unaudited pro forma statement of adjusted net tangible assets of the Group
is prepared in accordance with paragraph 4.29 of the Listing Rules and is set out below for the
purpose of illustrating the effect of the Global Offering on the consolidated net tangible assets
attributable to shareholders of the Company as if it had taken place on June 30, 2023. 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
financial position of our Group had the Global Offering been completed as of June 30, 2023
or at any future dates.
Consolidated net
tangible assets
attributable to
shareholders of
the Company as of
June 30, 2023
Estimated net
proceeds from
the Global
Offering
Unaudited
pro forma
adjusted net
tangible assets
attributable to
shareholders of
the Company
Unaudited pro forma
adjusted net tangible assets
attributable to shareholders
of the Company per Share
RMB’000 RMB’000 RMB’000 RMB HK$
(Note 1) (Note 2) (Note 3) (Note 4)
Based on an Offer Price
of HK$5.95 per Share 52,484 242,564 295,048 1.47 1.62
Based on an Offer Price
of HK$7.90 per Share 52,484 329,055 381,539 1.90 2.09
Notes:
1. The consolidated net tangible assets attributable to shareholders of the Company as of June 30, 2023 is
based on the total equity attributable to shareholders of the Company of RMB61,070,000 as of June 30,
2023, after deduction of intangible assets of RMB8,586,000, as shown in the Accountants’ Report as set
out in Appendix I to this prospectus.
APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION
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2. The estimated net proceeds from the Global Offering are based on the estimated Offer Prices of
HK$5.95 per Share or HK$7.90 per Share, being the lower end price and higher end price of the
indicative Offer Price range respectively, and the issuance of 50,540,000 Shares, after deduction of the
underwriting fees and related listing expenses paid or payable by the Group (excluding the listing
expenses charged to consolidated statements of profit or loss during the Track Record Period).
The estimated net proceeds from the Global Offering are converted into Renminbi at an exchange rate
of HK$1.00 to RMB0.90999 published by PBOC prevailing on December 20, 2023. No representation
is made that Hong Kong dollar amounts have been, could have been or may be converted to Renminbi,
or vice versa, at that rate or at any other rate or at all.
3. The unaudited pro forma adjusted net tangible assets attributable to shareholders of the Company per
Share is arrived at after adjustments as described in note (2), and on the basis that 200,540,000 Shares
were in issue (being 150,000,000 Shares in issue and outstanding as of June 30, 2023 and 50,540,000
Shares to be issued pursuant to the Global Offering), and does not take into account of: (i) the 1,620,000
restricted shares issued under the Pre-IPO Restricted Share Plan, which is accounted as treasury shares
as shown in Note 23 to the Accountants’ Report set out in Appendix I to this prospectus; and (ii) any
Shares which may be issued upon exercise of the options granted under the Pre-IPO Share Option Plan,
and any Shares that may be issued or bought back by the Company pursuant to the general mandates.
4. The unaudited pro forma adjusted net tangible assets attributable to shareholders of the Company per
Share is converted into Hong Kong dollars at an exchange rate of HK$1.00 to RMB0.90999 published
by PBOC prevailing on December 20, 2023. No representation is made that Renminbi amounts have
been, could have been or may be converted to Hong Kong dollars, or vice versa, at that rate or at any
other rate at all.
5. No adjustment has been made to reflect any trading results or other transactions of the Group subsequent
to June 30, 2023.
APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION
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B. REPORT ON THE UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following is the text of a report received from the reporting accountants, KPMG,
Certified Public Accountants, Hong Kong, in respect of the Group’ s pro forma financial
information for the purpose in this prospectus.
INDEPENDENT REPORTING ACCOUNTANTS’ ASSURANCE REPORT ON THE
COMPILATION OF PRO FORMA FINANCIAL INFORMATION
TO THE DIRECTORS OF CHANGJIU HOLDINGS LIMITED
We have completed our assurance engagement to report on the compilation of pro forma
financial information of Changjiu 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 net tangible assets as of June 30, 2023 and related notes as set out
in Part A of Appendix II to the prospectus dated December 29, 2023 (the “Prospectus”) issued
by the Company. The applicable criteria on the basis of which the Directors have compiled the
pro forma financial information are described in Part A of Appendix II to the Prospectus.
The pro forma financial information has been compiled by the Directors to illustrate the
impact of the proposed offering of the ordinary shares of the Company (the “Global Offering”)
on the Group’s financial position as of June 30, 2023 as if the Global Offering had taken place
at June 30, 2023. As part of this process, information about the Group’s financial position as
of June 30, 2023 has been extracted by the Directors from the Group’s historical financial
information included in the Accountants’ Report as set out in Appendix I to the Prospectus.
Directors’ Responsibilities for the Pro Forma Financial Information
The Directors are responsible for compiling the pro forma financial information in
accordance with paragraph 4.29 of the Rules Governing the Listing of Securities on The Stock
Exchange of Hong Kong Limited (the “Listing Rules”) and with reference to Accounting
Guideline 7 “Preparation of Pro Forma Financial Information for Inclusion in Investment
Circulars” (“AG 7”) issued by the Hong Kong Institute of Certified Public Accountants
(“HKICPA”).
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Our Independence and Quality Management
We have complied with the independence and other ethical requirements of the Code of
Ethics for Professional Accountants issued by the HKICPA, which is founded on fundamental
principles of integrity, objectivity, professional competence and due care, confidentiality and
professional behaviour.
The firm applies Hong Kong Standard on Quality Management 1 “Quality Management
for Firms that Perform Audits or Reviews of Financial Statements, or Other Assurance or
Related Services Engagements”, which requires the firm to design, implement and operate a
system of quality management including policies or procedures regarding compliance with
ethical requirements, professional standards and applicable legal and regulatory requirements.
Reporting Accountants’ Responsibilities
Our responsibility is to express an opinion, as required by paragraph 4.29(7) of the
Listing Rules on the pro forma financial information and to report our opinion to you. We do
not accept any responsibility for any reports previously given by us on any financial
information used in the compilation of the pro forma financial information beyond that owed
to those to whom those reports were addressed by us at the dates of their issue.
We conducted our engagement in accordance with Hong Kong Standard on Assurance
Engagements (“HKSAE”) 3420 “Assurance Engagements to Report on the Compilation of Pro
Forma Financial Information Included in a Prospectus” issued by the HKICPA. This standard
requires that the reporting accountants plan and perform procedures to obtain reasonable
assurance about whether the Directors have compiled the pro forma financial information in
accordance with paragraph 4.29 of the Listing Rules, and with reference to AG 7 issued by the
HKICPA.
For purpose of this engagement, we are not responsible for updating or reissuing any
reports or opinions on any historical financial information used in compiling the pro forma
financial information, nor have we, in the course of this engagement, performed an audit or
review of the financial information used in compiling the pro forma financial information.
The purpose of pro forma financial information included in an investment circular is
solely to illustrate the impact of a significant event or transaction on unadjusted financial
information of the Group as if the event had occurred or the transaction had been undertaken
at an earlier date selected for purposes of the illustration. Accordingly, we do not provide any
assurance that the actual outcome of events or transactions as of June 30, 2023 would have
been as presented.
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A reasonable assurance engagement to report on whether the pro forma financial
information has been properly compiled on the basis of the applicable criteria involves
performing procedures to assess whether the applicable criteria used by the Directors in the
compilation of the pro forma financial information provide a reasonable basis for presenting
the significant effects directly attributable to the event or transaction, and to obtain sufficient
appropriate evidence about whether:
 the related pro forma adjustments give appropriate effect to those criteria; and
 the pro forma financial information reflects the proper application of those
adjustments to the unadjusted financial information.
The procedures selected depend on the reporting accountants’ judgement, having regard
to the reporting accountants’ understanding of the nature of the Group, the event or transaction
in respect of which the pro forma financial information has been compiled, and other relevant
engagement circumstances.
The engagement also involves evaluating the overall presentation of the pro forma
financial information.
We believe that the evidence we have obtained is sufficient and appropriate to provide a
basis for our opinion.
Our procedures on the pro forma financial information have not been carried out in
accordance with attestation standards or other standards and practices generally accepted in the
United States of America, auditing standards of the Public Company Accounting Oversight
Board (United States) or any overseas standards and accordingly should not be relied upon as
if they had been carried out in accordance with those standards and practices.
We make no comments regarding the reasonableness of the amount of net proceeds from
the issuance of the Company’s shares, the application of those net proceeds, or whether such
use will actually take place as described in the section headed “Future Plans and Use of
Proceeds” in the Prospectus.
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Opinion
In our opinion:
(a) the pro forma financial information has been properly compiled on the basis stated;
(b) such basis is consistent with the accounting policies of the Group, and
(c) the adjustments are appropriate for the purposes of the pro forma financial
information as disclosed pursuant to paragraph 4.29(1) of the Listing Rules.
KPMG
Certified Public Accountants
Hong Kong
December 29, 2023
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Set out below is a summary of certain provisions of the Memorandum and Articles of
Association of the Company and of certain aspects of Cayman company law.
The Company was incorporated in the Cayman Islands as an exempted company with
limited liability on 16 June 2021 under the Companies Act (As Revised) of the Cayman Islands
(the “Companies Act”). The Company’s constitutional documents consist of its Memorandum
of Association (the “Memorandum”) and its Articles of Association (the “Articles”).
1. MEMORANDUM OF ASSOCIATION
(a) The Memorandum states, inter alia, that the liability of members of the Company is
limited to the amount, if any, for the time being unpaid on the shares respectively
held by them and that the objects for which the Company is established are
unrestricted (including acting as an investment company), and that the Company
shall have and be capable of exercising all the functions of a natural person of full
capacity irrespective of any question of corporate benefit, as provided in section
27(2) of the Companies Act and in view of the fact that the Company is an exempted
company that the Company will not trade in the Cayman Islands with any person,
firm or corporation except in furtherance of the business of the Company carried on
outside the Cayman Islands.
(b) The Company may by special resolution alter its Memorandum with respect to any
objects, powers or other matters specified therein.
2. ARTICLES OF ASSOCIATION
The Articles were conditionally adopted on December 11, 2023 with effect from the
Listing Date. The following is a summary of certain provisions of the Articles:
(a) Shares
(i) Classes of shares
The share capital of the Company consists of ordinary shares.
(ii) V ariation of rights of existing shares or classes of shares
Subject to the Companies Act, if at any time the share capital of the Company is
divided into different classes of shares, all or any of the special rights attached to the
shares or any class of shares may (unless otherwise provided for by the terms of issue of
that class) be varied, modified or abrogated either with the consent in writing of the
holders of not less than three-fourths in nominal value of the issued shares of that class
or with the sanction of a special resolution passed at a separate general meeting of the
holders of the shares of that class. To every such separate general meeting the provisions
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of the Articles relating to general meetings will mutatis mutandis apply, but so that the
necessary quorum (including at an adjourned meeting) shall be two persons holding or
representing by proxy not less than one-third in nominal value of the issued shares of that
class. Every holder of shares of the class shall be entitled to one vote for every such share
held by him.
Any special rights conferred upon the holders of any shares or class of shares shall
not, unless otherwise expressly provided in the rights attaching to the terms of issue of
such shares, be deemed to be varied by the creation or issue of further shares ranking pari
passu therewith.
(iii) Alteration of capital
The Company may by ordinary resolution of its members:
(i) increase its share capital by the creation of new shares;
(ii) consolidate all or any of its capital into shares of larger amount than its
existing shares;
(iii) divide its shares into several classes and attach to such shares any preferential,
deferred, qualified or special rights, privileges, conditions or restrictions as the
Company in general meeting or as the directors may determine;
(iv) subdivide its shares or any of them into shares of smaller amount than is fixed
by the Memorandum; or
(v) cancel any shares which, at the date of passing of the resolution, have not been
taken and diminish the amount of its capital by the amount of the shares so
cancelled.
The Company may reduce its share capital or any capital redemption reserve or other
undistributable reserve in any way by special resolution.
(iv) Transfer of shares
All transfers of shares may be effected by an instrument of transfer in the usual or
common form or in a form prescribed by The Stock Exchange of Hong Kong Limited (the
“Stock Exchange”) or in such other form as the board may approve and which may be
under hand or, if the transferor or transferee is a clearing house or its nominee(s), by hand
or by machine imprinted signature or by such other manner of execution as the board may
approve from time to time.
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Notwithstanding the foregoing, for so long as any shares are listed on the Stock
Exchange, titles to such listed shares may be evidenced and transferred in accordance
with the laws applicable to and the rules and regulations of the Stock Exchange that are
or shall be applicable to such listed shares. The register of members in respect of its listed
shares (whether the principal register or a branch register) may be kept by recording the
particulars required by Section 40 of the Companies Act in a form otherwise than legible
if such recording otherwise complies with the laws applicable to and the rules and
regulations of the Stock Exchange that are or shall be applicable to such listed shares.
The instrument of transfer shall be executed by or on behalf of the transferor and the
transferee provided that the board may dispense with the execution of the instrument of
transfer by the transferee. The transferor shall be deemed to remain the holder of the share
until the name of the transferee is entered in the register of members in respect of that
share.
The board may, in its absolute discretion, at any time transfer any share upon the
principal register to any branch register or any share on any branch register to the
principal register or any other branch register.
The board may decline to recognise any instrument of transfer unless a fee (not
exceeding the maximum sum as the Stock Exchange may determine to be payable)
determined by the Directors is paid to the Company, the instrument of transfer is properly
stamped (if applicable), it is in respect of only one class of share and is lodged at the
relevant registration office or registered office or such other place at which the principal
register is kept accompanied by the relevant Share certificate(s) and such other evidence
as the board may reasonably require to show the right of the transferor to 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 registration of transfers may be suspended and the register closed on giving
notice by advertisement in any newspaper or by any other means in accordance with the
requirements of the Stock Exchange, at such times and for such periods as the board may
determine. The register of members must not be closed for periods exceeding in the whole
thirty (30) days in any year. The period of thirty (30) days may be extended for a further
period or periods not exceeding thirty (30) days in respect of any year if approved by
members by ordinary resolution.
Subject to the above, fully paid shares are free from any restriction on transfer and
free of all liens in favour of the Company.
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(v) Power of the Company to purchase its own shares
The Company is empowered by the Companies Act and the Articles to purchase its
own shares subject to certain restrictions and the board may only exercise this power on
behalf of the Company subject to any applicable requirements imposed from time to time
by the Stock Exchange.
The board may accept the surrender for no consideration of any fully paid share.
(vi) Power of any subsidiary of the Company to own shares in the Company
There are no provisions in the Articles relating to ownership of shares in the
Company by a subsidiary.
(vii) Calls on shares and forfeiture of shares
The board may from time to time make such calls upon the members in respect of
any monies unpaid on the shares held by them respectively (whether on account of the
nominal value of the shares or by way of premium). A call may be made payable either
in one lump sum or by installments. If the sum payable in respect of any call or instalment
is not paid on or before the day appointed for payment thereof, the person or persons from
whom the sum is due shall pay interest on the same at such rate not exceeding twenty per
cent. (20%) per annum as the board may agree to accept from the day appointed for the
payment thereof to the time of actual payment, but the board may waive payment of such
interest wholly or in part. The board may, if it thinks fit, receive from any member willing
to advance the same, either in money or money’s worth, all or any part of the monies
uncalled and unpaid or installments payable upon any shares held by him, and upon all
or any of the monies so advanced the Company may pay interest at such rate (if any) as
the board may decide.
If a member fails to pay any call on the day appointed for payment thereof, the board
may serve not less than fourteen (14) clear days’ notice on him requiring payment of so
much of the call as is unpaid, together with any interest which may have accrued and
which may still accrue up to the date of actual payment and stating that, in the event of
non-payment at or before the time appointed, the shares in respect of which the call was
made will be liable to be forfeited.
If the requirements of any such notice are not complied with, any share in respect
of which the notice has been given may at any time thereafter, before the payment
required by the notice has been made, be forfeited by a resolution of the board to that
effect. Such forfeiture will include all dividends and bonuses declared in respect of the
forfeited share and not actually paid before the forfeiture.
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A person whose shares have been forfeited shall cease to be a member in respect of
the forfeited shares but shall, notwithstanding, remain liable to pay to the Company all
monies which, at the date of forfeiture, were payable by him to the Company in respect
of the shares, together with (if the board shall in its discretion so require) interest thereon
from the date of forfeiture until the date of actual payment at such rate not exceeding
twenty per cent. (20%) per annum as the board determines.
(b) Directors
(i) Appointment, retirement and removal
At each annual general meeting, one third of the Directors for the time being (or if
their number is not a multiple of three, then the number nearest to but not less than one
third) shall retire from office by rotation provided that every Director shall be subject to
retirement at an annual general meeting at least once every three years. The Directors to
retire by rotation shall include any Director who wishes to retire and not offer himself for
re-election. Any further Directors so to retire shall be those who have been longest in
office since their last re-election or appointment but as between persons who became or
were last re-elected Directors on the same day those to retire will (unless they otherwise
agree among themselves) be determined by lot.
Neither a Director nor an alternate Director is required to hold any shares in the
Company by way of qualification. Further, there are no provisions in the Articles relating
to retirement of Directors upon reaching any age limit.
The Directors have the power to appoint any person as a Director either to fill a
casual vacancy on the board or as an addition to the existing board. Any Director so
appointed shall hold office only until the first annual general meeting of the Company
after his appointment and shall then be eligible for re-election.
A Director (including a managing or other executive Director) may be removed by
an ordinary resolution of the Company before the expiration of his term of office (but
without prejudice to any claim which such Director may have for damages for any breach
of any contract between him and the Company) and members of the Company may by
ordinary resolution appoint another in his place. Unless otherwise determined by the
Company in general meeting, the number of Directors shall not be less than two. There
is no maximum number of Directors.
The office of director shall be vacated if:
(aa) he resigns by notice in writing delivered to the Company;
(bb) he becomes of unsound mind or dies;
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(cc) without special leave, he is absent from meetings of the board for six (6)
consecutive months, and the board resolves that his office is vacated;
(dd) he becomes bankrupt or has a receiving order made against him or suspends
payment or compounds with his creditors;
(ee) he is prohibited from being a director by law; or
(ff) he ceases to be a director by virtue of any provision of law or is removed from
office pursuant to the Articles.
The board may appoint one or more of its body to be managing director, joint
managing director, or deputy managing director or to hold any other employment or
executive office with the Company for such period and upon such terms as the board may
determine and the board may revoke or terminate any of such appointments. The board
may delegate any of its powers, authorities and discretions to committees consisting of
such Director or Directors and other persons as the board thinks fit, and it may from time
to time revoke such delegation or revoke the appointment of and discharge any such
committees either wholly or in part, and either as to persons or purposes, but every
committee so formed must, in the exercise of the powers, authorities and discretions so
delegated, conform to any regulations that may from time to time be imposed upon it by
the board.
(ii) Power to allot and issue shares and warrants
Subject to the provisions of the Companies Act and the Memorandum and Articles
and to any special rights conferred on the holders of any shares or class of shares, any
share may be issued (a) with or have attached thereto such rights, or such restrictions,
whether with regard to dividend, voting, return of capital, or otherwise, as the Directors
may determine, or (b) on terms that, at the option of the Company or the holder thereof,
it is liable to be redeemed.
The board may issue warrants or convertible securities or securities of similar nature
conferring the right upon the holders thereof to subscribe for any class of shares or
securities in the capital of the Company on such terms as it may determine.
Subject to the provisions of the Companies Act and the Articles and, where
applicable, the rules of the Stock Exchange and without prejudice to any special rights or
restrictions for the time being attached to any shares or any class of shares, all unissued
shares in the Company are at the disposal of the board, which may offer, allot, grant
options over or otherwise dispose of them to such persons, at such times, for such
consideration and on such terms and conditions as it in its absolute discretion thinks fit,
but so that no shares shall be issued at a discount to their nominal value.
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Neither the Company nor the board is obliged, when making or granting any
allotment of, offer of, option over or disposal of shares, to make, or make available, any
such allotment, offer, option or shares to members or others with registered addresses in
any particular territory or territories being a territory or territories where, in the absence
of a registration statement or other special formalities, this would or might, in the opinion
of the board, be unlawful or impracticable. Members affected as a result of the foregoing
sentence shall not be, or be deemed to be, a separate class of members for any purpose
whatsoever.
(iii) Power to dispose of the assets of the Company or any of its subsidiaries
There are no specific provisions in the Articles relating to the disposal of the assets
of the Company or any of its subsidiaries. The Directors may, however, exercise all
powers and do all acts and things which may be exercised or done or approved by the
Company and which are not required by the Articles or the Companies Act to be exercised
or done by the Company in general meeting.
(iv) Borrowing powers
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 assets and uncalled
capital of the Company and, subject to the Companies Act, to issue debentures, bonds and
other securities of the Company, whether outright or as collateral security for any debt,
liability or obligation of the Company or of any third party.
(v) Remuneration
The ordinary remuneration of the Directors is to be determined by the Company in
general meeting, such sum (unless otherwise directed by the resolution by which it is
voted) to be divided amongst the Directors in such proportions and in such manner as the
board may agree or, failing agreement, equally, except that any Director holding office for
part only of the period in respect of which the remuneration is payable shall only rank in
such division in proportion to the time during such period for which he held office. The
Directors are also entitled to be prepaid or repaid all travelling, hotel and incidental
expenses reasonably expected to be incurred or incurred by them in attending any board
meetings, committee meetings or general meetings or separate meetings of any class of
shares or of debentures of the Company or otherwise in connection with the discharge of
their duties as Directors.
Any Director who, by request, goes or resides abroad for any purpose of the
Company or who performs services which in the opinion of the board go beyond the
ordinary duties of a Director may be paid such extra remuneration as the board may
determine and such extra remuneration shall be in addition to or in substitution for any
ordinary remuneration as a Director. An executive Director appointed to be a managing
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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 may be either in addition to or in lieu of his
remuneration as a Director.
The board may establish or concur or join with other companies (being subsidiary
companies of the Company or companies with which it is associated in business) in
establishing and making contributions out of the Company’s monies to any schemes or
funds for providing pensions, sickness or compassionate allowances, life assurance or
other benefits for employees (which expression as used in this and the following
paragraph shall include any Director or past Director who may hold or have held any
executive office or any office of profit with the Company or any of its subsidiaries) and
ex-employees of the Company and their dependents or any class or classes of such
persons.
The board may pay, enter into agreements to pay or make grants of revocable or
irrevocable, and either subject or not subject to any terms or conditions, pensions or other
benefits to employees and ex-employees and their dependents, or to any of such persons,
including pensions or benefits additional to those, if any, to which such employees or
ex-employees or their dependents are or may become entitled under any such scheme or
fund as is mentioned in the previous paragraph. Any such pension or benefit may, as the
board considers desirable, be granted to an employee either before and in anticipation of,
or upon or at any time after, his actual retirement.
The board may resolve to capitalise all or any part of any amount for the time being
standing to the credit of any reserve or fund (including a share premium account and the
profit and loss account) whether or not the same is available for distribution by applying
such sum in paying up unissued shares to be allotted to (i) employees (including directors)
of the Company and/or its affiliates (meaning any individual, corporation, partnership,
association, joint-stock company, trust, unincorporated association or other entity (other
than the Company) that directly, or indirectly through one or more intermediaries,
controls, is controlled by or is under common control with, the Company) upon exercise
or vesting of any options or awards granted under any share incentive scheme or
employee benefit scheme or other arrangement which relates to such persons that has
been adopted or approved by the members in general meeting, or (ii) any trustee of any
trust to whom shares are to be allotted and issued by the Company in connection with the
operation of any share incentive scheme or employee benefit scheme or other
arrangement which relates to such persons that has been adopted or approved by the
members in general meeting.
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(vi) Compensation or payments for loss of office
Pursuant to the Articles, payments to any Director or past Director of any sum by
way of compensation for loss of office or as consideration for or in connection with his
retirement from office (not being a payment to which the Director is contractually
entitled) must be approved by the Company in general meeting.
(vii) Loans and provision of security for loans to Directors
The Company must not make any loan, directly or indirectly, to a Director or his
close associate(s) if and to the extent it would be prohibited by the Companies Ordinance
(Chapter 622 of the laws of Hong Kong) as if the Company were a company incorporated
in Hong Kong.
(viii) Disclosure of interests in contracts with the Company or any of its subsidiaries
A Director may hold any other office or place of profit with the Company (except
that of the auditor of the Company) in conjunction with his office of Director for such
period and upon such terms as the board may determine, and may be paid such extra
remuneration therefor in addition to any remuneration provided for by or pursuant to the
Articles. A Director may be or become a director or other officer of, or otherwise
interested in, any company promoted by the Company or any other company in which the
Company may be interested, and shall not be liable to account to the Company or the
members for any remuneration, profits or other benefits received by him as a director,
officer or member of, or from his interest in, such 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 thereof in favour of any resolution appointing the Directors or any of them to be
directors or officers of such other company, or voting or providing for the payment of
remuneration to the directors or officers of such other company.
No Director or proposed or intended Director shall be disqualified by his office from
contracting with the Company, either with regard to his tenure of any office or place of
profit or as vendor, purchaser or in any other manner whatsoever, nor shall any such
contract or any other contract or arrangement in which any Director is in any way
interested be liable to be avoided, nor shall any Director so contracting or being so
interested be liable to account to the Company or the members for any remuneration,
profit or other benefits realised by any such contract or arrangement by reason of such
Director holding that office or the fiduciary relationship thereby established. A Director
who to his knowledge is in any way, whether directly or indirectly, interested in a contract
or arrangement or proposed contract or arrangement with the Company must declare the
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nature of his interest at the meeting of the board at which the question of entering into
the contract or arrangement is first taken into consideration, if he knows his interest then
exists, or in any other case, at the first meeting of the board after he knows that he is or
has become so interested.
A Director shall not vote (nor be counted in the quorum) on any resolution of the
board approving any contract or arrangement or other proposal in which he or any of his
close associates is materially interested, but this prohibition does not apply to any of the
following matters, namely:
(aa) the giving of any security or indemnity either:-
(aaa) to the Director or his close associate(s) in respect of money lent or
obligations incurred or undertaken by him or any of them at the request
of or for the benefit of the Company or any of its subsidiaries; or
(bbb) to a third party in respect of a debt or obligation of the Company or any
of its subsidiaries for which the Director or his close associate(s) has
himself/themselves assumed responsibility in whole or in part and
whether alone or jointly under a guarantee or indemnity or by the giving
of security;
(bb) any proposal concerning an offer of shares or 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;
(cc) any proposal or arrangement concerning the benefit of employees of the
Company or its subsidiaries including:-
(aaa) the adoption, modification or operation of any employees’ share scheme
or any share incentive or share option scheme under which the Director
or his close associate(s) may benefit; or
(bbb) the adoption, modification or operation of a pension fund or retirement,
death or disability benefits scheme which relates to the Directors, his
close associate(s) and employee(s) of the Company or any of its
subsidiaries and does not provide in respect of any Director, or his close
associate(s), as such any privilege or advantage not generally accorded to
the class of persons to which such scheme or fund relates;
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(dd) any contract or arrangement in which the Director or his close associate(s)
is/are interested in the same manner as other holders of shares or debentures or
other securities of the Company by virtue only of his/their interest in shares or
debentures or other securities of the Company.
(c) Proceedings of the Board
The board may meet for the despatch of business, adjourn and otherwise regulate its
meetings as it considers appropriate. Questions arising at any meeting shall be determined by
a majority of votes. In the case of an equality of votes, the chairman of the meeting shall have
an additional or casting vote.
(d) Alterations to constitutional documents and the Company’s name
The Articles may be rescinded, altered or amended by the Company in general meeting
by special resolution. The Articles state that a special resolution shall be required to alter the
provisions of the Memorandum, to amend the Articles or to change the name of the Company.
(e) Meetings of members
(i) Special and ordinary resolutions
A special resolution of the Company must be passed by a majority of not less than
three-fourths of the votes cast by such members as, being entitled so to do, vote in person
or, in the case of such members as are corporations, by their duly authorised
representatives or, where proxies are allowed, by proxy at a general meeting of which
notice has been duly given in accordance with the Articles.
Under the Companies Act, a copy of any special resolution must be forwarded to the
Registrar of Companies in the Cayman Islands within fifteen (15) days of being passed.
An ordinary resolution is defined in the Articles to mean a resolution passed by a
simple majority of the votes of such members of the Company as, being entitled to do so,
vote in person or, in the case of corporations, by their duly authorised representatives or,
where proxies are allowed, by proxy at a general meeting of which notice has been duly
given in accordance with the Articles.
(ii) V oting rights and right to demand a poll
Subject to any special rights or restrictions as to voting for the time being attached
to any shares, at any general meeting on a poll every member present in person or by
proxy or, in the case of a member being a corporation, by its duly authorised
representative shall have one vote for every fully paid share of which he is the holder but
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so that no amount paid up or credited as paid up on a share in advance of calls or
installments is treated for the foregoing purposes as paid up on the share. A member
entitled to more than one vote need not use all his votes or cast all the votes he uses in
the same way.
At any general meeting a resolution put to the vote of the meeting is to be decided
by way of a poll save that the chairman of the meeting may in good faith, allow a
resolution which relates purely to a procedural or administrative matter to be voted on by
a show of hands in which case every member present in person (or being a corporation,
is present by a duly authorized representative), or by proxy(ies) shall have one vote
provided that 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. V otes
(whether on a show of hands or by way of poll) may be cast by such means, electronic
or otherwise, as the Directors or the chairman of the meeting may determine.
Any corporation which is a member may by resolution of its directors or other
governing body authorise such person as it thinks fit to act as its representative at any
general meeting of the Company or at any meeting of any class of members.
The person so authorised shall be entitled to exercise the same powers on behalf of
such corporation as the corporation could exercise if it were an individual member and
such corporation shall for the purposes of the Articles be deemed to be present in person
at any such meeting if a person so authorised is present thereat.
If a recognised clearing house (or its nominee(s)) is a member of the Company it
may authorise such person or persons as it thinks fit to act as its representative(s) at any
meeting of the Company or at any meeting of any class of members of the Company
provided that, if more than one person is so authorised, the authorisation shall specify the
number and class of shares in respect of which each such person is so authorised. A
person authorised pursuant to this provision shall be deemed to have been duly authorised
without further evidence of the facts and be entitled to exercise the same powers on behalf
of the recognised clearing house (or its nominee(s)) as if such person was the registered
holder of the shares of the Company held by that clearing house (or its nominee(s))
including, the right to speak and to vote, and where a show of hands is allowed, the right
to vote individually on a show of hands.
All members have the right to speak and vote at a general meeting except where a
member is required, by the rules of the Stock Exchange, to abstain from voting to approve
the matter under consideration.
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Where the Company has any knowledge that any member is, under the rules of the
Stock Exchange, required to abstain from voting on any particular resolution of the
Company or restricted to voting only for or only against any particular resolution of the
Company, any votes cast by or on behalf of such member in contravention of such
requirement or restriction shall not be counted.
(iii) Annual general meetings and extraordinary general meetings
The Company must hold an annual general meeting of the Company for each
financial year and such general meeting must be held within six (6) months after the end
of the Company’s financial year unless a longer period would not infringe the rules of the
Stock Exchange.
Extraordinary general meetings may be convened on the requisition of one or more
members holding, at the date of deposit of the requisition, not less than one-tenth of the
paid up capital of the Company having the right of voting at general meetings, on a one
vote per share basis. Such requisition shall be made in writing to the board or the
secretary for the purpose of requiring an extraordinary general meeting to be called by the
board for the transaction of any business or resolution specified in such requisition. Such
meeting shall be held within 2 months after the deposit of such requisition. If within 21
days of such deposit, the board fails to proceed to convene such meeting, the
requisitionist(s) himself/herself (themselves) may do so in the same manner, and all
reasonable expenses incurred by the requisitionist(s) as a result of the failure of the board
shall be reimbursed to the requisitionist(s) by the Company.
Notwithstanding any provisions in the Articles, any general meeting or any class
meeting may be held by means of such telephone, electronic or other communication
facilities as to permit all persons participating in the meeting to communicate with each
other, and participation in such a meeting shall constitute presence at such meeting.
(iv) Notices of meetings and business to be conducted
An annual general meeting must be called by notice of not less than twenty-one (21)
clear days. All other general meetings must be called by notice of at least fourteen (14)
clear days. The notice is exclusive of the day on which it is served or deemed to be served
and of the day for which it is given, and must specify the time and place of the meeting
and particulars of resolutions to be considered at the meeting and, in the case of special
business, the general nature of that business.
In addition, notice of every general meeting must be given to all members of the
Company other than to such members as, under the provisions of the Articles or the terms
of issue of the shares they hold, are not entitled to receive such notices from the Company,
and also to, among others, the auditors for the time being of the Company.
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Any notice to be given to or by any person pursuant to the Articles may be served
on or delivered to any member of the Company personally, by post to such member’s
registered address or by advertisement in newspapers in accordance with the requirements
of the Stock Exchange. Subject to compliance with Cayman Islands law and the rules of
the Stock Exchange, notice may also be served or delivered by the Company to any
member by electronic means.
All business that is transacted at an extraordinary general meeting and at an annual
general meeting is deemed special, save that in the case of an annual general meeting,
each of the following business is deemed an ordinary business:
(aa) the declaration and sanctioning of dividends;
(bb) the consideration and adoption of the accounts and balance sheet and the
reports of the directors and the auditors;
(cc) the election of directors in place of those retiring;
(dd) the appointment of auditors and other officers; and
(ee) the fixing of the remuneration of the directors and of the auditors.
(v) Quorum for meetings and separate class meetings
No business shall be transacted at any general meeting unless a quorum is present
when the meeting proceeds to business, but the absence of a quorum shall not preclude
the appointment of a chairman.
The quorum for a general meeting shall be two members present in person (or, in the
case of a member being a corporation, by its duly authorised representative) or by proxy
or, for quorum purposes only, two persons appointed by the clearing house as authorized
representative or proxy, and entitled to vote. In respect of a separate class meeting
(including an adjourned meeting) convened to sanction the modification of class rights
the necessary quorum shall be two persons holding or representing by proxy not less than
one-third in nominal value of the issued shares of that class.
(vi) Proxies
Any member of the Company entitled to attend and vote at a meeting of the
Company is entitled to appoint another person as his proxy to attend and vote instead of
him. A member who is the holder of two or more shares may appoint more than one proxy
to represent him and vote on his behalf at a general meeting of the Company or at a class
meeting. A proxy need not be a member of the Company and is entitled to exercise the
same powers on behalf of a member who is an individual and for whom he acts as proxy
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as such member could exercise. In addition, a proxy is entitled to exercise the same
powers on behalf of a member which is a corporation and for which he acts as proxy as
such member could exercise as if it were an individual member. V otes may be given either
personally (or, in the case of a member being a corporation, by its duly authorised
representative) or by proxy.
(f) Accounts and audit
The board shall cause true accounts to be kept of the sums of money received and
expended by the Company, and the matters in respect of which such receipt and expenditure
take place, and of the property, assets, credits and liabilities of the Company and of all other
matters required by the Companies Act or necessary to give a true and fair view of the
Company’s affairs and to explain its transactions.
The accounting records must be kept at the registered office or at such other place or
places as the board decides and shall always be open to inspection by any Director. No member
(other than a Director) shall have any right to inspect any accounting record or book or
document of the Company except as conferred by law or authorised by the board or the
Company in general meeting. However, an exempted company must make available at its
registered office in electronic form or any other medium, copies of its books of account or parts
thereof as may be required of it upon service of an order or notice by the Tax Information
Authority pursuant to the Tax Information Authority Act of the Cayman Islands.
A copy of every balance sheet and profit and loss account (including every document
required by law to be annexed thereto) which is to be laid before the Company at its general
meeting, together with a printed copy of the Directors’ report and a copy of the auditors’ report,
shall not less than twenty-one (21) days before the date of the meeting and at the same time
as the notice of annual general meeting be sent to every person entitled to receive notices of
general meetings of the Company under the provisions of the Articles; however, subject to
compliance with all applicable laws, including the rules of the Stock Exchange, the Company
may send to such persons summarised financial statements derived from the Company’s annual
accounts and the directors’ report instead provided that any such person may by notice in
writing served on the Company, demand that the Company sends to him, in addition to
summarised financial statements, a complete printed copy of the Company’s annual financial
statement and the directors’ report thereon.
At the annual general meeting or at a subsequent extraordinary general meeting in each
year, the members shall by ordinary resolution appoint an auditor to audit the accounts of the
Company and such auditor shall hold office until the next annual general meeting. Moreover,
the members may, at any general meeting, by ordinary resolution remove the auditor at any
time before the expiration of his terms of office and shall by ordinary resolution at that meeting
appoint another auditor for the remainder of his term. The remuneration of the auditors shall
be fixed and approved by the Company by an ordinary resolution passed at a general meeting
or in such manner as the members may by ordinary resolution determine.
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The financial statements of the Company shall be audited by the auditor in accordance
with generally accepted auditing standards which may be those of a country or jurisdiction
other than the Cayman Islands. The auditor shall make a written report thereon in accordance
with generally accepted auditing standards and the report of the auditor must be submitted to
the members in general meeting.
(g) Dividends and other methods of distribution
The Company in general meeting may declare dividends in any currency to be paid to the
members but no dividend shall be declared in excess of the amount recommended by the board.
The Articles provide dividends may be declared and paid out of the profits of the
Company, realised or unrealised, or from any reserve set aside from profits which the directors
determine is no longer needed. With the sanction of an ordinary resolution dividends may also
be declared and paid out of share premium account or any other fund or account which can be
authorised for this purpose in accordance with the Companies Act.
Except in so far as the rights attaching to, or the terms of issue of, any share may
otherwise provide, (i) all dividends shall be declared and paid according to the amounts paid
up on the shares in respect whereof the dividend is paid but no amount paid up on a share in
advance of calls shall for this purpose be treated as paid up on the share and (ii) all dividends
shall be apportioned and paid pro rata according to the amount paid up on the shares during
any portion or portions of the period in respect of which the dividend is paid. The Directors
may deduct from any dividend or other monies payable to any member or in respect of any
shares all sums of money (if any) presently payable by him to the Company on account of calls
or otherwise.
Whenever the board or the Company in general meeting has resolved that a dividend be
paid or declared on the share capital of the Company, the board may further resolve either (a)
that such 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 thereto will be entitled to elect to receive
such dividend (or part thereof) in cash in lieu of such allotment, or (b) that 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.
The Company may also upon the recommendation of the board by an ordinary resolution
resolve in respect of any one particular dividend of the Company that it may be satisfied wholly
in the form of an allotment of shares credited as fully paid up without offering any right to
members to elect to receive such dividend in cash in lieu of such allotment.
Any dividend, interest or other sum payable in cash to the holder of shares may be paid
by cheque or warrant sent through the post addressed to the holder at his registered address,
or in the case of joint holders, addressed to the holder whose name stands first in the register
of the Company in respect of the shares at his address as appearing in the register or addressed
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to such person and at such addresses as the holder or joint holders may in writing direct. Every
such cheque or warrant shall, unless the holder or joint holders otherwise direct, be made
payable to the order of the holder or, in the case of joint holders, to the order of the holder
whose name stands first on the register in respect of such shares, and shall be sent at his or their
risk and payment of the cheque or warrant by the bank on which it is drawn shall constitute
a good discharge to the Company. Any one of two or more joint holders may give effectual
receipts for any dividends or other moneys payable or property distributable in respect of the
shares held by such joint holders.
Whenever the board or the Company in general meeting has resolved that a dividend be
paid or declared the board may further resolve that such dividend be satisfied wholly or in part
by the distribution of specific assets of any kind.
All dividends or bonuses unclaimed for one year after having been declared may be
invested or otherwise made use of by the board for the benefit of the Company until claimed
and the Company shall not be constituted a trustee in respect thereof. All dividends or bonuses
unclaimed for six years after having been declared may be forfeited by the board and shall
revert to the Company.
No dividend or other monies payable by the Company on or in respect of any share shall
bear interest against the Company.
(h) Inspection of corporate records
Pursuant to the Articles, the register and branch register of members maintained in Hong
Kong shall be open to inspection for at least two (2) hours during business hours by members
without charge, or by any other person upon a maximum payment of HK$2.50 or such lesser
sum specified by the board, at the registered office or such other place at which the register is
kept in accordance with the Companies Act or, upon a maximum payment of HK$1.00 or such
lesser sum specified by the board, at the office where the branch register of members is kept,
unless the register is closed in accordance with the Articles.
(i) Rights of minorities in relation to fraud or oppression
There are no provisions in the Articles relating to rights of minority shareholders in
relation to fraud or oppression. However, certain remedies are available to members of the
Company under Cayman Islands law, as summarised in paragraph 3(f) of this Appendix.
(j) Procedures on liquidation
Unless otherwise provided by the Companies Act, a resolution that the Company be
wound up by the court or be wound up voluntarily shall be a special resolution.
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Subject to any special rights, privileges or restrictions as to the distribution of available
surplus assets on liquidation for the time being attached to any class or classes of shares:
(i) if the Company is wound up and the assets available for distribution amongst the
members of the Company shall be more than sufficient to repay the whole of the
capital paid up at the commencement of the winding up, the excess shall be
distributed pari passu amongst such members in proportion to the amount paid up
on the shares held by them respectively; and
(ii) if the Company is wound up and the assets available for distribution amongst the
members as such shall be insufficient to repay the whole of the paid-up capital, such
assets shall be distributed so that, as nearly as may be, the losses shall be borne by
the members in proportion to the capital paid up, or which ought to have been paid
up, at the commencement of the winding up on the shares held by them respectively.
If the Company is wound up (whether the liquidation is voluntary or by the court) the
liquidator may, with the authority of a special resolution and any other sanction required by the
Companies Act divide among the members in specie or kind the whole or any part of the assets
of the Company whether the assets shall consist of property of one kind or shall consist of
properties of 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 divided as aforesaid and may
determine how such division shall be carried out as between the members or different classes
of members. The liquidator may, with the like authority, vest any part of the assets in trustees
upon such trusts for the benefit of members as the liquidator, with the like authority, shall think
fit, but so that no contributory shall be compelled to accept any shares or other property in
respect of which there is a liability.
(k) Subscription rights reserve
The Articles provide that to the extent that it is not prohibited by and is in compliance
with the Companies Act, if warrants to subscribe for shares have been issued by the Company
and the Company does any act or engages in any transaction which would result in the
subscription price of such warrants being reduced below the par value of a share, a subscription
rights reserve shall be established and applied in paying up the difference between the
subscription price and the par value of a share on any exercise of the warrants.
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3. CAYMAN ISLANDS COMPANY LA W
The Company is incorporated in the Cayman Islands subject to the Companies Act and,
therefore, operates subject to Cayman Islands law. Set out below is a summary of certain
provisions of Cayman company law, although this does not purport to contain all applicable
qualifications and exceptions or to be a complete review of all matters of Cayman company law
and taxation, which may differ from equivalent provisions in jurisdictions with which
interested parties may be more familiar:
(a) Company operations
As an exempted company, the Company’s operations must be conducted mainly outside
the Cayman Islands. The Company is required to file an annual return each year with the
Registrar of Companies of the Cayman Islands and pay a fee which is based on the amount of
its authorised share capital.
(b) Share capital
The Companies Act provides that where a company issues shares at a premium, whether
for cash or otherwise, a sum equal to the aggregate amount of the value of the premiums on
those shares shall be transferred to an account, to be called the “share premium account”. At
the option of a company, these provisions may not apply to premiums on shares of that
company allotted pursuant to any arrangement in consideration of the acquisition or
cancellation of shares in any other company and issued at a premium.
The Companies Act provides that the share premium account may be applied by the
company subject to the provisions, if any, of its memorandum and articles of association in (a)
paying distributions or dividends to members; (b) paying up unissued shares of the company
to be issued to members as fully paid bonus shares; (c) the redemption and repurchase of shares
(subject to the provisions of section 37 of the Companies Act); (d) writing-off the 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.
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.
The Companies Act provides that, subject to confirmation by the Grand Court of the
Cayman Islands (the “ Court ”), a company limited by shares or a company limited by guarantee
and having a share capital may, if so authorised by its articles of association, by special
resolution reduce its share capital in any way.
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(c) Financial assistance to purchase shares of a company or its holding company
There is no statutory restriction in the Cayman Islands on the provision of financial
assistance by a company to another person for the purchase of, or subscription for, its own or
its holding company’s shares. Accordingly, a company may provide financial assistance if the
directors of the company consider, in discharging their duties of care and acting in good faith,
for a proper purpose and in the interests of the company, that such assistance can properly be
given. Such assistance should be on an arm’s-length basis.
(d) Purchase of shares and warrants by a company and its subsidiaries
A company limited by shares or a company limited by guarantee and having a share
capital may, if so authorised by its articles of association, issue shares which are to be
redeemed or are liable to be redeemed at the option of the company or a shareholder and the
Companies Act expressly provides that it shall be lawful for the rights attaching to any shares
to be varied, subject to the provisions of the company’s articles of association, so as to provide
that such shares are to be or are liable to be so redeemed. In addition, such a company may,
if authorised to do so by its articles of association, purchase its own shares, including any
redeemable shares. However, if the articles of association do not authorise the manner and
terms of purchase, a company cannot purchase any of its own shares unless the manner and
terms of purchase have first been authorised by an ordinary resolution of the company. At no
time may a company redeem or purchase its shares unless they are fully paid. A company may
not redeem or purchase any of its shares if, as a result of the redemption or purchase, there
would no longer be any issued shares of the company other than shares held as treasury shares.
A payment out of capital by a company for the redemption or purchase of its own shares is not
lawful unless immediately following the date on which the payment is proposed to be made,
the company shall be able to pay its debts as they fall due in the ordinary course of business.
Shares purchased by a company is to be treated as cancelled unless, subject to the
memorandum and articles of association of the company, the directors of the company resolve
to hold such shares in the name of the company as treasury shares prior to the purchase. Where
shares of a company are held as treasury shares, the company shall be entered in the register
of members as holding those shares, however, notwithstanding the foregoing, the company is
not to be treated as a member for any purpose and must not exercise any right in respect of the
treasury shares, and any purported exercise of such a right shall be void, and a treasury share
must not be voted, directly or indirectly, at any meeting of the company and must not be
counted in determining the total number of issued shares at any given time, whether for the
purposes of the company’s articles of association or the Companies Act.
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A company is not prohibited from purchasing and may purchase its own warrants subject
to and in accordance with the terms and conditions of the relevant warrant instrument or
certificate. There is no requirement under Cayman Islands law that a company’s memorandum
or articles of association contain a specific provision enabling such purchases and the directors
of a company may rely upon the general power contained in its memorandum of association to
buy and sell and deal in personal property of all kinds.
Under Cayman Islands law, a subsidiary may hold shares in its holding company and, in
certain circumstances, may acquire such shares.
(e) Dividends and distributions
The Companies Act permits, subject to a solvency test and the provisions, if any, of the
company’s memorandum and articles of association, the payment of dividends and
distributions out of the share premium account. With the exception of the foregoing, there are
no statutory provisions relating to the payment of dividends. Based upon English case law,
which is regarded as persuasive in the Cayman Islands, dividends may be paid only out of
profits.
No dividend may be declared or paid, and no other distribution (whether in cash or
otherwise) of the company’s assets (including any distribution of assets to members on a
winding up) may be made to the company, in respect of a treasury share.
(f) Protection of minorities and shareholders’ suits
The Courts ordinarily would be expected to follow English case law precedents which
permit a minority shareholder to commence a representative action against or derivative
actions in the name of the company to challenge (a) an act which is ultra vires the company
or illegal, (b) an act which constitutes a fraud against the minority and the wrongdoers are
themselves in control of the company, and (c) an irregularity in the passing of a resolution
which requires a qualified (or special) majority.
In the case of a company (not being a bank) having a share capital divided into shares,
the Court may, on the application of members holding not less than one fifth of the shares of
the company in issue, appoint an inspector to examine into the affairs of the company and to
report thereon in such manner as the Court shall direct.
Any shareholder of a company may petition the Court which may make a winding up
order if the Court is of the opinion that it is just and equitable that the company should be
wound up or, as an alternative to a winding up order, (a) an order regulating the conduct of the
company’s affairs in the future, (b) an order requiring the company to refrain from doing or
continuing an act complained of by the shareholder petitioner or to do an act which the
shareholder petitioner has complained it has omitted to do, (c) an order authorising civil
proceedings to be brought in the name and on behalf of the company by the shareholder
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petitioner on such terms as the Court may direct, or (d) an order providing for the purchase of
the shares of any shareholders of the company by other shareholders or by the company itself
and, in the case of a purchase by the company itself, a reduction of the company’s capital
accordingly.
Generally claims against a company by its shareholders must be based on the general laws
of contract or tort applicable in the Cayman Islands or their individual rights as shareholders
as established by the company’s memorandum and articles of association.
(g) Disposal of assets
The Companies Act contains no specific restrictions on the power of directors to dispose
of assets of a company. However, as a matter of general law, every officer of a company, which
includes a director, managing director and secretary, in exercising his powers and discharging
his duties must do so honestly and in good faith with a view to the best interests of the company
and exercise the care, diligence and skill that a reasonably prudent person would exercise in
comparable circumstances.
(h) Accounting and auditing requirements
A company must cause proper books of account to be kept with respect to (i) all sums of
money received and expended by the company and the matters in respect of which the receipt
and expenditure takes place; (ii) all sales and purchases of goods by the company; and (iii) the
assets and liabilities of the company.
Proper books of account shall not be deemed to be kept if there are not kept such books
as are necessary to give a true and fair view of the state of the company’s affairs and to explain
its transactions.
An exempted company must make available at its registered office in electronic form or
any other medium, copies of its books of account or parts thereof as may be required of it upon
service of an order or notice by the Tax Information Authority pursuant to the Tax Information
Authority Act of the Cayman Islands.
(i) Exchange control
There are no exchange control regulations or currency restrictions in the Cayman Islands.
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(j) 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 executed in or brought within the jurisdiction of the
Cayman Islands. The Cayman Islands are a party to a double tax treaty entered into with the
United Kingdom in 2010 but otherwise is not party to any double tax treaties.
(k) Stamp duty on transfers
No stamp duty is payable in the Cayman Islands on transfers of shares of Cayman Islands
companies except those which hold interests in land in the Cayman Islands.
(l) Loans to directors
There is no express provision in the Companies Act prohibiting the making of loans by
a company to any of its directors.
(m) Inspection of corporate records
The notice of registered office is a matter of public record. A list of the names of the
current directors and alternate directors (if applicable) is made available by the Registrar of
Companies of the Cayman Islands for inspection by any person on payment of a fee. The
register of mortgages is open to inspection by creditors and members.
Members of the Company have no general right under the Companies Act to inspect or
obtain copies of the register of members or corporate records of the Company. They will,
however, have such rights as may be set out in the Company’s Articles.
(n) Register of members
An exempted company may maintain its principal register of members and any branch
registers at such locations, whether within or without the Cayman Islands, as the directors may,
from time to time, think fit. The register of members shall contain such particulars as required
by Section 40 of the Companies Act. A branch register must be kept in the same manner in
which a principal register is by the Companies Act required or permitted to be kept. The
company shall cause to be kept at the place where the company’s principal register is kept a
duplicate of any branch register duly entered up from time to time.
APPENDIX III SUMMARY OF THE CONSTITUTION OF THE COMPANY
AND CAYMAN ISLANDS COMPANY LA W
– III-23 –


--- page 470 ---
There is no requirement under the Companies Act for an exempted company to make any
returns of members to the Registrar of Companies of the Cayman Islands. The names and
addresses of the members are, accordingly, not a matter of public record and are not available
for public 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 members, as may be required of it upon service of an order or notice by the Tax
Information Authority pursuant to the Tax Information Authority Act of the Cayman Islands.
(o) Register of Directors and Officers
The Company is required to maintain at its registered office a register of directors and
officers which is not available for inspection by the public. A copy of such register must be
filed with the Registrar of Companies in the Cayman Islands and any change must be notified
to the Registrar of Companies of the Cayman Islands within thirty (30) days of any change in
such directors or officers.
(p) Beneficial Ownership Register
An exempted company is required to maintain a beneficial ownership register at its
registered office that records details of the persons who ultimately own or control, directly or
indirectly, 25% or more of the equity interests or voting rights of the company or have rights
to appoint or remove a majority of the directors of the company. The beneficial ownership
register is not a public document and is only accessible by a designated competent authority
of the Cayman Islands. Such requirement does not, however, apply to an exempted company
with its shares listed on an approved stock exchange, which includes the Stock Exchange.
Accordingly, for so long as the shares of the Company are listed on the Stock Exchange, the
Company is not required to maintain a beneficial ownership register.
(q) Winding up
A company may be wound up (a) compulsorily by order of the Court, (b) voluntarily, or
(c) under the supervision of the Court.
The Court has authority to order winding up in a number of specified circumstances
including where the members of the company have passed a special resolution requiring the
company to be wound up by the Court, or where the company is unable to pay its debts, or
where it is, in the opinion of the Court, just and equitable to do so. Where a petition is
presented by members of the company as contributories on the ground that it is just and
equitable that the company should be wound up, the Court has the jurisdiction to make certain
other orders as an alternative to a winding-up order, such as making an order regulating the
conduct of the company’s affairs in the future, making an order authorising civil proceedings
to be brought in the name and on behalf of the company by the petitioner on such terms as the
Court may direct, or making an order providing for the purchase of the shares of any of the
members of the company by other members or by the company itself.
APPENDIX III SUMMARY OF THE CONSTITUTION OF THE COMPANY
AND CAYMAN ISLANDS COMPANY LA W
– III-24 –


--- page 471 ---
A company (save with respect to a limited duration company) may be wound up
voluntarily when the company so resolves by special resolution or when the company in
general meeting resolves by ordinary resolution that it be wound up voluntarily because it is
unable to pay its debts. In the case of a voluntary winding up, such company is obliged to cease
to carry on its business (except so far as it may be beneficial for its winding up) from the time
of passing the resolution for voluntary winding up or upon the expiry of the period or the
occurrence of the event referred to above.
For the purpose of conducting the proceedings in winding up a company and assisting the
Court therein, there may be appointed an official liquidator or official liquidators; and the court
may appoint to such office such person, either provisionally or otherwise, as it thinks fit, and
if more persons than one are appointed to such office, the Court must declare whether any act
required or authorised to be done by the official liquidator is to be done by all or any one or
more of such persons. The Court may also determine whether any and what security is to be
given by an official liquidator on his appointment; if no official liquidator is appointed, or
during any vacancy in such office, all the property of the company shall be in the custody of
the Court.
As soon as the affairs of the company are fully wound up, the liquidator must make a
report and an account of the winding up, showing how the winding up has been conducted and
how the property of the company has been disposed of, and thereupon call a general meeting
of the company for the purposes of laying before it the account and giving an explanation
thereof. This final general meeting must be called by at least 21 days’ notice to each
contributory in any manner authorised by the company’s articles of association and published
in the Gazette.
(r) Reconstructions
There are statutory provisions which facilitate reconstructions and amalgamations
approved by (i) a majority in number representing seventy-five per cent. (75%) in value of
creditors, or (ii) seventy-five per cent. (75%) in value of shareholders or class of shareholders,
as the case may be, as are present at a meeting called for such purpose and thereafter sanctioned
by the Court. Whilst a dissenting shareholder would have the right to express to the Court his
view that the transaction for which approval is sought would not provide the shareholders with
a fair value for their shares, the Court is unlikely to disapprove the transaction on that ground
alone in the absence of evidence of fraud or bad faith on behalf of management.
The Companies Act also contains statutory provisions which provide that a company may
present a petition to the Court for the appointment of a restructuring officer on the grounds that
the company (a) is or is likely to become unable to pay its debts within the meaning of section
93 of the Companies Act; and (b) intends to present a compromise or arrangement to its
creditors (or classes thereof) either, pursuant to the Companies Act, the law of a foreign
country or by way of a consensual restructuring. The petition may be presented by a company
APPENDIX III SUMMARY OF THE CONSTITUTION OF THE COMPANY
AND CAYMAN ISLANDS COMPANY LA W
– III-25 –


--- page 472 ---
acting by its directors, without a resolution of its shareholders or an express power in its
articles of association. On hearing such a petition, the Court may, among other things, make
an order appointing a restructuring officer or make any other order as the Court thinks fit.
(s) Take-overs
Where an offer is made by a company for the shares of another company and, within four
(4) months of the offer, the holders of not less than ninety per cent. (90%) of the shares which
are the subject of the offer accept, the offeror may at any time within two (2) months after the
expiration of the said four (4) months, by notice in the prescribed manner require the dissenting
shareholders to transfer their shares on the terms of the offer. A dissenting shareholder may
apply to the Court within one (1) month of the notice objecting to the transfer. The burden is
on the dissenting shareholder to show that the Court should exercise its discretion, which it will
be unlikely to do unless there is evidence of fraud or bad faith or collusion as between the
offeror and the holders of the shares who have accepted the offer as a means of unfairly forcing
out minority shareholders.
(t) Indemnification
Cayman Islands law does not limit the extent to which a company’s articles of association
may provide for indemnification of officers and directors, except to the extent any such
provision may be held by the Court to be contrary to public policy (e.g. for purporting to
provide indemnification against the consequences of committing a crime).
(u) Economic Substance Requirements
Pursuant to the International Tax Cooperation (Economic Substance) Act of the Cayman
Islands (“ES Act”) that came into force on 1 January 2019, a “relevant entity” is required to
satisfy the economic substance test set out in the ES Act. A “relevant entity” includes an
exempted company incorporated in the Cayman Islands as is the Company; however, it does
not include an entity that is tax resident outside the Cayman Islands. Accordingly, for so long
as the Company is a tax resident outside the Cayman Islands, including in Hong Kong, it is not
required to satisfy the economic substance test set out in the ES Act.
4. GENERAL
Conyers Dill & Pearman, the Company’s special legal counsel on Cayman Islands law,
have sent to the Company a letter of advice summarising certain aspects of Cayman Islands
company law. This letter, together with a copy of the Companies Act, is available for inspection
as referred to in the paragraph headed “Documents Available on Display” in Appendix V to this
prospectus. Any person wishing to have a detailed summary of Cayman Islands company law
or advice on the differences between it and the laws of any jurisdiction with which he is more
familiar is recommended to seek independent legal advice.
APPENDIX III SUMMARY OF THE CONSTITUTION OF THE COMPANY
AND CAYMAN ISLANDS COMPANY LA W
– III-26 –


--- page 473 ---
A. FURTHER INFORMATION ABOUT OUR COMPANY AND OUR SUBSIDIARIES
1. Incorporation
Our Company was incorporated in the Cayman Islands under the Cayman Companies Act
as an exempted company with limited liability on June 16, 2021. Our Company has established
a place of business in Hong Kong at 5/F, Manulife Place, 348 Kwun Tong Road, Kowloon,
Hong Kong, and was registered with the Registrar of Companies in Hong Kong as a non-Hong
Kong company under Part 16 of the Companies Ordinance on March 30, 2023. Ms. TANG King
Yin ( ቎౻ሬ) has been appointed as the authorized representative of our Company for the
acceptance of service of process in Hong Kong. The address for service of process is 5/F,
Manulife Place, 348 Kwun Tong Road, Kowloon, Hong Kong.
As our Company was incorporated in the Cayman Islands, it operates subject to the
Cayman Companies Act and its constitution comprises the Memorandum and Articles of
Association. A summary of the Memorandum and Articles of Association and relevant aspects
of the company law of the Cayman Islands is set forth in “Appendix III—Summary of the
Constitution of the Company and Cayman Islands Company Law.”
2. Changes in the Share Capital of Our Company
For the details of changes in the share capital of our Company, see “History,
Reorganization and Corporate Structure.”
Immediately following the completion of the Global Offering (without taking into
account any Shares which may be allotted and issued pursuant to the exercise of the Pre-IPO
Share Options), the issued share capital of the Company will be US$134.7740072 divided into
202,160,000 Shares, all fully paid or credited as fully paid.
Save as disclosed above, there has been no alteration in the share capital of our Company
since its incorporation.
3. Resolutions in Writing of Our Shareholders Passed on December 11, 2023
Pursuant to the written resolutions passed by our Shareholders on December 11, 2023, it
was resolved, among others:
(a) our Company approved and adopted the Memorandum and Articles of Association,
conditional upon and with effect from the Listing;
APPENDIX IV STATUTORY AND GENERAL INFORMATION
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--- page 474 ---
(b) conditional on (i) the Stock Exchange granting the approval for the listing of, and
permission to deal in, the Shares in issue and Shares to be issued (pursuant to the
Global Offering and the exercise of the Pre-IPO Share Options) and such listing and
permission not having been subsequently revoked prior to the commencement of
dealings in the Shares on the Stock Exchange, (ii) the Offer Price being determined,
(iii) the execution and delivery of the Underwriting Agreements and (iv) the
obligations of the Underwriters under the Underwriting Agreements becoming
unconditional (including, if relevant, as a result of the waiver of any condition(s) by
the Joint Sponsors and the Overall Coordinators (for themselves and on behalf of the
Underwriters)) and remaining unconditional and the Underwriting Agreements not
being terminated in accordance with their terms or otherwise:
(i) the Global Offering was approved and our Directors were authorized to effect
the same (including but not limited to, to agree the structure of the Global
Offering, to increase or reduce the number of Shares initially offered for
subscription in the Global Offering and to determine the Offer Price) and to
allot and issue new Shares pursuant to the Global Offering; and
(ii) the proposed Listing was approved and our Directors were authorized to
implement the Listing.
(c) a general unconditional mandate was granted to our Directors to, inter alia , allot,
issue and deal with Shares, securities convertible into Shares (the “Convertible
Securities”) or options, warrants or similar rights to subscribe for any Shares or such
Convertible Securities (the “Options and Warrants”) and to make or grant offers,
agreements or options which might require such Shares, the Convertible Securities
or the Options and Warrants to be allotted and issued or dealt with at any time
subject to the requirement that the aggregate number of the Shares or the underlying
Shares relating to the Convertible Securities or the Options and Warrants so allotted
and issued or agreed conditionally or unconditionally to be allotted and issued, shall
not exceed 20% of the aggregate number of Shares of our Company in issue
immediately following the completion of the Global Offering (without taking into
account any Shares which may be allotted and issued pursuant to the exercise of the
Pre-IPO Share Options);
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-2 –


--- page 475 ---
This mandate does not cover Shares to be allotted, issued or dealt with under a rights
issue or scrip dividend scheme or similar arrangements or a specific authority
granted by our Shareholders. Such mandate will remain in effect until the earliest of:
(i) the conclusion of the next annual general meeting of our Company;
(ii) the expiration of the period within which the next annual general meeting of
our Company is required to be held under any applicable laws or the
Memorandum and Articles of Associations; or
(iii) it is varied or revoked by an ordinary resolution of our Shareholders at a
general meeting,
(d) a general unconditional mandate was granted to our Directors to exercise all powers
of our Company to repurchase Shares with an aggregate number not exceeding 10%
of the aggregate number of Shares of our Company in issue immediately following
completion of the Global Offering (without taking into account any Shares which
may be allotted and issued pursuant to the exercise of the Pre-IPO Share Options).
This mandate only relates to repurchase made on the Stock Exchange or on any other
stock exchange on which the Shares may be listed (and which is recognized by the
SFC and the Stock Exchange for this purpose) and which are in accordance with all
applicable laws and regulations. Such mandate will remain in effect until the earliest
of:
(i) the conclusion of the next annual general meeting of our Company;
(ii) the expiration of the period within which the next annual general meeting of
our Company is required to be held under any applicable laws or the
Memorandum and Articles of Association; or
(iii) it is varied or revoked by an ordinary resolution of our Shareholders at a
general meeting,
(e) the general unconditional mandate as mentioned in paragraph (c) above was
extended by the addition to the aggregate number of the Shares which may be
allotted and issued or agreed to be allotted and issued by our Directors pursuant to
such general mandate of a number representing the aggregate number of the Shares
purchased by our Company pursuant to the mandate to repurchase Shares referred
to in paragraph (d) above (up to 10% of the aggregate number of the Shares in issue
immediately following the completion of the Global Offering (without taking into
account any Shares which may be allotted and issued pursuant to the exercise of the
Pre-IPO Share Options)).
APPENDIX IV STATUTORY AND GENERAL INFORMATION
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--- page 476 ---
4. Corporate Reorganization
The companies comprising our Group underwent the Reorganization in preparation for
the Listing. See “History, Reorganization and Corporate Structure—Reorganization” for
further details.
5. Changes in the Share Capital of Our Subsidiaries
A summary of the corporate information and the particulars of our subsidiaries are set out
in the Accountants’ Report in Appendix I to this prospectus.
Save as disclosed in “History, Reorganization and Corporate Structure” and below, there
has been no alteration in the share capital or the registered capital of any of our subsidiaries
within the two years immediately preceding the date of this prospectus:
Shanghai Bozhong
On September 6, 2021, Shanghai Bozhong was established in the PRC with a registered
capital of RMB3,000,000.
Changjiu Jinfu
On May 20, 2022, the registered capital of Changjiu Jinfu was increased from
RMB100,000,000 to RMB101,010,100.
6. Repurchase of Shares by our Company
(a) Provisions of the Listing Rules
The Listing Rules permit companies whose primary listings are on the Main Board
of the Stock Exchange to repurchase their securities on the Stock Exchange subject to
certain restrictions, the most important of which are summarized below:
(i) Shareholders’ approval
All proposed repurchases of securities on the Stock Exchange by a company
with a primary listing on the Stock Exchange must be approved in advance by an
ordinary resolution of shareholders, either by way of general mandate or by specific
approval of a particular transaction.
Pursuant to the resolutions in writing of our Shareholders passed on December
11, 2023, a general unconditional mandate (the “Repurchase Mandate”) was granted
to our Directors authorizing the repurchase by our Company 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,
APPENDIX IV STATUTORY AND GENERAL INFORMATION
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--- page 477 ---
of Shares with an aggregate number not exceeding 10% of the aggregate number of
Shares of our Company in issue immediately following the completion of the Global
Offering (without taking into account any Shares which may be allotted and issued
pursuant to the exercise of the Pre-IPO Share Options), at any time until the
conclusion of the next annual general meeting of our Company, the expiration of the
period within which the next annual general meeting of our Company is required by
any applicable laws or the Memorandum and Articles of Association to be held or
when such mandate is revoked or varied by an ordinary resolution of our
Shareholders in general meeting, whichever is the earliest.
(ii) Source of funds
Repurchases must be funded out of funds legally available for the purpose in
accordance with the Memorandum and Articles of Association and the 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 as amended from time
to time.
(iii) 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 aggregate number of the company’s shares in issue on the date the repurchase
mandate is granted. A listed 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 on the Stock Exchange 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 disclose to the Stock Exchange such information with
respect to the repurchase made on behalf of the listed company as the Stock
Exchange may require.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-5 –


--- page 478 ---
(iv) Status of repurchased securities
The listing of all purchased securities (whether on the Stock Exchange or,
otherwise) is automatically cancelled and the relative certificates must be cancelled
and destroyed. Under the laws of the Cayman Islands, unless, prior to the purchase
the directors of the company resolve to hold the shares purchased by the company
as treasury shares, shares purchased by the company shall be treated as cancelled
and the amount of the company’s issued share capital shall be diminished by the
nominal value of those shares. However, the purchase of shares will not be taken as
reducing the amount of the authorised share capital under Cayman Companies Act.
(v) Suspension of Repurchase
A listed company may not make any repurchase of securities 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 a listed
company to announce its results for any year or half-year under the Listing Rules,
or quarterly or any other interim period (whether or not required under the Listing
Rules) and ending on the date of the results announcement, the listed company may
not repurchase its securities on the Stock Exchange other than in exceptional
circumstances.
(vi) Reporting requirements
Certain information relating to the repurchases of securities 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 reviewed, 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 purchases, where relevant, and the aggregate prices
paid.
(vii) Core 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
respective close associates and a core connected person is prohibited from
knowingly selling his securities to the company, on the Stock Exchange.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
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--- page 479 ---
(b) Reasons for repurchases
Our Directors believe that it is in the best interests of our Company and
Shareholders for our Directors to receive the general authority from our Shareholders to
repurchase Shares in the market. Repurchases of Shares will only be made when our
Directors believe that such repurchases will be in the interest of our Company and our
Shareholders. Such repurchases may, depending on market conditions, funding
arrangements and other circumstances at the time, lead to an enhancement of the net value
of our Company and its assets and/or its earnings per Share.
(c) Funding of repurchases
In repurchasing securities, our Company may only apply funds legally available for
such purpose in accordance with the Memorandum and Articles of Association and the
applicable laws of the Cayman Islands.
Any payment for the repurchase of Shares will be drawn from the profits or share
premium of our Company or from the proceeds of a fresh issue of shares made for the
purpose of the repurchase and, in the case of any premium payable on the purchase over
the par value of the Shares to be repurchased must be provided for, out of either or both
of the profits of our Company or from sums standing to the credit of the share premium
account of our Company. Subject to the Cayman Companies Act, a repurchase of Shares
may also be paid out of capital.
Our Directors do not propose to exercise the Repurchase Mandate to such an extent
as would, under the circumstances, have a material adverse effect in the opinion of our
Directors on the working capital requirements of our Company or its gearing levels.
However, there might 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 is exercised in full.
(d) Share capital
Exercise in full of the Repurchase Mandate, on the basis of 202,160,000 Shares in
issue immediately after the listing of the Shares, could accordingly result in up to
20,216,000 Shares being repurchased by our Company during the period until the earlier
of:
(i) the conclusion of the next annual general meeting of our Company;
(ii) the expiration of the period within which the next annual general meeting of
our Company is required to be held under any applicable laws or the
Memorandum and Articles of Association; or
(iii) it is varied or revoked by an ordinary resolution of our Shareholders at a
general meeting.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-7 –


--- page 480 ---
(e) General
None of our Directors or, to the best of their knowledge, having made all reasonable
enquiries, any of their respective close associates (as defined in the Listing Rules), has
any present intention to sell any Shares to our Company or our subsidiaries.
Our Directors have undertaken to the Stock Exchange that, so far as the same may
be applicable, they will exercise the Repurchase Mandate in accordance with the Listing
Rules and the applicable laws of the Cayman Islands.
If as a result of a securities repurchase pursuant to the Repurchase Mandate, a
Shareholders’ proportionate interest in the voting rights of our Company increases, such
increase will be treated as an acquisition for the purpose of the Takeovers Code.
Accordingly, a Shareholder, or a group of Shareholders acting in concert, depending on
the level of the increase of our Shareholders’ interest, could obtain or consolidate control
of our Company and become obliged to make a mandatory offer in accordance with Rule
26 of the Takeovers Code as a result. Save as aforesaid, our Directors are not aware of
any consequences which may arise under the Takeovers Code if the Repurchase Mandate
is exercised. Any repurchase of Shares which results in the number of Shares held by the
public being reduced to less than 25% of our Shares then in issue could only be
implemented with the approval of the Stock Exchange 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. No core connected person (as defined in the Listing Rules) of our
Company has notified our Company that he/she or it has a present intention to sell Shares
to our Company, or has undertaken not to do so, if the Repurchase Mandate is exercised.
B. FURTHER INFORMATION ABOUT OUR BUSINESS
1. Summary of Material Contracts
The following contracts (not being contracts entered into in the ordinary course of
business) have been entered into by us within the two years preceding the date of this
prospectus and are or may be material:
(a) the Deed of Non-competition; and
(b) the Hong Kong Underwriting Agreement.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-8 –


--- page 481 ---
2. Intellectual Property Rights of our Group
(a) Trademarks
As of the Latest Practicable Date, we were the registered owner of and had the right
to use the following trademarks which we consider to be or may be material to our
business:
No. Trademark
Place of
registration
Registration
number
Registered
owner Class
Registration
date Expiry date
1.
 Hong Kong 305828437 Our Company 42 2021.12.10 2031.12.09
2.
 Hong Kong 305730750 Our Company 42 2021.08.27 2031.08.26
3.
 PRC 43730880 Changjiu Jinfu 12 2020.11.14 2030.11.13
4.
 PRC 43703248 Changjiu Jinfu 42 2020.11.07 2030.11.06
5.
 PRC 43699657 Changjiu Jinfu 41 2020.11.07 2030.11.06
6.
 PRC 43697731 Changjiu Jinfu 9 2020.11.07 2030.11.06
7.
 PRC 43694991 Changjiu Jinfu 36 2020.10.28 2030.10.27
8.
 PRC 43694708 Changjiu Jinfu 41 2021.01.14 2031.01.13
9.
 PRC 43694037 Changjiu Jinfu 45 2020.11.07 2030.11.06
10.
 PRC 43690986 Changjiu Jinfu 35 2020.11.07 2030.11.06
11.
 PRC 43687723 Changjiu Jinfu 16 2020.11.07 2030.11.06
12.
 PRC 43687679 Changjiu Jinfu 9 2020.11.07 2030.11.06
13.
 PRC 43683026 Changjiu Jinfu 38 2020.11.07 2030.11.06
14.
 PRC 43682699 Changjiu Jinfu 38 2020.11.07 2030.11.06
15.
 PRC 43682695 Changjiu Jinfu 39 2020.11.07 2030.11.06
16.
 PRC 43681457 Changjiu Jinfu 42 2020.11.07 2030.11.06
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-9 –


--- page 482 ---
No. Trademark
Place of
registration
Registration
number
Registered
owner Class
Registration
date Expiry date
17.
 PRC 34561923 Changjiu Jinfu 36 2019.07.07 2029.07.06
18.
 PRC 34554164 Changjiu Jinfu 42 2019.06.28 2029.06.27
19.
 PRC 34539101 Changjiu Jinfu 35 2019.07.07 2029.07.06
(b) Patents
As of the Latest Practicable Date, we had registered the following patents which we
consider to be or may be material to our business:
No. Patent Class
Registered
owner Patent number
Place of
registration
Granted
date
Expiry
date
1. OBD monitoring
devices and systems
(ɓ၇OBD္છༀໄ
ʿӻ୕)
Utility
model
Changjiu
Jinfu
ZL201820063928.8 PRC 2018.08.07 2028.01.15
2. OBD bluetooth devices
and systems of
inventory taking
(ɓ၇OBDࢫ
ༀໄʿӻ୕)
Utility
model
Changjiu
Jinfu
ZL201820064172.9 PRC 2018.08.07 2028.01.15
3. Bluetooth RFID UHF
readers ( ɓ၇ᔝ˫
RFID ൴৷᎖ᛘᄳኜ)
Utility
model
Changjiu
Jinfu
ZL201820064020.9 PRC 2018.08.07 2028.01.15
4. Custodial equipment
(၍ண௪)
Utility
model
Changjiu
Jinfu
ZL202120500036.1 PRC 2021.12.24 2031.03.09
5. Custodial equipment
(၍ண௪)
Utility
model
Changjiu
Jinfu
ZL202120504298.5 PRC 2021.12.24 2031.03.09
6. Access device ( ɓ၇π
՟ༀໄ)
Utility
model
Changjiu
Jinfu
ZL202120505220.5 PRC 2021.12.24 2031.03.09
7. Rotary storage unit
(Ꮇༀໄ)
Utility
model
Changjiu
Jinfu
ZL202120502009.8 PRC 2021.12.24 2031.03.09
8. Custodial equipment
(၍ண௪)
Utility
model
Changjiu
Jinfu
ZL202120505219.2 PRC 2021.12.24 2031.03.09
9. Automatic vehicle VIN
number reading
system ( ɓ၇ԓሿ
VINᇁІਗᛘ՟ӻ୕)
Utility
model
Changjiu
Jinfu
ZL202220081109.2 PRC 2022.07.01 2032.01.12
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-10 –


--- page 483 ---
No. Patent Class
Registered
owner Patent number
Place of
registration
Granted
date
Expiry
date
10. Method and apparatus
for generating
passwords in batches
(ɓ၇ҭඎ͛ϓ੗ᇁ
ʿༀໄ)
Invention Changjiu
Jinfu (as
transferee)
ZL201310260471.1 PRC 2016.08.24 2033.06.26
11. Remote controlled
document storage
cabinet ( Ⴣ೻̙છᏦ
၍ᓞ)
Appearance
design
Changjiu
Jinfu (as
transferee)
ZL201330291748.8 PRC 2014.01.29 2028.06.28
(c) Copyrights
As of the Latest Practicable Date, we had registered the following copyrights which
we consider to be or may be material to our business:
(i) Software copyrights
No. Copyright
Registered
owner
Registration
number
Place of
registration
Registration
date
1. Equipment monitoring
platform V1.0 ( ண௪္છ
̨̻V1.0)
Changjiu
Jinfu
2020SR1736384 PRC 2020.12.04
2. Financial direct link
management system V1.0
(ஹ၍ଣӻ୕V1.0)
Changjiu
Jinfu
2020SR1736205 PRC 2020.12.04
3. Business rules management
system V1.0 (၍
ଣӻ୕V1.0)
Changjiu
Jinfu
2020SR1736204 PRC 2020.12.04
4. Financial information
management system V1.0
(ፄ༟ৃ၍ଣӻ୕V1.0)
Changjiu
Jinfu
2020SR1736206 PRC 2020.12.04
5. VFS financial business
platform (abbreviation:
VFS) V1.0 (VFSፄุਕ
̨̻ (ᔊ၈:VFS) V1.0)
Changjiu
Jinfu
2020SR1733595 PRC 2020.12.04
6. Core warehouse inspection
management platform
V1.0 (၍ଣ̨̻
V1.0)
Changjiu
Jinfu
2020SR1706636 PRC 2020.12.02
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-11 –


--- page 484 ---
No. Copyright
Registered
owner
Registration
number
Place of
registration
Registration
date
7. Business channel
management system V1.0
(ุਕ၍༸၍ଣӻ୕V1.0)
Changjiu
Jinfu
2020SR1706642 PRC 2020.12.02
8. Jiuchetong software V1.0
(ɮԓஷழ΁V1.0)
Changjiu
Jinfu
2020SR1706658 PRC 2020.12.02
9. Changjiu inventory
examination software
V1.0 (ᄲழ΁V1.0)
Changjiu
Jinfu
2020SR1706660 PRC 2020.12.02
10. Business process
management system V1.0
(೻၍ଣӻ୕V1.0)
Changjiu
Jinfu
2020SR1706785 PRC 2020.12.02
11. Supervisor management
system V1.0 (၍ଣ
ӻ୕V1.0)
Changjiu
Jinfu
2020SR1706661 PRC 2020.12.02
12. Knowledge management
platform V1.0 (ᗆ၍ଣ
̨̻V1.0)
Changjiu
Jinfu
2020SR1706786 PRC 2020.12.02
13. Project management
platform V1.0 (၍ଣ
̨̻V1.0)
Changjiu
Jinfu
2020SR1706637 PRC 2020.12.02
14. Pankubao software V1.0 ( ᆵ
ᘒழ΁V1.0)
Changjiu
Jinfu
2020SR1706638 PRC 2020.12.02
15. Shixianyuan training
platform V1.0 ( ᗆሬ৫੃
৅̨̻V1.0)
Changjiu
Jinfu
2020SR1706776 PRC 2020.12.02
16. Jiuchetong software (Bank
version) V1.0 ( ɮԓஷვБ
ழ΁V1.0)
Changjiu
Jinfu
2020SR1706803 PRC 2020.12.02
17. Business operation
management system V1.0
(ุਕ዁Ъ၍ଣӻ୕V1.0)
Changjiu
Jinfu
2020SR1706659 PRC 2020.12.02
18. Distributor’s inventory
taking management
system V1.0 (ࢫ
၍ଣӻ୕V1.0)
Changjiu
Jinfu
2020SR1706632 PRC 2020.12.02
19. Inventory taking
management system V1.0
(၍ଣӻ୕V1.0)
Changjiu
Jinfu
2020SR1706872 PRC 2020.12.02
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-12 –


--- page 485 ---
No. Copyright
Registered
owner
Registration
number
Place of
registration
Registration
date
20. Document classification
management system
(abbreviation: JF-FMS)
V1.0 ( ˖΁ʱᗳ၍ଣӻ
୕ (ᔊ၈: JF-FMS) V1.0)
Changjiu
Jinfu
2020SR1706802 PRC 2020.12.02
(ii) Artwork copyrights
No. Copyright
Registered
owner Registration number
Place of
registration
Publication
date
Registration
date
1. Changjiu Jinfu (ɮ
ѿ)
Changjiu Jinfu Guozuodengzi-
2019-F-00711809
PRC 2018.02.13 2019.01.18
(d) Domain name
As of the Latest Practicable Date, we had registered the following domain name
which we consider to be or may be material to our business:
No. Domain name Registrant
Date of
registration Expiry date
1. cj-sxy.com Changjiu Jinfu 2019.11.05 2026.11.05
2. 99digtech.com Shanghai
Bozhong
2023.03.07 2024.03.07 (1)
Note:
(1) We plan to renew such domain name upon its expiry. Our PRC Legal Advisors are of the view that there
is no material legal impediment in renewing such domain name upon its expiry in the future as long as
we are in compliance with applicable PRC laws and regulations.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-13 –


--- page 486 ---
C. FURTHER INFORMATION ABOUT OUR DIRECTORS AND SUBSTANTIAL SHAREHOLDERS
1. Disclosure of Interests
(a) Disclosure of interests – interests and short positions of our Directors and the chief executive of our
Company in the Shares, underlying Shares and debentures of our Company and its associated
corporations
Immediately following the completion of the Global Offering (without taking into account the Shares
which may be allotted and issued pursuant to the exercise of the Pre-IPO Share Options), the interests or short
positions of our Directors or chief executive of our Company in the Shares, underlying Shares and debentures
of our Company or its associated corporations (within the meaning of Part XV of the SFO) which will be
required to be notified to our Company and the 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 therein, 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, will be as
follows:
(i) Interests in the Shares of our Company
Name of Director/
chief executive Nature of interest
Number of
Shares (1)
Approximate
percentage of
shareholding (1)
Ms. Li Interest in controlled
corporation (2)
60,000,000 29.68%
Interest of spouse/Interest of
concert parties (3)(4)
90,000,000 44.52%
Mr. Bo Interest in controlled
corporation (5)
90,000,000 44.52%
Interest of spouse/Interest of
concert parties (3)(4)
60,000,000 29.68%
Ms. Jia Hui ( ༠౉) Interest in a controlled
corporation (6)
1,620,000 0.80%
Notes:
(1) The percentage is for illustrative purpose only and is calculated based on the number of Shares in issue
immediately following the completion of the Global Offering (without taking into account the Shares
which may be allotted and issued upon the exercise of the Pre-IPO Share Options).
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-14 –


--- page 487 ---
(2) Ms. Li wholly owns Brightio Limited, which in turn wholly owns Brighht Limited, therefore Ms. Li is
deemed to be interested in the Shares directly held by Brighht Limited by virtue of the SFO.
(3) Ms. Li and Mr. Bo are the spouse of one another. Therefore, each of them is deemed to be interested
in all the Shares the other party is interested in by virtue of the SFO.
(4) Pursuant to a concert party confirmation dated March 1, 2023 entered into between Ms. Li and Mr. Bo,
they have confirmed that they had and would continue to, for so long as they remain interested in the
Shares, directly or indirectly, act in concert by aligning their votes at the shareholders’ meetings of the
Company. See “History, Reorganization and Corporation Structure—Concert Party Confirmation” for
details. As such, Ms. Li and Mr. Bo, together with their wholly-owned companies, are all deemed to be
interested in the total Shares directly held by Brighht Limited, Advancey Limited and Creationn Limited
by virtue of the SFO.
(5) Mr. Bo wholly owns Advancd Limited and CreateCube Limited, which in turn wholly own Advancey
Limited and Creationn Limited, respectively, therefore Mr. Bo is deemed to be interested in the Shares
directly held by Advancey Limited and Creationn Limited by virtue of the SFO.
(6) Ms. Jia Hui is a limited partner of the Restricted Share SPV , in which she holds more than one-third of
the partnership interest, therefore Ms. Jia Hui is deemed to be interested in the Shares directly held by
the Restricted Share SPV by virtue of the SFO.
(ii) Interest in underlying Shares of our Company
Name of Director Nature of interest
Number of
underlying
Shares subject
to the Pre-IPO
Share Options
Approximate
percentage
shareholding (1)
Ms. Jia Hui Beneficial interest 500,000 0.25%
Note:
(1) The percentage is for illustrative purpose only and is calculated based on the number of Shares in issue
immediately following the completion of the Global Offering (without taking into account the Shares
which may be allotted and issued upon the exercise of the Pre-IPO Share Options).
(b) Disclosure of interests – interests and short positions discloseable under Divisions
2 and 3 of the Part XV of the SFO
Save as disclosed in “Substantial Shareholders,” our Directors are not aware of any
other person who will, immediately following the completion of the Global Offering
(without taking into account the Shares which may be allotted and issued pursuant to the
exercise of the Pre-IPO Share Options), have an interest or short position in the Shares
or underlying Shares of our Company which are required to be disclosed to our Company
and the Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO,
or, directly or indirectly, be interested in 10% or more of the nominal value of any class
of share capital carrying the rights to vote in all circumstances at the general meetings of
our Company.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-15 –


--- page 488 ---
2. Particulars of Directors’ Service Contracts and Letters of Appointment
Each of Ms. Li, Mr. Bo and Ms. Jia Hui ( ༠౉), being our executive Directors, has entered
into a service contract with our Company, under which they agreed to act as executive
Directors for an initial term of three years commencing from the Listing Date. The service
contracts may be renewed in accordance with our Memorandum and Articles of Association
and the applicable laws, rules and regulations.
Ms. Jin Ting ( ◽ణ), being our non-executive Director, has entered into a letter of
appointment with our Company, under which she agreed to act as a non-executive Director for
an initial term of three years commencing from the Listing Date. The letter of appointment may
be renewed in accordance with our Memorandum and Articles of Association and the
applicable laws, rules and regulations.
Each of Mr. Dong Y ang ( ໨౮), Mr. Shen Jinjun (ࠏand Mr. Wang Fukuan ( ˮ၅ᄱ),
being our independent non-executive Directors, has entered into a letter of appointment with
our Company, under which they agreed to act as independent non-executive Directors for an
initial term of three years commencing from the Listing Date. The letters of appointment may
be renewed in accordance with our Memorandum and Articles of Association and the
applicable laws, rules and regulations.
3. Directors’ Remuneration
The aggregate amounts of remuneration (including fees, salaries, contributions to pension
schemes, housing allowances and other allowances and benefits in kind and discretionary
bonuses) for our Directors for the three years ended December 31, 2020, 2021 and 2022 and
the six months ended June 30, 2023 were RMB0.7 million, RMB1.4 million, RMB1.5 million
and RMB3.6 million, respectively. A share-based payment expense of RMB1.6 million relating
to the Restricted Shares and the Pre-IPO Share Options granted to Ms. Jia Hui on March 7,
2023 was recognized in our Group’s profit or loss for the six months ended June 30, 2023.
None of our Directors has waived or agreed to waive any emoluments for each of the three
financial years immediately preceding the issue of this prospectus.
Save as disclosed above, no other payments were made or payable for the years ended
December 31, 2020, 2021 and 2022 and the six months ended June 30, 2023 by any member
of our Group to any of our Directors.
During the Track Record Period, no remuneration was paid by us to, or receivable by, our
Directors or the five highest paid individuals as an inducement to join or upon joining our
Company. No compensation was paid by us to, or receivable by, our Directors, former
Directors, or the five highest-paid individuals for each of the Track Record Period for the loss
of any office in connection with the management of the affairs of any member of our Group.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-16 –


--- page 489 ---
The aggregate remuneration (inclusive of benefits in kind and estimated share-based
payment expense in relation to the Restricted Shares and Pre-IPO Share Options granted to our
Director to be recognized in our Group’s profit or loss for the year ending December 31, 2023,
but exclusive of any discretionary bonuses) of our Directors for the year ending December 31,
2023 is estimated to be approximately RMB9.4 million, based on the arrangements currently
in force.
4. Personal Guarantees
Save as disclosed in Note 18 “Bank Loans” to the Accountants’ Report in Appendix I to
this prospectus, our Directors have not provided personal guarantees in favour of lenders in
connection with banking facilities granted or to be granted to any member of our Group.
5. Agency Fees or Commissions Received
Save as disclosed in the section headed “Underwriting” in this prospectus, no
commissions, discounts, brokerages or other special terms were granted within the two years
preceding the date of this prospectus in connection with the issue or sale of any capital of any
member of our Group.
6. Disclaimers
(a) Save as disclosed in “ —1. Disclosure of Interests,” none of our Directors or chief
executive of our Company has any interest or short position in the Shares,
underlying Shares or debentures of our Company or any of its associated corporation
(within the meaning of the SFO) which will have to be notified to our Company and
the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO or which
will be required, pursuant to section 352 of the SFO, to be entered in the register
referred to therein, or which will be required to be notified to our Company and the
Stock Exchange pursuant to the Model Code for Securities Transactions by Directors
of Listed Issuers once the Shares are listed.
(b) Save as disclosed in “ —1. Disclosure of Interests,” taking no account of any Shares
which may be taken up under the Global Offering, so far as is known to our
Directors or chief executive of our Company, no person (not being a Director or
chief executive of our Company) who will, immediately following the completion of
the Global Offering, have an interest or short position in the Shares or underlying
Shares of our Company which would fall to be disclosed to our Company under the
provisions of Divisions 2 and 3 of Part XV of SFO or be interested, directly or
indirectly, in 10% or more of the nominal value of any class of share capital carrying
rights to vote in all circumstances at general meetings of any member of our Group.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-17 –


--- page 490 ---
(c) Save as disclosed in “—2. Particulars of Directors’ Service Contracts and Letters of
Appointment,” none of our Directors has any existing or proposed service contracts
with any member of our Group (excluding contracts expiring or determinable by the
employer within one year without payment of compensation (other than statutory
compensation)).
(d) None of our Directors or any of the experts referred to under “—E. Other
Information—7. Qualification of Experts” has any direct or indirect interest in the
promotion of our Company, or in any assets which have within the two years
immediately preceding the date of this prospectus been acquired or disposed of by
or leased to any member of our Group, or are proposed to be acquired or disposed
of by or leased to any member of our Group.
(e) None of our Directors is materially interested in any contract or arrangement
subsisting at the date of this prospectus which is significant in relation to the
business of our Group.
(f) So far as is known to our Directors, none of our Directors, their respective close
associates (as defined under the Listing Rules) or our Shareholders who are
interested in more than 5% of the issued share capital of our Company has any
interest in the five largest customers or the five largest suppliers of our Group.
D. PRE-IPO SHARE INCENTIVE PLANS
1. Pre-IPO Restricted Share Plan
The following is a summary of the principal terms of the Pre-IPO Restricted Share Plan
(the “Restricted Share Plan”) approved and adopted by our Company on March 7, 2023. The
Pre-IPO Restricted Share Plan is not subject to the provisions of Chapter 17 of the Listing
Rules as it does not involve the grant of restricted shares by our Company after the Listing.
(a) Purposes
The purpose of this Restricted Share Plan is to enable our Company to attract and retain
highly qualified personnel who had and will contribute to our Company’s success and to
provide incentives to participants that are linked directly to increases in shareholder value and
will therefore inure to the benefit of all shareholders of our Company.
(b) Eligible Participants
Persons eligible to receive the restricted shares (the “Restricted Share(s)”) under the
Restricted Share Plan are officers, directors, employees or consultants of our Group selected
by the Board, in its sole discretion.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-18 –


--- page 491 ---
Each selected participant has entered into a restricted share subscription agreement (the
“Restricted Share Agreement(s)”) with our Company for issue and subscription of the
Restricted Shares under the Restricted Share Plan.
(c) Administration
The Restricted Share Plan shall be administered by the Board. Pursuant to the terms of
the Restricted Share Plan, the Board shall have the power and authority:
(i) to select eligible participants;
(ii) to determine whether and to what extent the Restricted Shares are to be issued;
(iii) to determine the number of the Restricted Shares to be purchased by each
participant;
(iv) to determine the terms and conditions of each Restricted Share purchased by
participants;
(v) to determine the terms and conditions of all written instruments evidencing the
Restricted Shares purchased by participants; and
(vi) to determine the purchase of the Restricted Share according to the provisions of the
Restricted Share Plan and the Restricted Share Agreement.
Subject to provisions of the effective Articles, the Board shall have the authority, in its
sole discretion, to adopt, alter and repeal such administrative rules, guidelines and practices
governing the Restricted Share Plan as it shall from time to time deem advisable, to interpret
the terms and provisions of the Restricted Share Plan and any Restricted Shares issued under
the Restricted Share Plan (and any Restricted Share Agreement relating thereto), and to
otherwise supervise the administration of the Restricted Share Plan.
All decisions made by the Board pursuant to the provisions of the Restricted Share Plan
shall be final, conclusive and binding on all persons, including our Company and the
participants.
(d) Restrictions on the Restricted Shares
The Restricted Shares are subject to the following terms and conditions:
(a) Purchase price: The purchase price of Restricted Shares shall be determined by the
Board and set forth in the Restricted Share Agreement.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-19 –


--- page 492 ---
(b) Non-transferability of Restricted Share: Except permitted by the Board, the
participant shall not be permitted to sell, transfer, pledge or assign of any Restricted
Share that are not unlocked, however, the participant shall be permitted to transfer
one or more Restricted Share to a trust controlled by the participant for estate
planning purposes.
(c) Unlock schedule: 25% of the aggregate number of Restricted Shares upon each
anniversary of the date on which the Restricted Share is purchased by the
participant, as set forth in the Restricted Share Agreement (“Commencement Date”)
shall be unlocked, such that the Restricted Shares the participant has purchased will
unlock in its entirety over a period of four years since the Commencement Date.
(d) Effects of termination of employment or service: Termination of employment or
service shall have the following effects on Restricted Share purchased by the
participants:
For the purpose of the Restricted Share Plan, the “Cause” means any act involving
one or more of the following: (i) disclosure of any trade secret or confidential
information of our Group by the participant, including without limitation, any term
and condition of the Restricted Share Plan and the Restricted Share under the
Restricted Share Plan without authorization by our Company; (ii) the commission of
an act by any participant which constitutes competition with our Group or which
induces any customer or supplier to breach a contract with our Group; (iii) the
commission of an act by any participant which damages the interests or reputation
of our Group; (iv) the participant’s deliberation or gross negligence which result in
material loss or damage on our Group; or (v) the commission of any felony by the
participant.
(i) If the participant’s employment by or service to our Group is terminated by our
Group for Cause, the Restricted Shares held by such participant will be
repurchased by our Company upon such termination pursuant to the following
terms and conditions:
(1) Restricted Share that has not been unlocked: Regardless our Company is
listed on the Stock Exchange or not, our Company shall repurchase such
Restricted Share(s) at the initial purchase price paid by the participant.
(2) Restricted Share that has been unlocked: Prior to the Listing of our
Company, our Company shall repurchase such Restricted Share(s) at the
initial purchase price paid by the participant. After the Listing, the
participant shall retain such Restricted Shares, but any sell, transfer,
pledge or assign of any Restricted Share by the participant need to
comply with the applicable laws and regulations.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-20 –


--- page 493 ---
(ii) If a participant’s employment by or service to our Group is terminated for any
reason other than termination by our Group for Cause, the Restricted Shares
held by such participant will be repurchased by our Company upon such
termination pursuant to the following terms and conditions:
(1) Restricted Share that has not been unlocked: Regardless our Company is
listed on the Stock Exchange or not, our Company shall repurchase such
Restricted Share(s) at the initial purchase price paid by the participant
plus simple interest in an amount equal to 6% of the initial purchase price
that shall be deemed to have accrued per annum from the respective
Commencement Date until the date of the termination of the participant’s
employment or service.
(2) Restricted Share that has been unlocked: Regardless our Company is
listed on the Stock Exchange or not, the participant shall retain such
Restricted Shares, but any sell, transfer, pledge or assign of any
Restricted Share by the participant need to comply with the applicable
laws and regulations.
The Restricted Shares repurchased by the Company pursuant to the sub-paragraph (d)
above will be cancelled by our Company in accordance with the Articles.
(e) Rights attached to the Restricted Shares
The selected participants own the Restricted Shares through the Restricted Share SPV and
are entitled to the economic interests of the Restricted Shares, including the rights to receive
dividends and other economic benefits. V oting rights of the Restricted Shares held by the
Restricted Share SPV can only be exercised by the general partner of the Restricted Share SPV .
(f) Adjustments
In the event of any merger, reorganization, consolidation, recapitalization, stock dividend
or other change in corporate structure affecting the share capital of our Company, subject to
provisions of the Articles, an equitable substitution or proportionate adjustment shall be made
in the class, number and purchase price of Shares subject to outstanding Restricted Share
issuable under the Restricted Share Plan, in each case as may be determined by the Board. Such
other substitutions or adjustments shall be made as may be determined by the Board, in its sole
discretion, subject to provisions of the Articles.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-21 –


--- page 494 ---
(g) Tax
Each participant shall, no later than the date as of which the value of the Restricted Share
first becomes includible in the gross income of the participant for income tax purposes, pay to
our Company, or make arrangements satisfactory to the Board regarding payment of, any taxes
of any kind required by law to be withheld with respect to such Restricted Share. The
obligations of our Company under the Restricted Share Plan shall be conditional on the making
of such payments or arrangements, and our Company shall, to the extent permitted by law, have
the right to deduct any such taxes from any payment of any kind otherwise due to the
participant.
(h) Amendment and termination
Subject to provisions of the Articles, the Board may amend, alter or discontinue the
Restricted Share Plan, but no amendment, alteration, or discontinuation shall be made that
would impair the rights of a participant under any Restricted Share theretofore purchased
without such participant’s consent.
(i) Subscription of the Restricted Shares
As of the Latest Practicable Date, an aggregate of 1,620,000 Restricted Shares,
representing approximately 1.07% of the total issued share capital of our Company, were
issued to the Restricted Share SPV , the limited partners of which are the five participants of
the Restricted Share Plan, including one Director, three senior management members and one
of our joint company secretaries. The Restricted Shares have been issued on a one-off basis and
no Shares will be issued under the Restricted Share Plan after the Listing. As all Restricted
Shares under the Pre-IPO Restricted Share Plan have already been issued to the Restricted
Share SPV , the Restricted Shares will not have any dilution effect on the shareholding of the
Company upon Listing. From accounting aspects, the Restricted Shares are recognized as
treasury shares in the statements of financial position considering the specific service
conditions and the respective repurchase obligations. For details, see Note 23 to the
Accountants’ Report in Appendix I to this prospectus. Assuming full unlock of the Restricted
Shares at the same time, the dilution impact on the earnings per share of the Company would
be 0.80%.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-22 –


--- page 495 ---
Immediately following completion of the Global Offering, the number of Restricted
Shares issued pursuant to the Restricted Share Plan amounts to 1,620,000 Shares, representing
0.80% of the total issued share capital of our Company (without taking into account any Shares
which may be allotted and issued pursuant to the exercise of the Pre-IPO Share Options).
Particulars of the Restricted Shares issued to our Director and senior management members are
set forth below:
Name of participants
Position held within
our Group
Number of
Restricted
Shares
Approximate
shareholding
percentage (1)
Director of our Company
Jia Hui ( ༠౉)(2) Executive Director and vice
president
600,000 0.30%
Senior management of our Company (excluding that who is also Director)
Xu Zhengran (್)(2) Vice president 300,000 0.15%
Wang Y uanbin ( ˮʩ੸)(2) Vice president 240,000 0.12%
Tan Zhengyang ( ሔ͍ජ)(2) Vice president and financial
controller
240,000 0.12%
Other participant
Zhang Y exi ( ੵ⮶᷊)(2) Company secretary 240,000 0.12%
Total 1,620,000 0.80%
Notes:
(1) The percentage is for illustrative purpose only and is calculated based on the number of Shares in issue
immediately following the completion of the Global Offering (without taking into account the Shares which
may be allotted and issued upon the exercise of the Pre-IPO Share Options).
(2) The Restricted Shares issued to the participants were held by the Restricted Share SPV , the limited partners
of which are the participants of our Pre-IPO Restricted Share Plan.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-23 –


--- page 496 ---
2. Pre-IPO Share Option Plan
The following is a summary of the principal terms of the Pre-IPO Share Option Plan (the
“Share Option Plan”) approved and adopted by our Company on March 7, 2023. The terms of
the Pre-IPO Share Option Plan are not subject to the provisions of Chapter 17 of the Listing
Rules as the Pre-IPO Share Option Plan will not involve the grant of options by us to subscribe
for Shares after the Listing.
(a) Purposes
The purpose of the Share Option Plan is to enable our Company to attract and retain
highly qualified personnel who had and will contribute to our Company’s success and to
provide incentives to participants that are linked directly to increases in shareholder value and
will therefore inure to the benefit of all shareholders of our Company.
(b) Eligible Participants
Persons eligible to receive grants of options (the “Option(s)”) under the Share Option
Plan are officers, directors, employees or consultants of our Group selected by the Board, in
its sole discretion.
Each selected participant has entered into a share option subscription agreement (the
“Share Option Agreement(s)”) with our Company, in such form as the Board shall determine,
which Share Option Agreement shall set forth, among other things, the exercise price of the
Option, the term of the Option and exercisability of the option granted.
(c) Administration
The Share Option Plan shall be administered by the Board. Pursuant to the terms of the
Share Option Plan, the Board shall have the power and authority:
(i) to select eligible participants;
(ii) to determine whether and to what extent Options are to be granted to participants;
(iii) to determine the number of Options to be granted;
(iv) to determine the terms and conditions of Options granted;
(v) to determine the terms and conditions of all written instruments evidencing Options
granted.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-24 –


--- page 497 ---
Subject to provisions of the Articles, the Board shall have the authority, in its sole
discretion, to adopt, alter and repeal such administrative rules, guidelines and practices
governing the Share Option Plan as it shall from time to time deem advisable, to interpret the
terms and provisions of the Share Option Plan and any Option issued under the Share Option
Plan (and any Share Option Agreement relating thereto), and to otherwise supervise the
administration of the Share Option Plan.
All decisions made by the Board pursuant to the provisions of the Share Option Plan shall
be final, conclusive and binding on all persons, including our Company and the participants.
(d) Maximum number of Shares
The overall limit on the number of Shares which may be issued upon exercise of all
outstanding Options granted and yet to be exercised under the Share Option Plan at any time
shall not exceed 10,199,730 Shares, representing 5.05% of the total issued Shares immediately
following the completion of the Global Offering (without taking into account any Shares which
may be allotted and issued pursuant to the exercise of the Pre-IPO Share Options).
(e) V esting Schedule and Conditions
The Options shall become vested at such time or times and subject to fulfilment of the
performance target and other terms and conditions set by the Board and reflected in the Share
Option Agreement provided that the maximum percentage of the Options which shall become
vested upon each anniversary of the date on which the participant is granted, as set forth on
the Share Option Agreement is 25%.
(f) Exercise of option
To any given participant, the per share exercise price of shares purchasable under an
Option shall be such price as determined by the Board and set forth in the Share Option
Agreement, subject to adjustments that might be made by the Board at its sole discretion.
Unless otherwise provided in the Share Option Plan or otherwise determined by the
Board, vested options may be exercised in whole or in part at any time after the Listing, by
giving written notice of exercise to our Company specifying the number of Shares to be
purchased, accompanied by payment in full of the aggregate exercise price of the Shares.
(g) Effects of Termination of Employment or Service
Termination of employment or service shall have the following effects on Options granted
to the participants: (for the Share Option Plan, the “Cause” means any act involving one or
more of the following: (i) the participant’s unauthorized disclosure of any trade secret or
confidential information of our Group, including without limitation, any term and condition of
the Share Option Plan and any Option under the Share Option Plan; (ii) the commission of an
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-25 –


--- page 498 ---
act by any participant which constitutes competition with our Group or which induces any
customer or supplier to breach a contract with our Group; (iii) the participant’s damage of the
interests or reputation of our Group; (iv) our Group’s suffering from material loss or damage
due to the participant’s deliberation or gross negligence; or (v) the commission of any felony
by the participant.)
(i) Dismissal for Cause: If a Participant’s employment by or service to our Group is
terminated by our Group for Cause, the Options and Shares underlying such Options
will be revoked, retained or sold upon such termination as follows:
(1) Options that have not been vested: Regardless our Company is listed on the
Stock Exchange or not, the Options granted shall be forfeited upon the
participant’s termination of employment or service. The Shares underlying the
terminated portion of the Options will be revoked;
(2) Options that have been vested: Regardless our Company is listed on the Stock
Exchange or not, the participant’s vested Options shall be forfeited upon the
participant’s termination of employment or service. The Shares underlying the
terminated portion of the Options will be revoked;
(3) Options that have been exercised: The participant can choose to retain the
Shares underlying the vested Options or gain the profit by selling the Shares.
(ii) Other terminations of employment or service: If a participant’s employment by or
service to our Group is terminated for any reason other than termination by our
Group for Cause, the Options and Shares underlying the Options will be revoked,
retained or sold upon such termination as follows:
(1) Options that have not been vested: Regardless our Company is listed on the
Stock Exchange or not, the Options granted shall be forfeited upon the
participant’s termination of employment or service. The Shares underlying the
terminated portion of the Options will be revoked;
(2) Options that have been vested: Regardless our Company is listed on the Stock
Exchange or not, the participant will have the right to retain such Options.
Upon the Listing of our Company, the participant can exercise the Options and
choose to retain or sell the Shares;
(3) Options that have been exercised: The participant can choose to retain the
Shares underlying the vested option or sell the Shares.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-26 –


--- page 499 ---
(h) Term of the Share Option Plan
No Option shall be granted pursuant to the Share Option Plan on or after the Latest
Practicable Date prior to the printing of the prospectus, but Options granted may remain
effective beyond that date. The term of each Option shall be fixed by the Board, but no Option
shall be exercisable more than ten years after the date such Option is granted.
(i) Adjustments
In the event of any merger, reorganization, consolidation, recapitalization, stock dividend
or other change in corporate structure affecting the share capital of our Company, subject to
provisions of the Articles, an equitable substitution or proportionate adjustment shall be made
in the class, number and exercise price of Shares subject to outstanding Options granted under
the Share Option Plan, in each case as may be determined by the Board. Such other
substitutions or adjustments shall be made as may be determined by the Board, in its sole
discretion, subject to provisions of the Articles. In connection with any event described in this
paragraph, the Board may provide, in its sole discretion, for the cancellation of any outstanding
Option and payment in cash or other property therefor.
(j) Tax
Each participant shall, no later than the date as of which the value of the Options and the
underlying Shares (if applicable) first become includible in the gross income of the participant
for income tax purposes, pay to our Company, or make arrangements satisfactory to the Board
regarding payment of, any taxes of any kind required by law to be withheld with respect to such
Option and the underlying Shares (if applicable). The obligations of our Company under the
Share Option Plan shall be conditional on the making of such payments or arrangements, and
our Company shall, to the extent permitted by law, have the right to deduct any such taxes from
any payment of any kind otherwise due to the participant.
(k) Outstanding options granted
The grant of Options under the Pre-IPO Share Option Plan to the participants as set out
below was approved by the Board on March 7, 2023. The overall limit on the number of
underlying Shares pursuant to the Pre-IPO Share Option Plan is 10,199,730 Shares. The
number of underlying Shares pursuant to the Pre-IPO Share Options amounts to 10,199,730
Shares, representing 5.05% of the total issued Shares immediately following the completion of
the Global Offering (without taking into account any Shares which may be allotted and issued
pursuant to the exercise of the Pre-IPO Share Options).
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-27 –


--- page 500 ---
The table below sets out the details of Options granted to all participants under the
Pre-IPO Share Option Plan:
Name Address
Number
of Shares
under the
Options
granted (1) Date of grant Option period
Approximate
percentage of issued
Shares immediately
after completion of
the Global
Offering (2)
Director
Jia Hui ( ༠౉) Changjiu Building,
No. 99
Shigezhuang Road,
Chaoyang District,
Beijing
500,000 March 7, 2023 10 years from the
date of the grant
0.25%
Senior management (excluding that who is also Director)
Xu Zhengran (್) Changjiu Building,
No. 99
Shigezhuang Road,
Chaoyang District,
Beijing
430,000 March 7, 2023 10 years from the
date of the grant
0.21%
Wang Y uanbin ( ˮʩ੸) Changjiu Building,
No. 99
Shigezhuang Road,
Chaoyang District,
Beijing
360,000 March 7, 2023 10 years from the
date of the grant
0.18%
Tan Zhengyang ( ሔ͍ජ) Changjiu Building,
No. 99
Shigezhuang Road,
Chaoyang District,
Beijing
360,000 March 7, 2023 10 years from the
date of the grant
0.18%
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-28 –


--- page 501 ---
Name Address
Number
of Shares
under the
Options
granted (1) Date of grant Option period
Approximate
percentage of issued
Shares immediately
after completion of
the Global
Offering (2)
Other grantees
Zeng Weihai ( ಀၪऎ) Changjiu Building,
No. 99
Shigezhuang Road,
Chaoyang District,
Beijing
600,000 March 7, 2023 10 years from the
date of the grant
0.30%
Wang Cong ( ˮᑋ) Room 102, Unit 3,
Building 515,
Jinsong Fifth Zone,
Chaoyang District,
Beijing
384,300 March 7, 2023 10 years from the
date of the grant
0.19%
Dou Dayong (ۇNo. 35, Dahongmen
West Road, Fengtai
District, Beijing
363,000 March 7, 2023 10 years from the
date of the grant
0.18%
Zhang Y exi ( ੵ⮶᷊) Changjiu Building,
No. 99
Shigezhuang Road,
Chaoyang District,
Beijing
360,000 March 7, 2023 10 years from the
date of the grant
0.18%
Feng Lanhui ( ඹᚆ౉) Qianyanzi Village,
Niulanshan Town,
Shunyi District,
Beijing
300,000 March 7, 2023 10 years from the
date of the grant
0.15%
Cao Guoqing ( ૎਷ᅅ) No. 237, Xiuying
District, Haikou,
Hainan Province
299,475 March 7, 2023 10 years from the
date of the grant
0.15%
Li Linkai (௱) Room 7, Unit 17,
Building 1,
Qinggangwan
Community, Banan
District, Chongqing
299,475 March 7, 2023 10 years from the
date of the grant
0.15%
Zhao Wenchao ( Ⴛ˖൴) Baoli Shanjianqing
Community,
No. 20, Y ongwu
Road, Nanning,
Guangxi Province
299,475 March 7, 2023 10 years from the
date of the grant
0.15%
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-29 –


--- page 502 ---
Name Address
Number
of Shares
under the
Options
granted (1) Date of grant Option period
Approximate
percentage of issued
Shares immediately
after completion of
the Global
Offering (2)
Y ang Liao ( เ፱) Room 402,
Building 11, East
Area 1, Chaoxin
Jiayuan, Chaoyang
District, Beijing
299,475 March 7, 2023 10 years from the
date of the grant
0.15%
Li Chengzhi ( ҽϓқ) Qiuluyuan
Community,
Xibeiwang,
Haidian District,
Beijing
299,475 March 7, 2023 10 years from the
date of the grant
0.15%
Li Cao ( ҽ዁) Room 901, Unit 2,
Building 312,
Area C, Jinze
Homestead,
Dongba, Chaoyang
District, Beijing
288,225 March 7, 2023 10 years from the
date of the grant
0.14%
Guo Weiye ( ெ⑸⮶) No. 81, 12/F,
Hanzhuangzi Erli,
Fengtai District,
Beijing
288,225 March 7, 2023 10 years from the
date of the grant
0.14%
Zhang Mo (߲Room 203, Unit 2,
Building 36,
Songyuli,
Chaoyang District,
Beijing
288,225 March 7, 2023 10 years from the
date of the grant
0.14%
Jiang Lixiang (ͭୂ) Bowangyuan,
Bali Street, Guilin,
Guangxi Province
272,250 March 7, 2023 10 years from the
date of the grant
0.13%
Wang Shunjiang ( ˮන
Ϫ)
Room 101,
Building 68, No. 4
Ruijin Road,
Qinhuai District,
Nanjing,
Jiangsu Province
272,250 March 7, 2023 10 years from the
date of the grant
0.13%
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-30 –


--- page 503 ---
Name Address
Number
of Shares
under the
Options
granted (1) Date of grant Option period
Approximate
percentage of issued
Shares immediately
after completion of
the Global
Offering (2)
Zheng Hao ( ቍႴ) Room 102, Unit 1,
Building 4,
Beichenxianglu
Guanluyuan,
Wenquan Town,
Haidian District,
Beijing
270,000 March 7, 2023 10 years from the
date of the grant
0.13%
Gao Ying (ߵDongguan Guotong
Homestead,
Changping District,
Beijing
236,250 March 7, 2023 10 years from the
date of the grant
0.12%
Kong Min ( ˆઽ) No. 1, 8/F,
Building 7,
Fuxingmenwai
Street, Xicheng
District, Beijing
225,000 March 7, 2023 10 years from the
date of the grant
0.11%
Wang Qiang ( ˮ੶) Room 401, Unit 1,
No. 32, Cujin West
Street, Ganjingzi
District, Dalian
190,575 March 7, 2023 10 years from the
date of the grant
0.09%
Peng Chao ( ు൴) Room 702, Unit 2,
Building 11,
Caizhen
Homestead,
Qinghe Xiaoying,
Haidian District,
Beijing
189,000 March 7, 2023 10 years from the
date of the grant
0.09%
Y uan Chi (ཱུ) Room 602, Unit 3,
Building 39,
Y ard 11, Dongba
Middle Street,
Chaoyang District,
Beijing
189,000 March 7, 2023 10 years from the
date of the grant
0.09%
Zhang Pei ( ੵԽ) Xixin North Zone,
Shunyi District,
Beijing
120,780 March 7, 2023 10 years from the
date of the grant
0.06%
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-31 –


--- page 504 ---
Name Address
Number
of Shares
under the
Options
granted (1) Date of grant Option period
Approximate
percentage of issued
Shares immediately
after completion of
the Global
Offering (2)
Liu Mengmeng ( ᄎྫྷྫྷ) Room 1304, Unit 2,
Building 3, Area A,
Jinze Homestead,
Chaoyang District,
Beijing
120,780 March 7, 2023 10 years from the
date of the grant
0.06%
Y uan Y u (঺ρ) Room 1002,
Building 3,
Huafa Yiyuan
Community, No. 18
Beiyuan Road,
Chaoyang District,
Beijing
120,780 March 7, 2023 10 years from the
date of the grant
0.06%
Liang Xuebin ( ૑ኪⅳ) Room 1601,
Tower D,
Nanxi Building,
South Third Ring
Middle Road,
Fengtai District,
Beijing
115,290 March 7, 2023 10 years from the
date of the grant
0.06%
Wen Xianyi ( ˖ሬᆇ) Room 602, Unit 1,
Building 11,
Area 2, Zhaoshang
Duhuiwan,
Nanshao Town,
Changping District,
Beijing
108,000 March 7, 2023 10 years from the
date of the grant
0.05%
Chen Guang ( ௓Έ) Room 202, Unit 1,
Building 3,
Y ard 12,
Tayuan Hutong
Deshengmenwai,
Xicheng District,
Beijing
108,000 March 7, 2023 10 years from the
date of the grant
0.05%
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-32 –


--- page 505 ---
Name Address
Number
of Shares
under the
Options
granted (1) Date of grant Option period
Approximate
percentage of issued
Shares immediately
after completion of
the Global
Offering (2)
Liu Chuntao (ᏹ) Section A, Guiyuan
Nanli, Yizhuang
Development Zone,
Daxing District,
Beijing
100,650 March 7, 2023 10 years from the
date of the grant
0.05%
Zhang Mei ( ੵૠ) Room 809, Unit 3,
Building 2, Upper
East Street Area,
No. 2811
Dongsheng Street,
Erdao District,
Changchun, Jilin
Province
100,650 March 7, 2023 10 years from the
date of the grant
0.05%
Wang Sheng ( ˮ௷) Room 10, Unit 2,
Building 5, Meihao
Homestead,
No. 180
Airport Road,
Shuangliu District,
Chengdu, Sichuan
Province
100,650 March 7, 2023 10 years from the
date of the grant
0.05%
Zhang Shuqin ( ੵૺೞ) Room 502, Unit 2,
Building 35,
Lianxinyuan,
Changying Town,
Chaoyang District,
Beijing
100,650 March 7, 2023 10 years from the
date of the grant
0.05%
Zang Y anyan (ܗַRoom 302,
Building 9, Area 1,
Mingjia Garden,
Beiqijia Town,
Changping District,
Beijing
100,650 March 7, 2023 10 years from the
date of the grant
0.05%
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-33 –


--- page 506 ---
Name Address
Number
of Shares
under the
Options
granted (1) Date of grant Option period
Approximate
percentage of issued
Shares immediately
after completion of
the Global
Offering (2)
Dong Xiao ( ໨ᖋ) Room 202, Unit 2,
Building 34,
East Area, Jinshui
Homestead, Liulihe
Cement Factory,
Fangshan District,
Beijing
96,075 March 7, 2023 10 years from the
date of the grant
0.05%
Cui Ronghua (ڀRoom 70,
Building 12,
Y ard 1, Y ulin
South Road,
Zhengdong New
District,
Zhengzhou, Henan
Province
96,075 March 7, 2023 10 years from the
date of the grant
0.05%
Wang Si ( ˮෛ) Room 501, Unit 3,
Building 8,
Chaijiawan,
Chaoyang District,
Beijing
96,075 March 7, 2023 10 years from the
date of the grant
0.05%
Na Weihan ( ԟᙯᖍ) Room 2, Unit 1,
Building 4, No. 21
Binhe Xili,
Huangcun Town,
Daxing District,
Beijing
96,075 March 7, 2023 10 years from the
date of the grant
0.05%
Pang Xiaopeng ( ᕼ⓶ᘄ) Room 502,
Building 2,
Huangtingzi
Community,
Beijing
96,075 March 7, 2023 10 years from the
date of the grant
0.05%
Li Y anming ( ҽᝣთ) Room 219, Area C,
Beipiao Art Base,
Fifth Ring Road,
Chaoyang District,
Beijing
96,075 March 7, 2023 10 years from the
date of the grant
0.05%
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-34 –


--- page 507 ---
Name Address
Number
of Shares
under the
Options
granted (1) Date of grant Option period
Approximate
percentage of issued
Shares immediately
after completion of
the Global
Offering (2)
Ran Maojun (ё) Jinju Homestead,
Beijing
96,075 March 7, 2023 10 years from the
date of the grant
0.05%
Shi Dagang (࡝Room 801, Unit 3,
Building 27,
Phase 1, Shouzuo
Y uyuan, No. 7
Guanghe Street,
Daxing District,
Beijing
96,075 March 7, 2023 10 years from the
date of the grant
0.05%
Wang Shuai (܏Room 1602, Unit 1,
Building 24,
Tianlang Lanhushu
Community, Y anta
District, Xi’an,
Shanxi Province
96,075 March 7, 2023 10 years from the
date of the grant
0.05%
Hou Li (ɢ) Room 301, Unit 3,
Building 2,
Hongyan Road
Community,
Chaoyang District,
Beijing
91,500 March 7, 2023 10 years from the
date of the grant
0.05%
Li Y an ( ҽዲ) Room 1402, Unit 2,
Building 3,
Phase 1,
Haitian Xingfu
Tiandi, Dunkou
Community,
Caidian District,
Wuhan
91,500 March 7, 2023 10 years from the
date of the grant
0.05%
Wang Y unfeng ( ˮථቜ) No. 1, Northwest
Building, No. 42
Picai Hutong,
Xicheng District,
Beijing
91,500 March 7, 2023 10 years from the
date of the grant
0.05%
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-35 –


--- page 508 ---
Notes:
(1) The Options were granted to the participants at nil consideration, and the per share exercise price of the
Options granted was RMB6.67.
(2) The above table assumes that the Pre-IPO Share Options are not exercised. On every vesting date, the
underlying Shares in respect of the Options may be vested in the participants in accordance with the vesting
schedule as disclosed in sub-paragraph (e) above, subject to fulfilment of the performance target set by the
Board and terms and conditions as determined by the Board and reflected in the Share Option Agreement.
Save and except as set out above, no other Options have been granted or agreed to be
granted by our Company under the Pre-IPO Share Option Plan. No further Options may be
granted by our Company under the Pre-IPO Share Option Plan after the Listing.
As of the Latest Practicable Date, save as the Options to subscribe for 600,000 Shares
granted to Zeng Weihai, 96,075 Shares granted to Li Y anming, 225,000 Shares granted to Kong
Min and 120,780 Shares granted to Liu Mengmeng had been forfeited following their
resignation, the remaining Options to subscribe for 9,157,875 Shares were not exercised and
remained outstanding. Assuming full vesting and exercise of the outstanding Pre-IPO Share
Options, the shareholding percentage of our Shareholders immediately following the Listing
would be diluted by approximately 4.33% as calculated based on 211,317,875 Shares then in
issue and the dilution effect on our earnings per Share would be 4.33%.
(l) Ranking of Shares
The Shares to be allotted and issued upon the exercise of an Option shall be identical to
the then existing issued shares of our Company and subject to all the provisions of the
Memorandum and Articles for the time being in force and will rank pari passu with the other
fully paid Shares in issue on the date the name of the participant is registered on the register
of members of our Company or if that date falls on a day when the register of members of our
Company is closed, the first day of the re-opening of the register of members, save that the
participant shall not have any voting rights, or rights to participate in any dividends or
distributions (including those arising on a liquidation of our Company) declared or
recommended or resolved to be paid to the Shareholders on the register on a date prior to such
registration.
(m) Amendment and Termination
Subject to provisions of the Articles, the Board may amend, alter or discontinue the Share
Option Plan, but no amendment, alteration, or discontinuation shall be made that would impair
the rights of a participant under any Option theretofore granted without such participant’s
consent.
The Board may amend the terms of any Option theretofore granted, prospectively or
retroactively, but no such amendment shall impair the rights of any participant without his or
her consent.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-36 –


--- page 509 ---
E. OTHER INFORMATION
1. Estate Duty
Our Directors have been advised that no material liability for estate duty is likely to fall
on our Company or any of our subsidiaries.
2. Litigation
During the Track Record Period and up to the Latest Practicable Date, save as disclosed
in “Business—Legal Proceedings and Compliance—Legal Proceedings” in this prospectus and
so far as our Directors are aware, no litigation or claim of material importance (to our Group’s
financial condition or results of operation) is pending or threatened against any member of our
Group.
3. Joint Sponsors
The Joint Sponsors have made an application on our behalf to the Stock Exchange for the
listing of, and permission to deal in, the Shares in issue and the Shares to be issued as
mentioned in this prospectus (including the additional Shares which may fall to be issued
pursuant to the exercise of options granted or to be granted under the Pre-IPO Share Option
Scheme).
As members of the sponsor group (as defined in the Listing Rules) of CITIC Securities
(Hong Kong) Limited have current business relationships with the Group, CITIC Securities
(Hong Kong) Limited does not satisfy the independence criteria applicable to sponsor set out
in Rule 3A.07 of the Listing Rules.
ICBC International Capital Limited satisfies the independence criteria applicable to
sponsor set out in Rule 3A.07 of the Listing Rules.
The sponsor fee payable to the Joint Sponsors by our Company is US$800,000 in total.
4. Preliminary Expenses
The preliminary expenses incurred by our Company amount to approximately
RMB18,900.
5. Promoter
We do not have any promoter for the purpose of the Listing Rules. 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 promoter in
connection with the Global Offering and the related transactions described in this prospectus.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
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6. Taxation of Holders of Shares
(a) Hong Kong
The sale, purchase and transfer of Shares registered with our Hong Kong branch
register of members will be subject to Hong Kong stamp duty.
(b) Cayman Islands
There is no stamp duty payable in the Cayman Islands on transfers of shares of
Cayman Islands companies save for those which hold interests in land in the Cayman
Islands.
(c) Consultation with professional advisors
Intending holders of the Shares are recommended to consult their professional
advisors if they are in any doubt as to the taxation implications of subscribing for,
purchasing, holding or disposing of or dealing in the Shares. It is emphasized that none
of our Company, our Directors or the other parties involved in the Global Offering will
accept responsibility for any tax effect on, or liabilities of, holders of Shares resulting
from their subscription for, purchase, holding or disposal of or dealing in the Shares or
exercise of any rights attaching to them.
7. Qualification of Experts
The following are the qualifications of the experts who have given opinion or advice
which are contained in this prospectus:
Name Qualifications
CITIC Securities (Hong Kong)
Limited
Licensed to conduct Type 4 (advising on securities)
and Type 6 (advising on corporate finance) of the
regulated activities under the SFO
ICBC International Capital
Limited
Licensed to conduct Type 1 (dealing in securities),
Type 4 (advising on securities) and Type 6
(advising on corporate finance) of the regulated
activities as defined under the SFO
KPMG Certified Public Accountants
Public Interest Entity Auditor registered in
accordance with the Accounting and Financial
Reporting Council Ordinance
APPENDIX IV STATUTORY AND GENERAL INFORMATION
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Name Qualifications
JunHe LLP PRC legal advisors to our Company
Conyers Dill & Pearman Cayman Islands attorneys-at-law
China Insights Industry
Consultancy Limited
Industry consultant
Jiangsu Shanhe Law Firm Litigation lawyer to our Company as to the 2023
Changchun Lawsuit
8. Consents of Experts
Each of CITIC Securities (Hong Kong) Limited, ICBC International Capital Limited,
KPMG, JunHe LLP , Conyers Dill & Pearman, China Insights Industry Consultancy Limited
and Jiangsu Shanhe Law Firm has given and has not withdrawn its consent to the issue of this
prospectus with the inclusion of its view, report and/or letter and/or legal opinion (as the case
may be) and references to its name included herein in the form and context in which it
respectively appears.
None of the experts named above has any shareholding interest in our Company or any
of our subsidiaries or the right (whether legally enforceable or not) to subscribe for or to
nominate persons to subscribe for securities in our Company or any of our subsidiaries.
9. Indemnities
Changjiu Industrial has entered into an indemnity undertaking on April 26, 2023 in favor
of Shanghai Bozhong and Changjiu Jinfu to give indemnities in connection with, among others,
any losses arising from administrative penalties or dismantling of properties imposed by
relevant government authorities for failure to provide title certificate of the leased property by
Changjiu Industrial as described in “Business—Properties.”
10. Bilingual Prospectus
The English language and Chinese language versions of this prospectus are being
published separately in reliance on the exemption provided in section 4 of the Companies
Ordinance (Exemption of Companies and Prospectuses from Compliance with Provisions)
Notice (Chapter 32L of the Laws of Hong Kong).
APPENDIX IV STATUTORY AND GENERAL INFORMATION
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11. Binding Effect
This prospectus shall have the effect, if an application is made in pursuance hereof, of
rendering all persons concerned bound by all of the provisions (other than the penal provisions)
of sections 44A and 44B of the Companies (Winding Up and Miscellaneous Provisions)
Ordinance so far as applicable.
12. Miscellaneous
(a) Save as disclosed in the sections headed “History, Reorganization and Corporation
Structure,” “Underwriting” and “Structure of the Global Offering” in this
prospectus, within the two years immediately preceding the date of this prospectus:
(i) no share or loan capital of our Company or any member of our Group had been
issued or agreed to be issued or proposed to be fully or partly paid either for
cash or a consideration other than cash;
(ii) no commissions, discounts, brokerages or other special terms had been granted
or agreed to be granted in connection with the issue or sale of any share or loan
capital of our Company or any member of our Group; and
(iii) no commission had been paid or payable for subscription, agreeing to
subscribe, procuring subscription or agreeing to procure subscription of any
share in our Company or any member of our Group.
(b) Save as disclosed in the section headed “—D. Pre-IPO Share Incentive Plans—2.
Pre-IPO Share Option Plan” in this appendix and “Structure of the Global Offering,”
no share or loan capital of our Company or any member of our Group had been
under option or agreed conditionally or unconditionally to be put under option.
(c) There are no founder, management or deferred shares, convertible debt securities
nor any debentures in our Company or any member of our Group.
(d) Our Directors confirm that there has been no material adverse change in the
financial or trading position of our Group since June 30, 2023 (being the date to
which the latest audited consolidated financial statements of our Group were made
up), up to the date of this prospectus.
(e) There has not been any interruption in the business of our Group which may have
or has had a significant effect on the financial position of our Group in the 12
months preceding the date of this prospectus.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
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(f) Our principal register of members will be maintained by our principal registrar,
Harneys Fiduciary (Cayman) Limited, in the Cayman Islands and our Hong Kong
register of members will be maintained by our Hong Kong share registrar, Tricor
Investor Services Limited, in Hong Kong. All transfers and other documents of title
of the Shares must be lodged for registration with and registered by our share
register in Hong Kong.
(g) All necessary arrangements have been made to enable the Shares to be admitted to
CCASS.
(h) No company within our Group is listed on any stock exchange or traded on any
trading system at present, and our Group is not seeking or proposing to seek any
listing of, or permission to deal in, the Share or loan capital of our Company on any
other stock exchange.
(i) There is no arrangement under which future dividends are waived or agreed to be
waived.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
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DOCUMENTS DELIVERED TO THE REGISTRAR OF COMPANIES IN HONG KONG
The documents attached to the copy of this prospectus delivered to the Registrar of
Companies in Hong Kong for registration were, among other documents:
(a) the written consents referred to in the section headed “Statutory and General
Information—E. Other Information—7. Qualification of Experts” in Appendix IV to
this prospectus; and
(b) a copy of each of the material contracts referred to in the section headed “Statutory
and General Information—B. Further Information about Our Business—1. Summary
of Material Contracts” in Appendix IV to this prospectus.
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.99digtech.com during a period
of 14 days from the date of this prospectus:
(a) the Memorandum and the Articles of Association;
(b) the Accountants’ Report of our Group prepared by KPMG, the texts of which are set
out in Appendix I to this prospectus;
(c) the report on the unaudited pro forma financial information of our Group prepared
by KPMG, the text of which is set forth in Appendix II to this prospectus;
(d) the audited consolidated financial statements of our Group for the financial years
ended December 31, 2020, 2021, 2022 and the six months ended June 30, 2023;
(e) the PRC legal opinion issued by JunHe LLP on PRC law, in respect of certain
general corporate matters of our Group and the property interests of our Group;
(f) the letter of advice prepared by Conyers Dill & Pearman, our legal advisor on
Cayman Islands law, summarizing certain aspects of the Cayman Islands company
law referred to in Appendix III to this prospectus;
(g) the report issued by China Insights Industry Consultancy Limited, from which
information in the section headed “Industry Overview” of this prospectus is
extracted;
APPENDIX V DOCUMENTS DELIVERED TO THE REGISTRAR OF
COMPANIES IN HONG KONG AND ON DISPLAY
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(h) the legal opinions issued by Jiangsu Shanhe Law Firm, our litigation lawyer, the
view of which is contained in the section headed “Business” of this prospectus;
(i) the written consents referred to in the section headed “Statutory and General
Information—E. Other Information—8. Consents of Experts” in Appendix IV to this
prospectus;
(j) the material contracts referred to in the section headed “Statutory and General
Information—B. Further Information about Our Business—1. Summary of Material
Contracts” in Appendix IV to this prospectus;
(k) the service contracts and the 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. Particulars of Directors’
Service Contracts and Letters of Appointment” in Appendix IV to this prospectus;
(l) the Cayman Companies Act.; and
(m) the rules of Pre-IPO Restricted Share Plan and Pre-IPO Share Option Plan.
APPENDIX V DOCUMENTS DELIVERED TO THE REGISTRAR OF
COMPANIES IN HONG KONG AND ON DISPLAY
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GLOBAL OFFERING
长久股份有限公司
Changjiu Holdings Limited
(Incorporated in the Cayman Islands with limited liability)
Stock Code : 6959
Joint Sponsors, Overall Coordinators, Joint Global Coordinators, Joint Bookrunners and Joint Lead Managers
长久股份有限公司
Changjiu Holdings Limited
Joint Bookrunners and Joint Lead Managers
