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夢金園黃金珠寶集團股份有限公司
MOKINGRAN JEWELLERY GROUP CO., LTD.
夢金園黃金珠寶集團股份有限公司
MOKINGRAN JEWELLERY GROUP CO., LTD.
Sole Sponsor, Sponsor-Overall Coordinator, Sole Global Coordinator, Joint Bookrunner and Joint Lead Manager
GLOBAL
OFFERING
Stock Code: 2585
(A joint stock company incorporated in the People’s Republic of China with limited liability)


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IMPORTANT: If you are in any doubt about any of the contents of this p rospectus, you should obtain independent professional advice.
MOKINGRAN JEWELLERY GROUP CO., LTD.
夢 金 園 黃 金 珠 寶 集 團 股 份 有 限 公 司
(A joint stock company incorporated in the People ’s Republic of China with limited liability)
GLOBAL OFFERING
Number of Offer Shares under
Global Offering
: 43,956,800 H Shares (subject to the
Over-allotment Option)
Number of Hong Kong Offer Shares : 4,395,800 H Shares (subject to reallocation)
Number of International Offer Shares : 39,561,000 H Shares (subject to reallocation
and the Over-allotment Option)
Maximum Offer Price : HK$14.40 per H Share, plus brokerage of
1.0%, SFC transaction levy of 0.0027%,
AFRC transaction levy of 0.00015% and the
Stock Exchange trading fee of 0.00565%
(payable in full on application in Hong Kong
Dollars, subject to refund)
Nominal Value : RMB1.00 per Offer Share
Stock Code : 2585
Sole Sponsor, Sponsor-Overall Coordinator, Sole Global Coordinator,
Joint Bookrunner and Joint Lead Manager
Joint Bookrunners and Joint Lead Managers
(in alphabetical order)
Hong Kong Exchanges and Clearing Limited, The Stock Exchange of Hong Kong Limited and Hong Kong Securities Clearing Company Limited take no responsib ility for the
contents of this prospectus, make no representation as to its accuracy or completeness, and expressly disclaim any liability whatsoever for any loss howsoever arising from or
in 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 VIII ‘‘Documents Delivered to the Registrar of Companies and Available on Display ’’
to this prospectus, has been registered by the Registrar of Companies in H ong Kong as required by section 342C of the Companies (Winding Up and Miscella neous
Provisions) Ordinance (Chapter 32 of the Laws of Hong Kong). The Securities and Futures Commission and the Registrar of Companies in Hong Kong take no r esponsibility
for the contents of this prospectus or any other document referred to above.
The Offer Price is expected to be fixed by agreement between the Sponsor-Overa ll Coordinator and us on the Price Dete rmination Date. The Price Determi nation Date is
expected to be on or before Wednesday, November 27, 2024 and, in any event, not later than 12:00 noon on Wednesday, November 27, 2024. The Offer Price wil l be not
more than HK$14.40 and is currently expected to be not less than HK$12.00. Applicants for Hong Kong Offer Shares are required to pay, on application, th e maximum offer
price of HK$14.40 for each Hong Kong Offer Share together with brokerage of 1. 0%, SFC transaction levy of 0.0027%, Stock Exchange trading fee of 0.0056 5% and AFRC
transaction levy of 0.00015%, subject to refund if the Offer Price should be lower than HK$14.40. If, for any reason, the Sponsor-Overall Coordinator and us are unable to
reach an agreement on the Offer Price by 12:00 noon on Wednesday, Nov ember 27, 2024, the Global Offering will not proceed and will lapse.
We are established, and a majority of our business is located, in the PRC. Po tential investors should be aware of the differences in the legal, economic and financial systems
between the PRC and Hong Kong and that there are different risk factors rela ting to investment in PRC-incorporate d businesses. Potential investors s hould also be aware that
the regulatory framework in the PRC is different from the regulatory frame work in Hong Kong and should take into consideration the different market na ture of the H Shares.
Such differences and risk factors are set out in ‘‘Risk Factors ’’, ‘‘Appendix V — Summary of Principal Laws and Regulations’’ and ‘‘Appendix VI — Summary of Articles of
Association ’’.
The obligations of the Hong Kong Underwriters under the Hong Kong Underwriting Agreement to subscribe for, and to p rocure applicants for the subscrip tion for,
the Hong Kong Offer Shares, are subject to termination by the Sponsor-Overa ll Coordinator if certain grounds arise prior to 8:00 a.m. on the day that tr ading in the
H Shares commences on the Stock Exchange. Such grounds are set out in the section headed ‘‘Underwriting ’’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 are
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 ( http://www.mokingran.com ). If you require a printed copy of
this prospectus, you may download and print from the website addresses above.
November 21, 2024
IMPORTANT


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IMPORTANT NOTICE TO INVESTORS
OF HONG KONG OFFER SHARES
FULLY ELECTRONIC APPLICATION PROCESS
We have adopted a fully electronic application process for th e Hong Kong Public Offering.
We will not provide printed copies of this prospectus 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 http://
www.mokingran.com .
To apply for the Hong Kong Offer Shares, you may:
(1) apply online via the White Form eIPO service at
www.eipo.com.hk ; or
(2) apply electronically through the HKSCC EIPO channel and cause HKSCC Nominees to
apply on your behalf by instructing your broker or custodian who is a HKSCC Participant
to give electronic application instructions via HKSCC ’s FINI system to apply for the Hong
Kong Offer Shares on your behalf.
We will not provide any physical channels to accept any application for the Hong Kong Offer
Shares by the public. The contents of the electronic version of this prospectus are identical to the
printed prospectus as registered with the Registrar of Companies in Hong Kong pursuant to
Section 342C of the Companies (Winding Up and Miscellaneous Provisions) Ordinance.
If you are an intermediary, broker or agent, please remind your customers, clients or
principals, as applicable, that this prospectus is available online at the website addresses stated
above.
Please refer to the section headed ‘‘How to Apply for the Hong Kong Offer Shares ’’in this
prospectus for further details on the procedures through which you can apply for the Hong Kong
Offer Shares electronically.
IMPORTANT


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Your application through the White Form eIPO service or the HKSCC EIPO service must be
made for a minimum of 200 Hong Kong Offer Shares and in multiples of that number of Hong
Kong Offer Shares as set out in the table below.
No application for any other number of Hong Kong Offer Shares will be considered and such
an application is liable to be rejected.
If you are applying through the White Form eIP O service, you may refer to the table below
for the amount payable for the number of Hong Kong Offer Shares you have selected. You must
pay the respective amount payable on application in full upon application for Hong Kong Offer
Shares.
If you are applying through the HKSCC EIPO ch annel, 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.
No. of
Hong Kong
Offer Shares
applied for
Amount payable (2)
on application
No. of
Hong Kong
Offer Shares
applied for
Amount payable (2)
on application
No. of
Hong Kong
Offer Shares
applied for
Amount payable (2)
on application
No. of
Hong Kong
Offer Shares
applied for
Amount payable (2)
on application
HK$ HK$ HK$ HK$
200 2,909.04
400 5,818.10
600 8,727.13
800 11,636.18
1,000 14,545.22
1,200 17,454.28
1,400 20,363.31
1,600 23,272.35
1,800 26,181.40
2,000 29,090.45
3,000 43,635.67
4,000 58,180.90
5,000 72,726.12
6,000 87,271.34
7,000 101,816.57
8,000 116,361.79
9,000 130,907.01
10,000 145,452.25
20,000 290,904.48
30,000 436,356.72
40,000 581,808.95
50,000 727,261.20
60,000 872,713.45
70,000 1,018,165.68
80,000 1,163,617.92
90,000 1,309,070.15
100,000 1,454,522.40
200,000 2,909,044.80
300,000 4,363,567.20
400,000 5,818,089.60
500,000 7,272,612.00
600,000 8,727,134.40
700,000 10,181,656.80
800,000 11,636,179.20
900,000 13,090,701.60
1,000,000 14,545,224.00
1,250,000 18,181,530.00
1,500,000 21,817,836.00
1,750,000 25,454,142.00
2,000,000 29,090,448.00
2,197,800
(1) 31,967,493.30
Notes:
(1) This is the maximum number of Hong Kong Offer Shares you may apply for.
(2) The amount payable is inclusive of brokerage, SFC transaction levy, the Hong Kong Stock Exchange trading fee and
AFRC transaction levy. If your application is successful, brokerage will be paid to the Exchange Participants (as
defined in the Listing Rules) and the SFC transaction levy, the Stock Exchange trading fee and AFRC transaction
levy are paid to the Stock Exchange (in the case of the SFC transaction levy, collected by the Stock Exchange on
behalf of the SFC; and in the case of the AFRC transaction levy, collected by the Stock Exchange on behalf of the
AFRC).
IMPORTANT


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If there is any change to the expected timetable of the Hong Kong Public Offering, we will
issue an announcement to be published on the website of the Hong Kong Stock Exchange at
www.hkexnews.hk and our website at http://www.mokingran.com .
Hong Kong Public Offering commences . . . . . . . . . . . . . . 9:00 a.m. on Thursday, November 21, 2024
Latest time to complete applications under
the White Form eIPO service through the designated
website at www.eipo.com.hk (2) ................... 1 1 : 3 0 a . m . o n T u e s d a y , N o v e m b e r 2 6 , 2 0 2 4
Application lists open (3) ........................... 1 1 : 4 5 a . m . o n T u e s d a y , N o v e m b e r 2 6 , 2 0 2 4
Latest time (a) to complete payment of White Form eIPO
applications by effecting internet banking transfer(s) or
PPS payment transfer(s) and (b) apply through
the HKSCC EIPO channel (4) .................... 1 2 : 0 0 n o o n o n T u e s d a y , N o v e m b e r 2 6 , 2 0 2 4
If you are instructing your broker or custodian who is a HKSCC Participant will submit
electronic application instruction(s) on your behalf through HKSCC ’s FINI system in accordance
with your instruction, you are advised to contact your broker or custodian for the earliest and latest
time for giving such instructions, as this may vary by broker or custodian.
Application lists close
(3) ........................... 1 2 : 0 0 n o o n o n T u e s d a y , N o v e m b e r 2 6 , 2 0 2 4
Expected Price Determination Date (5) .......................... W e d n e s d a y , N o v e m b e r 2 7 , 2 0 2 4
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 allocation of the Hong Kong Offer Shares
to be published on the website of the Stock Exchange
at
www.hkexnews.hk and our website
at http://www.mokingran.com (6) ........................ a to rb e f o r e1 1 : 0 0p . m .o n
Thursday, November 28, 2024
EXPECTED TIMETABLE (1)
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Results of allocations in the Hong Kong Public Offering
(with successful applicants ’ identification document numbers,
where appropriate) to be made available through a variety of
channels as described in the section headed ‘‘How to Apply for
the Hong Kong Offer Shares — Publication of Results ’’including
. on the website of the Stock Exchange at
www.hkexnews.hk and our website at
http://www.mokingran.com (6) r e s p e c t i v e l y................... a to rb e f o r e1 1 : 0 0p . m .
on Thursday, November 28, 2024
. on the designated results of allocation website at
www.iporesults.com.hk (alternatively:
www.eipo.com.hk/eIPOAllotment with a
‘‘search by ID ’’f u n c t i o n.................................. f r o m1 1 : 0 0p . m .o n
Thursday, November 28, 2024
to 12:00 midnight
on Wednesday, December 4, 2024
. from the allocation results telephone enquiry line by at
+852 2862 8555 between 9:00 a.m. and 6:00 p.m. . . . . . from Friday, November 29, 2024 to
Wednesday, December 4, 2024
(excluding Saturdays, Sundays and
public holidays in Hong Kong)
Despatch of H Share certificates in respect of
wholly or partially successful applications, or deposit
of H Share certificate into CCASS, on or before
(7) .............. T h u r s d a y , N o v e m b e r 2 8 , 2 0 2 4
Despatch of White Form e-Refund payment (8)
i n s t r u c t i o n s a n d r e f u n d c h e q u e s o n o r b e f o r e ....................... F r i d a y , N o v e m b e r 2 9 , 2 0 2 4
Dealings in H Shares on the Stock Exchange
e x p e c t e d t o c o m m e n c e a t ........................... 9 : 0 0 a . m . o n F r i d a y , N o v e m b e r 2 9 , 2 0 2 4
Notes:
(1) All dates and times refer to Hong Kong local time and dates unless otherwise stated.
(2) You will not be permitted to submit your application through the designated website at www.eipo.com.hk after
11:30 a.m. on the last day for making applications. If you have already submitted your application and obtained an
application reference number from the designated webs ite before 11:30 a.m., you will be permitted to continue the
application process (by completing payment of application monies) until 12:00 noon on the last day for making
applications, when the application lists close.
EXPECTED TIMETABLE (1)
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(3) If there is/are Bad Weather Signal(s) (as defined in the section headed ‘‘How to Apply for the Hong Kong Offer
Shares — Bad Weather Arrangements ’’in this prospectus) in force in Hong Kong at any time between 9:00 a.m. and
12:00 noon on Tuesday, November 26, 2024 the application lists will not open on that day. For further information,
please refer to the section headed ‘‘How to Apply for the Hong Kong Offer Shares — Bad Weather Arrangements ’’
in this prospectus.
(4) If you instruct your broker or custodian who is an HKSCC Pa rticipant to give electronic application instructions via
FINI to apply for the Hong Kong Offer Shares on your behalf, you should contact your broker or custodian for the
latest time for giving such instructions which may be different from the latest time as stated above.
(5) The Price Determination Date is expected to be on or before Wednesday, November 27, 2024. If, for any reason, the
Offer Price is not agreed on or before 12:00 noon on Wednesday, November 27, 2024, the Global Offering will not
proceed and will lapse.
(6) None of the websites or any of the information contained on the websites forms part of this prospectus.
(7) The H Share certificates will only become valid evidence of title at 8:00 a.m. on the Listing Date, which is expected
to be on or around Friday, November 29, 2024 provided that the Global Offering has become unconditional in all
respects at or before that time. Investors who trade H Shar es on the basis of publicly available allocation details
before the receipt of H Share certificates or before the H Share certificates become valid evidence of title do so
entirely at their own risk.
(8) Applicants being individuals who are eligible for pers onal collection may not authorise any other person to collect
on their behalf. If you are a corporate applicant which is eligible for personal collection, your authorised
representative must bear a letter of authorisation from your corporation stamped with your corporation ’s chop. Both
individuals and authorised representatives must produce evidence of identity acceptable to our H Share Registrar at
the time of collection.
Any uncollected H Share certificates and/or refund check s will be dispatched by ordinary post, at the applicants ’
risk, to the addresses specified in the relevant applications.
White Form e-Refund payment instructions/refund cheques w ill be issued for the applicants who have applied
through White Form eIPO service in respect of wholly or partially unsuccessful applications and in respect of wholly
or partially successful applications pursuant to the Hong K ong Public Offering if the final Offer Price is less than
the Maximum Offer Price paya ble per Offer Share on application. Part of the applicant ’s Hong Kong identity card
number or passport number, or, if the application is mad e by joint applicants, part of the Hong Kong identity card
number or passport number of the first-named applicant, provided by the applicant(s) may be printed on the refund
cheque, if any. Such data would also be transferred to a third party for refund purposes. Banks may require
verification of an applicant’ s Hong Kong identity card number or passpor t number before encashment of the refund
cheques. Inaccurate completion of an applicant ’s Hong Kong identity card number or passport number may
invalidate or delay encashment of the refund cheques.
Applicants who have applied through White Form eIPO service and paid their applications monies through single
bank accounts may have refund monies (if any) dispatched to the bank account in the form of White Form e-Refund
payment instructions. Applicants who have applied thr ough White Form eIPO service and paid their application
monies through multiple bank accounts may have refund moni es (if any) despatched to the address as specified in
their application instructions in the form of refund cheq ue(s) in favor of the applicant (or, in the case of joint
applications, the first-named applicant) by ordinary post at their own risk.
EXPECTED TIMETABLE (1)
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Further information is set out in the sections headed ‘‘How to Apply for Hong Kong Offer Shares — Despatch/
Collection of H Share Certificates and Refund of Application Monies ’’.
The above expected timetable is a summary only. You should read carefully the sections
headed ‘‘Underwriting ’’, ‘‘Structure of the Global Offering ’’and ‘‘How to Apply for the Hong
Kong Offer Shares ’’for details relating to the structure of the Global Offering and the
conditions and procedures for application for the Hong Kong Offer Shares.
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 soli citation of an offer to buy any security other
than the Hong Kong Offer Shares offered by th is 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 t o restrictions and may not be made except as
permitted under the applicable securities laws of such jurisdictions pursuant to registration
with or authorization by the relevant securities regulatory authorities or an exemption
therefrom.
You should rely only on the information contained in this prospectus to make your
investment decision. We have not authorized anyone to provide you with information that is
different from what is contained in this prospectus. Any information or representation not
made in this prospectus must not be relied on by you as having been authorized by us, the Sole
Sponsor, the Sponsor-Overall Coordinator, the Capital Market Intermediaries, the Sole Global
Coordinator, the Joint Bookru nners, the Joint Lead Managers, any of the Underwriters, any
of our or their respective directors, officers or representatives, or any other person or party
involved in the Global Offering.
EXPECTED TIMETABLE ...................................................... i
CONTENTS .................................................................... v
SUMMARY ..................................................................... 1
DEFINITIONS .................................................................. 3 8
GLOSSARY OF TECHNICAL TERMS .......................................... 5 2
FORWARD-LOOKING STATEMENTS .......................................... 5 4
RISK FACTORS ................................................................ 5 7
WAIVERS FROM STRICT COMPLIANCE WITH THE LISTING RULES ........ 9 3
INFORMATION ABOUT THIS PROSPECTUS AND
THE GLOBAL OFFERING ................................................... 9 9
DIRECTORS, SUPERVISORS AND PARTIES INVOLVED IN
THE GLOBAL OFFERING ................................................... 1 0 5
CORPORATE INFORMATION ................................................. 1 1 2
INDUSTRY OVERVIEW ........................................................ 1 1 5
CONTENTS
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REGULATORY OVERVIEW .................................................... 1 3 0
HISTORY, DEVELOPMENT AND CORPORATE STRUCTURE .................. 1 5 4
BUSINESS ...................................................................... 1 9 2
RELATIONSHIP WITH OUR CONTROLLING SHAREHOLDERS ............... 3 8 8
CONNECTED TRANSACTIONS ................................................ 3 9 9
DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT ................... 4 0 1
SUBSTANTIAL SHAREHOLDERS .............................................. 4 2 0
SHARE CAPITAL .............................................................. 4 2 2
CORNERSTONE INVESTORS .................................................. 4 2 5
FINANCIAL INFORMATION ................................................... 4 3 6
FUTURE PLANS AND USE OF PROCEEDS ..................................... 5 2 0
UNDERWRITING .............................................................. 5 3 4
STRUCTURE OF THE GLOBAL OFFERING ................................... 5 4 8
HOW TO APPLY FOR THE HONG KONG OFFER SHARES .................... 5 5 9
APPENDIX I — ACCOUNTANTS’ REPORT ................................. I - 1
APPENDIX II — UNAUDITED PRO FORMA FINANCIAL INFORMATION . . . II-1
APPENDIX III — PROPERTY VALUATION REPORT ......................... III-1
APPENDIX IV — TAXATION AND FOREIGN EXCHANGE ................... I V - 1
APPENDIX V — SUMMARY OF PRINCIPAL LAWS AND REGULATIONS . . . V-1
APPENDIX VI — SUMMARY OF ARTICLES OF ASSOCIATION .............. V I - 1
APPENDIX VII — STATUTORY AND GENERAL INFORMATION ............. V II-1
APPENDIX VIII — DOCUMENTS DELIVERED TO THE REGISTRAR
OF COMPANIES AND AVAILABLE ON DISPLAY ........ V III-1
CONTENTS
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This summary aims to give you an overview of the i nformation contained in this prospectus.
As this is a summary, it does not contain all the information that may be important to you. You
should read this prospectus in its entirety before you decide to invest in the H Shares. There are
risks associated with any investment. Some of t he risks involved in investing in the H Shares are
set out in the ‘‘Risk Factors ’’section of this prospectus. You should read that section carefully
before you decide to invest in the H Shares. There are unique challenges, risks and uncertainties
associated with investing in companies like ours. Your investment decision should be made in
light of these considerations.
OVERVIEW
We are a gold jewellery Original Brand Manufacturer ( ‘‘OBM’’), focusing on markets in third
and lower-tier cities in the PRC. According to Frost & Sullivan, as of the Latest Practicable Date,
we were one of the very few with an operation that encompasses key stages of the gold jewellery
industry, from raw material sourcing and purification, R&D, product design, manufacturing to
retailing through our diversified sales network. O ver the years, we grew our business leveraging the
ability to integrate design and production capabilities, delivering high quality gold jewellery
products that appeals to our target consumers. With high-purity gold jewellery products at our core,
we have established a diversified sales network, through which we gain insight into market trends,
which in turn contributes to product design and development catering to specific consumer
demands, forming a positive feedback loop. We have been committed to such a proposition since
inception, which we believe is also the fou ndation to our success. Our founder, Mr. Wang
Zhongshan, gained accolades include being named as the honorable person in the gold and
jewellery industry for 30 years ( 黃金珠寶行業30年風雲人物‘‘功勛人物’’稱號).
Market Ranking
According to Frost & Sullivan, from 2018 to 2023, we were the only gold jewellery brand in
the PRC that had been ranked consecutively in the top five of both the ‘‘Top Ten Enterprises in
Gold Jewellery Processing Volume ’’ and the ‘‘Top Ten Enterprises in Gold Jewellery Sales
Revenue ’’by the China Gold Association. According to China Gold Association and Frost &
Sullivan, in 2023, we were ranked:
. third and fifth by gold processing volume and gold jewellery revenue, respectively,
amongst gold jewellery brands in the PRC; and
. third in terms of gold jewellery revenue (excl uding gold bullion) in third and lower tier
cities amongst gold jewellery brands in the PRC.
According to Frost & Sullivan, for the year ended December 31, 2023, our Group ranked fifth
and had a market share of 3.8% in the gold jewelle ry market amongst gold jewellery brands in the
PRC in terms of gold jewellery revenue.
SUMMARY
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Our Brand and Product Portfolio
Our brand is ‘‘ ’’and we are proud of our capability in producing high-purity gold
jewellery. High-purity gold is an integral part of our brand positioning and our jewellery design
concept and we focus not only on the aesthetic appeal and trendiness of our gold jewellery
products, but also on the cultural and emotional s ignificance that they represent. Our commitment
to using only the finest materials and our attention to craftsmanship ensure our gold jewellery
continues to meet the expectations of our customers in terms of both quality and value.
Adhering to the four core product development principles of ‘‘lightness ( 輕), craftsmanship
(巧), refinement ( 精), and aesthetic ( 美)’’, we provide our customers and consumers with a
comprehensive portfolio of gold jewellery products that reflects the latest trends. In particular, we
pay close attention to our target customers ’ preferences for product types and materials under
different scenarios. Additionally, we also offer gold bullion as part of our product portfolio. During
the Track Record Period, the revenue we derived from the sales of gold bullion amounted to
RMB1,652.1 million, RMB442.2 million, RMB711.7 million and RMB1,103.8 million for the years
ended December 31, 2021, 2022 and 2023 and the six months ended June 30, 2024, respectively.
With our deep understanding in the gold jewellery market and our well-integrated design and
production capability, we have been able to continuously innovate and broaden our product
portfolio. Below sets forth a few of our signature product lines:
“Master Craftsman
Legend series —
The Master's Legacy”
‘‘The Delicates
series — Twinkle’’
The ‘‘Ancient prayers
for good fortune series
— Buddha’s blessings’’
The ‘‘Ancient prayers
for good fortune series
— The Unparalleled
Oriental Beauty’’Θෂӻΐy
Θෂ
ୂ•ӻΐy
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SUMMARY
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‘‘Master Craftsman
Legend series — Luck,
Wealth and Golden
Fortune’’
‘‘‘The Delicates
series — Cute Pets’’
The ‘‘Ancient prayers
for good fortune series
— Sign of Fortune’’
‘‘The Happily
Ever After series —
Little Fortune’’
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τ
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Business Model (Simplified)
Our simplified principal business model
Self-operated
direct service
centers
Provincial-
dealers
Franchisees
Trade-in gold from
franchisees and
provincial-dealers
Trade-in gold
from consumers
Procurement
Trade-in Production Sales Channel
Gold
exchange
and its
members
Commercial
banks for
gold loans
Gold
Self-operated
stores
Production
E-commerce
platforms
Online
consumers
Offline
consumers
Purify gold to a purity
of 999.9 and above
Trade-in gold
Our operation covers key stages of the gold jewellery industry, from raw material sourcing
and purification, R&D, product design, manufacturing to retailing through our diversified sales
network. We are committed to quality control in each stage. See ‘‘Business — Our Business
Model ’’in this prospectus for further details. For our key milestones, see ‘‘History, Development
and Corporate Structure — Our Key Milestones’’ for further details.
SUMMARY
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OUR SALES AND DISTRIBUTION NETWORK
We primarily sell our products to our customers through our franchise network and self-
operated stores. In addition, we also offer our products to our customers through online sales via e-
commerce platforms. The following table sets forth the breakdown of our revenue by distribution
channels during the Track Record Period:
Year ended December 31, Six months ended June 30,
2021 2022 2023 2023 2024
Revenue
Percentage
of revenue
Gross
profit
Gross
profit
margin Revenue
Percentage
of revenue
Gross
profit
Gross
profit
margin Revenue
Percentage
of revenue
Gross
profit
Gross
profit
margin Revenue
Percentage
of revenue
Gross
profit
Gross
profit
margin Revenue
Percentage
of revenue
Gross
profit
Gross
profit
margin
RMB ’000 % RMB ’000 % RMB ’000 % RMB ’000 % RMB ’000 % RMB ’000 % RMB ’000 % RMB ’000 % RMB ’000 % RMB ’000 %
(Unaudited)
Franchise network . . . . . . . . . 14,772,630 87.6 415,712 2.8 14,836,284 94.4 631,072 4.3 18,923,195 93.7 896,006 4.7 8,851,440 95.1 433,352 4.9 8,207,527 82.3 493,777 6.0
— Franchisees .......... 9,409,225 55.8 336,795 3.6 9,629,142 61.3 453,023 4.7 12,273,776 60.8 603,449 4.9 5,906,356 63.5 284,445 4.8 5,755,003 57.7 310,207 5.4
— Provincial-dealers ....... 5,363,405 31.8 78,917 1.5 5,207,142 33.1 178,049 3.4 6,649,419 32.9 292,557 4.4 2,945,084 31.6 148,907 5.1 2,452,524 24.6 183,570 7.5
E-commerce sales . . . . . . . . . 1,608,263 9.5 40,051 2.5 364,473 2.3 28,816 7.9 750,705 3.7 56,769 7.6 172,095 1.8 26,149 15.2 1,318,687 13.2 48,785 3.7
— Self-operated online
stores
(Note 1) (Note 2) .... 79,108 0.5 12,267 15.5 233,641 1.5 20,736 8.9 651,431 3.2 46,389 7.1 118,279 1.3 19,617 16.6 412,632 4.1 34,100 8.3
— Sales to platform ....... 1,529,155 9.0 27,784 1.8 130,832 0.8 8,080 6.2 99,274 0.5 10,380 10.5 53,816 0.5 6,532 12.1 906,055 9.1 14,685 1.6
Self-operated stores . . . . . . . . 356,146 2.1 52,397 14.7 366,488 2.3 61,946 16.9 412,216 2.0 92,143 22.4 226,708 2.4 51,443 22.7 200,108 2.0 48,914 24.4
Others (Note 3) . . . . . . . . . . . 133,961 0.8 28,281 21.1 156,970 1.0 37,414 23.8 122,483 0.6 32,542 26.6 65,970 0.7 17,092 25.9 253,422 2.5 26,030 10.3
Total ............... 16,871,000 100.0 536,441 3.2 15,724,215 100.0 759,248 4.8 20,208,599 100.0 1,077,460 5.3 9,316,213 100.0 528,036 5.9 9,979,744 100.0 617,506 6.2
Notes:
(1) We had comparatively lower gross profit margin from our self-operated online stores in 2022 and 2023 and in
the six months ended June 30, 2024, primarily because in 2022, 2023 and the six months ended June 30,
2024, we promoted sales of gold bullion through our self-ope rated online stores and participated in promotion
activities for gold bullion on different online platforms, including TMall and JD.com, and sales of gold
bullion generally entail lower gross profit margin and (ii) during the six months ended June 30, 2024, we
enlarged our participation in an online sales promotio n event, the June 18 sales event, whereby such event
also contributed to our lower gross profit margin for the relevant period.
(2) For the years ended December 31, 2022 and 2023, and the six months ended June 30, 2023 and 2024, the
gross profit margin of our self-operated online stores w as generally lower than that of our self-operated stores.
This difference was primarily due to (i) promotional activities held in our self-operated online stores, which
affected product pricing; and (ii) the differing product mi x in our self-operated online stores, which featured a
higher proportion of lower-margi n items with higher sales volume.
(3) Others include sales in relation to subcontractin g production for independent third party and tailor-made
products for specific customers.
As of June 30, 2024, we had established a compre hensive franchise network covering 2,850
franchise stores operated by 1,670 franchisees, seven self-operated direct service centers and 17
provincial-dealers. Our other sales channels in clude 36 self-operated stores, sales to online
platforms and online stores on major e-commerce platforms in our consumer network. We have a
well-established market position in third and low er tier cities in the PRC, which are markets with
high growth potential according to Frost & Sullivan.
SUMMARY
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The following tables set forth certain key operating metrics as of the dates or for the periods/
as of the date indicated:
Year ended/As of December 31,
Six months ended/
As of June 30,
2021 2022 2023 2024
Distribution channel
Number of franchisees at the end of year/
p e r i o d ...................... 1 , 7 2 1 1 , 7 0 4 1 , 6 8 7 1 , 6 7 0
Number of franchise stores
as of the end of the year/period . . . . . . 2,680 2,743 2,817 2,850
Number of self-operated stores
as of the end of the year/period . . . . . . 31 32 35 36
Number of direct service center as of the
e n do ft h ey e a r / p e r i o d............ 7 7 7 7
Number of provincial-dealers
as of the end of the year/period . . . . . . 17 17 17 17
Number of e-commerce platforms as of the
end of the year/period . . . . . . . . . . . . 10 13 12 12
Our production capacity
Actual production volume of gold
jewellery products during the year/
period (kg) (Note 4) . . . . . . . . . . . . . . . 47,190 41,566 43,558 18,242
Optimal production capacity of gold
jewellery products during the year/
period (kg) (Note 5) . . . . . . . . . . . . . . . 50,000 50,000 50,000 25,000
Utilization rate of our production capacity
during the year/period (%) (Note 1) . . . . 94.4 83.1 87.1 73.0
Our purification capacity
Actual volume of gold purified (kg) (Note 2) 13,702 7,577 6,270 7,246
Optimal purification capacity (kg) . . . . . . 30,000 30,000 30,000 15,000
Utilization rate of our purification capacity
during the year/period (%) (Note 3) . . . . . 45.7 25.3 20.9 48.3
Notes:
1. The utilization rate of production capacity is calculated by dividing the actual production volume of gold
jewellery products by the optimal production capacity of gold jewellery products for the same period. The
lower utilization rate for the six months ended June 30, 2024 primarily resulted from slower sales as our sales
volume decreased by approximately 10.4% compar ed to the six months ended June 30, 2023. Our sales
volume decrease was generally in line with (and sligh tly better than) that of the industry, which observed a
period-to-period decrease of 26.7%. For the three months ended September 30, 2024, our utilization rate was
90.8%. The increase in our utilization rate for the three months ended September 30, 2024 was primarily due
to the increase in demand for our products during the ‘‘One RMB Exchange ’’promotion.
SUMMARY
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2. The actual volume of gold purified decreased from 13,702 kg in 2021 to 7,577 kg in 2022, and then to 6,270
kg in 2023. This decline aligns with the decreasing trend in the weight of gold trade-ins we received during
the Track Record Period. The actual volume of gold purified increased to 7,246 kg and the utilization rate for
our purification facilities increased to 48.3% for the six months ended June 30, 2024 mainly because we
increased the proportion of gold products of 999.99 purity level in our product mix. The gold raw materials
we procured from Shanghai Gold Exchange were of purity level of 999.9, such raw materials, together with
the gold jewellery products of purity level of 999.9 or above we collected from customers and/or end-
consumers through gold trade-in, ca n be used directly for production without purification when we produce
gold products of 999.9 purity level. Since we adjusted our product mix in 2024 to increase the proportion of
gold products of 999.99 purity level, all raw materials we procured from Shanghai Gold Exchange and used
gold of purity level less than 999.99 were required to be refined for production of such product. Accordingly,
the volume of gold purified for the six months ended June 30, 2024 increased.
3. The utilization rate of purification capacity is calculated by dividing the actual volume of gold purified by the
optimal purification capacity for the same year/period.
4. Production volume refers to actual output for the relevant year/period.
5. Our optimal production capacity is calculated based on th e optimal hourly production rate of various machines
and the workforce available operating 12 hours a day for 330 working days a year (not including time spent
on production line upgrade or adjustment).
Same store sales of our self-operated stores
Our profitability is affected in part by our ability to successfully increase revenue from our
existing stores, primarily through the launch of new products and various marketing and
promotional events, such as the ‘‘One RMB Exchange ’’promotions and advertisement through
different media. We utilize data col lected from our self-operated stores to illustrate the condition of
our same store growth because we have robust data from such stores for the relevant analysis. Same
store sales growth rates of our self-operated sto res provide a period-to-period comparison of our
performance, excluding increases and decreases due to the opening and closing of new self-operated
stores and only taking into account of stores that were in operation at the ending dates in both of
the compared years. There are variations in the way in which other retailers calculate these metrics.
Accordingly, our Directors are of the view that these metrics may not be fully comparable with
those of our competitors.
The table below sets forth our same store sales of self-operated stores for the years/period
indicated:
Year ended
December 31,
Year ended
December 31,
Six months ended
June 30,
2021 2022 2022 2023 2023 2024
Number of the same self-operated stores that
were in operation at the ending dates in
b o t ho ft h ec o m p a r e dy e a r s .......... 2 7 2 9 2 8
Same store sales of our self-operated stores
(RMB ’000) .................... 3 4 7 , 3 1 3 3 4 0 , 7 2 5 349,040 362,033 202,607 170,376
Same store sales growth of our self-operated
s t o r e s( % ) .................... ( 1 . 9 ) (1) 3.7 (15.9) (2)
SUMMARY
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Notes:
(1) The same store sales growth of self-operated stores was (1.9)% for the year ended December 31, 2022,
primarily because of disruptions to the operation of our self-operated stores caused by the pandemic.
(2) The same store sales growth for our self-operated stores was (15.9)% for the six months ended June 30, 2024
when compared to the corresponding period in 2023, which was in line with the fluctuations in sales at our
self-operated stores due to the decline in consu mption sentiments of purchase of gold products.
Our franchise network
According to Frost & Sullivan, it is common for gold jewellery companies to adopt a franchise
network. A franchise is a type of license that grants franchisees access to a franchisor ’s proprietary
business knowledge, processes, and trademarks to sell products or services under the franchisor ’s
business name. Our business model of having franchise stores across the PRC allows us to expand
rapidly in targeted markets. The franchise busines s model provides an asset-light and cost-effective
method to expand our store network and geographical coverage.
Our franchise network comprises two channels, namely: (i) through our self-operated direct
service centers and then through franchisees, and (ii) through provincial-dealers and then through
franchisees. The terms and conditions of franc hise agreements for franchisees under the two
different channels are the same. As advised by Fros t & Sullivan, the two-channel franchise network
structure adopted by us is in line with market norm. We appoint provincial -dealers mainly because
we believe we can utilize their business network in the jewellery industry to expand our franchisee
network, as well as to save costs such as exhibition hall maintenance and marketing expenses in
each covered province. Based on our Directors ’ knowledge, provincial-dealers usually have strong
connections with local jewellery stores. By appoin ting provincial-dealers, we can facilitate the
distribution of our products to franchisees within such regions and this practice is effective in terms
of building a distribution network.
Self-operated direct service centers and franchisees
. The self-operated direct service centers are operated by us.
. The self-operated direct service centers recei ve products from our production facilities,
showcase our products and allow franchisees to purchase such products from them.
. Our self-operated direct service centers only sell to franchisees and do not sell directly to
consumers.
Provincial-dealers and franchisees
. Different from our self-operated direct servic e centers, our provin cial-dealers operate
their own centers and are independent from our operations.
. Similar to our self-operated direct service centers, they showcase our products and allow
franchisees to purchase such products from them.
SUMMARY
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. Except for provincial-dealers who also own franchise stores (in which case they could be
selling directly to consumers), our provincial-dealers only sell to franchisees and do not
sell directly to consumers.
Growing franchise network
We have a growing franchise network supported by our franchisees. By partnering with local
franchisees who have established exceptional distribution capabilities and local industry knowledge,
we were able to efficiently enter into and expand our retail presence in third and lower tier cities in
the PRC. For the year ended December 31, 2021, 2022 and 2023 and the six months ended June 30,
2023 and 2024, the average revenue
(Note) of our franchise stores was RMB5.5 million, RMB5.4
million, RMB6.7 million, RMB3.2 million and RMB2.9 million, respectively. The decrease in
average revenue of our franchise stores by 9.4% for the six months ended June 30, 2024 when
compared to the corresponding period in 2023 was m ainly attributable to a general decline in sales
volume, as a result of rising gold prices negatively affecting consumer sentiment.
Revenue recognition under franchise network and sales return policy
We recognize revenue when (or as) a perform ance obligation is satisfied, i.e. when ‘‘control’’
of the goods or services underlying the particular performance obligation is transferred to the
customer. For sales of products, revenue is generally recognized at the point of sale. All sales
between us and provincial-dealers, as well as sa les between us and our franchisees, are buyout
sales. Provincial-dealers generally do not hold gold products as their inventory and only maintain a
relatively insignificant level of products for sales that occur on an ad hoc basis.
Except for situations such as the closure of franchise stores, we generally do not allow return
of products from provincial-dealers and franchisees. For diamond products, we offer provincial-
dealers and franchisees a right to exchange unsold diamond inlaying jewellery within a period of
five years from the date of sale settlement, which allows them to exchange outdated products with
current popular diamond products. For details of product exchange for diamond inlaying jewellery,
s e eN o t e5 ‘‘Critical Accounting Judgments and Key Sources of Estimation Uncertainty ’’and Note
34 ‘‘Refund Liabilities ’’in Appendix I to this prospectus. As for gold products, we offer gold
product exchange services to franchisees only under special and limited circumstances. This
includes promotional benefits for newly joined fra nchisees, and franchisees requesting to exchange
previously purchased products for same grade and same type of new gold products. Gold product
exchange does not constitute a gold trade-in. In addition, our gold product exchange requires strict
internal review and approval. According to Frost & Sullivan, most of our industry peers also
require strict internal review and approval for gold product exchange.
Note: Calculated by dividing revenue derived by our Group from franchise network (i.e. including revenue generated from
provincial-dealers) by total number of franchise stores as of the ending date of the respective year/period.
SUMMARY
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Franchise network management
Pursuant to our franchise agreements, our franc hisees are granted the rights to operate and
open franchise stores within specific geographical regions, and to sell our products under our brand
name ‘‘ ’’ to consumers. While franchisees are pri marily responsible for managing the
franchise store, staffing, and profit and loss, we closely supervise our franchisees to ensure
consumer satisfaction, and service quality in order to protect our reputation. To ensure consistency
in operations, we provide a set of standard operational procedures that our franchisees are required
to comply with. See the section ‘‘Business — Sales and Distribution Channels — Management of
Franchisees ’’for further details. Our franchise stores can sell other brands ’ gold products on the
condition that those third-party brand products are not displayed under our brand ’s name and/or
logo. In case where our franchisees wish to sell products of other brands under our brand, the
relevant products must pass our inspection or a third-party testing agency designated by us. For
details, see ‘‘Business — Admittance of third-party products ’’. The following table sets forth the
breakdown of our revenue derived from franchise network from (i) provincial-dealers, and (ii)
franchisees by different tiers of cities during the Track Record Period:
Year ended December 31, Six months ended June 30,
2021 2022 2023 2023 2024
Revenue
Percentage
of revenue Revenue
Percentage
of revenue Revenue
Percentage
of revenue Revenue
Percentage
of revenue Revenue
Percentage
of revenue
RMB ’000 % RMB ’000 % RMB ’000 % RMB ’000 % RMB ’000 %
(Unaudited)
Revenue from sales to
provincial-dealers . . . . . 5,363,405 31.8 5,207,142 33.1 6,649,419 32.9 2,945,084 31.6 2,452,524 24.6
Revenue from sales to
franchisees . . . . . . . . . 9,409,225 55.8 9,629,142 61.3 12,273,776 60.8 5,906,356 63.5 5,755,003 57.7
— Tier 1 cities . . . . . . 75,920 0.5 77,478 0.6 118,722 0.6 48,161 0.6 53,336 0.5
— Tier 2 cities . . . . . . 3,088,026 18.3 3,055,976 19.4 3,887,350 19.2 1,876,688 20.2 1,988,767 20.0
— Tier 3 cities . . . . . . 3,747,082 22.2 3,765,410 23.9 4,775,933 23.6 2,340,790 25.1 2,225,213 22.3
— Tier 4 and lower
cities . . . . . . . . 2,498,197 14.8 2,730,278 17.4 3,491,771 17.4 1,640,717 17.6 1,487,687 14.9
Total: . . . . . . . . . . . . . . 14,772,630 87.6 14,836,284 94.4 18,923,195 93.7 8,851,440 95.1 8,207,527 82.3
Note: According to Frost & Sullivan:
(1) the first-tier cities refer to Shanghai, Beijing, Guangzhou and Shenzhen;
(2) the second-tier cities refer to Chengdu, Chongqing, Hangzhou, Wuhan, Suzhou, Xi ’an, Nanjing,
Changsha, Tianjin, Zhengzhou, Dongguan, Qingdao, Kunming, Ningbo, Hefei, Foshan, Shenyang,
Wuxi, Jinan, Xiamen, Fuzhou, Wenzhou, Harbin, Shijiazhuang, Dalian, Nanning, Quanzhou, Jinhua,
Guiyang, Changzhou, Changchun, Nanchang, Nantong, Jiaxing, Xuzhou, Huizhou, Taiyuan, Taizhou,
Shaoxing, Baoding, Zhongshan, Weifang, Linyi, Zhuhai and Yantai;
(3) the third-tier cities refer to Lanzhou, Haikou, Huzhou, Yangzhou, Luoyang, Shantou, Yancheng,
Ganzhou, Tangshan, Urumqi, Jin ing, Zhenjiang, Langfang, Xia nyang, Taizhou, Wuhu, Handan,
Jieyang, Nanyang, Hohhot, Fuyang, Jiangmen, Yinchuan, Zunyi, Huai ’an, Zhangzhou, Guilin, Zibo,
Xinxiang, Lianyungang, Cangzhou, Mianyang, Hengyang, Shangqiu, Heze, Xinyang, Xiangyang,
SUMMARY
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Chuzhou, Shangrao, Jiujiang, Yichang, Putian, Zhanjiang, Liuzhou, Anqing, Suqian, Zhaoqin, Zhoukou,
Xingtai, Jingzhou, Sanya, Yueyang, Bengbu, Zhumadian, Tai ’an, Chaozhou, Zhuzhou, Weihai, Liu ’an,
Changde, Anyang, Suzhou, Huanggang, Dezhou, Ningde, Liaocheng, Yichun, Weinan, Qingyuan and
Nanchong; and
(4) the fourth and lower tier refer to the rest of the other cities in the PRC.
The decrease in our revenue derived from provincial-dealers and franchisees for the six
months ended June 30, 2024, compared to the same period ended June 30, 2023 was primarily
attributable to a general decline in sales volume to provincial-dealers and to franchisees in Tier 3,
Tier 4 and lower cities, as a result of rising gold p rices negatively affecting consumer sentiment
during the same period. For further details of our other sales channels including self-operated stores
and e-commerce sales, see ‘‘Business — Sales and Distribution Channels ’’of this prospectus.
SUPPLIERS AND CUSTOMERS
Our Suppliers
During the Track Record Period, our major suppl iers were all gold suppliers and commercial
banks who provided gold loans to us. Amounts pa id to our five largest suppliers of each of the
years ended December 31, 2021, 2022 and 2023 and the six months ended June 30, 2024 accounted
for approximately 96.8%, 98.8%, 97.4% and 98.6% of our total purchase for each of the respective
year/period. None of our Directors, their close associates or any Shareholder (who or which, to the
knowledge of our Directors, owns more than 5% of the issued share capital of our Company) had
any interest in any of our five largest suppliers of each year/period during the Track Record Period.
None of our five largest suppliers of each year/period were also our customers in each respective
year and period during the Track Record Period.
Reliance on Shanghai Gold Exchange for gold procurement
The amount paid to Shanghai Gold Exchange, being our largest supplier of each of the years
ended December 31, 2021, 2022 and 2023 and th e six months ended June 30, 2024, amounted to
RMB7,585.1 million, RMB8,050.2 million, RMB11,162.6 million and RMB5,327.9 million for each
of the respective year/period representing 90.9%, 93.2%, 87.6% and 83.4% of our total purchase of
the respective year/period. All our purchases from the Shanghai Gold Exchange during the Track
Record Period were procurement of gold bullion. For further details of our transactions with the
Shanghai Gold Exchange and other major suppliers, see ‘‘Business — Our Procurement/Suppliers
— Our Top Five Suppliers during the Track Record Period ’’.
Our Customers
Our customers include (i) provincial-dealers, (ii) franchisees, (iii) e-c ommerce platforms and
(iv) consumers from e-commerce sales and self-operated stores. Our customers are primarily our
franchisees and provincial-dealers through our franchise network. They normally settle payment
with us by bank transfer and/or by way of gold trade -in settlement. Consumers are also considered
as our customers if they purchase directly from our self-operated stores or self-operated e-commerce
platforms.
SUMMARY
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Our five largest customers of each year/period of the Track Record Period primarily consist of
provincial-dealers, except for an online retaili ng platform as one of our five largest customers in
2021 and six months ended June 30, 2024, and one franchisee as one of our five largest customers
in 2023. The revenue we derived from our five largest customers of each of the years ended
December 31, 2021, 2022 and 2023 and the six months ended June 30, 2024 accounted for
approximately 23.2%, 17.6%, 18.7% and 21.3% of our total revenue for each of the respective year/
period. For further details of the information of a nd arrangements with our franchise network, see
‘‘Business — Sales and Distribution Channels ’’.
Gold Trade-in
According to Frost & Sullivan, sourcing gold through trade-in is common amongst gold
jewellery manufacturers and brands. Leveraging o ur gold purification capabilities, we are able to
efficiently purify gold sourced through trade-in which we then use as raw materials for our new
jewellery products. To better ensure a stable supp ly and inventory of gold, we also procure gold on
an on-going basis through trade-in of used gold from our customers. For details of our gold trade-
in, see ‘‘Business — Gold Trade-in’’.
Pricing Policy
We generally adopt a cost-plus pricing policy for our gold jewellery and K-gold products.
When we sell our gold products and K-gold products, we normally charge customers an amount
based on the prevailing market price of gold and crafting fees, multiplied by the weight of gold of
the products. Crafting fees represent mark-ups on top of the costs of our products, which vary by
product and by the transaction type. We determine crafting fees primarily with reference to the
following criteria: (i) whether the transaction is s ettled by trade-in gold from third-party brands, we
charge a higher crafting fee to cover the necessa ry costs of purifying and processing gold from
third-party brands, (ii) our counter-party, namely (a) consumers with whom we directly transact, or
(b) franchisees and/or provincial -dealers, whereby we charge a higher crafting fee when transacting
with consumers to align with the charges impo sed by our franchisees when they transact with
consumers, (iii) the product specification, includ ing its design and production complexity, and (iv)
whether the product is to be sold under the ‘‘One RMB Exchange ’’for our ‘‘Wan Purity ’’series
products. If there is an increase in the prevailin g gold market price, we would adjust our price of
gold jewellery and K-gold products based on the current market price. Diamond inlaying products
are usually priced based on a cost-plus basis, and we usually add to our cost a profit margin on
different products with reference to their respective design complexity, novelty and popularity of
the relevant product line on a case-by-case b asis, and come up with a fixed selling price.
We have a suggested retail price guide for crafting fees to be charged, and franchisees have
some discretion to conduct promotional sales as long as they meet with our minimum retail price
requirements and franchisees can also adjust the ma rk-up based on fluctuations in the market gold
price. To maintain fair competition, we encourage franchisees in the same city or region to maintain
a consistent price, which is regulated by our mar ket supervision department to prevent unfair
competition.
SUMMARY
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For further details of our pricing policy, see ‘‘Business — Sales and Distribution Channels ’’.
MEASURES ADOPTED TO MANAGE THE RISK EXPOSURES TO CHANGE IN GOLD
PRICE
During the Track Record Period, to manage our exposure to changes in gold price, we
implemented (i) a ‘‘procuring according to sales ( 以銷定採)’’procurement strategy, and (ii) hedging
strategies including financing our procurement of gold through gold loans and entering into Au (T
+ D )c o n t r a c t so nad a i l yb a s i s .I ti so u rs t r a t e g yt oe n t e ri n t og o l dl o a n sa n dA u( T + D )c o n t r a c t s ,
i.e. the short position, to substantially cover our inventory balance and the adoption of such
hedging strategies allows us to avoid speculating against fluctuations in gold prices and focus on
the development of our core operations in gold jewellery manufacturing and sales.
We implement the strategy of ‘‘procuring according to sales ( 以銷定採)’’, whereby we
purchase gold materials based on our daily sales volume to manage the potential adverse impact of
mismatches between our gold procurement prices and sales prices. This approach allows us to
maintain an inventory level with stable inventory turnover days of 42.7 days, 45.6 days, 36.8 days
and 40.8 days as of December 31, 2021, 2022 and 2023 and June 30, 2024, respectively. We
believe our ‘‘procuring according to sales (以 銷定採)’’strategy helps mitigat e the potential adverse
impact of mismatches between our gold procurement prices and sales prices.
We implement hedging strategies including financing our procurement of gold through gold
loans and entering into Au (T+D) contracts on a daily basis to (i) mitigate the risks associated with
fluctuations in gold prices on our inventory on hand and (ii) avoid speculation on gold price
fluctuations. Our hedging measures are carefully assessed based on funds available, our gold
inventory position and projected sales needs. As of December 31, 2021, 2022 and 2023 and June
30, 2024, our remaining gold balance of Au (T+D) contracts and gold loans amounted to 5,647.0kg,
4,428.0kg, 5,267.0kg, and 4,416.0kg, respectively, covering 96.6%, 96.3%, 98.8% and 98.4% of
our long position in gold, i.e. the total balance of our gold and K-gold inventory, as well as gold
lent to our customers as of the respective dates. Our Directors believe that our procurement and
gold price exposure management strategies, th rough Au (T+D) contracts and gold loans, are
effective in managing risks associ ated with gold price fluctuations.
Au (T+D) is a standardized contract employed by the Shanghai Gold Exchange for the future
delivery of a predetermined amount of gold at a p redetermined price on a specified future date.
While we enter into Au (T+D) contracts to manag eo u rr i s ke x p o s u r ei nr e l a t i o nt og o l dp r i c e
fluctuation, our use of Au (T+D) does not qualify for hedging accounting under HKFRS 9 due to
the lack of formal designation and documentation of hedging relationship. For further details,
please refer to the section headed ‘‘Business — Our Procurement/Suppliers — Procurement of Gold
— (b) Gold Price Exposure Management to Manage Fluctuations of Raw Material Price —
Adoption of Au (T+D) contracts ’’.
Net profit margin and our hedging strategies
Our net profit margin fluctuation is subject to gold price fluctuation, among other factors.
SUMMARY
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--- page 23 ---
To mitigate the potential impact of gold price fluctuations on our net profit, we utilize gold
loans and Au (T+D) for an economic hedge against our gold inventory position. The financial
impact of our economic hedge of Au (T+D) and gold loans is reflected under ‘‘other gains and
losses, net ’’in our consolidated statements of profit or loss and other comprehensive income during
the Track Record Period. However, the appreciation or depreciation in the monetary value of our
gold inventories may not necessarily be reflected in our net profit, as gold inventories are stated at
the lower of cost and net realizable value in our cons olidated statements of financial position. The
gain or loss associated with the change in gold price for our gold inventories is generally reflected
at the time of sale of our products. The timing di fference between when we recognize the gains or
losses on Au (T+D) contracts and gold loans and when we are able to fully realize the gains or
losses from the gold price portion of our sales ( due to fluctuation in gold price) may affect our
results of operation. As we sell our products at prevailing market prices, the increase or decrease in
gross profits that we derive from sales of our products would reduce or cancel out the
aforementioned adverse impact on our net profi tc a u s e db yl o s so nA u( T + D )c o n t r a c t sa n dg o l d
loans.
Effects of Au (T+D) Contracts and Gold Loans as Hedging Strategies
We generally adopt a cost-plus pricing policy for our gold jewellery and K-gold products.
When we sell our gold products and K-gold pro ducts, we normally charge customers with an
amount based on the prevailing market price of gold and crafting fees, multiplied by the weight of
gold of the products. As we charge the raw material costs of our gold jewellery and K-gold
products based on prevailing gold price, we enter into Au (T+D) contracts and gold loans to hedge
against effects that gold price movements may have on our inventory, and in turn, our financial
results. For example:
When Gold Price Falls
. we have to sell our products at a lower price and our gross profits and gross profit
margins will be negatively impacted. When gold price falls at a scale that exceeds the
difference between the crafting fees we charge and our production cost, we would incur
losses as we have to sell gold jewellery at prices (including the crafting fees we charge)
that are lower than the gold procurement price plus production costs, which would result
in a negative gross profit.
. Under such circumstance the decrease in our gold inventory monetary value may not be
accounted for as our loss as such decrease in gold price may not necessarily lead to
impairment on our inventories. However, we will record gains from Au (T+D) contracts
and gold loans under ‘‘other gains and losses, net ’’. This will benefit our net profit and
net profit margins, mitigating the aforementioned negative impacts resulting from a drop
in gold price.
SUMMARY
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When Gold Price Increases
. When gold price rises, we benefit from selli ng gold jewellery at prices (including the
then prevailing market price for gold and the crafting fees we charge) that are higher
than the gold procurement price plus production costs.
. Under such circumstance the increase in our gold inventory monetary value will not be
accounted for as our gain. However, we will record losses from Au (T+D) contracts and
gold loans under ‘‘other gains and losses, net ’’. In turn, this would adversely impact our
net profit and net profit margins and reduc e or cancel out the aforementioned positive
impacts resulting from an increase in gold price.
As it takes time to sell our products, there is a timing difference between when we recognize
gains or losses on Au (T+D) contracts and gold loans and when we record gains or losses that
result from gold price changes derived from the sale of our products. As our Au (T+D) contracts
and gold loans substantially cover our inventory balance, and our sales volume of gold and K-gold
products during a given period may be less than the volume of our inventory on hand, the
fluctuation of gold price will result in larger financial impacts from Au (T+D) contracts and gold
loans as compared to that from changes in selling price of our products during such a period.
In 2021, we recorded a gain from Au (T+D) contracts and gold loans in the sum of RMB88.6
million due to the decreasing trend in gold price du ring the year. We suffered material losses from
Au (T+D) contracts and gold loans we entered into in 2022, 2023 and the six months ended June
30, 2023 and 2024, which amounted to RMB209.1 million, RMB369.5 million, RMB195.3 million
and RMB386.6 million, respectively. Given gold is highly liquid, had we sold all gold inventories
(including gold and K-gold materials and finished products) at the closing gold price quoted on the
Shanghai Gold Exchange on the last trading day for the years ended December 31, 2021, 2022 and
2023 and the six months ended June 30, 2023 and 2024 without taking into account the crafting
fees we should be able to charge, we would record a loss of RMB4.0 million for the year ended
December 31, 2021, and a gain of RMB52.1 million, RMB77.5 million, RMB60.8 million and
RMB132.4 million for the years ended December 31, 2022 and 2023 and the six months ended June
30, 2023 and 2024, respectively.
However, no matter whet her gold price falls or rises, the Au (T+D) contracts and gold loans
help us mitigate the impact of gold price movements on our financial condition and allows us to
better secure a targeted gross profit, and in turn, net profit margin in long run. Accordingly, we
believe our existing hedging policies of applying Au (T+D) contracts and gold loans are effective.
SUMMARY
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IMPACT OF MATERIAL INCREASE IN GOLD PRICES ON OUR FINANCIAL
CONDITION AND BUSINESS OPERATIONS AND THE EFFECTIVENESS OF OUR
HEDGING POLICY
Our net profits and net profit margins are mater ially affected by the gains and losses arising
from the Au (T+D) contracts and gold loans when there are material changes in gold prices during
a year/period. During the six months ended June 30, 2024, gold price rose by approximately 13.7%,
with the closing price of Au9999 increasing RMB483.7/g as of January 2, 2024 to RMB549.9/g as
of June 28, 2024 (being the last trading day of the Track Record Period), according to the closing
gold price quoted on the Shanghai Gold Exchange. As a result, we incurred losses on our hedging
activities of Au (T+D) contracts and gold loans during the period, which, in turn, led to lower net
profits and net profit margin as compared to those during the six months ended June 30, 2023.
Please see ‘‘ — SUMMARY OF HISTORICAL FINANCIAL INFORMATION AND SUMMARY
OF MAJOR FINANCIAL RATIOS — Selected items in our consolidated statements of profit and
loss — Net profit and total comprehensive income ’’.
However, as we subsequently sold our inventory on hand as of June 30, 2024 at a high selling
price and the gross profits that resulted from high selling price mitigated the adverse impacts of the
losses we incurred on Au (T+D) contracts and gold loans during the six months ended June 30,
2024, we do not expect the increase in gold prices to have a material adverse effect on our financial
conditions and business operations in the long run. For further details on the impact of material
increase in gold prices on our financial condition and business operations, please see ‘‘Business —
Impact of Material Increase in Gold Prices on Ou r Financial Condition and Business Operations ’’.
For further details on how Au (T+D) operates, please see ‘‘Business — Our Procurement/
Suppliers — Procurement of Gold — (b) Gold Price Exposure Management to Manage Fluctuations
of Raw Material Price — Adoption of Au (T+D) contracts ’’.
OUR COMPETITIVE STRENGTHS
We believe our success and future potentials are attributable to our competitive strengths
which include:
. We are a gold jewellery OBM in the PRC, encompassing key stages of the gold jewellery
industry;
. Our R&D capability allows us to realize ach ievements and pioneer industry standard,
which can be demonstrated in our gold puri fication capability, innovation in mass
production of 18K-gold spring clasps of various metals and specifications and setting
industry gold purity testing standards;
. Our manufacturing together with our sophisticated craftsmanship lays a solid foundation
for our rapid growth, and our ability to create, adapt and/or calibrate machinery for gold
jewellery production allows us to launch products according to the market trends, thereby
meeting customer demands in an efficient matter;
SUMMARY
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. We have a diverse and extensive national-wide multi-channel sales network in the PRC,
enabling us to reach a wide range of customers across different regions and
demographics, which ultimate ly strengthens our brand awareness, customer loyalty, and
business growth;
. Our ability to launch effective and inventive marketing strategies strengthened our brand
recognition and deeply connected with our consumers; and
. We have a sophisticated management team with valuable industry experience and pioneer
vision, encouraging an innovative and pragmatic corporate culture.
OUR STRATEGIES
To fulfil our mission and realize our vision, we i ntend to implement the following strategies:
. To expand our production capacity through further investment in our production
machinery to support our business growth;
. To further enhance our R&D capabilities through establishing a research and
development center to solidify our innova tion capacities and competitiveness;
. To strengthen and expand our distribution channels to further our customer reach and
improve customer experience;
. To accelerate the development of our digita l information platforms and to improve our
membership program; and
. To continuously invest in brand building and further improve product innovation and
expand product offerings.
SUMMARY
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--- page 27 ---
SUMMARY OF HISTORICAL FINANCIAL INFORMATION AND SUMMARY OF MAJOR
FINANCIAL RATIOS
The following is a summary of the consolidated statements of profit or loss and other
comprehensive income during the Track Record Period as derived from the Accountants ’ Report,
the full text of which is set out in Appendix I to this prospectus. This summary should be read in
conjunction with the aforesaid Accountants ’ Report and the section headed ‘‘Financial Information’’
of this prospectus.
Selected items in our consolidated statements of profit and loss
Year ended December 31, Six months ended June 30,
2021 2022 2023 2023 2024
RMB’000 RMB ’000 RMB ’000 RMB ’000 RMB ’000
(Unaudited)
Revenue . . . . . . . . . . . . . 16,871,000 15,724,215 20,208,599 9,316,213 9,979,744
Cost of sales . . . . . . . . . . (16,334,559) (14,964,967) (19,131,139) (8,788,177) (9,362,238)
Gross profit . . . . . . . . . . . 536,441 759,248 1,077,460 528,036 617,506
Distribution and selling
expenses . . . . . . . . . . . . (176,794) (194,473) (257,328) (128,337) (118,939)
Other gains and losses, net . 89,839 (208,961) (370,014) (195,592) (345,725)
Profit before tax . . . . . . . . 295,874 244,161 305,113 133,976 66,861
Profit and total
comprehensive income for
the year/period . . . . . . . . 224,498 180,756 233,472 105,987 52,252
Profit/(loss) and total
comprehensive income/
(expense) for the year/
period attributable to
Owners of the Company . 220,618 180,825 230,375 104,167 47,433
Non-controlling interests . 3 ,880 (69) 3,097 1,820 4,819
224,498 180,756 233,472 105,987 52,252
Revenue
During the Track Record Period, our re venue amounted to RMB16,871.0 million,
RMB15,724.2 million, RMB20,208.6 million and RMB9,979.7 million for the years ended
December 31, 2021, 2022 and 2023 and the six months ended June 30, 2024. The major
components of our sales were gold jewellery and other gold products, which accounted for
approximately 97.5%, 97.9%, 98.4% and 98.5% of our total revenue for the years ended December
31, 2021, 2022 and 2023 and the six months ended June 30, 2024. The fluctuations in our revenue
during the Track Record Period was primarily attributable to the sales of our gold jewellery
products and the market consumption sentiments during the relevant year/period. For the year ended
SUMMARY
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--- page 28 ---
December 31, 2022, our sales were affected by the outbreak of the COVID-19 pandemic in fourth
quarter of 2022 which affected consumption sentiments. For the year ended December 31, 2021, we
recorded a material increase in sales through e-commerce as we sold a large batch of gold bullion
to a leading PRC online discount retailer, Vipshop for a promotional event. We recorded an
increase in revenue derived from sales through e -commerce channel from RMB172.1 million for the
six months ended June 30, 2023 to RMB1,318.7 million for the six months ended June 30, 2024.
The increase in sales through e-commerce channel was primarily driven by (i) an increase in
revenue derived from self-operated online stores due to our active participation in promotion events
on major e-commerce retail platforms such as Tmall.com and JD.com during May and June 2024,
and (ii) an increase in revenue derived from sal es to platform due to our sales of gold bullion to a
leading PRC online discount retailer, Vipshop for a promotion event.
For sales of gold bullion to online discount retailer, we have not entered into any long-term
cooperation agreement and/or sales contract with such online discount retailer in relation to sales of
gold bullion. The online discoun t retailer purchased gold bullion from our Group on an ad-hoc
basis and the volume of gold bullion purchased var ied in each transaction. During the Track Record
Period, Vipshop made two major purchases of gold bullion from us in 2021 and the first half of
2024. Our gold bullion transaction with Vipshop involves only the sales of gold bullion to Vipshop
and, as requested by Vipshop, we delivered such gol d bullion directly to end consumers based on
the order information we received from Vipshop. In addition, we generally do not allow the return
of gold bullion, and during the Track Record Period, we received only a de minimis amount of gold
bullion returns from the online discount retailers we sold to, including Vipshop. The relevant online
discount retailer purchased another batch of go ld bullion from us in the third quarter of 2024.
Gross profit and gross profit margin
For the years ended December 31, 2021, 2022 and 2023 and the six months ended June 30,
2024, our gross profit was RMB536.4 million, RMB759.2 million, RMB1,077.5 million and
RMB617.5 million and our gross profit margin was 3.2%, 4.8%, 5.3% and 6.2%, respectively. Our
gross profit margin demonstrated a rising trend during the Track R ecord Period. Since our crafting
fees are usually fixed, our gross profit and gross profit margin are significantly influenced by
fluctuations in gold price. Due to timing of procu rement of gold raw materials and sales of our gold
products, there is generally a difference between the procurement costs of gold raw materials and
the selling prices of our gold products. As gold prices experienced a general upward trend during
the Track Record Period, the difference in gold prices contributed to higher gross profit and gross
profit margin. However, our gross profit and gros s profit margin might be negatively impacted if
the gold prices remain steady or even decline in the future. For further details of our gross profit,
gross profit margin and their relationship wit h our gold procurement price, please refer to the
section headed ‘‘Financial Information — Description of Selected Items in the Consolidated
Statements of Profit or Loss and Other Comprehensive Income — Gross profit and gross profit
margin — our pricing mechanism, gross profit and gross profit margin’’ .
The selling prices of our gold jewellery and othe r gold products usually reflect the market
price of the raw materials in the products and crafting fees. As our products are mainly made of
gold, we use gold loans and Au (T+D) contracts as economic hedges to reduce the financial impact
SUMMARY
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--- page 29 ---
of gold price fluctuations. As the economic hedge of Au (T+D) contracts and gold loans does not
directly reflect on our gross profit or gross profit margin, our gross profit and gross profit margin
are subject to fluctuations of gold price.
Breakdown by products and services
The following table sets forth the breakdown of our revenue by product and services during
the Track Record Period:
Year ended December 31, Six months ended June 30,
2021 2022 2023 2023 2024
Revenue
Percentage
of revenue Revenue
Percentage
of revenue Revenue
Percentage
of revenue Revenue
Percentage
of revenue Revenue
Percentage
of revenue
RMB ’000 % RMB ’000 % RMB ’000 % RMB ’000 % RMB ’000 %
(Unaudited)
Gold jewellery and other gold
products . . . . . . . . . . 16,457,308 97.5 15,392,835 97.9 19,877,366 98.4 9,137,879 98.1 9,834,885 98.5
999.9 ( ‘‘Wan Purity ’’
series) . . . . . . . . . 13,870,027 82.2 13,978,637 88.9 17,865,322 88.4 8,379,816 90.0 6,282,342 63.0
999.99 . . . . . . . . . . . 740,332 4.4 845,445 5.4 1,121,958 5.6 526,670 5.7 1,957,932 19.6
Others . . . . . . . . . . . . 194,815 1.2 126,570 0.8 178,425 0.9 91,848 1.0 490,795 4.9
Gold bullion . . . . . . . . 1,652,134 9.8 442,184 2.8 711,661 3.5 139,545 1.5 1,103,816 11.1
K-gold jewellery, diamond
inlaying jewellery and
other products . . . . . . . 296,605 1.8 226,187 1.4 225,513 1.1 127,648 1.4 99,925 1.0
Services . . . . . . . . . . . . . 117,087 0.7 105,193 0.7 105,720 0.5 50,686 0.5 44,934 0.5
Total .............. 16,871,000 100.0 15,724,215 100.0 20,208,599 100.0 9,316,213 100.0 9,979,744 100.0
The following table sets forth a breakdown of our gross profit and gross profit margin by our
products and services during the Track Record Period:
Year ended December 31, Six months ended June 30,
2021 2022 2023 2023 2024
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)
Gold jewellery and other
g o l dp r o d u c t s ....... 360,069 2.2 594,885 3.9 920,795 4.6 448,168 4.9 548,272 5.6
K-gold jewellery, diamond
inlaying jewellery and
other products . . . . . . 70,174 23.7 63,628 28.1 62,087 27.5 32,630 25.6 27,513 27.5
S e r v i c e s............ 106,198 90.7 100,735 95.8 94,578 89.5 47,238 93.2 41,721 92.8
Total ............. 536,441 3.2 759,248 4.8 1,077,460 5.3 528,036 5.7 617,506 6.2
SUMMARY
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Our gross profit margin for gold jewellery and other gold products for the three years ended
December 31, 2023 and the six months ended June 30, 2024 were 2.2%, 3.9%, 4.6% and 5.6%,
respectively. Our gross profit margin for gold products demonstrated an increasing trend during the
Track Record Period as a result of the combined effect of increase in our sales volume, fluctuation
of gold price and timing difference bet ween our procurement of gold and sales.
Our gross profit margin of K-gold jewellery, dia mond inlaying jewellery and other products
for the three years ended December 31, 2023 and the six months ended June 30, 2024 were 23.7%,
28.1%, 27.5% and 27.5%, respectively. Our gross profit margin for K-gold jewellery, diamond
inlaying jewellery and other products increased by 4.4% point from 2021 to 2022 and remained
stable with a slight decrease of 0.6% point from 2022 to 2023. In 2021, we recorded a lower gross
profit margin as a result of the fluctuation in gold price. In 2022, our gross profit margin improved
as a combined effect of the fluctuation of gold price and timing difference between our procurement
of gold and sales and remained stable in 2023 and the six months ended June 30, 2024.
Our gross profit margin of services for the three years ended December 31, 2023 and the six
months ended June 30, 2024 were 90.7%, 95.8%, 89.5% and 92.8%. Gross profit margin of services
increased by 5.1% point from 2021 to 2022 as a result of the increase in gross profit margin in our
entrusted processing services. In 2023, our gross profit margin decreased by 6.3% point as a result
of the decrease in gross profit margin of our entrusted processing services. For the six months
ended June 30, 2024, our gross profit margin incre ased by 3.3% mainly as a result of an increase in
gross profit margin of our entrusted processing services.
Breakdown by distribution channels
The following table sets forth the breakdown of our gross profit and gross profit margin by
distribution channels during the Track Record Period:
Year ended December 31, Six months ended June 30,
2021 2022 2023 2023 2024
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)
Franchise network
Franchisees . . . . . . . . . 336,795 3.6 453,023 4.7 603,449 4.9 284,445 4.8 310,207 5.4
Provincial-dealers . . . . . 78,917 1.5 178,049 3.4 292,557 4.4 148,907 5.1 183,570 7.5
Subtotal .......... 415,712 2.8 631,072 4.3 896,006 4.7 433,352 4.9 493,777 6.0
E-commerce platform . . . . . . 40,051 2.5 28,816 7.9 56,769 7.6 26,149 15.2 48,785 3.7
Self-operated online stores 12,267 15.5 20,736 8.9 46,389 7.1 19,617 16.6 34,100 8.3
Sales to platform . . . . . 27,784 1.8 8,080 6.2 10,380 10.5 6,532 12.1 14,685 1.6
Self-operated stores . . . . . . 52,397 14.7 61,946 16.9 92,143 22.4 51,443 22.7 48,914 24.4
Others (Note) . . . . . . . . . . . 28,281 21.1 37,414 23.8 32,542 26.6 17,092 25.9 26,030 10.3
Total .............. 536,441 3.2 759,248 4.8 1,077,460 5.3 528,036 5.7 617,506 6.2
SUMMARY
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--- page 31 ---
Note: Others include revenue in relation to subcontracting production for independent third party and to tailormake
products for specific customers.
The gross profit margin for our e-commerce platform is lower than that of our self-operated
stores primarily because: (i) we sell a larger por tion of bullion on our e-commerce platforms (both
to sales platforms and through self-operated online s tores), which generally have lower gross profit
margins; and (ii) the gross profit margin from our sales to e-commerce sales platforms is generally
lower than that of our self-operated stores beca use we typically sell at lower prices to these
platforms, which require a margin to resell our products to end consumers.
Our gross profit margin of our sales derived from franchise network for the three years ended
December 31, 2023 and the six months ended June 30, 2024 were 2.8%, 4.3%, 4.7% and 6.0%,
respectively. Our gross profit margin of our sales derived from franchise network increased by
1.5% point from 2021 to 2022, then remained stable with a slight increase of 0.4% point from 2022
to 2023. The increase in 2023 and the six months ended June 30, 2024 was primarily attributable to
the fluctuation in gold price.
Our gross profit margin of our sales derived from franchisees for the three years ended
December 31, 2023 and the six months ended June 30, 2024 were 3.6%, 4.7%, 4.9% and 5.4%,
respectively, whereas the gross profit margin of our sales derived from provincial-dealers for the
corresponding year/period were 1.5%, 3.4%, 4.4% and 7.5%, respectively. The gross profit margin
from our sales to provincial-dealers is generally lower than that of our sales to franchisees because
we typically sell at lower prices to provincial-dealers, which require a margin to resell our products
to franchisees.
For the six months ended June 30, 2023 and 2024, the gross profit margins of our sales
derived from provincial-dealers were higher than that of sales to franchisees. This is primarily
because while we hold ‘‘One RMB Exchange ’’program in other provinces from July to September
we began to hold the ‘‘One RMB Exchange ’’promotion in Shandong province, a province covered
by our self-operated direct service center, in Ju ne since 2023, which led to lower gross profit
margins of our sales to franchisees for the six months ended June 30, 2023 and 2024 as we charge
lower crafting fees for trade-in gold products under ‘‘One RMB Exchange ’’program.
Our gross profit margin of our sales derived from e-commerce sales for the three years ended
December 31, 2023 and the six months ended June 30, 2024 were 2.5%, 7.9%, 7.6% and 3.7%,
respectively. Our gross profit margin of our sales derived from e-commerce sales increased by 5.4%
point from 2021 to 2022, and remained stable with a slight decrease of 0.3% point from 2022 to
2023. In 2021, the revenue contribution of sales of gold bullion was relatively higher than the
revenue contribution in 2022 and 2023, as a result of a promotion event with a leading PRC online
discount retailer. The gross profit margin of sale s of gold bullion was relatively thinner than the
gross profit margin of gold jewel lery, accordingly, we recorded a l ower gross profit margin in 2021
with the combined effect of low gold price during the year. In 2022, without the impact of the gold
bullion sales promotion event, our gross profi t margin returned to a normal level at 7.9% and
remained stable at 7.6% in 2023. For the six months ended June 30, 2024, our gross profit margin
SUMMARY
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--- page 32 ---
derived from e-commerce sales decreased to 3.7% as a result of a sales of gold bullion through a
promotion event with a leading PRC online discount retailer. Sales of gold bullion generally had
lower gross profit margin when compared to sales of other products.
Gross profit margin of our self-operated stores for the three years ended December 31, 2023
and the six months ended June 30, 2024 were 14.7%, 16.9%, 22.4% and 24.4%, respectively, which
demonstrated an increasing trend over the Track R ecord Period. The increase in 2022 was primarily
attributable to the fluctuation in gold price. Our self-operated stores have longer inventory turnover
days when compared with that of our sales to the franchise network primarily because our self-
operated stores operate under a retail sales model w ith large inventories on display to meet diverse
consumer needs. On the other hand, our Group engag es in wholesale transactions with provincial-
dealers and franchisees, which typically involves la rger transaction volumes and faster turnover of
inventory, leading to shorter inventory turnover days. The longer inventory turnover days at our
self-operated stores coupled with a general increase in gold price in 2023, resulted in a more
substantial difference between gold procurement pr ice and sales price for our self-operated stores.
Consequently, this led to a higher gross profit margin when compared to that of sales to our
franchise network, which experienced shorter inventory turnover days and a reduced time span
between gold procurement and sales price.
Other gains and losses, net
For the years ended December 31, 2021 and 2022 and 2023 and the six months ended June
30, 2024, our other gains and losses, net amount ed to gain of RMB89.8 million, loss of RMB209.0
million, loss of RMB370.0 million and los s of RMB345.7 million, respectively.
Our other gains and losses, net mainly consis t of gains or losses we incurred in connection
with our Au (T+D) contracts and gold loans. According to gold price quoted on the Shanghai Gold
Exchange, the average daily closing price of Au9999 increased from RMB374.5/g in 2021 and to
RMB392.2/g in 2022. It further increased to RMB449.9/g in 2023 and the average daily closing
price of RMB520.9/g for the six months ended June 30, 2024. Accordingly, we recorded net
realized losses on Au (T+D) contracts and gol d loans for the years ended December 31, 2022 and
2023 and the six months ended June 30, 2024. Conversely, we recorded net realized gain from Au
(T+D) contracts and gold loans in 2021. The trend generally negatively corresponded with the price
of Au9999.
Net profit and total comprehensive income
For the years ended December 31, 2021, 2022 and 2023 and the six months ended June 30,
2024, our net profit was RMB224.5 million, RMB 180.8 million, RMB233.5 million and RMB52.3
million, respectively. Our net profit decreased by RMB43.7 million from RMB224.5 million for the
year ended December 31, 2021 to RMB180.8 million for the year ended December 31, 2022,
mainly because of the decrease in revenue together with net realized loss on Au (T+D) contracts.
Our net profit increased by RMB52.7 million from RMB180.8 million for the year ended December
31, 2022 to RMB233.5 million for the year ended December 31, 2023, representing a year-on-year
increase of 29.1%, which is in line with the increase in our overall revenue. Our net profit
SUMMARY
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decreased by RMB53.7 million from RMB106.0 million for the six months ended June 30, 2023 to
RMB52.3 million for the six months ended June 30, 2024, representing a decrease of 50.7% when
comparing the two periods. In turn, such decr ease was mainly because of our net realized loss on
Au (T+D) contracts incurred in the relevant period resulting from a materi al increase in gold price
in the first half of 2024. Our net profit decrease coupled with our revenue growth resulted in a
decrease in our net profit margin for the six months ended June 30, 2024 when compared to the
corresponding period of 2023.
Net profit margin
During the Track Record Period, our net profit margin remained stable at 1.3%, 1.1%, 1.2%
and 0.5% for the years ended December 31, 2021, 2022 and 2023 and the six months ended June
30, 2024, respectively. Our low net profit marg in was primarily attributable to our adoption of
franchise distribution model, whereby we maintained low fixed crafting fees to our products when
we sell to provincial-dealers and franchisees. Such pricing model in turn benefits our franchisees as
they are able to sell to consumers at higher margins subsequently.
Our net profit margin remained stable for the three years ended December 31, 2023. Decrease
in our net profit margin for 2022 when compared with that in 2021 was partially due to our
distribution and selling expenses increased as we implemented organic growth strategies to expand
our market share. Our net profit margin for the y ear ended December 31, 2023 slightly increased to
1.2%. Our net profit margin decreased from 1.2% for the year ended December 31, 2023 to 0.5%
for the six months ended June 30, 2024 primarily d ue to an increase in our net realized loss on Au
(T+D) contracts, which in turn, was a result of a mat erial increase in gold price during the first half
of 2024.
Gold jewellery products generally have lower margin when compared with other jewellery
products, but the lower margin for gold jewellery products does not mean low crafting skills
applied when producing such products. Also, due to c omparatively stronger market demand for gold
jewellery products, they generally have higher inventory turnover.
SUMMARY
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Selected items of consolidated statements of financial position
As of December 31, As of June 30,
2021 2022 2023 2024
RMB’000 RMB ’000 RMB ’000 RMB ’000
CURRENT ASSETS
I n v e n t o r i e s................. 2 , 0 4 8 , 9 8 9 1 , 6 8 8 , 9 2 5 2 , 169,633 2,016,500
T r a d er e c e i v a b l e s ............ 9 7 , 9 9 3 1 3 0 , 9 2 2 150,513 171,206
Prepayments, deposits and other
receivables . .............. 2 7 8 , 7 4 2 2 6 1 , 9 2 1 399,406 404,722
Financial assets at fair value
through profit or loss . . . . . . . . 6,011 —— —
Pledged/restricted deposits . . . . . . 569,476 369,555 528,795 444,102
Cash and cash equivalents . . . . . . 153,518 225,359 155,866 364,034
Total .................... 3,154,729 2,676,682 3,404,213 3,400,564
CURRENT LIABILITIES
Trade and bills payables . . . . . . . 45,560 64,953 511,787 302,191
Other payables and accruals . . . . . 117,258 122,987 139,142 182,303
Lease liabilities . . . . . . . . . . . . . 12,028 9,600 7,711 11,276
B o r r o w i n g s ................ 1 , 3 3 6 , 9 2 0 8 2 9 , 6 2 7 790,041 1,070,379
Contract liabilities . . . . . . . . . . . . 27,215 39,044 42,173 72,887
Tax liabilities . . . . . . . . . . . . . . . 1,849 12,296 24,963 13,390
G o l dl o a n s................. 4 8 6 , 9 9 8 3 9 4 , 1 4 3 502,508 413,627
D e f e r r e di n c o m e............. 1 3 2 1 3 2 4 1 3 4
P r o v i s i o n.................. 2 1 0 —— —
Refund liabilities . . . . . . . . . . . . 50,995 41,448 32,943 23,615
T o t a l..................... 2 , 0 7 9 , 1 6 5 1 , 5 1 4 , 2 3 0 2 , 051,309 2,089,702
Net Current Assets .......... 1,075,564 1,162,452 1,352,904 1,310,862
Non-current Assets .......... 540,553 583,711 616,793 610,101
Non-current Liability ......... 76,240 56,730 46,792 37,433
Net Assets ................. 1,539,877 1,689,433 1,922,905 1,883,530
Capital and Reserves
S h a r ec a p i t a l ............... 2 2 4 , 9 0 0 2 2 9 , 0 6 7 229,067 229,067
R e s e r v e s .................. 1 , 3 0 7 , 1 6 3 1 , 4 5 4 , 9 1 4 1 , 685,289 1,641,095
Equity attributable to owners of
the Company . . . . . . . . . . . . . . 1,532,063 1,683,981 1,914,356 1,870,162
Non-controlling interests . . . . . . . 7,814 5,452 8,549 13,368
Total Equity ............... 1 , 5 3 9 , 8 7 7 1 , 6 8 9 , 4 3 3 1 , 922,905 1,883,530
SUMMARY
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Our refund liabilities primarily arise from s ituations where franchisees have a right to
exchange unsold diamond inlaying jewellery within five years of purchase. We seek insight from
historical exchange rates to estimate the percen tage of exchange on a portfolio level using the
expected value method. When goods are expected to be returned, instead of revenue, a refund
liability is recognized. On the other hand, o ur right to recover the product when franchisees
exercise their rights is recognized as a right to returned goods and a corresponding adjustment will
be made to cost of sales.
Net current assets
Our net current assets increased from RMB1,075.6 million as of December 31, 2021 to
RMB1,162.5 million as of December 31, 2022 p rimarily due to an decrease in borrowings of
RMB507.3 million, which in turn resulted from the inability to timely renew certain borrowings
because of business disruption to banks caused by t he pandemic and partially offset by a reduction
in inventories of RMB360.1 million.
Our net current assets furthe r increased to RMB1,352.9 mi llion as of December 31, 2023
primarily due to (i) an increase in inventories o f RMB480.7 million mainly due to an increase in
our gold reserves to meet market demand, alongside an increase in gold prices throughout 2023, (ii)
an increase in pledged/restricted deposits of RMB15 9.2 million for securing financing, and (iii) an
increase in prepayments, deposits and other receivables of RMB137.5 million due to an increase in
the right to returned goods assets, and partially offset by a significant increase in trade and bills
payable of RMB446.8 million, primarily due to our adoption of settlements in bank acceptance bills
for gold bullion transactions.
Our net current assets slightly decreased by RM B42.0 million to RMB1,310.9 million as of
June 30, 2024, primarily because of (i) a decrease in inventories by RMB153.1 million due to the
sales of our finished goods, (ii) an increase in bor rowings by RMB280.3 million, and was partially
offset by a decrease in gold loans by RMB88.9 million.
Our net current assets remained relatively st able at RMB1,336.9 million as of September 30,
2024 when compared with that as of June 30, 2024.
Net assets
Our net assets increased from RMB1,539.9 million as of December 31, 2021 to RMB1,689.4
million as of December 31, 2022 mainly due to profit during the year of RMB180.8 million, issue
of shares of RMB50.0 million and offset by divide nds declared of RMB78.7 million. Our net assets
increased to RMB1,922.9 million as of December 31, 2023 mainly due to a profit attributable to
owners of the Company of RMB230.4 million during the year. Our net assets decreased to
RMB1,883.5 million as of June 30, 2024 mainly because of the payment of dividends in the sum of
RMB91.6 million in May 2024, and partially offs et by our net profits of RMB52.3 million during
the six months ended June 30, 2024.
For further details, see ‘‘Financial Information — Selected Items of Consolidated Statements
of Financial Position ’’of this prospectus.
SUMMARY
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Selected cash flow data from our consolidated statements of cash flows
Year ended December 31, Six months ended June 30,
2021 2022 2023 2023 2024
RMB’000 RMB ’000 RMB’ 000 RMB ’000 RMB ’000
(Unaudited)
Net cash (used in)/from
operating activities . . . . . (5,935) 522,670 229,676 (63,025) (13,685)
Net cash from/(used in)
investing activities . . . . . 15,779 136,741 (190,132) (268,836) 65,028
Net cash from/(used in)
financing activities . . . . . 86,526 (587,620) (108,931) 273,566 156,733
Net increase/(decrease) in
cash and cash equivalents 96,370 71,791 (69,387) (58,295) 208,076
Cash and cash equivalents at
beginning of the year/
period . . . . . . . . . . . . . . 57,151 153,518 225,359 225,359 155,866
Effect of foreign exchange
r a t ec h a n g e s.......... ( 3 ) 5 0 ( 1 0 6 ) ( 4 7 ) 9 2
Cash and cash equivalents
at end of the year/period 153,518 225,359 155,866 167,017 364,034
We recorded net cash used in operating activities of RMB63.0 million for the six months
ended June 30, 2023. Such result was largely attributable to (i) an increase in inventories of
RMB428.5 million because we procured a large quantity of gold to replenish our inventory shortfall
caused by the pandemic in the forth quarter of 2022 ；a n d( i i )a ni n c r e a s ei ng o l dp r i c e si nt h ef i r s t
half of 2023. In addition, we recorded net cash used in operating activities of RMB13.7 million for
the six months ended June 30, 2024. Such result was largely attributable to a decrease in trade and
bills payables of RMB196.8 million, which in large part was in relation to our settling bills we
applied to procure raw materials as we alternatively used bank acceptances within intra group
transaction and revolving loans to finance our set tlement of purchases of gold in the period. As our
settlement of bills payable was classified as operating activities, while the addition of revolving
loans was classified as financing activities, the d ifference in classification contributed to the net
cash used in operating activities. Going forward , to improve the net cash position of our operating
activities, we seek to (i) schedule payments to supp liers and utilize financial instruments such as
bills, and (ii) continue to optimize our inventory level. We strive to avoid cash outflows required to
settle payables and/or procure inventory that m aterially exceeds cash inflow from operating
activities. We believe such measures, in turn, will better ensure a net cash inflow from operating
activities.
SUMMARY
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For the year ended December 31, 2021, we recorded net cash used in operating activities of
RMB5.9 million, primarily due to profit before tax of RMB295.9 million, as adjusted for certain
non-cash and/or non-operating items (i) net unrealized loss on gold loans of RMB1.0 million, which
in turn, was a result of market gold price effect on the outstanding gold loan balance on hand as of
December 31, 2021, (ii) finance costs of RMB64.2 million, (iii) depreciatio n of property, plant and
equipment of RMB27.8 million, and (iv) negative changes in working capital. Adjustments for
changes in working capital primarily included (i) increase in inventories of RMB310.6 million, (ii)
increase in pledged/restricted deposits RMB28.1 million, (iii) increase in trade receivables of
RMB22.0 million and partially offset by (iv) increase in trade and bills payables of RMB32.6
million, (v) decrease in prepayments, deposits and others receivables of RM B10.3 million and (vi)
increase in contract liabilities of RMB20.1 million.
During the Track Record Period, having consi dered that our operating cash flows before
movements in working capital were RMB413.8 million, RMB335.1 million, RMB436.4 million and
RMB110.3 million for the three years ended December 31, 2023 and the six months ended June 30,
2024, respectively, which were stable, our net operating cash outflows during the Track Record
Period was mainly attributable to changes in the volume of our gold inventories and the upward
trend in the market price of gold.
At the end of each reporting period during the Track Record Period, our inventory balance
accounted for over 50% of our total assets, and gold inventories (excluding K-gold) accounted for
more than 80% of the total inventory balance. As changes in inventory balances were mainly
affected by gold price fluctuations and our invent ory management strategies on the raw materials
we were to hold for our production needs for the r elevant year, an increase in gold price and the
volume of gold inventories contributes to an operating cash outflow.
Affected by the pandemic in the fourth quarter of 2022, we took the initiative to reduce
inventory levels. The balance of inventories decreased from RMB2,049. 0 million as of December
31, 2021 to RMB1,688.9 million as of December 31, 2022. As a result of the inventories decrease
during 2022, we recorded net cash inflow from operating activities.
Whilst, during the first half of 2023, due to a mor e positive business outlook, we implemented
inventory management strategies to scale up our production. Such decision coupled with an increase
in the gold price led to a large amount of cash spent on procurement of gold raw materials, which
then contributed to us having net operating activities cash outflow.
However, since gold inventories are highly liquid and valuable, our Directors are of the view
that our Group ’s operating conditions remain healthy and stable and are not subject to any material
risks on cashflow and liquidity.
SUMMARY
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Key financial ratios
The following table sets forth our key financial ra tios for the periods/as of the dates indicated:
Year ended/As of December 31,
Six months
ended/As of
June 30,
2021 2022 2023 2024
G r o s sp r o f i tm a r g i n ............ 3 . 2 % 4 . 8 % 5 . 3 % 6 . 2 %
N e tp r o f i tm a r g i n ............. 1 . 3 % 1 . 1 % 1 . 2 % 0 . 5 %
Return on equity . . . . . . . . . . . . . . 15.7% 11.2% 12.9% 2.7%
R e t u r no nt o t a la s s e t s .......... 6 . 4 % 5 . 2 % 6 . 4 % 1 . 3 %
C u r r e n tr a t i o ................ 1 . 5t i m e s 1 . 8t i m e s 1 . 7t i m e s 1 . 6t i m e s
Q u i c kr a t i o ................. 0 . 5t i m e s 0 . 7t i m e s 0 . 6t i m e s 0 . 7t i m e s
Gearing ratio
(1) ............... 8 6 . 8 % 4 9 . 1 % 4 1 . 1 % 5 6 . 8 %
Debt to equity ratio . . . . . . . . . . . . 76.9% 35.8% 33.0% 37.5%
Note:
(1) Gearing ratio was calculated based on total borrowings divided by total equity as of the relevant dates and
multiplied by 100%.
For details of the calculation and reasons of fluctuations, see ‘‘Financial Information — Key
Financial Ratios ’’.
PREVIOUS A-SHARE APPLICATIONS
In August 2018, we engaged GF Securities Co., Ltd. ( 廣發証券股份有限公司) (the ‘‘GF
Securities ’’) as the sponsor in preparation for our proposed submission of application for listing of
our shares (the ‘‘A-share Application ’’) on the main board of the Shenzhen Stock Exchange (the
‘‘SZSE’’) considering the fact that GF Securities had previous experience of sponsoring the listing
of another PRC gold jewellery company on the SZSE. After such engagement, GF Securities did
not make any formal listing application on our behalf. Subsequently, we terminated our engagement
with GF Securities in May 2020 because GF Securities might have been involved in material non-
compliance and was allegedly subject to investigation, and we engaged Zhongtai Securities Co.,
Ltd. ( 中泰證券股份有限公司)( ‘‘Zhongtai Securities’’ ) as our sponsor to submit the A-share
Application on the main board of the SZSE to the CSRC in September 2020. The CSRC formally
issued a rejection notice to our A-share Application on December 20, 2021 and expressed concerns
that certain of its comments had not been satisfa ctorily addressed, including (i) the business
rationale of our gold trade-in and ‘‘One RMB Exchange ’’ activities; (ii) the discrepancy in
inventory data and (iii) the inventory level of our franchise stores. Our Directors are of the view
that the above-mentioned issues are no longer applicable or relevant to the Listing, or render our
Company not suitable for listing on the Stock Exchange.
SUMMARY
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We terminated our engagement of Zhongtai Securities and engaged CITIC Securities Co., Ltd
(中信證券有限公司)( ‘‘CITIC Securities Co. ’’) for our second A-share application (the ‘‘Second
A-share Application ’’). Nonetheless, to have greater access to diverse and global investors and
gain more international recognition, we did not s ubmit our Second A-share Application and decided
to pursue H-Share Listing. We were referred to CITIC Securities (Hong Kong) Limited by CITIC
Securities Co. as our Sole Sponsor for the current Listing application and terminated our
engagement with CITIC Securities Co. There has been no disagreement between our Company and
GF Securities and Zhongtai Securities in resp ect of the A-share Application. Based on the
independent due diligence work performed by th e Sole Sponsor, nothing material has come to the
attention of the Sole Sponsor which indicated that there were any disagreements between the
Company and the previous sponsors engaged by the Company in relation to the A-share
Application.
Our Directors confirmed that based on the publicly available information, none of the
professional parties engaged by the Company in relation to the A-share Application and Second A-
share Application had been/are subject to any inves tigation by the relevant regulatory authorities in
the PRC in relation to the A-share Application and the Second A-share Application. Our Directors
further confirmed that there is no other matter in r elation to the A-share Application and Second A-
share Application that needs to be brought to the attention of the Stock Exchange or investors.
For further details, please refer to ‘‘History, Development and Corporate Structure — Previous
A-Share Applications ’’.
LISTING EXPENSES
Assuming an Offer Price of HK$13.20 per H Share, being the mid-point of the indicative
Offer Price range of HK$12.00 to HK$14.40 per H Share, and assuming the Over-allotment Option
is not exercised the total estimated listing e xpenses in connection with the Global Offering
(including underwriting commission) was RMB72.0 million (including (i) underwriting-related
expenses (including but not limi ted to commissions and fees) of ap proximately RMB33.5 million,
and (ii) non-underwriting related expenses of app roximately RMB38.5 million, which consist of
fees and expenses paid to legal advisors and Repor ting Accountants of approximately RMB25.4
million, and other fees and expenses of approximately RMB13.1 million), representing
approximately 13.4% of the gross proceeds from the Global Offering, (based on the Offer Price of
HK$13.20 per Offer Share and assuming Over-allotment Option is not exercised).
During the Track Record Period, RMB26.2 million of listing expenses and issue costs has
been incurred. For the year ending December 31, 2024, we expect to incur listing expenses of
RMB45.8 million, respectively, of which an estimated amount of RMB12.2 million will be charged
to profit or loss and RMB33.6 million will be accounted for as a deduction from equity upon
successful Listing under relevan t accounting standards, respectively. The listing expenses above
were the best estimate as of the Latest Practicab le Date and for reference only and the actual
amount may differ from this estimate.
SUMMARY
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USE OF PROCEEDS
We estimate that we will receive net proceeds from the Global Offering of approximately
HK$502.4 million, after deducting underwriting commissions, fees and estim ated expenses payable
by us in connection with the Global Offering, a nd assuming an Offer Price of HK$13.20 per H
Share, being the mid-point of the indicative Offer Price range stated in this prospectus, assuming
Over-allotment Option is not exercised. Our future plans and intended use of the net proceeds from
the Global Offering are set out in details under the section headed ‘‘Future Plans and Use of
Proceeds ’’of this prospectus and a summary of which is set out as follows:
. approximately 50.0%, or HK$251.2 million ( equivalent to approximately RMB232.5
million), will be used for enhancing our production capabilities by upgrading our
production facility in Weifang, Shandong with a view to achieve further business growth;
. approximately 34.0%, or HK$170.8 million ( equivalent to approximately RMB158.1
million), will be allocated towards the expa nsion and enhancement of our franchise
network;
. approximately 16.0%, or HK$80.4 million (equivalent to approximately RMB74.4
million), will be used for investing in information technology:
— approximately 10.0%, or RMB46.5 million, will be allocated towards the
improvement of our operational efficiency through the acquisition of digital system
for data management;
— approximately 6.0%, or RMB27.9 million, will be allocated towards the
enhancement of our production line and inventory management through the
integration of advanced digital elements into our production chain.
OUR CONTROLLING SHAREHOLDERS
Mr. Wang Zhongshan, Ms. Zhang Xiuqin, Mr. Wang Guoxin, Ms. Wang Na, Jinmeng
Partnership, Jinyuan Partnership, Jinlong Part nership and Tianjin Yuanj inmeng constitute our
Controlling Shareholders group and will collectively be entitled to exercise the voting rights of
approximately 75.00% of the total issued share c apital of our Company assuming that the Over-
allotment Option is not exercised and will collect ively be entitled to exercise the voting rights of
approximately 73.23% of the total issued share capital of our Company assuming the Over-
allotment Option is exercised in full and will remain as a group of Controlling Shareholders upon
Listing. See ‘‘Relationship with our Controlling Shareholders ’’for details.
RELATIONSHIP WITH OUR CONTROLLING SHAREHOLDERS
During the Track Record Period, Mr. Wang Zhongshan and Ms. Zhang Xiuqin (the ‘‘CP
Guarantors ’’) had been providing personal guarantees/mortgages (the ‘‘CP Guarantees ’’) as
security for certain of our Group ’s banks loans, acceptance bills, lease financing and gold loans
(collectively, the ‘‘Guaranteed Loans ’’), and all of such CP Guarantees will be terminated and the
relevant banks loans, acceptance bills and gold loans will be guaranteed by the Company and/or
SUMMARY
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members of our Group upon Listing. As of the Lat est Practicable Date, we have received consent
letters from all lenders of our Guaranteed Loan s, pursuant to which they agreed in principle to
replace our CP Guarantees with guarantees/mor tgages and/or patent rights to be provided by our
Group upon Listing. See ‘‘Relationship with our Controlling Shareholders ’’for details.
OUR PRE-IPO INVESTORS
We have six Pre-IPO Investors including: (i) Tian jin Haikai Xinchuang; (ii) CITIC Securities
Investment; (iii) Mr. Zhao Duxue ( 趙篤學); (iv) Ms. Huang Yi ( 黃怡); (v) Ms. Zhang Yizhen ( 張義
貞); and (vi) Mr. Zhang Jianjun ( 張建軍), all of which are Independent Third Parties. For further
details, see ‘‘History, Development and Corporate Structure — Pre-IPO Investments ’’.
DIVIDEND
The dividend declared by our Group to the shareholders was nil, RMB78.7 million, nil and
RMB91.6 million for the years ended December 31, during 2021, 2022 and 2023 and the six
months ended June 30, 2024, respectively. All dividends declared have been fully settled by cash.
We do not have any fixed dividend policy nor pre-determined dividend payout ratio. The
declaration of dividends is subject to the discretion of our Board. Any declaration of final dividend
by our Company shall also be subject to the approval of our Shareholders in a Shareholders ’
meeting. Our Directors may recommend a paymen t of dividends in the future after taking into
account our operations and earnings, capital requirements and surplus, general financial condition,
contractual restrictions, capital expenditure and future development requirements, shareholders ’
interests and other factors which they may deem relevant at such time.
IMPACT OF THE COVID-19 PANDEMIC ON OUR OPERATIONS
During the Track Record Period, the COVID-19 pa ndemic and related rest rictive policies led
to a decline in social networking and business act ivities, which in turn had adverse impacts on
China’s gold jewellery market and our operations.
In 2022, our manufacturing facilities in Changle e xperienced a temporary decrease in capacity,
primarily due to an increase in the number of days waiting for raw materials to arrive, caused by
recurring COVID-19 outbreaks in China that led to transportation delays. Additionally, a number of
our franchise stores were temporarily shut down due to COVID-19 in 2021 and 2022. Despite the
COVID-19 challenges, our business maintained an upward trend during the Track Record Period.
We had promptly taken various measures to mitigate the impacts of the COVID-19 pandemic, such
as (i) organizing our employees to work remotely an d closely monitoring their health and wellness;
(ii) providing epidemic prevention essentials t o our employees, such as masks and disinfectant
alcohol; and (iii) conducting routin e sanitization and requiring regular negative COVID-19 PCR test
results to prevent any resurgence. Our revenue decreased from RMB16,871.0 million in 2021 to
RMB15,724.2 million in 2022, primarily due to the pandemic ’s effect on our sales in the fourth
quarter of 2022, then increased to RMB20,208.6 million in 2023, primarily due to the recovery of
economic activities in 2023. As of the Latest Practicable Date, COVID-19 has not posed any
material adverse impact on our daily operati on, supply chain, or regulatory affairs.
SUMMARY
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With the PRC government substantially lifting COVID-19 prevention and control policies
since December 2022, our Directors are of the view, and the Sole Sponsor concurs, that it is
unlikely that the COVID-19 pandemic will have a material adverse impact on our business going
forward. Other than the aforementioned impact, our Directors are of the view, and the Sole Sponsor
concurs, that the COVID-19 pandemic did not have any material adverse impact on our overall
business, financial condition and results of ope rations during the Track Record Period and up to the
Latest Practicable Date.
REGULATORY DEVELOPMENT
CSRC Filing
On February 17, 2023, the CSRC promulgated the Administrative Trial Implementation
Measures for Filing of Overseas Securities Offering and Listing by Domestic Companies ( 《境內企
業境外發行證券和上市管理試行辦法》) and the Notice on the Administrative Filing Arrangement
Concerning Overseas Offering and Listing by Domestic Companies ( 《關於境內企業境外發行上市
備案管理安排的通知》) (collectively, the ‘‘Overseas Listing Trial Measures ’’), which require
indirect overseas offering and listing by PRC d omestic companies to be subject to the CSRC ’s
filing requirement starting from March 31, 2023.
On October 9, 2023, we submitted initial filing documents to the CSRC, and the CSRC
published the notification on our completion of the required filing procedures on January 19, 2024
for this offering.
RECENT DEVELOPMENTS AND NO MATERIAL ADVERSE CHANGE
After the Track Record Period, gold prices c ontinued to show volatility, rising from
RMB549.2/g as of July 1, 2024, to RMB563.3/g as of July 31, 2024, then increasing to
RMB573.4/g as of August 30, 2024, and further to RMB603.1/g as of the Latest Practicable Date,
according to the closing gold price of Au9999 quoted on the Shanghai Gold Exchange. Such
increase in gold price resulted in our loss from Au (T+D) contracts and gold loans, and our net
profits and net profit margins for the year ending December 31, 2024 may also be negatively
affected if the gold prices continue to trend upwards in the remaining period of 2024. We generally
manage our exposure to gold price fluctuations by utilizing gold loans and Au (T+D) contracts as
economic hedges against gold price fluctuations. For details of the Au (T+D) contracts and gold
loans, and their impacts on our net profits and net profit margins, please see ‘‘ —Net Profit Margin
— Effects of Au (T+D) Contracts and Go ld Loans as Hedging Strategies. ’’On the other hand, the
continuous rise in gold prices after June 2024 has positively impacted our gross profit and gross
profit margin. However, as gold prices are currently at a relatively high level, if gold prices remain
steady or decline in the future, our gross profit and gross profit margin may be adversely affected
or even become negative.
Our Directors confirm that save as the negative impact of loss from Au (T+D) contracts and
gold loans due to increase of gold price, there has been no material adverse change in our business,
financial condition, or result of operations, nor has there been any material adverse change in our
SUMMARY
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revenue, cost of sales, gross profit, and gross profit margin since June 30, 2024, the latest balance
sheet date of our consolidated financial statements as set out in the Accountants ’ Report included in
Appendix I to this prospectus, up to the date of this prospectus.
THIRD-PARTY SETTLEMENT ARRANGEMENT
For the years ended December 31, 2021, 2022 and 2023, 573, 669 and 554 of our franchisees
entered into designation letters and settled tran sactions with us through accounts of third parties
designated by them ( ‘‘Third-party Settlement Arrangement ’’). In view of the risks relating to
such Third-party Settlement Arrangement, we have taken steps to cease our Third-party Settlement
Arrangement. On November 14, 2023, we issued notices and informed the Relevant Counterparties
of our intention to cease the Third-party Settlement Arrangement with effect from January 1, 2024.
All Third-party Settlement Arrangements have been ceased since January 1, 2024 and all
settlements thereafter have been made by the relevant franchisees. Out of the 554 Relevant
Counterparties who adopted Third-party Settle ment Arrangement during the year ended December
31, 2023, 530, or 95.7%, of them remained as our fra nchisees as of the Latest Practicable Date.
After due and careful consideration, our Directors confirm that subsequent to the cessation of
Third-party Settlement Arrangement on January 1, 2024 and up to the Latest Practicable Date, save
as disclosed in the paragraphs headed ‘‘Listing Expenses ’’in this section, we did not have any
significant non-recurrent items in our consolid ated financial statements. Our Directors also
confirmed that, subsequent to the Track Record Period and up to the Latest Practicable Date, (i)
there was no material adverse change in the market conditions or the industry and environment in
which we operate that materially and adversely aff ect our financial or operating position; (ii) there
was no material adverse change in the trading and f inancial position or prospects of our Group; and
(iii) no event occurred that would materially and adversely affect the data shown in the
Accountants ’ Report set out in Appendix I to this prospectus. Our Directors further confirm that
going forward, we will not accept Third-party Settlement Arrangement and any other payments
from third-party payors.
SUMMARY
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OFFERING STATISTICS
All statistics in this table are based on the assumption that the Over-allotment Option is not
exercised.
Based on an
Offer Price of HK$12.00
per H Share
Based on an
Offer Price of HK$14.40
per H Share
Market capitalization of the H Shares (1) . HK$819.2 million HK$983.0 million
Market capitalization of the Shares (2) . . . HK$3,276.3 million HK$3,931.5 million
Unaudited pro forma adjusted
consolidated net tangible assets of the
Group attributable to owners of the
Company as of June 30, 2024 per
Share
( 3 ) ........................ HK$9.07 HK$9.44
Notes:
(1) The calculation of market capitalization is based on the assumption that 43,956,800 H Shares will be in issue
immediately following the comple tion of the Global Offering (assuming the Over-allotment Option is not
exercised) and that 24,306,666 Unlisted Shares that w ill be converted into H Shares upon the completion of
the Global Offering.
(2) The calculation of market capitalization is based on 273,023,466 Shares expected to be in issue immediately
after completion of the Global Offering.
(3) The unaudited pro forma adjusted consolidated net ta ngible assets per Share in the above table is calculated
after the adjustments referred to in the section headed ‘‘Unaudited Pro Forma Statement of Adjusted
Consolidated Net Tangible Assets of the Group Attributable to Owners of the Company ’’set out in
‘‘Appendix II — Unaudited Pro Forma Financial Information ’’to this prospectus and on the basis of
273,023,466 Shares in issue immediately following the completion of the Global Offering, assuming that the
Over-allotment Option is not exercised.
LAND AND PROPERTIES
As of the Latest Practicable Date, we owned six parcels of land, with an aggregate area of
approximately 178,173.5 sq.m., and 34 buildings or units, with an aggregat e building floor area of
approximately 144,938.7 sq.m. in the PRC. For further details, see ‘‘Business — Land and
Properties ’’and the Property Valuation Report i n Appendix III to this prospectus.
SUMMARY
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SUMMARY OF LAWS AND REGULATIONS RELATED TO THE INDUSTRY IN WHICH
THE COMPANY OPERATES
Relevant to the gold and jewellery industry
The regulations applicable to the gold and je wellery industry mainly include the Decision
of the State Council in Relation to the Cancellation of the Second Batch of Administrative
Approval Items and Amendment to the Management Method of Certain Administrative Approval
Items （《國務院關於取消第二批行政審批項目和改變一批行政審批項目管理方式的決定》), the
Administrative Regulations on Gold and Silver of the PRC ( 《中華人民共和國金銀管理條例》) and
the Measures for the Administration of the Import and Export of Gold and Gold Products ( 《黃金及
黃金製品進出口管理辦法》). For details, see ‘‘Regulatory Overview — Regulations Related to the
Gold Jewellery Industry ’’. Pursuant to the aforesaid provisions, gold and gold products imported
and exported through processing trade are exempt from obtaining the ‘‘PBOC Import and Export
Permit for Gold and Gold Products’’ (《中國人民銀行黃金及黃金製品進出口准許證》) issued by the
PBOC, and are supervised by customs. As of the Latest Practicable Date, we have obtained the
export license for the gold and gold products.
Relevant to product manufacturing
The regulations applicable to product production mainly include the Work Safety Law of the
PRC (《中華人民共和國安全生產法》), the Fire Protection Law of the PRC ( 《中華人民共和國消防
法》), and the Environmental Protection Law of the PRC ( 《中華人民共和國環境保護法》). For
details, see the ‘‘Regulatory Overview — Regulations Related to Production ’’.A so ft h eL a t e s t
Practicable Date, our Group has completed the necessary procedures required for production.
Relevant to sales of products
We are subject to laws and regulations relating to the sale of our products, including the
Administrative Regulations on Commercial Franchised Operation ( 《商業特許經營管理條例》), the
Product Quality Law of the PRC ( 《中華人民共和國產品質量法》), the Protection of the Rights and
Interests of Consumers Law of the PRC ( 《中華人民共和國消費者權益保護法》), the Anti-Unfair
Competition Law of the PRC ( 《中華人民共和國反不正當競爭法》), the Advertisement Law of the
PRC (《中華人民共和國廣告法》) and the E-commerce Law of the PRC ( 《中華人民共和國電子商務
法》). For details, see ‘‘Regulatory Overview — Regulations Related to Franchised Commercial
Operation ’’and ‘‘Regulatory Overview — Regulations Regarding the Sale of Products ’’.A so ft h e
Latest Practicable Date, our Group completed for the filing of franchised commercial operation with
the Ministry of Commerce and our Group has taken measures to minimize the risk of product sales.
SUMMARY
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--- page 46 ---
Relevant to anti-unfair competition and anti-commercial bribery
The regulations applicable to anti-unfair competition and anti-commercial bribery mainly
include the Anti-Unfair Competition Law of the People ’s Republic of China ( 《中華人民共和國反不
正當競爭法》). For details, please refer to ‘‘Regulatory Overview — Regulations Regarding the Sale
of Products ’’. According to the above regulations, operators are not allowed to bribe any employees
of the counterpart entity, any entity or personnel entrusted by the counterparty, or influence the
entity or personnel of the counterparty to gain commercial opportunities or competitive advantages
through their power during production and operatio n activities. As of the Latest Practicable Date,
the Company has reduced the legal risks of commercial bribery by implementing an ‘‘Anti-
Corruption and Anti-Bribery Management System’’ , and establishing a commercial bribery reporting
hotline.
Having considered that (i) as advised by our PRC Legal Advisor, we have obtained all
licenses, permits and certificates required to conduct our business in all material respects from the
relevant PRC government authorities, and we have not been subject to significant administrative
penalties during the Track Record Period and up to the Latest Practicable Date; and (ii) we have
obtained compliance certificates with respect to our business operations from the relevant
authorities during the Track Record Period, our Directors are of the opinion that our Group has
complied with the applicable laws and regulation s including those on product quality and consumer
protection in China that affect our business activ ities in all material respects during the Track
Record Period and up to the Latest Practicable Date.
SUMMARY OF MAJOR RISK FACTORS
Our major risk factors include:
. Our business and future growth prospects rely on consumer demand for our products.
Any changes in market trends, consumers ’ demand or preferences, may materially and
adversely affect our business and results of operations
. We have limited control over the operations of our franchisees. If we cannot maintain or
further develop our collaborations with fra nchisees or if there are any illegal actions,
misconduct or any failure by our franchisees to provide satisfactory services, our
business, financial conditions and results of operations could be adversely affected
. Our business could be materially adversely affected if we cannot protect our trade name
and other intellectual property right s or if we face any negative publicity
. Our production machinery and technical know-how may become out-of-date which may
affect our business, financial conditions and results of operations
. Fluctuation of raw material prices could adversely affect our business, financial
conditions and results of operations
. We may not be successful in utilizing gold price exposure management method to
manage the fluctuations in gold price
SUMMARY
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--- page 47 ---
. We rely on our in-house and franchisees ’ sales and marketing force to promote our
brand. If the sales and marketing personnel are unable to implement effective marketing
or sales campaign, our business, financial conditions and results of operations could be
adversely affected
. We rely on our major suppliers whose supply may materially and adversely affect our
business, financial conditio ns and results of operations
. Competition in the gold jewellery manufacturing and retail industry is intense and could
cause us to lose market share, thereby materially and adversely affecting our business,
financial conditions and results of operations
NON-COMPLIANCE
For details of the non-compliance on failure to contribute in full social insurance and housing
provident funds and our measures to ensure compliance, see ‘‘Business — Compliance and legal
proceedings — Non-compliance’’. We will adopt enhanced internal controls, such as distributing
compliance policies to employees, assigning designated personnel to implement policies and senior
management to monitor compliance status. We will also maintain regular communication with
relevant PRC authorities and external legal a dvisers to assess non-compliance risks. Save as
disclosed, we are in compliance with laws and regulations in the PRC in material respects during
the Track Record Period and up to the Latest Practicable Date.
SUMMARY
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In this prospectus, unless the context otherwi se 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.
‘‘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 articles of association of the Company adopted by the
Shareholders on September 20, 2023 and with effect from the
Listing Date, as amended from time to time, a summary of
which is set out in Appendix VI to this prospectus
‘‘associate(s) ’’ has the meaning ascribed thereto under the Listing Rules
‘‘Beijing Chengxin ’’ Beijing Chengxin Mokingran Jewellery Limited* ( 北京誠信夢
金園珠寶首飾有限公司), a company established in the PRC
on March 9, 2010 and a wholly-owned subsidiary of our
Company
‘‘Beijing Mokingran ’’ Beijing Mokingran Jewellery Limited* (北 京夢金園珠寶首飾
有限公司), a company established in the PRC on August 21,
2017 and a wholly-owned subsidiary of our Company
‘‘Board ’’or ‘‘Board of Directors ’’ the board of Directors of our Company
‘‘Board of Supervisors ’’ the board of Supervisors of our Company
‘‘Business Day(s) ’’or ‘‘business
day(s) ’’
any day (other than a Saturday, Sunday or public holiday in
Hong Kong and any day on which tropical cyclone warning
no. 8 or above or a black rainstorm warning signal is hoisted
in Hong Kong) on which banks in Hong Kong are generally
open for normal banking business
‘‘Capital Market Intermediaries ’’ the capital market intermediaries engaged by our Company as
named in the section headed ‘‘Directors, Supervisors and
Parties Involved in the Global Offering ’’in this prospectus
‘‘CCASS’’ the Central Clearing and Settlement System established and
operated by HKSCC
DEFINITIONS
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--- page 49 ---
‘‘Changle Chengxin’’ Changle Chengxin Gold Limited* ( 昌樂誠信黃金有限公司), a
company established in the PRC on September 8, 2003 and a
wholly-owned subsidiary of our Company
‘‘Changle Mokingran ’’ Changle Mokingran Jewellery Limited* (昌 樂夢金園珠寶有限
公司), a company established in the PRC on April 11, 2024
and a wholly-owned subsidiary of our Company
‘‘Chengcheng Dinghui ’’ Guangzhou Chengcheng Dinghui Equity Investment
Partnership (Limited Partnership)* ( 廣州成誠鼎暉股權投資合
夥企業(有限合夥)), a limited liability partnership established
in the PRC on September 30, 2017, our promoter and an
Independent Third Party
‘‘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, references in this prospectus to
‘‘China ’’ and the ‘‘PRC’’ do not include Hong Kong, the
Macau Special Administrative Region of the PRC and Taiwan
‘‘CITIC Securities Investment ’’ CITIC Securities Investment Limited* ( 中信証券投資有限公
司), a company established in the PRC on April 1, 2012, our
Pre-IPO Investor and an Independent Third Party
‘‘close associate(s)’’ has the meaning ascribed thereto under 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 ’’,
and ‘‘the Company’’
MOKINGRAN JEWELLERY GROUP CO., LTD. ( 夢金園黃
金珠寶集團股份有限公司), a limited liability company
established in the PRC on September 8, 2000 and was further
converted into a joint stock limited company on June 29,
2018, which was formerly known as ‘‘Changle Huaye
Jewellery Limited* ( 昌樂華業珠寶有限公司)’’, ‘‘Tianjin
Mokingran Jewellery Limited* ( 天津夢金園珠寶首飾有限公
司)’’, ‘‘Tianjin Mokingran Gold Jewellery Limited* ( 天津夢金
園黃金珠寶有限公司)’’ and ‘‘Mokingran Gold Jewellery
Group Limited* ( 夢金園黃金珠寶集團有限公司)’’
DEFINITIONS
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--- page 50 ---
‘‘Company Law ’’or ‘‘PRC
Company Law ’’
the Company Law of the PRC ( 中華人民共和國公司法), as
amended, supplemented or otherwise modified from time to
time
‘‘connected person(s) ’’ has the meaning ascribed thereto under the Listing Rules
‘‘connected transaction(s)’’ has the meaning ascribed thereto under the Listing Rules
‘‘core connected person ’’ 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 Mr. Wang
Zhongshan, Ms. Zhang Xiuqin, Mr. Wang Guoxin, Ms. Wang
Na, Jinmeng Partnership, Jinyuan Partnership, Jinlong
Partnership and Tianjin Yuanjinmeng. See ‘‘Relationship with
Our Controlling Shareholders’’ for further details
‘‘COVID-19’’ a viral respiratory disease caused by the severe acute
respiratory syndrome coronavirus 2 (SARS-CoV-2)
‘‘CSDC ’’ China Securities Depository and Clearing Co., Ltd. ( 中國證券
登記結算有限責任公司)
‘‘CSRC’’ China Securities Regulatory Commission ( 中國證券監督管理
委員會), a regulatory body responsible for the supervision and
regulation of the PRC national securities markets
‘‘Director(s)’’ the director(s) of our Company, including all executive and
independent non-executive directors
‘‘Domestic Share(s) ’’ ordinary shares in the share capital of our Company, with a
nominal value of RMB1.00 each, which are subscribed for and
paid up in Renminbi
‘‘EIT’’ enterprise income tax
‘‘EIT Law’’ the Enterprise Income Tax Law of the PRC ( 《中華人民共和國
企業所得稅法》), as amended, supplemented or otherwise
modified from time to time
‘‘Employee Share Ownership
Scheme ’’
the employee share ownership scheme adopted by our
Company on March 10, 2016
‘‘Employee Shareholding
Platforms ’’
Jinmeng Partnership, Jinyuan Partnership and Jinlong
Partnership
DEFINITIONS
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--- page 51 ---
‘‘Extreme Conditions ’’ extreme conditions caused by a super typhoon as announced
by the government of Hong Kong
‘‘FIL’’ Foreign Investment Law of the PRC ( 中華人民共和國外商投
資法)
‘‘FINI’’or ‘‘Fast Interface for
New Issuance ’’
an online platform operated by HKSCC that is mandatory for
admission to trading and, wher e applicable, the collection and
processing of specified information on subscription in and
settlement for all new listings
‘‘Frost & Sullivan ’’ Frost & Sullivan (Beijing) Inc., Shanghai Branch Co., an
independent market, research and consulting company
‘‘General Rules of HKSCC ’’ the General Rules of HKSCC as may be amended or modified
from time to time and where the context so permits, shall
include the HKSCC Operational Procedures
‘‘Global Offering ’’ the Hong Kong Public Offering and the International Offering
‘‘Greater China’’ the PRC, the Hong Kong Special Administrative Region, the
Macau Special Administrative Region, and Taiwan
‘‘Group ’’, ‘‘we’’or ‘‘us’’ our Company and all of our subsidiaries or, where the context
so requires, in respect of the period before our Company
became the holding company of its present subsidiaries, the
businesses operated by such subsidiaries or their predecessors
(as the case may be)
‘‘Guangdong Mokingran ’’ Guangdong Mokingran Jewellery Limited* ( 廣東夢金園珠寶
首飾有限公司), a company established in the PRC on August
1, 2017 and a wholly-owned subsidiary of our Company
‘‘Hangzhou Mokingran ’’ Hangzhou Mokingran Jewellery Limited* ( 杭州夢金園珠寶首
飾有限公司), a company established in the PRC on August 26,
2016 and a wholly-owned subsidiary of our Company
‘‘HK$’’or ‘‘Hong Kong dollars ’’ Hong Kong dollars and cents respectively, the lawful currency
of Hong Kong
‘‘HKFRS ’’ Hong Kong Financial Reporting Standards, amendments and
the related interpretations issued by the Hong Kong Institute of
Certified Public Accountants
DEFINITIONS
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--- page 52 ---
‘‘HKSCC ’’ Hong Kong Securities Clearing Company Limited, a wholly-
owned subsidiary of Hong Kong Exchanges and Clearing
Limited
‘‘HKSCC EIPO ’’ the application for the Hong Kong Offer Shares to be issued in
the name of HKSCC Nominees and deposited directly into
CCASS to be credited to your designated HKSCC Participant ’s
stock account through causing HKSCC Nominees to apply on
your behalf, including by instructing your broker or custodian
who is a HKSCC Participant to give electronic application
instructions via HKSCC ’s FINI system to apply for the Hong
Kong Offer Shares on your behalf
‘‘HKSCC Operational
Procedures ’’
the operational procedures of HKSCC, containing the
practices, procedures and administrative or other requirements
relating to HKSCC ’s services and the operations and functions
of CCASS, FINI or any other platform, facility or system
established, operated and/or otherwise provided by or through
HKSCC, as from time to time in force
‘‘HKSCC Nominees ’’ HKSCC Nominees Limited, a wholly-owned subsidiary of
HKSCC
‘‘HKSCC Participant’’ a participant admitted to participate in CCASS as a direct
clearing participant, a general clearing participant or a
custodian participant
‘‘Hong Kong ’’ the Hong Kong Special Administrative Region of the PRC
‘‘Hong Kong Mokingran ’’ HONG KONG MOKINGRAN JEWELLERY GROUP
LIMITED (香 港夢金園國際珠寶集團有限公司), a company
incorporated in Hong Kong on April 25, 2003 and an indirect
wholly-owned subsidiary of our Company
‘‘Hong Kong Offer Shares ’’ the H Shares offered by us 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 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 conditions described in this prospectus as further
described in the section headed ‘‘Structure of the Global
Offering — The Hong Kong Public Offering ’’ in this
prospectus
DEFINITIONS
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--- page 53 ---
‘‘Hong Kong Underwriters ’’ the underwriters of the Hong Kong Public Offering listed in
the section headed ‘‘Underwriting — Hong Kong
Underwriters ’’in this prospectus
‘‘Hong Kong Underwriting
Agreement’’
the underwriting agreement dated Tuesday, November 19,
2024 relating to the Hong Kong Public Offering entered into
by, among other parties, our Company and the Controlling
Shareholders, the Sole Sponsor, the Sponsor-Overall
Coordinator and the Hong Kong Underwriters, as further
described in the section headed ‘‘Underwriting —
Underwriting Arrangements and Expenses — Hong Kong
Public Offering ’’in this prospectus
‘‘H Share(s)’’ overseas listed foreign share(s) in our ordinary share capital,
with nominal value of RMB1.00 each, which are to be
subscribed for and traded in Hong Kong dollars, and for
which an application has been made for listing and permission
to trade on the Stock Exchange
‘‘H Share Registrar ’’ Computershare Hong Kong Investor Services Limited
‘‘Huang Yi ’’ Ms. Huang Yi ( 黃怡), our Pre-IPO Investor
‘‘Independent Third Party(ies) ’’ an individual or a company which, to the best of our
Directors ’ knowledge, information and belief, having made all
reasonable enquiries, is not a connected person of the
Company within the meaning of the Listing Rules
‘‘industry report ’’ the report commissioned by the Company and independently
prepared by Frost & Sullivan, a summary of which is set forth
in the section headed ‘‘Industry Overview ’’in this prospectus
‘‘International Offer Shares ’’ the H Shares initially offered by our Company for subscription
at the Offer Price pursuant to the International Offering
together with, where relevant, any additional H Shares which
may be issued by our Company pursuant to the exercise of the
Over-allotment Option (subject to reallocation as described in
the section headed ‘‘Structure of the Global Offering ’’in this
prospectus)
‘‘International Offering ’’ the offer of the International Offer Shares by the International
Underwriters at the Offer Price outside the United States in
offshore transactions in accordance with Regulation S or any
other available exemption from registration under the U.S.
Securities Act, as further described in the section headed
‘‘Structure of the Global Offering ’’in this prospectus
DEFINITIONS
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--- page 54 ---
‘‘International Underwriters ’’ the group of international underwriters, led by the Sponsor-
Overall Coordinator that is expected to enter into the
International Underwriting Agreement to underwrite the
International Offering
‘‘International Underwriting
Agreement’’
the underwriting agreement expected to be entered into on or
about the Price Determination Date by, among other parties,
our Company and the Controlling Shareholders, the Sole
Sponsor, the Sponsor-Overall Coordinator and the International
Underwriters in respect of the In ternational Offering, as further
described in the section headed ‘‘Underwriting —
Underwriting Arrangements and Expenses — International
Offering ’’in this prospectus
Joint Bookrunners the joint bookrunners as named in the section headed
‘‘Directors, Supervisors and Parties Involved in the Global
Offering ’’in this prospectus
Joint Lead Managers the joint lead managers as named in the section headed
‘‘Directors, Supervisors and Parties Involved in the Global
Offering ’’in this prospectus
‘‘Jiaxing Yugang ’’ Jiaxing Yugang Investment Mana gement Partnership (Limited
Partnership)* ( 嘉興煜港投資管理合夥企業(有限合夥)), a
limited partnership established in the PRC on March 31, 2017,
our promoter and an Independent Third Party
‘‘Jinlong Partnership ’’ Tianjin Jinlong Enterprise Management Partnership (Limited
Partnership)* (天 津金隆企業管理合夥企業(有限合夥)), a
limited partnership establis hed in the PRC on March 16, 2016
and our Controlling Shareholder
‘‘Jinan Chengxin ’’ Jinan Chengxin Mokingran Jewellery Limited* ( 濟南誠信夢金
園珠寶首飾有限公司), a company established in the PRC on
May 15, 2019 and an indirect wholly-owned subsidiary of our
Company
‘‘Jinan Mokingran ’’ Jinan Mokingran Jewellery Limited* ( 濟南夢金園黃金珠寶有
限公司), a company established in the PRC on June 17, 2011
and a wholly-owned subsidiary of our Company
‘‘Jinmeng Partnership ’’ Tianjin Jinmeng Enterprise Mana gement Partnership (Limited
Partnership)* (天 津金夢企業管理合夥企業(有限合夥)), a
limited partnership establis hed in the PRC on March 16, 2016
and our Controlling Shareholder
DEFINITIONS
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--- page 55 ---
‘‘Jinyuan Partnership ’’ Tianjin Jinyuan Enterprise Management Partnership (Limited
Partnership)* ( 天津金園企業管理合夥企業(有限合夥)), a
limited partnership establis hed in the PRC on March 16, 2016
and our Controlling Shareholder
‘‘Latest Practicable Date ’’ November 13, 2024, being the latest practicable date for the
purpose of ascertaining certain information in this prospectus
prior to its publication
‘‘Lhasa Jinqianhui ’’ Lhasa Jinqianhui Technology Limited* ( 拉薩金千匯科技有限
公司), a company established in the PRC on April 1, 2024 and
a wholly-owned subsidiary of Shenzhen E-commerce
‘‘Listing ’’ the listing of our H Shares on the Stock Exchange
‘‘Listing Committee ’’ the Listing Committee of the Stock Exchange
‘‘Listing Date ’’ the date expected to be on or about Friday, November 29,
2024, on which dealings in our H Shares first commence on
the Stock Exchange
‘‘Listing Rules ’’ the Rules Governing the Listing of Securities on The Stock
Exchange of Hong Kong Limited, as amended, supplemented
or otherwise modified from time to time
‘‘Main Board ’’ the stock exchange (excluding the option market) operated by
the Stock Exchange, which is independent from and operated
in parallel with the Growth Enterprise Market of the Stock
Exchange
‘‘Maximum Offer Price ’’ HK$14.40 per Offer Share, being the maximum subscription
price in the Offer Price Range
‘‘Minimum Offer Price ’’ HK$12.00 per Offer Share, being the minimum subscription
price in the Offer Price Range, subject to change as described
in this prospectus
‘‘MOHRSS ’’ Ministry of Human Resources and Social Security of PRC ( 中
華人民共和國人力資源和社會保障部)
‘‘Nanjing Mokingran’’ Nanjing Mokingran Jewellery Limited* ( 南京夢金園珠寶首飾
有限公司), a company established in the PRC on September
24, 2013 and a wholly-owned subsidiary of our Company
‘‘NDRC ’’ the National Development and Reform Commission of the
PRC ( 中華人民共和國國家發展和改革委員會)
DEFINITIONS
– 45 –


--- page 56 ---
‘‘NPC’’ the National People ’s Congress of the PRC ( 中華人民共和國
全國人民代表大會)
‘‘OBM’’ original brand manufacturer, a manufacturer that develops and
owns the design of a product which is marketed and sold
under the manufacturer ’s own brand name
‘‘Offer Price’’ the final price per Offer Share in Hong Kong dollars
(exclusive of brokerage fee of 1%, 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$14.40 and
expected to be not less than HK$12.00, at which Hong Kong
Offer Shares are to be subscribed for, to be determined in the
manner further described in the section headed ‘‘Structure of
the Global Offering — Pricing ’’in this prospectus
‘‘Offer Price Range’’ HK$12.00 to HK$14.40 per Offer Share, subject to change as
described in this prospectus
‘‘Offer Share(s)’’ the Hong Kong Offer Shares and the International Offer
Shares, together with, where relevant, any additional H Shares
which may be issued by our Company pursuant to the exercise
of the Over-allotment Option
‘‘Over-allotment Option’’ the option expected to be granted by our Company to the
International Underwriters pursuant to the International
Underwriting Agreement, pursuant to which our Company
may be required to allot and issue up to an aggregate of
6,593,400 additional H Shares, representing approximately
15% of the Offer Shares initially being offered under the
Global Offering, at the Offer Price to, among other things,
cover over-allocations in the International Offering, if any,
further details of which are described in the section headed
‘‘Structure of the Global Offering — Stabilization ’’in this
prospectus
‘‘PBOC ’’ the People ’s Bank of China (中 國人民銀行), the central bank
of the PRC
‘‘Ping An Tianyu’’ Shenzhen Pingan Tianyu Equity Investment Fund Partnership
(Limited Partnership)* (深 圳平安天煜股權投資基金合夥企
業(有限合夥)), a limited liability partnership established in the
PRC on December 7, 2015, the promoter and an Independent
Third Party
DEFINITIONS
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‘‘PRC Legal Advisor ’’ Jia Yuan Law Offices, PRC legal advisor to our Company
‘‘PRC Securities Law ’’ the Securities Law of the PRC ( 《中華人民共和國證券法》), as
enacted by the 6th meeting of the 9th Standing Committee of
the NPC on December 29, 1998 and became effective on July
1, 1999, as amended, suppleme nted or otherwise modified
from time to time
‘‘Pre-IPO Investment(s) ’’ the pre-IPO investments in our Company undertaken by the
Pre-IPO Investors, details of which are set out in the section
headed ‘‘History, Development and Corporate Structure —
Pre-IPO Investments ’’in this prospectus
‘‘Pre-IPO Investor(s) ’’ the investors of Pre-IPO Investments, including Tianjin Haikai
Xinchuang, CITIC Securities Investment, Mr. Zhao Duxue,
Ms. Huang Yi, Ms. Zhang Yizhen and Mr. Zhang Jianjun
‘‘Price Determination Date ’’ the date, expected to be on or around Wednesday, November
27, 2024 (Hong Kong time) on which the Offer Price is
determined
‘‘prospectus ’’ this prospectus being issued in connection with the Hong
Kong Public Offering
‘‘provincial-dealer(s) ’’ external party responsible for distribution of our products to
franchisees in the regions they serve
‘‘R&D’’ research and development
‘‘Regulation S ’’ Regulation S under the U.S. Securities Act
‘‘RMB’’or ‘‘Renminbi ’’ Renminbi, the lawful currency of the PRC
‘‘SAFE ’’ the State Administration of Foreign Exchange of the PRC ( 中
華人民共和國國家外匯管理局)
‘‘SAMR ’’ State Administration for Market Regulation of the PRC ( 中華
人民共和國國家市場監督管理總局)
‘‘SAT’’ State Administration of Taxation (國 家稅務總局)
‘‘Securities and Futures
Ordinance’’or ‘‘SFO’’
the Securities and Futures Ordinance (Chapter 571 of the Laws
of Hong Kong), as amended, supplemented or otherwise
modified from time to time
‘‘SFC’’ the Securities and Futures Commission of Hong Kong
DEFINITIONS
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‘‘Shandong E-commerce ’’ Shandong Mokingran E-commerce Limited* ( 山東夢金園電子
商務有限公司), a company established in the PRC on
December 12, 2014 and an indirect wholly-owned subsidiary
of our Company
‘‘Shandong Mokingran ’’ Shandong Mokingran Jewellery Limited* ( 山東夢金園珠寶首
飾有限公司), a company established in the PRC on April 5,
2004 and a wholly-owned subsidiary of our Company
‘‘Shandong Yifu ’’ Shandong Yifu Gold Jewellery Limited* ( 山東億福金業珠寶
首飾有限公司), a company established in the PRC on August
2, 2007 and a wholly-owned subsidiary of our Company
‘‘Shanghai Yuanjunmeng ’’ Shanghai Yuanjunmeng D iamond Limited* ( 上海緣君夢鑽石
有限公司), a company established in the PRC on December 3,
2014 and an indirect wholly-owned subsidiary of our Company
‘‘Share(s)’’ shares in the share capital of our Company, with a nominal
value of RMB1.00 each, comprising Unlisted Shares and H
Shares
‘‘Shareholder(s)’’ holders of our Shares
‘‘Shenyang Mokingran ’’ Shenyang Mokingran Jewellery Limited* ( 瀋陽市夢金園珠寶
首飾有限公司), a company established in the PRC on April 7,
2015 and a wholly-owned subsidiary of our Company
‘‘Shenzhen E-commerce ’’ Shenzhen Mokingran E-commerce Limited* ( 深圳夢金園電子
商務有限公司), a company established in the PRC on August
22, 2018 owned as to 51% by Shandong E-commerce and 49%
by Shenzhen City Gold Chief Executive Technology Culture
Co., Ltd.* ( 深圳市金總裁科技文化有限公司), an Independent
Third Party
‘‘Shenzhen Mokingran ’’ Shenzhen Mokingran Jewellery Limited* ( 深圳市夢金園珠寶
首飾有限公司), a company established in the PRC on
December 10, 2010 and a wholly-owned subsidiary of our
Company
‘‘Sole Sponsor ’’ CITIC Securities (Hong Kong) Limited
‘‘Sole Global Coordinator ’’ CLSA Limited
‘‘Sponsor-Overall Coordinator ’’ CLSA Limited
‘‘Stabilizing Manager’’ CLSA Limited
DEFINITIONS
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‘‘State Council ’’ the State Council of the PRC ( 中華人民共和國國務院)
‘‘Stock Exchange ’’ The Stock Exchange of Hong Kong Limited, a wholly owned
subsidiary of Hong Kong Exchanges and Clearing Limited
‘‘subsidiary(ies) ’’ has the meaning ascribed thereto in section 15 of the
Companies Ordinance
‘‘substantial shareholder(s) ’’ has the meaning ascribed thereto under the Listing Rules
‘‘Supervisor(s)’’ supervisor(s) of our Company
‘‘Takeovers Code ’’ the Codes on Takeovers and Mergers and Share Buy-backs
issued by the SFC, as amended, supplemented or otherwise
modified from time to time
‘‘Tianjin Haikai Xinchuang’’ Tianjin Haikai Xinchuang Industry Development Co., Ltd.*
(天津海開信創產業發展有限公司), formerly known as Tianjin
City Tanggu Economic Development Zone Industrial
Investment Company* ( 天津市塘沽經濟開發區工業投資公
司), a company established in the PRC on December 3, 1992,
our Pre-IPO Investor and an Independent Third Party
‘‘Tianjin Mokingran ’’ Tianjin Mokingran Jewellery Limited* ( 天津夢金園珠寶首飾
有限公司), a company established in the PRC on November
27, 2015 and a wholly-owned subsidiary of our Company
‘‘Tianjin Yuanjinmeng’’ Tianjin Yuanjinmeng Enterprise Management Consultancy Co.,
Ltd.* ( 天津園金夢企業管理諮詢有限公司), a company
established in the PRC on November 27, 2015 and our
Controlling Shareholder
‘‘Tianjin Zongyi ’’ Tianjin Zongyi Technology Development Limited* ( 天津宗儀
科技研發有限公司), a company established in the PRC on
March 21, 2014 and a wholly-owned subsidiary of our
Company
‘‘Track Record Period ’’ the period comprising the years ended December 31, 2021,
2022 and 2023 and the six months ended June 30, 2024
‘‘Underwriters ’’ the Hong Kong Underwriters and the International
Underwriters
‘‘Underwriting Agreements ’’ the Hong Kong Underwriting Agreement and the International
Underwriting Agreement
DEFINITIONS
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‘‘United States ’’or ‘‘U.S. ’’ the United States of America, its territories, its possessions and
all areas subject to its jurisdiction
‘‘Unlisted Share(s)’’ unlisted ordinary Share(s) issued by our Company, with a
nominal value of RMB1.00 each, which is/are not listed on
any stock exchange
‘‘U.S. dollars’’, ‘‘US$’’or ‘‘USD’’ United States dollars, the lawful currency of the United States
‘‘U.S. Securities Act ’’ the United States Securities Act of 1933, as amended and
supplemented or otherwise modified from time to time, and the
rules and regulations promulgated thereunder
‘‘VAT’’ value added tax
‘‘White Form eIPO ’’ the application for Hong Kong Offer Shares to be issued in the
applicant’s own name, submitted online through the designated
website of the White Form eIPO Service Provider at
www.eipo.com.hk
‘‘White Form eIPO Service
Provider’’
Computershare Hong Kong Investor Services Limited
‘‘Zhang Jianjun ’’ Mr. Zhang Jianjun ( 張建軍), our Pre-IPO Investor and an
Independent Third Party
‘‘Zhang Yizhen ’’ Ms. Zhang Yizhen ( 張義貞), our Pre-IPO Investor and an
Independent Third Party
‘‘Zhao Duxue ’’ Mr. Zhao Duxue ( 趙篤學), our Pre-IPO Investor and an
Independent Third Party
‘‘Zhengzhou Mokingran ’’ Zhengzhou Mokingran Jewellery Limited* ( 鄭州夢金園珠寶首
飾有限公司), a company established in the PRC on August 3,
2015 and a wholly-owned subsidiary of our Company
‘‘Zhongbao Zhengxin ’’ Zhongbao Zhengxin Gold & Silver Je wellery Testing Limited*
(中寶正信金銀珠寶首飾檢測有限公司), a company established
in the PRC on March 26, 2013 and a wholly-owned subsidiary
of our Company
* For identification purposes
DEFINITIONS
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Certain amounts and percentage figures incl uded in this prospectus have been subject to
rounding adjustments. Accordingly, figures shown as totals in certain tables may not be an
arithmetic aggregation of the figures preceding them.
For ease of reference, the names of the PRC laws and regulations, governmental authorities,
institutions, natural persons or other entities (including certain of our subsidiaries) have been
included in the prospectus in both the Chines e and English languages and in the event of any
inconsistency, the Chinese versions shall prevail. English translations of official Chinese names are
for identification purpose only.
For the purpose of this prospectus, references to ‘‘provinces ’’of China include provinces,
municipalities under direct administration of the central government and provincial-level,
autonomous regions.
DEFINITIONS
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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 Company and our business shall
have the meanings set out below. The terms and their meanings may not always correspond to
standard industry meaning or usage of these terms.
‘‘3D’’ three dimensional
‘‘999’’ gold with 99.9% fineness
‘‘999.9 ’’ gold with 99.99% fineness
‘‘999.99’’ gold with 99.999% fineness
‘‘999.999’’ gold with 99.9999% fineness
‘‘Au9995 ’’ gold with 99.95% fineness
‘‘Au9999 ’’ gold with 99.99% fineness
‘‘Au (T+D)’’ Au (T+D) is a standardized contract employed by the Shanghai
Gold Exchange. It involves the delivery of a predetermined
amount of gold at a predetermined price on a specified future
date
‘‘CAGR ’’ compound annual growth rate
‘‘carat ’’ a unit of weight for diamonds and gemstones, each of which is
equal to 200 milligrams
‘‘CNC’’ computerized numerical control
‘‘CRM system’’ our proprietary customer relationship management system
which provides centralized management over various aspects
of our sales and distribution network, and enhanced with client
information categorization and analysis, sales personnel check-
in and workload management, as well as logistics data
management
‘‘fine jewellery ’’ jewellery products principally made of gold, diamonds and
other precious metals
GLOSSARY OF TECHNICAL TERMS
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‘‘gold bullion ’’ gold bullion refers to high purity gold metal bulks primarily
sold in bulk as an investment instrument for investors to hedge
against currency, inflation a nd geopolitical risks, and is
fundamentally different form gold jewellery which is primarily
sold as a consumable good
‘‘high-purity ’’ gold with 99.99% fineness or higher
‘‘long position ’’ position in which a person owns a positive amount of the
relevant financial instrument
‘‘millennials and Gen Z ’’ people who were born between 1981 and 2012
‘‘ICP’’ inductively coupled plasma
‘‘ISO’’ International Organization for Standardization
‘‘K’’ a unit of measure for the fineness of gold
‘‘K-gold ’’ alloy formed by fusion of gold and other metals, which the
gold purity is no less than 375 ‰ a n dn om o r et h a n9 1 6‰
‘‘ounce ’’ a unit of weight for gold, each of which is equal to
approximately 28 grams
‘‘short position ’’ position in the relevant financial instrument as a result of
selling the financial instrument when there was no exercisable
right to the financial instrument or the sale was subject to a
short selling order
‘‘ton’’ metric ton, a unit measuring weight, equal to 1,000 kilograms
‘‘%’’ per cent
‘‘ ‰ ’’ thousandth
GLOSSARY OF TECHNICAL TERMS
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This prospectus contains certain statements and information that are forward-looking and uses
forward-looking terminology such as ‘‘believe,’’ ‘‘expect, ’’ ‘‘estimate, ’’ ‘‘predict, ’’ ‘‘aim, ’’ ‘‘intend, ’’
‘‘will, ’’ ‘‘may, ’’ ‘‘plan,’’ ‘‘consider, ’’ ‘‘anticipate, ’’ ‘‘seek, ’’ ‘‘should, ’’ ‘‘could, ’’ ‘‘would, ’’
‘‘continue, ’’and other similar expressions. You are cautioned that reliance on any forward-looking
statement involves risks and uncertainties and t hat any or all of those assumptions could prove to
be inaccurate and as a result, the forward-looking statements based on those assumptions could also
be incorrect. In light of these and other risks and uncertainties, the inclusion of forward-looking
statements in this prospectus should not be regard ed as representations or warranties by us that our
plans and objectives will be achieved, and these forward-looking statements should be considered
in light of various important factors, includin g those set forth in this section. Subject to the
requirements of the Listing Rules, we do not intend publicly to update or otherwise revise the
forward-looking statements in this prospectus, whether as a result of new information, future events
or otherwise. Accordingly, you should not place undue reliance on any forward-looking
information. All forward-looking statements in this prospectus are qualified by reference to this
cautionary statement.
These statements are subject to certain risks, un certainties and assumptions, including the risk
factors as described in this prospectus. You are s trongly cautioned that reliance on any forward-
looking statements involves known and unknown risks and uncertainties. The risks and
uncertainties facing us which could affect the accuracy of forward-looking statements include, but
are not limited to, the following:
. our operations and business prospects;
. our strategies, plans, objectives and goals and our ability to successfully implement these
strategies, plans, objectives and goals;
. changes to the regulatory environment and ge neral outlook in the industry and markets in
which we operate;
. our expectations with respect to our ability to acquire and maintain regulatory licences or
permits;
. changes in competitive conditions and our ability to compete under these conditions;
. future developments, trends and conditions in the industry and markets in which we
operate;
. general economic, political and business cond itions in the markets in which we operate;
. the effects of the global financia l markets and economic crisis;
. our ability to control costs and expenses;
FORWARD-LOOKING STATEMENTS
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. our ability to defend our intellectual rights and protect confidentiality;
. our dividend policy;
. changes or volatility in interest rates, foreign exchange rates, equity prices, trading
volumes, commodity prices and overall market trends;
. capital market developments;
. the actions and developments of our competitors;
. changes to regulatory and operating conditions in the industry and markets in which we
operate;
. all other risks and uncertainties described in the section headed ‘‘Risk Factors’’ in this
prospectus; and
. other statements in this prospectus that are not historical facts.
This prospectus also contai ns market data and projects 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 addi tion, due to the rapidly changing nature of the
PRC economy, projections or estimates relating t o 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.
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 c ontained 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. You should read this prospectus in its entirety and with the understanding that
actual future results may be materially diffe rent from what we expect. The forward-looking
statements made in this prospectus relate only to events as at 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 or uncertainties may emerge
from time to time, you should not rely upon forwar d-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.
FORWARD-LOOKING STATEMENTS
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Subject to the requirements of applicable laws , rules and regulations, we do not have any and
undertake no obligation to update or otherwise revise the forward-looking statements in this
prospectus, whether as a result of new information, future events or otherwise. As a result of these
and other risks, uncertainties and assumptions, the forward-looking events and circumstances
discussed in this prospectus might not occur in the way we expect or at all. Accordingly, the
forward-looking statements are not a guarantee of future performance and you should not place
undue reliance on any forward-looking information. Moreover, the inclusion of forward-looking
statements should not be regarded as representations by us that our plans and objectives will be
achieved or realized. All forward-looking statements in this prospectus are qualified by reference to
the cautionary statements in this section. In this prospectus, statements of or references to our
intentions or those of the Directors are made as of the date of this prospectus. Any such
information may change in light of future developments.
FORWARD-LOOKING STATEMENTS
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You should carefully consider all of the information in this prospectus, including the risks
and uncertainties described below, before making an investment in our H Shares. The following
is a description of what we consider to be our mat erial risks. Any of the following risks could
have a material adverse effect on our business, fi nancial condition and results of operations. In
any such case, the market price of our H Shares could decline, and you may lose all or part of
your investment.
These factors are contingencies that may or may not occur, and we are not in a position to
express a view on the likelihood of any such contingency occurring. The information given is as
of the Latest Practicable Date unless otherwise stated, will not be updated after the date hereof,
and is subject to the cautionary statements in ‘‘Forward-looking Statements ’’in this prospectus.
We believe there are certain risks and uncertainties involved in our operations and the
industry, some of which are beyond our control. Additional risks and uncertainties that are
presently not known to us or not expressed or implied below or that we currently deem immaterial
could also harm our business, financial conditions and results of operations. You should consider
our business and prospects in light of the challenges we face, including those discussed in this
section.
RISKS RELATING TO OUR BUSINESS AND INDUSTRY
We may not be able to effectively manage any overlap or potential competition among our
franchisees, provincial-dealers and self-operated stores, and across our different sales channels
During the Track Record Period, we sold our products through various channels including our
franchise network entailing franchisees and provinc ial-dealers, e-commerce sales and self-operated
stores. Our success depends heavily on our ability to maintain and expand these channels and
distribution network. Despite our anti-cannibalization measures, our franchisees, provincial-dealers
and self-operated stores may still engage in cannibalization activities, such as cross-region sales in
contravention of their contractual obligations. They may also fail to effectively manage competition
among themselves, which may result in cannibaliz ation within our distribution network. We cannot
assure you that our measures to manage overlap or potential competition among our sales channels
will be effective. As a result, the expansion of our sales network may not lead to a proportionate
expansion of our sales revenue. Furthermore, adv erse competition and cannibalization among our
sales channels may have a negative impact on the stability of our sales network, which may have a
material and adverse effect on our business, financial conditions and results of operations.
RISK FACTORS
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Our business and future growth prospects r ely on market demand for our products. Any
challenging economic conditions or changes in market demand, may materially and adversely
affect our business and results of operations
Our success depends substantially on our contin ued ability to offer appealing and high-quality
gold jewellery to meet the market demand. The dem and for our gold jewellery products depends, in
part, on the income and spending patterns of our end consumers, which are affected by prevailing
economic conditions.
Given the diversity of our consumers in the PRC, buying habits, market trends, tastes and
preferences may vary from region to region. Consumers preferences differ and shift over time in
response to changing aesthetics and economic preferences. Accordingly, we must continuously
develop and offer products with various designs and characteristics across our product categories
that align with regional market trends and meet with consumers preferences and we must effectively
execute various strategies, such as:
. accurately assess and meet consumers needs;
. keep our product research and development up-to-date and conform with fashion trend;
. provide high quality and artistic products;
. price our products competitively;
. conduct effective marketing activities;
. effectively integrate customer and consumers ’ feedback into our business planning and
improvement; and
. increase our production capacity, customer service, franchise network management and
general process improvements.
In addition, decreasing gold prices may reduce consumers ’ willingness to purchase gold
jewellery, as gold is often valued not only for its consumption value but also for its investment
value. When gold prices decline, consumers may pe rceive gold jewellery as less valuable and prefer
other investment options, which can lead to reduc ed demand for our products and negatively impact
our sales and revenue.
We cannot assure you that general market demand will not be adversely affected by
challenging economic conditions or changes in m arket demand. If we fail to adapt to changes in
economic conditions or fail to launch new products that meet market demand in a timely manner,
our business, financial performance, and res ults of operations may be adversely impacted.
RISK FACTORS
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If we are unable to respond effectively to changes in market trends and consumer preferences,
our market share and result of operations could be adversely affected
The success of our business is dependent on our ability to identify market trends and
consumer preferences, and then to design and bring our products to market in a timely manner that
meet the current preferences of a wide range of consumers. We manufacture and sell gold jewellery
products in the PRC, offering a diverse product portfolio that includes rings, necklaces, pendants,
bangles, earrings, brooches, and bracelets, among others. Our gold jewellery product lines feature
collections such as ‘‘Blessing and Happiness, ’’ ‘‘Ancient Style, Pray for Good Luck, ’’ ‘‘Little
Dream, ’’ ‘‘Praying for Good Luck for Newborns, ’’as well as K-gold lines ‘‘Stella ’’and ‘‘Crown, ’’
and the diamond collection ‘‘Blessed with Flowers. ’’As gold jewellery is a high-end discretionary
product, our sales are generally sensitive to changes in economic conditions and consumer
confidence.
According to Frost & Sullivan, product custom ization and individualization that reflect
consumer preferences are becoming industry trends. We believe our continued success depends on
our ability to anticipate, identify, and interpret co nsumer habits, consumption trends, and tastes, and
to offer products that align with their preferences . Consumer preferences for discretionary products
are influenced by numerous factors beyond our control, such as general economic conditions,
inflation, availability of consum er credit, taxation, employment trends, and the stock and real estate
markets. Additionally, major social events, such as public health emergencies, may lead to the
temporary closure of offices, retail stores, and manufacturing faciliti es, impacting economic
activity. An economic downturn, recession, or uncertainty could adversely affect the purchasing
power of our customers and consumers, and we believe it may also shift consumer preferences
regarding gold jewellery products.
As we diversify and expand our product portfolio, we need to invest further in technology
development and digitalized machinery development, launch new designs, initiate cooperation with
different designers, recruit more staff with expert ise in managing different product categories, and
enhance our operational and financial systems, internal procedures and internal control for more
effective product development and manageme nt. It may also require the development of new
marketing strategies to accommodate different needs. All of these endeavors involve risks and
uncertainties, and require substantial planning, skillful execution and significant expenditures.
However, market trends and con sumer preferences may shift over time in response to changing
economic circumstances. If we fail to anticipate or response to changes in market trends or
consumer preferences, or fail to bring to market in a timely manner products that satisfy new trend
or preferences, our market share and our sales a nd profitability could be adversely affected.
RISK FACTORS
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Fluctuation of raw material prices could advers ely affect our business, financial conditions
and results of operations
Gold is the major raw materials of our gold jewellery products. For the years ended December
31, 2021, 2022 and 2023 and the six months ended June 30, 2024, our purchase of gold accounted
for approximately 99.0%, 99.2%, 99.5% and 99.6% of our total purchase of raw materials,
respectively. Fluctuations in gold price are inherently difficult to predict, being dependent on
numerous factors beyond our control, including, among others:
. the demand and supply of gold;
. consumers ’ preference and investor confide nce in gold and the gold business;
. the fluctuations in currencies;
. demand for other investment alternatives, including the emerging demand for
cryptocurrency; and
. international or regional political and economic events or trends.
A significant fluctuation in gold prices may a ffect our revenue and cashflow, and may have an
adverse impact on customers ’ and their consumers ’ demand. As a result, any significant price
increase of our raw materials may have an adverse e ffect on our business, financial conditions and
results of operations. On the other hand, if gold prices decrease sharply in the future, consumers
may perceive gold jewellery as less valuable and many prefer other investment options, leading to
reduced demand for our products and negatively affecting our sales and revenue. During the Track
Record Period, there was a general upward trend of gold price. If the gold price decreases in the
future, our gross profits and gross profits margins may be negatively impacted.
Beyond the fluctuations in gold prices, the dema nd for our gold jewellery products depends on
the economic conditions, such as j ob market outlook. Any adverse economic developments could
result in reduced demand for our gold jewellery products, which in turn could result in lower
revenue and reduced profits.
Moreover, the impact of gold prices on customer demand is not always direct or
straightforward. Customers ’ discretionary spending decisions may be influenced by many factors
such as consumers’ preferences, market trends, sales and marketing strategies, economic conditions
and seasonality. Therefore, it is difficult to ascertain the impact of any future fluctuation in the
prices of gold on consumers ’ demand for gold products or with our sales and profitability.
RISK FACTORS
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We have limited control over the operations of our franchisees and provincial-dealers. If we
cannot maintain or further develop our collaborations with franchisees and provincial-dealers
or if there are any illegal actions, misconduct or any failure by our franchisees and provincial-
dealers to provide satisfactory services, our business, financial conditions and results of
operations could be adversely affected
In order to expand our retail presence in third and lower tier cities in the PRC in a cost
effective and efficient manner, we collaborate with franchisees and provincial-dealers and have built
a strong franchise network together. As of December 31, 2021, 2022 and 2023 and June 30, 2024,
we had 2,680, 2,743, 2,817 and 2,850 franchise stor es, respectively across m ultiple provinces and
over 250 cities. Our results of operations are subject to the performance of these franchise stores
and our success in part depends on our ability to maintain and strengthen our relationships with
existing franchisees and provincial-dealers and c ontinue to build new relationships with additional
franchisees and provincial-dealers.
Our franchise agreements and provincial-deal er agreements generally have a term of one year,
which may be renewed upon mutual agreement. Our collaboration with franchisees and provincial-
dealers is governed by franchise agreements and p rovincial-dealer agreements, and we have a set of
strict standards for selecting our franchisees an d provincial-dealers including a thorough and
systematic evaluation of their industry experiences, sales record histories, financial backgrounds,
commercial resources and long-term goals. See ‘‘Business — Sales and Distribution Channels ’’for
further details. Nevertheless, our ability to manage the activities of our franchisees and provincial-
dealers is limited, and our franchisees and provincial-dealers may take one or more of the following
actions, any of which could have a material adverse effect on our business, prospects and
reputation:
. breaching our agreements with them, including selling products below our recommended
retail prices, selling our products through c hannels other than our designated sales areas
and escrowing gold products on behalf of their end consumers;
. failing to adequately promote our products;
. failing to provide proper training to their staff, thereby affecting the quality of services
they provide;
. violating applicable laws and regulations, i ncluding those on anti-money laundering, anti-
bribery, competition or other ap plicable rules and regulations.
Although we supervise the sales activities of our franchisees and provincial-dealers, we cannot
assure you that they will comply with our pricing policies at all times and will not compete using
aggressive discounts, which could lead to negative customer/consumer perception of our products.
At the same time, we cannot assure you that our franchisees and provincial-dealers will not make
decisions or take actions that are not in our best interests, or engage in any misconduct such as
violation of laws or regulations, thereby harming our reputation, and causing diversion of our
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management resources to deal with the negative publicity or exposing us to potential claims and/or
litigations from third parties. Such actions by our franchisees and provincial-dealers would harm
our reputation.
We cannot assure you that all of our franchisees and provincial-dealers will maintain their
business relationships with us, or if the existing franchisees and provincial-dealers stop cooperating
with us for any reasons, or if we fail to replace new franchisees and provincial-dealers in a timely
manner, we will likely be unable to generate suffi cient market presence, leading to insufficient
demand of our products for us to achieve profitabil ity. The failure to maintain or further develop
our collaborations with franchisees and provincial-dealers could adversely affect our business,
financial conditions and results of operations.
We or our franchisees may not be able to find su itable locations for new self-operated stores
and franchise stores on commercially acceptable terms, which may adversely affect our sales
and distribution channels, and expansion and growth prospects
Our sales performance is directly affected by the location of our new self-operated stores and
franchise stores. When selecting a site for self-operated store or approving the location of franchise
store, we take into account various factors, including but not limited to:
. the distance among our stores;
. its convenience and accessibility to our target consumer groups (standards will differ
depending on locations, for example the densit y of our stores will be higher in higher-tier
cities to make our products more easily accessible);
. the availability of space for our stores; and
. the level of surrounding competition with our competitors.
For our self-operated stores, the term of the majority of our leases ranges from one year to
three years. It is important to our business that the existing leases for our self-operated stores can
be maintained and renewed seamlessly at comparable prices. Going forward, as we open more self-
operated stores, we will need to secure more re tail locations through leases or acquisition of
properties, which will be determined on a case-by-c ase basis. Similarly, the locations for setting up
franchise stores have to be strategically picked. The supply of prime locations for new self-operated
stores and franchise stores is scarce and the comp etition to secure these locations is intense. As a
result, we may not be able to identify and lease or acquire suitable locations for our new self-
operated stores.
Our ability to purchase or lease suitable properties on acceptable terms is critical to the
success of our business and expansion strategy. We cannot assure you that we will be able to lease
or acquire suitable locations on terms commercially acceptable to us, as we have been able to do so
in the past. In the event that we encounter difficulti es in securing suitable sites for self-operated
stores in the localities we plan to expand into, our business and growth prospects will be adversely
affected.
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Our new franchise stores may not achieve expect ed level of operation within our desired time
frame, or at all
As of June 30, 2024, we had 2,850 franchise stores. As part of our growth strategy, we plan to
further expand more franchise stores within our current geographical areas and expand into new
regions where we currently have no presence. Ope ning new franchise stores requires franchisees ’
significant upfront capital outlays, including inventory purchases, and the hiring and training of
managers and sales staff and our franchisees may not have sufficient operating cash flow to conduct
proper sales and marketing activities to generate sales.
A new franchise store may not achieve our expected level of operations for a prolonged period
of time, or at all, due to a variety of factors, including, among others, (i) franchisees ’ ability to
properly position new franchise stores and to execu te business strategy in the locality, (ii) actions
taken by our existing or new competitors in the same locality and (iii) the effectiveness of our
marketing activities in the locality. Some of these factors are not entirely within our control.
Our franchisees may not successfully conduct business in a manner that meets our
expectations and requirements. As a major portion of our revenue is derived from the sale of gold
jewellery through franchise network, if new franchise stores fail to achieve our expected level of
operation within the anticipated timeframe, or a t all, our expansion plan might be hindered. This
may, in turn, adversely impact our profitability as a result of reduced purchases from our franchise
stores.
We may not be successful in utilizing gold price exposure management method to manage the
fluctuations in gold price
We enter into gold loans and Au (T+D) contracts to manage the financial impact of gold price
fluctuations. On a daily basis, we enter into short position transactions (being our gold loans
balance and outstanding Au (T+D) contracts), which is a common price management method
adopted by gold jewellery manufacturers accordi ng to Frost & Sullivan. On each trading day of Au
(T+D), if the gold price declines, we may experien ce a loss in the value of the gold jewellery sold,
but simultaneously benefit from a realised gain on Au (T+D) contracts. Conversely, if the gold
price rises, we may incur a loss on Au (T+D) contracts, but we can sell the gold jewellery at a
higher price to realize a gain from the increase in go ld price. Similarly, by utilizing gold loans, for
outstanding gold loans, if the gold price declines, we may experience a loss in the value of the gold
jewellery sold, but simultaneously we may benefit from a fair value gain on such gold loans.
Conversely, if the gold price rises, we may incur a loss on gold loans, but we can sell the gold
jewellery at a higher price to realize a gain from the increase in gold price. As of December 31,
2021, 2022 and 2023 and June 30, 2024, our Group had a net shortfall of 199.8kg, 169.6kg, 65.9kg
and 70.4kg of gold inventory against the gold balances from Au (T+D) and gold loans, which were
subject to gold price fluctuations , respectively. For details of Au (T+D) contracts and its function,
please refer to the section headed ‘‘Business — Our Procurement/ Suppliers — Procurement of
Gold — (b) Gold Price Exposure Management to Ma nage Fluctuations of Raw Material Price —
Adoption of Au (T+D) contracts ’’.
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Any potential gain or loss from such Au (T+D) contracts and gold loans arrangement will be
largely offset by the inherent effect arising from our business. We intend to continue using gold
loans and Au (T+D) contracts to manage gold price fluctuations in the future. However, we cannot
assure that such arrangement will continue to be effective in managing gold price movements and
that our arrangement will be able to protect us from unfavorable gold price movements. Failure to
utilize our exposure to gold price movements could have a material and adverse effect on our
business, financial condition and results of operations.
We rely on our in-house and franchisees ’sales and marketing force to promote our brand. If
the sales and marketing personnel are unable to implement effective marketing or sales
campaign, our business, financial conditions and results of operations could be adversely
affected
Effective sales and marketing initiatives are crucial for us to increase the market penetration
rate of our existing products, extend our brand awareness and enforce effective promotion of our
new products in the future. For instance, we initiated the ‘‘One RMB Exchange ’’promotion running
for up to a week annually which franchisees may accept consumer trade-in of their used high-purity
‘‘Wan Purity’’ series gold jewellery of 999.9 for new pieces of ‘‘Wan Purity ’’series gold jewellery
at a nominal crafting fee of one RMB per traded-in gram of gold with our franchisees or at our self-
operated stores, and full price of any addition of gold purchased. If we are unable to increase or
maintain the effectiveness and efficiency of our sales and marketing activities, our sales and
business prospects could be adversely affected.
The sales and marketing force must possess a high level of gold jewellery knowledge, up-to-
date understanding of industry trends, as well as su fficient promotion and co mmunication skills. If
we are unable to effectively train our in-house sales personnel or monitor and evaluate their
marketing performances, our sales and marketing may be less successful than desired.
We are exposed to credit period risk imposed by our franchisees and provincial-dealers
Although we have a credit period management policy, we are still exposed to certain risks
when it comes to payments from franchisees and p rovincial-dealers. During the Track Record
Period, we lent gold products to customers on a case-by-case basis to replenish their stocks. Our
ability to collect depends on supply and demand dynamics, budgetary cycles, shifting availability of
funds and other factors that may not be within our control. For details of credit period risks from
our franchisees and provincial-dealers, please refer to the section headed ‘‘Business — Sales and
Distribution Channels — Offline Sales — (a) Franchise Stores ’’. Our credit period risk arises from
default by our counterparties, including our franchisees. As of December 31, 2021, 2022 and 2023
and June 30, 2024, we had trade receivables of RMB98.0 million, RMB130.9 million, RMB150.5
million and RMB171.2 million, respectively. We ge nerally grant to our provincial-dealers and
franchisees a credit period ranging from three days to 90 days. For the years ended December 31,
2021, 2022 and 2023 and the six months ended June 30, 2024, our average trade receivables
turnover days were 2.0 days, 2.7 days, 2.5 days and 2.9 days, respectively. We cannot guarantee
that we can always detect potential default by our franchisees. If we cannot c ollect trade receivables
on time, our liquidity, result of operation and fin ancial condition may be adversely affected. Any
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substantial defaults or delays could materially and adversely affect our cash flows, and we could be
required to initiate legal proceedings and to te rminate our relationships with franchisees in a
manner that will impair our sales, which in turn would adversely impact our business, financial
conditions and results of operation. See ‘‘Financial Information — Description of Certain Items of
Consolidated Statements of Financial Position — Trade Receivables ’’and ‘‘Financial Information
— Description of Selected Items in the Consolidated Statements of Profit or Loss and Other
Comprehensive Income — Net reversal of impairment losses/(impairment losses) under expected
credit loss model’’ for further details.
Our business could be materially adversely a ffected if we cannot protect our trade name and
other intellectual property rights or if we face any negative publicity
Our ability to sell our gold jewellery products relies on the strength of our trade name. Any
deterioration in the reputation of our trade name could have an adverse effect on our sales,
profitability and implementation of growth strategy. As of the Latest Practicable Date, we registered
678 trademarks and 548 patents in the PRC and had 33 trademarks registered outside the PRC to
protect our trade name.
We cannot assure you that our trade name and intellectual property rights will not be subject
to any infringement in the future. Any unauthorize d use of our trade name or intellectual property
rights, including in locations where we do not operate, could harm our brand, market image and
reputation, which could adversely affect our business , financial conditions and results of operations.
Trade names that are identical or similar to our trade name may have been registered or used
by third parties in other markets we may enter. As a result, we may incur significant expenses
s h o u l dw ed e c i d et oa c q u i r et h er i g h tt ou s eo u rt r a d en a m ei nt h e s em a r k e t s .I fw ea r eu n a b l et o
acquire these rights on acceptable terms, or at all, we may be unable to enter these markets using
our trade name. Furthermore, others may attempt to counterfeit our products, sell ‘‘夢金園’’brand
look-a-likes or make unauthorized use of our trademarks and proprietary information, including the
content on our website. The unauthorized use o f our trade name and trademarks in counterfeit
products could harm our market image and reputation, which could have a material adverse effect
on our business, financial conditions and results of operations.
Furthermore, any negative publicity concerni ng us, our affiliates or subsidiaries, even if
untrue, could adversely affect our reputation and business prospects, which could damage our brand
image or have a material adverse effect on our business, financial conditions and results of
operations. Damage to our reputation could be difficult, expensive and time-consuming to restore
and could make potential or existing customers reluctant to select us for new engagements,
resulting in a loss of business, and could advers ely affect our recruitment and retention efforts.
Damage to our reputation could also reduce the value and effectiveness of our brand name and
could reduce investor confidence in us, adve rsely affecting the price of our H Shares.
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Our production machinery and technical know-how may become out-of-date which may affect
our business, financial conditions and results of operations
We have devoted substantial efforts in the development of our production machinery and
technical know-how and may incur significan t costs in adapting to new requirements or
specifications from our major customers due to the requirement of new machineries or know-how.
For example, in recent years, we have successfully introduced various self-developed and/or
imported industry-leading production equipment such as robotic arms for accessories flipping ( 首飾
抓取自動翻轉機械手), automated carving machines ( 自動刻花機), automatic butterfly chain
punching machines ( 自動蝴蝶鏈機), chain loosening machines ( 鬆鏈機), and automatic thin wall
gold tube necking machine ( 薄壁金管自動縮口機), with the prime focuses on the ‘‘lightness ( 輕),
craftsmanship (巧 ), refinement (精 ), and aesthetic ( 美)’’ of our products. Nevertheless, our
customers’ requirements, product specifications, mar ket trends and statutory requirements are
subject to changes. Our competitors may develop production techniques which are superior to ours
in terms of costs, time and product quality, which would render our production techniques out-of-
date and our business non-competitive. Equipment producers may also develop new production
machinery which would render our existing machinery out-of-date. Should any of these factors
materialize, our business, financ ial conditions and results of operations could be materially and
adversely affected.
We may experience complaints from end cust omers, or adverse publicity involving our
products, services of our self-operated stores and/or franchise network
We believe that brand image is a key consideration for customers when making purchase
decisions. Maintaining and enhancing the rec ognition and reputation of our brand image are
therefore pertinent to our business prospect. We fac e an inherent risk of claims or complaints from
our end customers which may or may not be remedied by strengthening our quality control and/or
internal control. For instance, we may receive complaints in relation to product quality due to
damage done to the packaging or even our products themselves during transportation.
Our brand and reputation might also be harmed by events beyond our control, for example we
may be associated with unauthorized sales actions by our franchisees or even with regards to
transactions by franchisees not involving our products. Any complaint, claim , or negative publicity
against us, even if malicious, meritless or immat erial to our operations, may divert management ’s
attention and other resources away from our day- to-day business operations. End customers may
lose confidence in us and our brand, which may adversely affect our business and results of
operations. Furthermore, end customer ’s complaints and negative publicity, including but not
limited to negative online reviews on social media, industry findings or media reports relating to
our products ’ quality, whether accurate or not, and whether directing specifically to our products or
not, can adversely affect our business, re sults of operations and reputation.
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We or our franchisees may be subject to intellectual property infringement claims, which may
be expensive to defend and may disrupt our business
We cannot be certain that any other aspects of our operations or our business, as well as our
franchisees ’ do not or will not infringe upon or otherwise violate patents, copyrights or other
intellectual property rights held by third parties. We or our franchisees may be subject to legal
proceedings and claims relating to the intellectual p roperty rights of others. In addition, there may
be other third party intellectual property that is infringed by our products, services or other aspects
of our business. There could also be existing intellectual property rights of which we or our
franchisees are not aware that our prod ucts may inadvertently infringe upon.
During the Track Record Period, we were involved in lawsuits initiated by Cartier
International AG (‘‘ Cartier ’’) for trademark infringement and improper competition related to our
franchisees ’ sales of products with designs similar to Cartier’ s. In April 2022, the Tianjin High
People ’s Court ruled that while there was insufficien t evidence that the infringing products were
manufactured by us, we were jointly responsible for the franchisees ’ infringing actions and required
to pay RMB250,000 to Cartier. We fully settled this amount and did not indemnify the franchisees
for their separate RMB180,000 payment liability to Ca rtier. For further details of lawsuits related to
Cartier, please refer to the section headed ‘‘Business — Intellectual Property — Trademark disputes
with Cartier ’’in this Prospectus.
The risk of being subject to intellectual property infringement claims will increase as we
continue to expand our product offering. We cannot assure you that holders of intellectual property
rights purportedly relating to some aspect of our technology platform or business, if any such
holders exist, would not seek to enforce such intellectual property rights against us in China or any
other jurisdictions. If we or our franchisees are found to have infringed the intellectual property
rights of others, we may be subject to liability fo r the infringement activities or may be prohibited
from using such intellectual property, and we may incur licensing fees or be forced to develop
alternatives of our own. In addition, we may incur s ignificant expenses, and may be forced to divert
management ’s time and other resources from our business a nd operations to defend against these
third-party infringement claims, regardless of their merits. Successful infringement or licensing
claims against us may result in significant liabili ties, which may materially and adversely affect our
business, financial conditions and results of operations.
Moreover, our ability to attract, motivate and ret ain qualified and professional sales force is
especially important because we also rely on ou r in-house sales force to market and sell our
products. Competition for experienced marketing, promotion and sales personnel is intense. If we
are unable to attract, motivate and retain a su fficient number of qualified and professional
marketing, promotion and sales personnel, sales of our services may be adversely affected and we
may be unable to expand our business coverage or increase our market penetration as contemplated.
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We rely on our major suppliers, and the lack of whose supply may materially and adversely
affect our business, financial conditions and results of operations
The amount we purchased from our top five suppliers of each of the years ended December
31, 2021, 2022 and 2023 and the six months ended June 30, 2024 amounted to approximately
RMB8,074.1 million, RMB8,528.7 million, RMB12,401.1 million and RMB6,302.2 million for the
respective year/period accounting for approximately 96.8%, 98.8%, 97.4% and 98.6% of our total
purchase for each of the respective year/period. Purchases from our largest supplier of each of the
years ended December 31, 2021, 2022 and 2023 and the six months ended June 30, 2024 amount to
approximately RMB7,585.1 million, RMB8,050.2 million, RMB11,162.6 million and RMB5,317.9
million, respectively, and accounted for approximately 90.9%, 93.2%, 87.6% and 73.4% of our total
purchase for the respective year/period.
There is no assurance that we will be able to continue to source sufficient, or high-quality
supply of raw materials from any of our major suppliers. In the event that any of our major
suppliers, such as commercial banks providing gold loans to us, fails to meet our purchase orders
on a timely manner or fails to offer us commercially acceptable terms or fails to supply us with
gold of the quality and quantity that we require or terminates their business r elationship with us, we
may be unable to source sufficient gold from comparable alternative suppliers on a timely basis and
on commercially acceptable terms or at all, and o ur business, financial conditions and results of
operations may be materiall y and adversely affected.
We may lose or fail to attract consumers if ou r product quality is compromised or if our
product quality does not meet consumers ’standards and expectations
As a manufacturer emphasizing on the purity of gold jewellery products, ensuring our product
quality is of paramount importance throughout our production process. We attribute our success to
our product quality which is derived from automated digitalized manufacturing, product designs and
our efforts in enhancing and ensuring the quality of our products. We also provide product warranty
policies, including free exchange of products failing to meet the prescribed quality requirements.
For further details, please see the section headed ‘‘Business — Quality Control ’’in this prospectus.
Any incident that compromises the quality of the products we sell may give rise to claims and
litigations, damage our reputation and negative publicity, which in turn may cause material adverse
impact on our business, financial conditions and results of operations.
We believe that maintaining and enhancing our product quality is critical to achieving
widespread acceptance of our products, strengthening our relationships with consumers and
nourishing our ability to attract new consumers. If the quality of our products cannot meet our
consumers ’standards and expectations, they would lose confidence in us and reduce their purchase
with us. If we upset these consumers, they may comment negatively on us, which could harm our
brand and reputation. If we fail to attract new custo mers or retain existing customers, our ability to
generate revenue will be materially impaired, an d our business, financial conditions and results of
operations could be adversely affected.
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Competition in the gold jewellery manufacturi ng and retail industry is intensive and could
cause us to lose market share, thereby materi ally and adversely affecting our business,
financial conditions and results of operations
According to Frost & Sullivan, the gold jewellery manufacturing and retail industry in the
PRC is competitive. There were approximately 8,000 gold jewellery players in the PRC as of
December 31, 2023. If we fail to compete effectively against our competitors, we may not be able
to expand and maintain our market share and profitability.
In addition, we also face competition from online and offline gold jewellery retailers and
franchisees, many of whom possess well-established brand recognition with promising sales volume
and customer bases. Our competitors may have certain advantages over us, including greater
financial and technical resources, more secured sources of production raw materials, greater
economies of scale, broader brand recognition and mo re established relationships with customers in
certain markets. Some of our competitors may be able to secure raw materials or gold jewellery
products from suppliers on more favorable terms , devote greater resources to marketing and
promotional campaigns, adopt more aggressive pricing or inventory availability policies and devote
substantially more resources to website and in formation system development than we do. For
instance, in the event that our competitors adopt aggressive pricing strategies and reduce retail
prices, our ability to maintain our market share may be adversely impacted, and we may have to
intensify our marketing efforts in order to compete effectively, such efforts being more aggressive
promotions, or reduction of our retail prices to respond to price competition. All of the
aforementioned could have a material adverse impact on our business, financial conditions and
results of operations.
There can be no assurance that we will be able to compete successfully against current and
future competitors, or that we will be able to address the challenges we face. Our failure to properly
respond to increased competition and the above challenges may reduce our profit margins, market
share and brand recognition, or force us to incur lo sses, which will have a material adverse effect
on our business, financial conditions and results of operations.
We are subject to environmental protection, fire safety and health and safety laws and
regulations and may be exposed to potential cost s for compliance and liabilities, including
consequences of accidental contamination, biol ogical or chemical hazards, or personal injury
Our business operations are subject to nationa l and local laws in the jurisdictions in which we
operate, including but not limited to the laws on the treatment and discharge of pollutants into the
environment. For details, see ‘‘Business — Environmental, Health and Work Safety Matters ’’in this
prospectus. Our business operations in Chin a are also subject to fire safety laws. Special
construction projects shall be subject to fire prot ection design review before construction and an
inspection before such construction is put into use. Because the requirements imposed by such laws
and regulations may change and more stringent laws or regulations may be adopted, we may be
unable to comply with, or to accurately predict the potentially substantial cost of complying with,
these laws and regulations. If more stringent regulatory requirements are implemented, we may
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have to incur significant expenses and divert substa ntial management time and resources to address
such deficiencies, and we may also experience negative publicity arising from such deficiencies,
which may materially and adversely affect our business operations and financial performance.
In addition, we cannot fully eliminate the risk of accidental personal injury at our production
facilities during our production processes. In the event of any accident, we could be held liable for
damages that, to the extent not covered by exist ing insurance or indemnification, could be
burdensome to our business. Other adverse effects could result from such liability, including
reputational damage resulting in the loss of bus iness from customers. W e may also be forced to
suspend operations at certain of our affected produ ction facilities temporarily for investigation and
inspection purposes. As a result, any accidental p ersonal injury could have a material and adverse
impact on our business, financial conditions and results of operations.
Our business relies on the proper operation of our IT systems, any malfunction of which could
materially and adversely affect our business, financial conditions and results of operations
Our business relies on the proper functioning of our IT systems, and we foresee continued
reliance in light of our vision to further digitalize our overall operation. Our information technology
systems support the operation of our warehouse man agement system, order management system and
online sales channels and enable us to efficiently collect and analyze our operational data and
information, including procurement, sales, invent ory, order fulfilment, logistics, customer and
membership data on a real-time basis. We use our information technology systems in human
resources management, inventory control, financial management and retail management. As a result,
the proper functioning of our information technology systems is critical for us, among others, to
effect marketing and sales and to monitor our inve ntory level and the level of our sales. We need to
constantly upgrade and improve our information technology systems to keep up with the continuous
growth of our business, financial conditions and results of operations. However, our IT systems
may not always operate without interruption and may encounter temporary abnormality or become
obsolete. Any malfunction to our information tec hnology systems may negatively affect our ability
to continue our operations smoothly, which in turn could adversely affect our business, financial
conditions and results of operations. Our securi ty measures may be breached due to employee error,
malfeasance, system errors or vulnerabilities, or otherwise. Outside parties may also attempt to gain
access to our data. As hacking and data theft tech niques are continuous evolving, our anti-virus
systems and security measure may not be able to adjust to these changes in a timely manner.
It is also important that we constantly review our existing IT systems, identify new business
needs, provide IT solutions and upgrade our systems. We may not always be successful in
developing, installing, running and migratin gt on e ws o f t w a r eo rs y s t e m sa sr e q u i r e db yo u r
business development. Although we did not experience any information technology breakdown
during the Track Record Period, we cannot assure you that our information security measures we
currently maintain are adequate or that our information technology system can withstand intrusions
form or prevent improper usage by third parties. Even if we are successful in this regard, significant
capital expenditure may be required, and we may not be able to benefit from these types of
investment immediately or at all. All of these may have a material adverse effect on our operations
and profitability.
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Our sales may be affected by seasonality
The demand of our products is event-driven due to the Chinese tradition of gold jewellery
gift-giving at ceremonial and festival events such as Chinese New Year, Valentine ’s Day, weddings
and newborn arrivals. Likewise, the d emand of our products is promoted by our ‘‘One RMB
Exchange ’’promotion. As a result, our sales are subject to seasonal fluctuations. The peak seasons
include the PRC National Day holiday, the period from Chinese New Year till Valentine ’s Day, and
the period during our ‘‘One RMB Exchange ’’promotion which is typically between June and
September. Due to these seasonal factors, comp arison of sales and operating results between
different periods within a single financial year may not be meaningful and should not be relied
upon as indicators of our performance. In addition, these seasonal consumption patterns may cause
our business, financial conditions and results of operations to fluctuate from period to period.
We charge a range of fixed crafting fees for our products and our profit margin is affected by
the movement in gold price
During the Track Record Period, we achieved high turnover with corresponding profit margins
that were low. Such financial result was attributable to: (i) our franchise distribution model,
whereby we charged low fixed crafting fees when we sell to provincial-dealers and/or franchisees.
In turn, our franchisees are then able to benefit from higher profit margins on subsequent sales to
consumers; and (ii) our focus on developing our brand in the third and lower tier cities where
consumers may be more price-sens itive. Moreover, due to the fact th at our crafting fees are largely
fixed but gold prices are subject to material mo vements, in the event of gold price increase, and
where our gold procurement price is equal to the gold component of the selling price, our profit
margins would be negatively impacted accordingl y. For details on how our gross profit and gross
profit margin may be effected by movements in gold price, please see ‘‘Summary — Summary of
Historical Financial Information and Summary of Major Financial Ratios — Gross profit and gross
profit margin. ’’We intend to continue with our existing business model of selling under our
existing pricing policy with lower profit margins. We cannot assure you that our profit margins will
not fluctuate from time to time, and any decline in our profit margins will adversely impact our
financial condition and prospects.
We depend on the continued service of our management team and other key employees, and
our business, financial conditions and results of operations will suffer greatly if we lose their
services
Our future success is dependent upon the continued service of our senior management, such as
Mr. Wang Zhongshan, our founder, chairman of our B oard and executive Director who has valuable
experience and knowledge of our products and industry, and who has made substantial
contributions to the development of our operations, the design and craftsmanship of our products,
and raw material procurement. For example, precise crafting machinery ’s procurement and
calibration require technical expertise that is di fficult to find, develop and replicate. Our success
also depends on the efforts and abilities of our des ign team, production team, procurement team and
sales team, which undertake the design and development of our products, the procurement of raw
materials and the sales of our products respectively. If we lose their services, we may not be able to
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locate suitable or qualified replacements, an d we may incur additional expenses to recruit new
senior management team members, which could severely disrupt our business and growth. In
addition, if these personnel join our competitors or form a competing business, our business and
prospects could be adversely affected. Further more, if the relationship between any of these
personnel and any of our substantial shareholders deteriorates, our operations could be disrupted.
As it is competitive to seek for qualified pers onnel in the gold jewellery industry, we may not
be able to attract and retain a sufficient number of qualified employees in the future, particularly in
light of our plans to expand our business. If we lose the services of one or more of our key
personnel, we may not be able to replace them easily or at all and may incur additional expenses to
recruit and train new personnel. Consequently, our business coul d be severely disrupted, and our
financial condition and results of operations cou ld be materially and adversely affected. We do not
maintain key person insurance for any of our key personnel. In addition, if any of our executive
officers or key employees joins a competitor or forms a competing business, we may lose know-
how, trade secrets, customers and key professionals and staff.
The nature of gold jewellery products busi ness exposes us to inventory security and
transportation risks
Due to the high value of our products and raw materials, our industry is susceptible to theft
and robbery by external parties, and at times internal employees. There is no guarantee that any
measures which are implemented will be adequate or effective despite that we have implemented
various security measures to safeguard the safety of our inventory and valuable goods at our
production facilities, our retail stores and exhi bition halls. Any occurrences of theft or robbery by
external parties and/or internal employees can ha ve a material and adverse effect on our reputation
and our brand and could result in financial losses.
The transportation of raw materials or products from suppliers or to customers, retail stores
and exhibition halls also expose us to risks. For details of our various procedures to manage and
track our products and raw materials and insurance policy, see ‘‘Business — Inventory Control ’’
and ‘‘Business — Insurance ’’in this prospectus. However, any security breach or failure in
transport logistics could result in a loss in inve ntory and have a material and adverse impact on our
business, financial conditions and results of operations.
Any negative publicity regarding the KOLs and celebrities whom we engage to market our
products or our brand could materially and adversely affect our sales and reputation
During the Track Record Period, we had collabo rated with KOLs and celebrities and launched
various marketing campaigns on social media as p art of our marketing initiatives to market our
products and our brand. While KOLs and celebrities endorsements help strengthen our brand
influence and promote our products, we cannot assu re you that we will maintain our collaborations
with our KOLs and celebrities. The KOLs and celebrities that we endorse may cease to cooperate
with us.
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Even if they continue to cooperate with us, we cannot assure you that the KOLs and
celebrities endorsements will remain compatible with the messages that our brands and products
aim to convey. Moreover, we cannot give assurance that any of these KOLs and celebrities will
remain popular or their public perceptions will r emain positive. Any negative publicity related to
any of such KOLs and celebrities, including but not limited to, inappropriate speech, unethical
behavior, non-compliance with the relevant laws and regulations or banning from conducting
marketing activities, the occurrence of which is beyond our control, may adversely impact our
reputation and brand image and consequently ou r ability to attract new customers and retain
existing customers. Although we have internal control measures in place to prevent the KOLs and
celebrities that we collaborate with from c onducting wrongdoings which may cause negative
impacts on our reputation or brand image, we cannot assure you that such measures would be
effective at all times. Although we will take pro active measures to mitigate impact once similar
incidents occur, we cannot assure you that our business, financial condition and results of
operations will not be affected. In the event that we need to replace KOLs and celebrities, we may
not be able to find suitable candidates in a timely manner, which may disrupt our marketing efforts
or we may need to incur additional costs as we may require more time to procure new KOLs and
celebrities to support our marketing activities. We may also initiate claims, disputes or legal
proceedings against KOLs and celebrities for compensation, which may divert our management ’s
attention and incur additional litigation expense s and costs. If any of these situations occurs, our
business, financial condition and results of operations could be materially and adversely affected.
In addition, customers/consumers may provi de feedback and public commentary about our
products and other aspects of our business online t hrough social media platforms, such as Wechat,
Weibo, Tiktok and Xiaohongshu, and any negative information concerning us, whether accurate or
not, may be posted on social media platforms at any time and may have a disproportionately
adverse impact on our brand, reputation, or business. The harm may be immediate without
affording us an opportunity for redress or correction and could have a material adverse effect on
our business, financial conditions and results of operations.
Our insurance coverage may not cover all lo sses which could have a material and adverse
effect on our business, financial conditions and results of operations
Different types of insurance policies are main tained to cover our operations, including
insurance on our exhibition halls and insurance for inventory losses, for details of our insurance
policy, see ‘‘Business — Insurance ’’in this prospectus. Our insurance policies may not cover
certain circumstances such as the types of loss, da mage and liability in which case we could incur
losses that could have a material and adverse effect on our business, financial conditions and results
of operations. There can also be no assurance that we will be able to renew our existing insurance
levels of coverage on commercially acceptable terms, or at all.
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The gold jewellery industry requires a constant supply of skilled labor and other staff at
competitive prices and labor shortage could disrupt our business, financial conditions and
results of operations, as well as our expansion plans
There is limited supply of skilled labor for the gold jewellery industry, and the acquisition for
skilled labor can be competitive. We rely on our em ployees to adhere to our operation and business
strategies in the daily execution of their dutie s to keep our business afloat and employees with
industry experience and technical skills are our key assets. We are proud of our ability to produce
substantially all of our products, and we rely heavily on our skilled labor to deliver our quality gold
jewellery products to our customers in a timely manner.
Our production plant is located in Changle County, Weifang City, Shandong Province, the
PRC, which is an area agglomerated with gold jewellery manufacturers. In light of the demand of
skilled labor in the vicinity, we cannot assure yo u that we will not face difficulties in competing
with other manufacturers for skilled labor. We did not experience any shortage of skilled labor
during the Track Record Period but we cannot assure you that we will not experience any shortage
of skilled labor in the future. In addition, we plan to recruit more skilled labor and other staff for
our expansion plans including but not limited to the upgrade of our production facility and
establishment of our research and development center, please see ‘‘Future Plans and Use of
Proceeds — Use of Proceeds ’’for further details. We may be unable to hire or retain appropriate
technically skilled employees, or may have to pay h igher levels of remuneration than we currently
intend for our existing and future operations.
In addition, our operation workflow consists of sophisticated procedures in the refinery and
processing of gold at our self-owned manufacturin g base, such that substantial training cost will be
incurred for less experienced labor for gold jewellery crafting techniques such as cast-crafting ( 澆
鑄), hydraulic crafting (油 壓), threading ( 抽絲) and weaving (機 織) for gold jewellery and K-gold
jewellery products. If we cannot retain sufficient skilled labor or fail to find replacement for
relevant positions with comparable experiences at similar wages, costs incurred for our operation
may increase as a result of increase of our salary payment, training cost for newly joined employees
and shortage in labor may also affect our product quality, which will have an adverse impact on our
business, financial conditions and results of operations.
Our processing and production plants are concentrated
Substantially all of our gold jewellery products are processed and produced in our production
facilities located in Changle Cou nty, Weifang City, Shandong Province, the PRC. The concentration
of our production facilities and our raw materia l warehouses means that our business, financial
conditions and results of operations are depende nt on the degree to which we are able to continue
to import raw materials into, manufacture products in, and transport products from, this locality.
Certain localized circumstances affecting the regi on such as power or water shortage, labor strikes,
riots, fire or any other events that may be beyond our control may cause prolonged interruptions to
or have a negative effect on the operations of our production facilities. We cannot assure you that,
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if any of the aforesaid events occurs, we will be able to find alternative ways to produce and fulfil
our customers ’ orders. Any disruption of operation of our production facilities could materially and
adversely affect our business, financial conditions and results of operations.
We are subject to risks relating to Third-party Settlement Arrangement such as claims from
third parties for return of funds and money laundering risks
During the years ended December 31, 2021, 2022 and 2023, 573, 669 and 554 customers
entered into designation letters and settled transac tions with us through the accounts of third parties
designated by them (the ‘‘Third-party Settlement Arrangement’’ ). For the years ended December
31, 2021, 2022 and 2023, the aggregate amount of payments from third-party payors to us
represented approximately 5.7%, 7.7% and 7.7% of t he total revenue, respectively. All the Third-
party Settlement Arrangement were settled with franchisees’ (i) shareholders or ultimate
beneficiaries, (ii) family members, and (iii) employees who have provided a designation letter to us
on a case-by-case basis subject to prior written approval from our Group.
We were subject to various risks relating to such Third-party Settlement Arrangement during
the Track Record Period, such as possible claims from third-party payors for return of funds as they
were not contractually indebted to us and possible claims from liquidators of third-party payors;
and potential money laundering risks as we have l imited knowledge about the source and purpose
of the funds utilized by the third-party payors. In the event of any claims from customers, third-
party payors or their liquidators, or legal proce edings (whether civil or criminal) instituted or
brought against us to demand return of the relevant payment or for violation or non-compliance of
laws and regulations, we will have to allocate financial and managerial resources to defend against
such claims and legal proceedings, and we may be forced to comply with the court ruling and
return the payment for the products that we sold, which may have an adverse effect on our
business, financial conditions and results of operation.
If we fail to comply with anti-bribery or anti -money laundering laws, our reputation may be
harmed, and we could be subject to significan t penalties and expenses that could have a
material adverse effect on our business, fina ncial conditions and results of operations
We are subject to the laws governing anti-bribery and anti-money laundering in the PRC. In
the PRC, the Anti-Unfair Competition Law, and pro visions of the Criminal Code, prohibit giving
and receiving money or property (which includes cash, proprietary interests and items of value) to
obtain an undue benefit. Further, in the PRC, Anti-Money Laundering Law of the People ’s Republic
of the PRC ( 《中華人民共和國反洗錢法》), promulgated by the Standing Committee of the National
People ’s Congress on October 31, 2006 and effective on January 1, 2007, prohibits money
laundering. In addition, many of our customers req uire us to follow strict anti-bribery as part of
doing business with us. Our procedures and controls to monitor anti-bribery and anti-money
laundering compliance may fail to protect us from reckless or criminal acts committed by our
employees or agents. If we fail to comply with a pplicable anti-bribery laws and anti-money
laundering laws, we may be subject to criminal and c ivil penalties and sanctions or incur significant
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expenses, our reputation could be harmed and our customers could cancel or not renew contracts
for our services, all of which could have a mater ial adverse effect on our business, financial
conditions and results of operations.
We may not succeed in implementing our business strategies and future expansion plan
Our business strategies and future expansion plans as proposed in this prospectus may not be
successful as there are a number of factors which are beyond our control. For example, the costs of
our future expansion plan may be higher than expected due to increased raw materials and
construction costs, or we may not be able to enhance our research and development capabilities and
expand product type number till the extent we expected. Furthermore, upgrading of our production
facility involves substantial amount of capital in vestment and may put pressure on our financial and
operational resources. If we are unable to manage ou r business strategies or expansion plan or the
rising costs associated with such expansion plan e ffectively, our business, financial conditions and
results of operation may be adversely affected.
If we fail to protect our proprietary data and customer information, our reputation and
business could be negatively affected
We believe that our ability to compile and analyze sales data and customer data is critical to
our success as a gold jewellery retailer. We collect customer data, such as our franchisees ’ and
consumers ’ mobile number, address and other personal data, and have built our own customer data
base. In accordance to the Personal Data Protection Law of the PRC( 《個人資訊保護法》), we may
only collect the aforementioned personal data wit h the prior consent of customers unless otherwise
provided by the relevant laws and administrative regulations. The Personal Data Protection Law
also mandates us to protect customer privacy an d prohibits unauthorized disclosure of the
aforementioned personal data. We may be resp onsible for any losses caused by unauthorized
processing or disclosure of customer personal data. Any mishandling of the co llection, storage, use
or disclosure of personal information or other privacy-related matters by us could damage our
reputation and results of operations. Furthermore, any actual or alleged leakage or unauthorized use
of the customer data we have collected could resul t in a decrease in our online traffic or the number
of our online consumers, either of which could have a material adverse effect on our business,
financial conditions and results of operations. The Personal Data Protection Law also mandates us
not to collect personal data excessively and to process personal data with a clear and reasonable
purpose and in a manner which is legitimate, necessary and directly related to the purpose. We may
be liable to the excessive collection of personal data due to our limited level of understanding.
In addition, advances in technology, the expertise of hackers, new discoveries in the field of
cryptography or other events or developments could result in a compromise or breach of the
technology that we use to protect confidential information. We may not be able to prevent third
parties, especially hackers or o ther individuals or entities enga ging in similar activities, from
illegally obtaining and misappropriating our proprie tary data and customer information. In addition,
we have limited control or influence over the secu rity policies or measures adopted by third-party
online payment service providers through which some of our consumers may elect to make online
purchases. Furthermore, our third -party logistics service providers or courier companies may also
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disclose or use information about our consumers illegally. Although we do not believe that we will
be held responsible for any such illegal activities, any negative publicity on our IT system ’s or
online sales channels ’ safety or privacy protection mechanism and policy could have a material
adverse effect on our public image and reputation. As such, we have established a data protection
working group, appointed a data protection o fficer and cyber security officer. We have also
formulated a personal data protection management policy in order to protect from material data
leakage, but we cannot assure you that events beyond our control will not occur in the future,
which could negatively affect our reputation.
Furthermore, the PRC laws and regulations governing the use of personal data are constantly
moving forward. As such, we may need to devote management ’s attention and substantial costs to
continuously upgrade our data privacy and cybersecurity measures, in order to comply with the
changing principles and requi rements of applicable laws and r egulations. Any change in the
regulations governing the use of such personal data could adversely affect our ability to use such
data or discourage our consumers from using our online sales channels, either of which could have
a material adverse effect on our business, financial conditions and results of operations.
For transactions which we adopt electronic p ayment services, in particular for our E-
commerce platform sales, changes in the oversight on the centralized deposit and supervision
of customer reserve funds by the PBOC may adversely affect our interest income and
customer experience
Since January 2019, the PBOC has mandated all payment service providers in the PRC to
deposit customer reserve funds to a central deposit and management reserve account with the PBOC
or a depositary account with a designated depositary bank. Customer reserve funds may or may not
be interest-bearing, and applicable interest rate may fluctuate from time to time. In addition, the
deposit and withdrawal of centralized deposits of customer reserve funds will incur processing time,
which may prolong the process for us to access the funds and affect our settlement efficiency, and
negatively affect our ability to process a significant surge in payment volume during peak times,
such as holiday seasons. This could adversely affect our processing costs and the customer
purchasing experience.
Some of our leased properties have title defects, have no property ownership certificate or the
lessor of which is unable to produce propert y ownership certificate, or yet to complete
registration and filing procedures. We may be required to cease occupation and use of such
leased properties if there is a valid claim for them
As of the Latest Practicable Date, some of our leased properties used for business operation
did not have any property ownership certificate, or the lessors of which were unable to provide us
with property ownership certificates. See ‘‘Business — Properties — Leased Properties ’’for further
details.
Any dispute or claim in relation to these properties, including the lessors ’ alleged
unauthorized lease of these properties, could force us to relocate these properties. If any of our
leases is terminated or becomes unenforceable as a r esult of challenges from third parties, we would
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need to seek alternative properties and incur r elocation costs. Any relocation could lead to
disruptions to our operations and adversely affect our business, financial conditions and results of
operations.
In addition, as of the Latest Practicable Date, some of our leased properties used for business
operation were yet to complete registration an d filing procedures. As advised by our PRC Legal
Advisor, the non-registration and filing of the relevant property lease will not affect the validity of
the lease contracts and the legal us e of the leased properties, but relevant local housing authorities
may require us to complete the filing within the prescribed period and we may be subject to
penalties of RMB1,000 to RMB10,000 as a result of delay in filing for each of such properties.
We cannot assure you that the lessors will cooperate and complete the registration in a timely
manner once we are required to do so. In the event that any fine is imposed on us for our failure to
register our lease agreements, we may not be able to recover such losses from the lessors.
We did not fully pay certain social insurance and housing provident fund for our employees in
the PRC during the Track Record Period
In accordance with the relevant PRC labor laws and regulations, we are required to contribute
to employee social welfare schemes for our empl oyees. Such schemes include housing provident
fund contributions, pension insurance, medical insurance, unemployment insurance, maternity
insurance, and job-related injury insurance. As advised by our PRC Legal Advisor, an employer
that has not made social insurance contributions at a rate and based on an amount prescribed by the
law, or at all, may be ordered to rectify the non-compliance and pay the required contributions
within a stipulated deadline and be subject to a late fee of up to 0.05% per day. If the employer
still fails to rectify the failure to make social insur ance contributions within the stipulated deadline,
it may be subject to a fine ranging from one to three times of the amount overdue.
During the Track Record Period, we did not fully pay certain social insurance and housing
provident fund for its staff in the PRC and such non-payment is a non-compliance with the related
PRC laws. For details of the non-compliance, see ‘‘Business — Compliance and Legal Proceedings
— Non-compliance’’. We cannot assure you that there are no, or will not be any, employee
complaints regarding payment of the social wel fare insurances against us, or that we will not
receive any claims or complaints from any labor dispute arbitration committee or court in China
relating to disputes about payment of these insurances in the future. We cannot assure you that we
will not be required to pay such insurances or any related damages in the future.
Changes in international trade or investment policies and barriers to trade or investment, the
ongoing trade conflict and the emergence of a trade war may have a material effect on our
business and expansion plans
International market conditions and the interna tional regulatory environment have historically
been affected by competition among countries and ge opolitical frictions. Changes to trade policies,
treaties and tariffs, or the perception that these changes could occur, could adversely affect our
business, financial conditions and results of operation. For instance, there have been political
matters that resulted in increas ed tensions between countries, such that different countries have to
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formulate measures in response to new trade poli cies, treaties and tariffs. Such measures may
further escalate the tension between the countries or even lead to a trade war, which eventually
have adverse impact to the global economy as a whol e. In addition, the escalation of political,
business, economic and trade relations between countries may trigg er negative public sentiment
towards particular countries. Although our business activities are substantially in the PRC, the
above could have a material impact on our future expansion plans to other countries, and eventually
affect our business, financial conditions and results of operation.
Changes in global economic, political or social c onditions or government policies could have a
material and adverse effect on our business, fina ncial conditions and results of operations
Due to the current economic, political, social and regulatory developments, it may be difficult
for us to predict all the risks and uncertaint ies we may face, and a slow-down of global or PRC ’s
economy may reduce our customers ’ demand for our products and services, which could have a
material adverse effect on our business and operating results. In addition, any significant changes in
local government ’s policies or relevant legislations could have a material impact on overall
economic growth, which could in turn have a material and adverse effect on our business, financial
conditions and results of operations.
Our potential engagement in acquisitions or strategic partnerships increase our capital
requirements, dilute our Shareholders, cause us to incur debt or assume contingent liabilities,
and subject us to other risks
From time to time, we may evaluate various acquisitions and strategic partnerships, including
licensing or acquiring complementary products, intellectual property rights, technologies or
businesses. Any completed, in-process or potential acquisition or strategic partnership may entail
numerous risks, including:
. increased operating expenses and cash requirements;
. the potential additional indebtedness or contingent or unforeseen liabilities;
. assimilation of operations, intellectual property and products of an acquired company,
including difficulties associated with integrating new personnel;
. the diversion of our management ’s attention from our existing product programs and
initiatives in pursuing such a strategic merger or acquisition;
. retention of key employees, the loss of key personnel, and uncertainties in our ability to
maintain key business relationships;
. risks and uncertainties associated with the other party to such a transaction, including the
prospects of that party and their existing prod ucts and product candidates and regulatory
approvals; and/or
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. our inability to generate revenue from acquired technology and/or products sufficient to
meet our objectives in undertaking the acqui sition or even to offset the associated
acquisition and maintenance costs.
In addition, if we undertake acquisitions, we may issue dilutive securities, assume or incur
debt obligations, incur large one-time expenses an d acquire intangible assets that could result in
significant future amortization expense.
Any litigation, legal and contractual disputes, claims, or administrative proceedings against us
could be costly and time-consuming to defend or settle
W em a yf r o mt i m et ot i m eb ei n v o l v e di nc o n t r a ctual disputes or legal and administrative
proceedings and claims arising out of the ordinary course of business or pursuant to governmental
or regulatory enforcement activity. Existing or future legal proceeding might result in substantial
costs both from defending such claims and from bei ng liable for any losses in the event any claims
against us are successful and divert management ’s attention and resources. Furthermore, any
litigation, legal disputes, claim s or administrative proceedings that are initially not material may
escalate and become material to us due to a variety of factors, such as changes in the facts and
circumstances of the cases, the likelihood of loss , the monetary amount at stake and the parties
involved. Laws, regulations and legal actions could also have significant regulatory consequences
and result in regulator y enforcement actions.
We, our Directors, senior management, employees, franchisees and provincial-dealers may be
involved in claims, disputes, court orders or other legal proceedings and our reputation may
be harmed as a result
From time to time, we, our current or past Dir ectors, senior management and employees may
be involved in claims, disputes, government investigations, court orders and legal proceedings.
These may concern issues relating to, among othe rs, shareholders litigations, insolvency or
bankruptcy litigations, consumer liability, environmental matters, breach of contract, employment or
labor disputes and infringement of intellectual property rights. So far as our Directors were aware,
none of us, our current Directors, senior management and employees are involved in any claims,
disputes, court orders or other legal proceedings that may have any material adverse impact on the
business operations, financial positions or reputation of us. Any claims, disputes or legal
proceedings initiated by or brought against us, our current or past Directors, senior management
and employees, with or without merit, may result in substantial costs and diversion of resources,
and if we are unsuccessful, could materially harm ou r reputation and generate negative publicity. In
addition, we may not be able to detect or prevent claims of fraud or other misconduct committed by
our provincial-dealers or franchisees. We may also be exposed to such claims, disputes or other
legal proceedings, which could subject us to financial losses and adversely affect our reputation.
Further, our sales and distribution network primarily comprise franchisees, including
provincial-dealers that we engage, who are autho rised to use our brand in their course of business.
As of December 31, 2021, 2022 and 2023 and June 30, 2024, we had 1,721, 1,704, 1,687 and
1,670 franchisees, respectively. There may be variou s litigation and regulatory risks related to our
franchisees and the franchise stores they operate, i ncluding but not limited to consumer complaints,
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personal injuries, litigation ini tiated by employees due to contractual dispute, non-compliance with
the applicable laws and regulations and so on. These claims, disputes and other legal proceedings
may become associated with us and our brand and hence adversely affect our brand image and
reputation.
The development of the legal system and cha nges in the interpretation and enforcement of
laws, regulations and policies could materially affect us
We conduct our business primarily through our subsidiaries in China. Our operations in China
are governed by PRC laws and regulations. The PRC legal system is a civil law system based on
written statutes. Unlike the common law system, prior court decisions under the civil law system
may be cited for reference but have limited precedential value. Over the past few decades, the PRC
legislation has provided greater protection to var ious forms of foreign or private-sector investment
in the PRC. However, the PRC’ s legal system continues to evolve in response to changing
economic and other conditions, many laws and regulations are new and continue to change. In
particular, the interpretation and enforcement of newly promulgated laws and regulations may be
subject to case by case analysis. In addition, as other civil law coun tries, there is a limited volume
of published court decisions, which may be cited for reference but are not binding on subsequent
cases and have limited precedential value unless the Supreme People ’s Court otherwise provides.
In addition, similar to a number of other countr ies and regions, new laws and regulations may
be enacted from time to time in response to changi ng economic and other conditions. In particular,
the PRC government authorities may continue to promulgate new laws, regulations, rules and
guidelines governing the gold jewellery manufact uring and retail company with respect to a wide
range of issues, such as franchise license, environmental protection, intellectual property,
competition and antitrust, priv acy and data protection, and other matters, which may result in
additional obligations imposed on it. The interp retation and implementation of relevant PRC laws
and regulations may have an impact on our business and operations.
Fluctuations in exchange rates could re sult in foreign currency exchange losses
Fluctuations in exchange rates between the Renminbi and the U.S. dollar and other currencies
may be affected by, among other things, changes in the global political and economic conditions, as
well as international economic and political d evelopments. Due to the economic situation and
financial market developments in the PRC and abroad, the PRC government has decided to proceed
further with reform of the Renminbi exchange rate regime and to enhance Renminbi exchange rate
flexibility.
A significant majority of our revenue, operat ing costs and expenses are, and are expected to
be denominated in Renminbi. Since the trend in gold price in Renminbi is generally consistent with
the trend in international gold price, which is denominated in the U.S. dollar, our earnings may be
materially affected by a change in the Renminb i/U.S. dollar exchange rate. In addition, being a
PRC-based company to list in Hong Kong, any significant change in the exchange rates of the
Hong Kong dollar against the Renminbi may materially and adversely affect any dividends payable
on our H Shares in Hong Kong dollars.
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Forward-looking statements contained in this prospectus are subject to risks and uncertainties
This prospectus contains certain statements and information that are forward-looking and uses
forward-looking terminology such as ‘‘believe,’’ ‘‘expect, ’’ ‘‘estimate, ’’ ‘‘predict, ’’ ‘‘aim, ’’ ‘‘intend, ’’
‘‘will, ’’ ‘‘may, ’’ ‘‘plan,’’ ‘‘consider, ’’ ‘‘anticipate, ’’ ‘‘seek, ’’ ‘‘should, ’’ ‘‘could, ’’ ‘‘would, ’’
‘‘continue, ’’and other similar expressions. You are cautioned that reliance on any forward-looking
statement involves risks and uncertainties and t hat any or all of those assumptions could prove to
be inaccurate and as a result, the forward-looking statements based on those assumptions could also
be incorrect. In light of these and other risks and uncertainties, the inclusion of forward-looking
statements in this prospectus should not be regard ed as representations or warranties by us that our
plans and objectives will be achieved, and these forward-looking statements should be considered
in light of various important factors, includin g those set forth in this section. Subject to the
requirements of the Listing Rules, we do not intend publicly to update or otherwise revise the
forward-looking statements in this prospectus, whether as a result of new information, future events
or otherwise. Accordingly, you should not place undue reliance on any forward-looking
information. All forward-looking statements in this prospectus are qualified by reference to this
cautionary statement.
RISKS RELATING TO OUR FINANCIAL POSITION
We require substantial capital for our operations. If we cannot satisfy such requirement with
cash from operations or raise sufficient additional capital on acceptable terms, our business,
financial conditions and results of operations may be adversely affected
In order to further expand our business, develop new gold jewellery products and remain
competitive, we may require additional capital to be expended in our operations. In particular, the
purchase of gold material is capital intensive and necessary for our organic business expansion.
Shanghai Gold Exchange only accepts purchase of gold with cash in their specified accounts. We
expect to satisfy such capital commitments using cash generat ed from operations and various
channels and instruments available to us. Financing may not be readily available in amounts or on
terms acceptable to us. Our ability to use cash from operations and to obtain additional capital is
subject to a variety of uncertainties, including our future financial condition, results of operations
and cash flows, general market conditions for capital-raising activities and economic, political and
other conditions in the PRC. The future incurrence of indebtedness may result in debt service
obligations and could result in operating and financing covenants restricting our operations or our
ability to make acquisitions or pay dividends. Any failure to meet our capital requirements may
materially and adversely affect our business, fi nancial conditions and results of operations.
We expect to incur additional capital expenditure and depreciation expenses associated with
the expansion of our production facilities
We plan to enhance our gold jewellery d igitalized manufacturing center (黃 金珠寶首飾智能製
造中心) at our production facility in the Economic and Technological Development Zone at
Changle County, Weifang City, Shandong Province, the PRC for the production of gold jewellery,
K-gold products and spring clasps. We would incur additional capital expenditure in the future,
RISK FACTORS
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which could negatively affect our financial conditio n and results of operations. In addition, there is
no guarantee that we could achieve production efficiency and other expected benefits for
establishing and utilizing our in-house production capacities in the near term, or at all.
We recorded negative operating cash flow at times during the Track Record Period. If we
continue to have negative operating cash flow in the future, our liquidity and financial
condition may be materially and adversely affected
We recorded negative operating cash flow of RMB5.9 million for the year ended December
31, 2021. Such result was mainly due to an increase in inventories of RMB310.6 million, which
was primarily attributable to our business expa nsion and was in line with our increase in sales in
2021. In addition, we recorded net cash used in ope rating activities of RMB13.7 million for the six
months ended June 30, 2024. Such result was largely attributable to decrease in trade and bills
payables of RMB196.8 million, which in large par t was in relation to our settling bills we applied
to procure raw materials. For further details of n egative operating cash flow, please refer to the
section headed ‘‘Financial Information — Cash Flows — Net cash (used in)/from operating
activities ’’.
We cannot assure you that we will not record negative operating cash flow again in the future.
If we resort to external financing facilities to generate additional cash, we will incur additional
financing costs. If operating cash flow remains negative in the future and if we cannot obtain
adequate fund from other resources on satisfact ory terms or at all to fund our operation, our
business, financial conditions and results of oper ations may be materially and adversely affected.
Failure to maintain optimal inventory levels and ensure the security of our inventory could
have a material adverse effect on our business, fi nancial conditions and results of operations
Maintaining optimal inventory levels is critical to the success of our business. As of December
31, 2021, 2022 and 2023 and June 30, 2024, the balance of our inventory was RMB2,049.0 million,
RMB1,688.9 million, RMB2,169.6 million and RMB2,016.5 million, respectively. During the
respective year/period, our inventory turnover days were 42.7 days, 45.6 days, 36.8 days and 40.8
days, respectively. See the sections headed ‘‘Financial Information — Description of Certain Items
of Consolidated Statements of Financial Position — Inventories ’’for more information. We are
exposed to inventory risks because of a variety of factors which are beyond our control, including
fluctuation of gold price, delay or disruption in the supply by our suppliers, decreases in the
number of orders placed by our customers, delayed return of gold products lent to our customers,
changing consumption trends and customer pref erences and launches of competing products.
Moreover, for stocking purposes we generally e stimate demand for the products we sell ahead of
the actual time of sale. We cannot assure you that we can accurately predict these trends and events
and always maintain adequate levels of inventory. Any unexpected decrease in the market demand
for the products we sell could lead to excessive inventory, and we may be forced to offer discounts
or conduct promotional activities to dispose of slow-moving inventory, sometimes at prices below
cost, which in turn may adversely affect our financial condition and results of operations. On the
other hand, insufficient inventory level may cause us delay production and delivery, and lose sales
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to our competitors. In addition, the costs of our raw materials such as gold and diamonds are high
and any under-stocking or over-stocking of our inventory will have adverse impacts to our
liquidity. During the Track Re cord Period, we did not record any inventory write-offs.
We are also subject to certain risks related to product warehousing, in particular due to the
fact that at a given time, we may store substantial amounts of high-value inventories, such as gold
bars, at our warehouse pending delivery to or pick up by our customers. Accidents such as theft,
fire, explosion, smoke, water damage, weather damages and other natural disasters may cause
damage to the products we store in our warehouse and adversely affect our ability to supply
products on time. The occurrence of any of these accidents could also require us to make
significant unanticipated expenses and delay our de livery of products. Lost sales or increased costs
that we may incur due to such disruption of operations and delay in product delivery may not be
recoverable under our existing insurance policies , and prolonged business disruptions could result
in a loss of our consumers. If any one or more of the above risks were to materialize, our business,
financial conditions and results of operations may be adversely affected.
The discontinuation of any government grants and other favorable policies currently available
to us could adversely affect our financial condition, results of operations and prospects
We have historically received government grants in the form of subsidies for certain of our
product development projects. For the years ended December 31, 2021, 2022 and 2023 and the six
months ended June 30, 2024, we recognized government grants as other income of RMB15.4
million, RMB12.6 million, RMB15.2 million and RM B2.8 million, respectively. For further details
of our government grants, see ‘‘Financial Information — Description of Selected Items in the
Consolidated Statements of Profit or Loss and Other Comprehensive Income — Other Income ’’.
Moreover, our growth has also been supported by favorable government policies, including
preferential tax treatment. The timing, amount and criteria of government grants and other favorable
policies are determined by the local government au thorities. We generally do not have the ability to
influence local governments in making these decisions. Local governments may decide to reduce or
eliminate such grants or policies. Our eligibility for government grants and other favorable policies
is dependent on a variety of factors, including th e assessment of our impr ovement on existing
technologies, relevant government policies, the availability of funding at different granting
authorities and the research and development progress made by other peer companies. In addition,
some of the government grants and policies are on a project basis and subject to the satisfaction of
certain conditions, including co mpliance with the applicable financial incentive agreements and
completion of the specific projects therein. In a ddition, the policies under which we historically
received government grants may be halted by the relevant government entities in accordance with
newly promulgated favorable government policies. We cannot assure you of the continued
availability of the government grants and other favorable policies currently enjoyed by us. Any
reduction or elimination of such government grants and other policies would materially adversely
affect our business, financial conditions and results of operations.
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Our operations are subject to PRC tax laws and regulations
We are subject to periodic examinations on fulfi llment of our tax obligation under the PRC tax
laws and regulations by PRC tax authorities. Although we believe that in the past, we have acted in
compliance with the requirements under the relevant PRC tax laws and regulations in all material
aspects and established effective internal control measures in relation to accounting regularities, we
cannot assure you that future examinations by PRC tax authorities would not result in fines, other
penalties or action that could adversely affect ou r business, financial conditions and results of
operations.
RISKS RELATING TO THE GLOBAL OFFERING
We may be subject to the approval or other requirements of the CSRC or other PRC
governmental authorities in connect ion with future security activities
On July 6, 2021, the relevant PRC government authorities issued Opinions on Strictly
Cracking Down Illegal Securities Activities in Accordance with the Law ( 《關於依法從嚴打擊證券
違法活動的意見》). These opinions enhanced administration and supervision on overseas listing by
The PRC-based companies and proposed to tak e effective measures, such as promoting the
construction of relevant regulatory systems to deal with the risks and incidents faced by The PRC-
based oversea-listed companies.
On February 17, 2023, the CSRC released the T rial Administrative Measures for Overseas
Securities Offering and Listing by Domestic Companies ( 《境內企業境外發行證券和上市管理試行
辦法》) (the ‘‘Trial Measures ’’), together with five interpretative guidelines thereof, which became
effective on March 31, 2023. The Trial Measures comprehensively improved and reformed the prior
regulatory regime for overseas listing of securiti es of PRC domestic companies, and had regulated
both direct and indirect overseas listing of PRC domestic companies ’securities by adopting a filing-
based regulatory regime. According to the Trial Measures, we, as a PRC domestic company seeking
to list securities in overseas markets, are required to apply for the filing procedure with the CSRC
within three working days after submitting the listing documents to the overseas supervisory
authorities and report relevant information. On October 9, 2023, we submitted initial filing
documents to the CSRC, and the CSRC published the notification on our completion of the required
filing procedures on January 19, 2024 for this offering.
Furthermore, we cannot assure you that any new rules or regulations promulgated in the future
will not impose additional r equirements or restrictions on us or our financing activities. We may
not be able to comply with such additional requirements in a timely manner or at all. In addition,
we may be subject to adjustments by the CSRC or other PRC regulatory authorities for failure to
seek CSRC filing or other government authorization for this Global Offering, and these regulatory
authorities may impose fines and penalties on us, affect our operating activities in the PRC, affect
our ability to pay dividends, delay or affect th e repatriation of the proceeds from the Global
Offering into the PRC or take other actions to affect our financing activities, which could have a
material adverse effect on our business, financial conditions and results of operations.
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No public market currently exists for our H Shares. An active trading market for our H
Shares may not develop and the market price and trading volume of our H Shares maybe
volatile
No public market currently exists for our H Share s. The initial Offer Price for our H Shares to
the public will be the result of negotiations betw een us and the Sponsor-Overall Coordinator, and
the Offer Price may differ significantly from the market price of the H Shares following the Global
Offering. We have applied to the Stock Exchange for the listing of, and permission to deal in, the H
Shares. A listing on the Stock Exchange, howeve r, does not guarantee that an active and liquid
trading market for our H Shares will develop, or if it does develop, that it will be sustained
following the Global Offering, or that the market price of the H Shares will not decline following
the Global Offering.
The price and trading volume of our H Shares may be subject to significant volatility in
response to various factors beyond our control, including the general market conditions of the
securities in Hong Kong and elsewhere in the wor ld. In particular, the business, results of
operations and the market price of the shares of other companies engaging in similar business may
affect the price and trading volume of our H Shares.
Our Controlling Shareholders have substantial influence over us and its interests may not be
aligned with the interests of our other Shareholders
Our Controlling Shareholders have substantial i nfluence over our business, including matters
relating to our management, policies and decision s regarding acquisitions, mergers, expansion
plans, consolidations and sales of all or substantially all of our assets, election of directors and
other significant corporate actions. Immediately after completion of the Global Offering, assuming
the Over-allotment Option is not exercised and based on the Offer Price of HK$13.20, being the
mid-point of the indicative Offer Price range, our Controlling Shareholders will hold (including
direct and indirect shareholdings) approximately 75.00% of the issued share capital in us,
respectively. This concentration of ownership may discourage, delay or prevent a change in control
of us, which could deprive other Shareholders o f an opportunity to receive a premium for their H
Shares as part of a sale of us and might reduce the price of our H Shares. These events may occur
even if they are opposed by our other Shareholders. In addition, the interests of our Controlling
Shareholders may differ from the interests of our other Shareholders. We cannot assure you that our
Controlling Shareholders will not exercise their s ubstantial influence over us and cause us to enter
into transactions or take, or fail to take, actions or make decisions that conflict with the best
interests of our other Shareholders.
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Future sales or perceived sales or conversion of significant amounts of our H Shares in the
public market following the Global Offering co uld materially and adver sely affect the price of
our H Shares
Prior to the Global Offering, there has not been a public market for our H Shares. Future sales
or perceived sales of significant amounts of our H Shares or conversion of the Unlisted Shares, if
any, by specific Shareholders subject to certain re gulatory requirements, after the Global Offering
could result in a significant decrease in the prevai ling market price of our H Shares. Nevertheless,
after these restrictions lapse or if they are waived, future sales of significant amounts of our H
Shares in the public market or the perception that these sales, or conversion of existing Unlisted
Shares, if any, may occur could significantly decr ease the prevailing market price of our H Shares
and our ability to raise eq uity capital in the future.
You will incur immediate and significant dilution and may experience further dilution if we
issue additional Shares or equity securities in the future
The Offer Price of the H Shares is higher than the net tangible asset value per H Share
immediately prior to the Global Offering. There fore, purchasers of the H Shares in the Global
Offering will experience an immediate dilution. In order to expand our business, we may consider
offering and issuing additional S hares in the future. Purchasers of the H Shares may experience
dilution if we issue additional Shares in the future at a price which is lower than the net tangible
asset value per Share at that time. Furthermo re, we may issue Shares through the employee
incentive platforms, which would further dilute Shareholders ’ interests in us.
We have significant discretion as to how we will use the net proceeds of the Global Offering,
and you may not necessarily agree with how we use them
Our management may spend the net proceeds from the Global Offering in ways you may not
agree with or that do not yield a favorable return to our Shareholders. We plan to use a significant
portion of the net proceeds from the Global Offering for the following purposes:
. enhancing our production capabilities by upgrading our production facilities in Weifang,
Shandong with a view to achieve further business growth;
. the expansion and enhancement of our franchise network;
. investing in information technology;
. establishing our research and development center; and
. working capital and other general corporate purposes.
However, our management will have discretion as to the actual application of our net
proceeds. You are entrusting your funds to our management, whose judgment you must depend on,
for the specific uses we will make of the net proceeds from the Global Offering.
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You should assess the legal protections you are entitled to under legal system in the PRC
The legal system in the PRC is a civil law system based on written statutes. Unlike common
law systems, it is a system in which decided legal cases have limited precedential value. The laws
and regulations in the PRC is subject to further revisions or interpretations from time to time. New
laws, regulations, guidelines and interpretations that are promulgated in the future may affect the
rights and obligations of the parties involved. Th erefore, you should assess the legal protections
you are entitled to under legal system in the PRC.
You may experience difficulties in effecting service of legal process and enforcing judgments
against us and our management
We are a company incorporated under the laws of the PRC, and a substantial portion of our
business, assets and operations are located in the PRC. In addition, a majority of our Directors,
Supervisors or members of our senior management reside in the PRC, and a substantial portion of
the assets of such Directors, Supervisors or members of our senior management are located in the
PRC. As a result, it may be difficult or impossible to effect service of process outside the PRC
upon us or such Directors, Supervisors or members of our senior management. Furthermore, a
judgement of a court of another jurisdiction may only be reciprocally recognized or enforced if the
jurisdiction has a treaty with the PRC or if there ar e reciprocal relationships between the PRC and
such jurisdiction. As a result, recognition and enforcement in the PRC of a court judgment obtained
in other jurisdictions relating to any matter that is not subject to a binding arbitration provision may
be difficult or impossible.
On July 14, 2006, the Supreme People ’s Court of the PRC and Hong Kong entered into the
Arrangement on Reciprocal Recognition and Enfo rcement of Judgements in Civil and Commercial
Matters by the Courts of the PRC and of the Hong Kong Special Administrative Region Pursuant to
Choice of Court Agreements between Parties Concerned ( 關於內地與香港特別行政區法院相互認
可和執行當事人協議管轄的民商事案件判決的安排) (the ‘‘2006 Arrangement ’’). Pursuant to such
arrangement, a party with a final judgment rendered by a Hong Kong court requiring payment of
money in a civil and commercial case according to a choice of court agreement in writing may
apply for recognition and enforcement of the judgment in the PRC, and vice versa. However, it is
subject to the parties in the dispute agreeing to enter into a choice of court agreement in writing
under the 2006 Arrangement. On January 18, 2019, the Supreme People ’s Court of the PRC and
Hong Kong entered into the Arrangement on Reciprocal Recognition and Enforcement of
Judgments in Civil and Commercial Matters by the Courts of the PRC and of the Hong Kong
Special Administrative Region (關 於內地與香港特別行政區法院相互認可和執行民商事案件判決
的安排) (the ‘‘2019 Arrangement ’’), which became effective on January 29, 2024. The 2019
Arrangement regulates, among others, the scope and particulars of recognized or enforced
judgment, the procedures and methods of the application for recognition or enforcement, the review
of the jurisdiction of the court that issued the original judgment, the circumstances where the
recognition and enforcement of a judgment shall be refused, and the approaches towards remedies
for the reciprocal recognition and enforcem ent of judgments in civil and commercial matters
between the courts in mainland China and those in Hong Kong.
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Although we will be subject to the Listing Rules and the Takeovers Code upon the listing of
our H Shares on the Stock Exchange, the holder s of H Shares will not be able to bring actions on
the basis of violations of the Listing Rules and must rely on the Stock Exchange to enforce its
rules. The Listing Rules and Takeovers Code do not have the force of law in Hong Kong.
Our historical dividends may not be indicative of our future dividend policy, and there can be
no assurance that we will declare and distribute any amount of dividends in the future
The dividend declared by our Group to the shareholders was nil, RMB78.7 million, nil and
RMB91.6 million during 2021, 2022 and 2023 and the six months ended June 30, 2024,
respectively.
Under the PRC laws, dividends may be paid only o ut of distributable profits and distribution
of dividends shall be at the discretion of our Board and subject to Shareholders ’ approval. Any
declaration and payment as well as the amount of such dividends may depend on our future
operations and earnings, capital re quirements and surplus, general financial conditions, contractual
restrictions and other factors that our Directors may consider relevant. Our distributable profits
represent our distributable net profits less appropriations to statutory surplus reserve, general
reserve, and discretionary surplus reserve (as approved by our Shareholders ’ meeting), each such
appropriation based on the unconsolidated net profit determined under PRC GAAP. Our
distributable net profit referred to above represents the lowest of ( i) our net profit attributable to
our equity holders for a period plus distributable profits or net of accumulated losses, if any, at the
beginning of such period, as determined under PR C GAAP, and (ii) our net profit attributable to
our equity holders for the period plus distributable profits or net of accumulated losses, if any, at
the beginning of such period, as determined under HKFRS. As a result, we may not have sufficient
distributable profits, if any, to make dividend distributions to our Shareholders in the future,
including in respect of periods where we register an accounting profit. Any distributable profits that
are not distributed in a given year are retained and available for distribution in subsequent years.
On the other hand, it would also be subject to our Articles of Association and the PRC laws,
including (where required) the approvals from our sh areholders and our Directors. As a result, there
can be no assurance whether, when and in what manner we will pay dividends in the future.
Holders of our H Shares may be subject to PRC income tax obligations
Under the current PRC tax laws and regulations, non-PRC resident individuals and non-PRC
resident enterprises are subject to different ta x obligations with respect to the dividends paid to
them by us and the gains realised upon the s ale or other disposition of H Shares.
Non-PRC resident individuals are required to pay PRC individual income tax at a 20% rate for
the dividends or gain from share transfer derived in China under Individual Income Tax Law of the
People ’s Republic of China ( 《中華人民共和國個人所得稅法》) and its implementation guidelines.
Accordingly, we are required to withhold such tax from dividend payments, unless applicable tax
treaties between the PRC and the jurisdiction in which the foreign individual resides reduce or
provide an exemption for the relevant tax obligations.
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Pursuant to the Arrangement between the M ainland of China and t he Hong Kong Special
Administrative Region for the Avoidance of Doubl e Taxation and the Prevention of Fiscal Evasion
with Respect to Taxes on Income signed on August 21, 2006, the Chinese government may impose
tax on dividends paid by a Chinese company to a re sident of the Hong Kong Special Administrative
Region (HKSAR) (including natural person and legal entity), but such tax will not exceed 10% of
the total amount of the dividends payable by the Chinese company. If an HKSAR resident directly
holds 25% or more of the equity interest in a Chinese company, such tax will not exceed 5% of the
total dividends payable by the Chinese company. The Fifth Protocol to the Arrangement between
the Mainland of China and the Hong Kong Special Administrative Region for the Avoidance of
Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income issued by
the State Administration of Taxation effective o n December 6, 2019 stipulates that the arrangements
or transactions made for the primary purpose of obtaining the above-mentioned tax benefits are not
subject to the above-mentioned provisions.
For non-PRC resident enterprises that do not have establishments or premises in the PRC, and
for those who have establishments or premises in the PRC but whose income is not related to such
establishments or premises, under the E nterprise Income Tax Law of the People ’s Republic of
China (《中華人民共和國企業所得稅法》), dividends paid by us and gains realized by such foreign
enterprises upon the sale or other disposition of H Shares are typically subject to PRC enterprise
income tax at a 20% rate. In accordance with the Circular on Issues Relating to the Withholding of
Enterprise Income Tax by PRC Resident Enterp rises on Dividends Paid to Overseas Non-PRC
Resident Enterprise Shareholders of H Shares ( 《關於中國居民企業向境外H股非居民企業股東派發
股息代扣代繳企業所得稅有關問題的通知》) issued by SAT, such tax rate has been reduced to
10%, subject to a further reduction under a special arrangement or an applicable treaty between the
PRC and the jurisdiction of the residence of t he relevant non-PRC resident enterprise.
Despite the arrangements mentioned above, the interpretation and application of applicable
PRC tax laws and regulations are subject to the t hen relevant laws and regulations due to several
factors, including whether the relevant preferential tax treatment will be revoked in the future such
that all non-PRC resident individual holders will be subject to PRC individual income tax at a flat
rate of 20%. In addition, the interpretation and ap plication of applicable PRC tax laws and rules by
the PRC ’s tax authorities are still evolving, including the taxation of capital gains by non-PRC
resident enterprises, individual income tax on dividends to non-PRC resident individual holders of
our H Shares and on gains realized on the sale o r other disposition of our H Shares. The PRC ’s tax
laws, rules and regulations may also change. If there is any change to applicable tax laws and rules
and interpretation or application with respect to such laws and rules, the value of your investment
in our H Shares may be materially affected.
RISK FACTORS
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Our foreign exchange transactions, such as dividend payment to holders of our H Shares are
subject to foreign currency conversion policies
We receive a majority of our revenues in Renminbi, a portion of which must be converted into
other currencies in order to meet our foreign currency obligations. For example, we need to obtain
foreign currency to make payments of declared dividends, if any, on our H Shares.
Currently, Renminbi may only be converted into other foreign currencies in accordance with
the relevant laws and regulations, and the conversion and remittance of foreign currencies are
subject to PRC foreign exchange regulations. Under the PRC ’s existing foreign exchange
regulations, by complying with certain procedural requirements, following completion of the H
Share listing, we will be able to undertake current a ccount foreign exchange transactions, including
payment of dividends without prior approval from the SAFE. However, the existing PRC foreign
exchange regulations may change in the future and adjust the regulations for our access to foreign
currencies for capital account and current account transactions, resulting in our inability to meet
new regulatory requirements. In this case, we may not be able to pay dividends in foreign
currencies to holders of our H Shares.
The value of the Renminbi against the U.S. dollar and other currencies fluctuates and is
affected by, among other things, changes in the PRC ’s economic conditions and the fiscal and
currency policies. Since 1994, the conversion of Renminbi into foreign currencies, including Hong
Kong and U.S. dollars, has been based on rates se t by the PBOC, which are set daily based on the
previous business day ’s inter-bank foreign exchange market rates and current exchange rates on the
world financial markets.
Any appreciation of the Renminbi against the U.S. dollar or any other foreign currencies may
result in the decrease in the value of our foreign currency-denominated assets. Conversely, any
devaluation of the Renminbi due to fluctuating exchange rates may affect the value of, and any
dividends payable on, our H Shares in foreign currency terms. All of these factors could materially
affect our financial conditi on and results of operations.
Certain facts, forecast and other statistics in this prospectus obtained from official government
publications have not been independently verified and may not be reliable
Certain facts, forecast and other statistics in this prospectus are derived from various
government and official resources. We believe that the sources of the said information are
appropriate sources for such information and have taken reasonable care in extracting and
reproducing such information. We have no reason to believe that such information is false or
misleading or that any fact has been omitted that would render such information false or
misleading. Nevertheless, such information has n ot been independently verified by us or any of our
affiliates or advisers. Therefore, we make no representation as to the accuracy of such facts and
statistics. Further, we cannot assure our investors that they are stated or compiled on the same basis
or with the same degree of accuracy as similar sta tistics presented elsewhere. In all cases, our
investors should consider carefully how much weigh t or importance should be attached to or placed
on such facts or statistics.
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You 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 or the
Global Offering
Prior to the publication of this prospectus, there has been coverage in the media regarding us
and the Global Offering, which contained among other things, certain financial information,
projections, valuations and other forward-looking information about us and the Global Offering. We
have not authorized the disclosure of any such information in the press or media and do not accept
any responsibility for the accuracy or completeness of such media coverage or forward-looking
statements. We make no representation as to the appropriateness, accuracy, completeness or
reliability of any information disseminated in the media. We disclaim any information in the media
to the extent that such information is inconsistent or conflicts with the information contained in this
prospectus. 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.
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For the purpose of the Listing, we have sought the following waivers from the Stock
Exchange in relation to certain requirements from the Listing Rules.
MANAGEMENT PRESENCE IN HONG KONG
Pursuant to Rule 8.12 and Rule 19A.15 of the Listing Rules, an issuer must have a sufficient
management presence in Hong Kong. This normally means that at least two of the executive
Directors must be ordinarily resident in Hong Kong. Rule 19A.15 of the Listing Rules further
provides that the requirement in Rule 8.12 may be waived by the Stock Exchange in its discretion.
Given that we are headquartered in the PRC with our principal business operation principally
located, managed and conducted in the PRC and all of our executive Directors are not ordinarily
resident in Hong Kong, it would be practically difficult and commercially unfeasible for us to either
relocate two of our executive Directors to Hong Kong or to appoint two additional executive
Directors who are ordinarily resident in Hong Kong in order to comply with the requirements under
Rule 8.12 and Rule 19A.15 of the Listing Rules.
Accordingly, our Company has applied to the Stock Exchange for, and the Stock Exchange
has granted, a waiver from strict compliance w ith the requirements under Rule 8.12 and Rule
19A.15 of the Listing Rules on the following conditions:
. our Company has appointed two authorized representatives (the ‘‘Authorized
Representatives ’’) pursuant to Rule 3.05 of the Listing Rules, namely, Mr. Wang
Zegang, an executive Director and one of our joint company secretaries and Ms. Yu
Wing Sze, one of our joint company secretaries, who will act as our Company ’s principal
channel of communication with the Stock Exchange. Ms. Yu Wing Sze is an ordinarily
resident in Hong Kong. Each of the Authorized Representatives will be available to meet
with the Stock Exchange in Hong Kong within a reasonable time frame upon the request
of the Stock Exchange and will be readily contactable by telephone and email. Each of
the Authorized Representatives is authori zed by our Board to communicate on behalf of
our Company with the Stock Exchange. Our Company has been registered as a non-Hong
Kong company under Part 16 of the Companies Ordinance, and Ms. Yu Wing Sze has
been authorized to accept service of legal process and notice in Hong Kong on behalf of
our Company;
. each of the Authorized Representatives has means to contact all members of our Board
(including the independent non-executive Directors) and the senior management team
promptly at all times as and when the Stoc k Exchange wishes to contact them or any of
them for any matters. To enhance the communication between the Stock Exchange, the
Authorized Representatives and our Directors, our Company will implement a number of
policies whereby (i) each Director shall pr ovide his/her mobile phone numbers and email
addresses to the Authorized Representatives; (ii) in the event that such Director expects
to travel and be out of office, he/she shall provide the phone number of the place of his/
her accommodation to the Authorized Representatives; and (iii) all our Directors and
WAIVERS FROM STRICT COMPLIANCE WITH THE LISTING RULES
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Authorized Representatives will provide their respective mobile phone numbers and
email addresses to the Stock Exchange. We s hall promptly inform the Stock Exchange of
any changes to the contact details of the Authorized Representatives and our Directors;
. Rainbow Capital (HK) Limited has been appointed as our Company ’s compliance
advisor, pursuant to Rule 3A.19 of the Listing Rules, to provide our Company with
professional advice on continuing obligati ons under the Listing Rules, and to act at all
times, in addition to the two Authori zed Representatives, as our Company ’s additional
channel of communication with the Stock Exchange for the period commencing on the
Listing Date and ending on the date on which our Company complies with Rule 13.46 of
the Listing Rules and publishes its annual re port in respect of its first full financial year
commencing after the Listing Date. The cont act person of the compliance advisor will be
fully available to answer enquiries from the Stock Exchange;
. each of our Directors (including independent non-executive Directors) who is not
ordinarily resident in Hong Kong has confirmed that he/she possesses or can apply for
valid travel documents to visit Hong Kong and would be able to meet with the Stock
Exchange in Hong Kong upon reasonable notice; and
. our Company will also appoint other professional advisors (including its legal advisors in
Hong Kong) after the Listing to assist our Company in addressing any enquiries which
may be raised by the Stock Exchange and to ensure that there will be prompt and
effective communication with the Stock Exchange.
APPOINTMENT OF JOINT COMPANY SECRETARIES
Pursuant to Rules 3.28 and 8.17 of the Listing Rules, we must appoint a company secretary
who, by virtue of his/her academic or professional q ualifications or relevant experience, is, in the
opinion of the Stock Exchange, capable of discharging the functions of the company secretary. Note
1t oR u l e3 . 2 8o ft h eL i s t i n gR u l e sf u r t h e rp r o vides that the Stock Exchange considers the
following academic or profession al 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); and
(c) a certified public accountant (as defined in the Professional Accountants Ordinance).
Note 2 to Rule 3.28 of the Listing Rules provides that, in assessing ‘‘relevant experience ’’, the
Stock Exchange will consider the individual ’s:
(i) length of employment with the issuer and other issuers and the roles he/she played;
(ii) familiarity with the Listing Rules and other relevant law and regulations including the
Securities and Futures Ordinance, Companies Ordinance, the Companies (Winding Up
and Miscellaneous Provisions) Ordinance and the Takeovers Code;
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(iii) relevant training taken and/or to be take n in addition to the minimum requirements under
Rule 3.29 of the Listing Rules; and
(iv) professional qualifications in other jurisdictions.
Our Company has appointed Mr. Wang Zegang as one of the joint company secretaries as Mr.
Wang has extensive experience in board and corporate management matters and has been assisting
the chairman of our Board in handling these matters for years. However, Mr. Wang Zegang
presently does not possess any of the qualifications under Rules 3.28 and 8.17 of the Listing Rules,
thus may not be able to fulfill the requirements of the Listing Rules. Therefore, we have appointed
Ms. Yu Wing Sze, an associate member of both The Hong Kong Chartered Governance Institute
and The Chartered Governance Institute, who fully meets the requirements stipulated under Rules
3.28 and 8.17 of the Listing Rules to act as the other joint company secretary. See ‘‘Directors,
Supervisors and Senior Management — Joint Company Secretaries ’’in this prospectus for details of
Mr. Wang Zegang ’s and Ms. Yu Wing Sze’ s experience. Ms. Yu will provide assistance to Mr.
Wang for an initial period of three years from the Listing Date to enable Mr. Wang to acquire the
‘‘relevant experience ’’under Note 2 to Rule 3.28 of the Listing Rules so as to fully comply with
the requirements set forth under Rules 3.28 and 8.17 of the Listing Rules. Specifically, Ms. Yu will
(i) communicate regularly with Mr. Wang on matters relating to corporate governance, the Listing
Rules and other laws and regulations which are relevant to our Company and its business; (ii)
arrange for trainings by the legal advisers of our Company, if needed, to Mr. Wang on updates of
the Listing Rules and other applicable Hong Kong regulatory requirements; and (iii) assist Mr.
Wang to meet the disclosure requirements under the Listing Rules, make filing(s) with the Registrar
of Companies and other matters which are incidental to the duties of a company secretary of a
listed company.
Both the compliance advisor and the Hong Kong legal advisors of our Company will assist
Mr. Wang in relation to Hong Kong corporate gove rnance practices and regulatory compliance,
ongoing compliance obligations under the Listing Rules and the applicable laws and regulations as
and when required. In addition, Mr. Wang will endeavor to comply with the requirement under
Rule 3.29 of the Listing Rules by attending annually not less than 15 hours of relevant professional
trainings and familiarize himself with the Listing Rules and duties required of a company secretary
of a PRC issuer listed on the Stock Exchange.
We have applied to the Stock Exchange for, and the Stock Exchange has granted, a waiver
from strict compliance with the requirements o f Rules 3.28 and 8.17 of the Listing Rules. The
waiver is valid for an initial period of three years from the Listing Date (the ‘‘Waiver Period ’’),
and is granted on the conditions that (i) Mr. Wang must be assisted by Ms. Yu, who possesses the
qualifications and experience as required under Rule 3.28 of the Listing Rules and is appointed as a
joint company secretary throughout the Waiver Period; and (ii) the waiver will be revoked
immediately if there are material breaches of the Listing Rules by our Company pursuant to chapter
3.10 of the Guide For New Listing Applicants.
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Before the expiration of the initial three-year period, the qualifications of Mr. Wang will be
re-evaluated to determine whether the requirements as stipulated in Rules 3.28 and 8.17 of the
Listing Rules can be satisfied and whether the ne ed for on-going assistance will continue. It is
expected that Mr. Wang will be able to fulfill all the requirements stipulated at the end of the initial
three-year period.
WAIVER FROM STRICT COMPLIANCE WITH RULE 10.04 OF AND CONSENT UNDER
PARAGRAPH 5(2) OF APPENDIX F1 OF THE LISTING RULES IN RESPECT OF
SUBSCRIPTIONS OF OFFER SHARES BY A CLOSE ASSOCIATE OF AN EXISTING
SHAREHOLDER AS CORNERSTONE INVESTOR
Rule 10.04 of the Listing Rules provides that a person who is an existing shareholder of the
issuer may only subscribe for or purchase any securi ties for which listing is sought which are being
marketed by or on behalf of a new applicant either in his or its own name or through nominees if
the conditions in Rules 10.03(1) and (2) of the Listi ng Rules are fulfilled. The conditions in Rules
10.03(1) and (2) of the Listing Rules are that (a) no securities are offered to the existing
shareholders on a preferential basis and no preferential treatment is given to them in the allocation
of the securities; and (b) the minimum prescribe d percentage of public shareholders required by
Rule 8.08(1) of the Listing Rules is achieved.
Paragraph 5(2) of Appendix F1 to the Listing Rules provides that, unless with the prior
written consent of the Stock Exchange, no allocations will be permitted to directors or existing
shareholders of the applicant or their close associates, whether in their own names or through
nominees unless the conditions set out in Rules 10. 03 and 10.04 of the Listing Rules are fulfilled.
Chapter 4.15 of the Guide for New Listing Applicants provides that the Stock Exchange will
consider giving consent and granting waiver fro m Rule 10.04 of the Listing Rules to an applicant ’s
existing shareholders or their close associates to participate in an initial public offering if any actual
or perceived preferential treatment arising from their ability to influence the applicant during the
allocation process can be addressed.
As further described in the section headed ‘‘Cornerstone Investors ’’, Tianjin Haikai Xinchuang
is an existing Shareholder. Tianjin Haikai Xinc huang is a wholly owned subsidiary of Tianjin
Haitai Capital, which is, therefore, a close associ ate of Tianjin Haikai Xinchuang. Tianjin Haitai
Capital has entered into a cornerstone investmen t agreement with the Company to participate in the
Global Offering as a cornerstone investor through its wholly owned subsidiary, HiTai (Hong Kong)
Limited. For further details of the cornerston e investment, please refer to the section headed
‘‘Cornerstone Investors ’’.
We have applied to the Stock Exchange for, and the Stock Exchange has granted us, a waiver
from strict compliance with the requirements under Rule 10.04 of, and consent under paragraph
5(2) of Appendix F1 to, the Listing Rules to allow Tianjin Haitai Capital to participate in the
Global Offering as a cornerstone investor , subject to the following conditions:
(i) Tianjin Haikai Xinchuang is interested in less than 5% of the voting rights of the
Company before the Global Offering;
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(ii) each of Tianjin Haikai Xinchuang, Tianjin Haitai Capital and HiTai (Hong Kong)
Limited is not a core connected person of the Company or a close associate of a core
connected person;
(iii) each of Tianjin Haikai Xinchuang, Tianjin Haitai Capital and HiTai (Hong Kong)
Limited does not have the power to appoint directors or any other special rights;
(iv) the allocation of H Shares to Tianjin Haitai Capital or HiTai (Hong Kong) Limited will
not affect the Company ’s ability to satisfy the public float requirement of Rule 8.08 of
the Listing Rules;
(v) no preferential treatment has been, nor will be, given to Tianjin Haikai Xinchuang or
Tianjin Haitai Capital or HiTai (Hong Kong) Limited or their respective close associates
in any allocation in the placing tranche, other than the assured entitlement for a
cornerstone investor following the principles set out in Chapter 4.15 of the Guide for
New Listing Applicants;
(vi) the cornerstone investment agreement doe s not contain any material term which is more
favorable to Tianjin Haitai Capital or HiTai (Hong Kong) Limited and/or their respective
close associates than those in other cornerstone invest ment agreements;
(vii) the Sole Sponsor confirms to the Stock Exchange in writing that (i) Tianjin Haikai
Xinchuang is interested in less than 5% of the voting rights of the Company before the
Global Offering; (ii) each of Tianjin Haikai X inchuang, Tianjin Haitai Capital and HiTai
(Hong Kong) Limited is not a core connected person of the Company or a close associate
of a core connected person; (iii) each of Tianjin Haikai Xinchuang, Tianjin Haitai Capital
and HiTai (Hong Kong) Limited does not have the power to appoint directors or any
other special rights; (iv) the allocation of H Shares to Tianjin Haitai Capital or HiTai
(Hong Kong) Limited will not affect the Company ’s ability to satisfy the public float
requirement of Rule 8.08 of the Listing R ules; (v) the Sole Sponsor has no reason to
believe that Tianjin Haikai Xinchuang, Tianjin Haitai Capital, HiTai (Hong Kong)
Limited or their respective close associates will receive any preferential treatment in the
allocation of the placing tranche as a cornerstone investor by virtue of their relationship
with the Company other than the preferential treatment of assured entitlement under a
cornerstone investment following the principles set out in Chapter 4.15 of the Guide For
New Listing Applicants, and details of the allocation will be disclosed in the Company ’s
prospectus and allotment results announcement;
(viii) the Sponsor-Overall Coordinator confirm s to the Stock Exchange that no preferential
treatment has been, nor will be, given to Ti anjin Haikai Xinchuang or Tianjin Haitai
Capital or HiTai (Hong Kong) Limited or thei r respective close associates by virtue of
their relationship with the Company in any allocation in the placing tranche, other than
the preferential treatment of assured entit lement under the cornerstone investment
following the principles set out in Chapter 4.15 of the Listing Guide;
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(ix) the Company confirms to the Stock Exchange in writing that no preferential treatment
has been, nor will be, given to Tianjin Haikai Xinchuang or Tianjin Haitai Capital or
HiTai (Hong Kong) Limited or their respectiv e close associates in any allocation in the
placing tranche, other than the assured entitlement for a cornerstone investor following
the principles set out in Chapter 4.15 of the Guide for New Listing Applicants; and
(x) the Company confirms that the cornerstone investment agreement does not contain any
material term which is more favorable to Tianjin Haitai Capital or HiTai (Hong Kong)
Limited and/or their respective close asso ciates than those in other cornerstone
investment agreements.
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DIRECTORS ’RESPONSIBILITY FOR THE CONTENTS OF THIS PROSPECTUS
This prospectus, for which our Directors (including any proposed Director who is named as
such in this prospectus) collectively and individuall y accept full responsibility, includes particulars
given in compliance with the Companies (Wind ing Up and Miscellaneous Provisions) Ordinance,
the Securities and Futures (Stock Market List ing) Rules of (Chapter 571V of the Laws of Hong
Kong) and the Listing Rules for the purpose of giving information to the public with regard to us.
Our Directors (including any proposed Director who is named as such in this prospectus), having
made all reasonable enquiries, confirm that to the best of their knowledge and belief that 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.
FILINGS AND APPROVALS
Our filing procedures with the CSRC for the Global Offering and the application to list the H
Shares on the Stock Exchange were completed on January 19, 2024. In accepting such filing, the
CSRC accepts no responsibility for the value of or income from the investment in our H Shares or
for the authenticity, accuracy or completeness o f any of the statements made or opinions expressed
in this prospectus or in other filing materials. As advised by our PRC Legal Advisors, our Company
has obtained all necessary approvals and author izations in the PRC in relation to the Global
Offering and the Listing as of the Latest Practicable Date.
THE GLOBAL OFFERING AND THIS PROSPECTUS
This prospectus is published solely in connect ion with the Hong Kong Public Offering, which
form part of the Global Offering. For applicants under the Hong Kong Public Offering, this
prospectus contains all the terms and conditions of the Hong Kong Public Offering.
The Hong Kong Offer Shares are offered solely o n the basis of the information contained and
the representations made in this prospectus an d on the terms and subject to the conditions set out
herein and therein. No person is authorized in connection with the Global Offering to give any
information or to make any representation not contained in this prospectus, and any information or
representation not contained herein and therein must not be relied upon as having been authorized
by the Company, the Sole Sponsor, the Sponsor-Overall Coordinator, the Sole Global Coordinator,
the Joint Bookrunners, the Joint Lead Managers, the Capital Market Intermediaries, any
Underwriter, any of their respective directors, officers, employees, agents, representatives or
advisers or any other person involved in the Global Offering.
Neither the delivery of this prospectus nor any offering, subscription, acquisition, sale or
delivery made in connection with the H Shares shall, under any circumstances, constitute a
representation that there has been no change or de velopment 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 such information.
INFORMATION ABOUT THIS PROSPECTUS AND THE GLOBAL OFFERING
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UNDERWRITING
The Global Offering comprises the Hong Kong Pu blic Offering of initially 4,395,800 Hong
Kong Offer Shares and the International Offering of initially 39,561,000 International Offer Shares,
subject, in each case, to adjustment on the basis as described in the section headed ‘‘Structure of
the Global Offering’’ and, in case of the International Offering , additionally to any exercise of the
Over-allotment Option.
The Listing is sponsored by the Sponsor. The Global Offering is managed by the Sponsor-
Overall Coordinator. 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 the
Sponsor-Overall Coordinator (for itself and on behalf of the Hong Kong Underwriters) and the
Company agreeing on the Offer Price on or before t he Price Determination Date. An International
Underwriting Agreement relating to the International Offering is expected to be entered into on or
about the Price Determination Date, subject to the Company and the Sponsor-Overall Coordinator
(for itself and on behalf of the International Underwriters) agreeing on the Offer Price.
We expect that the Offer Price will be fixed by agreement among the Company and the
Sponsor-Overall Coordinator (for itself and on behalf of the Hong Kong Underwriters) on the Price
Determination Date, which is expected to be on or around Wednesday, November 27, 2024 and in
any event no later than 12:00 noon on Wednesday, November 27, 2024. If, for whatever reason, the
Offer Price is not agreed between the Sponsor-Overall Coordinator (for itself and on behalf of the
Hong Kong Underwriters) and the Company on or before the Price Determination Date, the Global
Offering will not become unconditional and will lapse immediately. Further information about the
Underwriters and the underwriting arrangements is set out in the section headed ‘‘Underwriting’’.
RESTRICTIONS ON THE OFFER AND SALE OF THE OFFER SHARES
Each person acquiring the Hong Kong Offer Shares under the Hong Kong Public Offering will
be required to, or be deemed by his/her acquisition of Offer Shares to, confirm that he/she is aware
of the restrictions on offers and sales of the Offer Shares described in this prospectus.
No action has been taken to permit a public offering of the Offer Shares in any jurisdictions
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 offering an d sales 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. In particular, the Offer Shares have not been
offered and sold, and will not be offered or sold, directly or indirectly in the PRC.
INFORMATION ABOUT THIS PROSPECTUS AND THE GLOBAL OFFERING
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APPLICATION FOR LISTING ON THE STOCK EXCHANGE
We have applied to the Listing Committee for the listing of, and permission to deal in, the H
Shares in issue and to be issued pursuant to the Gl obal Offering (including the H Shares which may
be issued pursuant to the exercise of the Over-allotment Option).
No part of the H Shares or Domestic Shares of the Company is listed or dealt on any other
stock exchange and no such listing or permission to list is being or is proposed to be sought in the
near future.
COMMENCEMENT OF DEALINGS IN THE H SHARES
Dealings in the H Shares on the Stock Exchange are expected to commence at 9:00 a.m. on
Friday, November 29, 2024. The H Shares will be traded in board lots of 200 H Shares each. The
stock code of the H Shares is 2585.
H SHARES WILL BE ELIGIBL E FOR ADMISSION INTO CCASS
Subject to the granting of the listing of, and permission to deal in, the H Shares on the Stock
Exchange and our compliance with the stock admission requirements of HKSCC, the H Shares will
be accepted as eligible securities by HKSCC for de posit, clearance and settlement in CCASS with
effect from the Listing Date or any other date as determined by HKSCC. Settl ement of transactions
between participants of the Stock Exchange is required to take place in CCASS on the second
settlement day after any trading day. All activi ties under CCASS are subject to the General Rules
of HKSCC and the HKSCC Operational Procedures in effect from time to time. Investors should
seek the advice of their stockbroker or other professional advisers for the details of the settlement
arrangements as such arrangements may affect their rights and interests. All necessary arrangements
have been made for the H Shares to be admitted into CCASS.
H SHARE REGISTER AND STAMP DUTY
All of the H Shares issued pursuant to applications made in the Global Offering will be
registered on our H Share register to be maintained in Hong Kong by our H Share Registrar,
Computershare Hong Kong Investor Services Limi ted. Our principal register of members will be
maintained by us at our headquarters in the PRC.
Dealings in the H Shares registered on our H Share register 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
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REGISTRATION OF SUBSCRIPTION, PURCHASE AND TRANSFER OF H SHARES
We have instructed our H Share Registrar, and our H Share Registrar has agreed, not to
register the subscription, purchase or transfer of any H Shares in the name of any particular holder
unless and until such holder delivers a signed form to our H Share Registrar in respect of those H
Shares bearing statements to the effect that the holder:
. agrees with us and each of our Shareholders , and we agree with each Shareholder, to
observe and comply with the Companies Ordinance, the Companies (Winding Up and
Miscellaneous Provisions) Ordinance, the PRC Company Law and our Articles of
Association;
. agrees with us, each of our Shareholders, Directors, Supervisors, managers and officers,
and we, acting for ourselves and for each of our Directors, Supervisors, managers and
officers agree with each of our Shareholders, to refer all differences and claims arising
from our Articles of Association or any rights or obligations conferred or imposed by the
PRC Company Law or other relevant laws and adm inistrative regulations concerning our
affairs to arbitration in accordance with our Articles of Association, and any reference to
arbitration shall be deemed to authorize the arbitration tribunal to conduct hearings in
open session and to publish its award, which shall be final and conclusive. For further
details, see ‘‘Appendix V — Summary of Principal Laws and Regulations’’ and
‘‘Appendix VI — Summary of Articles of Association ’’in this prospectus;
. agrees with us and each of our Shareholders that the H Shares are freely transferable by
the holders thereof according to our Articles of Association; and
. authorizes us to enter into a contract on his or her behalf with each of our Directors,
Supervisors, managers and officers whereby s uch Directors, Supervisors, managers and
officers undertake to observe and comply with their obligations to our Shareholders as
stipulated in our Articles of Association.
Persons applying for or purchasing H Shares under the Global Offering are deemed, by their
making an application or purchase, to have represented that they are not close associates (as such
term is defined in the Listing Rules) of any of the Directors or Supervisors of the Company or an
existing Shareholder of the Company or a nominee of any of the foregoing.
DIVIDENDS PAYABLE TO HOLDERS OF H SHARES
Unless determined otherwise by our Company, dividends payable in Hong Kong dollars in
respect of H Shares will be paid to the Shareholders as recorded in our H Share register, and sent
by ordinary post, at the Shareholders’ own risk, to the registered address of each Shareholder.
INFORMATION ABOUT THIS PROSPECTUS AND THE GLOBAL OFFERING
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COMPLIANCE WITH THE LISTING RULES
We will comply with applicable laws and regulations in Hong Kong (including the Listing
Rules) and any other undertakings which have been given in favor of the Stock Exchange from time
to time. If the Listing Committee finds that there has been a breach by our Group of the Listing
Rules or such other undertakings which may have given in favor of the Stock Exchange form time
to time, the Listing Committee may instigate cancelation or disciplinary proceedings in accordance
with the Listing Rules.
PROFESSIONAL TAX ADVICE RECOMMENDED
If you are unsure about the taxation implications of subscribing for, purchasing, holding or
disposing of, and dealing in, our H Shares or exercise any rights attached to them, you should
consult an expert.
We emphasize that none of the Sole Sponsor, th e Sponsor-Overall Coordinator, the Sole
Global Coordinator, the Joint Bookrunners, the Joint Lead Managers, the Capital Market
Intermediaries, the Underwriters, or us, any of our or their respective directors, officers or any
other person or party involved in the Global Offering accepts responsibility for any tax effects on,
or liability of, any person resulting from the subscription for, purchase, holding, disposition of, or
dealing in, the H Shares or the exercise of any rights in relation to the H Shares.
STABILIZATION AND OVER-ALLOTMENT
Further details with respect to stabilization and the Over-allotment Option are set out in the
section headed ‘‘Structure of the Global Offering ’’.
INFORMATION ON THE CONVERSION OF UNLISTED SHARES INTO H SHARES
Our Company has applied for conversion of Unlisted Shares into H Shares, which involves
24,306,666 Unlisted Shares held by six existing Shareholders. See ‘‘History, Development and
Corporate Structure ’’ and ‘‘Share Capital’’ for details of our existing Shareholders and their
respective interests in our Company and relevant procedures for the conversion of Unlisted Shares
into H Shares. Such H Shares to be converted from Unlisted Shares are restricted from trading for a
period of one year after the Listing. The conversion of Unlisted Shares into H Shares has been
approved by the CSRC on January 17, 2024 and June 28, 2024 and is still subject to approval by
the Stock Exchange.
PROCEDURE FOR APPLICATION
The application procedure for the Hong Kon g Offer Shares is set out in the section headed
‘‘How to Apply for Hong Kong Offer Shares ’’.
STRUCTURE OF THE GLOBAL OFFERING
Details of the structure of the Global Offering, including its conditions, and the Over-
allotment Option, are set out in the section headed ‘‘Structure of the Global Offering ’’.
INFORMATION ABOUT THIS PROSPECTUS AND THE GLOBAL OFFERING
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CONDITIONS OF THE HONG KONG PUBLIC OFFERING
Details of the conditions of the Hong Kong Public Offering are set out in the section headed
‘‘Structure of the Global Offering ’’.
ROUNDING
Certain amounts and percentages figures included in this prospectus have been subject to
rounding adjustments. Any discrepancies in any table or chart between totals and sums of amounts
listed therein are due to rounding.
LANGUAGE
In the event of any inconsistency between this prospectus and the Chinese translation of this
prospectus, this prospectus prevails. Translat ed English names of Chinese laws and regulations,
governmental authorities, departments, entities (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 translation and for reference only.
EXCHANGE RATE CONVERSION
Solely for your convenience, this prospectus cont ains translations of certain Renminbi amounts
into Hong Kong dollar and of Renminbi amounts into US dollars at specified rates. Unless
indicated otherwise, the translation of Renminbi into Hong Kong dollars and of Renminbi into US
dollars, and vice versa, in this prospectus was made at the following rates:
RMB0.9255 to HK$1.00.
HK$7.7784 to US$1.00.
No representations are made that any amoun t in Renminbi, Hong Kong dollars or US dollars
can be or could have been at the relevant dates converted at the above rates or any other rates or at
all.
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PARTIES INVOLVED IN THE GLOBAL OFFERING
Directors
Name Address Nationality
Executive Directors
Mr. Wang Zhongshan
(王忠善先生)
Room 301, Unit 3, Building 7
No. 424 Heng An Street
Changle County, Shandong Province
PRC
Chinese
Ms. Zhang Xiuqin
(張秀芹女士)
Room 301, Unit 3, Building 7
No. 424 Heng An Street
Changle County, Shandong Province
PRC
Chinese
Ms. Jiang Liying
(姜麗英女士)
Room 202, Unit 2
No. 34 Jinkou Second Road, Shinan District
Qingdao City, Shandong Province
PRC
Chinese
Mr. Wang Zegang
(王澤鋼先生)
No. 8, Huatian Road
Huayuan Industrial Zone, Binhai New District
Tianjin City
PRC
Chinese
Independent Non-
executive Directors
Mr. Wang Gongyong
(王貢勇先生)
Building 3, Hengda Dijing, Wenhua East Road
Jinan City, Shandong Province
PRC
Chinese
Mr. Sha Nali
(沙拿利先生)
802, Unit 3, Building 2, No. 16, Neibei Small
Street, Dongzhimen, Dongcheng District
Beijing
PRC
Chinese
Mr. Huang Fangliang
(黃方亮先生)
2-1-903, District 1, Sunshine Shuncheng
Shizhong District
Jinan City, Shandong Province
PRC
Chinese
Mr. Bai Xianyue
(白顯月先生)
Room 550, 5/F, 8 Degrees Harbour Plaza
199 Kowloon City Road
To Kwa Wan, Kowloon
Hong Kong
Chinese
DIRECTORS, SUPERVISORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING
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Supervisors
Name Address Nationality
Mr. Zhang Xin
(張鑫先生)
20th Floor, East District, Changsheng Phase II
Changle County, Shandong Province
PRC
Chinese
Mr. Li Hu (李 虎先生) No. 5417, Fushou West Street, Weicheng District
Weifang City, Shandong Province
PRC
Chinese
Mr. Wang Yanpeng
(王艷鵬先生)
Xintiandi West District, Gushan Street
Changle County, Weifang City, Shandong
Province
PRC
Chinese
See the section headed ‘‘Directors, Supervisors and Senior Management ’’in this prospectus for
further details.
DIRECTORS, SUPERVISORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING
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PARTIES INVOLVED IN THE GLOBAL OFFERING
Sole Sponsor CITIC Securities (Hong Kong) Limited
18/F, One Pacific Place
88 Queensway
Hong Kong
Sponsor-Overall Coordinator and
Sole Overall Coordinator
CLSA Limited
18/F, One Pacific Place
88 Queensway
Hong Kong
Sole Global Coordinator CLSA Limited
18/F, One Pacific Place
88 Queensway
Hong Kong
Joint Bookrunners ABCI Capital Limited
11/F, Agricultural Bank of China Tower
50 Connaught Road Central
Hong Kong
China Everbright Securities (HK) Limited
33/F Everbright Centre
108 Gloucester Road
Wan Chai
Hong Kong
Futu Securities International (Hong Kong) Limited
34/F, United Centre
No. 95 Queensway
Admiralty
Hong Kong
ICBC International Securities Limited
37/F ICBC Tower
3 Garden Road
Hong Kong
TradeGo Markets Limited
Room 3405, West Tower, Shun Tak Centre
168–200 Connaught Road
Central
Hong Kong
DIRECTORS, SUPERVISORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING
– 107 –


--- page 118 ---
Joint Lead Managers ABCI Securities Company Limited
10/F, Agricultural Bank of China Tower
50 Connaught Road Central
Hong Kong
China Everbright Securities (HK) Limited
33/F Everbright Centre
108 Gloucester Road
Wan Chai
Hong Kong
Futu Securities International (Hong Kong) Limited
34/F, United Centre
No. 95 Queensway
Admiralty
Hong Kong
ICBC International Securities Limited
37/F ICBC Tower
3 Garden Road
Hong Kong
TradeGo Markets Limited
Room 3405, West Tower, Shun Tak Centre
168–200 Connaught Road
Central
Hong Kong
Capital Market Intermediaries ABCI Capital Limited
11/F, Agricultural Bank of China Tower
50 Connaught Road Central
Hong Kong
ABCI Securities Company Limited
10/F, Agricultural Bank of China Tower
50 Connaught Road Central
Hong Kong
DIRECTORS, SUPERVISORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING
– 108 –


--- page 119 ---
China Everbright Securities (HK) Limited
33/F Everbright Centre
108 Gloucester Road
Wan Chai
Hong Kong
Futu Securities International (Hong Kong) Limited
34/F, United Centre
No. 95 Queensway
Admiralty
Hong Kong
ICBC International Securities Limited
37/F ICBC Tower
3 Garden Road
Hong Kong
TradeGo Markets Limited
Room 3405, West Tower, Shun Tak Centre
168–200 Connaught Road
Central
Hong Kong
Legal Advisors to our Company As to Hong Kong law
Jia Yuan Law Office
7/F and 17/F
No. 238 Des Voeux Road Central
Sheung Wan
Hong Kong
As to PRC law
Jia Yuan Law Offices
F408, Ocean Plaza
158 Fuxing Men Nei Street, Xicheng District
Beijing, PRC
DIRECTORS, SUPERVISORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING
– 109 –


--- page 120 ---
Legal Advisors to the Sole Sponsor
and the Underwriters
As to Hong Kong law
Linklaters
11/F, Alexandra House
Chater Road
Central
Hong Kong
As to PRC law
Jingtian & Gongcheng
34/F, Tower 3, China Central Place
77 Jianguo Road
Beijing 100025
Beijing, PRC
Independent Auditor and Reporting
Accountants
Deloitte Touche Tohmatsu
Certified Public Accountants
Registered Public Interest Entity Auditor
35/F, One Pacific Place
88 Queensway
Hong Kong
Industry Consultant Frost & Sulliva n (Beijing) Inc., Shanghai Branch
Co.
2504 Wheelock Square
1717 Nanjing West Road
Shanghai 200040
Shanghai, PRC
Compliance Advisor Rainbow Capital (HK) Limited
Room 5B, 12/F, Tung Ning Building
No. 2 Hillier Street, Sheung Wan
Hong Kong
Receiving Bank China CITIC Bank International Limited
80 Floor, International Commerce Centre
1 Austin Road West, Kowloon
Hong Kong
DIRECTORS, SUPERVISORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING
– 110 –


--- page 121 ---
Property Valuer Cushman & Wakefield Limited
27/F
One Island East
Taikoo Place
18 Westlands Road
Quarry Bay
Hong Kong
DIRECTORS, SUPERVISORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING
– 111 –


--- page 122 ---
Registered Office No. 15 Ziyuan Road
Huayuan Industrial Zone
Binhai Hi-Tech District
Tianjin, PRC
Principal Places of Business in the PRC No. 15 Ziyuan Road
Huayuan Industrial Zone
Binhai Hi-Tech District
Tianjin, PRC
Mokingran Town
1998 North Three Mile Road
Economic and Technological Development Zone
Changle County, Weifang City
Shandong Province, PRC
Principal Place of Business in Hong
Kong
31/F., Tower Two, Times Square, 1 Matheson Street
Causeway Bay
Hong Kong
Company ’s Website
http://www.mokingran.com
(This website and the information contained in the
website does not form part of this prospectus.)
Joint Company Secretaries Mr. Wang Zegang
No. 8, Huatian Road, Huayuan Industrial Zone
Binhai New District
Tianjin City
PRC
Ms. Yu Wing Sze
31/F., Tower Two, Times Square, 1 Matheson Street
Causeway Bay
Hong Kong
CORPORATE INFORMATION
– 112 –


--- page 123 ---
Authorized Representatives Mr. Wang Zegang
No. 8, Huatian Road
Huayuan Industrial Zone, Binhai New District
Tianjin City
PRC
Ms. Yu Wing Sze
31/F., Tower Two, Times Square, 1 Matheson Street
Causeway Bay
Hong Kong
Strategy Committee Mr. Wang Zhongshan (Chairman)
Ms. Zhang Xiuqin
Mr. Sha Nali
Mr. Wang Zegang
Ms. Jiang Liying
Audit Committee Mr. Wang Gongyong (Chairman)
Mr. Huang Fangliang
Mr. Bai Xianyue
Remuneration and Appraisal
Committee
Mr. Huang Fangliang (Chairman)
Mr. Wang Gongyong
Ms. Jiang Liying
Nomination Committee Mr. Sha Nali (Chairman)
Mr. Wang Zegang
Mr. Huang Fangliang
H Share Registrar Computershare Hong Kong Investor Services Limited
Shops 1712 –1716
17th Floor, Hopewell Centre
183 Queen’s Road East
Wan Chai
Hong Kong
CORPORATE INFORMATION
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--- page 124 ---
Principal Banks Industrial and Commercial Bank of
China Limited, Changle Branch
376 Limin Street, Changle County
Weifang City, Shandong Province
PRC
Agricultural Bank of China Limited,
Weifang Branch
1777 Hongyang Street, Changle County
Weifang City, Shandong Province
PRC
CORPORATE INFORMATION
– 114 –


--- page 125 ---
The information and statistics set out in this section and other sections of this prospectus
were extracted from the industry report commissioned by us and independently prepared by
Frost & Sullivan, in connection with the Global Offering. In addition, certain information is
based on, or derived or extracted from, amon g other sources, publications of different
government authorities and intern al organizations, marke t statistics providers, communications
with various PRC government agencies or other independent third-party sources unless
otherwise indicated. We believe that the sources of such information and statistics are
appropriate and have taken reasonable care in e xtracting and reproducing such information.
We have no reason to believe that such informat ion and statistics are false or misleading or
that any fact has been omitted that would render such information and statistics false or
misleading. The information and statistics from official government sources have not been
independently verified by our Company, the Sole Sponsor, Sole Global Coordinator, Joint
Bookrunners, Joint Lead Managers, and the Underwriters, or any of their respective directors,
advisers and affiliates, or any other person or parties invol ved in the Global Offering, and no
representation is given as to their accuracy.
SOURCE OF INFORMATION
In connection with the Global Offering, we have engaged Frost & Sullivan to conduct a
detailed analysis and prepare a market research report on the gold jewellery market in the PRC.
Frost & Sullivan is an independent global market research and consulting company which was
founded in 1961 and is based in the U.S.. Services provided by Frost & Sullivan include market
assessments, competit ive benchmarking, and strategic and market planning for a variety of
industries. The agreed fee paid to Frost & Sullivan for the preparation and use of the Frost &
Sullivan Report is RMB350,000. The payment of such amount was not contingent upon our
successful Listing or on the results of the Frost & Sullivan Report. Except for the Frost & Sullivan
Report, we did not commission any other market r esearch report in connection with the Global
Offering. We have included certa in information from the Frost & Sullivan Report in this prospectus
because we believe such information facilitates an understanding of the gold jewellery market for
potential investors. Unless otherwise indicated, market estimates or forecasts in this section
represent Frost & Sullivan ’s view on the future development of the gold jewellery market.
In preparing the Frost & Sullivan Report, Frost & Sullivan has relied on its in-house database,
independent third-party reports, and publicly available data from reputable industry organizations.
Where necessary, Frost & Sullivan contacts com panies operating in the industry to gather and
synthesize information in relat ion to the market, prices, and other relevant information. Frost &
Sullivan has exercised due care in collecting and reviewing the information so collected and
believes that the basic assumptions used in preparing the Frost & Sullivan Re port, including those
used to make future projections, are factual, co rrect, and not misleading. Frost & Sullivan has
independently analysed the information, but the accuracy of the conclusions of its review largely
relies on the accuracy of the information collect ed. In compiling and prepa ring the research, Frost
& Sullivan assumed that the social, economic, and p olitical environments in the relevant markets
are likely to remain stable in the forecast period, which ensures the stable and healthy development
INDUSTRY OVERVIEW
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--- page 126 ---
of the gold jewellery market. In addition, Frost & Sullivan has developed its forecast on the
following bases and assumptions: (i) the economy in the global range is likely to maintain stable
growth in the next decade, and (ii) the gold jewellery market is expected to grow based on the
macroeconomic assumptions of the economy. Frost & Sullivan ’s research may be affected by the
accuracy of these assumptions and the choice of these primary and secondary sources. Except as
otherwise noted, all data and forecasts in this section come from the Frost & Sullivan Report.
OVERVIEW OF JEWELLERY MARKET
Definition and Classification
Jewellery is a precious metal material, natural jade, and artificial jade jewellery processed for
decoration and has a certain value as an artifact or other collections. Jewellery may be appreciated
for its material properties, patterns, or meaningful symbols. Jewellery can be mainly classified into
gold jewellery, jade jewellery, diamond jewellery, silver & platinum jewellery, coloured gemstone
jewellery, pearl jewellery and others by material.
Gold jewellery is jewellery mainly made of gold, including various gold purity level jewellery.
Jade jewellery is jewellery mainly made of jade st ones. Diamond jeweller y is jewellery (usually
made from platinum and K-gold) studded with diamonds. Sliver & platinum jewellery is jewellery
made of sliver or platinum. Others include jewe llery studded with gemstones, and jewellery made
out of or studded with pearls.
Market Size of Jewellery Market in the PRC
Market Size of Jewellery Market in the PRC, by Sales Revenue, 2018 –2028E
580 610 610
720 719
820
919 987 1,047 1,103 1,140
0
200
400
600
800
1,000
1,200
Market Size of Jewellery Market in the PRC
2018-2023CAGR 2023-2028E
2018 2019 2020 2021 2022 2023 2024E 2025E 2026E 2027E 2028E
7.2% 6.8%RMB Billion
Source: Gems & Jewellery Trade Association of China, Frost & Sullivan
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In line with the improvement of the consumption power and the diversification of jewellery
products, jewellery has gradually become a fashion accessory for people ’s daily wear. The jewellery
market in the PRC witnessed steady growth from 2018 to 2023. However, affected by the COVID-
19 pandemic, a large number of offline jewellery retail stores suspended their business, and
jewellery sales have stalled. As a result, the jewellery market size in 2022 witnessed a decline.
Overall, the sales revenue of the PRC jewellery market increased from RMB580 billion in 2018 to
RMB820 billion in 2023, representing a CAGR of 7.2%. Looking forward, due to the growing
purchasing power of PRC citizens, the jewellery market in the PRC is estimated to grow at a
CAGR of 6.8% from 2023 to 2028, reaching a total sales revenue of RMB1,140 billion by the end
of 2028.
Market Size of Jewellery Market in the PRC, Breakdown by Material
Market Size of Jewellery Market in the PRC, Breakdown by Material, 2018 –2028E
100%
53.1%
18.0%
4.0%
5.0%
4.0%
2.9%
13.0%
63.2%
18.3%
0.9%
4.3%
3.8%
2.3%
7.3%
71.1%
16.7%
0.5%
3.4%2.3%
1.7%
4.3%
2.5%
6.0%
3.8%
-21.3%
-4.5%
7.5%
11.0%
2018-2023
CAGR
2018 2023 2028E
Segments
2023-2028E
CAGR
Other
Colored Gemstone
Pearl
Silver & Platinum
Diamond
Jade
Gold
0.1%
-3.3%
2.1%
-4.0%
-3.9%
4.9%
9.4%
Source: Gems & Jewellery Trade Association of China, Frost & Sullivan
Gold jewellery has historically been a Chinese favourite due to its long cultural significance
dating back several thousand years. The sales revenue of the gold jewellery market in 2023 was
RMB518 billion, accounting for 63.2% of the who le jewellery market, and is forecasted to reach
RMB811 billion in 2028, growing at a CAGR of 9.4%.
The jade jewellery market has taken up about 18.3% of the jewellery market, with a market
size of RMB150 billion in 2023. It is expected to reach RMB190.5 billion in 2028, with a CAGR
of 4.9%.
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The diamond jewellery market is the third-largest segment, which took up about 7.3% of the
overall sales revenue in 2023. However, under the huge shock of lab-grown diamonds and the
global economy ’s slowdown, the diamond jewellery market size in the PRC is forecasted to
decrease to RMB49.2 billion in 2028, with a CAGR of (3.9)%.
The market size of silver & platinum jewellery in the PRC has decreased from RMB23.2
billion to RMB7 billion from 2018 to 2023. It is fore casted that the market size will continue to fall
to RMB49.2 billion in 2028, with a CAGR of (3.9)% as the popularity of silver and platinum
continues to decline.
Others, such as pearls and coloured gemstones, only account for a small share of the jewellery
market.
Market Drivers of Jewellery Market in the PRC
Expansion of jewellery consumption in third-tier and lower tier cities: With the continuous
growth of GDP and per capita disposable income in the PRC, consumer purchasing power in third-
tier and lower tier cities has also increased accordingly. In recent years, per capita consumption of
gold jewellery in these cities has risen signi ficantly, from RMB489.7 in 2018 to RMB663.2 in
2023, representing a CAGR of 6.3%, indicates a growing preference and willingness among
consumers to purchase jewelle ry, highlighting the market ’s potential and promising outlook. It is
projected that by 2028, per capita consumption of gold jewellery in third-tier and lower tier cities
will further increase to RMB927.8, with a CAGR of 6.9%, primarily driven by the expansion of
franchised gold jewellery stores in lower-tier cities and ongoing upgrades in consumer spending.
Diversified demands and consumption scenarios: Jewellery has increasingly become a
fashion-centric accessory for daily wear, as con sumers pursue unique and personalized styles. The
evolving aesthetic preferences of consumers, particularly young consumers, have driven a
heightened demand for well-designed and distincti ve jewellery. To fulfill diverse needs, jewellery
companies have intensified their efforts to l aunch new techniques, s uch as heritage gold
craftsmanship and contemporary designs, includi ng collaborations with popular IPs that resonate
with younger audiences. Additionally, the occasions for jewellery consumption have become
increasingly diverse. Beyond traditional events li ke weddings and engagements, self-appreciation
has emerged as an important purchasing driver among customers.
Growth potential of jewellery consumption d riven by increasing purchasing power: Compared
with the per capita consumption of jewellery in the U.S. and the Middle East, the per capita
consumption in China still falls behind. China ’s per capita disposable income is still lower than that
of the U.S. and the Middle East, which indicates great growth potential. With the robust growth of
China’s economy, the market size of jewellery in China is expected to continue to increase,
accompanied by the growth of per capita jewellery consumption.
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Future Trends of Jewellery Market in the PRC
Fierce competition with dominance of leading brands: The jewellery market is highly
competitive, and jewellery companies are extending their industry chains to improve cash flow and
profit margins. Leading jewellery enterprises hold financial, brand, scale, and cost advantages over
smaller competitors, enabling them to operate more e fficiently, offer competitive prices, and invest
heavily in branding, marketing, and product design. As a result, small jewellery production and
processing enterprises are likely to be gradua lly eliminated, leading to increased market
concentration and dominance by leading companies, who can better align with evolving consumer
preferences.
Digitalization of Sales Channels
Digital technologies and the expansion of d iverse sales channels are driving a radical
transformation in how consumers shop for jewell ery, reshaping purchasing habits across the
industry. Online sales have become a key growth area, with the e-commerce share of gold jewelry
revenue climbing from 5.7% in 2018 to 7.2% by 2023. In response, jewellery companies are
increasingly expanding their digital presence through e-commerce platforms, social media, and
personalized shopping experiences to attract a broader audience, particular ly younger consumers.
This digital shift offers consumers greater convenience while enabling brands to engage more
directly with their target customers, positioning the jewellery industry to better adapt to evolving
market demands.
Growing popularity of ‘‘China Chic ’’ for traditional brands: For a long time, foreign
jewellery brands reigned unchallenged in China. Consumers often saw them as a symbol of fashion.
In recent years, China has seen a surge in young consumers ’ interest in domestic brands and
products that incorporate Chinese traditional crafts and culture. The ‘‘China Chic ’’phenomenon has
been warmly embraced by the younger generation in China. With Chinese rising cultural
confidence, traditional Chinese brands will win the jewellery market with the resurgence of
traditional crafts and cultural elements , especially in the gold jewellery market.
Diversified and innovative jeweller y products for younger generation: As Chinese
consumers increasingly pursue personalized jewellery, jewellery products with novel models and
unique cultural connotations will be more popular among consumers. In the future, Chinese
jewellery products will become more innovative, fashionable, and exquisite regarding technological
design, model, and cultural connotation. Moreover, jewellery brands will continue to innovate and
create product differentiation to win the favor of the whole market.
INDUSTRY OVERVIEW
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OVERVIEW OF GOLD JEWELLERY MARKET
Definition and Classification
Gold jewellery is made of gold as the main ra w material, which can be categorized by gold
purity and technique.
The gold jewellery is classified into Au990, Au999, Au9999, and K-gold jewellery based on
the gold content. Au990 and Au999, with purity level of no less than 990 ‰ and 999‰
respectively, are the most commonly used gold for gold jewellery. Au9999 has the highest gold
fineness, with a gold purity of no less than 999.9 ‰ . Thus, it has a high investment value. However,
the processing technique for manufacturing gold jewellery from Au9999 is considerably strict. K
gold is an alloy formed by fusion of gold and other metals. The purity is no less than 375 ‰ and no
more than 916‰ .
Regarding the techniques, gold jewellery can be categorized into regular, heritage, 3D/5D, and
5G gold jewellery. Heritage gold jewelry refers to pure gold jewelry that combines modern designs
with classic Chinese culture, which applies at least two traditional Chinese handmade gold crafting
techniques. 3D gold refers to gold produced using electroforming techniques, which are
characterized by high hardness. 5D gold refers to g old of high content, high hardness (not less than
100HV), high gloss, strong wear resistance, and s trong deformation resistance. 5G gold refers to
gold with a surface hardness of not less than 60HV (under a loading force of 200gf for 15 seconds).
Value Chain Analysis
DownstreamMidstreamUpstream
Raw materials sourcing
Gold trading
Shanghai Gold
Exchange
Gold loans
companies
Branded gold
jewellery company
Gold jewellery
wholesaler
RetailerCommercial
banks
Gold loans
Gold
importing
Gold
mining
Gold
recycling
Gold jewellery
processing
Gold jewellery
sales
Chain stores
Franchise stores
Bank
E-commerce
platforms
...
Gold jewellery processing and
manufacturing companies
Design
Manufacture
Package
requirements
products
Customers
Source: Frost & Sullivan
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The upstream of the gold jewellery industry involves gold mining, gold importing, gold
recycling, gold trading and gold loans. The midstream companies in the gold jewellery industry are
gold jewellery processing and manufacturing companies, which also serves as OEMs for some
branded gold jewellery companies, and as suppliers for gold jewellery wholesalers and retailers.
The downstream of gold jewellery industry is the sa les of gold jewellery, the distribution channel
includes self-operated stores, franchise stores, banks, e-commerce platform and others.
It is common for gold jewellery companies to adopt a franchise network in the industry. The
reasons for using a franchise, which is a type of license that grants franchisees access to a
franchisor’s propriety business knowledge, processes , and trademarks to sell products or services
under the franchisor ’s business name, are that it can help the company to spread risks, adapt to
local market conditions, improve brand awareness , and ensure the consistency of operations across
various stores while rapidly expanding. The concentr ation rate of franchisees in the gold jewellery
market is low, with over tens of thousands of players in the industry. Most of the gold jewellery
franchisees are small and medium-sized companies or individually-owned businesses, concentrated
in provinces such as Guangdong, Shandong, Jiangsu, Fujian, and Zhejiang.
Market Size of Gold Jewellery Market in the PRC (by Processing Volume)
Processing Volume of Gold Jewellery in the PRC, 2018– 2028E
749.4
685.3
510.0
726.0 683.6 729.4
772.4 808.7 841.1 871.4 898.4
0
100
200
300
400
500
600
700
800
900
Processing V olume -0.5% 4.3%
2018-2023CAGR 2023-2028E
2018 2019 2020 2021 2022 2023 2024E 2025E 2026E 2027E 2028E
Ton
Source: China Gold Association, Frost & Sullivan
The processing volume of gold jewellery in the PRC fluctuated in the past few years.
Influenced by the economic downturn and the rising gold price, the processing volume of gold
jewellery decreased from 749.4 tons in 2018 to 685.3 tons in 2019. In 2020, the outbreak of the
pandemic caused the processing volume to slump t o 510.0 tons. The processing volume rebounded
in 2021 since effective control measures taken by the government which led to the fast resume of
the offline manufacturing process. The processing volume dipped again with the resurgence of the
pandemic in 2022. Looking forward, as the government has eased the COVID-19 curbs since the
end of 2022, the market size of the gold jewellery industry in terms of processing volume is
expected to grow at a CAGR of 4.3% and reach 898.4 tons in 2028.
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Market Size of Gold Jewellery Market in the PRC (by Consumption Volume)
The consumption volume of gold jewelry in the PRC exhibited a fluctuating pattern,
decreasing from 736.3 tons in 2018 to 706.5 tons in 2023, with a CAGR of (0.8)% over this period.
This decline was primarily driven by the wide spread impact of the pandemic in 2020 and 2022.
Economic downturn pressures also contributed to the overall weakness in consumption, resulting in
a drop in 2019. However, with consumers ’ growing preference for gold jewelry, the consumption
volume is projected to grow steadily, reaching 898.0 tons by 2028, with a CAGR of 4.9% from
2023 to 2028.
Consumption Volume of Gold Jewelry in the PRC, 2018 –2028E
736.3
676.2
490.6
711.3
654.3
706.5
755.2 795.3 832.6 866.8 898.0
0
100
200
300
400
500
600
700
800
900
Consumption V olume -0.8% 4.9%
2018-2023CAGR 2023-2028E
2018 2019 2020 2021 2022 2023 2024E 2025E 2026E 2027E 2028E
Ton
Source: Gems & Jewelry Trade Association of China, China Gold Association, Frost & Sullivan
Market Size of Gold Jewellery Market and Breakdown by Tiers of City
Market Size of Gold Jewellery Market in the PRC, Breakdown by Tiers of City, in Sales
Revenue, 2018 –2028E
308.0 328.1 334.9
400.3 409.8
518.0
81.1
217.7
120.9
607.1
722.5
669.6
769.5 811.0
53.3
133.4
67.4
53.9
140.8
54.8
73.8
58.7
55.6
142.7
75.7
60.9
62.4
169.3
92.9
75.7
63.9
171.7
95.9
78.3 98.3
94.3
255.4
142.2
115.2
104.0
282.2
156.7
126.7
111.6
305.6
168.9
136.4
119.0
326.4
179.6
144.5
123.9
345.3
189.5
152.3
0
100
200
300
400
500
600
700
800
900
First-tier Cities 8.8% 8.8%
2018-2023CAGR 2023-2028E
Second-tier Cities 10.3% 9.7%
Third-tier Cities 12.4% 9.4%
Fourth and Lower Tier Cities 13.0% 9.2%
2018 2019 2020 2021 2022 2023 2024E 2025E 2026E 2027E 2028E
RMB Billion
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Note: The first-tier cities refer to Shanghai, Beijing, Guangzhou, and Shenzhen. The second-tier cities refer to
Chengdu, Chongqing, Hangzhou, Wuhan, Suzhou, Xi ’an, Nanjing, Changsha, Tianjin, Zhengzhou,
Dongguan, Qingdao, Kunming, Ningbo, Hefei, Foshan, Shenyang, Wuxi, Jinan, Xiamen, Fuzhou, Wenzhou,
Harbin, Shijiazhuang, Dalian, Nanning, Quanzhou, Jinhua, Guiyang, Changzhou, Changchun, Nanchang,
Nantong, Jiaxing, Xuzhou, Huizhou, Taiyuan, Taizhou, Shaoxing, Baoding, Zhongshan, Weifang, Linyi,
Zhuhai, Yantai. The third-tier cities refer to La nzhou, Haikou, Huzhou, Yangzhou, Luoyang, Shantou,
Yancheng, Ganzhou, Tangshan, Urumqi, Jining, Zhenjiang, Langfang, Xianyang, Taizhou, Wuhu, Handan,
Jieyang, Nanyang, Hohhot, Fuyang, Jiangmen, Yinchuan, Zunyi, Huai ’an, Zhangzhou, Guilin, Zibo,
Xinxiang, Lianyungang, Cangzhou, Mianyang, Hengyang, Shangqiu, Heze, Xinyang, Xiangyang, Chuzhou,
Shangrao, Jiujiang, Yichang, Putian, Zhanjiang, Liuzhou, Anqing, Suqian, Zhaoqin, Zhoukou, Xingtai,
Jingzhou, Sanya, Yueyang, Bengbu, Zhumadian, Tai’ an, Chaozhou, Zhuzhou, Weihai, Liu ’an, Changde,
Anyang, Suzhou, Huanggang, Dezhou, Ningde, Liaoc heng, Yichun, Weinan, Qingyuan, Nanchong. The
fourth and lower tier refer to the rest of the other cities.
Source: Frost & Sullivan
The market size of gold jewellery in first-tier cities in terms of sales revenue increased from
RMB53.3 billion in 2018 to RMB81.1 billion in 2023, achieving a CAGR of 8.8%. The sales
revenue of gold jewellery in second-tier cities accounts for the largest proportion, growing at a
CAGR of 10.3% from RMB133.4 billion in 2018 to RM B217.7 billion in 2023. Looking forward,
the continuous enhancement of per capita consumption level will further drive the growth of the
gold jewellery market size in first-tier and second-tier cities, growing at CAGRs of 8.8% and 9.7%
and reaching RMB123.9 billion and RMB345.3 billion in 2028 respectively. Similarly, since the
consumption power in third and fourth-tier cities rises, the leading gold jewellery companies have
been expanding the sales network in the sinking market. Accordingly, the market size of gold
jewellery in third-tier and fourth and lower tier cities have increased rapidly, achieving a CAGR of
12.4% and 13.0% from 2018 to 2023 respectively. Th e gold jewellery market in third-tier cities is
expected to grow at a CAGR of 9.4% and reach RMB189.5 billion in 2028. The market size of gold
jewellery in fourth and lower tier cities is projected to reach RMB152.3 billion in 2028,
representing a CAGR of 9.2% from 2023 to 2028.
Price Trends of Gold in the PRC
International Price Trends of Gold (Au9995), 2018.01 –2024.09
250
300
350
400
450
500
550
600
01/18 07/21 07/2201/21 01/2307/20 07/2301/20 01/2407/19 07/2401/19 09/2407/18 01/22
RMB/g
Au9995
Source: London Bullion Market Association
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International Average Annual Spot Price of Gold (Au9995), 2018 –2024
RMB/g 2018 2019 2020 2021 2022 2023 2024
AU9995 269.9 308.9 392.4 373.1 389.3 439.6 524.7
Note: The 2024 price is the average for the period from January to September.
Source: London Bullion Market Association
Price Trends of Gold (Au9995 and Au9999) in the PRC, 2018.01 –2024.09
250
300
350
400
450
500
550
600
01/18 07/21 07/2201/21 01/2307/20 07/2301/20 01/2407/19 07/2401/19 09/2407/18 01/22
RMB/g
AU9999
Au9995
Source: Shanghai Gold Exchange
Average Annual Spot Price of Gold (Au9995 and Au9999) in the PRC, 2018 –2024
RMB/g 2018 2019 2020 2021 2022 2023 2024
AU9995 270.9 312.4 387.1 374.3 392.0 449.8 536.5
AU9999 271.1 312.7 387.4 374.5 392.2 449.9 537.3
Note: The 2024 price is the average for the period from January to September.
Source: Shanghai Gold Exchange
The gold price in the PRC is positively correlated with the international gold price, and most
of the gold prices at international markets are USD-dominated. From 2018 to 2023 the gold price in
the PRC is generally higher than the international gold price since the domestic market is in supply
shortage and imports a large amount of gold, which adds the cost of physical delivery,
warehousing, local taxation, conversion of local currency to USD, etc., to the spot price. The
average annual spot price for Au9995 in the international market experienced a fluctuating but
generally upward trend, increasing from RMB269.9/g in 2018 to RMB439.6/g in 2023. Due to
various factors including increasing inflationar y pressures and geopolitical uncertainties, the
average annual spot price for Au9995 in the international market rapidly reached RMB586.8/g in
September 2024.
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The average annual spot price for Au9995 in the PRC experienced a general upward trend
which increased from RMB270.9/g in 2018 to RMB449.8/g in 2023 due to several factors,
including the volatility in the global political and economic environment, the strong demand for
gold, particularly with the jewellery industry. Especially in 2020, due to the outbreak of Covid-19,
the international economic environment is fa ced with a lot of uncertainty. Furthermore, the
geopolitical conflict and the rising inflation have pushed up demand for gold to hedge risks and the
spot price hit a record high of RMB449.8/g in 2023. The trend of the average annual spot price for
Au9999 is in line with Au9995 but is slightly higher, growing from RMB271.1/g in 2018 to
RMB449.9/g in 2023. Due to the increasing of gold price in international market, the average
annual spot price for Au9995 and Au9999 in the PRC reached RMB579.7/g and RMB581.8/g in
September 2024, respectively. For gold jewellery co mpanies, the rise in gold p rice indicates that the
inventory value of a gold jewellery company ris es accordingly. In addition, the continuous rise in
the gold price will motivate consumers ’ investment enthusiasm, promoting the demand for gold
jewellery products. Driven by customers ’ ‘‘buy on the upside ’’philosophy for gold, the demand for
gold jewellery is likely to increase with the rising gold price. Hence, gold jewellery manufacturing
companies will receive more orders from eit her retailers or individual traders.
Market Drivers of Gold Jewellery Market in the PRC
Rising younger consumer group: Gold jewellery is trending among millennials and Gen Z
(those born between 1981 and 2012) in the PRC. The proportion of younger consumers, who
possess a stronger willingness to purchase and a g reater demand for well-designed jewellery, is
increasing substantially within the gold jewell ery market, thereby propelling its growth and
evolution. Besides, factors affecting purchasing decisions have changed among younger
generations. An increasing number of younger consu mers buy gold jewellery for self-satisfaction
and daily wearing, rather than just for specific c onsumption scenarios such as children gifting,
family gifting, holiday-related occasions, and wedding purchases.
Upgrade of the consumption in third and lower tier cities: China ’s economic boom over the
past few decades has significantly increased a nnual disposable income per capita, which has
steadily risen from RMB28.2 thousand to RMB39.2 th ousand over the last five years, reflecting a
CAGR of 6.8%, according to the National Bureau of Statistics. As income grows, consumer
spending has also increased, with the consumption structure of Chinese consumers continuously
optimized and upgraded, leading to a steady rise in total spending on luxury items. Notably, the per
capita consumption of gold jewellery in third-t ier and lower tier cities has experienced rapid
growth, with a CAGR of 6.3% from 2018 to 2023, reaching RMB663.2 in 2023. This growth
indicates a heightened preference and readine ss among consumers to buy jewellery, signaling
significant potential for market expansion.
Cultural significance of gold jewellery products: The cultural significance of gold jewellery
is pivotal, as gold has long been regarded as a symbol of good luck and a valuable heirloom,
deeply embedded in the nation ’s cultural heritage. Its esteemed status is particularly evident during
significant life events, such as weddings, festi vals, and celebrations, where it is cherished as a
valuable gift that can be passed down through gen erations. Beyond its traditional role, gold
jewellery also serves as a means of daily self-expression and personal adornment, enhancing
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individual style and confidence. This dual function underscores gold ’s enduring popularity and
cultural relevance in China, driving demand and solidifying its importance in both personal and
family histories.
Increasing demand for gold product investment: Gold jewellery is not only a decorative
accessory but also highly valued by consumers for it s inherent worth, as gold is widely regarded as
a reliable safe-haven asset that protects against th e depreciation of monetary assets. Factors such as
global inflation and geopolitical conflicts have heightened the demand for assets that resist
devaluation and mitigate risks, resulting in an increase in the average annual spot price for Au9995
in the international market from RMB373.1 per gram in 2021 to RMB439.6 per gram in 2023, and
further rising to RMB586.8 per gram by September 2024. Consequently, the gold jewellery markets
with investment features have gained significant popularity, as consumers increasingly seek
products that not only enhance their personal s tyle but also serve as a hedge against economic
uncertainty.
Growth in Gold Recycling: The usage of recycled gold jewellery grow steadily, benefiting
from the economic advantages of utilizing recycl ed precious metals and supportive policies, which
in turn drive the development of the gold jewellery market. Through gold trade-ins, jewellery
companies may acquire raw materials at lower prices, while also providing an attractive option for
consumers to purchase new jewellery. Additionally, the government of Luohu District in Shenzhen,
along with the China Gold Association and other enterprises, established relevant standards,
including the ‘‘Guidelines for Business Operations and Services of Gold Trade-In Enterprises ’’and
the ‘‘Initiative for Compliance in Gold Trade-In Operations ’’ in 2022 and 2023, which set
requirements for the professionalism of service per sonnel and equipment, compliance in operations,
and service processes to regulate gold recycling se rvices, thereby promoting the standardization of
gold jewelry recycling processes and enhancing the convenience of recycling channels.
Future Trends of Gold Jewellery Market in the PRC
More trendy designs and continuous technique enhancement: Gold jewellery is trending
among Generation Z and millennial customers (born between 1981 and 2012), who will become the
majority of gold consumers in the PRC. The cons umption group of gold jewellery is becoming
increasingly younger. Therefore, leading gold jewellery companies are adding more designs or
collaborating with different IPs catering to younger generations ’ preferences. Besides, innovative
designs are closely linked to gold processing techniques. In recent years, emerging gold processing
techniques are gaining popularity in the gold jewe llery market, for example, 3D gold, 5G gold, and
heritage gold. Besides, the technology enhancem ent has also led to the lifting of gold jewellery
purity level.
Rising trend of customization and personalization of gold jewellery: With people ’s pursuit
of quality life, customization and personalization of gold jewellery is seeing increasing demand. On
the one hand, customization is usually associat ed with a high-end brand image and uniqueness,
which can be worn as a symbol of status and wealth. A dditionally, customization allows customers
to add personal designs, giving the gold jewellery a special meaning and story and helping them
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express their emotions. On the other hand, more younger customers, who like to express their
individuality, are joining the gold jewellery consumer group. Hence, the demand for gold jewellery
customization foresees vast development potential in the future.
Digitalization and shifting sales channels: According to the digital economy development
plan for the 14th Five-Year Plan, the integration of the Internet and traditional industries will be
further bolstered by the Chinese government. With the massive population base, China is currently
the largest e-commerce market in the world. Besides, millennials and Gen Z are becoming a core
source of the gold jewellery market growth. These individuals are heavy internet and social media
users. Thus, digital transformation becomes the m eans of survival and revival for traditional gold
jewellery companies. Particularly, mobile social me dia sales were expected to increase significantly,
meaning that brands should focus on creating an optimal online presence with special customer
attention through e.g. customization and community-building.
Diversifying consumption scenarios: Across all consumers in China, gold jewellery
purchases are usually used to be as a gift or mark specific occasions that are laden with emotions
such as weddings, anniversaries, newborns an d Chinese New Year etc. Furthermore, Chinese
customers are more rational and mature, with more diversified consumption needs and preferences.
Especially for female consumers, who are the major driver of gold jewellery consumption, such
consumer groups are becoming self-purchasing consumers who purchase gold jewellery to celebrate
personal milestones. As a result, gold jewellery companies are required to develop more product
lines that fit evolving and diversifying consumption scenarios.
Competitive Landscape of Gold Jewellery Brands in the PRC
The gold jewellery market in the PRC was considered concentrated for the year ended
December 31, 2023 in terms of gold jewellery revenue. For the year ended December 31, 2023, the
aggregate gold jewellery revenue generated from the top five gold jewellery brands was
approximately RMB233.5 billion, contributing 45.0% to the entire market. The Group ranked fifth
and took up a share of 3.8% for the year ended December 31, 2023.
Market Share of Top Five Gold Jewellery Brands in the PRC, by Gold Jewellery Revenue
(1)
(2023)
Ranking Company Listing Status Market Share
1 ..... C h o wT a iF o o k (2) Public 12.7%
2 ..... L a oF e n gX i a n g (3) Public 10.9%
3 ..... C h i n aG o l d (4) Public 10.7%
4 . . . . . Yuyuan Group (5) Public 6.9%
5 ..... The Group Private 3.8%
Top 5 45.0%
Source: Annual Report, Frost & Sullivan
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Notes:
(1) The gold jewellery revenue here only includes the revenue generated in mainland China.
(2) It is a leading jewellery brand in the PRC. It mainly engages in the sale of gem-set jewellery, platinum/karat
gold products, gold products, and watches. Its estimated gold jewellery (excluding gold bullion) self-
production rate in 2023 is approximately 45%.
(3) It is one of the China time-honored brands in the PRC. It mainly engages in the jewellery and gold business,
stationary and art craft. Its estimated gold jewellery (e xcluding gold bullion) self-production rate in 2023 is
approximately 50%.
(4) It is a PRC ’s leading gold jewellery company. It mainly engages in the sale of gold jewellery and processing
of gold bullion. Its estimated gold jewellery (excluding gold bullion) self-production rate in 2023 is
approximately 0%.
(5) It is a comprehensive group in the PRC. It mainly engages in jewellery and fashion, food and beverage,
beauty and health, watches, department stores, etc. Its estimated gold jewellery (excluding gold bullion) self-
production rate in 2023 is approximately 0.5%.
The gold jewellery market in the PRC was considered concentrated for the year ended
December 31, 2023 in terms of gold processing volume. For the year ended December 31, 2023, the
aggregate gold processing volume of the top five gold jewellery enterprises was approximately
279.5 tons, contributing 38.3% to the entire market. The Group ranked third and took up a share of
6.9% for the year ended December 31, 2023.
Market Share of Top Five Gold Jewellery Br ands in the PRC, by Gold Processing Volume
(2023)
Ranking Company Listing Status
Processing
Volume Market Share
(Ton)
1 ..... B a t a rG r o u p (1) Private 81.3 11.1%
2 . . . . . Hangmin Baitai Jewelry (2) Private 59.2 8.1%
3 ..... The Group Private 50.0 6.9%
4 ..... S w i k yJ e w e l r y (3) Private 47.2 6.5%
5 . . . . . Gold Dragon Jewelry (4) Private 41.8 5.7%
Top 5 279.5 38.3%
Source: China Gold Association
Notes:
(1) It is a well-known gold jewellery enterprise in the PRC. It mainly engages in the processing, wholesale, and
retailing of gold jewellery.
(2) It is a well-known jewellery enterprise in the PRC. It mainly engages in the design, processing, and sales of
gold jewellery.
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(3) It is a well-known gold jewellery manufacturer and su pplier in the PRC. It mainly engages in the design,
processing, OEM, and wholesale of gold jewellery.
(4) It is a well-known gold jewellery enterprise in the PRC. It mainly engages in designing, processing,
wholesale, and retailing gold jewellery.
The market size of high-purity level (999.9 ‰ and above) gold jewellery in terms of revenue is
RMB63.0 billion in 2023. For the year ended December 31, 2023, the aggregate high-purity level
(999.9 ‰ and above) gold jewellery revenue of the top five gold jewellery enterprises was
approximately RMB43.4 billion, contributing 68.8% to the entire market. The Group ranked first
and took up a share of 31.3% for the year ended December 31, 2023.
Market Share of Top Five High-purity Le vel Gold Jewellery Brands in the PRC,
by High-purity Level (999.9 ‰ and above) Gold Jewellery Revenue (2023)
Ranking Company Listing Status Market Share
1 ..... The Group Private 31.3%
2 ..... C o m p a n yH (1) Private 12.0%
3 ..... C o m p a n yJ (2) Private 11.1%
4 ..... C o m p a n yK (3) Private 8.3%
5 ..... C o m p a n yL (4) Private 6.2%
Top 5 68.8%
Source: Frost & Sullivan
Notes:
(1) It is a famous jewellery brand that features gold, diamonds, colored gems, platinum, and K gold jewellery as
its main products.
(2) It is a well-known gold jewellery manufacturers and suppliers in the PRC. It mainly engages in the design,
processing, wholesale and retail of gold, diamond, colourful gems and jade jewellery.
(3) It is a well-known gold jewellery enterprise in the PRC. It mainly engages in the design, manufacturing, and
sales of gold jewellery.
(4) It is a well-known gold jewellery enterprise in the PRC. It mainly engages in processing, wholesale, retailing
and recycling of gold jewellery products.
DIRECTORS ’CONFIRMATION
Our Directors confirm that, after making reaso nable inquiries, there is no material adverse
change in the market information since the date of the Frost & Sullivan Report, which may qualify,
contradict, misrepresent or otherwise adversely affect the accuracy and completeness of the
information in this section in material respects.
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Our business operations are located in the PRC and are subject to extens ive supervision and
regulation by the PRC government. This sectio n summarizes the principal laws, rules and
regulations that may affect major aspects of our business.
REGULATIONS RELATED TO THE GOLD JEWELLERY INDUSTRY
Gold Production and Sales Qualification Requirements
According to the Decision of the State Council in Relation to the Cancellation of the Second
Batch of Administrative Approval Items and Amendment to the Management Method of Certain
Administrative Approval Items ( 《國務院關於取消第二批行政審批項目和改變一批行政審批項目管
理方式的決定》) in 2003, China officially cancelled the approval system of the People ’sB a n ko f
China (PBOC) for the production, processing and circulation of gold, including: (1) the gold
purchase permit; (2) the approval of gold products production, processing and wholesale business;
(3) the approval of gold supply; (4) the approval of gold products retail business.
REGULATIONS ON THE CONTROLLING OF THE IMPORT AND EXPORT OF GOLD
AND GOLD PRODUCTS
Foreign trade
According to the Foreign Trade Law of the PRC ( 《中華人民共和國對外貿易法》) (the
‘‘Foreign Trade Law ’’) promulgated by the Standing Committee of the National People ’s Congress
(SCNPC) on May 12, 1994 and amended on December 30, 2022, foreign trade operators are not
required to register since December 30, 2022. The PRC government permits the free import and
export of commodities and technolo gies, unless otherwise provided by laws and administrative
regulations. Prior to December 30, 2022, under the pre-amended Foreign Trade Law, foreign trade
operators engaged in the import and export of commodities or technologies shall apply for
registration with the foreign trade authorities under the State Counc il or its delegated authorities for
the record, unless otherwise provided by laws and administrative regulations and requirements of
the foreign trade authorities under the State Council . If a foreign trade operator fails to register for
the record in accordance with the provisions, the Customs Department shall not carry out customs
clearance of imported or exported commodities.
Import and export licensing sy stem for gold and gold products
According to the relevant provisions of the Administrative Regulations on Gold and Silver of
the PRC (《中華人民共和國金銀管理條例》) and the Measures for the Administration of the Import
and Export of Gold and Gold Products ( 《黃金及黃金製品進出口管理辦法》), a permit system is in
force for the import and export of gold and gold products (gold refers to unforged gold, and gold
products refer to semi-manufactured gold and manufactured gold products, etc.). The PBOC may, in
accordance with the needs of macroeconomic regulation and control of the State, grant restrictive
approval on the quantity of gold and gold products to be imported and exported.
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The PBOC, in cooperation with the General Ad ministration of Customs, has formulated,
adjusted and promulgated the Catalogue of Commodities for Management of Import and Export of
Gold and Gold Products. When handling the import or export customs clearance for the gold and
gold products listed in the Catalogue of Commodities for Management of Import and Export of
Gold and Gold Products, the PBOC Import and Export Permit for Gold and Gold Products issued
by the PBOC and its branches shall be submitted to the Customs.
Customs Law
According to the Customs Law of the PRC ( 《中華人民共和國海關法》) adopted by the
SCNPC on January 22, 1987, most recently amend ed on April 29, 2021 and effective from the same
date, the Customs of the People ’s Republic of China is the state ’s entry and exit customs
supervision and administration authority. Acco rding to the relevant laws and administrative
regulations, the Customs supervises the transportation vehicles, goods, luggages, postal articles and
other articles entering and leaving the country, collects customs duties and other taxes and fees,
prevents and counters smuggling, compiles customs statistics and handles other customs operations.
According to the Regulations of PRC Customs on Administration of Recordation of
Declaration Entities ( 《中華人民共和國海關報關單位備案管理規定》) adopted by the General
Administration of Customs on November 19, 20 21 and effective from January 1, 2022, customs
declaration entities refer to the consignees and consignors of import and export goods and customs
declaration enterprises recorded with the custo ms. If the consignees and consignors of import and
export goods and customs declaration enterpris es apply for recordation, they shall obtain the
qualification of market entities; among them, if t he consignees and consignors of import and export
goods apply for recordation, they shall also obtain the recordation of the foreign trade operators.
The recordation of the customs declaration entities is valid for a long period of time, while the
temporary recordation is valid for one year, aft er the expiry re-application of recordation can be
made.
REGULATIONS RELATED TO PRODUCTION
Regulations on production safety
Under relevant construction safety laws and regulations, including the Work Safety Law of the
PRC (《中華人民共和國安全生產法》), which was promulgated by the SCNPC on June 29, 2002,
last amended on June 10, 2021, and effective on September 1, 2021, production and operating
business entities must establish objectives and measures for work safety and improve the working
environment and conditions for workers in a planned and systematic way. A work safety protection
scheme must also be set up to implement the work safety job responsibility system. In addition,
production and operating business entities must arrange work safety training and provide their
employees with protective equipment that meets the national or industrial standards. During the
Track Record Period and up to the Latest Prac ticable Date, the Company was not subject to
penalties related to production safety.
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Regulations on fire protection
According to the Fire Prevention Law of the PRC ( 《中華人民共和國消防法》) promulgated by
the SCNPC on April 29, 1998 and recently amended on April 29, 2021, and the Interim Provisions
on the Administration of Examination and Acceptance of Fire Prevention Design of Construction
Projects ( 《建設工程消防設計審查驗收管理暫行規定》) promulgated by the Ministry of Housing
and Urban-Rural Development on April 1, 2020 and effective on June 1, 2020, special construction
projects that have failed to undergo fire safety accep tance inspection or failed to pass fire safety
acceptance inspection are prohibited from putting into use. Construction projects other than special
construction projects shall go through the fire sa fety acceptance filing, and the competent housing
and urban-rural development authorities shal l conduct random inspections on the fire safety
acceptance of other construction projects filed. I f the construction projects fail to pass the random
inspection on fire safety acceptance, such project s shall be ceased to use. During the Track Record
Period and up to the Latest Practicable Date, the Company was not subject to penalties related to
fire protection.
REGULATIONS RELATED TO ENVIRONMENTAL PROTECTION
Environmental Protection Law
The Environmental Protection Law of the PRC ( 《中華人民共和國環境保護法》) (the
‘‘Environmental Protection Law ’’), was promulgated and effective on December 26, 1989, and most
recently revised on April 24, 2014. The Environmental Protection Law has been formulated for the
purpose of protecting and improving both the living and the ecological environment, preventing and
controlling pollution and other public hazards and safeguarding people ’s health. According to the
provisions of the Environmental Protection L aw, in addition to other applicable laws and
regulations of the PRC, the Ministry of Environm ental Protection and its local counterparts are
responsible for administering and supervising environmental protection matters. Pursuant to the
Environmental Protection Law, construction projects that have environmental impact shall be
subject to environmental impact assessment. Insta llations for the prevention and control of pollution
in construction projects must be designed, buil t and commissioned together with the principal
construction plan of the project. Such installations shall not be dismantled or left idle without
authorization from the competent government agencies.
Consequences of violations of the Environmen tal Protection Law include warnings, fines,
rectification within a time limit, forced shutdown, or criminal punishment. During the Track Record
Period and up to the Latest Practicable Date, the Company was not subject to penalties related to
environmental protection.
Laws on Environment Impact Assessment
Pursuant to the Environment Impact Assessment Law of the People ’s Republic of China ( 《中
華人民共和國環境影響評價法》) issued on October 28, 2002 and most recently amended on
December 29, 2018, the State Council implemented a n environmental impact assessment, or EIA, to
classify construction projects according to the impact of the construction projects on the
environment. Constructing entities shall prepare an environmental impact report, or an EIR, or an
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environmental impact statement, or an EIS, or fill out the Environmental Impact Registration Form
according to the following rules: (i) for projects w ith potentially serious en vironmental impacts, an
EIR shall be prepared to provide a comprehensive assessment of their environmental impacts; (ii)
for projects with potentially mild environmental impacts, an EIS shall be prepared to provide an
analysis or specialized assessment of the environ mental impacts; and (iii) for projects with very
small environmental impacts, an EIS is not requ ired but an Environmental Impact Registration
Form shall be completed. Unless otherwise stip ulated by laws and regulations, construction
enterprises that are required to compile an EIR or EIS shall accept the environmental protection
facilities upon completion of the construction pro ject. When the environmen tal protection facilities
of a construction project pass the inspectio n and acceptance, the construction project can be
formally put into production or use.
REGULATIONS RELATED TO COMMERCIAL FRANCHISED OPERATION
Franchised operation is subject to the super vision and administration of the Ministry of
Commerce and its local competent commercial departments. These activities are currently regulated
by the Administrative Regulations on Commercial Franchised Operation ( 《商業特許經營管理條
例》) promulgated by the State Council on February 6, 2007 and implemented from May 1, 2007,
which was supplemented by the Administrative Measures for the Record-filing of Commercial
Franchised Operation ( 《商業特許經營備案管理辦法》) issued by the Ministry of Commerce on
April 30, 2007 and most recently amended on December 12, 2011 and effective from February 1,
2012 and the Administrative Measures for the Information Disclosure of Commercial Franchised
Operation (《商業特許經營信息披露管理辦法》) issued by the Ministry of Commerce on April 30,
2007, and most recently amended on February 23, 2012 and effective from April 1, 2012.
According to the above-mentioned applicabl e regulations, franchisers may engage in
franchised operation activities on conditions tha t they shall have a mature operation model and be
capable of providing continuous operation guidance a nd training services for franchisees, as well as
owning at least two direct-sale stores in China wi th the operation period being more than one year.
Where franchisers fail to conduct franchised activities in accordance with the above provisions,
punishment may be imposed, such as confiscating the illegal proceeds and imposing a fine of above
RMB100,000 but less than RMB500,000, and an announcement will be made by the Ministry of
Commerce or the local competent department of commerce. The franchise contract shall specify
certain necessary provisions concerning terms, the right to terminate and payment.
Franchisers shall submit the b usiness license, draft of the franchise contract and other
documents to the provincial competent commercial department where they are registered within 15
days from the date of the initial signing of the fra nchise contract with franchisees within China.
Where a franchiser engages in franchised activ ities within the scope of two or more provincial
areas, it shall file with the Ministry of Commerce. Filing shall be performed by the franchisers
complying with the above applicable regulations through the informatio n management system for
commercial franchised operation established b y the Ministry of Commerce in accordance with the
provisions of the Measures. In addition, franchi sers shall file with the commercial department
concerning the execution, cancellation, renewal and amendment of franchise agreements before
March 31 of every year.
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In case of any changes to franchisers ’ filing information, such chan ges shall also be filed with
the relevant commercial department after occurre nce. Where franchisers fail to file in accordance
with such regulations, relevant commercial depa rtments may order the franchiser to file within a
stipulated period and impose a fine of more than RMB10,000 but less than RMB50,000. Failure to
file within the stipulated period may render a fine of more than RMB50,000 but less than
RMB100,000, and an public announcement.
LAWS IN RELATION TO PRODUCT QUALITY AND CONSUMER PROTECTION
Pursuant to the Product Quality Law of the PRC ( 《中華人民共和國產品質量法》) promulgated
on February 22, 1993 and latest amended on December 29, 2018 by the SCNPC, the seller shall be
responsible for the repair, replacement or return of the product sold if (i) the product sold does not
possess the properties for use that it should possess, and no prior and clear indication is given of
such a situation; (ii) the product sold does not conform to the applied product standard as carried
on the product or its packaging; or (iii) the product sold does not conform to the quality indicated
by such means as a product description or physical sample. If a consumer incurs losses as a result
of the purchased product, the seller shall compensate for such losses.
Under the Civil Code of the People ’s Republic of China (the ‘‘Civil Code ’’, effective from
January 1, 2021) adopted by the SCNPC on May 28, 2020, a manufacturer or a commercial seller is
subject to liability for physical injury or propert y loss caused by the product defects. The aggrieved
party may seek compensation from the manufacturer or the commercial seller. Where the aggrieved
party seeks compensation from the commercial selle r, the commercial seller have the right to make
a claim against the liable manufact urer after it has made compensation.
The Protection of the Rights and Interests of Consumers Law of the PRC ( 《中華人民共和國消
費者權益保護法》) was promulgated on October 31, 1993 and was amended on August 27, 2009
and October 25, 2013 to protect consumers ’ rights when they purchase or use goods and accept
services. All business operators must comply with this law when they manufacture or sell goods
and/or provide services to consumers. Under the amendments made on October 25, 2013, all
business operators must pay high attention to protecting consumers ’ privacy and must strictly keep
confidential any consumer information they obtain during their business operations.
REGULATIONS REGARDING THE SALE OF PRODUCTS
Laws related to anti-unfair competition
The Anti-Unfair Competition Law of the PRC ( 《中華人民共和國反不正當競爭法》)
promulgated by the SCNPC on September 2, 1993, and effective from Decem ber 1, 1993, with the
latest amendment taking effect on April 23, 2019, h as established several m easures to combat unfair
competition and protect market order. These measures include prohibiting acts such as unfair prize
promotions and dumping to exclude market competit ors. According to the Anti-Unfair Competition
Law of the PRC, operators are not allowed to bribe any employees of the counterpart units, any
units or personnel entrusted by the counterpart, or influence the units or personnel of the
counterpart to gain commercial opportunities or competitive advantages through their power. In
addition, operators can openly pay discounts to the trading counterpart or commissions to
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intermediaries in their trading activities. When giving discount to a transaction counterparty or
paying commission to an intermedi ary, the operators shall record the discount or commission in its
accounts truthfully. Operators who receive discount or commission shall also record the discount or
commission in their accounts truthfully. Operat ors who violate the provisions of Article 7 of the
law by bribing others can have thei r illegal gains confiscated by the regulatory authority, and they
may be fined with an amount ranging from RMB100,000 to RMB3,000,000 depending on the
severity of the circumstances. In severe cases, their business licenses may be revoked.
Laws related to advertising
The Advertisement Law of the PRC ( 《中華人民共和國廣告法》) promulgated by the SCNPC
on October 27, 1994, and effective from February 1 , 1995, with the latest amendment taking effect
on April 29, 2021, stipulates that advertisements must not contain false content and must not
deceive or mislead consumers. Recommendation or certification from advertising endorsers on the
goods and services in advertisements, shall be based on facts and in compliance with relevant laws
and administrative regulations, and such endorsers are not allowed to recommend or certify the
goods or services that they have not used or received . If operators violate the provisions of this law
by disseminating false advertisements, the market supervision and management authorities shall
order them to cease the publication of the advertisements, require them to eliminate the impact
within the corresponding scope, impose fines of th ree to five times the advertising expenses. If the
advertising expenses cannot be calculated or are significantly understated, fines of no less than
RMB200,000 and no more than RMB1,000,000 shall be imposed. For those who commit violations
three or more times within two years or have other serious circumstances, fines of five to ten times
the advertising expenses shall be imposed. If the advertising expenses cannot be calculated or are
significantly understated, fines of no less t han RMB1,000,000 and no more than RMB2,000,000
may be imposed. In such cases, business licenses may be revoked, and the advertising review
authority may revoke the approval documents for advertising review and not accept their
advertising review applications for one year. If the violation constitutes a crime, criminal liability
may be pursued.
Legal aspects related to e-commerce
The E-commerce Law of the PRC ( 《中華人民共和國電子商務法》) promulgated by the
SCNPC on August 31, 2018, and effective from January 1, 2019, stipulates that e-commerce
operators engaged in business activities should adhere to the principles of voluntariness, equality,
fairness, and good faith. They must also comply with the law and business ethics, participate fairly
in market competition, fulfill obligations related to consumer rights protection, environmental
protection, intellectual property protection, network security and personal information protection,
and assume responsibility for the quality of produc ts and services. If e-commerce operators fail to
fulfill contractual obligations or do not meet the agreed-upon terms or cause harm to others, when
selling goods or providing services they shall bear civil liability under the law. E-commerce
operators who engage in business activities without obtaining relevant administrative permits, sell
or provide goods or services prohibited by laws or administrative regulations, or fail to fulfill their
information provision obligations shall be subject to penalties by the market supervision and
management authorities in accordance with relevant laws and administrative regulations.
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Regulations related to anti-money laundering
According to the Anti-Money Laundering Law of the PRC ( 《中華人民共和國反洗錢法》)
promulgated by the SCNPC on October 31, 2006, anti-money laundering refers to adopting relevant
measures in accordance with the provisions of the Anti-Money Laundering Law to prevent money
laundering activities by various means to cover up and conceal the source and nature of gains and
other profits from drug offences, organized crime, terrorist activities, smuggling, corruption and
bribery, disruption of financial management ord er, financial fraud, etc. Anyone who violates the
provisions of the Anti-Money Laundering Law and constitutes a crime shall be held criminally
responsible in accordance with the law. According to the provisions of the Notice of the People’ s
Bank of China on Strengthening Anti-Money Laundering and Anti-Terrorist Financing in Precious
Metals Marketplaces (Yinfa [2017] No. 218), as for the trading venues of precious metals where
business or services involve spot trading of preciou s metals, as well as those precious metal traders
engaged in precious metals trading within their marketplaces shall actively fulfill their anti-money
laundering and anti-terrorist financing obligations. Trading venues and traders shall take necessary
monitoring measures to monitor the personnel whose name appears on lists of terrorist
organizations and terrorist activities announced by the competent national authorities. No business
relationship shall be established with any entity, organization or individual on the list, nor any form
of services shall be provided to them. Funds or oth er assets related to terrorist organizations and
personnel shall be immediately frozen in accorda nce with the law and shall be promptly reported to
local public security agencies, national s ecurity agencies and branches of the People ’sB a n ko f
China in accordance with regulations.
REGULATIONS ON CYBER INFORMATION SECURITY, PRIVACY AND DATA
PROTECTION
Privacy protection
On May 28, 2020, the SCNPC promulgated the Civil Code, which came into effect on January
1, 2021. According to the Civil Code, the personal information of natural persons is protected by
law. Any organization or individual who needs to o btain personal information of another person
shall obtain such information legally and ensure the security of such information, and shall not
unlawfully collect, use, process, or transmit th e personal information of another person or
unlawfully purchase, sell, provide, or disclose to the public the personal information of another
person.
On August 22, 2019, the CAC issued the Provisions on the Protection of Children ’s Personal
Information on the Internet ( 《兒童個人信息網絡保護規定》), which became effective on October 1,
2019, and which applies to the collection, storage, use, transfer and disclosure of minors ’ or
children’s personal information under the age of 1 4 through the Internet. Where personal
information processors collect or use children ’s personal information, they should formulate special
rules for handling personal information and obtain the consent of the children ’s parents or other
guardians.
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Pursuant to the Ninth Amendment to the Criminal Law of the PRC ( 《中華人民共和國刑 法修
正案(九)》) issued by the SCNPC on August 29, 2015 and becoming effective on November 1,
2015, any network service provider that fails to fulfil the obligations related to Internet information
security administration as requ ired by applicable laws and refuses to rectify when is ordered by a
supervisory authority to do so, will be subject to criminal liability for causing (i) any dissemination
of information in large scale; (ii) any leakage of the users ’ information with serious consequences;
(iii) any loss of evidence of criminal activities with serious circumstances; or (iv) any other serious
circumstances. In addition, any individual or entity that (i) sells or provides personal information to
others unlawfully, or (ii) steals or illegally obtains any personal information by other methods, will
be subject to criminal liabilit y in serious circumstances.
On May 8, 2017, the Supreme People ’s Court and the Supreme People ’s Procuratorate released
the Interpretations of the Supreme People ’s Court and the Supreme People ’s Procuratorate on
Several Issues Concerning the Application of Law in the Handling of Criminal Cases Involving
Infringement of Citizens’ Personal Information ( 《最高人民法院、最高人民檢察院關於辦理侵犯公
民個人信息刑事 案件適用法律若干問題的解釋》) (the ‘‘Interpretations ’’), which became effective
from June 1, 2017. The interpretations clarify several concepts regarding the ‘‘crime of
infringement of citizens ’ personal information ’’stipulated by Article 253A of the Criminal Law of
the PRC ( 《中華人民共和國刑法》), including ‘‘citizens ’ personal information ’’, ‘‘violation of
relevant national provisions’’ , ‘‘provision of citizens ’ personal information ’’and ‘‘illegally obtaining
any citizen ’s personal information by other methods ’’. In addition, the interpretations specify the
standards for the conviction and sentencing in determining ‘‘serious circumstances ’’ and
‘‘particularly serious circumstances ’’of this crime. On October 21, 2019, the Supreme People ’s
Court and the Supreme People ’s Procuratorate jointly issued the Interpretations on Certain Issues
Regarding the Applicable of Law in the Handling of Criminal Case Involving Illegal Use of
Information Networks and Assist ing Committing Internet Crimes ( 《最高人民法 院、最高人民檢察
院關於辦理非法利用信息網絡 、幫助信息網絡 犯罪活動等刑事案件適用法律若干問題的解釋》),
which came into effect on November 1, 2019, and further clarifies the meaning of Internet service
operators and the meaning of aggravating circumstances of criminal offenses related to refusal to
fulfill the obligation of information network security management, illegal use of information
network, and assisting information network crim inal activities. Failure to comply with the above
laws and regulations on network security, information security, privacy and data protection may
subject the internet service provider or data proces sor to administrative penalties, including but not
limited to warnings, fines, suspension of business operations, closure of websites or applications,
revocation of licences, or even criminal liability. The Company belongs to the Internet service
operators referred to in the above provisions, but is not involved in the relevant criminal acts.
On August 20, 2021, the Law of the People ’s Republic of China on the Protection of Personal
Information (the ‘‘Personal Information Protection Law ’’) was promulgated by the SCNPC and
came into effect on November 1, 2021. The Personal Information Protection Law reiterates the
circumstances under which a personal information processor could process personal information and
the requirements for such circumstan ces, such as when (i) the individual ’s consent has been
obtained; (ii) the processing is necessary for the conclusion or performance of a contract to which
the individual is a party; (iii) the processing is necessary to fulfill statutory duties and statutory
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obligations; (iv) the processing is necessary to respond to public health emergencies or protect
natural persons’ life, health and property safety under emergency circumstances; (v) the personal
information that has been made public is processe d within a reasonable scope in accordance with
this Law; (vi) personal information is processed within a reasonable scope to conduct news
reporting, public opinion-based supervision, and o ther activities in the public interest; or (vii) under
any other circumstance as provided by any law or regulation, rather than relying on the
‘‘notification and consent ’’as provided for in the Cyber Securi ty Law. It also stipulates the
obligations of a personal information processor. Pe rsonal information processors who violate the
provisions and requirements of the Personal Information Protection Law may be subject to
correction, warning, fines, suspension of related b usiness, revocation of licenses, entry into credit
files, or even criminal liability.
According to the Personal Information Protectio n Law, personal information processors shall
take the necessary measures to ensure the safety o f the personal information being processed. The
Personal Information Protection Law stipulates the rights of data subjects, including the right to be
informed, the right to refuse or restrict the proces sing, access, transfer, correction and deletion of
their personal information; and the right of individuals to request that the personal information
processors provide explanations of the rules governing the processing of their personal information.
The Personal Information Protection Law stipulat es that Critical Inform ation Infrastructure
Operators and the personal information processors that process the personal information reaching
the threshold specified by the CAC in terms of qua ntity shall store domestically the personal
information collected and generated within the territory of the PRC. Where it is truly necessary to
provide the information abroad, the security as sessment organized by the CAC shall be passed;
where it is truly necessary to provide personal information outside of the People ’s Republic of
China, other personal information processors shall meet one of the following conditions: (i) passing
the security assessment by the CAC; (ii) obtaining certification of data security by a professional
body in accordance with the requirements of the CAC; (iii) entering into an agreement with the
overseas recipient with provisions governing the rights and obligations of the parties based on a
template contract to be released by the CAC; or (iv) other requirements as provided by laws and
regulations.
Processors shall also conduct personal information protection impact assessment in advance
when processing sensitive personal information, using personal information to conduct automated
decision-making, entrusting pers onal information processing, pro viding personal information to
other personal information processors, or disclosing personal information, providing personal
information abroad, and conducting other persona l information handling activities with a major
influence on individuals.
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Cyber information security
(1) The Law of the People ’s Republic of China on State Security
Pursuant to the Law of the People’ s Republic of China on State Security ( 《中華人民共和國國
家安全法》) promulgated by the SCNPC on July 1, 2015, the State shall establish a system and
mechanism for national security examination and supervision, and carry out national security
examination of key technology and networking information technology products as well as services
relating to national security, so as to effectively p revent and eliminate na tional security risks.
(2) The Cyber Security Law of the PRC
On November 17, 2016, the Cyber Security Law of the PRC (the ‘‘Cyber Security Law’’ ) was
promulgated by the SCNPC and became effective on June 1, 2017, which requires that a network
operator (including, among others, internet infor mation services providers) take technical measures
and other necessary measures to ensure the secure and stable operation of the network, effectively
cope with cyber security events, prevent criminal activities comm itted on the network, and protect
the integrity, confidentiality and availabilit y of network data. The Cyber Security Law provides
that: (i) to collect and use personal information, ne twork operators shall follow the principles of
legitimacy, rightfulness and necessity, disclose rules of data collection and use, clearly express the
purposes, means and scope of collecting and using the information, and obtain the consent of the
persons whose data are gathered; (ii) network opera tors shall neither gather personal information
unrelated to the services they provide, nor gather or use personal information in violation of the
provisions of laws and administrative regulati ons or the scopes of consent given by the persons
whose data are gathered; and shall dispose of pers onal information they have saved in accordance
with the provisions of laws and administrative reg ulations and agreements reached with users; and
(iii) network operators shall not divulge, tamper with or damage the personal information they have
collected, and shall not provide the personal information to others without the consent of the
persons whose data are collected. However, if the information has been processed and cannot be
recovered and thus it is impossible to match s uch information with specific persons, such
circumstance is an exception. Furthermore, und er the Cyber Security Law, network operators of
critical information infrastructure (the ‘‘Critical Information Infrastructure Operators ’’) generally
shall, during their operations in the PRC, store the personal information and important data
collected and produced within the territory of the PRC. Any violation of the provisions and
requirements under the Cyber Security Law may subject a network operator to warnings, fines,
confiscation of illegal gains, revocation of license s, cancellation of filings, closedown of websites
or even criminal liabilities.
(3) Administrative Provisions on Account Names of Internet Users
On February 4, 2015, the Cyberspace Administration of China (the ‘‘CAC’’) promulgated the
Administrative Provisions on Account Names of Internet Users ( 《互聯網用戶賬號名稱管理規定》),
which came into effect on March 1, 2015, stipulating that internet information service providers
shall implement the responsibility of security management, improve the user service agreement, and
expressly state that the account names, avatars, profiles and other registrati on information submitted
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by internet information service users shall not contain illegal or malicious information, and equip
professional personnel appropriate to the scale of ser vice to review the registration information such
as account name, avatar and profile submitted by internet users and refuse to register the
information containing illegal and malicious info rmation; internet information service providers
shall consciously accept social supervision, and promptly deal with the illegal or malicious
information contained in public reported account n ame, avatar and profile and other registration
information. Service providers shall also require users to register their accoun ts after authentication
of their real identity information in accordan ce with the principle that mandatory real name
registration at the back-office end, and voluntary real name display at the front-office end.
(4) Provisions on the Ecological Governance of Network Information Contents
On March 1, 2020, the CAC promulgated the Provisions on the Ecological Governance of
Network Information Contents ( 《網絡信息內容生態治理規定》) (the ‘‘CAC Order No. 5 ’’), which
became effective on March 1, 2020, to further strengthen the regulation and management of online
information content. Pursuant to these regulat ions, each network information content service
platform is required, among other things, (i) not to disseminate any information that violates laws
and regulations, such as information jeopardizing national security; (ii) to strengthen the
examination of advertisements published on such network information content service platform;
(iii) to formulate management rules and platform convention, improve user agreements, clarify
users ’ relevant rights and obligations and perform the c orresponding management responsibilities in
accordance with the laws, regulations, rules and conventions; (iv ) to establish convenient means for
complaints and reports; and (v) to prepare annual work report regarding its management of network
information content ecology. In addition, a network information content service platform must not,
among others, (i) utilize new technologies and applications such as deep learning and virtual reality
to engage in activities prohibited by laws and regulations; (ii) engage in traffic fraud, traffic
hijacking and other activities related to fraudulent account, illegal account transaction or maneuver
of users ’ account; and (iii) infringe a third party ’s legitimate rights or seek illegal interests by way
of interfering with information display.
(5) The Measures for Cyber Security Review
The Measures for Cyber Security Review (the ‘‘Cyber Security Review Measures ’’)(《網絡安
全審查辦法》) was jointly issued by the CAC, the NDRC, the MIIT, the Ministry of Public
Security, the Ministry of State Secu rity, the Ministry of Finance (the ‘‘MOF’’), the MOFCOM, the
People ’s Bank of China, the State Administration for Market Regulation, the National Radio and
Television Administration, the CSRC, the National Administration of State Secrets Protection and
the State Cryptography Administration on December 28, 2021 and took effect on February 15,
2022. The Cyber Security Review Measures specifies that the procurement of network products and
services by Critical Information Infrastructure Ope rator and the activities o f data process carried out
by online platform operator that raise or may raise ‘‘national security ’’concerns are subject to strict
cyber security review by Office of Cyber Secur ity Review established by the CAC. Before such
Critical Information Infrastructure Operator purchases internet products and services, it should
assess the potential risk of national security that may be caused by the use of such products and
services. If such use of products and services may give raise to national security concerns, it should
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apply for a cyber security review by the Cyber Security Review Office and a report of analysis of
the potential effect on national security shal l be submitted when the application is made. In
addition, online platform operators that possess t he personal data of at least one million users must
apply for a cyber security review by the Cyber Security Review Office before ‘‘foreign ’’listing ( 國
外上市). The Cyber Security Review Office may voluntarily conduct cyber security review if any
network products and services, activities of data pr ocess or listing of companies overseas affects or
may affect national security. Pursuant to the Cybe r Security Review Measures, any violation shall
be punished in accordance with the Cyber Security Law and the Data Security Law, the sanctions
under which include, among others, government en forcement actions and investigations, fines,
penalties, suspension of non-compliant operations. As the Company is not a critical information
infrastructure operator and has not received any notification that it has been recognized as a
‘‘critical information infrastructure operator ’’by the industry authorities or the Internet information
administration authorities, the listing of th e Company in the Hong Kong Special Administrative
Region of the PRC does not constitute a foreign listing, and therefore the Company does not have
the legal situation to take the initiative to conduct cyber security review as stipulated in the
Measures for Cyber Security Review.
(6) The Regulations for Safe Protection of Critical Information Infrastructure
On July 30, 2021, the State Council promulgated the Regulations for Safe Protection of
Critical Information Infrastructure ( 《關鍵信息基礎設施安全保護條例》) (the ‘‘Safe Protection
Regulations’’) which came into effect on September 1, 2021. Pursuant to the Safe Protection
Regulations, critical informatio n infrastructure refers to important network infrastructure and
information system in public telecommunications, information services, energy sources,
transportation, water conservation, finance, public services, e-government affairs and national
defense and other related technology industries, as well as others in which any destruction or data
leakage will have severe impact on national security, the nation ’s welfare, the people ’s living and
public interests. The Safe Protection Regulations provide specific requirements for the following
responsibilities and obligations of the operato r: (i) the operator shall establish and improve the
cyber security protection system and responsibility system, and ensure the input of manpower,
financial and material resources; (ii) the opera tor shall set up a special security management
department, and review the security background of the person in charge of the special security
management department and the personnel in key pos itions; (iii) the operator shall guarantee the
operation funds of the special security management department, allocate corresponding personnel,
and have the personnel of the special security management department participate in the decision-
making relating to cyber security and informatizat ion; (iv) the operators shall give priority to the
purchase of safe and reliable network produc ts and services; network products and services
procured that may affect the national security shall be subject to the security review in accordance
with the national provisions on network security. As the Company is not an operator of critical
information infrastructure, the Regulations for Safe Protection of Critical Information Infrastructure
does not apply to it.
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(7) The Administration Regulations on Cyber Data Security
The State Council promulgated the Administration Regulations on Cyber Data Security
(hereinafter referred to as the ‘‘Regulations on Cyber Data Security ’’) on September 24, 2024.
Administration Regulations on Cyber Data Securi ty is intended to come into effect on January 1,
2025, and provides that the data processors listing in foreign countries with the personal
information processed of more than one million i ndividuals shall declare cyber security review. The
draft further requires the data processors that car ry out the following activities to apply for cyber
security review in accordance with the relevant laws and regulations: (i) 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 affects or may affect
national security; (ii) the listing of the data processor in Hong Kong affects or may affect the
national security; and (iii) other data processing ac tivities that affect or may affect national security.
The Administration Regulations on Cyber Data Security is not applicable to the Company for the
following reasons: (1) the Company intends to apply for listing on the Hong Kong Stock Exchange
of the PRC, but the data handled by the Company do es not involve any situation that affects or is
likely to affect national security; (2) the Com pany does not belong to the operators of critical
information infrastructures and has not received any notification that it has been recognized as a
‘‘critical information infrastructure operator’’ by industry authorities and authorities of the Internet
information administration; (3) the Company is pri ncipally engaged in the design and development,
the production and processing, wholesale, retail and brand franchise of ‘‘MOKINGRAN ’’brand
gold jewelry and is not engaged in any of the following industries: public communications and
information services, energy, transportation, water, finance, public services, e-government and
national defense science and technology industry, and there are no circumstances that affect or may
affect national security.
The Administration of Cyber Data Security ( 《網絡數據安全管理條例》) provide that data
processors that handle personal information of more than one million individuals shall be subject to
network inspection in accordance with the provi sions on the processing of important data when
processing the important data. Such provision is not applicable to the Company for the following
reasons: (1) The Regulations on the Administration of Cyber Data Security have not yet been
formally implemented, and therefore are not applicable at the time of the Company ’s listing. (2)
The Company does not handle national important data or core data, and even if the Company is
listed in Hong Kong, there is no situation that affects or may affect national security.
(8) Measures for the Security Assessment of Cross-border Data Transmission (
《數據出境安全評
估辦法》)
On July 7, 2022, the CAC promulgated the Measures for the Security Assessment of Cross-
border Data Transmission ( 《數據出境安全評估辦法》), which came into effect on September 1,
2022. According to the Measures for the Security As sessment of Cross-border Data Transmission, a
data processor shall report for security assess ment of cross-border data transmission when it
provides personal information or important data collected and generated in the course of its
business operation within the PRC to a recipient outside the PRC under any of the following
circumstances: (i) transferring important data outside the PRC by a data processor; (ii) transferring
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personal information outside the PRC by a Critica l Information Infrastructure Operator or a data
processor that has processed personal informa tion of more than one million individuals; (iii)
transferring personal information outside the PRC b y a data processor that has transferred personal
information of more than 100,000 individuals or sensitive personal information of more than 10,000
individuals since January 1 of the previous year; and (iv) other circumstances under which security
assessment of data cross-border transfer is required as prescribed by the national cyberspace
administration. The data and personal inform ation collected by the Company are stored
domestically, and there is no cross-border transmi ssion of data and personal information, so there
is no need for security assessment of data outbound transfer, filing of standard contracts for
outbound transfer of personal information, or certification of personal information protection.
LAWS AND REGULATIONS RELATING TO INTELLECTUAL PROPERTY
Trademark Law
Registered trademarks are protected under the Trademark Law of the PRC ( 《中華人民共和國
商標法》) promulgated on August 23, 1982, and latest revised on April 23, 2019, and related rules
and regulations. Trademarks are registered with the State Intellectual Property Office, formerly the
Trademark Office of the SAIC. Where registration is sought for a trademark that is identical or
similar to another trademark that has already been re gistered or given preli minary examination and
approval for use in the same or similar category of commodities or services, the application for
registration of this trademark may be rejected. Trademark registrations are effective for 10 years
subject to renewal, unless otherwise revoked.
Patent Law
The Patent Law of the People ’s Republic of China ( 《中華人民共和國專利法》) promulgated
by the SCNPC on March 12, 1984 and most recently amended on October 17, 2020 and effective
from June 1, 2021, and the Implementing Rules of the Patent Law of the People ’s Republic of
China (《中華人民共和國專利法實施細則》), which was promulgated by the China Patent Office on
January 19, 1985 and most recently amended by the State Council on January 9, 2010 and effective
from February 1, 2010, provide for three types of patents, ‘‘invention ’’, ‘‘utility model ’’and
‘‘design ’’. ‘‘Invention ’’refers to any new technical solution in relation to a product, a process or
improvement thereof; ‘‘utility model ’’refers to any new technical solution relating to the shape,
structure, or their combination, of a product, which is suitable for practical use; ‘‘design ’’refers to
a new design that is aesthetic and suitable for indust rial application for the overall or partial shape,
pattern or its combination of pro ducts, as well as the combination of color, shape and pattern. The
validity period of patent for an ‘‘invention ’’is 20 years, while the validity period of patent for a
‘‘utility model ’’is 10 years and that of a ‘‘design ’’is 15 years, from the date of application.
Copyright Law
Pursuant to the Copyright Law of the People ’s Republic of China ( 《中華人民共和國著作權
法》) promulgated by the SCNPC on September 7, 1990 and most recently amended on November
11, 2020 and effective from June 1, 2021, Chinese citizens, legal persons or unincorporated
organizations shall, whether published or not, enjoy copyright in their works in accordance with the
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law. Unless otherwise provided in the Copyright Law of the People ’s Republic of China and other
related system and laws and regulations, repr oducing, 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, shall constitute infringements
of copyrights. The infringer shall, according to t he circumstances of the case, undertake to cease the
infringement, eliminate impact, and offer an apology, pay damages and other civil liabilities. In
exercising the rights, copyright owners and copyright related rights holders shall not be in violation
to the Constitution and laws nor prejudice to public interests.
Domain Names
Pursuant to the Measures for the Administration of Internet Domain Names ( 《互聯網絡域名管
理辦法》) promulgated by the Ministry of Industry and Information Technology on August 24, 2017
and effective from November 1, 2017, the Ministry of Industry and Information Technology
supervises and administers domain services nationwide. The principle of ‘‘first come, first serve ’’is
followed for the domain name registration servi ce. Applicants of domain name registration shall
provide the domain name registration authority wit h true, accurate and complete information about
the identity of the domain name holder for registration purpose, and sign a registration agreement
with it. After completing the domain name regis tration, the applicant becomes the holder of the
domain name registered by him/it.
LAWS AND REGULATIONS ON LABOR AND SOCIAL SECURITY
Labor Law and Labor Contract Law
According to the Labor Law of the PRC ( 《中華人民共和國勞動法》) promulgated on July 5,
1994 and amended on August 27, 20 09 and December 29, 2018, enterprises shall establish and
improve their system of work place safety and sanitation, strictly abide by state rules and standards
on work place safety, and conduct employees training on labor safety and sanitation. Labor safety
and sanitation facilities shall comply with statutory standards. Enterprises and institutions shall
provide employees with a safe work place and san itation conditions which are in compliance with
applicable laws and regulations of labor protection.
The Labor Contract Law of the PRC ( 《中華人民共和國勞動合同法》) promulgated on June
29, 2007 and amended on December 28, 2012, and the Implementation Rules of the Labor Contract
Law of the PRC ( 《中華人民共和國勞動合同法 實施條例》) promulgated on September 18, 2008 set
out specific provisions in relation to the execution, the terms and the termination of a labor contract
and the rights and obligations of the employees and employers, respectively. At the time of hiring,
the employers shall truthfully inform the employees the scope of work, working conditions,
working place, occupational hazards, work safety, salary and other matters which the employees
request to be informed about.
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Social Insurance and Housing Provident Fund
Pursuant to the Social Insurance Law of the PRC ( 《中華人民共和國社會保險法》) which was
promulgated on October 28, 2010 and with effect from July 1, 2011 and latest amended on
December 29, 2018, and the Interim Regulations o n the Collection of Social Insurance Fees ( 《社會
保險費徵繳暫行條例》) issued by the State Council on January 22, 1999 and last amended on
March 24, 2019, employees shall participate in basic pension insurance, basic medical insurance
and unemployment insurance. Basic pension, medi cal and unemployment insurance contributions
shall be paid by both employers and employees. Employees shall also participate in work-related
injury insurance and maternity i nsurance. Work-related injury insurance and maternity insurance
contributions shall be paid by employers rather than employees. Pursuant to the Notice of the
General Office of the State Council on Issuing the Plan for the Pilot Program of Combined
Implementation of Maternity Insurance and Basic Medical Insurance for Employees ( 《國務院辦公
廳關於印發〈生育保險和職工基本醫療保險合併實施試點方案〉的通知》) and Opinions of the
General Office of the State Council on Comprehen sively Promoting the Implementation of the
Combination of Maternity Insurance and Basic Medical Insurance for Employees ( 《國務院辦公廳關
於全面推進生育保險和職工基本醫療保險合併實施的意見》) promulgated on January 19, 2017 and
March 6, 2019, the maternity insurance and basic medical insurance for employees shall be
consolidated. According to the Social Insura nce Law of PRC, employers must carry out social
insurance registration at the local social insurance agency, provide social insurance and pay or
withhold the relevant social insurance premiu ms for or on behalf of employees. For employers
failing to conduct social insurance registration, the administrative department of social insurance
shall order them to make corrections within a prescribed time limit; if they fail to do so within the
time limit, employers shall have to pay a penalty over one time but no more than three times of the
amount of the social insurance premium payable by them. Where an employer fails to pay social
insurance premiums in full or on time, the social ins urance premium collection agency shall order it
to pay or make up the balance within a prescribed time limit, and shall impose a daily late fee at
the rate of 0.05% of the outstanding amount from the due date; if still failing to pay within the time
limit prescribed, a fine of one time to three times the amount in default will be imposed on them by
the competent administrative department.
According to the Regulations on the Admi nistration of Housing Provident Fund ( 《住房公積金
管理條例》) promulgated on April 3, 1999 and amended on March 24, 2002 and March 24, 2019,
employers shall timely pay the housing provident fund in full and overdue or insufficient payment
shall be prohibited. Employers shall process the housing fund payment and deposit registration in
the housing provident fund administrative center. For enterprises who violate the above laws and
regulations and fail to apply for housing provident fund deposit registration or open housing
provident fund accounts for their employees, the housing provident fund administrative center shall
order the relevant enterprises to make corrections within a designated period. Those enterprises
failing to process registration of provident fund ac counts for their employees within the designated
period shall be subject to a fine ranging from RMB10,000 to RMB50,000. When enterprises violate
those provisions and fail to pay the housing provident fund in full amount as due, the housing
provident fund administrative center will ord er such enterprises to pay up the amount within a
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prescribed period; if those enterprises still fail to comply with the regulations upon the expiration of
the above-mentioned time limit, furthe r application will be made to the People ’s Court for
mandatory enforcement.
Pursuant to the Reform Plan of the State Tax and Local Tax Collection Administration System
(《國稅地稅徵管體制改革方案》), which was promulgated by the General Office of the Communist
Party of China and the General Office of the State Council of the PRC on July 20, 2018, from
January 1, 2019, all the social insurance premi ums including the premiums of the basic pension
insurance, unemployment insurance, maternity ins urance, work injury insurance and basic medical
insurance will be collected by the tax authoritie s. According to the Notice of the General Office of
the State Taxation Administration on Conducing t he Relevant Work Concerning the Administration
of Collection of Social Insurance Premiums in a Steady, Orderly and Effective Manner ( 《國家稅務
總局辦公廳關於穩妥有序做好社會保險費徵管有關工作的通知》) promulgated on September 13,
2018 and the Urgent Notice of the General Office of the Ministry of Human Resources and Social
Security on Implementing the Spirit of the Executi ve Meeting of the State Council in Stabilizing
the Collection of Social Insurance Premiums ( 《人力資源和社會保障部辦公廳關於貫徹落實國務院
常務會議精神切實做好穩定社保費徵收工作的緊急通知》) promulgated on September 21, 2018, all
the local authorities responsible for the collection of social insurance are strictly forbidden to
conduct self-collection of historical unpaid social insurance contributions from enterprises. Notice
of the State Administration of Taxation on Implem enting the Several Measures to Further Support
and Serve the Development of Private Economy ( 《國家稅務總局關於實施進一步支持和服務民營
經濟發展若干措施的通知》) promulgated on November 16, 2018, repeats that tax authorities at all
levels may not organize self-collection of arrears of taxpayers including private enterprises in the
previous years.
LAWS AND REGULATIONS IN THE PRC RELATING TO TAX
Income Tax Law
According to the Enterprise Income Tax Law of the PRC ( 《中華人民共和國企業所得稅法》)
promulgated by the National People ’s Congress on March 16, 2007, and most recently amended on
December 29, 2018 and effective from the same date and the Implementation Regulations of the
Enterprise Income Tax Law of the PRC ( 《中華人民共和國企業所得稅法實施條例》) promulgated
by the State Council on December 6, 2007, and most recently amended on April 23, 2019 and
effective from the same date, enterprises are div ided into resident enterprises and non-resident
enterprises. Resident enterpri ses are enterprises which are set up in China in accordance with law,
or which are set up in accordance with the law of a foreign country (region) but which are actually
under the administration of institutions in China. No n-resident enterprises a re enterprises which are
set up in accordance with the law of a foreign country (region) and whose actual administrative
institution is not in China, but which have institut ions or establishments in China, or which have no
such institutions or establishments but have i ncome generated from inside China. Resident
enterprises are subject to a unif orm 25% enterprise income tax rate on their worldwide income. The
enterprise income tax rate is reduced by 20% for qualifying small low-profit enterprises. The high-
tech enterprises that need full support from the PRC ’s government will enjoy a 15% tax rate
reduction for enterprise income tax.
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Income Tax relating to Dividend Distribution
Pursuant to the Arrangement Between the Mainland of China and the Hong Kong Special
Administrative Region for the Avoidance of Doubl e Taxation and the Prevention of Fiscal Evasion
with respect to Taxes on Income ( 《內地和香港特別行政區關於對所得避免雙重徵稅和防止偷漏稅
的安排》) and relevant protocols, which were promulgated by SAT on August 21, 2006, came into
effect on December 8, 2006, the withholding tax rate 5% applies to dividends paid by a PRC
company to a Hong Kong company if such Hong Kong company directly holds at least 25% of the
equity interests in a PRC company, otherwise the 10% withholding tax rate applies.
Pursuant to the Administrative Measures on Entitlement of Non-resident Taxpayers to
Preferential Treatment under Tax Treaties ( 《非居民納稅人享受協 定待遇管理辦法》), which was
promulgated by the SAT on October 14, 2019, came into effect on January 1, 2020, non-resident
taxpayers are entitled to preferential treatment under tax treaties through self-determination, self-
declaration and keeping and documenting relevant information for inspection. Where a non-resident
taxpayer self-assesses and concludes that it satisfies the criteria for claiming treaty benefits, it may
enjoy treaty benefits at the time of tax declar ation or at the time of withholding through a
withholding agent, simultaneously gather and r etain the relevant materials pursuant to the
regulations for future inspection, and subject to subsequent administration by tax authorities.
Value-added Tax
Pursuant to the Provisional Regulations on Value-added Tax of the People ’s Republic of China
(《中華人民共和國增值稅暫行條例》), which was promulgated by the State Council on December
13, 1993 and most recently amended on November 19, 2017 effective from the same date, and the
Detailed Rules for the Implementation o f the Interim Regulations of the People ’s Republic of China
on Value-added Tax ( 《中華人民共和國增值稅暫行條例實施細則》) which was promulgated by the
Ministry of Finance on December 25, 1993 and most recently amended on October 28, 2011, and
effective from November 1, 2011, all entitie s or individuals in the PRC engaged in the sale of
goods, processing services, repair and replacemen t services, and the provision of services, sales of
intangible assets, real estate and importation o f goods are required to pay value-added tax (VAT).
Unless otherwise provided, taxpayers engaged in pr ovision of services and sales of intangible assets
are subject to a tax rate of 6%.
According to the Notice on Implementing the Pilot Program of Replacing Business Tax with
Value-Added Tax in an All-round Manner (Caishui [2016] No. 36) ( 《關於全面推開營業稅改徵增
值稅試點的通知》(財稅[2016] 第36號)) promulgated by the Ministry of Finance and the State
Administration of Taxation promulgated on March 23, 2016 and effective from May 1, 2016, and
amended on July 11, 2017, December 25, 2017 and March 20, 2019, with the approval of the State
Council, from May 1, 2016, the pilot program of replacing business tax with VAT shall be
implemented across the country, all business tax taxpayers in the construction industry, the real
estate industry, the financial industry, and the liv ing service industry shall be included in the scope
of the pilot program, and the payment of business tax shall be replaced by the payment of VAT.
According to the Circular on Policies for Simplifying and Consolidating Value-added Tax Rates
(Cai Shui [2017] No. 37( 《關於簡併增值稅稅率有關政策的通知》(財稅[2017]37號 )), announced by
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the Ministry of Finance and the State Administration of Taxation on April 28, 2017, and effective
from July 1, 2017, the structure of value-added tax rates will be simplified from July 1, 2017, and
the 13% VAT rate will be canceled. The scope of goods with 11% tax rate and the provisions for
deducting input tax are specified.
According to the Announcement on Relevant Policies for Deepening Value-Added Tax
Reform of the Ministry of Finance, the State Taxation Administration and the General
Administration of Customs ( 《財政部、稅務總局、海關總署關於深化增值稅改革有關政策的公
告》)( ‘‘Announcement of the Ministry of Finance of the PRC, the State Taxation Administration
and the General Administration of Customs of the PRC [2019] No. 39’’ ) announced by the Ministry
of Finance, the State Taxation Administration, and the General Administration of Customs on
March 20, 2019 and effective from April 1, 2019, with respect to VAT taxable sales or imported
goods of a VAT general taxpayer, the originally applicable VAT rate of 16% shall be adjusted to
13%; the originally applicable VAT rate of 10% shall be adjusted to 9%.
According to the Circular of the Ministry of Fin ance, the General Admini stration of Customs
and the State Taxation Administration on the Adjustment to Tax Policies on Diamonds and the
Shanghai Diamond Exchange ( 《財政部海關總署國家稅務總局關於調整鑽石及上海鑽石交易所有
關稅收政策的通知 》), the Ministry of Finance, the General Administration of Customs and the
State Taxation Administration stipulated that d iamonds declared for customs clearance on the
Shanghai Diamond Exchange are exempted from customs duty; the tax payment of consumption tax
on diamonds is moved from the production and im porting segments back to retailing segments; the
consumption tax on un-mounted finished diamonds and diamond jewelleries is reduced to a tax rate
of 5% from the original 10%; and the tax rate on the exportation of diamonds is implemented at a
zero tax rate.
REGULATIONS IN RELATIO N TO FOREIGN INVESTMENT
The establishment, operation and managem ent of companies in China is governed by the
Company Law of the People ’s Republic of China, as amended in 1999, 2004, 2005, 2013, 2018 and
2023. According to the PRC Company Law, companies established in the PRC are either limited
liability companies or joint stock limited liability companies. The PRC Company Law applies to
both PRC domestic companies and foreign-invested companies. On December 30, 2019, MOFCOM
and SAMR promulgated the Measures for the Repo rting of Foreign Investment Information
(effective from January 1, 2020), repealing the Provisional Administrative Measures on
Establishment and Modifications (Filing) for Foreign Investment Enterprises. Where foreign
investors or foreign-funded enterprises carry out i nvestment activities directly or indirectly within
China, they shall report investment information to commerce departments. On December 27, 2021,
MOFCOM and NDRC promulgated the Special Administrative Measures (Negative List) for
Foreign Investment Access (Edition 2021) (the ‘‘Negative List (2021) ’’), which became effective on
January 1, 2022. The production and sale of gold jewellery were not included in the Negative List
(2021). Fields that were not included in the Negative List (2021) shall be regulated according to the
principle of equal treatment of do mestic and foreign investments.
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On March 15, 2019, the SCNPC approved the Foreign Investment Law of the People ’s
Republic of China, and on December 26, 2019, the State Council promulgated the Implementing
Rules of the Foreign Investment Law of the People ’s Republic of China (the ‘‘Implementing
Rules ’’), to further clarify and elaborate the relevant provisions of the Foreign Investment Law. The
Foreign Investment Law and the Implementing Rules both took effect on January 1, 2020 and
replaced three previous major laws on foreign in vestments in China, namely, the Sino-foreign
Equity Joint Venture Law of the People ’s Republic of China, the Sino-foreign Cooperative Joint
Venture Law of the People ’s Republic of China and the Wholly Foreign-owned Enterprise Law of
the People ’s Republic of China, together with their resp ective implementing rules. Pursuant to the
Foreign Investment Law, ‘‘foreign investments ’’refer to investment activities conducted by foreign
investors (including foreign natural persons, foreign enterprises or other foreign organizations)
directly or indirectly in the PRC, which include a ny of the following circumstances: (i) foreign
investors setting up foreign-invested enterprises in the PRC solely or jointly with other investors;
(ii) foreign investors obtaining shares, equity inter ests, property portions or other similar rights and
interests of enterprises within the PRC; (iii) foreign investors investing in new projects in the PRC
solely or jointly with other investors; and (iv) investment of other methods as specified in laws,
administrative regulations, or as stipulated by the S tate Council. The Implementing Rules introduce
a see-through principle and further provide that fo reign-invested enterprises that invest in the PRC
shall also be governed by the Foreign Investment Law and the Implementing Rules. Our Company
will change to a foreign-invested enterprise af ter listing on the Hong Kong Stock Exchange and is
required to comply with the above relevant regulations.
LAWS AND REGULATIONS RELATING TO MERGERS AND ACQUISITIONS AND
OVERSEAS LISTING
On February 17, 2023, with the approval of the State Council, the CSRC released the Trial
Administrative Measures of Overseas Securiti es Offering and Listing by Domestic Companies
(‘‘Trial Administrative Measures ’’) and five related guidelines, which has come into effect from
March 31, 2023.
According to the Trial Administrative Measur es, (i) a domestic enterprise in the PRC that
directly or indirectly issues securities outside the PRC or lists and trades its securities outside the
PRC shall file a report with the CSRC and submit th e relevant materials; if a domestic enterprise
fails to comply with the procedures for filing a report, or hides important facts or fabricates any
material content in the report, the domestic ente rprise may be subject to administrative penalties
such as rectification order, warnings, fines, and s o forth, and the controlling shareholders, actual
controllers, officers in charge and other persons directly responsible may also be subject to
administrative penalties such as warnings, fines, a nd so forth; (ii) the direct overseas issuance and
listing of a domestic enterprise refers to the overs eas issuance and listing of shares of a joint stock
limited company registered and established in the PRC; and (iii) any domestic joint stock limited
company shall file a report with the CSRC within three working days after the submission of its
application for an overseas listing. A PRC domestic enterprise that fails to complete the filing in
accordance with the Trial Administrative M easures may be ordered by the CSRC to make
corrections, given a warning and fined not les s than RMB1 million and not more than RMB10
million.
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In addition, overseas offering and listing by domestic companies shall abide by laws,
administrative regulations and relevant rules con cerning foreign investment in China, state-owned
asset administration, industry regulation and outbound investment. Such activities shall not disrupt
domestic market order, harm state or public interest or undermine the lawful rights and interests of
domestic investors. A domestic company that seeks to offer and list securiti es in overseas markets
shall (i) abide by applicable laws, including the Company Law of the People ’s Republic of China
and the Accounting Law of the People ’s Republic of China, administrat ive regulations and relevant
state rules, and formulate articles of association, improve internal control system, enhance corporate
governance, and promote compliance in corporat e finance and accounting practices; (ii) abide by
national secrecy laws and relevant provisions and t ake necessary measures to fulfill confidentiality
obligations. Divulgence of state secrets or working secrets of government agencies is strictly
prohibited. Provision of personal information, im portant data and etc. to overseas parties in relation
to overseas offering and listing of domestic companies shall be in compliance with applicable laws,
administrative regulations and relevant state rules. Furthermore, Trial Administrative Measures also
stipulates that no overseas offering and lis ting shall be made under any of the following
circumstances (among others) (i) where such fundraising offering and listing is explicitly prohibited
by provisions in laws and regulations; (ii) where the intended securities offering and listing may
endanger national security; (iii) where the dom estic company intending to make the securities
offering and listing, or its controlling shareholders and the actual controller, have committed crimes
such as corruption, bribery, embezzlement, misap propriation of property or undermining the order
of the socialist market economy during the latest three years; (iv) where the domestic company
intending to make the securities offering and listing is suspected of committing crimes or major
violations of laws and regulations, and is under i nvestigation according to law, and no conclusion
has yet been made thereof; or (v) where there are material ownership disputes over the equity held
by controlling shareholders or by other shareholde rs that are controlled by controlling shareholders
or actual controllers.
Full Circulation of H Shares
‘‘Full circulation ’’represents listing and circulating on the Stock Exchange of the domestic
unlisted shares of a domestic H-share listed company, including unlisted Domestic Shares held by
domestic shareholders prior to overseas listing, unlisted Domestic Shares additionally issued after
overseas listing, and unlisted shares held by for eign shareholders. On November 14, 2019, CSRC
announced the Guidelines for the ‘‘Full Circulation ’’Program for Domestic Unlisted Shares of H-
share Listed Companies ( 《H股公司境內未上市股份申請「全流通」業務指引》), allows certain
qualified H-share listed companies and H-share c ompanies to be listed for the application of full
circulation to CSRC.
According to the Guidelines for the ‘‘Full Circulation ’’Program for Domestic Unlisted Shares
of H-share Listed Companies, shareholders o f domestic unlisted shares may determine by
themselves through consultation the amount and pr oportion of shares, for which an application will
be filed for circulation, provided that the requirements laid down in the relevant laws and
regulations and set out in the policies for state-owne d asset administration, foreign investment and
industry regulation are met, and the corresponding H-share listed company may be entrusted to file
the said application for ‘‘full circulation ’’. Pursuant to the Trial Measures for Administration of
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Overseas Issuance and Listing of Securities by Domestic Enterprises （《境內企業境外發行證券和
上市管理試行辦法》）, shareholders holding unlisted shares in the PRC should comply with the
relevant requirements of the CSRC and appoint a domestic enterprise to file a report with the
CSRC.
On December 31, 2019, China Securities Depository and Clearing Corporation Limited and
Shenzhen Stock Exchange jointly announced the Measures for Implementation of H-share ‘‘Full
Circulation ’’Business ( ‘‘Measures for Implementation ’’). The businesses of cross-border share
transfer registration, maintenance of deposit and holding details, transaction entrustment and
instruction transmission, settlement, managemen t of settlement participa nts, services of nominal
holders, etc. in relation to the H-share ‘‘full circulation business ’’, are subject to these Measures for
Implementation.
In order to fully promote the reform of H-shares ‘‘full circulation ’’and clarify the business
arrangement and procedures for the relevant shares ’ registration, custody, settlement and delivery,
China Securities Depository and Clearing Corporation Limited has issued the Circular on Issuing
the Guidelines to the Program for ‘‘Full Circulation ’’of H-shares ( 《關於發佈〈H股「全流通」業務
指南〉的通知》) in February 2020, which specified the business preparation, account arrangement,
cross-border share transfer registration and overseas centralized custody, etc. In February 2020,
China Securities Depository and Clearing (Hong Kong) Company Limited promulgated the
Guidelines to the Program for Full Circulation of H-shares of China Securities Depository and
Clearing (Hong Kong) Company Limited ( 《中國證券登記結算(香港)有限公司H股「全流通」業務
指南》) to specify the relevant escrow, custody, agent service of China Securities Depository and
Clearing (Hong Kong) Company Limited, arrang ement for settlement and delivery and other
relevant matters.
LAWS AND REGULATIONS RELATING TO FOREIGN EXCHANGE
The principal regulation governing foreign currency exchange in China is the Foreign
Exchange Administration Regulations of the PRC ( 《中華人民共和國外匯管理條例》) which was
promulgated by the State Council on January 29, 1996 and was latest amended on August 5, 2008.
Pursuant to this regulation and other PRC rules and regulations on currency conversion, Renminbi
is freely convertible for payments of current account items, such as trade and service-related foreign
exchange transactions and dividend payments, but not freely convertible for capital account items,
such as direct investment, loan or investment in s ecurities outside China unless prior approval of
the State Administration of Foreign Exchange (SAFE) or its local counterpart is obtained.
According to the Notice on Relevant Issue Concerning the Administration of Foreign
Exchange for Overseas Listing ( 《關於境外上市外匯管理有關問題的通知》) issued by the SAFE on
December 26, 2014, the domestic companies shall r egister the overseas listing with the foreign
exchange control bureau located at its registere d address in 15 working days after completion of the
overseas listing and issuance. The funds raised by the domestic companies through overseas listing
may be repatriated to China or deposited overseas, provided that the intended use of the fund shall
be consistent with the contents of the document and other public disclosure documents.
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On February 13, 2015, SAFE promulgated the Notice on Further Simplifying and Improving
the Direct Investment-related Foreign Exchange Administration Policies ( 《關於進一步簡化和改進
直接投資外匯管理政策的通知》), according to which, entities and individuals may apply for such
foreign exchange registrations from qualified ba nks. The qualified banks, under the supervision of
SAFE, may directly review the applications and conduct the registration. On March 30, 2015, SAFE
promulgated the Circular on Reforming the Mana gement Approach regarding the Settlement of
Foreign Capital of Foreig n-invested Enterprise ( 《關於改革外商投資企業外匯資本金結匯管理方式
的通知》) (the ‘‘SAFE Circular 19 ’’). According to the SAFE Circular 19, the foreign exchange
capital of foreign-invested enterprises shall be subject to the Discretionary Foreign Exchange
Settlement, which means that the foreign excha nge capital in the capital account of a foreign-
invested enterprise for which the rights and interests of monetary contribution have been confirmed
by the local foreign exchange bureau (or the book-entry registration of monetary contribution by
the banks) can be settled at the banks based on the actual operational needs of the foreign-invested
enterprise, and if a foreign-invested enterprise n eeds to make further payment from such account, it
still needs to provide supporting documents and proceed with the review process with the banks.
Furthermore, the SAFE Circular 19 stipulates that the use of capital by foreign-invested enterprises
shall follow the principles of authenticity and self-use within the business scope of enterprises. The
capital of a foreign-invested enterprise and capit al in Renminbi obtained by the foreign-invested
enterprise from foreign exchange settlement shall not be used for the following purposes: (i)
directly or indirectly used for payments beyond the business scope of the enterprises or payments as
prohibited by relevant laws and regulations; (ii ) directly or indirectly used for investment in
securities unless otherwise provided by the relevant laws and regulations; (iii) directly or indirectly
used for granting entrust loans in Renminbi (unless permitted by the scope of business), repaying
inter enterprise borrowings (including advances by the third-party) or repaying the bank loans in
Renminbi that have been sub-lent to third parties; or (iv) directly or indirectly used for expenses
related to the purchase of real estate that is not for self-use (except for the foreign-invested real
estate enterprises).
The Circular of Further Improving and Adjusting the Direct Investment-related Foreign
Exchange Administration Policies ( 《關於進一步改進和調整直接投資外匯管理政策的通知》) (the
‘‘SAFE Circular 13 ’’), which became effective on June 1, 2015 and was amended on December 30,
2019, cancels the administrative approvals of fore ign exchange registration of direct domestic
investment and direct overseas investment and simplifies the procedure of foreign exchange-related
registration. Pursuant to SAFE Circular 13, inve stors should register with banks for direct domestic
investment and direct overseas investment.
The Circular on Reforming and Standardizing the Foreign Exchange Settlement Management
Policy of Capital Account ( 《關於改革和規範資本項目結匯管理政策的通知》) (the ‘‘SAFE Circular
16’’), was promulgated by SAFE on June 9, 2016. Pursuant to the SAFE Circular 16, enterprises
registered in the PRC may also convert their for eign debts from foreign currency to Renminbi on a
self-discretionary basis. The SAFE Circular 16 r eiterates the principle that Renminbi converted
from foreign currency-denominated capital of a company may not be directly or indirectly used for
purposes beyond its business scope or prohibited by PRC Laws, while such converted Renminbi
shall not be provided as loans t o its non-affiliated entities.
REGULATORY OVERVIEW
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On January 26, 2017, SAFE promulgated the Circular on Further Improving Reform of
Foreign Exchange Administration and Optimizin g Genuineness and Compliance Verification ( 《關於
進一步推進外匯管理改革完善真實合規性審核的通知》), which stipulates several capital control
measures with respect to the outbound remittance of profit from domestic entities to offshore
entities, including: (i) banks should check board r esolutions regarding profit distribution, the
original version of tax filing records, and audited financial statements pursuant to the principle of
genuine transactions; and (ii) domestic entities should hold income to account for previous years ’
losses before remitting the profits. Moreover, pursuant to this circular, domestic entities should
make detailed explanations of the sources of capital and utilization arrangements, and provide board
resolutions, contracts, and other proof when completing the registration procedures in connection
with an outbound investment.
On October 23, 2019, the SAFE promulgated the Notice for Further Advancing the
Facilitation of Cross-border Trade and Investment ( 《關於進一步促進跨境貿易投資便利化的通
知》), which, among other things, allows all FIEs to use Renminbi converted from foreign currency
denominated capital for equity investments in Chi na, as long as the equity investment is genuine,
does not violate applicable laws, and complies with the negative list on foreign investment.
According to the Circular of the State Admini stration for Foreign Exchange on Optimizing
Foreign Exchange Administration to Support t he Development of Foreign-related Business ( 《國家
外匯管理局關於優化外匯管理支持涉外業務發展的通知》) promulgated with effect from April 10,
2020 by the SAFE, the reform of facilitating the payments of incomes under the capital accounts
shall be promoted nationwide. Under the prerequisite of ensuring true and compliant use of funds
and compliance and complying with the prevailing administrative provisions on use of income from
capital projects, enterprises which satisfy the criteria are allowed to use income under the capital
account, such as capital funds, foreign debt and o verseas listing, etc., for domestic payment,
without the need to provide proof materials for veracity to the bank beforehand for each
transaction.
REGULATORY OVERVIEW
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OUR HISTORY AND FOUNDERS
Our business was founded by M r. Wang Zhongshan and Ms. Zhang Xiuqin, each of whom has
more than 20 years of experience in jewellery industry. Ms. Zhang Xiuqin is the spouse of Mr.
Wang Zhongshan. Prior to founding our Group, Mr. Wang Zhongshan devoted himself to the
jewellery production and processing industry th rough accumulating valuable industry experience by
engaging in gemstone inlay and learning from masters of arts and crafts in this field. See
‘‘Directors, Supervisors and Senior Management ’’for further details. We have evolved since 2000,
when our operations were limited to processing and sale of jewellery. With the registration of
"Mokingran" as our trademark in 2004, we began designing innovative jewellery products via OBM
business model. We then further established our franchisees network since our first franchisee
stores in 2012 and gradually become one of the very few major gold jewellery brands in the PRC
with an operation that encompass key stages of the gold jewellery. Changle Huaye Jewellery
Limited* (昌 樂華業珠寶有限公司, now known as 夢金園黃金珠寶集團股份有限公司
MOKINGRAN JEWELLERY GROUP CO., LTD.) is our first manufacturing and operation entity
established in Changle County, Weifang City, Shandong Province in 2000 and was principally
engaged in processing, wholesale, and sales of jewellery upon its establishment. See ‘‘ — Our
Corporate Development ’’below for details.
We have continuously expanded our offline sales network through various subsidiaries. To
embrace opportunities in e-commerce market, we established Shenzhen E-commerce with an
Independent Third Party in August 2018. Shenzhen E-commerce is principally engaged in online
sales of jewellery. See ‘‘ — Our Corporate Development ’’and ‘‘ — Our Subsidiaries ’’below for
details.
OUR KEY MILESTONES
The following table sets forth our key milestones:
Year Milestones/Events
2008 . . . . We developed a patented technology of gold jewellery welding method ( 一種黃金飾品焊接方
法), also known as ‘‘autogenous welding" ( 無焊料焊接) and increased the purity level of gold
jewellery to 999.9.
2010 . . . . Our trademark ‘‘
 ’’was awarded as the China Well-known Trademark by China Trademark
Office of the State Administration for Industry and Commerce of the People ’s Republic of China.
2011 . . . . Our patented technology of gold jewellery welding method ( 一種黃金飾品焊接方法), also
known as ‘‘autogenous welding ’’(無焊料焊接) was awarded the China Patent Excellence Award
(第十三屆中國專利優秀獎) by National Intellectual Property Administration of the People ’s
Republic of China and was listed as Key Torch Plan Project (火炬計 劃項目) by the Ministry of
Science and Technology of the People ’s Republic of China.
2012 . . . . We have sponsored the ‘‘Golden 100 Seconds ( 《黃金100秒 》)’’produced by CCTV 3 for eight
years consecutively since 2012.
2013 . . . . We were awarded the ‘‘Provincial Intangible Cultural Heritage ( 省級非物質文化遺產)’’for our
skills in respect of gold jewellery crafting.
2014 . . . . We participated in the drafting of the national standard ‘‘Gold Ingot ’’.
2016 . . . . We successfully obtained the title of Guinness World Records — Largest Gold Ring and the
Purest Gold Jewellery, with purity level of gold jewellery products reaching 99.9999.
2017 . . . . We were awarded the China Patent Excellence Award for our ‘‘automatic thin wall gold tube
necking machine ( 薄壁金管自動縮口機)’’.
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Year Milestones/Events
2019 . . . . We achieved technological breakthroughs and ac hieved domestic mass production of spring
clasps for 18K-gold jewellery.
2022 . . . . We have been among the ‘‘Top Ten Enterprises in China in terms of Gold Jewellery Processing
Volume ( 中國黃金首飾加工量十大企業)’’for eight consecutive years since 2014.
. We have been awarded the ‘‘Top Ten Enterprises in China in terms of Gold and Jewellery Sales
Revenue ’’for seven consecutive years since 2015.
. We won the title of Single Champion Enterprise in Manufacturing Industry in Shandong
Province ( 山東省製造業單項冠軍企業).
2023 . . . . We commenced the operation of our gold jewellery intelligent manufacturing center.
OUR CORPORATE DEVELOPMENT
Establishment of our Company in September 2000
Our Company (formerly known as ‘‘Changle Huaye Jewellery Limited* ( 昌樂華業珠寶有限公
司)’’, ‘‘Tianjin Mokingran Jewellery Limited* ( 天津夢金園珠寶首飾有限公司)’’, ‘‘Tianjin
Mokingran Gold Jewellery Limited* ( 天津夢金園黃金珠寶有限公司)’’ and ‘‘Mokingran Gold
Jewellery Group Limited* ( 夢金園黃金珠寶集團有限公司)’’) was established on September 8,
2000 in the PRC with an initial registered cap ital of RMB500,000, of which RMB250,000 was
contributed by Mr. Wang Zhongshan in cash and RMB250,000 was contributed by Mr. Zhu Xuede
(朱學德) in cash. Mr. Zhu is a friend of Mr. Wang Zhongshan and an Independent Third Party. The
initial registered capital was fully paid up. Upon its establishment, our Company was owned as to
50% by Mr. Wang Zhongshan and 50% by Mr. Zhu Xuede ( 朱學德).
Ms. Zhang Xiuqin, spouse of Mr. Wang Zhongshan, acquired the entire equity interests held
by Mr. Zhu Xuede ( 朱學德) at a consideration of RMB250,000 in December 2000. The
consideration was determined based on the then registered capital of our Company and had been
fully settled. Upon completion of the transfer of a foresaid equity interests, our Company was owned
as to 50% by Mr. Wang Zhongshan and 50% by Ms. Zhang Xiuqin. Mr. Zhu Xuede ( 朱學德)
disposed his entire equity interests in our Company due to his personal financial concerns.
Capital increases by our Controlling Shareholders from March 2003 to December 2015
After two rounds of capital increase by Mr. Wang Zhongshan and Ms. Zhang Xiuqin from
March 2003 to May 2011, the registered capital of our Company was increased from RMB500,000
to RMB120 million, of which RMB59,750,000 was contributed by Mr. Wang Zhongshan in cash
and RMB59,750,000 was contributed by Ms. Zhang Xiuqin in cash. The consideration of the above
two rounds of capital increase was determined ba sed on the then registered capital of our Company
and had been fully paid up.
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In December 2015, Tianjin Yuanjinmeng subscr ibed for the increased registered capital of
RMB40 million in cash. Tianjin Yuanjinmeng has been owned as to 50% by Mr. Wang Guoxin and
50% by Ms. Wang Na since its establishment and up to the Latest Practicable Date. Mr. Wang
Guoxin is the son of Mr. Wang Zhongshan and Ms. Zhang Xiuqin and Ms. Wang Na is the
daughter of Mr. Wang Zhongshan and Ms. Zhang Xiuqin. The consideration of such capital
increase was determined based on the then registered capital of our Company and had been fully
paid up. Upon completion of the capital increase, our Company was owned as to 25.00%, 37.50%
and 37.50% by Tianjin Yuanjinmeng, Mr. Wang Zhongshan and Ms. Zhang Xiuqin, respectively.
Capital increases by three Employee Shareholding Platforms in March 2016
In March 2016, our Employee Shareholding Platforms subscribed for the increased registered
capital of RMB40 million in cash, of which Jinmeng Partnership, Jinyuan Partnership and Jinlong
Partnership made capital contribution of RMB 22 million, RMB9 million and RMB9 million,
respectively. See ‘‘ — Our Employee Shareholding Platforms ’’below for details of our Employee
Shareholding Platforms. The consideration of s uch capital increase was determined based on the
then net asset value of our Company as of the end of 2015 and had been fully paid up. Upon
completion of the capital increase, our Company was owned as to 11.00%, 4.50%, 4.50%, 20.00%,
30.00% and 30.00% by Jinmeng Partnership, Jinyua n Partnership, Jinlong Partnership, Tianjin
Yuanjinmeng, Mr. Wang Zhongshan and Ms. Zhang Xiuqin, respectively.
Conversion to a joint stock limited company
On June 7, 2018, all our then Shareholders passed resolutions approving, among other matters,
the conversion of our Company from a limited liability company into a joint stock limited
company. Upon completion of the conversion, the registered capital of our Company was
RMB224,900,000 divided into 224,900,000 Shares with a nominal value of RMB1.00 each, which
were subscribed by all the then Shareholders in proportion to their respective equity interests in our
Company before the conversion. The share conversion was completed on June 29, 2018.
HISTORY, DEVELOPMENT AND CORPORATE STRUCTURE
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Investment by our Pre-IPO Investors
In March 2018, our Company entered into a capital increase agreement with Tianjin Haikai
Xinchuang, Ping An Tianyu, Chengcheng Dinghui, Jiaxing Yugang and Ms. Huang Yi, pursuant to
which Tianjin Haikai Xinchuang, Ping An Tianyu, Chengcheng Dinghui, Jiaxing Yugang and Ms.
Huang Yi subscribed for increased registered capital of RMB10.00 million, RMB7.86 million,
RMB1.14 million, RMB0.90 million and RMB5.00 million, respectively. The consideration of such
capital increase was determined after arm’ s length negotiation among the parties with reference to
the then net profits of the Company for the year ended December 31, 2017. Each of Tianjin Haikai
Xinchuang, Ping An Tianyu, Chengcheng Dinghui, Jiaxing Yugang and Ms. Huang Yi fully settled
their respective subscription amount on March 28, 2018, March 23, 2018, March 26, 2018, March
23, 2018 and March 23, 2018, respectively. Upon co mpletion of the investm ent, the shareholding
structure of our Company was as follows:
Name of Shareholders Number of Shares
Approximate equity
interests percentage
in our Company
(%)
1 Wang Zhongshan .................... 6 0 , 0 0 0 , 0 0 0 2 6 . 6 8 %
2 Z h a n gX i u q i n ...................... 6 0 , 0 0 0 , 0 0 0 2 6 . 6 8 %
3 T i a n j i nY u a n j i n m e n g ................. 4 0 , 0 0 0 , 0 0 0 1 7 . 7 9 %
4 J i n m e n gP a r t n e r s h i p .................. 2 2 , 0 0 0 , 0 0 0 9 . 7 8 %
5 Tianjin Haikai Xinchuang . . . . . . . . . . . . . . 10,000,000 4.45%
6 J i n y u a nP a r t n e r s h i p .................. 9 , 0 0 0 , 0 0 0 4 . 0 0 %
7 J i n l o n gP a r t n e r s h i p ................... 9 , 0 0 0 , 0 0 0 4 . 0 0 %
8 Ping An Tianyu ( N o t e ) ................. 7,860,000 3.49%
9 H u a n gY i ......................... 5 , 0 0 0 , 0 0 0 2 . 2 2 %
10 Chengcheng Dinghui ( N o t e ) ............. 1,140,000 0.51%
11 Jiaxing Yugang ( N o t e )................. 900,000 0.40%
224,900,000 100.00%
Note:
Ping An Tianyu is a limited liability partnership established in the PRC on December 7, 2015, the general partner of
which is Ping An Caizhi Investment Management Co., Ltd.* ( 平安財智投資管理有限公司). Chengcheng Dinghui is
a limited liability partnership established in the PRC on September 30, 2017, the general partner of which is
Guangzhou Chengcheng Equity Inve stment Management Co., Ltd.* ( 廣州成誠股權投資管理有限公司). Jiaxing
Yugang is a limited partnership established in the PRC on March 31, 2017, the general partner of which is Ping An
Caizhi Investment Management Co., Ltd.* ( 平安財智投資管理有限公司). Ping An Tianyu, Chengcheng Dinghui and
Jiaxing Yugang are Independent Third Parties.
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On January 26, 2022, Chengcheng Dinghui entered into a share transfer agreement with Ms.
Zhang Yizhen and Mr. Zhang Jianjun, pursuant to which Chengcheng Dinghui transferred its
approximately 0.36% and 0.15% equity interests in our Company to Ms. Zhang Yizhen and Mr.
Zhang Jianjun, respectively, at a considerati on of RMB12.97 per Share. The consideration was
determined after arm ’s length negotiation among the parties and had been fully settled in February
2022. Upon completion of the Share transfer, the shareholding structure of our Company was as
follows:
Name of Shareholders Number of Shares
Approximate equity
interests percentage
in our Company
(%)
1 Wang Zhongshan .................... 6 0 , 0 0 0 , 0 0 0 2 6 . 6 8 %
2 Z h a n gX i u q i n ...................... 6 0 , 0 0 0 , 0 0 0 2 6 . 6 8 %
3 T i a n j i nY u a n j i n m e n g ................. 4 0 , 0 0 0 , 0 0 0 1 7 . 7 9 %
4 J i n m e n gP a r t n e r s h i p .................. 2 2 , 0 0 0 , 0 0 0 9 . 7 8 %
5 Tianjin Haikai Xinchuang . . . . . . . . . . . . . . 10,000,000 4.45%
6 J i n y u a nP a r t n e r s h i p .................. 9 , 0 0 0 , 0 0 0 4 . 0 0 %
7 J i n l o n gP a r t n e r s h i p ................... 9 , 0 0 0 , 0 0 0 4 . 0 0 %
8 P i n gA nT i a n y u ..................... 7 , 8 6 0 , 0 0 0 3 . 4 9 %
9 H u a n gY i ......................... 5 , 0 0 0 , 0 0 0 2 . 2 2 %
1 0 J i a x i n gY u g a n g ..................... 9 0 0 , 0 0 0 0 . 4 0 %
1 1 Z h a n gY i z h e n ...................... 8 0 0 , 0 0 0 0 . 3 6 %
1 2 Z h a n gJ i a n j u n ...................... 3 4 0 , 0 0 0 0 . 1 5 %
224,900,000 100.00%
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On March 5, 2022, Ms. Huang Yi entered into a share transfer agreement with Ms. Zhang
Yizhen, pursuant to which Ms. Huang Yi transferre d her approximately 0.67% equity interests in
our Company to Ms. Zhang Yizhen at a consideration of RMB12.98 per Share for her personal
financial reason. The total consideration of RMB19,470,000 was determined based on arm ’s length
negotiation among the parties and had been fully settled on January 27, 2022 (Note) . Upon
completion of the Share transfer, the sharehol ding structure of our Company was as follows:
Name of Shareholders Number of Shares
Approximate equity
interests percentage
in our Company
(%)
1 Wang Zhongshan .................... 6 0 , 0 0 0 , 0 0 0 2 6 . 6 8 %
2 Z h a n gX i u q i n ...................... 6 0 , 0 0 0 , 0 0 0 2 6 . 6 8 %
3 T i a n j i nY u a n j i n m e n g ................. 4 0 , 0 0 0 , 0 0 0 1 7 . 7 9 %
4 J i n m e n gP a r t n e r s h i p .................. 2 2 , 0 0 0 , 0 0 0 9 . 7 8 %
5 Tianjin Haikai Xinchuang . . . . . . . . . . . . . . 10,000,000 4.45%
6 J i n y u a nP a r t n e r s h i p .................. 9 , 0 0 0 , 0 0 0 4 . 0 0 %
7 J i n l o n gP a r t n e r s h i p ................... 9 , 0 0 0 , 0 0 0 4 . 0 0 %
8 P i n gA nT i a n y u ..................... 7 , 8 6 0 , 0 0 0 3 . 4 9 %
9 H u a n gY i ......................... 3 , 5 0 0 , 0 0 0 1 . 5 6 %
1 0 J i a x i n gY u g a n g ..................... 9 0 0 , 0 0 0 0 . 4 0 %
1 1 Z h a n gY i z h e n ...................... 2 , 3 0 0 , 0 0 0 1 . 0 2 %
1 2 Z h a n gJ i a n j u n ...................... 3 4 0 , 0 0 0 0 . 1 5 %
224,900,000 100.00%
On May 20, 2022, Jiaxing Yugang entered into a share transfer agreement with Mr. Wang
Zhongshan, pursuant to which Jiaxing Yugang transferred its approximately 0.40% equity interests
in our Company to Mr. Wang Zhongshan at a consideration of RMB12.88 per Share. The total
consideration of RMB11,592,0 00 was determined after arm ’s length negotiation among the parties
and had been fully settled on May 23, 2022.
On the same date, Ping An Tianyu entered into two separate share transfer agreements with
Mr. Wang Zhongshan and Mr. Zhao Duxue, pursuant to which Ping An Tianyu transferred its
approximately 1.72% and 1.78% equity interests in our Company to Mr. Wang Zhongshan and Mr.
Zhao Duxue, respectively, at a consideration of RMB12.88 per Share, which was determined after
arm’s length negotiation among the parties and had been fully settled on May 23, 2022.
Note: To the best knowledge of the Company, given that Ms. Huang Yi and Ms. Zhang Yizhen were not in the same country to
execute the agreement of the share transfer and in the interest of time, they agreed to settle the consideration first in
January 2022 and subsequently ex ecuted the agreement in writing.
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Upon completion of the Share transfers, the shareholding structure of our Company was as
follows:
Name of Shareholders Number of Shares
Approximate equity
interests percentage
in our Company
(%)
1 Wang Zhongshan .................... 6 4 , 7 6 0 , 0 0 0 2 8 . 8 0 %
2 Z h a n gX i u q i n ...................... 6 0 , 0 0 0 , 0 0 0 2 6 . 6 8 %
3 T i a n j i nY u a n j i n m e n g ................. 4 0 , 0 0 0 , 0 0 0 1 7 . 7 9 %
4 J i n m e n gP a r t n e r s h i p .................. 2 2 , 0 0 0 , 0 0 0 9 . 7 8 %
5 Tianjin Haikai Xinchuang . . . . . . . . . . . . . . 10,000,000 4.45%
6 J i n y u a nP a r t n e r s h i p .................. 9 , 0 0 0 , 0 0 0 4 . 0 0 %
7 J i n l o n gP a r t n e r s h i p ................... 9 , 0 0 0 , 0 0 0 4 . 0 0 %
8 Zhao Duxue . . ...................... 4 , 0 0 0 , 0 0 0 1 . 7 8 %
9 H u a n gY i ......................... 3 , 5 0 0 , 0 0 0 1 . 5 5 %
1 0 Z h a n gY i z h e n ...................... 2 , 3 0 0 , 0 0 0 1 . 0 2 %
1 1 Z h a n gJ i a n j u n ...................... 3 4 0 , 0 0 0 0 . 1 5 %
224,900,000 100.00%
Subsequent to being informed that our previous A-share listing attempt was not approved by
the CSRC in November 2021, Chengcheng Dinghui, Jiaxing Yugang and Ping An Tianyu disposed
of their entire equity interests in our Company between January to May 2022 due to their respective
internal investment decisions.
In August 2022, CITIC Securities Investment subscribed for 4,166,666 Shares in cash at
RMB12.00 per Share. The consideration of the capital increase was determined after arm ’s length
negotiation among the parties with reference to the then net asset value of our Company and had
been fully paid up on August 26, 2022. Upon completion of the capital increase, the shareholding
structure of our Company was as follows:
Name of Shareholders Number of Shares
Approximate equity
interests percentage
in our Company
(%)
1 Wang Zhongshan .................... 6 4 , 7 6 0 , 0 0 0 2 8 . 2 7 %
2 Z h a n gX i u q i n ...................... 6 0 , 0 0 0 , 0 0 0 2 6 . 1 9 %
3 T i a n j i nY u a n j i n m e n g ................. 4 0 , 0 0 0 , 0 0 0 1 7 . 4 6 %
4 J i n m e n gP a r t n e r s h i p .................. 2 2 , 0 0 0 , 0 0 0 9 . 6 0 %
5 Tianjin Haikai Xinchuang . . . . . . . . . . . . . . 10,000,000 4.37%
6 J i n y u a nP a r t n e r s h i p .................. 9 , 0 0 0 , 0 0 0 3 . 9 3 %
7 J i n l o n gP a r t n e r s h i p ................... 9 , 0 0 0 , 0 0 0 3 . 9 3 %
8 CITIC Securities Investment . . . . . . . . . . . . 4,166,666 1.82%
9 Zhao Duxue . . ...................... 4 , 0 0 0 , 0 0 0 1 . 7 5 %
1 0 H u a n gY i ......................... 3 , 5 0 0 , 0 0 0 1 . 5 3 %
1 1 Z h a n gY i z h e n ...................... 2 , 3 0 0 , 0 0 0 1 . 0 0 %
1 2 Z h a n gJ i a n j u n ...................... 3 4 0 , 0 0 0 0 . 1 5 %
229,066,666 100.00%
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OUR EMPLOYEE SHAREHOLDING PLATFORMS
In recognition of the contributions of our Group ’s directors, supervisors, senior management
and employees and to incentivize them to further p romote our development, Jinmeng Partnership,
Jinyuan Partnership and Jinlong Partnership were established in the PRC as our Employee
Shareholding Platforms.
JINMENG PARTNERSHIP
Jinmeng Partnership was established in the P RC as a limited partnership on March 16, 2016.
Mr. Wang Zhongshan (our founder, chairman of our Board, executive Director and a member of our
Controlling Shareholders group), is the general pa rtner of Jinmeng Partnership and is responsible
for the management of Jinmeng Partnership. As of t he Latest Practicable Date, Jinmeng Partnership
had 15 limited partners, including Mr. Wang Guoxin (our senior management and a member of our
Controlling Shareholders group), Ms. Wang Na (a me mber of our Controlling Shareholders group),
Ms. Jiang Liying (our executive Director), Mr. Wang Zegang (our executive Director), Mr. Wen
Shuqing (our senior management), Mr. Zhang Libai (our senior management), Mr. Zhang Xin (our
Supervisor), Mr. Wang Yanpeng (our Supervisor) and other seven persons who are either directors,
supervisors, senior management of our subsidiaries or employees of our Group. As of the Latest
Practicable Date, Jinmeng Partnership subscribe d for 9.60% of the total issued Share capital of our
Company by using the relevant employees ’ own funds. The voting rights attaching to the Shares
held by Jinmeng Partnership are exercised by th e general partner (i.e. Mr. Wang Zhongshan) of
Jinmeng Partnership.
JINYUAN PARTNERSHIP
Jinyuan Partnership was established in the P RC as a limited partnership on March 16, 2016.
Ms. Zhang Xiuqin (our vice chairman, execu tive Director and a member of our Controlling
Shareholders group) is the general partner of Ji nyuan Partnership and is responsible for the
management of Jinyuan Partnership. As of the Latest Practicable Date, Jinyuan Partnership had 28
limited partners, who are either directors, supervisors, senior management of our subsidiaries or
employees of our Group. As of the Latest Practic able Date, Jinyuan Partnership subscribed for
3.93% of the total issued Share capital of ou r Company by using the relevant employees ’ own
funds. The voting rights attaching to the Shares held by Jinyuan Partnership are exercised by the
general partner (i.e. Ms. Zhang Xiuqin) of Jinyuan Partnership.
JINLONG PARTNERSHIP
Jinlong Partnership was established in the PRC as a limited partnership on March 16, 2016.
Ms. Zhang Xiuqin is the general partner of Jinlong Partnership and is responsible for the
management of Jinlong Partnership. As of the Latest Practicable Date, Jinlong Partnership had 36
limited partners, including 35 persons who are either directors, supervisors, senior management of
our subsidiaries or employees of our Group and one successor who is the spouse of our Group ’s
deceased employee. As of the Latest Practicable Da te, Jinlong Partnership subscribed for 3.93% of
HISTORY, DEVELOPMENT AND CORPORATE STRUCTURE
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the total issued Share capital of our Company by using the relevant employees ’ own funds. The
voting rights attaching to the Shares held by Jinlong Partnership are exercised by the general
partner (i.e. Ms. Zhang Xiuqin) of Jinlong Partnership.
OUR SUBSIDIARIES
As of the Latest Practicable Date, we had 22 subsidiaries, including 21 wholly-owned
subsidiaries and one non-wholly owned subsidiary. The table below sets forth details of our 10
principal subsidiaries, which, in the opinion of our Directors, are material to our business
development or formed a substantial portion of the assets, revenue or profits of our Group during
the Track Record Period:
Name
Place of
Establishment Shareholding Structure
Registered
Capital/Share
Capital
Date of
Establishment/Date
of Commencement
of Business Principal Business Activities
Changle Chengxin . . . PRC 100% owned by
Company
RMB40,000,000 September 8, 2003 Jewellery retail stores
Shandong Mokingran . . PRC 100% owned by
Company
RMB60,000,000 April 5, 2004 Wholesale sales of jewellery
Shandong Yifu . . . . . PRC 100% owned by
Company
RMB76,614,000 August 2, 2007 Jewellery production
Shenzhen Mokingran . . PRC 100% owned by
Company
RMB80,000,000 December 10, 2010 Di amond jewellery retail stores
Jinan Mokingran . . . . PRC 100% owned by
Company
RMB5,000,000 June 17, 2011 Wholesale sales of jewellery
Zhongbao Zhengxin . . PRC 100% owned by
Company
RMB50,000,000 March 26, 2013 Jewellery testing
Shanghai Yuanjunmeng PRC 100% owned by
Shandong Mokingran
RMB1,000,000 December 3, 2014 Wholesale of pol ished diamond
Shandong E-commerce . PRC 100% owned by
Shandong Mokingran
RMB3,000,000 December 12, 2014 Jewellery retail stores and online
sales
Shenyang Mokingran . . PRC 100% owned by
Company
RMB5,000,000 April 7, 2015 Wholesale sales of jewellery
Beijing Mokingran . . . PRC 100% owned by
Company
RMB5,000,000 August 21, 2017 Wholesale sales of jewellery
HISTORY, DEVELOPMENT AND CORPORATE STRUCTURE
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PREVIOUS A-SHARE APPLICATIONS
The First A-Share Application
In August 2018, we engaged GF Securities Co., Ltd. ( 廣發証券股份有限公司) as the sponsor
in preparation for our proposed submission of application for listing of our shares (the ‘‘A-share
Application ’’) on the main board of the Shenzhen Stock Exchange (the ‘‘SZSE’’), considering the
fact that GF Securities Co., Ltd. ( 廣發証券股份有限公司) had previous experience of sponsoring
the listing of another PRC gold jewellery company on the SZSE. After such engagement, GF
Securities did not make any formal listing appli cation on behalf of the Company. Subsequently, we
terminated our engagement with GF Securities Co., Ltd. ( 廣發証券股份有限公司) in May 2020
because GF Securities might have been involved in material non-compliance and was allegedly
subject to investigation, and engaged Zhongtai Securities Co., Ltd. ( 中泰證券股份有限公司)a so u r
sponsor to submit the A-share Application on the main board of the SZSE to the CSRC in
September 2020. There has been no disagreement between our Company and GF Securities Co.,
Ltd. and Zhongtai Securities Co., Ltd in respect of the A-share Application. Based on the
independent due diligence work performed by th e Sole Sponsor, nothing material has come to the
attention of the Sole Sponsor which indicated that there were any disagreements between the
Company and the previous sponsors engaged by the Company in relation to the A-share
Application.
During the vetting of our A-share Application, the CSRC issued two rounds of comments,
with the first batch of comments in November 2020 and second batch in June 2021. We provided
written responses to these comments. Our A-Share Application then went into hearing on November
25, 2021. The CSRC formally issued a rejection notice to our A-share Application on December 20,
2021 and expressed concerns that certain of its comments had not been satisfactorily addressed,
namely (i) the business rationale of our gold trade-in and ‘‘One RMB Exchange ’’activities; (ii) the
discrepancy in inventory data in the A-share Applic ation materials; and (iii) the inventory level of
our franchise stores (the ‘‘CSRC Comments ’’). We terminated our engagement of Zhongtai
Securities Co., Ltd. ( 中泰證券股份有限公司) and engaged CITIC Securities Co., Ltd ( 中信證券有
限公司) for our second A-share application, after considering the latter ’s market reputation and
experience in similar transactions. For further details of our second A-share application and
engagement of CITIC Securities Co., Ltd ( 中信證券有限公司), please see ‘‘ —The Second A-Share
Application and the H-Share Listing. ’’
Our Directors are of the view, and the Sole Sponsor concurs, that the above-mentioned
comments are resolved or addressed, or render our Company not suitable for listing on the Stock
Exchange based on the facts and grounds set forth below.
(1) We believe we have a sound business rationale for our gold trade-in and ‘‘One RMB
Exchange ’’activities
During the course of vetting by the CSRC, co ncerns were raised as to the commercial
rationale of our gold trade-in activities. For details on the background and business activities
of gold trade-in, see ‘‘Business — Gold Trade-in’’. According to Frost & Sullivan, gold trade-
in is a common practice across the gold jewellery industry. Despite such activity being an
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industry norm, the CSRC was concerned that our Company had engaged in gold trade-in on a
much larger scale compared to other listed companies in the same industry. In addition,
according to Frost & Sullivan, the proportions of gold trade-in transaction among our peers
with purifying and manufacturing capabilities in the gold jewellery industry ranged from 20%
to 40%, in terms of our peers ’ sales volume during the Track Record Period, which was
comparable to that of our Group. Furthermore, according to Frost & Sullivan, the
counterparties of the gold trade-in conducted b y our peers are similar to ours, which include
franchisees, provincial-dealers and consumer s. The table sets forth the examples of our peer
companies that engage in the sales of gold jewel lery products and possess purification and
manufacturing capabilities:
Identity Profile Business model
Scale of
operations, in
terms of gold
jewellery revenue
in the PRC, 2023
Proportion of gold
trade-in
transaction in
terms of sales
volume, 2023 (Note)
Competitor A . . . . Competitor A is a leading
jewellery company that
offers a wide range of
jewellery products,
including gold, platinum,
and diamonds.
Its capacity to refine and
produce gold is limited,
requiring third-party
services. Additionally, it
sets a high trade-in
threshold for consumers
to exchange for new
products.
RMB11.0 billion approximately 15%
Competitor B . . . . Competitor B is one of
the China time-honoured
brands in the PRC.
Competitor B mainly
engages in jewellery and
gold business, stationary
and art craft.
It has certain purification
capabilities. Gold trade-in
is mainly used as a
marketing strategy to
serve and attract new and
existing customers.
RMB56.4 billion approximately 25%
Competitor C . . . . Competitor C is a leading
gold jewellery company
in the PRC. Competitor C
mainly engages in the
gold and gold jewellery
processing and sales.
It has a strong capability
with specialized recycling
business, and the self-
produced products are
mainly gold bars.
Additionally, Competitor
C has subsidiaries, which
specialize in gold
refining.
RMB55.5 billion approximately 50%
Competitor D . . . . Competitor D is a
jewellery company that
integrates the research
and development, design,
production, and retail of
jewellery, including gold,
platinum, diamonds, and
jade.
Its gold refining and
production capacity is
minimal, so it relies on
third parties to carry out
these processes.
RMB3.9 billion approximately 30%
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Note: Proportion of gold trade-in transactions in terms of sales volume = Volume of gold trade-in/Total sales
volume of gold. Competitor E in the below table does not have gold purification capabilities.
For further information on the background of conducting gold trade-in, see ‘‘Business —
Gold Trade-in — Background ’’.
Our Directors are of the view, and the Sole Sponsor concurs, that there are no material
unusual features regarding our gold trade-in practice when compared to other major industry
players, and that CSRC ’s concerns on our gold trade-in activities during the previous A-share
Application are resolved or addressed for the following reasons:
Commercial Rationale
— Our Strong Gold Purification Capability: We have the technical capability to
effectively process used gold for purifi cation. According to Frost & Sullivan, the
approximate proportions of gold trade-in to total revenue among our peers and our
Group during the previous A-Share Application (for the years ended December 31,
2018, 2019 and 2020) and during the Track Record Period, were as follows:
Proportion of gold trade-in to total revenue
2018 2019 2020 2021 2022 2023
Competitor A . . . . . 10% 15% 10% 15% 15% 20%
Competitor B . . . . . 15% 20% 15% 25% 20% 30%
Competitor C . . . . . 25% 25% 35% 45% 45% 50%
Competitor D . . . . . 20% 25% 15% 30% 30% 30%
Competitor E . . . . . 5% 5% 5% 20% 25% 30%
Our Group . . . . . . . 59.4% 51.9% 67.5% 47.9% 36.9% 33.1%
We had a relatively higher demand for gold a s raw materials in our manufacturing
process, compared to other major indust ry players during the previous A-Share
Application (for the three years ended December 31, 2020). According to Frost &
Sullivan, other major industry players either do not engage in the manufacturing of
gold jewelry or lack sufficient gold purific ation capabilities to process used gold, or
both. Our gold purification capabilities allow us to effectively reproduce high-purity
gold from trade-in gold, making it a viable option for us to source gold. According
to Frost & Sullivan, some gold jewellery companies lack adequate production
capacity and sufficient gold purification capabilities, necessitating the outsourcing
of used gold to refineries, which may increase costs and result in a lower trade-in
proportion. As such, although consumers had the needs for gold trade-in, some
major industry peers might not accept trade-in gold or imposed restrictions on the
gold trade-in during the A-share application period of the Company from 2018 to
2020, considering their cost to deal with the used gold received, according to Frost
& Sullivan. These restrictions included setting high weight requirements for newly
purchased gold jewellery products in gold trade-in transactions, refusing gold trade-
HISTORY, DEVELOPMENT AND CORPORATE STRUCTURE
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in of gold jewellery of third-party brands, limiting gold trade-ins by establishing
volume ceilings for provincial dealers and franchisees, and even refusing to accept
trade-in gold. However, as we enhanced our internal control over gold trade-in, in
particular, the controls over trade-in gold of third party brand, our proportion of
gold trade-in to revenue of gold jewellery had recorded a decreasing trend since
2020. Moreover, according to Frost & Sullivan, with the general upward trend of
gold price during the Track Record Peri od and the establishment of relevant
standards in 2022 and 2023 to regulate gold recycling services, there was a general
increase in consumers’ demand to conduct gold trade-in transactions, and in light of
such demand, our competitors have been m ore receptive of conducting gold trade-in
transactions, which includes (1) certain of them beginning to accept gold jewellery
of third-party brands for trade-in transactions and (2) alleviating their limit on gold
trade-in during the Track Record Period. For example, during the A-share
application period of the Company from 2018 to 2020, Competitor B required
newly purchased gold jewellery to be at least 30% heavier than the trade-in gold
and did not accept trade-in gold of third-party brands, whereas since 2022 the
requirement has been reduced to 20%, and trade-in gold of third-party brands are
accepted. At the same time, another jewellery brand did not accept third-party
brands, whereas since 2022 it accepts trade-in gold of third-party brands. The
aforementioned industry trend coupled with our decreasing proportion of gold trade-
in following our enhanced internal control brought our gold trade-in proportion
more in line with that of our competitors for the years ended December 31, 2021,
2022 and 2023.
According to Frost & Sullivan, the proportions of self-production and outsourcing
among our peer companies for the year ended December 31, 2023 were as follows:
Proportion of
self-production in
terms of processing
volume (excluding
gold bullion), 2023
Proportion of
outsourcing in
terms of processing
volume (excluding
gold bullion), 2023
C o m p e t i t o rA................ a p p r o x i m a t e l y4 5 % a p p r o x i m a t e l y5 5 %
C o m p e t i t o rB................ a p p r o x i m a t e l y5 0 % a p p r o x i m a t e l y5 0 %
C o m p e t i t o rC................ n i l 1 0 0 %
C o m p e t i t o rD................ a p p r o x i m a t e l y2 0 % a p p r o x i m a t e l y8 0 %
C o m p e t i t o rE................ n i l 1 0 0 %
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— Gold Trade-in is Beneficial Economically: Our gold trade-in arrangements are also
beneficial for us economically. From a liqu idity and commercial perspective, (i) we
charge higher crafting fees for the gold of third-party brand(s) traded-in from
provincial-dealers and franchisees, and (ii) receiving gold through trade-in allows us
to reduce substantial upfront cash outflow compared to sourcing gold through direct
procurement.
— Source Diversification and ESG: Engaging in gold trade-in allows us to diversify
the source of our gold procurement, which is in line with our ESG philosophy of
applying recycled material to production.
For further details on the commercial ra tionale for conducting gold trade-in, see
‘‘Business — Commercial rationale for conducting gold trade-in ’’.
Market data and industry consultant ’s view
According to Frost & Sullivan, our gold trade-in activities during the Track Record
Period were largely in line with that of the industry practice.
More specifically, according to Frost & Sullivan:
. During the Track Record Period, the re were no material unusual features
regarding our gold trade-in practice when compared to other major industry
players.
. The five-largest jewellery brands measured by revenue derived from gold
jewellery in the PRC in 2023 had an estimated self-production rate that ranged
from nil to approximately 50% in 2023, whereas we produced substantially all
of our gold jewellery products during the Track Record Period.
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. Among gold jewellery manufacturers who had gold purifying capability, the
proportion of traded-in gold as a percentage of total raw materials applied to
production ranged from 40% to 100% in 2023, which was comparable to that
of our Group. In addition, the table below sets forth the relevant details of
peer competitors that primarily focus on manufacturing gold jewellery and
have purification and manufacturing capabilities:
Identity Profile Business Model
Sales of operations,
in terms of value of
gold trade-in, 2023
Scale of operations,
in terms of volume
of gold trade-in,
2023
Percentage of trade-
in gold as raw
materials applied to
production, in terms
of processing
volume, 2023 (Note)
C o m p e t i t o rF ....... C o m p e titor F is a producer
and service provider
specializing in gold and other
jewellery.
Competitor F provides design
and processing services to
jewellery companies, refining
its recycled gold for reuse in
production or for direct sale
as gold bullion.
approximately
RMB15.5 billion
approximately
35 tons
approximately 40%
C o m p e t i t o rG ...... C o m p e titor G specializes in
the precious metals sector,
encompassing the research,
development, and
manufacturing of precious
metal jewellery, as well as
global trade and finance in
precious metals, and the
research, development, and
processing of new precious
metal materials.
Competitor G also engages in
the recycling of gold, refining
it for fabrication into gold
bars, which are either sold
directly or utilized in
international trade.
Additionally, a select portion
of this refined gold is crafted
into fine jewellery.
approximately
RMB8.7 billion
approximately
20 tons
approximately 50%
C o m p e t i t o rH ...... C o m p e titor H is a company
that focuses on the
repurchase, refining, and
trading of precious metal
materials, as well as the sales
of jewellery products.
Competitor H specializes in
recycling, refining, and
manufacturing gold, which is
used for production by
jewellery companies and for
investment purposes by
consumers.
approximately
RMB24.7 billion
approximately
55 tons
approximately 100%
C o m p e t i t o rI....... C o m p e titor I specializes in a
comprehensive suite of
precious metal services,
encompassing the sale,
recycling, processing, and
smelting of gold, palladium,
platinum, silver, and rhodium.
Competitor I engages in the
recycling and refining of gold,
subsequently manufacturing
the refined product into gold
bars for business customers
and gold jewellery for
personal customers.
approximately
RMB9.0 billion
approximately
20 tons
approximately 100%
Note: Percentage of trade-in gold used as raw materials in t erms of processing volume = Volume of trade-in gold/
Total processing (production, processing, refining) volume of gold.
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Moreover, according to the ‘‘China Gold Yearbook 2021 ’’, ‘‘China Gold Yearbook
2022 ’’and ‘‘China Gold Yearbook 2023’’ and ‘‘China Gold Yearbook 2024’’ released by
the China Gold Association, the proportions of gold jewellery made from used gold
jewellery in the PRC in 2020, 2021, 2022 and 2023 were 57.1%, 24.6%, 30.4% and
73.9%, respectively. In 2023, the proportion of gold jewellery made from used gold
jewellery in the PRC significantly increased, p rimarily due to several factors, including:
(i) gold prices experienced significant growth in 2023, prompting consumers to sell their
gold jewellery for profit; and (ii) the government of Luohu District in Shenzhen, along
with the China Gold Association and other enterprises, established relevant standards in
2022 and 2023 to regulate gold recycling servi ces, promoting the standardization of gold
jewellery recycling processes and improving the convenience of recycling channels.
While used gold as part of the consideration paid to us ranged between 33.7% and 48.5%
of our total revenue for the three years ended December 31, 2023, this range is within
the range of the aforementioned figures in the China Gold Yearbooks.
Internal control measures
To address the CSRC ’s concern that our Company had engaged in gold trade-in on
a much larger scale compared to other listed companies in the same industry, we have
enhanced our internal control over gold tra de-in arrangements, thereby to ensure the
quality of traded-in gold colle cted and exert better control over gold trade-in activities.
Gold received through trade-in is solely used as a means to settle the consideration of
new gold jewellery purchased from us. To strengthen our control over such trade-ins, we
have adopted a CRM system to monitor gold trade-in activities, and we encourage our
franchisees to utilize our CRM system to record their sales to consumers and their
procurement from our Group settled by way of gold trade-in. Such measures enhance our
ability to review sales data related to gold trade-in activities of franchisees, allow us to
more readily access accurate data relating to gold trade-ins and provide traceability of
our gold trade-in transactions. Despite our g old trade-in activities was of a larger scale
when compared to certain listed companies i n the same industry, through enhancing the
traceability of our gold trade-in transactions, we can still maintain the authenticity and
genuineness of our trade-in transactions, as we ll as the quality of traded-in gold collected
as such documentation provides us means to trace back and identify the source of any
issues. For more details, refer to ‘‘Business — Gold Trade-in.’’
Our internal control consultant did not identify any material defects with regard to
our gold trade-in internal control procedure.
CSRC’s concerns in relation to ‘‘One RMB Exchange ’’
Apart from day-to-day gold trade-in, we also implement ‘‘One RMB Exchange ’’
promotions regularly for our “Wan Purity ” series products. Under such promotions,
consumers may trade-in our ‘‘Wan Purity ’’gold series products that they previously
purchased for new pieces of ‘‘Wan Purity ’’series gold jewellery of the same weight or
more plus a nominal crafting fee of one RMB per traded-in gram of gold with our
HISTORY, DEVELOPMENT AND CORPORATE STRUCTURE
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franchisees or at our self-operated stores. Consumers pay the market gold price and
regular crafting fees for any additional gold they purchase as a result of the trade-in. See
‘‘Business — Gold Trade-in — Background ’’for further details.
During the vetting process of our previous A-Share Application, the CSRC raised
concerns about (1) the commercial rationa le behind franchisees participating in the ‘‘One
RMB Exchange ’’without a written agreement on spec ific policies and terms with us, and
(2) whether such participation might lead to franchisees incurring losses.
Economic benefits to franchisees
Our Directors are of the view that there are both direct and indirect economic
benefits for franchisees to participate in the ‘‘One RMB Exchange ’’promotion for our
‘‘Wan Purity ’’series products. The rationale for holding the ‘‘One RMB Exchange ’’
promotion is that (i) the transaction model of such promotion enhances customer
stickiness and (ii) as a promotional event, the ‘‘One RMB Exchange ’’promotion helps to
boost customer flow and increases sales for our franchisees.
As mentioned above, only customers who own our ‘‘Wan Purity ’’series products
may participate in the ‘‘One RMB Exchange ’’promotion. Such exclusivity channels
consumer demand and improves consumer stickiness towards our brand.
On the other hand, gold jewellery being traded-in can only be exchanged for new
pieces of gold jewellery of the same weight or more. If the weight of the new pieces of
gold jewellery exceeds that of the traded-in gold, consumers are required to pay for the
excess portion of gold purchased, along with the associated regular crafting fees. The
‘‘One RMB Exchange ’’ promotion offers consumers incentives to replace their old
jewellery with new pieces. With the promotional nature of the ‘‘One RMB Exchange ’’
program, franchisees may also experience higher consumer flow an d increased sales
volume and hence benefit from the promotion e vent. All franchisees participated in such
promotions, even though no specific written agreements were entered into solely for this
purpose, hence, the CSRC concerns are not relevant to the Listing. The following further
provides a quantitative analysis of the economic benefits brought about by the ‘‘One
RMB Exchange’’ promotion:
1. Average monthly sales revenue and sales volume of our franchise stores
during the ‘‘One RMB Exchange ’’promotion
During the Track Record Period, we typically held the ‘‘One RMB Exchange ’’
promotion for our ‘‘Wan Purity ’’series products for one week in each of our
franchise stores between June and September. We organize ‘‘One RMB Exchange ’’
program in different provinces sequentially in order to ensure stable supply of our
products. Accordingly, timing of holding the ‘‘One RMB Exchange ’’program is not
the same for all provinces. Each franchise store hosts the ‘‘One RMB Exchange ’’
program for one week during the promotional period. The following tables set forth
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breakdowns of (i) the volumes of ‘‘Wan Purity ’’series products sold from our
Group to our provincial-dealers and/or franchisees from June to September of 2021,
2022 and 2023 and the average monthly sales volume of ‘‘Wan Purity’’ series
products from our Group to provincial-dealers and/or franchisees for each of the
complete financial years during the Tr ack Record Period and during promotion
periods (i.e., July to September for 2021 and 2022, June to September for 2023),
and (ii) the total monthly revenue derived from all sales from our Group to our
provincial dealers and/or franchisees during the same periods and the average
monthly sales revenue of ‘‘Wan Purity ’’series products we derived from provincial-
dealers and/or franchisees for each of the complete financial years during the Track
Record Period and during promotion periods (i.e., July to September for 2021 and
2022, June to September for 2023).
‘‘Wan Purity ’’series monthly sales volume of the sales from our Group to our
provincial dealers and/or franchis ees and average monthly sales volume
throughout the year and during promotional period
June July August September
Average monthly
sales volume
during each year
Average monthly sales
volume during
promotional period
sales volume in kg
2021 . . . . 2,551.6 4,054.4 (2) 6,845.6 (2) 5,277.3 (2) 3,215.0 5,392.4
2022 . . . . 2,765.6 4,124.3 (2) 7,658.5 (2) 5,115.5 (2) 3,112.6 5,632.8
2023 (1) . . 4,173.9 (2) 3,587.3 (2) 5,667.1 (2) 5,086.4 (2) 3,450.2 4,628.7
Total monthly sales revenue of all sal es by our Group to our provincial-
dealers and/or franchisees and average monthly sales revenue throughout the
year and during promotional period
June July August September
Average monthly
sales revenue
during each year
Average monthly sales
revenue during
promotional period
RMB ’000
2021 . . . . 1,019,425 1,526,785 (2) 2,420,309 (2) 1,932,253 (2) 1,231,053 1,959,782
2022 . . . . 1,207,434 1,610,814 (2) 2,848,977 (2) 1,948,270 (2) 1,236,357 2,136,020
2023 (1) . . 1,837,686 (2) 1,691,844 (2) 2,552,946 (2) 2,344,085 (2) 1,576,933 2,106,640
Notes:
(1) Starting in 2023, we held the ‘‘One RMB Exchange ’’ promotion in June for our
franchisees in Shandong.
(2) Months that the ‘‘One RMB Exchange ’’promotion was held.
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During the promotional periods, the sales volume of the ‘‘Wan Purity ’’
series products from our Group to our provincial-dealers and/or franchisees
increased substantially as demonst rated by the monthly sales data.
Specifically, the average monthly sales volume to our provincial-dealers and/
or franchisees increased from 3,215.0 kg, 3,112.6 kg and 3,450.2 kg for the
years ended December 31, 2021, 2022 and 2023 to an average of 5,392.4 kg,
5,632.8 kg and 4,628.7 kg during the promotion months for respective years
during the Track Record Period.
In addition, the average monthly sal es revenue derived from our sales to
our provincial-dealers and/or franchisees increased from an average of
RMB1,231.1 million, RMB1,236.4 million and RMB1,576.9 million for the
years ended December 31, 2021, 2022 and 2023 to an average of RMB1,959.8
million, RMB2,136.0 million and RMB2,106.6 million during the promotion
months for respective years during the Track Record Period. We generally
record higher revenue and sales volume in August when compared to that in
September because (i) we usually hold ‘‘One RMB Exchange ’’program in
provinces where we have stronger presence, such as Shandong and Henan, in
August, and (ii) ‘‘One RMB Exchange ’’program is held in more stores in
August than September. The higher average monthly sales volume and average
monthly revenue generated by our Group from the sales to our provincial-
dealers and/or franchisees during the ‘‘One RMB Exchange ’’promotion period
demonstrated positive market response to our ‘‘One RMB Exchange ’’
promotion event, and it also helps garnering customer stickiness towards our
brand.
Our ‘‘One RMB Exchange ’’program generally had a positive impact on
franchise stores ’ sale revenue. In 2023, the average monthly sales revenue of
franchise stores which adopted CRM system, was RMB2,529.4 million during
the ‘‘One RMB Exchange ’’promotion period in 2023, which was 36.5%
higher than their average monthly sa les of RMB1,852.4 million in 2023.
For further details of the revenue and the gross profit we derived from
our franchise network through the ‘‘One RMB Exchange ’’program, please
refer to the section headed ‘‘Business — Gold Trade-in — Our Revenue and
Gross Profit Margin attributable to the ‘‘One RMB Exchange ’’Program ’’.
2. Average monthly sales revenue and sal es volume of our self-operated stores
during the ‘‘One RMB Exchange ’’promotion
During the Track Record Period, we typically held the ‘‘One RMB Exchange ’’
promotion for our ‘‘Wan Purity ’’series products for one week in each of our self-
operated stores during June and August. The following tables set forth breakdowns
HISTORY, DEVELOPMENT AND CORPORATE STRUCTURE
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of (i) the volumes of ‘‘Wan Purity ’’series products sold by our self-operated stores
from June to September of 2021, 2022 and 2023, and (ii) the revenue from all
products sold by self-operated stores during the same periods.
‘‘Wan Purity ’’series monthly sales volume by our self-operated stores and
average monthly sales volume throughout the year and during promotional
period
June July August September
Average monthly
sales volume
during each year
Average monthly sales
volume during
promotional period
sales volume in kg
2021 . . . 35.2 48.5 197.6 (2) 47.4 59.5 197.6
2022 . . . 43.0 55.0 240.2 (2) 42.2 61.5 240.2
2023 (1) . . 133.5 (2) 35.1 131.4 (2) 33.5 59.2 132.4
Total monthly sales revenue of all sales by our self-operated stores and
average monthly sales revenue throughout the year and during promotional
period
June July August September
Average monthly
sales revenue
during each year
Average monthly sales
revenue during
promotional period
RMB ’000
2021 . . . 18,939 23,859 76,426 (2) 23,992 29,679 76,426
2022 . . . 22,776 28,000 95,104 (2) 22,460 30,541 95,104
2023 (1) . . 68,631 (2) 22,686 67,279 (2) 23,081 34,351 67,955
Notes:
(1) Starting in 2023, we held the ‘‘One RMB Exchange ’’promotion in June for our self-
operated stores in Shandong.
(2) Months that the ‘‘One RMB Exchange ’’promotion was held in our self-operated stores.
Our self-operated stores also benefit from participation in the ‘‘One RMB
Exchange ’’promotion for our ‘‘Wan Purity’’ series. The monthly sales volume
of ‘‘Wan Purity ’’series products by our self-operated stores increased from an
average of 59.5 kg, 61.5 kg and 59.2 kg for the years ended December 31,
2021, 2022 and 2023, to 197.6 kg and 240.2 kg respectively for August 2021
and 2022, being the promotional month, and an average of 132.4 kg during the
promotional months in 2023 (i.e. June and August).
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In addition, the average monthly sales revenue of all sales in our self-
operated stores increased from RMB29.7 million, RMB30.5 million and
RMB34.4 million for the years ended December 31, 2021, 2022 and 2023 to
RMB76.4 million and RMB95.1 million respectively for August 2021 and
2022, being the promotional month, and an average of RMB68.0 million
during the promotional months in 2023 (i.e. June and August). The increases
in both sales volume and sales revenue in our self-operated stores during the
promotional period reflects that the promotion under our ‘‘One RMB
Exchange ’’program was effective in capturing end consumers ’ attention and
boosting our sales. As only products of our brand can be exchanged during the
‘‘One RMB Exchange ’’program, only existing customers of our brand will
benefit from the promotion. The increase in sales during the promotional
period also reflects that existing customers were incentivized to make repeated
purchases from us, thereby fostering customers ’ stickiness towards our brand.
Our ‘‘One RMB Exchange ’’program also had a positive impact on sales of
products not under ‘‘One RMB Exchange ’’program by our self-operated stores
to end consumers. Such effect can be illustrated in the below.
For the year ended December 31, 2021, 2022 and 2023, our self-operated
stores ’ average monthly sales (excluding gol d trade-in transactions) during the
‘‘One RMB Exchange ’’promotion period in August for 2021 and 2022, and in
June and August for 2023, was RMB28.7 million, RMB35.4 million and
RMB27.7 million per month, respectively, which was approximately 64.2%,
70.4% and 91.4% of their average monthly sales of products under ‘‘One RMB
Exchange ’’program of RMB44.7 million, RMB50.2 million and RMB30.3
million. The aforementioned average mo nthly revenue (excluding gold trade-in
transactions) we derived during the ‘‘One RMB Exchange ’’promotional period
through sales in our self-operated stores were 40.6%, 57.4% and 11.4% higher
than the average monthly sales revenue of our self-operated stores (excluding
gold trade-in transactions) of RMB20.4 million, RMB22.5 million and
RMB24.8 million for the years end ed December 31, 2021, 2022 and 2023,
respectively.
For further details in relation to the revenue and the gross profit we
derived from the ‘‘One RMB Exchange ’’program, please refer to the section
headed ‘‘Business — Gold Trade-in — Our Revenue and Gross Profit Margin
attributable to the ‘‘One RMB Exchange ’’Program’’.
Internal control measures
We have enhanced our internal control over our ‘‘One RMB Exchange ’’promotion
for the ‘‘Wan Purity ’’series products. In particular, we included a new term in our
agreements with franchisees specifying our requirement for them to cooperate with us
regarding promotional activities, which includes the ‘‘One RMB Exchange ’’for the
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‘‘Wan Purity’’ series products. In addition, we have st rengthened our internal control by
encouraging franchisees to adopt our CRM system to record their sales in relation to the
‘‘One RMB Exchange ’’promotion, which in turn, allows us to systematically and timely
review sales data related to the ‘‘One RMB Exchange ’’for the ‘‘Wan Purity ’’series
products.
Internal control measures in relation to used gold received through gold trade-in
Throughout the Track Record Period (including the period prior to the
implementation of CRM system), proper documentation of used gold received through
gold trade-in is required to be maintained in order to monitor and trace gold trade-in
transactions. Upon physical delivery of used gold to our Group by provincial-dealers
and/or franchisees, designated staff responsible for handling used gold is required to
review and record the actual amount of used gold received, then input the relevant data
in our internal system and issue a material receive note ( 來料單) after ascertaining the
relevant details. The material receive note se ts out information of used gold including the
net weight of gold received and its purity level. When provincial-dealers and/or
franchisees proceed to settle the consideration partially with used gold, staff responsible
for issuing sales settlement statement (結 算單) will state in the sales settlement statement
the amount of used gold being traded-in and verify the relevant information with the
provincial-dealers/franchisees based on the information on the material receive note.
Throughout the trade-in process, the details of traded-in gold is verified multiple times
by different personnels to ensure accuracy of such information.
Adoption and implementation of the CRM system
We began to adopt the CRM system across our franchise network around June 2022
to monitor the sales performance of our products, gold trade-in activities and inventory
levels of our franchise stores. Transaction details of franchisees who adopted the CRM
system were recorded on the CRM system since then. Franchisees who adopt the CRM
system are required to input details of key sale s transactions and gold trade-in activities
into the CRM system, including the relevant transactions during the ‘‘One RMB
Exchange ’’program. Through our CRM system, we are able to collect data on the sales
performance of our distribution channels such as inventory levels, sales volume and sales
trends. We have a dedicated sales data analy tics team responsible for monitoring the
sales and inventory data of our distribution ch annels. If they notice any irregularities in
the sales records and inventory levels of franchisees, they will inquire with the relevant
franchisees and follow up with them to ensure compliance with applicable laws and
regulations as well as our internal control pol icies. Our sales data analytics team monitor
and conduct analysis on the sale and inventory data of franchise stores with the aid of
data analytics tools, whereby such analyti cs tool will generate reports on inventory
structure and inventory turnover for each franchise store on weekly basis and therefore
can monitor if there is any abnormalities in the inventory structure of individual
franchise stores.
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Measures adopted to ensure accuracy of data on the CRM system
In order to ensure accuracy of the data being inputted on the CRM system, we also
conduct regular checking through the aid of data analytics system. Our data analytics
system generates reports through data analyt ics tools to keep track of inventory levels
and sales performance data of our franchise stores.
On the other hand, we also perform site visits to all franchise stores which have
installed the CRM system approximately on a quarterly basis. We have a team of
approximately 30 dedicated individuals respon sible for site visits to franchise stores.
When our staff visit franchise stores, they require franchisees to provide us with their
paper-based sales records, including vouchers and receipts, for checking against data
being inputted on the CRM system, as well as performing stocktaking exercise in order
to ensure the accuracy of inventory data on the CRM system. Our staff responsible for
site visits are required to com plete a checklist report for every site visit for our internal
record keeping. We also maintain a site visit control list to keep track on the progress of
site visits to ensure regular checking is perfo rmed at each of the franchise stores. In case
it is discovered that the data entries on the CRM system cannot be reconciled with that
of the paper-based sales records at the franchise stores, or if it is discovered that there is
any non-compliance with the CRM system operation guidelines and/or relevant internal
control policies by franchisees, we may consider to impose restrictions over the sales
activities and/or services provided to the fra nchise stores depending on the level of non-
compliance, such as restrict them from borrowing gold from us. Based on the terms of
the standard franchise agr eement we enter into with our provincial-dealers and/or
franchisees, our provincial-dealers and/or franchisees are under the obligation to reply to
our enquiry letters and cooperate with us in reconciliating their inventory levels and sales
performance data.
With detailed transaction records in respect of sales and gold-trade-in activities
recorded on the CRM system, we will be able to track and monitor in real-time the
relevant sales data and adopt appropriate mea sures in a timely manner to mitigate risk of
improper market conduct, including channel stuffing, by provincial-dealers and/or
franchisees. This helps us ensure due compli ance with our control policies across our
distribution network. Since the adoption of the CRM system in June 2022 and up to the
Latest Practicable Date, we have not identified any material irregular sales and/or gold-
trade-in activities within our franchise network.
Internal control measures in relation to fra nchisees who do not install the CRM system
As of June 30, 2024, 2,653 franchise stores operated by 1,550 franchisees,
accounting for approximately 92.8% of all our franchisees, have installed and were using
our CRM system to record sales from gold trade-in. The revenue contribution for the
year ended December 31, 2023 and the six months ended June 30, 2024 of franchisees
who conducted gold trade-in with us directly and have yet to adopt the CRM system as
of June 30, 2024 amounted to RMB623.8 million and RMB220.5 million, respectively,
HISTORY, DEVELOPMENT AND CORPORATE STRUCTURE
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representing 3.1% and 2.2% of our total rev enue for respective year/period. We do not
intend to require mandatory installation of t he CRM system by all franchisees as (i) some
franchisees already have their own sales sy stem and the administrative work involved
and costs of replacing their original sales system with the CRM system may be
significant due to system compatibility i ssue and (ii) it may not be cost-efficient for
certain smaller-scaled franchisees to adopt the system given the size of their operation.
To monitor used gold received from franchi sees who have not installed the CRM system,
our staff will inspect and verify the relevant information of the actual used gold received.
When franchisees which did not adopt the CRM system conduct gold trade-in with our
Company, our staff will manually examine and record the details of used gold received
to ensure authenticity of such used gold. Details of the relevant used gold will be
recorded on our internal system. Accordingly, we may monitor the frequency and volume
of used gold traded-in by franchisees based on the record in our internal system.
On the other hand, our site visits to franchise stores also cover those operated by
franchisees who have not installed the CRM system. When our staff visits such franchise
stores, we will inspect their sales record and inventory to see if there is any
abnormalities. Where if such franchisees have adopted their own retail system instead of
the CRM system, we may also require such franchisees to produce records in relation to
its sales, gold trade-in transactions and inventory.
We believe that the inclusion of such terms enhances our internal control by clearly
informing our franchisees and formally documenting the requirement for our franchisees
to participate in and support our promotional activities, including the ‘‘One RMB
Exchange ’’for the ‘‘Wan Purity ’’series products. Through the inclusion of such terms,
franchisees have thus also agreed to closely follow and be engaged in our promotional
activities, and it provides a solid basis for u s to enforce our rights to require franchisees
to support our promotional activities, particularly the ‘‘One RMB Exchange ’’for the
‘‘Wan Purity’’ series products.
(2) Discrepancy in inventory data in the A-share Application materials
During the vetting process of the previous A- share Application, the CSRC also identified
inconsistent disclosures regar ding inventory-related data.
The differences were mainly due to inconsistent classification and calculations, including
(i) K-Gold jewellery being included in a disclosure of inventory balance but excluded in
another disclosure of inventory; (ii) consigned processing materials being included in one
disclosure of inventory balance for gold raw materials but not in another inventory balance
disclosure; and (iii) applying the book value of K-Gold materials for one inventory balance
disclosure, while K-Gold value was converted to gold value (applying the conversion formula
of 75.5%) in another inventory balance disclosure. Such discrepant disclosures were made for
different illustrative purposes but without sufficient clarification of the differences. Due to the
aforementioned discrepancies, there were inconsistencies when calculating the breakdown of
gold raw materials and the unit price of gold raw materials.
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Examples of the discrepancy aforementioned:
1. in a table to calculate inventory turnover days, we included consigned processing
materials in our inventory tally, while in our classification of inventory table,
consigned processing materials were not included in the inventory tally, which in
turn led to different inventory calculations for the two tables.
2. in a chart we applied to calculate and illustrate inventory turnover days, we applied
the book value of K-Gold when tallying the inventory, while in a table to illustrate
inventory movement due to procurement and consumption, K-Gold value was
converted to gold value applying the conversion formula of 75.5%, which
ultimately led to different inventory calculations for the chart and the table.
We inquired into the factors that led to differences in interpretation when calculating
inventory balances, including discussions with relevant personnel on the reasons for a
particular method of inventory tallying and the presentation of such tallies and reconciling the
differences. We then checked whether details of the items included in a specific tally were
clearly stated. Additionally, we have appointed a dedicated person to supervise and ensure the
quality of our inventory-related data. Ou r Directors came to a conclusion that the
discrepancies were mainly due to interpretation differences without sufficient clarification on
the relevant disclosures at the time the materials were submitted in the A-share Application.
Our internal control consultant conducted a review of the internal control measures on
inventory management, including management of inventory inflow and outflow, inventory
counting and reconciliation, and analysis and management of inventory safety. No material
defects were identified in these internal cont rol procedures. Considering the foregoing and
based on the independent due diligence work performed by the Sole Sponsor, nothing material
has come to the attention of the Sole Sponsor that would cause them to disagree with the
Directors ’ aforementioned conclusion.
Our Group has since conducted thorough examination on the inconsistent classification
of inventory line items and carefully checked line items which may potentially cause
interpretation differences and confirmed that th ere are no such interpretation differences for
the current H-Share Listing Application, an d therefore this issue has been resolved or
addressed to the current H-Share Listing application.
Our Reporting Accountants have audited our historical financial information for the
Track Record Period and issued an unqualified opinion on the Historical Financial Information
of the Group for the Track Record Period as a whole as detailed in Appendix I to this
prospectus.
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On the basis that (i) we have conducted thorough internal examination on the accounting
classification of inventory and confirmed that th e previous calculation discrepancies no longer
apply, and (ii) the Reporting Accountants issued an unqualified opinion on the Historical
Financial Information of the Group for the Track Record Period as a whole, we believe
concerns with regard to previous discrepancies have been satisfactorily addressed in the
current H-Share Listing application. Consider ing the foregoing and based on the independent
due diligence work performed by the Sole Sponsor, the Sole Sponsor concurs with the
Company ’s view that concerns with regard to previous discrepancies have been satisfactorily
addressed in the current H-Share Listing application. Our Directors further confirm, and the
Sole Sponsor concurs, that there has been no inconsistency in the invent ory data disclosed in
this prospectus.
(3) CSRC’ s concerns in relation to inventory level issues
During the previous A-share Application, the CSRC expressed concerns about the slower
inventory turnover rates of our franchise stores compared to our overall inventory turnover
rates.
Our Directors are of the view, and the Sole Sponsor concurred, that CSRC ’s concerns
regarding inventory levels during the previous A-share Application have been addressed as
such difference in inventory turnover days between our franchise stores and our Group
primarily stems from the diffe rence in business models.
We profit from the manufacture and sales of gold jewellery, primarily in the form of
crafting fees. According to Frost & Sullivan, su ch a business model typically experiences high
turnover rates. We engage in wholesale transacti ons with provincial-dealers and franchisees,
which typically involves larger transactio n volumes and faster turnover of inventory.
Consequently, the product lifecycle for our gold jewellery is shorter, leading to high
inventory turnover rates. On the other hand, our franchisees operate under a retail sales model,
often holding large stock levels to display at stores and to accommodate the extensive and
varied needs of end consumers, which contributes to a lower turnover rate.
Accordingly, the lower inventory turnover rate of our franchise stores compared with
ours does not indicate channel stuffing or premature sales/revenue adjustments through
franchise stores but merely reflects the differe nces in the business mod els between franchise
stores and us.
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Based on the disclosure in our A-share Application materials, the inventory turnover rate
of the Company for the years ended December 31, 2018, 2019 and 2020 amounted to 8.67,
7.96 and 5.96, respectively (which were equivalent to inventory turnover days of 42.1 days,
45.9 days and 61.4 days, respectively); whereby the inventory turnover rates of our franchise
stores for the sales of gold jewellery and other gold products were 2.09, 2.09 and 1.40
(Note) for
the years ended December 31, 2018 and 2019 and the nine months ended September 30, 2020
(which were equivalent to inventory turnove r days of 174.6 days, 174.6 days and 195.7 days,
respectively).
The following table sets forth the inventory turnover days among our Group, our
wholesale business and our self-operated stores and the range of inventory turnover days of
our industry peers, during the Track Record Period:
Year ended December 31,
Six months
ended June 30,
2021 2022 2023 2024
(days) (days) (days) (days)
O u rG r o u p .............. 4 2 . 7 4 5 . 6 3 6 . 8 4 0 . 8
Our wholesale business
(Note 3) 39.8 37.6 29.8 38.8
Industry peers at Group level
(Note 2) ................ 2 8 . 6 –223.9 21.1 –282.9 28.1 –241.7 21.6 –271.9
Our self-operated stores . . . . . 172.0 215.5 236.0 261.0
Our Franchisees (which
adopted the CRM
system) (Note 1) .......... N / A N / A 2 1 1 . 6 3 3 7 . 1
Stores of industry peers (Note 2) . 45.0 –205.0 50.0 –215.0 55.0 –230.0 65.0 –350.0
Note 1: We began to roll out the CRM system across our franchise network in June 2022 to record the sales
and inventory levels of our franchisees. As the CRM system was not adopted for the full year in
2022, tally of inventory turnover days of gold products of franchisees (which adopted the CRM
system) in 2021 and 2022 may not be comparable. Thus, only the relevant turnover days for the year
ended December 31, 2023 and for the six months ended June 30, 2024 are disclosed.
Note 2: According to Frost & Sullivan.
Note 3: Includes our sales to provincial-dealers and releva nt franchisees under the wholesale model, but does
not include our inventory for sales to platforms under the e-commerce sales model as such inventory
was managed together with the inventory sold through our self-operated online stores which we
operate under the retail model.
Note: The information related to inventory turnover rates of our franchise stores, as disclose d in our A-share Application
materials, were obtained by separate inquiries with the relevant franchisees stores on a sampling basis.
HISTORY, DEVELOPMENT AND CORPORATE STRUCTURE
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During the Track Record Period, our Group ’s inventory turnover days ranged from 36.8
days to 45.6 days. Our inventory turnover days generally fell within the range of our peer
companies. At the same time, the higher end of the range of our peer companies ’ inventory
turnover days was much higher than ours. This discrepancy is mainly because our Group
primarily engages in wholesale distribution of gold jewellery, which typically involves larger
transaction volumes and faster turnover of inventory. In contrast, certain of our industry peers
primarily operate on the retail side, which oft en entails slower inventory turnover due to the
need to maintain higher levels of inventory for consumer selection.
For the three years ended December 31, 2023, our self-operated stores ’ inventory
turnover days ranged from 172.0 days to 236.0 days. The inventory turnover days at our self-
operated stores for the three years ended December 31, 2023 were closer to the high-end but
generally within the aforementioned range and comparable to those of our industry peers’
stores. For the six months ended June 30, 2024, our self-operated stores recorded an increase
in inventory turnover days as a result of decline in consumption sentiment of gold products.
According to Frost & Sullivan, the consumption volume of gold products in terms of weight
for the six months ended June 30, 2024 decreased by 26.7% when compared to the
corresponding period in 2023. Accordingly, the sales of gold products slowed down in the
first half of 2024, leading to an increase in inventory turnover days at our self-operated stores.
According to Frost & Sullivan, at the sam e time, the low-end of our peer companies ’
inventory turnover days for the three years ended December 31, 2023 was much lower than
ours, mainly because one competitor has larger proportion of revenue generated from sales of
gold bullions, which are standard products and usually involves larger transaction volumes and
faster turnover. In contrast, sales of gold bullions is not our primary business activity, and
thus the inventory turnover days at our self-operated stores were closer to the high-end of the
inventory turnover days of our peer stores.
The inventory turnover days of gold products of our franchisees (which adopted the
CRM system) for 2023 was 211.6 days, which is generally within the range of our industry
peers’ stores’ inventory turnover days and in line with the inventory turnover days of our self-
operated stores for the same period of 236.0 days. For the six months ended June 30, 2024,
based on information available on the CRM system, the inventory turnover days of our
franchisees increased to 337.1 days. Such increas e was primarily attributable to the decline in
consumption sentiments of gold products. For further discussion on the fluctuations in
inventory turnover days of our self-operated sto res and franchisees, please refer to the section
headed ‘‘Business — Management of franchisees — Measures to avoid channel stuffing and
cannibalization ’’.
Our Directors further confirmed that there is no other material matter in relation to our
previous A-Share Application that needs to be b rought to the attention of the Stock Exchange
or our investors.
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The Second A-Share Application
In December 2022, we engaged CITIC Securities Co., Ltd ( 中信證券有限公司)a so u r
sponsor for our second A-share application ( ‘‘Second A-share Application ’’) taking into
account of its market reputation as a leadin g investment bank in the PRC, experience in
similar listing transactions for companies in si milar industry and overall-competitiveness.
Nonetheless, to have greater access to diverse and global investors and to gain more
international recognition, we did not submit our Second A-share Application and decided to
pursue H-Share Listing. We were referred to CITIC Securities (Hong Kong) Limited by CITIC
Securities Co., Ltd. and engaged CITIC Secur ities (Hong Kong) Limited as our Sole Sponsor
to the H-Share Listing in June 2023. We then terminated our engagement with CITIC
Securities Co., Ltd as our sponsor for Second A-share Application in September 2023. Our
Directors confirmed that there is no disagreement between the Company and Zhongtai
Securities Co., Ltd. and CITIC Securities Co., Ltd., the two former sponsors in previous
listing applications. Considering the foregoing and based on the independent due diligence
work performed by the Sole Sponsor, nothing material has come to the attention of the Sole
Sponsor which indicated that there were any disagreements between the Company and the
outgoing professional parties, including previous sponsors, engaged by the Company in
relation to the A-share Application and Second A-share Application.
Our Directors confirmed that based on the publicly available information, none of the
professional parties engaged by the Company in relation to the A-share Application and
Second A-share Application had been/are subject to any investigation by the relevant
regulatory authorities in the PRC in relatio n to the A-share Application and the Second A-
share Application. Our Directors further confirmed, and the Sole Sponsor concurred, that there
is no other significant matter in relation to t he A-share Application and Second A-share
Application that needs to be brought to the attention of the Stock Exchange or investors.
HISTORY, DEVELOPMENT AND CORPORATE STRUCTURE
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PRE-IPO INVESTMENTS
Overview
Pre-IPO Investors
Date of
agreement
Number of Shares
subscribed/acquired Consideration
Date of
completion on
which the
consideration was
fully settled
Number of Shares
as of the Latest
Practicable Date
Approximate
average cost
per Share
Interest held in
our Company
immediately
before completion
of the Global
Offering
Interest held in
our Company
upon completion
of the Global
Offering
(assuming the
Over-allotment
Option is not
exercised)
Approximate
discount/
(premium) to
the Offer Price
(midpoint) (1)(2)
Ms. Huang Yi (3) . . . . . . . . . . . March 20, 2018 5,000,000 RMB50,000,000 May 23, 2022 3,500,000 RMB8.72 1.53% 1.28% 28.63%
Tianjin Haikai Xinchuang . . . . . March 20, 2018 10,000,000 RMB100,000,000 March 28, 2018 10,000,000 RMB10.00 4.37% 3.66% 18.18%
Ms. Zhang Yizhen . . . . . . . . . January 26, 2022 800,000 RMB10,376, 000 February 16, 2022 2,300,000 RMB12.98 1.00% 0.84% (6.12)%
March 5, 2022 1,500,000 RMB19,470,000 January 27, 2022
Mr. Zhang Jianjun . . . . . . . . . January 26, 2022 340,000 RMB4, 409,800 February 14, 2022 340,000 RMB12.97 0.15% 0.12% (6.17)%
Mr. Zhao Duxue . . . . . . . . . . May 20, 2022 4,000,000 RMB51,520,000 May 23, 2022 4,000,000 RMB12.88 1.75% 1.47% (5.38)%
CITIC Securities Investment . . . Augu st 15, 2022 4,166,666 RMB49,992,992 August 26, 2022 4,166,666 RMB12.00 1.82% 1.53% 1.83%
Notes:
(1) The Offer Price is calculated based on the exchange rate of RMB1.00 to HK$1.08, and assuming the Offer Price is fixed at HK$13.20, being the mid-poin t of the
indicative Offer Price range.
(2) Consideration represents the amount paid by each Pre-IPO Investor for their subscription or acquisition of Shares at relevant time. The discount/(premium) to the Offer
Price is calculated based on the assumption that the Offer Price is HK$13.20 per Share (being the mid-point of the indicative Offer Price range of HK$12 .00 to
HK$14.40). The foregoing price range has taken various factors including the recent market condition, liquidity premium after the Listing, valuati on level of the listed
comparable peers, the current business scale of our Group and future profitability of our Group, into account.
(3) Ms. Huang Yi transferred her 1,500,000 Shares to Ms. Zhang Yizhen at a c onsideration of RMB19,470,000 on March 5, 2022. Thus, her total investment a mount in our
Company was RMB30,530,000. As of the Latest Practicable Date, Ms. Huang Yi held 3,500,000 Shares in our Company.
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The table below sets forth the other details of the Pre-IPO Investments:
Reasons and benefits ...... A tt h et i m eo f each Pre-IPO Investments, our Directors were
of the view that our Company would benefit from:
. the additional capital to fund our business development
and supplement our Company ’s working capital;
. the insights for industry, advice on business expansion
or strategic direction that the Pre-IPO Investors may
bring to our Company;
. the network and experience of the Pre-IPO Investors in
capital market which may facilitate our Company ’s
future financing; and
. the Pre-IPO Investor’ s investments demonstrating their
confidence and recognition in our business, strengths
and prospects, which may attract further investments in
our Company.
Basis for determination of
consideration ..........
The considerations for the Pre-IPO Investments received by
us were determined after arm ’s length negotiations between
our Company and the relevant Pre-IPO Investors with
reference to the then net asset value of our Company.
Use of proceeds from the
Pre-IPO Investments .....
All proceeds from the Pre-IPO Investments are used for
business expansion and operation, including expenses for
new construction and expansion of production bases, R&D
of advanced technology and daily operation.
As of the Latest Practicable Date, the proceeds from the
Pre-IPO Investments had been fully utilized.
Lock-up Period . . . . . . . . . . In accordance with the applicable PRC laws, the Pre-IPO
Investors are not allowed to sell any of their Shares within
12 months after the Listing.
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Special Rights granted to our Pre-IPO Investors
Mr. Zhao Duxue ( 趙篤學), Ms. Huang Yi (黃 怡), Ms. Zhang Yizhen (張 義貞), Mr. Zhang
Jianjun ( 張建軍) (collectively, ‘‘Individual Pre-IPO Investors ’’and each an ‘‘Individual Pre-IPO
Investor ’’) and Tianjin Haikai Xinchuang were granted certain special rights, including without
limitation, rights to require redemption of the Shares by Mr. Wang Zhongshan and Ms. Zhang
Xiuqin (the ‘‘CP Redemption Rights’’ ), information rights, rights to appoint observer, rights of
first refusal, restrictions on s ale, and drag-along rights (the ‘‘Special Rights I ’’), all of which have
been terminated before our first submis sion of application for the Listing ( ‘‘First A1 Submission ’’).
In the event that: (i) our Company abandons or terminates our listing plan; (ii) the Stock Exchange
does not accept our listing applicati on; (iii) our Company withdraws our listing application; or (iv)
our listing application is rejected or returned by the Stock Exchange (the ‘‘Reinstatement Events
I’’), the CP Redemption Rights shall reinstate.
CITIC Securities Investment was granted certain special rights, including without limitation,
rights to require redemption of the Shares by Mr. Wang Zhongshan, Ms. Zhang Xiuqin, Mr. Wang
Guoxin, Ms. Wang Na (the ‘‘Wang Family ’’) or any third party designated by the Wang Family
with the written consent of CITIC Securities Investment (the ‘‘Family Redemption Rights ’’)
information rights, rights of first refusal, restri ctions on sale, co-sale rights, drag-along rights,
inspection rights, rights of most favored treat ment and rights to inspect or freeze the accounts of
our Company and/or the Wang Family opened with C ITIC Securities Investment or its affiliates
(the ‘‘Special Rights II ’’, together with the Special Rights I are collectively referred to as the
‘‘Special Rights’’). Save for the Family Redemption Rights, which have been terminated before our
First A1 Submission, all the other Special Rights II will be terminated upon Listing. In the event
that: (i) our Company abandons or terminates our listing plan; (ii) the Stock Exchange does not
accept our listing application; (iii) our Company wit hdraws our listing application; (iv) our listing
application is rejected or returned by the Stock Exchange; (v) the Stock Exchange terminates
review of our listing application; or (vi) our Company fails to complete our Listing on or before
December 31, 2024 (the ‘‘Reinstatement Events II’’ ), all the Special Rights II shall reinstate.
HISTORY, DEVELOPMENT AND CORPORATE STRUCTURE
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Information of Pre-IPO Investors
To the best of our knowledge, information and belief and having made all reasonable
enquiries, all the Pre-IPO Investors are Independe nt Third Parties. The following table sets forth the
information of the Pre-IPO Investors:
Name of Pre-IPO Investors Information of our Pre-IPO Investors
Tianjin Haikai Xinchuang . . . . Tianjin Haikai Xinchuang Industrial Development Co.,
Ltd.* (天 津海開信創產業發展有限公司) (formerly known
as Tianjin City Tanggu Eco nomic Development Zone
Industrial Development Company* 天津市塘沽經濟開發區
工業投資公司) is a limited liability company incorporated
under the laws of the PRC. Its principal businesses include
park management, entrepreneurial space management and
enterprise management. According to publicly available
information, Tianjin Haikai Xinchuang is solely owned by
Tianjin Haitai Capital Investment Management Co., Ltd. ( 天
津海泰資本投資管理有限公司), which is solely owned by
Tianjin Haitai Group Co., Ltd.* ( 天津海泰控股集團股份有
限公司)( ‘‘Tianjin Haitai Group’’ ). Tianjin Haitai Group is
owned as to approximately 91% by the management
committee of Tianjin Binhai High-tech Industrial
Development Zone* ( 天津濱海高新技術產業開發區管委
會).
CITIC Securities Investment . . CITIC Securities Investment Limited* ( 中信証券投資有限
公司) is a limited liability company incorporated under the
laws of the PRC and is a wholly-owned subsidiary of CITIC
Securities Company Limited ( 中信証券股份有限公司),
being a company listed on the Stock Exchange (Stock
Code: 6030) and a company listed on the Shanghai Stock
Exchange (Stock Code: 600030). Its principal businesses
include financial product inves tment, securities investment
and equity investment.
CITIC Securities Investment and the Sole Sponsor, CITIC
Securities (Hong Kong) Limited, are both wholly-owned
subsidiaries of CITIC Securiti es Company Limited, and are
members of a sponsor group as defined under the Listing
Rules.
HISTORY, DEVELOPMENT AND CORPORATE STRUCTURE
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--- page 197 ---
Name of Pre-IPO Investors Information of our Pre-IPO Investors
Mr. Zhao Duxue ( 趙篤學) . . . . Mr. Zhao Duxue is a businessman. He was the former
chairman of Shandong Mining Machinery Group Co., Ltd.
(山東礦機集團股份有限公司)( ‘‘Shandong Mining ’’), a
company listed on the Shenzhen Stock Exchange (stock
code: 002526). As of June 30, 2024, Mr. Zhao Duxue was
the de facto controller of and held 20.79% of the issued
shares of Shandong Mining. He was introduced to our
Group by our executive Director, Mr. Wang Zegang while
he worked in Shandong Mining previously.
Ms. Huang Yi (黃 怡) . . . . . . . Ms. Huang Yi is a famous actress in the PRC who
graduated from the performance department in the Beijing
Film Academy. She became acquainted with our Company
as she was our Company ’s corporate image spokesperson
from 2013 to 2020.
Ms. Zhang Yizhen ( 張義貞) . . Ms. Zhang Yizhen is an accountant. She was the former
director and chief financial officer of Shandong Mining. As
of June 30, 2024, Ms. Zhang Yizhen held 0.89% of the
issued shares of Shandong Mining. She was introduced to
our Group by our executive Director, Mr. Wang Zegang
while he worked in Shandong Mining previously.
Mr. Zhang Jianjun ( 張建軍) . . Mr. Zhang Jianjun is an engineer. He was a former director
of Shandong Mining. He was introduced to our Group by
our executive Director, Mr. Wang Zegang while he worked
in Shandong Mining previously.
Compliance with the Guide for New Listing Applicants
On the basis that (i) the consideration for each of the Pre-IPO Investments was settled at least
28 clear days prior to the date of the Company ’s submission, and (ii) the Special Rights and
undertakings granted under the shareholders ’ agreement to the Pre-IPO Investors will be terminated
or otherwise fulfilled upon Listing, the Sole Spons or confirmed that the Pre-IPO Investments are in
compliance with requirements set out in chapte r 4.2 of the Guide For New Listing Applicants.
MAJOR ACQUISITIONS, MERGERS AND DISPOSALS
Throughout the Track Record Period and as of the Latest Practicable Date, we did not conduct
any major acquisitions, mergers or disposals.
HISTORY, DEVELOPMENT AND CORPORATE STRUCTURE
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COMPLIANCE WITH LAWS AND REGULATIONS
As of the Latest Practicable Date, as advised by our PRC Legal Advisor, the establishment of
our Company and transfers of equity interests and changes in registered capital (where applicable)
have been properly and legally completed in compli ance with the applicable laws and regulations.
As advised by our PRC Legal Advisor, our Company has obtained relevant approvals or
confirmation and has registered or filed with the relevant competent authorities (where applicable)
in accordance with the relevant laws and regulati ons in respect of its establi shment and subsequent
transfers of equity interests, including the Pre -IPO Investment as referred to above, and changes in
registered capital (where applicable) up to the Late st Practicable Date, and the establishment of our
Company and subsequent transfers of equity inte rests and changes in registered capital (where
applicable) up to the Latest Practicable Date are effective and legally binding.
FULL CIRCULATION
Our Company has applied for H-share full circulation to convert certain of the Unlisted Shares
into H Shares as per the instructions of the relevant Shareholders. The conversion of Unlisted
Shares into H Shares will involve an aggregate of 24,306,666 Unlisted Shares held by six existing
Shareholders (i.e. 4,000,000 Unlisted Shares being held by Mr. Zhao Duxue ( 趙篤學), 3,500,000
Unlisted Shares being held by Ms. Huang Yi (黃 怡), 2,300,000 Unlisted Shares being held by Ms.
Zhang Yizhen ( 張義貞), 340,000 Unlisted Shares being held by Mr. Zhang Jianjun (張 建軍),
10,000,000 Unlisted Shares being held by Tianjin Haikai Xinchuang and 4,166,666 Unlisted Shares
being held by CITIC Securities Investment), representing approximately 8.90% of total issued Share
capital of the Company upon the completion of the conversion of Unlisted Shares into H Shares
and the Global Offering (assuming the Ov er-allotment Option is not exercised).
Save as disclosed in this prospectus and to the best knowledge of our Directors, we are not
aware of the intention of any existing Shareh olders to convert their Unlisted Shares. See ‘‘Share
Capital ’’for further details.
PUBLIC FLOAT
Given that (i) the shareholding of each of Mr. Zhao Duxue ( 趙篤學), Ms. Huang Yi ( 黃怡),
Ms. Zhang Yizhen ( 張義貞), Mr. Zhang Jianjun ( 張建軍), Tianjin Haikai Xinchuang, and CITIC
Securities Investment (collectively, the ‘‘Full Circulation Pre-IPO Investors ’’) in our Company
upon the completion of the Global Offering is le ss than 10%; (ii) each of the Full Circulation Pre-
IPO Investors is solely financia l investor in our Group; (iii) each of the Full Circulation Pre-IPO
Investors is Independent Third Party; and (iv) none of the Full Circulation Pre-IPO Investors are
core connected person as defined under the Listin g Rules and none of the Full Circulation Pre-IPO
Investors fall within any category under Rule 8.24 of the Listing Rules, the Shares held by the Full
Circulation Pre-IPO Investors will be counted as part of the public float of our Company upon the
completion of the Global Offering.
HISTORY, DEVELOPMENT AND CORPORATE STRUCTURE
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--- page 199 ---
The aggregate of 204,760,000 Shares held by Mr. Wang Zhongshan, Ms. Zhang Xiuqin,
Jinmeng Partnership, Jinyuan Partnership, Ji nlong Partnership and T ianjin Yuanjinmeng
(collectively, the ‘‘Unlisted Shareholders ’’), representing approximately 75.00% of our total issued
Shares upon the completion of the Global Offering (assuming the Over-allotment Option is not
exercised), or approximately 73.23% of our total issued Shares upon exercise of the Over-allotment
Option in full, will not be considered as part of the public float as the Shares they hold are Unlisted
Shares which will not be converted into H Shares and public float following the completion of the
Global Offering.
Pursuant to the applicable PRC law, within the 12 months following the Global Offering, all
Unlisted Shareholders are not allowed to d ispose of any of the Shares held by them.
Immediately upon the completion of the Global Offering and conversion of Unlisted Shares
into H Shares (assuming the Over-allotment Option is not exercised), assuming 43,956,800 H
Shares are issued to the public Shareholders in the Global Offering and 24,306,666 Unlisted Shares
held by the Full Circulation Pre-IPO Investors will be converted into H Shares, an aggregate of
68,263,466 H Shares representing approximately 25.00% of our total issued Shares will be counted
towards the public float, which is in compliance with the requirement under Rule 8.08 of the
Listing Rules.
HISTORY, DEVELOPMENT AND CORPORATE STRUCTURE
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--- page 200 ---
OUR CORPORATE STRUCTURE AND SHAREHOLDING STRUCTURE
The following chart sets out our shareholding structure immediately before the completion of the Global Offering:
100% 100% 100% 100% 100%100% 100% 100% 100% 100% 100%100% 100%100% 100% 100%
100%
100%
100% 100%
51%
28.27% 1.75% 0.15%1.53% 1.00%9.60% 17.46%3.93% 26.19% 3.93% 4.37% 1.82%
20.08% 18.18% 18.18%
50% 50%
82.00% 60.22%
100%
Mr. Wang Zhongshan Mr. Wang Guoxin Ms. Wang Na Ms. Zhang Xiuqin
Jinmeng(2)
Partnership
(PRC)
Tianjin
Yuanjinmeng
(PRC)
Jinyuan(2)
Partnership
(PRC)
Jinlong(2)
Partnership
(PRC)
Tianjin(3)
Haikai
Xinchuang
(PRC)
CITIC(3)
Securities
Investment
(PRC)
Zhao Duxue(3) Huang Yi(3) Zhang(3)
Yizhen
Zhang(3)
Jianjun
Shandong
Yifu
(PRC)
Tianjin
Zongyi
(PRC)
Shenzhen
Mokingran
(PRC)
Zhongbao
Zhengxin
(PRC)
Shandong
Mokingran
(PRC)
Beijing
Mokingran
(PRC)
Guangdong
Mokingran
(PRC)
Jinan
Mokingran
(PRC)
Nanjing
Mokingran
(PRC)
Zhengzhou
Mokingran
(PRC)
Shenyang
Mokingran
(PRC)
Hangzhou
Mokingran
(PRC)
Changle
Chengxin
(PRC)
Jinan
Chengxin
(PRC)
Tianjin
Mokingran
(PRC)
Beijing
Chengxin
(PRC)
Changle
Mokingran
(PRC)
Shanghai
Yuanjunmeng
(PRC)
Shandong
E-commerce
(PRC)
Hong Kong
Mokingran
(Hong Kong)
Our Company
(PRC)
Shenzhen(1)
E-commerce
(PRC)
Lhasa
Jinqianhui
(PRC)
Notes:
(1) Shenzhen E-commerce is owned 51% by Shandong E-commerce and 49% by Shenzhen City Gold Chief Executive Technology Culture Co., Ltd.* ( 深圳市金總裁科技文化
有限公司), an Independent Third Party.
(2) Jinmeng Partnership, Jinyuan Partnership and Jinlong Partnership are our Employee Shareholding Platforms. See ‘‘ — Our Employee Shareholding Platforms ’’above for
details.
(3) Tianjin Haikai Xinchuang, CITIC Securities Investment, Zhao Duxue ( 趙篤學), Huang Yi (黃 怡), Zhang Yizhen (張 義貞) and Zhang Jianjun ( 張建軍) are our Pre-IPO
Investors.
HISTORY, DEVELOPMENT AND CORPORATE STRUCTURE
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--- page 201 ---
The following chart sets out our shareholding structure immediat ely after the completion of the Global Offering (assuming the Over-
allotment Option is not exercised):
23.72% 1.47% 0.12%1.28% 0.84%8.06% 14.65%3.30% 21.98% 3.30% 3.66% 1.53% 16.10%
20.08% 18.18% 18.18%
100%
100%
100% 100%
51%
50% 50%
100% 100% 100% 100% 100%100% 100% 100% 100% 100% 100%100% 100%100% 100%
82.00% 60.22%
100%
100%
Mr. Wang Zhongshan Mr. Wang Guoxin Ms. Wang Na Ms. Zhang Xiuqin
Jinmeng(2)
Partnership
(PRC)
Tianjin
Yuanjinmeng
(PRC)
Jinyuan(2)
Partnership
(PRC)
Jinlong(2)
Partnership
(PRC)
Tianjin(3)
Haikai
Xinchuang
(PRC)
CITIC(3)
Securities
Investment
(PRC)
Zhao Duxue(3) Huang Yi(3) Zhang(3)
Yizhen
Zhang(3)
Jianjun
Other Public
Shareholders
Shandong
Yifu
(PRC)
Tianjin
Zongyi
(PRC)
Shenzhen
Mokingran
(PRC)
Zhongbao
Zhengxin
(PRC)
Shandong
Mokingran
(PRC)
Beijing
Mokingran
(PRC)
Guangdong
Mokingran
(PRC)
Nanjing
Mokingran
(PRC)
Zhengzhou
Mokingran
(PRC)
Shenyang
Mokingran
(PRC)
Hangzhou
Mokingran
(PRC)
Changle
Chengxin
(PRC)
Tianjin
Mokingran
(PRC)
Beijing
Chengxin
(PRC)
Jinan
Chengxin
(PRC)
Shanghai
Yuanjunmeng
(PRC)
Shandong
E-commerce
(PRC)
Hong Kong
Mokingran
(Hong Kong)
Shenzhen(1)
E-commerce
(PRC)
Our Company
(PRC)
Jinan
Mokingran
(PRC)
Lhasa
Jinqianhui
(PRC)
Changle
Mokingran
(PRC)
Notes:
(1) Shenzhen E-commerce is owned 51% by Shandong E-commerce and 49% by Shenzhen City Gold Chief Executive Technology Culture Co., Ltd.* ( 深圳市金總裁科技文化
有限公司), an Independent Third Party.
(2) Jinmeng Partnership, Jinyuan Partnership and Jinlong Partnership are our Employee Shareholding Platforms. See ‘‘ — Our Employee Shareholding Platforms ’’above for
details.
(3) Tianjin Haikai Xinchuang, CITIC Securities Investment, Zhao Duxue ( 趙篤學), Huang Yi (黃 怡), Zhang Yizhen (張 義貞) and Zhang Jianjun ( 張建軍) are our Pre-IPO
Investors.
HISTORY, DEVELOPMENT AND CORPORATE STRUCTURE
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OVERVIEW
We are a gold jewellery Original Brand Manufacturer ( ‘‘OBM’’), focusing on markets in third
and lower-tier cities in the PRC. According to Frost & Sullivan, as of the Latest Practicable Date,
we were one of the very few with an operation that encompasses key stages of the gold jewellery
industry, from raw material sourcing and purification, R&D, product design, manufacturing to
retailing through our diversified sales network. In 2023, we were ranked:
. third and fifth by gold processing volume and gold jewellery revenue, respectively,
amongst gold jewellery brands in the PRC
(1) ; and
. third in terms of gold jewellery revenue (excl uding gold bullion) in third and lower tier
cities amongst gold jewellery brands in the PRC (2) .
Moreover, from 2018 to 2023, we were the only gold jewellery brand in the PRC that had
consecutively ranked in the top five of both the ‘‘Top Ten Enterprises in Gold Jewellery Processing
Volume ’’and the ‘‘Top Ten Enterprises in Gold Jewellery Sales Revenue ’’by the China Gold
Association. With high-purity gold jewellery as our core products, high-growth third and lower tier
cities as our market entry points, and leveraging our technical know-how, artisan craftsmanship and
advanced production capability, we have built a well-recognized domestic gold jewellery brand,
‘‘ ’’.
We were one of the very few major gold jewellery brands in the PRC with an operation that
encompasses key stages of the gold jewellery indus try, from raw material sourcing and purification,
R&D, product design, manufacturing to retailing through our diversified sales network, as of the
Latest Practicable Date, according to Frost & Sullivan. With high-purity gold jewellery products as
our core products, we have established a diversified sales network, through which we gain insight
into market trends, which in turn contributes to pro duct design and development catering to specific
consumer demands, forming a positive feedback loop. Under the leadership of our founder, Mr.
Wang Zhongshan, whose accolades include being named as the inheritor of PRC ’s intangible
cultural heritage at provincial level (中 國省級非物質文化遺產傳承人), honorable person in the
gold and jewellery industry for 30 years ( 黃金珠寶行業30年風雲人物‘‘功勛人物’’稱號), and
‘‘Outstanding Contributor to the Jewellery Industry on the 40th Anniversary of the Reform and
Opening up ’’(中國改革開放40周年珠寶行業突出貢獻人物), our operation covers key stages of
gold jewellery value chain.
We believe our growth was achieved through leveraging our ability to deliver gold jewellery
with sophisticated craftsmanship that highly r esonates with our target consumers. Chinese
consumers attach great importance to the quality , design and cultural connotation of jewellery
products. Thus, a gold jewellery company ’s ability to decipher market trends and launch new
products is essential to its growth. Throughout the Track Record Period, we introduced no less than
1,000 new Stock Product Units ( ‘‘SPUs ’’) on a monthly basis, which was higher than the monthly
Notes:
(1) According to Frost & Sullivan.
(2) According to Frost & Sullivan.
BUSINESS
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average of approximately 500 SPUs of our competitors according to Frost & Sullivan. In addition
to our in-house designed products, we also collaborated with well intellectual property owners
(‘‘IPs’’) including Eight Imperial Handcrafts ( 燕京八絕), a national intangible cultural heritage and
a well-recognized beverage brand to introduce new products. As the gold jewellery market evolves,
consumers have more diversified consumption needs and preferences, and would demand products
that allow them to express their individuality. Our ability to capture market opportunities arising
therefrom promptly and to effectively introduce recent trending products to the market enables us to
revamp our product offerings in accordance with market preferences swiftly.
Our operation is enhanced by our past success and continued effort to introduce and/or revamp
production equipment that is crucial to our gold jewellery production. We introduced/revamped
advanced equipment to enhance our automated process, including robotic arms for accessories
flipping ( 首飾抓取自動翻轉機械手), automated carving machines ( 自動刻花機), automatic
butterfly chain punching machines ( 自動蝴蝶鏈機), automatic thin wall gold tube necking machine
(薄壁金管自動縮口機), and chain loosening machines ( 鬆鏈機). We also adopted high-precision
wax film pouring technique ( 高精度蠟膜澆) and 3D printing techniques in our production line.
This enabled us to carve high precision mold of va rious forms within hours that otherwise would
require days (or longer) to complete when applying the traditional method. Since 2020, we have
self-developed approximately 300 production equipment and approximately 3,200 molds. We
believe our ability to self-develop advanced production equipment and molds has strengthened our
operation and has fortified our position as a leading high-purity gold jewellery OBM.
As a precious metal, gold is frequently valued based on its purity, and gold-purifying
capability is essential to gold jewellery manuf acturer, according to Fro st & Sullivan. Our gold
purifying capability allowed us to become a key player in the 999.9 high-purity gold jewellery
market. According to Frost & Sullivan, we were ranked first in the 999.9 high-purity gold jewellery
market in terms of gold jewellery revenue in 2023 and were amongst the first batch of gold
jewellery manufacturers to mass produce 999.9 high-purity gold jewellery with digitalized
production. Furthermore, according to Frost & Sullivan, in 2019, we became the first and one of
the very few domestic enterprises with scaled production of 18K-gold spring clasps. Our success in
navigating the challenges of producing such p roducts effectively alleviated the industry ’s over-
reliance on foreign manufacturers for the 18K-gold spring clasps. Moreover, as the gold jewellery
market expands, the demand for gold spring clasps, which are applied to join two ends of a relevant
jewellery products, is also projected to grow at a CAGR of 7.8% between 2023 and 2028 according
to Frost & Sullivan. Our groundbreaking achievements in this realm well position us to benefit
from the aforementioned market expansion.
Our ability to consistently introduce quality products that are well-accepted by consumers
helped us build a diversified sales network. Ou r multi-channel sales network includes 2,850
franchise stores operated by 1,670 franchisees, 36 self-operated stores, seven self-operated direct
service centers and 17 provincial-dealers located in more than 1,400 county-level areas in over 250
across multiple provinces and municipalities i n the PRC, as of June 30, 2024. While we primarily
rely on offline sales channels that include our sel f-operated stores and fran chise stores, to capture
the opportunities presented by fast-growing online channels, we have also expanded our online
sales through e-commerce platforms such as Tmall, JD.com, PinDuoDuo and Vipshop.
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Our accomplishment can be demonstrated in the awards we received over the years. Our
recent main accolades include being awarded the 2023 China Gold and Jewellery Industry Excellent
Full Supply Chain Service Provider (2023 中國黃金珠寶行業全產業鏈優秀服務商) and 2023 China
Gold and Jewellery Consumer Survey Reco mmended National Chain Store Brands ( 中國黃金珠寶
消費者調查全國連鎖推薦品牌) by Beijing Gold Economic Development and Research Center and
China Gold News. See ‘‘ —Awards and Recognition ’’below for further details.
As a gold jewellery brand in the PRC with an ope ration that encompasses key stages of the
gold jewellery industry, from raw material sourcing and purification, R&D, product design,
manufacturing to retailing thro ugh our diversified sales network, we are well-positioned in the
market to benefit from the rapid growth of the gold jewellery market.
OUR COMPETITIVE STRENGTHS
We are a gold jewellery OBM in the PRC, encompassing key stages of the gold jewellery
industry
We are a gold jewellery OBM, focusing on markets in third and lower-tier cities in the PRC.
According to Frost & Sullivan, as of the Latest Practicable Date, we were one of the very few with
an operation that encompasses key stages of the gold jewellery industry, from raw material sourcing
and purification, R&D, product design, manufacturing to retailing through our diversified sales
network. Our brand embodies an operation that c overs the aforementioned key stages of the gold
jewellery industry value chain. We are committed to quality control in each stage. According to
Frost & Sullivan, from 2018 to 2023, we were the only gold jewellery brand in the PRC that had
been consecutively ranked in the top five of both the ‘‘Top Ten Enterprises in Gold Jewellery
Processing Volume ’’and the ‘‘Top Ten Enterprises in Gold Jewellery Sales Revenue ’’by the China
Gold Association and in 2023, we were ranked:
. third and fifth by gold processing volume and gold jewellery revenue, respectively,
amongst gold jewellery brands in the PRC; and
. third in terms of gold jewellery (excluding gold bullion) revenue in third and lower tier
cities amongst gold jewellery brands in the PRC.
Since our inception, we have been committed to nurturing and strengthening an integrated
operation that encompasses key stages of the gold jewellery industry, journeying through raw
material sourcing and purification, manufactur ing and retailing through our diversified sales
network. We are committed to quality control in each stage. Such commitment has fortified our
strengths, which can be demonstrated in the following:
. In terms of R&D, we made substantial investments. As of the Latest Practicable Date, we
held 548 patents in the PRC. According to Fr ost & Sullivan, such result far exceeded
that of the industry average. Our commitment to R&D supported our groundbreaking
achievements in gold purification, breaking reliance on overseas imports on 18K-gold
spring clasps, success in machinery develop ment and jewellery design. For details, see
‘‘ — Research and Development ’’. We also implement strict control over our product
BUSINESS
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design and machinery development processes to mitigate the risk of intellectual property
infringement and reduce the likelihood of unauthorized replication or imitation by
competitors, thus preserving our dis tinctiveness and market position.
. In production, during the Track Record Period, we produced substantially all of our
products in-house, such proportion has far exceeded the self-production rate amongst our
industry peers according to Frost & Sullivan. Our production capability and capacity also
allow us to efficiently adjust our production plans according to the consumer demand and
market trend. See ‘‘Business — Production ’’for further details. Moreover, we have
increased the purity of our mass-produced gold jewellery from 999 to 999.9, and
successfully developed products with purity l evels of 999.99 and 999.999. Furthermore,
our dedication to gold jewellery product des ign and development enables us to create
gold jewellery products that are aesthetically pleasing, aligned with evolving consumer
preferences and feasible for ma ss production. According to Frost & Sullivan, the market
size of gold jewellery with purity levels of 999.99 and above in terms of revenue was
RMB2.30 billion in 2023, and it is expected to reach RMB3.10 billion in 2028 with a
CAGR of 6.2% from 2023 to 2028. The market demand for gold jewellery products with
purity levels of 999.99 and 999.999 is expected to grow further due to consumers’
pursuit for quality gold jewellery products given that high-purity gold is valuable and has
investment potential. According to Frost & Sullivan, in the long run, the gold price is
expected to trend upward, thus making the purchase of high-purity gold a value
protection investment. In addition, high- purity gold has good collection value, and some
exquisite gold jewellery not only can be worn but also has ornamental and artistic value,
which can be used as a family heirloom. Further, according to the same source,
processing techniques for high-purity gold are complex, under which more exquisite and
detailed jewellery can be produced, thereby satisfying consumers ’ requirements for
craftsmanship embodied in the gold jewellery products.
. For marketing, to achieve extensive and im pactful consumer reach across both online and
offline channels, we employ versatile marke ting strategies. For instance, during the Track
Record Period, we devised successful pro motional plans, such as initiating the ‘‘One
RMB Exchange ’’promotion. Such marketing strategies not only enhance our brand
recognition but also create a p ositive cycle of interaction between our consumers, our
franchisees and us. Moreover, we have success fully established a diverse and extensive
national multi-channel sales network in the PRC. This diverse and extensive network
helps to extend our consumer reach and ca talysts our sales and marketing goals.
. For quality control, we incorporate quality assuring/testing machinery to the production
line. With our direct involvement in each production stage, commencing with the
development of machinery and equipment to the creation of innovative products, we
strive to ensure the quality standards are me t at every step. For example, through our
gold purification and testing processes, we strictly monitor the purity and authenticity of
our gold jewellery products, which in turn, reinforces customer confidence.
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As a leading OBM brand in the PRC in terms of gold jewellery revenue and gold processing
volume in 2023, according to Frost & Sullivan, we are confident that we can capture the
opportunities offered by the market growth.
Our R&D capability allows us to realize achi evements and pioneer industry standard
Our R&D capability can be demonstrated by (i) our gold purification capability, (ii)
innovation in mass production of 18K-gold spring clasps of various metals and specifications and
(iii) our ability to set industry gold purity testing standards.
We consider gold purification as fundamental to the production of gold jewellery, as it can
enhance the intrinsic value of gold jewellery. To meet the increasingly stringent consumer demand,
we have made significant advancements in this area, particularly in the development of our patented
technology of ‘‘autogenous welding’’ (無焊料焊接). This technique materially reduced the inclusion
of non-gold materials in our production that may reduce purity level of our gold jewellery products
and enables us to achieve gold jewellery purity levels of 999.999, which can only be achieved by a
few jewellery manufacturers in the PRC, according to Frost & Sullivan. By reducing impurities
through the process, we have successfully addresse d common issues associated with traditionally
welded joints in gold jewellery, such as discolora tion, detachment, inadequate color, and wearer
allergies.
We have attained significant milestones in cour se of developing our production capabilities,
which can be demonstrated by our independent development and production of jewellery with gold
purity level of 999.9 and 999.99, along with the launching of our cutting-edge 3D hard gold and
other innovative products. Furthermore, we have developed an cyanide-free process for producing
999.9 high-purity gold. This achievement not only addresses environmental concerns related to
conventional cyanide-based methods, but also brings about energy savings and reduced energy
consumption.
Apart from gold purification, through our unwavering commitment to innovation, we have
successfully overcome technical challenges rela ting to the production process to mass produce 18K-
gold spring clasps. According to Frost & Sullivan, in 2019, we became the first and one of the very
few domestic enterprises with scaled production of 18K-gold spring clasps. This accomplishment
marks a milestone in the PRC gold jewellery in dustry as it effectively breaks the reliance on
overseas imports of the mid-to-high end 18K-gold spring clasps. Our production capabilities allow
us to manufacture 18K-gold spring clasps with a minimum outer diameter of 4mm and a remarkable
sheet accuracy of +/ – 1 micron on a large scale. This achievement addresses the previous industrial
limitations and signifies the realization of PRC domestic production. Moreover, as the gold
jewellery market expands, the demand for gold spring clasps, which are applied to join two ends of
jewellery products, is also projected to grow at a CAGR of 7.8% between 2023 and 2028 according
to Frost & Sullivan. We achieved technological breakthrough and realized mass production of
spring clasps made of 999 gold, silver, stainless steel and copper and our groundbreaking
achievement in this realm well positions us to be nefit from the aforementioned market expansion.
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Our dedication to R&D extends beyond the innovation with respect to mid-to-high end 18K-
gold spring clasps. We have independently develop ed and manufactured stainless steel jewellery
spring clasps. This pioneering accomplishment demo nstrates our ability to introduce new jewellery
processing technologies to the market.
In terms of contribution to gold purity testi ng standards, our achievements include:
. Our self-developed testing standard of ‘‘Gold Spectrum and Gold Chemistry Standard
Sampling’’provides an accurate and reliable method for detecting high-purity gold with a
gold purity level exceeding 999.95. Our t esting results are traceable to national
measurement standards, thereby ensu ring the highest level of accuracy.
. We have spearheaded the creation of the ‘‘High Purity Gold Chemical Analysis Method
for the Determination of Impurity Eleme nt Content in Ultra-Pure Gold by Glow
Discharge Mass Spectrometry ’’(T/SDAS4-2016), which was recognized as the industry
standard for detecting ultra-high purity gold by the Shandong Standardization
Association. This achievement sets us apart from competitors and solidifies our position
as an industry leader in setting and advancing industry standards, further emphasizing
our commitment to promoting standardization and ensuring the quality and consistency
of gold jewellery production practices.
Our manufacturing together with our sophisticated craftsmanship lays a solid foundation for
our rapid growth
Our ability to mass produce high-purity gold jewe llery that embodies tra ditional craftsmanship
has propelled our growth. We can create, adapt and/or calibrate machinery for gold jewellery
production that allows us to launch products according to the market trends. Our strength in
production is fundamental to our ability to mee t customer demands in an efficient manner and a
critical part of our operation. We treasure and maintain the intangible cultural heritage production
techniques, including the traditional technique of ‘‘gold and silver fine crafting ’’(金銀細工製作技
藝) in our production process, and further enhanced our automated and digitized production
capacity through attaining production capabilities such as our patented technology of ‘‘autogenous
welding ’’, thereby constructing an efficient producti on chain. Our manufacturing capabilities
separates us from our peers and gives us an edge in the growingly competitive market.
Our leading manufacturing equipment and production technique allow us to breakthrough the
limitations of traditional craftmanship and standardize complicated pro duction procedures. The
application of computerized numerical control ( CNC) processing centers, high-precision wire
electrical discharge machines ( 精工線切割機), automatic laser welding machines (激 光焊接機) and
nine-axis engraving machines (九 軸刻花精雕機), allows us to further enhance our automated
process. Additionally, we widely apply 3D printing in our molding process which allows us to form
high precision mold in hours that otherwise would require days (or longer). Our 3D molding
process gives us the capacity to mass produce co mplex gold jewellery products and to reduce the
amount of wasted gold in the production process.
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We incorporate ICP (Inductively Coupled Plasma) quality assuring/testing machinery to the
production line. We have established a gold testing center equipped with ICP (Inductively Coupled
Plasma) emission spectrometry, ICP-MS (Induc tively Coupled Plasma Mass Spectrometry), and
spark direct-reading devices. Unlike the traditiona l practice of outsourcing testing of gold and other
jewellery raw materials, our testing center is l ocated inside our production complex in Changle
County, Weifang City, Shandong Province, the PRC. Our self-owned testing center allows us to
readily conduct quality control tests on raw materia ls, work-in-progress inventories, and finished
goods. Based on the testing results, our production l ines can be adjusted simultaneously to increase
production yield rate and reduce wastage. In 2013, we obtained CNAS (China National
Accreditation Service for Conformity Assessment) laboratory accreditation for our test center.
Our leading gold purification technology and advanced production facility allow us to purify
trade-in gold materials and produce new products in our own production facility. This process
enables us to produce new jewellery that aligns w ith current aesthetic trends while enhancing
product quality. By engaging in gold trade-in, we also strengthen our interaction and connection
with consumers while diversifying our gold material sources.
We have strong innovative capability and a track record of introducing quality and
fashionable products driven by consumer preference
As the gold jewellery market evolves, consumers have more diversified consumption needs
and preferences, and would demand products that allow them to express their individuality. Our
ability to design and produce products that are we ll accepted by our target consumers has therefore
been crucial to our success.
Adhering to the four principles of lightness ( 輕), craftsmanship ( 巧), refinement ( 精), and
aesthetic ( 美), we provide our customers and consumers with a comprehensive portfolio of gold
jewellery products that reflects the latest trends. In particular, we pay close attention to our target
customers’ preferences for product types and material s under different scenarios. With our deep
understanding in the gold jewellery market an d our well-integrated design and production
capability, we have been able to continuously innovate and broaden our product portfolio.
We remain dedicated to innovating in both styles and materials used for our products.
Throughout the Track Record Period, we introduced no less than 1,000 new SPUs on a monthly
basis, which was higher than the average of approximately 500 SPUs of our competitors according
to Frost & Sullivan. We firmly believe that presenting a constant stream of new jewellery designs
and offerings can quickly captivate the inte rest of jewellery enthusiasts who have a deep
appreciation for beauty and fashion.
With the beauty of the Chinese culture and its influence on gold jewellery products engrained
in us, we always remain attentive to and seek to capture the market trends and popular elements. As
of June 30, 2024, we had a design team comprising approximately 50 designers from design
institutions across the nation, which strives to b lend the trends into our jewellery in their daily
course of work. We seamlessly incorporate modern fashion elements with contemporary Chinese
styles into our design, resulting in a harmonious fusion of contemporary fashion and traditional
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Chinese aesthetics in our jewellery. For example, we have developed new products combining the
traditional filigree inlaying tech niques with lacquerware carving ( 漆雕) and golden lacquer ( 金漆鑲
嵌) to promote and raise awareness for Chinese i ntangible cultural heritage handcrafts.
Our diverse product range encompasses not only the esteemed cultural heritage craftsmanship
such as the renowned Eight Imperial Handcrafts, a na tional intangible cultural heritage but also to
introduce cross-over merchandise, such as the ‘‘Lucky Golden Year ( 金年大吉)’’jewellery series
with a widely recognized beverage brand, among others. On top of collaborating with well-known
IPs, we also introduced the ‘‘Sail with Dreams’’ jewellery series in honor of China ’s space
exploration achievements, and it was highly sought after by the younger generation consumers.
Our prowess in product development is also demo nstrated through various aspects, including
the stiffness, brightness, and delicacy of our high-purity gold jewellery. Typically, gold purity and
stiffness are inversely related. However, with o ur advanced technology on gold purity processing,
we have created high-purity gold jewellery that possess the stiffness of not less than 60 HV scale.
This demonstrates our ability to ove rcome conventional limitations.
Furthermore, apart from pursuing gold purity level breakthroughs, we also made progress on
jewellery processing technologies and craftmanship. In 2019, we introduced the ‘‘Ultra-thin high
precision ’’bracelet, a series which utilized our high- glossy polishing tec hnology and achieved
significant advancements in surface brightness , stiffness and delicacy . This exemplifies our
dedication to precision craftsmanship and the production of exquisite jewellery pieces.
We have diverse and extensive national sales ch annels in the PRC that enables comprehensive
consumers outreach
Our ability to produce high-purity gold jewellery products with consistent quality has helped
build a diverse and extensive multi-channel sa les network in PRC. In turn, this diverse and
extensive network helps to enable consumer outreach and allows us to reach our sales and
marketing goals.
As of June 30, 2024, our sales channels extended to more than 1,400 county level areas in
over 250 cities across multiple provinces an d municipalities in the PRC and included:
. 2,850 franchise stores operated by 1,670 franchisees;
. 36 self-operated stores strategically located in various shopping malls;
. seven self-operated direct service centers and 17 provincial-dealers appointed by us;
. online stores on major e-commerce platforms; and
. mainstream social media platforms, including but not limited to Wechat, Weibo, Tiktok
and Xiaohongshu.
Our sales channels are anchored by our franchise network. In 2023, we were ranked third in
terms of gold jewellery revenue (excluding gold bul lion) in third and lower ti er cities amongst gold
jewellery brands in the PRC, according to Frost & Sullivan. According to the same source, third
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and lower tier cities had the highest growth rate in terms of market size from 2018 to 2023. They
are projected to continue this rapid growth, whereb y the sales growth in third-tier cities amounted
to 12.4% from 2018 to 2023 and was projected to grow at a CAGR of 9.4% from 2023 to 2028.
While the same for fourth and lower tier cities was 13.0% from 2018 to 2023 and was projected to
grow at a CAGR of 9.2% from 2023 to 2028, respectively. We strategically targeted at third and
lower tier cities in the PRC as our market entry points, with a vision to expand our market shares in
these untapped markets and capitalizing on the ir significant growth and sustained expansion.
Gaining first mover advantage in these markets helped us build market recognition and outpace our
competitors. With our coverage and service capabil ities, strong reputation, effective cost-control
and diversified product portfolio, we have successfully developed our business and established our
market position in third and lower tier cities.
Our franchise network played a crucial role in our success. By offering strong branding,
quality products, and operational support to our franchisees, we have established a strong
franchisees network. During the Track Record Period, our number of franchise stores remained
stable. Leveraging our OBM business model and our gold purification capabilities, we supported
our franchisees in implementing innovative promotion campaigns such as initiating the industry
first ‘‘One RMB Exchange ’’ promotion to enhance our brand awareness. Such marketing
promotions not only attract consumers but also st rengthened our relationship with franchisees and
enhance our brand awareness, which is essential for sustainable long-term growth.
In addition, to ensure franchisees can adequately source our products, our self-operated direct
service centers and provincial-d ealers are responsible for selling our products to franchisees in their
respective designated regions and to provide su pport and services. Such arrangement has been
essential for maintaining a solid and loyal franchise network, and our franchise network is a
cornerstone to our long-term growth and success. Providing high quality support and services to our
franchisees helps to benefit our franchisees by enabling them to achieve higher sales and
profitability, in turn benefiting our sales and profitability. We can also ensure their alignment with
our brand values and strategic objectives. This approach creates a positive development cycle
between ourselves and the provincial-dealers, whereby our provincial-dealers can economically
benefit from the onward sales while we gain their expertise in management and/or development of a
stronger network of franchisees. Moreover, such arrangement also enables our provincial-dealers to
provide diversified products for franchisees ’ selection, which is essential for maintaining a strong
and loyal franchise network.
Our extensive sales network is complemented by our online distribution channels through
e-commerce platforms and mainstream social me dia platforms. Accordi ng to Frost & Sullivan,
millennials and Gen Z are becoming the source of growth to the gold jewellery market and such
consumers often shop on the internet and soci al media. Thus, online presence has become
increasingly essential to gold jewellery bra nds. Faced with such market development, we have
established major online stores on e-commerce platforms such as T -mall and Taobao. We have also
expanded our online business on other mainst ream e-commerce platforms such as JD.com,
Pinduoduo, Vipshop and etc. in order to seize opportunities in the rapidly developing e-commerce
market. For details, see ‘‘ —Sales and distribution channels ’’. Revenue from online sales has grown
rapidly, increasing from RMB364.5 million in 2022 to RMB750.7 million in 2023, representing a
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year-on-year growth of approximately 106.0%. For the six months ended June 30, 2024, our
revenue derived from online sales further grew to RMB1,318.7 million, representing a
period-to-period growth rate of 666.3% when co mpared to that of RMB172.1 million for the six
months ended June 30, 2023. Such increase was primarily attributable to sales of gold bullion for a
promotional event of a leading PRC online retailer. Moreover, to further enhance our online
presence, we created sales platforms on mainstream social media platforms such as Xiaohongshu,
Weibo, and Douyin. The use of these social media platforms allow us to tap into new consumer
segments and fortified our brand awareness and reputation amongst such target consumers.
Our multi-channel sales network is diverse and extensive, enabling us to reach a wide range of
customers across different regions and demographics, which ultimately strengthens our brand
awareness, customer loya lty, and business growth.
Effective and inventive marketing strategies strengthened our brand recognition and deeply
connected with our consumers
According to Frost & Sullivan, we were a leading brand in the 999.9 high-purity gold
jewellery market in the PRC in 2023. Our high-purity gold jewellery not only demonstrates our
leading technical know-how but is also the crux of our marketing strategy. It is an integral part of
our brand concept and product design. We understand and appreciate the deeply-rooted belief of
Chinese consumer in the authenticity and invaluable nature of high-purity gold jewellery. Our
commitment to using only the finest raw materials and our dedication to craftsmanship ensure that
our high-purity gold jewellery exceeds the expectations of our customers and consumers in terms of
both quality and value.
Our marketing strategy focuses not only on the aesthetic appeal and trendiness of our high-
purity gold jewellery products, but also on the c ultural and emotional significance that they
represent. By prioritizing these values, we ga ined customer loyalty and enhanced our brand
recognition through publicity. Moreover, we are proud of the cultural influence of our brand, which
enhanced our established sales network. Our founder, Mr. Wang Zhongshan is recognized for his
gold and silver precision production technique and was named as one of the ‘‘Fifth Batch of
Inheritors of Provincial Intangible Cultural Heritage of Shandong Province ’’(山東省第五批省級非
遺項目傳承人名單) by Shandong Province. Benefiting from our founder ’s unique accolades and
technical know-how, we incorporate some of the intangible cultural heritage production technique
to bolster the cultural influence and artistic value of some of our products. Along the way, we also
contributed to the promotion of such technique, creating a positive marketing and development
cycle.
We regularly organize activities and promoti ons to increase customer participation, enhance
brand exposure, and receive product feedbacks. As an industry pioneer and taking the advantage of
our production capabilities, we introduced the ‘‘One RMB Exchange ’’promotion, which takes place
annually for a week per store. Through this initiative, we may accept consumer trade-in of their
used ‘‘Wan Purity ’’series gold jewellery purchased from us for new pieces of ‘‘Wan Purity ’’series
gold jewellery of the same weight or more at a nominal crafting fee of one RMB per traded-in gram
of gold with our franchisees or at our self-operated stores, and market gold price of any additional
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gold purchased and regular crafting fees for additi onal gold. Accordingly, consumers can enjoy the
benefits of purchasing new pieces of gold jewellery while franchisees also benefit from consumer
flow during such promotion events. As a result, this also creates a positive cycle that encourages
consumers to continue buying from us, thereby inc reasing brand recognition and customer loyalty.
To achieve extensive and impactful customer reac h, we deployed various marketing strategies.
Leveraging our established sales network, we pri de ourselves on our profound understanding of our
target consumers ’ preferences, allowing us to develop tailored marketing plans that cater to specific
product characteristics and market demands, especial ly among the millennials and Generation Z.
We tapped into the innovative minds of the younger generation by partnering with university
advertising festivals and we have also teamed up with renowned IPs such as with various renowned
artists to launch various promotional events, as well as to introduce cross-over merchandise, such as
the ‘‘Master Craftsman Legend ( 匠傳系列)’’jewellery series in collaboration with the ‘‘Eight
Imperial Handcrafts ’’, the ‘‘Lucky Golden Year ’’jewellery series with a widely recognized beverage
brand. We also introduced ‘‘Sail with Dreams’’ jewellery series in honor of China ’s space
exploration achievements. These products extended our brand influence and attracted greater
attention and participation from our consumers.
We believe our brand awareness has steadily inc reased and we have fostered a deep emotional
connection with our consumers, earning us numerous accolades, including the 2023 China Gold and
Jewellery Industry Excellent Full Supply Chain Service Provider (2023中 國黃金珠寶行業全產業鏈
優秀服務商) and 2023 China Gold and Jewellery Consumer Survey Recommended National Chain
Store Brands ( 中國黃金珠寶消費者調查全國連鎖推薦品牌) by Beijing Gold Economic
Development and Research Ce nter and China Gold News. See ‘‘Business — Awards and
Recognition ’’below for further details.
Sophisticated management team with valuable industry experience and pioneer vision,
encouraging an innovative and pragmatic corporate culture
We have assembled an experienced management team of successful industry veterans led by
Mr. Wang Zhongshan, our founder, executive Director and chairman of our Board and Ms. Zhang
Xiuqin, our vice chairman and executive Director. Both of them have more than 20 years of
experience in the gold jewellery industry.
Our founder, executive Director and chairman of Board, Mr. Wang Zhongshan, is a well-
recognized figure in the gold jewellery industry in the PRC. He has more than 20 years of
experience and was recognized as the inheritor of PRC ’s intangible cultural heritage at provincial
level ( 中國省級非物質文化遺產傳承人). Mr. Wang has extensive and invaluable knowledge in the
gold jewellery industry and has been accredited as honorable person in the gold and jewellery
industry for 30 years, and ‘‘Outstanding Contributor to the Jewellery Industry on the 40th
Anniversary of the Reform and Opening up’’ . More importantly, he has led our Group to set
national standard for the purification and manufacturing of 999.99 gold jewellery, through
achieving technological breakthrough to produc e gold jewellery products with higher level of
fineness, i.e. purity levels of 999.9 and 999.99.
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Under the leadership of our experienced management team, we have an innovative and
pragmatic corporate culture. We are a firm believer of the notion that innovation is the key to
driving the development and progress of enterprises, while practicality is a vital catalyst
transforming innovation into tangible results. We also benefit from establishing our production
facility in Changle County, Weifang City, Shandong Province, the PRC, a city which we believe
has rich jewellery history and profound jewellery crafting tradition. Embracing the local gold
jewellery cultural heritage, we were able to establ ish a reputable gold jewellery brand that is highly
competitive.
OUR STRATEGIES
Our mission is to ‘‘continuously driving technological innovation and delivering quality
aesthetic products and trusted services with exceptional value to consumers ’’and our vision is
‘‘showcasing the beauty of China through forging a world-class gold jewellery brand across an
operation that encompasses key stages of the gold j ewellery industry, from raw material sourcing
and purification, R&D, product design, manufacturing to retailing through our diversified sales
network ’’. To fulfil our mission and realize our vision, we intend to implement the following
strategies:
Expand our production capacity through further investment in our production machinery to
support our business growth
Our ability to mass-produce gold products with advanced equipment sets us apart from our
competitors. We have invested in and revamped our production facilities and introduced digitalized
equipment to our production line, including CNC pro cessing centers, high-precision wire electrical
discharge machining, nine-axis engraving machines, and automatic laser welding machines. For the
years ended December 31, 2021, 2022 and 2023 and the six months ended June 30, 2024, the
utilization rate of our production facility was 94 .4%, 83.1%, 87.1% and 73.0%, respectively. The
lower utilization rate for the six months ended J une 30, 2024 primarily resulted from slower sales
as our sales volume decreased by approximately 10.4% compared to the six months ended June 30,
2023. Our Directors consider that the production facilities were highly utilized during the Track
Record Period. Our effective utilization rate h as been consistently above 70% since 2021. We
believe that upgrading the production facility is necessary as illustrated below:
(1) Increasing market demand
According to Frost & Sullivan, sales growth of gold jewellery products in the third-tier
c i t i e sw a sa taC A G Ro f1 2 . 4 %f r o m2 0 1 8t o2 0 2 3a n dw a sp r o j e c t e dt og r o wa taC A G Ro f
9.4% from 2023 to 2028, while the same for fourth and lower tier cities grew at a CAGR of
13.0% from 2018 to 2023 and was projected to grow at a CAGR of 9.2% between 2023 and
2028, respectively. Additionally, as the gold j ewellery market expands, the demand for K-gold
spring clasps, which are applied to join two end s of jewellery products, is also projected to
grow at a CAGR of 7.8% between 2023 and 2028 according to Frost & Sullivan. In 2023, we
established a dedicated production line for K-gol d spring clasps to separately track the sales of
this product category. Our revenue derived from the sales of K-gold spring clasps amounted to
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RMB7.7 million for the year ended Decembe r 31, 2023, and RMB2.6 million for the six
months ended June 30, 2024. Considering these market trends, this necessitates an upgrade in
the production facilities.
(2) Foreseeable increase in number of product types
We expect to enhance our research and development capabilities and to increase our
number of stock product unit from more than 67,000 as of June 30, 2024 to over 74,000 as of
December 31, 2025 after establishing the research and development center. With this
expansion, there is a clear need to augment production capabilities to accommodate the
substantial increase in the variety of products.
We believe that upgrading the production facility is vital due to the projected market
demand growth for gold jewellery products and gold spring clasps. Additionally, the
anticipated increase in the number of produc t types necessitates enhanced production
capabilities. By upgrading the production facility, we aim to meet market demand, support
product diversification, and maintain our competitive position in the industry.
In order to further enhance our supply chain capabilities to support the increasing market
demand, we strive to optimize our supply chain through expansion of our production capacity
and upgrading our existing production line through automation as follows:
. To elevate our manufacturing capabilities, we plan to upgrade our production
facilities for gold jewellery products and mid-to-high end 18K-gold spring clasps
located in Changle County, Weifang City, Shandong Province, the PRC. The
estimated investment for fixed assets is approximately RMB639.0 million. Our
upgrade plan includes: (i) the construction of a major new production workshop and
refurbishment of the existing producti on area to meet the increasing demand for
gold jewellery; and (ii) the construction of new staff canteen and staff quarters to
improve the overall employee welfare. For further details of our upgrade plan,
please refer to the section headed ‘‘Future Plan and Use of Proceeds — Use of
Proceeds ’’; and
. We believe we will take advantage of facility upgrade and technological innovation
to increase automation level and reduce manual labor in our key manufacturing
processes. The investment in integrated and automated infrastructure will enable us
to materialize flexible manufacturing cap abilities, better satisfy the customized
product preferences of consumers and re alize fast response to market demand.
We are confident in the viability of our expansion plan, supported by the below factors.
According to Frost & Sullivan, the gold jewellery market in first-tier and second-tier cities in the
PRC are expected to grow at CAGRs of 8.8% and 9.7% from 2023 to 2028 and reaching
RMB123.9 billion and RMB345.3 billion in 2028 respectively, while the market size of gold
jewellery in third-tier cities and in fourth and lower tier cities are projected to reach RMB189.5
billion and RMB152.3 billion in 2028, representing a CAGR of 9.4% and 9.2% from 2023 to 2028,
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respectively. In view of the growing market demand for the gold jewellery products and our high
utilization of the existing production facility, we target to enlarge our scale of production,
strengthen our production process and further imple ment automated production infrastructure at our
production facility in Weifang, which in tur n further enhance our pr oduction capacity and
efficiency.
With our substantial investment in upgrading of production facility, we are well-positioned to
meet customer demand and support our rapid business growth. We anticipate that the increased
level of automation in production and the increase in our production capacity would allow us to
compete with better product price, and in turn expand our business and engage more franchisees to
explore unsaturated markets. Also, we believe that we can fulfil the demand for our products from
our franchisees and provincial-dealers, which in turn would strengthen our relationship with them,
and at the same time, penetrate into unsaturated markets for an increase in consumer base.
There is no guarantee that any of the expansion projects will proceed as planned. We remain
open to investing in additional expansion projects as we continue to expand our business and
capitalize on market opportunities.
Approximately 50.0% (or HK$251. 2 million/RMB232.5 millio n) of our net proceeds from the
Global Offering will be used to finance our expans ion of our production capabilities by upgrading
our existing production facility. For further details, please refer to ‘‘Future Plans and Use of
Proceeds — Use of Proceeds ’’.
Further enhance our R&D capabilities throug h establishing a research and development
center to solidify our innovation capacities and competitiveness
Our R&D capabilities is vital for us to remain at the forefront of the market. According to
Frost & Sullivan, there will be expectedly more trendy designs and continuous technique
enhancement in the gold jewellery market in the PRC. As such, we plan to continue to focus our
R&D efforts in perfecting gold processing techniques, machinery required for mass production of
gold jewellery and gold jewellery design as follows:
. Introduction of a research and development center at Changle County, Weifang City,
Shandong Province, the PRC to serve the functi ons of material testing, jewellery design,
R&D of machinery and technologies in order to advance our jewellery crafting
technology and continuously developing new product designs to fill our new gold
jewellery product pipelines and a supporting office at Shenzhen City, Guangdong
Province, the PRC; and
. Recruitment of 70 R&D talents to enhance our R&D capabilities.
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We plan to use our R&D center to make significant contributions to the development and
enhancement of gold processing techniques and th e machinery required for the mass production of
jewellery and related products. We plan to leverage our R&D center to (i) enhance our gold-related
technologies, including improving the purity of our gold jewellery products and advancing
jewellery processing tech niques; (ii) collaborate closely with our manufacturing team to standardize
complex production procedures and achieve high precision in the automated mass-production of
gold jewelry; and (iii) expand our product portfolio by conducting extensive market research on
current jewelry trends and consumer preferences, as well as analyzing regional trends for our
customers. These initiatives enable our R&D cente r to help us reduce costs and increase efficiency.
For further details of our R&D activities, please refer to the section ‘‘ — Our Research and
Development ’’.
We expect to increase number of stock product units from more than 67,000 as of June 30,
2024 to over 74,000 as of December 31, 2025. Further, in order to bolster our automated gold
crafting techniques and product design capabilit ies, we plan to form collaborations with renown
design institutes and designers both in the PRC and overseas for specific projects to diversify
service offerings.
Strengthen and expand our distribution channels to further our customer reach and improve
customer experience
We believe that maintaining an effective and extensive sales network is crucial to our business
success. We also believe that there are still many untapped opportunities in the PRC ’s gold
jewellery market with a vast number of locations in the PRC where we can set-up new self-operated
stores or franchise stores. As of June 30, 2024, we established an offline store network covering
over 2,850 franchise stores and 36 self-operated stores. We will continue to expand the breadth and
depth of our offline store network through the ope ning of new franchise stores and self-operated
stores in existing markets, and expand nation-wi de to achieve more effective and in-depth consumer
reach. We believe that expanding the number of our offline stores and our consumers reach is vital
to improving our brand recognition and market penetration rate.
We intend to further enhance our well-establish ed market position in third and lower tier cities
in China. We plan to expand franchise store network across the country, with the majority of these
new franchise stores located in regions where we already have a strong competitive advantage, such
as Shandong Province, Hubei Province and Henan P rovince. The strategic placement of these stores
leverages our existing market strength and consumer familiarity with our brand, allowing us to
efficiently expand our network while maintaining cost-effectiveness. Additionally, to penetrate
urban markets and enhance our brand presence in first-tier cities, we are also planning to launch
new franchise stores in Beijing and Tianjin. This ex pansion into first-tier cities is a strategic move
targeting affluent consumer segments and expandi ng our market penetration in high-density areas
with significant purchasing power.
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To realize the expansion of our offline store network, we also plan to open 33 self-operated
stores by December 2027. We will primarily focus our expansion efforts in opening self-operated
stores in third and lower tier cities in the PRC where we have relatively strong market position and
store density, as we can leverage the brand aw areness that we have built up in those cities to
accelerate our growth. In selecting the location for opening new stores in these areas, we will
carefully consider (1) the economic status of citi es and overall development of the regions; (2)
factors on consumers including the demographics of regions, consumer consumption habits and
preferences and consumer purchasing power; and (3) surrounding environment including traffic
conditions, rental situation of nearby shops and positioning of the regions. We also strive to
minimize unhealthy competition among stores.
At the same time, we will also be looking to opening self-operated stores in new first-tier and
second-tier cities in the PRC where our store density is relatively low. According to Frost &
Sullivan, these markets always have a high demand for gold jewellery products, which presents as a
significant opportunity for us to expand our presence to new markets and improve our market
coverage across the PRC. Further, the expansion into first tier and second tier cities helps to
improve our brand exposure in cities where we are less well-known, thus improving our brand
awareness and image.
In addition to opening new stores, we also intend to improve the scale and operations of our
seven self-operated direct service centers thro ugh enlarging the exhibition halls managed by our
self-operated direct service centers. We believe that this will increase the inventory of gold
jewellery available for sale and therefore motivat e franchisees to increase their purchases during
exhibition events.
Approximately 34.0% (or HK$170. 8 million/RMB158.1 millio n) of our net proceeds from the
Global Offering will be used to expand and enhance our sales and distribution network. For further
details, please refer to ‘‘Future Plans and Use of Proceeds — Use of Proceeds ’’.
Accelerate the development of our digital information platforms and to improve our
membership program
We plan to continue to enhance the digitalization of our operations across all aspects of our
operations. In particular, we plan to further inve st in the development of a centralized operational
system over the next few years to enhance our business functions and improve our operating
efficiency. Our intended centralized operational s ystem will include our complete proprietary CRM
system which provides centralized management ov er various aspects of our sales and distribution
network, and enhanced with client information categorization and analysis, sales personnel check-in
and workload management, as well as logistics data management. Currently, we have a CRM
system in place that serves as an internal sales da ta management system to record sales and trade-in
transaction details, as well as to capture end consumer information. We intend to enhance the
features and expand the capabi lities of our CRM system with additional functions and enriched
dimensions for recording transaction details to better accommodate our business needs.
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Apart from serving as a sales data management system, we plan to develop new features in the
upgraded CRM system to cater to other operational n eeds of franchisees and self-operated stores.
For instance, we intend to introduce a new interfa ce on the CRM system enabling users to manage
their sales performance. This will entail new features such as setting sales performance targets and
utilization rates for key performance indicator s by individual staff, along with a new commission
management system linked to the sales data inputted. Additionally, with the constant diversification
of our product portfolio, we intend to further str atify the labeling of our inventory management
system, enabling users of the CRM system to locat e relevant products more accurately. With these
additional details recorded in the new CRM system, we not only aim to optimize our operational
efficiency but also to draw further insights fro m the more detailed transactional information
gathered from franchisees.
On the other hand, we also intend to enhance our existing membership management module in
the new CRM system, encompassing more advanced customer support and clientele management
functionalities, such as member rewards and the generation of discount codes. We believe these
initiatives will help foster customer loyalty.
Furthermore, we aim to explore the synergistic effects between our digitalization of CRM
system, our EDM System and our franchise networ k outreach. For details of our EDM System, see
the section headed ‘‘Future plans and use of proceeds ’’. Data-driven intelligence marketing
solutions can be strategized and an integrated d igital business ecosystem can be built with the
synergies of our CRM system. Our CRM system will be connected to all our online and offline
stores, and through various intelligent platforms of our centralized operational system, we will also
be able to collect and analyze big data on the sales performance of our distribution channels such as
inventory level, sales volume, trends in the sales, and comparisons of sales with historical statistics,
as well as feedback from our customers in ord er to conduct analysis to identify customer
preferences and any deficiencies in our sales network. Our sales and marketing team will also be
able to analyze the information collected regularly to understand customer preferences with even
more granularity and accuracy, allowing us to fine-tune our media reach, optimize our conversion
funnel and offer customized promotions. We believe a deeper understanding of our customers ’
preferences and market trends will drive our abilit y to effectively engage with customers, make our
marketing more efficient, enlarge our customer base, increase the frequency of orders and repeat
orders, and ultimately generate more sales.
With the CRM system, we aim to further advance the development of our membership system
and grow our membership base through precision marketing and optimized membership benefit
program. We will also strengthen our insights into consumers ’ behavior to offer the most suitable
marketing, customized services, and products, thus increasing members ’ activity and loyalty.
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Continuously invest in brand building and further improve product innovation and expand
product offerings
Our brand is the foundation and cornerstone of our relationship with consumers and we see
the Listing as an opportunity to further enhance our brand awareness domestically and overseas. We
are committed to promoting and strengthening our brand ‘‘ ’’through various marketing
initiatives including placing advertisements on transportation hubs and commercial districts.
Furthermore, with an aim to promote our brand to younger generation and in light of the increasing
internet penetration rates and the widespread use of smartphones, we intend to increase our online
advertising expenditure in order to promote our brands and products online. We also intend to
increase the use of online social media platforms such as Xiaohongshu and Douyin and collaborate
with popular celebrities and key opinion leaders (KOLs) to leverage on their public image and
popularity to further promote our brand and pr oducts. Moreover, we plan to continue devising
marketing plans during festivals and holida ys such as Chinese New Year festival and Qixi ( 七夕)
festival to further elevate our brand recognition and awareness.
We believe that the constant release of new product lines and the maintenance of a rich and
diverse product portfolio is vital to improving our brand exposure and brand awareness. We will
continue to offer our customers diversified gold jewellery products with appealing designs at
affordable prices to capture more market opportun ities. In the future, we will continue to invest in
the development and launching of other product lines based on trending themes to enrich our
product offerings to further promote our brand.
OUR BRAND AND PRODUCT PORTFOLIO
Our brand is ‘‘
’’. We are proud of our capability in producing high-purity gold
jewellery. High-purity gold is an integral part of our brand positioning and our jewellery design
concept. We focus not only on the aesthetic appeal and trendiness of our gold jewellery products,
but also on the cultural and emotional significance that they represent. Our commitment to using
only the finest materials and our attention to craft smanship ensure our gold jewellery continues to
meet, if not exceeds, the expectations of our customers in terms of both quality and value. In
addition, our gold jewellery and other gold products include jewellery and gold bullion.
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Over the years, through our ‘‘ ’’brand, we have fostered a d eep emotional connection
with our consumers, earning us numerous accolades, including being awarded the 2023 China Gold
and Jewellery Industry Excellent Full Supply Chain Service Provider (2023 中國黃金珠寶行業全產
業鏈優秀服務商) and 2023 China Gold and Jewellery Cons umer Survey Recommended National
Chain Store Brands ( 中國黃金珠寶消費者調查全國連鎖推薦品牌) by Beijing Gold Economic
Development and Research Ce nter and China Gold News. See ‘‘ —Awards and Recognition ’’below
for further details.
During the Track Record Period, we primarily derive our revenue through (i) sales of gold
jewellery and other gold products, (ii) sales of K -gold jewellery, diamond inlaying jewellery and
other products and (iii) provision of services. The following table sets forth the breakdown of our
revenue by product and services during the Track Record Period:
Year ended December 31, Six months ended June 30,
2021 2022 2023 2023 2024
Revenue
Percentage
of revenue Revenue
Percentage
of revenue Revenue
Percentage
of revenue Revenue
Percentage
of revenue Revenue
Percentage
of revenue
RMB ’000 % RMB ’000 % RMB ’000 % RMB ’000 % RMB ’000 %
(Unaudited)
Gold jewellery and
other gold products . 16,457,308 97.5 15,392,835 97.9 19,877,366 98.4 9,137,879 98.1 9,834,885 98.5
K-gold jewellery,
diamond inlaying
jewellery and other
products . . . . . . . . 296,605 1.8 226,187 1.4 225,513 1.1 127,648 1.4 99,925 1.0
Services . . . . . . . . . . 117,087 0.7 105,193 0.7 105,720 0.5 50,686 0.5 44,934 0.5
Total ............ 16,871,000 100.0 15,724,215 100.0 20,208,599 100.0 9,316,213 100.0 9,979,744 100.0
Average unit price of our products
During the Track Record Period, the average unit price of gold jewellery and other gold
products (excluding gold bullion) sold by us amounted to RMB2,949.0/unit, RMB3,125.1/unit,
RMB3,304.8/unit and RMB2,832.1/unit for the years ended December 31, 2021, 2022 and 2023 and
the six months ended June 30, 2024, respectively. The average unit price of gold bullion sold by us
for the same year/period amounted to RMB6,780.2/unit, RMB7,151.6/unit, RMB4,316.0/unit and
RMB4,935.8/unit, respectively. Additionally, th e average unit price of K-gold jewellery, diamond
inlaying jewellery and other products sold b y us amounted to RMB540.1/ unit, RMB595.7/unit,
RMB670.9/unit and RMB806.6/unit for the years ended December 31, 2021, 2022 and 2023 and the
six months ended June 30, 2024, respectively.
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Our gold jewellery and other gold products
During the Track Record Period, our revenue derived from the sales of gold jewellery and
other gold products accounted for 97.5%, 97.9% , 98.4% and 98.5% of our total revenue for the
years ended December 31, 2021, 2022 and 2023 and the six months ended June 30, 2024,
respectively. We offer a variety of gold jewellery and other gold products, including gold bullion,
under different product lines catering for different scenarios one may encounter in daily life, such
as for daily wear and sending gold jewellery as gif ts under different scenarios. We also offer gold
jewellery products under different products lines o f different purity levels. Gold jewellery of purity
level of 999.9 are also referred to as ‘‘Wan Purity ’’series ( 萬純系列), and gold jewellery of purity
level of 999.99 are referred to as ‘‘Yi Purity ’’series ( 億純系列).
The following table sets forth the breakdown of sales volume and revenue of our gold
products by product type:
Year ended December 31, Six months ended June 30,
2021 2022 2023 2023 2024
Sales
volume Revenue
Sales
volume Revenue
Sales
volume Revenue
Sales
volume Revenue
Sales
volume Revenue
(kg) (RMB ’000) (kg) (RMB ’000) (kg) (RMB ’000) (kg) (RMB’ 000) (kg) (RMB ’000)
Gold products of purity
level of:
999.9 ( ‘‘Wan Purity ’’
series) . . . . . . . . . 40,468.2 13,870,027 39,101.2 13,978,637 43,251.3 17,865,322 21,095.1 8,379,816 13,594.2 6,282,342
999.99 . . . . . . . . . . . 2,139.2 740,332 2,367.0 845,445 2,733.5 1,121,958 1,332.9 526,670 3,988.7 1,957,932
Others . . . . . . . . . . . . 519.6 194,815 306.9 126,570 377.2 178,425 199.2 91,848 697.1 490,795
Gold bullion . . . . . . . . 4,962.8 1,652,134 1,250.5 442,184 1,704.5 711,661 359.0 139,545 2,308.8 1,103,816
Total . . . . . . . . . . . . . . . 48,089.8 16,457,308 43,025.6 15,392,835 48,066.6 19,877,366 22,986.2 9,137,879 20,588.7 9,834,885
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We set forth below our major product portfolio for our gold jewellery and other gold products:
Major scenarios
Major product
lines
Theme of
the design
Product
showcase
Product
showcase
Selling price
range
Mulberry
flower to convey
the message of
to love who you
treasure and to
cherish what you have
Inherit
ancient crafts
and preserve
inheritance
Continue to
write the legend
of the Winter
Olympics
under ice
and snow
Displaying the
oriental art of
ink in Chinese
painting in
a square inch
of enamel
The exquisite
light that soars
through the
mysterious
universe
Crafting fee
range (RMB)
for Major
product lines
Marriage Giving birthDaily wear
Cherish
your love
Praying for
good luck
for newborn
Exquisite
small
ornaments
Ancient style,
pray for good luck
Sail with dream
Gold Jewellery
Gold Bullion
10.5–24 4.5–2410.5–24 17.5–35 14.5–28
Our selling prices for gold bullion are generally based on the gold market price plus a crafting
fee, which is generally lower than the crafting fee for our other gold products, as gold bullion
requires less craftmanship.
Note : Each product line includes Wan Purity series pr oducts that qualify for trade-in under the ‘‘One RMB
Exchange ’’program. The price range of the Wan Purity series products is the same as the illustrative selling
price range for consumers.
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Below sets forth a few of our signature product lines:
“Master Craftsman
Legend series —
The Master's Legacy”
‘‘The Delicates
series — Twinkle’’
The ‘‘Ancient prayers
for good fortune series
— Buddha’s blessings’’
The ‘‘Ancient prayers
for good fortune series
— The Unparalleled
Oriental Beauty’’Θෂӻΐy
Θෂ
ୂ•ӻΐy
ୂ•ӻΐy
਷Ѝೌᕐ
ᘡʃུӻΐy
ਗ
‘‘Master Craftsman
Legend series — Luck,
Wealth and Golden
Fortune’’
‘‘‘The Delicates
series — Cute Pets’’
The ‘‘Ancient prayers
for good fortune series
— Sign of Fortune’’
‘‘The Happily
Ever After series —
Little Fortune’’
Θෂӻΐy
τ
ୂ•ӻΐy
ΛΊ
ఃԫᑗy
၅
ᘡʃུӻΐy
഼ᕻ
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Our K-gold jewellery, diamond inlaying jewellery and other products
During the Track Record Period, our revenue derived from the sales of K-gold jewellery,
diamond inlaying jewellery and other products accounted for 1.8%, 1.4%, 1.1% and 1.0% of our
total revenue for the years ended December 31, 2021, 2022 and 2023 and the six months ended
June 30, 2024, respectively. The following table sets forth our major product portfolio for our K-
gold jewellery, diamond inlayin g jewellery and other products:
Scenario
Product
line
Theme of
the design
Only have eyes
for you
(ԕຬɷ
Ы)
Make it simple
(ᔊ
່ೊᓃ)
Happiness for
yourself
(၅)
Product
showcase
Star Minimalism Pure Diamond Always
with you
Little Surprise
Daily wear Daily wear Marriage
Diamond Other accessories and partsK-Gold
Daily wear
Create “1314” diamond
ring with D0.13/0.14ct,
d0.014/0.013ct
(ʱ˴᝝

ʱ᩶Ⴞ᝝ଡ଼Υ
͂ி᝝ҡ)
High Purity D-E
Diamond Sacred gift,
precious as you are
(৷ॱЍ%&ॱ᝝
൮νЫ)
Exquisite
Craftsmanship,
Chinese Characteristics
(਷Ѝ˂ʈ
˙)
Chinese Fad
OUR BUSINESS MODEL
Our operation weaves together key stages of the gold jewellery industry, commencing with
trusted raw material sourcing, and through core operations including raw material purification,
brand management, R&D, product design, manufact uring and completing with a diversified sales
network, while committing to quality along the way. Our OBM business model allows us to
effectively decipher the recent c onsumer trends through our diversified sales network and to bring
such products to market leveraging our independently developed gold purification capability and
strong production know-how, effectively elevating our operational efficiency. According to Frost &
Sullivan, from 2018 to 2023, we were the only gold jewellery brand in the PRC that had
consecutively been ranked in the top five of both the “Top Ten Enterprises in Gold Jewellery
Processing Volume ” and the “Top Ten Enterprises in Gold Jewellery Sales Revenue ” by the China
Gold Association. In 2023, we ranked third and fifth by gold processing volume and gold jewellery
revenue, respectively, amongst gold jewellery brands in the PRC, according to Frost & Sullivan.
We believe our OBM business model enables us to reduce costs, improve efficiency and reliability
of our production process and maintain control over our sales channels.
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Our expertise in gold purification enables us to elevate the purity of our mass-produced gold
jewellery from 999 to 999.9. We consider gold purification to be fundamental to the production of
gold jewellery, as it can upgrade the intrinsic val ue of gold jewellery and the purity level of gold is
a crucial factor in the purchasing decisions of consumers.
Our self-owned production facility, combined with our investment in R&D, allow us to
integrate production with sales. This ensures that we can timely meet the demand of our customers
and consumers, while providing flexibility in new product offerings. Leveraging such strength, we
have successfully established a diverse and extensive national-wide multi-channel sales network in
PRC including franchise stores, self-operated sto res, and e-commerce platforms. According to Frost
& Sullivan, sales growth of gold jewellery produc ts in the third-tier cities was at a CAGR of 12.4%
from 2018 to 2023 and was projected to grow at a CAGR of 9.4% from 2023 to 2028, while the
same for fourth and lower tier cities grew at a CAGR of 13.0% from 2018 to 2023 and was
projected to grow at a CAGR of 9.2% between 2023 a nd 2028, respectively. Our diverse and
extensive sales network extends our consumer outreach and helps to achieve our sales and
marketing goals.
Our franchise network
We primarily sell our products to consumers through our offline network comprising of
franchise stores and self-operated stores. In a ddition, we also offer our products to consumers
through online sales via e-commerce platforms. We also maintain a third-party product list which
our franchisees are permitted to buy and sell third-party produced products under our brand name
‘‘
’’, provided that the products passed the inspection of us or a third-party testing agency
designated by us.
As of June 30, 2024, we had established a compre hensive franchise ne twork including 2,850
franchise stores operated by 1,670 franchisees, seven self-operated direct service centers and 17
provincial-dealers. Our other sales channels in clude 36 self-operated stores, sales to online
platforms and online stores on major e-commerce platforms in our consumer network. For further
information, see ‘‘ —franchisees and provincial-dealers management ’’.
During the Track Record Period, we achieved a high turnover with corresponding net profit
margins that were low. Such financial results were primarily attributable to our adoption of
franchise distribution model, whereby we mai ntained low fixed crafting fees when we sell to
provincial-dealers and/or franchi sees. In turn, our franchisees can be nefit from higher profit margins
on their subsequent sales to consumers. The increased profit margins not only strengthened our
franchisees ’ financial standing but also fostered their loyalty, reinforcing the bond between them
and us. When franchisees are able to achieve higher profit margins, they are more likely to remain
committed to our brand and franchise network. They see the value in continuing their partnership
with us and are motivated to actively participate in the growth and success of our franchise
network. Our business model, with franchise stores across the PRC, enables rapid expansion in
targeted markets. The franchise business model provides an asset-light and cost-effective means of
expanding our store network and geographical coverage. According to Frost & Sullivan, our
business model of high revenue but a relativel y thin net profit margin is not uncommon among
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industry peers who also adopt a franchise distribu tion strategy. Due to the aforementioned, for the
three years ended December 31, 2023 and the six months ended June 30, 2024, our Group operated
on a thin net profit margin of 1.3%, 1.1%, 1.2% and 0.5%, respectively.
Net profit margin
During the Track Record Period, our net profit margin remained relatively stable at 1.3%,
1.1%, 1.2% and 0.5% for the years ended Decem ber 31, 2021, 2022 and 2023 and the six months
ended June 30, 2024, respectively. Our low net p rofit margin was primarily attributable to our
adoption of franchise distribution model, where by we maintained low fixed crafting fees to our
products when we sell to provincial-dealers and franchisees. Such pricing model in turn benefits our
franchisees as they are able to sell to consumers at higher margins subsequently.
Our net profit margin remained relatively stable for the three years ended December 31, 2023.
We recorded a slightly decreases in our net profit margin from 2021 to 2022 partially due to our
distribution and selling expenses increased as we implemented organic growth strategies to expand
our market share. For the year ended December 31, 2023, our net profit margin remained stable
with a slight increase from 1.1% in 2022 to 1.2% in 2023. Our net profit margin decreased from
1.2% for the year ended December 31, 2023 to 0.5% for the six months ended June 30, 2024
primarily due to an increase in our net realized loss on Au (T+D) contracts and gold loans, which
in turn, was a result of a material increase in gold p rice during the first half of 2024. Our net profit
decrease coupled with our revenue growth resulted in a decrease in our net profit margin for the six
months ended June 30, 2024 when compared to the corresponding period of 2023.
Gold jewellery products generally have lower margin when compared with other jewellery
products, but the lower margin for gold jewellery products does not mean low crafting skills
applied when producing such products. Also, due to c omparatively stronger market demand for gold
jewellery products, they generally have higher inventory turnover.
Net profit margin and our hedging strategies
Our net profit margin fluctuation is subject to gold price fluctuation, among other factors.
To mitigate the potential impact of gold price fluctuations on our business, we utilized gold
loans and Au (T+D) for an economic hedge against our gold inventory position. The financial
impact of our economic hedge of Au (T+D) and gold loans was reflected under ‘‘other gains and
losses, net ’’in our consolidated statements of profit or loss and other comprehensive income during
the Track Record Period. However, the appreciation or depreciation in the monetary value of our
gold inventories may not necessarily be reflected in our net profit, as gold inventories were stated
at the lower of cost and net realizable value in our co nsolidated statements of financial position. In
situations where (i) there is an appreciation of monetary value of gold inventory, or (ii) there is a
depreciation of monetary value of gold inventory but the net realizable value is still higher than
cost, the inventory value will be calculated by cost and will not affect our net profit; however,
under situations where there is a depreciation of monetary value of gold inventory resulting in the
net realizable value lower than costs, an impairment loss on inventory will be incurred, thereby
affecting our net profit.
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In case of gold price decrease, the depreciation of monetary value of our gold inventory
balance is not necessarily reflected as a loss, but we will record a gain on our Au (T+D) contract as
we can sell at the previously determined Au (T+D) gold price which is higher than the market gold
price. This leads to a gain to be recorded under ‘‘other gains and losses, net’’ .
In case of gold price increase, the appreciation of monetary value of our gold inventory
balance is not reflected in our net profit, but we will record a loss on our Au (T+D) contract as we
need to sell at the previously determined Au (T+ D) gold price which is lower than the market gold
price. This leads to a loss to be recorded under ‘‘other gains and losses, net ’’.
To illustrate, when gold price increases, incre ase in our gold inventory monetary value will
not be accounted for as our profit, but we will suffer losses on Au (T+D), adversely impacting our
net profit, which leads to a net profit margin decrease.
For further details on how Au (T+D) operates, please see ‘‘Business — Our Procurement/
Suppliers — Procurement of Gold — (b) Gold Price Exposure Management to Manage Fluctuations
of Raw Material Price — Adoption of Au (T+D) contracts ’’.
Other factors which may also have an impact on our net profit margin include business
activities, product mix and sales channels.
To mitigate the situation of thin profit margins, we intend to continue to increase the
proportion of higher-margin products in our product mix by focusing on products that incorporate
more sophisticated crafting skills. We will also continue to conduct periodic review of our gold
jewellery crafting fees and product mix and mak e appropriate adjustments from time to time, as
they have a direct impact on our gross profit margin. We also believe that with our success in
Listing, our brand image would be elevated and we would have the proceeds from the Global
Offering to further expand our business and with our business expansion, our gross profit margin
may improve based on the economies of scale effect.
Furthermore, our Directors are of the view that although our gross profit margin is low, the
gross profit amount was still substantial at appr oximately RMB536.4 million, RMB759.2 million,
RMB1,077.5 million and RMB617.5 million for the years ended December 31, 2021, 2022 and
2023 and the six months ended June 30, 2024, respectively.
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Our principal business model and operation workf low are illustrated in the following diagram:
Our principal business model
Self-operated
direct service
centers
Provincial-
dealers
Franchisees
Trade-in gold from
franchisees and
provincial-dealers
Trade-in gold
from consumers
Procurement
Trade-in Production Sales Channel
Gold
exchange
and its
members
Commercial
banks for
gold loans
Gold
Self-operated
stores
Production
E-commerce
platforms
Online
consumers
Offline
consumers
Purify gold to a purity
of 999.9 and above
Trade-in gold
DiamondDiamond
exchange
and its
members
Finished
goods and
parts
Other
suppliers
Our Procurement
We specialize in developing and commercializi ng high-purity gold jewellery products. Our
ability to source high-purity gold and other raw materials is essential to our operation and growth.
Over the years, we have built a stable supply network for our main raw materials, which primarily
include gold and diamond. We attained special membership with the Shanghai Gold Exchange in
2020 after demonstrating satisfactory financial resources, internal controls, and business
capabilities. As a special member of the Shanghai Gold Exchange, we are able to purchase gold
directly from the officially authenticated source, which reduces the need to purchase gold from
third parties. According to Frost & Sullivan, as of October 31, 2023 the Shanghai Gold Exchange
had approximately 290 members, out of which appr oximately 30 companies were special members.
Many of the members are banks, financial institutions, gold mining companies, gold products
manufacturers and gold traders. To apply for special membership with the Shanghai Gold
Exchange, applicants are required to lodge a formal application and the approval process typically
takes around 60 working days. The eligibility r equirements include that the applicant: (i) be a
validly existing entity registered in China, (ii) have net assets of no less than RMB50 million, (iii)
have been profitable for each of the last three financial years (prior to application) and (iv) be
compliant with relevant laws and regulations of the PRC and have had no material non-compliant
incidents during the course of the applicant ’s operation in the three years (prior to application).
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Generally, the review process involves an assessment conducted by the Shanghai Gold Exchange ’s
general manager and final approval by the chairman, unless otherwise specified. The membership of
the Shanghai Gold Exchange requires annual renewal through the payment of an annual fee and we
will renew our membership in September 2026. The gold we purchase from the Shanghai Gold
Exchange is tested and certified, thus reducing any uncertainty about the gold purity/quality that we
use as raw materials for our gold jewellery products. We also obtained gold through gold trade-in.
For details of our gold trade-in, see ‘‘ —Gold Trade-in’’.
Our Research and Development (R&D)
We have been committed to and have invested substantively in the R&D of the gold
processing techniques and the machinery required for the mass production of jewellery and
jewellery products.
R&D on technology: We are committed to ensuring the gold purity of our gold jewellery
products, advancing jewellery processing tech niques, and enhancing production capabilities.
According to Frost & Sullivan, as of the Lates t Practicable Date, we are one of the few gold
jewellery brands that can mass produce gold jewellery of 999.9.
R&D on machinery: Our R&D on machinery allows us to standardize complicated production
procedures and achieve high precision automated mass-production of gold jewellery, thus allowing
us to be one of the few gold jewellery brands th at can independently manufacture and sell gold
jewellery products, according to Frost & Sullivan. Over the years, we have revamped imported
industry-leading production equipment, including robotic arms for accessories flipping, automated
carving machines, automatic butterfly chain pun ching machines, chain l oosening machines,
automatic thin wall gold tube necking machine and precisely calibrated these machinery to suit our
production needs. These machineries distinguish us from gold jewellery brands that only focus on
jewellery design but rely on external manufactur ers or imported machinery for production. Backed
with R&D capability and self-developed machinerie s, we can fine-tune our production process, self-
improve our product quality and conduct production trial to support our product development
department.
R&D on products: Our product portfolio encompasses a wide range of jewellery products,
including rings, necklaces, pendants, bangles, earrings, brooches, bracelets, and more. Such
comprehensive product portfolio provides our consumers with ample choices for different
occasions, such as daily wear, weddings, and gi fts for newborns. We innovate to meet current
market trends and satisfy the needs of different types of customers. One of the most salient features
of our products is that we employ the traditional technique of ‘‘gold and silver fine crafting ’’in our
production process, which is an ancient jewell ery crafting technique that was recognized as a
Chinese intangible cultural heritage in 2008, combining with our patented technology of
‘‘autogenous welding ’’, we are committed to preserve Chinese cultural heritage and to showcase
the beauty of traditional craftmanship through our high quality gold jewellery. With our deep
understanding of the gold jewellery market an d our well-integrated design and production
capability, we have been able to continuously innovate and broaden our jewellery portfolio.
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Our Production and Quality Control
Our ability to mass-produce gold jewellery with advanced equipment in the production phase
sets us apart from our competitors. We have invested in and revamped our hardware production
facilities and introduced digitalized equipment to our production line. Such production capability
allows us to enhance the quality and efficiency of our gold jewellery production through better
control of our production process — starting from testing the quality of raw materials used,
adopting standardized quality control, and final product sample testing.
With our direct quality control involvement in each stage of production, we can ensure the
quality standards are monitored and met at every step along the production chain. For example, we
perform gold purity tests starting from the early stage of material sourcing. Our workers perform
tests on the content of impurities by spectrome ter and electrode brush. Only products passing
through our purity standards can proceed to next stage of production. Through our gold purification
and stringent testing processes, we strive to ensure the purity and authenticity of our gold jewellery
products, which prevents sale of products which do not fulfil our gold purity standards and in turn,
instills confidence in our consumers.
Building on our advanced production capabili ties, we have achieved technical breakthroughs
in carrying out digitalized mass production of gold products of 999.9 purity level. In 2019, we
achieved breakthroughs in the production of gold spring clasps and became the first in the PRC to
mass produce such products according to Frost & Sullivan.
Our Sales Channel
As of June 30, 2024, we established a sales network with over 2,850 franchise stores operated
by 1,670 franchisees, 36 self-operated stores, se ven self-operated direct service centers and 17
provincial-dealers, as well as online stores on major e-commerce platforms in our customer
network.
We were ranked third in terms of gold jewellery revenue (excluding gold bullion) in third and
lower tier cities amongst gold jewellery brands in the PRC in 2023 according to Frost & Sullivan.
We believe our sales network positions us well to deepen our market penetration in markets with
growth potential.
Our business model of having franchise stores across the PRC allows us to expand rapidly in
third and lower tier cities. Our local franchise st ores understand local preferences and can adjust
product mix and be flexible with their marketing strategies, thereby enhancing consumer shopping
experience. We believe that our franchisee networ k has helped us capture the growth potential of
our targeted markets and deepen our market penetration, which is essential for long-term growth.
We believe our ability to provide high-purity gold jewellery products has consistently helped
us to build a strong reputable brand. Our branding and reputation, in addition, attracts franchisees
to join our franchise network and strengthens consumers ’ loyalty, both of which have been the
foundation to our strong growth.
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OUR PROCUREMENT/SUPPLIERS
Over the years, we have built a stable supply n etwork for our main raw materials, mainly
including gold and diamond. Apart from raw mate rials, we also procure finished goods and parts
from suppliers as needed. The procurement of fi nished goods and parts constitute a de minimis
portion of our total procurement.
According to our internal policy, our procurem ent department conducts multi-dimensional
evaluations on newly selected suppliers, regularly evaluates the qualifications of our suppliers and
eliminates unqualified suppliers to ensure all our requirements for external suppliers are met.
During the Track Record Period, we did not suffer from shortages in the supply of raw materials
from our suppliers and we do not anticipate any supp ly chain constraints that will materially and
adversely affect our results of operations.
The following table sets forth the breakdown of our material costs:
Year ended December 31, Six months ended June 30,
2021 2022 2023 2023 2024
Material costs
% to total
material costs Material costs
% to total
material costs Material costs
% to total
material costs Material costs
% to total
material costs Material costs
% to total
material costs
(RMB ’000) (%) (RMB ’000) (%) (RMB ’000) (%) (RMB ’000) (%) (RMB ’000) (%)
(Unaudited)
Gold . . . . . . . . 16,015,563 99.0 14,694,499 99.2 18,812,047 99.5 8,620,254 99.3 9,216,361 99.6
K-gold . . . . . . . 67,104 0.4 33,303 0.2 42,245 0.2 25,672 0.3 20,183 0.2
Diamond . . . . . . 93,988 0.6 84,390 0.6 58,248 0.3 38,197 0.4 18,126 0.2
Others . . . . . . . 5,937 — 5,016 — 3,671 — 2,706 — 31 —
Total ..... 16,182,592 100.0 14,817,208 100.0 18,916,211 100.0 8,686,829 100.0 9,254,701 100.0
The following tables set forth the breakdowns of (i) the volume; (ii) the average carrying
value; (iii) the comparison with PRC market price for our major categories of inventories (gold, k-
gold and diamond) during the Track Record Period. We disregard the inclusion of (i) work in
progress; (ii) consumables; and (iii) other categ ories of raw materials such as silver and platinum
jewellery due to the insignificant amount of such products/materials.
Materials (including raw materials and consignment processing materials)
Inventory volume
As of December 31, As of June 30,
2021 2022 2023 2024
Gold (kg) ............... 1 , 6 2 1 . 1 9 0 1 . 5 1 , 1 0 6 . 7 1 , 2 5 9 . 4
K-gold (kg) ............. 1 1 2 . 5 1 5 1 . 4 1 4 9 . 0 1 4 7 . 6
Diamond (carat) (1) . . . . . . . . 5,062.4 3,117.1 3,404.7 3,375.4
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Note:
(1) For diamond as raw materials, we normally purchase diamonds with carats as the unit of measurement.
Average carrying value and comparison with the closing gold price of Shanghai Gold
Exchange
As of December 31, As of June 30,
2021 2022 2023 2024
Average
carrying
value
Comparison
with the
closing gold
price of
Shanghai
Gold
Exchange on
the last
trading day
of the year
Average
carrying
value
Comparison
with the
closing gold
price of
Shanghai
Gold
Exchange on
the last
trading day
of the year
Average
carrying
value
Comparison
with the
closing gold
price of
Shanghai
Gold
Exchange on
the last
trading day
of the period
Average
carrying
value
Comparison
with the
closing gold
price of
Shanghai
Gold
Exchange on
the last
trading day
of the period
Gold (RMB/g) . . . . . 329.0 –1.8 355.0 –8.2 414.3 –10.2 467.1 –19.5
K-gold (RMB/g) . . . . 248.6 N/A 260.6 N/A 245.4 N/A 268.7 N/A
Diamond (RMB/
carat) . . . . . . . . . 5,958.0 N/A 5,071.5 N/A 5,104.0 N/A 5,072.2 N/A
Products (including finished goods and goods in transit)
Inventory volume
As of December 31, As of June 30,
2021 2022 2023 2024
Gold products (kg) . . . . . . . . 3,635.7 3,041.7 3,389.6 2,463.0
K-gold products (kg) . . . . . . 353.0 260.3 344.0 211.5
Diamond inlaying jewellery
products (unit) (1) . . . . . . . . 92,837.0 90,146.0 81,113.0 83,338.0
Note:
(1) For inventory volume of diamond in laying jewellery products, only number of product units is available, as
our finished diamond inlaying jewellery products, which contain diamonds and other precious metals such as
gold, are measured and sold by product units instead of the weight of diamond.
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Average carrying value and comparison wit h the closing gold price of Shanghai Gold
Exchange
As of December 31, As of June 30,
2021 2022 2023 2024
Average
carrying
value
Comparison
with the
closing gold
price of
Shanghai
Gold
Exchange on
the last
trading day
of the year
Average
carrying
value
Comparison
with the
closing gold
price of
Shanghai
Gold
Exchange on
the last
trading day
of the year
Average
carrying
value
Comparison
with the
closing gold
price of
Shanghai
Gold
Exchange on
the last
trading day
of the period
Average
carrying
value
Comparison
with the
closing gold
price of
Shanghai
Gold
Exchange on
the last
trading day
of the period
Gold (RMB/g) . . . . . 332.6 +1.8 351.2 –12.1 414.0 –10.5 461.4 –25.2
K-gold (RMB/g) . . . . 217.2 (1) N/A 265.6 N/A 271.1 N/A 290.5 N/A
Diamond (RMB/unit) . 1,528.6 N/A 1,505.7 N/A 1,238.9 N/A 1,217.0 N/A
Note:
(1) As of December 31, 2021, certain K-gold jewellery was manufactured for third-party commissioners but not
yet delivered to them, which were included in K-gold products. The corresponding inventory balances consist
of only staff costs and overheads (raw materials are supplied by commissioners), while their quantities are
included in the total quantities of K-gold products, resulting in the lower average carrying value of K-gold
products. This does not indicate that the provision for inventories is inadequate or that the accounting policy
has not been consistently applied.
In summary, the average carrying value of our gol d materials/finished goods were generally
lower than the closing gold price on the Shanghai Gold Exchange on the last trading day of the
year/period during the Track Record Period. Suc h results were primarily attributable to the
increasing trend in gold prices during the Track Record Period, with gold mat erials being purchased
at a lower unit price than the market price of gold on the last trading day of the relevant year/
period. Similarly, for certain years/periods during the Track Record Period, the average carrying
value per gram of gold raw materials was higher than that of finished gold jewellery products,
because at times when gold price is generally increasing, the gold prices of raw materials would be
closer to the market price, which is generally higher than that of finished gold jewellery products as
such products contained gold procured from a time when gold price was comparatively lower than
the prevailing market price.
As gold prices generally trended upwards since 2022, we suffered material losses from Au (T
+D) contracts and gold loans we entered into in 2022, 2023 and the six months ended June 30,
2023 and 2024. Such loss amounted to RMB209.1 million, RMB369.5 million, RMB195.3 million
and RMB386.6 million for the years ended December 31, 2022 and 2023 and the six months ended
June 30, 2023 and 2024, respectively. At the same time, we benefited from the higher selling price
of our products, which were reflected in our gross profits and gross profit margins in the same
period. However, as our inventories are measured at the lower of cost and net realizable value, the
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appreciation of our inventory as of December 31, 2022 and 2023, and June 30, 2023 and 2024 is
not reflected in the value of our inventories. Given gold is highly liquid, had we sold all gold
inventories (including gold and K-gold material s and finished products) at the closing gold price
quoted on the Shanghai Gold Exchange on the last trading day of the years ended December 31,
2022 and 2023 and the six months ended June 30, 2023 and 2024 without taking into account the
crafting fees we should be able to charge, we w ould record a gain of RMB52.1 million, RMB77.5
million, RMB60.8 million and RMB132.4 million for the years ended December 31, 2022 and 2023
and the six months ended June 30, 2023 and 2024. Conversely, in 2021, we recorded gains from
Au (T+D) contracts and gold loans in the sum of RMB88.6 million due to the decreasing trend in
gold price during the year. Meanwhile, our gross profit margin derived from sales of gold products
in 2021 was low due to low market price of gold. Had we sold all our gold inventories (including
gold and K-gold materials and finished products) at the closing gold price quoted on the Shanghai
Gold Exchange on the last trading date of 2021, disregarding the crafting fee we could have
charged, we would incur a loss of RMB4.0 million.
Procurement of Gold
During the Track Record Period, all of our gold material was procured from the PRC, and we
mainly source our gold through two means, namely (i) gold obtained from the Shanghai Gold
Exchange and its members and (ii) obtaining used gold by way of accepting gold trade-in
(including franchisee trade-in and consumer trade-in) as a settlement method to offset the amount of
gold which our customers purchase from us. For details of gold trade-in, see ‘‘ — Gold Trade-In’’.
According to Frost & Sullivan, these are also the two common channels of gold sourcing in the
PRC gold jewellery industry.
Gold Procurement Plan
Our procurement team determined the quantity of gold raw materials to be purchased mainly
based on the sales volume data prepared by relevant sales personnel. Such data are prepared several
times each day, and based on the actual sales volume our procurement team would make gold
purchases at the spot price from the Shanghai Gold Exchange several times each day. We do not
enter into long-term procurement contracts with the Shanghai Gold Exchange. Also, while our
procurement team determined the quantity of gold raw materials to be purchased mainly based on
the sales volume data prepared by relevant sales personnel, in accordance to our internal policy, our
procurement department is to monitor the gold price on daily basis (amongst other measures), and
such measures are to help us procure gold at approp riate prices. For further details on monitoring of
gold prices please see ‘‘ — (a) Gold obtained from the Shanghai Gold Exchange — Monitoring
Gold Prices ’’. During the Track Record Period, gold sourced through direct procurement was
generally determined based on th e prevailing trading price of the Shanghai Gold Exchange on the
relevant trading day or the day for Au (T+D) (i.e. Trade + Delay) settlement. We implemented
measures including financing gold procurement through gold loans and entering into Au (T+D)
contracts to mitigate the risks associated with fluctuations in gold prices. These measures are
carefully assessed based on funds available, our gold inventory position and estimated sales needs.
For details of hedging, see ‘‘ — (b) Gold Price Exposure Management to Manage Fluctuations of
Raw Material Price ’’below.
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The following table sets forth the breakdown of our sources of gold:
Year ended December 31,
Six months ended
June 30,
2021 2022 2023 2024
Amount of
gold
obtained
% to total
amount of
gold
obtained
Amount of
gold
obtained
% to total
amount of
gold
obtained
Amount of
gold
obtained
% to total
amount of
gold
obtained
Amount of
gold
obtained
% to total
amount of
gold
obtained
(Kg) (%) (Kg) (%) (Kg) (%) (Kg) (%)
Gold obtained from the
Shanghai Gold Exchange
. Direct procurement . . . 23,027.1 46.5 23,480.1 55.9 30,325.5 62.0 13,357.8 66.6
. Gold loans obtained
from commercial
banks . . . . . . . . . 1,795.0 3.6 1,390.0 3.3 1,589.0 3.2 730.0 3.6
Gold trade-in . . . . . . . . . . . 24,766.4 49.9 17,158.4 40.8 16,987.7 34.8 5,969.5 29.8
Total .............. 49,588.5 100.0 42,028.5 100.0 48,902.2 100.0 20,057.3 100.0
(a) Gold obtained from the Shanghai Gold Exchange
During the Track Record Period, we mainly purchased gold through our own Shanghai Gold
Exchange ’s corporate account. The Shanghai Gold Exchange is the largest gold exchange in the
PRC and directly regulated by the PRC government. The Shanghai Gold Exchange, as the central
counterparty, uniformly organizes clearing and settlement for all transactions in the exchange
system. We have been a special member of the Shanghai Gold Exchange since 2020, which gave us
the right to directly purchase gold material fro m our special trading account on the Shanghai Gold
Exchange. According to the Shanghai Gold Exchange Auction Trading Rules, only members
(including special members) are allowed to trade directly on the Shanghai Gold Exchange, whereas
non-members can only trade through members and special members. This structure grants members
and special members the right to ear n fees for facilitating non-members’ trade. Through our
membership with the Shanghai Gold Exchange , we achieved a procurement advantage by
eliminating our dependence on other members for g old procurement and reducing our cost of sales
as we no longer need to pay trade premiums to members of the Shanghai Gold Exchange.
Moreover, the gold we procure from the Shanghai Gold Exchange is tested and certified, thus
reducing uncertainties on quality of the gold we use for production of our gold jewellery products.
During the Track Record Period, we also obtained gold from the Shanghai Gold Exchange through
gold loans obtained from commercial banks. For fu rther details, please refer to the section headed
‘‘ —Gold Loans ’’.
Monitoring Gold Prices
In accordance to our internal policy, our procurement department monitors the gold price on
daily basis and conducts analysis based on various factors including the daily fluctuations in gold
prices, order and trading volume of London gold, th e difference between spot prices and futures or
BUSINESS
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forward prices of gold, and the fluctuations in the exchange rate of RMB against the US dollar. For
details of our gold procurement plan, please see ‘‘ — Procurement of Gold — Gold Procurement
Plan ’’.
For details of our gold purchase amount from the Shanghai Gold Exchange, see ‘‘ —Our Top
Five Suppliers during the Track Record Period ’’below.
The following diagram sets forth our internal procedure of direct procurement of gold:
Determine
procurement
volume based on
sales volume
Input transaction
order
Settlement Daily clearing report Logistics for
physical delivery
Final approvalMonitor gold price
and determine the
time of procurement
Funding the transaction
accounts
ApprovalSubmit procurement
request in OA system
(b) Gold Price Exposure Management to Manage Fluctuations of Raw Material Price
During the Track Record Period, to manage our exposure to changes in gold price, we
implemented (i) a ‘‘procuring according to sales ( 以銷定採)’’procurement strategy, and (ii) hedging
strategies including financing our procurement of gold through gold loans and entering into Au (T
+ D )c o n t r a c t so nad a i l yb a s i s .I ti so u rs t r a t e g yt oe n t e ri n t og o l dl o a n sa n dA u( T + D )c o n t r a c t s ,
i.e. the short position, to substantially cover our inventory balance and the adoption of such
hedging strategies allows us to avoid speculating against fluctuations in gold prices and focus on
the development of our core operations in gold jewellery manufacturing and sales.
‘‘Procurement According to Sales ( 以銷定採)’’Procurement Strategy
We implement the strategy of ‘‘procuring according to sales ( 以銷定採)’’, whereby we
purchase gold materials based on our daily sales volume to manage the potential adverse impact of
mismatches between our gold procurement prices and sales prices. This approach allows us to
maintain an inventory level by with stable inventory turnover days of 42.7 days, 45.6 days, 36.8
days and 40.8 days as of December 31, 2021, 2022 and 2023 and June 30, 2024, respectively. We
do not make gold procurements based on gold p rice movements alone, and thus, material
movements in gold price do not substantially impact our gold inventory. We believe our ‘‘procuring
according to sales ( 以銷定採)’’strategy helps mitigate the potential adverse impact of mismatches
between our gold procurement prices and sales prices.
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Economic Hedge of Au (T+D) Contracts and Gold Loans
According to our gold price exposure management strategy, we implemented measures
including financing our procurement of gold through gold loans and entering into Au (T+D)
contracts on a daily basis to mitigate the risks associated with fluctuations in gold prices. These
measures are carefully assessed based on funds available, our gold inventory position and projected
sales needs. Our Directors believe that our multi-channel procurement and gold price exposure
management strategies, through Au (T+D) contracts and gold loans, are effective in controlling and
mitigating risks associated with gold price fluctuations.
Adoption of Au (T+D) contracts
Au (T+D) is a standardized contract employed by the Shanghai Gold Exchange. It involves the
delivery of a predetermined amount of gold at a p redetermined price on a specified future date.
Investors in Au (T+D) do not buy or sell gold at the current market price. Instead, they need to set
a price and quantity (i.e. create a position), and then in case there is a match of orders for the
buying and selling of gold, the system will recognize the transaction, inform the buyer and seller
and create a binding agreement between the parties accordingly. Au (T+D) transactions operate on a
margin system, typically around 5-10%, allowing traders to make purchase of gold on margin and
then to defer delivery if desired. According to Frost & Sullivan, the adoption of Au (T+D) is
common among gold jewellery manufacturers in PRC.
We typically enter into Au (T+D) contracts on a daily basis as a seller to create a short
position and choose for delay settlement on a future date. The contract amount of Au (T+D) is
determined with reference to our current day ’s sales and procurement volume of gold materials. Au
( T + D )c o n t r a c t sa r es e t t l e do nad a i l yb a s i s .O ne a c ht r a d i n gd a yo fA u( T + D ) ,i ft h eg o l dp r i c e
declines, we may experience a loss in the value of the gold jewellery sold, but simultaneously
benefit from a realised gain on Au (T+D) contracts. Conversely, if the gold price rises, we may
incur a loss on Au (T+D) contracts, but we can sell the gold jewellery at a higher price to realize
the increase in gold price. In practice, the Au (T+D) contracts are marked-to-market by receiving
from or paying to the counterparty the net gain or loss amount at each market trading date during
the contract period with our deposits for margin.
During the Track Record Period, we did not engag e in speculative activities that falls within
the definition under HKFRS 9 for gold price exp osure management. We employ economic hedges
(i.e. derivatives that were used to manage risks b ut were not subject to hedge accounting treatment)
to manage risks arising from gold price fluctuations with the objective to reduce and/or eliminate
the effects of market gold price fluctuations. Our hedging instrument was not accounted for under
hedge accounting, because (1) for accounting purpose, they do not meet the qualifying criteria for
hedge accounting in accordance with HKFRS 9 ‘‘Financial Instruments ’’including at the inception
of the hedging relationship there is no formal designation and documentation of the hedging
relationship and our risk management objective and strategy for undertaking the hedge, (2) as the
formal designation and documentation of hedging relationship are not allowed to be retrospectively
adjusted under relevant HKFRSs, adoption of hedge accounting in the middle of the Track Record
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Period will cause the financial performance to be not comparable throughout the Track Record
Period, and (3) many of our listed peers does not adopt hedge accounting even if they also utilize
similar hedging instrument.
The financial impact of our economic hedge of Au (T+D) and gold loans was reflected under
‘‘other gains and losses, net’’ in our consolidated statements of profit or loss and other
comprehensive income during the Track Record Period. However, the appreciation or depreciation
in the monetary value of our gold inventories may not necessarily be reflected in our net profit, as
gold inventories were stated at the lower of cost and net realizable value in our consolidated
statements of financial position. The timing di fference between when we recognize the loss on Au
(T+D) contracts and when we are able to fully realize the gains from the gold price portion of our
sales (due to increase in gold price) may affect our results of operation. Below are examples to
illustrate how our results of operations are affected.
Assuming:
. We procure 100 grams of gold at RMB5 per gram on Day 1;
. We enter into an Au (T+D) contract to sell 100 grams of gold at RMB5/gram on Day 2;
and
. On Day 2 and Day 3 gold price rises to RMB10/gram.
Scenario One — On Day 2, we sell all 100 grams of gold
. Gross profit on gold price portion of the sales RMB(10 –5)/gram * 100 grams =
RMB500.
. We incur a loss of RMB500 on the Au (T+D) contract due to the rise in gold price.
. The gain we received from the gold price portion of our sales is cancelled out by our
loss on the Au (T+D) contracts, and thus, the gold price fluctuation has
no effect on our
net profit .
Scenario Two — O nD a y2 ,w es e l l5 0g r a m so fg o l d ,a n ds e l lt h er e m a i n i n go nD a y3
. Day 2: Gross profit on gold price portion of the sales RMB(10 –5)/gram * 50 grams =
RMB250.
. Day 2: We incur a loss of RMB500 on the Au (T+D) contract due to the rise in gold
price.
. Day 2: Our net profit would be negatively impacted by RMB250 due to the increase
in gold price.
. D a y3 :W es e l lt h er e m a i n i n g5 0g r a mo fg o l dp r o c u r e do nD a y1a n dm a k eap r o f i to f
RMB250,
which positively impacts our net profit by RMB250 and cancels out the
negative impact on our net profit on Day 2 .
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While the adoption of seller position in Au (T+D) may negate the benefit from gold price
increase, it prevents us from suffering from substantial losses in the event of material decrease in
gold price.
Similarly for outstanding gold loans, if the gold price declines, we may experience a loss in
the value of the gold jewellery sold, but simult aneously we may benefit from a fair value gain on
such gold loans. Conversely, if the gold price rises, we may incur a loss on gold loans, but we can
sell the gold jewellery at a higher price to realize the increase in gold price. As a result, the
financial impact that comes with changes in the fair value of gold loans is evened out and does not
materially impact our financial results adversely.
To ensure that our business is mitigated against the impact of the fluctuations in gold prices,
we determine the total amount of Au (T+D) contracts largely based on our inventory level.
The following table sets forth the inventory an d gold lent to customers positions of our Group
against the balance of Au (T+D) contracts and go ld loans, which we utilized for the purpose of
managing the exposure of gold price fluctuation as of the dates indicated:
As of December 31, As of June 30,
2021 2022 2023 2024
(Kg) (Kg) (Kg) (Kg)
Long position
Gold inventory . . . . . . . . . . . 5,256.8 3,943.2 4,496.3 3,722.4
Gold lent to customers (1) . . . . 238.6 343.5 464.3 492.9
K-gold inventory (2) . . . . . . . . 465.5 411.7 493.0 359.2
Total balance ............ 5,846.8 4,597.6 5,332.9 4,486.4
Short position
Instruments for managing
gold price fluctuations
Remaining gold balance of Au
(T+D) contracts . . . . . . . . . 4,175.0 3,343.0 4,083.0 3,566.0
Remaining gold balance of
gold loans . . . . . . . . . . . . . 1,472.0 1,085.0 1,184.0 850.0
Total balance ............ 5,647.0 4,428.0 5,267.0 4,416.0
Net exposure to gold price
fluctuation ............ 1 9 9 . 8 1 6 9 . 6 6 5 . 9 7 0 . 4
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Notes:
1. For details, see ‘‘— Sales and Distribution Channels — Exhibition halls, gold lending arrangement and
logistics arrangement ’’.
2. For K-gold inventory, we adopted a conversion formula of 1Kg of 18K-gold to 0.755Kg of gold. Such
conversion standard was our interna l standard of 18K-gold which is higher than the national standard of 75.0
percent of gold content as we built in room for margin of error. Over 80% of our K-gold inventories at the
end of each year during the Track Record Period were in 18K-gold.
To maintain the equilibrium on a daily basis, we adjust the volume of our Au (T+D) contracts
based on (i) our sales volume reported by relevant sales personnel several times each day, which in
turn determines the amount of gold we need to procure (excluding the total amount of traded-in
gold for such day), and (ii) the amount of gold borrowed from relevant banks.
As of December 31, 2021, 2022 and 2023 and June 30, 2024, our Group had a net shortfall of
199.8kg, 169.6kg, 65.9kg and 70.4kg of gold inventory against the gold balances from Au (T+D)
and gold loans, which were subject to gold price fluctuations, respectively.
Our Directors believe that our multiple-channels procurement and our gold price exposure
management is effective in controlling and mitig ating risks associated wi th fluctuations in gold
price.
Accounting Treatment of Au (T+D) Contracts
The relevant accounting treatments of Au (T+D) contracts transactions are set out below:
(1) Day of entering into Au (T+D):
The amount of deposit is locked-up by the Shanghai Gold Exchange according to the
deposit ratio (as margin for the margin system).
Debit: pledged/restricted deposits
Credit: Cash and cash equivalents — surplus deposits with Shanghai Gold Exchange
(2) At the end of each day ’s trading, the Shanghai Gold Exchange clears the member ’s profit
and loss, deposit, handling fees and other payments, i.e. transferring of funds to/from the
member’s account. Our profit and loss for the day would be the sum of the profit and
loss of closed positions and the profit and loss of held positions.
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If gains, Debit: Cash and cash equivalents — surplus deposits with Shanghai Gold
Exchange
Credit: other gains and losses, net
If Losses, Debit: other gains and losses, net
Credit: pledged/restricted deposits
In case our margin deposit is less than the minimum balance required by the Shanghai
Gold Exchange, we should make up for the deposit.
Deferred fees and Transaction fees are recognized as ‘‘other gains and losses, net’’ when
incurred.
Impact of Material Increase in Gold Prices on our Financial Condition and Business
Operations
During the six months ended June 30, 2024, gold price trended upwards (1) and we incurred
losses on our hedging activities of Au (T+D) contracts and gold loans. Such financial arrangements
adversely impacted our net profit a nd net profit margin. Please see ‘‘ — SUMMARY OF
HISTORICAL FINANCIAL INFORMATION AND SUMMARY OF MAJOR FINANCIAL
RATIOS — Selected items in our consolidated statements of profit and loss — Net profit and total
comprehensive income ’’. However, we do not expect the increase in gold prices to have a material
adverse effect on our financial conditions and business operations in the long run.
No Material Adverse Impact on our Financial Condition in the Long-run
A material increase in gold prices in the short term led us to incur losses on Au (T+D)
contracts and gold loans, as we were obligated to s ell at the previously agreed-upon Au (T+D) gold
prices, which were lower than the market prices at the time of settlement and thus negatively
impacts our financial conditions.
However, such gold price movements are not expected to materially adversely affect our
financial results in the long-run because we gene rally sell our products at a higher price as gold
prices increase. Moreover, as gold products are highly liquid, we believe we are generally able to
readily realize the aforementioned gains in the long-run, which then offset the losses incurred in the
short-run with respect to the Au (T+D) contracts and gold loans. This can be further illustrated and
supported by the fact that while the material incr ease in gold price led to adverse impacts on our
net profit and net profit margin for the periods/months in which gold price rapidly increased, such
negative effect were generally cancelled out by the end of June 2024, whereby our net profit for the
six months ended June 30, 2024 amounted to approximately RMB52.3 million and our net profit
margin was 0.5%.
(1) Gold price rose by approximately 13.7%, with the closing price of Au9999 increasing RMB483.7/g as of January 2,
2024, to RMB549.9/g as of June 28, 2024 (being the last trading day of the Track Record Period), according to the
closing gold price quoted on the Shanghai Gold Exchange.
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Gold Price Changes and Impact on our Business Operations in the Long-run
The effect of an increase in gold prices on our business operations in the long-run largely
depends on consumer sentiment. However, we gener ally do not expect an increase in gold prices to
materially adversely impact our business opera tions in the long-run for the following reasons:
In general, a moderate increase in gold prices in the long-run supports consumer willingness
to purchase gold products, leading to increased sales volumes, which then positively impacts our
business operation. This is due to the fact that go ld jewellery often not only embodies consumption
value but is also considered by many consumers as a valuable investment due to its status as a safe-
haven asset. A moderate appreciation in gold price would thus make gold products more appealing
to consumers as they are deemed more valuable. According to Frost & Sullivan, at a time when the
gold price steadily increases, such as from 2022 to 2023 when the average closing price of Au9999
rose from RMB392.2/g in 2022 to RMB449.9/g in 2023, consumer interest in buying gold jewellery
was generally strengthened as evidenced by an 8. 0% increase in the consumption volume of gold
jewelry in China during the same period.
On the other hand, a sharp short-term increas e in gold prices, such as those experienced in
March and April 2024, could lead to a reduction in s ales volume, which in turn adversely impacts
our business operations. This is due to the fact that a material increase in gold price could (i) deter
potential consumers from purchasing gold product s as gold products may be deemed too pricey, and
(ii) cause consumers to divert their demand to alternative products. According to Frost & Sullivan,
the rapid increase in gold prices during the six m onths ended June 30, 2024 adversely impacted the
industry as a whole, whereby: (i) the consumption volume of gold jewellery in China for the first
six months of 2024 dropped by 20.2% compared to the same period in 2023; and (ii) according to
Frost & Sullivan, many of our peers’ revenue decreased in the first six months of 2024 compared to
the same period in 2023, with period-to-period decreases ranging from 0.9% to 33.3%. Our sales
volume of gold products decreased by 10.4% for the six months ended June 30, 2024 when
compared to the same period in 2023, which was bet ter than the industry contraction of 20.2% (as
aforementioned). At the same time, our revenue for the six months ended June 30, 2024 increased
by 7.1% when compared to the corresponding period in 2023, which was also better than many of
our industry peers who recorded negative revenue growth of gold products that ranged between
0.9% to 33.3% (as aforementioned).
In sum, it is possible that an increase in gold p rices may cause our sales volume to decrease
due to slower consumer demand for the aforementi oned reasons. However, given the gold jewellery
is deemed by many to have investment values , we do not expect an increase in gold price to
materially adversely impact our business operations in the long-run.
Inventory and Working Capital
To ensure that we acquire gold at competitive market price and in accordance with the
demands for our products, our management and procurement staff communicate regularly to
estimate our gold procurement amount. We do not make gold procurement based on gold price
movements alone. We implement a gold price exposure management strategy known as ‘‘procuring
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according to sales (以 銷定採)’’to mitigate the impact of the fast-moving gold prices and to manage
the potential adverse impact of mismatches betw een our gold procurement prices and sales prices.
This approach allows us to maintain an inventor y level by purchasing gold material based on our
daily sales volume. We continued to implement the ‘‘procuring according to sales ( 以銷定採)’’
strategy during the period of material gold pri ce increase, and our inventory was not materially
adversely impacted by the aforementioned change in gold price.
A tt h es a m et i m e ,t h em a t e r i a li n c r e a s ei ng o l dprice did not materially adversely impact our
working capital. This is supported by the fact that our net current asset as of June 30, 2024 only
slightly decreased when compared to that of December 31, 2023. Please see ‘‘ — Summary of
Historical Financial Information an d Summary of Major Financial Ratios — Selected items of
consolidated statements of financial position — Net Current Assets ’’for further details of changes
to our net current assets. In addition, our current ratio and quick ratio as of June 30, 2024 remained
stable when compared to that of December 31, 2023, which we believe further illustrates that the
material increase in gold price did not materially adversely impact our working capital.
Measures to mitigate short-term impact
To mitigate against the adverse impacts of sharp short-term increase of gold prices, we have
implemented various measures to strengthen the sales of gold jewellery products so that we can
more quickly realize the economic gains derived from selling our product s at gold prices higher
than the average procurement price as gold prices increase.
Our measures to strengthen sales include (i) launching the ‘‘One RMB Exchange ’’promotion
between June and September for our franchisees, (ii) enhancing our promotional activities through
online platforms, such as participating in more e-commerce shopping festivals and increasing our
marketing efforts for online events, such as the ‘‘88 VIP Shopping Day ’’, the ‘‘Double 11 Shopping
Festival ’’(雙十一購物節), and the ‘‘Double 12 Shopping Festival ’’(雙十二購物節) e-commerce
events on Tmall, JD.com, and PinDuoDuo, (iii) organizing at least two gold jewellery product
exhibitions per month for our franchisees, (iv) holding a large-scale expo for our franchisees to
celebrate the 30th anniversary of our Company, where we plan to offer promotions to boost sales
volumes, and (v) initiating a promotional event that offers discounts on crafting fees to our
franchisees, providing with increased profit margins to franchisees to further incentivize them to
enhance sales. We believe such promotional events contributed positively to our financial results
for the six months ended June 30, 2024, whereby we recorded a (i) 7.1% growth in revenue, and
(ii) 16.9% growth in gross profit and 0.5% increase in gross profit margin, when compared to the
corresponding period in 2023. Moreover, for the six months ended June 30, 2024, we recorded a
net profit of RMB52.3 million and a net profit margin of 0.5%.
Procurement of Diamond
For diamond procurement, we normally purchase polished diamonds.
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During the Track Record Period, we did not enter into any long-term agreements with
minimum annual purchase amount f or our procurement of diamonds.
(a) Overseas Procurement
As outlined in the ‘‘Measures of the Customs of China on the Supervision of the Shanghai
Diamond Exchange ’’(General Administration of Customs Order No. 152), the Shanghai Diamond
Exchange has been designated as a special cust oms supervision unit authorized by the State
Council. Its purpose is to facilitate the import and export of diamonds and streamline diamond
trading procedures. Registered members of the Shanghai Diamond Exchange have the privilege of
applying for customs clearance directly for diamond trading activities.
To fulfill our demands for diamond for production needs, we mainly source diamonds from
Hong Kong, India and other foreign markets through our indirect wholly-owned subsidiary
Shanghai Yuanjunmeng. Shanghai Yuanjunmeng, as a registered member of the Shanghai Diamond
Exchange, is eligible for obtaining custom clearance for the diamonds we procured from foreign
suppliers.
The procedures of procuring diamond from foreign suppliers are illustrated in the diagram
below:
Procurement
plan
Shanghai
Yuanjunmeng
to handle
procurement and
custom clearance
Quality
control
inspection
Procurement
need
Approval
(b) Domestic Procurement
We also procure polished diamonds from domestic companies. Pursuant to the requirements of
the ‘‘Shanghai Diamond Exchange Trading Rules ’’(《上海鑽石交易所交易規則》), companies may
only enter into diamond trading transactions with other members of the Shanghai Diamond
Exchange. Thus, we only purchase diamonds dire ctly from suppliers who are also members of the
Shanghai Diamond Exchange. The procedure of diamond procurement in the PRC is set out as
follows:
Procurement
need Approval Procurement
plan Procurement
Quality
control
inspection
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The following table sets forth the geographic distribution of the sources where we procured
diamonds from:
Year ended December 31,
Six months ended
June 30,
2021 2022 2023 2024
Amount of
Diamond
procured
% to total
amount of
diamond
procured
Amount of
Diamond
procured
% to total
amount of
diamond
procured
Amount of
Diamond
procured
% to total
amount of
diamond
procured
Amount of
Diamond
procured
% to total
amount of
diamond
procured
(Carat) (%) (Carat) (%) (Carat) (%) (Carat) (%)
PRC . . . . . . . . . . . . . . 359.2 3.6 2,484.3 82.7 843.9 84.6 347.2 100.0
Outside PRC . . . . . . . . 9,547.9 96.4 520.5 17.3 153.1 15.4 ——
Total ........... 9,907.1 100.0 3,004.8 100.0 997.0 100.0 347.2 100.0
Procurement of other auxiliary raw materials
Auxiliary raw materials we purchased mainly include K-gold patching. We do not rely on
unique auxiliary materials which may only be sourced from limited supplies for production. We
established a sound procurement management system and developed a strict supplier selection
system to ensure that the source of purchased materials is legal and of good quality. During the
Track Record Period, we did not enter into any long -term agreements for our procurement of other
auxiliary raw materials. The specific procurement process for auxiliary raw materials is illustrated
in the diagram below:
Procurement
need
Obtaining
quotations
and screening
Procurement
plan Approval Procurement
Quality
control
inspection
Our Top Five Suppliers during the Track Record Period
During the Track Record Period, our major suppl iers were all gold suppliers and commercial
banks who provided gold loans to us. Due to the f act that Shanghai Gold Exchange requires its
members to make purchase on its trading platfor m with cash and on designated registered bank
accounts, we sometimes procure gold directly from other fellow members of the Shanghai Gold
Exchange, who offer us with more flexible or favorable payment methods and terms. These
arrangements effectively diversifies our financing means in procuring gold and help better secure
our raw material supply.
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The table below sets out our Group ’s five largest suppliers of each of the years ended
December 31, 2021, 2022 and 2023 and the six months ended June 30, 2024, ranked in accordance
with the total purchase by our Group during respective year/period:
Rank Name of Supplier
Principal
business and
business profile
Products
procured/services
provided by
supplier
Year of
commencement
of procurement
from supplier
Cost paid to the
supplier
Percentage to
our total
purchase
Settlement
Method Credit term
(RMB$ ’000)
(approximately)
(%)
(approximately)
(day)s
For the year ended December 31, 2021
1 Shanghai Gold
Exchange
Gold Exchange Gold bullion 2005 7,585,082 (1) 90.9 Bank transfer Prepayment
2 Industrial and
Commercial Bank of
China Limited
Changle Branch
Commercial
bank (2)
Gold loans 2007 143,879 1.7 Settlement in gold Repay when
due
3 China Zheshang Bank
Co., Ltd.
Weifang Branch
Commercial
bank
(2)
Gold loans 2017 121,409 1.5 Settlement in gold Repay when
due
4 China Minsheng
Banking Corp., Ltd.
Weifang Branch
Commercial
bank
(2)
Gold loans 2015 120,764 1.5 Settlement in gold Repay when
due
5 Ping An Bank
Co., Ltd.
Qingdao Maidao
Road Branch
Commercial
bank
(2)
Gold loans 2013 102,988 1.2 Settlement in gold Repay when
due
Total 8,074,122 96.8
For the year ended December 31, 2022
1 Shanghai Gold
Exchange
Gold Exchange Gold bullion 2005 8,050,182 (1) 93.2 Bank transfer Prepayment
2 Industrial and
Commercial Bank of
China Limited
Changle Branch
Commercial
bank (2)
Gold loans 2007 194,211 2.3 Settlement in gold Repay when
due
3 China Zheshang Bank
Co., Ltd.
Weifang Branch
Commercial
bank
(2)
Gold loans 2017 122,490 1.4 Settlement in gold Repay when
due
4 China Minsheng
Banking Corp., Ltd.
Weifang Branch
Commercial
bank
(2)
Gold loans 2015 106,559 1.2 Settlement in gold Repay when
due
5 Bank of Beijing
Co., Ltd.
Weifang Branch
Commercial
bank (2)
Gold loans 2019 55,284 0.6 Settlement in gold Repay when
due
Total 8,528,726 98.8
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Rank Name of Supplier
Principal
business and
business profile
Products
procured/services
provided by
supplier
Year of
commencement
of procurement
from supplier
Cost paid to the
supplier
Percentage to
our total
purchase
Settlement
Method Credit term
(RMB$ ’000)
(approximately)
(%)
(approximately)
(day)s
For the year ended December 31, 2023
1 Shanghai Gold
Exchange
Gold Exchange Gold bullion 2005 11,162,603 (1) 87.6 Bank transfer Prepayment
2 Yantai Penggang Gold
Industry Co., Ltd.
(煙台蓬港金業有限
公司)
Calendering of
non ferrous
metals;
precious metal
smelting, sales
of gold and
silver products
and
manufacturing
of jewellery
Gold bullion 2023 795,612 6.2 Bank transfer and
settlement in
banks
acceptance
bills
Prepayment
3 Industrial and
Commercial Bank of
China Limited
Changle Branch
Commercial
bank
(2)
Gold loans 2007 194,945 1.5 Settlement in gold Repay when
due
4 China Minsheng
Banking Corp., Ltd.
Weifang Branch
Commercial
bank
(2)
Gold loans 2015 134,435 1.1 Settlement in gold Repay when
due
5 China Zheshang Bank
Co., Ltd.
Weifang Branch
Commercial
bank
(2)
Gold loans 2017 122,485 1.0 Settlement in gold Repay when
due
Total 12,410,080 97.4
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Rank Name of Supplier
Principal
business and
business profile
Products
procured/services
provided by
supplier
Year of
commencement
of procurement
from supplier
Cost paid to the
supplier
Percentage to
our total
purchase
Settlement
Method Credit term
(RMB$ ’000)
(approximately)
(%)
(approximately)
(day)s
For the six months ended June 30, 2024
1 Shanghai Gold
Exchange
Gold Exchange Gold bullion 2005 5,327,946 83.4 Bank transfer Prepayment
2 Yantai Penggang Gold
Industry Co., Ltd.
(煙台蓬港金業有限
公司)
Calendering of
non ferrous
metals;
precious metal
smelting, sales
of gold and
silver products
and
manufacturing
of jewellery
Gold bullion 2023 627,439 9.8 Bank transfer and
settlement in
banks
acceptance
bills
Prepayment
3 Industrial and
Commercial Bank of
China Limited
Changle Branch
Commercial
bank
(2)
Gold loans 2007 145,859 2.3 Settlement in gold Repay when
due
4 China Minsheng
Banking Corp., Ltd.
Weifang Branch
Commercial
bank
(2)
Gold loans 2015 134,611 2.1 Settlement in gold Repay when
due
5 Bank of Beijing
Co., Ltd. Weifang
Branch
Commercial
bank
(2)
Gold loans 2019 66,340 1.0 Settlement in gold Repay when
due
Total: 6,302,195 98.6
Notes:
(1) The amount included our proc urement through fellow member(s) of the Shanghai Gold Exchange.
(2) Commercial banks are considered as our suppliers because (1) we obtain the right to take delivery of gold
from commercial banks although we receive physical gold from the Shanghai Gold Exchange; and (2) Since
we gain control of the gold and the manufactured gold jewellery products can be sold to generate economic
benefits, with the associated costs reliably measured, we classify such gold as inventory. Purchases made for
the return of gold loans are not double-counted as dir ect purchases from the Shanghai Gold Exchange. For
details of our purchase through gold loan c ontracts, please refer to the section ‘‘Business — Gold loans ’’.
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Procurement Through Fellow Member(s) of the Shanghai Gold Exchange
During the Track Record Period, we procured gold on the Shanghai Gold Exchange through
two of its fellow members, namely 中國珠寶首飾進出口股份有限公司(China National Pearl
Diamond Gem & Jewellery Imp. & Ex p. Corporation, also known as ‘‘Sino Gem ’’) and Yantai
Penggang Gold Industry Co., Ltd. ( 煙台蓬港金業有限公司, ‘‘Penggang Gold ’’).
Sino Gem is a state-owned enterprise primarily engaged in the export/import, production and
sales of jewellery products in China. It is listed on the National Equities Exchange and Quotations
with stock code: 872775.NQ.
In each of the years/period during the Track Re cord Period, our procurement of gold on the
Shanghai Gold Exchange through Sino Gem amounted to RMB2,716.2 million, RMB932.7 million,
RMB1,087.9 million and RMB379.4 million, respectively, and the amount due to it as of December
31, 2021, 2022 and 2023 and June 30, 2024 was nil, nil, nil and nil, respectively.
Penggang Gold is a private company establ ished in the PRC. It primarily engages in
calendaring of non-ferrous metals, precious metal smelting, sales of gold and silver products and
manufacturing of jewellery.
We did not purchase from Penggang Gold for the years ended December 31, 2021 and 2022,
and accordingly, the purchase amount and amount due to Penggang Gold for both years and as of
December 31, 2021 and 2022 were nil. As disclosed in the top five suppliers of our Group above,
the purchase amount paid to Penggang Gold for the year ended December 31, 2023 and the six
months ended June 30, 2024 were RMB795.6 million and RMB627.4 million, whereas the amount
due to Penggang Gold as of December 31, 2023 and June 30, 2024 was nil and nil.
The major terms of our procurement from Sino Gem and Penggang Gold are set out as
follows:
Procurement arrangement: Sino Gem and Penggang Gold will procure gold bullion for our
Company through its membership with Shanghai Gold Exchange.
For procurement through Sino Gem, sub-account will be
established under Sino Gem ’s membership with the Shanghai
Gold Exchange. Payment for the procurement of gold bullion
shall be made through an account under Sino Gem ’s name.
Payment by our Company made to such sub-account can only be
applied to settle the consideration for gold procurement from
Shanghai Gold Exchange. As for procurement from Penggang
Gold, the purchase consideration will be settled by bank transfer
and settlement in banks acceptance bills.
Term: The term of the procurement arrangement agreement with Sino
Gem usually lasts for a year.
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Fees: A handling fee of 0.007% of the total purchase amount will be
applied to the gold bullion purchase transactions through Sino
Gem. For procurements through Penggang Gold, no fees were
charged by Penggang Gold.
When we procure from Sino Gem and Penggang Gold, we could utilize capital from credit
lines designated for such purchases, which provide us with greater flexibility in financing our gold
procurement. In addition, we believe procuring from Sino Gem and Penggang Gold is beneficial to
our business as such arrangement diversifies our gold supply channels.
According to Frost & Sullivan, our procurement arrangement with fellow members of the
Shanghai Gold Exchange is common and in line with the industry norm. Our Directors are of the
view that given (i) the Group ’s procurements from other members of the Shanghai Gold Exchange
are permitted by the Shanghai Gold Exchange and are thus legal and valid transactions; (ii) save for
the 0.007% handling fee paid to Sino Gem, the Group does not pay a premium to the relevant
members of the Shanghai Gold Exchange for gold procurement; (iii) the quality of the gold
received and the time required for procurement are comparable to direct procurement from the
Shanghai Gold Exchange; and (iv) such members of the Shanghai Gold Exchange may accept more
diversified payment methods, the financial, ope rational and legal risks and costs associated with
procuring through fellow members of the Shanghai Gold Exchange are considered manageable, and
coupled with the fact that procurement from other members allow us to diversify our source of gold
procurement, our Directors consider it is beneficial for our Group to procure gold from other
members of the Shanghai Gold Exchange.
Reliance on Shanghai Gold Exchange for gold procurement
During the Track Record Period, the amount paid to Shanghai Gold Exchange amounted to
RMB7,585.1 million, RMB8,050.2 million, RMB11,162.6 million and RMB5,327.9 million for the
years ended December 31, 2021, 2022 and 2023 and the six months ended June 30, 2024,
respectively, representing 90.9%, 93.2%, 87.6% and 83.4% of our total purchase of the respective
year/period. All our purchases from the Shanghai Gold Exchange during the Track Record Period
were procurement of gold bullion.
According to Frost & Sullivan, the Shanghai Go ld Exchange is the largest gold exchange in
the PRC and is directly regulated by the PRC government, purchasing gold from the Shanghai Gold
Exchange is an industry norm in the gold jewellery industry. Given the various restrictions on
importing gold from overseas, our Directors are of the view that procurement from the Shanghai
Gold Exchange is the most reliable source of procurement in the PRC. Furthermore, only members
(including special members) of the Shanghai Gold Exchange are allowed to trade directly on the
Shanghai Gold Exchange. Our capability to trade on the Shanghai Gold Exchange provides us a
competitive advantage, allowing us to access a stable source of gold procurement at market prices
as opposed to entities without such status which would be required to procure at higher prices from
members of the Shanghai Gold Exchange. Accordingly, our Directors are of the view that our
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reliance on the Shanghai Gold Exchange is reasonable and aligns with the industry practice, and is
in the best interest of the Company as a whole to continue purchasing gold from the Shanghai Gold
Exchange.
In the event of a disruption in our procuremen t of gold from the Shanghai Gold Exchange,
given that gold is a commonly traded commodity, o ur Directors are of the view that we can shift to
other procurement sources. During the Track Record Period, we not only procured gold directly
from the Shanghai Gold Exchange, but also obtained gold through gold trade-in and other suppliers.
In particular, by leveraging our gold purification capabilities, gold trade-in remains a viable method
of sourcing gold. Hence, in the unlikely event that we require an immediate source of gold, we
have the flexibility to increase the percentage of gold obtained through gold trade-in.
Amounts paid to our five largest suppliers of each of the years ended December 31, 2021,
2022 and 2023 and six months ended June 30, 2024 accounted for approximately 96.8%, 98.8%,
97.4% and 98.6% of our total purchase for the respective year/period. None of our Directors, their
close associates or any Shareholder (who or which, to the knowledge of our Directors, owns more
than 5% of the issued share capital of our Company) had any interest in any of our five largest
suppliers of each year/period during the Track Record Period. None of our five largest suppliers
were also our customers of each year/period during the Track Record Period.
GOLD LOANS
During the Track Record Period, we financed our procurement of gold from the Shanghai
Gold Exchange by way of gold loans obtained from commercial banks. Gold loans refer to financial
transactions in which we (as lessee) borrow gold fro m commercial bank (the lessor) for a specified
period of time. During the process, we receive p hysical gold through the membership service
system of the Shanghai Gold Exchange ( 上海黃金交易所的會員服務系統) and we pay the
commercial banks an interest on the leased gold . At the end of the loan period, we return the
borrowed gold to the commercial banks by delivering contracts of fully paid gold that we purchase
from the Shanghai Gold Exchange. We normally adopt gold loans as a means of financing our
procurement of gold when we intend to procure gold by way of banking facilities of gold loans.
This approach allows us to preserve our cash for working capital and avoid the need for physical
gold delivery when returning gold to commercial b anks. Our standard practice is to return gold to
these banks through the transfer of the bill of lading of gold purchased from Shanghai Gold
Exchange, ensuring convenience and efficiency.
While gold loans are not our primary tool for managing risks arising from gold price
fluctuations, they can effectively act as an economic hedge against such fluctuations. For instance,
once we obtain a gold loan, we effectively create a short position on our gol d holding position as
we are obligated to return the gold loan at a later date. As an illustration, if the market price of
gold decreases when we repay the gold loan, we would earn a profit resulting from the price
difference between the borrowing and repaying date, offsetting the loss we suffer due to lower
selling price of our products which are based on the market price of gold.
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The following diagram sets forth our gold loans procedure:
Our Group
Gold loans Return of gold
Designated vault
of the Shanghai
Gold Exchange
Shanghai Gold
Exchange Our Group
Shanghai Gold ExchangeCommercial
Bank
Flow of physical gold
(1) Gold loans
agreement
(3) Settlement of
the gold loans
(3) Bill of lading
of gold
(1) Purchase
of gold
(2) Transfer of
bill of lading
of gold
(3)
Received
Gold
(2)
(2)
Flow of instructions Flow of funds
Commercial
Bank
GOLD TRADE-IN
Background
Gold, our main raw material, is a scarce resource and at times has a volatile market price.
Sufficient source of gold is of utmost importance to our operation and business. To better ensure
stable supply and inventory of gold, we also procure gold on an on-going basis through trade-in of
used gold from our customers. We collect used gold through gold trade-in from both our
franchisees/provincial-dealers a nd end-consumers. According to Frost & Sullivan, trade-in of gold
by consumers for new gold products is a common market practice. According to Frost & Sullivan,
sourcing gold through trade-in is common amongst gold jewellery manufacturers and brands, and
some of our industry peers have also adopted similar gold trade-in model with franchisees and
consumers that are comparable to ours. However, due to the cost associated with gold purification
and the fact that many of our industry peers do not have such capability, according to Frost &
Sullivan, not all of our industry peers engage in gold trade-in at the level which we conducted gold
trade-in during the Track Record Period. Leveraging our gold purification capabilities we are able
to efficiently purify gold sourced through trade-in which we then use as raw materials for our new
jewellery products.
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Our revenue breakdown by payment methods a nd trade-in gold during the Track Record
Period were as follows:
As of December 31, As of June 30,
2021 2022 2023 2024
Consideration
paid by
settlement
method
Percentage to
total revenue
Consideration
paid by
settlement
method
Percentage to
total revenue
Consideration
paid by
settlement
method
Percentage to
total revenue
Consideration
paid by
settlement
method
Percentage to
total revenue
(RMB ’000) % (RMB ’000) % (RMB ’000) % (RMB ’000) %
Cash . . . . . . . . . . . . . 6,448.2 0.0 5,283.5 0.0 8, 548.6 0.0 5,776.4 0.1
Bank transfer . . . . . . . . . 8,579,022.4 50.9 9, 541,660.7 60.7 12,721,114.7 62.9 6,756,708.0 67.7
Electronic payment . . . . . . 84,897.3 0.5 247,924.1 1.6 640,365.2 3.2 429,071.6 4.3
Trade-in gold . . . . . . . . . 8,188,841.3 48.5 5, 894,106.0 37.5 6,806,723.6 33.7 2,760,021.3 27.6
Other non-cash settlement
method (Note) ........ 11,790.9 0.1 35,240.4 0.2 31,847.0 0.2 28,166.3 0.3
T o t a l............. 1 6 , 8 7 1 , 0 0 0 . 1 100.0 15,724,214.7 100.0 20,208,599.1 100.0 9,979,743.7 100.0
Note: Other non-cash settlement method includes concessionai re expenses for self-operated stores under concession
agreements with shopping malls and diamond inlaying product exchange adjustment.
Commercial rationale for conducting gold trade-in
Conducting gold trade-in is beneficial to us in the following ways:
1. Receiving gold from trade-in diversifies our source of gold supplies and helps ensure
sufficient access to gold without substant ial upfront cash outflow as required when
purchasing gold from Shanghai Gold Exchange or other suppliers.
2. In addition, the trade-in arrangements allo w us to mitigate the timing difference on gold
price between the procurement and selling of gold, as we can align the procurement gold
prices and the sales gold prices according to the gold spot price simultaneously so that
they are substantially the same, thereby, reduc ing the potential risks that comes with gold
price fluctuations. The trade-in arrangement s are also used for reducing our use of gold
loans, which is interest bearing.
3. We are able to further garner franchisees, pr ovincial-dealers and consumer loyalty. Our
ability to process gold received from gold tra de-in and our strong production capability is
why we can offer consumer trade-in, and in tur n, provincial-dealers offering franchisee
trade-in and franchisees offering consumer trade-in. This allows consumers to lower the
purchase price of new gold jewellery by exch anging their used gold. They only need to
pay for the crafting fees and the price associated with the difference in gold volume
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being traded in. This significantly reduces the cost required to be paid upfront for
purchasing new gold jewellery and serves as an incentive for consumers to make
repeated purchase from us.
4. Receiving gold from gold trade-in is a recycling measure and matches with the ESG
philosophy.
5. With our gold purification know-how, we can reproduce high-purity gold jewellery
products with such trade-in gold while ensuring product quality.
6. Apart from normal day to day gold trade-in, we implement promotional activities such as
the ‘‘One RMB Exchange ’’promotion, which franchisees may accept consumer trade-in
of the ‘‘Wan Purity ’’gold series products previously purchased for new pieces of ‘‘Wan
Purity ’’series gold jewellery of the same weight at a nominal crafting fee of one RMB
per traded-in gram of gold with our franchisees or at our self-operated stores, and market
gold price of any addition of gold purchased and regular crafting fee for additional gold
purchased. Accordingly, consumers can enjoy the benefits of purchasing new pieces of
gold jewellery while franchisees also benefit from consumer flow during such promotion
events. This initiative is designed to enhan ce brand loyalty and encourage consumers to
select us or our franchisees to conduct consumer trade-in. By further incentivizing
consumers to select us for consumer trade-in with high-purity gold jewellery purchased
from us, we aim to capture their loyalty and f oster repeated purchases with our brand in
the future. This strategy not only strengthens our consumer base but also promotes
ongoing engagement and long-term relationships with our consumers.
Comparison Against Our Peers
According to Frost & Sullivan, the proportions of gold trade-in to total revenue for our peers
for the three years ended December 31, 2023 are presented below:
Year ended December 31,
2021 2022 2023
Competitor A . . . . . . . . . . . . . . . . . . approximately 15% approximately 15% approximately 20%
Competitor B . . . . . . . . . . . . . . . . . . approximately 25% approximately 20% approximately 30%
Competitor C . . . . . . . . . . . . . . . . . . approximately 45% approximately 45% approximately 50%
Competitor D . . . . . . . . . . . . . . . . . . approximately 30% approximately 30% approximately 30%
Competitor E (Note) . . . . . . . . . . . . . . . approximately 20% approximately 25% approximately 30%
O u rG r o u p.................... 4 7 . 9 % 3 6 . 9 % 3 3 . 1 %
Note: Competitor E in the table does not have gold purification capabilities.
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The table sets forth the proportion of trade-in gold as settlement to the overall sales by weight
among our industry peers for the three years ended December 31, 2023:
Year ended December 31,
2021 2022 2023
Competitor A . . . . . . . . . . . . . . . . . . approximately 14% approximately 12% approximately 15%
Competitor B . . . . . . . . . . . . . . . . . . approximately 20% approximately 18% approximately 25%
Competitor C . . . . . . . . . . . . . . . . . . approximately 40% approximately 40% approximately 50%
Competitor D . . . . . . . . . . . . . . . . . . approximately 28% approximately 25% approximately 30%
Competitor E . . . . . . . . . . . . . . . . . . approximately 20% approximately 20% approximately 25%
Our Group (Note) ................. 5 1 . 1 % 3 9 . 7 % 3 5 . 2 %
Note: The proportion of trade-in gold was calculated by wei ght of trade-in gold we received (without conversion
adjustment for K gold products) divided by our overall sales volume of gold and K-gold products (without
conversion adjustment for K gold products) times 100%.
According to Frost & Sullivan, in contrast to our peers, we believe our gold purification
capability gives us a comparative advantage, we are fully equipped to conduct gold trade-in
transactions. The proportion of our trade-in gol d used as settlement to overall sales by weight was
higher than our industry peers in 2021, primarily a ttributable to our purification ability, which
enables us to collect a higher proportion of used gold as our production raw materials. After we
strengthened our control of trade-in gold in 2022, this figure decreased from 51.1% in 2021 to
39.7% in 2022, and further to 35.2% in 2023. For the six months ended June 30, 2024, the
proportion of our trade-in gold used as settlement to overall sales by weight was 28.8%. According
to Frost & Sullivan, these proportions were within the range observed among our industry peers,
which varied from approximately 12% to 40% in 2022 and from 15% to approximately 50% in
2023.
According to Frost & Sullivan, of all our competitors in the table above, Competitor A is the
only industry player whose customers comprise en d-consumers only; while all other competitors in
the table above sell their products to end-consumers and franchisees and/or provincial-dealers. The
proportion of trade-in gold as settlement to the overall sale by weight of Competitor A remained at
the lower-end among industry peers throughout the Track Record Period. According to Frost &
Sullivan, provincial-dealers and franchisees usually have extra source of obtaining used gold
through their retail channels, thereby attributing t o higher proportion of trade-in gold as settlement
of the gold jewellery manufacturers whose customer s comprise both franchisees/provincial-dealers
and end-consumers.
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One RMB Exchange Program
Our Revenue and Gross Profit Margin attributable to the ‘‘One RMB Exchange ’’Program
The following table sets forth the revenue, gross profit and gross profit margin we derived
from and/or for the ‘‘One RMB Exchange ’’program through different distribution channels for the
years ended December 31, 2021, 2022 and 2023 (Note) (excluding the revenue and gross profit we
generated from sales of additional gold jewellery sold together with the gold jewellery exchanged
for traded-in gold):
Year ended December 31,
2021 2022 2023
Revenue
Gross Profit/
(Loss)
Gross profit
margin Revenue
Gross Profit/
(Loss)
Gross profit
margin Revenue
Gross Profit/
(Loss)
Gross profit
margin
(RMB ’000) (RMB’ 000) (%) (RMB’ 000) (RMB ’000) (%) (RMB ’000) (RMB ’000) (%)
Sales to provincial-dealers . . . 914,610 4,305 0.5 872,031 (4,782) (0.5) 1,031,388 21,519 2.1
Sales to franchise stores . . . . 1,962,495 9,172 0.5 2,043,545 15,703 0.8 2,355,117 15,491 0.7
Self-operated stores . . . . . . . 44,693 (1,748) (3.9) 50,244 (712) (1.4) 60,551 1,614 2.7
Total: . . . . . . . . . . . . . . . . 2,921,798 11,729 0.4 2,965,820 10,209 0.3 3,447,056 38,624 1.1
The fluctuation in the gross profit margin for our sales derived from the ‘‘One RMB
Exchange ’’program is primarily attributable to the chan ges in gold prices. As gold price increases,
our gross profit margin also increases due to the di fference in gold price at the time of procurement
of gold as raw materials, during which the gold price is lower, and at the time of sales of the gold
jewellery, during which the gold price is higher. The increasing trend of the gross profit margin for
our sales derived from the ‘‘One RMB Exchange ’’program was generally in line with that of our
overall gross profit margin.
Rationale and Benefits of the ‘‘One RMB Exchange ’’program
Although the gross profit margin for the ‘‘One RMB Exchange ’’program (excluding sales of
additional gold jewellery sold during the ‘‘One RMB Exchange ’’program) is relatively lower
compared to our overall gross profit margin, the management of our Company considers the
launching of the annual ‘‘One RMB Exchange ’’program desirable for the Company as a whole due
to (i) the additional sales we may generate from the program, and (ii) the promotional nature of the
‘‘One RMB Exchange ’’program.
Note: Disclosures have been made for the years ended December 31, 2021, 2022 and 2023 only, as information regarding the
‘‘One RMB Exchange ’’program for the year ended December 31, 2024 is not yet available. The ‘‘One RMB Exchange ’’
program is generally held in the second half of each year.
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Improved performance at our self-operated store level during the ‘‘One RMB Exchange’’ program
Apart from the additional weight of gold purchased (the weight of new product sold minus the
weight of trade-in product) as a result of the exchange, when end-consumers visit our self-operated
stores during the ‘‘One RMB Exchange ’’program, some of them also purchase additional gold
jewellery. The increase in footfall at our self-operated stores during the promotional period extends
our reach to end-consumers and offers us more opportunities to promote our products.
As disclosed in the section headed ‘‘History, Development and Corporate Structure —
Previous A-Share applications — The First A-Share Application — (1) We believe we have a sound
business rationale for our gold trade-in and ‘‘One RMB Exchange ’’activities — CSRC ’s concerns
in relation to ‘‘One RMB Exchange ’’ — Economic benefits to franchisees ’’, the average monthly
sales volume of our ‘‘Wan Purity ’’series products and the average monthly sales revenue we
generated from all products in our self-operated stores during the ‘‘One RMB Exchange ’’
promotional period were significantly higher than that of our overall monthly average throughout
the Track Record Period.
Accordingly, our management is of the view that the increases in both sales volume and sales
revenue in our self-operated stores during the promotional period reflected that our ‘‘One RMB
Exchange ’’program in fact contributed positively to our financial performance as well as our
franchise values.
Based on the financial results of our self-operated stores in connection with the ‘‘One RMB
Exchange ’’program and given the largely similar sales and operational model between our self-
operated stores and franchise stores , our Directors are of the view that ‘‘One RMB Exchange ’’
program is largely beneficial to the Group ’s franchisees. Please refer to the section headed
‘‘History, Development and Corporate Structure — Previous A-Share applications — The First A-
Share Application — (1) We believe we have a sound business rationale for our gold trade-in and
‘‘One RMB Exchange ’’activities — CSRC ’s concerns in relation to ‘‘One RMB Exchange ’’ —
Economic benefits to franchisees ’’for further details.
Promotion of brand awareness and enhancing customer stickiness
The ‘‘One RMB Exchange ’’program was launched with a view to raise brand awareness and
enhance customers stickiness instead of serving as a solely profit-oriented program. Promotional
activities often garner attention among consumers and such increased publicity raises brand
awareness, which in turn, result in increased customer interest, word-of-mouth recommendations,
and long-term benefits for our brand. In addition, with such annual promotional event, we offer
economic incentives to customers to buy our ‘‘Wan Purity’’ series products as they may benefit
from acquiring gold jewellery with newer designs through our ‘‘One RMB Exchange ’’program in
the future. Accordingly, this may serve as a unique competitive edge of our products over our
competitors’ products.
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In light of the above, the management of our Company is of the view that the launching of the
annual ‘‘One RMB Exchange ’’program is desirable for the Company as a whole.
Gold Trade-in Operation, Inventory and Fund Flow
From time to time, our franchisees receive consumers ’ trade-in gold as part of the
consideration for the consumers’ purchase. Our franchisees then conduct trade-in with provincial-
dealers and our self-operated direct service centers after receiving trade-in gold from their
consumers. The aforementioned trade-in gold is then used to offset part of the payment by our
franchisees to provincial-dealers and self-operated direct service centers, as the case may be.
Subsequently, our provincial-dealers conduct gold trade-in and pay crafting fees to us, while our
self-operated direct service centers conduct gold t rade-in to offset the gol d price component of the
products and pay crafting fees directly to our Company, which is an intra-group transaction. We
consider gold trade-in a form of non-cash settlement arrangement between our customers and us,
rather than a direct purchase of gold from them. Gold jewellery and other gold products constituted
substantially all of the used gold received through gold trade-in. K-gold jewellery constituted a de
minimis portion of the total amount of used gold we received, and accounted for less than 0.1% of
the used gold we received during the Track Record Period. We do not accept trade-ins of diamond-
inlaid jewellery or other products.
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The following diagram sets forth the operation and inventory and fund flow of our procedure
of gold trade-in:
Self-operated stores
to directly collect
trade-in gold from
consumers
Franchisees outside the
operation region of
provincial-dealers  to
settle and deliver trade-in
gold to our self-operated
direct service centers
at exhibitions and
pay crafting fees to us.
For trade-in gold of
third-party brands, we
charge a higher crafting
fee. For trade-in gold of
our brands, we charge a
regular crafting fee.
Franchisees who adopted
the CRM system are
required to input the
relevant information of
the trade-in transaction on
the CRM system. Upon
delivering the trade-in
gold to us, franchisees are
required to concurrently
deliver us a list exported
from the CRM system
stating the details of the
each piece of gold
jewellery being traded-in,
including identities of end
consumers who traded-in
such used gold
To record relevant data
and to check the origin of
trade-in gold
Gold trade-in
completed
Flow of funds*
Is the trade-in gold
up to standard?
We recycle the trade-in
gold and make record
of the process
To return the
trade-in gold
Trade-in gold will be sent
to our testing center in
our production facility
for examination
Generate  pick-up order
To accept trade-in gold
from franchisees under
their operation region
To examine the trade-in
gold from franchisee
trade-in and to settle with
franchise stores
Provincial-dealers to
deliver trade-in gold to
us and settle the crafting
fees with us. For trade-in
gold of third-party brands,
we charge a higher
crafting fee. For trade-in
gold of our brands, we
charge a regular crafting
fee.
No
Self-operated stores
Franchise stores
Consumers trade-in gold to our
self-operated stores or franchise stores
to setoff the purchase price of their
new jewellery purchase and pay for the
higher crafting fees. Our self-operated
stores and franchisees generally
request our consumers to provide their
names and contact details for
record-keeping purposes at the time
of gold trade-in.
Flow of funds to our Group:
Cash from self-operated
stores, franchisees outside
the operation region of
provincial-dealers, and
provincial-dealers to us as
crafting fees.
Consumers
Provincial-dealer
Yes
(including franchise stores
operated by provincial-dealers)
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For illustration purposes:
Transaction between End Consumer and Franchisees:
. End consumers trade in their used gold products at our franchise stores, at which time
end consumers generally pay for the additional weight of the new gold plus the crafting
fees for the whole weight of the new products to our franchisees.
. After a careful on-site inspection of the used gold by our franchisees, the relevant end
consumers then immediately receive the new gold jewellery. For details of the testing of
trade-in gold and our implementation of quality controls, please see ‘‘ — Gold Trade-in
— Testing of trade-in gold.’’
Transaction between Franchisees and our Group
. Generally within one week after the receipt and acceptance of the used gold, our
franchisees would deliver the t rade-in gold to our provincial-dealers or directly to us as
settlement of their purchases of new gold produ cts, as applicable, and settle the crafting
fees with us.
. After we test the trade-in gold and ensure that the gold traded-in meets our standard, our
franchisees would receive the new gold jewellery on the same day.
During the Track Record Period, trade-ins in whi ch we are one of the counterparties include:
(i) with provincial-dealers and franchisees, and (ii) with consumers (through our self-operated
stores). We do not provide cash payments to gold tra de-in counterparties, and all gold jewellery
acquired through gold trade-in will not be directly re -sold to any provincial-dealers/franchisees and
will be sent to our production facilities for refining and production. During the Track Record
Period, most of the gold trade-ins for our Group were conducted with provincial-dealers and
franchisees and to a lesser extent with consumer s through our self-operated stores. Gold trade-in
without involving our Group as a counterparty includes gold trade-in (i) between franchisees and
provincial-dealers, and (ii) between consumers and franchisees. Please see ‘‘ — Sales and
Distribution Channels — Pricing Policy ’’for further details on how we determine crafting fees for
our products. The number of franchisees who conducted gold trade-in with us were 753, 727, 692
and 729 in each year/period during the Track Record Period and there were 17 provincial-dealers
who used gold trade-in to settle with us during the same period. We do not impose any limits or
restrictions on the amount of gold trade-in by provincial-dealers and franchisees for the following
reasons: (i) trade-in gold is a source of our raw materials, which we then use as raw materials for
our gold jewellery products; and (ii) leveraging our gold purification capabilities, we are able to
efficiently purify and process gold sourced through trade-ins. During the Track Record Period and
as of the Latest Practicable Date, there was no concentration of custome rs/franchisees who
repeatedly conducted gold trade-in.
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Apart from the difference in settlement means, our business arrangement with franchisees who
conducted gold trade-in with us was the same as that of those which did not conduct gold trade-in
with us. We enter into the same franchise agreemen t with all franchisees, regardless of whether or
not they will conduct gold trade-in with us.
(i) Testing of trade-in gold
We place great importance on the quality of th e trade-in gold we receive and implement
quality controls to ensure that the trade-in gold meets our standards. The following diagram sets
forth the process and examination procedure for gold trade-in among end consumers, franchise
network and our Group:
End consumers(1)
Self-operated
stores
Franchise
stores
Provincial-dealers/
Self-operated direct
service centers
On-site
testing(2)
Our Group
On-site
testing(2)
Our Group’s testing
Our Group’s testing(3)
Provincial-dealers’
testing(3)
Our Group’s testing
(On-site testing; subsequent testing, if needed(4))
Notes:
(1) End consumers may trade in products with any entity within our franchise network, not limited to the relevant
franchisee from whom the product was originally purch ased. In addition, the trade-in procedure is generally
uniform across the entire franchise network.
(2) If the trade-in gold does not meet our standards, it will be rejected by our franchisees and self-operated stores.
(3) The timing of delivery from franchise stores to pr ovincial-dealers depends on the frequency of pick-ups
among them.
(4) In certain cases, we test the gold purity with hydrostatic weighing method to determine the density and purity
of the gold.
Our franchisees and self-operated stores typically conduct on-site testing and examinations of
the trade-in gold provided by end consumers. If the trade-in gold does not meet our standards, our
franchisees and self-operated stores will directly reject those trade-in gold. We do not release the
new gold products to end consumers prior to the completion of the required on-site testing.
The on-site testing and examinations conducte d by our franchisees and self-operated stores
include (i) checking the identification, brand, warra nty certificate and purchase proof of the trade-in
gold as a preliminary inspection; (ii) testing the weight and gold purity of the trade-in gold using
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methods such as visual inspection, and the magnet test; and (iii) if necessary, further testing may
involve the melting down the gold or cutting off parts of the trade-in gold. According to Frost &
Sullivan, it is common for gold jewellery stores t o conduct such on-site testing and examinations of
the trade-in gold. After receiving the trade-in gol d, our franchisees and self-operated stores enter
the relevant gold trade-in information into our CRM system. On a later stage, our provincial-dealers
generally follow the same testing procedures as our franchisees and self-operated stores.
When our provincial-dealers and franchisees deliver the trade-in gold to us, we immediately
conduct on-site testing and examinations, such as testing the weight and purity level of the trade-in
gold. After the relevant testing, we issue a material receive note (來 料單) to provincial-dealers and/
or franchisees setting out the relevant informati on of trade-in gold received. In certain cases, we
may use the hydrostatic weighing method to test the gold. We reject the trade-in gold directly on
the date of delivery if it does not meet our standard s. Our provincial-dealers and franchisees are
required to review and verify the relevant informa tion of trade-in gold by signing on the material
receive note. During the Track Record Period, there was no instance where we had to return used
gold to end customers, franchisees and provinc ial dealers due to quality of used gold received.
We do not accept trade-in gold that does not meet our standards upon on-site checking from
our franchise network, and there is thus no retu rning of trade-in gold to our franchise network.
After we accept the trade-in gold, we discount the weight of trade-in gold based on its purity level,
and deduct the same amount of weight from that of the new piece of gold jewellery being traded-in
for when calculating the gold price component. Fr anchisees or provincial dealers are required to
settle the shortfall in cash or trade-in gold if we find out that the purity level of the trade-in gold is
not as high as they claimed during the melting and purifying process.
(ii) Used trade-in gold and new gold jewellery between our franchise network and our Group
The following diagram outlines the different procedures between the used trade-in gold from
our provincial-dealers and franchisees to us and the delivery of new gold jewellery to our
franchisees.
Provincial-dealers
and Franchisees
T
Provide new gold jewellery to
franchisees on the same day
Provide
trade-in gold to us
Our Group Melting and
purification
Manfacturing used trade-in
gold into new products
New trade-in gold jewellery
Used trade-in gold
T+1 T+approximately 14 days
Packing for
entry into the
consumer market
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As illustrated in the diagram above, our provinci al-dealers and franchisees deliver their used
gold to us. After we test it and ensure that the gold traded-in meets our standards, our franchisees
receive the new gold jewellery on the same day. Generally, it takes 24 hours for us to melt and
purify the gold traded-in in our production facility. Then, it takes approximately 14 days to further
process the raw materials into new products.
Apart from the day-to-day gold trade-in between consumers and our self-operated stores or
franchisees, we implemented promotional activities including the ‘‘One RMB Exchange ’’promotion
running for up to a week annually, pursuant to which self-operated stores o r franchisees may only
accept consumer trade-in of our ‘‘Wan Purity’’ gold series products previously purchased for new
pieces of ‘‘Wan Purity’’ series at a nominal crafting fee of one RMB per traded-in gram of gold,
and full price of any additional weight of gold purchased.
Illustration of Price Charge for Gold Trade-in
The following diagram is for illustrating th e price charge components in our regular gold
trade-in:
Gold Price Component Crafting Fees Component
• The value of the gold traded-in can only be
applied to settle against the gold price
component of the new purchase.
• Scenario 1: if 5g of used gold is traded-in
for a 5g new product, there would be no
gold price component payable in cash for
the new product.
• Scenario 2: if 5g of used gold is traded-in
for a 12g new product, gold price payable
in cash for the new product under this
settlement model =
Prevailing Gold price × (12g – 5g)
Used gold: 5g
Crafting fee for new product +
Trade-in crafting fee × 5g
• Different crafting fees will be applied to our
provincial-dealers and franchisees for traded-in gold
that are of our brand and of other third-party brands.
• A trade-in crafting fee is applied to all products
received from (i) consumers who traded-in through
our self-operated stores and (ii) of third-party brands
received from provincial-dealers and franchisees. When
receiving used gold from provincial dealers and
franchisees, we charge a trade-in crafting fees on
traded-in gold that are of third-party brands to cover the
additional costs for handling such traded-in gold as they
are not our products, and such gold products may require
additional purification/processing. On the other hand,
there would be no trade-in crafting fee for used golds
under our own brand because we are more certain of the
quality of our products and such products can be more
readily purified/processed (but we will still charge the
regular crafting fee). We also charge a higher trade-in
crafting fee for consumers who traded-in through our
self-operated store to align with the trade-in crafting fees
which our franchisees charge their consumers.
• If 5g of used gold is of our brand and received from
provincial-dealers and franchisees, there would be no
trade-in crafting fee (but we will still charge the regular
crafting fee).
Under the ‘‘One RMB Exchange ’’promotion, consumers have the option to trade-in their
‘‘Wan Purity ’’series of gold for a gold product of the same or heavier weight.
If consumers choose to trade-i n their gold for a product of the same weight, they are only
required to pay a nominal crafting fee of one RMB per gram of gold they traded in. However, if
consumers choose to trade-in for a gold product that is heavier than the original, the process is
slightly different. They are still required to p ay the nominal crafting fee of one RMB per gram of
gold up to the product weight they traded-in. Additionally, they need to pay for the price of the
extra gold they purchased, as well as the regular crafting fees for the additional gold.
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Our ‘‘One RMB Exchange ’’for ‘‘Wan Purity ’’series products is promotional in nature and it
does not follow our normal gold trade-in settlemen t practices in calculating regular crafting fees.
For further details on nominal and regular crafting fees, please refer to ‘‘ — Business — Sales and
Distribution Channels — Pricing Policy. ’’
Gold Trade-in with Different Counterparties
During the Track Record Period, the breakdown of the consideration settled by gold trade-in
for each counterparty type were as below:
Year ended December 31, Six months ended June 30,
2021 2022 2023 2024
Consideration
settled by gold
trade-in
Percentage to
total revenue
Consideration
settled by gold
trade-in
Percentage to
total revenue
Consideration
settled by gold
trade-in
Percentage to
total revenue
Consideration
settled by gold
trade-in
Percentage to
total revenue
(RMB ’000) % (RMB ’000) % (RMB ’000) % (RMB ’000) %
Consumers from our self-
operated stores . . . . . . 111,028.5 0.7 96,690.5 0.6 114,025.5 0.6 58,937.9 0.6
Franchise stores (Note) . . . . . 5,005,506.0 29.7 3, 870,742.1 24.6 4,549,877.9 22.5 2,039,239.9 20.4
Provincial-dealers . . . . . . . 3,072,306.8 18.2 1, 926,673.4 12.3 2,142,820.2 10.6 661,843.5 6.6
Total ............. 8,188,841.3 48.5 5,894,106.0 37.5 6,806,723.6 33.7 2,760,021.3 27.7
Note: The consideration settled by gold trade-in included that from franchise stores which ceased operation during
the relevant year/period.
Our franchise stores may conduct gold trade-in with the Group through provincial-dealers or
directly with our Group in our self-operated direc t service centres. Most of the franchisees under
provincial-dealers will only conduct gold trade-i n through provincial-dealers. On the other hand,
such franchisees usually only conduct gold trade-in with us when they purchase directly from us in
limited circumstances, including cases where a franchisee owns more than one franchise store
located in different regions or when franchisees make special direct purchase requests which were
pre-approved by us. The total number of franchisees who conducted gold trade-in with us directly
during the Track Record Period (including those that ceased operation during the relevant year) was
753, 727, 692 and 729 for the years ended December 31, 2021, 2022 and 2023 and the six months
ended June 30, 2024, respectively.
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The following table sets forth (i) number of franchise stores procuring through our self-
operated direct service centers and (ii) the propor tion of franchise stores who conducted gold trade-
in with us under our self-operated direct service centers:
Year ended December 31,
Six months
ended June 30,
2021 2022 2023 2024
Franchise stores procuring
through our self-operated
direct service centers (Note)
. Number of stores under our
self-operated direct service
c e n t e r s ................ 1 , 3 1 2 1 , 3 4 6 1 , 4 3 4 1 , 3 7 5
. Number of stores that had
conducted gold trade-in with
our Group . . . . . . . . . . . . . 1,212 1,256 1,310 1,268
. Proportion of stores that have
conducted gold trade-in out
of the number of stores under
our self-operated direct
service centers (%) . . . . . . . 92.4% 93.3% 91.4% 92.2%
Note: Franchise stores that ended operation during the relevant year/period were included.
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The number of franchise stores under our self-operated direct service centers that conducted
gold trade-in with the Group directly (including those that ceased operation during the relevant
year/period) were 1,212, 1,256, 1,310 and 1,268 for the years ended December 31, 2021, 2022 and
2023 and the six months ended June 30, 2024, respectively, which accounted for 92.4%, 93.3%,
91.4% and 92.2% of the total number of franchise stores under our self-operated service centers
during the relevant year/period.
Year ended December 31,
Six months
ended June 30,
2021 2022 2023 2024
Franchisees procuring through
our self-operated direct service
centers (Note)
. Number of franchisees under
our self-operated direct
s e r v i c ec e n t e r s .......... 6 6 1 6 5 0 6 5 4 6 4 3
. Number of franchisees that
had conducted gold trade-in
with our Group . . . . . . . . . . 619 606 604 557
. Proportion of franchisees that
have conducted gold trade-in
out of the number of
franchisees under our
self-operated direct service
c e n t e r s( % ) ............. 9 3 . 6 % 9 3 . 2 % 9 2 . 4 % 8 6 . 6 %
Note: Franchisees that ended operation during t he relevant year/period were included.
The number of franchisees under our self-operated direct service centers that conducted gold
trade-in with the Group directly (including those that ceased operation during the relevant year/
period) was 619, 606, 604 and 557 for the years ended December 31, 2021, 2022 and 2023 and the
six months ended June 30, 2024, respectively, which accounted for 93.6%, 93.2%, 92.4% and
86.6% of the total number of franchisees under our self-operated service centers during the relevant
year/period.
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We had 17 provincial-dealers during the Track Record Period and all of our provincial-dealers
conducted gold trade-in with us during each y ear/period of the Track Record Period. As of
December 31, 2021, 2022 and 2023 and June 30, 2024, there were 1,091, 1,087, 1,074 and 1,057
franchisees under our provincial-dealers, respectively. During the Track Record Period, 135, 122,
90 and 172 of the franchisees under provincial -dealers conducted gold trade-in with us
directly.
(Note)
During the Track Record Period, a larger proport ion of our sales to franchisees were settled
with used gold as compared to our sales to end consumers through our self-operated stores, as a
result of combining factors, inclu ding store locations, operational history and local market presence.
The following table sets forth (i) the proportion of gold trade-in amount to total sales revenue
and (ii) the number of stores for each of the self-ope rated stores and franchisees by store location
during the Track Record Period:
Year ended December 31, Six months ended June 30,
2021 2022 2023 2024
Number of
stores
(Note 1)
Sales
amount
settled by
used gold
(Note 2)
Total sales
revenue
(Note 2)
Proportion
of sales
settled by
used gold
Number of
stores
(Note 1)
Sales
amount
settled by
used gold
(Note 2)
Total sales
revenue
(Note 2)
Proportion
of sales
settled by
used gold
Number of
stores
(Note 1)
Sales
amount
settled by
used gold
(Note 2)
Total sales
revenue
(Note 2)
Proportion
of sales
settled by
used gold
Number of
stores
(Note 1)
Sales
amount
settled by
used gold
(Note 2)
Total sales
revenue
(Note 2)
Proportion
of sales
settled by
used gold
(RMB’000) (RMB ’000) (%) (RMB ’000) (RMB ’000) (%) (RMB ’000) (RMB ’000) (%) (RMB ’000) (RMB ’000) (%)
Franchise stores
operated by
franchisees
. Shopping mall/
department store . . 763 1,771,100.2 3,436,716.0 51.5% 802 1,479,476.3 3,790,355.6 39.0% 914 1,840,615.5 5,170,360.9 35.6% 948 924,889.1 2,533,035.4 36.5%
. Elsewhere . . . . . . 1,917 3,234,405.8 5,972,509.4 54.2% 1,941 2,391,265.8 5,838,786.3 41.0% 1,903 2,709,262.4 7,103,416.0 38.1% 1,902 1,114,350.8 3,221,967.5 34.6%
Self-operated store
. Shopping mall/
department store . . 30 82,968.9 289,017.8 28.7% 29 75,169.6 289,442.4 26.0% 32 91,874.1 328,446.5 28.0% 33 49,735.3 168,855.2 29.5%
. Elsewhere . . . . . . 1 28,059.6 67,128.5 41.8% 3 21,520.9 77,045.4 27.9% 3 22,151.4 83,769.0 26.4% 3 9,202.6 31,252.8 29.4%
Notes:
1. The number of store only take into account of franchi se stores under both our self-operated direct service
centers and provincial-dealers that were still in op eration as of December 31, 2021, 2022 and 2023 and June
30, 2024.
2. The sales amount settled by used gold and total sales revenue included sales to franchise stores who
conducted gold trade-in and transactions with us dir ectly, and included the sales to franchise stores that
ceased operation during the relevant year/period.
Note: For the years ended December 31, 2021, 2022 and 202 3 and the six months ended June 30, 2024, out of all
franchisees who have conducted gold trade-in with us, we have one, one, two and nil franchisees who were
under both our self-operated direct service centers and provincial-dealers, respectively. Such overlaps were
primarily due to the fact that some franchise stores opera ted by the relevant franchisees were located in areas
covered by provincial-dealers while some of them were located in the areas covered by our self-operated
direct service centers.
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The proportion of sales settled by used gold may be affected by store location, and the stores
located in department stores or shopping malls generally received lower proportion of used gold.
The proportion of sales settled by used gold at our self-operated stores located in shopping mall/
department store was evidently lower than self-ope rated stores located elsewhere in 2021. This was
mainly due to the fact that department stores or shopping malls may prefer or even require that
stores within their premises settle sales of goods in cash, rather than accepting in-kind settlements.
However, such difference was not as apparent in 2022 and 2023 as one out of three of our self-
operated stores that were not in shopping mall/department store recorded decrease in proportion of
sales settled by used gold in 2022 and 2023. Our m anagement is of the view that as the relevant
self-operated store was located in a neighbourhood with many stores that bought used gold from
end-consumers in cash, with increasingly keen competition for used gold in its vicinity driven by
the increase in gold price in 2022 and 2023, a decreasing number of end-consumers opt for trading-
in gold at such store, which may not be representative for all self-operated stores and franchisees.
In addition, used gold as a percentage of sales revenue for relevant year/period for the franchisees ’
stores in department stores or shopping malls were generally lower than that for the franchisees ’
stores located elsewhere. Such results further supports that store location is one of the major factors
that led to the difference in the proportion of sales settled with used gold.
In addition to difference in store location, the higher proportion of sales settled with used gold
for our sales to provincial dealers and franchisees was also due to our provincial-dealers and
franchisees having broader access to traded-in gol d through their own retail channels. Many of our
provincial-dealers and franchisees are established jewellery wholesalers in their respective regions,
and thus can acquire more traded-in gold from their customers, leveraging their strong market
positions. For example, as we do not enter into exclusivity agreements with provincial dealers and
franchisees, some of our franchisees may operate other gold jewellery stores under their own or
third party brands, which enabled them to get access to a broader range of end consumers and
received used gold of third party brand from such c onsumers. Also, some of our franchisees operate
multiple franchise stores, which enables them to r each a larger group of end consumers due to their
geographical coverage. During the Track Record Period, sales amount settled by used gold of third-
party brands as a percentage of total sales reve nue derived from our franchisees amounted to
22.1%, 9.8%, 8.4% and 11.1%, while the comparable figures for our provinci al-dealers were 29.8%,
9.5%, 6.2% and 10.5%, which were both generally higher than the comparable figures for our self-
operated stores of 7.1%, 7.7%, 7.6% and 6.7%. We believe the aforementioned is an example which
illustrates that our provincial-dealers and franchisees have greater access to used gold. Commencing
in mid-2022, we implemented stricter control o n accepting traded-in gold which resulted in a
decrease in used gold from third-party brands as a percentage of total gold traded-in. Consequently,
the proportion of sales settled by traded-in go ld at franchise stores has gradually become more
aligned with that of our self-operated stores.
Moreover, during the Track Record Period, the re was a general positive correlation between
the number of years that a store had been in operation and the proportion of sales that such store
settled with used gold. We believe such correlati on resulted from the larger customer base that a
store attracts with time, and with the larger customer base, a store can typically acquire more
traded-in gold from their customers. The correlation was generally reflected in both our self-
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operated stores and our franchise stores. As many of our franchise stores have been established
longer than our self-operated stores, the proporti on of sales settled with used gold at our franchise
stores was generally higher than that of our self-operated stores.
For the used gold received through gold trade-in, we recognize the revenue and inventory by
multiplying the weight of trade-in gold with the real-time price of Au9999 on the Shanghai Gold
Exchange on the day the gold is traded-in. If the su bsequent real-time gold price movement exceeds
RMB0.5 per gram, we will adjust the subsequent transaction price of gold accordingly. If the gold
trade-in occurs on a day when Au9999 is not traded, we will refer to the closing price of Au9999
on the Shanghai Gold Exchange and spot gold on overseas exchanges on the previous trading day
to determine the price to be used. The prices of gold traded-in are not discounted.
We did not make any provision for gold trade-in during the Track Record Period because
there was no unavoidable obligation for us to accept used material.
For sale of gold products, we allow consumers (fro m our self-operated sto res), franchisees and
provincial-dealers to trade-in gold products as settlement for gold component of the transaction
price. For the years ended December 31, 2021, 2022 and 2023 and the six months ended June 30,
2024, used gold as part of the consideration paid from franchisees and provincial-dealers amounted
to RMB8,077.8 million, RMB5,797.4 million, RMB6,692.7 million and RMB2,701.1 million,
respectively, representing 49.1%, 37.7%, 33.7% and 27.5% of our total revenue generated from the
sale of gold jewellery and other gold products and 47.9%, 36.9%, 33.1% and 27.1% of our total
revenue for the respective year/period. We implemented higher standard of quality control and
stricter selection criteria for accepting traded-in gold, which is reflected in (i) the increase in our
gold procurement directly from the Shanghai Gold Exchange, as gold procured through the
Shanghai Gold Exchange is generally quality assured; and (ii) a stricter quality control and more
careful acceptance of traded-in gold from third-par ty brands, which resulted in a decrease in used
gold from third-party brands as a percentage of total gold traded-in.
In addition, used gold as part of consideration paid received from consumers at our self-
operated stores amounted to RMB111.0 million, RMB96.7 million, RMB114.0 million and
RMB58.9 million for the years ended December 31, 2021, 2022 and 2023 and the six months ended
June 30, 2024, respectively, representing 0.7%, 0.6%, 0.6% and 0.6% of our total revenue
generated from the sale of gold jewellery and other gold products and 0.7%, 0.6%, 0.6% and 0.6%
of the total revenue for the respective year/period.
For the years ended December 31, 2021, 2022 and 2023 and the six months ended June 30,
2024, used gold from third-party brands amounted to RMB3,702.7 million, RMB1,468.2 million,
RMB1,468.8 million and RMB911.2 million respectively, while used gold from our brand
amounted to RMB4,486.1 million, RMB4,425.9 million, RMB5,337.9 million and RMB1,848.8
million, respectively. As a perce ntage of total gold traded-in, used gold from third-party brands
constituted 45.2%, 24.9%, 21.6% and 33.0%, r espectively, while used gold from our brand
constituted 54.8%, 75.1%, 78.4% and 67.0%, respe ctively. The percentage of used gold from third-
party brand generally decreased during the Track Record Period because we implemented higher
standard of quality control and stricter selection criteria for accepting traded-in gold, which is
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reflected in (i) the increase in our gold procurement directly from the Shanghai Gold Exchange, as
gold procured through the Shanghai Gold Exchange is generally quality assured; (ii) a stricter
quality control and more careful acceptance of traded-in gold from third-party brands; and (iii)
higher crafting fees for used gold from third-party brands. There was a slight decrease in the
percentage of used gold from our brand to all used gold received for the six months ended June 30,
2024 when compared to that for the year ended December 31, 2023. Such result is mainly due to
the fact that our ‘‘One RMB Exchange ’’program is generally held in the second half of the year,
during which we usually receive more used gold of o ur brand. For further details of crafting fees
charged during our ‘‘One RMB Exchange ’’program, please refer to the section headed ‘‘Business
— Our customers — Average and price range of crafting fees according to different source. ’’
For details of the accounting treatment in relation to gold trade-in, see notes 4 and 43 of
‘‘Appendix I — Accountants ’ Report — Non-cash consideration ’’.
Accounting treatment of gold trade-in
In a gold trade-in transaction, we recognize the actual selling price of the new products as
revenue based on almost the real-time price of Au9999 on the Shanghai Gold Exchange plus
crafting fee, and the cost of gold sold based on the cost of the new products. The non-cash
consideration received (trade-in gold) was recognized as inventories based on the weight of trade-in
gold and the real-time price of Au9999 on the Shanghai Gold Exchange. Cash consideration is
based on the actual selling price multiplied by the weight difference between the new products and
trade-in gold plus crafting fee.
For illustration purpose only, assuming a franchisee/provincial-dealers purchased 100 grams of
‘‘Wan Purity ’’series gold jewellery from us and used 40 grams of used’’ Wan Purity ’’series gold
jewellery collected from end consumers as part of t he purchase consideration. The real-time selling
price of the ‘‘Wan Purity ’’series gold jewellery was RMB339 per gram (excluding crafting fee),
and the crafting fee for the transaction is RMB11.3 per gram. VAT was charged at 13%. The cost
of the ‘‘Wan Purity ’’series gold jewellery sold is RMB290 per gram.
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Below are the relevant accounting entries:
RMB
Debit:
Cash/Trade receivables 339×60+11.3×(60+40)=21,470
Raw materials — gold materials 339×40/(1+13%)=12,000
Credit:
Revenue (339+11.3)×100/(1+13%)=31,000
Other payables — VAT
payable (output tax)
339×60×13%/(1+13%)+11.3×(60
+40)×13%/(1+13%)=2,470
Debit:
Cost of sales (290×100)=29,000
Credit:
Inventory — Finished goods 29,000
The accounting treatment of gold trade-in betw een our Group and franchisees/provincial-
dealers is the same as the treatment between our Group and consumers from our self-operated
stores.
The accounting treatment of ‘‘One RMB Exchange ’’is listed below:
a. ‘‘One RMB Exchange ’’between our Group and franchisees/provincial-dealers
There is no difference in accounting treatment of trade-in transactions of our group with
franchisees and with provincial-dealers, other t han the different charge rate of crafting fee per
gram for the trade-in settlement portion.
b. ‘‘One RMB Exchange ’’between our Group and consumers from our self-operated stores
For illustration purpose only, assuming a customer purchased 10 grams of ‘‘Wan Purity ’’
series gold jewellery from one of our self-operated stores during the ‘‘One RMB Exchange ’’
promotion and used 6 grams of used ’’Wan Purity’’ series gold jewellery as part of the
purchase consideration. The real-time selling price of the ‘‘Wan Purity’’ series gold jewellery
on transaction date was RMB350 per gram. (excluding crafting fee). The crafting fee for trade-
in settlement portion of the purchase is RM B1 per gram. The crafting fee for the cash
settlement portion of the purchase is RMB40 per gram. VAT was charged at 13%. The cost of
the ‘‘Wan Purity ’’series gold jewellery sold is RMB290 per gram.
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Below are the relevant accounting entries:
RMB
Debit:
Cash 350×4+1×6+40×4=1,566.00
Raw materials — gold materials 350×6/(1+13%)=1,858.41
Credit:
Revenue (350×10+40×4+ 1×6)/(1+13%)=3,244.25
Other payables — VAT
payable (output tax)
350×4×13%/(1+13%)+(1×6
+40×4)×13%/(1+13%)= 180.16
Debit:
Cost of sales (290×10)=2,900.00
Credit:
Inventory — Finished goods 2,900.00
The relevant sales of gold trade-in were recognized on a gross basis based on the below
reasons:
(i) Our business covers all stages of the jewellery industry value chain, from raw
material sourcing and purification, R&D, product design, manufacturing,
distribution to retailing. We make decisions independently on the various stages
above, not under the instruction or engaged b y the provincial-dealers/franchisees or
customers who provides trade-in golds. We obtain the control of the trade-in golds
and mix the trade-in golds with other gold materials in the production process. We
produce and sell jewellery products, not provide processing services, to our
customers;
(ii) we bear the inventory risk of the new products and trade-in gold, like fluctuations
in the gold price, outdated styles and slow s ales for new products and lost for trade-
in gold;
(iii) we has discretion in establishing the price for the new products;
(iv) the trade-in transaction has commercial substance and the risk, timing or amount of
the cash flows is different between th e products sold and the trade-in gold;
(v) due to the special nature of gold, we consider gold trade-in as a form of payment
w h i c hi sa sg o o da sc a s hp a y m e n t .
In conclusion, except for the form of consideration, there ’s no difference between this
arrangement and an arrangement in which customers make a cash payment. According to
Hong Kong Financial Reporting Standards, we account for trade-in gold as non-cash
consideration received from the customer and recognize the sales on a gross basis.
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We noticed from the published financial information of relevant peer public companies
that they also apply the same accounting treatment as us regarding trade-in transactions.
Potential impact if we substantially reduce or cease to conduct gold trade-in
In the event of a material reduction or cessation of gold trade-in activities, the potential
impacts on our procurement and our sales and marketing are as below:
For procurement, we may not be able to collect u sed gold as raw materials from gold trade-in.
However, given our special membership status of the Shanghai Gold Exchange, our Directors
believe our procurement would not be materially impacted.
For our sales and marketing, it has been one of our competitive strengths to offer gold trade-in
services to our provincial-dealers and franchisees, and consumers at our self-operated stores. Our
gold trade-in services offered to franchisees empower franchisees to offer gold trade-in to
consumers through their franchise stores. Pot ential impacts may include losing a competitive
strength to maintain loyalty of our franchisees and consumers from both franchise and self operated
stores and affecting our brand image of being cap able of offering gold trade-in services in the
market. According to Frost & Sullivan, it is comm on for gold jewellery stores to accept gold trade-
in from consumers. If we do not accept trade-in gold from our provincial-dealers and franchisees,
they may have to find other counterparties with pu rifying capabilities to accept used gold from their
consumers. This may increase the burden on our provi ncial-dealers and franchisees and in turn, may
adversely affect our relationship with them.
Our PRC Legal Advisor has confirmed that the Anti-Money Laundering Law, the ‘‘Notice of
the Ministry of Finance and the State Administrat ion of Taxation on the Collection of Value-Added
Tax on Gold, Silver Jewellery and Other Goods ’’and related laws and regulations in force do not
prohibit or restrict the retail industry from ca rrying out gold trade-in. Given that we have a proper
commercial rationale to conduct gold trade-in, we have no plan to completely cease gold trade-in
activities.
Gold Trade-in & Anti-Money Laundering Law
Our PRC Legal Advisor is of the view that, pursuant to the Anti-Money Laundering Law of
the People ’s Republic of China ( ‘‘Anti-Money Laundering Law ’’) and the relevant laws and
regulations currently in force in the PRC, there is no prohibition or restriction to the retail industry
from carrying out gold trade-in business. Accordin g to the Article 2 of the Anti-Money Laundering
Law, ‘‘Anti-Money Laundering referred to in this Law refers to the act of taking relevant measures
in accordance with the provisions of this Law to prevent money laundering activities that disguise
and conceal the source and nature of proceeds from crimes and their proceeds of drug crimes,
organisational crimes of a triad nature, crimes of terrorist activities, smuggling crimes,
embezzlement and bribery, sabotage of the financial management order, and crimes of financial
fraud by various means ’’. According to Article 35 of the Anti-Money Laundering Law, ‘‘the scope
of the special non-financial institutions subject to the performance of the duties of anti-money
laundering, their performance of the duties of anti-money laundering and the specific measures for
their supervision and management shall be formula ted by the competent administrative authority of
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anti-money laundering under the State Council join tly with the relevant departments of the State
Council ’’. We are not regarded as precious metals tra ding venues, but our business encompasses
precious metals spot trading on established venu es, along with retail trading of precious metals
conducted within such venues. According to the Notice of the People ’s Bank of China on
Strengthening Anti-Money Laundering and Counter-Terrorist Financing Work of Precious Metals
Trading Venues ( 《中國人民銀行關於加強貴金屬交易場所反洗錢和反恐怖融資工作的通知》) (Yin
Fa [2017] No. 218), precious metals trading venues engaged in the business or providing services
involving spot trading of precious metals, as well as precious metals dealers engaging in the trading
of precious metals in their venues, shall actively fulfil their obligations to anti-money laundering
and counter-terrorist financing, and trading venues and dealers shall take the necessary monitoring
measures to monitor the lists of terrorist organisa tions and persons engaged in terrorist activities,
etc. published by the competent state authorities, and shall not establish business relationships with
or provide any form of service to any entities, organ isations or individuals on the lists, and shall, in
accordance with the law, immediately take measure s to freeze funds or other assets related to the
terrorist organisations and persons, etc., and repor t to the local public security organs, state security
organs and branches of the People ’s Bank of China in a timely manner in accordance with relevant
provisions. Trading venues and dealers shall, i n principle, adopt non-cash methods when providing
services or conducting business.
As of June 30, 2024, 2,653 franchise stores operated by 1,550 franchisees, accounting for
approximately 92.8% of all our franchisees, had installed and were using our CRM system to record
sales from gold trade-in. According to our intern al control policy on gold trade-in management, we
encourage franchisees to use our CRM system to record sales for gold trade-in. We did not make it
compulsory for franchisees to use CRM system ma inly because (i) some franchisees have adopted
similar management systems to which they are accustomed, offering the same or similar functions
as our CRM system; and (ii) certain smaller-scale franchisees may find it costly to adopt the CRM
system while we monitor their sales through onsite visits given the size of their operations. Through
our CRM system, we can monitor transactions conducted by our franchisees, including the volume,
frequency and types of sales/transactions. Having immediate access to such information allows us
to more effectively identify any irregular or abnormal transactions that may be suspicious of being
money laundering activities. In the event that such franchisee ’s transaction frequency or per
transaction amount materially deviates from the previous month or period, we can readily access
such information and take necessary actions, including but not limite d to investigating whether such
transactions might be related to money launderin g activities and, if necessary, reporting to the
relevant authorities. For illustration purposes only, consider a scenario in which a franchisee
typically conducts around 100 transactions per month, with an average of RMB10,000 per
transaction. Should there be a significant deviation, such as conducting 200 transactions in a single
month with an average of RMB20,000 per transa ction, it would raise concerns and lead to an
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internal investigation. We charge franchisees who do not adopt our CRM system a higher crafting
fee. We also have internal control policy in combating money laundering, which specifies as
follows:
— identify customers: establish a customer risk level m anagement system according to the
characteristics of customers, and consider f actors such as region, business, industry to
identify the risk level of customers, and strengthen the management of high-risk
customers.
— strict upfront measures for high-risk customers: When establishing relevant business
relationships with high-risk customers, we shall strictly implement real-name record
system, conduct procedures on customer due diligence and understand their business
operations. High-risk customer ’s identity, transaction records and all other relevant
information shall be collected for investigating suspicious transaction and for
investigating and dealing with money la undering cases and must be kept strictly
confidential and shall not be disclosed to any unrelated bodies or individuals.
— special management: for customers, business relationships or transactions which possess
characteristics of money laundering or terrorist financing, we shall take appropriate
measures such as in-depth investigation, interviews, and access to relevant materials, to
understand the customers and the purpose and nature of the transactions, and to
understand the natural persons who actually control the customers and their transactions.
— large amount and abnormal transactions: we pay particular attention to large and
abnormal transactions that include, but are not limited to, the following:
— If the customers’ name is the same or similar to the list of terrorist organizations,
terrorists and criminal suspects issued by j udicial authorities, law enforcement
agencies, regulatory aut horities, and the United Nations Security Council;
— Institutional customers that frequently have transactions of more than RMB200,000
or foreign exchange equivalent of more than USD20,000
(Note) or individual
customers that frequently have transac tions of more than RMB100,000 or foreign
exchange equivalent of more than USD10,000 (Note) ; and
— The frequency, amount or time of the customer ’s transaction are obviously
inconsistent with the business they operate.
If the large amount or abnormal transactions are determined to be related to money laundering,
terrorist financing and other illegal and criminal activities, or it cannot be ruled out otherwise, we
shall report the transactions to the Group ’s anti-money laundering officers within six working days
of the transaction. The anti-money laundering officers shall submit suspicious transaction report to
the China Anti-Money Laundering Monitoring and Analysis Center within four working days.
Note: Such foreign exchange transactions are primarily conducted through Hong Kong Mokingran.
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Our gold trade-in business does not involve foreign exchange transactions.
There have been no suspicious Anti-Money Laundering transactions reported internally or to
the China Anti-Money Laundering Monitoring and Analysis Center during Track Record Period,
and we have not been subject to any fines, administ rative penalties or other sanctions, or received
any enquiries, notices or warning from any relevant regulatory authorities in relation to violations
of the Anti-Money Laundering Law and foreign exchange laws and regulations during the Track
Record Period.
Based on the aforementioned, our PRC Legal Advisor holds the view that the risk of us being
subject to material punishment for violating the Anti-Money Laundering Law and foreign exchange
laws and regulations in the PRC for our gold trade-in is low.
Our Directors consider the risk of utilizing our gold trade-in service as a method of money
laundering is remote given that customers can only trade-in gold for gold jewellery. We do not pay
cash to (i) provincial-dealers and franchisees who trade-in gold with us or (ii) consumers who
trade-in gold through our self-operated stores with us.
Our aforementioned arrangement is in line with o ur commercial interest and market practice.
Frost & Sullivan has further confirmed that there were no material unusual features regarding our
gold trade-in practice when compared with other major industry players.
In terms of our accounting treatment, gold tra de-in is considered as non-cash settlement and
our revenue recognition. The critical accounting judgment includes the consideration of:
1. Our Group receives used gold products from franchisees, provincial-dealers and
consumers to be used in manufacturing new gold products.
2. There is no obligation or c ommitment for our Group to accept the used gold products.
3. Except for the form of consideration, there ’s no difference between this arrangement and
an arrangement in which customers makes a cash payment.
4. Our Directors apply judgment to assess whether or not we obtain control of customer-
provided materials. After careful analysis of all relevant fact and circumstances, it is
concluded that our Group obtain control of the used gold products.
5. As a result, the value of the non-cash consideration is included in the transaction price.
6. Our Group estimates the fair value of the n on-cash consideration by reference to the real-
time trading price of the Shanghai Gold Exchange on the relevant trading day.
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Five largest gold trade-in parties for our fr anchise network during the Track Record Period
The table below sets out our Group ’s five largest trade-in parties of each year/period of our
franchise network during the years ended Decem ber 31, 2021, 2022 and 2023 and the six months
ended June 30, 2024, ranked in accordance with the trade-in amount by our Group during the
respective year/period:
Rank Name
Principal
business and
business profile
Products
provided
Year of
commencement
of business
relationship
with our Group
Trade-in
amount
Percentage to
our total trade-
in amount from
franchisees and
provincial-
dealers
Settlement
Method Credit term
(RMB$ ’000)
(approximately)
(%)
(approximately)
(day)s
For the year ended December 31, 2021
1 Provincial-dealer A Provincial-dealer Trade-in gold Since 2014 470,161 5.8 Settlement
in gold
Payment
on spot
2 Provincial-dealer C Provincial-dealer Trade-in gold Since 2012 399,095 4.9 Settlement
in gold
Payment
on spot
3 Provincial-dealer B Provincial-dealer Trade-in gold Since 2012 332,761 4.1 Settlement
in gold
Payment
on spot
4 Provincial-dealer D Provincial-dealer Trade-in gold Since 2019 275,465 3.4 Settlement
in gold
Payment
on spot
5 Provincial-dealer E Provincial-dealer Trade-in gold Since 2019 269,739 3.3 Settlement
in gold
Payment
on spot
For the year ended December 31, 2022
1 Provincial-dealer C Provincial-dealer Trade-in gold Since 2012 428,193 7.4 Settlement
in gold
Payment
on spot
2 Franchisee F Franchisee Trade-in gold Since 2012 285,555 4.9 Settlement
in gold
Payment
on spot
3 Provincial-dealer B Provincial-dealer Trade-in gold Since 2012 228,057 3.9 Settlement
in gold
Payment
on spot
4 Provincial-dealer A Provincial-dealer Trade-in gold Since 2014 160,418 2.8 Settlement
in gold
Payment
on spot
5 Provincial-dealer D Provincial-dealer Trade-in gold Since 2019 158,133 2.7 Settlement
in gold
Payment
on spot
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Rank Name
Principal
business and
business profile
Products
provided
Year of
commencement
of business
relationship
with our Group
Trade-in
amount
Percentage to
our total trade-
in amount from
franchisees and
provincial-
dealers
Settlement
Method Credit term
(RMB$ ’000)
(approximately)
(%)
(approximately)
(day)s
For the year ended December 31, 2023
1 Provincial-dealer C Provincial-dealer Trade-in gold Since 2012 548,277 8.2 Settlement
in gold
Payment
on spot
2 Franchisee F Franchisee Trade-in gold Since 2012 396,415 5.9 Settlement
in gold
Payment
on spot
3 Provincial-dealer B Provincial-dealer Trade-in gold Since 2012 244,551 3.7 Settlement
in gold
Payment
on spot
4 Provincial-dealer A Provincial-dealer Trade-in gold Since 2014 190,323 2.8 Settlement
in gold
Payment
on spot
5 Provincial-dealer E Provincial-dealer Trade-in gold Since 2019 163,747 2.4 Settlement
in gold
Payment
on spot
For the six months ended June 30, 2024
1 Provincial-dealer C Provincial-dealer Trade-in gold Since 2012 209,430 7.8 Settlement
in gold
Payment on
spot
2 Franchisee F Franchisee Trade-in gold Since 2012 138,607 5.1 Settlement
in gold
Payment on
spot
3 Provincial-dealer B Provincial-dealer Trade-in gold Since 2012 81,255 3.0 Settlement
in gold
Payment on
spot
4 Provincial-dealer E Provincial-dealer Trade-in gold Since 2019 74,046 2.7 Settlement
in gold
Payment on
spot
5 Franchisee G Franchisee Trade-in gold Since 2011 64,471 2.4 Settlement
in gold
Payment on
spot
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Overlapping of franchise stores as customers and our gold trade-in parties
Due to our business model on accepting gold trade-in as a settlement method, naturally some
of our customers are also our gold trade-in parties. The following table sets out quantitative
disclosures on our total sales to and purchases from our franchise stores, who purchased gold
jewellery from us as customers and also acted as ou r gold trade-in parties during the Track Record
Period:
Sales to all overlapping franchise e customers and gold trade-in parties
Year ended December 31,
Six months
ended June 30,
2021 2022 2023 2024
Sales revenue
(RMB million) . . . . . . . . 14,508 14,438 18,363 7,752
As a percentage to total
r e v e n u e( % ).......... 8 6 9 2 9 1 7 8
Gross profit
(RMB million) . . . . . . . . 481 587 845 461
Gross profit margin (%) . . . 3.3 4.1 4.6 5.9
The gross profit margin from overlapping franchisee customers and gold trade-in parties
during the Track Record Period was 3.3%, 4.1%, 4.6% and 6.2% for the years ended December 31,
2021, 2022 and 2023 and the six months ended June 30, 2024, respectively.
Gold purchases and gold trade-in from overlapping franchisee customers and gold trade-in parties
Year ended December 31,
Six months
ended June 30,
2021 2022 2023 2024
Gold trade-in amount
(RMB million) . . . . . . . . 8,078 5,797 6,693 2,701
As a percentage to total gold
purchase and gold trade-in
from franchisees and
provincial-dealers (%) . . . 49 40 34 30
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The table below sets out the details of our major gold trade-in parties in our franchise network
during the Track Record Period:
Provincial-dealer A
Year ended December 31,
Six months
ended June 30,
2021 2022 2023 2024
Sales (RMB ’000) . . . . . . 648,100 593,341 689,177 133,394
As a percentage to total
r e v e n u e( % ) ........ 3 . 8 3 . 8 3 . 4 1 . 3
Gold trade-in
(RMB’000) . . . . . . . . 470,161 160,418 190,323 60,152
As a percentage to total
amount of gold trade-in
from franchisees and
provincial-dealers (%) . 5.8 2.8 2.8 2.2
Gross profit (RMB’ 000) 5,740 20,174 30,092 12,488
Gross profit margin (%) 0.9 3.4 4.4 9.4
Provincial-dealer A’ s ultimate beneficial owner commenced business relationship with us since
2012. Provincial-dealer A is a company establi shed in the PRC in 2021 with a registered share
capital of RMB1.0 million and is principally engag ed in retail and wholesale of jewellery. Prior to
the establishment of Provincial-dealer A, we conducted business with its ultimate beneficial owner
directly and/or other entities controlled by him/her. Provincial-dealer A ’s ultimate controller is a
merchant specializing in jewellery business and an Independent Third Party. To the best of our
Directors ’ knowledge, it has no connection with our former employees. As of June 30, 2024, it was
our provincial-dealer in Wenzhou.
The gross profit margin of the transactions between our Group and Provincial-dealer A for the
year ended December 31, 2021 was lower primarily because (i) the difference in product mix sold
to Provincial-dealer A (in particular we had low sales of our diamond inlaying jewellery products
which carried a higher margin to Provincial-deal er A); and (ii) Provincial-dealer A purchased and
traded-in more gold jewellery products from us whe n the gold price was higher, while the crafting
fees we charged were stable.
For the years ended December 31, 2021, 2022 and 2023 and the six months ended June 30,
2024, the proportions of sales settled by traded-in gold by Provincial-dealer A were 72.5%, 27.0%,
27.6% and 45.1%, respectively. In 2021, 49.1% of our total revenue generated from sales of gold
jewellery and other gold products was settled by u sed gold. The same proportion for Provincial-
dealer A was higher because it had more access to used gold of third-party brands and 60% of the
used gold traded-in by Provincial-dealer A was o f third-party brands. With more access to used
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gold from customers through its sa les network, Provincial-dealer A may settle more of its sales with
a higher volume of used gold it collected, there by contributing to a higher proportion of sales
settled by traded-in gold. The proportion of sales settled by traded-in gold by Provincial-dealer A
declined to 27.0% and 27.6% in 2022 and 2023, respectively, which was primarily due to the fact
that we adopted stricter quality control and mo re careful acceptance of traded-in gold from third-
party brands in 2022, which resulted in a decrease in volume of used gold from third-party brands
received from Provincial-dealer A. In 2022, we began to adopt the CRM system across our
franchise network, through which we may monitor the information of used gold we received
through gold trade-in. For further details of the internal control policies adopted in 2022 in relation
to the quality control of trade-in gold, please refer to the section headed ‘‘History, Development
and Corporate Structure — Previous A-Share Applications — The First A-Share Application —
CSRC ’s concerns in relation to ‘‘One RMB Exchange ’’ — Internal Control Measures. ’’In addition,
we charge higher crafting fees for sales settled by trade-in gold from third-party brands, for further
details of the crafting fees we charge, please refer to the section headed ‘‘Business — Our
Customer — Pricing policy. ’’
For the six months ended June 30, 2024, the proportion of sales settled by traded-in gold by
Provincial-dealer A increased to 45.1%, as a re sult of a temporary suspension of business by
Provincial-dealer A in January 2024 due to its personal reason. As the sales of gold jewellery
products usually increase before Chinese Ne w Year, the temporary cessation in business by
Provincial-dealer A resulted in a decrease in its total sales for the six months ended June 30, 2024.
Following the temporary cessation of business, Provincial-dealer A resumed operations in February
2024. While the temporary cessation in business in the first quarter of 2024 led to a decrease in
total sales for Provincial-dealer A during the first half of 2024, the change in the volume of used
gold received by Provincial-dealer A in the first half of 2024 was comparatively marginal when
compared to that of the decrease in sales for the co rresponding period due to (i) the stable source of
used gold stemming from the solid franchisee base by Provincial-dealer A and (ii) the increase in
willingness to conduct gold trade-in in general due to the increase in gold price in the first half of
2024. Accordingly, the proportion of sales sett led by traded-in gold by Provincial-dealer A
increased during the six months ended June 30, 2024.
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Provincial-dealer B
Year ended December 31,
Six months
ended June 30,
2021 2022 2023 2024
Sales (RMB ’000) . . . . . . 669,332 646,569 858,207 356,897
As a percentage to total
r e v e n u e( % ) ........ 4 . 0 4 . 1 4 . 2 3 . 6
Gold trade-in
(RMB’000) . . . . . . . . 332,761 228,057 244,551 81,255
As a percentage to total
gold trade-in from
franchisees and
provincial-dealers (%) . 4.1 3.9 3.7 3.0
Gross profit (RMB’ 000) 13,033 25,084 39,616 31,723
Gross profit margin (%) 1.9 3.9 4.6 8.9
Provincial-dealer B ’s ultimate beneficial owner commence d business relationship with us since
2012. Provincial-dealer B is a company establi shed in the PRC in 2016 with a registered share
capital of RMB5.0 million and is principally engaged in the wholesale of jewellery and art pieces.
Prior to the establishment of Provincial-dealer B, we conducted business with its ultimate beneficial
owner directly and/or other entities controlled by him/her. Provincial-dealer B ’s ultimate beneficial
owner is a merchant specializing in jewellery business and an Independent Third Party. To the best
of our Directors ’ knowledge, it has no connection with our former employees. As of June 30, 2024,
it was our provincial-dealer in Taiyuan.
For the years ended December 31, 2021, 2022 and 2023 and the six months ended June 30,
2024, the proportions of sales settled by traded-in gold by Provincial-dealer B were 49.7%, 35.3%,
28.5% and 22.8%, respectively which are generally in line with the proportion of settlement by
trade-in gold by provincial-dealers and franchisees of 49.1%, 37.7%, 33.7% and 27.5% out of our
total revenue generated from the sales of gold jew ellery and other gold products for respective year/
period.
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Provincial-dealer C
Year ended December 31,
Six months
ended June 30,
2021 2022 2023 2024
Sales (RMB ’000) . . . . . . 641,756 792,556 1,026,117 428,313
As a percentage to total
r e v e n u e( % ) ........ 3 . 8 5 . 0 5 . 1 4 . 3
Gold trade-in
(RMB’000) . . . . . . . . 399,095 428,193 548,277 209,430
As a percentage to total
gold trade-in from
franchisees and
provincial-dealers (%) . 4.9 7.4 8.2 7.8
Gross profit (RMB’ 000) 13,755 30,881 49,478 31,887
Gross profit margin (%) 2.1 3.9 4.8 7.4
Provincial-dealer C ’s ultimate beneficial owner commence d business relationship with us since
2012. Provincial-dealer C is a company establi shed in the PRC in 2017 with a registered share
capital of RMB1.0 million and is principally engaged in the retail and wholesale of gold and silver
accessories, jewellery and art pieces. Prior to the establishment of Provincial-dealer C, we
conducted business with its ultimate beneficial owner directly and/or other entities controlled by
him/her. Its ultimate beneficial owner is a jewel lery merchant and an Independent Third Party. To
the best of our Directors ’ knowledge, it has no connection wit h our former employees. As of June
30, 2024, it was our provincial-dealer in Harbin.
For the years ended December 31, 2021, 2022 and 2023 and the six months ended June 30,
2024, the proportions of sales settled by traded-in gold by Provincial-dealer C were 62.2%, 54.0%,
53.4% and 48.9%, respectively. The proportion of sales settled by traded-in gold by Provincial-
dealer C slightly decreased from 62.2% in 2021 to 54.0% in 2022 as we applied more stringent
requirements in accepting used gold, and such proportion remained stable at 53.4% for 2023 and
48.9% for the six months ended June 30, 2024.
The proportion of sales settled by traded-in gold by Provincial-dealer C was generally higher
than that of the Group as it has been operating in Harbin Province for more than 10 years and has
established a solid customer base in the area which it operates. Accordingly, the Directors believe
that Provincial-dealer C has access to a more used gold and therefore settled sales with higher
proportion of traded-in gold.
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Provincial-dealer D
Year ended December 31,
Six months
ended June 30,
2021 2022 2023 2024
Sales (RMB ’000) . . . . . . 322,395 294,102 343,777 128,485
As a percentage to total
r e v e n u e( % ) ........ 1 . 9 1 . 9 1 . 7 1 . 3
Gold trade-in
(RMB’000) . . . . . . . . 275,465 158,133 129,314 34,771
As a percentage to total
gold trade-in from
franchisees and
provincial-dealers (%) . 3.4 2.7 1.9 1.3
Gross profit (RMB’ 000) 4,605 9,468 14,409 7,628
Gross profit margin (%) 1.4 3.2 4.2 5.9
Provincial-dealer D’ s ultimate beneficial owner commenced business relationship with us since
2019. Provincial-dealer D is a company establi shed in the PRC in 2022 with a registered share
capital of RMB2.0 million, and is principally eng aged in the business of sales of gold and silver
products and wholesale of art pieces. In 2023, provincial-dealer D primarily conducted business in
Hunan Province. Prior to the establishment of Provincial-dealer D, we conducted business with its
ultimate beneficial owner directly and/or other ent ities controlled by him/her. Its ultimate controller
is a jewellery merchant and an Independent Third Party. To the best of our Directors ’ knowledge, it
has no connection with our former employees.
For the years ended December 31, 2021, 2022 and 2023 and the six months ended June 30,
2024, the proportions of sales settled by traded-in gold by Provincial-dealer D were 85.4%, 53.8%,
37.6% and 27.1%, respectively. The proportion of sales settled by traded-in gold by Provincial-
dealer D demonstrated a declining trend during the Track Record Period.
The proportion of sales settled by traded-in gold by Provincial-dealer D in 2021 was higher
than that of the overall trade-in proportion of the Group as a whole. This was largely due to (i)
approximately 56.5% of the used gold traded-in by Provincial-dealer D in 2021 consisted of third-
party brand gold products, with more access to used gold from customers through its sales network,
Provincial-dealer D may settle more of its sales with a higher volume of used gold it collected,
thereby attributing to a higher proportion of sales settled by traded-in gold; and (ii) Provincial-
dealer D and us launched a promotional event within its region to promote the sales of gold
products of purity level of 999.99, which we offered d iscount of crafting fees to Provincial-dealer D
for trading-in used gold products of our own brand for our gold products of purity level of 999.99
with the intention to encourage end consumers to trade in used gold for such products in that
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region, which, in turn, led to the increase in the proportion of sales settled by traded-in gold by
Provincial-dealer D. Accordingly, the proportion of sales settled by traded-in gold by Provincial-
dealer D in 2021 was higher than usual.
Following the introduction of stricter quality control measures for used gold collected from
customers in 2022, the percentage of sales settled through traded-in gold by Provincial-dealer D
decreased since 2022. Save for 2021, such proportion was generally in line with the overall
proportion of settlement by trade-in gold by provincial-dealers and franchisees out of our total
revenue generated from the sales of gold jewelle ry and other gold products, which amounted to
49.1%, 37.7%, 33.7% and 27.5% for respective year/period. The Directors believe that such decline
was primarily attributable to our Group ’s heightened scrutiny over the quality of used gold we
collect since 2022.
Provincial-dealer E
Year ended December 31,
Six months
ended June 30,
2021 2022 2023 2024
Sales (RMB ’000) . . . . . . 339,719 365,907 454,507 213,430
As a percentage to total
r e v e n u e( % ) ........ 2 . 0 2 . 3 2 . 2 2 . 1
Gold trade-in
(RMB’000) . . . . . . . . 269,739 152,855 163,747 74,046
As a percentage to total
gold trade-in from
franchisees and
provincial-dealers (%) . 3.3 2.6 2.4 2.7
Gross profit (RMB’ 000) 7,742 14,810 21,159 18,546
Gross profit margin (%) 2.3 4.0 4.7 8.7
Provincial-dealer E is our provincial-dealer since 2019. It was established in the PRC in 2005
with a registered share capital of RMB3.0 million. It is principally engaged in trading of jewellery
and accessories, art pieces, construction raw materials and other sundry supplies. Its ultimate
controller is a merchant and an Independent Third Party. To the best of our Directors ’ knowledge, it
has no connection with our former employees. As of June 30, 2024, it was our provincial-dealer in
Kunming.
For the years ended December 31, 2021, 2022 and 2023 and the six months ended June 30,
2024, the proportions of sales settled by traded-in gold by Provincial-dealer E were 79.4%, 41.8%,
36.0% and 34.7%, respectively.
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The proportion of sales settled by traded-in gold by Provincial-dealer E in 2021 was higher
that the overall trade-in proportion of the Group as a whole. This was largely due to the fact that (i)
approximately 62.4% of the used gold traded-in by Provincial-dealer E in 2021 were of third-party
brand, with more access to used gold of third-party brands from customers through its sales
network, Provincial-dealer E may settle more of its sales with a higher volume of used gold it
collected, leading to a higher proportion of sales set tled through traded-in gold and (ii) Provincial-
dealer E launched a promotional campaign with our Group in its region to promote the sales of gold
products with a purity level of 999.99 in 2021, which we offered discount of crafting fees to
Provincial-dealer E for trading-in used gold products of our own brand for our gold products of
purity level of 999.99 with the intention to encourage end consumers to trade in used gold for such
products in that region, which, in turn, led to the increase in the proportion of sales settled by
traded-in gold by Provincial-dealer E. As a resul t, the percentage of sales settled with traded-in
gold by Provincial-dealer E in 2021 was above the usual level.
Save for that in 2021, the proportion of sales settled by traded-in gold by Provincial-dealer E
was generally in line with the overall proportion of settlement by traded-in gold by provincial-
dealers and franchisees out of our total revenue generated from the sales of gold jewellery and other
gold products, which amounted to 49.1%, 37.7%, 3 3.7% and 27.5% for the respective year/period.
Franchisee F
Year ended December 31,
Six months
ended June 30,
2021 2022 2023 2024
Sales (RMB ’000) . . . . . . 354,965 460,502 605,901 204,236
As a percentage to total
r e v e n u e( % ) ........ 2 . 1 2 . 9 3 . 0 2 . 0
Gold trade-in
(RMB’000) . . . . . . . . 263,571 285,555 396,415 138,607
As a percentage to total
gold trade-in from
franchisees and
provincial-dealers (%) . 3.3 4.9 5.9 5.1
Gross profit (RMB’ 000) 11,734 14,899 24,314 5,013
Gross profit margin (%) 3.3 3.2 4.0 2.5
We commenced business relations hip with the ultimate beneficial owner of Franchisee F since
2012. Franchisee F is a sole proprietorship established in 2018 which primarily engages in retail of
jewellery products, and pieces and cosmetics, gold trade-in, and t he production and maintenance of
jewellery and accessories. Prior to the establishment of Franchisee F, we conducted business with
its sole proprietor directly and/or other entities controlled by him/her. The sole proprietor of
Franchisee F is an individual jewellery merchant and an Independent Third Party. To the best of
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our Directors ’ knowledge, it has no connection with our former employees. As of June 30, 2024,
Franchisee F operated 20 franchise stores in total, including 13 franchise stores in Jilin, six
franchise stores in Inner Mongolia and on e franchise store in Heilongjiang.
For the years ended December 31, 2021, 2022 and 2023 and the six months ended June 30,
2024, the proportions of sales settled by gold trade-in by Franchisee F were 74.3%, 62.0%, 65.4%
and 67.9%, respectively. The proportion of sales settled by gold trade-in by Franchisee F decreased
from 74.3% in 2021 to 62.0% in 2022 due to our raised standard in accepting used gold in 2022,
and such proportion remained stable at 65.4% for 2023 and 67.9% for the six months ended June
30, 2024.
The Directors believe that the proportion of sales settled by gold trade-in by Franchisee F was
generally higher than the overall gold trade-in proportion of the Group as it has been operating
several franchise stores in different provinces, and has built a strong customer base with a wider
geographical coverage, thereby having access to more used gold from its customers and therefore
settled sales with higher proportion of traded-in-gold.
Franchisee G
For the year ended December 31,
For the six
months ended
June 30,
20242021 2022 2023
Sales (RMB ’000) . . 153,828 136,436 168,283 97,835
As a percentage to
total revenue (%) . 0.9 0.9 0.8 1.0
Gold trade-in
(RMB’000) . . . . . 96,718 86,049 106,340 64,471
As a percentage to
total gold trade-in
from franchisees
and provincial-
d e a l e r s( % ) ..... 1 . 2 1 . 5 1 . 6 2 . 4
Gross profit
(RMB’000) . . . . . 3,285 4,756 5,270 2,855
Gross profit
margin (%) . . . . 2.1 3.5 3.1 2.9
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We commenced business relation ship with the ultimate beneficial owner of Franchisee G since
2011. Franchisee G is a sole proprietorship established in 2020 and it primarily engages in the retail
of jewellery and accessories. Prior to the establi shment of Franchisee G, we conducted business
with its sole proprietor directly and/or other entities controlled by him/her. The sole proprietor of
Franchisee G is a jewellery merchant and an Indepe ndent Third Party. To the best of our Directors ’
knowledge, it has no connection with our former employees. As of June 30, 2024, Franchisee G
operated nine franchise stores in Shandong province.
Our sales to and our gold trade-in from these m ajor overlapping customer and major gold
trade-in parties were (i) entered into after the due consideration taking into account the prevailing
market gold price at the relevant times, (ii) conducted in the ordinary course of business under
normal commercial terms and on an arm ’s length basis, and (iii) our gol d trade-in policy applies to
all our customers to request for gold trade-in s ettlement to offset part of their purchase price.
For the years ended December 31, 2021, 2022 and 2023 and the six months ended June 30,
2024, the proportions of sales settled by traded-in gold by Franchisee G has remained stable at
62.9%, 63.1%, 63.2% and 65.9%, respectively. There was a slight increase in the proportion of
sales settled by traded-in gold by Franchisee G during the six months ended June 30, 2024 as it
held the ‘‘One RMB Exchange ’’program in June 2024, which was a promotional event encouraging
end consumers to conduct gold trade-in.
The Directors believe that the proportion of sales settled by gold trade-in by Franchisee G was
generally higher than the overall gold trade-in proportion of the Group as it has been running
several franchise stores and has developed a robust customer base, enabling Franchisee G to reach a
larger group of end consumers, thus accessing and receiving more used gold. Accordingly, the
proportion of sales settled by traded-in gold by F ranchisee G has consiste ntly been higher than the
overall gold trade-in proportion of our Group as a whole.
RESEARCH AND DEVELOPMENT
We are committed to and have invested in the research and development of the gold
processing techniques, the machinery require d for the mass production of gold jewellery and
jewellery designs. Backed by our solid research and development, we can independently mass-
produce substantially all of our products.
As of June 30, 2024, our research and developm ent department comprises approximately 100
members with average experience of approximately seven years in Company and led by Mr. Wang
Zhongshan, our executive Director, our founder and chairman of our Board. Our R&D policy is to
work closely and proactively with our sales and ma rketing department and production department to
enhance our understanding of and ability to respond to consumers ’ preferences while maintaining
our cost of production at acceptable levels. We are constantly striving to enrich our research and
development capabilities to stay at the forefront of the industry and we did not change our R&D
policy in the last five years.
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We made substantial investments in intellectual property and as of the Latest Practicable Date,
we held 548 patents in the PRC. According to Frost & Sullivan, such number of patents held have
exceeded the industry average, demonstrating our commitment to R&D on areas of gold purification
technologies, machinery devel opment and jewellery design.
We also implement strict control over our jewellery design and machinery development
processes to mitigate the risk of intellectual pro perty infringement and reduce the likelihood of
unauthorized replication or imitation by competitor s, thus preserving our dis tinctiveness and market
position.
Our Research and Development Emphasis
Our research and development centers around th ree key focuses: the (1) technology R&D; (2)
machinery R&D; and (3) product R&D. The following table sets forth a summary of the three
focuses of our research and development:
R&D Center
Technology R&D Machinery R&D Product R&D
With our collaboration with
strategic R&D parties, we
continue to challenge the
benchmark of gold purity.
We have successfully
developed series of products
with gold purity of 999.9,
999.99 and 999.999.
Exhibition
type
Signature
type
Regular
type
Our Jewellery design covers exhibition,
signature and regular types, which are
for products exhibition, for brand
promotion and for daily wearing
respectively.
Our R&D team takes “people, regions,
timeliness, and individual preferences”
as the core design concept, emphasizing
the harmonious coexistence of jewellery
and people.
We have been and continue to
be committed to the automation
and digitalized construction of
gold jewellery processing.
We have successfully
developed equipment such as
automatic beading machines,
automatic welding machines,
and automatic engraving
machines, covering multiple
product processes.
(a) R&D on technology
Our team of research and develop ment personnel in high-precision technology is dedicated to
improving our gold purification ability, optimizing jewellery processing technology, and enhancing
production capabilities.
To further modernize our production process, we actively introduce new processing
equipment, tools, molds, and other advanced t echnology. This ensures that we remain at the
forefront of the industry and continue to provide customers with the highest quality products.
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Our technology is developed based on the actual needs of our production.
. Firstly, we focus on improving gold purity to maintain our leading position in producing
999.9 high-purity gold jewellery in the industry.
. Secondly, while maintaining gold purity, we ex plore low-cost, high-efficiency, and high-
quality processing technology to provide customers with value-for-money products.
. Thirdly, we proactively develop new pr oduction technology that emphasizes the
‘‘lightness ( 輕), craftsmanship ( 巧), refinement ( 精), and aesthetic ( 美)’’of our products.
In addition, by way of R&D, we achieved significant technical breakthrough in the production
of high-purity gold jewellery products, including:
. We successfully developed an industry-leading cyanide-free process for producing 999.9
high purity gold, which prioritizes environm ental protection and energy efficiency.
. We have adopted our patented technology of ‘‘autogenous welding ’’into our production
process. This innovative technique allows us to achieve gold jewellery purity levels of up
to 999.999. By minimizing the introduction of impurities during the welding process, we
have improved quality issues include discoloration, detachment and wearer allergies. Our
Directors are of the view that our technology fills a significant gap in the field of laser
and electron beam welding for gold jewellery.
. According to Frost & Sullivan, in 2019, we became the first and one of the very few
domestic enterprises with scaled production of 18K-gold spring clasps. Our efforts have
resulted in the replacement of imported components with domestically produced ones,
effectively reversing the prevailing industry trend of relying on overseas imports for mid-
to-high end jewellery spring clasps in PRC, according to Frost & Sullivan.
. We have dedicated efforts in gold purity testing standards. For example, we have
developed the ‘‘Gold Spectrum and Gold Chemical Standard Sampling, ’’applicable to
the detection of high-purity gold with a gold content above 999.95. We have also taken
the lead in the drafting of the ‘‘High Purity Gold Chemical Analysis Method for the
Determination of Impurity Element Content in Ultra-Pure Gold by Glow Discharge Mass
Spectrometry ’’(T/SDAS4-2016), which serves as a testing method for ultra-pure gold in
the entire industry.
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(b) R&D on machinery
Our R&D on machinery allows us to standardize complicated production procedures and
achieve high precision automated mass-productio n of gold jewellery, thus allowing us to be one of
the few gold jewellery brands that can independently manufacture and sell gold jewellery products,
according to Frost & Sullivan. Our production facilities are equipped wi th advanced equipment,
such as ICP color monitoring equipment, automated bracelet buckle processing equipment, thread
knitting machines, CNC automated engraving machines, 3D metrology machine, and digitalized
processing center. Our patented machinery include hydrangea engraving machine, hammer chain
machine, machine tool for processing patterns on the surface of decorative chains, fully automatic
four-axis engraving machine.
To produce high-quality gold jewellery pro ducts with precision and efficiency, we have
introduced/revamped imported industry-leading production equipment, including robotic arms for
accessories flipping, automated carving machin es, automatic butterfly chain punching machines,
chain loosening machines, and automatic thin wall gold tube n ecking machine, and precisely
calibrated these machinery to suit our production need. As a result of our R&D on machinery, we
have developed approximately 300 sets of self-d eveloped production equipment since 2020. Our
proprietary equipment, combined with our use of 3D printing technology, CNC precision carving
technology and high precision gold crafting techniques, have significantly improved the
mechanization and automation of our production process.
We believe our achievement in advancing our production machinery distinguishes us from
gold jewellery brands which only focus on jewellery design but relies on gold external
manufacturers or imported machinery for production. At the same time, backed with our solid
research and development and proprietary machinery, we can actively fine tune our production
process, self-improve our product quality, and provide production trial support to our jewellery
design department.
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Photos: Our various production equipment
ICP color monitoring equipment Automated bracelet buckle processing
equipment
Thread knitting machines CNC automated engraving machines
Three-dimensional metrology machi ne Digitalized processing center
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(c) R&D on products
Our product portfolio encompas ses a wide range of fine jewellery products, including rings,
necklaces, pendants, bangles, earrings, brooches, bracelets, and more. This diverse range provides
our customers with ample choices for different occasions, such as daily wear, weddings, and gifts
for newborns.
We innovate to meet current market trends and satisfy the needs of different types of
customers. Our design team creates hundreds of n ew jewellery designs every year. One of the most
salient features of our products is that we employ the traditional technique of ‘‘gold and silver fine
crafting’’ (金銀細工製作技藝) in our production process, which is an ancient jewellery crafting
technique that was recognized as a Chinese intangible cultural heritage in 2008, combining with our
patented technology of ‘‘autogenous welding ’’(無焊料焊接), we are committed to preserve Chinese
cultural heritage and to showcase the beauty of traditional craftmanship through our high quality
gold jewellery.
With our broad online and offlin e sales channels and product portfolio, we can reach different
customer segments and further penetrate the c onsumer markets. Our jewellery designers have
participated in multiple jewellery design exhibitions, winning gold and silver awards in domestic
competitions and other honors. We have attained some key recognitions as below:
. in 2013, our gold jewellery crafting technique was shortlisted in the ‘‘Third Batch of
Provincial Intangible Cultural Heritage of Shandong Province ’’(山東省第三批省級非物
質文化遺產代表性項目名錄);
. in 2018, our founder Mr. Wang was named as one of the ‘‘Fifth Batch of Inheritors of
Provincial Intangible Cultural Heritage of Shandong Province ’’(山東省第五批省級非遺
項目傳承人名單) with the gold and silver fine crafting techniques;
. in 2022, we launched the ‘‘Five ‘9’s high purity gold product line ’’(五九億純金系列產
品) finely crafted by our gold and silver fine crafting techniques ’’, which was
subsequently recognized as one of the ‘‘Shandong handcrafts 100 ’’(山東手造優選100);
and
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. in 2023, we collaborated with the Beijing Eight Imperial Handcrafts Association ( 北京燕
京八絕協會), Beijing Eight Imperial Handcrafts Museum ( 北京燕京八絕博物館) and the
inheritor of the Eight Imperial Handcrafts ( 燕京八絕傳承人) to develop new products
combining the traditional filigree inlaying techniques with lacquerware carving ( 漆雕)
and golden lacquer ( 金漆鑲嵌) to promote and raise awareness for Chinese intangible
cultural heritage handcrafts.
Equipped with such valued knowledge and engineered by our well-integrated design and
production capability, we have been able to continuously innovate and broaden our jewellery
portfolio. We continuously introduce new gold jewellery that emphasizes on the ‘‘lightness ( 輕),
craftsmanship (巧 ), refinement ( 精), and aesthetic ( 美)’’of our jewellery.
The following sets forth our procedures in jewellery design:
Approval
Production
Market launch
Data analysis
Improvement
Results
Project planning
Initiation
Product Launch
On-going
Management
For the years ended December 31, 2021, 2022 and 2023 and the six months ended June 30,
2024, our research and development expenses were RMB10.7 million, RMB13 .5 million, RMB17.5
million and RMB11.3 million, respectively. Our r esearch and development expenditure primarily
includes staff costs of our R&D staff and consumables.
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PRODUCTION
It had been our corporate strategy since our establishment to differentiate ourselves from other
gold jewellery brands by possessing the ability to mass-produce with advanced equipment in the
production phase. During the Track Record Period, we manufactured substantially all of our
products sold, which far exceeds the self-produc tion rate amongst our industry peers according to
Frost & Sullivan.
We have invested in our hardware production facilities and introduced digitalized equipment
to our production line, including CNC processing centers, high-precision wire electrical discharge
machining, nine-axis engraving machines, and au tomatic laser welding machines. Such production
capacity allows us to enhance the qu ality and efficiency of our gold jewellery production through
better control of our production process from identifying the quality of raw materials used, adopting
standardized quality control, and final product sample testing.
We place great emphasis on innovation and optimization in our production process and are
committed to refining the technology utili zed in mechanical processing, automation, and
purification of raw materials, as well as mold-making. To achieve this goal, we have developed
production lines that incorporate some of our sel f-developed patented production equipment with
the aim of improving the efficiency, cost-effectiveness, and quality of our products.
We adopt a production model in which we conduct purification and processing at our own
self-owned production facility. However, for certain jewellery products which we believe is not
commercial for us to produce on our own, we outs ource the production to external manufacturers.
During the Track Record Period, the cost of sales incurred for products produced by external
manufacturers constitute a de minimis amount o f our total cost of sales. According to Frost &
Sullivan, during the Track Record Period, our sel f-production rate far exceeds that of our industry
peers, which was approximately 20% during the same period. Our production process is
summarized as below:
External
manufacturers
accepting
orders
We provide raw
materials (gold,
diamonds, etc)
Production
Monthly
production
plan
Preparing the
raw materials
Arrange
production
schedule
Production
Quality
Check
Stock as
our finished
goods
Production in our self-owned production facility
We emphasize on retaining our own in-house prod uction capabilities and for better protecting
our proprietary production know-how. Unlike competitors who rely on outsourcing the core
production and crafting of gold jewellery to external parties, we maintain a competitive strength by
fully controlling and executing the entire production process in-house. Such dedication gives us
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quality control over our finished goods, better keeping of proprietary production know-how and
allows us to timely meet the demands of our cus tomers. For the years ended December 31, 2021,
2022 and 2023 and the six months ended June 30, 2024, our self-production rates for gold products
were 96.8%, 97.8%, 89.9%, and 92.8%, respectively. During the same periods, our self-production
rates for K-gold products were 92.3%, 92.8%, 99.8%, and 98.5%, respectively.
Our strength in production capability is fundamental to our ability to meet customer demands
in an efficient matter. We treasure and maintain the intangible cultural heritage production
techniques, that include the traditional technique of ‘‘gold and silver fine crafting ’’(金銀細工製作
技藝) in our production process, which is an ancient jewellery crafting technique that was
recognized as a Chinese intangible cultural heritage in 2008 and further enhanced our automated
and digitized production capacity, including our patented technology of ‘‘autogenous welding’’ . In
turn, we have constructed an efficient production chain, that is in close collaboration with our
design team. We believe our manufacturing separates us from our peers and gives us an edge in a
rather competitive market.
Our production proportion bre akdown and the economic benefit of production in our self-
operated facilities
The following table sets forth the comparison of our costs incurred for production of gold
products and K-gold products in our self-operated production facilities and through entrusting
external OEMs during the Track Record Period:
Year ended December 31, Six months ended June 30,
2021 2022 2023 2024
Weight of
gold
jewellery
processed
Cost
incurred
Average
cost per
gram of
gold
jewellery
processed
Weight of
gold
jewellery
processed
Cost
incurred
Average
cost per
gram of
gold
jewellery
processed
Weight of
gold
jewellery
processed
Cost
incurred
Average
cost per
gram of
gold
jewellery
processed
Weight of
gold
jewellery
processed
Cost
incurred
Average
cost per
gram of
gold
jewellery
processed
(kg) (RMB ’000) (RMB/g) (kg) (RMB ’000) (RMB/g) (kg) (RMB ’000) (RMB/g) (kg) (RMB ’000) (RMB/g)
Gold products
. Our self-operated
production facilities . . . . 47,189.8 70,461 1.49 41,566.3 71,602 1.72 43,558.4 80,474 1.85 18,242.4 37,689 2.07
. External OEMs . . . . . . 1,544.9 10,813 7.00 933.1 6,291 6.74 4,919.4 35,277 7.17 1,411.3 10,126 7.17
K-gold products
. Our self-operated
production facilities . . . . 2,700.3 21,763 8.06 2,231.7 25,190 11.29 2,621.2 45,305 17.28 784.4 16,173 20.62
. External OEMs . . . . . . 225.8 4,841 21.46 174.1 3,519 20.22 5.1 127 24.64 11.8 305 25.83
The average costs per finished goods of production of gold jewellery in our self-operated
production facilities were significantly lower t han that of entrusting external OEMs. During the
years ended December 31, 2021, 2022 and 2023 and the six months ended June 30, 2024, the
average costs of production of gold products in our self-operated production facilities when
compared to that of entrusting external OEMs were RMB5.5, RMB5.0, RMB5.3 and RMB5.1
cheaper per gram of gold jewellery processed; and the average costs of production of K-gold
products in our self-operated production facilitie s when compared to that of entrusting external
OEMs were RMB13.4, RMB8.9, RMB7.4 and RMB3.5 cheaper per gram of gold jewellery
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processed. Accordingly, with such costs differe nce, it is more economical for us to produce gold
jewellery and K-gold products in our self-operated facilities, which offers us competitive
advantages over competitors who outsource production to external OEMs. While our self-
production volume increased in 2023, our self-p roduction rate declined primarily due to the
demands of our national franchisee sales conf erence held in 2023, which led to increased
subcontracted production to fulfill the event ’s product demand.
(a) Integration of design and production
Our product development process is summarized as follows:
       case by case        case by case around one week around two weeks
Market
research and
data analytics
Jewellery
development
planning
Trial
production
testing
Mass
production
solutions
Market research and data analytics:
Our designers and technical personnel conduct market research through visiting our self-
operated stores, franchise stores, and reaching out to our consumers. We also monitor the
global fashion trend of gold and jewellery products and analyze customer satisfaction with our
product quality while gathering feedback from customers.
Jewellery development planning:
Our jewellery development strategies are r ooted in market research and data analytics,
which provide us with valuable insigh ts and ideas. To understand consumers’ preference
across our various sales channels, we collect and analyze consumer data, including sales
volumes and geographical distribution of local sales. This approach ensures that our jewellery
meet the evolving needs and preferences of our customers while also reflecting the recent
trends in the industry. Our design team collaborates closely with our production team, aiming
to ensure that the final jewellery designs are n ot only aesthetically pleasing but also feasible
for mass production.
Trial production testing:
Our production team conducts trial productio n testing for our new products. We initiate
the process by analyzing and determining the production method and techniques to be
employed. For jewellery casting, the preferred a pproach is to utilize 3D modeling for the trial
production phase. Depending on the specific requirements, other production methods such as
laser cutting, CNC, wire drawing with CNC, or engraving may be employed. These different
methods and techniques are chosen based on the product design and desired outcome. We
continuously refine the key parameters of our machine tools used in the production process
and solve the problems and technical barriers encountered during the trial production process.
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Mass production solutions:
Our production team then carries the experience gained in the trial production testing
phase and develop it into new product mass production solutions. Our research and
development department on machinery takes the lead in modifying and refurbishing our
existing mechanical equipment to meet with the production need for our evolving new
products.
(b) Purification of raw materials and high precision testing
The production of high purity gold jewellery requires comprehensive capacity including
procurement, refining, and gold purity-testing capabilities.
. In terms of procurement:
○ we are a special member of the Shanghai Gold Exchange and may directly purchase
gold materials from the Shanghai Gold Exchange, thereby ensuring the quality of
raw materials procured for production.
. In terms of gold purification:
○ we have developed our self-owned production facility currently with an annual gold
purification capacity of approximately 30 tons.
○ Through an integrated production layout, we are capable of carrying our jewellery
production processes using gold with purity levels of 999.9 to 999.99 refined by
ourselves as raw materials.
○ We possess three invention patents for gold refinery, which can be applied for
purified gold to 999.999 purity level.
. In terms of gold purity testing capabilities:
○ we have advanced testing equipment such as ICP (Inductively Coupled Plasma)
emission spectrometry, ICP-MS (Inductively Coupled Plasma Mass Spectrometry),
and spark direct-reading devices.
○ We have also drafted the ‘‘High-purity Gold Chemical Analysis Methods for
Determination of Impurity Element Content in Ultra-Pure Gold by Glow Discharge
Mass Spectrometry ’’ (《高純金化學分析方法雜質元素含量的測定輝光放電質譜
法》) (T/SDAS4-2016), which provides the testing basis for detection of gold purity
level in ultra-high purity gold.
○ Through these self-developed technologies, we are able to constantly monitor the
quality and gold purity level of our gold jewellery products, which in turn, equips
us with the appropriate technologies to ensure strict quality control over our gold
jewellery.
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(c) Production facilities and mold development and production
We have an advanced production facilities capable of automated crafting, and we utilize
cutting-edge technology to achieve multi-dimensional product innovation. The application of 3D
printing technology on mold development enables us to quickly respond to the personalized needs
of the market, solve the problems that conventional technology cannot break through, and create a
flexible supply chain. The introduction of CNC ( 雕刻技術) machineries to the production process
enables us to process complex surfaces of fine je wellery that are difficult to process using
conventional methods. In addition, with our advanced technology on hard gold processing, we had
created high-purity hard gold jewellery that possess the stiffness of not less than 60 HV scale.
We possess advanced automated production equipment and techniques in a modern and
digitalized production chain for the production of hi gh-quality gold jewellery. Through independent
operation and patent transfer, we believe we have further advanced the gold jewellery industry by
introducing mass-produced yet delicate gold jewellery.
For instance, the production of gold jewellery a nd bracelet components requires high levels of
mass production capacities in terms of available molds and existing production equipment. Due to
the high precision requirements of gold jeweller y and bracelet components, ordinary molds often
fall short of meeting the criteria in terms of purity. However, we possess the ability to produce
high-precision molds using industrial 3D printers and other technologies. This allows us to shorten
the time required for mold-making to a few hours, which could have taken a few days when using a
traditional mold-making production model.
We have also effectively improved production efficiency and precision in our jewellery
craftsmanship. For example, high-precision wax films produced by 3D printing can be cast into
jewellery for direct polishing, forming part of the fi nal product. This speeds up our production time,
in particular for gold jewellery with comple x structure and helps us meet the efficiency
requirements for and minimize raw material waste during the mass production.
The production process of our major products is summarized and illustrated in the diagram
below:
Plate
making
(1–5 days)
Film
making
(0.25–0.5 day)
Wax
injection
(0.25–1 day)
Gold
Molding and Welding
Cast
crafting
(7 days)
Hydraulic
crafting
(3 days)
Threading
(5 days)
Weaving
(5 days)
Polish
(0.25–0.5 day)
Glaze
(0.1–0.5 day)
Sand
(0.1–0.5 day)
Sand
blasting
(0.1–0.25 day)
Lathe
carve
(0.1–0.25 day)
Clean
(0.1–0.25 day)
Quality
check
(immediate)
Stock as
inventory
(immediate)
Design Basic crafting techniques Surface processing Finishing
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i. Processing of gold and K-gold jewellery
The major production processes of gold and K-gold jewellery are largely similar, with
slight differences in production process depending on the jewellery type. The processing of
gold and K-gold jewellery mainly includes four basic procedures ：cast crafting (澆 鑄),
hydraulic crafting ( 油壓), threading ( 抽絲), and weaving (機 織). Based on specific design
requirements of the final jewellery, different surface treatments will be applied to the semi-
finished jewellery and will be stored and shipped.
The four major processing types can be manifested in the final jewellery as shown
below:
Cast crafting
Hydraulic
crafting
Threading
Weaving
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ii. Production of diamond inlaying jewellery
Our diamond inlaying products are primarily gold bracelets decorated with diamonds.
After crafting the gold jewellery with the aforementioned process, we will proceed with
inlaying diamond on top of the gold bracelets. The diamond inlaying process is set out in the
flowchart below:
Cast
crafting Molding Typeprint Stone
inlaying
TrimmingPolishingCleaningInspection
(d) Digitalized production of gold jewellery
We have incorporated high-precision, automated, and digitalized machinery into the
production process of gold jewellery, forming an automated and digitalized production chain from
design to processing and sales of gold jewellery. Our effort in incorporating traditional crafting
techniques into digitalized machin ery not only preserves the intangible cultural heritage production
process of gold and silver fine crafting but also integrates these techniques into an industrialized
and high-precision production mode.
We research on and develop machinery, revamp our imported equipment and adopt digitalized
production of gold jewellery to ensure:
1. Efficiency and Precision: Our advanced production systems adopts a high level of
digitalization and automation, includin g computer-aided design (CAD) and computer-
aided manufacturing (CAM), enable precise and accurate jewellery designs. These
technologies eliminate the need for manual d rafting and handcrafted models, reducing the
likelihood of errors and enhancing the overall efficiency of the production process. It
also enables us to track, monitor, control, and optimize the end-to-end production
processes on a real-time basis, from planning and scheduling to procurement and
warehousing, and from production to finished goods transporting. Our automated
warehousing enables us to enhance operational efficiency.
2. Faster time-to-market: our mold creation know-how allows for faster prototyping and
production cycles. Designs can be created, modified, and tested digitally, reducing the
time required for traditional manual processes. This enables us to bring new jewellery
designs to market more quickly, staying ah ead of trends and meeting consumer demands
in a timely manner.
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3. Customization and personalization: With our advanced digital tools, it becomes easier to
offer customization and personalized jewell ery options to consumers. Design software
allows for the creation of unique designs tailored to individual preferences, enabling a
more personalized purchasing experience. This capability enhances consumer satisfaction
and increases our competitive advantage.
4. Cost savings: Computer simulations can be used to op timize material usage and reduce
waste. Additionally, automation and robotic s can be incorporated into the production
line, streamlining operations a nd reducing labor costs. Overall, digitalized production can
improve our cost efficiency and profitability.
5. Scalability and flexibility: Our production systems are inherently scalable and flexible.
They allow for easy replication of designs an d scaling up production volumes as needed.
Digital files of jewellery designs and crafting techniques can be stored and retrieved
easily, eliminating the need for physical inventory and reducing storage costs. It also
eliminates human error and flaws in crafting the desired design patterns. This scalability
and flexibility enable us to efficiently manage production volume fluctuations.
Our ultimate goal in adopting digitalized manu facturing is to accommodate the rising trend of
large-scale commercial customization of gold jewe llery, including increased efficiency, faster time-
to-market, customization capabilities, cost optimization and scalability. As PRC ’s consumption
trend shifts towards personalized and diversified consumption needs according to Frost & Sullivan,
we aim to meet this demand by developing processing machinery and molds according to
production needs. Our digitalized flexible produc tion allows us to modify our processing equipment
and processes quickly, adapt to different production models, and cater to different product needs
and design requirements. This agility enables u s to respond quickly to market demand and improve
the competitiveness of our products.
(e) Production Capacity
The following table sets out the optimal produc tion capacity and the actual production volume
of our gold jewellery products in our production f acility during the year/period indicated:
Year ended December 31,
Six months
ended June 30,
2021 2022 2023 2024
Actual production volume of gold
jewellery products (kg) (1) and (2) . . . . . . . 47,190 41,566 43,558 18,242
Optimal production capacity of gold
jewellery products (kg) (2) and (4) . . . . . . . 50,000 50,000 50,000 (5) 25,000
Utilization rate (3) ................... 9 4 . 4 % 8 3 . 1 % 8 7 . 1 % 7 3 . 0 %
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Notes:
(1) Our production scale is flexible depending on factors such as workforce, work hours and equipment. Our
optimal production capacity is calculated based on the optimal hourly production rate of various machines and
the workforce available operating 12 hours a day for 330 working days a year (not including time spent on
production line upgrade or adjustment).
(2) Production volume refers to actua l output for the relevant year/period.
(3) The utilization rate is calculated by dividing the actual production volume of gold jewellery products by the
optimal production capacity of gold jewellery products for the same year/period.
(4) The optimal production capacity are adjusted by the duration of the reporting period (i.e. 50% production
capacity for six months period).
(5) Despite the relocation of our production facilities, our optimal production capacity of gold jewellery remained
the same as we maintained our previous production lines.
The lower utilization rate for the year ended Dece mber 31, 2022, was primarily attributed to a
significant number of our employees diagnosed with COVID-19 in the fourth quarter of 2022,
which in turn were stemmed from measures implemented to control the most recent pandemic. It
was in line with our relatively lower sales volume of gold jewellery products during the same year.
The lower utilization rate for the six months ended June 30, 2024 was mainly attributed to a slower
sales, whereby our sales volume decreased by 10.4% for the six months ended June 30, 2024 when
compared to the same period in 2023. Our sales volume decrease was generally in line with (and
slightly better than) that of the industry, which observed a period-to-period decrease of 26.7%. For
the three months ended September 30, 2024, our utilization rate was 90.8%. The increase in our
utilization rate for the three months ended Septe mber 30, 2024 was primarily due to the increase in
demand for our products during the ‘‘One RMB Exchange ’’promotion.
The following table sets forth the purification capacity and utilization rate of our purification
facilities during the yea rs/period indicated:
Year ended December 31,
Six months
ended June 30,
2021 2022 2023 2024
Actual volume of gold purified (kg) (1) . . . . . 13,702 7,577 6,270 7,246
Optimal purification capacity (kg) . . . . . . . . 30,000 30,000 30,000 15,000
Utilization rate (2) ................... 4 5 . 7 % 2 5 . 3 % 2 0 . 9 % 4 8 . 3 %
Notes:
(1) The actual volume of gold purified decreased from 13,702 kg in 2021 to 7,577 kg in 2022, and then to 6,270
kg in 2023. This decline aligns with the decreasing trend in the weight of gold trade-ins we received during
the Track Record Period. The actual volume of gold purified increased to 7,246 kg and the utilization rate for
our purification facilities increased to 48.3% for the six months ended June 30, 2024 mainly because we
increased the proportion of gold products of 999.99 purity level in our product mix. The gold raw materials
we procured from Shanghai Gold Exchange were of purity level of 999.9 such raw materials, together with
the gold jewellery products of purity level of 999.9 or above we collected from customers and/or end-
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consumers through gold trade-in, ca n be used directly for production without purification when we produce
gold products of 999.9 purity level. Since we adjusted our product mix in 2024 to increase the proportion of
gold products of 999.99 purity level, all raw materials we procured from Shanghai Gold Exchange and used
gold of purity level less than 999.99 were required to be refined for production of such product. Accordingly,
the volume of gold purified for the six months ended June 30, 2024 increased.
(2) The utilization rate is calculated by dividing the actual volume of gold purified by the optimal purification
capacity for the same year/period.
Production Expansion Plan
In order to further elevate our production capabilities, we plan to upgrade our existing
production facilities in Changle County, Weif ang City, Shandong Province, the PRC. We follow
several key steps in upgrading our production fac ilities, namely (i) engineering and construction
preparation, (ii) equipment sourcing, (iii) equipment installation, (iv) staff training, (v) equipment
testing, and (vi) pilot operation.
The table below sets forth the details of our est imated capital expenditure, additional planned
annual production capacity and expected timeline of our intended production expansion plan.
Location of intended expansion Key products
Estimated
capital
expenditure
(RMB ’000)
Proceeds
from the
Global
Offering to
be applied
(RMB ’000)
Expected
timeline of
completing
operation
Economic and Technological Development Zone in
Changle County, Weifang City, Shandong
Province, the PRC
Gold jewellery and K-gold
products and spring clasps
898,650 286,200 February 2026
Production Expansion Descriptions
We intend to upgrade our production facilities with a total estimated investment amount of
approximately RMB639.0 million, which opera tions have already been commenced since March
2019. With the completion of the upgrade, we expect to see an increase in our annual production
capacity of (1) gold jewellery and K-gold products and (2) spring clasps by approximately 30 tons
each. The expected investment payback period for the upgrade of our production facilities is 11.6
years commencing from 2022. Investment payback period refers to the time needed for the net
profits after tax generated from operating the upgraded production facilities to equate the total costs
paid for upgrading the production facilities.
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In order to maximize our production expansion plan and fully utilize our newly constructed
major production workshop, we plan to purchase the manufacturing equipment, as following:
Manufacturing equipment Total cost
Quantity of
equipment to
procure Unit Price Function of the equipment
CNC Gold Product Processing
Machine (CNC 金飾品加工中
心機)(1)
RMB500,000 Two units RMB250,000 Used for engraving and
milling complex patterns
and textures on gold
product
Single-Spindle Automatic Tool-
Change Five-Axis Engraving
Machine (單 主軸自動換刀快速車
花雕銑五軸機)(1)
RMB690,000 Three units RMB230,000 A single-spindle engraving
machine for gold
jewellery, suitable for
processing gold at few
positions
Film Chain Weaving Machine
(菲林鏈織鏈機)
(1)
RMB1,845,000 Three units RMB615,000 For the production and
assembly of blanks,
with arrangement for
laser welding
Sewage Treatment Equipment
(2) RMB10,000,000 One set RMB10,000,000 Used to treat wastewater
generated during the
production of gold
jewellery and K-gold
products
Notes:
(1) We plan to procure two sets of CNC gold product processing machines, three units of single-spindle
automatic tool-change five-axis engraving machines, a nd three units of film chain weaving machines to meet
our gold jewellery production needs. With enhanced production capacity, we aim to: (i) ensure the quality of
our products; (ii) enhance the efficiency of our production processes and labor; (iii) ensure on-time production
and delivery of our products; (iv) accommodate urgent and/or bulk orders received from time to time; and (v)
achieve optimal usage and maintenance of our production machinery and equipment.
(2) We have sewage treatment equipment in our manuf acturing facility in Changle. We plan to procure one
additional set of sewage treatment equipment for our ma jor production facilities to treat wastewater based on
our future expansion needs.
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Reasons for Production Expansion
We develop our production expansion plans based on, among other things: (i) estimated
supply and demand for relevant products; (ii) pre vailing and anticipated prices for relevant
products; (iii) utilization of existing manufacturing facilities and feasibility for expanding existing
facilities; (iv) estimated cost of development; an d (v) availability and cost of capital resources. Our
production expansion plan is primarily based o n our understandings of business plans, product
planning, potential demands for existin g and new products and expected customers ’ needs in the
coming years.
We are confident in the viability of our expansion plan, supported by the below factors.
During the Track Record Period, despite a slight decrease in revenue for the year ended
December 31, 2022, attributable to the impact of the pandemic, our overall revenue demonstrated
an upward trend. Our revenue increased from RMB 16,871.0 million for the year ended December
31, 2021 to RMB20,208.6 million for the year e nded December 31, 2023, indicating a positive
outlook for our expansion plan.
With our substantial investment in upgrading of production facility, we are well-positioned to
meet customer demand and support our rapid busin ess growth. There is no guarantee that any of the
expansion projects will proceed as planned. We remain open to investing in additional expansion
projects as we continue to expand our business and capitalize on market opportunities.
(f) Production machinery and equipment
During the Track Record Period, our production machinery and equipment were mainly
purchased in the PRC or self-developed. The tabl e below sets forth the details of on our major
machinery and equipment as of June 30, 2024:
Type of machinery/
equipment Principal functions Units
Approximate
average age
Approximate
average
remaining
useful lives
(year) (1) (year) (2)
Spring clasps production
e q u i p m e n t ............
manufacture spring clasps 175 10 8.7
Turning and milling
compound CNC processing
c e n t e r s ..............
processing high-end precision
shaped molds and equipment
parts
1 10 6.9
Five-axis CNC processing
c e n t e r s ..............
machining of complex molds and
equipment parts shapes
1 10 6.9
Tablet press machine . . . . . . rolled precious metal sheets for
efficient supply of high quality
sheets for stamped fittings and
spring-buttoned tubes
1 10 8.1
Coordinate machine for
m e t r o l o g y ............
measurement of workpiece
dimensions and data inspection
of machined workpieces
1 10 8.4
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Notes:
(1) The average age of the machinery and equipment is calculated based on the total time since the machineries
or equipments of the same category had been put into use divided by the number of units of the machinery or
equipment.
(2) The remaining useful life of the machinery is calculated based on the estimated useful life deducted the
average age of the machinery.
We adopt the straight line method to recogni ze the depreciation of our machinery and
equipment.
Outsourcing to external manufacturers
We carry out substantially all of the high-purity gold processing and j ewellery design and
production process ourselves. However, we also engage external manufacturers to produce gold
jewellery and diamond products. As confirmed by our Directors, during the Track Record Period,
all the external manufacturers engaged by us were Independent Third Parties.
When outsourcing our production, we provide external manufacturers with major raw materials
such as gold and/or diamonds and pays auxiliary m aterial costs and processing fees to external
manufacturers. We have worked with some of these external manufacturers for around two to five
years. We have not entered into any long-term contract with these external manufacturers and
services are provided on an as required basis. Each invoice for the work to be done will specify,
among other things, a description of the product, weight of the product, cost and the work required
to be done. The fee payable to these external man ufacturers is calculated based on the type and
amount of products processed.
Our stable cooperation with external manufacturer effectively enhances our production
capacity and enriches our product portfolio. Acco rding to our internal policy, we have developed
detailed and comprehensive evaluation criteria in selecting external manufacturers, under which we
will consider external manufacturers ’ industrial capabilities, reputation, technical skills, design and
research capabilities, and quotations when choosing appropriate external manufacturers. We will
review the qualifications of our existing external manufacturers on annual basis.
During the Track Record Period, the cost of sales incurred for products produced by external
manufacturers constituted a de minimis amount of total cost of sales. For the years ended December
31, 2021, 2022 and 2023 and the six months ended June 30, 2024, our outsourcing rates for gold
products by weight were 3.2%, 2.2%, 10.1%, and 7 .2%, respectively. During the same periods, our
outsourcing rates for K-gold products by weight were 7.7%, 7.2%, 0.2%, and 1.5%, respectively.
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SALES AND DISTRIBUTION CHANNELS
As of June 30, 2024, we had established a franchise network covering 2,850 franchise stores,
operated by 1,670 franchisees, seven self-operated direct service centers and 17 provincial-dealers,
as well as 36 self-operated stores and online stores on major e-commerce platforms in our consumer
network. For further information, see ‘‘ — franchisees and provincial-dealers management ’’. The
following diagram illustrates our goods flow in our distribution channels.
Production
Facility(Note)
Self-operated
online stores
Sales to
online
platforms
Provincial-
dealers
Franchisees
Franchise Network E-commerce
Self-operated
Stores
(Note)
(Note)
Self-operated
direct service
centers
Franchisees
Consumers
(Note)
Note: Our Group’s in-house operation.
Revenue by Distribution Channels
The following table sets forth the breakdown of our revenue by distribution channels during
the Track Record Period:
Year ended December 31, Six months ended June 30,
2021 2022 2023 2023 2024
Revenue
Percentage
of revenue Revenue
Percentage
of revenue Revenue
Percentage
of revenue Revenue
Percentage
of revenue Revenue
Percentage
of revenue
RMB ’000 % RMB ’000 % RMB ’000 % RMB ’000 % RMB ’000 %
(Unaudited)
Franchise network . . . . . . . . . . 14,772,630 87.6 14,836,284 94.4 18,923,195 93.7 8,851,440 95.1 8,207,527 82.3
— Franchisees ............ 9,409,225 55.8 9,629,142 61.3 12,273,776 60.8 5,906,356 63.5 5,755,003 57.7
— Provincial-dealers ........ 5,363,405 31.8 5,207,142 33.1 6,649,419 32.9 2,945,084 31.6 2,452,524 24.6
E-commerce sales . . . . . . . . . . 1,608,263 9.5 364,473 2.3 750,705 3.7 172,095 1.8 1,318,687 13.2
— Self-operated online stores ... 79,108 0.5 233,641 1.5 651,431 3.2 118,279 1.3 412,632 4.1
— Sales to platform ........ 1,529,155 9.0 130,832 0.8 99,274 0.5 53,816 0.5 906,055 9.1
Self-operated stores . . . . . . . . . 356,146 2.1 366,488 2.3 412,216 2.0 226,708 2.4 200,108 2.0
Others (Note 1) . . . . . . . . . . . . . 133,961 0.8 156,970 1.0 122,483 0.6 65,970 0.7 253.422 2.5
Total .................. 16,871,000 100.0 15,724,215 100.0 20,208,599 100.0 9,316,213 100.0 9,979,744 100.0
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Note:
(1) Others include sales in relation to subcontractin g production for independent third party and tailor-made
products for specific customers.
From 2021 to 2023, our revenue from franchise network generally increased mainly as a result
of the growth in our direct sales to franchisees through our direct service centers. While for the six
months ended June 30, 2024, revenue from our franchise network generally decreased when
compared to the same period in 2023 as consumer sentiments were affected by the economic
condition and gold price in general.
Our revenue from e-commerce sales fluctuat ed during the Track Record Period. While e-
commerce sales through our self-operated online s tores generally increased during the Track Record
Period, our e-commerce sales to platforms fluctuated in correlation to demand from online
platforms in accordance to such platform ’s promotion events during the same period. In particular,
our revenue from e-commerce sales increased materially in 2021 and for the six months ended June
30, 2024 because of our sales of gold bullion to a leading PRC online discount retailer, Vipshop,
for their promotion events during the respective year/period.
Our revenue from self-operated stores generally increased during the Track Record Period,
while our revenue from others sales channel flu ctuated based on (i) the demand for subcontracted
production from independent third parties, (ii) our tailor-make products for specific customers and
(iii) sales of gold raw materials to an Independent Third-Party.
For further details, please see ‘‘Financial Information — Description of Selected Items in the
Consolidated Statements of Profit or Loss and Other Comprehensive Income — Revenue —
Revenue breakdown by distribution channels ’’.
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Key Operating Metrics
The following tables set forth certain key opera ting metrics as of the dates or for the years/as
of the period indicated:
Year ended/As of December 31,
Six months
ended/ As of
June 30,
2021 2022 2023 2024
Distribution channel
Number of franchisees at the end of year/period . . . . . . . . . . . . . . . . . . . 1,721 1,704 1,687 1,670
Number of franchise stores as of the end of the year/period . . . . . . . . . . . 2,680 2,743 2,817 2,850
Number of self-operated stores as of the end of the year/period . . . . . . . . . 31 32 35 36
Number of direct service center as of the end of the year/period . . . . . . . . 7 7 7 7
Number of provincial-dealers as of the end of the year/period . . . . . . . . . . 17 17 17 17
Number of e-commerce platforms as of the end of the year/period . . . . . . . 10 13 12 12
Procurement of gold as raw material for production
Total material costs (RMB ’000) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,182,592 14,817,208 18,916,211 9,254,701
Amount of gold obtained fro m the Shanghai Gold Exchange (kg)
. Direct procurement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,027.1 23,480.1 30,325.5 13,357.8
. Gold loans obtained from commercial banks . . . . . . . . . . . . . . 1,795.0 1,390.0 1,589.0 730.0
Gold trade-in amount (kg) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24,766.4 17,158.4 16,987.7 5,969.5
Total sources of gold (kg) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49,588.5 42,028.5 48,902.2 20,057.3
Details for gold trade-in arrangement
Number of franchisees conduc ted gold trade-in with us during the year/period 753 727 692 729
Consideration settled by gold trade-in during the year/period (RMB ’000)
. Consumers from our self-operated stores . . . . . . . . . . . . . . . . 111,028.5 96,690.5 114,025.5 58,937.9
. Franchise stores . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,005,506.0 3,870,742.1 4,549,877.9 2,039,239.9
. Provincial-dealers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,072,306.8 1,926,673.4 2,142,820.2 661,843.5
Total consideration settled by gol d trade-in during the year/period (RMB ’000) 8,188,841.3 5,894,106.0 6,806,723.6 2,760,021.3
Our production capacity
Actual production volume of gol d jewellery products during the
year/period (kg)
(Note 4) ................................. 4 7 , 1 9 0 4 1 , 5 6 6 4 3 , 5 5 8 1 8 , 2 4 2
Optimal production capacity of gold jewellery products during the
year/period (kg) (Note 5) ................................. 5 0 , 0 0 0 5 0 , 0 0 0 5 0 , 0 0 0 2 5 , 0 0 0
Utilization rate of our production capacity during the year/period (%) (Note 1) 94.4 83.1 87.1 73.0
Our purification capacity
Actual volume of gold purified (kg)
(Note 2) . . . . . . . . . . . . . . . . . . . . . . 13,702 7,577 6,270 7,246
Optimal purification capacity (kg) ............................ 3 0 , 0 0 0 3 0 , 0 0 0 3 0 , 0 0 0 1 5 , 0 0 0
Utilization rate of our purification capacity during the year/period (%) (Note 3) . 45.7% 25.3% 20.9% 48.3%
Notes:
1. The utilization rate of production capacity is calculated by dividing the actual production volume of gold
jewellery products by the optimal production capacity of gold jewellery products for the same period. The
lower utilization rate for the six months ended June 30, 2024 primarily resulted from slower sales as our sales
volume decreased by approximately 10.4% compar ed to the six months ended June 30, 2023. Our sales
volume decrease was generally in line with (and sligh tly better than) that of the industry, which observed a
period-to-period decrease of 26.7%. For the three months ended September 30, 2024, our utilization rate was
90.8%. the increase in our utilization rate for the three months ended September 30, 2024 was primarily due
to the increase in demand for our products during the ‘‘One RMB Exchange’’ promotion.
2. The actual volume of gold purified decreased from 13,702 kg in 2021 to 7,577 kg in 2022, and then to 6,270
kg in 2023. This decline aligns with the decreasing trend in the weight of gold trade-ins we received during
the Track Record Period. The actual volume of gold purified increased to 7,246 kg and the utilization rate for
our purification facilities increased to 48.3% for the six months ended June 30, 2024 mainly because we
increased the proportion of gold products of 999.99 purity level in our product mix. The gold raw materials
we procured from Shanghai Gold Exchange were of purity level of 999.9 such raw materials, together with
the gold jewellery products of purity level of 999.9 or above we collected from customers and/or end-
consumers through gold trade-in, ca n be used directly for production without purification when we produce
gold products of 999.9 purity level. Since we adjusted our product mix in 2024 to increase the proportion of
gold products of 999.99 purity level, all raw materials we procured from Shanghai Gold Exchange and used
gold of purity level less than 999.99 were required to be refined for production of such product. Accordingly,
the volume of gold purified for the six months ended June 30, 2024 increased.
3. The utilization rate of purification capacity is calculated by dividing the actual volume of gold purified by the
optimal purification capacity for the same year/period.
4. Production volume refers to actual output for the relevant year/period.
5. Our optimal production capacity is calculated based on th e optimal hourly production rate of various machines
and the workforce available operating 12 hours a day for 330 working days a year (not including time spent
on production line upgrade or adjustment).
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Our Franchise Network
Our franchise network comprises two channels, namely: (i) through our self-operated direct
service centers and then through franchisees and (ii) through provincial-dealers and then through
franchisees. Given consumer mobility, there are instances where consumers make overlapping
purchases at our franchisees and self-operated store s as they travel to different regions/markets. In
order to mitigate the competition between franchisees and our self-operated stores, when
considering an application for new franchisee and/o r establishing a self-operated store, we analyze
the market demand of the particular region/market and take into consideration of the density of
existing franchise stores and/or self-operated s tores in the relevant area/region. According to the
terms of our standard franchise agreement, our prior approval must be obtained before any
franchisee set-up additional franchise stores and/or counters to sell our products. Such measured
expansion plan also minimizes the potential competition between franchisees and/or between
franchisees and self-operated stores in that region/ market. In addition, we issue pricing guidelines
for our products to franchisees to avoid potential price competition between franchisees and our
self-operated stores. Furthermore, according to the terms in our standard franchise agreement, if it
comes to our knowledge that a franchisee engaged in unauthorized cross-region sales, we will be
entitled to terminate the franchisee agreement with the relevant franchisee, which helps ensure that
we can exert sufficient supervision over competition among our franchisees. As advised by Frost &
Sullivan, the two channels franchise network structure adopted by us was in line with market norm.
Self-operated direct service centers and franchisees
. The self-operated direct service centers are operated by us.
. The self-operated direct service centers recei ve products from our production facilities,
showcase our products and allow franchisees to purchase such products from them.
. Our self-operated direct service centers only sell to franchisees and do not sell directly to
consumers.
Provincial-dealers and franchisees
. Different from our self-operated direct servic e centers, our provin cial-dealers operate
their own centers and are independent from our operations.
. Similar to our self-operated direct service centers, they showcase our products and allow
franchisees to purchase such products from them.
. Except for provincial-dealers who also own franchise stores (in which case they could be
selling directly to consumers), our provincial-dealers only sell to franchisees and do not
sell directly to consumers.
Apart from holding exhibition event and selling to franchisees, provincial-dealers serve a
business administrative purpose for assisting us on franchise store management. Apart from our
franchise network, we also offer our products through self-operated stores and online stores on e-
commerce platforms.
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Industry Norm/Market Practice
According to Frost & Sullivan:
. It is common for gold jewellery companies to adopt a franchise network in the industry,
whereby a franchise is a type of license that grants franchisees access to a franchisor ’s
proprietary business knowledge, processes, and trademarks to sell products or services
under the franchisor’ s business name.
. The reasons for using a franchise model are that it can help the franchisor save costs,
adapt to local market conditions, improve brand awareness, and expand rapidly while
ensuring the consistency of operations across various stores.
We focus on sales through franchise network even though the gross profit margin for selling
to the franchise network is substantially lower th an that of self-operated stores, as we have taken
into account the following factors:
(i) We efficiently expanded our network through franchisees, who bore the initial costs for
setting up stores, including obtaining premise s, staff hiring, store decoration, purchasing
gold jewellery, and managing franchise stor es. In contrast, in the case of setting up our
self-operated stores, the aforementioned initial costs for setting up a store were borne by
us with our own capital. The franchise model provides an asset-light and cost-effective
means of expanding our store network and geographical coverage;
(ii) Our local franchise stores have a good understanding of local consumer preferences.
Based on such market knowledge, they can order products based on the local consumer
taste and implement marketing strategies that cater to their market, which in turn, we
believe, enhance our consumers ’ shopping experience. We believe that our franchise
network helps us capture the growth potenti al of our targeted markets and deepen our
market penetration; and
(iii) Our business strategy and market positioning have been focused on being an OBM in the
PRC since our inception. We are committed to n urturing and strengthening an integrated
operation that encompasses the key stages of the gold jewellery industry, including R&D,
production and sales network, rather than solely focusing on operating our own retail
stores network.
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Well-established Market Position in Third and Lower Tier Cities in the PRC
We have a well-established market position in third and lower tier cities in the PRC, which are
markets with high growth potential according to Frost & Sullivan. Our sales network positions us
well to deepen our market penetration in these untapped markets. We have strategically focused on
markets in third and lower-tier cities in China . Meanwhile, we engaged our franchisees opening
franchise stores in provincial capitals with the intention to enhance our brand ’s recognition within
the province, which in turn supports development in third and lower-tier cities. As these provincial
capitals are mostly second-tier c ities, we also generate a significant portion of our revenue from
such tiered cities. The following table sets forth the breakdown of our revenue derived from (i)
franchise network from provincial-dealers and franc hisees; and (ii) self-operated stores by tiers of
cities during the Track Record Period:
Franchise network
Year ended December 31, Six months ended June 30,
2021 2022 2023 2023 2024
Revenue
Percentage
of revenue Revenue
Percentage
of revenue Revenue
Percentage
of revenue Revenue
Percentage
of revenue Revenue
Percentage
of revenue
RMB ’000 % RMB ’000 % RMB ’000 % RMB ’000 % RMB ’000 %
(Unaudited)
Revenue from sales to provincial-dealers . 5,363,405 31.8 5,207,142 33.1 6,649,419 32.9 2,945,084 31.6 2,452,524 24.6
Revenue from sales to franchisees . . . . . 9,409,225 55.8 9,629,142 61.3 12,273,776 60.8 5,906,356 63.5 5,755,003 57.7
— Tier 1 cities . . . . . . . . . . . . . . . 75,920 0.5 77,478 0.6 118,722 0.6 48,161 0.6 53,336 0.5
— Tier 2 cities . . . . . . . . . . . . . . . 3,088,026 18.3 3,055,976 19.4 3,887,350 19.2 1,876,688 20.2 1,988,767 20.0
— Tier 3 cities . . . . . . . . . . . . . . . 3,747,082 22.2 3,765,410 23.9 4,775,933 23.6 2,340,790 25.1 2,225,213 22.3
— Tier 4 and lower cities . . . . . . . . 2,498,197 14.8 2,730,278 17.4 3,491,771 17.4 1,640,717 17.6 1,487,687 14.9
Total: . . . . . . . . . . . . . . . . . . . . . . . 14,772,630 87.6 14,836,284 94.4 18,923,195 93.7 8,851,440 95.1 8,207,527 82.3
Self-operated stores
Year ended December 31, Six months ended June 30,
2021 2022 2023 2023 2024
Revenue
Percentage
of revenue Revenue
Percentage
of revenue Revenue
Percentage
of revenue Revenue
Percentage
of revenue Revenue
Percentage
of revenue
RMB ’000 (%) RMB ’000 (%) RMB ’000 (%) RMB ’000 (%) RMB ’000 (%)
(Unaudited)
T i e r1c i t i e s................... —— 189 — 11,493 0.1 5,456 0.1 8,028 0.1
Tier 2 cities . . . . . . . . . . . . . . . . . . . 303,248 1.7 293,211 1.8 314,759 1.5 172,227 1.8 146,917 1.4
Tier 3 cities . . . . . . . . . . . . . . . . . . . 42,976 0.3 58,712 0.4 70,659 0.3 40,382 0.4 40,223 0.4
Tier 4 and lower cities . . . . . . . . . . . . 9,922 0.1 14,376 0.1 15,305 0.1 8,643 0.1 4,940 0.1
Total ....................... 356,146 2.1 366,488 2.3 412,216 2.0 226,708 2.4 200,108 2.0
Note: According to Frost & Sullivan:
(1) the first-tier cities refer to Shanghai, Beijing, Guangzhou and Shenzhen;
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(2) the second-tier cities refer to Chengdu, Chongqing, Hangzhou, Wuhan, Suzhou, Xi ’an, Nanjing,
Changsha, Tianjin, Zhengzhou, Dongguan, Qingdao, Kunming, Ningbo, Hefei, Foshan, Shenyang,
Wuxi, Jinan, Xiamen, Fuzhou, Wenzhou, Harbin, Shijiazhuang, Dalian, Nanning, Quanzhou, Jinhua,
Guiyang, Changzhou, Changchun, Nanchang, Nantong, Jiaxing, Xuzhou, Huizhou, Taiyuan, Taizhou,
Shaoxing, Baoding, Zhongshan, Weifang, Linyi, Zhuhai and Yantai;
(3) the third-tier cities refer to Lanzhou, Haikou, Huzhou, Yangzhou, Luoyang, Shantou, Yancheng,
Ganzhou, Tangshan, Urumqi, Jin ing, Zhenjiang, Langfang, Xia nyang, Taizhou, Wuhu, Handan,
Jieyang, Nanyang, Hohhot, Fuyang, Jiangmen, Yinchuan, Zunyi, Huai ’an, Zhangzhou, Guilin, Zibo,
Xinxiang, Lianyungang, Cangzhou, Mianyang, Hengyang, Shangqiu, Heze, Xinyang, Xiangyang,
Chuzhou, Shangrao, Jiujiang, Yichang, Putian, Zhanjiang, Liuzhou, Anqing, Suqian, Zhaoqin, Zhoukou,
Xingtai, Jingzhou, Sanya, Yueyang, Bengbu, Zhumadian, Tai ’an, Chaozhou, Zhuzhou, Weihai, Liu ’an,
Changde, Anyang, Suzhou, Huanggang, Dezhou, Ningde, Liaocheng, Yichun, Weinan, Qingyuan and
Nanchong; and
(4) the fourth and lower tier refer to the rest of the other cities in the PRC.
We believe having a strong and reputable brand a ttracts franchisees to join our sales network,
which in turn, strengthens our ability to build a solid and loyal customer base. The pictures below
illustrate our exhibition halls where franchisees shop and purchase from us:
The pictures below illustrate our self-operated stores:
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Management of franchisees
We have established stable and cooperative relationships with our franchisees. In order to
strengthen the management of franchisees and p rovide high-quality services to franchisees
nationwide, we set up self-ope rated direct service centers ( 直營區服務中心), which are responsible
for distribution of our products to franchisees in their respective regions. Further, in regions where
it is not commercially efficient to establish se lf-operated direct service centers, we engage
provincial-dealers with strong local distribution capabilities to enable us to penetrate these local
markets in order to save time and set-up costs for establishing self-operated direct service centers.
We engage only one provincial-dealer in a given province in the PRC. As of June 30, 2024, we had
seven self-operated direct service centers that were directly managed and operated by us, and we
have appointed 17 provincial-dealers. In our franchisees management structure during the Track
Record Period, direct services centers and provincia l-dealers carried similar operational functions,
with the main difference being that self-operated direct service centers were part of our in-house
operation and provincial-dealers were external parties. As a result, we concurrently sold to
provincial-dealers (who resell the products to fra nchisees) and directly to franchisees during the
Track Record Period.
We appoint provincial-dealers mainly because we believe we can utilize provincial-dealers ’
business network in the jeweller y industry to expand our franchisees ’ network, as well as for cost
saving such as exhibition hall s maintenance and marketing expenses in each covered province.
Based on our Directors ’ knowledge, provincial-dealers usual ly have strong connections with local
jewellery stores. By appointing provincial-dealer s, we can facilitate the distribution of our products
to franchisees within the regions and this practice is effective in terms of building a distribution
network. Our Directors believe that some franchisees do not directly transact with the Group but
transact through the provincial-dealers mainly becau se of logistical convenie nce. Provincial-dealers
perform similar functions as our self-operated direct service centers, which include to host
exhibition halls for franchisees to make purchase. As there is no price difference for franchisees to
purchase at exhibition halls hosted by our self-ope rated direct service centers or exhibition halls
hosted by provincial-dealers, franchisees us ually attend the exhibition halls which are more
convenient for them logistically . Given the nature of gold jewellery, many franchisees opt for self-
pickup of the purchased goods at the exhibition halls.
All sales between our Group and provincial-dealers, as well as sales between our self-operated
direct service centers and our franchisees, are buyout sales. All franchisees are required to sign
franchise agreements with us for each franchise store, establishing a seller and buyer relationship
rather than a principal and agent relationship. Dur ing the Track Record Period, provincial-dealers
were our major customers in terms of their respective sales amount, but revenue we derived from
sales to franchisees through our self-operated dir ect service centers in aggregate outnumbered that
of revenue derived from provincial-dealers in aggregate.
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We are of the view that relationship between the Group and the provincial-dealers is seller and
buyer relationship and are buyout sales (not consignment sales) because: (i) we do not have control
over the gold products once they are transferred to provincial-dealers, whereby the provincial-
dealers have control over the exhibition and sales of such products, and we have no right to reclaim
the gold products, and (ii) risks associated with holding and selling the relevant gold products are
shouldered by our provincial-dealers, whereby the inventory risk and payment collection risks
rests with our provincial-dealers. Furthermore, according to Hong Kong Financial Reporting
Standards 15, the sales between our Group and provincial-dealers is recognized as revenue from
direct sales instead of consignment s ales based on the following reasons:
i. For provincial-dealers, we dispatch the gold products to be showcased at the provincial-
dealers ’ exhibition halls. We transfer the control of the gold products to provincial-
dealers which transfer to the franchisee by the provincial-dealers at or near the same
time. The provincial-dealers act as the pri ncipal in the arrangement based on the below
reasons:
a. The provincial-dealers are primarily resp onsible for fulfilling the promise to provide
the specified gold products.
. The provincial-dealers physically possessed the gold products during the
period of the exhibition and were respons ible for display and sales of the gold
products.
. The provincial-dealers have the right to veto the timing of exhibitions.
. In case of tight supply of certain gold products, the provincial-dealers can
decide how to allocate the gold products to fulfil orders from the franchisees.
. In case of any quality issues of the gold products, the provincial-dealers are
responsible to follow up with the franchisees.
b. The provincial-dealer has inventory risk before the specified gold product has been
transferred to a franchisee.
The provincial-dealers are responsible for the security arrangement during the
exhibition. If the gold products went missing or were lost during the exhibition, the
provincial-dealers took full responsibility.
c. Under the pricing model of ‘‘gold price + crafting fee for the relevant gold
product’’, the provincial-dealers do not have discretion in establishing the price for
the gold products, such policy was mai nly to maintain price stability and
consistency among various franchisees and markets.
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ii. During the process of exhibition, we cannot arbitrarily withhold, take back the gold
products or transfer them to any other third pa rties without the consent from provincial-
dealers. In addition, provincial-dealers have the right to sell the gold products or not
during the exhibition, or to buy any unsold gold products as its own inventories by the
end of exhibition;
iii. Provincial dealers have an unconditional obligation to pay us for the gold products
purchased regardless of whether they could be paid by franchisees or not. Provincial
dealers are solely responsible to collect receivables from franchisees they sell product to.
The Reporting Accountants issued an unqualified opinion on the Historical Financial
Information of the Group for the Track Record Period as a whole. The Sole Sponsor agrees with
the classification of the relationship between the Group and the provincial-dealers as a seller and
buyer relationship, and that sales made to the provincial-dealers are not consignment sales.
Save as disclosed in the prospectus, during the Track Record Period and up to the Latest
Practicable Date: (i) we were not aware any franc hisee who has committed a significant breach of
franchise agreements or has violated our retail policies; and (ii) to the best of our knowledge, there
had been no significant disputes or litigation bet ween us and either past or present franchisees.
Moreover, we had not been informed of any mater ial incidents, claims, litigation, or legal
proceedings, either actual or threatened, related to non-compliance in any of the franchise stores
that we supervise during the Track Record Pe riod and up to the Latest Practicable Date.
Control on franchise network
Although we do not own or have direct managerial control over our provincial-dealers or
franchisees, we monitor and indirectly manage their performance through adopting and
implementing policies on their operations, prici ng guidelines and providing them with training
sessions in relation to our product. To monitor the performance of our franchise network, our
internal management policy includes requiring our sa les representatives to conduct ad-hoc site-visits
and monitoring the sales performance, pricing and quality of marketing activities. We also initiate
meetings with provincial-dealers and franchisees who are underperforming to help them recover.
(i) Use of Company name
We exert full control over the franchisees regarding the use of our Company name. Our
franchisees display the name of ‘‘Mokingran ’’and our logo at their franchise stores or, in a very
few cases where our franchisees operate their o wn branded jewellery collection stores, at the
counters where our products are displayed. Aside from bearing the name of ‘‘Mokingran ’’and the
brand ‘‘
’’, we require franchisees and provincial-d ealers not to use our legal business name
or trademarks in their operations, including in advertisements, or sign any agreements under our
legal business name, unless authorized by us in writing. Our staff conduct on-site checks at our
franchise stores to ensure there are no unauthorized displays of our name, sign or use of it on their
marketing materials. We would conduct investig ations and may issue warnings or terminate the
business relationship if such violation was confir med. Our franchisees are responsible for losses
from unauthorized uses of our Company name.
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During the Track Record Period, we did not ha ve any material disputes with our franchisees
relating to the improper use of our Company names during the Track Record Period in the course
of our normal commercial dealings, as confirmed by our Directors. As of the Latest Practicable
Date, a small number of franchisees and provincial-dealers, who were Independent Third Parties,
incorporated our trade name or similar terms into their legal business names. In the event that the
aforementioned franchisees and provincial-deal ers engage in transactions or conduct that is not in
compliance with relevant laws or regulations and that could adversely impact us reputationally,
financially or otherwise. We could be harmed by s uch actions as we may be mistakenly identified
as the party that engaged in such misconduct give n such franchisees and provincial-dealers
incorporated our trade name or similar terms into their legal business names. However, as of the
Latest Practicable Date, we were not aware of any actual or potential abuses or improper use of our
legal business name by our franchisees and provincial dealers which could adversely affect our
reputation, business operation or financial condition. We shall continue to monitor the activities of
the aforementioned entities thr ough onsite checks and conduct investigations into any misconducts
that may adversely impact our reputation, finan ces, or in other ways to mitigate potential adverse
effects of such activities on us. Should our franchi sees and provincial-dealers engage in abuses or
improper use of our legal business name, we will file claims for indemnity against them.
(ii) Exclusivity
We do not enter into exclusivity agreements with provincial-dealers and franchisees to limit
their own business. Our franchise stores can sell other brands ’ gold products on the condition that
those third-party brand products are not displayed under our brand ’s name and/or logo. We do not
allow franchisees to sell products of other brands under our brand. In case where our franchisees
wishes to sell products of other brands under our brand, the relevant products will have to pass the
inspection of us or a third-party testing agency designated by us. For details, see ‘‘Business —
Admittance of third-party products ’’.
(iii) Selling price
We have control on the products and the selling price we offer in our self-operated direct
service centers and to provincial-dealers. At any time, the price we sell to our franchisees from our
self-operated direct service centers and the sales price offered by provincial-dealers to franchisees
are the same.
In general, we have policies in place and issue guidelines to regulate the retail price of our
products. For example, we have in place minimum retail prices and suggested retail price guidelines
which all franchisees are required to follow. Our franchisees may determine the retail prices, but
the prices cannot be lower than our predetermined minimum retail prices. We reserve the right to
review and approve the retail price of our franchisees and will exercise such right as appropriate
and necessary.
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(iv) Store image
We also require our franchisees to maintain a unified image of our brand by providing
franchisees guidance on size and layout, designs an d decorations, such as colour scheme and design
specifications, for the franchise stores.
(v) Minimum sales target
Minimum sales target for provincial-dealers
Minimum sales targets for our provincial-dealers are generally set through commercial
negotiations. We have the discretion to establish a minimum sales target, and typically, we
take into consideration factors such as the provincial-dealer ’s historical performance, number
of franchise stores in the respective regions and the market environment.
The table below sets out the historical range of the minimum sales amount during the
Track Record Period.
Year ended December 31,
2021 2022 2023
Range of minimum sales target Gold:
150 kg to
1,500 kg
Diamond:
RMB0.5 million to
RMB23.5 million
Gold:
173 kg to
2,130 kg
Diamond:
RMB0.1 million to
RMB20.0 million
Gold:
129 kg to
2,300 kg
Diamond:
RMB0.2 million to
RMB10.0 million
Number of provincial-dealers
who did not achieve the
minimum sales target . . . . .
Gold:
7
Diamond:
17
Gold:
16
Diamond:
16
Gold:
12
Diamond:
17
Aggregate sales target . . . . . . . Gold:
14,486 kg
Diamond:
RMB141.3 million
Gold:
16,732 kg
Diamond:
RMB120.6 million
Gold:
17,185 kg
Diamond:
RMB75.9 million
Overall sales target
achievement . . . . . . . . . . . .
Gold:
106%
Diamond:
56%
Gold:
84%
Diamond:
42%
Gold:
89%
Diamond:
45%
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Year ended December 31,
2021 2022 2023
Aggregate amount of sales
target shortfall of principal-
dealers who did not achieve
the minimum sales target . . .
Gold:
678 kg
Diamond:
RMB62.4 million
Gold:
2,780 kg
Diamond:
RMB70.9 million
Gold:
2,417 kg
Diamond:
RMB41.6 million
Minimum sales targ et for franchisees
Minimum sales targets for our franchisees are normally set through commercial
negotiations. Factors considered include (i) hi storical sales and (ii) economic environment.
The table below sets out the historical range of the minimum sales amount during the
Track Record Period. Sales of high purity gold with 99.999% gold content, K gold and solid
gold are converted to 99.99% gold at respective pre-determined formula for calculating sales
target. The pre-determined formula is formu lated primarily based on the gold content of
respective products.
Year ended December 31,
2021 2022 2023
Range of minimum sales target Gold:
0 kg to 623 kg (1)
Diamond:
RMB0 to
RMB5.1 million
Gold:
0k gt o6 7 8k g (1)
Diamond:
RMB0 to
RMB5.6 million
Gold:
0k gt o8 2 3k g
(1)
Diamond:
RMB0 to
RMB3.7 million
Number of franchisees who did
not achieve the minimum
s a l e st a r g e t ............
Gold:
763
Diamond:
1,318
Gold:
1,217
Diamond:
1,327
Gold:
1,000
Diamond:
1,040
Aggregate sales target . . . . . . . Gold:
34,157 kg
Diamond:
RMB342.8 million
Gold:
39,187 kg
Diamond:
RMB301.6 million
Gold:
41,894 kg
Diamond:
RMB190.3 million
Overall sales target
achievement . . . . . . . . . . . .
Gold:
102%
Diamond:
53%
Gold:
87%
Diamond:
41%
Gold:
88%
Diamond:
42%
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Year ended December 31,
2021 2022 2023
Aggregate amount of sales
target shortfall of franchisees
who did not achieve the
minimum sales target . . . . .
Gold:
4,499 kg
Diamond:
RMB192.8 million
Gold:
7,521 kg
Diamond:
RMB167.1 million
Gold:
7,995 kg
Diamond:
RMB117.3 million
Note:
(1) The minimum sales target of some of our franchi sees exceed the minimum sales of target of some of
our provincial-dealers because of the business scale of such franchisees, which in turn, relates to the
such franchisee ’s market reach and its customer base. For instance, as of December 31, 2023, our
largest franchisee was operating a total of 20 stores. Due to the larger scale of operations for such
franchisee, its minimum sales target exceeds that of certain provincial-dealer.
Consequences of failure to meet minimum sales targets
In the event that a provincial-dealer or franc hisee fails to meet its minimum sales target,
we have the right to require the provincial-dealer or franchisee to pay us market promotion
fees, calculated based on the amount of shortfall, to recover our subsidies and marketing and
promotion expenses.
In light of the general economic environment and the pandemic, we waived all fees on
provincial-dealers and franchisees for their failure to meet minimum sales targets in 2021. In
2022, considering the performance of provincial-dealers and franchisees and the marketing
expenses we incurred, we decided to reactivate our controls over our provincial-dealers and
franchisees in terms of sales targets and promote their proactiveness in sales of our products
and thus, we exercised our right to charge them for such failure. In 2022, the fees charged on
each provincial-dealer and franchisee that failed to meet the targets ranged from RMB91,200
to RMB2.3 million and RMB800 to RMB1.7 million, respectively. The total fees (tax-
excluded) we charged amounted to RMB60.6 mi llion, which were recognized as our revenue
and represent 0.4% of our total revenue in 2022. In 2023, the fees charged on each provincial-
dealer and franchisee that failed to meet t he targets ranged from RMB35,000 to RMB2.9
million and RMB1,000 to RMB2.4 million, resp ectively. The total fees we charged amounted
to RMB90.9 million, which were recognized as our revenue and represent 0.4% of our total
revenue in 2023.
Measures to avoid channel stuffing and cannibalization
When appointing new franchisees, we are conscious of the potential negative impacts of
channel stuffing and cannibalization among existing franchis ees. Therefore, we have adopted
measures to mitigate these issues.
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We pay close attention to the inventory levels of our franchisees. In order to prevent channel
stuffing, we have adopted a transaction arrangement that all sales between (i) our Group and
provincial-dealers, and (ii) our self-operated direct service centers and our franchisees, are buyout
sales. For franchisees, we generally do not allow returns of gold products sold to franchisees,
except when they cease to be our franchisees. We also generate sales reports on an as-needed basis
to monitor franchisees’ sales, and regularly visit franchise stores to check the inventory levels. We
have an inspection team responsible for conducting site visits to our franchise stores intermittently
to review various aspects of their overall busines s operations, including but not limited to (i) the
sales performance, (ii) inventory levels, (iii) brand image, customer service and display of products
sold under our brand and (iv) whether there are any non-compliance issue in relation to product
labeling, to ensure there is no non-compliance of the terms and conditions of the franchise
agreement. Our staff responsible for conductin gs i t ev i s i t si sr e q u i r e dt oc o m p l e t eac h e c k l i s t
recording the relevant findings during the site visit, where if there are any non-compliances,
supporting documents such as photos of the stor es are required to be uploaded to our internal
system for record keeping. Our inspection tea m conduct site visits to each franchise stores
intermittently but at an interval of approximately once a year. Apart from site visits performed by
our inspection team, we also perform site visits to all franchise stores which have installed the
CRM system approximately on a quarterly basis, an d check their sales performances and inventory
levels against data being inputted on the CRM sy stem, to ensure, among other things, accuracy of
inventory data on the CRM system and sufficien t supervision over the inventory levels of our
franchise stores. For further details of our inte rnal control mechanism, please also refer to the
section headed ‘‘History, Development and Corporate Structure — Previous A-Share Applications
— The First A-Share Application — CSRC ’s concerns in relation to ‘‘One RMB Exchange ’’ —
Internal Control Measures ’’. In general, we do not allow payment on credit for sales to franchisees
while on a case by case basis, we may permit payment on credit for sales to franchisees when our
existing franchisees open new stores. We typically do not accept product returns, ensuring that
franchisees cannot compel us to accept unsold products. For provincial-dealers, given our business
model, provincial-dealers generally do not hold gold products as their inventory and may only
maintain a insignificant level of products for sales that occur at ad hoc.
The table below sets out the gold inventory levels of provincial-dealers as of December 31,
2021, 2022 and 2023 and as of June 30, 2024.
As of December 31, As of June 30,
2021 2022 2023 2024
(kg) (kg) (kg) (kg)
Gold inventory of provincial-
dealers in aggregate (Note) ..
92 111 55 57
Note: Volume include K-gold products without conversion adjustment.
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As of December 31, 2023 and June 30, 2024, based on the information available on our CRM
system, the amount of inventories held by our franchisees were 24,266.8kg and 25,868.6kg,
respectively. The inventory turnover days of gold products calculated based on the inventory held
by the aforementioned franchisees (per the CRM system) were 211.6 days and 337.1 days for the
year ended December 31, 2023 and for the six mont hs ended June 30, 2024, respectively. The
increase in inventory turnover days of gold products for our franchisees was mainly due to our
franchisees having low inventory due to the pandemic at the beginning of 2023 that lead the
inventory turnover days to be lower for 2023. Moreover, the inventory turnover days of gold
products of 211.6 days for our franchisees (per the CRM system) for 2023 was within the inventory
turnover days range (55 days to 230 days) of our i ndustry peers, which we believe illustrates the
reasonableness of our franchisees’ inventory balance. For the six months ended June 30, 2024,
based on information available on the CRM system, the inventory turnover days of our franchisees
increased to 337.1 days. Such increase was prim arily attributable to the decline in consumption
sentiment for gold products resulting from the increase in gold price. According to Frost &
Sullivan, the consumption volume of gold products in terms of weight for the six months ended
June 30, 2024 decreased by 26.7% when compared to the corresponding period in 2023.
Accordingly, the sales of gold products slowed down in the first half of 2024, leading to an
increase in inventory turnover days of our franchisees.
Our self-operated stores recorded a lower inventory turnover days of 261.0 days when
compared with that of 337.1 days of our franchisees due to a higher proportion of our self-operated
stores commenced ‘‘One RMB Exchange ’’program during the six months ended June 30, 2024. As
of June 30, 2024, out of our 36 self-operated stores, 24 of them were located in Shandong Province
and organized the ‘‘One RMB Exchange ’’promotion event in June 2024. Benefited from such
promotion, the inventory turnover days of our self-operated stores located in Shandong Province
were lower than those located in other provinces. T he inventory turnover days of our self-operated
stores located outside Shandong Province for the six months ended June 30, 2024 was 337.5 days,
which were in line with that of our franchisees ’ inventory turnover days. Since our franchisees
outside Shandong Province generally only organize the ‘‘One RMB Exchange ’’program in July to
September, the impact of our ‘‘One RMB Exchange ’’promotion has yet to be reflected in our
franchisees ’sales performance as of June 30, 2024.
Given we have a higher proportion of self-operated stores located in Shandong Province when
compared with franchise stores, the effect of ‘‘One RMB Exchange ’’on overall inventory turnover
days of our self-operated stores was more signific ant, thereby contributing to a lower inventory
turnover days when compared with that of our franchisees.
Based on the foregoing measures taken by our Group, our Directors are of the view that as a
whole, there was no abnormal accumulation of inve ntories by provincial-dealers and franchisees
during the Track Record Period.
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In practice, we have anti-cannibalization measures to foster healthy competition among
franchisees, provincial-dealers a nd self-operated stores, and across our different sales channels:
. Between our self-operated stores and franchi se stores, we (i) determine the distance
between our franchise stores and self-operated stores based on our market analysis as
well as commercial considerations to minimi ze unhealthy competitio n; and (ii) retain the
discretion to terminate our re lationships with franchise stores engaging in non-compliant
acts or employing unhealthy competition means.
. Between our self-operated direct service centers and provincial-dealers, we (i) only
appoint provincial-dealers in regions where we do not have own self-operated direct
service centers, particularly in areas relying on provincial-dealers ’ networks to reach
consumers, to avoid competition; (ii) assign each provincial-dealer their designated sales
and operating regions; and (iii) reserve the right to expand, re-assign or modify the
operating regions of provincial-dealers when we foresee cannibalization risk.
. Among our franchisees, (i) each franchise store is generally required to purchase
products from designated exhibition halls hos ted by self-operated direct service center or
provincial-dealer; and (ii) we require self-operated direct service centers and provincial-
dealers to offer uniform crafting fees for products sold to franchise stores.
. Among our provincial-dealers, we believe ca nnibalization risks are limited due to the
small number of provincial-dealers, and in a ny event, they are prohibited from marketing
and selling our products outside their designated territory.
To prevent channel stuffing and cannibalization across franchisees, we implement strong
control measures over franchisees within each service area of our self-operated direct service
centers and provincial-dealers. We also dispatch managers to provide joint support in the daily
operations and supervision management of our brand and franchisees as needed.
Each of our self-operated direct service centers and provincial-dealers is designated to cover a
specific geographical region that does not overlap with others. Accordingly, franchisees typically
procure from the self-operated direct service center or provincial-dealer within their region, which
helps prevent overlapping purchases by the franchisees from both self-o perated direct service
centers and provincial-dealers. In addition, we c harge the same price to our self-operated service
centers and provincial-dealers to help alleviate ch annel stuffing and cannibalization among them. In
practice, we require each franchisee to only purchase from its assigned regional self-operated direct
service center or provincial-dealer as the cas e may be. Normally, there is no overlapping of
purchases from both self-operated direct service center and provincial-dealer. However, in limited
circumstances, including cases where a franchise e owns more than one franchise store located in
different regions or when a franchisee makes a sp ecial purchase request (whereby such purchase is
subject to our pre-approval), there may be instances where such franchisee may have overlapping
purchases from both self-operated direct service center and provincial-dealer. For such reasons,
franchisees are not limited to purchasing only from exhibition halls within their region.
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Our Directors believe that the above internal control policies and measures are sufficient to
effectively manage inventory risk and/or detect an y possible channel stuffing and cannibalization.
Exhibition halls and logistics arrangement
Our self-operated direct service centers and provincial-dealers have exhibition halls to
showcase and to sell our products to franchisees w ithin the respective region. Franchisees purchase
at the relevant exhibition halls and are require d to arrange their own logistics for the purchased
goods.
For provincial-dealers, we dispatch the products to be showcased at the provincial-dealers
exhibition halls. When the products are purchased by franchisees at the exhibition halls, the
provincial-dealers will simultaneously make pur chase of the relevant products from us and onwards
sell them to the franchisees. This approach creates a positive development cycle between ourselves
and the provincial-dealers, whereby our provi ncial-dealers can economically benefit from the
onward sales while we gain their expertise in management/development of a stronger network of
franchisees. Moreover, such arrangement also enabl es our provincial-dealers to provide diversified
products for franchisees ’ selection, which is essential for maintaining a strong and loyal franchise
network.
In situations where customers have an urgent need to replenish their inventory, we may
consider lending gold products to creditworthy customers on a case-by-case basis to ensure our
customers have sufficient inventory to sell on to c onsumers. Such situations include the hosting of
exhibition events, new opening of franchise stores and shortage of inventories at franchise stores.
The decision regarding the quantity of gold products to be lent and whether any security pledge or
guarantee is required is determined by our management team on a case-by-case basis.
Such gold lending arrangement involves entering into written agreements to lend gold
products to customers for a specified period. T he major terms and conditions are set out below.
Lending period . . . . . . The lending period is usually less than one month, but in certain
cases, it may exceed one month.
Fees or charges . . . . . For exhibition event, we normally charge lump sum exhibition
service fees. For long-term lending (which exceeds one month), we
normally charge lump sum exhibition service fees based on the
value of the gold being lent, which, when converted according to
the value of the gold being lent, ranges approximately from nil to
0.9% per month normally.
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For short-term lending (which is no more than one month) to
replenish inventories, we normall y charge fees based on the value of
the gold being lent ranging from nil to 1.0% per month normally or
up to 1.5% per month for the renewal of lending period. In case of
short-term lending, especially for new franchisees in need of gold
jewellery for display in their new franchise stores, we have the
discretion to waive the services fees or charges.
Return of the gold
p r o d u c t s.........
At the end of the lending period, customers can purchase the lent
gold products based on the prevailing gold price at settlement date
or return the remaining gold products to us.
Settlement method . . . Those customers who purchase the lent gold products can settle with
cash or use trade-in gold as a mean of non-cash settlement.
Pledge and guarantee . Fixed prop erties and personal guarantee.
If the borrowers intend to extend the lending period, we will negotiate a new period with the
borrowers and charge the service fee. There was no default on gold lending made during the Track
Record Period where borrowers failed to return or to purchase the gold we lent to them and there
has been no material adverse impact on our Company ’s performance due to our gold lending
activities. To the best knowledge, information and believes of our Directors, there were no material
breach of terms of any relevant gold-lending agreements by our provincial-dealers and franchisees
during the Track Record Period which may impose material adverse effect on our business
operation and financial position.
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During the Track Record Period, the respective number, range of the amounts of gold lent and
total amount/weight of gold lent as at the end of each year/period were as follows:
As of December 31,
As of
June 30,
2021 2022 2023 2024
N u m b e r............... F r a n c h i s e e s 4 0 5 4 6 0 5 5 2 5 6 9
Provincial-dealers 17 17 17 17
Range of the gold lent
(RMB ’0 0 0 ) ...........
Franchisees 0.5
16,380.5
2.4
21,334.5
1.3
30,796.7
1.0
19,507.9
Provincial-dealers 0.8
28,378.1
1.0
36,001.5
2.9
56,608.9
5.5
36,406.3
Amount of gold lent as of the
end of each period
(RMB ’0 0 0 ) ...........
Franchisees 65,881.1 118,741.0 183,720.8 165,519.4
Provincial-dealers (Note) 13,269.4 2,109.5 10,969.5 59,579.9
Weight of gold lent as of the
end of each period (kg) . . .
Franchisees 198.7 337.5 438.0 361.8
Provincial-dealers (Note) 39.9 6.0 26.3 131.1
Note: Although our provincial-dealers generally do not hold our gold products as their inventory, we sometimes
lend gold to them in the following scenarios: (i) gold lent t o provincial-dealers that also operated franchisee
stores for operations of their own franchisee stores, an d (ii) gold lent to provincial-dealers, who, in turn,
lent such gold to franchisees in their respective regions.
Per our internal control policy, gold lending is approved by our management on a case-by-case
basis. Assessments are made on factors includi ng the reasons for the gold lending request, the
borrowers ’ credibility, availability of fixed asset pledges and/or guarantees from the borrower, the
amount of gold to be lent per the request, and our b usiness relationship with the borrower. For the
gold products lent, we enter into lending agreements with the borrowers outlining details of the
gold lending arrangement including the type of gold products to be lent, duration of the loan,
service fee, basis of calculating service fee and o ther obligations (if applicable). In addition, we
formulated an internal manual to govern the lending process for longer-term loans with a term
beyond six months. As confirmed by Frost & Sullivan, it is an industry norm for gold jewellery
producers/brands to provide gold lending servi ces to their franchisee customers and provincial-
dealers.
Our gold lending balances are reflected in the right to returned goods assets. As of December
31, 2021 and 2022 and 2023 and June 30, 2024, our right to returned goods assets amounted to
approximately RMB157.9 million, RMB184.4 mill ion, RMB246.0 million and RMB259.9 million,
of which our gold lending balances were RMB79.2 million, RMB120.9 million, RMB194.7 million
and RMB225.1 million, respectively. During the Track Record Period, our gold lending balances
generally increased due to (i) the growth in our business scale and franchise network, which
required us to lend more gold to provincial-dealers and franchisees, and (ii) an increase in gold
prices. In particular, the balance of gold lent to franchisees increased from RMB65.9 million as of
December 31, 2021 to RMB118.7 million as of Dece mber 31, 2022, primarily attributable to the
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growth in number of newly-opened franchise stores which borrowed gold from us towards the end
of 2022, resulting in an increase in number of gold-lending transactions that crossed the year-end
when compared to that of 2021. Our gold lending balances as of June 30, 2024 increased compared
to that of December 31, 2023 mainly due to the gold price increase in the first half of 2024 and an
increase in volume of gold lent in preparation for our annual promotional ‘‘One RMB Exchange ’’
program held between June and September 2024. For details of the accounting treatment of gold
lending arrangement, see ‘‘Financial Information — Prepayments, deposits and other receivables ’’.
Selection of Franchisees
We have strict standards for selecting franchisees. We conduct a thorough systematic
evaluation of potential franchise es, including evaluation on their:
. sales record history;
. financial background and performance;
. commercial resources; and
. long-term operational goals including but not limited to concrete sales targets and
expansion plans.
As of June 30, 2024, we had contracted 1,670 fra nchisees. The table below sets forth the
changes in the number of our franchis ees during the Track Record Period
(Note) :
Year ended December 31,
Six months
ended June 30,
2021 2022 2023 2024
Beginning of the
year/period . . . . . . . . . 1,703 1,721 1,704 1,687
A d d i t i o n s ........... 1 0 6 6 9 8 8 3 1
C e s s a t i o n s........... ( 8 8 ) ( 8 6 ) ( 1 0 5 ) ( 4 8 )
N e ti n c r e a s e ......... 1 8 ( 1 7 ) ( 1 7 ) ( 1 7 )
End of year/period . . . . . 1,721 1,704 1,687 1,670
Note: The number of franchisees includes provincial-deal ers engaged by us during the relevant year/period as
indicated.
The major reasons for the decrease in number of franchisees for the year ended December 31,
2022 and 2023 and the six months ended June 30, 2024 were (i) the relevant franchisees had other
business endeavours and no longer intended to ope rate as our franchisees; and (ii) the relevant
franchisees were unable to follow our franchise management and operational standards and we
terminated the franchise relationship with them accordingly.
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Services and support we provide to franchisees
To ensure that our franchise stores receive co mprehensive operational support, we have
established a system where our support personnel visit franchise stores to provide guidance and
training to store staff. This includes coaching and training on the daily routine work, operational
management standards, store display and managem ent of goods, sales strategies, appearance, and
other relevant areas. Franchisees who require additional support may apply for our support
personnel to visit the relevant franchise stores. With the guidance of our support personnel,
franchisees can improve their management ability and operational efficiency.
To promote franchise network management and for brand development, we hold franchisee
conferences to discuss industry trends, our develo pment plans, and business strategies with all
franchisees. Furthermore, we offer various subsidies to encourage franchisees to open new stores
and expand our market share. These subsidies i nclude decoration subsidies and discounts on
crafting fees for franchisees who meet the specified conditions for a certain period of time. Some of
the key subsidies are listed below:
Major subsidies Description
Store decoration
s u b s i d i e s ..........
Franchisees are required to renovate new and existing stores
according to our requirements. We will provide renovation
subsidies in the form of price discounts based on factors such as
store channel type, business district, business area, and
geographical location.
Advertising subsidies . . . To encourage franchisees to carry out advertising and promotion
activities in their respective regions (including but not limited to
television advertising, packaging advertising, outdoor advertising,
car advertising), as well as to carry out store celebrations,
festivals, exhibitions, and other promotional activities, we
provide advertising fee subsidies at a certain proportion of the
total advertising costs.
Promotion subsidies . . . . For promotional activities carried out by franchisees during new
store opening, store celebrations, holiday promotions, and
exhibitions, we can provide proces sing fee subsidies at a certain
proportion of the total promotional activities.
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Major subsidies Description
Product support during
special events and peak
s e a s o n ............
On franchisees ’ request, we may lend franchisees with display
products and product for sales during store celebrations and other
approved activities. Furthermor e, during the spring festival,
which is traditionally peak sales season, leveraging our strong
production capability, we formul ate sales strategies to provide
our franchisees with a large variety of different products and to
improve store efficiency. After the provision of our products,
franchisees can settle the payment according to our unified
quotation on the expiration date. The policy aims to effectively
support high-quality franchis ees to establish new branches and
enhance the competitiveness of the brand in the regional market.
The following table sets out the total amount and average amount per franchisee of different
types of subsidies during the Track Record Period:
Year ended December 31,
Six months
ended June 30,
2021 2022 2023 2024
Total
amount
Average
amount
per
franchisee
(Note)
Total
amount
Average
amount
per
franchisee
(Note)
Total
amount
Average
amount
per
franchisee
(Note)
Total
amount
Average
amount
per
franchisee
(Note)
RMB ’000 RMB ’000 RMB ’000 RMB ’000 RMB ’000 RMB ’000 RMB ’000 RMB ’000
Store decoration subsidies . 17,522.7 10.2 15,302.8 9.0 23,878.2 14.2 13,812.7 8.2
Advertising subsidies . . . . 19,408.5 11.3 12,378.8 7.3 13,679.6 8.1 5,800.0 3.5
Promotion subsidies . . . . . 5,697.6 3.3 8,171.0 4.8 75,992.0 45.0 11,671.5 7.0
Product support during
special events and peak
season . . . . . . . . . . . . 6,416.4 3.7 5,771.9 3.4 15,992.4 9.5 6,793.0 4.1
Total . . . . . . . . . . . . . . . 49,045.2 28.5 41,624.5 24.5 129,542.2 76.8 38,077.2 22.8
Note: The average amount per franchisee is calculated by d ividing the respective total amount by the number of
franchisee at the end of each year.
For the years ended December 31, 2021, 2022 and 2023 and the six months ended June 30,
2024, our subsidies to franchisees amounted to RMB49.0 million, RMB41.6 million, RMB129.5
million and RMB38.1 million, respectively. The increase in our subsidies to franchisees for the year
ended December 31, 2023 was mainly attributable to the increase in promotion subsidies. We
incurred a significant increase in subsidies for prom otional activities for the year ended December
31, 2023 to support our franchisees as they resumed operation and as the economy began to recover
from the recent pandemic.
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Admittance of third-party products
We maintain a third-party product list which our franchisees are permitted to buy and sell
third-party produced products under our brand name ‘‘ ’’, provided that the products passed
the inspection of us or a third-party testing agency designated by us.
To apply for third-party product admittance, franchisees are required to submit the relevant
products to our self-operated direct service centers and provincial-dealers for registration. Our
quality control department conducts a preliminary inspection of the products to determine whether
they infringe upon any intellectual property rights. The products are then sent to a qualified
national or provincial gold jewellery quality testing center for inspection. Once qualified, we will
issue category labels for the products and the products will be added to our list of approved
products. We then collect brand usage fees from the franchisees and grant them approval to sell the
products under our brand name. During the Track Record Period, our brand usage fees collected
from franchisees amounted to RMB32.1 million, RMB25.8 million, RMB25.7 million and RMB11.3
million for the years ended December 31, 2021, 2022 and 2023 and the six months ended June 30,
2024, respectively.
According to Frost & Sullivan, the aforemention e di sc o m m o ni nt h ej e w e l l e r yi n d u s t r y .I ti sa
useful method for franchisees to broaden the product portfolio available for sale, and possibly
increase the sales of both franchisees and us in the local market and to enlarge our market share.
Other than passing through our stringent qualit y control and testing mechanism as set above
for third-party brand products admittance, ou r franchisees are subject to their contractual
obligations under the franchisees ’ agreement, pursuant to which, they are not allowed, in any
manner, to sell other products under our brand, or to adopt our trademark and logo in any
packaging material, quality assurance slip, pictur es or videos when selling products of other brands.
We also have a designated market inspection team to perform routine inspections in franchisees
store to scrutinize whether there is any alleged infringing products sold in the stores and whether
the content and use of product labels fulfil our internal regulations. We will strictly enforce our
legal rights and consider seeking necessary actions to safeguard our reputation in situation where
there is evidence that the franchisees may have breached our relevant policies when conducting
their business.
Former Employee-Franchisees
During the Track Record Period, we had franchis ees stores or engage provincial-dealers that
were established by our former (or then former) employees. As of December 31, 2021, 2022 and
2023 and June 30, 2024, we had two, four, four and four former employees that left our Group
since 2018 (or their respective successors), respectively ( ‘‘Former Employee-Franchisees ’’), and
these Former Employee-Franchisees operated 13, 16, 13 and 12 franchise stores or provincial-
dealers during the respective year/period.
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Some of our former employees developed interes ts in engaging in retailing business of gold
jewellery when working with us and some of them has resigned from our Company and enter into
franchisee agreements or arrangements with us for their personal business pursuits. Our Directors
believe our Former Employees-Franchisees woul d be able to gain better understanding of our
product development concepts and corporate culture during their tenure with us, and would be able
to promote our brand and products more effectively, and therefore having Former Employees-
Franchisees will be in the interest in of our Company as a whole. Our Directors also further
confirms that such practice is common in gold jewellery retailing industry.
We applied the same selection criteria and review procedures as other franchisees when
selecting and conducting periodic review of the p erformances of Former Employee-Franchisees. The
terms and conditions of the franchise arrangements and/or agreements we entered into with these
Former Employee-Franchisees are the same as that we offered to other third-party franchisees.
During each of the years ended December 31, 2021, 2022 and 2023 and the six months ended
June 30, 2024, the revenue contribution by the franchisees stores operated by our Former
Employee-Franchisees amounted to RMB74.9 million, RMB77.0 million, RMB76.7 million and
RMB36.9 million, representing approximately 0. 4%, 0.5%, 0.4% and 0.4%, respectively, of our
total revenue over the same years. Accordingly, our Directors are of the view that the revenue
contribution from our Former Employ ee-Franchisees were immaterial.
Save as disclosed above, none of our franchisees or provincial-dealers have any relationship
with our Group, their respective Directors or shareholders during the Track Record Period.
Offline Sales
We have established an extensive national-wide offline sales network comprising franchise
stores and self-operated stores. As of June 30, 2 024, our offline sale network had a total of 2,850
franchise stores operated by 1,670 franchisees, 36 self-operated stores, seven self-operated direct
service centers and 17 provincial-dealers located in more than 1,400 county-level areas in over 250
cities across multiple provinces and municipalities in the PRC.
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The map below illustrates the locations of our offline sales network in the PRC as of the
Latest Practicable Date:
: ≥100
: 50 – 99
: 10 – 49
: 0 – 9
Heilongjiang
Liaoning
Tianjin
Shandong
Jiangsu
Shanghai
Zhejiang
Jiangxi
Fujian
Hong KongMacauGuangxi
Yunnan
Guizhou
Hunan
Chongqing
Sichuan
Hainan
Guangdong
Taiwan
Anhui
Henan
Hubei
Hebei
Shanxi
Beijing
Inner Mongolia
Ningxia
Gansu
Qinghai
Tibet
Xinjiang
Shaanxi
Jilin
No. of offline stores*:
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The following table sets forth a breakdown of number of our franchise stores by tiers of city
as of the end of each year/period during the Track Record Period:
As of December 31, As of June 30,
2021 2022 2023 2024
Number of
franchise
stores
% of total
number of
franchise
stores
Number of
franchise
stores
% of total
number of
franchise
stores
Number of
franchise
stores
% of total
number of
franchise
stores
Number of
franchise
stores
% of total
number of
franchise
stores
(%) (%) (%) (%)
Tier 1 cities . . . . . . 8 0.3 9 0.3 15 0.5 15 0.5
Tier 2 cities . . . . . . 676 25.2 696 25.4 732 26.0 744 26.1
Tier 3 cities . . . . . . 765 28.6 778 28.4 798 28.3 802 28.2
Tier 4 and
lower cities . . . . . 1,231 45.9 1,260 45.9 1,272 45.2 1,289 45.2
Total: ........ 2,680 100.0 2,743 100.0 2,817 100.0 2,850 100.0
The following table sets forth a breakdown of the geographical areas of our franchise stores
during the Track Record Period:
As of December 31, As of June 30,
2021 2022 2023 2024
Number of
franchise
stores
% of total
number of
franchise
stores
Number of
franchise
stores
% of total
number of
franchise
stores
Number of
franchise
stores
% of total
number of
franchise
stores
Number of
franchise
stores
% of total
number of
franchise
stores
(%) (%) (%) (%)
PRC
Northeast region . . . . 253 9.4 258 9.4 280 10.0 290 10.2
Northern region . . . . 857 32.0 906 33.0 958 34.0 975 34.2
Northwest region . . . 404 15.1 415 15.1 431 15.3 444 15.6
Southwest region . . . 384 14.3 398 14.5 418 14.8 417 14.6
Eastern region . . . . . 429 16.0 424 15.5 421 14.9 423 14.8
Southern region . . . . 353 13.2 342 12.5 309 11.0 301 10.6
Total ......... 2,680 100.0 2,743 100.0 2,817 100.0 2,850 100.0
(a) Franchise Stores
We have a rapidly growing sales network supported by our franchisees. We believe our
business model of having franchise stores across the PRC allows us to expand rapidly in targeted
markets as the franchise business model provides an asset-light and cost-effective means of
expanding our store network and geographical coverage. By partnering with local franchisees who
possess exceptional distribution capabilitie s and local industry knowledge, we were able to
efficiently enter into and expand our retail presen ce in third and lower tier cities in China. For the
years ended December 31, 2021, 2022 and 2023 and the six months ended June 30, 2024, we
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recorded an average revenue (Note) of RMB5.5 million, RMB5.4 million, RMB6.7 million and
RMB2.9 million per franchise store, respectively. According to Frost & Sullivan, the engagement of
franchise stores as a method of distribution is c ommon in the gold jewellery industry in the PRC.
We enter into a separate franchise agreement with each franchise store. Our franchise
agreements grant franchisees the rights to operate and open franchise stores within specific
geographical regions, and to sell our products under our brand name ‘‘ ’’to consumers. While
the franchisee is primarily resp onsible for managing the franchise store, staffing, and profit and
loss, we closely supervise our franchisees to ensu re consumer satisfaction, service quality, and to
protect our reputation. To ensure consistency in operations, we provide a set of operational
procedures that our franchisees are req uired to comply with. See the section ‘‘ — Sales and
Distribution Channels — Franchisees and provincial dealers management’’ above for further details.
To enhance franchisee management and standardize the image of our franchise stores, we have
implemented a systematic and unified standard. T his standard covers various aspects, including
product display, sales process, after-sales service, pricing, promotion, salesperson appearance, and
promotional language. We occasionally ask managers and inspectors to visit and record the business
operation of franchise stores.
The table below sets forth the changes in the number of the franchise stores during the Track
Record Period.
Year ended December 31,
Six months
ended June 30,
2021 2022 2023 2024
Beginning of the year/period . . . . 2,543 2,680 2,743 2,817
A d d i t i o n s .................. 3 1 8 2 5 8 3 0 1 1 1 5
C l o s u r e s .................. ( 1 8 1 ) ( 1 9 5 ) ( 2 2 7 ) ( 8 2 )
N e ti n c r e a s e................ 1 3 7 6 3 7 4 3 3
End of the year/period . . . . . . . . . 2,680 2,743 2,817 2,850
For the years ended December 31, 2021, 2022 and 2023 and the six months ended June 30,
2024, the number of franchise stores closed was 181, 195, 227 and 82, respectively. The major
reasons for closure of stores during the years/period indicated were (i) failure of franchise store to
follow our store operational standards; (ii) franchi sees took the initiative to terminate for various
reasons, including the franchisees considered the performance of the franchise store to be
unsatisfactory; and (iii) termination of or dis agreements to the renew of lease agreements.
During the Track Record Period, we implemented a careful expansion strategy and
successfully attracted a fitting number of new franchisees. We also proactively adjust and improve
our distribution management strat egies to suit our business development. By maintaining stringent
management control, we terminated our business relationship with franchisees who failed to meet
Note: Calculated by dividing revenue derived from franchise network (i.e. including revenue generated from provincial-dealers) by
the total number of franchise stores as of the ending date of the respective year/period.
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our expectations in terms of sales performance, ope rational capabilities, active transactions, and
materially breached our franchise management policies. During the Track Record Period, there was
no material breach of franchise agreement that resulted in a material adverse impact to our Group.
Set forth below is a summary of the salient terms of our franchising agreements for franchise
stores:
D u r a t i o n : ............ T y p i c a l l yf o ro n ey e a ra n di sr e n e w a b l e .
Exclusivity: . . . . . . . . . . Without our prior consent, our franchisees shall only sell
products sourced from us. For application procedures for the
sales of products sourced from third parties, see ‘‘— Admittance
of third-party products ’’.
Minimum sales target: . . . Depending on the historic transaction amount, we may require
franchisees for a minimum sales amount.
Restrictions on appointing
sub-distributor(s): . . . .
There are no provisions in our franchising agreements restricting
our franchisees from further appointing sub-distributors (Note) .
Store location: . . . . . . . . Our franchisees are required to operate the franchise store only in
our approved premises and not at any other premise or online
platforms in order to minimize malicious competition among
franchisees.
Cost of renovation of
s t o r e :.............
The franchisees shall be responsible for appointing renovation
agencies approved by us to renovate the franchise store, provided
that the renovation plan is in accordance with our internal
standards.
Note: We enter into a separate franchise agreement with the relevant franchisee for each franchise store. Thus, before a franchisee
opens a franchise store through a sub-distributor, such franchisee would have to receive our consent and enter into a
separate franchise agreement with us. As of the Latest Practicable Date, we had not entered any such agreements, and
neither were we aware of the appointment of sub-distributors by any of our provincial-dealers or franchisees. Moreover, our
relevant personnel regularly visit our franchise stores, and during such visits they have not come across franchise stores that
have not been authorized by us. Accordingly, to the best of our knowledge, there were no appointments of sub-distributors
by our provincial-dealers and franchisees, and hence no revenue attributable to provincial-dealers and franchisees who
engaged sub-distributors. In addition, ou r sales to provincial-dealers and franc hisees are buy-out sales and we had not
received substantial product returns during the Track Record Period. Based on the aforementioned, our Directors are of the
view that there was no abnormal accumulation of inventories from our franchisees that raises reasonable suspicion of the
existence of sub-distributors d uring the Track Record Period.
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Settlement terms and
c r e d i tp e r i o d : .......
Upon execution of the franchising agreement, our franchisees are
required to pay an annual brand royalty and franchising fee.
According to the franchising agr eement, we charge a fixed annual
brand royalty fee of RMB30,000 for each franchise store, which
may be discounted at our discretion. We also charge a one-time
franchising fixed fee of RMB10,000 per franchise store. The
annual brand royalty fee and franchising fee were set by us with
reference to similar fees charged by our industry peers according
to Frost & Sullivan. Fees that we collected are applied to
commercials, advertisements, sales events, amongst other events/
purposes that we believe can support and strengthen our franchise
network. According to Frost & Sullivan, the annual brand royalty
fee and the franchising fee that we charge per franchise store are
within the industry norm, which usually range from RMB30,000
to RMB100,000, or are determined by a designated percentage of
the sales value of the previous year. Thereafter, franchisee settle
with us based on the actual amount of products purchased. We
generally grant franchisees a credit period ranging from three to
90 days.
Suggested retail price and
d i s c o u n t : ..........
We set a suggested retail price for our gold jewellery products.
Our franchisee shall participate in promotional activities arranged
by us.
Transfer of risk: . . . . . . . The risk transfers to the franchisees after they complete
inspection and confirm receipt of the products on the day of
delivery. The franchisee is also responsible for purchasing
insurance for the delivery of products.
Product return: . . . . . . . . Once the franchisee has accepted delivery of the g oods, we
generally do not allow the return of products. According to Frost
& Sullivan, our product return policy is in line with industry
practice.
(b) Provincial-dealers
In regions where we do not have our own self-operated direct service centers, we appoint
provincial-dealers to handle sales distribution to franchisees in that region. As of December 31,
2023, we had 17 provincial-dealers and there had been no changes of number of provincial-dealers
throughout the Track Record Period. Provincial-dealers set up exhibition halls where our products
will be showcased, and franchisees in such regions can source our products at the exhibition halls.
According to Frost & Sullivan, the engagement of provincial-dealers is common in the gold
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jewellery industry in the PRC. For the years ended December 31, 2021, 2022 and 2023 and the six
months ended June 30, 2024, we recorded an average revenue of RMB315.5 million, RMB306.3
million, RMB391.1 million and RMB1 44.3 million per provincial-dealer (Note) , respectively.
While provincial-dealers facilitate the distribution of our products to franchisees within the
regions, we are responsible for the brand management, store management, and after-sales services
for franchisees in the respective regions.
We normally deliver our products to provincial-dealers ’ exhibition halls without transferring
title of goods, and provincial-dealers will only c onfirm purchases and settle with us after they sell
such products to franchisees. However, diamond products are usually delivered to provincial-dealers
following their confirmed purchases, and we generally grant a product exchange period of five
years for diamond products only.
Set forth below is a summary of the salient terms of our provincial-dealer agreements with
provincial-dealers:
D u r a t i o n : ............ T y p i c a l l yf o ro n ey e a r .
Area of distribution: . . . . Provincial-dealers are restricted to distributing our products
within the agreed region. We have the right to expand, re-assign
or modify the operating regions of the provincial-dealer.
Use of brands: . . . . . . . . Provincial-dealers are authorized to use our brands, trademarks
and other intellectual property r ights within the agreed region.
They are required to protect our brand and reputation during their
ordinary course of business and marketing and promotion
activities. Provincial-dealers are prohibited from authorising
third-parties to use our brand.
Minimum sales target: . . . Depending on the historic transaction amount, we may require
provincial-dealers for a minimum sales amount.
Restrictions on appointing
sub-distributor(s): . . . .
There are no provisions in our provincial-dealer agreements
restricting our provincial-dealers from further appointing sub-
distributors.
Cost for operating
exhibition hall: . . . . . .
The provincial-dealer shall be responsible for appointing
renovation agencies approved by us to renovate the exhibition
hall premises, provided that the renovation plan is in accordance
with our internal standards.
Admittance of third party
p r o d u c t s : ..........
Provincial-dealers may only sell products of third parties in
accordance with our relevant product admittance procedures.
Note: Calculated by dividing revenue derived from provincial-dealers by the total number of provincial-dealers as of the ending
date of the respective year/period.
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Resale selling price of
p r o d u c t s : ..........
Provincial-dealers must onward sell our jewellery products to
franchisees in accordance with the price guidance provided by us.
Settlement and credit
t e r m s : ............
At the end of an day of sale in exhibition halls, the provincial-
dealers shall confirm with us the amount of products sold. Upon
the conclusion of an agreed period, provincial-dealers shall settle
with us based on the actual number of products sold. We
generally grant provincial-dealers a credit period ranging from
three to 90 days.
(c) Self-operated stores
We operate self-operated stores to directly sell our products to consumers. We believe
business strategies on having se lf-operated stores are built on several benefits, including:
. Greater control over the consumer experience: By owning and operating our self-
operated stores, we have greater control over the consumer experience and can ensure
that our products and customer services align with our brand ’s values and standards.
. Improved brand recognition: Self-operated stores can help improve brand recognition
and awareness, as consumers can directly interact with our products and staff. It also sets
a standard for our franchisees to follow in the operation of their franchise store.
. Increased revenue and profitability: By selling our products directly to consumers, we
can eliminate distributor costs and therefore increase our revenue and profitability.
For the years ended December 31, 2021, 2022 and 2023 and the six months ended June 30,
2024, we recorded an average revenue of RMB11. 5 million, RMB11.5 million, RMB11.8 million
and RMB5.6 million per self-operated store
(Note 1) , respectively comparing with average revenue
per franchise store (Note 2) of RMB5.5 million, RMB5.4 million, RMB6.7 million and RMB2.9
million for the same period, respectively. During the same period, the average monthly sales per
self-operated store (Note 3) were approximately RMB957,000, approximately RMB954,000,
Notes:
(1) Calculated by dividing revenue derived from self-operated stores by the total number of self-operated stores as of
the ending date of the respective year/period.
(2) Calculated by dividing revenue derived from franchise network (i.e. including revenue generated from provincial-
dealers) by the total number of franchise stores as of the ending date of the respective year/period.
(3) Calculated by dividing average revenue per self-oper ated store (calculation as indicated in Note 1 above) by
the number of months of the relevant year/period.
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approximately RMB981,000 and approximately RMB926,000, respectively, comparing with the
average monthly sales per franchise store (Note 4) of approximately RMB458,000, approximately
RMB451,000, approximately RMB560,000 and approximately RMB480,000, respectively.
Same store sales of our self-operated stores
Our profitability is affected in part by our ability to successfully increase revenue from our
existing stores, primarily through the launch of new products and various marketing and
promotional events, such as the ‘‘One RMB Exchange ’’promotions and advertisement through
different media. We utilize data col lected from our self-operated stores to illustrate the condition of
our same store growth because we have robust data from such stores for the relevant analysis. Same
store sales growth rates of our self-operated sto res provide a period-to-period comparison of our
performance, excluding increases and decreases due to the opening and closing of new self-operated
stores and only taking into account of stores that were in operation at the ending dates in both of
the compared years. There are variations in the way in which other retailers calculate these metrics.
Accordingly, our Directors are of the view that these metrics may not be fully comparable with
those of our competitors.
The table below sets forth our same store sales of self-operated stores for the years indicated:
Year ended
December 31,
Year ended
December 31,
Six months ended
June 30,
2021 2022 2022 2023 2023 2024
Number of the same self-operated stores that
were in operation at the ending dates in both
of the compared years/periods . . . . . . . . . . 27 29 28
Same store sales of our self-operated stores
(RMB ’000) . . . . . . . . . . . . . . . . . . . . . 347,313 340,725 349,040 362,033 202,607 170,376
Same store sales growth of our self-operated
s t o r e s( % )...................... ( 1 . 9 ) (1) 3.7 (15.9) (2)
Notes:
(1) The same store sales growth of self-operated stores was (1.9)% for the year ended December 31, 2022,
primarily because of disruptions to the operation of our self-operated stores caused by the pandemic.
(2) The same store sales growth of self-operated stores was (15.9)% for the six months ended June 30, 2024 when
compared to the corresponding period in 2023, which was in line with the fluctuation in sales at our self-
operated stores due to the decline in consumption sentiments of purchase of gold products.
Notes:
(4) Calculated by dividing average revenue per franchise store (calculation as indicated in Note 2 above) by the number
of months of the relevant year/period.
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The table below sets forth the changes in the number of the self-operated stores during the
Track Record Period.
Year ended December 31,
Six months
ended
June 30,
2021 2022 2023 2024
Beginning of the year/period . . . . . 28 31 32 35
A d d i t i o n s .................. 3481
Closures (Note) ................ — (3) (5) —
E n do fy e a r / p e r i o d ............ 3 1 3 2 3 5 3 6
Note: Major reasons for closure of stores during the Track Record Period included change in our marketing
strategy.
E-commerce sales
We have also been ramping up our online pr esence and catering to our consumers ’ evolving
consumption patterns. Through making our product s available on leading, nationwide e-commerce
platforms, such as JD.com and Tmall, which are independent third-parties, our gold jewellery
products are easily accessible by our consumers via online platforms. Our online sales grew rapidly
across the Track Record Period. Revenue recorded from our e-commerce sales for the year ended
December 31, 2021 of RMB1,608.3 million was higher than that in 2022 and 2023, mainly due to
our sales of gold bullion to Vipshop, for a promotional event. For details, see ‘‘Financial
Information — E-commerce sales ’’. As we continue to expand our footprints online, we believe we
are able to broaden our consumer coverage and forge a lasting connection between our brand and
consumers.
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We adopt two types of e-commerce sales model as following:
Sales Model
Major
e-commerce
platforms Description Settlement Logistics
Self-operated
E-commerce . .
Tmall,
JD.com POP
We establish our own
online stores on the
e-commerce platforms
and sell goods directly
to consumers
Consumer makes
payments to the
e-commerce platform
or their payment
gateways, then such
amount will be
transferred to us after
confirmation of sales
We engage third party
service providers to
deliver the goods to
the consumers directly
Sales to
platform . . . .
Vipshop,
JD.com and
etc.
The e-commerce
platform either settles
with us directly upon
purchase or settles
with us after they have
successfully sell our
products on behalf of
us. The e-commerce
platform then sells our
products to consumers
on our behalf.
Bank transfer We deliver the goods
to the designated
warehouses of the
e-commerce platform
and the e-commerce
platform handles the
delivery to the
consumers
(a) Self-operated E-commerce
Under our self-operated e-commerce model, we sell directly to consumers through establishing
our online flagship stores on three main e-co mmerce platforms, namely, Tmall, JD.com,
PinDuoDuo among others, and thus providing a convenient and efficient shopping experience to
our consumers. The following key steps summarizes our self-operated e-commerce operations:
. Consumers place orders through our online fla gship stores on the e-commerce platforms,
and pay for the jewellery products via the platform ’s payment gateway.
. Payments are automatically credited to our e-commerce account once the order is
confirmed and we issue invoices to consumers as required.
. We provide delivery, product return, and after-sales services directly to the consumers.
Consumers are generally allow ed to return the purchased products within the purchase cool-
down period, which is generally seven days upon purchased and they are eligible for a refund.
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(b) Sales to platforms
Under our sales to platforms model, we sell our product directly to the e-commerce platforms
and they settle with us accordingly. We deliver the goods to the warehouses of the e-commerce
platforms and they are responsible for product promotion, order management and delivery.
Consumers place orders and pay directly to the e-commerce platforms and the e-commerce
platforms arrange delivery and provide after-sales services as necessary, whereas we provide after-
sales services to the e-commerce platforms in acco rdance with our contractual obligations. The
e-commerce platforms settle with us on a regular basis following the agreed billing period.
According to Frost & Sullivan, the engagement of e-commerce platforms for the distribution of our
products is in line with the industry norm in the gold jewellery industry.
Set forth below is a summary of the salient terms of our standard agreements with e-commerce
platforms during the Track Record Period:
D u r a t i o n : ............ T y p i c a l l yf o ro n ey e a r .
Minimum purchase
r e q u i r e m e n t :........
We generally do not set sales target for e-commerce platforms.
Pricing policy: . . . . . . . . We generally sell our products through e-commerce platforms at
a mutually agreed price after considering the suggested price
provided by us.
Product return: . . . . . . . . The terms and policies for pr oduct return between e-commerce
platforms vary, we generally allow product return in various
circumstances including product defects or products not sold to
consumers after a set period of time, which is usually seven or 15
days in accordance with return policy of the e-commerce
platforms. In case product return is allowed, e-commerce
platforms will give refund instructions to us in the manner as
contractually agreed and we shall reimburse the e-commerce
platforms for refunds. Accordin g to Frost & Sullivan, our product
return policy is in line with industry practice.
Credit terms: . . . . . . . . . Based on the specific arrangements, we generally grant a credit
period within 30 days.
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The table below sets forth the changes in the n umber of e-commerce platforms under sales to
platforms engaged by us during the Track Record Period.
Year ended December 31,
Six months
ended June 30,
2021 2022 2023 2024
Beginning of the year/
p e r i o d.............. 8 1 0 1 3 1 2
A d d i t i o n s ............. 4 4 3 —
Cessation (Note) .......... ( 2 ) ( 1 ) ( 4 ) —
E n do fy e a r / p e r i o d....... 1 0 1 3 1 2 1 2
Note: The major reason for cessation was due to adjust ments in marketing strategy by our management.
For sales of goods from self-operated online stores, revenue is recognised when the end
customer confirms acceptance of goods. For sales of goods to platforms, revenue is recognised
when the platform accepts goods or we delivered to the carrier designated by the platform. The
point at which revenue is recognised is also the point at which the customer obtains control of
goods. Such revenue recognition practices comply with our Group’ s revenue recognition policy.
The actual amount of returns from e-commerce platforms during the Track Record Period were
as follows:
Year ended December 31,
Six months
ended June 30,
2021 2022 2023 2024
Actual
amount of
returns Percentage
Actual
amount of
returns Percentage
Actual
amount of
returns Percentage
Actual
amount of
returns Percentage
(RMB’000) % (RMB ’000) % (RMB ’000) % (RMB ’000) %
E-commerce returns (Note) :
Self-operated online stores . . . 10,607.4 26.9 18,818.8 69.5 41,686.8 74.0 28,677.5 33.0
Sales to platform . . . . . . . . . 28,757.3 73.1 8,277.9 30.5 14,622.9 26.0 58,350.8 67.0
Total: ............... 39,364.7 100.0 27,096.7 100.0 56,309.7 100.0 87,028.3 100.0
Note: The amount of sales returns from e-commerce platforms ‘‘after receipts were confirmed ’’is also included.
Returns from e-commerce platforms include both returns from end consumers to our self-
operated online stores and returns from our sale s to platforms. The major reasons for the return of
goods from e-commerce platform sales to consumers included: (i) returns during the seven-day
cool-down period for online purchases, and (ii) consumers refusing to accept goods due to personal
reasons. For returns from e-commerce platforms during the Track Record Period, the majority of
returns occurred before the consumer or the system confirmed receipt of goods, meaning that
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returns happened before we recognized revenue. Fewer returns occurred after receipts were
confirmed. Returned goods from e-commerce platf orm sales constituted a de minimis portion of our
total sales during the Track Record Period. Returned products from e-commerce platforms are
generally resold on e-commerce platforms. Changes in our sales returns from e-commerce closely
followed our sales trends through this channel, and the rapid increase in the actual amount of
returns through our e-commerce channel was mainly a ttributed to the increase in actual returns from
our sales to end consumers via our self-operated online stores. In 2021, our e-commerce sales
returns were primarily from tra nsactions with platforms, notably from sales of gold bullion to
Vipshop. In 2022, our e-commerce sales returns decreased in line with a reduction in our overall e-
commerce sales, however such decrease was partia lly offset by an increase in the actual amount of
returns from our self-operated online stores as our sales through such channel materially increased
to RMB233.6 million in 2022 from RMB79.1 million in 2021. In 2023, our e-commerce sales
returns increased mainly due to returns from end consumers who purchased via our self-operated
online stores. In turn, this increase in sales returns was primarily attributed to our sales of gold
bullion to end consumers through our self-operated online stores on JD.com. For the six months
ended June 30, 2024, our e-commerce sales returns were primarily from sales to platforms,
particularly from sales of gold bullion to a leading PRC online retailer.
Sales returns after receipts confirmation are not allowed for most e-commerce platforms, while
returns after receipts confirmation due to quality issues are only allowed for few e-commerce
platforms within a certain period of time. In practice, sales returns from e-commerce platforms
‘‘after receipts were confirmed ’’is directly deducted from the revenue.
Sales to Vipshop under a Promotion Event in 2021 and the first half of 2024
Certain online retailers may procure products from us when they conduct promotional events.
In 2021, we sold a large batch of gold bullion to a leading online discount retailer, Vipshop. The
gold bullion sold to Vipshop was then resold at a promotion event throughout 2021 organized by
Vipshop. During this event, Vipshop promoted the sales of gold bullion to its members at a
discount to market prices. Vipshop obtained the gold bullion through us, and we received
approximately 3,300 orders from Vipshop during the 40-week promotion event. We believe
Vipshop collaborated with us because of our (i) market reputation; and (ii) sales and supply chain
capability. In addition, Vipshop made another procurement of gold bullion from us in the first half
of 2024 for its promotional event. We generally do not allow the return of gold bullion, and during
the Track Record Period, we received only a de minimis amount of gold bullion returns from the
online discount retailers we sold to, including Vipshop in 2021.
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Loss-making stores
During the Track Record Period, there were some loss-making stores and the details are as
below:
Year ended/As of December 31, Six months
ended/As of
June 30,
2021 2022 2023 2024
Self-operated stores
— Total number of self-operated
stores (6) .............
31 35 40 36
— Number of loss-making
self-operated stores . . . . .
4736
— Aggregate operating loss
amount (RMB ’0 0 0 ) .....
259.2 (1) 1,730.0 (2) 636.8 (3) 930.7 (4)
E-commerce stores
— Number of e-commerce
s t o r e s...............
12 14 16 14
— Number of loss-making
e-commerce stores . . . . . .
5666
— Aggregate operating loss
amount (RMB ’0 0 0 ) .....
4,718.9 (5) 2,928.0 (5) 2,182.3 (5) 1,728.1 (5)
Notes:
(1) We had an aggregate operating loss of RMB259,200 from our self-operated stores in 2021, primarily due to
the slow-moving sales at one self-operated store, w hich contributed to be approximately 50% of the loss.
(2) We had an aggregate operating loss of RMB1.7 million from our self-operated stores in 2022, primarily due
to the adjustments in the leasing contract of one of the se lf-operated stores and an increase in leasing costs at
another.
(3) We had an aggregate operating loss of RMB0.6 million from our self-operated stores in 2023, primarily due
to we established several self-operated stores in 2023, all of which have yet to reach breakeven, thereby
causing an operating loss. In particular, out of the newly established stores, we have closed down one of them
due to the low sales volume, which further contributed to the aggregate operating loss of our self-operated
stores.
(4) We had an aggregate operating loss of RMB0.9 million from our self-operated stores for the six months ended
June 30, 2024, primarily due to the establishment of one new self-operated store towards the end of 2023 and
one at the beginning of 2024, both of which have yet to reach breakeven, thereby causing an operating loss.
(5) We had aggregate operating losses from our e-commerce stores of RMB4.7 million, RMB2.9 million, RMB2.2
million and RMB1.7 million in 2021, 2022 and 2023 and the six months ended June 30, 2024, respectively,
primarily due to the establishment of new e-commerc e stores and the operational expenses of e-commerce
stores. The costs we incurred in association with man y of such stores, including marketing and promotion
fees, staff salaries and other miscellaneous expenses, exceeded the gross profits we derived from sales of
products in such stores because they were still in the sales ramp-up stage.
(6) The number of self-operated stores includes all self- operated stores that were in operation during the relevant
year/period in the Track Record Period.
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Our customers
Our customers are primarily our franchisees and provincial-dealers. They normally settle
payment with us by bank transfer and/or by way of gold trade-in settlement. Consumers are also
considered as our customers if they purchase direc tly from our self-operated stores or self-operated
e-commerce platforms.
Our five largest customers of each year/period of the Track Record Period primarily consist of
provincial-dealers, except for an online retaili ng platform as one of our five largest customers in
2021 and six months ended June 30, 2024, and one franchisee as one of our five largest customers
in 2023. The revenue we derived from our five largest customers of each of the years ended
December 31, 2021, 2022 and 2023 and the six months ended June 30, 2024 accounted for
approximately 23.2%, 17.6%, 18.7% and 21.3% of our total revenue for the respective year/period.
Save for customers who participated in the gold trade-in activities, none of our five largest
customers of each year/period during the Track Record Period supplied gold to us in each year and
period during the Track Record Period. For details of our gold trade-in, see ‘‘ —Gold Trade-in ’’.
During the Track Record Period, we were not dependent on any single customer. During the
Track Record Period and up to the Latest Practicable Date, we had not experienced any major
disruption of business due to material delay or default of payment by our customers due to their
financial difficulties, nor had we experienced any material disputes with our customers causing
material disruption to our business. None of our Dire ctors or their respective close associates or any
of our Shareholders who own more than 5% of our issued share capital had any interest in any of
our five largest customer of each of the years ended December 31, 2021, 2022 and 2023 and the six
months ended June 30, 2024. During the Track Record Period, we did not enter into any long term
contracts with our five largest customers of each of the respective year/period.
Pricing Policy
We generally adopt a cost-plus pricing policy for our gold jewellery and K-gold products.
When we sell our gold products and K-gold, we normally charge customers based on prevailing
market price of gold and crafting fees, multiplied by the weight of gold. Crafting fees represent
mark-ups on top of the costs of our products, which vary by product and by the transaction type.
We determine crafting fees primarily with refer ence to the following criteria: (i) whether the
transaction is settled by trade-in gold from third-party brands, we charge a higher crafting fee to
cover the necessary costs of purifying and processing gold from third-party brands, (ii) our counter-
party, namely (a) consumers with whom we directly tr ansact, or (b) franchisees and/or provincial-
dealers, whereby we charge a higher crafting fee wh en transacting with consumers to align with the
charges imposed by our franchisees when they transact with consumers, (iii) the product
specification, including its design and production complexity, and (iv) whether the product is to be
sold under the ‘‘One RMB Exchange ’’for our ‘‘Wan Purity ’’series products. The crafting fees
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listed in the table below illustrate the differen ces between crafting fees charged for the same gold
jewellery product in different scenarios. The crafting fees listed are for illustrative purpose only and
are not indicative of the actual crafting fees charged for each scenario.
Settlement Party
Consumers of
Self-operated
Stores
Franchisees Provincial-
dealers
Crafting Fee per Gram
Form of Settlement
C a s h ............................ R M B 4 5 R M B 1 8
(Note 2) RMB15 (Note 2)
Trade-in Gold of Our Own Brand . . . . . . . . RMB65 (Note 1) RMB18 (Note 2) RMB15 (Note 2)
Trade-in Gold of Third-party Brand . . . . . . RMB75 (Note 1) RMB21 RMB18
Note 1: The crafting fee charged to consumers when gold trade-in is involved is determined with reference to (i)
our market position in, and (ii) the competitive landscape of, the relevant market.
Note 2: The crafting fee charged to franchisees and provincial-dealers is the same when gold trade-in is settled in
cash or gold of our brand. This is because we believe in the quality of gold jewellery of our own brand
and does not require mark-up on crafting f ee when trade-in gold is of our own brand.
In addition, we charge a nominal crafting fee under the ‘‘One RMB Exchange ’’program,
where our self-operated stores and franchise stores charge RMB1.0 per gram as the crafting fee for
our end consumers, and we charge RMB4.5 per gram as the crafting fee for our provincial-dealers
and franchisees. The table below sets forth the crafting fees we charged different parties under the
‘‘One RMB Exchange ’’program:
Settlement Party
End consumers
at both
self-operated
stores and
franchise
stores
Franchisees Provincial-
dealers
Crafting fee per gram
Form of Settlement
Trade-in gold under the
‘‘One RMB Exchange ’’program . . . . . . . RMB1.0 RMB4.5 RMB4.5
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The following diagram outlines the transaction and fund flow of the ‘‘One RMB Exchange ’’
promotion between our end consumers, franchise network, and our Group.
End consumers
Self-operated
stores
Franchise
stores
Provincial-dealers/
Self-operated direct
service centers
(Trade-in gold from
end consumers to
self-operated stores)
Our Group
(Trade-in gold from
end consumers to
franchise stores)
Fund flow of the
crafting fees
(Trade-in gold from
provincial-dealers
to our Group)
(Trade-in gold from
franchise stores
to provincial-dealers)
Movement of trade-in gold
Under the ‘‘One RMB Exchange ’’program, we charge nominal crafting fees for the used gold
received and for the additional new gold purchased (the portion that exceeds the weight of the
trade-in gold), we charge regular crafting fee.
The following diagram illustrates the allocation of crafting fees charged by our franchise
network during the ‘‘One RMB Exchange ’’program across two scenarios:
Scenario I: If the weight of the used gold is the same as that of the new gold, end consumers
pay only RMB1 per gram for the trade-in gold. There is no gold price component payable in cash
for the new product.
End consumers
RMB1 per gram
as crafting fee
from end
consumers
to franchise
stores
RMB1 per gram as crafting
fee from end consumers
to self-operated stores
RMB4.5 per
gram as crafting
fee to our Group
RMB4.5 per gram
as crafting fee from
franchise stores to
provincial-dealers
Franchise stores
Self-operated stores
Provincial-dealers Our Group
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Scenario II: If the weight of the used gold is less than that of the new gold jewellery, end
consumers pay for the following components: (i ) RMB1 per gram as the nominal crafting fees for
the weight of used trade-in gold under ‘‘One RMB Exchange ’’program, (ii) the regular crafting
fees for the extra new gold, and (iii) the price of t he extra new gold, calculated as prevailing gold
price multiplied by (the weight of the new gold minus weight of the used gold.)
End consumers Franchise stores
Self-operated stores
Provincial-dealers Our Group
RMB4.5 per
gram for the
weight equal to
used gold;
regular crafting
fee for the extra
new gold
RMB4.5 per
gram for the
weight equal to
used gold;
regular crafting
fee for the extra
new gold
RMB1 per gram
for the weight
equal to used gold;
regular crafting
fee for the extra
new gold
RMB1 per gram for the weight equal
to used gold; regular crafting fee for
the extra new gold
Average and price range of crafting fees according to different source
During the Track Record Period, the crafting fe es we derived from sales of gold jewellery and
K-gold products were less than 5% of our total revenue for each of the respective year/period. The
following table sets forth the crafting fees associated with gold jewellery and K-gold products for
each year during the Track Record Period:
Year ended December 31,
Six months
ended June 30,
2021 2022 2023 2024
RMB RMB RMB RMB
Gold jewellery (Note 3)
Crafting fee range (Note 1) ......... 1 . 0 0 –199.98 1.00– 189.92 1.00– 215.49 1.00– 209.99
Average crafting fee (Note 2) . . . . . . . 15.53 14.81 18.38 18.68
K-gold products (Note 3)
Crafting fee range (Note 1) ......... 1 0 . 8 2 –399.98 7.50– 389.97 1.00– 408.29 1.28– 410.96
Average crafting fee (Note 2) . . . . . . . 46.26 59.12 51.99 41.12
Notes:
(1) We exclude the fixed-price products, when we calculate crafting fee range.
(2) We calculate the average crafting fee for trade-in gold jewellery and K-gold products using the total crafting
fee in RMB divided by the total gold weight in grams.
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(3) We have a diverse range of trade-in gold jewellery an d K-gold product types. We charge different crafting
fees based on the styles and types of the gold jewellery and K-gold products, which results in a wide range of
crafting fee. It is necessary to account for the differences in the complexity, including the level of detail for
the product design (i.e., one pattern or multiple patterns), and craftsmanship, including pressing and product
surface treatment, required for each distinct K-gold product. Crafting fees for our gold jewelry products are
generally higher for high-precision, se mi-handcrafted ancient-style craftsmanship, with fees reaching up to
approximately RMB209 per gram, depending on the complexity of the craftsmanship methods and styles used.
Similarly, crafting fees for our K- gold products are higher for inlaid designs, with fees reaching up to
approximately RMB410 per gram, based on the number of inlays and the complexity of the craftsmanship.
The following table sets forth the crafting fee s associated with gold jewellery and K-gold
products through gold trade-in transactions for each year during the Track Record Period:
Year ended December 31,
Six months
ended June 30,
2021 2022 2023 2024
RMB RMB RMB RMB
Sales of gold jewellery settled
by traded-in gold
Crafting fee range (Note 1) ......... 1 . 0 0 –199.98 1.00– 189.92 1.00– 208.98 1.00– 208.14
Average crafting fee (Note 2) (Note 4) . . 11.33 9.93 11.82 15.74
Sales of K-gold products settled by
traded-in K-gold (Note 3)
Crafting fee range (Note 1) ......... 1 0 . 8 4 –399.04 7.50– 389.77 1.00– 408.29 1.28 –410.3
Average crafting fee (Note 2) . . . . . . . 53.63 61.61 60.43 59.91
Notes:
(1) We exclude the fixed-price products, when we calculate crafting fee range for products through gold trade-in.
(2) We calculate the average crafting fee for trade-in gold jewellery and K-gold products using the total crafting
fee in RMB divided by the total trade-in gold weight in grams.
(3) We have a diverse range of trade-in K-gold product types. We charge different crafting fees based on the
styles and types of the K-gold products, which results in a wide range of crafting fee. It is necessary to
account for the differences in the complexity and craft smanship required for each distinct K-gold product.
(4) The average crafting fee associated with gold jewelle ry through gold trade-in transactions was lower than the
average crafting fee associated with sales of gold jewellery mainly due to ‘‘One RMB Exchange ’’program.
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The following table sets forth the crafting fees associated with trade-in gold from our brand
and from third-party brand for each year during the Track Record Period:
Year ended December 31,
Six months
ended June 30,
2021 2022 2023 2024
RMB RMB RMB RMB
Sales settled by trade-in gold from
our brand (excluding gold
bullion)
Crafting fee range . . . . . . . . . . . . . 1.00 –199.83 1.00– 189.44 1.00– 199.71 1.00– 208.14
Average crafting fee (Note 1) . . . . . . . 8.02 7.61 9.18 13.24
Sales settled by trade-in gold from
third-party brand (excluding gold
bullion)
Crafting fee range . . . . . . . . . . . . . 7.2 –199.98 6.05– 189.92 8.00– 208.98 7.17– 198.12
Average crafting fee (Note 1)(Note 2) . . . 15.36 17.03 21.45 20.89
Sales settled by trade-in gold
bullion
Crafting fee range (Note 3) ......... 1 . 0 0 –97.06 1.00 –83.30 1.00 –83.82 1.00 –97.73
Average crafting fee . . . . . . . . . . . . 4.80 1.72 4.14 5.11
Notes:
(1) We calculate the average crafting fee from our brand and from third-party brand using the total crafting fee in
RMB divided by the total trade-in gold weight in grams.
(2) Our average crafting fee for sales settled by trade-in gold from third-party brand was largely in line with the
average crafting fee of our gold products for 2021. Commencing in 2022, we implemented stricter control on
accepting traded-in gold from third-party brand and continued to charge higher crafting fees on sales settled
by trade-in gold from third-party brand. As a result, our a verage crafting fee for sales settled by trade-in gold
from third-party brand had been evidently higher than the average crafting fee of our gold products since
2022.
(3) Our trade-in program for gold bullion includes craft gold bullion, investment gold bullion, and investment
ornaments. Crafting fees for craft gold bullion and investment ornaments are higher due to their intricate
designs and craftsmanship.
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The following table sets forth the crafting fees of trade-in gold from different customer types,
such as consumers who purchase from our self-opera ted stores, provincial-dealers and franchisees
for each year during the Track Record Period:
Year ended December 31,
Six months
ended June 30,
2021 2022 2023 2024
RMB RMB RMB RMB
Self-operated stores ’sales to end
consumers
Crafting fee range . . . . . . . . . . . . . 1.00 –399.98 1.00– 389.97 1.00– 408.29 1.00– 410.96
Average crafting fee (Note) . . . . . . . . 72.78 63.96 75.28 71.36
Sales to franchisees
Crafting fee range . . . . . . . . . . . . . 1.00 –92.50 1.00 –189.50 1.00– 191.50 1.00– 118.50
Average crafting fee (Note) . . . . . . . . 12.59 12.51 15.79 17.18
Sales to provincial-dealers
Crafting fee range . . . . . . . . . . . . . 1.00 –46.50 1.00 –40.50 1.00 –102.00 1.00 –30.50
Average crafting fee (Note) . . . . . . . . 11.33 10.79 13.54 15.21
Note: We calculate the average crafting fee for trade-in gold using the total crafting fee in RMB divided by the
total trade-in gold weight in grams.
As indicated in the above, we handle a diverse range of trade-in K-gold product types.
Different types of K-gold products incur varying crafting fees depending on their specifics. This
broad range is due to the inclusion of various types of K-gold products in the trade-in gold. The
wide range of crafting fees is attributed to (i) the diversity in styles of K-gold products; and (ii)
each style may require different levels of craftsmanship and materials.
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The following table sets forth the crafting fees we charged during the ‘‘One RMB Exchange ’’
program for each year during the Track Record Period:
Year ended December 31,
Six months
ended June 30,
2021 2022 2023 2024
RMB RMB RMB RMB
Crafting fees charged by our self-
operated stores to end consumers
during the ‘‘One RMB
Exchange ’’program
Crafting fee range . . . . . . . . . . . . . 1.00 1.00 1.00 1.00
Average crafting fee (Note 1) . . . . . . . 1.00 1.00 1.00 1.00
Crafting fees we charge to
franchisees under the ‘‘One RMB
Exchange ’’program
Crafting fee range . . . . . . . . . . . . . 4.50 4.50 4.50 4.50
Average crafting fee (Note 1) . . . . . . . 4.50 4.50 4.50 4.50
Note 1: We calculate the average crafting fee for our franchisees and self-operates stores during the ‘‘One RMB
Exchange ’’program using the total crafting fee in RMB divided by the total trade-in gold weight in grams.
For the years ended December 31, 2021, 2022 and 2023 and the six months ended June 30,
2024, the total amount of crafting fees we charge d aggregated to RMB513.6 million, RMB482.7
million, RMB662.8 million and RMB279.1 million, respectively, representing 3.0%, 3.1%, 3.3%
and 2.8% of our total revenue for the corresponding years/period.
If there is an increase in the prevailing gold market price, we would adjust our price of gold
jewellery and K-gold products based on the current market price. Diamond inlaying products are
usually priced based on cost-plus basis, and we usually add to our cost a profit margin on different
products with reference to their respective design complexity, nove lty and popularity of the relevant
product line on a case-by-case basis, and come up with a fixed selling price.
We have a suggested retail price guide for crafting fees to be charged, and franchisees have
some discretion to conduct promotional sales as long as they meet with our minimum retail price
requirements and franchisees can also adjust the ma rk-up based on fluctuations in the market gold
price. To maintain fair competition, we encourage franchisees in the same city or region to maintain
a consistent price, which is regulated by our mar ket supervision department to prevent unfair
competition.
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We usually transfer any increase in cost of gold material to our customers for gold products
and maintain a reasonable profit margin. Our ability to pass on increases in costs of raw materials
to our customers varied primarily depending on whether the jewellery products are priced mainly
based on their cost of raw material or both their cost of raw material and crafting work.
Marketing and promotion
The high-purity of our gold jewellery demonstrates not only our leading technical know-how
but also the crux of our marketing strategy setting us apart from our competitors. We understand
and appreciate the deeply-rooted belief of Chines e consumers in the authenticity and invaluable
nature of high-purity gold jewellery. As a result, high-purity gold is an integral part of our brand
concept and jewellery design. Our commitment t o using only the finest raw materials and our
attention to craftsmanship ensure that our gold jewellery exceeds the high expectations of our
customers in terms of both quality and value. Our focus is not only on the aesthetic appeal and
trendiness of our gold jewellery products, but also on the cultural and emotional significance that
they represent. By prioritizing these values, we aim to gain customer loyalty and enhanced our
brand recognition through positive publicity.
We develop tailored marketing plans that cater to specific product characteristics and market
demands. For example, we have teamed up with renowned intellectual property owners to introduce
cross-over merchandise, such as the ‘‘Master Craftsman Legend ( 大師匠傳)’’jewellery series in
collaboration with the ‘‘Eight Imperial Handcrafts ( 燕京八絕)’’and the ‘‘Lucky Golden Year ( 金年
大吉)’’jewellery series with a widely recognized beverage brand. We also introduced the ‘‘Sail
with Dreams ( 小夢奇航)’’jewellery series in honor of China ’s space exploration achievements,
among others. These products extend our brand influence and attract greater attention and
participation from our consumers. In addition, our self-operated stores and franchisees ’ stores
simultaneously serve as our primary custome r touchpoints and as our brand ambassadors. We
provide guidelines to franchisees to design and decorate stores to provide a uniform ambiance that
is both comfortable and stylish, thereby capturing consumers ’ attention and stimulating their desire
to purchase.
Due to our OBM capabilities, we are able to devise promotional plans for franchisees to take
advantage of different festivals and holidays. We deploy consistent marketing and promotional
strategies through operations management, daily trai ning, and on-site supervision. As an illustration,
we initiated the ‘‘One RMB Exchange ’’promotion, which runs for up to one week in each region
annually. Through this promotion, our franchisees may accept consumer trade-in of their used high
purity ‘‘Wan Purity ’’series gold jewellery of 999.9 for new pieces of ‘‘Wan Purity ’’series gold
jewellery of the same weight or more by paying only the crafting fees of one RMB for each traded-
in gram of gold to our franchisees or our self-operated stores, as applicable, and full price of any
addition of gold purchased. Accordingly, consum ers can enjoy the benefits of purchasing new
pieces of gold jewellery while franchisees also be nefit from consumer flow during such promotion
events. As a result, this not only boosts consumers ’ confidence and desire to purchase from us but
also creates a positive cyc le that encourages them to continue buying from our ‘‘
’’brand,
thereby increasing brand recognition and customer loyalty.
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To strengthen our online marketing efforts, we have established a consumer-centric and
multifaceted marketing system that encompasses live streaming, KOL sales, product reviews,
advertorials, and more. Furthermore, we specially design promotional pages on leading e-commerce
platforms like Tmall, JD.com, Pinduoduo, and Vipshop, utilizing superior content and captivating
advertising to stimulate purchase intent and drive customers ’ engagement.
We have established publicity and promotion management guideline which specifies the
approval process for brand publicity, including so cial media publicity. The context of all external
advertising manuscripts, product packaging, product theme posters, and other external promotional
materials are reviewed by our legal and compliance departments before publication.
Inventory management
Our inventory comprises raw materials, work-in-progress and finished products.
We have a computerized inventory managemen t system that enables us to track the level of
inventory, particularly gold. As of the Latest Practicable Date, our computerized system extended to
cover all of our provincial-dealers, allowing us to track the gold inventories held by provincial-
dealers on a daily basis. However, due to the fact that the computerized system was only launched
in mid-2022 and we did not mandatorily requi re our franchisees to adopt such system, data
collected on franchisees ’ inventory levels and sales records were not as complete as at the
provincial-dealer level. Nevertheless, our Group normally track inventories levels of franchisees
through sales reports and through regular site visits.
We manufacture our gold and jewellery products based on confirmed purchase orders from
customers and estimated sales volume. Our sales and senior management teams analyze market
information to determine the required amount of r aw materials required t o meet market demand for
our products. We closely monitor our inventory levels of production materials, work-in-progress
products, and finished products through daily r eviews of computerized inventory records. We
produce according to demand, thus we generally do not have a significant amount of slow-moving
or obsolete stock.
We generally pre-set and maintain an inventory level for gold of approximately five tons,
which represents approximately one-eighth of o ur total annual sales volume. We do not impose any
policies on pre-set inventory level for our provincial-dealers and franchisees.
Inventory security
To ensure the security of our inventory which is mainly gold, we have implemented various
security measures. Our self-owned production faci lity is equipped with face recognition entrances
and vaults, which can only be accessed by registered staff. At the end of each day, all valuable
inventory is counted and stored in the checkout va ults. To prevent misapp ropriation of gold, all
staff must pass through metal detectors when entering and leaving our production facilities. Staff
members are required to wear uniforms and must leave all personal belongings and bags in
designated storage rooms before entering the p roduction facility. Clos ed circuit television
surveillance is also installed to provide additional security measures.
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Our inventory control procedures generally involve the following:
. each inventory withdrawal must be recorded and justified by the person making the
withdrawal and the withdrawer must sign a pre -numbered inventory withdrawal notice to
acknowledge receipt of the inventory, which must be witnessed by another staff;
. at the beginning of each working day, the inventory control team distributes raw
materials and work-in-progress inventory to t he supervisors of the production workshops
and records all distributions;
. the supervisors of the production workshop th en distribute raw materials and work-in-
progress to the workers in his/her production workshop and records all distributions;
. at the end of the working day or when the workers leave the production areas, the
workers must return all inventories distributed to him/her to the supervisors of the
production workshops who will check against his/her record to ensure the inventories
returned matches the particulars stated in the record; and
. security guards are placed at the entrances of our production facility to detect any
suspicious staff movements and prevent trespassing.
Our Directors confirmed that, during the Track Record Period, our Group did not experience
any material loss of inventory due to theft. In light of our inventory control procedures as
mentioned above, our Directors are of the view that the inventory control measures implemented by
our Group are effective and adequate.
IMPACT OF THE OUTBREAK OF COVID-19
During the Track Record Period, the COVID-19 pa ndemic and related rest rictive policies led
to a decline in social networking and business act ivities, which in turn had adverse impacts on
China’s gold jewellery market and our operations.
In 2022, our manufacturing facilities in Changle e xperienced a temporary decrease in capacity,
primarily due to an increase in the number of days waiting for raw materials to arrive, caused by
recurring COVID-19 outbreaks in China that led to transportation delays. Additionally, a number of
our franchise stores were temporarily shut down due to COVID-19 in 2021 and 2022. Despite the
COVID-19 challenges, our business maintained an upward trend during the Track Record Period.
We had promptly taken various measures to mitigate the impacts of the COVID-19 pandemic, such
as (i) organizing our employees to work remotely an d closely monitoring their health and wellness;
(ii) providing epidemic prevention essentials t o our employees, such as masks and disinfectant
alcohol; and (iii) conducting routin e sanitization and requiring regular negative COVID-19 PCR test
results to prevent any resurgence. Our revenue decreased from RMB16,871.0 million in 2021 to
RMB15,724.2 million in 2022, primarily due to the pandemic ’s effect on our sales in the fourth
quarter of 2022, then increased to RMB20,208.6 million in 2023, primarily due to the recovery of
economic activities in 2023. As of the Latest Practicable Date, COVID-19 has not posed any
material adverse impact on our daily operati on, supply chain, or regulatory affairs.
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With the PRC government substantially lifting COVID-19 prevention and control policies
since December 2022, our Directors are of the vie w that it is unlikely that the COVID-19 pandemic
will have a material adverse impact on our business going forward. Based on the above, our
Directors are of the view that the COVID-19 pandemic did not have any material adverse impact on
our overall business, financial condition and results of operations during the Track Record Period
and up to the Latest Practicable Date.
AWARDS AND RECOGNITION
We received a number of accolades in recognition of our quality of products and our
achievements. The following table sets forth major awards and recognition we received in recent
years:
No Award Recipient Year(s) awarded Issuing Organization
1 2024 National Product and Service
Quality Integrity Demonstration
Enterprise (2024 年全國產品和服
務質量誠信示範企業)
Company 2024 China Association for
Quality Inspection
2 2023 China Gold and Jewellery
Industry Excellent Full Supply
Chain Service Provider (2023 中
國黃金珠寶行業全產業鏈優秀服
務商)
Company 2023 Beijing Gold Economic
Development and
Research Center and
China Gold News
3 2023 China Gold and Jewellery
Consumer Survey Recommended
National Chain Store Brands
(中國黃金珠寶消費者調查全國
連鎖推薦品牌)
Company 2023 Beijing Gold Economic
Development and
Research Center and
China Gold News
4 Top Ten Enterprises in China’ s
Jewellery Processing Volume
(全國黃金首飾加工量十大企業)
Company 2014 –2022 China Gold Association
5 Top Ten Enterprises in China’ s
Jewellery Sales Revenue
(中國黃金珠寶銷售收入
十大企業)
Company 2015 –2022 China Gold Association
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No Award Recipient Year(s) awarded Issuing Organization
6 The 40th Anniversary of China ’s
Reform and Opening up
Jewellery Industry Social
Contribution Award
(中國改革開放40週年珠寶
業社會貢獻獎)
Company 2018 Gems & Jewellery Trade
Association of China
7 The 40th Anniversary of China ’s
Reform and Opening up
Jewellery Industry Social
Innovation Award (中 國改革開
放40週年珠寶業科技創新獎)
Company 2018 Gems & Jewellery Trade
Association of China
8 China Jewellery & Jade Association
Science and Technology Award
(中國珠寶玉石首飾產業協會科
學技術獎)
Company 2018 Gems & Jewellery Trade
Association of China
9 National Intellectual Property
Advantageous Enterprise
(國家智慧財產權優勢企業)
Shandong
Mokingran
2017 China National
Intellectual Property
Administration
MARKET AND COMPETITION
According to Frost & Sullivan, the recognition of the gold jewellery brand is one of the most
important factors that affect customers ’ purchasing decisions since gold price is transparent and
gold jewellery products are normally set with a high unit price. Brand awareness and brand scale
are the assurance of consumers ’ confidence in product quality and related services. With the
improvement of people ’s aesthetic level, Chinese consumers attach great importance to the quality,
design and cultural connotation of jewellery products. The gold jewellery company’ s ability to
accurately decipher what is trendy in the market and launch new product line is crucial, which
depends on a strong design team and efficient product design and production system. Establishing a
national wide sales channel is also one of the core competitiveness of gold jewellery companies.
Building a sales network is time consuming and requires a lot of resources and an experienced
management team to form and maintain a long-term stable and reliable cooperative relationship
with franchisees at all levels.
The gold jewellery market in the PRC was concentrated in 2023 in terms of revenue from gold
jewellery. The market size of gold jewellery in terms of sales revenue experienced an overall
growth from RMB308.0 billion in 2018 to RMB5 18.0 billion in 2023, achieving a CAGR of 9.1%
for the aforementioned period. According to the Frost & Sullivan, the top five gold jewellery
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brands in the PRC constituted 45.0% of the total market in 2023 when measured by gold jewellery
revenue, while the top five gold jewellery brands in the PRC constituted 36.3% of the total market
when measured by gold processing volume in 2023.
According to Frost & Sullivan, most gold jewell ery products offered by the top gold jewellery
brands in the PRC are 999 and 990 and below purity. With the maturity of gold jewellery
manufacturing technology, a few enterprises, such as us, have developed high-purity level gold
jewellery processing techniques, and the purit y level of its gold jewellery can reach 999.9 and
above. With consumers ’ increasing enthusiasm for the investment of gold, high-purity gold
jewellery is no longer merely for meeting consumers ’ aesthetic needs but also has inherit
investment value. As an OBM possessing an established gold jewellery brand with high popularity,
wide national sales network layout and diversified product portfolio with innovative design, we
believe that our business model enables us to main tain competitive in the gold jewellery market.
According to Frost & Sullivan, the concentra tion rate of franchisees in the gold jewellery
market is low, with over tens of thousands of players in the industry. Most of the gold jewellery
franchisees are small and medium-sized companies or individually-owned businesses, concentrated
in provinces such as Guangdong, Shandong, Jiangsu, Fujian, and Zhejiang.
SEASONALITY
Our sales are festive in nature and past experience indicates that this seasonality will continue
in the future. The peak seasons include the PRC National Day holiday, the period from Chinese
New Year till Valentine’ s Day, and the period during our ‘One RMB Exchange ’ promotion which is
typically between June and September. For details, see ‘‘Risk Factor — Risks relating to our
Business and Industry — Our sales may be affected by seasonality ’’.
Accordingly, results of any interim period are not necessarily indicativ e of results that might
be expected during a full year.
RISK MANAGEMENT AND INTERNAL CONTROL
We have devoted ourselves to establishing and maintaining risk management and internal
control systems consisting of policies and procedures that we consider to be appropriate for our
business operations, and we are dedicated to cont inuously improving these systems. We regularly
review the implementation of our risk management and internal control policies and procedures to
enhance their effectiveness and sufficiency. During the Track Record Period, we have gold price
exposure management to manage fluctuations of raw material price. See ‘‘ — Our Procurement/
Suppliers — (b) Gold price exposure management to manage fluctuations of raw material price ’’
above for further details. However, we do not treat such arrangements as hedging arrangements
since (i) we do not have formal designation and doc umentation of the hedging relationship, risk
management objective and strategy for undertaking the hedge; and (ii) the arrangements do not
meet all of the hedge effectiveness requireme nts under HKFRS 9. As such, we have not had any
hedging arrangements in relation to risk management.
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Without prejudice to the responsibilities of our Board of Directors as a whole, our Audit
Committee provide independent advice on the e ffectiveness of our financial reporting, risk
management and internal control systems. See ‘‘Directors, Supervisors and Senior Management ’’for
further details of the qualification and experience of the members of our Audit Committee.
Internal control on financial reporting
We have adopted comprehensive accounting policies in connection with our financial
reporting risk management, such as payment pol icy. Our accounting department reviews our
management accounts based on such policies.
Internal control on technol ogy system and data privacy
We have not suffered from any material data leakage during the Track Record Period and up
to the Latest Practicable Date. We place great importance on users ’ personal data and we
continually evaluate the effectiveness of our da ta security and privacy pr otection procedures,
monitor our compliance status in accordance with the recent changes in applicable regulatory
requirements and regularly update our privacy policy and internal procedures to better protect our
users ’ privacy and interests.
Internal control on trademark, paten t and intellectual property rights
Our well-established brand recognition in the PRC may attract industry peers or others to
produce counterfeit products without our authorization or using similar trade marks. Counterfeiting
and imitation may divert our potential customers from our own products. More importantly,
counterfeiting or substandard products could significantly harm our reputation and brand image. See
‘‘Risk Factors — Risks Relating to Our Business and Industry — Our business could be materially
adversely affected if we cannot protect our trade nam e and other intellectual property rights or if we
face any negative publicity ’’for more details.
We endeavor to combat counterfeit products to protect our brand integrity. As of the Latest
Practicable Date, we registered 678 trademarks and 548 patents in the PRC and have 33 trademarks
registered outside the PRC. For details, see ‘‘Appendix VII — Statutory and General Information —
B. Further Information about our Business — 2. Our Intellectual Property Rights ’’. Our franchise
stores are contractually required to preserve our reputation and brand integrity, and selling
counterfeit products is strictly prohibited. We en courage consumers to report unauthorized uses of
our brands or counterfeit products to us. Furthermore, we have dedicated a team to monitoring and
handling counterfeiting issues. In the event we identify any counterfeit products, we may initiate
legal actions and take other responsive measur es based on the advice of intellectual property
consultants and legal counsel.
Internal control on human resources
We have established internal control policies covering various aspects of human resource
management such as recruitment, training, work ethics and legal compliance. We adopt strict
procedures with regard to recruitment to ensur e the quality of new hires. We provide specialized
training tailored to the needs of our employees in different departments and compliance policies.
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Our employee handbook contains guidelines contai ning internal rules and guidelines regarding
work ethics and prevention of fraud, negligence and corruption. We explain to employees the
guidelines contained in the employee handbook dur ing orientation. We have also made available an
anonymous reporting channel through which potential violations of our internal policies or illegal
acts at all levels can be timely reported to management and appropriate measures can be taken to
minimize damage.
Third-party Settlement Arrangement
Background
Historically, as requested by certain franchisees (the ‘‘Relevant Counterparty(ies) ’’), we
settled transactions with these Relevant Counterparties through the accounts of third parties
designated by them (the ‘‘Third-party Settlement Arrangement ’’). On November 14, 2023, we
issued notices and informed the Relevant Counterparties of our intention to cease the Third-party
Settlement Arrangement with effect from Janua ry 1, 2024. For the years ended December 31, 2021
and 2022 and 2023, the number of Relevant Counterparties was 573, 669 and 554, respectively, and
the number of the third-party payors was 741, 723 and 644, respectively. Out of the 554 Relevant
Counterparties who adopted Third-party Settle ment Arrangement during the year ended December
31, 2023, 530, or 95.7%, of them remained as our franchisees as of the Latest Practicable Date.
Most of the Relevant Counterparties are our recurring customers and the average duration of our
business relationship with them is approximately six to eight years. During the Track Record
Period, the Relevant Counterparties often had more than one third-party payors settle payments on
their behalf due to their commercial needs and convenience. For instance, franchisees may have
different shareholders/family member/personnel attending sales events at our self-operated direct
service centers/sales exhibition hall , and pay with the relevant shareholder’ s/family member ’s/
personnel ’s account, which may result in different third party payors in such payments. For details,
see ‘‘ — Reasons for Utilizing Third-party Settlement Arrangement. ’’ Among the Relevant
Counterparties, one had a shareholder who was our former employee ( ‘‘Counterparty A ’’) and
Counterparty A’ s Third-party Settlement Arrangements were primarily made through its shareholder
during the Track Record Period. In addition, another Relevant Counterparty had a shareholder who
was a family member of our former employee ( ‘‘Counterparty B ’’) and Counterparty B ’s Third-
party Settlement Arrangements were primarily made through its shareholde rs and family members.
Our Directors have confirmed that after due enquiry and to their best knowledge, except for
Counterparty A and Counterparty B, none of the Relevant Counterparties, their respective third-
party payors, or any shareholders, directors, or senior management of the aforementioned Relevant
Counterparties and third-party payors during the Track Record Period have had any other past or
present relationships with us, our subsidiaries, S hareholders, Directors, Senior Management, or any
of our respective associates.
For the years ended December 31, 2021, 2022 and 2023, the aggregate amount of payment
from third-party payors to us was RMB965.0 mi llion, RMB1,211.4 million and RMB1,546.0
million, respectively, represen ting approximately 5.7%, 7.7% and 7.7% of the total revenue,
respectively. The increase in the aggregate amount of payments from third-party payors for the
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years ended December 31, 2021, 2022 and 2023 was primarily attributable to the increase of
transaction amount with Relevant Counterpar ties. None of the Relevant Counterparty had made
material contribution to our revenue during the Track Record Period. As we ceased Third-party
Settlement Arrangement since January 1, 2024, we have not received any payments from third-party
payors for the six months ended June 30, 2024. All settlements since January 1, 2024 have been
made by the relevant franchisees. Our Directors further confirm that going forward, we will not
accept Third-party Settlement Arrangement and any other payments from third-party payors.
The table below sets forth our revenue attributable to the Relevant Counterparties, and the
percentage of our sales to them settled through third party payors, for the years ended December
31, 2021, 2022 and 2023:
Year ended December 31,
2021 2022 2023
Our revenue attributable to the Relevant
Counterparties (RMB million) . . . . . . . . . . 5,836.9 5,564.4 6,044.5
Percentage of our total revenue (%) . . . . . . . . 34.6 35.4 29.9
Payment received from third-party payors
( R M Bm i l l i o n )..................... 9 6 5 . 0 1 , 2 1 1 . 4 1 , 5 4 6 . 0
Average percentage of our sales to Relevant
Counterparties settled through third-party
payors (%)
(Note) .................... 1 6 . 5 2 1 . 8 2 5 . 6
Note: By dividing the total payment received from third-party payors by the total revenue attributable to Relevant
Counterparties during the respective year/period of the Track Record Period.
The following table sets out the revenue attributable to Relevant Counterparties by band of the
percentage of our sales to Relevant Counterparties that were settled through third party payors for
the years ended December 31, 2021, 2022 and 2023.
Revenue settled by
third-party payors
Year ended December 31,
2021 2022 2023
Relevant
Counterparties
Revenue from
Relevant
Counterparties
Relevant
Counterparties
Revenue from
Relevant
Counterparties
Relevant
Counterparties
Revenue from
Relevant
Counterparties
Number RMB million % Number RMB million % Number RMB million %
B e l o w5 % ........... 8 1 3 , 123.0 53.5 174 2,358.8 42.4 101 2,391.3 39.6
5%–5 0 % ............. 2 2 5 1 , 967.7 33.7 252 2,419.4 43.5 186 2,166.4 35.8
O v e r5 0 % ............ 2 6 7 746.2 12.8 243 786.2 14.1 267 1,486.8 24.6
Total .............. 573 5,836.9 100 669 5,564.4 100 554 6,044.5 100
For the years ended December 31, 2021, 2022 and 2023, the third-party payors designated by
the Relevant Counterparties primarily consisted of their (i) shareholders or ultimate beneficiaries,
(ii) individual franchisees ’ family members, and (iii) employees.
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The table below sets forth a breakdown of the payments received from third-party payors by
the types of relationships with the Relevant Counterparties for the years ended December 31, 2021,
2022 and 2023:
Year ended December 31,
2021 2022 2023
(RMB million) (RMB million) (RMB million)
Shareholders or ultimate beneficiaries . . . . . . 12.9 121.4 11.8
Individual Franchisees ’ Family Members . . . . 915.6 1,077.7 1,492.9
E m p l o y e e sa n do t h e r s ................. 3 6 . 5 1 2 . 3 4 1 . 3
T o t a l............................. 9 6 5 . 0 1 , 2 1 1 . 4 1 , 5 4 6 . 0
All Relevant Counterparties have pro vided to us designation letters (the ‘‘Designation
Letter(s)’’) signed with their respective third-party pa yors on a case-by-case basis subject to prior
written approval from us. Such Designation Letter s pecifies, among others, the relationship between
the Relevant Counterparties and their respective third-party payors and payment account
information.
During the Track Record Period, (i) we had not proactively initiated any Third-party
Settlement Arrangement or participated in othe r forms in any of such arrangement; (ii) we had not
provided any discount, commission, rebate or other benefit to any of the Relevant Counterparties to
facilitate or incentivize the Third-party Settleme nt Arrangement; and (iii) the pricing and payment
terms of the agreements we entered into with the Relevant Counterparties were generally in line
with those of customers not involved in th e Third-party Settlement Arrangement.
Potential impact of the Cessation of Third-party Settlement Arrangement
Taking into account that (i) none of the Relevant Counterparties accounted for a significant
portion of our revenue during the Track Record Period, and (ii) despite our Group informing the
Relevant Counterparties of the intention to cease Third-party Settlement Arrangement, none of them
had indicated their intention to terminate their business relationships with our Group, as of the
Latest Practicable Date, our Directors are of the view that the cessation of Third-party Settlement
Arrangement will not have a material impact on the operation of our Group and we do not expect
the cessation of Third-party Settlement Arrangement will result in loss of major customers.
On November 14, 2023, we issued notices and informed the Relevant Counterparties of our
intention to cease the Third-party Settlement Arrangement from January 1, 2024 onwards. All
Third-party Settlement Arrangements have been ceased since January 1, 2024 and all settlements
thereafter have been made by the relevant franchisees. In addition, there has been no major change
in the relationship or terms with franchisees following the cessation of the Third-party Settlement
Arrangement. As of June 30, 2024, 95.4% of the amount due from parties that previously applied
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Third-party Settlement Arrangement with us as of December 31, 2023 has been paid by the relevant
franchisees. As advised by our PRC Legal Advisor, the Third-party Settlement Arrangement is not
in breach of restrictive regulations of PRC laws and regulations in force.
Reasons for Utilizing Third-party Settlement Arrangement
The use of the Third-party Settlement Arrangem ent was mainly aimed at addressing requests
during ordinary course of business for convenience. Many Relevant Counterparties are small-sized
private business in the form of sole proprietor ship or small and medium-sized enterprises.
According to Frost & Sullivan, it is reasonabl e for smaller-scale franchisees in the PRC gold
jewellery industry do not possess a comprehensive settlement system. Such franchisees would then
utilize any payment methods that are readily accessible to them for trade settlement purpose,
including using personal, spousal or family members ’ bank accounts for settlement in their business
transactions. As confirmed by Frost & Sullivan, it is a common practice for entities (e.g., small-
sized customers) or individual traders in the PRC to settle payments through third-party payors in
the gold jewellery industry for convenience when purchasing products. For small-sized customers
and individual traders, Third-Party Settlement Arrangement enables them to complete payments in a
timely manner, which is conducive to the transaction efficiency. These third-party payors usually
include, but not limited to, the legal representative of the franchisee company, the spouse or
relative of the franchisee, and the manager of stores owned by the franchisee.
Implications Relating to Third-party Settlement Arrangement
The Third-party Settlement Arrangement has been recorded completely and accurately in our
accounting books and records in all material respects and we have certain measures to manage this
arrangement as following:
(i) Prevention of fraud or money laundering: to prevent fraud or money laundering
activities, our Group implemented several know-your-customer procedures to have a
comprehensive understanding of Relevant Co unterparties. Further, we also conducted
periodic business meetings with Relevant Counterparties to understand the nature of their
business. Based on above, our Directors are not aware of the customers involving in
fraud or anti-money laundering, nor would our Directors have reason to believe that the
relevant settlement involves proceeds or gains from fraud or anti-money laundering.
(ii) Genuine underlying transactions: in order to ensure the Third-party Settlement
Arrangement are supported by genuine tran sactions, for payments received from the
Relevant Counterparties and their respective third-party payors, the Relevant
Counterparties are required to submit the payors’ accounts and payment information to
our Group upon signing franchise agreements. They are also required to submit a
Designation Letter before making p ayment through third-party payors ’ accounts.
As advised by our PRC Legal Advisor, (1) the Th ird-party Settlement Arrangement is merely
an assignment of liability from Relevant Counterparties to their respective third-party payors
pursuant to the Civil Code of the PRC ( 中華人民共和國民法典) and the Designation Letters, once
coming into effect, constitute valid and binding obl igations on each of the signing parties involved;
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(2) the Third-party Settlement Arrangement is not in breach of restrictive regulations of applicable
laws or regulations in the PRC; (3) the risks are remote for our Group to be found obligated to
return funds to the Relevant Counterparties or the ir respective third-party payors, and/or their
respective creditors under the Third-party Settlement Arrangement; and (4) taking into consideration
the cessation of the Third-party Settlement Arrangement as mentioned above, the risk of us being
subject to administrative penalties in violation of laws and regulations related to tax evasion under
the Third-party Settlement Arrangement is low.
Based on the foregoing, our Directors confirm that, (i) during the Track Record Period, the
relevant payments were based on bona fide underlying transactions and valid contracts, and (ii) the
risk of committing crimes, such as fraud, money lau ndering crime or commercial bribery is remote.
Our Directors consider that the use of the Third-party Settlement Arrangement did not have any
material adverse impact on our Group.
Enhanced Internal Control Measures
Transactions involving the Third-party Set tlement Arrangement may negatively affect the
integrity of our financial information and our normal business operations. Furthermore, misconducts
involved during the settlement, such as embezzlement, fraud or other illegal activities, may
significantly harm our reputation and bra nd image. For further information, see ‘‘Risk Factors —
Risks Relating to Our Business and Industry — We are subject to various risks relating to third-
party settlement arrangements. ’’Since 2018, we have implemented know-your-customer procedures
to prevent fraud and money laundering activities. On top of the know-your-customer procedures,
when dealing with Third-party Settlement Arra ngement, we sought gaining a better understanding
of the Relevant Counterparties through the following measures:
(i) Engaging in discussions with Relevant Counterparties regarding their background (such
as identification card, banking account, etc) an d their operational plans for the franchise
store. Through such interactions, we aim to confirm the commercial legitimacy of the
Relevant Counterparty and assess the veracity of the need for a designated third-party
payor; and
(ii) We require the Relevant Counterparties to submit the necessary documents to prove the
relationship between the third-party payor an d themselves (includi ng copies of marriage
certificate, household registers and employment records, as applicable), and we do not
approve of third-party payment arrangements unless there is satisfactory written proof of
the genuineness of the relationship betw een the third-party payor and the Relevant
Counterparty.
During the Track Record Period, we adopted enhanced internal control measures to safeguard
our interest against risks associated with the Third-party Settlement Arrangement, including but not
limited to the following:
(i) in our franchise agreements with customers, we request Relevant Counterparties to have
their business account information consistent with their business licenses when making
payments;
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(ii) our Group will closely monitor any change of payment account information to identify
any Third-party Settlement Arrangement;
(iii) for Relevant Counterparties who are unable to directly settle payments with our Group
immediately, they will be required to, (a) c ommunicate relevant information to our
Group, including, among others, the identity of their respective third-party payors; and
(b) provide our Group with a Designation Lette r. In the Designation Letter, it is specified
that the Relevant Counterparties delegate their payment obligation or grant rights for
payments from Company under the terms of the original agreement with our Group to
their respective third-party payors, which undertake to pay the transaction amount
directly to or from our Group under the same t erms. It is further specified that, (i) our
Group shall settle with the respective third-party payors as if it were settled with the
Relevant Counterparties, (ii) the Third-party Settlement Arrangement shall not discharge
the payment obligation of the Relevant Coun terparties, and (iii) our Group may demand
payment from, and pursue legal action against, the Relevant Counterparties if the
respective third-party payor fails to pay accordingly;
(iv) before accepting any Third-party Settlemen t Arrangement, information of the third-party
payor such as identity cards and relationshi p proofs shall be provided by the Relevant
Counterparties and our Group will verify the information against the record in our system
to ensure that it was settled through the relevant third-party payors ’ account as provided
by the Relevant Counterparties;
(v) our employees are required to reject and/or return all payments made by third-party
payors that failed to satisfy the above-mentioned requirements;
(vi) our employees are required to notify the a bove policies and measures to all the Relevant
Counterparties and not to make payment to our Group on behalf of any of the Relevant
Counterparties; and
(vii) we manage our Group ’s bank accounts as well as our Group ’s other accounts used for
transactions, in accordance with the principle of segregation of duties. Different
personnels of our finance department are assi gned with different duties to verify, record,
manage and settle transactions through such accounts, to ensure the accuracy of our
accounting records, reduce the risks of account misuse and avoid account security risks.
Our Directors are responsible for overseeing the implementation of our internal control
measures formulated by the finance department. Based on the follow-up review on the
implementation of measures, our internal control c onsultant did not identify any material defects
with regard to our Third-party Settlement Arra ngement related process and policies and our
Directors are of the view that the above measures are effective and adequate in preventing
unauthorized Third-party Settlement Arrangeme nt and its associated risks without any material
weaknesses identified and necessary rectifications needed, and our Directors will oversee the
effectiveness of the aforementioned enhanced in ternal controls on the Third-party Settlement
Arrangement in the future.
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Since we have implemented comprehensive control measures to govern Third-party Settlement
Arrangement, we will cease Third-party Settlement Arrangement prior to Listing and the related
transaction amounts were not material to our business during the Track Record Period, our
Directors are of the view that the risks, including money laundering risks relating to Third-party
Settlement Arrangement is immaterial.
QUALITY CONTROL
We are committed to maintaining the highest level of quality in our products and have attained
accreditations including ISO9001 quality management, GB/T29490-2013 enterprise intellectual
property management system, China Metrology Accreditation and CNAS (China National
Accreditation Service for Conformity Assessment) laboratory accreditation for our testing center.
We have designed and implemented a quality management system that provides the framework for
continuous improvement of products and processes. We have also implemented a management
review control process to conduct regular systematic reviews of our quality management system, in
order to closely monitor the implementation of our quality management system.
Our business model benefits our quality contr ol. We have established trusted sourcing
channels to source for high quality gold, establi shed our in-house testing center and developed key
production capacities that are essential to producing quality gold jewellery products, while ensuring
quality along the value chain.
Supply Chain Management
We have comprehensive policies and detailed procedures in place to ensure the quality of the
components and raw materials we procured from Shanghai Gold Exchange and other suppliers.
Our quality control department is responsible for communicating with suppliers regarding
quality standards and will thoroughly test and inspect product samples to ensure that they meet all
the requirements such as gold purity level.
Testing along production
We bring testing equipment onto the production line for gold jewellery product manufacturing.
We have established a gold testing center equippe d with advanced testing equipment such as ICP
(Inductively Coupled Plasma) emission spectrometry, ICP-MS (Inductively Coupled Plasma Mass
Spectrometry), and spark direct-reading dev ices. In 2013, we obtained CNAS (China National
Accreditation Service for Conformity Assessment) laboratory accreditation for our testing center.
Our testing center is located inside our production complex in Changle County, Weifang City,
Shandong Province, the PRC, allowing us to conduct quality control tests on raw material, work-in-
progress inventories, and finished goods conveniently. Based on the testing results, our production
lines can be adjusted without any delay to increase production yield rate and minimize wastage.
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Advanced production equipment
Our strengths on machinery R&D allows us to tailor-make and calibrate our production
machinery and equipment to high precise leve l. Over the years, we have introduced and/or
revamped imported advanced equipment that include robotic arms for accessories flipping (首 飾抓
取自動翻轉機械手), automated carving machines ( 自動刻花機), automatic butterfly chain punching
machines (自 動蝴蝶鏈機), chain loosening machines ( 鬆鏈機), and automatic thin wall gold tube
necking machine ( 薄壁金管自動縮口機), which are crucial to our gold jewellery production. These
machinery enables us to mass-produce gold jewellery at high quality level.
Product Returns and Recalls
For franchisees, we generally do not allow return s of gold products sold to franchisees, except
when they cease to be our franchisees. For provincial-dealers, given our business model, provincial-
dealers generally do not hold gold products as their inventory and may only maintain an
insignificant level of other products. We offer franchisees and provincial-dealers a right to
exchange unsold diamond inlaying jewellery a period of five years. For details, see Note 5 ‘‘Critical
Accounting Judgments and Key Sources of Estimation Uncertainty ’’ and Note 34 ‘‘Refund
Liabilities’’ in Appendix I to this prospectus. As advised by our PRC Legal Advisor, as the OBM
of our gold jewellery products, we bear the responsibility for ensuring their quality and safety. In
the event of any product failures or issues that may pose risks to customers or consumers, we take
full accountability for addressing and resolving t he situation. According to Frost & Sullivan, our
product return policy is in line with industry practice.
Apart from product returns, in special circumstances such as promotional benefits for newly
joined franchisees and franchisees requesting to exchange previously purchased products of our
brand for same grade and same type of new gold products, we allow gold product exchange. During
the Track Record Period, within the franchise network, the volume of product exchange of gold
jewellery and other gold products for each year/period were 993 kg, 1,017 kg, 1,094 kg and 492
kg, respectively, which represented an immaterial amount (2.3%, 2.5%, 2.4% and 2.8% of the sales
of gold jewellery and other gold products for the same periods, respectively) compared with our
sales of gold jewellery and other gold products within the franchise network, of 42,267 kg, 40,923
kg, 45,423 kg and 17,418 kg for the same period, respectively.
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The following table sets out our product return and product exchange, excluding the
exchanges previously purchased gold pr oducts during the Track Record Period.
Year ended December 31,
Six months
ended June 30,
2021 2022 2023 2024
RMB’000 RMB ’000 RMB ’000 RMB ’000
Due to product exchange policy
for diamond inlaying
jewellery (Note 1) . . . . . . . . . . . . 70,607 58,173 50,143 10,132
Due to closure of franchise stores . 8,935 4,083 8,530 4,096
Product returns due to other
reasons
(Note 2) ............. 1 , 6 1 8 3 0 1 , 8 5 0 9 1
Total .................... 8 1 , 1 6 0 6 2 , 2 8 6 6 0 , 5 2 3 1 4 , 3 1 9
Notes:
1. The amount sold and exchanged due to product excha nge policy in the same (current) year (e.g., sold in 2021
and exchanged also in 2021) is also included.
2. Other types of product returns represent product return on a case-by-case basis, including cases where
provincial-dealers and franchisees were materially impacted by the pandemic and in consideration of our
established business relationship, we exercised our discretion to accept certain product returns on their
previous purchases.
The estimated percentages of diamond inlaying jewellery exchange in relation to the five year
diamond inlaying jewellery exchange period of di amond inlaying jewellery for the years during the
Track Record Period were as follows:
Year ended December 31,
Six months
ended June 30,
2021 2022 2023 2024
(%) (%) (%) (%)
Estimated exchange percentage
for the first year .......... 8 . 1 7 . 5 7 . 2 6 . 6
Estimated exchange percentage
for the second year ........ 5 . 1 4 . 9 4 . 7 4 . 2
Estimated exchange percentage
for the third year .......... 3 . 0 3 . 0 3 . 1 2 . 8
Estimated exchange percentage
for the fourth year ......... 2 . 2 2 . 2 2 . 3 2 . 1
Estimated exchange percentage
for the fifth year .......... 1 . 9 1 . 6 1 . 6 1 . 4
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Under our standard contract terms, except for store closures, franchisees and provincial-dealers
have no right to return any goods after their acceptance of the products, but retain the option to
exchange unsold diamond inlaying jewellery within five years. We estimate the percentage of
exchange at a portfolio level using the expected value method with reference to historical data. The
average exchange rate for forecasted future exchanges during the Track Record Period has shown a
decreasing trend over time, correlating with the lengthening sales period for diamond inlaying
jewellery. The average exchange rate has remaine d stable from period to period with no significant
unusual fluctuations.
The estimated and actual amount of products exchanged by provincial-dealers and franchisees
for each of the years during the Track Record Period were as follows:
Year ended December 31,
Six months
ended June 30,
2021 2022 2023 2024
(RMB ’000) (RMB ’000) (RMB ’000) (RMB ’000)
Estimated exchange amount at
December 31 of the previous
year ................... 4 9 , 5 7 4 5 0 , 9 9 5 4 1 , 4 4 8 1 6 , 4 7 2
Actual exchange amount . . . . . . 52,136 40,261 35,920 7,486
The estimated exchanges amount for each year du ring the Track Record Period were RMB49.6
million, RMB51.0 million, RMB41.4 million and RMB16.5 million, respectively, while the actual
exchange amount were RMB52.1 million, RMB40.3 million, RMB35.9 million and RMB7.5
million, respectively. The actual exchange percent age of diamond inlaying jewellery was relatively
high prior to 2020, leading to cautious accounting estimates by our management at the end of 2019.
From 2020 onwards, the actual exchange percenta ge of diamond inlaying jewellery gradually
stabilizes, resulting in a high difference between the estimated amount of exchange and the actual
amount of exchange for 2020 only. As the revenue from diamond inlaying jewellery accounted for
only approximately 1% of our total revenue, the impact of the exchange of diamond inlaying
jewellery on the total revenue was small, and we had reasonably measured the exchange data and
recognized the right to returned goods asset and ref und liabilities based on the historical data during
the Track Record Period, and therefore the diffe rence in the estimated amount of the exchange of
diamond inlaying jewellery would not have a material impact on our financial position and results.
Should a product recall be necessary due to defects or safety concerns, we are committed to
executing the recall process promptly and efficiently. We communicate openly and transparently
with customers and consumers, providing clear instructions and support throughout the recall
process. We believe this will effectively pre vent non-conforming products from being used or
delivered. Regarding customer complaints receive d during our daily business operation in relation
to product or service quality, our customer service officer will gather customer ’s requests and put
forward handling proposals to our brand management centre. Upon receiving the complaint details,
we aim to revert to the relevant customers within one day for settlement. For cases requiring
additional resources or involving risk of triggering public relations issues, the complaints will be
escalated and handled by our designated crisis management team to formulate action plan to reach
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amicable solution with the customer. During the Track Record Period and up to the Latest
Practicable Date, we had not experienced any product recall and we also had not received any
material complaints.
MAJOR QUALIFICATIONS AND LICENSES
Our Group has obtained all requisite business registration certificates, permits and licences in
accordance with all relevant laws and regulations in the jurisdictions where our Group has
operations. For further detail ‘s, see ‘‘Regulatory Overview’’ of this prospectus.
Details of our major license, permits and registrations are set our below:
License/Permit Licence Holder Issuing authority Valid period
Registration as a
Commercial Franchisor
(商業特許經營特許人
備案) ..............
Shandong
Mokingran
MOFCOM Registered on
August 27, 2015
Customs import and export
goods consignee and
consignor filing receipt
(海關進出口貨物收發貨
人備案回執) .........
Company Customs of the
People ’s Republic of
China
No expiry date
Customs import and export
goods consignee and
consignor filing receipt
(海關進出口貨物收發貨
人備案回執) .........
Shandong Yifu Customs of the
People ’s Republic of
China
No expiry date
Registration Certificate of
Customs Declaration Unit
of the People ’s Republic
of China ( 中華人民共和
國海關報關單位註冊登記
證書) ..............
Shanghai
Yuanjunmeng
Customs of Shanghai
of the People ’s
Republic of China
No expiry date
Gold and Gold Products
Permit (黃 金及黃金製品
許可證) ............
Shandong Yifu People’ s Bank of
China, Weifang City
Central Branch
September 29,
2024 – March
28, 2025
As of the Latest Practicable Date, we had obtained all licences and certificates as required by
the relevant government authorities and all such licences and certificates were in full force and
effect. We did not experience any material difficulties in renewing the licences and certificates
necessary for our business operations during the Track Record Period and up to the Latest
Practicable Date, and we currently do not expect to have any material difficulties in renewing such
licences and certificates when they expire.
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INTELLECTUAL PROPERTY
We recognize the importance of to our busines s and are committed to the development and
protection of our intellectual property rights. We actively seek patent protection for our products
and have developed a significant po rtfolio of intellectual property rights to protect our technologies
and products. As of the Latest Practicable Date, w e registered 678 trademarks and 548 patents in
the PRC and have 33 trademarks registered out side the PRC, the content of which covers gold
jewellery processing technologi es, automatic production equipm ent for jewellery components and
parts and etc. For details, see ‘‘Appendix VII — Statutory and General Information — B. Further
Information about our Business — 2. Our Intellectual Property Rights ’’.
As of the Latest Practicable Date, we owned the following registered patents which we
consider to be material to our business:
No. Product/Technology Nature
Place of
Registration Patent Number
Registered
Owner Expiry Date
1 Purity level 999.999
precious metal
jewellery processing
equipment and
methods
(‘‘純度為999.999‰
貴金屬飾品加工設
備及方法’’)
Invention PRC 201611067618.5 Shandong
Mokingran
November 23,
2036
2 Automatic pricing
method and
automatic pricing
system for gold
jewellery (‘‘金飾自
動計價方法及自動
計價系統’’)
Invention PRC 201810892474.X Shandong
Mokingran and
the Company
August 6, 2038
3 A gold jewellery
welding method
(‘‘一種黃金飾品焊
接方法’’)
Invention PRC 200810139385.4 Shandong
Mokingran
August 28, 2028
As of the Latest Practicable Date, we have not registered the trademark of ‘‘萬純金’’and none
of the intellectual property which we own would expire in the next 12 months. Further, as of the
Latest Practicable Date, we were not involved in any proceedings in respect of, and we had not
received notice of any claims of infringement of a ny intellectual property rights, in which we may
be a claimant or a respondent, and none of our empl oyees breached the confidentiality obligations
under their employment contracts in a material respect.
Trademark disputes with Cartier
During the Track Record Period, we were involved in lawsuits with Cartier International AG
(‘‘Cartier ’’). In December 2018, Cartier initiated legal proceedings against our Company, Shandong
Mokingran and its franchisees for trademark in fringement and improper competition regarding
franchisees ’ sales of products adopting same or similar marking and design of Cartier ’s jewellery
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product series. Upon parties ’ appeal, the Tianjin High People’ s Court handed down its final
judgment in April 2022, pursuant to which the court ruled that, among others, (i) the sales of
jewellery with same mark as Cartier ’s trademark series by the franchisees of Shandong Mokingran
constituted trademark infringement and improper c ompetition; (ii) there were insufficient evidence
to support Cartier ’s claim that the infringing products sold by the franchisees were manufactured by
and sold from our Company or Shandong Mokingran; (iii) our Company and Shandong Mokingran
should bear joint responsibility for the infringing behaviour of the four franchisees, including joint
payment liability of a total amount of RMB180,000 (the ‘‘Franchisees Sum ’’) payable by the
franchisees to Cartier, because our Company and Shandong Mokingran failed to perform its
monitoring obligation over the franchisees; and (iv) our Company and Shandong Mokingran were
liable to pay a total amount of RMB250,000 (the ‘‘Settlement Sum ’’) to Cartier for the economic
losses suffered by and reasonable expenses incurred by Cartier. We fully settled the Settlement Sum
and did not pay nor indemnify the franchisees for Franchisees Sum, which was not included in the
Settlement Sum.
Following the conviction of those franchisees by the court, we imposed various penalties
against each of the four franchisees. As at the La test Practicable Date, we (i) received RMB82,000
from and terminated cooperation with the first franchisee; (ii) received RMB104,112 from the
second franchisee; (iii) reached agreement wit h the third franchisee to pay us RMB62,467 and
received partial payment of RMB10,000; and (iv) c ommenced legal actions to seek compensation in
an amount of RMB150,000 from the fourth franchisee. We did not seek indemnification of the
Settlement Sum from them considering the immaterial amount involved and the potential time and
resources that would need to be devo ted to seeking indemnification.
After this incident, we adopted the following internal control measures to enhance our
prevention against similar incidents and supervision over franchisees ’ business operation, (i) we
prepared a detailed guideline to remind and request all franchisees to refra in from infringing other
parties ’ intellectual property rights, portrait rights and name rights, and explicitly prohibited the
unauthorized printing and sticking the Group ’s marking and logo on the products. In addition to
signing franchisees ’ contracts with us, all franchisees are required to separately read, accept, sign
and strictly implement such guideline and bear legal responsibilities should there be any breach
thereof; (ii) we instructed our external legal ad viser to review and update the franchisee contract
and incorporate provisions on enhanced protecti on of intellectual property rights; and (iii) our
designated market inspection team has enhanced effort to perform inspection over the franchisees ’
stores by specifically focusing on whether franchisees infringe on the intellectual property right of
third-party products during their inspection.
Considering that (i) the Settlement Sum was immaterial and had been fully settled; (ii) we
have since adopted enhanced internal control measures; and (iii) we had never manufactured nor
sold the infringing products, did not record reve nue in relation to the infringing products and will
not do so in the future, our Directors are of the view, and the Sole Sponsor concurs that, the Cartier
dispute did not have any material adverse impact on our Group ’s operations and financial
performance.
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LAND AND PROPERTIES
Our primary production facility for our gold je wellery products is located in Changle County,
Weifang City, Shandong Province, the PRC.
Photo: Our production facility in Changle county, Weifang, Shandong Province, the PRC
Our headquarters is located in Tianjin in the PRC.
Photo: Our headquarters in Tianjin
Owned land and properties
As of the Latest Practicable Date, we owned six parcels of land, with an aggregate area of
approximately 178,173.5 sq.m., and 34 buildings or units, with an aggregat e building floor area of
approximately 144,938.7 sq.m. in the PRC. Save for the properties as set out in the Property
Valuation Report in Appendix III to this prospectus, all of the above properties are used for non-
property activities as defined under Rule 5.01(2) o f the Listing Rules. Our Directors confirm that no
single property interest that formed part of our Group ’s non-property activities had a carrying
amount of 15% or more of our consolidated total assets as of June 30, 2024.
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The following table sets forth the material pr operties owned by our Group with building floor
area more than 1,000 sq.m. in the PRC:
No Owner Location
Building
floor area Usage
Mortgage
status
(m2)
1 Company No. 15 Ziyuan Road,
Huayuan Industrial Zone,
Binhai High-tech Zone
17,555.4 Non-residential Yes
2 Company No. 12, Rongyuan Road,
Huayuan Industrial Zone,
Binhai High-tech Zone
7,555.4 Non-residential Yes
3 Changle
Chengxin
Building 15, No. 1388,
Baoshicheng 2nd Road,
Changle County
2,879.6 Industrial Yes
4 Changle
Chengxin
Building 5, No. 1388,
Baoshicheng 2nd Road,
Changle County
1,625.4 Industrial Yes
5 Changle
Chengxin
Building 4, No. 1388,
Baoshicheng 2nd Road,
Changle County
1,625.4 Industrial Yes
6 Changle
Chengxin
Building 18, No. 1388,
Baoshicheng 2nd Road,
Changle County
2,620.8 Industrial Yes
7 Changle
Chengxin
Building 37, No. 1388,
Baoshicheng 2nd Road,
Changle County
1,222.7 Industrial Yes
8 Changle
Chengxin
Building 30, No. 1388,
Baoshicheng 2nd Road,
Changle County
2,285.0 Industrial Yes
9 Changle
Chengxin
Building 35, No. 1388,
Baoshicheng 2nd Road,
Changle County
4,192.1 Industrial Yes
10 Changle
Chengxin
Building 29, No. 1388,
Baoshicheng 2nd Road,
Changle County
7,071.8 Industrial Yes
11 Changle
Chengxin
Building 1, No. 1388,
Baoshicheng 2nd Road,
Changle County
2,158.2 Industrial Yes
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No Owner Location
Building
floor area Usage
Mortgage
status
(m2)
12 Changle
Chengxin
Building 17, No. 1388,
Baoshicheng 2nd Road,
Changle County
3,057.6 Industrial Yes
13 Changle
Chengxin
Building 16, No. 1388,
Baoshicheng 2nd Road,
Changle County
1,099.3 Industrial Yes
14 Changle
Chengxin
Workshop 32, No. 1388,
Baoshicheng 2nd Road,
Changle County
1,026.9 Industrial Yes
15 Shandong Yifu Building 1, No. 1998,
Beisanli Street, Changle
County
73,678.5 Industrial Yes
16 Shandong Yifu Building 2, No. 1998,
Beisanli Street, Changle
County
8,849.6 Industrial Yes
Leased properties
As of the Latest Practicable Date, we lease d approximately 28 properties for business
operation with total floor area of approximately 10,359.5 sq.m. in the PRC. The following table sets
forth the material properties leased by our Group for business operation with total floor area of
more than 1,000 sq.m. in the PRC:
No Lessee Lessor Location
Lease
registration
status Usage Area Term
(sq. m)
1 Shenzhen
Mokingran
An independent
third party
Floor 7, Shuibei Ginza
Building, No. 97 Beili
North Road, Luohu
District, Shenzhen
Registered Commerce 1,298.0 2024.09.01 –
2027.05.20
2 Shenzhen
E-commerce
An independent
third party
Room 601, 5th Floor,
Building B27,
Zhonghe Shengshi,
No. 1, Juying 3rd
Street, Liuyue
Community,
Henggang Street,
Longgang District,
Shenzhen,
Guangdong, China
Nil (Note 1) Commerce 3,183.9 2020.11.15 –
2025.11.14
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Note:
1. The property has no ownership certificate due to hi storical reasons and therefore the lease cannot be
registered. Our Group has obtaine d a confirmation issued by the landlord which confirms that the lease
agreement entered into between the lessor and lesse e are duly recognized, and that there is no disputes or
potential disputes in the leasing of the property in concern.
In addition, as of the Latest Practicable Date, our Group also leased 22 residential properties
which were used as staff dormitories with total floor area of 2,674.2 sq.m. As of the Latest
Practicable Date, we have renewed all of these lease agreements with the lessors.
Leased properties with no property ownership certificate or the lessor of which is unable to
produce property ownership certificate
As of the Latest Practicable Date, of the leased properties used for business operation, (i) nine
of the leased properties with a total floor area of 5,769.1 sq.m. did not have any property ownership
certificate; and (ii) the lessors of six of the leased properties with a floor area of 848.7 sq.m. were
unable to provide us with property ownership certificates. Further, of the leased properties which
are used as staff dormitories, seven of such leased properties with a total floor area of 1,160.4 sq.m.
either had no property ownership certificate o r the lessors of which were unable to produce the
relevant property ownership certificates.
As advised by our PRC Legal Advisor, such leased properties that either have no property
ownership certificate or the lessor of which is unable to produce property ownership certificate does
not have a material adverse impact on our business and operation results for the following reasons:
(i) the aforementioned properties were either used as staff dormitories or for non-production
purposes. As confirmed by our Directors, if the leased properties cannot be continued to
be leased to us due to defects in the rights of t he leased properties, we can promptly find
alternative premises and this will not affect the normal operations of our Group;
(ii) such properties, which has a total floor ar ea of 7,778.2 sq.m., accounted for a small area
of the total floor area used by the Group (being just 5.0% of the total floor area used by
our Group) as of the Latest Practicable Date.
In the event that our Group is required to relocate such leased properties that either have no
property ownership certificate or the lessor of which was unable to provide property ownership
certificate during the lease term due to defects in the ownership of the leased properties, the total
costs are expected to be approximately RMB6.6 million, considering the potential labour,
construction renovation and other related expenses to be incurred for relocation. Pursuant to the
undertaking from our Controlling Shareholders, such relocation costs, if incurred, will be fully
indemnified by our Controlling Shareholders.
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Leased properties yet to complete re gistration and filing procedures
As of the Latest Practicable Date, of the leased properties used for business operation, 27 of
the aforementioned leased properties with a floor area of 10,117.5 sq.m. were yet to complete
registration and filing pro cedures. Further, as of the Latest Practicable Date, of the leased properties
used as staff dormitories, 17 of the leased propert ies with a total floor area of 2,338.6 sq.m. were
yet to complete registration and filing procedures.
As advised by our PRC Legal Advisor, the non-registration and filing of the relevant property
lease will not affect the validity of the lease contr acts and the legal use of the leased properties, but
relevant local housing authorities may require us to complete the filing within the prescribed period
and we may be subject to penalties of RMB1,000 to RMB10,000 as a result of delay in filing for
each of such properties. Accordingly, our Directors are of the view that the failure to register these
lease agreements does not have a material adver se impact on our business and operation results.
In addition to the above, our Controlling Shareholders have undertaken to indemnify our
Group for any losses caused by the defects in the ownership of the aforementioned properties.
Based on the above, the Directors are of the view t hat the subject leased properties are not crucial
to the operations of our Group. As of the Latest Practicable Date, we were not subject to any
material claims arising from or in respect of an y defect in our leasehold interest in any of our
leased properties.
EMPLOYEES
As of December 31, 2021, 2022 and 2023, June 30, 2024 and the Latest Practicable Date, we
had in total 1,751, 1,915, 2,103, 1,997 and 1,870 full-time employees respectively. Most of our
employees are stationed in our production facilities in Changle County, Weifang City, Shandong
Province, the PRC. The table below sets forth the number of our employees by functions as of the
Latest Practicable Date:
As of the
Latest Practicable Date
Functions
Number of
employees
Percentage of
total number of
employees
(%)
M a n a g e m e n t ............................... 3 2 8 1 7 . 5
S a l e sa n dM a r k e t i n g .......................... 7 0 7 3 7 . 8
R e s e a r c ha n dd e v e l o p m e n t ..................... 1 0 6 5 . 7
P r o d u c t i o n ................................ 7 2 9 3 9 . 0
Total .................................. 1,870 100.0
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We have invested substantial efforts and resources in recruiting and training our employees. In
addition to our recruitment process and internal referrals, we also recruit talent through specialised
recruiting firms and other third parties.
We offer vocational training to our newly hired employees serving in the production function
to equip them with adequate knowledge and skill s in respect of gold jewellery crafting before
formally engaging them in our da ily production. The training will usually last for three to six
months depending on the skillsets required for respective positions. During the Track Record
Period, we did not rely on a certain labor group for our business operations and did not experience
any material labor shortages. We have been able to meet our labor demand through our usual
recruitment and the aforementi oned offering of vocational training to newly hired employees in the
production function. As we expand our operations, we intend to continue with our existing
recruitment and training practices to ensure that our labor force have the relevant skillsets required
for respective positions. In addition to salaries, our employees who a re retained after the probation
period are entitled to discretionary year-end bon uses. We regularly review the performance of our
employees according to their individual key performance indicators (KPI) and make reference to
such performance appraisals in our discretiona ry bonus, salary adjustment and promotional
appraisal in order to attract and retain talented employees.
In light of the long-term benefits of talent culti vation, we provide internal training programs to
our employees from time to time so as to enhance our overall efficiency and promote employees ’
sense of belonging to our Group. We place heavy emphasis on occupational safety in our
production and we conduct periodic training for our employees to raise awareness in relation to
production safety. We will continue to offer training on industry knowledge, technical know-how in
using our latest production facilities and provide updated market information to our employees. In
addition to providing training to our employees, our franchise management department also
provides various regular comprehensive training programs including store opening training, ad hoc
large-scale training sessions, and in store traini ng to the franchise store managers and other staff of
our franchisees in order to enhance the quality of their services. Such trainings are focused on
product knowledge, brand knowledge, appearance, sales process, product after-sales service, and
other aspects. Our franchise management depart ment also regularly holds sales competitions and
other events to enhance the overall professional qua lity and sales ability of our franchise store staff.
We enter into confidentiality and non-competition agreements with our employees who hold
key positions and have access to our trade secret as necessary. Such agreements typically include a
non-competition provision effective during our employees ’ employment with us and up to two years
after termination, and a confidentiality provi sion that remains in effect until the protected
information becomes public knowledge. We have the right to take legal action against any
violations of the agreement. As of the Latest Pr acticable Date, we were not aware of incidents of
breaches of these provisions.
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We have a labour union representing our employees. We believe that we maintain a good
working relationship with our employees, and we did not experience any strikes, protests or other
material labor disputes that may materially impai r our business and reputation during the Track
Record Period and up to the Latest Practicable Date.
During the Track Record Period and up to the Latest Practicable Date, there was no fatal
accident case or material injury that had led to production suspension.
INSURANCE
We maintain insurance policies that we consider to be in line with market practice and
adequate for our business, including insurance on our exhibition halls, insurance for inventory
losses, and jewellery property insurance. Our jewellery property insurance covers operational risks,
including losses incurred due to theft, with covera ge amounts determined with reference to the size
of each store. We maintain social welfare insurance for our employees in accordance with relevant
PRC laws and regulations. See ‘‘Risk Factor — Risks Relating to our Business and Industry — Our
insurance coverage may not cover all losses which could have a material and adverse effect on our
business, financial condition s and results of operations ’’. There was no material claim of insurance
during the Track Record Period and up to the Latest Practicable Date.
ENVIRONMENTAL, SOCIAL, HEALTH AND WORK SAFETY MATTERS
Overview
Corporate social responsibility is a core part of our business philosophy and is crucial for us
to create sustainable value for our shareholders . We are committed to advocating for corporate
social responsibility and sustainable development a nd promoting sustainability at all major levels of
business operations. We have implemented a ser ies of corporate governance and environmental,
social and governance ( ‘‘ESG’’) related policies, which provides guidelines to the management of
our Group’ s environmental and social and related issues, corporate governance and code of ethics.
We will comply with the environmental, social and governance ( ‘‘ESG’’) reporting requirements
after Listing and the responsi bility to publish ESG report on an annual basis in accordance with
Appendix C2 to the Listing Rules. We will focus on each of the areas as specified in Appendix C2
to the Listing Rules to analyze and disclose imp ortant ESG matters, risk management and the
accomplishment of performance ob jectives, particularly those environmental and social issues that
could have a material impact on the sustainability of our operations and that are of interest to our
Shareholders.
We believe that it requires collective effort from our Board of Directors to evaluate and
manage material ESG issues and integrate ESG into the Company ’s strategy and daily operational
management. In order to better manage the Company ’s ESG-related affairs, the Board has the
overall responsibility for developing, adopting, and reviewing our Group ’s environmental, social,
and governance ( ‘‘ESG’’) related strategies and policies. Thes e policies are continuously updated to
ensure full compliance with the latest laws, regulations, and guidelines. In accordance with
Appendix C2 of the Listing Rules, we prepare disclosure that complies with the requirements of the
Environmental, Social and Governance Reporting Guide ( ‘‘ESG Reporting Guide ’’), either upon
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Listing or when appropriate. The Board is also responsible for identifying, evaluating and managing
our ESG-related risks and opportunities and ensuring that appropriate and effective ESG risk
management and internal control systems are in place. Our Board of Directors appoints management
and relevant functional departments of ESG to form an ESG working group and implement ESG-
related decisions to ensure that our operations and business practices align with the relevant ESG
strategies. Furthermore, the Board identifies ESG KPIs, assigns relevant targets, reviews
performance against ESG-related targets on an annual basis, and revises the ESG strategy as
appropriate in the event of material non-compliance.
Following the Listing, we intend to recruit employees with ESG backgrounds to augment our
ESG capabilities. Additionally, we will enhance ESG training programs for the directors, senior
management and staff to elevate their proficiency in ESG matters. After the Listing, we will
gradually appoint dedicated directors to participate in the development of necessary ESG
mechanisms and policies and establish an ESG co mmittee to be responsible for supervising and
managing ESG-related risks and matters, inclu ding formulating ESG policy and strategies,
monitoring ESG issues, reviewing and evaluating sustainability performance, setting metrics and
targets, preparing ESG report and making recommendations to our Board.
With respect to the management of environmental, social and climate-related issues, we take
into account the concerns of internal and exte rnal stakeholders on ESG issues, as well as the
business characteristics of our Group, and incorporate the opinions of third-party professionals.
Identification, Assessment and Management of the Risks and Opportunities for Major ESG
Issues
Our Board has the overall and collective res ponsibility to ensure an effective ESG risk
management and internal control mechanism w ith periodic review on its effectiveness in
safeguarding our Group ’s assets and Shareholders ’ interests. Upon the Listing, our Group will
conduct enterprise risk assessment at least once a year to cover the current and potential risks faced
by us in our business, including, but not limited to the risks arising from the ESG aspects. Our
Board will assess to evaluate the risks and review our Group ’s existing strategy, target and internal
controls, and necessary improvements will be implemented to mitigate the risks.
Based on our board and management ’s judgment, reference from materiality maps provided by
well-known external institutions including SASB Materiality Map by Sustainability Accounting
Standards Board (SASB), as well as the professional opinion from third-party professionals, we
have identified the material ESG issues highly related to our business. We will incorporate ESG
related risks into our risk assessment processes.
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Firstly, we acknowledge that climate-related issues pose a certain level of threat to us.
Climate-related risks identified can be classified into two major categories: physical risk and
transition risk. We identify, evaluate, and monito r the climate-related ris ks and opportunities over
the short, medium and long term, and seek to incorporate such climate-related issues into our policy
and management. See ‘‘Environmental protection’’ in this section for further details on climate-
related policies. Below is a summary of the climat e-related risks and countermeasures that we have
identified over the short, medium and long term:
Time horizon
Climate-related
risk type Climate-related risks Potential impact Countermeasures
Short term (current
reporting period) . .
Physical risk:
Acute risk
. Extreme weather
conditions such as
rainstorms and typhoons
. Damages and disruptions
to the points of sale and
the resulting incurring
increased capital cost
. Create and continuously
optimize emergency
response measures to
extreme weather
conditions
Medium term (one to
three years) . . . . .
Transition risk:
Policies and laws
. Heightened
environmental regulatory
oversight
. Increased operating and
compliance costs
. Higher operating costs
and/or tax burdens due
to stringent
environmental
regulations
. Pay close attention to
environmental policies
and regulations
especially climate
related
Transition risk:
Technology
. Global initiatives and
technological innovation
for carbon emission
reduction
. Increased cost caused by
technology research and
development on energy
structure transformation
and electric reform
. Energy saving upgrade
and transformation of
motor equipment to
reduce carbon emissions
Transition risk:
Market
. Consumer behavior
change on environmental
protection and green in
product purchase and
selection
. Reduction in revenue
due to customer
preferences
. Transmit low-carbon and
green consumption
concepts
Long term (above
three years) . . . . .
Physical risk:
Chronic risk
. Global warming and sea
level rise caused by
continuous high
temperatures
. Increased in cooling
demand and the
resulting incurring
higher electricity
demand and operating
cost
. Interruption and price
fluctuation of raw
material supply and the
resulting incurring
higher purchasing cost
. Continuously improve
operational energy
efficiency
. Strengthen supply chain
management to improve
the climate resilience of
supply chain
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We are constantly exploring more ways to reduce GHG emissions in response to climate
change and continuously improve the ability of cli mate related risk management. Meanwhile,
climate change mitigation presents opportunities for us to adopt energy efficient technologies or
sustainable practices that he lp to reduce our operating cost.
On top of the risks regarding climate-related issues, we have identified the following material
ESG issues and their potential impacts.
Material Topics Topics Potential Risks, Opportunities and Impacts
Occupational and
workplace safety . . . . .
We strive to protect the health of our employees, create a safe
working environment, thereby reducing the costs of accident
handling, litigation and fines, and improving our business
continuity and operational efficiency.
Employee care . . . . . . . . Neglecting employee care may bring us the risk of talent loss.
We focus on equal rights, diversity and welfare of employee and
fairly evaluate employee perfo rmance and culti vate employee
skills to attract, reserve, promote, and retain talent.
Social responsibility . . . . We attach great importance to corporate social responsibility to
promote the harmonious development of society which may also
bring us the opportunities of social credibility, corporate
reputation and business development.
Energy saving and
emission reduction . . . .
Through improving operational efficiency, reducing the use of
energy and resources, as well as emissions of pollutants and
wastes may allow us to enhance our environmental performance
and reduce the negative impact of our operation in relation to
climate change. While this may potentially incur extra cost to
comply with the increasingly stringent environmental regulatory
requirements and increase operational cost, it may positively
improve our reputation.
We report various measures that we undertake to manage and mitigate risks relating to
material ESG issues in the following.
Occupational and workplace safety
We attach great importance to occupational and workplace safety and are accredited with ISO
45001 occupational health and safety management. In order to ensure production safety, we have in
place a comprehensive and effective safety pr oduction management system, and have formulated
various standard operating procedures to regulate workplace safety management such as the ‘‘Fire
Safety Management System ’’(《消防安全管理制度》), ‘‘Safety Risk Grading Control and Hidden
Danger Investigation and Management System ’’(《安全風險分級管控和隱患排查治理管理制度》),
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‘‘Quality/Environmental/Occupational Health and Safety Management Manual ’’(《質量╱環境╱職業
健康安全管理手冊》) and the ‘‘Production Safety Emergency Management Plan ’’(《安全生產應急管
理預案》). We have established a safety production management committee with the general manager
as the responsible personnel and each department ’s safety officer as the specific responsible person.
This committee is responsible fo r implementing our safety production management system, which
adheres to the principle of ‘‘safety first, prevention first ’’.
We also attach significant importance to safety training and enhance safety awareness among
our employees. We conduct regular safety production training and daily production safety
inspections, as well as comprehensive safety ins pections once a month, to identify and rectify any
safety hazards. This approach helps to ensure the safety and well-being of employees and the public
near our production facility, and it is important for maintaining our reputation and social
responsibility.
We also strictly implement the safety productio n responsibility system, regularly conducts
safety education, training, inspection, and evaluat ion for employees, especially pre job training for
frontline production employees to understand the production process of our products, master
equipment performance, strictly standardize operating procedures, continuously improve employees’
safety production responsibility and awareness, and follow the safety concept of ‘‘accident comes
from negligence, safety comes from standardization ’’, effectively prevented the occurrence of safety
accidents. In order to standardize the management of safety incidents, reporting and assessment, we
have established a set of standards to classify safety accidents into different severity levels. The
disciplinary actions, such as penalties and y ear-end bonus deductions, against the directly
responsible person, responsible management, and responsible leader are d etermined based on the
severity of the accidents.
During the Track Record Period, we did not have any material accidents in relation to
occupational and workplace safety in the cour se of our operation. As advised by our PRC Legal
Advisor, based on our Directors’ confirmations, we were not subjec t to any administrate penalties
as a result of breach of safety related laws, rules, r egulations, or regulatory documents during the
Track Record Period and up to the Latest Practicable Date.
Employee care
We fully protect the legitimate rights and interests of employees on recruitment, dismissal,
salary, and benefits to ensure equal opportunities and create a diverse and inclusive working
atmosphere to all of our employees.
We have developed a comprehensive human resources system, which clearly lays out the
policies on remuneration, holidays, working hour s, welfare, reward, dismissal and termination of
employment contract. According to ‘‘the Labor Law of the People ’s Republic of China ’’(《中華人民
共和國勞動法》), ‘‘the Labor Contract Law of the People ’s Republic of China ’’(《中華人民共和國
勞動合同 法》), ‘‘the Employment Promotion Law of the People ’s Republic of China ’’(《中華人民
共和國就業促進法》) and other relevant laws and regulation s, we have formulated various policies
and operating procedures to regulate employment management such as the ‘‘Recruitment
Management Measures’’ (《招聘管理辦法》), ‘‘Management Measures for Employee Induction and
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Probation Period’’ (《員工入職及試用期管理辦法》), ‘‘Salary and Welfare Management Measures ’’
(《薪酬福利管理辦法》), ‘‘Attendance and Vacation Management System ’’(《考勤休假管理制度》),
‘‘Management Measures for Travel Expenses for Family Visits ’’(《探親路費管理辦法》) and other
policies to ensure the rights and interests of employees on salary, dismissal, diversification, anti-
discrimination, and other welfare policies within the company ’s systems and management processes.
We believe that our talents are an integral part of our success. We have in vested significant
resources in career development and training for our employees of all levels. See ‘‘ — Employees ’’
in this section for further details.
We also offer a comprehensive compensation and benefits package, with competitive salaries,
bonuses, maternity leave, and other allowances, o n top of social insurance and housing provident
fund contributions. We also embrace diversity an d inclusion, so all our employees enjoy equal
opportunities in all respects, ranging from recr uitment, training, welfare coverage, career and
personal development during their time with us. Besides, we will also continue to encourage a
culture of work-life balance, in order to create a positive and comfortable work environment for our
employees. Our policy is to treat all employees equally regardless of age and sex. We conduct
internal assessment, employee self-assessment to ensure the fairness of empl oyee compensation, and
motivate, attract, and retain outstanding talents through equity incentive plans. During the Track
Record Period, we were not subject to any violations of anti-discrimination and fairness principles
thereof.
Social responsibility
We are committed to contributing to the welfare of society and sharing our corporate social
responsibility. For example, we made charitable contribution on education fields to support the
child welfare, the development of Hope Primary School and university scholarship. We also
contributed to the projects of infrastructure construction and cultural construction to empower rural
revitalization and promote harmonious social development. For the years ended December 31, 2021,
2022 and 2023 and the six months ended June 30, 2024, our donation for social responsibility
amounted to RMB0.4 million, RMB2.4 million, RMB1.15 million and RMB0.6 million,
respectively.
Compliance, Business Integrity and Anti-corruption
We attach great importance to integrity and an ti-corruption and cultivate the culture of
compliance. We have always maintained a high-pressure stance against violations of disciplines and
regulations, and actively formulated the ‘‘Anti-Corruption and Anti-Bribery System’’ (《反貪污、反
賄賂制度》). We seek for legal advice in relation to our Group ’s compliance and operation from
time to time. Our internal policy includes a system of commitment to the prevention of commercial
bribery for staff in key areas, and staff in important positions are required to sign a Letter of
Commitment to Integrity with the company.
We also set up a reporting hotline for the prev ention of commercial bribery and publish the
reporting telephone number in the franchise agreement. For the whistleblower ’s report, once
verified, the whistleblower will be rewarded a ccordingly. We actively encourage employees to
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report any suspected corruption and illegal behaviors, with all reported cases being investigated
rigorously and in a timely manner. Our Group soundly implements the whistle-blower protection
mechanism, to carry out investigation of complaints and reports follow ing the principles of fairness,
impartiality and confidentiality. The whistle-blower and the reported information will be kept
strictly confidential. During the Track Rec ord Period, we have no judicial cases involving
corruption.
Responsible Supply Chain
Responsible sourcing and sound supply chai n management are essential for us to ensure
reliable product quality and sustainability along our supply chain. In order to promote sustainable
and responsible practices, our Group has formulated the ‘‘Supplier Management Measures ’’(《供應
商管理辦法》), including procurement policies, and screening, evaluation and monitoring of
suppliers. Our Group have also conducted a series of assessments and moni toring activities to
optimize product quality and their environmenta l performance. The purchasing department will
evaluate suppliers and establish a file for each supplier. The supplier file contains the ‘‘supplier
questionnaire ’’, ‘‘supplier evaluation form ’’ and the qualification documents provided by the
supplier. The supplier ’s form document specifically looks at the supplier ’s environmental issues as
well as reputational issues.
Furthermore, we categorically prohibit any occurrence that violates human rights, and the
Company has not been involved in any conflict diamond incidents. To prevent the occurrence of
such events, the Company has b ecome a member of the Shanghai Diamond Exchange and currently
procures diamonds exclusively from the Shanghai Diamond Exchange to ensure the legality and
compliance of the diamond sources.
To ensure the quality of raw materials and meet industry standards, we collaborate with
widely recognized suppliers in the industry durin g our procurement process. We have established a
supply chain approval process, through which suppl iers must provide relevant qualifications, such
as their business licenses, operation licenses, among others, and demonstrate legal compliance with
good business ethics prior to approval. Then we conduct on-site inspections of the supplier ’s work
environment and perform a comprehensive quality in spection to ensure that the raw materials fulfil
our quality requirements. Once the above processes have been passed, the Procurement Department
will eventually submit the Supplier Admissi on Process. Through effective supply chain
management, we strive to enhance business devel opment, improve operation al efficiency and drive
suppliers towards sustainable practices.
Environmental protection
We recognize that environmental protectio n has become a vital component of promoting
sustainable development. We have always been committed to improving the environment,
emphasizing energy conservation and environme ntal protection in our production and operation
processes, reducing the use of natural resources , and avoiding environmental damage caused by
excessive emissions and pollutants.
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(a) Overview of environmental protection related matters
Our production process does not produce substantial heavy pollutants, and was not named in
the ‘‘High Pollution and High Environmental Risk ’’(高污染、高環境風險) product list of the
‘‘Comprehensive Environmental Protection Catalogue (2017 Edition) ’’(《環境保護綜合名錄(2017 年
版)》) released by the Ministry of Environmental Protection ( 環境保護部). Meanwhile, our business
does not belong to any of the heavy pollution industry named in the ‘‘List of Environmental
Protection Verification Industry Classif ication Management of Listed Companies ’’(《上市公司環保
核查行業分類管理名錄》), and there are no high-risk or heavy pollution situations. During the
Track Record Period, we have strictly implemented various environmental protection measures and
complied with environmental protection laws and regulations. We have also been accredited with
ISO14001 environmental management.
We have established Safety and Environmenta l Protection Department, with specialists
responsible for the implementation and execution of environmental protectio n policies, constantly
improving the environmental management system, establishing and improving the environmental
protection control mechanism and long-term mechanism, forming the environmental protection
system, and taking the construction of ecological c ivilization and environmental protection work as
an important part of the work, so as to ensure lasting development.
According to the Environmental Protection Law of the People ’s Republic of China ( 《中華人民
共和國環境保護法》), in order to implement the policy of ‘‘comprehensive planning, technological
innovation, comprehensive utilization, scientific management, and pollution prevention and control ’’
(全面規劃、革新科技、綜合利用、科學管理、防治污染), we have in place a comprehensive and
effective environment management system and ha ve formulated various policies and operating
procedures to regulate and promote environment management such as the ‘‘Environmental
Protection Management System ’’ (《環境保護管理制度》), ‘‘Environmental Protection Target
Responsibility System’’ (《環境保護目標責任制》), ‘‘Environmental Protect ion Facility Operation
Management System ’’(《環境保護設施管理制度》), ‘‘Hazardous waste management system ’’(《危險
廢棄物管理制度》), ‘‘Three Waste Management System’’ (《三廢管理制度》) and other policies and
systems.
In addition, with the intensification of climate change and under the background of China ’s
‘‘carbon peak ’’and ‘‘carbon neutrality’’ goals, we are strengthening our focus on climate change
management and greenhouse gas emissions reduction. We have developed the ‘‘Environmental
Emergency Management System ’’(《突發環境應急管理制度》) to cope with the major risks brought
by environmental events, and we continue to optim ize the emergency management mechanism and
strengthen the training and drills in order to mitigate the operational losses caused by such events.
Meanwhile, we mitigate the transition ris ks posed by climate change by formulating
‘‘Environmental Responsibility System ’’ (《崗位環保責任制》) and ‘‘Environmental Protection
Management System ’’(《環境保護管理制度》) that requires enhanced energy-saving renovation,
thereby improving energy comprehensive utilization efficiency and reducing greenhouse gas
emissions. We have described the identification, management and mitigation of climate change in
the section of ‘‘Identification, Assessment and Management of the Risks and Opportunities for
Major ESG Issues ’’.
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(b) Nature resource use and actions taken to manage related impacts
We strive to minimize the impacts of our production and operations on the environment and
natural resources and take proactive measures and actions to minimize these impacts.
i. Energy
We endeavor to proactively conserve energy and reduce GHG emissions in response to
the government ’s initiatives. In addition to purchased el ectricity and steam for production and
operation, our production facilities consume fossil fuels such as natural gas and our fleet of
Group-owned vehicles consumes diesel and petrol. In order to reduce energy consumption and
GHG emissions, we continue to replace high energy consuming motor equipment to save
energy consumption, especially electricity consumption, and improve energy conservation
efficiency. In addition, we adhere to green op eration and implement electricity card
management system to ensure that electricity consumption is within a reasonable range of use
and avoid power waste.
ii. Water
We adhere to green operation and implement water card management system to ensure
that water consumption is within a reasonable range of use and avoid water waste. We utilize
wastewater treatment and water reuse technologi es to improve water recycling. The wastewater
is treated in the sewage treatment station a nd reused in the production process after ‘‘double-
effect evaporation — ultrafiltration ’’(雙效蒸發 — 超濾), thereby reducing the consumption of
water resources.
iii. Resource Consumption
We endeavor to reduce negative impact on the environment through our commitment to
resource saving. We actively promote the i dea of paperless workplace, and we encourage
double-sided printing of documents in our office.
I Specific production process that may cause pollution and types of pollutants emitted in
course of production and operation
As disclosed in the section headed ‘‘Our operation workflow — Production — Purification
and processing in our self-owned production facility ’’, our major production processes include
casting, hydraulic pressing, threading and weaving of gold. The major types of pollutants that may
be produced in course of our production process include the followings:
i. Sewage
This includes industrial sewage and domestic sewage, amongst which, the industrial
sewage from our gold processing was mainly pr oduced in course of the cleaning process after
polishing ( 拋光). Such industrial sewage can be used in the other production process after
processing and purification and the leftover purified water from our production will be sold to
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qualified companies. The industrial sewage from the production of hard gold and K-gold
products was mainly produced in course of gold, exhaust gas treatment device drainage, pure
water preparation wastewater, etc.;
We adopt strict sewage treatment procedures. The industrial sewage is treated in the
sewage treatment station by ‘‘PH adjustment — gold extraction (hydrazine hydrate method) —
multi-media filtration ’’ (PH調節 — 提金(水合肼法) — 多介質過濾), and reused in the
production process after ‘‘double-effect evaporation — ultrafiltration ’’(雙效蒸發 — 超濾).
Industrial sewage is received by professional third-party organizations for treatment after
sedimentation. We treat domestic wastewater for reuse and use electronic water cards to
monitor and minimize uncontrolled d ischarge of domestic wastewater.
ii. Waste gases
The waste gas generated during the process ing of hard gold and K-gold mainly consists
of the waste gas generated by the preparation of liquid gold, the organic waste gas which has
volatilized during the process of adding silver oil, the waste gas from electroforming, and the
waste gas from acid boiling. The main pollutants in the waste gas generated from the
preparation of gold water are hydrogen chloride and a small amount of ammonia.
We adhere to the concept of ‘‘source control, prevention first ’’(源頭治理、預防為主),
continuously optimize production process to reduce the impact of waste gases on the
surrounding environment. We install gas collection hoods and treatment cabinets in all waste
gas generation processes for collection and us es variable frequency fans to avoid waste gas
diffusion. Organic waste gas is treated by drying box, adsorption box, and carbonization
furnace, and then treated by three-stage spray ing treatment before reaching the standard for
discharge. Acidic waste gas is adsorbed by acid treatment equipment through ceramic
granules, condensed and recovered, and then tr eated by three-stage spraying treatment before
reaching the standard for discharge. We regularly invite third-party to test the waste gases to
ensure compliance with standards, and the re are no instances of excessive emissions.
iii. Noise
The production noise mainly comes from e mbossing machines, CNC discharge
machining machines, multifunctional engrav ing machines, pumps, exhaust systems, etc.,
which has a small impact on the surrounding environment, as the machineries are operated
inside an enclosed building;
In order to avoid the generation and spread of noise, the production shop adopts the
upper and lower layered design and installs process partitions and aluminum alloy partition
walls. The outside of the workshop is equipped with marble, and there is a cavity between the
marble and the wall, thus greatly blocking the spread of sound. In addition, the company
regularly carries out workshop noise and factory noise inspections and there are no exceeding
standards. The inspection results show that the noise generated during our production and
processing has less impact on the surrounding environment.
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iv. Solid waste
The solid waste that needs disposal mainly includes general solid waste, household
waste, hazardous waste, etc. General solid waste mainly includes waste wax, leftover
materials, raw material packaging materials, and waste cardboard boxes generated during the
jewellery processing process. Raw material packaging materials and waste cardboard boxes are
centralized and sold by us, and waste wax, leftover materials, and other materials are recycled
and reprocessed for reuse. Domestic waste i s centrally cleared and disposed of by the
environmental sanitation depa rtment. Hazardous waste includes packaging of waste chemical
raw materials, sludge from sewage treatment stations, evaporated waste salts, waste filter
cartridges, etc. is temporarily stored in a hazar dous waste warehouse and entrusted to qualified
external parties for collection, transportation, and storage.
We have established a ‘‘solid waste warehouse ’’and a ‘‘hazardous waste warehouse ’’,
which store and classify waste in different areas. Domestic waste is centrally cleared and
transported by the environmental health department, while general solid waste and hazardous
waste are regularly cleared and professionally treated by qualified units, and transfer receipts
are kept ensuring compliance. We strictly st ore and dispose of hazardous waste in accordance
with relevant standards for hazardous waste a nd implements full process management of
hazardous waste.
For the years ended December 31, 2021, 2022 and 2023 and the six months ended June
30, 2024, we have incurred costs for compliance with the applicable environmental rules and
regulations of approximately RMB306,100, RMB353,000, RMB404,300 and RMB251,900,
respectively. As advised by our PRC Legal Advisor, based on our Director ’s confirmation, we
were not subject to any administrative penal ties as a result of a breach of any relevant PRC
environmental-related laws, regulations, rules or regulatory documents during the Track
Record Period.
In the future, we expect that our costs for compliance with the applicable environmental
rules and regulations shall increase along with our overall business development, however, we
expect that the proportion of such costs against our total revenue will have a downward trend.
Metrics and targets to manage ESG-related risks
We enforce metrics and targets to manage the ESG-related risks especially on environmental
issues. To protect the environment and create an ‘‘environmentally friendly enterprise’’ to prevent
various environmental accidents, we have set a series of environmental targets.
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As our business continues to expand, we expect the absolute use of energy and discharge
volume of our waste to grow concurrently. However, we strive to minimize the discharge of wastes
and eliminate the occurrence of various major environmental pollution accidents. We are committed
to gradually adopt more environmentally frien dly measures and not discharge various types of
sewage containing harmful substa nces into domestic water bodies. In setting targets for the ESG-
related KPIs, we have taken into account the respective historical levels, the best practice from peer
industry and our future business development thoroughly and prudently with a view of balancing
business growth and environmental protection to achieve sustainable developm ent. Specifically, we
target to reduce the water, energy, GHG emissions and waste per million revenue by 5%,
respectively, by 2030 when compared to 2020. At the same time, we will continue to establish more
comprehensive ESG-related indicators and targets as we discuss with relevant stakeholders. In order
to achieve relevant environmental targets, we p romote green operation and have taken a series of
measures such as carry out energy-saving and car bon emission reduction projects, strengthen
resource use and waste management. We have described the actions taken by the group for
achieving the relevant targets in the sections of ‘‘ —Environmental, Social, Health and Work Safety
Matters — Environmental Protection — (a) Overview of environmental protection related matters ’’
and ‘‘ — Environmental, Social, Health and Work Safety Matters — Environmental Protection —
(b) Nature resource use and certain actions taken to manage related impacts — I. Specific
production process that may cause pollution and types of pollutants emitted in course of production
and operation ’’. The specific financial impact on the opera tion of actions taken for achieving the
related targets includes that help us reduce the cost of resource utilization, thereby further reducing
operational costs. The specific non-financial impact on the operation of actions taken for achieving
the related targets includes that help us effectively achieve environmental goals, improve water and
energy efficiency, and further improve production and operational efficiency. At the same time,
actions to reduce waste and GHG emissions will also minimize the negative impact of our
operations on the environment, enhance resilience to climate change risks, enhance the sustainable
development capabilities of enterprises, and shape a good image of social responsibility.
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We will collect and review our KPIs regularly to ensure that they remain appropriate to our
Group. Set forth below are our major KPIs during the Track Record Period:
(i) Resource consumption
Resource Consumption
Year ended December 31,
Six months
ended June 30,
2021 2022 2023 2024
Energy Consumption:
Purchased electricity (kWh) . . . . . 5,630,894 6,053,123 7,769,924 3,887,880
Purchased steam (tons) . . . . . . . . 2,556.34 3,529.28 2, 139.67 2,352.91
Natural Gas (cubic meters) . . . . . 43,428.56 48,608.03 1 48,177.95 120,938.50
Gasoline (Liters) . . . . . . . . . . . . 89,203.69 71,865.18 96, 507.06 52,853.66
D i e s e l( L i t e r s ) .............. 3 0 , 6 2 5 . 0 1 2 4 , 6 4 7 . 8 1 2 4 , 912.15 6,676.47
Total energy consumption
(tons of standard coal) . . . . . . . 1,211.84 1,369.80 1, 561.31 1,006.20
Total energy consumption per
million revenues (tons of
standard coal/million reve nue) . . 0.07 0.09 0.08 0.10
Water Consumption (tons) . . . . . . 74,750 74,667 81,647 35,732
Water consumption per million
revenues (tons/million rev enue) . 4.43 4.75 4.04 3.58
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(ii) Emissions including greenhouse gas emissi ons, sewage, waste gases and solid waste
Years ended December 31,
Six months
ended June 30,
Emission 2021 2022 2023 2024
Scope 1 (direct emissions)
(tons CO 2 equivalent) . . . . . . . 373.59 330.72 603.21 398.42
Scope 2 (indirect emissions)
(tons CO 2 equivalent) . . . . . . . 4,269.44 4,912.97 5, 316.86 2,164.77
Total greenhouse gas emissions
(tons CO 2 equivalent) . . . . . . . 4,643.04 5,243.69 5, 920.07 2,563.19
Emissions of greenhouse gas per
million revenue (tons CO 2
equivalent/million reve nue) . . . . 0.28 0.33 0.29 0.26
Sewage discharge (m 3) . . . . . . . . 74,823.20 75,253.40 84, 713.60 38,311.00
Sewage discharge per million
revenue (m 3/million revenue) . . 4.44 4.79 4.19 3.84
Waste Gas:
H C lg a s( t o n s ).............. 0 . 0 3 3 0 . 0 5 8 0 . 0 7 7 0 . 0 5 6
Ammonia (tons) . . . . . . . . . . . . . 0.044 0.057 0.046 0.035
V O C s( t o n s ) ............... 0 . 0 8 7 0 . 0 5 5 0 . 1 0 6 0 . 0 9 3
NOx emissions (tons) . . . . . . . . . 0.081 0.091 0.277 0.226
Waste gas per million revenue
(kg/million revenue) . . . . . . . . 0.015 0.017 0.025 0.041
Hazardous waste generated during
processing and manufacturing
( t o n s ) .................. 1 . 5 0 4 1 . 5 5 7 1 . 3 9 4 1 . 1 2 2
Hazardous waste generated during
processing and manufacturing
per million revenue
(kg/million revenue) . . . . . . . . 0.089 0.099 0.07 0.11
Non-hazardous waste (tons) . . . . . 154.33 153.81 173.54 90.36
Non-hazardous waste per million
revenue (kg/million reve nue) . . . 9.15 9.78 8.59 9.05
In addition, we identify our ESG-related KPI s to include social issues. We attach great
importance to corporate social responsibility, and we are dedicated to providing more contributions
and value to society. We target to providing fair and equal treatment and maintain a healthy and
safe environment for all of our employees. See ‘‘Occupational and workplace safety’’ , ‘‘Employee
care ’’and ‘‘Social responsibility ’’in these sections for further details.
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COMPLIANCE AND LEGAL PROCEEDINGS
Legal Proceedings
We may from time to time be involved in legal proceedings or other disputes in the ordinary
course of business. During the Track Record Period and up to the Latest Practicable Date, we had
not received material complaints from consumers and we were not the defendant of any actual or
pending litigation cases, arbitrations or administrative proceedings (including any bankruptcy or
receivership proceedings), nor were we aware of any litigation, claim or arbitration to be pending or
threatened against any member of our Group that we believe would have material adverse effect on
our business, financial conditions, r esults of operations or reputations.
Non-Compliance
Inadequate Contribution to the Social Insurance Plan and Housing Provident Fund
During the Track Record Period, we and certain subsidiaries of our Group did not pay social
insurance and housing provident fund in full for employees based on their actual wages in
accordance with PRC laws. For each of the years ended December 31, 2021, 2022 and 2023 and the
six months ended June 30, 2024, the aggregate amount of social insurance and housing provident
fund that we had failed to pay was estimated to be RMB7.0 million, RMB9.3 million, RMB10.6
million and RMB5.5 million.
Our Directors confirm that the non-compliance was mainly due to (i) failure to make timely
contribution upon the hiring of new employees; (ii) a number of our employees had already
participated in comparable new local rural social insurance plans, rural cooperative medical
schemes or other similar schemes; and (iii) a number of our employees voluntarily forfeit to
participate in the social welfare schemes.
As advised by our PRC Legal Advisor, the rel evant PRC authorities may demand that we pay
the outstanding social insurance contributions wi thin a stipulated deadline and we may be liable to
a late payment fee equal to 0.05% of the outstanding amount for each day of delay; if we fail to
make such payments within the prescribed period, we may be liable to a fine of one to three times
the amount of the outstanding contributions. The maximum amount of fine we may be liable in
relation to such outstanding contributions are expected to be approximately RMB13.3 million,
RMB18.0 million, RMB19.1 million and RMB10.4 million for each of the years ended December
31, 2021, 2022 and 2023 and the six months ended June 30, 2024. Our PRC Legal Advisor have
also advised us that, under the relevant PRC laws and regulations, we may be ordered to pay the
outstanding housing provident fund contributions within a prescribed time period, and if we fail to
make such payments within the prescribed p eriod, application may be made to a people ’s court in
the PRC for compulsory enforcement.
With a view to prevent potential future non-compliances, we plan to implement various
enhanced internal control measures including (i) to maintain regular communication with the
relevant PRC authorities to ensure our contributions calculation and payment methods comply with
relevant rules and regulations, (ii) to prepare and distribute internally compliance policies with
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respect to social insurance plans and housing provident funds, (iii) to assign designated personnel
to handle routine administrative matters and legal department staff to mo nitor the status of our
social insurance and housing provident fund contributions and report to our senior management on
a regular basis, (iv) to consult external legal ad viser regularly to assess whether we are subject to
relevant risks of non-compliance, as well as (v) to o rganise regular legal compliance training on the
relevant laws and regulations to our employees to enhance their awareness of and encourage their
participation in the social welfare scheme. Our Directors believe that our enhanced internal control
measures to be adopted will be sufficient for our current operations and ensure on-going
compliance with the relevant rules and regulat ions. Our management confirmed that during the
Track Record Period and up to the Latest Practicable Date, our Group were not subject to any
administrative penalty imposed by any competent au thority as a result of inadequate contribution to
the social insurance plan and housing provident fund.
As advised by our PRC Legal Advisor, and our Directors are of the view based on our PRC
Legal Advisor ’s advice, the risk of us being subject to fines and penalties as a result of the
aforementioned non-compliance is low with consideration to the following factors:
(i) we were not subject to any administrative penalties in respect of the inadequate
contribution to the social insurance plan and housing provident fund during the Track
Record Period and up to the Latest Practicable Date;
(ii) during the Track Record Period, we and our subsidiaries each individually (i) did not
have shortfall of social insurance and housing provident fund contributions; or (ii) did
not have any records of non-compliance; or (iii) had not been subject to any
administrative penalties, based on interviews with regulatory bodies, confirmations from
relevant authorities, credit report obtaine d from searches and online searches on relevant
websites; and
(iii) according to the relevant PRC laws and regulations, (i) all the local authorities
responsible for the collection of social insurance are prohibited to conduct centralized
self-collection of historical unpaid social in surance contributions from enterprises; and
(ii) that tax authorities at all levels may not organize centralized self-collection of arrears
of taxpayers including private enterprises in the previous years.
Our Controlling Shareholders Mr. Wang Zhongshan, Ms. Zhang Xiuqin, Mr. Wang Guoxin
and Ms. Wang Na have also undertaken to indemnify us against all of such outstanding shortfalls,
penalties or damages in the event that we are required to pay any of the abovementioned
outstanding contributions, or any overdue ch arges or penalties imposed by the relevant PRC
authorities. Based on the above, no provisions were made in respect of the aforesaid underpayment
of social insurance and housing provident fund.
Save as disclosed above, our Directors confi rm that we have complied with the relevant PRC
laws and regulations in all material respects and we were not subject to any ma terial administrative
penalties as a result of a breach of the relevant PRC laws and regulations during the Track Record
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Period and as of the Latest Practicable Date. Our Directors confirm that the incompliance with
relevant PRC laws and regulations have no material adverse impact on the Company ’s financial
performance and business operation.
MATTERS IN RELATION TO CYBERSECURITY
During the Track Record Period, our Group had not suffered any material attacks from hackers
or mal-ware, material sensitive data leakage, or suffered from any material loss from cyber security
issues. According to the ‘‘Administration Regulations on Cyber Data Security (Draft for Comments)
(《網絡數據安全管理條例(徵求意見稿)》)’’and the ‘‘Measures for Cyber Security Review ( 《網絡安
全審查辦法》)’’data is categorized into general data, important data, and core data. We only engage
in data processing activities required in rela tion to our business operations and internal
management. The data we collect and store primarily consists of personal information. Such data
collection generally does not cons titute data concerning national security as it is regarded as a type
of general data.
Regarding the aforementioned collected and stored data, we have implemented security
measures in accordance with the requirements of the Cybersecurity Law, Data Security Law, and
Personal Information Protection Law, fulfilling our compliance obligations. We have conducted
impact assessments on the protection of sensitive personal information in specific scenarios. We
have established regulations including security management, personal information protection, and
emergency response plans for personal information security incidents. Through technical measures
such as data encryption, network controls, and system backups, as well as the implementation of
appropriate network and data security technologies in line with our operations, we can effectively
prevent the leakage, tampering, and loss of personal information. To establish reasonable
permissions for personal information processing, we have appointed a data security officer and a
personal information protection officer and established a data management organizational structure.
Additionally, we plan to provide data security training to our employees after this issuance
application to enhance their awareness of network and data security.
BUSINESS
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OVERVIEW
Our Company was established in the PRC on S eptember 8, 2000 as a limited liability
company and was further converted into a joint stock limited company on June 29, 2018. As of the
Latest Practicable Date, our Company was owned as to approximately 28.27% by Mr. Wang
Zhongshan, 26.19% by Ms. Zhang Xiuqin, 9.60% by Jinmeng Partnership, 3.93% by Jinyuan
Partnership, 3.93% by Jinlong Partnership and 1 7.46% by Tianjin Yuanjinmeng, which was owned
as to 50% by Mr. Wang Guoxin and 50% by Ms. Wang Na. Ms. Zhang Xiuqin is the spouse of Mr.
Wang Zhongshan. Mr. Wang Guoxin is the son of Mr. Wang Zhongshan and Ms. Zhang Xiuqin,
and Ms. Wang Na is the daughter of Mr. Wang Zhongshan and Ms. Zhang Xiuqin. Mr. Wang
Guoxin and Ms. Wang Na are accustomed to take instructions from Mr. Wang Zhongshan. See
‘‘Directors, Supervisors and Senior Management ’’ for details. Jinmeng Partnership, Jinyuan
Partnership and Jinlong Partners hip are limited partnerships established in the PRC and are our
Employee Shareholding Platforms. Ms. Zhang Xiuqin is the general partner of Jinyuan Partnership
and Jinlong Partnership. Mr. Wang Zhongshan is the general partner of Jinmeng Partnership. The
voting rights attaching to the Shares held by Jinyuan Partnership, Jinlong Partnership and Jinmeng
Partnership in our Company are exercised by their respective general partners, who are responsible
for daily management of the partnerships ’ external investments pursuant to the respective
partnership agreements. Mr. Wang Guoxin and Ms. Wang Na are the limited partners of Jinyuan
Partnership. Mr. Wang Zhongshan, Ms. Zhang Xiuqin, Mr. Wang Guoxin, Ms. Wang Na, Jinmeng
Partnership, Jinyuan Partnership, Jinlong Partnership and Tianjin Yuanjinmeng, as a group of
Controlling Shareholders, were col lectively entitled to exercise the voting rights of approximately
89.39% of the total registered capital of our Company as of the Latest Practicable Date. See
‘‘Substantial Shareholders ’’and ‘‘History, Development and Corporate Structure’’ in this prospectus
for details.
Immediately following completion of the Global Offering, Mr. Wang Zhongshan, Ms. Zhang
Xiuqin, Mr. Wang Guoxin, Ms. Wang Na, Jinmeng Partnership, Jinyuan Partnership, Jinlong
Partnership and Tianjin Yuanjinmeng will collect ively be entitled to exercise the voting rights of
approximately 75.00% of the total issued share c apital of our Company assuming that the Over-
allotment Option is not exercised and will collect ively be entitled to exercise the voting rights of
approximately 73.23% of the total issued share capital of our Company assuming the Over-
allotment Option is exercised in full and will remain as a group of Controlling Shareholders upon
Listing.
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 Cont rolling Shareholders and their respective close
associates after Listing.
Management independence
Our daily operational and management decisions are made by our Board and our senior
management. Our Board comprises four executive Directors and four independent non-executive
Directors. See ‘‘Directors, Supervisors and Senior Management ’’in this prospectus for details.
RELATIONSHIP WITH OUR CONTROLLING SHAREHOLDERS
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Each of our Directors is aware of his/her fiduciary duties as a Director which require, among
other things, that he/she must act for the benefit of and in the best interests of our Company and no
conflict between his/her duties as a Director and hi s/her personal interests shall exist. In the event
that there is a potential conflict of interest arising out of any transaction to be entered into between
our Company and our Directors or their respective clo se associates, the interested Director(s) shall
abstain from voting on any Board resolutions approving any contract or arrangement or any other
proposal in which he/she or any of his/her close as sociates has a material interest and shall not be
counted in the quorum present at the relevant Boa rd meeting. In addition, we believe that our
independent non-executive Directors can bring independent judgement to the decision-making
process of our Board. Our Board has a balanced composition of executive Directors and
independent non-executive Directors which ensures the independence of our Board in making
decisions affecting our Company. Specifically, (a ) our independent non-executive Directors are not
associated with our Controlling Shareholders group or each of their associates; (b) our independent
non-executive Directors account for over one-th ird of the Board; and (c) our independent non-
executive Directors individually and collectively possess the requisite knowledge and experience as
independent directors of listed companies and will be able to provide professional and experienced
advice to our Company. We will establish corporate governance measures and adopt sufficient and
effective control mechanisms to manage conflicts of interest, if any, between our Group and our
Controlling Shareholders group, which would support our independent management.
The daily operation of our Group is carried out by an experienced management team. We have
the capabilities and personnel to perform all essentia l administrative functions, including financial
and accounting, human resources, business m anagement and research and development on a
standalone basis.
The table below sets forth certain information about the Directors who also hold positions in
the Controlling Shareholders:
Name of Director Roles held in the Controlling Shareholders
Mr. Wang Zhongshan
(executive Director and
chairman)
. Executive director, general manager and legal
representative of Tianjin Yuanjinmeng
. General partner of Jinmeng Partnership
Ms. Zhang Xiuqin
(executive Director and
vice chairman)
. General partner of Jinyuan Partnership
. General partner of Jinlong Partnership
Save as disclosed above, there is no overlap of the management team of the Controlling
Shareholders ’ and ours.
Given that (i) Tianjin Yuanjinmeng was established for investment holding purpose; and (ii)
Jinmeng Partnership, Jinyuan Partnership and Jinlong Partnership are our Employee Shareholding
Platforms, Mr. Wang Zhongshan and Ms. Zhang Xiuqin will be able, and has undertaken, to devote
RELATIONSHIP WITH OUR CONTROLLING SHAREHOLDERS
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--- page 400 ---
all of his/her time and attention to the development strategy and strategic planning and business of
our Group. In addition, there are sufficient non-overlapping Directors and senior management who
are independent from our Controlling Shareholders a nd their respective close associates and possess
relevant experience to ensure that the Board is able to perform its functions properly.
Based on the above, our Directors are satisfied that the Board as a whole, together with our
senior management team, is able to perform the managerial role in our Group independently.
Operational independence
We have full rights, hold all relevant licenses, permits and qualifications, have sufficient
capital and employees necessary to make all deci sions on, and to carry out, our own business
operation independently of our Controlling Share holders and their respective close associates and
will continue to do so after Listing. We have our ow n accounting and financial department, human
resources and administration department, internal control department and technology department.
We have also established a set of internal control procedures and adopted corporate governance
practices to facilitate the effective operation of our business.
Intellectual property rights and licenses required for operation
We are not reliant on intellectual property right s (such as patents, trademarks or copy rights)
owned by our Controlling Shareholders or their res pective close associates. In addition, we hold
and enjoy the benefit of all relevant licences and p ermits material to the operation of our business.
Access to customers
We conduct our own sales and marketing through our own sales and marketing team. Our
Group has a large and diversified base of customers that are independent of our Controlling
Shareholders and/or their respective close associates.
Operational facilities
Save as disclosed in the ‘‘Connected Transactions ’’section, all the prop erties and facilities
necessary to our business operations are owned by us or leased from Independent Third Parties.
Employees
As of the Latest Practicable Date, substantially all of our full-time employees were recruited
independently and primarily through open market and by referral.
Transactions with our Controlling Shareholders
Save as disclosed in the ‘‘Connected Transactions ’’section, our Directors do not expect that
there will be any transaction between our Group and our Controlling Shareholders or their
respective associates upon or after Listing. In add ition, none of our Controlling Shareholders and
Directors or their respective close associates ha s been our major suppliers or customers during the
Track Record Period which provide any critical serv ices or materials for our business operation.
RELATIONSHIP WITH OUR CONTROLLING SHAREHOLDERS
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Based on the above, our Directors believe that we are able to operate independently from our
Controlling Shareholders and their respective close associates. Our Directors confirmed that our
Group will be able to operate independently from our Controlling Shareholders and each of his or
her or its close associates after Listing.
Financial independence
We have established our own finance depart ment with a team of financial staff, who are
responsible for financial control, accounting, repo rting, group credit and internal control function of
our Company, independent from our Controlling S hareholders. We can make financial decisions
independently and our Controlling Shareholders do not intervene with our use of funds. We have
also established an independent audit system, a st andardised financial and accounting system and a
complete financial management system. In addition, we have been and are capable of obtaining
financing from Independent Third Parties.
During the Track Record Period, Mr. Wang Zhongshan and Ms. Zhang Xiuqin (the ‘‘CP
Guarantors ’’) had been providing personal guarantees/mortgages (the ‘‘CP Guarantees ’’) as
security for certain of our Group ’s banks loans, acceptance bills, lease financing and gold loans
(collectively, the ‘‘Guaranteed Loans ’’), and all of such CP Guarantees will be terminated and the
relevant banks loans, acceptance bills and gol d loans will be guaranteed by our Company and/or
members of our Group upon Listing. As of the Latest Practicable Date, we had a total outstanding
gold loans with principal amount of RMB484,0 28,360 and total outstanding bank loans and
acceptance bills with principal amount of RMB428,000,000 (collectively, the ‘‘Guaranteed
Loans ’’) from seven lenders guaranteed by the CP Guarantors, details of which are set forth below:
Number Type Lender Borrower
Principal
amount
Interest
rate
Commencement
date
Maturity
date
(RMB) (%)
1 Bank loan Bank A Our Company 120,000,000.00 4.70 20/6/2024 17/6/2025
Bank loan Shandong Mokingran 20,000,000.00 4.60 20/8/2024 18/2/2025
Bank loan Shandong Mokingran 50,000,000.00 4.70 10/7/2024 9/12/2024
Bank loan Shandong Mokingran 30,000,000.00 4.70 24/4/2024 22/4/2025
Bank loan Shandong Mokingran 30,000,000.00 4.70 22/5/2024 21/5/2025
2 Bank loan Bank X Our Company 20,000,000.00 4.50 29/8/2024 24/11/2024
3 Bank loan Bank E Shandong Mokingran 50,000,000.00 3.25 27/6/2024 25/6/2025
Bank loan Shandong Mokingran 80,000,000.00 4.15 18/12/2023 11/12/2024
Bank loan Shandong Mokingran 28,000,000.00 4.15 4/1/2024 28/12/2024
4 Gold loan Bank G Shandong Mokingran 43,506,000.00 4.30 4/3/2024 26/2/2025
Gold loan Shandong Mokingran 121,314,600.00 1.20 27/5/2024 27/11/2024
5 Gold loan Bank H Shandong Mokingran 74,964,000.00 4.40 7/3/2024 7/3/2025
6 Gold loan Bank J Shandong Mokingran 152,109,900.00 3.50 19/4/2024 14/11/2024
7 Gold loan Bank I Shandong Mokingran 92,133,860.00 4.50 20/8/2024 20/2/2025
We consider that an early discharge of the above guarantees is not in the best interests of our
Group and our Shareholders as a whole, as it would incur unnecessary additional costs, expenses
and time to refinance all or part of the Guaranteed Loans before their respective maturity dates. To
RELATIONSHIP WITH OUR CONTROLLING SHAREHOLDERS
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our best knowledge, it is local market practice an d generally required by commercial banks in the
PRC to obtain personal guarantees by de facto contro ller(s) of private companies before providing
any loan/facility.
As of the Latest Practicable Date, we have obtained letters from all lenders of the Guaranteed
Loans (collectively, ‘‘Consent Letters ’’and each a ‘‘Consent Letter ’’), pursuant to which (i) the
lenders agreed in principle to replace the CP Guarantees with guarantees/mortgages to be provided
by our Company and/or members of our Group upon Listing, if such corporate guarantees/
mortgages meet the guarantee requirements of the relevant bank and/or if we provide necessary risk
mitigation measures recognized by the relevant bank; (ii) the lender agreed to report to its superior
to release the CP Guarantees and to replace the CP Guarantees with guarantee/mortgage to be
provided by our Company and/or members of our Group and recognized by the lender upon Listing
if the corporate guarantee/mortgage meet the guarantee requirement of the lender; or (iii) the
lenders agreed to release the CP Guarantees and to replace the CP Guarantees with guarantees to be
provided by our subsidiary(ies) or patent rights pl edges. Should we fail to complete the Listing, we
are required to provide additional guarantees from our Controlling Shareholders.
To our best knowledge, commercial banks in the PRC may not request de facto controller(s)
of public companies to provide personal guarantees as market practice. As such, we believe that we
are able to obtain new financings or extend ex isting financings from commercial banks on
comparable terms without guarantee and security from our Controlling Shareholders group
following the Listing. Upon completion of the Global Offering, we do not expect to rely on any
new guarantee, loan or other financial assista nce from the Controlling Shareholders group.
Save as disclosed above, as of the Latest Practicable Date, there were no other loans, advances
or balances due to and from our Controlling Shareh olders and their respect ive close associates
which have not been fully settled.
As of the Latest Practicable Date, we did not provide any guarantee or mortgage in favour of
our Controlling Shareholders and th eir respective clo se associates.
Based on the above, our Directors are satisfied that we are able to maintain financial
independence from our Controlling Sharehold ers and their respective close associates.
RELATIONSHIP WITH OUR CONTROLLING SHAREHOLDERS
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DELINEATION OF BUSINESSES
No competition and clear delineation of business
According to the prospectus of China National Gold Group Gold Jewellery Co., Ltd* ( 中國黃
金集團黃金珠寶股份有限公司, ‘‘China Gold Jewellery ’’), which is listed on the Shanghai Stock
Exchange (stock code: 600916), Ms. Zhang Xiuqin subscribed for 4.56% interests in Longkou
Caifeng Juxin Commerce Center (Limited Partnership)* ( 龍口彩鳳聚鑫商貿中心(有限合夥),
‘‘Caifeng Juxin’’ ), formerly known as Beijing Caifeng Jinxin Commerce Center (Limited
Partnership)* ( 北京彩鳳金鑫商貿中心(有限合夥)), as a limited partner. Caifeng Juxin is an
investment platform established by certain fra nchisees of China Gold Jewellery and held 5.76%
equity interests in China Gold Jewellery as of S eptember 30, 2023. China Gold Jewellery is mainly
engaged in, among others, research and development, processing, wholesale and sales of gold,
silver, and jewellery. According to Rule 8.10 of the Listing Rules, an interest in an excluded
business may consist of (i) where the business is conducted through a company, an interest as a
director (other than an independent non-executive director) or a substantial shareholder of such
company; or (ii) where the business is conducted through a partnership, an interest as a partner in
such partnership. Ms. Zhang Xiuqin is neither a director nor a substantial shareholder of China
Gold Jewellery. Caifeng Juxin is solely an invest ment platform and China Gold Jewellery does not
conduct its business through such investment platform. Furthermore, Ms. Zhang Xiuqin has
minority interests in Caifeng Juxin and has no control over Caifeng Juxin as a limited partner. Our
Group had no business dealings with and did not conduct any transaction with China Gold
Jewellery during the Track Record Period and up to the Latest Practicable Date. Based on the
above, our Directors believe that the risk of bus iness competition and consequential effect to
commercial decision-making are fairly low and th e indirect interests held by Ms. Zhang Xiuqin in
China Gold Jewellery through Caifeng Juxin do not constitute excluded business under Rule 8.10 of
the Listing Rules.
Save as disclosed above, as of the Latest Practicable Date and so far as our Directors are
aware, (1) apart from the interest in our Group, none of our Controlling Shareholders and their
respective close associates was engaged or had any interest in any business which, directly or
indirectly, competes or may compete with the business of our Group, which would require
disclosure under Rule 8.10 of the Listing Rules; and (2) none of our Directors had any interest in
any business which competes or is likely to compete, either directly or indirectly, with the business
of our Group, which would require disclosure under Rule 8.10 of the Listing Rules.
Mr. Wang Zhongshan ’s brother and sister and their respective family members engage in or
exercise control over certain business which may compete with our business ( ‘‘Other Family-
Owned Business ’’). Our Group, our Controlling Shareholders and our Directors do not conduct any
transaction with Other Family- Owned Business. Furthermore, our Group, Controlling Shareholders
and our Directors do not have any financial or other interests in Other Family-Owned Business.
Other Family-Owned Business does not constitute competing business which would require
disclosure under Rule 8.10 of the Listing Rules.
RELATIONSHIP WITH OUR CONTROLLING SHAREHOLDERS
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--- page 404 ---
NON-COMPETITION AGREEMENT
To ensure that competition does not develop between us and other business activities and/or
interests of our Controll ing Shareholders, each of our Controlling Shareholders (collectively, the
‘‘Covenantors ’’and each, a ‘‘Covenantor ’’) has commercially agreed and has entered into a non-
competition agreement with our Company (the ‘‘Non-Competition Agreement ’’) in favour of our
Company (for ourselves and as trustee for the benefit of each of our subsidiaries from time to time)
on November 19, 2024, pursuant to which each of the Covenantors has, among other things,
irrevocably and unconditionally undertaken, joi ntly and severally, with our Company that at any
time during the Relevant Period (as defined below), the Covenantor shall not, and shall procure that
its/his/her close associates (other than members of our Group) shall not in the PRC and in Hong
Kong, directly or indirectly, carry on, engage in, inv est in, participate in, attempt to participate in,
render any services to, provide any financial supp ort to or otherwise be involved in or interested in,
whether alone or jointly with another person and whether directly or indirectly or on behalf of or to
assist or act in concert with any other person, the research, development, manufacturing and sales
of jewellery products and any other business or investment activities in the PRC and in Hong Kong
which are the same as, similar to or in competition or likely to be in competition with the business
carried on or contemplated to be carried on by an y member of our Group from time to time (the
‘‘Restricted Business ’’).
The above restrictions do not prohibit any of the Covenantors and its/his/her close associates
(excluding members of our Group) from:
(a) holding any securities of any companies which conducts or is engaged in any Restricted
Business through their interests in our Group;
(b) undertaking project(s) or otherwise be involved in any of the Restricted Business
provided that the project or business opportunity has been first offered to our Group, and
our Group has not taken it up;
(c) through acquiring or holding any investment or interest in units or shares of any
company, investment trust, joint venture, p artnership or other entity in whatever form
which engages in any Restricted Business where such investment or interest does not
exceed 10% of the issued shares of such entity provided that (1) such investment or
interest does not grant the Covenantors or th eir respective close associates any right to
control the composition of the board of direct ors or managers of such entity, (2) none of
the Covenantors or their respective close associates control the board of directors or
managers of such entity and (3) such investment or interest does not grant the
Covenantors or their respective close associates any right to participate directly or
indirectly in such entity.
RELATIONSHIP WITH OUR CONTROLLING SHAREHOLDERS
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--- page 405 ---
Each of the Covenantors has also undertaken to refer, or to procure the referral of, any
investment or commercial opportunities relating to any Restricted Business (‘‘ New Business
Opportunities ’’and each, a ‘‘New Business Opportunity ’’) to us (for ourselves and as trustee for
the benefit of each of our subsidiaries from time to time) in the following manner:
. As soon as it/he/she becoming aware of any N ew Business Opportunity, give written
notice (the ‘‘Offer Notice ’’) to us identifying the target company (if relevant) and the
nature of the New Business Opportunity, detailing all information available to it/him/her
for us to consider whether to pursue such New Business Opportunity (including details
of any investment or acquisition costs and the contact details of the third parties offering,
proposing or presenting the New Business Opportunity to it).
. Our Company shall, as soon as practicable an di na n yc a s ew i t h i n3 0b u s i n e s sd a y sf r o m
the receipt of the Offer Notice (the ‘‘Offer Notice Period ’’) notify the relevant
Covenantor in writing of any decision taken to pursue or decline the New Business
Opportunity. During the Offer Notice Period, our Company may negotiate with the third
party offering it/him/her, proposing or presenting the New Business Opportunity and the
relevant Covenantor shall use its/his/her b est endeavours to assist us in obtaining such
New Business Opportunity on the same or more favourable terms. Our Company is
required to seek approval from our independent non-executive Directors who do not have
a material interest in the matter for consideration as to whether to pursue or decline the
New Business Opportunity, and that the appointment of an independent financial advisor
to advise on the terms of the transaction i n the subject matter of such New Business
Opportunity may be required.
. The relevant Covenantor may, at its/his/her absolute discretion, c onsider extending the
Offer Notice Period as appropriate.
. The relevant Covenantor shall be entitled to but shall not be obliged to carry on, engage,
invest, participate or be interested (economically or otherwise) in the New Business
Opportunity (whether individually or jointly with another person and whether directly or
indirectly or on behalf of or to assist any other person) on the same, or less favourable,
terms and conditions in all material respects as set out in the Offer Notice if:
(i) it/he/she has received a written notice from us declining the New Business
Opportunity; or
(ii) it/he/she has not received any written notice from us of our decision to pursue or
decline the New Business Opportunity within 30 business days from our receipt of
the Offer Notice, or if it/he/she has extended the Offer Notice Period, within such
other period as agreed by it, in which case our Company shall be deemed to have
declined the New Business Opportunity.
RELATIONSHIP WITH OUR CONTROLLING SHAREHOLDERS
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--- page 406 ---
. If there is a change in the nature or proposal of the New Business Opportunity pursued
by the relevant Covenantor, it/he/she shall refer the New Business Opportunity as revised
and shall provide to us details of all available information for us to consider whether to
pursue the New Business Opportunity as revised.
When considering whether or not to pursue any New Business Opportunities, our independent
non-executive Directors will form their views bas ed on a range of factors, including but not limited
to, the estimated profitability , investment value and permits and approval requirements. The
Covenantors, for themselves and on behalf of their close associates (except any members of our
Group), have also acknowledged that our Company may be required by the relevant laws,
regulations and rules and regulatory bodies to disc lose, from time to time, information on the New
Business Opportunities, including but not limite d to disclosure in public announcements or annual
reports of our Company our decisions to pursue or decline the New Business Opportunities, and
have agreed to disclose to the extent necessary to comply with any such requirements.
Under the Non-Competition Agreement, each of the Covenantors has further irrevocably and
unconditionally undertaken jointly and severally, with us the following:
(i) the Covenantors shall provide, and shall procure their 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 our
independent non-executive Directors, subject to any relevant laws, rules and regulations
or any contractual obligations, to enable them to review the Covenantors ’ and their close
associates ’ (other than members of our Group) co mpliance with the Non-Competition
Agreement, and to enable the independent non-executive Directors to enforce the Non-
Competition Agreement;
(ii) without prejudicing the generality of paragraph (i) above, the Covenantors shall provide
to us with an annual declaration for inclusion in our annual report, in respect of their
compliance with the terms of the Non-Competition Agreement;
(iii) the Covenantors have agreed and authorised us to disclose decisions on matters reviewed
by the independent non-executive Directors relating to the compliance and enforcement
of the Non-Competition Agreement, either through our annual reports or by way of
public announcements; and
(iv) each of the Covenantors agrees to indemnify us from and against any and all losses,
damages, claims, liabilities, costs and expe nses (including legal costs and expenses)
where we may suffer or incur as a result of any failure to comply with the terms of the
Non-Competition Agreement by the Covenantors or any of their respective close
associates.
Our Company will disclose the decisions with basis on matters reviewed by our independent
non-executive Directors relating to the compliance with and enforcement of the Non-Competition
Agreement either in the annual report of our Co mpany or by way of announcement to the public.
RELATIONSHIP WITH OUR CONTROLLING SHAREHOLDERS
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--- page 407 ---
For the purposes of the above, the ‘‘Relevant Period’’ means the period commencing from the
Listing Date and shall expire on the earlier of (i ) the date when the Covenantors and any of their
close associates, cease to hold, or otherwise be interested in, 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 or
(ii) the date on which our Shares cease to be listed on the Stock Exchange (except for temporary
suspension of trading of our Shares).
CORPORATE GOVERNANCE MEASURES
Our Directors believe that there are adequate corporate governance measures in place to
manage the potential conflict of interests between our Controlling Shareholders and our Group and
to safeguard the interests of the Shareholders taken as a whole for the following reasons:
. the independent non-executive Directors will review, on an annual basis, the compliance
with non-competition undertakings by our Controlling Shareholders under the Non-
Competition Agreement;
. our Controlling Shareholders shall provide all information requested by our Company
which is necessary for the annual review by th e independent non-executive Directors and
the enforcement of the Non-Competition Agreement;
. our Company will disclose decisions and related basis on matters reviewed by the
independent non-executive Directors (including all rejections by our Company of New
Business Opportunities that have been referred from our Controlling Shareholders)
relating to the compliance with and enforceme nt of the non-competition undertakings by
our Controlling Shareholders under the Non-Competition Agreement in the annual
reports of our Company or by way of public announcements;
. our Controlling Shareholders will make annual statements on compliance with the Non-
Competition Agreement in our annual reports, which is consistent with the principles of
making disclosure in the corporate governance report of the annual report under the
Listing Rules;
. as part of our preparation for the Global Offering, we have amended our Articles of
Association to comply with the Listing Rules . In particular, our Articles of Association
provide that, unless otherwise provided, a Director shall not vote on any resolution
approving any contract or arrangement or an y other proposal in which such Director or
any of his/her close associates has a material interest nor shall such Director be counted
in the quorum present at the meeting;
. a Director with material interests shall make full disclosure in respect of matters that
conflict or potentially conflict with our inter est and absent himself/herself from the Board
meetings on matters in which such Director or any of his/her close associates have a
RELATIONSHIP WITH OUR CONTROLLING SHAREHOLDERS
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--- page 408 ---
material interest, unless the attendance or participation of such Director at such meeting
of the Board is specifically requested by a majority of the independent non-executive
Directors;
. we are committed that our Board should include a balanced composition of executive and
independent non-executive Directors. We have appointed four independent non-executive
Directors and we believe our independent non-executive Directors possess sufficient
experience and they are free of any business or other relationship which could interfere
in any material manner with the exercise of their independent judgement and will be able
to provide an impartial, external opinion to protect the interests of our public
Shareholders. See ‘‘Directors, Supervisors and Senior Management — Directors —
Independent Non-executive Directors ’’for details;
. in the event that our independent non-executive Directors are requested to review any
conflicts of interests circumstances between our Group on the one hand and our
Controlling Shareholders and/or our Director s on the other, our Controlling Shareholders
and/or our Directors shall provide our independent non-executive Directors with all
necessary information and our Company shall disclose the decisions of our independent
non-executive Directors (including why business opportunities referred to it by our
Controlling Shareholders were not taken up) either through its annual report or by way of
announcements;
. our Directors (including the independent non-executive Directors) will seek independent
and professional opinions from external advisors at our Company ’s cost as and when
appropriate in accordance with the Corporate Governance Code and Corporate
Governance Report as set out in Appendix C1 to the Listing Rules;
. any transactions between our Company and its connected persons shall be in compliance
with the relevant requirements of Chapter 14A of the Listing Rules, including the
announcement, annual reporting and independent shareholders ’ approval requirements (if
applicable) under the Listing Rules; and
. we have appointed Rainbow Capital (HK) Limited as our compliance advisor, which will
provide advice and guidance to us in respect of compliance with the applicable laws and
the Listing Rules, including various requirements relating to directors ’ duties and
corporate governance.
Further, any transaction that is proposed between our Company and the Controlling
Shareholders and/or our Directors and their resp ective associates will be required to comply with
the requirements of the Listing Rules, including, where appropriate, the reporting, annual review,
announcement and independent Shareholders ’ approval requirements.
Based on the above, our Directors are satisfied that sufficient corporate governance measures
have been put in place to manage conflicts of int erest between our Group and our Controlling
Shareholders and/or other Directors to protect minority Shareholders ’ rights after Listing.
RELATIONSHIP WITH OUR CONTROLLING SHAREHOLDERS
– 398 –


--- page 409 ---
Following the Global Offering, the transactions between our Company and our connected
persons will constitute continuing connected transactions of our Company under Chapter 14A of the
Listing Rules.
CONNECTED PERSONS
The table below sets forth certain parties who will become our connected persons upon the
Listing and have entered into certain transactions with the Group which will constitute continuing
connected transactions under Chapter 14A of the Listing Rules, and the nature of their relationship
with our Group:
Name of connected person Relationship with our Group
Mr. Wang Zhongshan . . . . . a member of our Controlling Shareholders group, our executive
Director and director and/or general manager of certain of our
subsidiaries
Ms. Zhang Xiuqin . . . . . . . a member of our Controlling Shareholders group and our
executive Director and director and/or general manager of
certain of our subsidiaries
Ms. Wang Na . . . . . . . . . . a member of our Controlling Shareholders group and director
and/or general manager of certain of our subsidiaries
FULLY EXEMPT CONTINUING CONNECTED TRANSACTIONS
1. VEHICLE LEASE AGREEMENT
Major terms of the vehicle lease agreement and reasons for the transaction
On January 1, 2024, to fulfill the continuing business operation needs of Shandong
Mokingran given the limited supply of vehicles licenses in the capital city of the PRC, Ms.
Wang Na as lessor and Shandong Mokingran (being a wholly-owned subsidiary of our
Company) as lessee entered into a vehicle lease agreement, pursuant to which Ms. Wang Na
agreed to lease her vehicle to Shandong Mokingran at a monthly rental of RMB2,000
determined after arm ’s length negotiations between the parties with reference to the rental rate
of similar vehicle in the vicinity. The term of the lease is one year commencing from January
1, 2024 to December 31, 2024. Our Group expects to continue the vehicle lease from Ms.
Wang Na after the Listing and will renew the vehicle lease agreement on annual basis with the
same rental rate and substantially the same terms and conditions.
CONNECTED TRANSACTIONS
– 399 –


--- page 410 ---
Listing Rules implications
The transaction under the vehicle lease agreement has been made in the ordinary and
usual course of business and on normal commercial terms where, as our Directors currently
expect, the highest applicable percentage ratios for the purpose of Chapter 14A of the Listing
Rules will be less than 0.1% on an annual basis. Accordingly, such transaction will constitute
a de minimis continuing connected transactio n of our Company that will be fully exempt from
reporting, annual review, announcement and independent Shareholders ’ approval requirements
under Chapter 14A of the Listing Rules.
2. TENANCY AGREEMENT
Major terms of the tenancy agreemen t and reasons for the transaction
On July 1, 2024, Mr. Wang Zhongshan and Ms. Zhang Xiuqin as landlords and Changle
Chengxin (being a wholly-owned subsidiary of our Company) as tenant entered into a tenancy
agreement, pursuant to which Mr. Wang Zhongshan and Ms. Zhang Xiuqin agreed to lease
their property located at 331 Heng An Street, Changle County, Weifang City, Shandong
Province, the PRC to Changle Chengxin at an annual rental of RMB350,000 determined after
arm’s length negotiations between the parties afte r taking into consideration the prevailing
market price of comparable properties in the vicinity of the property, for the purpose of sales
of jewellery to fulfill our business plan to cont inue our operation of a self-operated store in
Changle County. The term of the lease is one year from July 1, 2024 to June 30, 2025. Our
Group expects to continue to lease the property from Mr. Wang Zhongshan and Ms. Zhang
Xiuqin after the Listing and will renew the tenancy agreement on annual basis with the same
rental rate and substantially the same terms and conditions.
Listing Rules implications
The transaction under the tenancy agreement has been made in the ordinary and usual
course of business and on normal commercial terms where, as our Directors currently expect,
the highest applicable percentage ratios for the purpose of Chapter 14A of the Listing Rules
will be less than 0.1%. Accordingly, such trans action will constitute a de minimis continuing
connected transaction of our Company that will be fully exempt from reporting, annual
review, announcement and independent Shareholders ’ approval requirements under Chapter
14A of the Listing Rules.
Our Directors are of the view that the connected transactions as set out above have been
and will be entered into in our ordinary and usual course of business and on normal
commercial terms, and are fair and reasonable and in the interest of our Company and the
Shareholders as a whole.
CONNECTED TRANSACTIONS
– 400 –


--- page 411 ---
BOARD OF DIRECTORS
Our Board currently consists of eight Directors , comprising four executive Directors and four
independent non-executive Directors. The functions and duties of our Board include, but are not
limited to, convening the general meetings , reporting on the performance of our Board ’sw o r ka tt h e
general meetings, implementing the resolutions passed at the g eneral meetings, determining
business and investment plans, formulating our annual financial budget and final accounts,
formulating our proposals for increase or reduc tion of our capital as well as exercising other
powers, functions and duties as conferred by our Articles of Association.
The following table sets forth certain i nformation regarding our Directors:
Name Age Position
Roles and
Responsibilities
Date of Joining
our Group
Date of
Appointment
as Director
Relationship with
other Directors,
Supervisors and
Senior Management
Executive Directors
Mr. Wang
Zhongshan
(王忠善). .
60 Chairman of
our Board
and
Executive
Director
Responsible for
overseeing overall
business
development,
formulating and
implementing
business
strategies of our
Group
September 8, 2000 June 22, 2018 Spouse of
Ms. Zhang Xiuqin
and father of
Mr. Wang Guoxin
Ms. Zhang
Xiuqin
(張秀芹). .
58 Vice chairman
of our
Board and
Executive
Director
Responsible for
formulating and
implementing
business
strategies, daily
management and
operation of our
Group
September 8, 2000 June 22, 2018 Spouse of
Mr. Wang
Zhongshan and
mother of
Mr. Wang Guoxin
Ms. Jiang
Liying
(姜麗英). .
74 Executive
Director,
Vice
General
Manager
and
Director of
Supply
Chain
Center
Responsible for
production
management and
operation of our
Group
September 8, 2000 June 22, 2018 None
Mr. Wang
Zegang
(王澤鋼). .
44 Executive
Director,
Vice
General
Manager
and Joint
Company
Secretary
Responsible for the
investment and
financing,
information
disclosure,
investor relations
of our Group
December 20, 2015 June 22, 2018 None
DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT
– 401 –


--- page 412 ---
Name Age Position
Roles and
Responsibilities
Date of Joining
our Group
Date of
Appointment
as Director
Relationship with
other Directors,
Supervisors and
Senior Management
Independent Non-executive Directors
Mr. Wang
Gongyong
(王貢勇). .
51 Independent
non-
executive
Director
Providing
independent
judgment and
advice to the
Board on the
operation and
management of
our Group
June 22, 2018 June 22, 2018 None
Mr. Sha Nali
(沙拿利). .
46 Independent
non-
executive
Director
Providing
independent
judgment and
advice to the
Board on the
operation and
management of
our Group
June 22, 2018 June 22, 2018 None
Mr. Huang
Fangliang
(黃方亮). .
56 Independent
non-
executive
Director
Providing
independent
judgment and
advice to the
Board on the
operation and
management of
our Group
June 22, 2018 June 22, 2018 None
Mr. Bai
Xianyue
(白顯月). .
54 Independent
non-
executive
Director
Providing
independent
judgment and
advice to the
Board on the
operation and
management of
our Group
August 22, 2024 August 22, 2024 None
DIRECTORS
Executive Directors
Mr. Wang Zhongshan (王忠善, formerly known as Wang Zhongshan ( 王中善)), aged 60, is
the founder of our Group. He was appointed as a Director and chairman of our Board in June 2018
and re-designated as an executive Director in September 2023. Mr. Wang serves as director or
management in certain subsidiaries of our Company, such as Tianjin Mokingran, Shandong
Mokingran, Changle Chengxin, Hong Kong Mokingran and Nanjing Mokingran. Mr. Wang is
responsible for overseeing the overall business development, and formulating and implementing
business strategies of our Group.
DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT
– 402 –


--- page 413 ---
Mr. Wang has more than 20 years of experience in gold jewellery industry and has been
committed to gold jewellery crafting skills for years. Prior to founding our Group in 2000,
Mr. Wang first acted as an apprentice and was engaged in gemstone inlay and processing work in
the 1990s, accumulating valuable industry experience. In recognition of Mr. Wang ’s gold jewellery
craftsmanship and contribution to the jewellery industry, he was named as one of the List of Fifth
Batch of Inheritors of Provincial Intangible Cultural Heritage of Shandong Province in October
2018, recognized as the first folk art master in Weifang in January 2013, and awarded with
‘‘Individual with Outstanding Contributio n in Jewellery Industry of 40th Years of China ’s Reform
and Opening up’’ in December 2018.
Mr. Wang obtained a master of Business Administration training certificate from Taishan
Management School in June 2014.
Mr. Wang is the spouse of Ms. Zhang Xiuqin, our executive Director, the father of Mr. Wang
Guoxin, our General Manager, and Ms. Wang Na, our Controlling Shareholder.
Mr. Wang served the positions below in the following dissolved enterprises, companies or
unincorporated businesses and confirmed that the se enterprises, companies or unincorporated
businesses were solvent immediately prior to their dissolution and there were no outstanding claims
or liabilities. The relevant details are as follows:
Name of company Position
Place of
establishment Principal business Status
Date of
deregistration
Reason for
deregistration
Weifang Mokingran
Jewellery Co.,
Ltd. (濰 坊市
夢金園珠寶首飾
有限公司).....
Executive
director and
general
manager
PRC Metal products,
machinery and
equipment repair
industry
Dissolved by
deregistration
May 31, 2004 No business
operations
Beijing Yifu Jinyuan
Jewellery Co.,
Ltd. (北 京億福金
緣珠寶首飾有限
公司)........
Executive
director and
general
manager
PRC Jewellery
wholesaling
Dissolved by
deregistration
May 10, 2007 No business
operations
Shanghai Mokingran
Jewellery Co.,
Ltd. (上 海夢金園
黃金珠寶有限
公司)........
Executive
director and
general
manager
PRC Jewellery
wholesaling
Dissolved by
deregistration
April 7, 2021 No business
operations
Chongli County
Jinda Mining Co.,
Ltd. (崇 禮縣金達
礦業有限公司) ..
Supervisor PRC Mining Dissolved by
deregistration
July 21, 2015 No business
operations
DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT
– 403 –


--- page 414 ---
Name of company Position
Place of
establishment Principal business Status
Date of
deregistration
Reason for
deregistration
Beijing Zhongtou
Zhilian
Investment
Management Co.,
Ltd. (Limited
Partnership)
(北京中投智聯投
資管理中心(有限
合夥) ) .......
Partner PRC Investment holding Dissolved by
deregistration
December 20,
2018
No business
operations
Guangdong
Jinmengyuan
Jewellery
Co., Ltd.
(廣東金夢園珠寶
首飾有限公司) ..
General
Manager
PRC Jewellery, jade and
handicrafts
processing,
wholesaling and
sales
Dissolved by
deregistration
June 15, 2021 No business
operations
Jinan Lixia
Mokingran
Jewellery Store
(濟南歷下夢金園
珠寶商行).....
Owner PRC Jewellery
wholesaling
Dissolved by
deregistration
August 10,
2015
No business
operations
Changle County
Jinding Jewellery
Store ( 昌樂縣
金鼎珠寶行) ...
Owner PRC Jewellery
wholesaling
Dissolved by
deregistration
April 22,
2008
No business
operations
Changle County
Baoda Jewellery
Equipment Store
(昌樂縣寶達首飾
器材行) ......
Owner PRC Jewellery
wholesaling
Dissolved by
deregistration
March 20,
2007
No business
operations
Mr. Wang served as a director of the followi ng company whose business license has been
revoked and confirmed that the company was solve nt immediately prior to the revocation of its
business license and there were no outstanding cla ims or liabilities. The relevant details are as
follows:
Name of company
Place of
establishment
Principal
business Reason for revocation
Date of revocation
of business license
Shandong Tianlan
Jewellery Co., Ltd.
(山東天藍珠寶首飾
有限公司).........
PRC Jewellery
wholesaling
Failure to complete
relevant matters
required by the
relevant administrative
departments in time for
lack of continuous
actual operation
December 26, 2017
DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT
– 404 –


--- page 415 ---
Ms. Zhang Xiuqin (張 秀芹), aged 58, was appointed as a Director in December 2000, served
as an executive Director and general manager o f our Company from December 2000 to May 2011,
as a Supervisor from May 2011 to August 2018, and as an executive Director and general manager
from June 2018 to September 2023, and was re-designated as our executive Director and appointed
as our vice chairman of our Board since September 2023. Ms. Zhang also serves as director or
management in certain subsidiaries of our Company, such as Jinan Chengxin, Shandong Yifu,
Shandong Mokingran, Shenzhen Mokingran and Hong Kong Mokingran. Ms. Zhang is responsible
for formulating and implementing business str ategies, daily management and operation of our
Group.
Ms. Zhang has accumulated more than 20 years of working experience in gold jewellery
industry. From 1999 to 2003, Ms. Zhang was self-employed and was engaged in gemstone inlay
and raw materials processing business.
Ms. Zhang obtained a master of Business Administration training certificate from Taishan
Management School in June 2014.
Ms. Zhang is the spouse of Mr. Wang Zhongshan, our executive Director, and the mother of
Mr. Wang Guoxin, our General Manager, and Ms. Wang Na, our Controlling Shareholder.
Ms. Zhang served the positions below in the fo llowing dissolved partnerships or companies
and confirmed that these partnerships or companies were solvent immediately prior to their
dissolution and there were no outst anding claims or liabilities. The relevant details are as follows:
Name of company/
partnership Position
Place of
establishment Principal business Status
Date of
deregistration
Reason for
deregistration
Beijing Yifu Jinyuan
Jewellery Co., Ltd.
(北京億福金緣珠寶首
飾有限公司) ......
Supervisor PRC Jewellery
wholesaling
Dissolved by
deregistration
May 10, 2007 No business
operations
HK VFOOK JEWELRY
INT ’L GROUP
LIMITED
(香港億福珠寶國際集
團有限公司) ......
Director Hong Kong Jewellery sales Dissolved by
deregistration
January 27, 2017 No business
operations
Tianjin Jinmengyuan
Enterprise
Management
Consulting
Partnership (Limited
Partnership) (天 津金
夢緣企業管理諮詢合
夥企業(有限合夥)) . .
Partner PRC Investment holding Dissolved by
deregistration
August 8, 2016 No business
operations
DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT
– 405 –


--- page 416 ---
Ms. Jiang Liying ( 姜麗英), aged 74, was appointed as a Director and vice general manager of
our Company in June 2018 and re-designated as o ur executive Director in September 2023. She
joined our Group with her prior industry experience in September 2000, initially serving as a
factory director of the production department, and then as a factory director of the production
department of Shandong Mokingran from May 2004 to August 2007, and a vice general manager of
Shandong Yifu from September 2007 to June 2015. Ms. Jiang is responsible for the production
management and operation of our Group.
Ms. Jiang has more than 20 years of working experience in gold jewellery manufacturing
industry. Prior to joining our Group, Ms. Jiang worked in Qingdao Xinxing Metal Products Factory
(青島新興金屬製品廠) and retired in February 1996.
Ms. Jiang studied and obtained a graduate certificate from the Technical Secondary School for
Cadres and Workers of Sifang District of Qingdao City ( 青島市四方區幹部職工中等專業學校) in
April 1992.
Mr. Wang Zegang ( 王澤鋼), aged 44, was appointed as a Director, vice general manager and
secretary of the Board in June 2018, re-designated as our executive Director in September 2023 and
appointed as our joint company secretary in September 2023. He is primarily responsible for our
Group ’s investment, financing, information disclosure, investor relations of our Group.
Prior to joining our Group, Mr. Wang served successively as a director of the customer service
center and securities management department, a vice general manager, secretary of the board and
chief financial officer of Shandong Mining Machinery Group Co., Ltd. ( 山東礦機集團股份有限公
司), a company listed on the Shenzhen Stock Ex change (stock code: 002526) (the principal
business of which is production and sales of sp ecialized equipment), a nd was responsible for
matters such as board of directors office and f inance management center from March 2007 to
December 2015.
Mr. Wang studied Chinese language and literature in and graduated from Shandong Normal
University in June 2004 and obtained an engineering master degree in project management from
Qingdao University of Science and Technology in June 2015.
Mr. Wang obtained the certificate of board secretary qualification issued by the Shanghai
Stock Exchange in December 2011 and the certificate of board secretary qualification issued by the
Shenzhen Stock Exchange in May 2013.
Independent Non-executive Directors
Mr. Wang Gongyong (王 貢勇), aged 51, was appointed as an independent Director in June
2018 and re-designated as an independent non-executive Director in September 2023. He is
responsible for providing independent judgment and advice to our Board on the operation and
management of our Group.
Mr. Wang has more than 10 years of financial accounting experience. He is a partner of
Shinewing Certified Public Accountants LLP. Mr. Wang obtained the qualification of senior
accountant in December 2020.
DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT
– 406 –


--- page 417 ---
Mr. Wang was an independent director of Dongfang Electronics Co., Ltd. ( 東方電子股份有限
公司), a company listed on the Shenzhen Stock Exchange (stock code: 000682), from May 2021 to
June 2024 and currently is an independent director of the following two listed companies whose
shares are listed on the Shenzhen Stock Exchange. Details are as follows:
Name of listed company Stock code Tenure
Shandong Sino-Agri Union Biotechnology Co., Ltd.
(山東中農聯合生物科技股份有限公司) ........
003042 From August 2012
Sinopec Shandong Taishan Petroleum Co., Ltd.
(中國石化山東泰山石油股份有限公司) ........
000554 From June 2022
Mr. Wang obtained a master ’s degree of business administration from Shandong University in
June 2011.
Mr. Sha Nali (沙 拿利), aged 46, was appointed as an independent Director in June 2018 and
re-designated as an independent non-executive Director in September 2023. He has been
responsible for providing independent judgment and advice to the Board on the operation and
management of our Group.
He is the director of the Membership Department and deputy secretary-general of Gems &
Jewellery Trade Association of China. Mr. Sha serves as an executive director of GACC ( 中寶
協(北京)基金管理有限公司). Mr. Sha was elected as the chairman of Beijing Jewellery Academy
Alumni Association Branch of Alumni Association of China University of Geosciences ( 中國地質
大學校友會北京珠寶校友分會) in April 2019. From December 2013 to January 2018, Mr. Sha
served as a supervisor of Weiyou Bouti que (Beijing) Jewellery Co., Ltd. ( 惟優精品(北京)珠寶有限
公司). From March 2017 to April 2019, he served as a supervisor of GAC (Beijing) Media
Technology Co., Ltd. ( 中寶協(北京)傳媒科技有限公司). And from April 2017 to July 2019, he
served as a supervisor of GAC (Beijing) Jewellery Culture Co., Ltd. ( 中寶協(北京)珠寶文化有限公
司). Since January 2023, he has served as an executive director of Sanya Guanyi Fashion Industry
Development Co., Ltd. ( 三亞觀逸時尚產業發展有限公司).
Mr. Sha obtained a master ’s degree of science in mineralogy , petrology and mineral deposits
from China University of Geosciences, Beijing in July 2005 and an engineering doctor ’s degree in
geological resources and geological engineering (economics of resource industry) from China
University of Geosciences, Beijing in June 2020.
Mr. Sha has obtained the Fund Practicing Qua lification Certificate issued by the Asset
Management Association of China and the Securities P ractitioner Qualification Certificate issued by
the Securities Association of China in April 2018 and September 2017, respectively.
DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT
– 407 –


--- page 418 ---
Mr. Huang Fangliang (黃 方亮), aged 56, was appointed as an independent Director in June
2018 and was re-designated as an independent non-executive Director in September 2023. He has
been responsible for providing independent judgment and advice to our Board on the operation and
management of our Group.
Mr. Huang has more than 10 years of financial and accounting experience. He has served as a
professor and postgraduate tutor of the School of Finance, the president of Digital Economy
Academy and the director of Capital Management Institute of Shandong University of Finance and
Economics since March 5, 2012. Mr. Huang has served as an arbitrator of Jinan Arbitration
Commission since May 2013.
Mr. Huang is an independent director of the following three listed companies whose shares are
listed on the Shenzhen Stock Exchange, details of which are as follows:
Name of listed company Stock code Tenure
Shandong Denghai Seed Industry Co., Ltd.
(山東登海種業股份有限公司)...............
002041 From April 2019
Shandong Weifang Rainbow Chemical Co., Ltd.
(山東濰坊潤豐化工股份有限公司) ...........
301035 From September 2019
Shandong Link Science and Technology Co., Ltd.
(山東聯科科技股份有限公司)...............
001207 From March 2020
Mr. Huang was an independent director of Sublime China Information Co., Ltd. ( 山東卓創資
訊股份有限公司), a company listed on the Shenzhen Stock Exchange (Stock Code: 301299) from
June 2017 to May 2023.
Mr. Huang obtained an economics doctor ’s degree in history of economic thought from Fudan
University in June 2006.
Mr. Huang has obtained the qualification certi ficate of independent directors issued by the
Shanghai Stock Exchange in October 2013.
DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT
– 408 –


--- page 419 ---
Mr. Huang served as the following positions in the following dissolved companies and
confirmed that these companies were solvent imme diately prior to their dissolution and there were
no outstanding claims or liabilities. The relevant details are as follows:
Name of company Position held
Place of
establishment Principal business Status
Date of
deregistration
Reason for
deregistration
Shandong Yiqichuang
Network Technology
Co., Ltd.
(山東一起創網絡
科技有限公司).....
Director PRC Research and
development of
internet
information
technology and
computer software
and hardware
technology
Dissolved by
deregistration
May 27, 2019 No business
operation
Beijing Jinxin
Chuangfu Investment
Management Co, Ltd.
(北京金鑫創富投資
管理有限公司).....
Supervisor PRC Investment holding Dissolved by
deregistration
August 9, 2019 No business
operation
Mr. Bai Xianyue ( 白顯月), aged 54, was appointed as an independent non-executive Director
in August 22, 2024. He has been responsible for providing independent judgment and advice to our
Board on the operation and management of our Group.
Mr. Bai Xianyue was first approved to practice as a licensed lawyer in China in April 2002
and has been practicing for over 20 years. He has been an independent director of First Futures Co.,
Ltd. ( 一德期貨有限公司) since April 2016 and has been a partner of Grandall Law Firm (Tianjin)
(國浩(天津)律師事務所) since January 2019.
Mr. Bai has been appointed as an arbitrator on th e roster of China International Economic and
Trade Arbitration Commission (CIETAC), Hong Ko ng International Arbitration Centre (HKIAC),
Court of Arbitration for Sport (CAS ), Asian International Arbitrati on Centre (AIAC), International
Commercial Dispute Prevention and Settlement Organization (ICDPASO), Beijing Arbitration
Commission, Shanghai International Arbitration Centre, Shenzhen Court of In ternational Arbitration
and other arbitration instituti ons; and concurrently he is a member of the Arbitration Committee of
the International Chamber of Commerce (ICC). He served as one of the six arbitrators on the Ad
Hoc Arbitral Tribunal for the 18th Asian Games held in Indonesia in 2018 and as one of the nine
arbitrators on the Ad Hoc Arbitral Tribunal for the Beijing 2022 Winter Olympics from January to
February 2022.
Mr. Bai obtained the Degree of Advanced Studies Master of Laws granted by Katholieke
Universiteit Leuven in July 2003 and the Degree of Magister Juris granted by the Lincoln College,
the University Offices, Oxford in July 2006. Mr. Bai was awarded the title of third grade lawyer
(三級律師職稱) in December 2023 by the Tianjin Municipal Human Resources and Social Security
Bureau ( 天津市人社局).
DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT
– 409 –


--- page 420 ---
Supervisors
The Board of Supervisors of our Company consists of three members. The following table sets
forth certain information about our Supervisors:
Name Age Position
Roles and
Responsibilities
Date of Joining
our Group
Date of
Appointment
as Supervisor
Relationship with
other Directors,
Supervisors and
Senior Management
Mr. Zhang Xin
(張鑫) ....
56 Chairman of
the Board
of
Supervisors
Supervising the Board
and senior
management
March 26, 2014 June 22, 2018 None
Mr. Li Hu
(李虎) ....
37 Supervisor Supervising the Board
and senior
management
June 3, 2014 June 22, 2018 None
Mr. Wang
Yanpeng
(王艷鵬)...
39 Employee
supervisor
Supervising the Board
and senior
management
March 21, 2011 June 22, 2018 None
Mr. Zhang Xin (張 鑫), aged 56, was appointed as the chairman of the Board of Supervisors
in June 2018, responsible for supervising the Board and senior management.
From June 2018, Mr. Zhang served as the manager of administrative management department
of our Company, responsible for administrative management. From March 2014 to June 2018, he
served as the administration manager of Sha ndong Yifu, responsible for administrative
management.
Mr. Zhang completed professional course of industrial enterprise management from Shandong
University of Technology in July 1996 and obtained a bachelor ’s degree in administrative
management from Central Party School of the Communist Party of China in December 2003.
Mr. Zhang served the position below in the following dissolved company and confirmed that
the company was solvent immediately prior to its d issolution and there were no outstanding claims
or liabilities. The relevant details are as follows:
Name of company Position
Place of
establishment
Principal
business
Date of
deregistration
Reason for
deregistration
Changle County
Guorui Property
Management Co.,
Ltd. ( 昌樂縣國瑞物
業管理有限公司). . .
Director PRC Property
management
September 19, 2018 No business
operation
DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT
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Mr. Li Hu ( 李虎), aged 37, was appointed as our Supervisor in June 2018, responsible for
supervising our Board and senior management.
Mr. Li served as the manager of market inspection department of Shandong Mokingran since
September 2019, responsible for regulating mark et and the operation of franchisees under contracts.
Mr. Li worked as the secretary of the chairman of Shandong Mokingran from June 2014 to
September 2015, responsible for assisting the chairman. Prior to joining our Group, Mr. Li worked
in Qingdao Junyi Holding Group Co., Ltd. (青 島君一控股集團有限公司, formerly known as
Qingdao Haier Real Estate Developm ent and Investment Co., Ltd. ( 青島海爾房地產開發投資有限
公司), Qingdao Haier Real Estate Group Co., Ltd. ( 青島海爾房地產集團有限公司), and Qingdao
Haier Chengchuang Group Co., Ltd. ( 青島海爾產城創集團有限公司) from July 2011 to August
2013, and worked in Dongying Keying Real Estate Co., Ltd. ( 東營科英置業有限公司, formerly
known as Dongying Keying Laser Electronics Co., Ltd. ( 東營科英雷射電子有限公司)) from
December 2013 to November 2016.
Mr. Li obtained his bachelor ’s degree majoring in business administration (English-medium
courses) from China University of Geosciences (Wuhan) in June 2009, and obtained his master ’s
degree in management (majoring in business admin istration) from China University of Geosciences
(Wuhan) in June 2011.
Mr. Wang Yanpeng ( 王艷鵬), aged 39, was appointed as our employee Supervisor in June
2018, responsible for supervising our Board and senior management.
Mr. Wang served as a manager of purchasing d epartment of our Company since September
2016. Prior to joining our Group, Mr. Wang served as a project manager of Hangzhou Branch of
Shandong Geo-Surveying & Mapping Institute from August 2007 to February 2011. Mr. Wang
successively served as an officer of administra tion department, the manager of inspection
department, and the manager of procurement department of Shandong Yifu from March 2011 to
August 2016.
Mr. Wang obtained a college degree in engineering of surveying and mapping from Shandong
University of Science and Technology in June 2007.
Mr. Wang served the position below in the following dissolved company and confirmed that
the company was solvent immediately prior to its d issolution and there were no outstanding claims
or liabilities. The relevant details are as follows:
Name of company Position
Place of
establishment
Principal
business
Date of
deregistration
Reason for
deregistration
Weifang Jinmengyun
Culture Media Co.,
Ltd. ( 濰坊金夢韻文
化傳媒有限公司). . .
Supervisor PRC Planning of
cultural and
artistic
exchange
May 14, 2018 No business
operation
DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT
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Senior Management
The following table sets forth key information about our senior management:
Name Age Position
Roles and
Responsibilities
Date of Joining
our Group
Date of
Appointment
as senior
management
Relationship with
other Directors,
Supervisors and
Senior Management
Mr. Wang
Guoxin
(王國鑫)...
34 General
Manager
Responsible for
formulating and
implementing
business strategies,
daily management
and operation of our
Group
April 1, 2014 September 22,
2022
(Deputy
General
Manager,
Marketing
Director)
September 20,
2023
(General
Manager)
Son of Mr. Wang
Zhongshan and
Ms. Zhang Xiuqin
Ms. Jiang
Liying
(姜麗英)...
74 Vice General
Manager
and
Director of
Supply
Chain
Center
Responsible for
production
management and
operation of our
Group
September 8, 2000 June 22, 2018 None
Mr. Wen
Shuqing
(溫書慶)...
56 Vice General
Manager,
Operation
Director
Responsible for
marketing operation
and risk control
management of our
Group
March 1, 2006 June 22, 2018 None
Mr. Wang
Zegang
(王澤鋼)...
44 Vice General
Manager,
Joint
Company
Secretary
Responsible for
investment, financing,
information
disclosure and
investor relation of
our Group
December 20, 2015 June 22, 2018
(Deputy
General
Manger)
September 20,
2023 (Joint
Company
Secretary)
None
Mr. Zhang
Libai
(張理柏)...
47 Vice General
Manager,
Chief
Financial
Officer
Responsible for financial
management
March 16, 2014 June 22, 2018 None
Our executive Directors (namely, Ms. Jiang Liying and Mr. Wang Zegang) also hold senior
management positions of our Group. See ‘‘ — Directors — Executive Directors’’ in this section
above for their respective biographies.
DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT
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Mr. Wang Guoxin ( 王國鑫), aged 34, joined our Group in February 2016 as the
commissioner to the administration department o f Shenzhen Mokingran, and then successively
served as a channel commissioner of the channel management department, a director assistant of
direct service management department and a director of the product planning department. He was
appointed as a deputy general manager of our Company in September 2018 and a marketing
director of our Company in November 2019. He was appointed as a deputy general manager and
marketing director in September 2022 and a general manager in September 2023, responsible for
formulating and implementing business strateg y, daily management and operation of our Group.
Mr. Wang has also served as a general manager of Guangdong Mokingran since August 2019.
Mr. Wang obtained a junior college diploma in International Trade Practice from Shandong
University of Finance ( 山東財政學院) in June 2011 and a master ’s degree of science in
International Finance from Edinburgh Napier University in October 2014.
Mr. Wang is the son of Mr. Wang Zhongshan and Ms. Zhang Xiuqin, our executive Directors
and the brother of Ms. Wang Na, our Controlling Shareholder.
Mr. Wen Shuqing ( 溫書慶), aged 56, served as a director of the Marketing Department of
Shandong Mokingran from March 2007 to June 2018, responsible for marketing operation and risk
control management of our Group.
Mr. Wen has more than 30 years of experience in gold jewellery industry, serving as a deputy
chief secretary of Gems & Jewellery Trade Association of Shandong Province ( 山東省珠寶玉石首
飾行業協會) since November 2017 and a vice chairman of Shandong Gem and Jade Chamber of
Commerce (山 東省寶玉石商會). Prior to joining our Group, Mr. Wen worked in the jewellery and
gold shop of Shandong Province Gold Industry Company ( 山東省黃金工業總公司珠寶金行) from
July 1991 to September 1996. Mr. Wen worked at Shandong Industrial Company from September
1996 to December 2003 and Shandong Gold Xinyi Jewellery Co., Ltd. ( 山東黃金鑫意首飾有限公
司) from January 2004 to May 2007.
Mr. Wen completed his undergraduate studi es majoring in statistics and accounting in
Shandong Institute of Economics ( 山東經濟學院) in July 1998.
Mr. Zhang Libai ( 張理柏), aged 47, was appointed as a vice general manager and chief
financial officer of our Company on June 22, 2018. Mr. Zhang is responsible for financial
management.
Mr. Zhang has approximately 20 years of experience in finance and auditing. Mr. Zhang
joined our Company in March 2014, initially as a director of the audit department and was
subsequently promoted to chief financial officer in August 2014. Prior to joining our Group, from
May 2005 to February 2011, he had worked in Johnson Electric (ShenZhen) Co., Ltd. ( 德昌電機(深
圳)有限公司) and Shenzhen Daier Jewellery Co., Ltd. (深 圳市代而珠寶有限公司).
DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT
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--- page 424 ---
Mr. Zhang obtained a bachelor ’s degree in law in sociology from Huazhong Agricultural
University in June 2002. He has been qualified as a certified public accountant in China since
December 2009, a certified tax accountant since June 2006 and an internationally certified internal
auditor since November 2009.
OTHER DISCLOSURE PURSUANT TO THE LISTING RULES
Apart from Mr. Bai Xianyue, each of our Directors confirmed that he or she (i) obtained the
legal advice referred to under Rule 3.09D of the Listing Rules on September 17, 2023; and (ii)
understood his or her obligations as a director of a listed issuer under the Listing Rules. Mr. Bai
Xianyue confirmed that he (i) obtained the legal a dvice referred to under Rule 3.09D of the Listing
Rules on August 19, 2024; and (ii) understood his obligations as a director of a listed issuer under
the Listing Rules.
Each of our independent non-executive Directors confirmed (i) his/her independence as
regards each of the factors referred to in Rule 3.13(1) to (8) of the Listing Rules; (ii) that he/she
had no past or present financial or other in terests in the business of our Company or our
subsidiaries or any connection with any core connected person of our Company under the Listing
Rules as at the Latest Practicable Date; and (iii) that there were no other factors that may affect his/
her independence at the time of his/her appointment.
Save as disclosed above, each of our Directors, Supervisors and senior management (i) did not
hold other positions in our Company or other members of our Group as of the Latest Practicable
Date; (ii) had no other relationship with any Directors, Supervisors, senior management or
substantial or controlling shareholders of our C ompany as of the Latest Practicable Date; and (iii)
did not hold any other directorships in listed companies in the three years prior to the date of this
prospectus.
Immediately following the completion of the Global Offering, save for the interests in the
Shares which are disclosed in the sections headed ‘‘Substantial Shareholders’’ and ‘‘Appendix VII
— Statutory and General Information ’’in this prospectus, each of our Directors and Supervisors
does not have any interest in the Shares within the meaning of Part XV of the SFO, or is a director
or an employee of a company who has interests or short positions in the Shares and underlying
Shares of our Company. Each of our Directors and Supervisors has confirmed that none of them is
engaged in, or interested in, any business (other than our Group) which, directly or indirectly,
competes or may compete with our business.
Save as disclosed in this prospectus, to the best of the Directors and Supervisors ’ knowledge,
information and belief, having made all reason able enquiries, no other matters relating to the
appointment of Directors and Supervisors need to be brought to the attention of Shareholders and
no information relating to Directors and Supervis ors is required to be disclosed pursuant to Rules
13.51(2)(h) to (v) of the Listing Rules as of the Latest Practicable Date.
DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT
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Joint Company Secretaries
Mr. Wang Zegang ( 王澤鋼), aged 44, was appointed as our joint company secretary in
September 2023. See ‘‘ —Directors — Executive Directors ’’above for details of his background.
Ms. Yu Wing Sze ( 余詠詩), aged 41, was appointed as our joint company secretary in
September 2023. She is a manager of the listing services division at TMF Hong Kong Limited, a
company providing corporate accounting and corporate secretarial services in Hong Kong. She has
over 15 years of working experience in company secretarial profession and has been serving as the
company secretary of a number of listed companies in Hong Kong.
Ms. Yu is an associate member of both The Hong Kong Chartered Governance Institute and
The Chartered Governance Institute (formerly known as the Institute of Chartered Secretaries and
Administrators) in the United Kingdom.
Ms. Yu holds a bachelor ’s degree in business administration from The Chinese University of
Hong Kong.
Pursuant to Rule 3.28 of the Listing Rules, an issuer must appoint as its company secretary an
individual who, by virtue of his/her academic or pro fessional qualifications or relevant experience,
is, in the opinion of the Stock Exchange, capable of discharging the functions of a company
secretary.
We have applied to the Stock Exchange for, and the Stock Exchange has granted us, a waiver
from strict compliance with Rules 3.28 and 8.17 of the Listing Rules, with regards to the
qualifications of company secretary. For further details of this waiver application, see ‘‘Waivers
from Strict Compliance with the Listing Rules — Appointment of Joint Company Secretaries ’’in
this prospectus.
BOARD COMMITTEE
Strategy Committee
The main functions of strategy committee of our Company ( ‘‘Strategy Committee’’ ) are to
conduct research and provide recommendations on our Company ’s long-term development strategies
and major investment decisions.
Our Strategy Committee comprises five members, namely Mr. Wang Zhongshan, Ms. Zhang
Xiuqin, Mr. Sha Nali, Mr. Wang Zegang and Ms. Jiang Liying. Mr. Wang Zhongshan is the
chairman of our Strategy Committee.
Audit Committee
We have established an audit committee of our Company ( ‘‘Audit Committee ’’) in
compliance with Rule 3.21 of the Listing Rules and with written terms of reference in compliance
with paragraph D.3 of the Corporate Governance Code as set out in Appendix C1 to the Listing
Rules. The main functions of our Audit Committee are to provide independent advice on the
DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT
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--- page 426 ---
effectiveness of our financial reporting, risk management and internal control systems, supervise the
audit process, formulate and review policies and pe rform other duties and responsibilities assigned
by our Board.
Our Audit Committee comprises three members, namely Mr. Wang Gongyong, Mr. Huang
Fangliang and Mr. Bai Xianyue. Mr. Wang Gongyong is the chairman of our Audit Committee,
who is an independent non-executive Director with the appropriate accounting and related financial
management expertise as required under Rules 3.10(2) and 3.21 of the Listing Rules.
Remuneration and Appraisal Committee
We have established a remuneration and appraisal committee of our Company
(‘‘Remuneration and Appraisal Committee’’ ) in compliance with Rule 3.25 of the Listing Rules
and with written terms of reference in compliance with paragraph E.1 of the Corporate Governance
Code as set out in Appendix C1 to the Listing Rules. The primary duties of our Remuneration and
Appraisal Committee are (i) to formulate and review policies and structures relating to the
remuneration of Directors and senior management and to establish formal and transparent
procedures for formulating such remuneration policies and to advise our Board on the above
matters; (ii) to determine the specific terms of the remuneration package for each executive Director
and senior management; and (iii) to approve performance-based remuneration in accordance with
our Company ’s goals and objectives resolved by the Board from time to time.
The Remuneration and Appraisal Committee comprises three members, namely Mr. Huang
Fangliang, Mr. Wang Gongyong and Ms. Jiang Liying. Mr. Huang Fangliang is the chairman of our
Remuneration and Appraisal Committee.
Nomination Committee
We have established a nomination committee of our Company ( ‘‘Nomination Committee ’’)
with written terms of reference in compliance with paragraph B.3 of the Corporate Governance
Code set out in Appendix C1 to the Listing Rules. The primary duties of our Nomination
Committee are (i) to review the structure, size and composition of our Board on a regular basis and
make recommendations to our Board regarding any proposed changes; (ii) to identify and select
individuals nominated for directorships or make recommendations to our Board on such matters;
(iii) to ensure diversity on the Board; (iv) to assess the independence of our independent non-
executive Directors; and (v) to ma ke recommendations to our Board on relevant matters relating to
the appointment, re-appointment and removal of D irectors and succession planning for Directors.
The Nomination Committee comprises three members, namely Mr. Sha Nali, Mr. Wang
Zegang and Mr. Huang Fangliang. Mr. Sha Nali is the chairman of our Nomination Committee.
DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT
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BOARD DIVERSITY POLICY
We have adopted a board diversity policy (the ‘‘Board Diversity Policy ’’) which sets out the
objective and approach to achieve and maintain diversity of our Board in order to enhance the
effectiveness of our Board. Pursuant to the Board Diversity Policy, we seek to achieve diversity of
our Board through the consideration of a number of factors when selecting candidates to our Board,
including but not limited to professional experience, skills, knowledge, gen der, age, cultural and
education background, ethnicity and length of s ervice. Our Company recognizes and embraces the
benefits of having a diverse Board and sees incr easing diversity at the Board level, including
gender diversity, as an essential element in maintaining our Company ’s competitive advantage and
enhancing its ability to attract talents and to ret ain and motivate employees. We have also taken,
and will continue to take steps to promote gender d iversity at all levels of our Company, including
but not limited to at our Board and the senior management levels.
Our Directors have a balanced mix of knowledge and skills, including in management,
strategy and business development, R&D, sales a nd marketing, legal compliance and corporate
investment and finance. The ages of our Directors range from 44 years old to 74 years old, and we
have both male and female representatives on ou r Board. Our Nomination Committee will review
and assess the composition of our Board and make recommendations to our Board on appointment
of members of our Board. Meanwhile, our Nominat ion Committee will consider the benefits of all
aspects of diversity, including without limitati on, professional experience, skills, knowledge,
education background, age, gender, culture and ethn icity and length of service, in order to maintain
an appropriate range and balance of talents, skills , experience and diversity of perspectives on our
Board.
We will continue to take steps to promote gender diversity at all levels of our Company,
including but not limited to at our Board and senior management levels. We will encourage current
Board members, particularly members of our Nomination Committee, to recommend female
candidates for election to our Board and take other a ctions to promote diversity on our Board, such
as inviting some of our outstanding female staff at the middle to senior level to attend and observe
Board meetings. This will allow our Board to understand more about these potential female
candidates before they are nominated to our Board and provide opportunities for potential female
candidates to be prepared for discharging a Director ’s duties. We will also continue to ensure that
there is gender diversity when recruiting staff at the middle to senior level so that we have a
pipeline of female senior management and potential successors to our Board in a timely manner to
ensure gender diversity on our Board. In particul ar, we will keep identifying and selecting female
individuals with a diverse range of skills, expe rience and knowledge in different fields who are
suitably qualified to become our Board members and maintain at least one female Director and at
least 10% female representations in our Board. Ou r Group will continue to emphasize the training
of female talents and provide long-term developm ent opportunities for female employees, including
but not limited to business operations, management, accounting and finance, legal and compliance.
As such, we are of the view that our Board will be offered chances to identify competent female
staff at the middle to senior level to be nominated as a Director in the future with a pipeline of
female candidates.
DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT
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--- page 428 ---
COMPLIANCE ADVISOR
We have appointed Rainbow Capital (HK) Limite d as our compliance advi sor upon the Listing
pursuant to Rule 3A.19 and Rule 19A.05 of the Listing Rules. Pursuant to Rule 3A.23 and Rule
19A.06 of the Listing Rules, our compliance advisor will advise us when we consult our
compliance advisor in the following circumstances:
(i) before the publication of any regulatory announcement, circular or financial report;
(ii) where a transaction, which might be a notifiable or connected transaction under the
Listing Rules, is contempl ated by our Group, including share issues and share
repurchases;
(iii) where our Group proposes to use the proceeds of the Global Offering in a manner
different from that detailed in thi s prospectus or where our Group ’s business activities,
developments or results of operation devi ate from any forecast, estimate or other
information in this prospectus; and
(iv) where the Stock Exchange makes an inquiry to our Company regarding unusual
movements in the price or trading volume of the Shares.
The terms of appointment of the compliance a dvisor shall commence on the Listing Date and
end on the date on which our Group complies wit h Rule 13.46 of the Listing Rules in respect of
our financial results for the first full financial year commencing after the Listing Date and such
appointment may be subject to extension by mutual agreement.
COMPETITION
Save as disclosed in the ‘‘Relationship with our Controlling Shareholders — Delineation of
Businesses — No competition and clear delineation of business ’’in this prospectus, each of our
Company ’s Directors confirms that, as of the Latest Practicable Date, he or she did not have any
interest in a business, which competes or is likely to compete, directly or indirectly, with our
business that would require disclosure under Rule 8.10 of the Listing Rules.
COMPLIANCE WITH THE CORPORATE GOVERNANCE CODE
We expect to comply with the code provisions stated in the Corporate Governance Code as set
forth in Appendix C1 to the Listing Rules after the Listing. Our Company is of the view that our
Board includes a balanced composition of executi ve and independent non-executive Directors so
that there is a strong independent element on our Board, which can effectively exercise independent
judgment.
DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT
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REMUNERATION POLICY
For each of the three years ended December 31, 2021, 2022 and 2023 and the six months
ended June 30, 2024, the aggregate remuneration ( including salaries, allowances, performance-
based bonuses, equity-settled share-based payme nts, and contributions to retirement benefits
schemes) of our Directors were approximately RMB 4.2 million, RMB3.2 million, RMB3.4 million
and RMB1.6 million, respectively. None of our Directors waived or agreed to waive any
remuneration arrangements du ring the aforesaid periods.
For each of the three years ended December 31, 2021, 2022 and 2023 and the six months
ended June 30, 2024, the aggregate remuneration ( including salaries, allowances, performance-
based bonuses, equity-settled share-based payme nts, and contributions to retirement benefits
schemes) of our Supervisors were approximat ely RMB0.5 million, RMB0.5 million, RMB0.7
million and RMB0.4 million, respectively.
For each of the three years ended December 31, 2021, 2022 and 2023 and the six months
ended June 30, 2024, the five highest paid individuals of our Company include two, one, nil and
one Directors or Supervisors, respectively. The a ggregate remuneration (including salaries,
allowances, performance-based bon uses, equity-settled share-based payments, and contributions to
retirement benefits schemes) paid to our Group’ s five highest paid individuals were approximately
RMB5.7 million, RMB4.6 million , RMB5.8 million and RMB2.3 million, respectively, for each of
the three years ended December 31, 2021, 2022 and 2023 and the six months ended June 30, 2024.
Under the current arrangement, the aggregate remuneration (excluding non-cash benefits and
performance related bonuses) payable to the Directors and Supervisors for the year ending
December 31, 2024 are estimated to be approximately RMB2.8 million and RMB0.9 million,
respectively.
During the Track Record Period, no emolument was paid by our Group to any of our Directors
or the five highest paid individuals (including t he Directors and employees) as an inducement to
join or upon joining our Group or as compensation for loss of office.
Save as disclosed above, no other payments of remuneration have been made, or are payable,
in respect of the Track Record Period, by our Group to or on behalf of any of our Directors.
DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT
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So far as our Directors are aware, (i) as of the Latest Practicable Date, and (ii) immediately
following the completion of the Global Offering (assuming that the Over-allotment Option is not
exercised) and based on the Offer Price of HK$12.00 (being the low-end of the indicative Offer
Price range set out in this prospectus), the following persons are expected to have or be deemed or
taken to have an interest and/or a short position in our Shares or the underlying Shares of our
Company which will be required to be disclosed to our Company and the Stock Exchange pursuant
to the provisions of Divisions 2 and 3 of Part XV of the SFO, or, who will be, directly or
indirectly, interested in 10% or more of the numbe r of any class of share capital carrying rights to
vote in all circumstances at general meetings of our Company or any other members of our Group:
Name of
Shareholder Nature of interest
Description of
Shares (1)
Shares held in the total
share capital of our
Company as of the Latest
Practicable Date and
immediately prior to
the Global Offering
Shares held in the
total share capital of
our Company immediately
following the completion of the
Global Offering (assuming the
Over-allotment Option is not
exercised)
Number of
Shares
Approximate
percentage of
shareholding
Number of
Shares
Approximate
percentage of
shareholding
Mr. Wang
Zhongshan ( 2 ) .....
Beneficial owner/
interest in
controlled
corporation/
interest of spouse
Unlisted Shares (L) 164,760,000 71.93% 164,760,000 60.35%
Ms. Zhang Xiuqin
(2) . Beneficial owner/
interest in
controlled
corporation/
interest of spouse
Unlisted Shares (L) 164,760,000 71.93% 164,760,000 60.35%
Jinmeng Partnership
(2) Beneficial owner Unlisted Shares (L) 22,000,000 9.60% 22,000,000 8.06%
Mr. Wang Guoxin (3) . Interest in controlled
corporation
Unlisted Shares (L) 40,000,000 17.46% 40,000,000 14.65%
Ms. Wang Na (3) . . . . Interest in controlled
corporation
Unlisted Shares (L) 40,000,000 17.46% 40,000,000 14.65%
Tianjin
Yuanjinmeng (3) . . .
Beneficial owner Unlisted Shares (L) 40,000,000 17.46% 40,000,000 14.65%
Tianjin Haitai
Capital ( 4 ) .......
Interest in controlled
corporation
Unlisted Shares (L) 10,000,000 4.37% ——
H Shares (L) —— 16,473,600 6.03%
Tianjin Haitai Group
Co., Ltd.* ( 天津海
泰控股集團股份
有限公司)( 4 ).....
Interest in controlled
corporation
Unlisted Shares (L) 10,000,000 4.37% ——
H Shares (L) —— 16,473,600 6.03%
SUBSTANTIAL SHAREHOLDERS
– 420 –


--- page 431 ---
Notes:
(1) The Letter ‘‘L’’denotes the person ’s long position in our Shares.
(2) As of the Latest Practicable Date, our Company was owned as to approximately 28.27% by Mr. Wang
Zhongshan, 26.19% by Ms. Zhang Xiuqin, 9.60% by Jin meng Partnership, 3.93% by Jinyuan Partnership,
3.93% by Jinlong Partnership and 17.46% by Tianjin Yuanjinmeng.
Ms. Zhang Xiuqin is the spouse of Mr. Wang Zhongshan. As such, Mr. Wang Zhongshan and Ms. Zhang
Xiuqin are deemed to be interested in the Shares, directly or indirectly, held by each other.
Jinmeng Partnership, Jinyuan Partnership and Jinlong Pa rtnership are limited partnerships established in the
PRC and are our Employee Shareholding Platforms. Ms. Zhang Xiuqin is the general partner of Jinyuan
Partnership and Jinlong Partnership. Mr. Wang Zhongshan is the general partner of Jinmeng Partnership. The
voting rights attaching to the Shares held by Jinyuan Partnership, Jinlong Partnership and Jinmeng Partnership
in our Company are exercised by their respective gener al partners (i.e. Mr. Wang Zhongshan and Ms. Zhang
Xiuqin). Therefore, Mr. Wang Zhongshan and Ms. Zhang Xiuqin are deemed to be interested in the Shares
directly held by Jinyuan Partnership, Jinlong Partne rship and Jinmeng Partnership by virtue of the SFO.
(3) Tianjin Yuanjinmeng was owned as to 50% by Mr. Wang Guoxin and 50% by Ms. Wang Na. Therefore, Mr.
Wang Guoxin and Ms. Wang Na are deemed to be interested in the Shares directly held by Tianjin
Yuanjinmeng.
(4) Tianjin Haikai Xinchuang is wholly owned by Tianjin Haitai Capital and Tianjin Haitai Capital is wholly
owned by Tianjin Haitai Group Co., Ltd.* ( ‘‘Tianjin Haitai Group ’’). Therefore, each of Tianjin Haitai Group
and Tianjin Haitai Capital is deemed to be interested in the Shares held by Tianjin Haikai Xinchuang under
the SFO. 10,000,000 Unlisted Shares held by Tianjin Haikai Xinchuang will be converted into H Shares upon
completion of the Global Offering. Therefore, each of Tianjin Haitai Group and Tianjin Haitai Capital will
indirectly hold 10,000,000 H Shares through Tianjin Haikai Xinchuang and indirectly hold 6,473,600 H
Shares through its wholly-owned subsidiary, HiTai (Hong Kong) Limited ( 海泰(香港)有限公司) following the
completion of the Global Offering (assuming the Over-allotment Option is not exercised) and based on the
Offer Price of HK$12.00, the low-end of the indicative Offer Price range set out in this prospectus.
Save as disclosed above, our Directors are not aware of any person who will, immediately
following the completion of the Global Offering (assuming the Over-allotment Option is not
exercised), have an interest or a short positions in any Shares or underlying Shares, which will be
required to be disclosed to our Company and the Stock Exchange under the provisions of Divisions
2 and 3 of Part XV of the SFO, or who will be, directly or indirectly interested in 10% or more of
the issued voting shares of our Company.
SUBSTANTIAL SHAREHOLDERS
– 421 –


--- page 432 ---
SHARE CAPITAL
Immediately before the Global Offering
As of the Latest Practicable Date, our registered capital was RMB229,066,666, divided into
229,066,666 Unlisted Shares with a nominal value of RMB1.00 each.
Upon the Completion of the Global Offering
Immediately following the completion of the Global Offering assuming the Over-allotment
Option is not exercised, the share capital of our Company will be as follows:
Description of Shares Number of Shares
Approximate %
of the share
capital
Unlisted Shares in issue (1) ...................... 2 0 4 , 7 6 0 , 0 0 0 7 5 . 0 0 %
H Shares converted from Unlisted Shares (2) .......... 2 4 , 3 0 6 , 6 6 6 8 . 9 0 %
H Shares to be issued pursuant to the Global Offering . . 43,956,800 16.10%
T o t a l .................................... 2 7 3 , 0 2 3 , 4 6 6 1 0 0 . 0 0 %
Assuming the Over-allotment Option is exercised in full, the share capital of our Company
upon completion of the Global Offering will be as follows:
Description of Shares Number of Shares
Approximate %
of the share
capital
Unlisted Shares in issue (1) ...................... 2 0 4 , 7 6 0 , 0 0 0 7 3 . 2 3 %
H Shares converted from Unlisted Shares (2) .......... 2 4 , 3 0 6 , 6 6 6 8 . 6 9 %
H Shares to be issued pursuant to the Global Offering . . 50,550,200 18.08%
T o t a l .................................... 2 7 9 , 6 1 6 , 8 6 6 1 0 0 . 0 0 %
Notes:
(1) The Unlisted Shares in issue refer to 64,760,000 Unlisted Shares held by Mr. Wang Zhongshan, 60,000,000
Unlisted Shares held by Ms. Zhang Xiuqin, 40,000,000 Unlisted Shares held by Tianjin Yuanjinmeng,
22,000,000 Unlisted Shares by Jinmeng Partnership, 9,000,000 Unlisted Shares held by Jinyuan Partnership,
and 9,000,000 Unlisted Shares held by Jinlong Partnership.
(2) Following the completion of the Global Offering and subject to the approvals of the CSRC, 4,000,000
Unlisted Shares held by Mr. Zhao Duxue ( 趙篤學), 3,500,000 Unlisted Shares held by Ms. Huang Yi ( 黃怡),
2,300,000 Unlisted Shares held by Ms. Zhang Yizhen ( 張義貞), 340,000 Unlisted Shares held by Mr. Zhang
Jianjun ( 張建軍), 10,000,000 Unlisted Shares held by Tianjin Haikai Xinchuang and 4,166,666 Unlisted
Shares by CITIC Securities Investment will be converted into H Shares on a one-for-one basis and listed on
the Stock Exchange for trading.
SHARE CAPITAL
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SHARES OF OUR COMPANY
T h eHS h a r e s ,t ob ei s s u e df o l l o w i n gt h ec o mpletion of the Global Offering and converted
from the Unlisted Shares, and the Unlisted Shares are ordinary Shares in the share capital of our
Company, all of which are considered as one class o f Shares. Apart from certain qualified domestic
institutional investors in the PRC, qualified PRC investors under the Shanghai-Hong Kong Stock
Connect and the Shenzhen-Hong Kong Stock Conn ect and other persons entitled to hold H Shares
pursuant to the relevant PRC laws and regulations or upon approval by any competent authorities,
H Shares generally may not be subscribed for b y, or traded between, investors of the PRC. H
Shares may only be subscribed for and traded in Hong Kong dollars.
Unlisted Shares and H Shares are regarded a s one class of Shares under our Articles of
Association and will rank pari passu with each other in all other respects and, in particular, will
rank equally for all dividends or distributions declared, paid or made after the date of this
prospectus. Dividends in respect of our Shares may be paid by us in Hong Kong dollars or
Renminbi, as the case may be. In addition to cash , dividends may be distributed in the form of
Shares.
CONVERSION OF OUR UNLISTED SHARES INTO H SHARES
According to the regulations issued by the CSRC and our Articles of Association, the holders
of our Unlisted Shares may, at their own option, authorize the Company to apply to the CSRC for
conversion of their respective Unlisted Shares t o H Shares, and such converted Shares may be listed
and traded on an overseas stock exchange provided that the conversion, listing and trading of such
converted Shares have been approved by the securit ies regulatory authorities of the State Council.
Additionally, such conversion, trading and listing shall meet any requirement of internal approval
process and in all respects comply with the regulat ions prescribed by the securities regulatory
authorities of the State Council and the regulations, requirements and procedures prescribed by the
relevant overseas stock exchange. Save as disclosed in this prospectus and to the best knowledge of
our Directors, we are not aware of the intention of such existing Shareholders to convert their
Unlisted Shares.
If any of the Unlisted Shares are to be converted, listed and traded as H Shares on the Stock
Exchange, the approvals of the relevant PRC regulatory authorities, including the CSRC, and the
approval of the Stock Exchange are necessary for s uch conversion. Based on the procedures for the
conversion of Unlisted Shares into H Shares as set forth below, before any proposed conversion
after the Global Offering, we will apply for the lis ting of all or any portion of the Unlisted Shares
on the Stock Exchange as H Shares to ensure that the conversion process can be completed
promptly upon notice to the Stock Exchange and delivery of Shares for entry on the H Share
register. As the listing of additional Shares after the Listing on the Stock Exchange is ordinarily
considered by the Stock Exchange to be a purely a dministrative matter, it does not require such
prior application for listing at the time of our listing in Hong Kong. No Shareholder voting is
required for the conversion of such Shares or the listing and trading of such converted Shares on an
SHARE CAPITAL
– 423 –


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overseas stock exchange. Any application for listing of the converted shares on the Stock Exchange
after our initial listing is subject to prior notification by way of announcement to inform our
Shareholders and the public of any proposed conversion.
After all the requisite approvals have been obtained, the relevant Unlisted Shares will be
withdrawn from the Unlisted Share register, and our Company will re-register such Shares on the H
Share register maintained in Hong Kong and instruct the H Share Registrar to issue H Share
certificates. Registration on the H Share regist er of our Company will be on the conditions that (i)
the H Share Registrar lodges with the Stock Exchange a letter confirming the entry of the relevant
H Shares on the H Share register and the due dis patch of H Share certificates; and (ii) the
admission of the H Shares to be traded on the Stock Exchange complies with the Listing Rules and
the General Rules of HKSCC and the HKSCC Operat ional Procedures in force from time to time.
Until the converted Shares are re-registered on the H Share register of our Company, such Shares
would not be listed as H Shares.
RESTRICTIONS OF SHARE TRANSFER
The PRC Company Law provides that in relation to the public share offering of a company,
the shares of the company which have been issued prior to the offering shall not be transferred
within one year from the date of the listing. Accordingly, Shares issued by our Company prior to
the Listing Date shall be subject to this statutory restriction and shall not be transferred for a period
of one year from the Listing Date.
Our Directors, Supervisors and members of the senior management of our Company shall
declare their shareholdings in our Company a nd any changes in their shareholdings. Shares
transferred by our Directors, Supervisors and members of the senior management each year during
their term of office shall not exceed 25% of their total respective shareholdings in our Company.
The Shares that the aforementioned persons held in our Company cannot be transferred within one
year from the date on which the Shares are listed and traded, nor within half a year after they leave
their positions in our Company. The Articles of Association may contain other restrictions on the
transfer of the Shares held by our Directors, Supervisors and members of senior management of our
Company.
For details of the lock-up undertaking given by our Controlling Shareholders pursuant to Rule
10.07 of the Listing Rules, see ‘‘Underwriting — Underwriting Arrangements and Expenses —
Lock Up Arrangement — Undertakings to the Stock Exchange pursuant to the Listing Rules — (B)
Undertakings by each of our Controlling Shareholders ’’.
SHAREHOLDERS’ GENERAL MEETINGS
For details of circumstances under which our general Shareholders ’ meeting is required, see
‘‘Appendix VI — Summary of Articles of Association ’’.
SHARE CAPITAL
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OUR CORNERSTONE INVESTORS
We have entered into cornerstone investment agreements (the ‘‘Cornerstone Investment
Agreements’’) with each of our cornerstone investors, namely Tianjin Haitai Capital Investment
Management Co., Ltd. ( 天津海泰資本投資管理有限公司)( ‘‘Tianjin Haitai Capital ’’), Matrix
Capital Limited ( ‘‘Matrix Capital ’’), Solid Elegance International (Hong Kong) Limited ( ‘‘Solid
Elegance’’), Bright Ambition International Limited ( ‘‘Bright Ambition ’’) and Swift Grace (Hong
Kong) Limited ( ‘‘Swift Grace ’’) (each a ‘‘Cornerstone Investor’’ and collectively, the
‘‘Cornerstone Investors ’’).
THE CORNERSTONE PLACING
The Cornerstone Investors have agreed to, subject to certain conditions, subscribe or cause its
designated entities to subscribe for such number of Offer Shares (rounded down to the nearest
whole board lot of 200 H Shares) which may be purchased at the Offer Price with an aggregate
amount of RMB196.9 million (inclusive of the brokerage fee, the SFC transaction levy, the Stock
Exchange trading fee, the AFRC transaction levy, taxes and other costs (where applicable)) (the
‘‘Cornerstone Placing ’’).
Assuming an Offer Price of HK$12.00 (being the low-end of the indicative Offer Price range
set out in this prospectus), the total number of Offer Shares to be subscribed for by the Cornerstone
Investors would be 17,480,000 Offer Shares, repr esenting (i) approximately 39.77% of the Offer
Shares (assuming the Over-allotment Option is not exercised); (ii) approximately 6.40% of our total
issued share capital immediately upon the compl etion of the Global Offering (assuming the Over-
allotment Option is not exercised); and (iii) approximately 6.25% of our total issued share capital
immediately upon the completion of the Global O ffering (assuming the Ov er-allotment Option is
fully exercised).
Assuming an Offer Price of HK$13.20 (being the mid-point of the indicative Offer Price range
set out in this prospectus), the total number of Offer Shares to be subscribed for by the Cornerstone
Investors would be 15,890,600 Offer Shares, repr esenting (i) approximately 36.15% of the Offer
Shares (assuming the Over-allotment Option is not exercised); (ii) approximately 5.82% of our total
issued share capital immediately upon the compl etion of the Global Offering (assuming the Over-
allotment Option is not exercised); and (iii) approximately 5.68% of our total issued share capital
immediately upon the completion of the Global O ffering (assuming the Ov er-allotment Option is
fully exercised).
Assuming an Offer Price of HK$14.40 (being the high-end of the indicative Offer Price range
set out in this prospectus), the total number of Offer Shares to be subscribed for by the Cornerstone
Investors would be 14,566,400 Offer Shares, repr esenting (i) approximately 33.14% of the Offer
Shares (assuming the Over-allotment Option is not exercised); (ii) approximately 5.34% of our total
issued share capital immediately upon the compl etion of the Global Offering (assuming the Over-
allotment Option is not exercised); and (iii) approximately 5.21% of our total issued share capital
immediately upon the completion of the Global O ffering (assuming the Ov er-allotment Option is
fully exercised).
CORNERSTONE INVESTORS
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The Cornerstone Investors will acquire the O ffer Shares pursuant to, and as part of, the
International Offering. Our Company is of the view that, the Cornerstone Placing will help raise the
profile of our Company and signify that the Cornerstone Investors have confidence in our business
and prospects.
Tianjin Haitai Capital is the immediate holding company of Tianjin Haikai Xinchuang, an
existing Shareholder of our Company which holds approximately 4.37% of the equity interest in our
Company as of the Latest Practicable Date and will h old 3.66% shareholding interest immediately
after the Global Offering (assuming Over-allotment Option has not been exercised). Tianjin Haitai
Capital is therefore a close associate of Tianjin Haikai Xinchuang. We have applied for, and the
Stock Exchange has granted us, a waiver from str ict compliance with Rule 10.04 of the Listing
Rules and consent under paragraph 5(2) of Appendix F1 to the Listing Rules so that Tianjin Haitai
Capital may participate in the Global Offering as a cornerstone investor through its wholly owned
subsidiary, HiTai (Hong Kong) Limited ( 海泰(香港)有限公司). For further details, please refer to
‘‘Waivers from Strict Compliance with the Listing Rules ’’in this prospectus.
If there is over-allocation in the International Offering, there may be deferred delivery of the
Offer Shares to be subscribed by the Cornerstone Investors under the Cornerstone Placing. The
Cornerstone Investors have agreed that the Sponsor-Overall Coordinator may, in their sole
discretion, defer the delivery of all or part of the Offer Shares that the Cornerstone Investors have
subscribed for to a date later than the Listing Date. The Cornerstone Investors have agreed to pay
for the relevant Offer Shares that it has subscr ibed before the listing of the Offer Shares on the
Stock Exchange. The Offer Shares to be subscribed by the Cornerstone Investors will rank pari
passu in all respects with the other fully paid Offer Shares in issue and will be counted towards the
public float of our Company under Rule 8.24 of the Listing Rules.
There are no side agreements and no side arrangements between our Company, or the
Underwriters on the one hand, and any of the Cornerstone Investors and their respective beneficial
owners on the other hand, or any benefit, direct or indirect, conferred on any the Cornerstone
Investors and their respective beneficial owner sb yv i r t u eo fo ri nr e l a t i o nt ot h eC o r n e r s t o n e
Placing, and the Cornerstone Investors do not have any preferential rights in the Cornerstone
Investment Agreements compared wi th other public Shareholders, ot her than a guaranteed allocation
of the relevant Offer Shares at the Offer Price. The Cornerstone Investors will not have any
representation on the Board nor will any of them become a substantial shareholder of our Company
immediately upon completion of the Global Offering, and the Cornerstone Investors will not
subscribe for any Offer Shares under the Global Offering other than pursuant to the Cornerstone
Investment Agreements.
To the best knowledge of our Company, (i ) save as disclosed in the section headed
‘‘Information of the Cornerstone Investors ’’ below, each of the Cornerstone Investors is an
Independent Third Party and do not have other business relationship with the Company; (ii) save
for Tianjin Haitai Capital, a close associate of an e xisting Shareholder, Tianjin Haikai Xinchuang,
each of the Cornerstone Investors is not accustomed to take instructions from our Company, the
Directors, Supervisors, the chief executive of our Company, our Controlling Shareholders,
substantial Shareholder or existing Shareholders or any of its subsidiaries or their respective close
CORNERSTONE INVESTORS
– 426 –


--- page 437 ---
associates in relation to the acquisition, disposal, voting or other disposition of securities of our
Company registered in its name or otherwise held by it; (iii) save for Tianjin Haitai Capital, a close
associate of an existing Shareholder, Tianjin Ha ikai Xinchuang, the subscription of the relevant
Offer Shares by each of the Cornerstone Investor is not financed by our Company, the Directors,
the Supervisors, the chief executive of the Company, our Controlling Shareholders, substantial
Shareholders or existing Shareholders or any of their respective subsidiaries or close associates; (iv)
each Cornerstone Investor will be utilizing their internal resources or financial resources of its
parent company as their source of funding for the subscription of the Offer Shares; and (v) no
approval from other stock exchange is required for each Cornerstone Investor ’s investment in our
Company as described in this section. Each of th e Cornerstone Investor has confirmed that all
necessary approvals have been obtained w ith respect to the Cornerstone Placing.
The total number of Offer Shares to be subscribed by the Cornerstone Investors pursuant to
the Cornerstone Placing may be affected by r eallocation of the Offer Shares between the
International Offering and the Hong Kong Public Offering. If the total demand for H shares in the
Hong Kong Public Offering falls within the circumstance as set out in the section headed
‘‘Structure of the Global Offering — The Hong Kong Public Offering — Reallocation ’’in this
prospectus, the Sponsor-Overall Coordinator has the absolute discretion, but is not obliged, to
deduct the number of Offer Shares to be subscribed by the Cornerstone Investors on a pro rata basis
to reallocate to the Hong Kong Public Offering pursuant to Practice Note 18 of the Listing Rules.
The Cornerstone Investors have agreed that, in t he event that the requirement pursuant to Rule
8.08(3) of the Listing Rules, which provides that no more than 50% of our Shares in public hands
on the Listing Date can be beneficially owned by the three largest public Shareholders, cannot be
satisfied, our Company, the Sponsor-Overall Coordinator has the right to adjust the allocation of the
number of Offer Shares to be subscribed by the Corn erstone Investors in their respective absolute
discretion, to satisfy the requirement pursuant to Rule 8.08(3) of the Listing Rules. Details of the
actual number of Offer Shares to be allocated to each of the Cornerstone Investors will be disclosed
in the allotment results announcem ent to be issued by our Company.
CORNERSTONE INVESTORS
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The following tables set out certain details of the Cornerstone Placing:
Cornerstone Investor
Investment amount
in Renminbi (1)
Investment amount
in Hong Kong
dollar (2)
Indicative Offer
Price
Number of Offer
Shares (3)
Approximate % of the International
Offer Shares
Approximate % of total number of
Offer Shares
Approximate shareholding percentage
in our Company immediately upon the
completion of the Global Offering
Assuming the
Over-allotment
Option is not
exercised
Assuming the
Over-allotment
Option is exercised
in full
Assuming the
Over-allotment
Option is not
exercised
Assuming the
Over-allotment
Option is exercise
in full
Assuming the
Over-allotment
Option is not
exercised
Assuming the
Over-allotment
Option is exercise
in full
(HK$)
Tianjin Haitai Capital . . . . . . . 73,000,000.00 78,466,885 12.00 6,473,600 16.36% 14.03% 14.73% 12.81% 2.37% 2.32%
13.20 5,885,000 14.88% 12.75% 13.39% 11.64% 2.16% 2.10%
14.40 5,394,600 13.64% 11.69% 12.27% 10.67% 1.98% 1.93%
Matrix Capital . . . . . . . . . . . . 40,000,000.00 43,219,881 12.00 3,565,600 9.01% 7.73% 8.11% 7.05% 1.31% 1.28%
13.20 3,241,400 8.19% 7.02% 7.37% 6.41% 1.19% 1.16%
14.40 2,971,400 7.51% 6.44% 6.76% 5.88% 1.09% 1.06%
Solid Elegance . . . . . . . . . . . . 26,980,000.00 28,999,814 12.00 2,392,400 6.05% 5.18% 5.44% 4.73% 0.88% 0.86%
13.20 2,175,000 5.50% 4.71% 4.95% 4.30% 0.80% 0.78%
14.40 1,993,600 5.04% 4.32% 4.54% 3.94% 0.73% 0.71%
Bright Ambition . . . . . . . . . . . 39,980,000.00 42,939,955 12.00 3,542,600 8.95% 7.68% 8.06% 7.01% 1.30% 1.27%
13.20 3,220,400 8.14% 6.98% 7.33% 6.37% 1.18% 1.15%
14.40 2,952,000 7.46% 6.40% 6.72% 5.84% 1.08% 1.06%
Swift Grace . . . . . . . . . . . . . 16,980,000.00 18,251,886 12.00 1,505,800 3.81% 3.26% 3.43% 2.98% 0.55% 0.54%
13.20 1,368,800 3.46% 2.97% 3.11% 2.71% 0.50% 0.49%
14.40 1,254,800 3.17% 2.72% 2.85% 2.48% 0.46% 0.45%
Total: . . . . . . . . . . . . . . . . . 196,940,000.00 211,878,422 12.00 17,480,000 44.18% 37.87% 39.77% 34.58% 6.40% 6.25%
13.20 15,890,600 40.17% 34.43% 36.15% 31.44% 5.82% 5.68%
14.40 14,566,400 36.82% 31.56% 33.14% 28.82% 5.34% 5.21%
Notes:
(1) Inclusive of brokerage of 1.0%, SFC transaction levy of 0.0027%, Stock Exchange trading fee of 0.00565% and AFRC transaction levy of 0.00015%.
(2) Based on the respective real-time exchange rates applied by Cornerstone Investors when converting their investment amount in Renminbi into Hong Kong dollar.
(3) Subject to rounding down to the nearest whole board lot of 200 H Shares.
CORNERSTONE INVESTORS
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INFORMATION OF THE CORNERSTONE INVESTORS
The following information about the Cornerstone Investors was provided to our Company by
the Cornerstone Investors in relation to the Cornerstone Placing.
Tianjin Haitai Capital
Tianjin Haitai Capital is a company establishe d in China and its principal activity is private
equity fund management and investment management. Tianjin Haitai Capital participated in our
Cornerstone Placing through its wholly-owned subsidiary, HiTai (Hong Kong) Limited ( 海泰(香港)
有限公司), a company incorporated in Hong Kong. Tianjin Haitai Capital is the holding company
of Tianjin Haikai Xinchuang, our Pre-IPO Investo r and a wholly-owned subsidiary of Tianjin Haitai
Group Co., Ltd.* (天 津海泰控股集團有限公司)( ‘‘Tianjin Haitai Group’’ ), which in turn is owned
as to 91.1522% by the management committee of Tianjin Binhai Hi-Tech Industrial Development
Zone* ( 天津濱海高新技術產業開發區管理委員會) and 8.8478% indirectly owned by the Tianjin
Finance Bureau ( 天津市財政局). Tianjan Haitai Group is a large-scale state-owned enterprise in
Tianjin City and is principally engaged in activitie s including technology development, consulting
and infrastructure construction. Immediately following the completion of the Global Offering,
Tianjin Haitai Capital, together with Tianjin Haikai Xinchuang, wil l be interested in approximately
5.64% of our total issued share capital, assuming t he Over-allotment Option is not exercised and an
Offer Price of HK$14.40 (being the Maximum Offer Price), or 6.03% of our total issued share
capital,, assuming the Over-allotment Option is not exercised and an Offer Price of HK$12.00
(being the Minimum Offer Price).
Matrix Capital
Matrix Capital is a limited liability company incorporated in the British Virgin Islands and its
principal activity is investment holding and assets management. It is indirectly wholly owned by
Liaw Lin-Hsiang ( 廖凌祥) who is an Independent Third Party. Matrix Capital will invest in our
Company on behalf of Matrix Income SP, a segregate portfolio of Matrix Income SPC. Matrix
Income SPC is an exempted segregated portfolio company incorporated in the Cayman Islands and
100% of its management shares in issue is owned b y Income Capital Limited, a limited liability
company incorporated in the British Virgin Islands which is in turn wholly-owned by Jin Lu (金 路),
an Independent Third Party. Matrix Capital has b een appointed by Matrix Income SPC on behalf of
Matrix Income SP to be the investment manager of Matrix Income SP and shall have broad
discretion to make management and investment d ecision on behalf of Matrix Income SPC and for
the account of Matrix Income SP. There are seven investors, all of whom are Independent Third
Parties, in Matrix Income SP and none of them holds more than 30% interest in Matrix Income SP.
As of September 30, 2024, the total amount of asset under management of Matrix Income SP was
over US$127 million.
CORNERSTONE INVESTORS
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Solid Elegance
Solid Elegance is a limited liability company incorporated in Hong Kong and its principal
activity is investment holding. The beneficial owners of Solid Elegance are provincial-dealers of
our Company. See ‘‘Further Information of Solid Elegance, Bright Ambition and Swift Grace ’’for
details of beneficial owners of Solid Elegance below. During the Track Record Period, the
aggregate revenue contribution of the beneficial owners of Solid Elegance and entities controlled by
them amounted to RMB1,754.3 million, RMB1,734.7 million, RMB2,100.7 million and RMB863.6
million, for the years ended December 31, 2021, 2022 and 2023 and the six months ended June 30,
2024, respectively, representing 10.4%, 11.0%, 10.4% and 8.7% of our total revenue of respective
year/period.
Bright Ambition
Bright Ambition is a limited liability company incorporated in Hong Kong and its principal
activity is investment holding. The beneficial owners of Bright Ambition consist of provincial-
dealers and/ or franchisees of our Company and family members of such provincial-dealers and/ or
franchisees. See "Further Information of Solid Elegance, Brig ht Ambition and Swift Grace" for
details of beneficial owners of Bright Ambition below. During the Track Record Period, the
aggregate revenue contribution of the beneficia l owners of Bright Ambition and entities controlled
by them or their respective family members ment ioned below amounted to RMB1,123.1 million,
RMB1,133.8 million, RMB1,361.8 million and RMB456.6 million, for the years ended December
31, 2021, 2022 and 2023 and the six months ended June 30, 2024, respectively, representing 6.7%,
7.2%, 6.7% and 4.6% of our total revenue of respective year/period.
Swift Grace
Swift Grace is a limited liability company incorporated in Hong Kong and its principal
activity is investment holding. The beneficial owners of Swift Grace consist of franchisees of our
Company and family members of such franchisees. See ‘‘Further Information of Solid Elegance,
Bright Ambition and Swift Grace ’’for details of beneficial owners of Swift Grace below. During
the Track Record Period, the aggregate revenue contribution of the beneficial owners of Swift
Grace and entities controlled by them or their r espective family mem bers mentioned below
amounted to RMB200.2 million, RMB213.7 million, RMB269.4 million and RMB163.6 million, for
the years ended December 31, 2021, 2022 and 2023 and the six months ended June 30, 2024,
respectively, representing 1. 2%, 1.4%, 1.3% and 1.6% of our total revenue of respective year/
period.
CORNERSTONE INVESTORS
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Further Information of Solid Elegance, Bright Ambition and Swift Grace
The following table sets forth the information of each of the shareholders of Solid Elegance,
Bright Ambition and Swift Grace and their respective relationships with our Company:
Name of
Cornerstone Investor
Shareholders of Cornerstone Investor and
respective shareholding Relationship with our Company
1. Solid Elegance Taiyuan Hongshen Jewellery Co.,
Ltd.* ( 太原宏珅珠寶有限公司)
— Indirectly holds 66.67%
shareholding in Solid
Elegance.
— It is indirectly owned as
to 60% by Ma Jun
(馬駿) and 40% by
Qin Lina ( 秦麗娜).
An entity controlled by our
provincial-dealer mentioned in the
section headed ‘‘Business — Gold
Trade-in — Five largest gold
trade-in parties for our franchise
network during the Track Record
Period ’’.
Guizhou Keshi Gold Coast Jewellery
Co. Ltd. ( 貴州柯氏金海岸珠寶有限
公司)
— Indirectly holds 8.33%
shareholding in Solid
Elegance.
— It is owned as to 95% by Ke
Shunqiu ( 柯順秋) and 5% by
Z h e n gE n(鄭恩).
Our provincial-dealer.
Fuzhou Jinwanfu Jewellery Co., Ltd.
(福州金萬福珠寶首飾有限公司)
— Indirectly holds 8.33%
shareholding in Solid
Elegance.
— It is wholly owned by Liu
Xin ( 劉信).
Our provincial-dealer.
CORNERSTONE INVESTORS
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--- page 442 ---
Name of
Cornerstone Investor
Shareholders of Cornerstone Investor and
respective shareholding Relationship with our Company
Changsha Baishun Commercial
Management Co., Ltd.
(長沙市百順商業管理有限公司)
— Indirectly holds 8.33%
shareholding in Solid
Elegance.
— It is owned as to 80% by
Chen Huizhen ( 陳惠真) and
20% by Ke Guanghua
(柯光華).
Our provincial-dealer.
Yunnan Xia Chong Trading Co., Ltd
(雲南夏翀貿易有限公司)
— Indirectly holds 8.33%
shareholding in Solid
Elegance.
— It is owned as to 90% by
Shang Xiahui (商 夏暉) and
1 0 %b yC h e nJ i n g( 陳靜).
Our provincial-dealer.
2. Bright Ambition Sun Haifeng ( 孫海峰)
— Indirectly holds 62.50%
shareholding in Bright
Ambition.
A family member of one of our
franchisees mentioned in the
section headed ‘‘Business — Gold
Trade-in — Five largest gold
trade-in parties for our franchise
network during the Track Record
Period. ’’.
Hou Bin ( 侯彬)
— Indirectly holds 16.67%
shareholding in Bright
Ambition.
Our franchisee mentioned in the
section headed ‘‘Business — Gold
Trade-in — Five largest gold
trade-in parties for our franchise
network during the Track Record
Period. ’’.
CORNERSTONE INVESTORS
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Name of
Cornerstone Investor
Shareholders of Cornerstone Investor and
respective shareholding Relationship with our Company
Jiangxi Huifeng Jewelry Co., Ltd.*
(江西滙豐珠寶首飾有限公司)
— Indirectly holds 8.33%
shareholding in Bright
Ambition.
— It is owned as to 50% by
Deng Jushun ( 鄧菊順) and
5 0 %b yD e n gP i n g( 鄧平).
Deng Jushun ( 鄧菊順)i st h e
ultimate beneficial owner of one
of our provincial dealer. Deng
Ping ( 鄧平) operated one
franchise store in Jiangxi Province
as of the Latest Practicable Date
and is a family member of Deng
Jushun.
Cai Guolin (蔡 國霖)
— Indirectly holds 4.17%
shareholding in Bright
Ambition.
Our franchisee in Shandong
Province since 2012, and operated
four franchise stores as of the
Latest Practicable Date.
Zhang Suzhen ( 張素珍)
— Indirectly holds 8.33%
shareholding in Bright
Ambition.
A family member of one of our
franchisees who operated three
franchise stores in Shandong
Province as of the Latest
Practicable Date.
3. Swift Grace Zhang Zongkui ( 張宗奎)
— Indirectly holds 94.17%
shareholding in Swift Grace.
A family member of one of our
franchisees who operated five
franchise stores in Shandong
Province as of the Latest
Practicable Date.
Qingdao Quantum Gold Point
Jewelry Co., Ltd.* ( 青島量子金點珠
寶首飾有限公司)
— Indirectly holds 4.17%
shareholding in Swift Grace.
— It is owned as to (i) 95% by
Liangyu (Qingdao) Enterprise
Management Co., Ltd.* (良
宇(青島)企業管理有限公司),
which is owned as 99% by Li
Jiaxuan ( 李佳軒) and 1% by
Dong Chunwei ( 董春偉); and
(ii) 5% by Li Jiaxuan ( 李佳
軒).
Li Jiaxuan ( 李佳軒) is a family
member of Wang Ping ( 王萍) as
mentioned below.
CORNERSTONE INVESTORS
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Name of
Cornerstone Investor
Shareholders of Cornerstone Investor and
respective shareholding Relationship with our Company
Qingdao Songqi Trading Co., Ltd.*
(青島頌琪商貿有限公司)
— Indirectly holds 1.67%
shareholding in Swift Grace.
— It is owned as to (i) 95% by
Qingdao Longjia Jinxi
Commercial Management
Co., Ltd.* (青 島隆嘉金璽商
業管理有限公司), which is
owned as to 99% by Wang
Ping ( 王萍) and 1% by Wang
Jianying ( 王建英); and (ii)
5% by Zhang Weiliang ( 張維
良).
Wang Ping ( 王萍) has been our
franchisee since 2011, and
operated six franchise stores in
Shandong Province as of the
Latest Practicable Date.
Both Wang Jianying ( 王建英) and
Zhang Weiliang (張 維良) are the
family members of Wang Ping
(王萍).
To the best knowledge of our Company, the beneficial owners of each of Solid Elegance,
Bright Ambition and Swift Grace decided to group together and invest in our Company for the
reasons that: (i) the investment amount of certain beneficial owners is relatively small and they
consider it is not cost effective to set up separate investment vehicles and obtain the approval for
overseas investment individually from the PRC government authorities; and (ii) in their capacities
as the provincial dealers/franchisees of our Company, they became acquainted with each other or
their respective family member who is provincial-dealer or franchisee of our Company at the
Company ’s franchisee conferences or other similar events and acquired certain knowledge about
others ’ business operation and financial strength; and (iii) there is no geographical overlap in their
respective operating regions and therefore no competition among them that would result in conflict
of interest to prevent them from investing together.
We became acquainted with Tianjin Haitai Capital through the pre-IPO investment of Tianjin
Haikai Xinchuang in our Company, Matrix Capital through the introduction by our Sponsor-Overall
Coordinator, and the other Cornerstone Investor s, the shareholders of which are our franchisees or
provincial dealers through our ordinary course of business cooperation. Shareholders of the
Cornerstone Investors who are the Company ’s franchisees or provincial dealers will not be given
any preferential treatment in our business cooperation with them when compared with other
franchisees or provincial dealers of the Company. We are of the view that the receiving investments
from both Tianjin Haitai Capital and Matrix Capital, as established financial investor and fund, will
help to raise the profile of our Company and that the involvement of our other Cornerstone
Investors whose shareholders are our provincial dealers or franchisees signify that the our business
partners have confidence in our business and prospect.
CORNERSTONE INVESTORS
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CONDITIONS PRECEDENT
The obligation of the Cornerstone Investors to acquire the relevant Offer Shares under the
Cornerstone Investment Agreements are subject to, among other things, the following closing
conditions:
(a) the Hong Kong Underwriting Agreement and the International Underwriting Agreement
being entered into and having become effective and unconditional (in accordance with
their respective original terms or as subse quently waived or varied by agreement of the
parties thereto) by no later than the time and date as specified in these underwriting
agreements, and neither of the aforesaid underwriting agreements having been
terminated;
(b) the Offer Price having been agreed upon between our Company and the Sponsor-Overall
Coordinator (on behalf of the underwriters of the Global Offering);
(c) the Stock Exchange having granted the approval for the listing of, and permission to deal
in, the H Shares (including the H Shares subs cribed for by the Cornerstone Investors as
well as other applicable waivers and approval s) and such approval, permission or waiver
having not been revoked prior to the commen cement of dealings in the Shares on the
Stock Exchange;
(d) no relevant laws or regulations shal l have been enacted or promulgated by any
governmental authority which prohibi ts the consummation of the transactions
contemplated in the Global Offering or herein and there shall be no orders or injunctions
from a court of competent jurisdiction in e ffect precluding or prohibiting consummation
of such transactions; and
(e) the representations, warranties, undertaki ngs, acknowledgements and confirmations of the
Cornerstone Investors under the Cornerstone Investment Agreements are (as of the date
of the respective Cornerstone Investment Agreement) and will be (as of the closing of the
subscription of the Offer Shares in accord ance with the terms and conditions of the
Cornerstone Investment Agreements) accurate and true in all respects and not misleading
and that there is no material breach of the respective Cornerstone Investment Agreement
on the part of the relevant Cornerstone Investor.
RESTRICTIONS ON DISPOSAL OF OFFER SHARES BY THE CORNERSTONE
INVESTORS
Each of the Cornerstone Investors has agreed that it will not, whether directly or indirectly, at
any time during the period of six months from (and inclusive of) the Listing Date (the ‘‘Lock-up
Period ’’), dispose of, in any way, any of the Offer Sha res or any interest in any company or entity
holding such Offer Shares that they have purchased pursuant to the relevant Cornerstone Investment
Agreement, save for certain limited circumstances, such as transfers to any of its wholly-owned
subsidiaries who will be bound by the same obligations of such Cornerstone Investor, including the
Lock-up Period restriction.
CORNERSTONE INVESTORS
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You should read this section in conjunction with our consolidated financial information as
set out in Appendix I to this prospectus. The consolidated financial information has been
prepared in accordance with HKFRSs.
The following discussion and analysis contains forward-looking statements that involve
risks and uncertainties. These statements ar e based on assumptions and analysis made by us in
light of our experience and perception of historical trends, current conditions and expected
future developments, as well as other factors we believe are appropriate under the
circumstances. However, our actual results may d iffer significantly from those projected in the
forward-looking statements. Factors that might c ause future results to differ significantly from
those projected in the forward-looking statements include those discussed in ‘‘Risk Factors ’’.
OVERVIEW
We are a gold jewellery Original Brand Manufacturer ( ‘‘OBM’’), focusing on markets in third
and lower tier cities in the PRC. A ccording to Frost & Sullivan, as of the Latest Practicable Date,
we were one of the very few with an operation that encompasses key stages of the gold jewellery
industry, from raw material sourcing and purification, R&D, product design, manufacturing to
retailing through our diversified sales network. Our operation covers the aforementioned key stages
of the gold jewellery industry. We are committed to quality control in each stage.
We primarily sell our products through our franchise network. In addition, we also offer our
products to our customers through self-operated stores and online sales via e-commerce platforms.
As of June 30, 2024, we have established a compre hensive sales channels covering franchise
network of 2,850 franchise stores operated by 1,670 franchisees, seven self-operated direct service
centers and 17 provincial-dealers, as well as 36 self-operated stores and online stores on major e-
commerce platforms. We have a wel l established market position in third and lower tier cities in the
PRC, which are markets with high growth potential according to Frost & Sullivan. For further
details of our sales and distribution network and arrangements with our franchisee, see ‘‘Business
— Sales and Distribution Channels’’ of this prospectus.
We generally adopt a cost-plus pricing policy for our gold jewellery and K-gold products.
When we sell our gold products and K-gold, we normally charge customers with an amount based
on the prevailing market price of gold and craft ing fees, multiplied by the weight of gold of the
products. Crafting fees represent mark-ups on top of the costs of our products, which vary by
product and by the transaction type.
Based on our gold price exposure management strategy, we implement measures including
procurement through gold loans and Au (T+D) contracts to mitigate the risks associated with
fluctuations in gold prices. These measures are carefully assessed based on funds available, our
gold inventory position and projected sales needs. Au (T+D) is a standardized contract employed by
the Shanghai Gold Exchange. It involves the delivery of a predetermined amount of gold at a
predetermined price on a specified future date.
FINANCIAL INFORMATION
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--- page 447 ---
During the Track Record Period, our revenue decreased from RMB16,871.0 million for the
year ended December 31, 2021 to RMB15,724.2 million for year ended December 31, 2022, and
increased to RMB20,208.6 million for the year ended December 31, 2023. During the same periods,
our revenue generated from the sales of gold jewellery and other gold products amounted to 97.5%,
97.9% and 98.4%, respectively. Our net profit decreased from RMB224.5 million for the year
ended December 31, 2021 to RMB180.8 million for year ended December 31, 2022 and increased
to RMB233.5 million for the year ended December 31, 2023. Our revenue for the six months ended
June 30, 2024 amounted to RMB9,979.7 million, representing an increase of RMB663.5 million or
a period-to-period increase of 7.1% when compared to that for the six months ended June 30, 2023.
Our net profit for the six months ended June 30, 2024 amounted to RMB52.3 million, which
decreased by RMB53.7 million when compared to that of the six months ended June 30, 2023.
BASIS OF PRESENTATION
The historical financial information of the Track Record Period incorporates the financial
statements of the Company and entities controlled by the Group. Control is achieved when the
Company:
. has power over the investee;
. is exposed, or has rights, to variable returns from its involvement with the investee; and
. has the ability to use its power to affect its returns.
The Group reassesses whether or not it controls an investee if facts and circumstances indicate
that there are changes to one or more of the three elements of control listed above.
Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and
ceases when the Group loses control of the subsid iary. Specifically, income and expenses of a
subsidiary acquired or disposed of during the Track Record Period are included in the consolidated
statements of profit or loss and other comprehensive income from the date the Group gains control
over the subsidiary until the date when the Group ceases to control the subsidiary.
Profit or loss and each item of other comprehens ive income are attributed to the owners of the
Company and to the non-controlling interests. Total comprehensive income of subsidiaries is
attributed to the owners of the Company and to the non-controlling interests even if this results in
the non-controlling interests having a deficit balance.
When necessary, adjustments are made to the financial statements of subsidiaries to bring their
accounting policies in line with the Group ’s accounting policies.
All intragroup assets and liabilities, equity, income, expenses and cash flows relating to
transactions between members of the Group a re eliminated in full on consolidation.
Non-controlling interests in subsidiaries are presented separately from the Group ’s equity
therein, which represent present ownership intere sts entitling their holders to a proportionate share
of net assets of the relevant subsidiaries upon liquidation.
FINANCIAL INFORMATION
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--- page 448 ---
KEY FACTORS AFFECTING OUR RESULTS OF OPERATIONS
Our results of operations have been and will continue to be affected by a number of factors,
including those set out below:
Gold supply and pricing
Our ability to source steady supply of gold materials is crucial to our business operation. The
material costs of gold for the years ended December 31, 2021, 2022 and 2023 and the six months
ended June 30, 2024 constituted 99.0%, 99.2%, 99.5% and 99.6% of our material cost during the
respective year/period.
We generally adopt a cost-plus pricing policy. Our jewellery products are priced based on two
pricing components, which are the raw material co sts and crafting fees. Changes to gold material
prices also affect our results of operations. Our jewellery products that are mainly made of gold are
subject to changes in market prices. An increase i n gold material price will directly increase our
procurement cost. If there is an increase in the prevailing gold market price, we will adjust our
selling gold prices based on the current market price to ensure that our customers are charged
accordingly. As such, we have generally been able to pass-on gold price changes to our customers.
According to Frost & Sullivan, the continuous ri se in the gold price will motivate consumers ’
investment enthusiasm, thereby promoting the demand for gold jewellery products. Driven by
customers’ ‘‘buy on the upside ’’philosophy for gold, the demand for gold jewellery is likely to
increase with the rising gold price. Hence, gold jewellery manufacturing companies will receive
more orders from either retailers or individual customers in light of the rising trend of gold price.
According to gold price quoted on the Shanghai Gold Exchange, the annual average daily
closing price for Au9995 in the PRC experienced a general upward trend, which increased from
RMB270.9/g in 2018 to RMB449.8/g in 2023, and further to the average daily closing price of
RMB520.9/g for the six months ended June 30, 2024 due to several factors, including the volatility
in the global political and economic environment, the strong demand for gold, particularly with the
jewellery industry. Especially in 2020, due to the outbreak of COVID-19, the international
economic environment was faced with a lot of uncertainty. Furthermore, the geopolitical conflict
and the rapid inflation have pushed up the demand for gold to hedge risks and the average daily
closing price for Au9995 hit RMB522.9/g for the six months June 30, 2024. The trend of the
average daily closing price for Au9999 was in line with that of Au9995 but was slightly higher,
growing from RMB271.1/g in 2018 to RMB449.9/g in 2023 and further to the average daily closing
price of RMB520.9/g for the six months ended June 30, 2024.
We use gold loans and Au (T+D) contracts to hedge against the financial impact of gold price
fluctuations. For details, see ‘‘Business — Our procurement/suppliers — Procurement of Gold —
(b) Gold Price exposure management to manage fluctuations of raw material price — Adoption of
Au (T+D) contracts ’’and ‘‘Business — Gold Loans ’’.
FINANCIAL INFORMATION
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The following tables demonstrate the sensitivity to a reasonably possible change in the gold
price during each year/period of our profit before tax during the Track Record Period based on the
assumptions that (1) the gold price at the beginni ng of each year/period remains unchanged; (2) the
daily gold price fluctuates similarly but to a larger extent when compared to the original fluctuation
throughout each year/period, which then resulted in the gold price increase or decrease by the end
of each year/period set out in below table; (3) the Company ’s inventory level and short position do
not fluctuate significantly during each year/period; and (4) all other variables held constant:
Year ended December 31, Six months ended June 30,
2021 2022 2023 2023 2024
RMB’000 RMB’ 000 RMB ’000 RMB ’000 RMB ’000
(Unaudited)
Gold price increase/decrease
by end of each year/period
by:
+5% . . . . . . . . . . . . . . . . . (44,234) (74,487) (96,170) (53,588) (87,751)
+10% . . . . . . . . . . . . . . . . (88,469) (148,973) (192,340) (107,175) (175,501)
+20% . . . . . . . . . . . . . . . . (176,938) (297,947) (384,679) (214,350) (351,003)
–20% . . . . . . . . . . . . . . . . 176,938 297,947 384,679 214,350 351,003
–10% . . . . . . . . . . . . . . . . 88,469 148,973 192,340 107,175 175,501
–5% . . . . . . . . . . . . . . . . . 44,234 74,487 96,170 53,588 87,751
Outbreak of pandemics, natural disasters and other calamities
As a gold jewellery brand with franchise stores spreading across the PRC as of June 30, 2024,
our business, financial conditions and results of operations depend on operations.
According to Frost & Sullivan, during the Track Record Period, the COVID-19 pandemic
negatively impacted the retail industry globally, which in turn adversely affected our business,
financial conditions and results of operations. T he processing volume of gold jewellery in the PRC
fluctuated in the past few years. Influenced by the economic condition and the rising gold price, the
processing volume of gold jewellery decreased from 749.4 tons in 2018 to 685.3 tons in 2019. In
2020, the outbreak of the pandemic caused the processing volume to slump to 510.0 tons. The
processing volume rebounded in 2021 since effective control measures were taken by the
government, which led to the swift recovery of the offline manufacturing process. The processing
volume dipped again with the resurgence of the pandemic in 2022. Looking forward, as the
government has eased the COVID-19 curbs since the end of 2022, the market size of the gold
jewellery industry in terms of processing volume is expected to grow at a CAGR of 6.0% from
2022 to 2027 and reach 913.0 tons in 2027.
Specifically, according to Frost & Sullivan , affected by the COVID-19 pandemic, a large
number of offline jewellery retail stores in the PRC suspended their business and jewellery sales
stalled. As a result, the jewellery market size in the PRC witnessed a decline in 2022.
FINANCIAL INFORMATION
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According to Frost & Sullivan, restrictive measures controlling the spread of the COVID-19
virus have generally been uplifted since December 2022, and there has been a noticeable uptick in
infections among people. To the extent that future waves of COVID-19 infections disrupt normal
business operations and traveling in markets w hich we operate, we may face disrupted market
demand and operational challenges with our servic es. We are closely monitoring the occurrence of
health pandemics, natural disasters and extraordinary events, and continuously evaluating any
potential impact on our business, financial conditions and results of operations.
Economic conditions of the PRC
During the Track Record Period, we derived substantially all our revenue from sales in the
PRC. Our business is particularly sensitive to the economic development and the purchasing power
of consumers in the PRC. Economic growth in th e PRC over the past three decades has led to
substantial growth in personal disposable incom e and has resulted in increasing purchasing power
and greater demand for discretionary consumer products, according to Frost & Sullivan.
According to Frost & Sullivan, the PRC ’s economy has boomed over the past decades, and the
disposable income per capita and people ’s living standards are increasing accordingly; Chinese
residents ’ annual disposable income per capita has steadily risen from RMB28.2 thousand to
RMB39.2 thousand over the past five years from 2018 to 2023, with a CAGR of 6.8%. During the
same period, the consumption structure of Chines e people has also been c onstantly optimized and
upgraded, with the continuous increase of total spending on luxury items, indicating that the quality
of life has been steadily improving. Notably, acc ording to Frost & Sullivan, the per capita
consumption of gold jewellery in third and lower tier cities underwent rapid growth at a CAGR of
6.3% from 2018 to 2023 and reached RMB663.2 in 2023. Hence, the rising consumption power in
lower tier cities will further fuel the growth of the gold jewellery market in the PRC.
According to Frost & Sullivan, the processing volume of gold jewellery in the PRC fluctuated
in the past few years. The overall gold jewellery market sales in the PRC witnessed steady growth
from 2018 to 2023. Overall, the sales revenue of the PRC jewellery market increased from
RMB580.0 billion in 2018 to RMB820.0 billion in 2023, representing a CAGR of 7.2%.
During the Track Record Period, our revenue decreased by RMB1,146.8 million or 6.8% from
RMB16,871.0 million to RMB15,724.2 million for the year ended December 31, 2022 and
increased by RMB4,484.4 million or 28.5% to RMB20,208.6 million for the year ended December
31, 2023. In addition, our revenue increased by RMB663.5 million or 7.1% from RMB9,316.2
million for the six months ended June 30, 2023 to RMB9,979.7 million for the six months ended
June 30, 2024. As shown, our revenue during the Track Record Period largely followed the trend of
the gold jewellery market of the PRC and was generally affected by economic conditions.
We expect that the continuing economic growth in the PRC will translate into an increase in
consumer spending and demand for luxury goods. Accordingly, we expect the economic conditions
and the level of consumer spending in the PRC to continue to have a significant impact on our
business, financial conditions and results of operations.
FINANCIAL INFORMATION
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Number of franchise stores and expansion of our sales and distribution network
Our revenue is derived primarily from the sales of gold jewellery products through our
franchise network, which comprises franchise stores under our brand and sell our products to
consumers. We also sell our products via our self-operated stores and e-commerce platforms. Our
revenue is primarily driven by the scale of our franchise network and our future revenue growth
depends on our ability to attract franchisees to joi n our sales and distribution network and open new
stores and expand the coverage of our sales and distribution network. As of December 31, 2021,
2022 and 2023 and June 30, 2024, our store network included 2,680, 2,743, 2,817 and 2,850
franchise stores and 31, 32, 35 and 36 self-operate d stores, respectively. While it generally takes
time for the new stores to ramp up, we believe that we are able to leverage our expanding sales and
distribution network to achieve economies of scale and further enhance our brand awareness.
We provide incentive support for provincial-dealers, franchisees and their stores. For example,
we offer a variety of services to our franchisees such as training, guidance, branding and marketing.
We also offer promotional events together with ou r franchisees to attract consumers. Our managers
supervise and provide guidance for franchisees with respect to market development and store
operating strategies. As a result, our franchisees ’ operating capability has been continuously
improving, with some of them starting from operati ng a single store to operating multiple stores.
We plan to continue to grow our presence in the PRC by expanding our geographic coverage
and deepening our market penetration. We expect to open more stores in new geographic regions to
cover more third and lower tier cities in the PRC, offering quality high-purity gold jewellery to the
general public across the PRC. For details, see ‘‘Business — Our Strategies ’’.
Maintaining a brand image that appeals to consumers
We derive substantially all of our revenue from gold jewellery products, and we believe that
the brand image of a jewellery manufacturer is an important factor affecting consumers ’ selection.
The strength of our brand is based in part on our long history and track record consolidated with
our reputation for providing trusted jewellery with distinctive product designs that appeal to a wide
range of consumers. We continually develop and promote a wide range of jewellery to suit
consumer preferences.
According to the Frost & Sullivan, gold jewellery is trending among millennials and Gen Z in
the PRC nowadays. The proportion of the younger generation in the gold jewellery consumer group
is increasing substantially in the PRC. Accordin g to the same source, an increasing number of
younger consumers buy gold jewellery for self-wear instead of specific consu mption scenarios such
as children gifting, family gifting, couple gifting , holiday-related occasions, and wedding purchases.
A significant part of our success has been and will continue to depend on our ability to maintain
our strong brand image and at the same time continue to design and produce a wide range of
quality jewellery products that meet continuously changing consumer preferences.
FINANCIAL INFORMATION
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Seasonality
We experience seasonal fluctu ations in demand for our products. The peak seasons include the
PRC National Day holiday, the period from Chinese New Year till Valentine ’s Day, and the period
during our ‘‘One RMB Exchange ’’promotion which is typically in June to September. As a result,
we usually record higher sales in first quarter and third quarter of each calendar year where there
are holiday seasons such as Chinese New Yea r and the October Golden Week. As a result,
comparisons of our sales and operating results bet ween different periods within a single financial
year are not necessarily meaningful and cannot be relied on as indicators of our performance. Our
results of operations are likely to continu e to fluctuate according to seasonality.
MATERIAL ACCOUNTING POLICY INFORMATION AND CRITICAL ACCOUNTING
JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY
We have identified certain accounting policies that are material to the preparation of our
Group ’s financial information. Some of our accounting policies involve subjective assumptions and
estimates, as well as complex judgements relating to accounting items. In each case, the
determination of these items requires managemen t judgements based on information and financial
data that may change in future periods. When reviewing our financial information, you should
consider: (i) our selection of accounting policies; and (ii) the results to changes in conditions and
assumptions. We set forth below those accounting policy information that we believe are material to
us or involve critical accounting judgments and key sources of estimation uncertainty used in the
preparation of our Group ’s financial information. Our materia l accounting policy information,
critical accounting judgments and key sources of es timation uncertainty, which are important for an
understanding of our financial condition and resul ts of operations, are set forth in detail in notes 4
and 5 to the historical financial information of the Accountants ’ Report set out in Appendix I to
this prospectus, respectively.
Material Accounting Policy Information
Revenue from contracts with customers
The Group recognizes revenue when (or as) a performance obligation is satisfied, i.e. when
‘‘control ’’of the goods or services underlying the particular performance obligation is transferred to
the customer. A performance obl igation represents a good and service (or a bundle of goods or
services) that is distinct or a se ries of distinct goods or services that are substantially the same.
Control is transferred over time and revenue is recognized over time by reference to the
progress towards complete satisfaction of the relevant performance obligation 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
Group performs; or
FINANCIAL INFORMATION
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--- page 453 ---
. 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.
Otherwise, revenue is recognized at a point in time when the customer obtains control of the
distinct good or service.
A contract liability represents the Group ’s obligation to transfer goods or services to a
customer for which the Group has received consideration (or an amount of c onsideration is due)
from the customer.
Non-cash consideration
The Group receives used gold products from franchisees, provincial-dealers and consumers to
be used in manufacturing new gold products. The fair value of such non-cash consideration
received from the customer is included in the transaction price and measured when the Group
obtains control of the used gold products. The Group estimates the fair value of the non-cash
consideration by reference to the real-time tr ading price of the Shanghai Gold Exchange on the
relevant trading day.
Inventories
Inventories are stated at the lower of cost and net realizable value. Cost of inventories are
determined on a weighted average method. Net real izable value represents the estimated selling
price for inventories less the estimated costs of completion and costs n ecessary to make the sale.
Costs necessary to make the sale include incremental costs directly attribut able to the sale and non-
incremental costs which the Group must incur to make the sale.
Property, plant and equipment
Property, plant and equipment are tangible assets that are held for use in the production or
supply of goods or services, or for administrative purposes. Property, plant and equipment are
stated in the consolidated statements of financ ial position at cost less subsequent accumulated
depreciation and subsequent accumu lated impairment losses, if any.
Construction in progress is carried at cost, less a ny recognized impairment loss. Costs include
any costs directly attributable to bringing the ass et to the location and condition necessary for it to
be capable of operating in the manner intended by m anagement, including costs of testing whether
the related asset is functioning pr operly and, for qualifying asset s, borrowing costs capitalized in
accordance with the Group ’s accounting policy. Depreciation of these assets, on the same basis as
other property, plant and equipment, commences when the assets are ready for their intended use.
An item of property, plant and equipment is derecognized upon disposal or when no future
economic benefits are expected to arise from the continued use of the asset. Any gain or loss
arising on the disposal or retirement of an item of property, plant and equipment is determined as
the difference between the sales proceeds and the carrying amount of the asset and is recognized in
profit or loss.
FINANCIAL INFORMATION
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If a property becomes an investment property because its use has changed as evidenced by end
of owner-occupation, the cost of the relevant property and the related accumulated depreciation and
impairment loss (if any) (including the relevant leasehold land classified as right-of-use assets) are
transferred to investment pro perty at the date of transfer.
Sale with a right of return/exchange
For a sale of products with a right of return/exchange for dissimilar products, the Group
recognizes all of the following:
(a) revenue for the transferred products in the amount of consideration to which the Group
expects to be entitled (therefore, revenue would not be recognized for the products
expected to be returned/exchanged);
(b) a refund liability; and
(c) an asset (and corresponding adjustment to cost of sales) for its right to recover products
from customers.
Financial instruments
Financial assets and financial liabilities are r ecognized when a group entity becomes a party to
the contractual provisions of the instrument. All regular way purchases or sales of financial assets
are recognized and derecognized on a trade date basis. Regular way purchases or sales are
purchases or sales of financial assets that require delivery of assets within the time frame
established by regulation or convention in the market place.
Financial assets and financial liabilities are initially measured at fair value except for trade
receivables arising from contracts with customers which are initially measured in accordance with
HKFRS 15 Revenue from Contracts with Customers. Transaction costs that are directly attributable
to the acquisition or issue of financial assets and fin ancial liabilities (other than financial assets or
financial liabilities at fair value through profit or loss ( ‘‘FVTPL ’’)) are added to or deducted from
the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition.
Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at
FVTPL are recognized immediately in profit or loss.
The effective interest method is a method of calculating the amortized cost of a financial asset
or financial liability and of allocating interest income and interest expense over the relevant period.
The effective interest rate is the rate that exactly discounts estimated future cash receipts and
payments (including all fees and points paid or received that form an integral part of the effective
interest rate, transaction costs and other premiums or discounts) through the expected life of the
financial asset or financial liability, or, where appropriate, a shorter period, to the net carrying
amount on initial recognition.
FINANCIAL INFORMATION
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Classification and subsequent me asurement of financial assets
Financial assets
Financial assets are subsequently measured at amortised cost:or FVTPL, except that at the date
of initial recognition of a financial asset the Group may irrevocably elect to present subsequent
changes in fair value of an equity investment in other comprehensive income if that equity
investment is neither held for trading nor contingent consideration recognised by an acquirer in a
business combination to which HKFRS 3 Business Combinations applies.
Amortised cost and interest income
Interest income is recognised using the effective interest method for financial assets measured
subsequently at amortised cost. Interest income is calculated by applying the effective interest rate
to the gross carrying amount of a financial asset, except for financial assets that have subsequently
become credit-impaired. For financial assets that have subsequently become credit-impaired, interest
income is recognised by applying the effective int erest rate to the amortised cost of the financial
asset from the next reporting period. If the credit risk on the credit-impaired financial instrument
improves so that the financial asset is no longer c redit-impaired, interest income is recognised by
applying the effective interest rate to the gros s carrying amount of the financial asset from the
beginning of the reporting period following the determination that the asset is no longer credit-
impaired.
Financial assets at FVTPL
Financial assets at FVTPL are measured at fair value at the end of each reporting period, with
any fair value gains or losses recognised in profit or loss. The net gain or loss recognised in profit
or loss includes any dividend or interest earne do nt h ef i n a n c i a la s s e ta n di si n c l u d e di nt h e‘‘other
gains and losses, net ’’line item.
Financial liabilities
All financial liabilities are subsequently measured at amortised cost using the effective interest
method or at FVTPL.
Financial liabilities at amortised cost
Financial liabilities including borrowings, trade and bills payables and other payables are
subsequently measured at amortised cost, using the effective interest method.
Derivative financial instruments
Derivatives are initially recognised at fair value at the date when derivative contracts are
entered into and are subsequently remeasured to th eir fair value at the end of each reporting period.
The resulting gain or loss is recognised in profit or loss.
FINANCIAL INFORMATION
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Gold loan
Gold loans representing the obligation to delive r gold are classified as liabilities at FVTPL at
initial recognition.
Critical Accounting Judgements and Key Sources of Estimation Uncertainty
Critical judgements in applying accounting policies
The following are the critical judgments, apart from those involving estimations (see below),
that the directors of the Company have made in the process of applying the Group ’s accounting
policies and that have the most significant effect on the amounts recognized in the consolidated
financial statements.
Revenue recognition for sales settled in used gold products
The Group receives used gold products fro m franchisees and consumers to be used in
manufacturing new gold products. There is no obligation or commitment for the Group to accept
the used gold products. Except for the form of consideration, there ’s no difference between this
arrangement and an arrangement in which our customers makes a cash payment. The directors of
the Company apply judgment to assess whether or not the Group obtains control of customer-
provided materials. After careful analysis of all relevant facts and circumstances, it is concluded
that the Group obtains control of the used gold products. As a result, the fair value of the non-cash
consideration is included in the transaction price.
The Group estimates the fair value of the non-ca sh consideration by reference to the real-time
trading price of the Shanghai Gold Exchange on the relevant trading day.
Key sources of estimation uncertainty
The following are the key assumptions concerning the future, and other key sources of
estimation uncertainty at the end of each repor ting period that may have a significant risk of
causing a material adjustment to the carrying amounts of assets and liabilities within the next
financial year.
Provision of ECL for trade receivables
The provision of ECL is sensitive to changes in e stimates. The information about the ECL and
the Group ’s trade receivables are disclosed in note 41 of the Appendix I to this prospectus.
FINANCIAL INFORMATION
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Net realizable value of inventories
The Group ’s inventories are measured at the lower of cost and net realizable value. The net
realizable value of inventories is based on estima ted selling prices less any estimation costs to be
incurred to completion costs necessary to make th e sale. These estimates, based on the current
market condition and the historical experience in selling goods of a similar nature. Changes in these
estimates will affect the carrying value of inventories and profit in subsequent years. The Group
reassesses the estimation at the end of each reporting period. The carrying amount of inventories is
detailed in note 23 to the consolidated financial statements of the Appendix I to this prospectus.
Sales return
The Group makes a reasonable estimate of the ret urn rate of diamond inlaying jewellery sold.
The Group has developed a statistical model for forecasting sales returns. The model used the
historical return data to come up with expected return percentages. Any significant changes in
experience as compared to historical return pattern will impact the expected return percentages
estimated by the Group.
The Group updates its assessment of expected returns half yearly and the refund liabilities are
adjusted accordingly. Estimates of expected returns are sensitive to changes in circumstances and
the Group ’s past experience regarding returns may not be representative of customers ’ actual returns
in the future. The amount recognized as refund liabilities are disclosed in Note 34 of the Appendix
I to this prospectus.
Deferred tax assets
The recognition of the deferred tax assets mainly depends on whether sufficient future profits
or taxable temporary differences will be available in the future, which is a key source of estimation
uncertainty. In cases where the actual future taxable profits generated are less or more than
expected, or change in facts and circumstances which result in revision of future taxable profits
estimation, a material reversal or further recognition of deferred tax assets may arise, which would
be recognized in profit or loss for the period in which such a reversal or further recognition takes
place.
FINANCIAL INFORMATION
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RESULTS OF OPERATIONS
The following table summarizes the consolidated statements of profit or loss and other
comprehensive income during the Track Record Pe riod, details of which are set out in Appendix I
to this prospectus.
Year ended December 31, Six months ended June 30,
2021 2022 2023 2023 2024
RMB’000 RMB ’000 RMB ’000 RMB ’000 RMB ’000
(Unaudited)
Revenue . . . . . . . . . . . . . . . . . . . . . . . . 16,871,000 15,724,215 20,208,599 9,316,213 9,979,744
Cost of sales . . . . . . . . . . . . . . . . . . . . . (16,334,559) (14,964,967) (19,131,139) (8,788,177) (9,362,238)
G r o s sp r o f i t ...................... 5 3 6 , 4 4 1 7 5 9 , 2 4 8 1 , 0 7 7 , 4 6 0 528,036 617,506
Other income . . . . . . . . . . . . . . . . . . . . 27,430 28,401 27,773 7,502 10,648
Distribution and selling expenses . . . . . . . (176,794) (194,473) (257,328) (128,337) (118,939)
Research and development expenses . . . . . (10,723) (13,533) (17,470) (7,442) (11,258)
Administrative expenses . . . . . . . . . . . . . (75,947) (68,275) (79,770) (33,521) (40,471)
Other expenses . . . . . . . . . . . . . . . . . . . (17,014) (11,465) (8,499) (4,997) (2,098)
Other gains and losses, net . . . . . . . . . . . 89,839 (208,961) (370,014) (195,592) (345,725)
Finance costs . . . . . . . . . . . . . . . . . . . . . (64,161) (56,868) (63,134) (31,142) 35,432
Net reversal of impairment losses/
(impairment losses) under expected
credit loss model . . . . . . . . . . . . . . . . (13,197) 10,087 (1,076) (531) (238)
L i s t i n ge x p e n s e s .................. —— (2,829) — (7,132)
Profit before tax .................. 2 9 5 , 8 7 4 2 4 4 , 1 6 1 3 0 5 , 1 1 3 133,976 66,861
Income tax expense . . . . . . . . . . . . . . . . (71,376) (63,405) (71,641) (27,989) (14,609)
Profit and total comprehensive income
for the year/period . . . . . . . . . . . . . . 224,498 180,756 233,472 105,987 52,252
Profit/(loss) and total comprehensive
income/(expense) for the year/period
attributable to
Owners of the Company . . . . . . . . . . . 220,618 180,825 230,375 104,167 47,433
Non-controlling interests . . . . . . . . . . . 3,880 (69) 3,097 1,820 4,819
224,498 180,756 233,472 105,987 52,252
Earnings per share
Basic and diluted (RMB) . . . . . . . . . . . . 0.98 0.80 1.01 0.45 0.21
FINANCIAL INFORMATION
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DESCRIPTION OF SELECTED ITEMS IN THE CONSOLIDATED STATEMENTS OF
PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
Revenue
Our revenue amounted to RMB16,871.0 million, RMB15,724.2 million, RMB20,208.6 million
and RMB9,979.7 million for the years ended December 31, 2021, 2022 and 2023 and the six
months ended June 30, 2024. The major components of our sales were gold jewellery and other
gold products, which accounted for approximately 97.5%, 97.9%, 98.4% and 98.5% of our total
revenue for the years ended December 31, 2021, 2022 and 2023 and the six months ended June 30,
2024.
We typically adjust selling price of our gold jew ellery and other gold products in accordance
with prevailing gold market price at the time of sales. As such, our revenue will also fluctuate
according to gold price movement. To manage gold p rice fluctuation, we use Au (T+D) contracts
which are purchased on Shanghai Gold Exchange and gold loans obtained from commercial banks
as economic hedge of our commodity price risk and our exposure to variability in fair value
changes attributable to price fluctuation risk asso ciated with gold products. We settle the Au (T+D)
contracts on a daily basis. For details, see ‘‘Business — Our Procurement/Suppliers — Procurement
of Gold — (b) Gold price exposure management to ma nage fluctuations of raw material price —
Adoption of Au (T+D) contracts ’’.
Revenue breakdown by products and services
The following table sets forth the breakdown of our revenue by product and services during
the Track Record Period:
Year ended December 31, Six months ended June 30,
2021 2022 2023 2023 2024
Revenue
Percentage
of revenue Revenue
Percentage
of revenue Revenue
Percentage
of revenue Revenue
Percentage
of revenue Revenue
Percentage
of revenue
RMB ’000 % RMB ’000 % RMB ’000 % RMB ’000 % RMB ’000 %
(Unaudited)
Gold jewellery and
other gold products . 16,457,308 97.5 15,392,835 97.9 19,877,366 98.4 9,137,879 98.1 9,834,885 98.5
K-gold jewellery,
diamond inlaying
jewellery and other
products . . . . . . . . 296,605 1.8 226,187 1.4 225,513 1.1 127,648 1.4 99,925 1.0
Services . . . . . . . . . . 117,087 0.7 105,193 0.7 105,720 0.5 50,686 0.5 44,934 0.5
Total ............ 16,871,000 100.0 15,724,215 100.0 20,208,599 100.0 9,316,213 100.0 9,979,744 100.0
During the Track Record Period, we primarily derived our revenue from sales of goods and
provision of services. Our sales of goods incl ude (i) sales of gold jewellery and other gold
products; and (ii) sales of K-gold jewellery, diamond inlaying jewellery and other products. While
our provision of services include annual franchise fees, one-off franchise fees, brand admittance
FINANCIAL INFORMATION
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--- page 460 ---
fees and others. Our sales of goods constituted a substantial portion of our revenue, amounting to
99.3%, 99.3%, 99.5% and 99.5% of our total revenue for the year ended December 31, 2021, 2022
and 2023 and the six months ended June 30, 2024, respectively.
Sales of gold jewellery and other gold products
Sales of gold jewellery and other gold products were our main source of revenue during the
Track Record Period. Our revenue from sales of gold jewellery and other gold products was
RMB16,457.3 million, RMB15,392.8 million, RMB19,877.4 million and RMB9,834.9 million,
representing 97.5%, 97.9%, 98.4% and 98.5% of our total revenue for the year ended December 31,
2021, 2022 and 2023 and the six months ended June 30, 2024, respectively. Our gold jewellery and
other gold products include jewellery and gold bullion. The fluctuation of our sales of gold
jewellery and other gold products during 2021 and 2022 was generally a result of the effects
associated with the pandemic. Our sales increased materially in 2021 when economic activities
recovered and our sales decreased when there were more stringent preventive measures leading to
limited operation in fourth quarter of 2022. For 2023, our revenue increase was driven by the
general increase of gold price and an increase in sales volume of gold products, while for the six
months ended June 30, 2024, our revenue increase was driven by the general increase of gold price.
According to gold price quoted on the Shanghai Gold Exchange, the average daily closing price of
Au9999 significantly increased from RMB392.2/g in 2022 to RMB449.9/g in 2023, and further
increased to the average daily closing price of RMB520.9/g for the six months ended June 30,
2024. Comparatively, according to gold price quoted on the Shanghai Gold Exchange, the average
daily closing price of Au9999 increased from RMB374.5/g in 2021 to RMB392.2/g in 2022. The
effect of increase in gold price on our revenue derived from sales of gold jewellery and other gold
products was offset by the decrease in sales volume of gold products, which was caused by the
decline in consumption sentiment of gold jewellery and other gold products as a result of the
increase in gold price.
Gold jewellery refers to our high-purity gold jewellery, including gold bracelet, necklace, ring
and earrings. Our gold jewellery is usually pri ced with two components, namely the gold price and
the crafting fees. Our gold jewellery sales were affected by the fluctuation gold price during the
Track Record Period.
Sales of K-gold jewellery, diamond inlaying jewellery and other products
We also sell K-gold jewellery, diamond inlaying jewellery and other products such as spring
clasps of K-gold, silver, platinum, copper and stainless-steel. Spring clasps and accessories are
usually fixed priced products without splitting the cost of materials and crafting fees. Our revenue
from the K-gold jewellery, diamond inlaying jewellery and other products were RMB296.6 million,
RMB226.2 million, RMB225.5 million and RMB99.9 million, representing 1.8%, 1.4%, 1.1% and
1.0% of our total revenue for the years ended December 31, 2021, 2022 and 2023 and the six
months ended June 30, 2024, respectively.
FINANCIAL INFORMATION
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Our sales of K-gold jewellery, diamond inlaying jewellery and other products decreased for
the year ended December 31, 2022 because we strategically shifted our focus to high-purity gold
jewellery. The sales amount then remained stable for the year ended December 31, 2023. In
addition, our sales of K-gold jewellery, diamond inlaying jewellery and other products decreased by
RMB27.7 million from RMB127.6 million for the six months ended June 30, 2023 to RMB99.9
million for the six months ended June 30, 2024, due to the general decline in consumption
sentiment of gold-related products as a result of the increase in gold price.
Services
We received service fees from various sources including annual franchise fees, one-off
franchise fees, brand admittance fees and others. Our revenue from the services was RMB117.1
million, RMB105.2 million, RMB105.7 million and RMB44.9 million, representing 0.7%, 0.7%,
0.5% and 0.5% of our total revenue for the years ended December 31, 2021, 2022 and 2023 and the
six months ended June 30, 2024, respectively. Our revenue derived from provision of services
decreased by 11.4% or RMB5.8 million from RMB50.7 million for to RMB44.9 million. Such
decrease was primarily attributable to the decrease in brand service fee we collected from
franchisees for provision of product labeling services. With the general decline in consumption
sentiment of gold jewellery, our sales volume for the six months ended June 30, 2024 decreased
when compared with the corresponding period in 2023. Accordingly, the demand for product
labeling decreased, thereby resulting in a decrease in the brand service fee we charged thereof. We
recorded a decrease in revenue derived from provision of K-gold processing subcontracting service
due to the general decrease in market demand for gold and gold-related products.
Revenue breakdown by distribution channels
The following table sets forth the breakdown of our revenue by distribution channels during
the Track Record Period:
Year ended December 31, Six months ended June 30,
2021 2022 2023 2023 2024
Revenue
Percentage
of revenue Revenue
Percentage
of revenue Revenue
Percentage
of revenue Revenue
Percentage
of revenue Revenue
Percentage
of revenue
RMB ’000 % RMB ’000 % RMB ’000 % RMB ’000 % RMB ’000 %
(Unaudited)
Franchise network . . . . 14,772,630 87.6 14,836,284 94.4 18,923,195 93.7 8,851,440 95.1 8,207,527 82.3
— Franchisees ...... 9,409,225 55.8 9,629,142 61.3 12,273,776 60.8 5,906,356 63.5 5,755,003 57.7
— Provincial-dealers .. 5,363,405 31.8 5,207,142 33.1 6,649,419 32.9 2,945,084 31.6 2,452,524 24.6
E-commerce sales . . . . 1,608,263 9.5 364,473 2.3 750,705 3.7 172,095 1.8 1,318,687 13.2
— Self-operated online
stores ........ 79,108 0.5 233,641 1.5 651,431 3.2 118,279 1.3 412,632 4.1
— Sales to platforms .. 1,529,155 9.0 130,832 0.8 99,274 0.5 53,816 0.5 906,055 9.1
Self-operated stores . . . 356,146 2.1 366,488 2.3 412,216 2.0 226,708 2.4 200,108 2.0
O t h e r s ............ 1 3 3 , 9 6 1 0 . 8 156,970 1.0 122,483 0.6 65,970 0.7 253,422 2.5
Total ............ 16,871,000 100.0 15,724,215 100.0 20,208,599 100.0 9,316,213 100.0 9,979,744 100.0
FINANCIAL INFORMATION
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We generated revenue from four major distribution channels, namely: (i) franchise network;
(ii) e-commerce sales; (iii) self-operated stores; and (iv) others. We derived a material portion of
our revenue from sales through our franchise network, amounting to approximately 87.6%, 94.4%,
93.7% and 82.3% of our total revenue for the years ended December 31, 2021, 2022 and 2023 and
the six months ended June 30, 2024, respectively.
Franchise network
Revenue from our franchise network included revenue derived from direct sales to franchisees
and revenue derived from provincial-dealers. We had established a franchise network covering
2,850 franchise stores operated by 1,670 fra nchisees as of June 30, 2024. We have set up
self-operated direct service centers and appoint ed provincial-dealers which were responsible for
distribution of our products to franchisees in their respective regions. As of June 30, 2024, we had
seven self-operated direct service centers that were directly managed and operated by us, and we
had appointed 17 provincial-dealers.
Our revenue from direct sales to franchisees wa s RMB9,409.2 million, RMB9,629.1 million,
RMB12,273.8 million and RMB5, 755.0 million, representing 55.8%, 61.3%, 60.8% and 57.7% of
our total revenue for the years ended December 31, 2021, 2022 and 2023 and the six months ended
June 30, 2024, respectively. Our revenue from sales to provincial-dealers was RMB5,363.4 million,
RMB5,207.1 million, RMB6,649.4 million and RMB2,452.5 million, representing 31.8%, 33.1%,
32.9% and 24.6% of our total revenue for the years ended December 31, 2021, 2022 and 2023 and
the six months ended June 30, 2024, respectiv ely. For the six months ended June 30, 2024, we
recorded a decrease in revenue derived from our fra nchise network as a result of a general decline
in consumption sentiment of gold products.
The revenue contribution of sales to our fra nchise network, including that from both
provincial-dealers and franchisees, was 87. 6%, 94.4%, 93.7% and 82.3% for the years ended
December 31, 2021, 2022 and 2023 and the six months ended June 30, 2024. The decrease in such
revenue contribution for the six months ended June 30, 2024 when compared to the three years
ended December 31, 2023 was primarily attributab le to (i) the decline in consumption sentiment of
gold products and (ii) the increase in revenue derived from e-commerce sales.
Under our franchise network management struct ure, all sales to our franchisees and provincial-
dealers are buyout sales. All franchisees are required to sign franchise agreements with us for each
franchise store, establishing a seller and buyer relationship rather than a principal and agent
relationship. During the Track Record Period, provi ncial-dealers were our major customers in terms
of their respective sales amount, but revenue we derived from sales to franchisees through our
self-operated direct service centers in aggregate outnumbered that of revenue derived from
provincial-dealers in aggregate.
FINANCIAL INFORMATION
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E-commerce sales
We adopt two types of e-commerce sales model, na mely self-operated online stores and sales
to platforms.
Our revenue from e-commerce sales was RMB1,608.3 million, RMB364.5 million, RMB750.7
million and RMB1,318.7 million, representing 9.5%, 2.3%, 3.7% and 13.2% of our total revenue
for the years ended December 31, 2021, 2022 and 2023 and the six months ended June 30, 2024,
respectively.
Under our self-operated online stores mod el, we sell directly to consumers through
establishing our online flagship stores on popula r e-commerce platforms such as Tmall, JD.com,
and PinDuoDuo. Consumers place orders through our online flagship stores on the e-commerce
platforms, and pay for the jewellery products via the platform ’s payment gateway. Payments are
automatically credited to our e-commerce account once the order is confirmed. We then deliver the
goods to consumers, and provide after-sales services and issue invoices to them as required. Our
revenue from self-operated online stores was RMB79.1 million, RMB233.6 million, RMB651.4
million and RMB412.6 million, representing 0.5 %, 1.5%, 3.2% and 4.1% of our total revenue for
the years ended December 31, 2021, 2022 and 2023 and the six months ended June 30, 2024,
respectively. For the years ended December 31, 2021, 2022 and 2023 and the six months ended
June 30, 2024, we had operation on 11, 11, 14 and 12 self-operated online stores, respectively. The
increase for the year ended December 31, 2023 was mainly due to our sales through our online
f l a g s h i ps t o r eo nJ D . c o m ,w h i c hi nt u r n ,w a sl argely attributable to an increase in demand
following the granting of consumption vouchers by a government authority. For the six months
ended June 30, 2024, our revenue derived from self-operated online stores amounted to RMB412.6
million, representing a period-to-period incr ease of RMB294.4 million or 248.9%. Such increase
was primarily attributable to promotion event s on major e-commerce retail platforms such as
Tmall.com and JD.com during May and June 2024, leading to an increase in our revenue derived
therefrom.
Under our sales to platforms model, we sell our product directly to the e-commerce platforms
and they settle with us accordingly. We deliver the goods to the warehouses of the e-commerce
platforms and they are responsible for product promotion, order management and delivery.
Consumers place orders and pay directly to the e-commerce platforms and the e-commerce
platforms arrange delivery and provide after-sales services as necessary, whereas we provide after-
sales services to the e-commerce platforms in accordance with our contractual obligations. The e-
commerce platforms settle with us on a regular basis following the agreed billing period. Our
revenue from sales to platforms was RMB1,529 .2 million, RMB130.8 million, RMB99.3 million
and RMB906.1 million, representing 9.0%, 0.8%, 0.5% and 9.1% of our total revenue for the years
ended December 31, 2021, 2022 and 2023 and the six months ended June 30, 2024, respectively.
The significant increase in the year ended Decem ber 31, 2021 and for the six months ended June
30, 2024 was mainly due to our sales of gold bullio n to a leading PRC online discount retailer,
Vipshop for a promotion event.
FINANCIAL INFORMATION
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Self-operated stores
Our revenue from self-operated stores was RMB 356.1 million, RMB366.5 million, RMB412.2
million and RMB200.1 million, representing 2.1 %, 2.3%, 2.0% and 2.0% of our total revenue for
the years ended December 31, 2021, 2022 and 2023 and the six months ended June 30, 2024,
respectively. For details, see ‘‘Business — Sales and distribution channels — Offline Sales — (c)
Self-operated stores ’’.
Others
Our revenue from others was RMB134.0 million, RMB157.0 million, RMB122.5 million and
RMB253.4 million, representing 0.8%, 1.0%, 0 .6% and 2.5% of our total revenue for the years
ended December 31, 2021, 2022 and 2023 and the six months ended June 30, 2024, respectively.
Others include revenue in relation to subcontractin g production for independent third party and to
tailor-make products for specific customers.
Overall, our revenue contributed by others rep resented an immaterial amount of our revenue
contribution during the Track Record Period. We recorded an increase in our revenue from others
during the six months ended June 30, 2024 as a result of (i) an increase in our revenue from tailor-
made production by RMB59.1 million or 138.4% from RMB42.7 million for the six months ended
June 30, 2023 to RMB101.8 million for the six months ended June 30, 2024, and (ii) sales of gold
raw materials to an Independent Third-party.
Cost of sales
The following table sets forth the breakdown of our cost of sales during the Track Record
Period:
Year ended December 31, Six months ended June 30,
2021 2022 2023 2023 2024
Cost of
sales
Percentage
of cost of
sales
Cost of
sales
Percentage
of cost of
sales
Cost of
sales
Percentage
of cost of
sales Revenue
Percentage
of revenue
Cost of
sales
Percentage
of cost of
sales
RMB ’000 % RMB ’000 % RMB’ 000 % RMB ’000 % RMB ’000 %
(Unaudited)
Material costs . . . . . 16,182,592 99.1 14,817,208 99.0 18,916,211 98.9 8,686,829 98.9 9,254,701 98.9
Staff costs . . . . . . . 66,948 0.4 67,045 0.4 81,571 0.4 38,761 0.4 41,408 0.4
Overheads . . . . . . . 48,659 0.3 56,749 0.4 87,650 0.5 37,308 0.4 48,866 0.5
Subcontracting . . . . 36,360 0.2 23,965 0.2 45,707 0.2 25,279 0.3 17,263 0.2
Total .......... 16,334,559 100.0 14,964,967 100.0 19,131,139 100.0 8,788,177 100.0 9,362,238 100.0
Our cost of sales mainly represented material c osts, which contributed approximately 99.1%,
99.0%, 98.9% and 98.9% of our total cost of sales for the years ended December 31, 2021, 2022
and 2023 and the six months ended June 30, 2024, resp ectively. Our cost of sales mainly fluctuated
with our sales volume and gold price, as gold cont ributed a substantial majority of our material
costs. The increase in staff costs and overhead in 2023 was mainly due to (i) a rise in our sales
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volume from 43,025.6 kg in 2022 to 48,066.6 kg in 2 023, leading to higher compensation costs,
and (ii) our relocation to the new production facility in 2023, where we hired additional production
staff and incurred more overhead expenses.
Our subcontracting costs primarily consist of payments made to our entrusted external OEMs
for manufacturing products. The following table sets forth the breakdown of our subcontracting
costs by different products:
Year ended December 31, Six months ended June 30,
2021 2022 2023 2023 2024
RMB’000 RMB ’000 RMB ’000 RMB ’000 RMB ’000
(Unaudited)
Gold jewellery . . . . . . . . . . 10,997 6,637 33,022 15,611 12,230
K-gold jewellery . . . . . . . . . 5,160 3,472 2,396 2,620 1,699
Diamond inlaying jewellery
and other products . . . . . . 20,203 13,856 10,289 7,048 3,334
Total: ................ 36,360 23,965 45,707 25,279 17,263
During the Track Record Period, 96.8%, 97. 8%, 89.9% and 92.8% of our gold products and
92.3%, 92.8%, 99.8% and 98.5% of our K-gold pr oducts were produced by our self-operated
production facilities, respectively. While our ou tsourcing rate was materially lower than our self-
production rate during the Track Record Period, because the average costs per gram for gold
jewellery and K-gold jewellery produced by external OEMs were higher than those manufactured
by our self-operated production facilities, our subcontracting costs constitute a material portion of
our cost of sales (excluding the material costs). In 2023, the subcontracting fees for our gold
jewellery products increased significantly due to a national franchisee sales conference, which
increased subcontracted production to meet the event ’s product demand. In addition, the
subcontracting fees for our K-gold products continued to decrease, which is in line with our
reduced sales of K-gold products. We also engaged t he external OEMs to process diamond inlaying
jewellery and other products, and decrease in subcontracting costs for our diamond inlaying
jewellery and other products produced by external OEMs aligns with the decreased sales of such
products.
Gross profit and gross profit margin
For the years ended December 31, 2021, 2022 and 2023 and the six months ended June 30,
2024, our gross profit was RMB536.4 million, RMB759.2 million, RMB1,077.5 million and
RMB617.5 million and our gross profit margin w ere 3.2%, 4.8%, 5.3% and 6.2%, respectively.
While our revenue decreased in 2022 when comparing with 2021, the corresponding gross
profit increased for the same period. It was primarily due to the increasing trend of gold price
during the year ended December 31, 2022, as we procured gold at a low price level before the gold
price started to increase while charging our customers with the prevailing market gold price that
tend to be higher than our previous purchase cost. Such timing difference between our procurement
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and sales transactions, coupled with the increasin g trend of gold price during the year, resulted in
an increase in our gross profit for the year ended December 31, 2022. Our gross profit increased in
2023 compared with 2022, mainly driven by the g eneral increasing trend in gold price and an
increase in our sales volume in 2023. Our gross profit for the six months ended June 30, 2024
compared to that of the same period in 2023 increased mainly because of the general increasing
trend in gold price.
Our pricing mechanism, gross profit and gross profit margin
When we sell our gold products and K-gold, we normally charge customers based on
prevailing market price of gold and crafting f ees, multiplied by the weight of gold. While gold
price varies according to market, crafting fees per product are generally fixed. In terms of
proportion, the gold price component is substantially larger than the corresponding crafting fee
component for each product. Under our cost-plus basis pricing model, our gross profit per gram of
the gold product is calculated as follows:
Selling price of the product = selling gold price + crafting fee for the relevant product
Cost = gold procurement price + other cost of sales
i. In the event that gold procurement price equal to gold component of our product price
(selling gold price),
Gross profit = crafting fee for the relevant product – other cost of sales
ii. In the event that gold procurement price does not equal to gold component of our
product price (selling gold price),
Gross profit = gold price differential + crafting fee for the relevant product – other cost
of sales
Essentially, our gross profit is composed of the crafting fees and gold price differential
between the original gold cost on the procurement day and prevailing gold market price on the sales
day. Since the crafting fees are usually fixed, our gross profit and gross profit margin are
significantly influenced by fluctuations in the g old price. Below is an illustration of how our gross
profit and gross profit margin may interact with changes in gold prices based on two assumptions:
i. Scenario one: where gold procurement price equals to gold component of our product
price (selling gold price); and
ii. Scenario two: where gold procurement price does not equal to gold component of our
product price (selling gold price).
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Scenario One: gold procurement price equal to gold component of our product price
Assuming we can substantially match our gold procurement price with the gold component of
our product price, where our gross profit is essentially equal to the net amount of the crafting fees
and other cost of sales. A higher gold price woul d generally adversely impact our gross profit
margin, and vice versa although the gross profit remains unchanged.
For illustration purpose:
Product: One gram of gold product
Crafting fees: RMB20 per gram
Other cost of sales: RMB5 per gram
. Market price 1 — gold price is at RMB285 per gram
o The selling price for such product would be approximately RMB285 + RMB20 =
RMB305
o Our gross profit for such product would be approximately RMB20 – RMB5 =
RMB15
o Our gross profit margin for such product would be approximately RMB15/RMB305
= approximately 4.9%
. Market price 2 — gold price is at RMB290 per gram
o The selling price for such product would be approximately RMB290 + RMB20 =
RMB310
o Our gross profit for such product would be approximately RMB20 – RMB5 =
RMB15
o Our gross profit margin for such product would be approximately RMB15/RMB310
= approximately 4.8%
. Market price 3 — gold price is at RMB280 per gram
o The selling price for such product would be approximately RMB280 + RMB20 =
RMB300
o Our gross profit for such product would be approximately RMB20 – RMB5 =
RMB15
o Our gross profit margin for such product would be approximately RMB15/RMB295
= approximately 5.0%
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The illustration above is based on the assumption that we can fully match the buying and
selling prices of the gold sourced for our production, and disregard the possible impact of changes
in gold prices on our gross profit. In such cases, our gross profit margin would move in the
opposite direction of gold price changes (as illu strated above). However, it is not common for the
gold procurement price to match the gold component of the selling price during the Track Record
Period. In general, the gold price at the time of sal es is either higher or lower than the procurement
price.
Scenario Two: gold procurement price does not e qual to gold component of our product price
For illustration purpose:
Gold procurement price: RMB285 per gram
Product: One gram of gold product
Crafting fees: RMB20 per gram
Other cost of sales: RMB5 per gram
. Market price 1 — gold price is assumed to increase to RMB290 per gram
o The selling price for such a product would be approximately RMB290 + RMB20 =
RMB310
o Our gross profit for such a product would be approximately RMB290 – RMB285 +
RMB15 = RMB20
o Our gross profit margin for such a product would be approximately RMB20/
RMB310 = approximately 6.5%
. Market price 2 — gold price is assumed to decrease to RMB280 per gram
o The selling price for such a product would be approximately RMB280 + RMB20 =
RMB300
o Our gross profit for such a product would be approximately RMB280 – RMB285 +
RMB15 = RMB10
o Our gross profit margin for such a product would be approximately RMB10/
RMB300 = approximately 3.3%
However, as an OBM, our average inventory turnover days typically ranged from one to two
months, and as gold prices fluctuate, we may not be able to fully match the buying and selling
prices of gold, thus leading to our gross profit being impacted by changes in gold prices.
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When our average gold procurement price is lower than the gold component of our product price
Under such circumstances, both our gross profit and gross profit margin would increase.
When our average gold procurement price is higher than the gold component of our product price
Under such circumstances, both our gross profit and gross profit margin would decrease.
For instance, in 2021, the gold price generally trended downward, leading us to procure gold
at a higher price level while charging our customers with the prevailing market gold price that tend
to be lower than our previous purchase cost. Such timing difference between our procurement and
sales transactions, coupled with the decreasing trend of gold price during the year, resulted in a
decrease in our gross profit and negatively affected our gross profit margin for the year ended
December 31, 2021 (as further discussed below).
The selling prices of our gold jewellery and othe r gold products usually reflect the market
price of the raw materials in the products and crafting fees. As our products are mainly made of
gold, we use gold loans and Au (T+D) contracts as economic hedge to reduce the financial impact
of gold price fluctuations. As the economic hedge of Au (T+D) contracts does not directly reflect
on our gross profit or gross profit margin, our gross profit and gross profit margin are subject to
fluctuations of gold price.
Breakdown by products and services
The following table sets forth a breakdown of our gross profit and gross profit margin by our
products and services during the Track Record Period:
Year ended December 31, Six months ended June 30,
2021 2022 2023 2023 2024
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)
Gold jewellery and other gold
products . . . . . . . . . . . . . . 360,069 2.2 594,885 3.9 920,795 4.6 448,168 4.9 548,272 5.6
K-gold jewellery, diamond
inlaying jewellery and other
products . . . . . . . . . . . . . . 70,174 23.7 63,628 28.1 62,087 27.5 32,630 25.6 27,513 27.5
Services . . . . . . . . . . . . . . . . 106,198 90.7 100,735 95.8 94,578 89.5 47,238 93.2 41,721 92.8
Total .................. 536,441 3.2 759,248 4.8 1,077,460 5.3 528,036 5.7 617,506 6.2
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Gold jewellery and other gold products
For the years ended December 31, 2021, 2022 and 2023 and the six months ended June 30,
2024, our gross profit for gold jewellery and other gold products amounted to RMB360.1 million,
RMB594.9 million, RMB920.8 million and RMB548.3 million, respectively. The fluctuation were
due to factors including gold price fluctuations a nd timing difference in our sales cycle, limited
operation due to pandemic and followed by the recovery of economic activities. Our gross profit
margin for sales of gold jewellery and other gold products was 2.2%, 3.9%, 4.6% and 5.6%, for the
years ended December 31, 2021, 2022 and 2023 and the six months ended June 30, 2024,
respectively. During the Track Record Period, our gross profit and gross profit margin were
generally affected by our sales volume, gold price and timing difference between our procurement
of gold and sales.
K-gold jewellery, diamond inlaying jewellery and other products
For the years ended December 31, 2021, 2022 and 2023 and the six months ended June 30,
2024, our gross profit for K-gold jewellery, diamond inlaying jewellery and other products
amounted to RMB70.2 million, RMB63.6 million, RMB62.1 million and RMB27.5 million,
respectively. The gross profit fluctuation was in line with the fluctuation in revenue for K-gold
jewellery, diamond inlaying jewellery and other products for the corresponding year or period. Our
gross profit margin for sales of K-gold jewellery, diamond inlaying jewellery and other products
was 23.7%, 28.1%, 27.5% and 27.5%, for the years ended December 31, 2021, 2022 and 2023 and
the six months ended June 30, 2024, respectively. Our gross profit margin for K-gold jewellery,
diamond inlaying jewellery and other products for 2022 increased compared to that of 2021 mainly
because of an increase in the gross profit margin o f K-gold jewelry products, which in turn, was
partially contributed by the increase in gold price in 2022 and the timing difference between our
procurement of gold and sales of K-gold products.
Services
Our gross profit for services amounted to RMB106.2 million, RMB100.7 million, RMB94.6
million and RMB41.7 million. Our gross profit margin for service fees was 90.7%, 95.8%, 89.5%
and 92.8%, for the years ended December 31, 2021, 2022 and 2023 and the six months ended June
30, 2024, respectively.
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Breakdown by distribution channels
The following table sets forth the breakdown of our gross profit and gross profit margin by
distribution channels during the Track Record Period:
Year ended December 31, Six months ended June 30,
2021 2022 2023 2023 2024
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)
Franchise network . . 415,712 2.8 631,072 4.3 896,006 4.7 433,352 4.9 493,777 6.0
E-commerce
platform . . . . . . 40,051 2.5 28,816 7.9 56,769 7.6 26,149 15.2 48,785 3.7
Self-operated stores . 52 ,397 14.7 61,946 16.9 92,143 22.4 51,443 22.7 48,914 24.4
Others . . . . . . . . . 28,281 21.1 37,414 23.8 32,542 26.6 17,092 25.9 26,030 10.3
Total .......... 536,441 3.2 759,248 4.8 1,077,460 5.3 528,036 5.7 617,506 6.2
Franchise network
For the years ended December 31, 2021, 2022 and 2023 and the six months ended June 30,
2024, our gross profit derived from franchise network amounted to RMB415.7 million, RMB631.1
million, RMB896.0 million and RMB493.8 million, respectively. The fluctuation was mainly driven
by our revenue and the fluctuation was in line with the trend observed in the revenue from our
franchise network. While our revenue from franc hise network was relatively stable in 2021 and
2022, the corresponding gross profit increased fo r the same period. It was primarily due to the
increase of gold price during the year ended December 31, 2022, as we procured gold at a
relatively low price level before the gold price started to increase while charging our customers
with the prevailing market gold price that tend to be higher than our previous purchase cost. Such
timing difference between our procurement and sa les transactions, coupled with the increase trend
of gold price during the year, resulted in an increase in our gross profit from franchise network for
the year ended December 31, 2022. For 2023, our gross profit increased due to higher revenue, as
driven by an increase in sales volume and an incr ease in gold price. Our gross profit for the six
months ended June 30, 2024 was primarily due to the increase in gold price. Our gross profit
margin from franchise network was 2.8%, 4.3%, 4.7% and 6.0%, for the years ended December 31,
2021, 2022 and 2023 and the six months ended June 30, 2024, respectively.
E-commerce sales
Our e-commerce sales include sales to both e-com merce platform operators and end customers
through our self-operated online stores. For the years ended December 31, 2021, 2022 and 2023
and the six months ended June 30, 2024, the revenue we derived from sales to e-commerce
platform operators amounted to RMB1,529.2 mil lion, RMB130.8 million, RMB99.3 million and
RMB906.1 million; whereas the revenue we derived from sales through our self-operated online
FINANCIAL INFORMATION
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stores amounted to RMB79.1 million, RMB233.6 million, RMB651.4 million and RMB412.6
million. For the years ended December 31, 2021, 2022 and 2023 and the six months ended June 30,
2024, our gross profit from e-commerce sales amounted to RMB40.1 million, RMB28.8 million,
RMB56.8 million and RMB48.8 million, respectiv ely. The relatively higher gross profit for e-
commerce sales in 2021 was due to our large qua ntity sales to a leading PRC online discount
retailer, under our sales to platforms. We also reco rded a relatively higher gross profit for the year
ended December 31, 2023 because of an increase in sales on our online flagship store on JD.com,
which in turn, was largely contributed by increase in demand following the granting of
consumption vouchers by a government authority. Our gross profit margin from e-commerce sales
was 2.5%, 7.9%, 7.6% and 3.7%, for the years ended December 31, 2021, 2022 and 2023 and the
six months ended June 30, 2024, respectively. The decrease in our gross profit margin for the six
months ended June 30, 2024 was due to the fact that the revenue contribution of sales of gold
bullion for such period was relatively higher than that for the six months ended June 30, 2023, as a
result of a sales of gold bullion to a leading PRC online retailer, Vipshop for a promotional event.
Sales of gold bullion entailed lower gross profit margin as we charge lower crafting fees for gold
bullion, accordingly, our overall gross profit m argin derived from e-commerce sales decreased.
Self-operated stores
For the years ended December 31, 2021, 2022 and 2023 and the six months ended June 30,
2024, our gross profit for self-operated stores amounted to RMB52.4 million, RMB61.9 million,
RMB92.1 million and RMB48.9 million, respectiv ely. Our gross profit for self-operated stores
increased for the year ended December 31, 2022 primarily due to our enhanced cost control and it
further increased for the year ended December 31, 2023 mainly due to the timing difference
between the procurement of gold and sales of gold p roducts coupled with the substantial increase of
gold price during the year, resulting in an increase in our gross profit from our self-operated stores.
Our gross profit margin for self-operated store s was 14.7%, 16.9%, 22.4% and 24.4%, for the years
ended December 31, 2021, 2022 and 2023 and the six months ended June 30, 2024, respectively.
Others
For the years ended December 31 2021, 2022 and 2023 and the six months ended June 30,
2024, our gross profit for others amounted to RMB28.3 million, RMB37.4 million, RMB32.5
million and RMB26.0 million, respectively. The increase for the years ended December 31, 2021
and 2022 was in line with the fluctuation in the corresponding revenue of the respective year and
the decrease for the year ended December 31, 2023 was due to higher overheads and other costs
incurred as we upgraded our production facilities in relation to subcontracting production for
independent third-party and tailor-make products for specific customers. Overall, our gross profit
contributed by others represented an immaterial amount of our gross profit contribution during the
Track Record Period. Our gross profit margin for others was 21.1%, 23.8%, 26.6% and 10.3%, for
the years ended December 31, 2021, 2022 and 2023 and the six months ended June 30, 2024,
respectively. Our gross profit margin from others sales channel for the six months ended June 30,
2024 decreased significantly compared to the gross profit margin of 2023 primarily due to the sale
of gold raw materials to an Independent Third Party, which entailed lower gross profit margin.
FINANCIAL INFORMATION
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Other income
The following table sets forth the breakdown of our other income during the Track Record
Period:
Year ended December 31, Six months ended June 30,
2021 2022 2023 2023 2024
RMB’000 RMB ’000 RMB ’000 RMB ’000 RMB ’000
(Unaudited)
Interest income from bank
and other deposits . . . . . 5,970 8,158 5,492 3,119 2,261
Other income from
franchisees and
provincial-dealers (Note 1) . 2,343 4,079 3,563 1,665 1,533
Rental income . . . . . . . . . 3,604 3,200 3,222 1,560 1,741
Government grants . . . . . . 15,416 12,648 15,230 895 2,844
O t h e r s .............. 9 7 3 1 6 2 6 6 2 6 3 2 , 2 6 9
Total ............... 27,430 28,401 27,773 7,502 10,648
Note 1: Includes interest income derived from gold loaned to relevant franchisees and provincial-dealers.
Our other income mainly consisted of (i) intere st income from bank deposits; (ii) other income
from franchisees; (iii) rental income; and (iv) government grants.
For the years ended December 31, 2021, 2022 and 2023 and the six months ended June 30,
2024, our other income amounted to RMB27.4 million, RMB28.4 million, RMB27.8 million and
RMB10.6 million, respectively.
For the years ended December 31, 2021, 2022 and 2023 and the six months ended June 30,
2024, income of approximately RMB15.4 million, RMB12.6 million, RMB15.2 million and
RMB2.8 million, respectively, represented the subsidies from the relevant government authorities
for the purpose of motivating the business devel opment of our Group including (i) an incentive
grant from Tianjin government which was granted for a period of three years commencing from
2020 and (ii) diamond imported tax refund subsid y policy as promulgated by the State Taxation
Administration of The People ’s Republic of China in 2006. The subsidies received were in
substance other financial support to our Group with no future related costs and were recognized as
income when the subsidies were received. Ther e were no unfulfilled conditions for all the
government grants in the years in which they were recognized during the Track Record Period.
FINANCIAL INFORMATION
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Distribution and selling expenses
The following table sets forth the breakdown of our distribution and selling expenses during
the Track Record Period:
Year ended December 31 Six months ended June 30,
2021 2022 2023 2023 2024
RMB ’000 % RMB’ 000 % RMB ’000 % RMB ’000 % RMB ’000 %
(Unaudited)
Staff costs . . . . . . . . . . . . . . . . . . . 84,982 48.1 96,552 49.6 114,054 44.3 55,591 43.3 55,613 46.7
Media advertising and promotion
expenses . . . . . . . . . . . . . . . . . . 35,996 20.3 40,473 20.8 66,761 25.9 37,210 29.0 24,532 20.6
Distributor ’s handling fee . . . . . . . . . . 16,810 9.5 16,003 8.2 23,070 9.0 9,183 7.2 11,996 10.1
Depreciation and amortization . . . . . . . 8,403 4.7 9,010 4.7 11,018 4.3 4,067 3.2 6,498 5.5
Travel expenses . . . . . . . . . . . . . . . . 7,225 4.1 7,753 4.0 12,794 5.0 5,933 4.6 4,934 4.1
Testing fee . . . . . . . . . . . . . . . . . . 7,092 4.0 7,049 3.6 6,696 2.6 2,894 2.3 3,436 2.9
Office expenses . . . . . . . . . . . . . . . . 5,220 3.0 5,375 2.8 5,837 2.3 4,290 3.3 2,943 2.5
Others . . . . . . . . . . . . . . . . . . . . . 11,066 6.3 12,258 6.3 17,098 6.6 9,169 7.1 8,986 7.6
Total ...................... 176,794 100.0 194,473 100.0 257,328 100.0 128,337 100.0 118,939 100.0
Our distribution and selling expenses mainly consisted of staff costs, media advertising and
promotion expenses.
For the years ended December 31, 2021, 2022 and 2023 and the six months ended June 30,
2024, our distribution and selling expenses amounted to RMB176.8 million, RMB194.5 million,
RMB257.3 million and RMB118. 9 million, respectively.
Our distribution and selling expenses generally increased during the Track Record Period. It
increased by RMB17.7 million for the year ended December 31, 2022, mainly due to an increase in
staff costs as a result of our increase in commission paid, whereby the commission were related to
the increase in revenue for the year ended December 31, 2021 and also a general increase in our
number of staff for the year ended December 31, 2022. It increased by RMB62.9 million for the
year ended December 31, 2023, mainly due to an in crease in staff costs as a result of increased
commission payments due to an increase in reven ue and a general increase in our number of staff
for the year ended December 31, 2023, coupled w ith an increase in media advertising and
promotion expenses during the year. Our dist ribution and selling expenses decreased from
RMB128.3 million for the six months ended June 30, 2023 to RMB118.9 million for the six months
ended June 30, 2024, representing a period-to-period decrease of RMB9.4 million or 7.3%. Such
decrease was primarily attributable to a decrease in our media advertising and promotion expenses.
Media advertising and promotion expenses were mainly expenses for placing more advertisement on
social media and in railway stations and in relation to the launching of promotions on e-commerce
platforms. In addition, distributor ’s handling fees mainly represent concessionaire expenses
associated with our self-operated stores, which operate under concession agreements with shopping
malls or department stores, and we are charged a handling fee based on our revenue from such self-
operated stores. The increase in distributor ’s handling fees was generally in line with the increase in
sales at our self-operated stores under concession agreements with shopping malls or department.
FINANCIAL INFORMATION
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Moreover, our distributor ’s handling fee increased material ly in 2023 when compared to that of
2022. Such increase was mainly attributable to a growth in sales at our self-operated stores under
concession agreements with shopping malls/department stores, which in turn, was partially
contributed by an increase in number of our sel f-operated stores in shopping malls/department
stores from 29 stores (as of December 31, 2022) to 32 stores (as of December 31, 2023). Testing
fees are fees paid to qualified third-party testi ng organizations for serv ices required to obtain
certificates of inspection to meet the statutory requirements for the sale of jewellery. These fees are
generally fixed and do not vary based on the number of products tested.
Research and development expenses
The following table sets forth the breakdo wn of our research and development expenses
during the Track Record Period:
Year ended December 31 Six months ended June 30,
2021 2022 2023 2023 2024
RMB ’000 % RMB’ 000 % RMB ’000 % RMB ’000 % RMB ’000 %
(Unaudited)
Staff costs . . . . . . . . . . . . . . . . . . . 9,243 86.2 9,238 68.3 8,862 50.7 3,951 53.1 7,145 63.5
Consumables . . . . . . . . . . . . . . . . . 625 5.8 1,844 13.6 5,147 29.5 1,484 19.9 1,565 13.9
Depreciation . . . . . . . . . . . . . . . . . . 691 6.5 901 6.6 1,220 7.0 498 6.7 1,211 10.8
Design fees . . . . . . . . . . . . . . . . . . 139 1.3 868 6.4 766 4.4 616 8.3 471 4.2
Intellectual property service fee . . . . . . —— 389 2.9 930 5.3 682 9.2 329 2.9
Others . . . . . . . . . . . . . . . . . . . . . 25 0.2 293 2.2 545 3.1 211 2.8 536 4.7
Total ...................... 10,723 100.0 13,533 100.0 17,470 100.0 7,442 100.0 11,258 100.0
Our research and development expenses mainly consisted of staff costs and consumables such
as raw materials for used in R&D and parts and components of machinery.
For the years ended December 31, 2021, 2022 and 2023 and the six months ended June 30,
2024, our research and development expenses am ounted to RMB10.7 million, RMB13.5 million,
RMB17.5 million and RMB11.3 million, respectively.
FINANCIAL INFORMATION
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--- page 476 ---
Administrative expenses
The following table sets forth the breakdown of o ur administrative expenses during the Track
Record Period:
Year ended December 31 Six months ended June 30,
2021 2022 2023 2023 2024
RMB ’000 % RMB’ 000 % RMB ’000 % RMB ’000 % RMB ’000 %
(Unaudited)
Staff costs . . . . . . . . . . . . . . . . . . . 30,924 40.7 34,021 49.8 37,117 46.5 17,885 53.4 20,277 50.0
Depreciation and amortization . . . . . . . 10,792 14.2 10,061 14.7 10,791 13.5 4,755 14.2 7,476 18.5
Office expenses . . . . . . . . . . . . . . . . 7,465 9.8 6,352 9.3 9,090 11.4 2,958 8.8 4,402 10.9
Entertainment expenses . . . . . . . . . . . 7,481 9.9 5,831 8.5 6,086 7.6 953 2.8 620 1.5
Share-based payment . . . . . . . . . . . . 2,268 3.0 130 0.2 —— —— ——
Agency fees . . . . . . . . . . . . . . . . . . 9,062 11.9 3,821 5.6 6,281 7.9 1,584 4.7 3,259 8.1
Travel expenses . . . . . . . . . . . . . . . . 1,707 2.3 2,037 3.0 2,040 2.6 898 2.7 953 2.4
Decoration expenses . . . . . . . . . . . . . 1,552 2.0 765 1.1 210 0.3 64 0.2 53 0.1
Service fees . . . . . . . . . . . . . . . . . . 1,443 1.9 1,628 2.4 3,359 4.2 1,752 5.2 609 1.5
Others . . . . . . . . . . . . . . . . . . . . . 3,253 4.3 3,629 5.4 4,796 6.0 2,672 8.0 2,822 7.0
Total ...................... 75,947 100.0 68,275 100.0 79,770 100.0 33,521 100.0 40,471 100.0
Our administrative expenses mainly represent ed our (i) staff costs, (ii) depreciation and
amortization and (iii) office expenses.
For the years ended December 31, 2021, 2022 and 2023 and the six months ended June 30,
2024, our administrative expenses amounted to RMB75.9 million, RMB68.3 million, RMB79.8
million and RMB40.5 million, respectively. Du ring the Track Record Period, staff costs for our
administrative personnel consti tuted a substantial portion of our administrative expenses. The
changes in staff costs were mainly in relation to the number of our administrative employees.
FINANCIAL INFORMATION
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--- page 477 ---
Other expenses
The following table sets forth the breakdown of our other expenses during the Track Record
Period:
Year ended December 31, Six months ended June 30,
2021 2022 2023 2023 2024
RMB’000 RMB ’000 RMB ’000 RMB ’000 RMB ’000
(Unaudited)
Costs related to previous
A-share listing attempt . . 13,290 7,261 4,302 2,898 —
Direct operating expenses
incurred for investment
properties . . . . . . . . . . . 3,724 4,204 4,197 2,099 2,098
Total ............... 17,014 11,465 8,499 4,997 2,098
Our other expenses comprise costs related to previous A-share listing attempt and direct
operating expenses incurred for investment prop erties. Direct operatin g expenses incurred for
investment properties refer to depreciation and amortization of our investment properties.
For the years ended December 31, 2021, 2022 and 2023 and the six months ended June 30,
2024, our other expenses amounted to RMB17.0 mil lion, RMB11.5 million, RMB8.5 million and
RMB2.1 million, respectively. The fluctuations of our other expenses were mainly due to our costs
related to previous A-share listing attempt. Our d irect operating expenses incurred for investment
properties were generally slightly higher than our rental income for the corresponding periods
because some of our investment properties had not been leased and we had no rental income for
such property while we still incurred operating e xpenses to maintain such properties. For further
details of our rental income during the Track Record Period, please refer to ‘‘ —Other Income ’’.
FINANCIAL INFORMATION
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--- page 478 ---
Other gains and losses, net
The following table sets forth the breakdown o f our other gains and losses, net during the
Track Record Period:
Year ended December 31, Six months ended June 30,
2021 2022 2023 2023 2024
RMB’000 RMB ’000 RMB ’000 RMB ’000 RMB ’000
(Unaudited)
(Loss)/gain on disposal of
property, plant and
equipment, intangible
assets and termination of
leases, net . . . . . . . . . . 58 1,555 (55) 218 (20)
Net foreign exchange gain/
( l o s s ).............. 9 ( 1 2 4 ) ( 1 3 4 ) ( 7 7 ) 5 3
Net realised (loss)/gain on
Au (T+D) contracts (Note) . 76,001 (170,942) (299,391) (158,000) (298,527)
Net realised (loss)/gain on
gold loans . . . . . . . . . . 13,552 (29,247) (50,358) (42,919) (67,662)
Net unrealised gain/(loss)
on gold loans . . . . . . . . (973) (8,913) (19,735) 5,632 20,440
Fair value changes on
financial assets at
F V T P L ............ 8 0 3 1 4 0 8 0 5 4 5
Charitable contribution . . . (443) (2,382) (1,146) (500) (613)
O t h e r s .............. 8 3 2 9 5 2 7 2 5 — 599
Total ............... 89,839 (208,961) (370,014) (195,592) (345,725)
Note: Our Group uses Au (T+D) contracts which are purchased on Shanghai Gold Exchange as an economic hedge
of its commodity price risk and its exposure to variability in fair value changes attributable to price
fluctuation risk associated with gold products. The Au (T+D) contracts are settled on a daily basis.
However, our Group does not formally designate or document the hedging transactions with respect to the
Au (T+D) contracts. Therefore, those transactions ar e not designated for hedge accounting. We do not treat
such arrangements as hedging arrangements since (i) we do not have formal designation and documentation
of the hedging relationship, risk management objective for accounting purpose and strategy for undertaking
the hedge; and (ii) the arrangements do not meet all of the hedge effectiveness requirements under HKFRS 9.
As such, we have not had any hedging arrangements in this regard.
For the years ended December 31, 2021, 2022 and 2023 and the six months ended June 30,
2024, our other gains and losses, net amounted to gain of RMB89.8 million, loss of RMB209.0
million, loss of RMB370.0 million and los s of RMB345.7 million, respectively.
FINANCIAL INFORMATION
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--- page 479 ---
Our other gains and losses, net mainly consis t of gains or losses we incurred in connection
with our Au (T+D) contracts and gold loans. According to gold price quoted on the Shanghai Gold
Exchange, the average daily closing price of Au9999 decreased from RMB387.4/g in 2020 to
RMB374.5/g in 2021, then to RMB392.2/g in 2022 and further increased to RMB449.9/g in 2023,
and further increased to the average daily closing price of RMB520.9/g for the six months ended
June 30, 2024. Accordingly, we recorded net realized losses on Au (T+D) contracts and gold loans
for the years ended December 31, 2022 and 2023 and six months ended June 30, 2024. Conversely,
we recorded net realized gain from Au (T+D) contr acts and gold loans in 2021. The trend generally
negatively corresponded with the price of Au9999. For the six months ended June 30, 2024, we
recorded an increase in net realised loss on Au (T +D) contracts in the sum of RMB140.5 million,
representing a period-to-period increase of approximately 88.9% when compared to the
corresponding period in 2023. Such increase in los s is primarily attributable to a significant
increase in gold price during the first half of 2024.
Finance costs
The following table sets forth the breakdown of our finance costs during the Track Record
Period:
Year ended December 31, Six months ended June 30,
2021 2022 2023 2023 2024
RMB’000 RMB ’000 RMB ’000 RMB ’000 RMB ’000
(Unaudited)
Interest on borrowings . . . 23,921 27,891 33,703 15,059 22,890
Interest on gold loans . . . . 19,948 18,526 17,272 7,130 9,646
Interest on bills discounted
with recourse . . . . . . . . 18,366 8,931 11,224 8,483 2,335
Interest on lease liabilities . 1,926 1,520 935 470 561
Total ............... 64,161 56,868 63,134 31,142 35,432
For the years ended December 31, 2021, 2022 and 2023 and the six months ended June 30,
2024, our finance costs amounted to RMB64.2 million, RMB56.9 million, RMB63.1 million and
RMB35.4 million, respectively.
Our finance costs represented (i) interest on borrowings, (ii) interest on gold loans, (iii)
interest on bills discounted with recourse and (iv) interest on lease liabilities. Interest on bills
discounted with recourse is in relation to the cash received on bills receivables discounted to
various banks with full recourse related to discounted bills issued among subsidiaries of our Group
for intra-group transactions.
Reason(s) for applying bills as a payment method
Bills discounted with recourse were in relation to intra-group transactions which involved bills
obtained from banks by various Group members. Due to the fact that our procurement and
production are performed by different entities of our Group, our Group conducted intra-group
FINANCIAL INFORMATION
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--- page 480 ---
transactions between the production entity and th e procurement entities for the purchase of gold and
gold finished products. As some of the banking facilities obtained by us had restrictions that they
can be used for bills settlement purpose, we utilis ed such bills as the payment method for the intra-
group transactions, as opposed to using cash or other banking facilities. These intra-group
transactions represented genuine transact ions in relation to different subsidiaries ’ operation, and the
lending banks were aware of the intra-group transactions as the entities involved in the intra-group
transactions are named in the relevant documents submitted to the lending banks for the issuance of
bills. In situations where the banks issuing the bills were not the same banks receiving the bills, the
bank receiving the bill directly cashes out the bill from the bank issuing the bill and no transaction
documents are submitted to such bank. The majority of the bills are secured by security deposits.
The following diagrams illustrate the transact ions in relation to bill discounted with recourse
in the Track Record Period:
Mainly: Bills for purchasing gold for subsidiaries
Bill
discounted
with
recourse
Company
Cash Cash Gold
Bill Gold
Issuance of
bill for
gold
purchase
Shandong
Mokingran
Banks
(Note)
Banks
(Note) Shanghai Gold
Exchange
Note: The banks issuing the bills may or may not be the same banks receiving the bills.
Our bills discounted with recourse mainly represented bills utilized by Shandong Mokingran
for gold purchase from our Company. Bills discounted with recourse were part of the bundle of
financing options under the credit line provided to us by relevant financial institutions, under which
the relevant bills can only be applied for the purpose specified in the facilities documents. When we
need external financing for transactions, we utilize the financing method that is most accessible
and/or commercially feasible for us, which at times, includes the bills discounted with recourse
instead of direct drawdown. We are also required to submit relevant transactional document of
relevant arrangement to the banks for their independent review before we use bank bills as
FINANCIAL INFORMATION
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--- page 481 ---
settlement tools. In addition, Frost & Sullivan confirmed that bank bills are commonly used as a
settlement mean, which further substantiates t hat the relevant transactions were conducted in
accordance with commercial norms. Accordingly, our Directors are of the view that the bank bills
were proper commercial settlement tools.
Our Directors are also of the view that the bank bills represented genuine business
transactions because: (i) stemming from our histor ical development and growth over the years, we
have delineated responsibilities within and amongst our Group entities. Such delineation may
originate from an operational efficacy standpoin t, with certain entities designated to procure
materials and others to focus on manufacture and/or sales. According to Frost & Sullivan, it is very
common in China that companies in the same group have different functions in business operation,
(ii) the aforementioned delineation of responsibilities thus led to genuine intra-group transactions
that involve the procurement of raw materials and sales of products, (iii) in our Group ’s case, bank
bills were granted to and applied by certain of our entities to settle the relevant purchase in intra-
group transactions. Such bills were issued by commercial banks that operate under strict regulatory
regimes, which also requires that they properly assess and document relevant transactions.
Accordingly, we had been required to submit rele vant transactional documents of the relevant
arrangements to the banks for their independent re view to verify the genuineness of respective
transactions and bills were only issued after the relevant bank ’s review/analysis of the relevant
transactions/documents, and (i v) following the receipt of the ban k bills, actual transactions were
conducted with product and fund flow in the same manner stated in the relevant transactional
documents submitted to the banks.
Under the current transaction process, Shandong Mokingran, our subsidiary responsible for
our sales to provincial-dealers, would purchase gold from our Company. Upon receiving the bank
bills from Shandong Mokingran, our Company wo uld discount the bank bills with commercial
banks for financing and apply such capital to the procurement of gold from the Shanghai Gold
Exchange, as the Shanghai Gold Exchange does not accept bills as payment method. Our Company,
as a special member of the Shanghai Gold Exchange, is the only member of our Group who could
procure gold directly from the Shanghai Gold Exchange. By adopting aforementioned transaction
flow, we will be able to utilize our Company ’s membership to procure gold directly from the
Shanghai Gold Exchange. According to Frost & Sullivan, such arrangement is common in the
industry.
FINANCIAL INFORMATION
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--- page 482 ---
Miscellaneous: Purchase of gold finished pro ducts, raw materials and other intra-group
transactions
Issuance of bills
for gold finished
products and
raw materials purchase
Company
Cash Cash
bill flows
cash and goods flows
Finished
gold products
and raw materials
Bill
Bill
Bill
discounted
with recourse
Bill
discounted
with recourse
Shandong Yifu Shandong
MokingranGoods flow between
the subsidiaries
Issuance of bills
for gold material
purchase
Issuance of bills
for gold finished
products purchase
Banks
(Note)
Banks
(Note)
Note: The banks issuing the bills may or may not be the same banks receiving the bills.
The miscellaneous scenarios relate to (i) the C ompany purchasing gold finished products and
raw materials from Shandong Mokingran, and (ii) intra-group transactions between Shandong
Mokingran and Shandong Yifu which involves purchase of raw materials and finished goods
between the intra-group entities.
FINANCIAL INFORMATION
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--- page 483 ---
For details of other miscellaneous transactions in relation to bills discounted with recourse,
please see the table below.
Purchase of gold
finished products
and raw materials Other in tra-group transactions
Parties ............ B u y e r :C o m p a n y
Seller: Shandong Mokingran
Shandong Mokingran and Shandong Yifu
Transaction matter . . . . Our Company utilized bank bills to purchase gold
finished products for selling to franchisees through our
self-operated direct service centers and raw materials
from Shandong Mokingran for commissioning
Shandong Yifu for production
(I) Shandong Yifu purchasing materials for production
from Shandong Mokingran
(II) Shandong Mokingran purchasing gold finished
products from Shandong Yifu for selling purpose
Gold purchase
Purchase of gold
finished products
and raw materials Other intra-group transactions
Discounted bills amount
(RMB million)
For the year ended
December 31, 2021 ....
451.1 242.6 88.0
For the year ended
December 31, 2022 ....
551.1 Nil Nil
For the year ended
December 31, 2023 ....
464.8 98.7 Nil
For the six months ended
June 30, 2024 .......
Nil Nil Nil
Use of proceeds from
bill discounted with
recourse ...........
Purchase gold from the Shanghai
Gold Exchange
Working capital Working capital
Term of bills issued . . . . . Up to 12 months Up to 12 months Up to 12 months
Discounted rates . . . . . . . 0.8% to 2.8% 2.65% to 2.96% 2.9% to 3.5%
Security deposit . . . . . . . . Mainly 50% security deposit for
the value of the bills to
be issued
40% to 50% security deposit 50% to 100% security deposit
Total amount of transactions
(including cash settlement
and bill settlement)
(RMB million)
For the year ended
December 31, 2021 . . . .
1,132.4 347.9 154.2
For the year ended
December 31, 2022 . . . .
927.2 N/A N/A
For the year ended
December 31, 2023 . . . .
632.2 109.7 N/A
For the six months ended
June 30, 2024 . . . . . . .
N/A N/A N/A
FINANCIAL INFORMATION
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--- page 484 ---
As advised by our PRC Legal Advisor, the aforementioned use of bills discounted with
recourse did not violate Negotiable Instruments Law of the PRC or applicable prohibitive laws,
considering that these bank bills represented genuine business transactions and were proper
commercial settlement tools. Based on the foregoing, these bank bills do not fall under non-
compliant bill financing as stipulated under chapter 1.2D of the Guide For New Listing Applicants.
Based on the independent due diligence performed by the Sole Sponsor including, without
limitation, (i) discussing with key members of the Group ’s management who oversee the Group ’s
financial matters to understand the nature, purpose and frequency of the bank bills and the
underlying business transactions; (ii) obtaining an d reviewing relevant supporting documents related
to the underlying business transactions and the ba nk bill arrangements, including copies of bank
bills issued, invoices, contracts f or the intra-group transactions, p ayment records, evidence of goods
delivery, shipment details, and inventory records to verify the actual occurrence of the transactions
and corroborate the commercial substance of the underlying business transactions and verify their
consistency with the explanations provided by the Group ’s management; (iii) discussing with the
Reporting Accountants in relation to the audit procedures they conducted on the genuineness of the
underlying business transactions related to the bank bills under bank borrowings in forming an
opinion on the Historical Financial Informati on as a whole; (iv) interviewing several banks
providing financing to the Group, at which certain bank bills were issued, to understand the
procedures undertaken by the banks to verify the genuineness of the underlying business
transactions, and noted that such banks were aware the bank bills were used in intra-group
transactions, and that they expressed no concerns regarding the authenticity of the transactions; (v)
discussing with the PRC Legal Advisor, to understand whether bank bills are legitimate commercial
settlement tools and compliant with PRC laws. The PRC Legal Advisor confirmed that, considering
that the bank bills represented genuine business transactions and were proper commercial settlement
tools, the use of such bank bills did not violate Negotiable Instruments Law of the PRC or
applicable prohibitive laws; and (vi) discussin g with the Industry Consultant to understand the
prevalence and extent of use of simi lar bank bill arrangements for intra-group transactions by other
market players in the industry and the rationale behind employing such arrangements in the
industry, the Sole Sponsor concurs with the Directors ’ view that the bank bills represent genuine
business transactions.
FINANCIAL INFORMATION
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--- page 485 ---
Net reversal of impairment losses/(impairment losses) under expected credit loss model
The following table sets forth the breakdown of our net reversal of impairment losses/
(impairment losses) under expected credit loss model during the Track Record Period:
Year ended December 31, Six months ended June 30,
2021 2022 2023 2023 2024
RMB’000 RMB ’000 RMB ’000 RMB ’000 RMB ’000
(Unaudited)
Impairment losses, net of
reversals, recognized on:
— Trade receivables . . . (12,402) 11,116 (675) (666) 424
— Other receivables . . . (795) (1,029) (401) 135 (662)
Total ............... (13,197) 10,087 (1,076) (531) (238)
Our net reversal of impairment losses/(impairment losses) under expected credit loss model
mainly represented impairment losses, net of rever sals, recognized on (i) trade receivables, and (ii)
other receivables.
Our Group writes off trade receivables or other receivables when there is information
indicating that the debtor is in severe financial difficulty and there is no realistic prospect of
recovery, when the debtor has been placed under liquidation or has entered into bankruptcy
proceedings, whichever occurs earlier.
FINANCIAL INFORMATION
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--- page 486 ---
The following table shows the movement in lif etime ECL that has been recognized for trade
receivables under the simplified approach.
Lifetime
ECL (not
credit-
impaired)
Lifetime
ECL (credit-
impaired) Total
RMB’000 RMB ’000 RMB ’000
A tJ a n u a r y1 ,2 0 2 1................................... 2 1 3 4 , 3 9 1 3 4 , 4 1 2
T r a n s f e rt oc r e d i t - i m p a i r e d ............................. ( 1 ) 1 —
I m p a i r m e n tl o s s e sr e c o g n i z e d ............................ 2 1 6 1 3 , 3 2 1 1 3 , 5 3 7
I m p a i r m e n tl o s s e sr e v e r s e d ............................. — (1,135) (1,135)
W r i t e - o f f s......................................... — (1) (1)
A tD e c e m b e r3 1 ,2 0 2 1 ................................ 2 3 6 4 6 , 5 7 7 4 6 , 8 1 3
I m p a i r m e n tl o s s e sr e c o g n i z e d ............................ 2 — 2
I m p a i r m e n tl o s s e sr e v e r s e d ............................. ( 1 8 5 ) ( 1 0 , 9 3 3 ) ( 1 1 , 1 1 8 )
A tD e c e m b e r3 1 ,2 0 2 2 ................................ 5 3 3 5 , 6 4 4 3 5 , 6 9 7
I m p a i r m e n tl o s s e sr e c o g n i z e d ............................ 1 3 2 , 7 3 5 2 , 7 4 8
I m p a i r m e n tl o s s e sr e v e r s e d ............................. ( 6 ) ( 2 , 0 6 7 ) ( 2 , 0 7 3 )
A tD e c e m b e r3 1 ,2 0 2 3 ................................ 6 0 3 6 , 3 1 2 3 6 , 3 7 2
I m p a i r m e n tl o s s e sr e c o g n i z e d ............................ 3 4 — 34
I m p a i r m e n tl o s s e sr e v e r s e d ............................. ( 8 ) ( 4 5 0 ) ( 4 5 8 )
At June 30, 2024 . . . ................................. 8 6 3 5 , 8 6 2 3 5 , 9 4 8
The following tables show reconciliation of loss allowances that has been recognized for other
receivables.
12m ECL
Lifetime
ECL (credit-
impaired) Total
RMB’000 RMB ’000 RMB ’000
A tJ a n u a r y1 ,2 0 2 1................................... 1 , 8 3 7 1 7 0 2 , 0 0 7
I m p a i r m e n tl o s s e sr e c o g n i z e d ............................ 8 6 9 — 869
I m p a i r m e n tl o s s e sr e v e r s e d ............................. ( 7 4 ) — (74)
A tD e c e m b e r3 1 ,2 0 2 1 ................................ 2 , 6 3 2 1 7 0 2 , 8 0 2
I m p a i r m e n tl o s s e sr e c o g n i z e d ............................ 8 8 0 4 8 9 1 , 3 6 9
I m p a i r m e n tl o s s e sr e v e r s e d ............................. ( 3 4 0 ) — (340)
W r i t e - o f f s......................................... — (659) (659)
A tD e c e m b e r3 1 ,2 0 2 2 ................................ 3 , 1 7 2 — 3,172
T r a n s f e rt oc r e d i t - i m p a i r e d ............................. ( 1 1 2 ) 1 1 2 —
I m p a i r m e n tl o s s e sr e c o g n i z e d ............................ 8 0 1 — 801
I m p a i r m e n tl o s s e sr e v e r s e d ............................. ( 4 0 0 ) — (400)
W r i t e - o f f s......................................... — (112) (112)
A tD e c e m b e r3 1 ,2 0 2 3 ................................ 3 , 4 6 1 — 3,461
I m p a i r m e n tl o s s e sr e c o g n i z e d ............................ 7 4 7 — 747
I m p a i r m e n tl o s s e sr e v e r s e d ............................. ( 8 5 ) — (85)
At June 30, 2024 . . . ................................. 4 , 1 2 3 — 4,123
FINANCIAL INFORMATION
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--- page 487 ---
Income tax expenses
During the Track Record Period, the assessable profit of our other PRC subsidiaries was
subject to a statutory rate of 25.0% determined in accordance with the EIT Law. See note 12 to the
historical financial information in the Accountants ’ Report set out in Appendix I to this prospectus
for further details.
Our income tax expense amounted to RMB71.4 m illion, RMB63.4 million, RMB71.6 million
and RMB14.6 million for the years ended December 31, 2021, 2022 and 2023 and the six months
ended June 30, 2024, respectively.
Our effective tax rates were 24.1%, 26.0%, 23.5% and 21.8% for the years ended December
31, 2021, 2022 and 2023 and the six months ended June 30, 2024, respectively. Our effective tax
rates were in line with the statutory tax rate of 25.0%, with fluctuations mainly due to the different
tax rates entitled by certain of our subsidiaries and the deductible allowance for research and
development cost for tax purpose.
As of the Latest Practicable Date and during t he Track Record Period, our Directors confirmed
that we had fulfilled all our tax obligations and did not have any unresolved tax disputes.
REVIEW OF HISTORICAL RESULTS OF OPERATIONS
Six months ended June 30, 2024 compared to six months ended June 30, 2023
Revenue
Our revenue increased by RMB663.5 million or 7.1% from RMB9,316.2 million for the six
months ended June 30, 2023 to RMB9,979.7 million for the six months ended June 30, 2024. The
increase in our revenue was mainly due to an incr ease in gold price. According to gold price quoted
on the Shanghai Gold Exchange, the average daily closing price of Au9999 was RMB520.9/g for
the six months ended June 30, 2024, compared with that of RMB435.5/g for the six months June
30, 2023. As we charged our customers according to the prevailing gold market price of gold
jewellery products, higher market gold price in the six months ended June 30, 2024 led to an
increase in our revenue for the six months ended June 30, 2024 when compared with the six
months ended June 30, 2023.
In terms of products, for the six months ended June 30, 2024, 98.5% of our revenue was
derived from sales of gold jewellery and other gold products, which is similar to the revenue
contribution of sales of gold jewellery and other gold products for the six months ended June 30,
2023. Accordingly, the increase in our revenue was p rimarily driven by (i) the revenue increase of
our gold jewellery and other gold products as a result of the increase in gold market price, the
increment of which amounted to RMB697.0 million for the six months ended June 30, 2024 when
compared to that of the six months ended June 30, 2023, and (ii) our sales of gold bullion to a
leading PRC e-commerce platform, Vipshop for a promotional event during the first half of 2024.
FINANCIAL INFORMATION
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In terms of distribution channels, our reve nue increase was mainly driven by e-commerce
sales, which increased by RMB1,146.6 million or 666.3% from RMB172.1 million for the six
months ended June 30, 2023 to RMB1,318.7 million. Such increase was mainly attributable to our
sales of gold bullion to a leading PRC e-commerce platform, Vipshop for a promotional event. In
addition, during the six months ended June 30, 2024, our revenue derived from provision of tailor-
made production services increased by RMB59.1 million or 138.4% from RMB42.7 million for the
six months ended June 30, 2023 to RMB101.8 million for the six months ended June 30, 2024. The
increase in our revenue derived from e-commerce sales was partially offset by the decrease in
revenue generated from sales to our franchise netw ork as consumer sentiments were affected by the
economic condition and gold price in general.
The sales volume of gold jewellery and other gold products for the six months ended June 30,
2023 and 2024 amounted to 22,986.2 kg and 20,588.7 kg respectively.
Cost of sales
Our cost of sales increased by 6.5% from RMB8,788.2 million for the six months ended June
30, 2023 to RMB9,362.2 million for the six months ended June 30, 2024, which was in line with
the change in revenue. Our material costs, which accounted for 98.9% and 98.9% of our cost of
sales for the six months ended June 30, 2023 and 2024, respectively, increased by RMB567.9
million. Such increase was mainly due to gold price increase in the six months ended June 30, 2024
compared with the same period of 2023.
Gross profit and gross profit margin
As a result of the changes in our revenue and cost of sales described above, our gross profit
increased by 16.9% from RMB528.0 million for the six months ended June 30, 2023 to RMB617.5
million for the period ended June 30, 2024. The increase in our gross profit for the six months
ended June 30, 2023 to June 30, 2024 was largely in line with the increase in revenue for the same
period.
The gross profit margin for six months ended June 30, 2023 and 2024 were 5.7% and 6.2%,
respectively, which were relatively stable.
Other income
Our other income increased by RMB3.1 million from RMB7.5 million for the six months
ended June 30, 2023 to RMB10.6 million for the six months ended June 30, 2024. It was mainly
due to an additional deduction for value-added tax in the sum of RMB2.2 million during the six
months ended June 30, 2024 when compared to the same period in 2023. On the other hand, we
recorded an increase of RMB2.1 million in relatio n to an incentive grant we received from Liaoning
Province ’s cultural development fund, which further contributed to the increase in our other income.
Such increases was partially offset by a slight decrease in our interest income from bank and other
deposits by RMB0.9 million when compared to the same for the six months ended June 30, 2023.
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Distribution and selling expenses
Our distribution and selling expenses decreased by 7.3% from RMB128.3 million for the six
months ended June 30, 2023 to RMB118.9 million for the six months ended June 30, 2024 mainly
due to decrease in media advertisin g and promotion expenses as we reduced such spending in light
of the overall market condition.
Research and development expenses
Our research and development expenses increased from RMB7.4 million for the six months
ended June 30, 2023 to RMB11.3 million for the six months ended June 30, 2024, representing a
period-to-period increase of 51.3%. Such increase was mainly due to our increased number of staff
we hired to further develop machinery R&D, technology R&D and product R&D.
Administrative expenses
Our administrative expenses increased from RMB33.5 million for the six months ended June
30, 2023 and at RMB40.5 million for the six months ended June 30, 2024. Such increase was partly
due to an increase in staff cost, depreciation and amortization costs and office expenses of RMB2.4
million, RMB2.7 million and RMB1.4 million, respectively, which in turn, was related to our
relocation to the existing new production facility and for which we hired additional administrative
staff and incurred more depreciation and amortization costs and office expenses.
Other expenses
Our other expenses decreased by RMB2.9 million from RMB5.0 million for the six months
ended June 30, 2023 to RMB2.1 million for the six months ended June 30, 2024. The decrease was
mainly due to a reduction in costs related to pre vious A-share listing attempt as we incurred no
such cost during the six months ended June 30, 2024.
Other gains and losses, net
Our other gains and losses, net increase by RMB150.1 million from a loss of RMB195.6
million for the six months ended June 30, 2023 to a loss of RMB345.7 million for the six months
ended June 30, 2024 mainly due to an increase in net realised loss on Au (T+D) contracts in the
sum of RMB140.5 million, representing an increase of approximately 88.9% when compared to the
corresponding period in 2023. Such loss was due to the fact that the magnitude of gold price
increase for the six months ended June 30, 2024 was larger than that of the corresponding period in
2023.
Finance costs
Our finance costs increased by RMB4.3 million from RMB31.1 million for the six months
ended June 30, 2023 to RMB35.4 million for the six months ended June 30, 2024 primarily due to
an increase in interest on borrowings in the sum of RMB7.8 million and an increase in interest on
FINANCIAL INFORMATION
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gold loans in the sum of RMB2.5 million, which was partially offset by a decrease in interest on
bills discounted with recourse of RMB6.1 million as we reduced the application of such bills for
procurement settlement purposes.
Net reversal of impairment losses/(impairment losses) under expected credit loss model
We recorded net impairment losses under expected credit loss model of RMB0.2 million for
the six months ended June 30, 2024 and a net reversal of impairment losses of RMB0.5 million for
the six months ended June 30, 2023. For the six months ended June 30, 2024, we had no material
reversal of impairment losses.
Income tax expenses
Our income tax expense decreased by RMB13. 4 million from RMB28.0 million for the six
months ended June 30, 2023 to RMB14.6 million for the six months ended June 30, 2024 primarily
attributable to a decrease in our profit before tax.
Our effective tax rate slightly increased from 20.9% for the six months ended June 30, 2023 to
21.8% for the six months ended June 30, 2024.
Profit for the period
Our profit for the period decreased from RMB106.0 million for the six months ended June 30,
2023 to RMB52.3 million for the six months ended June 30, 2024, representing a period-to-period
decrease of approximately 50.7%. Despite an increase in our total revenue, our profit for the period
decreased as a result of an increase in net realised loss on Au (T+D) contracts due to the rapid
increase in gold price during the six months ended June 30, 2024.
Our net profit margin decreased by 0.6 percentage point from 1.1% for the six months ended
June 30, 2023 to 0.5% for the six months ended June 30, 2024.
Year ended December 31, 2023 compared to year ended December 31, 2022
Revenue
Our revenue increased by RMB4,484.4 million or 28.5% from RMB15,724.2 million for the
year ended December 31, 2022 to RMB20,208.6 million for the year ended December 31, 2023.
The increase in our revenue was mainly due to the recovery of economic activities in 2023, whereas
our sales were affected by pandemic in 2022. Our r evenue increase was also attributable to the
relatively higher gold market price in 2023 than the gold market price in 2022. According to gold
price quoted on the Shanghai Gold Exchange, the average daily closing price of Au9999 was
RMB449.9/g as of December 31, 2023, compared with that of RMB392.2/g as of December 31,
2022. As we charged our customers according to the prevailing gold market price of gold jewellery
products, higher market gold price in 2023 led to an increase in our revenue for the year ended
December 31, 2023 when compared with the year ended December 31, 2022.
FINANCIAL INFORMATION
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In terms of products, the increase in our revenue was primarily due to revenue growth for our
gold jewellery and other gold products, where our sales in gold jewellery and other gold products
increased by RMB4,484.5 million for the year ended December 31, 2023 compared to the year
ended December 31, 2022.
In terms of distribution channels, our revenue i ncrease was mainly due to revenue increase via
our franchise network, which increased by RMB4,086.9 million or 27.5% from RMB14,836.3
million for the year ended December 31, 2022 to RMB18,923.2 million for the year ended
December 31, 2023. Such increase was attributable to our direct sales to franchisees through our
direct service centers, which increased by R MB2,644.6 million for the year ended December 31,
2023 compared with the year ended December 31, 20 22, as well as our sales to provincial-dealers,
which increased by RMB1,442.3 million for the compared years.
The sales volume of gold jewellery and other gold products for the years ended December 31,
2022 and 2023 amounted to 43,025.6 kg and 48,066.6 kg respectively.
Cost of sales
Our cost of sales increased by 27.8% from RMB14,965.0 million for the year ended December
31, 2022 to RMB19,131.1 million for the year ended December 31, 2023, which was in line with
the change in revenue. Our material costs, which accounted for 99.0% and 98.9% of our cost of
sales for the year ended December 31, 2022 and 2023, respectively, increased by RMB4,099.0
million for the year ended December 31, 2023. Such increase was mainly due to the relatively
higher level of gold market price in 2023 compared with that in 2022.
Gross profit and gross profit margin
As a result of the changes in our revenue and cost of sales described above, our gross profit
increased by 41.9% from RMB759.2 million for t he year ended December 31, 2022 to RMB1,077.5
million for the year ended December 31, 2023. The increase in our gross profit for the year ended
December 31, 2022 to December 31, 2023 was largely in line with the increase in revenue for the
same period, with the increasing trend of gold prices during the year resulting in a higher growth of
our gross profit as compared to the growth of our revenue.
The gross profit margin for the years ended December 31, 2022 and 2023 were 4.8% and
5.3%, respectively. The increase was primarily d ue to the increasing trend of gold price during the
year ended December 31, 2023, as we procured gold at a relatively low price level before the gold
price started to increase while charging our customers with the prevailing market gold price that
tend to be higher than our previous purchase cost. Such timing difference between our procurement
and sales transactions, coupled with the increasin g trend of gold price during the year, resulted in
an increase in our gross profit margin for the year ended December 31, 2023.
The selling prices of our gold jewellery and othe r gold products usually reflect the market
price of the raw materials in the products and crafting fees. As our products are mainly made of
gold, we use gold loans and Au (T+D) contracts as economic hedge to reduce the financial impact
FINANCIAL INFORMATION
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of gold price fluctuations. As the economic hedge of Au (T+D) contracts does not directly reflect
on our gross profit or gross profit margin, our gross profit and gross profit margin are subject to
fluctuations of gold price.
Other income
Our other income slightly decreased by RMB0.6 million from RMB28.4 million for the year
ended December 31, 2022 to RMB27.8 million for the year ended December 31, 2023. It was
relatively stable.
Distribution and selling expenses
Our distribution and selling expenses increa sed by 32.3% from RMB194.5 million for the year
ended December 31, 2022 to RMB257.3 million for the year ended December 31, 2023 mainly due
to increases in employees remuneration as a result of commission paid to emp loyees, advertising
expenses and marketing expenses as a result of our increased effort in marketing and promotion and
our business expansion.
Research and development expenses
Our research and development expenses incr eased from RMB13.5 million for the year ended
December 31, 2022 to RMB17.5 million for the year ended December 31, 2023 mainly due to (i) an
increase in our R&D expenses of molds and equipment, particularly for spring clasp equipment; (ii)
an increase in our R&D of product design styles; and (iii) an increase in the expenses for
intellectual property application fees and agency fees.
Administrative expenses
Our administrative expenses increased by RMB11.5 million from RMB68.3 million for the
year ended December 31, 2022 to RMB79.8 million for the year ended December 31, 2023. The
increase was partly due to an increase in staff cost and office expenses of RMB3.1 million and
RMB2.7 million, respectively, which in turn, wa s related to our relocation to the existing new
production facility during 2023 and for which we hired additional administrative staff and incurred
more office expenses.
Other expenses
Our other expenses decreased by RMB3.0 milli on from RMB11.5 million for the year ended
December 31, 2022 to RMB8.5 million for th e year ended December 31, 2023. The decrease was
mainly due to we have incurred less expenses related to previous A-share listing attempt in 2022
but not in 2023.
Other gains and losses, net
Our other gains and losses, net decreased by RMB161.0 million from a loss of RMB209.0
million for the year ended December 31, 2022 to a loss of RMB370.0 million for the year ended
December 31, 2023 mainly due to we have incurred losses in connection with our Au (T+D)
FINANCIAL INFORMATION
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contracts and gold loans. According to gold price quoted on the Shanghai Gold Exchange, the
average daily closing price of Au9999 signifi cantly increased from RMB392.2/g in 2022 to
RMB449.9/g in 2023. Accordingly, we recorded net realized losses on Au (T+D) contracts and gold
loans while we benefited from higher gross profit for the year ended December 31, 2023.
Finance costs
Our finance costs increased by RMB6.2 million from RMB56.9 million for the year ended
December 31, 2022 to RMB63.1 million for the y ear ended December 31, 2023 primarily due to
increase in interest paid on borrowings and bills discounted with recourse. We mainly utilized the
fundings for the procurement of gold raw mate rials because the expansion of our business
operations leads to an increased demand for financing in 2023.
Net reversal of impairment losses/(impairment losses) under expected credit loss model
We recorded net impairment losses under expected credit loss model of RMB1.1 million for
the year ended December 31, 2023 and a net reversal of impairment losses of RMB10.1 million for
the year ended December 31, 2022. For the year ended December 31, 2022, we reversed
impairment losses as we managed to collect certain impaired trade receivables through legal actions
from a customer who previously purchased gold bullion from us prior to the Track Record Period.
For the year ended December 31, 2023, we had no material reversal of impairment losses.
Income tax expenses
Our income tax expense increased by RMB8.2 million from RMB63.4 million for the year
ended December 31, 2022 to RMB71.6 million fo r the year ended December 31, 2023 primarily
attributable to business expansion.
Our effective tax rate decreased from 26.0% for the year ended December 31, 2022 to 23.5%
for the year ended December 31, 2023. They were generally in line with the statutory tax rate of
25.0%, with fluctuations mainly due to the different tax rates entitled by certain of our subsidiaries
and the deductible allowance for research and development cost for tax purpose.
Profit for the period
As a result of the foregoing, our profit increased by RMB52.7 million from RMB180.8 million
for the year ended December 31, 2022 to RMB233.5 million for the year ended December 31,
2023.
Our net profit margin remained stable with a slight increase from 1.1% for the year ended
December 31, 2022 to 1.2% for the year ended December 31, 2023.
FINANCIAL INFORMATION
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Year ended December 31, 2022 compared to year ended December 31, 2021
Revenue
Our revenue decreased by RMB1,146.8 million or 6.8% from RMB16,871.0 million for the
year ended December 31, 2021 to RMB15,724.2 million for the year ended December 31, 2022.
The decrease was mainly because our sales were affected by pandemic for the year ended December
31, 2022 as well as we recorded a surge in sales from e-commerce in 2021 as we sold a large batch
of gold bullion to a leading PRC online discount retailer, Vipshop for a promotion event. We did
not record comparable sales from this source for the year ended December 31, 2022.
In terms of breakdown by distribution channel s, our sales through franchise network were
relatively stable, at RMB14,772.6 million for t he year ended December 31, 2021 and RMB14,836.3
million for the year ended December 31, 2022. Th e decrease was mainly due to the decrease in
sales via our e-commerce by RMB1,243.8 million.
The sales volume of gold jewellery and other gold products for the years ended December 31,
2021 and 2022 amounted to 48,089.8 kg and 43,025.6 kg respectively.
Cost of sales
Our cost of sales decreased by RMB1,369.6 m illion or 8.4% from RMB16,334.6 million for
the year ended December 31, 2021 to RMB14,965.0 million for the year ended December 31, 2022,
which was primarily due to our decrease in revenue and partly offset by the increase in gold price
for the year ended December 31, 2022.
Gross profit and gross profit margin
As a result of the changes in our revenue and cost of sales described above, our gross profit
increased by RMB222.8 million or 41.5% from RMB 536.4 million for the year ended December 31,
2021 to RMB759.2 million for the year ended December 31, 2022. It was primarily due to the
increase of gold price during the year ended December 31, 2022. The average annual closing price
for Au9999 in the PRC experienced a general upward trend from RMB374.5/g in 2021 to
RMB392.2/g in 2022, according to gold price quoted on the Shanghai Gold Exchange. As an OBM,
our average inventory turnover days typically ranged from one to two months. This means that, in
general for the year, we tend to procure gold at a r elatively low price level while charging our
customers with the prevailing market gold price that tend to be higher than our previous purchase
cost. Such timing difference between our procur ement and sales transactions, coupled with the
increase trend of gold price during the year, resulted in an increase in our gross profit for the year
ended December 31, 2022.
In terms of breakdown by products, the gross profit for our gold jewellery and other gold
products increased by RMB234.8 million. In terms of distribution channel, our gross profit increase
was mainly due to the increase in gross profit in our franchise network, which increased by
RMB215.4 million.
FINANCIAL INFORMATION
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The gross profit margin increased from 3.2% for year ended December 31, 2021 to 4.8% for
the year ended December 31, 2022, mainly due to the factors as described above in the analysis of
gross profit and also due to increased gross profit margin of gold jewellery and other gold products,
which was mainly due to the our sales of gold bullion to a leading PRC online discount retailer,
Vipshop for a promotion collaboration event in 2021 and that in 2022 we did not record similar
sales. Gold bullion generally has a lower gross profit margin than gold jewellery.
Other income
Our other income remained relatively stable, at RMB27.4 million for the year ended December
31, 2021 and at RMB28.4 million for the year ended December 31, 2022 mainly due to the
increased interest from bank and other deposits offset by the decreased government grants.
Distribution and selling expenses
Our distribution and selling expenses increased by RMB17.7 million from RMB176.8 million
for the year ended December 31, 2021 to RMB194. 5 million for the year ended December 31, 2022
mainly due to a substantial increase in employees remuneration in light of an increase of staff
number, as well as increased spending on adver tising expenses and marketing expenses for our
business expansion. Such media advertising expense s included placing more advertisement in social
media and in railway stations and such publicity and promotion expenses were mainly in relation to
the launching of promotion expenses on e-commerce platforms.
Research and development expenses
Our research and development expenses increased by RMB2.8 million from RMB10.7 million
for the year ended December 31, 2021 to RMB13.5 million for the year ended December 31, 2022
mainly due to our increased R&D consumables.
Administrative expenses
Our administrative expenses decreased by RMB 7.6 million from RMB75.9 million for the year
ended December 31, 2021 to RMB68.3 milli on for the year ended December 31, 2022. Such
decrease was primarily attributable to our limited operation during the fourth quarter of 2022 as a
result of pandemic.
Other expenses
Our other expenses decreased by RMB5.5 milli on from RMB17.0 million for the year ended
December 31, 2021 to RMB11.5 million for the year ended December 31, 2022. The decrease was
mainly due to the decrease in costs related to previous A-share listing attempt in the amount of
RMB13.3 million for the year ended December 31, 2021. We had an A-share listing attempt in
2021 and following its cessation, we initiate d another attempt in 2022, but incurred less cost
comparatively due to differences in work stage.
FINANCIAL INFORMATION
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Other gains and losses, net
Our other gains and losses, net decrease d by RMB298.8 million from a gain of RMB89.8
million for the year ended December 31, 2021 to a loss of RMB209.0 million for the year ended
December 31, 2022. Such decrease was mainly due to net realized loss on Au (T+D) contracts,
because of the general increase of gold price from 2021 to 2022, which according to gold price
quoted on the Shanghai Gold Exchange, the average annual closing price for Au9999 increased
from RMB374.5/g for 2021 to RMB392.2/g for 2022.
Finance costs
Our finance costs decreased by RMB7.3 million from RMB64.2 million for the year ended
December 31, 2021 to RMB56.9 million for the year ended December 31, 2022 mainly due to
decrease in interest paid on bills discounted with recourse. We utilized less bills discounted with
recourse mainly because of limited operation caused by pandemic and we have less financing need.
Net reversal of impairment losses/(impairment losses) under expected credit loss model
We recorded net impairment losses under exp ected credit loss model of RMB13.2 million for
the year ended December 31, 2021 and a net reversal of impairment losses of RMB10.1 million for
year ended December 31, 2022. For the year ended December 31, 2022, we reversed impairment
losses of RMB11.1 million as we managed to collect certain impaired trade receivables through
legal actions from a customer who previously purchased gold bullion fro m us prior to the Track
Record Period.
Income tax expenses
Our income tax expense decreased by RMB8.0 million from RMB71.4 million for the year
ended December 31, 2021 to RMB63.4 million for the year ended December 31, 2022. The
decrease was mainly due to our revenue decrease for the year ended December 31, 2022.
Our effective tax rate remain ed relatively stable at 24.1% and 26.0% for the years ended
December 31, 2021 and 2022, respectively.
Profit for the year
As a result of the foregoing, our profit decreased by RMB43.7 million from RMB224.5
million for the year ended December 31, 2021 to RMB180.8 million for the year ended December
31, 2022, mainly because of the decrease in revenu e together with net realized loss on Au (T+D)
contracts.
Our net profit margin decreased by 0.2 percentage point from 1.3% for the year ended
December 31, 2021 to 1.1% for the year ended December 31, 2022.
FINANCIAL INFORMATION
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SELECTED ITEMS OF CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
Net Current Assets
The following consolidated statement of financial position as of the dates indicated,
respectively is extracted from the accountants ’ report set out in Appendix I to this prospectus:
As of December 31,
As of
June 30,
2024
As of
September 30,
20242021 2022 2023
RMB’000 RMB ’000 RMB ’000 RMB ’000 RMB ’000
(Unaudited)
CURRENT ASSETS
I n v e n t o r i e s ............ 2 , 0 4 8 , 9 8 9 1 , 688,925 2,169,633 2,016,500 1,951,839
T r a d er e c e i v a b l e s ........ 9 7 , 9 9 3 130,922 150,513 171,206 147,255
Prepayments, deposits and
other receivables . . . . . . . 278,742 261,921 399,406 404,722 551,528
Financial assets at fair value
through profit or loss . . . . 6,011 ——— —
Pledged/restricted deposits . . 569,476 369,555 528,795 444,102 386,574
Cash and cash equivalents . . 153,518 225,359 155,866 364,034 134,101
Total ................ 3,154,729 2,676,682 3,404,213 3,400,564 3,171,297
CURRENT LIABILITIES
Trade and bills payables . . . 45,560 64,953 511,787 302,191 84,816
Other payables and accruals . 117,258 122,987 139,142 182,303 146,283
Lease liabilities . . . . . . . . . 12,028 9,600 7,711 11,276 9,467
B o r r o w i n g s ............ 1 , 3 3 6 , 9 2 0 829,627 790,041 1,070,379 1,037,928
Contract liabilities . . . . . . . 27,215 39,044 42,173 72,887 53,470
Tax liabilities . . . . . . . . . . . 1,849 12,296 24,963 13,390 9,938
G o l dl o a n s ............. 4 8 6 , 9 9 8 394,143 502,508 413,627 469,352
Deferred income . . . . . . . . . 132 132 41 34 38
P r o v i s i o n .............. 2 1 0 ——— —
Refund liabilities . . . . . . . . 50,995 41,448 32,943 23,615 23,108
T o t a l ................ 2 , 0 7 9 , 1 6 5 1 , 514,230 2,051,309 2,089,702 1,834,400
Net Current Assets ...... 1,075,564 1,162,452 1,352,904 1,310,862 1,336,897
FINANCIAL INFORMATION
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Our non-current assets included property, plant and equipment, right-of-use assets, investment
properties, intangible assets, deferred tax assets, prepayments, deposits and other receivables and
other non-current assets. Our current assets included inventories, trade receivables, prepayments,
deposits and other receivables, financial assets at fa ir value through profit or loss, pledged/restricted
deposits and cash and cash equivalents.
Our current liabilities mainly included trade and bills payables, other payables and accruals,
lease liabilities, borrowings, tax liabilities , gold loans and refund liabilities. Our non-current
liabilities included deferred tax liabilities, lease liabilities, refund liabilities and deferred income.
Our net current assets increased from RMB1,075.6 million as of December 31, 2021 to
RMB1,162.5 million as of December 31, 2022 p rimarily due to an decrease in borrowings of
RMB507.3 million as due to the inability to timely renew certain borrowings because of business
disruption to banks caused by the pandemic and partially offset by a reduction in inventories of
RMB360.1 million.
Our net current assets furthe r increased to RMB1,352.9 mi llion as of December 31, 2023
primarily due to (i) an increase in inventories o f RMB480.7 million mainly due to an increase in
our gold reserves to meet market demand, alongside an increase in gold prices in 2023, (ii) an
increase in pledged/restricted deposits of RMB 159.2 million for securing financing, and (iii) an
increase in prepayments, deposits and other receivables of RMB137.5 million due to an increase in
the right to returned goods assets, and partially offset by a significant increase in trade and bills
payable of RMB446.8 million, primarily due to our adoption of settlements in bank acceptance bills
for procurement of gold raw materials.
Our net current assets slightly decreased by RM B42.0 million to RMB1,310.9 million as of
June 30, 2024, primarily attributable to (i) a dec rease in inventories by RMB153.1 million due to
the sales of our finished goods and (ii) an increase in borrowings by RMB280.3 million, and was
partially offset by a decrease in gold loans by RMB88.9 million.
Our net current assets remained relatively st able at RMB1,336.9 million as of September 30,
2024 when compared with that as of June 30, 2024.
FINANCIAL INFORMATION
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DESCRIPTION OF CERTAIN ITEMS OF CONSOLIDATED STATEMENTS OF
FINANCIAL POSITION
Inventories
The following table sets forth the breakdown of our inventories as of the dates indicated:
As of December 31, As of June 30,
2021 2022 2023 2024
RMB’000 RMB ’000 RMB ’000 RMB ’000
Raw materials . . . . . . . . . . . . . . . 596,811 387,942 533,868 667,678
Work in progress . . . . . . . . . . . . . 1,480 2,596 6,343 1,400
Finished goods (Note 1) . . . . . . . . . . 1,434,117 1,280,587 1,612,052 1,326,328
G o o d si nt r a n s i t .............. 3 , 3 2 5 6 , 1 6 4 7 , 2 7 2 9 , 4 8 9
Consignment processing
materials (Note 2) ............. 5 , 4 8 9 2 , 9 7 2 5 2 5 1 , 4 3 3
C o n s u m a b l e s ................ 7 , 7 6 7 8 , 6 6 4 9 , 5 7 3 1 0 , 1 7 2
2,048,989 1,688,925 2,169,633 2,016,500
Note 1: Included in the finished goods related to consignment arrangements with two of our provincial-dealers for
diamond inlaying products in the amount of RMB3 .0 million, RMB1.7 million, RMB0.9 million and
RMB0.8 million as of December 31, 2021, 2022 and 2023 and June 30, 2024, respectively.
Note 2: Included K-gold and other gold products that we commissioned third parties to process.
Our inventories mainly included raw material s, work in progress, finished goods, goods in
transit, consigned processing materials and consumables.
Our inventories decreased by RMB360.0 million to RMB1,688.9 million as of December 31,
2022, mainly due to our Group ’s operation was affected by pandemic in the fourth quarter of 2022
and our reduced procurement, leading to a lower inventories balance.
Our inventories increased to RMB2,169.6 million as of December 31, 2023, mainly due to (i)
an increase in the gold price throughout 2023, and (ii) an increase in our inventories balance to
normal levels after the restrictions in place because of the pandemic was lifted in early 2023, as
compared to 2022.
Our inventories decreased by RMB153.1 million to RMB2,016.5 million as of June 30, 2024,
mainly due to a decrease in value of finished goods as inventories by RMB285.7 million due to a
decrease in our actual production v olume of gold jewellery products which was partially offset by
an increase in gold price which led to an increase i n the value of our raw materials as inventories
by RMB133.8 million.
FINANCIAL INFORMATION
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--- page 500 ---
The following table sets forth the ageing analysis of our inventories as of the dates indicated:
As of December 31, As of June 30,
2021 2022 2023 2024
RMB’000 RMB ’000 RMB ’000 RMB ’000
Within 1 year . . . . . . . . . . . . . . . . 1,959,098 1,551,779 2,095,496 1,933,408
1t o2y e a r s................. 3 9 , 6 7 7 8 4 , 6 4 9 4 8 , 0 8 5 5 9 , 3 6 5
O v e r2y e a r s ................ 5 0 , 7 6 6 5 3 , 1 5 8 2 6 , 1 3 2 2 6 , 0 7 5
P r o v i s i o n................... ( 5 5 2 ) ( 6 6 1 ) ( 8 0 ) ( 2 , 3 4 8 )
Total ..................... 2,048,989 1,688,925 2,169,633 2,016,500
Our jewellery production rate is generally in respond to market demand and inventory
turnover so we generally do not have a significant amount of slow-moving or obsolete stock.
Moreover, since our products are mostly made of gol d, which possesses significant value. As such,
write-downs usually only occur when the underlyin g value of the gold significantly deteriorates.
The following table sets forth a summary of average turnover days of inventories for the years
or period indicated:
Year ended December 31,
Six months
ended June 30,
2021 2022 2023 2024
Average turnover days of
inventories (Note) ............. 4 2 . 7d a y s 4 5 . 6d a y s 3 6 . 8d a y s 4 0 . 8d a y s
Note: Average turnover days of inventories is derived f rom dividing the arithmetic mean of the opening and
closing balances of inventories by our cost of sales in the respective year/period.
Our average inventories turnover days were 42.7 days, 45.6 days, 36.8 days and 40.8 days for
the years ended December 31, 2021, 2022 and 2023 and the six months ended June 30, 2024,
respectively.
Our average inventories turnover days typical ly range from one to two months, primarily as a
result of our business model and the nature of our business as a gold jewellery manufacturer and
retailer. Our inventories move from procurement, p roduction, to marketing and sale of jewellery,
which results in a higher inventories turnover days than what it would be if we were solely a
jewellery retailer that does not engage in manufacturing.
FINANCIAL INFORMATION
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--- page 501 ---
Our average inventories turnover days were relatively stable and within the typical range from
one to two months at 42.7 days, 45.6 days, 36.8 days and 40.8 days for the year ended December
31, 2021, 2022 and 2023 and the six months ended June 30, 2024.
As of September 30, 2024, RMB1,801.0 million or 89.3% of our inventories outstanding as of
June 30, 2024 were settled.
Property, plant and equipment
Our property, plant and equipment mainly represented building, leasehold improvement,
construction in progress, machinery, transporta tion equipment, electronics equipment and other
equipment. Our property, plant and equipmen t increased from RMB294.7 million as of December
31, 2021 to RMB364.1 million as of December 31, 2022, increased to RMB400.0 million as of
December 31, 2023 due to investments in the construction of production and office facilities, which
was transferred to buildings during the year ended December 31, 2023, and an increase in the
carrying amount of machinery. Our property, plant and equipment decreased by RMB8.3 million to
RMB391.7 million as of June 30, 2024 due to provision for depreciation. The increase in
construction in progress was mainly due to the construction of the premises where our
manufacturing base is located; whereas the increase in machineries was mainly for expansion of
our business scale and increase in product variet ies. It is our business strategies to expand and
upgrade our production facility to maintain our competitive strengths, which enable us to produce
latest trend of jewellery speedily, to inc rease output and to achieve cost savings.
As of December 31, 2021, 2022 and 2023 and as of June 30, 2024, property, plant and
equipment with carrying amount of RMB41.3 million, RMB37.8 million, RMB205.5 million and
RMB223.0 million, respectively, were pledged t o banks as collaterals for our borrowings and gold
loans. The substantial increase in pledged assets as collateral for 2023 and the six months ended
June 30, 2024 was mainly due to the completion of construction in progress, which was then
transferred to buildings and pledged to banks during the year.
Right-of-use assets
During the Track Record Period, we leased var ious lands, offices and retail stores for our
operations. Lease contracts are entered into for fixed terms ranging from one month to 50 years,
with the 50-year lease being the maximum term for the land use rights. Lease terms are negotiated
on an individual basis and contain a wide range of different terms and conditions. Our lease
agreements do not contain any contingent rent nor any extension, termination option or purchase
option for lessee.
FINANCIAL INFORMATION
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--- page 502 ---
Our right-of-use assets decreased from RMB 63.1 million as of December 31, 2021 to
RMB55.2 million as of December 31, 2022 due to termination of leases and depreciation charge,
and to RMB52.8 million as of December 31, 2023 due to depreciation charges. As of June 30,
2024, our right-of-use asset increased by RMB6.4 million to RMB59.2 million due to us renewing
the lease for an exhibition hall in Shenzhen.
The carrying amount of our right- of-use assets of leasehold lands remained stable at RMB40.4
million as of December 31, 2021, RMB39.5 millio n as of December 31, 2022, RMB38.6 million as
of December 31, 2023 and RMB38.2 million as of J une 30, 2024, respectively. As of December 31,
2021, 2022 and 2023 and June 30, 2024, the carrying amount of leasehold lands of RMB32.6
million, nil, RMB3.5 million and RMB3.5 million were pledged to banks as security for our
Group ’s borrowings and gold loans.
The carrying amount of our right-of-use assets of leasehold properties decreased from
RMB22.7 million as of December 31, 2021 to RMB15.7 million as of December 31, 2022, mainly
due to depreciation charges of RMB10.5 million and termination of leases of RMB7.1 million,
which was mainly in relation to a lease we did not renew for a property unit for an exhibition hall
in Shenzhen, and we converted part of our rented office premises into an exhibition hall as a
replacement. It then decreased to RMB14.2 million as of December 31, 2023, mainly due to
depreciation charges of RMB8.7 million partially offset by the net addition of leased properties of
RMB7.3 million. The carrying amount of our right- of-use assets of leasehold properties increased
from RMB14.2 million as of December 31, 2023 to RMB21.1 million as of June 30, 2024, mainly
due to us renewing the lease for an exhibition hall in Shenzhen.
FINANCIAL INFORMATION
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--- page 503 ---
Prepayments, deposits and other receivables
The following table sets forth the breakdown of our current prepayments, deposits and other
receivables as of the dates indicated:
As of December 31, As of June 30,
2021 2022 2023 2024
RMB ’000 RMB ’000 RMB ’000 RMB ’000
Current:
Other receivables
— D e p o s i t s................. 4 , 3 9 2 4 , 4 9 7 5 , 5 9 9 6 , 6 0 4
— Payments on behalf of employee . 930 1,152 1,310 1,310
— O t h e r s .................. 4 6 6 1 , 8 2 3 2 , 2 6 5 4 , 0 3 7
Less: Allowance for credit losses . . . . (1,424) (1,814) (2,827) (3,083)
Total other receivables . . . . . . . . . . . 4,364 5,658 6,347 8,868
Prepayment to suppliers . . . . . . . . . . . 3,297 7,314 9,880 8,786
Prepayments for listing expenses and
i s s u ec o s t s .................. —— 930 204
P r e p a i dE I T .................. 3 0 , 2 6 5 1 1 , 5 4 8 3 5 , 6 3 4 3 6 , 9 6 2
Deductible input value-added tax
(‘‘VAT’’) .................. 1 1 6 , 3 6 1 7 8 , 9 4 7 1 0 6 , 1 3 0 8 4 , 6 7 1
Right to returned goods asset . . . . . . . 115,533 150,373 218,353 241,869
Deferred share issu e costs for initial
public offering of H-shares . . . . . . . —— 15,098 16,261
Prepaid advertising expenses . . . . . . . 6,532 6,511 4,594 3,044
Prepaid interest on gold loans . . . . . . . 1,643 841 1,661 2,329
O t h e r s ...................... 7 4 7 7 2 9 7 7 9 1 , 7 2 8
Total ....................... 278,742 261,921 399,406 404,722
Our prepayments, deposits and other receivables mainly repres ented our deductible input VAT
and right to returned goods asset. Our deductible input VAT was VAT mainly in relation to
procurement of property, plant and equipment. Ou r right to returned goods asset represented the
gold lending arrangement to our customers to rep lenish their inventories when they have urgent
needs and the return policy of our diamond inlaying jewellery products. For gold lending, upon
lending gold to our customers, the amount of the respective inventory would be transferred to right
to returned goods asset on our management account. If the customer choose to procure all or part of
such gold products, our customers will settle with us based on the prevailing gold price at
settlement date, and we will recognize revenue accordingly and the corresponding amount in right
to returned goods asset will be recognized as cost o f sales. If the customer choose to return all or
part of the gold products to us, the previously recognized right to returned goods asset will be
FINANCIAL INFORMATION
– 493 –


--- page 504 ---
reversed into inventories. For details of gold lending arrangement, see ‘‘Business — Sales and
Distribution Channels — Franchisees and provincial-dealers management — Exhibition halls, gold
lending and logistics arrangement ’’.
Our current prepayments, deposits and other receivables decreased by RMB16.8 million to
RMB261.9 million as of December 31, 2022. The decrease was mainly due to a decrease in
deductible input VAT of RMB37.4 million and a d ecrease in prepaid EIT of RMB18.7 million, and
partially offset by an increase in right to returned good assets in relation to gold lent to our
customers to replenish inventory when they have urgent needs.
It then increased by RMB137.5 million to RMB399.4 million as of December 31, 2023 due to
an increase in prepaid EIT of RMB24.1 million, the increase in deductible input VAT of RMB27.2
million, as well as an increase in the right to returned goods assets of RMB68.0 million in relation
to the increase in gold prices and the increase of gol d lent to franchisees or provincial-dealers to
replenish their products for display.
As of June 30, 2024, our current prepayments, deposits and other receivables amounted to
RMB404.7 million, representing an increase of RMB5.3 million or 1.3% when compared to that as
of December 31, 2023. Such increase was primarily attributable to (i) an increase in the current
portion of the right to returned goods asset by RMB23.5 million mainly as a result of an increase in
gold price and increase in volume of gold lending and (ii) an increase in deferred expenses related
to the Listing in the sum of RMB1.2 million, and partially offset by a decrease in deductible input
VAT by RMB21.5 million due to a decrease in our procurement volume.
Non-current prepayments, deposits and other receivables
The following table sets forth the breakdown o f our non-current prepayments, deposits and
other receivables as of the dates indicated:
As of December 31, As of June 30,
2021 2022 2023 2024
RMB’000 RMB ’000 RMB ’000 RMB ’000
Non-current:
Other receivables
— D e p o s i t s ................ 5 , 3 3 6 4 , 4 5 5 4 , 1 8 7 4 , 7 8 1
Less: Allowance for credit losses . . (1,378) (1,358) (634) (1,040)
Total other receivables . . . . . . . . . 3,958 3,097 3,553 3,741
Prepayment for acquisition of
non-current assets . . . . . . . . . . . 12,650 9,838 10,307 14,936
Right to returned goods asset . . . . . 42,321 34,068 27,642 18,067
Total ..................... 58,929 47,003 41,502 36,744
FINANCIAL INFORMATION
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--- page 505 ---
Our non-current prepayments, deposits and oth er receivables decreased by RMB11.9 million
from RMB58.9 million to RMB47.0 million as of December 31, 2022 mainly due to a decrease in
right to returned goods assets of RMB8.3 million . It then further decreased to RMB41.5 million as
of December 31, 2023, mainly due to a decrease in the right to non-current returned goods asset.
The right to returned goods assets primarily repre sented the accounting treatment in relation to our
sales policy granted to certain provincial-dealers or franchisees of accepting diamond inlaying
jewellery product exchange a period of five years. The prepayment for acquisition of non-current
assets were mainly prepayment made for the purchase of property, plant and equipment. As of June
30, 2024, our non-current prepayments, deposits and other receivables decreased by RMB4.8
million, which was mainly due to a decrease in the non-current portion of the right to returned
goods asset as a result of a decrease in provision made for return of diamond inlaying products, and
partially offset by the increase in prepayment f or acquisition of non-current assets by RMB4.6
million due to the prepayment made for procurement of new financial management software system.
As of September 30, 2024, RMB305.0 million or 69.1% of our prepayments, deposits and
other receivables outstanding as of June 30, 2024 were settled.
Trade receivables
Our trade receivables primarily represented receivables from our customers.
The following table sets forth the breakdown of our trade receivables as of the dates indicated:
As of December 31, As of June 30,
2021 2022 2023 2024
RMB’000 RMB ’000 RMB ’000 RMB ’000
Trade receivables . . . . . . . . . . . . . 144,806 166,619 186,885 207,154
Less: allowance for credit losses . . . (46,813) (35,697) (36,372) (35,948)
Total ..................... 97,993 130,922 150,513 171,206
Our net trade receivables increased from RMB98.0 million to RMB130.9 million as of
December 31, 2022. It then increased to RMB150.5 million as of December 31, 2023 and further
increased to RMB171.2 million as of June 30, 2024. The increase in trade receivables from 2021 to
2023 and as of June 30, 2024 was primarily due to the increase in the amount of sales to our
customers.
In practice, when purchasing our products some of our franchisee choose to pay on spot or
pay in advance before the delivery of the products for securing the gold price of the transaction
with us. Our Group primarily allows a credit per iod around three to 90 days, except for certain
credit worthy customers, where the credit periods are extended to a longer period. Our Group seeks
to maintain strict control over our outstanding receivables. Overdue balances are reviewed regularly
by senior management. Our Group does not hold an y collateral or other credit enhancements over
our trade receivable balances. Trade receivabl es are non-interest-bearing. See note 24 to the
historical financial information in the Accountants ’ Report set out in Appendix I to this prospectus
for details.
FINANCIAL INFORMATION
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--- page 506 ---
The following is an aging analysis of trade receivables net of allowance for credit losses
presented based on dates of delivery or rendering of services at the dates indicated.
As of December 31, As of June 30,
2021 2022 2023 2024
RMB’000 RMB ’000 RMB ’000 RMB ’000
Within 90 days . . . . . . . . . . . 86,424 111,332 147,878 163,934
90–180 days . . . . . . . . . . . . . 7,071 13,191 2,456 6,582
180 days –1 year . . . . . . . . . . 4,398 6,144 179 690
1–2y e a r s............... — 255 ——
Total .................. 97,993 130,922 150,513 171,206
As of December 31, 2021, 2022 and 2023 and June 30, 2024, an aggregate carrying amount of
RMB4.8 million, RMB12.2 million, RMB3.0 million and RMB9.3 million respectively which were
past due as of the reporting dates. Out of the past due balances, RMB3.4 million, RMB8.0 million,
RMB2.4 million and RMB2.8 million has been past due less than 90 days, RMB1.4 million,
RMB4.2 million, RMB0.6 million and RMB6.5 mill ion respectively has been past due 90 days or
more. Those past due were not considered as in def ault as there has not been a significant change in
credit quality and the amounts were considered recoverable.
Our Group performs impairment analysis at each year end or period end date using a provision
matrix to measure expected credit losses. The provision rates are based on days past due for
groupings of various customer segments with similar loss patterns. The calculation reflects the
probability-weighted outcome, the time value of money and reasonable and supportable information
that is available at the year end or period end date about past events, current conditions and
forecasts of future economic conditions. As of January 1, 2021, we recorded a specific provision of
RMB34.4 million for our trade receivables under ECL model, mainly due to financial difficulties of
a prior-Track Record Period provincial-dealer. As of January 1, 2021, the total amount due from
this provincial-dealer was RMB32.6 million, fo r which we made provision of RMB25.6 million. We
initiated legal claims as plaintiff for recove ry of such outstanding amount. As we managed to
collect certain amount from this provincial-dealer through legal actions, we reversed our provision
of RMB1.1 million, RMB0.5 million and nil for the yea rs ended December 31, 2021, 2022 and
2023, respectively. As of December 31, 2023, the amount due from this provincial-dealer was
RMB24.0 million, which had been fully impaired. As of the Latest Practicable Date, our claims and
legal proceedings against this provincial-deal er had been awarded in our favor but the judgment
debt had not been fully enforced. Details of the i mpairment analysis are set out in notes 11 and 41
of the Accountants ’ Report in Appendix I to this prospectus.
FINANCIAL INFORMATION
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--- page 507 ---
The following table sets forth a summary of average turnover days of trade receivables for the
years or period indicated:
Year ended December 31,
Six months
ended June 30,
2021 2022 2023 2024
Average turnover days of trade
receivables (Note) ............. 2 . 0d a y s 2 . 7d a y s 2 . 5d a y s 2 . 9d a y s
Note: Average turnover days of trade receivables is derive d from dividing the arithmetic mean of the opening and
closing balances of trade receivables by our total revenue in the respective year/period.
Our average turnover days of trade receivables was 2.0 days, 2.7 days, 2.5 days and 2.9 days
for the years ended December 31, 2021, 2022 and 2023 and the six months ended June 30, 2024,
respectively, which was in line with our credit policy and within the trade receivable turnover days
of the industry.
The increase of our average turnover days of t rade receivables for the year ended December
31, 2022 was mainly due to an increase in our net trade receivables from RMB98.0 million as of
December 31, 2021 to RMB130.9 million as of Decem ber 31, 2022, mainly due to slower collection
of trade receivables due to pandemic reason. The average turnover days of trade receivables
remained relatively stable for the year ended December 31, 2023 and the six months ended June 30,
2024.
As of September 30, 2024, RMB133.2 million or 77.8% of our trade receivables outstanding
as of June 30, 2024 were settled.
Pledged/restricted deposits
As of December 31, 2021, 2022 and 2023 and the six months ended June 30, 2024, pledged/
restricted deposits included deposits pledged to banks to secure banking facilities, security deposits
for issuance of notes payable, security deposits f or gold loans, security deposits for gold trading
accounts and others. The balances carried interest rates ranging from nil to 2.25%, nil to 2.25%, nil
to 2.25% and nil to 2.25% per annum, respectively. Our pledged/rest ricted deposits were
RMB569.5 million, RMB369.6 million, RMB528.8 m illion and RMB444.1 million as of December
31, 2021, 2022 and 2023 and June 30, 2024, respectively. The decrease between 2021 and 2022
was mainly attributable to the reduction of our use of gold loans, while the rise as of December 31,
2023 was mainly for the purpose of securing our borrowings and gold loans for our business
operation use. The decrease in our pledged/restricted deposits as of June 30, 2024, compared to
December 31, 2023, was due to the reduction in bank acceptance bill deposits.
FINANCIAL INFORMATION
– 497 –


--- page 508 ---
Trade and bills payables
Our trade payables increased from RMB45.6 million as of December 31, 2021 to RMB65.0
million as of December 31, 2022 mainly due to the growth of our business for the year ended
December 31, 2022. We recorded trade payables of RMB41.8 million as of December 31, 2023. We
recorded a decrease in our trade payables by RMB19.6 million from RMB41.8 million as of
December 31, 2023 to RMB22.2 million as of June 30 , 2024. Such changes were attributable to the
payment made for an installment of the construction fee for our new office building.
Our trade payables primarily relate to purchase of raw materials and finished goods. Trade
payables are non-interest bearing.
As of December 31, As of June 30,
2021 2022 2023 2024
RMB’000 RMB ’000 RMB ’000 RMB ’000
B i l l sp a y a b l e ................ —— 470,000 280,000
Trade payables . . . . . . . . . . . . . . . 45,560 64,953 41,787 22,191
Total ..................... 45,560 64,953 511,787 302,191
Our bills payables amounted to RMB280.0 million as of June 30, 2024. Our bills payables
were in relation to bank bills that were applied to settle with an independent third-party supplier for
our procurement of gold materials from it. All bills payable by our Group were with a maturity
period of less than one year.
The following table sets forth the ageing analy sis of our trade payables based on the invoice
date as of the dates indicated:
As of December 31, As of June 30,
2021 2022 2023 2024
RMB’000 RMB ’000 RMB ’000 RMB ’000
W i t h i n1y e a r................ 4 4 , 3 5 3 6 4 , 0 4 2 4 0 , 4 9 0 1 9 , 0 9 8
1t o2y e a r s................. 7 7 0 3 0 1 9 1 4 2 , 6 8 3
2t o3y e a r s................. 6 3 4 5 2 1 7 0 1 0 1
O v e r3y e a r s ................ 3 7 4 1 5 8 2 1 3 3 0 9
Total ..................... 45,560 64,953 41,787 22,191
FINANCIAL INFORMATION
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--- page 509 ---
The following table sets forth a summary of average turnover days of trade and bills payables
for the years or period indicated:
Year ended December 31,
Six months
ended June 30,
2021 2022 2023 2024
Average turnover days of trade and
bills payables (Note) ........... 0 . 9d a y s 1 . 3d a y s 5 . 5d a y s 7 . 9d a y s
Note: Average turnover days of trade and bills payables is derived from dividing the arithmetic mean of the
opening and closing balances of trade and bills payables by cost of sales in the respective year/period.
Our procurement were mainly from Shanghai Gold Exchange during the Track Record Period,
Shanghai Gold Exchange only accepts settlement w ith cash in specified account, so we have a low
average turnover days of trade and bills payables. Our average turnover days of trade and bills
payables were stable at 0.9 days and 1.3 days for the years ended December 31, 2021, 2022,
respectively, which were in line with our normal settlement days and remained stable. We recorded
trade and bills payable turnover days of 5.5 days for the year ended December 31, 2023, which
were mainly in relation to bank bills of RMB470. 0 million that were applied to settle with an
independent third-party supplier for our procurement of gold materials from it. Our trade and bills
payable turnover days for the six months ended June 30, 2024 were longer than those for the same
period in 2023. In 2022, we did not use bank bills to finance our gold procurement, resulting in a
low beginning balance for 2023. However, starting in 2023, we began procuring gold through trade
and bills payable from an independent third-party supplier. As a result, we had a larger beginning
balance of bank bills payables as of January 1, 2024. This difference in the beginning balances
between the two periods contributed to the longer trade and bills payable turnover days observed in
the first half of 2024. Excluding bills payable from the calculation, the trade payables turnover days
were 1.0 days and 0.6 days for the year ended December 31, 2023 and six months ended June 30,
2024, respectively, which were stable and in line with the trade payables turnover days of 0.9 days
and 1.3 days for the years ended December 31, 2021 and 2022, respectively.
As of September 30, 2024, RMB291.1 million or 96.3% of our trade and bills payables
outstanding as of June 30, 2024 were settled.
FINANCIAL INFORMATION
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--- page 510 ---
Refund liabilities
As of December 31, As of June 30,
2021 2022 2023 2024
RMB’000 RMB ’000 RMB ’000 RMB ’000
Refund liabilities . . . . . . . . . . 110,746 89,376 71,327 49,178
Analysed for reporting
purposes as:
Non-current liabilities . . . . . 59,751 47,928 38,384 25,563
Current liabilities . . . . . . . . 50,995 41,448 32,943 23,615
Total ................ 110,746 89,376 71,327 49,178
Under our standard contract terms, except for closures of stores, franchisees have no right to
return any goods after its acceptance of the pro ducts but have a right to exchange unsold diamond
inlaying jewellery within five years. Our Group estimate the percentage of exchange on a portfolio
level with reference to historical pattern, in partic ular, historical product exchange rates in previous
years. Revenue is recognized for sales which are considered highly probable that a significant
reversal in the cumulative rev enue recognized will not occur.
In addition, the following table sets forth the movement of refund liabilities during the Track
Record Period:
RMB’000
As of January 1, 2021 ....................................... 108,309
P r o v i d e df o rt h ey e a r ........................................ 4 6 , 7 9 5
U t i l i z a t i o no fp r o v i s i o nf o rt h ey e a r .............................. ( 4 4 , 3 5 8 )
As of December 31, 2021 ..................................... 110,746
P r o v i d e df o rt h ey e a r ........................................ 3 2 , 6 1 7
U t i l i z a t i o no fp r o v i s i o nf o rt h ey e a r .............................. ( 5 3 , 9 8 7 )
As of December 31, 2022 ..................................... 89,376
P r o v i d e df o rt h ey e a r ........................................ 2 2 , 9 1 3
U t i l i z a t i o no fp r o v i s i o nf o rt h ey e a r .............................. ( 4 0 , 9 6 2 )
As of December 31, 2023 ..................................... 71,327
P r o v i d e df o rt h ey e a r ........................................ 7 , 9 0 5
U t i l i z a t i o no fp r o v i s i o nf o rt h ey e a r .............................. ( 3 0 , 0 5 4 )
As of June 30, 2024 ......................................... 49,178
FINANCIAL INFORMATION
– 500 –


--- page 511 ---
We estimate the percentage of exchanges on a portf olio basis, referencin g historical patterns,
particularly product exchange rates from previou s years. Revenue is recognized for sales when it is
highly probable that a significant reversal in the cumulative revenue recognized will not occur.
Conversely, if the goods are expected to be exchanged, a refund liability, instead of revenue, is
recognized. Simultaneously, we recognize a right to returned goods asset, measured at the carrying
amount of the inventories sold less any expected costs to recover the goods, with a corresponding
adjustment to the cost of sales.
On the other hand, if goods are expected to be returned or exchanged, a refund liability,
instead of revenue, is recognized, and at the same t ime, we will recognize a right to returned goods
asset, which is measured at the carrying amount of the inventory sold less any expected costs to
recover the goods.
Other payables and accruals
The following table sets forth the breakdown of our other payables and accruals as of the
dates indicated:
As of December 31, As of June 30,
2021 2022 2023 2024
RMB’000 RMB ’000 RMB ’000 RMB ’000
Other payables
— deposits received . . . . . . 78,144 78,703 84,329 97,089
— accrued expenses . . . . . . 2,000 4,392 5,526 2,758
— accrued listing expenses
a n di s s u ec o s t s....... —— 529 4,366
— rent and property fees
p a y a b l e............ 3 3 6 5 ——
— others . . . . . . . . . . . . . . 1,062 1,150 1,893 3,610
Total other payables . . . . . . . . 81,209 84,610 92,277 107,823
Rent received in advance . . . . 2,756 3,274 2,693 1,891
Other tax payable . . . . . . . . . 8,205 13,734 16,898 50,590
Salaries, welfare and bonus
payable . . . . . . . . . . . . . . . 25,088 21,369 27,274 21,999
Total .................. 117,258 122,987 139,142 182,303
Our other payables and accruals mainly represented deposits received, salaries, welfare and
bonus payable, accrued expenses, and other tax paya ble. Our other payables and accruals increased
from RMB117.3 million as of December 31, 2021 to RMB123.0 million as of December 31, 2022.
It was mainly due to an increase in other tax paya ble as a result of contract liabilities which we
received advance payments on sales which had not been recognized as revenue. It further increased
FINANCIAL INFORMATION
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by RMB16.2 million to RMB139.1 million as of December 31, 2023, primarily due to an increase
in other tax payable and an increase in salaries, welfare and bonus payable. Our other payables and
accruals further increased by RMB43.2 million to RMB182.3 million as of June 30, 2024, which
was primarily attributable to (i) an increase in deposits received in the sum of RMB12.8 million
and (ii) an increase in other tax payable by RMB33.7 million.
Financial assets at fair value through profit or loss
Our financial assets at fair value through prof it or loss comprised bank financial products and
structured products incurred during the year as of December 31, 2021. The following table sets
forth a summary of our financial assets at fair val ue through profit or loss as of the dates indicated:
As of December 31, Six months ended June 30,
2021 2022 2023 2023 2024
RMB’000 RMB ’000 RMB ’000 RMB ’000 RMB ’000
(Unaudited)
Financial products .. 6,011 ————
Our financial assets at fair value through profi t or loss were RMB6.0 million, nil, nil and nil
as of December 31, 2021, 2022 and 2023 and June 30, 2024, respectively. The financial products
were for investment yield enhancement purpose and were classified as financial assets at FVTPL as
their contractual cash flows are not solely payments of principal and interest. As of December 31,
2021, the financial products were issued by banks in the PRC. The principals and returns of the
financial products are not guaranteed and the expec ted rates of return of the structured deposits are
linked to the fluctuation of London Interbank Offered Rate ( ‘‘LIBOR ’’).
As of December 31, 2022 and 2023 and June 30, 2024, we ceased to maintain any structured
deposits and financial products.
Contract liabilities
A contract liability represents our Group ’s obligation to transfer goods or services to a
customer for which the Group has received consideration (or an amount of c onsideration is due)
from the customer. The contract liabilities were expected to be recognized as revenue in the next 12
months. The contract liabilities arose when customers made advance payment to us for their
purchases, which the customers can fix the purchase price of the gold jewellery to be purchased in
advance. Our contract liabilities increased from RMB27.2 million as of December 31, 2021 to
RMB39.0 million as of December 31, 2022, further increased to RMB42.2 million as of December
31, 2023 and increased to RMB72.9 million as of Ju ne 30, 2024. The increase in contract liabilities
during the Track Record Period was primarily due to the increase in advance payments made by
customers.
As of September 30, 2024, RMB51.9 million or 71.2% of our contract liabilities outstanding
as of June 30, 2024 were recognised as revenue.
FINANCIAL INFORMATION
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CASH FLOWS
Our use of cash primarily related to operating activities and capital expenditure. We have
historically financed our operations primarily through a consolidation of cash flow generated from
our operations and bank borrowings.
The following table sets forth a summary of our cash flows information for the years
indicated:
Year ended December 31, Six months ended June 30,
2021 2022 2023 2023 2024
RMB’000 RMB ’000 RMB ’000 RMB ’000 RMB ’000
(Unaudited)
Operating cash flows before
movements in working capital . 413,775 335,055 436,444 180,668 110,327
(Increase)/decrease in inventories (310,623) 258,296 (392,078) (428,498) 84,691
(Increase)/decrease in pledged/
restricted deposits . . . . . . . . . (28,078) 389 (65,868) (63,751) (10,269)
(Increase)/decrease in trade
receivables . . . . . . . . . . . . . (21,955) (19,050) (21,937) 9,449 (20,964)
(Increase)/decrease in
prepayments, deposits and
other receivables . . . . . . . . . . 10,251 17,219 (91,653) (92,170) 9,289
(Decrease)/increase in refund
liabilities ............... 2 , 4 3 8 ( 2 1 , 3 7 0 ) ( 1 8 , 0 4 9 ) 5 7 4 ( 2 2 , 1 4 9 )
Increase/(decrease) in provision . 20 (210) ———
Increase/(decrease) in trade and
bills payables . . . . . . . . . . . . 32,616 7,987 471,665 268,638 (196,760)
(Decrease)/increase in other
payables and accruals . . . . . . (8,181) (17,958) 16,137 5,158 40,760
Increase in contract liabilities . . . 20,137 11,829 3,129 72,710 30,714
Cash (used in)/generated from
operations . . . . . . . . . . . . . . 110,400 572,187 337,790 (47,222) 25,639
Income taxes paid . . . . . . . . . . (97,903) (32,568) (92,332) (9,362) (30,379)
Interest paid for gold loans . . . . (19,948) (18,526) (17,272) (7,130) (9,646)
Interest received . . . . . . . . . . . 1,516 1,577 1,490 689 701
FINANCIAL INFORMATION
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Year ended December 31, Six months ended June 30,
2021 2022 2023 2023 2024
RMB’000 RMB ’000 RMB ’000 RMB ’000 RMB ’000
(Unaudited)
Net cash (used in)/from operating
activities . . . . . . . . . . . . . . . (5,935) 522,670 229,676 (63,025) (13,685)
Net cash (used in)/ from investing
activities . . . . . . . . . . . . . . . 15,779 136,741 (190,132) (268,836) 65,028
Net cash from/(used in) financing
activities . . . . . . . . . . . . . . . 86,526 (587,620) (108,931) 273,566 156,733
Net (decrease)/increase in cash
and cash equivalents . . . . . . . 96,370 71,791 (69,387) (58,295) 208,076
Cash and cash equivalents at
beginning of the year . . . . . . 57,151 153,518 225,359 225,359 155,866
Effect of foreign exchange rate
c h a n g e s ................ ( 3 ) 5 0 ( 1 0 6 ) ( 4 7 ) 9 2
Cash and cash equivalents at
end of the year .......... 153,518 225,359 155,866 167,017 364,034
Net cash (used in)/from operating activities
Net cash used in operating activities for the six months ended June 30, 2024 was RMB13.7
million, primarily due to profit before tax of RMB66.9 million, as adjusted for certain non-cash
and/or non-operating items (i) finance costs of RMB35.4 million, (ii) depreciation of property, plant
and equipment of RMB22.1 million, (iii) net unr ealized gain on gold loans of RMB20.4 million,
which in turn, was a result of a decrease in gold price in June 2024, and (iv) negative changes in
working capital. Adjustments for changes in worki ng capital primarily included (i) decrease in trade
and bills payables of RMB196.8 million, (ii) decrease in refund liabilities of RMB22.1 million, (iii)
increase in trade receivables of RMB21.0 million, and partially offset by (iv) decrease in
inventories of RMB84.7 million, (v) increase in other payables and accruals of RMB40.8 million
and (vi) increase in contract liab ilities of RMB30.7 million. We recorded net cash used in operating
activities of RMB13.7 million for the six months ended June 30, 2024. Such result was largely
attributable to decrease in trade and bills payables of RMB196.8 million, which in large part was in
relation to our settling bills we applied to procure raw materials. Going forward, to improve the net
cash position of our operating activities, we seek t o (i) schedule payments to suppliers and utilize
financial instruments such as bills, and (ii) continue to optimize our inventory level. We strive to
FINANCIAL INFORMATION
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avoid cash outflows required to settle payables and/or procure inventory that materially exceeds
cash inflow from operating activities. We believe such measures, in turn, will better ensure a net
cash inflow from operating activities.
Net cash from operating activities was RMB229.7 million in 2023, primarily due to profit
before tax of RMB305.1 million, as adjusted for certain non-cash and/or non-operating items (i) net
unrealized loss on gold loans of RMB19.7 milli on, which in turn, was a result of an overall
increase of gold price in 2023, (ii) finance costs of RMB63.1 million, (iii) depreciation of property,
plant and equipment of RMB37.5 million, and (iv) negative changes in working capital.
Adjustments for changes in working capital primari ly included (i) increase in pledged/restricted
deposits of RMB65.9 million, (ii) increase in inventories of RMB392.1 million, (iii) increase in
prepayments, deposits and other receivables of RMB91.7 million, and partially offset by (iv)
increase in trade and bills payables of RMB471.7 million and (v) increase in other payables and
accruals of RMB16.1 million.
Net cash generated from operating activities was RMB522.7 million in 2022, primarily due to
profit before tax of RMB244.2 million, as adjusted for certain non-cash and/or non-operating items
(i) net unrealized loss on gold loans of RMB8.9 million, which in turn, was a result of the
continuous rise in gold prices, (ii) finance costs of R MB56.9 million, (iii) depreciation of property,
plant and equipment of RMB27.8 million, (iv) de preciation of right-of-u se assets of RMB11.4
million, (v) net reversal of impairment losses u nder expected credit loss model of RMB10.1 million
and (vi) changes in working capital . Adjustments for changes in working capital primarily included
(i) decrease in inventories of RMB258.3 million, (ii) decrease in prepayments, deposits and other
receivables of RMB17.2 million, and partially offset by (iii) decrease in refund liabilities of
RMB21.4 million, (iv) increase in trade receivab les of RMB19.1 million and (v) decrease in other
payables and accruals of RMB18.0 million.
Net cash used in operating activities was RMB5.9 million in 2021, primarily due to profit
before tax of RMB295.9 million, as adjusted for certain non-cash and/or non-operating items (i) net
unrealized loss on gold loans of RMB1.0 million, which in turn, was a result of market gold price
effect on the outstandi ng gold loan balance on hand as of December 31, 2021, (ii) finance costs of
RMB64.2 million, (iii) depreciation of property, plant and equipment of RMB27.8 million, and (iv)
negative changes in working capit al. Adjustments for changes in wo rking capital primarily included
(i) increase in inventories of RMB310.6 million, (ii) increase in pledged/restricted deposits
RMB28.1 million, (iii) increase in trade receivables of RMB22.0 million and partially offset by (iv)
increase in trade and bills payables of RMB32.6 mi llion, (v) decrease in prepayments, deposits and
others receivables of RMB10.3 million and (vi) increase in contract liabilities of RMB20.1 million.
During the Track Record Period, having consi dered that our operating cash flows before
movements in working capital were RMB413.8 million, RMB335.1 million, RMB436.4 million and
RMB110.3 million for the three years ended December 31, 2023 and the six months ended June 30,
2024, respectively, which were relatively stable , our net operating cash outflows during the Track
Record Period was mainly attributable to change s in the volume of our gold inventories and the
upward trend in the market price of gold.
FINANCIAL INFORMATION
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At the end of each reporting period during the Track Record Period, our inventory balance
accounted for over 50% of the total assets, and go ld inventories (excluding K-gold) accounted for
more than 80% of the total inventory balance. Changes in inventory balances were mainly affected
by gold price fluctuations and our inventory management strategies on the volume of gold raw
materials we were to hold for our p roduction needs for the relevant year. Thus, an increase in gold
prices and the volume of gold inventories contributes to an operating cash outflow.
Affected by the pandemic in the fourth quarter of 2022, we took the initiative to reduce
inventory levels. The balance of inventories decreased from RMB2,049. 0 million as of December
31, 2021 to RMB1,688.9 million as of December 31, 2022. As a result of the inventories decrease
during 2022, we recorded net cash inflow from operating activities.
In 2023, due to a more positive business outl ook, we implemented inventory management
strategies for scaling up our production. Such d ecision coupled with increase in gold price led to
higher revenue but with more cash spent on procurem ent of gold raw materials, and as a result, we
have reverted to having net operating activities cash inflow.
However, since gold inventories are highly liqui d and valuable, our Directors are of the view
that our Group ’s operating conditions remain healthy and stable and are not subject to any material
risks on cashflow and liquidity.
Net cash generated from/(us ed in) investing activities
Net cash from investing activities was RMB65.0 million for the six months ended June 30,
2024, primarily due to (i) withdrawal of pledged/restricted deposits of RMB265.0 million, and (ii)
proceeds from disposal of financial products and structured deposits of RMB6.0 million, partially
offset by (i) placement of pledged/restricted deposits of RMB170.0 million, (ii) purchase of
property, plant and equipment of RMB24.8 millio n and (iii) purchase of intangible assets of
RMB6.7 million.
Net cash used in investing activities was RMB 190.1 million in 2023, primarily due to (i)
placement of pledged/restricted deposits of RMB 765.0 million and (ii) purchase of plant, property
and equipment of RMB99.7 million, partially offset by withdrawal of pledged/restricted deposits of
RMB671.0 million.
Net cash generated from investing activities was RMB136.7 million in 2022, primarily due to
(i) placement of pledged/restricted deposits of RMB380.0 million, (ii) purchase of financial
products and structured deposits of RMB107.1 million and (iii) purchase of plant, property and
equipment of RMB73.7 million, partially offset by (i) withdrawal of pledged/restricted deposits of
RMB580.5 million and (ii) proceeds from disposal o f financial products and structured deposits of
RMB113.2 million.
FINANCIAL INFORMATION
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--- page 517 ---
Net cash generated from investing activities was RMB15.8 million in 2021, primarily due to
(i) purchase of financial products and structured deposits of RMB997.4 million and (ii) placement
of pledged/restricted deposits of RMB476.1 milli on, partially offset by (i) p roceeds from disposal of
financial products and structured deposits of RMB1,074.0 million and (ii) withdrawal of pledged/
restricted deposits of RMB485.1 million.
Net cash from/(used in) financing activities
Net cash from financing activities was RMB156.7 million for the six months ended June 30,
2024, primarily consisting of (i) proceeds from borrowings of RMB904.3 million, and was partially
offset by (i) repayments of borrowings of RMB623.7 m illion, (ii) dividends paid to shareholders of
RMB91.6 million, and (iii) interest paid of RMB26.0 million.
Net cash used in financing activities was RMB108.9 million in 2023, primarily consisting of
repayment of borrowings of RMB1,465.8 million, and was partially offset by (i) proceeds from
borrowings of RMB1,424.7 million and ( ii) interest paid of RMB44.4 million.
Net cash used in financing activities was RMB587.6 million in 2022, primarily consisting of
(i) repayment of borrowings of RMB1,642.5 million, (ii) dividend distribution of RMB78.7 million
and (iii) interest paid of RMB39.1 million, and was partially offset by (i) p roceeds borrowings of
RMB1,136.0 million and (ii) proceeds from issue of shares of RMB50.0 million, which represented
Pre-IPO Investment.
Net cash from financing activities was RMB86. 5 million in 2021, primarily consisting of (i)
repayment of borrowings of RMB1,385.0 million and (ii) interest paid of RMB43.5 million, and
was partially offset by proceeds of borrowings of RMB1, 525.5 million.
WORKING CAPITAL SUFFICIENCY
Our Directors confirm that, taking into consid eration the financial resources available to us,
which is primarily our internal resources, our banking facilities and the esti mated net proceeds from
the Global Offering, we have sufficient working capital for our present requirements and for at least
the next 12 months commencing from the date of this prospectus.
Our Directors confirm that we had no material d efaults in payment of trade and non-trade
payables and borrowings, or breaches of covenants during the Track Record Period and up to the
Latest Practicable Date.
Our Directors are not aware of any other factors that would have a material impact on our
Group ’s liquidity. Details of the funds necessary to meet our existing operations and to fund our
future plans are set out in ‘‘Future Plans and Use of Proceeds’’ in the prospectus.
FINANCIAL INFORMATION
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CAPITAL EXPENDITURES
During the Track Record Period, our Group incurred capital expenditures of RMB73.5 million,
RMB75.5 million, RMB101.1 million and RMB31.5 million for the years ended December 31,
2021, 2022 and 2023 and for the six months ended June 30, 2024, respectively. Our capital
expenditures comprised of purchase of property, plant and equipment, purchases of intangible assets
and payment for leasehold lands, where the majority of which was related to purchase of property,
plant and equipment for upgrading our production facility in Shandong, PRC.
We have an upgrade and expansion plan of our production facility initiated in 2019 which
estimated to require a total capital expenditu re budget of RMB639.0 million. See the sections
headed ‘‘Future Plans and Use of Proceeds ’’, ‘‘Business — Production Expansion Plan ’’and ‘‘Risk
Factors — We expect to incur additional capital expendit ure and depreciation expenses associated
with the expansion of our production facilities ’’for further details.
CAPITAL COMMITMENTS
As of December 31, 2021, 2022 and 2023 and June 30, 2024, our Group incurred capital
commitments of RMB12.1 million, RMB8.8 mi llion, RMB8.3 million and RMB10.0 million.
Details of our Group ’s capital commitments are disclosed in note 40 to the historical financial
information in the Accountants ’ Report in Appendix I to this prospectus.
INDEBTEDNESS
The following table sets forth the breakdown of our indebtedness as of the dates indicated:
As of December 31, As of June 30,
As of
September 30,
2021 2022 2023 2024 2024
RMB’000 RMB ’000 RMB ’000 RMB ’000 RMB ’000
(Unaudited)
Borrowings . . . . . . . . . . 1,336,920 829,627 790,041 1,070,379 1,037,928
Gold loans . . . . . . . . . . . 486,998 394,143 502,508 413,627 469,352
Lease liabilities . . . . . . . 28,204 18,223 15,992 23,000 16,234
Total .............. 1,852,122 1,241,993 1,308,541 1,507,006 1,523,514
As of the latest practicable date for the pur pose of this indebtedness statement, being
September 30, 2024, our Group had outstanding indebtedness representing bank borrowings of
RMB1,037.9 million, gold loans of RMB469.4 million and lease liabilities of RMB16.2 million. As
of September 30, 2024, we had available banking facilities of RMB1,919.0 million, of which
RMB390.0 million was unutilized.
FINANCIAL INFORMATION
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--- page 519 ---
Bank Borrowings
Our bank borrowings consist of bank borrowings and bank borrowings relating to bills
discounted with recourse. Our bank borrowing s were RMB1,336.9 million, RMB829.6 million,
RMB790.0 million, RMB1,070.4 million and RMB1,037.9 million as of December 31, 2021, 2022
and 2023, June 30, 2024 and September 30, 2024, respectively. For the year ended December 31,
2022, we experienced a decrease in borrowings due to the inability to timely renew certain
borrowings when there was business disruption to banks caused by the pandemic. For the year
ended December 31, 2023 and for the six months ende d June 30, 2024, we have utilized more bills
to pay for the procurement of gold raw materials.
The following table sets out our borrowings as at the dates indicated:
As of December 31,
As of
June 30,
As of
September 30,
2021 2022 2023 2024 2024
RMB’000 RMB ’000 RMB’ 000 RMB ’000 RMB ’000
(Unaudited)
Guaranteed and secured
(notes i & ii) . . . . . . . 1,168,178 579,356 569,820 588,734 538,647
Unguaranteed and secured
(note i) ........... 4 8 , 5 8 4 — 29,981 308,869 168,867
Guaranteed and unsecured
(note ii) . . . . . . . . . . . 120,158 250,271 190,240 172,776 330,414
1,336,920 829,627 790,0 41 1,070,379 1,037,928
Notes:
i. The secured borrowings were secured by the pledge of certain bank deposits, prope rty, plant and equipment
(including properties owned by Mr. Wang Zhongshan, the controlling shareholder of the Company), right-of-
use assets, investment properties, inventories, patents and/or trade receivables.
ii. The guaranteed bank borrowings and other borrowings were guaranteed by the controlling shareholders of the
Company, Mr. Wang Zhongshan, Ms. Zhang Xiuqin and/or Mr. Wang Guoxin (as at December 31, 2021
only), and certain subsidiaries of the Group. For further details, please refer to the section headed
‘‘Relationship with Our Controlling Shareholder — Financial Independence ’’.
Our carrying amounts of gold loans were RMB487.0 million, RMB394.1 million, RMB502.5
million, RMB413.6 million and RMB469.4 million as of December 31, 2021, 2022 and 2023 and
June 30, 2024 and September 30, 2024, respectively. During 2022, our Group experienced a decline
in the utilization of gold loans, primarily driven by the implementation of more stringent conditions
imposed by banks on obtaining gold loans. This shi ft can be attributed to the internal policies of
banks, which aimed to restrict the use of gold loans. As a result, our Group had temporarily
adjusted our approach and reduced our utilization of gold loans accordingly. For the year ended
December 31, 2023 and for the six months ended June 30, 2024, we have utilized more bills to pay
for the procurement of gold raw materials.
FINANCIAL INFORMATION
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--- page 520 ---
During the Track Record Period and up to the Latest Practicable Date, our Group had not
experienced any difficulty in obtaining banking facilities. Our banking faci lities were secured by
certain bank deposits, property, plant and equipment (including properties owned by the Controlling
Shareholder), right-of-use assets, patents or investment properties. All personal guarantees provided
by our de facto controllers, Mr. Wang Zhongshan and Ms. Zhang Xiuqin for our Group ’s
indebtedness will be released upon Listing, and will be released and replaced with guarantee/
mortgage to be provided by our Company and/or members of our Group.
Save as disclosed above, as of September 30, 2024, being the latest practicable date for the
purpose of the indebtedness statement, we did not have any banking facilities, outstanding loan
capital, debt securities issued or agreed to be issue d, bank overdrafts or other similar indebtedness,
debentures, mortgages, charges or loans, or acc eptance credits or hire purchase commitments,
guarantees or other material contingent liabilities, or any covenant in connection therewith on a
consolidated basis.
Our Directors confirm that during the Track Record Period and up to the Latest Practicable
Date, there were (i) no material covenants and (ii) no breaches of covenant related to any of our
outstanding debt. In addition, there have been no material changes in the indebtedness since
September 30, 2024 and up to the date of the Prospectus.
Lease liabilities
At the commencement date of a lease, our Group recognises and measures the lease liability at
the present value of lease payments that are unpaid at that date. In calculating the present value of
lease payments, we use the incremental borrowing rate at the lease commencement date if the
interest rate implicit in the lease is not readily determinable. We had lease liabilities of RMB28.2
million, RMB18.2 million, RMB16.0 million , RMB23.0 million and RMB16.2 million as of
December 31, 2021, 2022 and 2023, June 30, 2024 and September 30, 2024 respectively. The
decrease in lease liabilities from 2021 to 2023 were mainly due to the lapse of lease terms of
properties leased by us, while the increase in l ease liabilities for the six months ended June 30,
2024 was attributable to our renewing the lease for an exhibition hall in Shenzhen. Our lease
liabilities decreased by RMB6.8 million to RMB16.2 million as of September 30, 2024, such
decrease was primarily due to lease payments made in accordance with payment schedule in
relevant lease agreements.
FINANCIAL INFORMATION
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The following table sets out the carrying amounts of our lease liabilities as at the dates
indicated:
As of December 31,
As of
June 30,
As of
September 30,
2021 2022 2023 2024 2024
RMB ’000 RMB ’000 RMB ’000 RMB ’000 RMB ’000
(Unaudited)
Lease liabilities payable:
Within one year . . . . . . . . . . . . . . . 12,028 9,600 7,711 11,276 9,467
Within a period of more than one year
but not exceeding two years . . . . . 10,799 4,564 5,692 8,247 5,009
Within a period of more than two
years but not exceeding five years . 5,377 4,059 2,589 3,477 1,758
28,204 18,223 15,992 23,000 16,234
Analysed as:
Amounts due for set tlement within
one year shown under current
liabilities . . . . . . . . . . . . . . . . . . 12,028 9,600 7,711 11,276 9,467
Amounts due for settlement after one
year shown under non-current
liabilities . . . . . . . . . . . . . . . . . . 16,176 8,623 8,281 11,724 6,767
The lease liabilities of approximately RMB28.2 million, RMB17.0 million, RMB16.0 million,
RMB23.0 million and RMB16.2 million were secu red by the rental deposits of approximately
RMB2.7 million, RMB1.9 million, RMB2.4 mi llion, RMB2.2 million and RMB1.6 million,
respectively as of December 31, 2021, 2022 and 2 023 and June 30, 2024 and September 30, 2024.
The incremental borrowing rates applied to lease liabilities range from 5.22% to 5.88% for each of
the three years ended December 31, 2021, 2022 and 2023, from 4.49% to 5.88% for the six months
ended June 30, 2024.
Interest-bearing bank borrowings
Our interest-bearing bank borrowings amounte d to RMB1,336.9 million, RMB829.6 million,
RMB790.0 million and RMB1,070 .4 million as of December 31, 2021, 2022, 2023 and June 30,
2024, respectively. We experienced a decrease in interest-bearing bank borrowings in the year
ended December 31, 2022 due to inability to renew bank borrowings relating to bills discounted
with recourse in time due to limited operation of banks during the pandemic. All of our interest-
bearing bank borrowings are fixed-rate borrowings repayable within one year and shown under
current liabilities.
FINANCIAL INFORMATION
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--- page 522 ---
As of December 31, 2021, 2022 and 2023, Jun e 30, 2024, our interest-bearing bank
borrowings carry interest at 1.78% to 5.83%, 2.08% to 5.83%, 3.60% to 5.51%, 3.25% to 7.92%
per annum, respectively.
Gold loans
As of December 31, As of June 30,
As of
September 30,
2021 2022 2023 2024 2024
RMB’000 RMB ’000 RMB’ 000 RMB ’000 RMB ’000
(Unaudited)
Gold loans . . . . . . . . 486,998 394,143 502,508 413,627 469,352
Our gold loans amounted to RMB487.0 million, RMB394.1 million, RMB502.5 million,
RMB413.6 million and RMB469.4 million as of December 31, 2021, 2022 and 2023, June 30, 2024
and September 30, 2024, respectively.
Our Group borrows gold from commercial banks for 3 months to 12 months and pays a fixed
fee to bank for the duration of the contract base d on the value of gold at inception and relevant
interest rates at inception. Fixed fees presented a s interest rates, were 2.1% to 4.3%, 2.6% to 4.4%,
3.1% to 5.5% and 3.5% to 4.7% during the Track Record Period. At maturity, our Group is obliged
to deliver gold of the same type, quantity and qu ality to bank. Our Group does not have an option
to settle its obligation in cash. Gold loans representing the obligation to deliver gold are classified
as liabilities at FVTPL at initial recognition.
As of December 31, 2021, 2022 and 2023, June 30, 2024 and September 30, 2024, the gold
loans were guaranteed by Mr. Wang Zhongsha n, Ms. Zhang Xiuqin or Mr. Wang Guoxin, the
Controlling Shareholders, and certain subsidiaries of the Group and(or) secured by property, plant
and equipment, the pledge of certain bank deposits, right-of-use assets or investment properties.
Contingent liabilities
As of September 30, 2024, being the latest practicable date for the purpose of the indebtedness
statement, we did not have any material contingent liabilities.
OFF-BALANCE SHEET ARRANGEMENT
Our Directors confirm that there has been no material off-balance sheet arrangement since
June 30, 2024 to the date of this prospectus.
TRANSACTIONS WITH RELATED PARTIES
With respect to the related party transactions s et forth in note 44 to the historical financial
information in the Accountants ’ Report in Appendix I to this prospectus, our Directors confirm that
these transactions were conducted on normal commercial terms or such terms that were no less
favorable to our Group than those available to independent third parties and were fair and
reasonable and in the interest of our Shareholders as a whole.
FINANCIAL INFORMATION
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During the Track Record Period, our Group ent ered into the following transactions with
related parties:
Relationship Nature of transaction
Year ended December 31,
Six months
ended
June 30,
2021 2022 2023 2024
RMB ’000 RMB ’000 RMB ’000 RMB ’000
The Controlling
Shareholders Group . . .
Short-term lease expenses — 24 191 179
Short-term lease expenses with the Controllin g Shareholders represented the vehicle lease
entered into between Wang Na as lessor and Beijing Mokingran as lessee, pursuant to which Wang
Na agreed to lease her vehicle to our Grou p at a monthly rental rate of RMB2,000.
Except for the above short-term lease in which we applied recognition exemption, our Group
has recognized an addition of right-of-use assets and lease liabilities of RMB1.5 million for the
year ended December 31, 2022 for the lease of retail stores with the Controlling Shareholders Wang
Zhongshan and Zhang Xiuqin as landlords and Changle Chengxin as tenant for our use of sales of
jewellery. The lease was terminated early on June 30, 2023.
KEY FINANCIAL RATIOS
The following table sets forth our key financial ratios for the years/as of the dates indicated:
As of/Year ended December 31,
As of/
Six months
ended June 30,
2021 2022 2023 2024
Gross profit margin (1) ........ 3 . 2 % 4 . 8 % 5 . 3 % 6 . 2 %
Net profit margin (2) .......... 1 . 3 % 1 . 1 % 1 . 2 % 0 . 5 %
Return on equity (3) .......... 1 5 . 7 % 1 1 . 2 % 1 2 . 9 % N / A
Return on total assets (4) ....... 6 . 4 % 5 . 2 % 6 . 4 % N / A
Current ratio (5) ............. 1 . 5t i m e s 1 . 8t i m e s 1 . 7t i m e s 1 . 6t i m e s
Quick ratio (6) .............. 0 . 5t i m e s 0 . 7t i m e s 0 . 6t i m e s 0 . 7t i m e s
Gearing ratio (7) ............. 8 6 . 8 % 4 9 . 1 % 4 1 . 1 % 5 6 . 8 %
Debt to equity ratio (8) . . . . . . . . 76.9% 35.8% 33.0% 37.5%
Notes:
(1) Gross profit margin was calculated based on gross profit divided by revenue for the respective year/period.
(2) Net profit margin was calculated based on net profit after taxes divided by revenue for the respective year/
period.
FINANCIAL INFORMATION
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(3) Return on equity was calculated based on net profit of the respective year, divided by the arithmetic mean of
the opening and closing balances of total equity and multiplied by 100%. Return on equity for the six months
ended June 30, 2024 is not meaningful as it may not be comparable to the ones for the full year.
(4) Return on total assets was calculated based on net p rofit of the respective year, divided by the arithmetic
mean of the opening and closing balances of total assets and multiplied by 100%. Return on total assets for
the six months ended June 30, 2024 is not meaningful as it may not be comparable to the ones for the full
year.
(5) Current ratio was calculated based on the total current assets divided by the total current liabilities as of the
relevant dates.
(6) Quick ratio was calculated based on the total current a ssets less inventories and divided by the total current
liabilities as of the relevant dates.
(7) Gearing ratio was calculated based on total borrowings divided by total equity as of the relevant dates and
multiplied by 100%.
(8) Debt to equity ratio was calculated based on total borrowings net of cash and cash equivalents divided by
total equity as of the relevant date and multiplied by 100%.
Gross profit margin
For the years ended December 31, 2021, 2022 and 2023 and the six months ended June 30,
2024, our gross profit margin was approximately 3.2%, 4.8%, 5.3% and 6.2%, respectively. See
‘‘ —Review of Historical Results of Operations ’’above for a discussion of the factors affecting our
gross profit margin during the Track Record Period.
Net profit margin
Our net profit margin was 1.3%, 1.1%, 1.2% and 0.5% respectively, for the years ended
December 31, 2021, 2022 and 2023 and the six months ended June 30, 2024.
Return on equity
Our return on equity decreased from 15.7% for the year ended December 31, 2021 to 11.2%
for the year ended December 31, 2022 mainly due to t he significant amount of losses recognized in
other gains and losses, net due to Au (T+D) where gold price was on an upward trend in 2022. Our
return on equity was 12.9% for the year ended 2023, mainly due to higher profit driven by revenue
growth in 2023 and our sales were affected by pandemic for the year 2022.
Return on total assets
Our return on total assets decreased from 6.4% for the year ended December 31, 2021 to 5.2%
for the year ended December 31, 2022, which were in line with the trend in return on equity. Our
return on total assets was 6.4% for the year ende d 2023, which were in line with the trend in return
on equity.
Current ratio and quick ratio
Our current ratios remained stable at 1.5x, 1.8x, 1.7x and 1.6x as of December 31, 2021,
2022, and 2023 and June 30, 2024, respectively.
FINANCIAL INFORMATION
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Our quick ratio remained relatively stable and was 0.5 times, 0.7 times, 0.6 times and 0.7
times as of December 31, 2021, 2022 and 2023 and June 30, 2024, respectively, which were
generally in line with the trend of current ratio.
Gearing ratio
Our gearing ratio was 86.8%, 49.1%, 41.1% and 56.8% as of December 31, 2021, 2022 and
2023 and June 30, 2024, respectively. The decrease in our gearing ratio from 86.8% as of
December 31, 2021 to 49.1% as of December 31, 2022 was primarily due to the decrease in
borrowings because we did not renew certain borrowings caused by limited operations during the
pandemic in the fourth quarter of 2022. Our gearing ratio then remained relatively stable at 41.1%
as of December 31, 2023, and further increased to 56.8% as of June 30, 2024 as we incurred more
borrowings.
Debt to equity ratio
Our debt to equity ratio was 76.9%, 35.8%, 33.0% and 37.5% as of December 31, 2021, 2022
and 2023 and June 30, 2024, respectively. The trend in our debt to equity ratio was in line with our
gearing ratio.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
We are exposed to market risks from changes in market, such as market risk, credit risk and
liquidity risk.
Market risk
(i) Commodity price risk
The Group is principally engaged in the sales of jewellery including gold products in the PRC.
The gold market is influenced by global as well as regional supply and demand conditions. A
significant decline in prices of gol d could adversely affect the Group ’s financial performance. In
order to reduce the commodity price risk, the Group uses gold loans as well as derivative financial
instruments of gold contracts, such as Au (T+D) con tracts, to reduce its exposure to fluctuations in
the gold price on gold products. Should the gold price go up, the Group would recognize a loss
representing the increase in gold price compared to the contract price, and largely net against the
increase in turnover of gold products as a result of gold price increase.
The Au (T+D) contracts are settled on a daily basis and the differences between the contract
price and market price are immediately recognized in the consolidated statements of profit or loss
and other comprehensive income.
The gold loans are settled at maturity which usually mature in three to 12 months from date of
inception and the fair value changes are immediately recognized in the consolidated statements of
profit or loss and other comprehensive income. The gold price exposures are monitored by
management in a timely manner.
FINANCIAL INFORMATION
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As of December 31, 2021, 2022 and 2023 and June 30, 2024, if the market price of gold had
increased/decreased by 5%, post-tax profit for the years ended December 31, 2021, 2022 and 2023
and for the six months ended June 30, 2024, due to changes in fair values of gold loans, would
have been approximately RMB18.3 million, RMB 14.8 million, RMB18.8 million and RMB15.5
million lower/higher respectively.
(ii) Interest rate risk
Our Group ’s fair value interest rate risk relates primarily to pledged/restricted deposits, fixed-
rate borrowings, gold loans and lease liabilities. Our Group are also exposed to cash flow interest
rate risk in relation to variab le-rate bank balances. The Group ’s cash flow interest rate risk are
mainly concentrated on the fluctuation of interest rates on bank balances, which carry prevailing
market interest rates. Our Group manage interest rate exposures by assessi ng the potential impact
arising from any interest rate movements based on interest rate level and outlook. No sensitivity
analysis on cash flow interest rate risk is presented as the management considers the sensitivity on
interest rate risk on bank balances is insignificant.
Details of the market risk we are exposed are set out in note 41 to the historical financial
information in the Accountants ’ Report set out in Appendix I to this prospectus.
Credit risk
Our Group’ s maximum exposure to credit risk which will cause a financial loss to our Group
due to failure to discharge an obligation by the co unterparties is arising from the carrying amount
of the respective recognized financial assets as stated in the consolidated statements of financial
position (including trade receivables, other receivables, pledged/restricted deposits and cash and
cash equivalents).
Details of the credit quality and the maximum exposure to credit risk we are exposed are set
out in note 41 to the historical financial information in the Accountants ’ Report set out in Appendix
I to this prospectus.
Liquidity risk
In the management of the liquidity risk, the management of our Group monitors and maintains
a reasonable level of cash and cash equivalents which is deemed adequate by the management to
finance our Group ’s operations and mitigate the effect s of fluctuations in cash flows.
Details of the maturity profile of our financial lia bilities are set out in note 41 to the historical
financial information in the Accountants ’ Report set out in Appendix I to this prospectus.
FINANCIAL INFORMATION
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LISTING EXPENSES
Assuming an Offer Price of HK$13.20 per H Share, being the mid-point of the indicative
Offer Price range of HK$12.00 to HK$14.40 per H Share, and assuming the Over-allotment Option
is not exercised the total estimated listing e xpenses in connection with the Global Offering
(including underwriting commission) was RMB72.0 million (including (i) underwriting-related
expenses (including but not limi ted to commissions and fees) of ap proximately RMB33.5 million,
and (ii) non-underwriting related expenses of app roximately RMB38.5 million, which consist of
fees and expenses paid to legal advisors and Repor ting Accountants of approximately RMB25.4
million, and other fees and expenses of approximately RMB13.1 million), representing
approximately 13.4% of the gross proceeds from the Global Offering, (based on the Offer Price of
HK$13.20 per Offer Share and assuming Over-allotment Option is not exercised).
During the Track Record Period, RMB26.2 million of listing expenses and issue costs has
been incurred. For the years ending December 31, 2024, we expect to incur listing expenses of
RMB45.8 million, respectively, of which an estimated amount of RMB12.2 million will be charged
to profit or loss and RMB33.6 million will be accounted for as a deduction from equity upon
successful Listing under relevan t accounting standards, respectively. The listing expenses above
were the best estimate as of the Latest Practicab le Date and for reference only and the actual
amount may differ from this estimate.
DIVIDENDS
The dividend declared by our Group to the shareholders was nil, RMB78.7 million, nil and
RMB91.6 million for the years ended December 31, during 2021, 2022 and 2023 and for the six
months ended June 30, 2024, respectively. All dividends declared have been fully settled by cash.
We do not have any fixed dividend policy nor pre-determined dividend payout ratio. The
declaration of dividends is subject to the discretion of our Board. Any declaration of final dividend
by our Company shall also be subject to the approval of our Shareholders in a Shareholders ’
meeting. Our Directors may recommend a paymen t of dividends in the future after taking into
account our operations and earnings, capital requirements and surplus, general financial condition,
contractual restrictions, capital expenditure and future development requirements, shareholders ’
interests and other factors which they may deem relevant at such time. Any declaration and
payment as well as the amount of the dividends will be subject to constitutional documents, any
applicable laws and regulations. Historical divi dend distributions are not indicative of our future
dividend distribution.
Any distributable profits that are not distributed in any given year will be retained and
available for distribution in subsequent years. To the extent profits are distributed as dividends,
such portion of profits will not be available to be reinvested in our operations.
FINANCIAL INFORMATION
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--- page 528 ---
PROPERTY VALUATION
Cushman & Wakefield Limited, an independent property valuer, has valued certain of our
property interests as of August 31, 2024 and is of the opinion that the total market value in existing
state as of such date was RMB119.0 million. The full text of the letter, summary of valuation and
valuation certificates with regard to such property interests are set out in Appendix III to this
prospectus. A reconciliation of the net book value of our properties as of June 30, 2024 as set out
in the ‘‘Accountants ’ Report ’’in Appendix I to this prospectus to their fair value as of August 31,
2024 as stated in the property valuation report as set out in Appendix III to this prospectus is set
out below:
1. Office units located in Tianjin
RMB’000
N e tb o o kv a l u ea so fJ u n e3 0 ,2 0 2 4.......................... 2 2 , 1 4 0
Movement for the period from June 30, 2024 to August 31, 2024
( u n a u d i t e d ) ......................................... ( 3 1 2 )
Net book value as of August 31, 2024 (unaudited) . . . . . . . . . . . . . . . . 21,828
N e tv a l u a t i o ns u r p l u s.................................... 3 1 , 1 7 2
Valuation of the properties owned by our Group as of
August 31, 2024 as set out in the property valuation report in
A p p e n d i xI I It ot h i sp r o s p e c t u s ............................ 5 3 , 0 0 0
2. Factory located in Tianjin
RMB’000
N e tb o o kv a l u ea so fJ u n e3 0 ,2 0 2 4.......................... 5 3 , 1 6 0
Movement for the period from June 30, 2024 to
A u g u s t3 1 ,2 0 2 4( u n a u d i t e d ) ............................. ( 3 2 0 )
Net book value as of August 31, 2024 (unaudited) . . . . . . . . . . . . . . . . 52,840
N e tv a l u a t i o ns u r p l u s.................................... 2 , 1 6 0
Valuation of the properties owned by our Group as of
August 31, 2024 as set out in the property valuation report in
A p p e n d i xI I It ot h i sp r o s p e c t u s ............................ 5 5 , 0 0 0
FINANCIAL INFORMATION
– 518 –


--- page 529 ---
3. Commercial property units located in Beijing
RMB’000
N e tb o o kv a l u ea so fJ u n e3 0 ,2 0 2 4.......................... 3 , 2 9 7
Movement for the period from June 30, 2024 to
A u g u s t3 1 ,2 0 2 4( u n a u d i t e d ) ............................. ( 6 8 )
N e tb o o kv a l u ea so fA u g u s t3 1 ,2 0 2 4( u n a u d i t e d )................ 3 , 2 2 9
N e tv a l u a t i o ns u r p l u s.................................... 7 , 7 7 1
Valuation of the properties owned by our Group as of
August 31, 2024 as set out in the property valuation report
i nA p p e n d i xI I It ot h i sp r o s p e c t u s.......................... 1 1 , 0 0 0
DISTRIBUTABLE RESERVES
Our Company was as a limited liability company on September 8, 2000 and converted into a
joint-stock company with limited liability under the Company Law of the PRC on June 29, 2018.
Reserves available for distribution to our Shareholders as of December 31, 2023 amounted to
RMB490.7 million.
UNAUDITED PRO FORMA ADJUSTED CONSOLIDATED NET TANGIBLE ASSETS
See ‘‘Appendix II — Unaudited Pro Forma Financial Information ’’to this prospectus for
details.
NO MATERIAL AND ADVERSE CHANGE
Our Directors have confirmed, after performing all the due diligence work which our Directors
consider sufficient, that, as of the date of this Prospectus, there had been no material adverse
change in our financial, trading position, prospects, gross profit margin or revenue since June 30,
2024 and there has been no event since June 30, 2024 which would materially affect the
information shown in the Accountants ’ Report set out in Appendix I to this Prospectus.
DISCLOSURE PURSUANT TO RULES 13.13 TO 13.19 OF THE LISTING RULES
Our Directors confirm that as of the Latest Practicable Date, there was no circumstance that
would give rise to a disclosure requirement under Rules 13.13 to 13.19 of the Listing Rules.
RECENT DEVELOPMENTS
See ‘‘Summary — Recent Developments and No Material and Adverse Change ’’for further
details of recent developments of our Group.
FINANCIAL INFORMATION
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--- page 530 ---
FUTURE PLANS AND PROSPECTS
See ‘‘Business — Our Strategies ’’for a detailed description of our future plans and prospects.
USE OF PROCEEDS
We estimate that we will receive net proceeds from the Global Offering of approximately
HK$502.4 million, after deducting underwriting commissions, fees and estim ated expenses payable
by us in connection with the Global Offering, a nd assuming an Offer Price of HK$13.20 per H
Share, being the mid-point of the indicative Offer Price range stated in this prospectus, assuming
over-allotment option is not exercised. If the O ffer Price is set at HK$14.40 per H Share, being the
high end of the indicative Offer Price range, the net proceeds from the Global Offering will be
HK$563.1 million. If the Offer Price is set at HK$12.00 per H Share, being the low end of the
indicative Offer Price range, the net proceeds from the Global Offering will be HK$463.2 million.
Assuming an Offer Price at the mid-point of th e indicative Offer Pri ce range and that the
Over-allotment Option is not exercised, we currently intend to apply these net proceeds for the
following purposes:
. approximately 50.0%, or HK$251.2 million (RMB232.5 million), will be used for
enhancing our production capabilities by upgrading our production facility in Weifang,
Shandong with a view to achieve further business growth:
It is one of our major business objectives to complete the upgrade of our production
facilities located in the Economic and Technological Development Zone in Changle
County, Weifang City, Shandong Province, the PRC. We anticipate that the upgraded
production facility will be fully completed by December 2025.
The upgrade plan construction was initiated in 2019 and was estimated to require a total
capital expenditure budget of RMB639.0 million for fixed assets. As of June 30, 2024,
approximately RMB257.9 million has been invested, which was primarily used for
construction of our major buildings, land inv estment, purchase of office furniture, and
acquisition of office software. We intend to apply RMB232.5 million of proceeds on the
upgrade plan. We intend to apply RMB168.0 million, RMB18.2 million and RMB27.3
million on constructions costs, equipment pur chase costs and installation costs and other
expenses, respectively. Our Directors expect that the remaining capital expenditure
budget of RMB148.6 million as of June 30, 2024 in relation to the above facility upgrade
will be financed by our internal resources and external financing.
FUTURE PLANS AND USE OF PROCEEDS
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We intend to allocate RMB232.5 million of proceeds to upgrade our production facilities.
The construction of our major production workshop officially commenced in 2019. As of
June 30, 2024, we have relocated all production processes to the major production
workshop, except for gold purification operations.
For refurbishment of the production area, we plan to continuously improve and upgrade
our major production workshop ’s manufacturing facilities to meet market demands and
enhance manufacturing efficiency, the upgrade of which is expected to complete by
December 2025. We plan to start construction of the staff quarters in 2024, with
completion expected by December 2025.
The following table sets forth details of the floor areas, timeframe, allocation of net
proceeds and cost breakdown for each of the major buildings:
Buildings Floor area Timeframe
Estimation of
proceeds on the
upgrade plan Cost breakdown
Major production
workshop . . .
74,146 sq.m. Started in 2019, was
essentially completed
in 2023 and is
expected to be fully
completed in
December 2024
RMB185.2 million (i) Construction costs: RMB110.8 million, primarily
for earthworks, masonry, and other major building
constructions; (ii) Installation cost: RMB33.1
million, primarily including floor and wall
decorations, equipment installations and
beautification projects; and (iii) Other expenses:
RMB41.3 million, including the purchase of
manufacturing equipment, setup and calibration
and ongoing operational expenses.
Staff canteen . . . 9,143 sq.m. Started in 2019 and has
been in use by our
employees since
2024
RMB22.9 million (i) Construction costs: RMB14.7 million, primarily
allocated to earthworks, masonry, and concrete
and reinforcement works; (ii) Installation cost:
RMB3.4 million, primarily including floor and
wall decorations, equipment installations and
beautification projects; and (iii) Other expenses:
RMB4.8 million, including the purchase of
kitchen equipment, and ongoing operational
expenses.
Staff quarters . . . 20,623 sq.m. Expected to begin
construction in early
2025 and to be fully
completed by
December 2025
RMB60.7 million N/A
(Note)
Refurbishment of
the production
a r e a .......
6,000 sq.m. Expected to begin
construction in early
2025 and to be fully
completed by
December 2025
RMB17.5 million N/A
(Note)
Note: We plan to schedule the quotations for our staff quarters and refurbishment of the production area in
December 2024.
FUTURE PLANS AND USE OF PROCEEDS
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Other miscellaneous construction works include warehouse, security centers and
groundwork.
The major equipment purchase cost include production lines of gold and K-gold,
production lines of platinum products, spr ing clasps assembly machines, wastewater
disposal system, various laboratory testing machines and various units of over 900 types
of miscellaneous production machineries and equipment at unit price ranging from
approximately RMB5,000 to RMB3.2 million. Installation costs and other expenses
mainly relate to the setting up of the aforeme ntioned production lines and machinery to
be placed in the new production workshop and putting them into working condition.
Further details of the upgrade plan
As of the Latest Practicable Date, we were i n the construction phase and undergoing the
procurement and installation of machinery. Upon the completion of the construction
project, we anticipate an increase in our production capacity up to 30 tons of gold
jewellery and K-gold products per year, as well as substantially increasing our
production capacity for spring clasps. In addition, leveraging our R&D on the mass
production of mid-to-high end 18K-gold spring clasps for jewellery products, we intend
to upgrade and enhance our production lines on high-precision jewellery parts and
components. Such upgrade also requires con struction costs and equipment purchase
costs.
Accordingly, we believe this can enhance our production capabilities to support increased
sales orders and ultimately, boost our market share in the gold jewellery industry and
brand image.
We intend to follow several key steps in upgrading our production facilities, namely (i)
engineering and construction preparation, (ii) equipment sourcing, (iii) equipment
installation, (iv) staff training, (v) equipment testing, and (vi) pilot operation.
We have carried out a feasibility study on the e xpansion of the production site. Based on
the study, our Directors considered that our Group can leverage the experience and
management knowhow on product development to capture the expected increase in
demand for gold jewellery in the PRC, and the growing business opportunities in our
untapped market. Also, the expansion plan is intended to be completed by the end of
2025, which will be a gradual process.
Reasons for Production Expansion
We develop our production expansion plans based on, among other things: (i) estimated
supply of and demand for relevant products; (ii) prevailing and anticipated prices for
relevant products; (iii) utilization of existing manufacturing facilities and feasibility for
expanding existing facilities; (iv) estimated co st of development; and (v) availability and
FUTURE PLANS AND USE OF PROCEEDS
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cost of capital resources. Our production e xpansion plan is primarily based on our
understandings of business plans, product pla nning, potential demands for existing and
new products and expected customers ’ needs in the coming years.
According to Frost & Sullivan, the drive rs of the gold jewellery market in the PRC
includes the following:
. Consumption upgrades in third and fourth-tier cities: Benefiting from
consumption upgrades in the third-tie r and fourth-tier cities, consumers ’
consumption of jewellery products has grown rapidly. The per capita consumption
of gold jewellery in third and lower tier cities has seen rapid growth in recent years,
from RMB489.7 in 2018 to RMB663.2 in 2023, with a CAGR of 6.3%. The per
capita consumption of gold jewellery in third and lower tier cities is forecasted to
increase to RMB927.8 in 2028 with a CAGR of 6.9% in light of the expanding
franchised stores of gold jewellery brands in lower-tier cities and ongoing
consumption upgrading.
. Investment-driven jewellery collection: In the post-pandemic period, the prices of
precious metals went up. Precious metals, especially gold, are often high-valued,
rare, and widely recognized, providing a stable and protective haven against
depreciation of monetary assets. Global inflation and geopolitical conflicts have
heightened the demand for assets resistant to devaluation and risks. Under
prevailing pessimistic exp ectations towards the future macro environment, gold and
other jewellery with investment features bounced back soon after the pandemic.
Gold jewellery, with both decorative functions and investment properties, became
popular during the post-pandemic period.
. Increasing demand for personalized jewe llery products and newly consumption
scenarios: In addition to collection and investment value, jewellery has gradually
become a fashion-oriented ornament that people wear daily. The consumption
mindset of Chinese consumers have become increasingly personalized and trendy,
and the aspiration to purchase well-designed and unique pieces of jewellery has
been rising accordingly. Besides, jewellery consumption scenes are also
increasingly diversified. In addition to the traditional marriage scenes, young
consumers gradually form the habit of buying jewellery as gifts for themselves.
Besides, the special promotions on the Valentine ’s Day, Spring Festival, and other
festivals can stimulate consumers ’ consumption potential of jewellery products.
With our substantial investment in the upgra ding of our production facility, we are well-
positioned to meet market opportunities, customer demand and support our rapid
business growth. We anticipate that the increased level of automation in production and
the increase in our production capacity allow us to maintain a competitive cost structure,
enhance operational efficiency, and maintain quality control, thus allowing us to offer
our products to customers at competitive pri ces and at quality standards which satisfy our
customers requirements, thereby allowing us to enhance profitability. Also, we believe
FUTURE PLANS AND USE OF PROCEEDS
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that we can fulfil the demand for our products from our franchisees and provincial-
dealers, such that we can strengthen the relationship with them, and at the same time,
penetrate into unsaturated market s for an increase in consumer base.
Although the current production facilities were not over utilized (i.e. exceeding 100% of
utilization rate) during th e Track Record Period, our Directors consider that the
production facilities were sufficiently highl y utilized during the Track Record Period.
The overall effective utilization rates of our production facilities were approximately
94.4%, 83.1%, 87.1% and 73.0%, for the three years ended December 31, 2023 and the
six months ended June 30, 2024, respectively, re presenting a consistent utilization rate of
over 70% since 2021, of which our Directors b elieve to be close to saturation level. The
lower utilization rate for the six months ended June 30, 2024 was mainly attributed to a
decrease in sales volume, whereby our sales volume decreased by 10.4% for the six
months ended June 30, 2024 when compared to the same period in 2023. Our sales
volume decrease was generally in line with (and slightly better than) that of the industry,
which observed a period-to-period decrease of 26.7%. In essence, our Directors hold the
view that the necessity of upgrading produ ction facility can be illustrated by (i)
increasing market demand; and (ii) foreseea ble increase in our number of jewellery
models. Our Directors consider that with an enlarged production capacity, we would be
able to (i) ensure the quality of our products; (ii) enhance the working efficiency of our
production process and labour; (iii) ensure on-time production and delivery of our
products; (iv) take up urgent and/or bulk orders received from time to time; and (v)
attain optimal usage and maintenance of our production machineries and equipment.
According to Frost & Sullivan, the sales revenue of the gold jewellery market in 2022
was RMB409.8 billion, accounting for 57.0% of the whole jewellery market, and is
forecasted to reach RMB546.5 billion in 2027, growing at a CAGR of 5.9%. In view of
the rising market demand for gold jewellery products and our high utilization of the
existing production facilities, we target to enlarge our scale of production, enhance our
production process and further implement automated production infrastructures at our
production facility in Weifang for the product ion of gold jewellery and related products,
which in turn will further boost our production capacity and efficiency.
During the Track Record Period, despite a slight decrease in revenue for the year ended
December 31, 2022, which was attributable to the impact of the pandemic, our overall
revenue demonstrated an upward trend. Our revenue decreased from RMB16,871.0
million for the year ended December 31, 2021 to RMB15,724.2 million for the year
ended December 31, 2022, and then increas ed to RMB20,208.6 million for the year
ended December 31, 2023. Our revenue increased from RMB9,316.2 million for the six
months ended June 30, 2023 to RMB9,979.7 million for the six months ended June 30,
2024. See the section ‘‘Financial Information — Review of Historical Results of
Operations — Six months ended June 30, 2024 compared to six months ended June 30,
2023 ’’for further details.
FUTURE PLANS AND USE OF PROCEEDS
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--- page 535 ---
We remain open to investing in additional expansion projects as we continue to expand
our business and capitalize on market opportunities.
. approximately 34.0%, or HK$170.8 million (RMB158.1 million), will be allocated
towards the expansion and enhancement of our sales network. We intend to do so by (i)
establishing self-operated stores and (ii) improving the scale and operations of our seven
self-operated direct service centers.
— approximately 31.0%, or RMB144.1 million, will be allocated towards the
establishment of 33 new self-operated stores. We estimate a budget of RMB264.0
million for the establishment of 33 new stores. The shortfall of RMB119.9 million
will be covered by our internal resources and external financing.
Apart from utilizing our franchise network to strengthen our geographical coverage, we
intend to strengthen our sales channels through self-operated stores, which is primarily
due to (i) our self-operated stores have demon strated a higher gross profit margin than
our franchise stores during the Track Record Period, and (ii) our self-operated stores help
us establish a strong brand identity, which is crucial for our market expansion. To
achieve this, we plan to open 33 new self-operated stores by December 2027. This
includes 20 new self-operated stores in Shandong to enhance our business scale in the
region, five new self-operated stores in Henan to expand into new markets, four new
self-operated stores in Beijing and another four new self-operated stores in Tianjin.
The budgets we intend to apply the opening of each self-operated store is estimated to be
approximately RMB8.0 million, being:
(1) cost of initial inventories of approximately RMB6.5 million;
(2) decoration cost of the store of approximately RMB0.5 million; and
(3) initial working capital of ap proximately RMB1.0 million.
The operation of self-operated stores has sound commercial rationale. For the years
ended December 31, 2021, 2022 and 2023 and the six months ended June 30, 2024, we
recorded an average revenue of RMB11.5 mill ion, RMB11.5 million, RMB11.8 million
and RMB5.6 million per self-ope rated store, respectively, wh ich the revenue contribution
per store were considerable comparing with that we derived per franchise store, the
average revenue
(Note) of which amounted to RMB5.5 million, RMB5.4 million, RMB6.7
million and RMB2.9 million for the said period, respectively. We believe our self-
operated stores play a key role in enhancin g our brand recognitio n and increasing our
financial condition for two main reasons: (i) Self-operated stores allow us to achieve
higher markups and improve profitability by selling directly to end consumers. For the
years ended December 31, 2021, 2022 and 2023 and the six months ended June 30,
Note: Calculated by dividing revenue derived from franchise network (i.e. including revenue generated from provincial-
dealers) by the total number of franchise stores as of the ending date of the respective year/period.
FUTURE PLANS AND USE OF PROCEEDS
– 525 –


--- page 536 ---
2024, we recorded gross profit margin of 14.7%, 16.9%, 22.4% and 24.4% from self-
operated stores, whereas our gross profit margin from franchise network were 2.8%,
4.3%, 4.7% and 6.0%, respectively. (ii) Self-operated stores provide valuable consumer
insights and feedback. Through direct cons umers interactions, we can gain a deeper
understanding of consumers ’ preferences, trends, and market demands. These insights
can inform product development, marketing str ategies, and overall business decisions,
leading to a more customer-centric approach and improve competitiveness.
We will primarily focus our expansion effort s in opening stores in third and lower tier
cities in the PRC where we have relatively s trong market position, market recognition
and penetration rate, as we can leverage th e brand awareness that we have built up in
those cities to accelerate our growth. In sel ecting the location for opening new stores in
these areas, we will carefully assess the local demand for our products, distance between
our stores based on our market analysis, as well as commercial considerations to
minimize unhealthy co mpetition among stores and avoid cannibalization amongst our
stores.
At the same time, we will also be looking to opening stores in new first-tier and second-
tier cities in the PRC where our store density is relatively low. According to Frost &
Sullivan, these markets always have a high d emand for gold jewellery products, which
presents as a significant opportunity for us to expand our presence to new markets and
improve our market coverage across the PRC. Fu rther, the expansion into first-tier and
second-tier cities helps to improve our brand exposure in cities where we are relatively
less well-known, thus improving our brand awareness and image.
— approximately 3.0%, or RMB14.0 million, will be allocated towards the
improvement of the scale and operations of our seven self-operated direct service
centers. We estimate a budget of RMB22.4 million to enhance our exhibition halls.
The shortfall of RMB8.4 million will be covered by our internal resources and
external financing. We also intend to utilize part of the proceeds as initial funds to
enhance and enlarge the exhibition halls managed by our self-operated direct
service centers. By offering a wider range of gold jewellery options in well-
decorated and inviting exhibition halls, along with enhanced services, we believe
that we can motivate franchisees to incr ease their purchases during exhibition
events.
FUTURE PLANS AND USE OF PROCEEDS
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--- page 537 ---
The following table sets out our intended use of proceeds for enhancing of our exhibition
halls.
Description Total cost
RMB’million
Budget for decoration and
improvement .................
To enhance our seven
self-operated direct service
centers and exhibition halls
7.0
Cost for products to display ........ T oi n c r e a s ed i s p l a yi n v e n t o r i e s
by 30 kg of gold products for
our seven exhibition halls
15.4
Total ........................ 2 2 . 4
According to Frost & Sullivan, sales growth of gold jewellery products in the third-tier
cities was at a CAGR of 12.4% from 2018 to 2023 and was projected to grow at a
CAGR of 9.4% from 2023 to 2028, while the same for fourth and lower tier cities grew
at a CAGR of 13.0% from 2018 to 2023 and was projected to grow at a CAGR of 9.2%
between 2023 and 2028, respectively. With such in mind, the expansion of additional
self-operated stores in third-tier cities and below are essential for our business expansion.
. approximately 16.0%, or HK$80.4 million (RMB 74.4 million), will be used for investing
in information technology;
— approximately 10.0%, or RMB46.5 million, will be allocated towards the
improvement of our operational efficiency through the acquisition of digital system
for integrating operation data (i.e. an Enterprise digital management system)
(‘‘EDM System ’’). The EDM System will enable us to enhance the real-time flow
of operational data within our organization, facilitating centralized and synchronized
data management across our Group. By implementing the system, we will be able to
monitor our operations and manage cashflow activities more efficiently, ensuring
smooth capital flow and real-time monitoring of our financial status. Furthermore,
we intend to acquire data management system to support our sales development for
our e-commerce channels. It will enable us to monitor purchase orders, payments,
and delivery instructions efficiently, ensuring streamlined and effective management
of our e-commerce operations. This will en hance our ability to serve customers,
optimize the e-commerce experience, and contribute to the growth of our online
sales platform.
FUTURE PLANS AND USE OF PROCEEDS
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--- page 538 ---
We estimate a budget of RMB106.9 million for improving our operational
efficiency through the acquisition of a digital system for i ntegrating operation data.
The shortfall of RMB60.4 million will be covered by our internal resources and
external financing. In relation to the upgrade of information technology system, we
expect to allocate RMB46.5 million to procure equipment and install software in
various major aspects:
(1) approximately RMB31.6 million for EDM System with the additions of
equipment such as cloud platform, server and cloud storage and training
services and maintenance provision;
(2) approximately RMB1.9 million for ent erprise network construction with the
additions of modular room, core switch, firewall and other various software
systems serving the purpose of operations, intrusion detection and intrusion
prevention;
(3) approximately RMB7.4 million for industrial internet construction with
upgrades in the MES system, IOT gateway, wireless network, 3D printing
capabilities; and
(4) approximately RMB5.6 million for var ious other systems including operation
training and video conferencing capabilities, collaborative office system, store
sales system, security system and POS system.
The following table sets out the major cost components of our upgrade of
information technology system.
Items Description Unit price Quantity Total price
(RMB ’000) (RMB ’000)
(I) Enterprise Digital
Management System
(企業數字化管理系統) ....
Data center and data mining system 19,000 1 19,000
Hybrid Cloud Platform 650 3 1,950
High-end Server 200 16 3,200
Remote Disaster Recovery 3,300 1 3,300
CRM Membership System 5,550 1 5,550
ERP Integrated System for Oper ation and Finance 13,200 1 13,200
Supply Chain Collaborative Man agement System 3,800 1 3,800
B2B Network Order System 2,300 1 2,300
Human Resources System 1,350 1 1,350
FUTURE PLANS AND USE OF PROCEEDS
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--- page 539 ---
Items Description Unit price Quantity Total price
(RMB ’000) (RMB ’000)
Comprehensive Budget Manag ement System 2,600 1 2,600
Fund Management System 1,700 1 1,700
Financial Statement Conso lidation System 1,600 1 1,600
Business and Development Technology Center 7,700 1 7,700
Upgrade of EOS Production Management System 4,200 1 4,200
Identity Authentication Man agement System 1,000 1 1,000
Product life cycle management system
(PLM System)
1,800 1 1,800
Portal System 1,700 1 1,700
(II) Enterprise Network
Construction .........
Enterprise Modular Room 1,200 1 1,200
Firewall 286 4 1,144
(III) Industrial Internet
Construction .........
MES Manufacturing Execution System 4,600 1 4,600
IOT Intelligent Gateway 30 40 1,200
Intelligent Machine Retrofit 25 60 1,500
3D Printing 300 200 6,000
Industrial Robot 1,200 3 3,600
(IV) Others:
Upgrade of Store Sales
S y s t e m .........
Upgrade of Store Sales System 2,700 1 2,700
Store security . . . . . . . Store Monitoring and Security System 40 200 8,000
Additional POS System
o fS t o r e s ........
Additional POS System of Stores 1 1,000 1,000
We expect to complete the above by December 2025 and we expect to create
synergy and operational efficiency via the enhancement of information technology
in our operations and monitoring of various tranches of our operation.
FUTURE PLANS AND USE OF PROCEEDS
– 529 –


--- page 540 ---
— approximately 6.0%, or HK$30.1 million (RMB27.9 million), will be allocated
towards the enhancement of our production line and inventory management through
the integration of advanced digital elements into our production chain. This
includes the implementation of digital technologies to monitor warehouse storage,
transportation data, sales, and capita l flow in a dynamic and real-time manner,
enabling us to operate more efficiently. By embracing digitalization, we aim to
improve operational and cost efficiency, est ablish stringent quality control measures
throughout our manufacturing process, and increase overall productivity.
The above allocation of the net proceeds from the Global Offering will be adjusted on a pro-
rata basis in the event that the Offer Price is fixe d at a higher or lower level compared to the mid-
point of the indicative Offer Price range stated in this prospectus.
If the Over-allotment Option is not exercised, the net proceeds we will receive will be
approximately: (i) HK$502.4 million, assuming an Offer Price of HK$13.20 per H Share (being the
mid-point of the indicative Offer Price range); (ii) HK$463.2 million, assuming an Offer Price of
HK$12.00 per H Share (being the low end of the indicative Offer Price range); or (iii) HK$563.1
million, assuming an Offer Price of HK$14.40 pe r H Share (being the high end of the indicative
Offer Price range).
If the Over-allotment Option is exercised in full, the net proceeds that we will receive will be
approximately: (i) HK$584.8 million, assuming an Offer Price of HK$13.20 per H Share (being the
mid-point of the indicative Offer Price range); (ii) HK$538.2 million, assuming an Offer Price of
HK$12.00 per H Share (being the low end of the indicative Offer Price range); or (iii) HK$653.0
million, assuming an Offer Price of HK$14.40 pe r H Share (being the high end of the indicative
Offer Price range). In the event that the Over-allotment Option is exercised in full, we intent to
apply the additional net proceeds to the above purposes in the proportions stated above.
To the extent that the net proceeds from the Global Offering are not immediately used for the
purposes described above and to the extent permitted by the relevant laws and regulations, they will
be placed in short-term interest-bearing accounts at licensed commercial banks and/or other
authorized financial institutions (as defined under the Securities and Futures Ordinance or
applicable laws and regulations in other jurisdictions).
We will issue an appropriate announcement if there is any material change to the above
proposed use of proceeds.
IMPLEMENTATION PLANS
Our implementation plans are set forth below for the period from the Latest Practicable Date
to December 31, 2026.
Our actual course of business may vary from our business strategies set out in this prospectus.
There is no assurance that our plans will materialize in accordance with our expected timeframe or
that our objectives will be accomplished.
FUTURE PLANS AND USE OF PROCEEDS
– 530 –


--- page 541 ---
While the actual course of events may invariably encounter unforeseeable changes and
fluctuations, we shall use our best endeavours to anticipate changes, yet allowing for flexibility to
implement the following plans.
The table below sets forth the expected implementation timetable of our planned use of
proceeds (assuming an Offer Price at the mid-point of the indicative Offer Price range and that the
Over-allotment Option is not exercised):
Implementation timeframe
By the end of
December 31,
2024
By the end of
December 31,
2025
By the end of
December 31,
2026
Production Expansion Plan ................ C o n s t r u c t i o n ,
purchase and
installation of
equipment
Construction,
purchase and
installation of
equipment, staff
training
Trial run by phase,
completion and
acceptance
Expansion of sales network
— (number of additional self-operated stores
to be established) ..................
8 12 13
— (number of self-operated direct service
centers to be enhanced and upgraded) ..
322
Upgrade on information technology .......... C o n s t r u c t i o n
preparation,
validation of
construction design
Equipment
installation and
testing
Equipment
installation and
testing, trial run,
completion and
acceptance
N/A
Research and development ................ C o n s t r u c t i o n
Purchase and
installation of
equipment
Construction,
purchase and
installation of
equipment, staff
training, trial run,
completion and
acceptance
N/A
FUTURE PLANS AND USE OF PROCEEDS
– 531 –


--- page 542 ---
The breakdown of net proceeds to be allocated is as follows:
For the year ending December 31,
2024 2025 2026 Total % of total
RMB’
million
RMB’
million
RMB’
million
RMB’
million
Production Expansion Plan .......... 96.0 97.8 38.8 232.5 50.0
Expansion of sales network .......... 39.5 57.1 61.5 158.1 34.0
— Establishment of self-operated stores . 35.0 52.4 56.7 144.1 31.0
— Improving scale and operations of
self-operated direct service centers . 4.7 4.7 4.7 14.0 3.0
Upgrade on information technology .... 33.1 41.3 — 74.4 16.0
— E D MS y s t e m s ................ 2 1 . 3 2 5 . 2 — 46.5 10.0
— Production and inventories system . . 11.6 16.3 — 27.9 6.0
Total ........................ 465.0 100.0
Operation and financial impact
We are a vertically integrated OBM, our future plans and our use of proceeds are mainly for
our business enhancement. As such, save for the capital expenditure on production expansion plan
as detailed in ‘‘Risk Factors — Risks relating to our Financial Position — We expect to incur
additional capital expenditure and depreciatio n expenses associated with the expansion of our
production facilities ’’, we do not expect any material impact on our operational and financial
(including the cost structure, profi t margin, cashflow and risk profile).
FUTURE PLANS AND USE OF PROCEEDS
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--- page 543 ---
Expected operational and financial impact on our Group
Cost structure Profit margin Cashflow Risk profile
Production
Expansion Plan . .
Increased depreciation
from our enlarged
production facilities and
new machinery and
equipment after they are
put into use
More automation and
faster production cycle
may increase our
efficiency, increasing
our gross margins
We may face liquidity
pressure as an additional
RMB215.9 million of
internal resources and
external financing apart
from proceeds from the
global offering is
expected to be utilized
to complete the
expansion
See ‘‘Risk Factors — Risks
relating to our Financial
Position — We expect to incur
additional capital expenditure
and depreciation expenses
associated with the expansion
of our production facilities ’’
Expansion of sales
n e t w o r k .......
Increased depreciation
from our newly opened
self-operated stores
It may increase our
turnover, driving up
profit
No material impact We have measures in place to
avoid cannibalization and
channel stuffing. See ‘‘Business
— Sales and Distribution
Channels — Management of
franchisees — Measures to
avoid channel stuffing and
cannibalization ’’. We do not
see material risk on the
expansion
Upgrade on
information
technology . . . . .
Maintenance cost of
computer systems may
increase
No material impact No material impact See ‘‘Risk Factor — Risks
relating to our Business and
Industry — Our business relies
on the proper operation of our
IT systems, any malfunction of
which could materially and
adversely affect our business,
financial conditions and results
of operations’’
Research and
development . . . .
Increased R&D expenses Based on the
intelligence from our
CRM system, our R&D
may develop new
products and be able to
mass produce them at
competitive cost. It can
improve our product mix
and possibly improve
our profit margin
No material impact Our R&D may not be able to
achieve the intended results.
See ‘‘Risk Factor — Risks
relating to our Business and
Industry — We may not
succeed in implementing our
business strategies and future
expansion plan ’’
FUTURE PLANS AND USE OF PROCEEDS
– 533 –


--- page 544 ---
HONG KONG UNDERWRITERS
CLSA Limited
ABCI Securities Company Limited
China Everbright Securities (HK) Limited
Futu Securities International (Hong Kong) Limited
ICBC International Securities Limited
TradeGo Markets Limited
UNDERWRITING
This prospectus is published solely in connection with the Hong Kong Public Offering. The
Hong Kong Public Offering is fully underwritten by the Hong Kong Underwriters on a conditional
basis. The International Offering is expected to be fully underwritten by the International
Underwriters.
The Global Offering comprises the Hong Kong Pu blic Offering of initially 4,395,800 Hong
Kong Offer Shares and the International Offering of initially 39,561,000 International Offer Shares,
subject to, in each case, reallocation on the basis as described in the section headed ‘‘Structure of
the Global Offering ’’as well as the Over-allotment Option (applicable only to the International
Offering).
UNDERWRITING ARRANGEMENTS AND EXPENSES
Hong Kong Public Offering
Hong Kong Underwriting Agreement
We have entered into the Hong Kong Underwri ting Agreement with, among others, the Hong
Kong Underwriters on Tuesday, November 19, 2024. Pursuant to the Hong Kong Underwriting
Agreement, we are offering the Hong Kong Offer Shares for subscription by the public in Hong
Kong at the Offer Price on, and subject to, the terms and conditions set out in this prospectus, the
Hong Kong Underwriting Agreement and on the designated website at
www.eipo.com.hk .
Subject to: (a) the Listing Committee granting listing of, and permission to deal in, our H
Shares in issue and to be issued pursuant to the Global Offering (including additional H Shares
which may be issued pursuant to the exercise of the Over-allotment Option) on the Main Board of
the Stock Exchange and the listing and permission not having been revoked; 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 for, or procure subscribers for, their respective
applicable proportions of the Hong Kong Offer Shares being offered but which are not taken up
under the Hong Kong Public Offering, on the terms and conditions set out in this prospectus, the
Hong Kong Underwriting Agreement and on the designated website at
www.eipo.com.hk .
If, for any reason, the Offer Price is not agreed between us and the Sponsor-Overall
Coordinator (on behalf of the Underwriters) by 1 2:00 noon on Wednesday, November 27, 2024, the
Global Offering will not proceed.
UNDERWRITING
– 534 –


--- page 545 ---
The Hong Kong Underwriting Agreement is conditional upon and subject to, among other
things, the International Underwriting Agreement having been entered into, becoming unconditional
and not having been terminated.
Grounds for Termination
The Sponsor-Overall Coordinator (for itself and on behalf of the Hong Kong Underwriters),
shall be entitled, in its sole and absolute disc retion, by notice to us, terminate the Hong Kong
Underwriting Agreement with immediate effect if, any of the following events shall occur prior to
8:00 a.m. on the Listing Date:
(a) there develops, occurs, exists or comes into effect:
(i) any new law or any change or development involving a prospective change
(whether or not permanent) or any event or series of events or circumstance likely
to result in any change or development involving a prospective change (whether or
not permanent) in existing law, or any change or development involving a
prospective change in the interpretation or application thereof by any court or other
competent authority in or affecting Hon g Kong, the PRC, the United States, the
United Kingdom, the European Union (or any of its members), Japan, Singapore or
any other jurisdiction where any me mber of the Group is incorporated or
established or operates or any other jurisdiction relevant to any member of the
Group or the Global Offering (each, a ‘‘Relevant Jurisdiction ’’); or
(ii) any change or development involving a prospective change (whether or not
permanent) or development, or any event or series of events likely to result in or
representing a change or development, or prospective change (whether or not
permanent) or development, in local, national, regional or international financial,
legal, political, military, industrial, eco nomic, trading, currency market, fiscal or
regulatory market conditions, securities, exchange control or any monetary or
trading settlement system or other financial markets (including, without limitation,
conditions in stock and bond markets, mon ey and foreign exchange markets, inter-
bank markets and credit markets) in or affecting any Relevant Jurisdiction; or
(iii) any event or circumstance or a series of events or circumstances, in the nature of
force majeure (including, without limitation, any act of government or order of any
courts, strike, calamity, crisis, lock-out, fire, explosion, flooding, earthquake, civil
commotion, act of war, outbreak or escalatio n of hostilities (whether or not war is
declared), act of God, act of terrorism (whether or not responsibility has been
claimed), declaration of a national or interna tional emergency, riot, public disorder,
outbreak of diseases, pandemics or epidemics, outbreak or escalation of disease
(including infectious disease, including without limitation COVID-19, SARS,
MERS, H5N1, H1N1, swine or avian influenza or such related/mutated forms) in
each case beyond the control of the Hong Kong Underwriters; or
UNDERWRITING
– 535 –


--- page 546 ---
(iv) the imposition or declaration of any moratorium, suspension or limitation
(including, without limitation, any imposition of or requirement for any minimum
or maximum price limit or price range) on trading in shares or securities generally
on the Stock Exchange, the New York Stock Exchange, the NASDAQ Global
Market, the London Stock Exchange, the Shanghai Stock Exchange, the Shenzhen
Stock Exchange, the Singapore Stock Exchange or the Tokyo Stock Exchange; or
(v) (A) any change or prospective change in or affecting taxation, foreign exchange
controls, currency exchange rates or foreign investment regulations (including,
without limitation, a devaluation of the Hong Kong dollar or RMB against any
foreign currencies, a change in the system under which the value of the Hong Kong
dollar is linked to that of the United States dollars or RMB is linked to any foreign
currency or currencies) or the implementation of any exchange control, or (B) any
change or prospective change in Taxation (as defined in the Hong Kong
Underwriting Agreement) in any Relevan t Jurisdiction adversely affecting an
investment in the H Shares; or
(vi) any general moratorium on commercial ba nking activities in or affecting any of any
Relevant Jurisdiction or any disruption in commercial banking or foreign exchange
trading or securities trading or securi ties settlement or clearance services,
procedures or matters in any Relevant Jurisdictions; or
(vii) the imposition of economic sanctions, o r the withdrawal of trading privileges which
existed on the date of the Hong Kong Underwriting Agreement, in whatever form,
directly or indirectly, by, or for, any jurisdiction relevant to the business operations
of any member of our Group; or
(viii) any demand by creditors for repayment of indebtedness or an order or petition
being presented for the winding-up or liquidation of any member of our Group or
any member of our Group making any composition or arrangement with its
creditors or entering into a scheme of arrangement or any resolution being passed
for the winding-up of any member of our Group or a provisional liquidator, receiver
or manager being 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
(ix) any change, development or event involving a prospective change in, or a
materialisation of, any of the risks set out in the section headed ‘‘Risk Factors ’’in
this Prospectus; or
(x) that any certificate given by our Compan y or any of our respective officers under or
in connection with the Hong Kong Underwriting Agreement or the Global Offering
is false or misleading in any material respect; or
UNDERWRITING
– 536 –


--- page 547 ---
(xi) the commencement by any authority or other regulatory or political body or
organization of any action or investigation against any member of our Group, any
of the Controlling Shareholders or any Director or Supervisor or the chief executive
officer or the chief financial officer of our Company or an announcement by any
authority or regulatory or political body or organization that it intends to take any
such action or investigation; or
(xii) any non-compliance of this Prospectus, the CSRC filings (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 Companies (Winding Up and
Miscellaneous Provisions) Ordinance, the Listing Rules, the CSRC rules or any
other applicable laws; or
(xiii) any contravention by any member of the Group, any of the Controlling
Shareholders, or any Director or any Supe rvisor or the chief executive officer or
the chief financial officer of the Compa ny of applicable provisions under the
Companies (Winding Up and Miscellaneous Provisions) Ordinance, the Companies
Ordinance, the PRC Company Law, the CSRC rules or the Listing Rules or other
applicable laws,
which, in any such case individually or in the aggregate, in the sole and absolute opinion
of the Sponsor-Overall Coordinator (for itself and on behalf of the Hong Kong
Underwriters): (A) is, will be or may be m aterially adverse to, or materially and
prejudicially affects, the assets, liabilitie s, business, general affairs, management,
prospects, shareholder ’s equity, profitability, results of operations, position or condition
(financial, operational, trading or otherwise), or performance or prospects of any member
of our Group or our Group as a whole or to any present or prospective Shareholder of
our Company in its capacity as such; or (B) has, will have or may have a material
adverse effect on the success or marketabilit y of the Global Offering or the level of Offer
Shares being applied for, under the Hong Kong Public Offering or the level of interest
under the International Offering or anticipa ted dealings in the H Shares in the secondary
market; or (C) makes, will make it or may m ake it impracticable or inadvisable or
incapable or inexpedient to proceed with the Hong Kong Public Offering and/or the
International Offering or the delivery of the Offer Shares on the terms and in the manner
contemplated by this prospectus, the formal notice, the preliminary offering circular or
the offering circular; or (D) would have or may have the effect of making any part of the
Hong Kong Underwriting Agreement (includ ing underwriting) incapable of performance
in accordance with its terms or which prevents the processing of applications and/or
payments pursuant to the Global Offering or pursuant to the underwriting thereof; or
UNDERWRITING
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--- page 548 ---
(b) there comes to the notice of any of the Sole Sponsor, the Sponsor-Overall Coordinator,
the Sole Global Coordinator, the Joint Bookrunners, the Joint Lead Managers, the Capital
Market Intermediaries and t he Hong Kong Underwriters ( ‘‘Appointees ’’) as at or after
the date of the Hong Kong Underwriting Agreement:
(i) a governmental, regulatory or other prohibition on our Company for whatever
reason from issuing, selling the H Shares (including H Shares that may be issued
pursuant to the exercise of the Over-allotment Option) pursuant to the terms of the
Global Offering or converting Domestic Shares to H Shares; or
(ii) that any statement contained in this prospectus, the formal notice, the application
proof prospectus, the post-hearing information pack and any notice, announcement,
advertisement, communication issued o r used (by or on behalf of our Company) in
connection with the Hong Kong Public Offering (including any supplement or
amendment thereto) was or has become untrue, incomplete, inaccurate, incorrect in
any material respect or misleading or deceptive, or any forecast, estimate,
expression of opinion, intention or expectation expressed in any of this prospectus,
the formal notice, the application proof prospectus, the post-hearing information
pack and any notice, announcement, adve rtisement, communication so issued or
used is not fair and honest and made on reasonable grounds or, where appropriate,
based on reasonable assumptions, when taken as a whole; or
(iii) any matter has arisen or has been discovered which would, had it arisen or been
discovered immediately before the date of this prospectus, constitute a material
omission from any of this prospectus, the application proof prospectus, the
preliminary offering circular, the offering circular, the post-hearing information
pack, the formal notice or any notices, announcements, advertisements,
communications or other documents arising out of, relating to or connected with
our Company, our Group or the Global Offering (whether or not approved by any
Appointee), or any amendment or supplement thereto; or
(iv) any non-compliance of this prospectus (or any other documents used in connection
with the contemplated subscription of the Offer Shares) or any aspect of the Global
Offering with the Companies (Winding Up and Miscellaneous Provisions)
Ordinance, the Listing Rules or any other applicable law; or
(v) either (A) there has been a breach of any of the representations, warranties,
undertakings or provisions of either the Hong Kong Underwriting Agreement or the
International Underwriting Agreement by our Company or any of our Controlling
Shareholders or (B) any of the representations, warranties and undertakings given
by us or any of our Controlling Shareholders in the Hong Kong Underwriting
Agreement or the International Underwrit ing Agreement, as applicable, is (or would
when repeated be) untrue, inaccurate or misleading; or
UNDERWRITING
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--- page 549 ---
(vi) any of the experts named in this prospectus (except the Sole Sponsor) has
withdrawn its consent to the issue of this prospectus with the inclusion of its
reports, letters, summaries or legal opi nions (as the case may be) and references to
its name included in the form and context in which it respectively appears; or
(vii) any event, act or omission which gives or is likely to give rise to any liability of
our Company or our Controlling Shareholders (as the case may be) pursuant to the
indemnities given by our Company and our Controlling Shareholders under the
Hong Kong Underwriting Agreement; or
(viii) any breach of any of our obligations or the obligations of the Controlling
Shareholders, under the Hong Kong Underw riting Agreement or t he International
Underwriting Agreement; or
(ix) a significant portion of the orders in the book-building process at the time the
International Underwriting Agreement is entered into, or the investment
commitments by any cornerstone investors after signing of the Cornerstone Investor
Agreements, has been withdrawn, terminated or cancelled; or
(x) our Company has withdrawn this prospectus (and/or any other documents issued or
used in connection with the Global Offering) or the Global Offering; or
(xi) any Controlling Shareholder, any Director or any Supervisor or any member of our
Group ’s senior management being charged with an indictable offence or prohibited
by laws or otherwise disqualified from taking part in the management of a
company, or any litigation, dispute, legal action, claim, investig ation or other action
(including arrest or detainment) or pro ceedings being commenced, threatened or
instigated against any of our Company and our subsidiaries, any Controlling
Shareholder or any Director or Supervisor or any member of our Group ’s senior
management; or
(xii) any of the Director, chairman, the presi dent, the chief executive officer or the chief
financial officer or member of senior management of our Group vacating his office;
or
(xiii) any adverse change or any development involving a prospective adverse change in
or affecting the assets, liabilities, business, general affairs, management, prospects,
shareholders ’ equity, profitability, results of operations, position or condition
(financial or otherwise) or performance, of any members of our Group or our Group
as a whole (including any litigation or claim of any third party being threatened or
instigated against any members of our Group); or
(xiv) the issue or requirement to issue by us of a supplemental or amendment to this
prospectus, preliminary offering circular or offering circular or other documents in
connection with the offer and sale of the H Shares pursuant to the Companies
UNDERWRITING
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--- page 550 ---
(Winding Up and Miscellaneous Provisions) Ordinance or the Listing Rules or upon
any requirement or request of the Stock Exchange or the SFC, in circumstances
where the matter to be disclosed could, in the sole and absolute opinion of the
Sponsor-Overall Coordinator, adversely affect the marketing for or implementation
of the Global Offering; or
(xv) any adverse change, or any development or any prospective adverse change or
development, in the condition (financial or o therwise) or in the assets, liabilities,
business, general affairs, manag ement, prospects, shareholders’ equity, profits,
losses, results of operations, position or condition, financial or otherwise, or
performance of our Group as a whole; or
(xvi) the approval by the Listing Committee of the listing of, and the permission to deal
in, the Offer Shares and the H Shares to be converted from Domestic Shares is
refused or not granted, other than subject to customary conditions, on or before the
Listing Date, or if granted, the approval is subsequently withdrawn, cancelled,
qualified (other than by customary conditions), revoked or withheld.
Lock Up Arrangement
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 we will not exercise our power to issue further H Shares, or securities convertible
into H Shares (whether or not of a class already listed), or form the subject of any agreement to
such an issue within six months from the Listing Date (whether or not such issue of H Shares or
securities will be completed within six months from the Listing Date) except the Offer Shares to be
issued pursuant to the Global Offering (including any additional H Shares which may be issued
pursuant to exercise of the Over-allotment Option), or under any of the circumstances provided
under Rule 10.08 of the Listing Rules.
(B) Undertakings by each of our Controlling Shareholders
Pursuant to Rule 10.07 of the Listing Rules, each of our Controlling Shareholders has
undertaken to the Stock Exchange and our Company that, except pursuant to the Global Offering,
he/she will not and will procure that the relevant registered holder(s) will not (without the prior
written consent of the Stock Exchange or unles s otherwise in compliance with the applicable
requirements of the Listing Rules):
(i) in the period commencing on the date by reference to which disclosure of the
shareholding in our Company is made in this prospectus and ending on, and including,
the date which is six months from the Listing Date (the ‘‘First Six-month Period ’’),
directly or indirectly dispose of, nor enter into any agreement to dispose of or otherwise
UNDERWRITING
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--- page 551 ---
create any options, rights, interests or encum brances in respect of, any of the securities
of our Company in respect of which the shareholder is shown in this prospectus to be the
beneficial owner(s); or
(ii) in the period of six months immediately following the expiry of the First Six-month
Period (the ‘‘Second Six-month Period ’’), 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 or securities referred to in (i) above if,
immediately following the disposal or upon the exercise or enforcement of the options,
rights, interests or encumbrances, the sh areholder would cease to be our Controlling
Shareholders.
Note (2) to Rule 10.07(2) of the Listing Rules provides that Rule 10.07 does not prevent a
member of Controlling Shareholders from using the H Shares beneficially owned by him/her as
security (including a charge or pledge) in favor of an authorized institution (as defined in the
Banking Ordinance (Chapter 155 of the Laws of Hong Kong)) for a bona fide commercial loan.
Pursuant to Note 3 to Rule 10.07(2) of the Listing Rules, each of our Controlling Shareholders
has further undertaken to the Stock Exchange and our Company that, within the period commencing
on the date by reference to which disclosure of the shareholding in our Company is made in this
prospectus and ending on the date which is 12 months from the Listing Date, it/he/she will and will
procure that the relevant registered holder(s) will:
(i) when it/he/she pledges or charges any securities of our Company beneficially owned by
it/him/her in favor of an authorized institution (as defined in the Banking Ordinance
(Chapter 155 of the Laws of Hong Kong)) for a bona fide commercial loan, immediately
inform us of such pledge or charge together with the number of securities so pledged or
charged; and
(ii) when it/he/she receives indications, either verbal or written, from the pledgee or chargee
that any of the pledged or charged securities of our Company will be disposed of,
immediately inform our Company of such indications.
We will inform the Stock Exchange as soon as we have been informed of the matters referred
to in paragraphs (i) and (ii) above (if any) by any of our Controlling Shareholders and subject to
the then requirements of the Listing Rules disc lose such matters by way of an announcement which
is published in accordance with Rule 2.07C of the Listing Rules as soon as possible.
Undertakings pursuant to the Hong Kong Underwriting Agreement
(A) Undertaking by our Company in respect of itself
Pursuant to the Hong Kong Underwriting Agr eement, our Company has undertaken to each of
the Sole Sponsor, the Sponsor-Overall Coordinator, the Sole Global Coordinator, the Capital
Market Intermediaries, the Joint Bookrunners, the Joint Lead Managers and the Hong Kong
Underwriters not to (except for the offer, allotm ent and issue of the Offer Shares pursuant to the
UNDERWRITING
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--- page 552 ---
Global Offering, including pursuant to any exercise of the Over-allotment Option), and to procure
that each member of our Group shall not, at any time during the period commencing on the date of
the Hong Kong Underwriting Agreement and ending on, and including, the date that is six months
after the Listing Date (the ‘‘First Six-Month Period ’’), without the prior written consent of the
Sole Sponsor and the Sponsor-Overall Coordinator (for itself and on behalf of the Hong Kong
Underwriters) and unless in compliance with the requirements of the Listing Rules:
(a) allot, issue, sell, accept subscription for, offer to allot, issue or sell, contract or agree to
allot, issue or sell, mortgage, charge, pledge, hypothecate, hedge, 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 over, or contract or agree to transfer or dispose of or create an
encumbrance over, or repurchase, either d irectly or indirectly, conditionally or
unconditionally, any Shares or any other securities of our Company or other securities of
such other member of the Group, as applicable, or any interest in any of the foregoing
(including, without limitation, any securi ties convertible into or exchangeable or
exercisable for or that represent the right to receive, or any warrants or other rights to
subscribe for or purchase, any Shares or any other equity securities of our Company); 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 any other 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 or other rights to subscribe for or purchase, any Shares or any
other equity securities of our Company); or
(c) enter into any transaction with the same economic effect as any transaction described in
paragraph (a) or (b) above; or
(d) offer to or agree to or announce any intention to effect any such transaction specified in
paragraph (a), (b) or (c) above,
in each case, whether the transaction is to be settled by delivery of Shares or such other securities
of our Company or in cash or otherwise (whether or not the allotment or issue of Shares or such
other securities of our Company will be completed within the First Six-Month Period).
Our Company further agrees that, in the event that during the period of six months
immediately following the expiry of the First Six-Month Period (the ‘‘Second Six-Month Period ’’),
our Company enters into any of the transactions specified in paragraph (a), (b) or (c) above or
offers to or agrees to or announces any intention to effect any such transaction, our Company
undertakes to take all reasonable steps to ensure that any such transaction, offer, agreement or
announcement will not create a disorderly or false market in the Shares or any other securities of
our Company.
UNDERWRITING
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--- page 553 ---
Our Company has undertaken to each of the Sole Sponsor, the Sponsor-Overall Coordinator,
the Sole Global Coordinator, the Joint Bookrunners, the Joint Lead Managers and the Hong Kong
Underwriters that it will, and each of our Controlling Shareholders has undertaken to each of the
Sole Sponsor, the Sponsor-Overall Coordinator, the Sole Global Coordinator, the Joint
Bookrunners, the Joint Lead Managers and the Hong Kong Underwriters to procure that our
Company will, comply with the minimum public float requirements specified in the Listing Rules
or in any waiver granted to our Company and not revoked by the Stock Exchange (the ‘‘Minimum
Public Float Requirement ’’). In addition, our Company has undertaken to each of the Sole
Sponsor, the Sponsor-Overall Coordinator, the Sole Global Coordinator, the Joint Bookrunners, the
Joint Lead Managers and the Hong Kong Underwriters that our Company will not, and each of our
Controlling Shareholders has undertaken to e ach of the Sole Sponsor, the Sponsor-Overall
Coordinator, the Sole Global Coordinator, the Joint Bookrunners, the Joint Lead Managers and the
Hong Kong Underwriters to procure that our Company will not, agree to or effect any purchase of
H Shares which may reduce the holdings of H Shares held by the public (as defined in Rule 8.24 of
the Listing Rules) below the Minimum Public Float Requirement on or before the first anniversary
of the Listing Date.
(B) Undertaking by our Controlling Shareholders in respect of themselves
Pursuant to the Hong Kong Underwriting Agreement, each of our Controlling Shareholders
has undertaken to our Company, and the Sole Sponsor, the Sponsor-Overall Coordinator, the Sole
Global Coordinator, the Joint Bookrunners, the Joint Lead Managers and the Hong Kong
Underwriters that (except for the offer and issue of the Offer Shares pursuant to the Global
Offering, including pursuant to any exercise of the Over-allotment Option), without the prior
written consent of the Sponsor-Overall Coordinator (for itself and on behalf of the Hong Kong
Underwriters) and unless in compliance with the requirements of the Listing Rules:
(a) it/he/she will not during the First Six-Month Period:
(i) sell, offer to sell, contract or agree to sell, mortgage, charge, pledge, hypothecate,
hedge, lend, grant or sell any option, warrant, contract or right to purchase, grant or
purchase any option, warrant, contract or right to sell, or otherwise transfer or
dispose of or create an encumbrance over, or agree to transfer or dispose of or
create an encumbrance over, either dir ectly or indirectly, conditionally or
unconditionally, any Shares, any other securities of our Company or any interest in
any of the foregoing (including any securities convertible into or exchangeable or
exercisable for or that represent the right to receive, or any warrants or other rights
to purchase, any Shares or any other securities of our Company) beneficially owned
by it/him/her as of the Listing Date (the ‘‘Locked-up Securities ’’);
(ii) enter into any swap or other arrangement that transfers to another, in whole or in
part, any of the economic consequences of ownership of any Locked-up Securities;
(iii) enter into any transaction with the same economic effect as any transaction
specified in paragraph (i) or (ii) above; or
UNDERWRITING
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--- page 554 ---
(iv) offer to or agree to or announce any intention to effect any transaction specified in
paragraph (i), (ii) or (iii) above,
in each case, whether the transaction is to be settled by delivery of Shares or such other
securities of our Company or in cash or otherwi se (whether or not the transaction will be
completed within the First Six-Month Period); or
(b) it/he/she will not, at any time during the Second Six-Month Period, enter into any of the
transactions specified in paragraph (i), (ii) or (iii) above in respect of any Locked-up
Securities or offer to or agree to or announce any intention to effect any such transaction
if, immediately following any sale, transfer or disposal or upon the exercise or
enforcement of any option, right, interest or encumbrance pursuant to such transaction,
its/his/her will cease to be a ‘‘controlling shareholder ’’(as the term is defined in the
Listing Rules) of the Company; and
(c) until the expiry of the Second Six-Month Period, in the event that it/he/she enters into
any of the transactions specified in paragraph (i), (ii) or (iii) above in respect of any
Locked-up Securities or offers to or agrees to or announces any intention to effect any
such transaction, it/he/she will take all reasonable steps to ensure that any such
transaction, offer, agreement or announcement will not create a disorderly or false market
in the Shares or any other securities of our Company.
International Offering
International Underwriting Agreement
In connection with the International Offering, we expect to enter into the International
Underwriting Agreement with, among others, the S ponsor-Overall Coordinator and the International
Underwriters on the Price Determination Date. Under the International Underwriting Agreement, the
International Underwriters would, subject to certain conditions, severally (but not jointly) agree to
purchase or procure purchasers for the Internati onal Offer Shares initially offered pursuant to the
International Offering. It is expected that the International Underwriting Agreement may be
terminated on grounds similar to those contained in the Hong Kong Underwriting Agreement.
Please see the section headed ‘‘Structure of the Global Offering — The International Offering ’’for
further details.
Over-allotment Option
Our Company intends to grant to the International Underwriters the Over-allotment Option,
exercisable in whole or in part, at the sole and absolute discretion of the Sponsor-Overall
Coordinator on behalf of the International Underwriters from the Listing Date until 30 days from
the last day permitted for the making of appli cations under the Hong Kong Public Offering,
pursuant to which our Company may be required to allot and issue up to an aggregate of 6,593,400
additional H Shares, representing approximately 15.0% of the number of Offer Shares initially
UNDERWRITING
– 544 –


--- page 555 ---
available under the Global Offering at the Offer Price to cover over-allocations in the International
Offering, if any. Please see the section headed ‘‘Structure of the Global Offering — Over-allotment
Option ’’for further details.
It is expected that the International Underwriting Agreement may be terminated on similar
grounds as the Hong Kong Underwriting Agreement. Potential investors shall be reminded that in
the event that the International Underwriting Agreement is not entered into, the Global Offering
will not proceed.
Commission and Expenses
The Underwriters and the Capital Market Intermediaries will receive an underwriting
commission of 3.8% of the aggregate Offer Price of all the Offer Shares (including any Offer
Shares to be issued pursuant to the exercise of the Over-allotment Option) (the ‘‘Fixed Fees ’’), out
of which they will pay any sub-underwriting commissions and other fees.
The Underwriters and the Capital Market Intermediaries may receive a discretionary incentive
fee of up to 1.5% of the aggregate Offer Price of all the Offer Shares (including any Offer Shares
to be issued pursuant to the exercise of the Over-allotment Option) (the ‘‘Discretionary Fees ’’).
The ratio of the Fixed Fees and the Discretionary Fees (if fully paid) is therefore 3.8:1.5. The
Discretionary Fees are discretionary in nature and the payment of such fees is subject to the sole
discretion of our Company.
For any unsubscribed Hong Kong Offer Shares reallocated to the International Offering, the
underwriting commission will not be paid to the Hong Kong Underwriters but will instead be paid
to the International Underwriters.
The sponsor’ s fees payable to the Sponsor are US$700,000 in aggregate.
The aggregate commissions and f ees (exclusive of any Discretionary Fees), together with the
Stock Exchange listing fee, the SFC transact ion levy, the AFRC transaction levy, the Stock
Exchange trading fee, the brokerage fee, the legal and other professional fees, printing and other
fees and expenses relating to the Global Offering , are estimated to be about HK$82.86 million (on
the assumption that the Over-allotment Option will be exercised in full and based on an Offer Price
of the mid-point of the Offer Price Range) and will be paid by our Company.
Indemnity
Our Company has agreed to indemnify the Hong Ko ng Underwriters for certain losses which
they may suffer, including losses incurred arising from their performance of their obligations under
the Hong Kong Underwriting Agreement and any breach by our Company of the Hong Kong
Underwriting Agreement.
UNDERWRITING
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--- page 556 ---
Hong Kong Underwriters ’Interests in our Company
Save for their respective obligations under the Hong Kong Underwriting Agreement, as of the
Latest Practicable Date, none of the Hong Kong Underwriters was interested, directly or indirectly,
in any H Shares or any securities of any member of our Group or had any right or option (whether
legally enforceable or not) to subscribe for or purchase, or to nominate persons to subscribe for or
purchase, any H Shares or any securities of any member of our Group.
ACTIVITIES BY SYNDICATE MEMBERS
The underwriters of the Hong Kong Public Offering and the International Offering (together,
the ‘‘Syndicate Members ’’) and their affiliates may each individually undertake a variety of
activities (as further described below) which do not form part of the underwriting or stabilizing
process.
The Syndicate Members and their affiliates ar e 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 accoun t of others. In the ordinary course of their
business activities, the Syndicate Members and their affiliates may purchase, sell or hold a broad
array of investments and actively trade securities, d erivatives, loans, commodities, currencies, credit
default swaps and other financial instruments fo r their own account and for the accounts of their
customers. These investment and tr ading activities may involve or relate to assets, securities and/or
instruments of 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 loans and other debt.
In relation to our H Shares, the activities of the Syndicate Members and their affiliates may
include acting as agent for buyers and sellers of our H Shares, entering into transactions with those
buyers and sellers in a principal capacity, including as a lender to initial purchasers of our H Shares
(whose financing may be secured by our H Shares) in the Global Offering, proprietary trading in
our H Shares, and entering into over-the-counter or listed derivative transactions or listed or
unlisted securities transactions (including issuing securities such as derivative warrants listed on a
stock exchange) which have as their underlyin g assets, assets including our H Shares. Such
transactions may be carried out as bilateral agreeme nts or trades with selected counterparties. Those
activities may require hedging activity by those enti ties involving, directly or indirectly, the buying
and selling of our H Shares, which may have a negative impact on the trading price of our H
Shares. All such activities may take place in Hong Kong and elsewhere in the world and may result
in the Syndicate Members and their affiliates holding long and/or short positions in our H Shares,
in baskets of securities or indices including our H Shares, in units of funds that may purchase our
H Shares, or in derivatives related to any of the foregoing.
UNDERWRITING
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--- page 557 ---
In relation to issues by the Syndicate Members or their affiliates of any listed securities
having our H Shares as their underlying securities, whether on the Stock Exchange or on any other
stock exchange, the rules of the stock 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 our H Shares in most cases.
All these activities may occur both during and af ter the end of the stabilizing period described
in the section headed ‘‘Structure of the Global Offering ’’. Such activities may affect the market
price or value of our H Shares, the liquidity or trading volume in our H Shares and the volatility of
the price of our H 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 and
their affiliates will be subject to certain restrictions, including the following:
(a) the Syndicate Members and their affiliat es (other than the Stabilizing Manager or any
person acting for it) must not, in connection with the distribution of the Offer Shares,
effect any transactions (including issuing or entering into any option or other derivative
transactions relating to the Offer Shares), whether in the open market or otherwise, with
a view to stabilizing or maintaining the market price of any of the Offer Shares at levels
other than those which might otherwise prevail in the open market; and
(b) the Syndicate Members and their affiliates must comply with all applicable laws and
regulations, including the market misconduct provisions of the SFO, including the
provisions prohibiting insider dealing, fa lse trading, price rigging and stock market
manipulation.
Some of the Syndicate Members or their affiliates have provided from time to time, and are
expected to provide to our Group investment banking and other services in the future for which the
Syndicate Members or their affiliates have r eceived or will receive customary fees and
commissions.
In addition, the Syndicate Members or their affi liates may provide financing to investors to
finance their subscriptions of Offer Shares in the Global Offering.
UNDERWRITING
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--- page 558 ---
THE GLOBAL OFFERING
This prospectus is published in connection with the Hong Kong Public Offering as part of the
Global Offering. CITIC Securities (Hong Kong) Limited is the Sole Sponsor, and CLSA Limited is
the Sponsor-Overall Coordinator, of the Global Offering.
The listing of our H Shares on the Stock Exchange is sponsored by the Sponsor. The Sponsor
has made an application on our behalf to the Listing Committee of the Stock Exchange for the
listing of, and permission to deal in, the H Shares in issue and to be issued pursuant to the Global
Offering (including any additional H Shares pursua nt to the exercise of the Over-allotment Option)
on the Main Board of the Stock Exchange as described in this prospectus.
The Global Offering consists of (subject to reallocation and the Over-allotment Option as
described below):
(a) the Hong Kong Public Offering of initially 4,395,800 H Shares as described below under
the subsection headed ‘‘ —The Hong Kong Public Offering ’’; and
(b) the International Offering of initially 39,561,000 H Shares outside the United States
(including to professional and institu tional investors in Hong Kong) in offshore
transactions in reliance on Regulation S, as described below under the subsection headed
‘‘ —The International Offering ’’.
Investors may either:
(a) apply for the Hong Kong Offer Shares under the Hong Kong Public Offering; or
(b) apply for or indicate an interest, if qualified to do so, for the International Offer Shares
under the Internat ional Offering,
but may not do both.
The Offer Shares will represent approximately 64.39% of the total H Shares in issue share
capital of our Company immediately following the completion of the Global Offering (assuming
that the Over-allotment Option is not exercised). I f the Over-allotment Option is exercised in full,
the Offer Shares will represent approximately 67.53% of the enlarged number of H Shares in issue
(including Offer Shares issued pursuant to the full exercise of the Over-allotment Option)
immediately following the completion of the Global Offering and allotment and issue of Offer
Shares pursuant to the Over-allotment Option.
References in this prospectus to applications, application monies or the procedure for
applications relate solely to the Hong Kong Public Offering.
STRUCTURE OF THE GLOBAL OFFERING
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--- page 559 ---
THE HONG KONG PUBLIC OFFERING
Number of Offer Shares Initially Offered
We are initially offering 4,395,800 H Shares for subscription by the public in Hong Kong at
the Offer Price, representing approximately (i) 10.0% of the total number of Offer Shares initially
available under the Global Offering and (ii) 6.44% of the total H Shares in issue immediately
following the completion of the Global Offering (subject to the reallocation of Offer Shares
between the International Offering and the H ong Kong Public Offering and assuming the Over-
allotment Option is not exercised).
The Hong Kong Public Offering is open to members of the public in Hong Kong as well as to
institutional and professional investors. Professional investors gen erally include brokers, dealers,
companies (including fund managers) whose ordinary business involves dealing in shares and other
securities and corporate entities that regularly invest in shares and other securities.
Completion of the Hong Kong Public Offering is subject to the conditions set out in the sub-
section headed ‘‘Conditions of the Global Offering ’’below.
Allocation
Allocation of 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. The allocation of Hong Kong Offer Shares 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 Hong Kong Offer Shares available under the
Hong Kong Public Offering (after taking into acc ount any reallocation referred to below) will be
divided equally (to the nearest board lot) into two pools: Pool A and Pool B (with any odd lots
being allocated to pool A).
. Pool A : The Hong Kong Offer Shares in Pool A will be allocated on an equitable basis
to applicants who have applied for Hong Kong Offer Shares with a total price of HK$5
million or less (excluding the brokerage fee, the SFC transaction levy, the AFRC
transaction levy and the Stock Exchange trading fee).
. Pool B : The Hong Kong Offer Shares in Pool B will be allocated on an equitable basis
to applicants who have applied for Hong K ong Offer Shares with a total price of more
than HK$5 million and up to the total value of Pool B (excluding the brokerage fee, the
SFC transaction levy, the AFRC transaction levy and the Stock Exchange trading fee).
For the purpose of the immediately preceding paragraph only, the ‘‘price ’’for the Hong Kong
Offer Shares means the price payable on application. See the subsection headed ‘‘ — Pricing —
Price Payable on Application ’’below.
STRUCTURE OF THE GLOBAL OFFERING
– 549 –


--- page 560 ---
Applicants should be aware that applications in Pool A and Pool B are likely to receive
different allocation ratios. If Hong Kong Offer Shares in one pool (but not both pools) are
undersubscribed, the unsubscribed 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 Ho ng 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 2,197,800 Hong Kong Offer Shares (being approximately 50% of the Offer Shares
initially made available under the Hong Kong Public Offer) will be rejected.
Reallocation
The allocation of the Offer Shares between the Hong Kong Public Offering and the
International Offering is subject to adjustment under the Listing Rules. Chapter 4.14 under the
Guide for New Listing Applicants published by the Stock Exchange and paragraph 4.2 of Practice
Note 18 of the Listing Rules requires a clawback mechanism to be put in place which would have
the effect of increasing the number of Hong Kong Offer Shares to a certain percentage of the total
number of Offer Shares offered under the Global Offering when certain prescribed total demand
levels are reached under the Hong Kong Public Offering.
If the number of Offer Shares validly applied for under the Hong Kong Public Offering
represents (a) 15 times or more but less than 50 t imes, (b) 50 times or more but less than 100 times
and (c) 100 times or more of the number of Offer S hares initially available under the Hong Kong
Public Offering, then Offer Shares will be reall ocated to the Hong Kong Public Offering from the
International Offering. As a resul t of the reallocation, the total number of Offer Shares available
under the Hong Kong Public Offering will be increased to 13,187,200 Offer Shares (approximately
30% in the case of (a)), 17,582,800 Offer Shares (approximately 40% in the case of (b)) and
21,978,400 Offer Shares (50% in the case of (c)) (of the total number of Offer Shares initially
available under the Global Offering (before any ex ercise of the Over-allotment Option)). In each
case, the number of Offer Shares to be allocated to the International Offering will be
correspondingly reduced and the additional Offer Shares will be allocated between Pool A and
Pool B in such manner as the Sponsor-Overall Coordinator deem appropriate.
The Sponsor-Overall Coordinator may, at their discretion, reallocate Offer Shares initially
allocated for the International Offering to th e Hong Kong Public Offering to satisfy valid
applications in Pool A and Pool B in accordance with Chapter 4.14 under the Guide for New
Listing Applicants as follows:
If: (i) the International Offer Shares are undersubscribed and the Hong Kong Offer
Shares are fully subscribed or oversubscribed irrespective of the number of times; or (ii) the
International Offer Shares are fully subscribed or oversubscribed and the Hong Kong Offer
Shares are oversubscribed by less than 15 times of the number of Hong Kong Offer Shares
initially available under the Hong Kong Public Offering, provided that the Offer Price would
be set at (or no higher than) the Minimum Offer Price, up to 4,395,600 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
STRUCTURE OF THE GLOBAL OFFERING
– 550 –


--- page 561 ---
to 8,791,400 Offer Shares, representing approximately but no more than twice the number of
the Offer Shares initially available under the Hong Kong Public Offering (before any exercise
of the Over-allotment Option).
In addition, if the Hong Kong Offer Shares are oversubscribed, subject to any
reallocation in accordance with Chapter 4.14 u nder the Guide for New Listing Applicants, the
Sponsor-Overall Coordinator may reallocate Offer Shares from the International Offering to
the Hong Kong Public Offering to satisfy valid applications under the Hong Kong Public
Offering, in such proportions as the Sponsor-Overall Coordinator may, in their sole and
absolute discretion, determine.
If the Hong Kong Public Offering is not f ully subscribed, the Sponsor-Overall
Coordinator may reallocate all or some unsubscribed Hong Kong Offer Shares to the
International Offering, in such proportions as the Sponsor-Overall Coordinator may, in their
sole and absolute discretion, determine.
Applications
Each applicant under the Hong Kong Public Offering will be required to give an undertaking
and confirmation in the application submitted by that applicant that it/he/she and any person(s) for
whose benefit the applicant is making the application have not applied for or taken up, or indicated
an interest for, and will not apply for or take up, or indicate an interest for, any International Offer
Shares under the International Offering, and that applicant ’s application is liable to be rejected if
either or both of the undertaking and confirmation are breached or untrue (as the case may be) or
the applicant has been or will be placed or allo cated International Offer Shares under the
International Offering.
THE INTERNATIONAL OFFERING
Number of H Shares Initially Offered
The International Offering will consist of an offering of initially 39,561,000 H Shares at the
Offer Price for subscription or sale under the Inte rnational Offering, representing approximately
90.0% of the total number of Offer Shares initially available under the Global Offering. Subject to
the reallocation of the Offer Shares between the I nternational Offering and the Hong Kong Public
Offering, the number of H Shares initially offered under the Internat ional Offering will represent
approximately 57.95% of the total H Shares in is sue immediately following the completion of the
Global Offering (assuming the Over-a llotment Option is not exercised).
Allocation
The International Offering will include selective marketing of Offer Shares to institutional and
professional investors and other investors ant icipated to have a sizeable demand for the Offer
Shares in Hong Kong and other jurisdictions outside the United States in reliance on Regulation S.
STRUCTURE OF THE GLOBAL OFFERING
– 551 –


--- page 562 ---
Professional investors generally include brokers, dealers, companies (including fund managers)
whose ordinary business involves dealing in share s and other securities and corporate entities that
regularly invest in shares and other securities.
Allocation of Offer Shares under the Internati onal Offering will be effected in accordance with
the ‘‘book-building ’’process described in the section headed ‘‘ —Pricing — Determining the Offer
Price’’and based on a number of factors, including the level and timing of demand, total size of the
relevant investor ’s invested assets or equity assets in the relevant sector and whether or not it is
expected that the relevant investor is likely to buy further H Shares, and/or hold or sell its H
Shares, after the Listing. This basis of allocation i s intended to result in a distribution of the Offer
Shares which is likely to lead to the establishment of a solid and stable professional and
institutional shareholder base to the benefit of our Group and our Shareholders as a whole.
The Sponsor-Overall Coordinator (on behalf of the Underwriters) may require any investor
who has been offered (or has indicated an interest fo r) Offer Shares under the International Offering
and who has made an application under the Hong Kong Public Offering to provide sufficient
information to the Sponsor-Overall Coordinator 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
allocation of Offer Shares under the Hong Kong Public Offering.
Reallocation
The total number of Offer Shares to be issued or sold pursuant to the International Offering
may change as a result of the clawback arrangement and/or any reallocation of Offer Shares
between the Hong Kong Public Offering and the International Offering as described in the
subsection headed ‘‘ — The Hong Kong Public Offering — Reallocation ’’, and the exercise of the
Over-allotment Option in whole or in part as described in the subsection headed ‘‘ —Over-allotment
Option ’’below.
PRICING
Offer Price Range
The Offer Price will be not more than HK$14.40 per H Share and is expected to be not less
than HK$12.00 per H Share, unless otherwise announced, as explained below.
Price Payable on Application
Applicants for Hong Kong Offer Shares must pay, on application (subject to application
channel), the Maximum Offer Price per Hong Kong Offer Share plus the brokerage fee of 1.0%, the
SFC transaction levy of 0.0027%, the AFRC transaction levy of 0.00015% and the Stock Exchange
trading fee of 0.00565%, amounting to a total of HK$2,909.04 for one board lot of 200 H Shares.
Applicants 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 Minimum Offer Price.
STRUCTURE OF THE GLOBAL OFFERING
– 552 –


--- page 563 ---
If the Offer Price is less than the Maximum Offer Price, appropriate refund payments
(including the brokerage fee, the SFC transact ion levy, the AFRC transaction levy and the Stock
Exchange trading fee attributable to the surplus application monies) will be made to successful
applicants. Please see the subsection headed ‘‘How to Apply for the Hong Kong Offer Shares —
Despatch/Collection of H Share Certificates and Refund of Application Monies ’’.
Determining the Offer Price
The International Underwriters are soliciting from prospective investors indications of interest
in acquiring our H Shares in the International Offeri ng. Prospective investors will be required to
specify the number of International Offer Shares u nder 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, but to cease on or around, the Price Determination Date.
The Offer Price is expected to be fixed by agreement between the Sponsor-Overall
Coordinator (on behalf of the Underwriters) and us, on the Price Determination Date, when market
demand for the Offer Shares will be determined. The Price Determination Date is expected to be on
or before Wednesday, November 27, 2024 and in any event, no later than 12:00 noon on
Wednesday, November 27, 2024.
Reduction in Offer Price Range and/or Number of Offer Shares
The Sponsor-Overall Coordinator (on behalf of the Underwriters) may, based on the level of
interest expressed by prospective investors during the book-building process in respect of the
International Offering, and with our consent, reduce the Offer Price Range and/or the number of
O f f e rS h a r e ss t a t e di nt h i sp r o s p e c t u sa ta n yt i m eo no rb e f o r et h em o r n i n go ft h el a s td a yf o r
making applications under the Hong Kong Public Offering. In this case, we will as soon as
practicable after the decision to make the reduction (and no later than the morning of the last day
for making applications under the Hong Kong Public Offering) publish on the website of the Stock
Exchange at
www.hkexnews.hk and our website at http://www.mokingran.com notice of the
reduction. This notice will also include confirma tion or revision, as appropriate, of the working
capital statement and the Global Offering statistics as set out in this prospectus, as well as any
other financial information which ma y change as a result of the reduction.
We will, as soon as practicable following the decision to make the reduction, in addition to
publishing the notice, issue a supplemental prospectus containing details in relation to the change in
the number of Offer Shares being o ffered and/or the Offer Price Range.
Upon the issue of such a notice and a supplemental prospectus or a new prospectus, the
revised number of Offer Shares and/or the Offer P rice will be final and conclusive. The Global
Offering must first be cancelled and subsequently relaunched on FINI pursuant to a supplemental
prospectus or a new prospectus.
STRUCTURE OF THE GLOBAL OFFERING
– 553 –


--- page 564 ---
Before making applications for the Hong Kong Offer Shares, applicants should have regard to
the possibility that any announcement of a reduction in the indicative Offer Price Range and/or
number of Offer Shares may not be made until the day which is the last day for making
applications under the Hong Kong Public Offering.
In the event of a reduction in the number of Offer Shares, the Sponsor-Overall Coordinator
may, at their 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 Hong Kong Offer
Shares comprised in the Hong Kong Public Offering will not be less than 10% of the total number
of Offer Shares available under the Global Offeri ng (assuming the Over-allotment Option is not
exercised).
In the absence of a notice of reduction, the number of Offer Shares will not be reduced and
the Offer Price, if agreed upon between us and the Sponsor-Overall Coordinator (on behalf of the
Underwriters), will not be set outside the indicative Offer Price Range.
Announcement of the Offer Price and Basis of Allocations
The Offer Price, level of applications in the Hong Kong Public Offering, level of indications
of interest in the International Offering, and basis of allocations of the Hong Kong Offer Shares are
expected to be made available through a variety of channels in the manner described in the
subsection headed ‘‘How to Apply for the Hong Kong Offer Shares — Publication of Results’’ .
OVER-ALLOCATION
Following any over-allocation of H Shares in connection with the Global Offering, the
Stabilizing Manager (or any person acting for it) may cover the over-allocation through delayed
delivery arrangements with investors who have been allocated Offer Shares in the International
Offering). The delayed delivery arrangements (if specifically agreed to by an investor) relate only
to the delay in the delivery of the Offer Shares to such investor and the Offer Price for the Offer
Shares allocated to such investor will be fully paid prior to Listing, accordingly there will be no
delayed settlement of payment of the Offer Shares. Additional Offer Shares may be issued by the
exercise of the Over-allotment Option in full or in part, or the Stabilizing Manager (or any person
acting for it) may purchase H Shares in the secondar y market at prices that do not exceed the Offer
Price, or a combination of these means may be used, to return to such investor the Offer Shares
subject to delayed delivery arrangements.
OVER-ALLOTMENT OPTION
In connection with the Global Offering, we may grant the Over-allotment Option to the
International Underwriters, exercisable by the Sponsor-Overall Coordinator in its sole and absolute
discretion on behalf of the I nternational Underwriters.
Pursuant to the Over-allotment Option (if grante d), the International Underwriters have the
right, exercisable by the Sponsor-Overall Coordina tor (in its sole and absolute discretion on behalf
of the International Underwriters) at any time from the Listing Date until 30 days from the last day
for the making of applications under the Hong Kong Public Offering (being the last day for the
STRUCTURE OF THE GLOBAL OFFERING
– 554 –


--- page 565 ---
exercise of the Over-allotment Option, which is Thursday, December 26, 2024), to require us to
allot and issue up to 6,593,400 additional Offer Shares representing not more than 15% of the total
number of Offer Shares initially available under the Global Offering, at the Offer Price, to cover
over-allocations in the International Offering.
If the Over-allotment Option is exercised in ful l, the additional Offer Shares will represent
approximately 8.81% of the enlarged total numb er of H Shares in issue immediately following
completion of the Global Offering and the exercise of the Over-allotment Option. We will make an
announcement if the Over-allotment Option is exercised.
STABILIZATION
Stabilization is a practice used by underwriters in some markets to facilitate the distribution of
securities. To stabilize, the underwriters may bid for, or purchase, the securities in the secondary
market, during a specified period of time, to retard, and if possible, prevent a decline in the market
price of the securities below the offer price. Such transactions may be effected in all jurisdictions
where it is permitted to do so, in each case in compliance with all applicable laws and regulatory
requirements, including those of Hong Kong. In H ong Kong, the price at which stabilization is
effected cannot exceed the offer price of shares.
In connection with the Global Offering, the Stabilizing Manag er (or any person acting for it),
on behalf of the Underwriters, may over-allocate or effect short sales or any other stabilizing
transactions with a view to stabilizing or maintaining the market price of our H Shares at a level
higher than that which might otherwise prevail for a limited period after the Listing Date. However,
there is no obligation on the Stabilizing Manager (or its affiliates or any person acting for it) to
conduct any stabilizing action. Such stabilizing actions, if taken, (a) will be conducted at the
absolute discretion of the Stabilizing Manager ( or its affiliates or any person acting for it) and in
what the Stabilizing Manager reasonably regards as being in the best interest of our Company, (b)
may be discontinued at any time and (c) is required to end within 30 days of the last day for
making applications under the Hong Kong Public Offering.
Stabilizing actions permitted in Hong Kong pursuant to the Securities and Futures (Price
Stabilizing) Rules (Chapter 571W of the Laws of Hong Kong) include (a) over-allocating for the
purpose of preventing or minimizing any reduction in the market price of our H Shares, (b) selling
or agreeing to sell our H Shares so as to establish a short position in them for the purpose of
preventing or minimizing any reduction in the market price of our H Shares, (c) subscribing, or
agreeing to subscribe, for our H Shares pursuant to the Over-allotment Option in order to close out
any position established under (a) or (b), (d) pur chasing, or agreeing to purchase, our H Shares for
the sole purpose of preventing or minimizing any re duction in the market price of our H Shares, (e)
selling or agreeing to sell our H Shares to liqu idate a long position held as a result of those
purchases and (f) offering or attempting to do anything described in (b), (c), (d) or (e).
STRUCTURE OF THE GLOBAL OFFERING
– 555 –


--- page 566 ---
Specifically, prospective applicants for and investors in the Offer Shares should note that:
(a) the Stabilizing Manager (or its affiliates or any person acting for it) may, in connection
with the stabilizing action, maintain a long position in our H Shares;
(b) there is no certainty as to the extent to which and the time or period for which the
Stabilizing Manager (or its affiliates or any person acting for it) will maintain such a
long position;
(c) liquidation of any long position by the St abilizing Manager (or its affiliates or any
person acting for it) and selling in the open market may have an adverse impact on the
market price of our H Shares;
(d) no stabilizing action can be taken to support the price of our H Shares for longer than the
stabilizing period, which will begin on the Listing Date and is expected to expire on
Thursday, December 26, 2024 (being the 30th day after the last day for making
applications under the Hong Kong Public O ffering). After this date, when no further
stabilizing action may be taken, demand for our H Shares, and therefore the price of our
H Shares, could fall;
(e) stabilizing activities by the Stabiliz ing Manager (or any person acting for it) may
stabilize, maintain or otherwise affect th e market price of our Shares. This means the
price of our Shares may be higher than the price that otherwise might exist in the open
market;
(f) the price of our H Shares cannot be assured to stay at or above the Offer Price by the
taking of any stabilizing action; and
(g) stabilizing bids may be made or transactions effected in the course of the stabilizing
action at any price at or below the Offer Price, which means that stabilizing bids may be
made or transactions effected at a price below the price paid by applicants for, or
investors in, acquiring the Offer Shares.
We will make an announcement in complianc e with the Securities and Futures (Price
Stabilizing) Rules (Chapter 571W of the Laws of Hong Kong) within seven days of the expiration
of the stabilizing period.
STRUCTURE OF THE GLOBAL OFFERING
– 556 –


--- page 567 ---
CONDITIONS OF THE GLOBAL OFFERING
Acceptance of applications for the Hong Kong Offer Shares will be conditional on:
(a) the Listing Committee granting approval for the listing of, and permission to deal in, our
H Shares in issue and to be issued pursuant to the Global Offering (including any
additional H Shares pursuant to the exercise of the Over-allotment Option) on the Main
Board of the Stock Exchange and such approval and permission not subsequently having
been withdrawn or revoked prior to the Listing Date;
(b) the execution and delivery of the International Underwriting Agreement on or around the
Price Determination Date;
(c) the Offer Price having been agreed between our Company and the Sponsor-Overall
Coordinator (on behalf of the Underwriters) on or before the Price Determination Date;
and
(d) the obligations of the underwriters unde r both the Hong Kong Underwriting Agreement
and the International Underwriting Agreement having become unconditional and not
having been terminated in accordance wit h 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) and
in any event not later than Friday, November 29, 2024.
If, for any reason, the Offer Price is not agreed be tween the Sponsor-Overall Coordinator (for
itself and on behalf of the Hong Kong Underwriters) and our Company on or before 12:00 noon on
the Price Determination Date, the Global Offering will not proceed and will lapse.
The consummation of each of the Hong Kong Public Offering and the International Offering is
conditional upon, among others, the other becomin g unconditional and not having been terminated
in accordance with its terms.
If the above conditions are not fulfilled or waived before the dates and times specified, the
Global Offering will not proceed and will lapse, and the Stock Exchange will be notified
immediately. We will publish a notice of the lapse of the Hong Kong Public Offering on the
website of the Stock Exchange at
www.hkexnews.hk and the website of our Company at http://
www.mokingran.com on the next business day following the lapse. In such eventuality, all
application monies will be returned, without int erest, on the terms set out in the subsection headed
‘‘How to Apply for the Hong Kong Offer Shares — Despatch/Collection of H Share Certificates
and Refund of Application Monies ’’. In the meantime, the application monies will be held in
separate accounts with the receiving banks or ot her bank(s) in Hong Kong licensed under the
Banking Ordinance (Chapter 155 of the Laws of Hong Kong).
STRUCTURE OF THE GLOBAL OFFERING
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--- page 568 ---
H Share certificates for the Offer Shares are e xpected to be issued on Thursday, November 28,
2024, but they will only become valid evidence of title at 8:00 a.m. on Friday, November 29, 2024,
provided the Global Offering has become unconditional in all respects at or before that time.
DEALING ARRANGEMENTS
Assuming that the Hong Kong Public Offering becomes unconditional at or before 8:00 a.m.
in Hong Kong on Friday, November 29, 2024, it is expected that dealings in our H Shares on the
Stock Exchange will commence at 9:00 a.m. on that date.
Our H Shares will be traded in board lots of 200 H Shares each and the stock code of our H
Shares will be 2585.
STRUCTURE OF THE GLOBAL OFFERING
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--- page 569 ---
IMPORTANT NOTICE TO INVESTORS
OF HONG KONG OFFER SHARES
FULLY ELECTRONIC APPLICATION PROCESS
We have adopted a fully electronic application process for th e Hong Kong Public Offering.
We will not provide printed copies of this prospectus 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 http://
www.mokingran.com . You may download and print from these website addresses if you want a
printed copy of this prospectus.
The contents of the electronic version of the prospectus are identical to the printed prospectus as
registered with the Registrar of Companies in Hong Kong pursuant to Section 342C of the
Companies (WUMP) Ordinance.
APPLICATION FOR HONG KONG OFFER SHARES
1 WHO CAN APPLY
If you apply for Hong Kong Offer Shares, then you may not apply for or indicate an interest
for International Offer Shares.
You can apply for Hong Kong Offer Shares if you or the person(s) for whose benefit you are
applying:
. are 18 years of age or older;
. have a Hong Kong address (for the White Form eIPO service only);
. are outside the United States (within the meaning of Regulation S), and are a person
described in paragraph (h)(3) of Rule 902 of Regulation S; and
. are not a legal or natural mainland China pers on (except qualified domestic institutional
investors).
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;
. are a director, supervisor or chief executive officer of ours and/or any of our subsidiaries;
or
. are a close associate of any of the above persons.
HOW TO APPLY FOR THE HONG KONG OFFER SHARES
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--- page 570 ---
2 APPLICATION CHANNELS
The Hong Kong Public Offering period will begin at 9:00 a.m. on Thursday, November 21,
2024 and end at 12:00 noon on Tuesday, November 26, 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
White Form eIPO
Service
www.eipo.com.hk Investors who would
like to receive a
physical H Share
certificate. Hong
Kong Offer Shares
successfully applied
for will be allotted
and issued in your
own name.
From 9:00 a.m. on
Thursday, November
21, 2024 to 11:30
a.m. Tuesday,
November 26, 2024,
Hong Kong time.
T h el a t e s tt i m ef o r
completing full
payment of
application monies
will be 12:00 noon on
Tuesday, November
26, 2024, Hong Kong
time.
HKSCC EIPO
channel
Your broker or
custodian who is an
HKSCC Participant
will submit an EIPO
application on your
behalf through
HKSCC ’s FINI
system in accordance
with your instruction
Investors who would
not like to receive a
physical H Share
certificate. Hong
Kong Offer Shares
successfully applied
for will be allotted
and issued in the
name of HKSCC
Nominees, deposited
directly into CCASS
and credited to your
designated HKSCC
Participant ’s stock
account.
Contact your broker
or custodian for the
earliest and latest time
for giving such
instructions, as this
may vary by broker or
custodian.
HOW TO APPLY FOR THE HONG KONG OFFER SHARES
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--- page 571 ---
The White Form eIPO service and the HKSCC EIPO channel are facilities subject to
capacity limitations and potential service interru ptions 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 White Form eIPO service, once you complete payment in
respect of any application instructions given by you or for your benefit through the White Form
eIPO service to make an application for Hong Kong Offer Shares, an actual application shall be
deemed to have been made. If you are a person for whose benefit the electronic application
instructions are given, you shall be deemed t o have declared that only one set of electronic
application instructions has been given for your be nefit. 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 White Form eIPO
service more than once and obtaining different appl ication reference numbers without effecting full
payment in respect of a particular reference number will not constitute an actual application.
If you apply through the White Form eIPO service, you are deemed to have authorized the
White Form eIPO Service Provider to apply on the terms and conditions in this prospectus, as
supplemented and amended by the terms and conditions of the White Form eIPO service.
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 appli cation 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 HKS CC 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.
Only one application may be made for the benefit of any person. If you are suspected of
making more than one application through the White Form eIPO service or any other channel, all
of your applications are liable to be rejected.
HOW TO APPLY FOR THE HONG KONG OFFER SHARES
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--- page 572 ---
3 INFORMATION REQUIRED TO APPLY
You must provide the following information with your application:
For Individual/Joint Applicants For Corporate Applicants
. Full name(s) 2 as shown on your
identity document
. Full name(s) 2 as shown on your identity
document
. Identity document ’s issuing country
or jurisdiction
. Identity document ’s issuing country or
jurisdiction
. Identity document type, with order
of priority:
. Identity document type, with order of
priority:
i. HKID card; or i. LEI registration document; or
ii. National identification
document; or
ii. Certificate of incorporation; or
iii. Passport; and iii. Busines s Registration Certificate; or
. Identity document number iv. Other equivalent document; and
. Identity document number
Notes:
1. If you are applying through the White Form eIPO service, you are required to provide a valid e-mail address,
a contact telephone number and a Hong Kong address. You are also required to declare that the identity
information provided by you follows the requirements as described in Note 2 below. In particular, where you
cannot provide a HKID number, you must confirm that you do not hold a HKID card.
2. The applicant ’s full name as shown on their identity document must be used. If an applicant ’s identity
document contains both an English and Chinese name, both English and Chinese names must be used.
Otherwise, either English or Chinese names will be accepted. The order of priority of the applicant ’s identity
document type must be strictly followed and where an i ndividual applicant has a valid HKID card, the HKID
number must be used when making an application to subscribe for Hong Kong Offer Shares. Similarly for
corporate applicants, a LEI number must be used if an entity has a LEI certificate.
3. If the applicant is a trustee, the client identification data ( ‘‘CID’’) of the trustee, as set out above, will be
required. If the applicant is an investment fund (i.e. a collective investment scheme, or CIS), the CID of the
asset management company or the individual fund, as appropriate, which has opened a trading account with
the broker will be required, as above.
4. The maximum number of joint applicants on FINI is capped at 4 in accordance with market practice.
HOW TO APPLY FOR THE HONG KONG OFFER SHARES
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--- page 573 ---
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, i n the case(s) of joint beneficial owners, for each joint
beneficial owner. If you do not include this informa tion, the application will be treated as being made for
your benefit.
6. If you are applying as an unlisted company and (i) the principal business of that company is dealing in
securities; and (ii) you exercise statutory control over that company, then the application will be treated as
being for your benefit and you should provide the required information in your application as stated above.
‘‘Unlisted company ’’means a company with no equity securities listed on the Stock Exchange or any other
stock exchange.
‘‘Statutory control ’’means you:
. control the composition of the board of directors of the company;
. control more than half of the voting power of the company; or
. hold more than half of the issued share capital of the company (not counting any part of it which
carries no right to participate beyond a specified amount in a distribution of either profits or capital).
For those applying through HKSCC EIPO channel, and making an application under a power
of attorney, we and the Sponsor-Overall Coordinator, as our agent, have discretion to consider
whether to accept it on any conditions we think f it, including evidence of the attorney ’s authority.
Failing to provide any required information may result in your application being rejected.
HOW TO APPLY FOR THE HONG KONG OFFER SHARES
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--- page 574 ---
4 PERMITTED NUMBER OF HONG KONG OFFER SHARES FOR APPLICATION
Board lot size : 200 H Shares
Permitted Number of
Hong Kong Offer
Shares for application
and amount payable
on application/
successful allotment
: Hong Kong Offer Shares are available for application in
specified board lot sizes only. Please refer to the amount
payable associated with each s pecified board lot size in the
table below.
The maximum Offer Price is HK$14.40 per Share.
If you are applying through the HKSCC EIPO channel, you
are required to pre-fund your application based on the
amount specified by your broker or custodian, as determined
based on the applicable laws and regulations in Hong Kong.
By instructing your broker or custodian to apply for the
Hong Kong Offer Shares on your behalf through the
HKSCC EIPO channel, you (and, if you are joint
applicants, each of you jointly a nd severally) are deemed to
have instructed and authorized HKSCC to cause HKSCC
Nominees (acting as nominee for the relevant HKSCC
Participants) to arrange payment of the final Offer Price,
brokerage, SFC transactio n levy, the Stock Exchange
trading fee and the AFRC transaction levy by debiting the
relevant nominee bank account at the designated bank for
your broker or custodian.
If you are applying through the White Form eIPO service,
you may refer to the table below for the amount payable for
the number of Shares you have selected. You must pay the
respective amount payable on application in full upon
application for Hong Kong Offer Shares.
HOW TO APPLY FOR THE HONG KONG OFFER SHARES
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--- page 575 ---
No. of
Hong Kong
Offer Shares
applied for
Amount payable (2)
on application
No. of
Hong Kong
Offer Shares
applied for
Amount payable (2)
on application
No. of
Hong Kong
Offer Shares
applied for
Amount payable (2)
on application
No. of
Hong Kong
Offer Shares
applied for
Amount payable (2)
on application
HK$ HK$ HK$ HK$
200 2,909.04
400 5,818.10
600 8,727.13
800 11,636.18
1,000 14,545.22
1,200 17,454.28
1,400 20,363.31
1,600 23,272.35
1,800 26,181.40
2,000 29,090.45
3,000 43,635.67
4,000 58,180.90
5,000 72,726.12
6,000 87,271.34
7,000 101,816.57
8,000 116,361.79
9,000 130,907.01
10,000 145,452.25
20,000 290,904.48
30,000 436,356.72
40,000 581,808.95
50,000 727,261.20
60,000 872,713.45
70,000 1,018,165.68
80,000 1,163,617.92
90,000 1,309,070.15
100,000 1,454,522.40
200,000 2,909,044.80
300,000 4,363,567.20
400,000 5,818,089.60
500,000 7,272,612.00
600,000 8,727,134.40
700,000 10,181,656.80
800,000 11,636,179.20
900,000 13,090,701.60
1,000,000 14,545,224.00
1,250,000 18,181,530.00
1,500,000 21,817,836.00
1,750,000 25,454,142.00
2,000,000 29,090,448.00
2,197,800
(1) 31,967,493.30
Notes:
(1) Maximum number of Hong Kong Offer Shares you may apply for.
(2) The amount payable is inclusive of brokerage, SFC tr ansaction levy, the Stock Exchange trading fee and
AFRC transaction levy. If your application is successful, brokerage will be paid to the Exchange Participants
(as defined in the Listing Rules) and the SFC transact ion levy, the Stock Exchange trading fee and the AFRC
transaction levy are paid to the Stock Exchange (in the case of the SFC transaction levy, collected by the
Stock Exchange on behalf of the SFC; and in the case of the AFRC transaction levy, collected by the Stock
Exchange on behalf of the AFRC).
No application for any other number of the Hong Kong Offer Shares will be considered and
any such application is liable to be rejected.
5 MULTIPLE APPLICATIONS PROHIBITED
You or your joint applicant(s) shall not make more than one application for your own benefit,
except where you are a nominee and provide the information of the underlying investor in your
application as required under the paragraph headed ‘‘— Applications for Hong Kong Offer Shares
— 3. Information Required to Apply ’’in this section. If you are suspected of submitting or cause to
submit more than one application, all of your applications will be rejected.
Multiple applications made either through (i) the White Form eIPO service, (ii) HKSCC
EIPO channel, or (iii) both channels concurrently ar e prohibited and will be rejected. If you have
made an application through the White Form eIPO service or HKSCC EIPO channel, you or the
person(s) for whose benefit you have made the application shall not apply for any International
Offer Shares.
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--- page 576 ---
6 TERMS AND CONDITIONS OF AN APPLICATION
By applying for Hong Kong Offer Shares through the White Form eIPO service or HKSCC
EIPO channel, you (or as the case may be, HKSCC Nominees will do the following things on your
behalf):
(a) undertake to execute all relevant documen ts and instruct and authorize us and/or the
Sponsor-Overall Coordinator (or its agent s or nominees), 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;
(b) confirm that you have read and understand the terms and conditions and application
procedures set out in this prospectus and the designated website of the White Form
eIPO Service Provider (or as the case may be, the agreement you entered into with your
broker or custodian), and agree to be bound by them;
(c) (if you are applying through the HKSCC EIPO channel) agree to the arrangements,
undertakings and warranties under the par ticipant agreement between your broker or
custodian and HKSCC and observe the General Rules of HKSCC and the HKSCC
Operational Procedures for giving applicatio n instructions to apply for Hong Kong Offer
Shares;
(d) confirm that you are aware of the restrictio ns 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;
(e) confirm that you have read this prospectus and have only relied on the information and
representations contained in this prospectus in making your application and will not rely
on any other information or rep resentations, except those co ntained in any supplement to
this prospectus;
(f) agree that none of us, the Sole Sponsor, the Sponsor-Overall Coordinator, the Sole
Global Coordinator, the Joint Bookrunners, the Joint Lead Managers, the Underwriters,
the H Share Registrar, HKSCC, any of our or th eir affiliates or any of their respective
directors, officers, employees, agents or a dvisers, or any other persons or parties
involved in the Global Offering is or will be liable for any information and
representations not contained in this prospectus (and any supplement to it);
(g) agree to disclose the details of your application and your personal data and any other any
personal data which may be required about you and the person(s) for whose benefit you
have made the application to us, our H Share Registrar, receiving bank(s), the Sole
Sponsor, the Sponsor-Overall Coordinator, the Sole Global Coordinator, the Joint
Bookrunners, the Joint Lead Managers, the Underwriters, HKSCC, HKSCC Nominees,
HOW TO APPLY FOR THE HONG KONG OFFER SHARES
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--- page 577 ---
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 ‘‘— Personal Data — Purposes ’’and ‘‘- Personal Data — Transfer of
personal data ’’in this section;
(h) 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;
(i) agree that subject to Section 44A(6) of the Companies (WUMP) Ordinance, any
application made by you or HKSCC Nominees on your behalf cannot be revoked once it
is accepted, which will be evidenced by the notification of the result of the ballot by the
H Share Registrar by way of publication of the results at the time and in the manner as
specified in the paragraph headed ‘‘— Publication of Results ’’in this section;
(j) confirm that you are aware of the situations specified in the paragraph headed ‘‘ —
Circumstances in which You Will Not Be Allocated Hong Kong Offer Shares ’’in this
section;
(k) 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;
(l) agree to comply with the Companies Ordi nance, Companies (WUMP) Ordinance, the
Articles of Association and the PRC Compa ny Law, and that neither we nor the Sole
Sponsor, the Sponsor-Overall Coordinator, the Sole Global Coordinator, the Joint
Bookrunners, the Joint Lead Managers and the Underwriters will breach any law inside
and/or outside Hong Kong as a result of the acc eptance of your offer to purchase, or any
action arising from your rights and obligations under the terms and conditions contained
in this prospectus;
(m) confirm that (a) your application or HKSCC Nominees ’ application on your behalf is not
financed directly or indirectly by the Company, any of the directors, chief executives,
substantial Shareholder(s) or existing shareholder(s) of the Company or any of its
subsidiaries or any of their respective close associates; and (b) you are not accustomed or
will not be accustomed to taking instructions from the Company, any of the directors,
chief executives, substantial shareholder(s) or existing shareholder(s) of the Company or
any of its subsidiaries or any of their resp ective close associates in relation to the
acquisition, disposal, voting or other disposition of the H Shares registered in your name
or otherwise held by you;
(n) warrant that the information you have provided is true and accurate;
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--- page 578 ---
(o) confirm that you understand that we, our Directors and the Sponsor-Overall Coordinator
will rely on your declarations and represent ations in deciding whether or not to make any
allotment of any of the Hong Kong Offer Shares to you and that you may be prosecuted
for making a false declaration;
(p) agree to accept the Hong Kong Offer Shares applied for, or any lesser number allocated
to you under the application;
(q) 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;
(r) represent, warrant and undertake that (i) you understand that the Hong Kong Offer
Shares have not been and will not be registered under the U.S. Securities Act; and (ii)
you and any person for whose benefit you are applying for the Hong Kong Offer Shares
are outside the United States (as defined i n Regulation S) or are a person described in
paragraph (h)(3) of Rule 902 of Regulation S;
(s) undertake and confirm that you or the per son(s) for whose benefit you have made the
application have not applied for or taken up, or indicated an interest for, and will not
apply for or take up, or indicate an interest for, any International Offer Shares nor have
participated in the International Offering;
(t) confirm that you are aware of the restrictions on the Global Offering set out in this
prospectus;
(u) (if you are making the application 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 through the White Form eIPO service or by any one as your agent
or by any other person;
(v) (if you are making the application as an agent for the benefit of another person) warrant
that: (i) no other application has been or will be made by you as agent for or for the
benefit of that person or by that person or by any other person as agent for that person
by giving application instructions to HKSCC; and (ii) you have due authority to give
electronic application instructions on beha lf of that other person as its agent; and
(w) if the laws of any place outside Hong Kong apply to your application, agree and warrant
that you have complied with all these laws and none of us nor any of the Sole Sponsor,
the Sponsor-Overall Coordinator, the Sole Global Coordinator, the Joint Bookrunners,
the Joint Lead Managers, the Underwriters will breach any of these laws 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.
HOW TO APPLY FOR THE HONG KONG OFFER SHARES
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--- page 579 ---
PUBLICATION OF RESULTS
Results of Allocation
You can check whether you are successfully allocated any Hong Kong Offer Shares through:
Platform Date/Time
Applying through White Form eIPO service or HKSCC EIPO channel:
Website The designated results of allocation at
www.iporesults.com.hk (alternatively: www.eipo.com.hk/
eIPOAllotment ) with a ‘‘search by ID ’’function.
The full list of (i) wholly or partially successful applicants
using the White Form eIPO service and HKSCC EIPO
channel, and (ii) the number of Hong Kong Offer Shares
conditionally allotted to them, among other things, will be
displayed on the “Allotment Results ” page of the designated
results of allocation at
www.iporesults.com.hk (alternatively:
www.eipo.com.hk/eIPOAllotment )
24 hours, from 11:00 p.m. Thursday,
November 28, 2024 to 12:00 midnight,
Wednesday, December 4, 2024 (Hong
Kong time)
The Stock Exchange ’s website at
www.hkexnews.hk and our
website at http://www.mokingran.com which will provide
links to the above mentioned websites of the H Share
Registrar.
No later than 11:00 p.m. on Thursday,
November 28, 2024 (Hong Kong time).
Telephone +852 2862 8555 — the allocation results telephone enquiry
line provided by the H Share Registrar
Between 9:00 a.m. and 6:00 p.m.,
from Friday, November 29, 2024 to
Wednesday, December 4, 2024
(excluding Saturdays, Sundays and
public holidays in Hong Kong)
For those applying through HKSCC EIPO channel, you may also check with your broker or custodian from 6:00
p.m. Wednesday, November 27, 2024 (Hong Kong time).
HKSCC Participants can log into FINI and review the allotment result from 6:00 p.m. on
Wednesday, November 27, 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 http://www.mokingran.com by no later than 11:00 p.m. on
Thursday, November 28, 2024 (Hong Kong time).
HOW TO APPLY FOR THE HONG KONG OFFER SHARES
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--- page 580 ---
CIRCUMSTANCES IN WHICH YOU WILL NOT BE ALLOCATED HONG KONG OFFER
SHARES
You should note the following situations in which no Hong Kong Offer Shares will be
allocated to you or the person(s) for whose benefit you are applying for:
1. If your application is revoked:
Your application or the application made by HKSCC Nominees on your behalf may be
revoked pursuant to Section 44A(6) of the Companies (WUMP) Ordinance.
2. If we or our agents exercise discretion to reject your application:
We, the Sponsor-Overall Coordinator, the H Share Registrar and our/their respective
agents and nominees have full discretion to rej ect or accept any application, or to accept only
part of any application, without giving any reasons.
3. If the allocation of Hong Kong Offer Shares is void:
The allocation of Hong Kong Offer Shares will be void if the Stock Exchange does not
grant permission to list our H Shares either:
. within three weeks from the closing date of the application lists; or
. within a longer period of up to six weeks if the Stock Exchange notifies us of that
longer period within three weeks of the closing date of the application lists.
4. If:
. you make multiple applications or suspected multiple applications. You may refer to
the paragraph headed ‘‘— Applications for Hong Kong Offer Shares — 5. Multiple
Applications Prohibited’’ in this section on what constitutes multiple applications;
. your application instruction is incomplete;
. your payment (or confirmation of funds, as the case may be) is not made correctly;
. the Underwriting Agreements do not become unconditional or are terminated; or
. we or the Sponsor-Overall Coordinator b elieve that by accepting your application,
we or they would violate applicable securi ties or other laws, rules or regulations.
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--- page 581 ---
5. If there is money settlement failure for allotted Shares:
Based on the arrangements between HKS CC Participants and HKSCC, HKSCC
Participants will be required to hold sufficient application funds on deposit with their
designated bank before balloting. After bal loting 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 designate d bank to determine the cause of failure and request such
defaulting HKSCC Participant to rectif y 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 w ill not be allocated any Hong Kong Offer Shares
due to the money settlement failure by such HKSCC Participant. None of us, the Sole
Sponsor, the Sponsor-Overall Coordinator, the Sole Global Coordinator, the Joint
Bookrunners, the Joint Lead Managers, the Underwriters, the H Share Registrar and HKSCC
is or will be liable if Hong Kong Offer Shares are not allocated to you due to the money
settlement failure.
DESPATCH/COLLECTION OF H SHARE CERTIFICATES AND REFUND OF
APPLICATION MONIES
You will receive one H Share certificate for all Hong Kong Offer Shares allocated to you
under the Hong Kong Public Offering (except pursuant to applications made through the HKSCC
EIPO channel where the H Share certificate will be deposited into CCASS as described below).
We will not issue: (i) the temporary document o f title in respect of our H Shares; or (ii) the
receipt for sums paid on application.
H Share certificates will only become valid evidence of title at 8:00 a.m. on Friday, November
29, 2024 (Hong Kong time), provided that the Global Offering has become unconditional and the
right of termination described in the section headed ‘‘Underwriting ’’has not been exercised.
Investors who trade H Shares prio r to the receipt of H Share certificates or the H Share certificates
becoming valid evidence of title do so entirely at their own risk.
The right is reserved to retain any H Share certificate(s) and (if applicable) any surplus
application monies pending clearance of application monies.
HOW TO APPLY FOR THE HONG KONG OFFER SHARES
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--- page 582 ---
The following sets out the relevant procedures and time:
White Form eIPO Service HKSCC EIPO channel
Despatch/collection of H Share certificate 1
For physical share
certificates of
1,000,000 or more
Offer Shares issued
under your own name
Collection in person from our H Share Registrar at
Shops 1712– 1716, 17th Floor, Hopewell Centre, 183
Queen ’s Road East, Wan Chai, Hong Kong.
Time: from 9:00 a.m. to 1:00 p.m. on Friday,
November 29, 2024 (Hong Kong time)
If you are an individual, you must not authorise any
other person to collect for you. If you are a corporate
applicant, your authorised representative must bear a
letter of authorization from your corporation stamped
with your corporation ’s chop.
Both individuals and authorised representatives must
produce, at the time of collection, evidence of
identity acceptable to the H Share Registrar.
Note: If you do not collect your 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.
H Share certificate(s) will be
issued in the name of HKSCC
Nominees, deposited into CCASS
and credited to your designated
HKSCC Participant ’s stock
account.
No action by you is required.
For physical share
certificates of less than
1,000,000 Offer Shares
issued under your own
name
Your H Share certificate(s) will be sent to the
address specified in your application instructions by
ordinary post at your own risk.
Time: Thursday, November 28, 2024
Refund mechanism for surplus application monies paid by you
Date Friday, November 29, 2024 Subject to the arrangement
between you and your broker or
custodian
Responsible party H Share Registrar Your broker or custodian
Application monies
paid through single
bank account
Any refund will be despatched to the bank account in
the form of White Form e-Refund payment
instructions
Your broker or custodian will
arrange refund to your designated
bank account subject to the
arrangement between you and it.
Application monies
paid through multiple
bank accounts
Refund cheque(s) will be dispatched to the address
as specified in your application instructions by
ordinary post at your own risk
1 Except in the event of any Bad Weather Signals (as defined below) in force in Hong Kong in the morning on the
business day before the Listing Date rendering it impossibl e for the relevant share certificates to be dispatched to
HKSCC in a timely manner, the Company shall procure t he H Share Registrar to arrange for delivery of the
supporting documents and share certificates in accord ance with the contingency arrangements as agreed between
them. You may refer to ‘‘— Bad Weather Arrangements ’’in this section.
HOW TO APPLY FOR THE HONG KONG OFFER SHARES
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--- page 583 ---
BAD WEATHER ARRANGEMENTS
The Opening and Closing of the Application Lists
The application lists will not open or close on Tuesday, November 26, 2024 if, there is (are):
. a tropical cyclone warning signal number 8 or above;
. a ‘‘black ’’rainstorm warning; and/or
. Extreme Conditions
(collectively, ‘‘Bad Weather Signals ’’)
in force in Hong Kong at any time between 9:00 a.m. and 12:00 noon on Tuesday, November 26,
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 any of those warnings in Hong Kong 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 list ing date. Should there be any changes to the dates
mentioned in the section headed ‘‘Expected Timetable’’ in this prospectus, an announcement will be
made and published on the Stock Exchange ’s website at
www.hkexnews.hk and our website at
http://www.mokingran.com of the revised timetable.
If any of those warnings is hoisted on Thursday, November 28, 2024, the H Share Registrar
will make appropriate arrangements for the delivery of the share certificates to the CCASS
Depository ’s service counter so that they would be available for trading on Friday, November 29,
2024.
If any of those warnings is hoisted on Friday, November 29, 2024:
. for physical share certificates of 1,000,000 or more offer shares issued under your own
name, you may pick them up from the H Share Registrar’ s office after any of those
warnings is lowered or cancelled (e.g. in the afternoon of Friday, November 29, 2024 or
on Monday, December 2, 2024.
If any of those warnings is hoisted on Thursday, November 28, 2024:
. for physical share certificates of less than 1,000,000 offer shares issued under your own
name, despatch will be made by ordinary post when the post office re-opens after any of
those warnings is lowered or cancelled (e.g. in the afternoon of Thursday, November 28,
2024, or on Friday, November 29, 2024.
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--- page 584 ---
Prospective investors should be aware tha t if they choose to receive physical share
certificates issued in their own name, there may be a delay in receiving the share certificates.
ADMISSION OF OUR H SHARES INTO CCASS
If the Stock Exchange grants the listing of, and permission to deal in, our H Shares and we
comply with the stock admission requirements of HKSCC, our H Shares will be accepted as eligible
securities by HKSCC for deposit, clearance and settlement in CCASS with effect from the Listing
Date or any other date HKSCC chooses.
Settlement of transactions between Exchange Participants is required to take place in CCASS
on the second settlement day after any trading day.
All activities under CCASS are subject to the General Rules of HKSCC and HKSCC
Operational Procedures in effect from time to time.
All necessary arrangements have been made enabling the H Shares to be admitted into
CCASS.
You 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.
PERSONAL DATA
The following Personal Information Collection Statement applies to any personal data
collected and held by us, the Sole Sponsor, the Sponsor-Overall Coordinator, the Sole Global
Coordinator, the Joint Bookrunners, the Joint Lead Managers, the Underwriters, the H Share
Registrar and the receiving bank(s) about you in the same way as it applies to personal data about
applicants other than HKSCC Nominees. This personal data may include c lient 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.
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 ours and the H Share Registrar in relation to
personal data and the Personal Data (Privacy) Ordinance (Chapter 486 of the Laws of Hong Kong).
Reasons for the collection of your personal data
It is necessary for applicants and registered holders of Hong Kong Offer Shares to ensure that
personal data supplied to us or our agents and the H Share Registrar is accurate and up-to-date
when applying for Hong Kong Offer Shares or transferring Hong Kong Offer Shares into or out of
their names or in procuring the services of the H Share Registrar.
HOW TO APPLY FOR THE HONG KONG OFFER SHARES
– 574 –


--- page 585 ---
Failure to supply the requested data or supplying inaccurate data may result in your
application for the Hong Kong Offer Shares being re jected, or in the delay or the inability of us or
the H Share Registrar to effect transfers or otherwise render their services. It may also prevent or
delay registration or transfers of Hong Kong Offe r Shares which you have successfully applied for
and/or the despatch of H Share certificate(s) to which you are entitled.
It is important that applicants for and holders of Hong Kong Offer Shares inform us and the H
Share Registrar immediately of any inaccuracies in the personal data supplied.
Purposes
Your personal data may be used, held, processed, and/or stored (by whatever means) for the
following purposes:
. processing your application and refund cheque and White Form e-Refund payment
instruction(s), where applicable, verif ication of compliance with the terms and
application procedures set out in this prospectus and announcing results of allocation of
the Hong Kong Offer Shares;
. compliance with applicable laws and re gulations in Hong Kong and elsewhere;
. registering new issues or transfers int o or out of the names of the holders of our H
Shares including, where applicable, HKSCC Nominees;
. maintaining or updating our register of members;
. verifying identities of the applicants for and holders of our H Shares and identifying any
duplicate applications for our H Shares;
. facilitating Hong Kong Offer Shares balloting;
. establishing benefit entitlements of holde rs of our H Shares, such as dividends, rights
issues, bonus issues, etc.;
. distributing communications from us and our subsidiaries;
. compiling statistical information and profiles of the holder of our H Shares;
. disclosing relevant information to facilitate claims on entitlements; and
. any other incidental or associated purposes relating to the above and/or to enable us and
the H Share Registrar to discharge our or their obligations to applicants and holders of
our H Shares and/or regulators and/or any other purposes to which the applicants and
holders of the H Shares may from time to time agree.
HOW TO APPLY FOR THE HONG KONG OFFER SHARES
– 575 –


--- page 586 ---
Transfer of personal data
Personal data held by us and the H Share Registrar relating to the applicants for and holders
of Hong Kong Offer Shares will be kept confidential, but we and the H Share Registrar may, to the
extent necessary for achieving any of the above purposes, disclose, obtain or transfer (whether
within or outside Hong Kong) the personal data to, from or with any of the following:
. our appointed agents such as financial advisers and receiving bank(s);
. HKSCC or HKSCC Nominees, who will use the personal data and may transfer the
personal data to the H Share Registrar for the purposes of providing its services or
facilities or performing its functions in accordance with its rules or procedures and
operating FINI and CCASS (including where applicants for the Hong Kong Offer Shares
request a deposit into CCASS);
. any agents, contractors or third-party service providers who offer administrative,
telecommunications, computer, payment or other services to us or the H Share Registrar
in connection with their respective business operation;
. the Stock Exchange, the SFC and any other statutory regulatory or governmental bodies
or otherwise as required by laws, rules or regulations including for the purpose of the
Stock Exchange ’s administration of the Listing Rules and the SFC ’s performance of its
statutory functions; and
. any persons or institutions with which the holders of the Hong Kong Offer Shares have
or propose to have dealings, such as the ir bankers, solicitors, accountants or
stockbrokers, etc.
Retention of personal data
We and the H Share Registrar will keep the personal data of the applicants and holders of
Hong Kong Offer Shares for as long as necessary to f ulfil 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).
Access to and correction of personal data
Applicants for and holders of Hong Kong Offer Shares have the right to ascertain whether we
or the H Share Registrar hold their personal data, to obtain a copy of that data, and to correct any
data that is inaccurate. We and the H Share Registr ar 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 us and the H Share Registrar, at our and their registered address disclosed in the
section headed ‘‘Corporate Information’’ in this prospectus or as notified from time to time, for the
attention of the secretary, or the H Share Registr ar for the attention of the privacy compliance
officer.
HOW TO APPLY FOR THE HONG KONG OFFER SHARES
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--- page 587 ---
The following is the text of a report set out on pages I-1 to I-92, received from the Company’ s
reporting accountants, Deloitte Touche Tohmatsu, Certified Public Accountants, Hong Kong, for
the purpose of incorporation in this prospectus.
ACCOUNTANTS’ REPORT ON HISTORICAL FINANCIAL INFORMATION TO THE
DIRECTORS OF MOKINGRAN JEWELLERY GROUP CO., LTD. AND CITIC
SECURITIES (HONG KONG) LIMITED
Introduction
We report on the historical financial informa tion of Mokingran Jewellery Group Co., Ltd.
(夢金園黃金珠寶集團股份有限公司, the ‘‘Company ’’) and its subsidiaries (together, the
‘‘Group ’’) set out on pages I-4 to I-92, which comprises the consolidated statements of financial
position of the Group as at December 31, 2021, 2022 and 2023 and June 30, 2024, the statements
of financial position of the Company as at December 31, 2021, 2022 and 2023 and June 30, 2024,
and the consolidated statements of profit or loss and other comprehensive income, the consolidated
statements of changes in equity and the consolida ted statements of cash flows of the Group for each
of the three years ended December 31, 2023 and the six months ended June 30, 2024 (the ‘‘Track
Record Period ’’) and material accounting policy information and other explanatory information
(together, the ‘‘Historical Financial Information’’ ). The Historical Financial Information set out
on pages I-4 to I-92 forms an integral part of this report, which has been prepared for inclusion in
the prospectus of the Company dated November 21, 2024 (the ‘‘Prospectus ’’) in connection with
the initial listing of shares of the Company on the Main Board of The Stock Exchange of Hong
Kong Limited (the ‘‘Stock Exchange ’’).
Directors ’responsibility for the Historical Financial Information
The directors of the Company are responsible for the preparation of the Historical Financial
Information that gives a true and fair view in acc ordance with the basis of preparation set out in
Note 2 to the Historical Financial Information, and for such internal control as the directors of the
Company determine is necessary to enable the prepa ration 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 (the ‘‘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.
APPENDIX I ACCOUNTANTS ’REPORT
– I-1 –


--- page 588 ---
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 misstatem ent 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 the Historical
Financial Information that gives a true and fair view in accordance with the basis of preparation set
out in Note 2 to the Historical Financial Information in order to design procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the entity ’s internal control. Our work also included evaluating the appropriateness
of accounting policies used and the reasonablene ss of accounting estimates made by the directors of
the Company, as well as evaluating the overall presentation of the Historical Financial Information.
We believe that the evidence we have obtained is sufficient and appropriate to provide a basis
for our opinion.
Opinion
In our opinion, the Historical Financial Information gives, for the purposes of the accountants ’
report, a true and fair view of the Group ’s financial position as at December 31, 2021, 2022 and
2023 and June 30, 2024, of the Company’ s financial position as at December 31, 2021, 2022 and
2023 and June 30, 2024 and of the Group ’s financial performance and cash flows for the Track
Record Period in accordance with the basis of preparation set out in Note 2 to the Historical
Financial Information.
Review of stub period comparative financial information
We have reviewed the stub period comparative financial information of the Group which
comprises the consolidated statement of profit or loss and ot her comprehensive income, the
consolidated statement of changes in equity and the consolidated statement of cash flows for the six
months ended June 30, 2023 and other explanatory information (the ‘‘Stub Period Comparative
Financial Information ’’). The directors of the Company are res ponsible for the preparation of the
Stub Period Comparative Financial Information in accordance with the basis of preparation set out
in Note 2 to the Historical Financial Information. Our responsibility is to express a conclusion on
the Stub Period Comparative Financial Information based on our review. We conducted our review
in accordance with Hong Kong Standard on Review Engagements 2410 ‘‘Review of Interim
Financial Information Performed by the Independent Auditor of the Entity ’’issued by the HKICPA.
A review consists of making inquiries, 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. Accord ingly, we do not express an audit opinion. Based
on our review, nothing has come to our attention that causes us to believe that the Stub Period
Comparative Financial Information, for the purposes of the accountants ’ report, is not prepared, in
all material respects, in accordance with the basis of preparation set out in Note 2 to the Historical
Financial Information.
APPENDIX I ACCOUNTANTS ’REPORT
– I-2 –


--- page 589 ---
Report on matters under the Rules Governing th e Listing of Securities on the Stock Exchange
and the Companies (Winding Up and Mis cellaneous Provisions) Ordinance
Adjustments
In preparing the Historical Financial Information, no adjustments to the Underlying Financial
Statements as defined on page I-4 have been made.
Dividends
We refer to Note 17 to the Historical Financial I nformation which contains information about
the dividends declared and paid by the Company in respect of the Track Record Period.
Deloitte Touche Tohmatsu
Certified Public Accountants
Hong Kong
November 21, 2024
APPENDIX I ACCOUNTANTS ’REPORT
– I-3 –


--- page 590 ---
HISTORICAL FINANCIAL INFORMATION OF THE GROUP
Preparation of Historical Financial Information
Set out below is the Historical Financial Information which forms an integral part of this
accountants ’ report.
The consolidated financial statements of the Group for the Track Record Period, on which the
Historical Financial Information is based, have been prepared in accordance with the accounting
policies which conform with Hong Kong Financial Reporting Standards ( ‘‘HKFRSs ’’)i s s u e db yt h e
HKICPA and were audited by us 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 when otherwise indicated.
APPENDIX I ACCOUNTANTS ’REPORT
– I-4 –


--- page 591 ---
CONSOLIDATED STATEMENTS OF PROF IT OR LOSS AND OTHER COMPREHENSIVE
INCOME
For the year ended December 31,
For the six months
ended June 30,
2021 2022 2023 2023 2024
Notes RMB ’000 RMB ’000 RMB ’000 RMB ’000 RMB ’000
(Unaudited)
R e v e n u e................. 6 16,871,000 15,724,215 20,208,599 9,316,213 9,979,744
Cost of sales . . . . . . . . . . . . . . (16,334,559) (14,964,967) (19,131,139) (8,788,177) (9,362,238)
Gross profit . . . . . . . . . . . . . . . 536,441 759,248 1,077,460 528,036 617,506
O t h e ri n c o m e .............. 7 27,430 28,401 27,773 7,502 10,648
Distribution and selling expenses . (176,794) (194,473) (257,328) (128,337) (118,939)
Research and development
expenses . . . . . . . . . . . . . . . (10,723) (13,533) (17,470) (7,442) (11,258)
Administrative expenses . . . . . . . (75,94 7) (68,275) (79,770) (33,521) (40,471)
O t h e re x p e n s e s ............. 8 (17,014) (11,465) (8,499) (4,997) (2,098)
Other gains and losses, net . . . . . 9 89,839 (208,961) (370,014) (195,592) (345,725)
F i n a n c ec o s t s .............. 10 (64,161) (56,868) (63,134) (31,142) (35,432)
(Impairment losses)/reversal
of impairment losses under
expected credit loss model, net . 11 (13,197) 10,087 (1,076) (531) (238)
L i s t i n ge x p e n s e s ............ —— (2,829) — (7,132)
Profit before tax . . . . . . . . . . . 295,874 244,161 305,113 133,976 66,861
I n c o m et a xe x p e n s e .......... 12 (71,376) (63,405) (71,641) (27,989) (14,609)
Profit and total comprehensive
income for the year/period .. 13 224,498 180,756 233,472 105,987 52,252
Profit/(loss) and total
comprehensive income/
(expense) for the year/period
attributable to
Owners of the Company . . . . . 220,618 180,825 230,375 104,167 47,433
Non-controlling interests . . . . . 3,880 (69) 3,097 1,820 4,819
224,498 180,756 233,472 105,987 52,252
Earnings per share
Basic and diluted (RMB) . . . . 16 0.98 0.80 1.01 0.45 0.21
APPENDIX I ACCOUNTANTS ’REPORT
– I-5 –


--- page 592 ---
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
As at December 31,
As at
June 30,
2021 2022 2023 2024
Notes RMB’000 RMB ’000 RMB ’000 RMB ’000
Non-current Assets
P r o p e r t y ,p l a n ta n de q u i p m e n t ......... 18 294,724 364,125 400,001 391,700
R i g h t - o f - u s ea s s e t s ................. 19 63,081 55,181 52,837 59,234
I n v e s t m e n tp r o p e r t i e s ............... 20 89,096 84,892 80,695 78,597
I n t a n g i b l ea s s e t s................... 21 7,905 7,573 7,589 6,762
D e f e r r e dt a xa s s e t s................. 22 26,483 24,808 34,069 36,972
Prepayments, deposits and
o t h e rr e c e i v a b l e s................. 25 58,929 47,003 41,502 36,744
Other non-current assets . . . . . . . . . . . . . 335 129 100 92
540,553 583,711 616,793 610,101
Current Assets
I n v e n t o r i e s ...................... 23 2,048,989 1,688,925 2,169,633 2,016,500
Trade receivables .................. 24 97,993 130,922 150,513 171,206
Prepayments, deposits and other
receivables . .................... 25 278,742 261,921 399,406 404,722
Financial assets at fair value through profit
or loss ( ‘‘FVTPL ’’)............... 26 6,011 ———
P l e d g e d / r e s t r i c t e dd e p o s i t s............ 27 569,476 369,555 528,795 444,102
C a s ha n dc a s he q u i v a l e n t s............ 27 153,518 225,359 155,866 364,034
3,154,729 2,676,682 3, 404,213 3,400,564
Current Liabilities
T r a d ea n db i l l sp a y a b l e s ............. 28 45,560 64,953 511,787 302,191
O t h e rp a y a b l e sa n da c c r u a l s........... 29 117,258 122,987 139,142 182,303
L e a s el i a b i l i t i e s ................... 30 12,028 9,600 7,711 11,276
B o r r o w i n g s ...................... 31 1,336,920 829,627 790,041 1,070,379
C o n t r a c tl i a b i l i t i e s ................. 32 27,215 39,044 42,173 72,887
T a xl i a b i l i t i e s ..................... 1 , 8 4 9 1 2 , 2 9 6 2 4 , 9 6 3 1 3 , 3 9 0
G o l dl o a n s ....................... 33 486,998 394,143 502,508 413,627
D e f e r r e di n c o m e ................... 1 3 2 1 3 2 4 1 3 4
P r o v i s i o n ........................ 2 1 0 ———
R e f u n dl i a b i l i t i e s .................. 34 50,995 41,448 32,943 23,615
2,079,165 1,514,230 2, 051,309 2,089,702
N e tC u r r e n tA s s e t s ................. 1 , 075,564 1,162,452 1,352,904 1,310,862
Total Assets less Current Liabilities .... 1 , 616,117 1,746,163 1,969,697 1,920,963
APPENDIX I ACCOUNTANTS ’REPORT
– I-6 –


--- page 593 ---
As at December 31,
As at
June 30,
2021 2022 2023 2024
Notes RMB’000 RMB ’000 RMB ’000 RMB ’000
Non-current Liabilities
D e f e r r e dt a xl i a b i l i t i e s ............... 22 28 26 15 50
L e a s el i a b i l i t i e s ................... 30 16,176 8,623 8,281 11,724
R e f u n dl i a b i l i t i e s .................. 34 59,751 47,928 38,384 25,563
D e f e r r e di n c o m e ................... 2 8 5 1 5 3 1 1 2 9 6
76,240 56,730 46,792 37,433
Net Assets ...................... 1 , 539,877 1,689,433 1,922,905 1,883,530
Capital and Reserves
S h a r ec a p i t a l ..................... 35 224,900 229,067 229,067 229,067
R e s e r v e s........................ 1 , 307,163 1,454,914 1,685,289 1,641,095
Equity attributable to owners of
t h eC o m p a n y ................... 1 , 532,063 1,683,981 1,914,356 1,870,162
Non-controlling interests . . . . . . . . . . . . . 7,814 5,452 8,549 13,368
Total Equity ..................... 1 , 539,877 1,689,433 1,922,905 1,883,530
APPENDIX I ACCOUNTANTS ’REPORT
– I-7 –


--- page 594 ---
STATEMENTS OF FINANCIAL POSITION OF THE COMPANY
As at December 31,
As at
June 30,
2021 2022 2023 2024
Notes RMB’000 RMB ’000 RMB ’000 RMB ’000
Non-current Assets
P r o p e r t y ,p l a n ta n de q u i p m e n t ......... 18 29,731 26,997 24,510 23,278
R i g h t - o f - u s ea s s e t s ................. 19 2,877 2,776 2,674 2,623
I n v e s t m e n tp r o p e r t i e s ............... 20 84,775 80,980 77,193 75,300
I n t a n g i b l ea s s e t s................... 21 4,088 3,527 4,062 3,617
I n v e s t m e n t si ns u b s i d i a r i e s ........... 45B 1,730,510 1,733,125 1,725,125 1,726,125
D e f e r r e dt a xa s s e t s................. 22 150 94 5,456 15,566
Prepayments, deposits and
o t h e rr e c e i v a b l e s................. 25 2,752 3,390 3,175 3,806
1,854,883 1,850,889 1,842,195 1,850,315
Current Assets
I n v e n t o r i e s ...................... 23 205,741 123,854 241,524 239,121
Trade receivables .................. — 514 29 642
A m o u n t sd u ef r o ms u b s i d i a r i e s ......... 44 66,870 22,362 17,170 154,395
Prepayments, deposits and
o t h e rr e c e i v a b l e s................. 25 84,238 127,276 225,866 164,264
P l e d g e d / r e s t r i c t e dd e p o s i t s............ 27 216,655 55,700 132,453 119,162
C a s ha n dc a s he q u i v a l e n t s............ 27 33,953 103,496 25,422 96,113
607,457 433,202 642,464 773,697
Current Liabilities
T r a d ep a y a b l e s.................... 28 4,540 293 1,062 645
A m o u n t sd u et os u b s i d i a r i e s .......... 44 962,313 811,599 680,098 935,181
O t h e rp a y a b l e sa n da c c r u a l s........... 29 2,796 1,858 3,889 6,871
B o r r o w i n g s ...................... 31 278,966 230,284 430,554 429,997
C o n t r a c tl i a b i l i t i e s ................. ——— 4,196
1,248,615 1,044,034 1,115,603 1,376,890
N e tC u r r e n tL i a b i l i t i e s .............. ( 641,158) (610,832) (473,139) (603,193)
Total Assets less Current Liabilities .... 1 , 213,725 1,240,057 1,369,056 1,247,122
Net Assets ...................... 1 , 213,725 1,240,057 1,369,056 1,247,122
Capital and Reserves
S h a r ec a p i t a l ..................... 35 224,900 229,067 229,067 229,067
R e s e r v e s........................ 46 988,825 1,010,990 1,139,989 1,018,055
Total Equity ..................... 1 , 213,725 1,240,057 1,369,056 1,247,122
APPENDIX I ACCOUNTANTS ’REPORT
– I-8 –


--- page 595 ---
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Attributable to owners of the Company
Share
capital
Share
premium
Other
reserve
Share-
based
payments
reserve
Statutory
reserve
Retained
profits Subtotal
Non-
controlling
interests Total
RMB’000 RMB’ 000 RMB ’000 RMB’ 000 RMB’ 000 RMB ’000 RMB’ 000 RMB ’000 RMB ’000
(Note i) (Note ii)
At January 1, 2021 . . . . . . . . . . . . . . . . . 224,900 465,249 (17,965) 68,846 80,278 487,869 1,309,177 5,037 1,314,214
Profit and total comprehensive income for
t h ey e a r...................... ————— 220,618 220,618 3,880 224,498
Recognition of equity-settled share-based
payments (Note 36) .............. ——— 2,268 —— 2,268 — 2,268
Appropriation of statutory reserve . . . . . . . ———— 58,233 (58,233) — ——
Dividend paid to non-controlling
shareholders of a subsidiary . . . . . . . . . ——————— (1,103) (1,103)
——— 2,268 58,233 (58,233) 2,268 (1,103) 1,165
At December 31, 2021 . . . . . . . . . . . . . . . 224,900 465,249 (17,965) 71,114 138,511 650,254 1,532,063 7,814 1,539,877
Profit/(loss) and total comprehensive income/
(expense) for the year . . . . . . . . . . . . . ————— 180,825 180,825 (69) 180,756
Issue of shares (Note 35) ............. 4 , 1 6 7 4 5 , 8 3 3 ———— 50,000 — 50,000
Recognition of equity-settled share-based
payments (Note 36) .............. ——— 130 —— 130 — 130
Acquisition of additional interest in a
s u b s i d i a r y ..................... —— (322) ——— (322) (2,293) (2,615)
Appropriation of statutory reserve . . . . . . . ———— 21,509 (21,509) — ——
Dividend declared (Note 17) ........... ————— (78,715) (78,715) — (78,715)
4,167 45,833 (322) 130 21,509 (100,224) (28,907) (2,293) (31,200)
At December 31, 2022 . . . . . . . . . . . . . . . 229,067 511,082 (18,287) 71,244 160,020 730,855 1,683,981 5,452 1,689,433
Profit and total comprehensive income for
t h ey e a r...................... ————— 230,375 230,375 3,097 233,472
Appropriation to statutory reserve . . . . . . . ———— 40,124 (40,124) — ——
At December 31, 2023 . . . . . . . . . . . . . . . 229,067 511,082 (18,287) 71,244 200,144 921,106 1,914,356 8,549 1,922,905
Profit and total comprehensive income
f o rt h ep e r i o d .................. ————— 47,433 47,433 4,819 52,252
Dividend declared (Note 17) ........... ————— (91,627) (91,627) — (91,627)
At June 30, 2024 . . . . . . . . . . . . . . . . . . 229,067 511,082 (18,287) 71,244 200,144 876,912 1,870,162 13,368 1,883,530
At January 1, 2023 . . . . . . . . . . . . . . . . . 229,067 511,082 (18,287) 71,244 160,020 730,855 1,683,981 5,452 1,689,433
Profit and total comprehensive income
f o rt h ep e r i o d .................. ————— 104,167 104,167 1,820 105,987
At June 30, 2023 (unaudited) . . . . . . . . . . 229,067 511,082 (18,287) 71,244 160,020 835,022 1,788,148 7,272 1,795,420
Notes:
(i) Other reserve mainly represents the differences between the amount by which non-controlling interests are adjusted
and the fair value of consideration paid when the Group acquired partial interests in existing subsidiaries.
(ii) According to the relevant laws of the People ’s Republic of China (the ‘‘PRC’’), the Group ’s subsidiaries established
in the PRC have to transfer a portion of their profits after taxation to the statutory reserve. The transfer to this
reserve must be made before the distribution of a dividend to the equity owners. The transfer can cease when the
balance of the reserve reaches 50% of the r egistered capital of the respective subsidiaries. The reserve can be applied
either to set off accumulated losses or to increase capital.
APPENDIX I ACCOUNTANTS ’REPORT
– I-9 –


--- page 596 ---
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the year ended December 31,
For the six months
ended June 30,
2021 2022 2023 2023 2024
RMB ’000 RMB ’000 RMB ’000 RMB ’000 RMB ’000
(Unaudited)
Operating activities
Profit before tax . . . . . . . . . . . . . . . . . . 295,874 244,161 305,113 133,976 66,861
Adjustments for:
Interest income . . . . . . . . . . . . . . . . . (5,970) (8,158) (5,492) (3,119) (2,261)
Finance costs . . . . . . . . . . . . . . . . . . . 64,161 56,868 63,134 31,142 35,432
Net unrealised loss/(gain) on gold loans . 973 8,913 19,735 (5,632) (20,440)
Fair value changes on financial assets
a tF V T P L ................... ( 8 0 3 ) ( 1 4 0 ) ( 8 0 ) ( 5 4 ) ( 5 )
Depreciation of property, plant and
equipment . . . . . . . . . . . . . . . . . . . 27,813 27,840 37,507 16,676 22,097
Depreciation of right-of-use assets . . . . . 11,008 11,389 9,611 4,474 5,356
Depreciation of investment properties . . . 3,724 4,204 4,197 2,099 2,098
Amortisation of intangible assets . . . . . . 1,732 1,514 1,692 829 915
(Gain)/loss on disposal of property, plant
and equipment, intangible assets and
termination of leases . . . . . . . . . . . . (58) (1,555) 55 (218) 20
Net foreign exchange (gain)/loss . . . . . . (12) 174 28 30 39
Net impairment losses/(reversal of
impairment losses) under expected
credit loss model . . . . . . . . . . . . . . . 13,197 (10,087) 1,076 531 238
Release of government grants . . . . . . . . (132) (132) (132) (66) (23)
Recognition of equity-settled
share-based payments . . . . . . . . . . . . 2,268 130 ———
Covid-19-related rent concessions . . . . . — (66) ———
Operating cash flows before movements
in working capital . . . . . . . . . . . . . . . . 413,775 335,055 436,444 180,668 110,327
(Increase)/decrease in inventories . . . . . . . (310 ,623) 258,296 (392,078) (428,498) 84,691
(Increase)/decrease in pledged/restricted
d e p o s i t s ...................... ( 2 8 , 0 7 8 ) 3 8 9 ( 6 5 , 8 6 8 ) ( 6 3 , 7 5 1 ) ( 1 0 , 2 6 9 )
(Increase)/decrease in trade receivables . . . . (21,955) (19,050) (21,937) 9,449 (20,964)
Decrease/(increase) in prepayments, deposits
and other receivables . . . . . . . . . . . . . . 10,251 17,219 (91,653) (92,170) 9,289
Increase/(decrease) in refund liabilities . . . . 2,438 (21,370) (18,049) 574 (22,149)
Increase/(decrease) in provi sion . . . . . . . . 20 (210) ———
Increase/(decrease) in trade and
bills payables . . . . . . . . . . . . . . . . . . . 32,616 7,987 471,665 268,638 (196,760)
(Decrease)/increase in other payables
and accruals . . . . . . . . . . . . . . . . . . . (8,181) (17,958) 16,137 5,158 40,760
Increase in contract liabilities . . . . . . . . . . 20,137 11,829 3,129 72,710 30,714
Cash generated from/(used in) operations . . 110,400 572,187 337,790 (47,222) 25,639
Income taxes paid . . . . . . . . . . . . . . . . . (97,903) (32,568) (92,332) (9,362) (30,379)
Interest paid for gold loans . . . . . . . . . . . (19,948) (18,526) (17,272) (7,130) (9,646)
Interest received . . . . . . . . . . . . . . . . . . 1,516 1,577 1,490 689 701
Net cash (used in)/from operating activities . (5,935) 522,670 229,676 (63,025) (13,685)
APPENDIX I ACCOUNTANTS ’REPORT
– I-10 –


--- page 597 ---
For the year ended December 31,
For the six months
ended June 30,
2021 2022 2023 2023 2024
RMB ’000 RMB ’000 RMB ’000 RMB ’000 RMB ’000
(Unaudited)
Investing activities
Purchase of property, plant and equipment . (69,471) (73,717) (99,651) (71,447) (24,814)
Proceeds from disposal of property,
p l a n ta n de q u i p m e n t .............. 1 5 3 1 4 3 0 1 2 9 4 2
Purchases of intangible assets . . . . . . . . . . (945) (1,820) (1,492) (905) (6,687)
Payment for leasehold lands . . . . . . . . . . . (3,225) ————
Proceeds from disposal of financial products
and structured deposits . . . . . . . . . . . . 1,074,048 113,221 30,080 16,054 6,005
Purchase of financial products and
structured deposits . . . . . . . . . . . . . . . (997,386) (107,070) (30,000) (16,000) (6,000)
Withdrawal of pledged/restricted deposits . . 485,068 580,500 671,000 290,000 265,000
Interest received from pledged/restricted
deposits . . . . . . . . . . . . . . . . . . . . . . 3,587 5,613 4,630 3,168 1,522
Placement of pledged/restricted deposits . . . (476,050) (380,000) (765,000) (490,000) (170,000)
Net cash from/(used in) investing activities . 15,779 136,741 (190,132) (268,836) 65,028
Financing activities
Proceeds from borrowings . . . . . . . . . . . . 1,525,500 1,136,000 1,424,730 1,083,930 904,300
Repayment of borrowings . . . . . . . . . . . . (1,384,950) (1,642,500) (1,465,800) (783,050) (623,723)
Interest paid . . . . . . . . . . . . . . . . . . . . . (43,485) (39,135) (44,378) (23,188) (26,025)
Proceeds from issue of shares . . . . . . . . . . — 50,000 ———
Payments for H-share issue costs . . . . . . . —— (15,397) — (2,139)
Dividends paid to shareholders . . . . . . . . . — (78,715) —— (91,627)
Dividends paid to non-controlling
shareholders of a subsidiary . . . . . . . . . (1,103) ————
Repayments of lease liabilities . . . . . . . . . (9,436) (10,655) (8,086) (4,126) (4,053)
Payment for acquisition of additional
i n t e r e s ti nas u b s i d i a r y ............. — (2,615) ———
Net cash from/(used in) financing activities . 86,526 (587,620) (108,931) 273,566 156,733
Net increase/(decrease) in cash and
cash equivalents . . . . . . . . . . . . . . . . . 96,370 71,791 (69,387) (58,295) 208,076
Cash and cash equivalents at
beginning of the year/period . . . . . . . . . 57,151 153,518 225,359 225,359 155,866
Effect of foreign exchange rate changes . . . (3) 50 (106) (47) 92
Cash and cash equivalents at end
of the year/period . . . . . . . . . . . . . . . . 153,518 225,359 155,866 167,017 364,034
APPENDIX I ACCOUNTANTS ’REPORT
– I-11 –


--- page 598 ---
NOTES TO HISTORICAL FINANCIAL INFORMATION
1. GENERAL
The Company was established as a limited liability company in the PRC on September 8, 2000 and converted into a
joint-stock company with limited liability under the Company Law of the PRC on June 29, 2018. The addresses of the
registered office and the principal place of busin ess of the Company are set out in the section headed ‘‘Corporate
Information ’’to the Prospectus.
The controlling shareholders of the Company are Mr. Wang Zhongshan, Ms. Zhang Xiuqin and their son, namely
Mr. Wang Guoxin and their daughter, namely Ms. Wang Na, through their direct or indirect interests held in the Company.
The Company and the Group are primari ly engaged in the design, production, wh olesale and retail of jewellery in
the PRC.
The Historical Financial Information is presented in RM B, which is also the functional currency of the Company.
2. BASIS OF PREPARATION OF HISTORICAL FINANCIAL INFORMATION
The Historical Financial Information has been prepar ed based on the accounting policies which conform with
HKFRSs issued by the HKICPA. For the purpose of preparation of the Historical Financial Information, information is
considered material if such information is reasonably expected to influence decisions made by primary users. In addition,
the Historical Financial Information includes applicable di sclosures required by the Rules Governing the Listing of
Securities on the Stock Exchange and by the Hong Kong Companies Ordinance.
The statutory financial statements of the Company for the years ended December 31, 2021, 2022 and 2023 were
prepared in accordance with Accounting Standards for Business Enterprises issued by the Ministry of Finance of the PRC
and were audited by Beijing Xintuo Zixin Certified Public Accountants Co., Ltd* (北 京信拓孜信會計師事務所有限公司),
Changle Zhengfang Certified Public Accountants Co., Ltd* ( 昌樂正方會計師事務所有限責任公司) and Shandong Shiji
Yuanfei Certified Public Accountants* ( 山東世紀鳶飛會計師事務所), respectively.
* English name is for identification purpose only.
3. ADOPTION OF AMENDMENTS TO HKFRSs
For the purpose of preparing the Historical Financial Information for the Track Record Period, the Group has
consistently applied the accounting policies which conform w ith HKFRSs, which are effective for the accounting period
beginning on January 1, 2024, throughout the Track Record Period.
New and Amendments to HKFRSs in issue but not yet effective
At the date of this report, the following amendments to HKFRSs have been issued which are not yet effective:
Amendments to HKFRS 10 and HKAS 28 Sale or Contribution of Assets between an Investor and its
Associate or Joint Venture
1
Amendments to HKAS 21 Lack of Exchangeability 2
HKFRS 18 Presentation and Disclosure in Financial Statements 3
1 Effective for annual periods beginning on or after a date to be determined
2 Effective for annual periods beginning on or after January 1, 2025
3 Effective for annual periods beginning on or after January 1, 2027
APPENDIX I ACCOUNTANTS ’REPORT
– I-12 –


--- page 599 ---
The application of HKFRS 18 is not expected to have significant impact on the financial positions or performance of
the Group but may affect the presentations and disclosures of the Group ’s consolidated financial statements. The Group is
in the process of making a detailed assessment of the impact of HKFRS18. Except for the HKFRS 18, The directors of the
Company anticipate that the application of the above amendments to HKFRSs will have no material impact on the Group ’s
consolidated financial statements in the foreseeable future.
4. MATERIAL ACCOUNTING POLICY INFORMATION
Basis of consolidation
The Historical Financial Information incorporates the financial statements of the Company and entities
controlled by the Company and its subsidiaries. Control is achieved when the Company:
. has power over the investee;
. is exposed, or has rights, to variable returns from its involvement with the investee; and
. has the ability to use its power to affect its returns.
The Group reassesses whether or not it controls an investee if facts and circumstances indicate that there are
changes to one or more of the three elements of control listed above.
Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the
Group loses control of the subsidiary. Specifically, income and expenses of a subsidiary acquired or disposed of
during the Track Record Period are included in the consolidat ed statements of profit or loss and other comprehensive
income from the date the Group gains control until the date when the Group ceases to control the subsidiary.
Profit or loss and each item of other comprehensive income are attributed to the owners of the Company and
to the non-controlling interests. Total comprehensive income of subsidiaries is attributed to the owners of the
Company and to the non-controlling interests even if this results in the non-controlling interests having a deficit
balance.
When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting
policies in line with the Group ’s accounting policies.
All intragroup assets and liabilities, equity, income, expenses and cash flows relating to transactions between
members of the Group are eliminated in full on consolidation.
Non-controlling interests in subsidiaries are presented separately from the Group ’s equity therein, which
represent present ownership interests entitling their holders to a proportionate share of net assets of the relevant
subsidiaries upon liquidation.
Changes in the Group’ s interests in existing subsidiaries
Changes in the Group’ s interests in subsidiaries that do not result in the Group losing control over the
subsidiaries are accounted for as equity transactions. The carrying amounts of the Group ’s relevant components of
equity and the non-controlling interests are adjusted to reflect the changes in their relative interests in the
subsidiaries, including re-attribution of relevant reserves between the Group and the non-controlling interests
according to the Group ’s and the non-controlling interests’ proportionate interests.
Any difference between the amount by which the non-controlling interests are adjusted, and the fair value of
the consideration paid or received is recognised directly in equity and attributed to owners of the Company.
APPENDIX I ACCOUNTANTS ’REPORT
– I-13 –


--- page 600 ---
Investments in subsidiaries
Investments in subsidiaries are stated in the statements of financial position of the Company at cost less
accumulated impairment losses, if any.
Revenue from contracts with customers
The Group recognises revenue when (or as) a per formance obligation is satisfied, i.e. when ‘‘control ’’of the
goods or services underlying the particular performance obligation is transferred to the customer.
A performance obligation represents a good or service (or a bundle of goods or services) that is distinct or a
series of distinct goods or services that are substantially the same.
Control is transferred over time and revenue is recognised over time by reference to the progress towards
complete satisfaction of the relevant performance obligation if one of the following criteria is met:
. the customer simultaneously receives and c onsumes 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 Group performs;
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.
Otherwise, revenue is recognised at a point in time when the customer obtains control of the distinct good or
service.
A contract liability represents the Group ’s obligation to transfer goods or services to a customer for which the
Group has received consideration (or an amount of consideration is due) from the customer.
Variable consideration
For contracts that contain variable consideration, the Group estimates the amount of consideration to which it
will be entitled using the expected value method, which better predicts the amount of consideration to which the
Group will be entitled.
The estimated amount of variable consideration is included in the transaction price only to the extent that it is
highly probable that such an inclusion will not result in a significant revenue reversal in the future when the
uncertainty associated with the variable consideration is subsequently resolved.
At the end of each reporting period, the Group updates t he estimated transaction price (including updating its
assessment of whether an estimate of variable consideration is constrained) to represent faithfully the circumstances
present at the end of the reporting period and the ch anges in circumstances during the reporting period.
Refund liabilities
The Group recognises a refund liability if the Group expects to refund some or all of the consideration
received from customers.
APPENDIX I ACCOUNTANTS ’REPORT
– I-14 –


--- page 601 ---
Sale with a right of return/exchange
For a sale of products with a right of return/exchange for dissimilar products, the Group recognises all of the
following:
(a) revenue for the transferred products in the amount of consideration to which the Group expects to be
entitled (therefore, revenue would not be recognised for the products expected to be returned/
exchanged);
(b) a refund liability; and
(c) an asset (and corresponding adjustment to cost of sales) for its right to recover products from
customers.
Non-cash consideration
The Group receives used gold products from franchisees , provincial-dealers and end customers to be used in
manufacturing new gold products. The fair value of such non-cash consideration re ceived from the customer is
included in the transaction price and measured whe n the Group obtains control of the used gold products.
The Group estimates the fair value of the non-cash conside ration by reference to the real-time trading price of
the Shanghai Gold Exchange on the relevant trading day.
Principal versus agent
When another party is involved in providing goods or se rvices to a customer, the Group determines whether
the nature of its promise is a performance obligation to provide the specified goods or services itself (i.e. the Group
is a principal) or to arrange for those goods or services to be provided by the other party (i.e. the Group is an agent).
The Group is a principal if it controls the specified good or service before that good or service is transferred
to a customer.
The Group is an agent if its performance obligation is to arrange for the provision of the specified good or
service by another party. In this case, the Group does not control the specified good or service provided by another
party before that good or service is transferred to the customer. When the Group acts as an agent, it recognises
revenue in the amount of any fee or commission to which it expects to be entitled in exchange for arranging for the
specified goods or services to be provided by the other party.
Leases
Definition of 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.
The Group assesses whether a contract is or contains a lease, at inception of a contract. Such contract will not
be reassessed unless the terms and conditions of the contract are subsequently changed.
APPENDIX I ACCOUNTANTS ’REPORT
– I-15 –


--- page 602 ---
The Group as a lessee
Short-term leases
The Group applies the short-term lease recognition exemption to leases of certain properties, electronic
equipment and transportation equipment that have a lease term of 12 months or less from the commencement date
and do not contain a purchase option. Lease payments on short-term leases are recognised as expense on a straight-
line basis over the lease term.
Right-of-use assets
The cost of right-of-use assets includes:
. the amount of the initial measurement of the lease liability;
. any lease payments made at or before the commencement date, less any lease incentives received; and
. any initial direct costs incurred by the Group.
Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and
adjusted for any remeasurement of lease liabilities other than adjustments to lease liabilities resulting from Covid-
19-related rent concessions in which the Group applied the practical expedient.
Right-of-use assets are depreciated on a straight-line basis over the shorte r of its estimated useful life and the
lease term.
The Group presents right-of-use assets as a separate line item on the consolidated statements of financial
position.
Refundable rental deposits
Refundable rental deposits paid are accounted for under HKFRS 9 Financial Instruments and initially
measured at fair value. Adjustments to fair value at initial recognition are considered as additional lease payments
and included in the cost of right-of-use assets.
Lease liabilities
At the commencement date of a lease, the Group recognises and measures the lease liability at the present
value of lease payments that are unpaid at that date. In cal culating the present value of lease payments, the Group
uses the incremental borrowing rate at the lease commencement date if the interest rate implicit in the lease is not
readily determinable.
The lease payments include fixed payments (including in-substance fixed payments) less any lease incentives
receivable and payments of penalties for terminating a lease if the lease term reflects the Group exercising an option
to terminate the lease.
After the commencement date, lease liabilities are adjusted by interest accretion and lease payments.
The Group presents lease liabilities as a separate line item on the consolidated statements of financial
position.
APPENDIX I ACCOUNTANTS ’REPORT
– I-16 –


--- page 603 ---
The Group as a lessor
Classification and measurement of leases
Leases for which the Group is a lessor are classified as finance or operating leases. Whenever the terms of the
lease transfer substantially all the risks and rewards incidental to ownership of an underlying asset to the lessee, the
contract is classified as a finance lease. All other leases are classified as operating leases.
Rental income from operating leases is recognised in profit or loss on a straight-line basis over the term of the
relevant lease.
Refundable rental deposits
Refundable rental deposits received are accounted for under HKFRS 9 and initially measured at fair value.
Adjustments to fair value at initial recognition are considered as additional lease payments from lessees.
Sale and leaseback transactions
The Group as a seller-lessee
The Group applies the requirements of HKFRS 15 to assess whether sale and leaseback transaction constitutes
a sale by the Group. For a transfer that does not satisfy th e requirements as a sale, the Group as a seller-lessee
continues to recognise the assets and accounts for the transfer proceeds as borrowings within the scope of HKFRS 9.
Foreign currencies
In preparing the financial statements of each individual group entity, transactions in currencies other than the
functional currency of that entity (foreign currencies) are recognised at the rates of exchanges prevailing on the dates
of the transactions. At the end of each reporting period, monetary items denominated in foreign currencies are
retranslated at the rates prevailing at that date.
Exchange differences arising on the settlement of monetary items, and on the retranslation of monetary items,
are recognised in profit or loss in the period in which they arise.
Borrowing costs
Borrowing costs directly attributable to the construction of qualifying assets, which are assets that necessarily
take a substantial period of time to get ready for their int ended use or sale, are added to the cost of those assets until
such time as the assets are substantially ready for their intended use or sale.
All other borrowing costs are recognised in profit or loss in the period in which they are incurred.
Government grants
Government grants are not recognised until there is reasonable assurance that the Group will comply with the
conditions attaching to them and that the grants will be received.
Government grants are recognised in profit or loss on a systematic basis over the periods in which the Group
recognises as expenses the related costs for which the grants are intended to compensate. Specifically, government
grants whose primary condition is that the Group should pur chase, construct or otherwise acquire non-current assets
are recognised as deferred income in the consolidated statements of financial position and transferred to profit or
loss on a systematic and rational basis over the useful lives of the related assets.
APPENDIX I ACCOUNTANTS ’REPORT
– I-17 –


--- page 604 ---
Government grants related to incom e that are receivable as compensation for expenses or losses already
incurred or for the purpose of giving i mmediate financial support to the Group with no future related costs are
recognised in profit or loss in the period in which they become receivable. Such grants are presented under ‘‘other
income ’’.
Employee benefits
Short-term employee benefits
Short-term employee benefits are recognised at the undiscounted amount of the benefits expected to be paid as
and when employees rendered the services. All short-term employee benefits are recognised as an expense unless
another HKFRS requires or permits the inclusion of the benefit in the cost of an asset.
A liability is recognised for benefits accruing to employees (such as wages and salaries and annual leave)
after deducting any amount already paid.
Retirement benefits costs
Full-time employees of the Group in the PRC participate in a government mandated defined contribution plan.
Chinese labor regulations require that the Group makes contributions to the government for these benefits based on
certain percentages of the employees ’ salaries, up to a maximum amount specified by the local government. The
Group has no legal obligation for the benefits beyond the contributions made. The Group ’s contributions to the
defined contribution plan are expensed as incurred and not reduced by being forfeited by those employees who leave
the plan prior to vesting fully in the contributions.
Equity-settled share-based payment transactions
Shares granted to employees
Equity-settled share-based payments to employees are measured at the fair value of the equity instruments at
the grant date.
The fair value of the equity-settled share-based payments determined at the grant date without taking into
consideration all non-market vesting conditions is expensed on a straight-line basis over the vesting period, based on
the Group ’s estimate of equity instruments that will eventually ve st, with a corresponding increase in equity (share-
based payments reserve). At the end of each reporting period, the Group revises its estimate of the number of equity
instruments expected to vest based on assessment of all relevant non-market vesting conditions. The impact of the
revision of the original estimates, if any, is recognised in profit or loss such that the cumulative expense reflects the
revised estimate, with a corresponding adjustment to share-based payments reserve.
Taxation
Income tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on taxable profit for the year/period. Taxable profit differs from profit
before tax because of income or expense that are taxable or deductible in other years and items that are never
taxable or deductible. The Group ’s liability for current tax is calculated using tax rates that have been enacted or
substantively enacted by the end of each reporting period.
Deferred tax is recognised on temporary differences be tween the carrying amounts of assets and liabilities in
the Historical Financial Information and the corresponding tax bases used in the computation of taxable profit.
Deferred tax liabilities are generally recognised for all ta xable temporary differences. Deferred tax assets are
generally recognised for all deductible temporary differenc es to the extent that it is probable that taxable profits will
be available against which those deductible temporary differences can be utilised. Such deferred tax assets and
liabilities are not recognised if the temporary difference a rises from the initial recognition (other than in a business
APPENDIX I ACCOUNTANTS ’REPORT
– I-18 –


--- page 605 ---
combination) of assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit
and at the time of the transaction does not give rise to equal taxable and deductible temporary differences. In
addition, deferred tax liabilities are not recognised if the tem porary difference arises from the initial recognition of
goodwill.
Deferred tax liabilities are recognised for taxable temporary differences associated with investments in
subsidiaries, except where the Group is able to control the reversal of the temporary difference and it is probable
that the temporary difference will not reverse in the foreseeab le future. Deferred tax assets arising from deductible
temporary differences associated with such investments a re only recognised to the extent that it is probable that there
will be sufficient taxable profits against which to utilise the benefits of the temporary differences and they are
expected to reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the
extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to
be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in
which the liability is settled or the asset is realised, based on tax rate (and tax laws) that have been enacted or
substantively enacted by the end of each reporting period.
The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from
the manner in which the Group expects, at the end of each reporting period, to recover o r settle the carrying amount
of its assets and liabilities.
For leasing transactions in which the tax deductions are attributable to the lease liabilities, the Group applies
HKAS 12 Income Taxes requirements to right-of-use assets and lease liabilities separately. The Group recognises a
deferred tax asset related to lease liabilities to the extent that it is probable that taxable profit will be available
against which the deductible temporary difference can be utilised and a deferred tax liability for all taxable
temporary differences.
Deferred tax assets and liabilities are offset when ther e is a legally enforceable right to set off current tax
assets against current tax liabilities and when they relate to income taxes levied to the same taxable entity by the
same taxation authority.
Current and deferred tax are recognised in profit or lo ss, except when they relate to items that are recognised
in other comprehensive income or directly in equity, in which case, the current and deferred tax are also recognised
in other comprehensive income or directly in equity, respectively.
Property, plant and equipment
Property, plant and equipment are tangible assets th at are held for use in the production or supply of goods or
services, or for administrative purposes. Property, plant a nd equipment are stated in the consolidated statements of
financial position at cost less subsequent accumulated depreciation and subsequent accumulated impairment losses, if
any.
Construction in progress is carried at cost, less any recognised impairment loss. Costs include any costs
directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in
the manner intended by management, including costs of testing whether the related asset is functioning properly and,
for qualifying assets, borrowing costs capitalised in accordance with the Group ’s accounting policy. Depreciation of
these assets, on the same basis as other property, plant and equipment, commences when the assets are ready for
their intended use.
APPENDIX I ACCOUNTANTS ’REPORT
– I-19 –


--- page 606 ---
Depreciation is recognised so as to write off the cost of assets other than construction in progress less their
residual values over their estimated useful lives, using the straight-line method. The estimated useful lives, residual
values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in
estimate accounted for on a prospective basis.
An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits
are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an
item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying
amount of the asset and is recognised in profit or loss.
If a property becomes an investment property because its use has changed as evidenced by end of owner-
occupation, the cost of the relevant property and the related accumulated depreciation and impairment loss (if any)
(including the relevant leasehold land classified as right-of-use assets) are transferred to investment property at the
date of transfer.
Investment properties
Investment properties are properties held to e arn rentals and/or for capital appreciation.
Investment properties are initially measured at cost, i ncluding any directly attributable expenditure.
Subsequent to initial recognition, invest ment properties are stated at cost less subsequent accumulated depreciation
and any accumulated impairment losses. Depreciation is recognised so as to write off the cost of investment
properties over their estimated useful lives and after taking into account of their estimated residual value, using the
straight-line method.
Intangible assets
Intangible assets with finite useful lives that are acquired separately are carried at cost less accumulated
amortisation and any accumulated impairment losses. Amortisation for intangible assets with finite useful lives is
recognised on a straight-line basis over their estimated useful lives. The estimated useful life and amortisation
method are reviewed at the end of each reporting period, with the effect of any changes in estimate being accounted
for on a prospective basis.
Research and development expenses
Expenditure on research activities is recognised as an expense in the period in which it is incurred.
Expenditure incurred on development projects are capitalised as intangible assets if, and only if, all of the
following have been demonstrated:
. the technical feasibility of completing the intangible asset so that it will be available for use or sale;
. the intention to complete the intangible asset and use or sell it;
. the ability to use or sell the intangible asset;
. how the intangible asset will generate probable future economic benefits;
. the availability of adequate technical, financial and other resources to complete the development and to
use or sell the intangible asset; and
. the ability to measure reliably the expenditure attributable to the intangible asset during its
development.
APPENDIX I ACCOUNTANTS ’REPORT
– I-20 –


--- page 607 ---
Other development expenditure that does not meet those criteria is expensed as incurred. There were no
development expenses meeting these criteria and capitalised as intangible assets as of December 31, 2021, 2022 and
2023 and June 30, 2024.
Impairment on property, plant and equipment, investment properties, right-of-use assets and intangible assets
At the end of each reporting period, the Group reviews the carrying amounts of its property, plant and
equipment, investment properties, right-of-use assets an d intangible assets with finite useful lives to determine
whether there is any indication that these assets have suffered an impairment loss. If any such indication exists, the
recoverable amount of the relevant asset is estimated in orde r to determine the extent of the impairment loss (if any).
The recoverable amount of property, pl ant and equipment, investment properties, right-of-use assets and
intangible assets are estimated individually. When it is not po ssible to estimate the recoverable amount individually,
the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs.
In testing a cash-generating unit for impairment, corporat e assets are allocated to the relevant cash-generating
unit when a reasonable and consistent basis of allocation can be established, or otherwise they are allocated to the
smallest group of cash generating units for which a reasonable and consistent allocation basis can be established.
The recoverable amount is determined for the cash-genera ting unit or group of cash-generating units to which the
corporate asset belongs, and is compared with the carrying amount of the relevant cash-generating unit or group of
cash-generating units.
Recoverable amount is the higher of 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 th e risks specific to the asset (or a cash-generating unit)
for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or a cash-generating unit) is estimated to be less than its carrying
amount, the carrying amount of the asset (or a cash-gene rating unit) is reduced to its recoverable amount. For
corporate assets or portion of corporate assets which cannot be allocated on a reasonable and consistent basis to a
cash-generating unit, the Group compares the carrying amount of a group of cash-generating units, including the
carrying amounts of the corporate assets or portion of corporate assets allocated to that group of cash-generating
units, with the recoverable amount of the group of cash-ge nerating units. In allocating the impairment loss, the
impairment loss is allocated first to reduce the carryin g amount of any goodwill (if applicable) and then to the other
assets on a pro-rata basis based on the carrying amount of each asset in the unit or the group of cash-generating
units. The carrying amount of an asset is not reduced below the highest of its fair value less costs of disposal (if
measurable), its value in use (if determinable) and zero. The amount of the impairment loss that would otherwise
have been allocated to the asset is allocated pro rata to the other assets of the unit or the group of cash-generating
units. An impairment loss is recognised immediately in profit or loss.
Where an impairment loss subsequently reverses, the carrying amount of the asset (or a cash-generating unit
or a group of cash-generating units) is increased to the revised estimate of its recoverable amount, but so that the
increased carrying amount does not exceed the carrying amount that would have been determined had no impairment
loss been recognised for the asset (or a cash-generating unit or a group of cash-generating units) in prior years. A
reversal of an impairment loss is recognised immediately in profit or loss.
Inventories
Inventories are stated at the lower of cost and net realisable value. Cost of inventories are determined on a
weighted average method. Net realisable value represe nts the estimated selling price for inventories less the
estimated costs of completion and costs necessary to make the sale. Costs necessary to make the sale include
incremental costs directly attributable to the sale and non-incremental costs which the Group must incur to make the
sale.
APPENDIX I ACCOUNTANTS ’REPORT
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--- page 608 ---
Financial instruments
Financial assets and financial liabilities are recognis ed when a group entity becomes a party to the contractual
provisions of the instrument. All regular way purchases or sales of financial assets are recognised and derecognised
on a trade date basis. Regular way purchases or sales are pu rchases or sales of financial assets that require delivery
of assets within the time frame established by regulation or convention in the market place.
Financial assets and financial liabilities are initially meas ured at fair value except for trade receivables arising
from contracts with customers which are initially measured in accordance with HKFRS 15 Revenue from Contracts
with Customers. Transaction costs that are directly attributable to the acquisition or issue of financial assets and
financial liabilities (other than financial assets or financial liabilities at FVTPL) are added to or deducted from the
fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs
directly attributable to the acquisition of financial assets or financial liabilities at FVTPL are recognised immediately
in profit or loss.
The effective interest method is a method of calculating the amortised cost of a financial asset or financial
liability and of allocating interest income and interest expense over the relevant period. The effective interest rate is
the rate that exactly discounts estimated future cash receipts and payments (including all fees and points paid or
received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts)
through the expected life of the financial asset or financi al liability, or, where appropriate, a shorter period, to the
net carrying amount on initial recognition.
Financial assets
Classification and subsequent measurement of financial assets
Financial assets that meet the following conditions are subsequently measured at amortised cost:
. the financial asset is held within a business model whose objective is to collect contractual cash flows;
and
. the contractual terms give rise on specified dates to cash flows that are solely payments of principal
and interest on the principal amount outstanding.
All other financial assets are subsequently measured at FVTPL, except that at the date of initial recognition of
a financial asset the Group may irrevocably elect to present subsequent changes in fair value of an equity investment
in other comprehensive income if that equity investment is neither held for trading nor contingent consideration
recognised by an acquirer in a business combination to which HKFRS 3 Business Combinations applies.
(i) Amortised cost and interest income
Interest income is recognised using the effective interest method for financial assets measured
subsequently at amortised cost. Interest income is calculated by applying the effective interest rate to the
gross carrying amount of a financial asset, except for financial assets that have subsequently become credit-
impaired (see below). For financial assets that have subsequently become credit-impaired, interest income is
recognised by applying the effective interest rate to the amortised cost of the financial asset from the next
reporting period. If the credit risk on the credit-impaired financial instrument improves so that the financial
asset is no longer credit-impaired, interest income is recognised by applying the effective interest rate to the
gross carrying amount of the financial asset from the beginning of the reporting period following the
determination that the asset is no longer credit-impaired.
APPENDIX I ACCOUNTANTS ’REPORT
– I-22 –


--- page 609 ---
(ii) Financial assets at FVTPL
Financial assets that do not meet the criteria for being measured at amortised cost or at fair value
through other comprehensive income or designated as at fair value through other comprehensive income are
measured at FVTPL.
Financial assets at FVTPL are measured at fair value at the end of each reporting period, with any fair
value gains or losses recognised in profit or loss. The net gain or loss recognised in profit or loss includes any
dividend or interest earned on the financial asset and is included in the ‘‘other gains and losses, net ’’line
item.
Impairment of financial assets subject to impairment assessment under HKFRS 9
The Group performs impairment asse ssment under expected credit loss (‘‘ ECL’’) model on financial assets
(including trade receivables, other receivables, pledged/restricted deposits and cash and cash equivalents) which are
subject to impairment assessment under HKFRS 9. The am ount of ECL is updated at each reporting date to reflect
changes in credit risk since initial recognition.
Lifetime ECL represents the ECL that will result from all possible default events over the expected life of the
relevant instrument. In contrast, 12-month ECL ( ‘‘12m ECL’’) represents the portion of lifetime ECL that is
expected to result from default events that are possible within 12 months after the reporting date. Assessment is
done based on the Group ’s historical credit loss experience, adjusted for factors that are specific to the debtors,
general economic conditions and an assessment of both the current conditions at the reporting date as well as the
forecast of future conditions.
The Group always recognises lifetime ECL for trade receivables. The ECL on trade receivables are assessed
individually for those relating to customers with significant doubt on collection of receivables and collectively using
a provision matrix with appropriate groupings with shared credit characteristics for the others.
For all other instruments, the Group measures the loss allowance equal to 12m ECL, unless when there has
been a significant increase in credit risk since initial recognition, in which case the Group recognises lifetime ECL.
The assessment of whether lifetime ECL should be recognised is based on significant increases in the likelihood or
risk of a default occurring since initial recognition.
(i) Significant increase in credit risk
In assessing whether the credit risk has increased significantly since initial recognition, the Group
compares the risk of a default occurring on the financial instrument as at the reporting date with the risk of a
default occurring on the financial instrument as at the date of initial recognition. In making this assessment,
the Group considers both quantitative and qualitative information that is reasonable and supportable, including
historical experience and forward-looking informa tion 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:
. existing or forecast adverse changes in business, financial or economic conditions that are
expected to cause a significant decrease in the debtor ’s ability to meet its debt obligations;
. an actual or expected significant deterioration in the operating results of the debtor;
. an actual or expected significant adverse change in the regulatory, economic, or technological
environment of the debtor that results in a significant decrease in the debtor ’s ability to meet its
debt obligations.
APPENDIX I ACCOUNTANTS ’REPORT
– I-23 –


--- page 610 ---
Despite the aforegoing, the Group assumes that the cr edit risk on a debt instrument has not increased
significantly since initial recognition if the debt instrument is determined to have low credit risk at the
reporting date. A debt instrument is determined to have low credit risk if (i) it has a low risk of default, (ii)
the borrower has a strong capacity to meet its contractual cash flow obligations in the near term and (iii)
adverse changes in economic and business conditions in the longer term may, but will not necessarily, reduce
the ability of the borrower to fulfil its contractual cash flow obligations.
The Group regularly monitors the effectiveness of the criteria used to identify whether there has been a
significant increase in credit risk and revises them a s appropriate to ensure that the criteria are capable of
identifying significant increase in credit risk before the amount becomes past due.
(ii) Definition of default
For internal credit risk management, the Group cons iders an event of default occurs when information
developed internally or obt ained from external sources indicates that the debtor is unlikely to pay its creditors,
including the Group, in full (without taking into account any collaterals held by the Group).
(iii) Credit-impaired financial assets
A financial asset is credit-impaired when one or more events that have a detrimental impact on the
estimated future cash flows of that financial asset hav e occurred. Evidence that a financial asset is credit-
impaired includes observable data about the following events:
(a) significant financial difficulty of the issuer or the borrower;
(b) a breach of contract, such as a default;
(c) the lender(s) of the borrower, for economic or contractual reasons relating to the borrower’ s
financial difficulty, having granted to the borro wer a concession(s) that the lender(s) would not
otherwise consider; or
(d) it is becoming probable that the borrower will enter bankruptcy or other financial reorganisation.
(iv) Write-off policy
The Group writes off a financial asset when there is information indicating that the counterparty is in
severe financial difficulty and there is no realistic prospect of recovery, for example, when the debtor has
been placed under liquidation or has entered into bankruptcy proceedings, whichever occurs earlier. Financial
assets written off may still be subject to enforcement activities under the Group ’s recovery procedures, taking
into account legal advice where appropriate. A write -off constitutes a derecognition event. Any subsequent
recoveries are recognised in profit or loss.
(v) Measurement and recognition of ECL
The measurement of ECL is a function of the probability of default, loss given default (i.e. the
magnitude of the loss if there is a default) and the exposure at default. The assessment of the probability of
default and loss given default is based on historical da ta and forward-looking information. Estimation of ECL
reflects an unbiased and probability-weighted amount that is determined with the respective risks of default
occurring as the weights. The Group uses a practical e xpedient in estimating ECL on trade receivables using a
provision matrix taking into consideration historical credit loss experience, adjusted for forward looking
information that is available without undue cost or effort.
Generally, the ECL is the difference between all contractual cash flows that are due to the Group in
accordance with the contract and the cash flows that the Group expects to receive, discounted at the effective
interest rate determined at initial recognition.
APPENDIX I ACCOUNTANTS ’REPORT
– I-24 –


--- page 611 ---
Lifetime ECL for certain trade receivables are consider ed on a collective basis taking into consideration
debtors’ aging and relevant credit information such as f orward looking macroeconomic information.
For collective assessment, the Group takes into consideration the following characteristics when
formulating the grouping:
. Nature, size and industry of debtors; and
. External credit ratings where available.
The grouping is regularly reviewed by the management to ensure the constituents of each group
continue to share similar credit risk characteristics.
The Group recognises an impairment gain or loss in profit or loss for all financial instruments by
adjusting their carrying amount, with the exception of trade receivables and other receivables where the
corresponding adjustment is recognised through a loss allowance account.
Derecognition of financial assets
The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset
expire, or when it transfers the financial asset and substa ntially all the risks and rewards of ownership of the asset to
another entity.
On derecognition of a financial asset measured at amortised cost, the difference between the asset ’s carrying
amount and the sum of the consideration received and receivable is recognised in profit or loss.
Financial liabilities and equity
Classification as debt or equity
Debt and equity instruments are classified as either financial liabilities or as equity in accordance with the
substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.
Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting
all of its liabilities. Equity instruments issued by the Company are recognised at the proceeds received, net of direct
issue costs.
Financial liabilities
All financial liabilities are subsequently measured at am ortised cost using the effective interest method or at
FVTPL.
Financial liabilities at amortised cost
Financial liabilities including borrowings, trade and bills payables and other payables are subsequently
measured at amortised cost, using the effective interest method.
Derecognition of financial liabilities
The Group derecognises financial liabilities when, and only when, the Group ’s obligations are discharged,
cancelled or have expired. The difference between the carrying amount of the financial liability derecognised and the
consideration paid and payable is recognised in profit or loss.
APPENDIX I ACCOUNTANTS ’REPORT
– I-25 –


--- page 612 ---
Derivative financial instruments
Derivatives are initially recognised at fair value at the date when derivative contracts are entered into and are
subsequently remeasured to their fair value at the end of each reporting period. The resulting gain or loss is
recognised in profit or loss.
Au (T+D) contracts
The Group has a practice of settling Au (T+D) contracts net in cash or another financial instrument, and hence
accounted for as derivatives. Au (T+D) contracts are initially recognised at fair value at the date when Au (T+D)
contracts are entered into and are subsequently remeasured to their fair value at the end of the reporting period. The
resulting gain or loss is recognised in profit or loss.
Gold loans
Gold loans representing the obligation to deliver gold are classified as liabilities at FVTPL at initial
recognition. The net gain or loss recognised in profit or loss excludes any interest paid on gold loans.
5. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY
In the application of the Group ’s accounting policies, which are described in Note 4, the directors of the Company
are required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are
not readily apparent from other sources. The estimates and underlying assumptions are based on historical experience and
other factors that are considered to be relevant. A ctual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an on-going basis. Revisions to accounting estimates are
recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the
revision and future periods if the revision affects both current and future periods.
Critical judgements in applying accounting policies
The following are the critical judgements, apart from those involving estimations (see below), that the directors of
the Company have made in the process of applying the Group’ s accounting policies and that have the most significant
effect on the amounts recognised in the Historical Financial Information.
Revenue recognition for sales settled in used gold products
The Group receives used gold products from franchisees , provincial-dealers and end customers to be used in
manufacturing new gold products. There is no obligation or commitment for the Group to accept the used gold
products. Except for the form of consideration, there ’s no difference between this arrangement and an arrangement in
which customers make a cash payment. The directors of t he Company apply judgement to assess whether the Group
has obtained control of customer-provided materials or not . Based on due and careful analysis of all relevant facts
and circumstances, it is concluded that the Group has obtained control of the used gold products. As a result, the fair
value of the non-cash consideration is included in the tr ansaction price. The Group estimates the fair value of the
non-cash consideration by reference to the real-time trading price of the Shanghai Gold Exchange on the relevant
trading day.
Key sources of estimation uncertainty
The following are the key assumptions concerning the futur e, and other key sources of estimation uncertainty at the
end of each reporting period that may have a significant risk of causing a material adjustment to the carrying amounts of
assets and liabilities within the next financial year.
APPENDIX I ACCOUNTANTS ’REPORT
– I-26 –


--- page 613 ---
Provision of ECL for trade receivables
Trade receivables relating to customers with significant doubt on collection of receivables are assessed for
ECL individually. In addition, the Group uses practical expedient in estimating ECL on trade receivables which are
not assessed individually using a provision matrix. The provision rates are based on aging of debtors as groupings of
various debtors taking into consideration the Group ’s historical default rates and forward-looking information that is
reasonable and supportable available without undue costs or e ffort. At every reporting date, the historical observed
default rates are reassessed and changes in the forward-looking information are considered.
The provision of ECL is sensitive to changes in estimates. The information about the ECL and the Group ’s
trade receivables are disclosed in Note 41.
Net realisable value of inventories
The Group ’s inventories are measured at the lower of cost and net realisable value. The net realisable value of
inventories is based on estimated selling prices less any estimation costs to be incurred to completion and costs
necessary to make the sale. These estimates, based on the current market condition and the historical experience in
selling goods of a similar nature. Changes in these estimates will affect the carrying value of inventories and profit
in subsequent years. The Group reassesses the estimation at the end of each reporting period. The carrying amount
of inventories is detailed in Note 23.
Sales return
The Group makes a reasonable estimate of the return rate of diamond inlaying jewellery sold. The Group has
developed a statistical model for forecasting sales returns. The model used the historical return data to come up with
expected return percentages. Any significant changes i n experience as compared to historical return pattern will
impact the expected return percentages estimated by the Group.
The Group updates its assessment of expected returns biannually and the refund liabilities are adjusted
accordingly. Estimates of expected returns are sensitive to changes in circumstances and the Group ’s past experience
regarding returns may not be representative of customers’ actual returns in the future. The amount recognised as
refund liabilities is disclosed in Note 34.
Deferred tax assets
The recognition of the deferred tax assets mainly depends on whether sufficient future profits or taxable
temporary differences will be available in the future, which is a key source of estimation uncertainty. In cases where
the actual future taxable profits generated are less or mo re than expected, or change in facts and circumstances
which result in revision of future taxable profits estimation, a material reversal or further recognition of deferred tax
assets may arise, which would be recognised in profit or loss for the period in which such a reversal or further
recognition takes place.
6. REVENUE AND SEGMENT INFORMATION
The Group is primarily engaged in the design, produc tion, wholesale and retail of jewellery in the PRC.
The executive directors of the Company, being the chief ope rating decision makers, review the consolidated results
when making decisions about allocating resources and asse ssing performance of the Group as a whole and hence, the
Group has only one operating and reportable segment and no further analysis of this single segment is presented.
The Group ’s non-current assets are all located in Mainland China of the PRC and the Group ’s revenue are
predominantly derived from Mainland China of the PRC. Duri ng the Track Record Period, there was no revenue derived
from transactions with a single external customer or a group of entities known to be under common control with that
customer amounted to 10% or more of the Group ’s revenue.
APPENDIX I ACCOUNTANTS ’REPORT
– I-27 –


--- page 614 ---
The Group ’s revenue is generated from the sales of gold jewellery and other gold products, K gold jewellery,
diamond inlaying jewellery and other products and provision of other services. Disaggregatio n of revenue from contracts
with customers is as follows:
For the year ended December 31,
For the six months
ended June 30,
2021 2022 2023 2023 2024
RMB’000 RMB ’000 RMB ’000 RMB ’000 RMB ’000
(Unaudited)
Type of goods or services
Sale of goods:
— Gold jewellery and other gold
p r o d u c t s .................. 1 6 , 457,308 15,392,835 19,877,366 9,137,879 9,834,885
— K gold jewellery, diamond inlaying
jewellery and other products . . . . 296,605 226,187 225,513 127,648 99,925
O t h e rs e r v i c e s .................... 117,087 105,193 105,720 50,686 44,934
T o t a l .......................... 1 6 , 871,000 15,724,215 20,208,599 9,316,213 9,979,744
Geographical markets
M a i n l a n dC h i n a ................... 1 6 , 870,796 15,718,606 20,191,104 9,314,263 9,942,215
O t h e r s ......................... 2 0 4 5 , 6 0 9 1 7 , 4 9 5 1 , 9 5 0 3 7 , 5 2 9
T o t a l .......................... 1 6 , 871,000 15,724,215 20,208,599 9,316,213 9,979,744
Timing of revenue recognition
Ap o i n ti nt i m e ................... 1 6 , 807,389 15,663,827 20,149,774 9,288,643 9,953,053
Over time . . . . . . . . . . . . . . . . . . . . . . . 63,611 60,388 58,825 27,570 26,691
T o t a l .......................... 1 6 , 871,000 15,724,215 20,208,599 9,316,213 9,979,744
For the sales of gold jewellery and other gold products, K gold jewellery, diamond inlaying jewellery and other
products, revenue is recognised when customers obtain control of the goods, being when the goods have been accepted by
customers or delivered to the carrier designated by the customers. The payment is usually due immediately for retail
customers or in 3 to 90 days ’ credit period for the franchise es and provincial-dealers.
Under the Group’ s standard contract terms, except for closures of stores, customers (franchisees and provincial-
dealers) have no right to return any goods after its acceptance of the products but have a right to exchange unsold diamond
inlaying jewellery within 5 years. The Group uses its accumulated historical experience to estimate the percentage of
exchange on a portfolio level using the expected value method. Revenue is recognised for sales which are considered
highly probable that a significant reversal in the cumulative revenue recognised will not occur. For goods that are expected
to be returned, instead of revenue, a refund liability is recognised. The Group ’s right to recover the product when
customers exercise their rights is recognised as a right to returned goods and a corresponding adjustment to cost of sales.
Other services include royalty and service, brand usage, cu stomised processing service and testing service. Royalty
and service income and brand usage income in respect of the use of the Group ’s trademarks are recognised over time in
accordance with the relevant agreements. Customised processi ng service income and testing service income are recognised
when the services are rendered.
The Group applies the practical expedient of not disclosing the transaction price allocated to the remaining
performance obligation as the original expected duration of all the contracts from customers of the Group are within one
year or less.
APPENDIX I ACCOUNTANTS ’REPORT
– I-28 –


--- page 615 ---
7. OTHER INCOME
For the year ended December 31,
For the six months
ended June 30,
2021 2022 2023 2023 2024
RMB’000 RMB ’000 RMB ’000 RMB ’000 RMB ’000
(Unaudited)
Interest income from bank and
other deposits . . . . . . . . . . . . . . . . . . . 5,970 8,158 5,492 3,119 2,261
Other income from franchisees and
provincial-dealers . . . . . . . . . . . . . . . . 2,343 4,079 3,563 1,665 1,533
R e n t a li n c o m e .................... 3 , 6 0 4 3 , 2 0 0 3 , 2 2 2 1 , 5 6 0 1 , 7 4 1
Government grants (note) . . . . . . . . . . . . 15,416 12,648 15,230 895 2,844
Additional Deduction f or value-added tax
(‘‘VAT’’) ...................... ———— 2,165
O t h e r s ......................... 9 7 3 1 6 2 6 6 2 6 3 1 0 4
27,430 28,401 27,773 7,502 10,648
Note: For the years ended December 31, 2021, 2022 and 2023 and the six months ended June 30, 2023 and 2024,
income of approximately RMB15,284,000, RMB12,516,000, RMB15,098,000, RMB829,000 (unaudited) and
RMB2,821,000 respectively represents the subsidies from the relevant government authorities for the purpose
of motivating the business development of the Group. The subsidies received are in substance a kind of
immediate financial support to the Group with no futu re related costs and are recognised as income when the
subsidies are received. There were no unfulfilled conditions for all the government grants in the years in
which they were recognised.
For the years ended December 31, 2021, 2022 and 2023 and the six months ended June 30, 2023 and 2024,
income of approximately RMB132,000, RMB132,000, RMB132,000, RMB66,000 (unaudited) and
RMB23,000 respectively represents the grants from t he relevant government authorities for funding the
purchase of certain non-current assets. The government grants received are recognised in profit or loss over
the useful lives of the relevant non-current assets.
8. OTHER EXPENSES
For the year ended December 31,
For the six months
ended June 30,
2021 2022 2023 2023 2024
RMB’000 RMB ’000 RMB ’000 RMB ’000 RMB ’000
(Unaudited)
Expenses related to previous
A-share listing attempt . . . . . . . . . . . . 13,290 7,261 4,302 2,898 —
Direct operating expenses incurred
for investment properties . . . . . . . . . . . 3,724 4,204 4,197 2,099 2,098
17,014 11,465 8,499 4,997 2,098
APPENDIX I ACCOUNTANTS ’REPORT
– I-29 –


--- page 616 ---
9. OTHER GAINS AND LOSSES, NET
For the year ended December 31,
For the six months
ended June 30,
2021 2022 2023 2023 2024
RMB’000 RMB ’000 RMB ’000 RMB ’000 RMB ’000
(Unaudited)
Gain/(loss) on disposal of property, plant
and equipment, intangible assets and
t e r m i n a t i o no fl e a s e s ,n e t........... 5 8 1 , 5 5 5 ( 5 5 ) 2 1 8 ( 2 0 )
Net foreign exchange gain/(loss) . . . . . . . . 9 (124) (134) (77) 53
Net realised gain/(loss) on Au (T+D)
contracts (note) ................. 7 6 , 0 0 1 ( 170,942) (299,391) (158,000) (298,527)
Net realised gain/(loss) on gold loans . . . . 13,552 (29,247) (50,358) (42,919) (67,662)
Net unrealised (loss)/gain on gold loans . . (973) (8,913) (19,735) 5,632 20,440
Fair value changes on financial assets
a tF V T P L ..................... 8 0 3 1 4 0 8 0 5 4 5
Charitable contribution . . . . . . . . . . . . . . (443) (2,382) (1,146) (500) (613)
O t h e r s ......................... 8 3 2 9 5 2 7 2 5 — 599
T o t a l .......................... 8 9 , 8 3 9 ( 208,961) (370,014) (195,592) (345,725)
Note: The Group uses Au (T+D) contracts which are purchased on Shanghai Gold Exchange as an economic hedge
of its commodity price risk and its exposure to variability in fair value changes attributable to price
fluctuation risk associated with gold products. The Au (T+D) contracts are settled on a daily basis.
The Group does not formally designate or document the hedging transactions with respect to the Au (T+D)
contracts. Therefore, those transacti ons are not designated for hedge accounting.
10. FINANCE COSTS
For the year ended December 31,
For the six months
ended June 30,
2021 2022 2023 2023 2024
RMB’000 RMB ’000 RMB ’000 RMB ’000 RMB ’000
(Unaudited)
Interest on borrowings . . . . . . . . . . . . . . 23,921 27,891 33,703 15,059 22,890
Interest on gold loans . . . . . . . . . . . . . . . 19,948 18,526 17,272 7,130 9,646
Interest on bills discounted with r ecourse . . 18,366 8,931 11,224 8,483 2,335
Interest on lease liabilities . . . . . . . . . . . . 1,926 1,520 935 470 561
64,161 56,868 63,134 31,142 35,432
APPENDIX I ACCOUNTANTS ’REPORT
– I-30 –


--- page 617 ---
11. (IMPAIRMENT LOSSES)/REVERSAL OF IMPAIRMENT LOSSES UNDER EXPECTED CREDIT LOSS
MODEL, NET
For the year ended December 31,
For the six months
ended June 30,
2021 2022 2023 2023 2024
RMB’000 RMB ’000 RMB ’000 RMB ’000 RMB ’000
(Unaudited)
(Impairment losses)/reversal of impairment
losses, net recognised on:
— Trade receivables . . . . . . . . . . . . . . (12,402) 11,116 (675) (666) 424
— Other receivables .............. ( 7 9 5 ) ( 1 , 0 2 9 ) ( 4 0 1 ) 1 3 5 ( 6 6 2 )
T o t a l .......................... ( 1 3 , 1 9 7 ) 1 0 , 0 8 7 ( 1 , 0 7 6 ) ( 5 3 1 ) ( 2 3 8 )
12. INCOME TAX EXPENSE
For the year ended December 31,
For the six months
ended June 30,
2021 2022 2023 2023 2024
RMB’000 RMB ’000 RMB ’000 RMB ’000 RMB ’000
(Unaudited)
Current enterprise income
Tax ( ‘‘EIT’’): . . . . . . . . . . . . . . . . . . . 71,722 61,732 80,913 34,646 16,754
Under provision in prior years . . . . . . . . . ———— 723
D e f e r r e dt a x ..................... ( 3 4 6 ) 1 , 6 7 3 ( 9 , 2 7 2 ) ( 6 , 6 5 7 ) ( 2 , 8 6 8 )
71,376 63,405 71,641 27,989 14,609
Under the Law of the PRC on Enterprise Income Tax (the ‘‘EIT Law ’’) and Implementation Regulation of the EIT
Law, the statutory tax rate of the PRC subsidiaries is 25% during the Track Record Period.
Certain subsidiaries are qualified as small low-profit enterprises by the relevant tax authorities. The entitled
subsidiaries are subject to a prefere ntial income tax rate of 2.5%, 5% or 10% during the Track Record Period.
Shandong Yifu Gold Jewellery Limited (‘‘ Shandong Yifu ’’), is entitled to a preferential income tax rate of 15% for
the six months ended June 30, 2024, as Shandong Yifu was qualified as a High-New Tec hnology Enterprise (the
‘‘HNTE ’’) and the HNTE qualification was approved and valid for 3 years from November 29, 2023 to November 28,
2026.
No provision for taxation in Hong Kong has been made as the Group ’s income neither arises in, nor is derived from,
Hong Kong.
APPENDIX I ACCOUNTANTS ’REPORT
– I-31 –


--- page 618 ---
The income tax expense for the Track Record Period can be r econciled to the profit before tax per the consolidated
statements of profit or loss and other comprehensive income as follows:
For the year ended December 31,
For the six months
ended June 30,
2021 2022 2023 2023 2024
RMB’000 RMB ’000 RMB ’000 RMB ’000 RMB ’000
(Unaudited)
P r o f i tb e f o r et a x................... 295,874 244,161 305,113 133,976 66,861
Tax at PRC statutory income tax rate
of 25% . . . . . . . . . . . . . . . . . . . . . . . 73,969 61,040 76,278 33,494 16,715
Effect of different tax rates of subsidiaries . (516) (765) (2,751) (894) (2,781)
Tax effect of expenses not deductible for
t a xp u r p o s e s ................... 1 , 8 7 0 1 , 2 6 2 2 , 6 3 8 5 1 5 8 0
Utilisation of tax losses previously not
recognised ..................... ( 1 , 3 1 4 ) ( 2 2 6 ) ( 1 , 5 2 0 ) ( 1 , 5 4 0 ) ( 4 5 5 )
Utilisation of deductible temporary
differences previously not recognised . . (1,776) (357) (2,110) (1,962) (147)
Tax effect of tax losses not recognised . . . 1,865 4,277 3,413 504 4,197
Tax effect of deductible temporary
differences not recognised .......... 6 2 1 , 8 1 5 ———
Under provision in respect of prior years . . ———— 723
Additional deductible items under
the EIT law (note i) . . . . . . . . . . . . . . (2,784) (3,641) (4,307) (2,128) (3,723)
Income tax expense for the year/period . . . 71,376 63,405 71,641 27,989 14,609
Note:
i. Additional deductible items under the EIT law include sup er deduction for research and development expenses
and super deduction for salary of disabled individuals.
APPENDIX I ACCOUNTANTS ’REPORT
– I-32 –


--- page 619 ---
13. PROFIT FOR THE YEAR/PERIOD
The Group ’s profit for the year/period has been arrived at after charging/(crediting):
For the year ended December 31,
For the six months
ended June 30,
2021 2022 2023 2023 2024
RMB’000 RMB ’000 RMB ’000 RMB ’000 RMB ’000
(Unaudited)
Depreciation of property, plant and
equipment . . . . . . . . . . . . . . . . . . . . . 27,813 27,840 37,507 16,676 22,097
Depreciation of investment properties . . . . 3,724 4,204 4,197 2,099 2,098
Depreciation of right-of-use assets . . . . . . 11,008 11,389 9,611 4,474 5,356
Amortisation of intangible assets . . . . . . . 1,732 1,514 1,692 829 915
Total depreciation and amortisation . . . . . . 44,277 44,947 53,007 24,078 30,466
Less: capitalised in inventories . . . . . . . . . (14,287) (15,497) (19,643) (8,953) (10,546)
29,990 29,450 33,364 15,125 19,920
Auditor ’sr e m u n e r a t i o n .............. 4 3 2 3 6 3 3 7 4 0
L i s t i n ge x p e n s e ................... —— 2,829 — 7,132
Short-term lease expense . . . . . . . . . . . . . 1,970 3,053 3,184 1,723 1,037
Covid-19-related rent concessions . . . . . . . — (66) ———
Gross rental income from investment
p r o p e r t i e s ..................... ( 3 , 6 0 4 ) ( 3 , 2 0 0 ) ( 3 , 2 2 2 ) ( 1 , 5 6 0 ) ( 1 , 7 4 1 )
Less:
direct operating expenses incurred
for investment properties that
generated rental income
during the year/period . . . . . . . . . . . 2,286 2,287 2,234 1,139 1,135
direct operating expenses incurred
for investment properties that
did not generated rental income
during the year/period . . . . . . . . . . . 1,438 1,917 1,963 960 963
120 1,004 975 539 357
Directors ’ and supervisors ’ remuneration
(Note 14) ...................... 4 , 7 5 3 3 , 7 0 2 4 , 0 9 4 1 , 8 7 5 2 , 0 7 1
Other staff cost:
Salaries and other allowances . . . . . . . . 181,170 198,211 231,960 111,170 113,105
Equity-settled share-based payments
included in administrative expenses . . 1,224 118 ———
Retirement benefits scheme
contributions . . . . . . . . . . . . . . . . . 11,615 15,307 17,736 8,359 9,850
T o t a ls t a f fc o s t s................... 194,009 213,636 249,696 119,529 122,955
Less: capitalised in inventories . . . . . . . . . (68,553) (76,775) (86,337) (40,024) (41,408)
125,456 136,861 163,359 79,505 81,547
Cost of inventories recognised
a sa ne x p e n s e ................... 1 6 , 334,200 14,964,650 19,130,638 8,787,968 9,362,088
Including: (reversal of write-down)/
write-down of inventories . . . . . . . . . . (12,946) 109 (583) (348) 2,268
APPENDIX I ACCOUNTANTS ’REPORT
– I-33 –


--- page 620 ---
14. EMOLUMENTS OF DIRECTORS, CHIEF EXECUTIVE AND SUPERVISORS
The emoluments paid or payable to the directors, chief ex ecutive and supervisors of the Company during the Track
Record Period are as follows:
For the year ended December 31, 2021
Salaries,
allowances
and benefits
in kind
Performance-
based
bonuses
Retirement
benefits
scheme
Equity-settled
share-based
payments Total
RMB’000 RMB ’000 RMB ’000 RMB ’000 RMB ’000
(note i)
Executive directors:
Mr. Wang Zhongshan . . . . 483 339 35 492 1,349
Ms. Zhang Xiuqin
(Chief executive) . . . . . 424 387 30 380 1,221
Mr. Wang Zegang . . . . . . 435 194 35 39 703
Ms. Jiang Liying . . . . . . . 376 282 — 104 762
Sub-total . . . . . . . . . . . . . 1,718 1,202 100 1,015 4,035
Independent non-executive
directors:
Mr. Wang Gongyong . . . . 70 ——— 70
M r .S h aN a l i.......... 7 0 ——— 70
Mr. Huang Fangliang . . . . 70 ——— 70
S u b - t o t a l ............. 2 1 0 ——— 210
Supervisors:
M r .Z h a n gX i n ........ 1 4 4 — 9 7 160
M r .L iH u............ 1 5 2 — 9 — 161
Mr. Wang Yanpeng . . . . . 156 — 9 22 187
S u b - t o t a l ............. 4 5 2 — 27 29 508
T o t a l ............... 2 , 3 8 0 1 , 2 0 2 1 2 7 1 , 0 4 4 4 , 7 5 3
APPENDIX I ACCOUNTANTS ’REPORT
– I-34 –


--- page 621 ---
For the year ended December 31, 2022
Salaries,
allowances
and benefits
in kind
Performance-
based
bonuses
Retirement
benefits
scheme
Equity-settled
share-based
payments Total
RMB’000 RMB ’000 RMB ’000 RMB ’000 RMB ’000
(note i)
Executive directors:
Mr. Wang Zhongshan . . . . 485 338 40 — 863
Ms. Zhang Xiuqin
(Chief executive) . . . . . 355 388 —— 743
Mr. Wang Zegang . . . . . . 436 194 40 — 670
Ms. Jiang Liying . . . . . . . 386 290 — 8 684
Sub-total . . . . . . . . . . . . . 1,662 1,210 80 8 2,960
Independent non-executive
directors:
Mr. Wang Gongyong . . . . 70 ——— 70
M r .S h aN a l i.......... 7 0 ——— 70
Mr. Huang Fangliang . . . . 70 ——— 70
S u b - t o t a l ............. 2 1 0 ——— 210
Supervisors:
M r .Z h a n gX i n ........ 1 5 0 1 1 0 — 161
M r .L iH u............ 1 6 9 1 2 4 — 194
Mr. Wang Yanpeng . . . . . 159 4 10 4 177
S u b - t o t a l ............. 4 7 8 6 4 4 4 5 3 2
T o t a l ............... 2 , 3 5 0 1 , 2 1 6 1 2 4 1 2 3 , 7 0 2
APPENDIX I ACCOUNTANTS ’REPORT
– I-35 –


--- page 622 ---
For the year ended December 31, 2023
Salaries,
allowances
and benefits
in kind
Performance-
based
bonuses
Retirement
benefits
scheme
Equity-settled
share-based
payments Total
RMB’000 RMB ’000 RMB ’000 RMB ’000 RMB ’000
(note i)
Executive directors:
Mr. Wang Zhongshan . . . . 489 338 43 — 870
Ms. Zhang Xiuqin
(Chief executive)
(note ii) ........... 3 8 1 3 7 4 —— 755
Mr. Wang Zegang . . . . . . 448 252 45 — 745
Ms. Jiang Liying . . . . . . . 393 307 —— 700
S u b - t o t a l ............. 1 , 7 1 1 1 , 2 7 1 8 8 — 3,070
Independent non-executive
directors:
Mr. Wang Gongyong . . . . 70 ——— 70
M r .S h aN a l i.......... 7 0 ——— 70
Mr. Huang Fangliang . . . . 70 ——— 70
Mr. Wong Lit Chor, Alexis
(note iii) ........... 2 3 ——— 23
S u b - t o t a l ............. 2 3 3 ——— 233
Chief executive:
Mr. Wang Guoxin
(note iv) ........... 4 4 — 7 — 51
Supervisors:
M r .Z h a n gX i n ........ 1 5 5 3 2 4 — 182
M r .L iH u............ 1 7 5 6 0 2 5 — 260
Mr. Wang Yanpeng . . . . . 162 126 10 — 298
S u b - t o t a l ............. 4 9 2 1 8 9 5 9 — 740
T o t a l ............... 2 , 4 8 0 1 , 4 6 0 1 5 4 — 4,094
APPENDIX I ACCOUNTANTS ’REPORT
– I-36 –


--- page 623 ---
For the six months ended June 30, 2024
Salaries,
allowances
and benefits
in kind
Performance-
based
bonuses
Retirement
benefits
scheme
Equity-settled
share-based
payments Total
RMB’000 RMB ’000 RMB ’000 RMB ’000 RMB ’000
(note i)
Executive directors:
Mr. Wang Zhongshan . . . . 227 152 7 — 386
Ms. Zhang Xiuqin . . . . . . 195 177 —— 372
Mr. Wang Zegang . . . . . . 223 85 24 — 332
Ms. Jiang Liying . . . . . . . 198 143 —— 341
S u b - t o t a l ............. 8 4 3 5 5 7 3 1 — 1,431
Independent non-executive
directors:
Mr. Wang Gongyong . . . . 35 ——— 35
M r .S h aN a l i.......... 3 5 ——— 35
Mr. Huang Fangliang . . . . 35 ——— 35
Mr. Wong Lit Chor, Alexis
(note iii) ........... 3 5 ——— 35
S u b - t o t a l ............. 1 4 0 ——— 140
Chief executive:
M r .W a n gG u o x i n ...... 1 1 3 — 18 — 131
Supervisors:
M r .Z h a n gX i n ........ 7 7 — 12 — 89
M r .L iH u............ 1 2 9 — 12 — 141
Mr. Wang Yanpeng . . . . . 127 — 12 — 139
S u b - t o t a l ............. 3 3 3 — 36 — 369
T o t a l ............... 1 , 4 2 9 5 5 7 8 5 — 2,071
APPENDIX I ACCOUNTANTS ’REPORT
– I-37 –


--- page 624 ---
For the six months ended June 30, 2023 (Unaudited)
Salaries,
allowances
and benefits
in kind
Performance-
based
bonuses
Retirement
benefits
scheme
Equity-settled
share-based
payments Total
RMB’000 RMB ’000 RMB ’000 RMB ’000 RMB ’000
(note i)
Executive directors:
Mr. Wang Zhongshan . . . . 251 171 22 — 444
Ms. Zhang Xiuqin (Chief
executive) (note ii) . . . . 185 183 —— 368
Mr. Wang Zegang . . . . . . 226 97 22 — 345
Ms. Jiang Liying . . . . . . . 199 146 —— 345
S u b - t o t a l ............. 8 6 1 5 9 7 4 4 — 1,502
Independent non-executive
directors:
Mr. Wang Gongyong . . . . 35 ——— 35
M r .S h aN a l i.......... 3 5 ——— 35
Mr. Huang Fangliang . . . . 35 ——— 35
S u b - t o t a l ............. 1 0 5 ——— 105
Supervisors:
M r .Z h a n gX i n ........ 7 6 — 5 — 81
M r .L iH u............ 8 8 — 13 — 101
Mr. Wang Yanpeng . . . . . 81 — 5 — 86
S u b - t o t a l ............. 2 4 5 — 23 — 268
T o t a l ............... 1 , 2 1 1 5 9 7 6 7 — 1,875
Notes:
i. Performance-based bonuses are determined based on the Group ’s performance and performance of the relevant
individuals within the Group.
ii. Ms. Zhang Xiuqin resigned as chief executive on September 4, 2023.
iii. Mr. Wong Lit Chor Alexis was appointed as an independent non-executive director on September 20, 2023
and resigned as an independent non-executive director on July 31, 2024.
iv. Mr. Wang Guoxin was appointed as chief executive on September 20, 2023.
APPENDIX I ACCOUNTANTS ’REPORT
– I-38 –


--- page 625 ---
The emoluments of executive directors and supervisors shown above were mainly for their services in connection
with the management of affairs of the Company and the Group. The independent non-executive directors ’ emoluments
shown above were mainly for their services as the directors of the Company.
During the Track Record Period, certain directors and supervisors were granted shares in respect of their services to
the Group, details are set out in Note 36 to t he Historical Financial Information.
There was no arrangement under which a director, supervisor or chief executive of the Company waived or agreed to
waive any remuneration during the Track Record Period.
15. FIVE HIGHEST PAID EMPLOYEES
The five highest paid employees of the Group during the Tr ack Record Period included 2, 1, nil, nil (unaudited) and
1 directors or supervisors for the years ended December 31, 2021, 2022 and 2023 and the six months ended June 30, 2023
and 2024, respectively, details of whose remuneration are set out in Note 14 above. Details of the remuneration for the
remaining 3, 4, 5, 5 (unaudited) and 4 individuals who are not a d irector, supervisor or chief executive of the Company for
the Track Record Period were as follows:
For the year ended December 31,
For the six months
ended June 30,
2021 2022 2023 2023 2024
RMB’000 RMB ’000 RMB ’000 RMB ’000 RMB ’000
(Unaudited)
Salaries and other allowances . . . . . . . . . . 2,435 3,422 5,301 2,802 1,861
Performance-based bonuses ........... 6 3 2 2 2 8 3 6 3 1 0 0 —
R e t i r e m e n tb e n e f i t ss c h e m e ........... 2 1 8 1 1 1 7 5 2 4 8
Equity-settled share-based payments
e x p e n s e....................... 4 2 ————
3,130 3,731 5,781 2,954 1,909
The number of the highest paid employees who are not the directors, supervisors or chief executive of the Company
whose remuneration fell within the following bands is as follows:
For the year ended December 31,
For the six months
ended June 30,
2021 2022 2023 2023 2024
Number of
employees
Number of
employees
Number of
employees
Number of
employees
Number of
employees
(Unaudited)
Hong Kong dollars ( ‘‘HKD’’) nil to
HKD1,000,000 .................. — 1 — 54
HKD1,000,001 to HKD1,500,000 . . ..... 3 3 5 ——
T o t a l .......................... 3 4 5 5 4
During the Track Record Period, no emoluments were paid by the Group to any of the directors, supervisors, chief
executive of the Company or the five highest paid individuals as an inducement to join or upon joining the Group or as
compensation for loss of office.
APPENDIX I ACCOUNTANTS ’REPORT
– I-39 –


--- page 626 ---
16. EARNINGS PER SHARE
The calculation of the basic earnings per share attributable to the owners of the Company is based on the following
data:
For the year ended December 31,
For the six months
ended June 30,
2021 2022 2023 2023 2024
RMB’000 RMB ’000 RMB ’000 RMB ’000 RMB ’000
(Unaudited)
Profit for the year attributable to
t h eo w n e r so ft h eC o m p a n y ......... 220,618 180,825 230,375 104,167 47,433
Number of shares
For the year ended December 31,
For the six months
ended June 30,
2021 2022 2023 2023 2024
’000 ’000 ’000 ’000 ’000
(Unaudited)
Weighted average number of ordinary
shares for the purpose of basic earnings
p e rs h a r e...................... 224,900 226,289 229,067 229,067 229,067
No diluted earnings per share for the Track Record Period were presented as there were no potential ordinary shares
in issue for the Track Record Period.
17. DIVIDENDS
In May 2022, a final dividend of RMB78,715,000 was decl ared and paid by the Company to its shareholders.
In March 2024, a final dividend of RMB91,627,000 was decl ared and paid by the Company to its shareholders in
May 2024.
Other than the above, no dividend was paid or declared by the Company during the Track Record Period.
APPENDIX I ACCOUNTANTS ’REPORT
– I-40 –


--- page 627 ---
18. PROPERTY, PLANT AND EQUIPMENT
The Group
Buildings
Leasehold
improvement
Construction
in progress Machinery
Transportation
equipment
Electronic
equipment
Other
equipment Total
RMB ’000 RMB ’000 RMB ’000 RMB ’000 RMB ’000 RMB ’000 RMB ’000 RMB ’000
At January 1, 2021 . . . . 99,730 20,824 87,652 144,896 12,020 22,400 18,293 405,815
A d d i t i o n s ........... — 1,986 45,183 24,630 2,113 2,088 417 76,417
Transfer from
construction in
p r o g r e s s ......... —— (2,371) 2,172 —— 199 —
Transfer to investment
properties . . . . . . . . (20,947) — —— ——— (20,947)
D i s p o s a l s ........... ——— — (522) (132) (6) (660)
At December 31, 2021 . . 78,783 22,810 130,464 171,698 13,611 24,356 18,903 460,625
A d d i t i o n s ........... — 3,073 77,857 14,256 284 1,679 218 97,367
Transfer from
construction in
p r o g r e s s ......... —— (8,075) 7,470 —— 605 —
D i s p o s a l s ........... ——— (502) — (1,579) (107) (2,188)
At December 31, 2022 . . 78,783 25,883 200,246 192,922 13,895 24,456 19,619 555,804
Additions . . . . . . . . . . . 141 5,789 29,831 28,151 462 5,241 4,171 73,786
Transfer from
construction in
progress . . . . . . . . . 216,701 — (226,210) 470 — 8,862 177 —
D i s p o s a l s ........... ——— (3,578) (114) (2,442) (1,194) (7,328)
At December 31, 2023 . . 295,625 31,672 3,867 217,965 14,243 36,117 22,773 622,262
A d d i t i o n s ........... — 1,517 15 12,422 352 2,571 86 16,963
Transfer from
construction in
p r o g r e s s ......... —— (2,928) 2,600 —— 328 —
D i s p o s a l s ........... ——— (52) — (114) (10) (176)
Other decrease . . . . . . . (2,207) — (940) — ——— 3,147
At June 30, 2024 . . . . . . 293,418 33,189 14 232,935 14,595 38,574 23,177 635,902
APPENDIX I ACCOUNTANTS ’REPORT
– I-41 –


--- page 628 ---
Buildings
Leasehold
improvement
Construction
in progress Machinery
Transportation
equipment
Electronic
equipment
Other
equipment Total
RMB ’000 RMB ’000 RMB ’000 RMB ’000 RMB ’000 RMB ’000 RMB ’000 RMB ’000
DEPRECIATION
At January 1, 2021 . . . . 33,280 13,800 — 56,284 9,613 18,226 11,448 142,651
Charge for the year . . . . 4,075 4,501 — 13,503 1,039 2,096 2,599 27,813
Transfer to investment
properties . . . . . . . . (3,980) — —— ——— (3,980)
Eliminated on disposals . . ——— — (452) (125) (6) (583)
At December 31, 2021 . . 33,375 18,301 — 69,787 10,200 20,197 14,041 165,901
Charge for the year . . . . 3,826 3,399 — 15,325 1,150 2,074 2,066 27,840
Eliminated on disposals . . ——— (458) — (1,503) (101) (2,062)
At December 31, 2022 . . 37,201 21,700 — 84,654 11,350 20,768 16,006 191,679
Charge for the year . . . . 11,369 2,674 — 17,062 876 3,686 1,840 37,507
Eliminated on disposals . . ——— (3,399) (108) (2,284) (1,134) (6,925)
At December 31, 2023 . . 48,570 24,374 — 98,317 12,118 22,170 16,712 222,261
Charge for the period . . . 7,142 1,600 — 9,389 422 2,546 998 22,097
Eliminated on disposals . . ——— (49) — (98) (9) (156)
At June 30, 2024 . . . . . . 55,712 25,974 — 107,657 12,540 24,618 17,701 244,202
CARRYING AMOUNT
At December 31, 2021 . . 45,408 4,509 130,464 101,911 3,411 4,159 4,862 294,724
At December 31, 2022 . . 41,582 4,183 200,246 108,268 2,545 3,688 3,613 364,125
At December 31, 2023 . . 247,055 7,298 3,867 119,648 2,125 13,947 6,061 400,001
At June 30, 2024 . . . . . . 237,706 7,215 14 125,278 2,055 13,956 5,476 391,700
The above items of property, plant and equipment, except for construction in progress, af ter taking into account the
residual value, are depreciated on a straight-line basis at the following rates per annum:
B u i l d i n g s ...................... 4 . 7 5 % –9.50%
L e a s e h o l di m p r o v e m e n t ............ 2 0 . 0 0 % –33.33%
M a c h i n e r y ...................... 4 . 7 5 % –31.67%
Transportation equipment . . . . . . . . . . . 9.50% –23.75%
E l e c t r o n i ce q u i p m e n t .............. 8 . 6 4 % –33.53%
O t h e re q u i p m e n t ................. 8 . 3 3 % –34.55%
As at December 31, 2021, 2022 and 2023 and June 30, 2024, the carrying amount of property, plant and equipment
of RMB41,293,000, RMB37,818,000, RM B205,542,000 and RMB 222,980,000, respectively, are pledged to banks as
collaterals for the Group ’s borrowings and gold loans.
APPENDIX I ACCOUNTANTS ’REPORT
– I-42 –


--- page 629 ---
The Company
Buildings
Leasehold
improvement Machinery
Transportation
equipment
Electronic
equipment
Other
equipment Total
RMB ’000 RMB ’000 RMB ’000 RMB ’000 RMB ’000 RMB ’000 RMB ’000
COST
At January 1, 2021 . . . . . . . . . . . . . . 42,448 4,184 4,559 4,650 1,508 372 57,721
A d d i t i o n s .................... — —— 1,023 8 — 1,031
D i s p o s a l s ..................... — —— (421) (22) — (443)
At December 31, 2021 . . . . . . . . . . . . 42,448 4,184 4,559 5,252 1,494 372 58,309
D i s p o s a l s ..................... —— (480) — (46) (102) (628)
At December 31, 2022 . . . . . . . . . . . . 42,448 4,184 4,079 5,252 1,448 270 57,681
A d d i t i o n s .................... — —— — 4 — 4
D i s p o s a l s ..................... —— (609) ——— (609)
At December 31, 2023 . . . . . . . . . . . . 42,448 4,184 3,470 5,252 1,452 270 57,076
A d d i t i o n s .................... — —— — 1 — 1
D i s p o s a l s ..................... —— (1,236) ——— (1,236)
At June 30, 2024 . . . . . . . . . . . . . . . 42,448 4,184 2,234 5,252 1,453 270 55,841
DEPRECIATION
At January 1, 2021 . . . . . . . . . . . . . . 12,993 4,072 3,079 4,417 1,431 353 26,345
C h a r g ef o rt h ey e a r .............. 2 , 0 2 3 1 1 2 4 3 6 8 1 2 — 2,654
E l i m i n a t e do nd i s p o s a l s ........... — —— (400) (21) — (421)
At December 31, 2021 . . . . . . . . . . . . 15,016 4,184 3,515 4,098 1,412 353 28,578
C h a r g ef o rt h ey e a r .............. 2 , 0 2 3 — 435 243 2 — 2,703
E l i m i n a t e do nd i s p o s a l s ........... —— (456) — (44) (97) (597)
At December 31, 2022 . . . . . . . . . . . . 17,039 4,184 3,494 4,341 1,370 256 30,684
C h a r g ef o rt h ey e a r .............. 2 , 0 1 4 — 201 243 3 — 2,461
E l i m i n a t e do nd i s p o s a l s ........... —— (579) ——— (579)
At December 31, 2023 . . . . . . . . . . . . 19,053 4,184 3,116 4,584 1,373 256 32,566
C h a r g ef o rt h ep e r i o d............. 1 , 0 0 7 — 40 122 2 — 1,171
E l i m i n a t e do nd i s p o s a l s ........... —— (1,174) ——— (1,174)
At June 30, 2024 . . . . . . . . . . . . . . . 20,060 4,184 1,982 4,706 1,375 256 32,563
CARRYING AMOUNT
At December 31, 2021 ............ 2 7 , 4 3 2 — 1,044 1,154 82 19 29,731
At December 31, 2022 ............ 2 5 , 4 0 9 — 585 911 78 14 26,997
At December 31, 2023 ............ 2 3 , 3 9 5 — 354 668 79 14 24,510
At June 30, 2024 . . . ............ 2 2 , 3 8 8 — 252 546 78 14 23,278
APPENDIX I ACCOUNTANTS ’REPORT
– I-43 –


--- page 630 ---
The above items of property, plant and equipment, after tak ing into account the residual value, are depreciated on a
straight-line basis at the following rates per annum:
B u i l d i n g s ...................... 4 . 7 5 %
L e a s e h o l di m p r o v e m e n t ............ 3 3 . 3 3 %
M a c h i n e r y ...................... 9 . 5 0 %
Transportation equipment . . . . . . . . . . . 19.00%
E l e c t r o n i ce q u i p m e n t .............. 3 1 . 6 7 %
O t h e re q u i p m e n t ................. 1 9 . 0 0 %
As at December 31, 2021, 2022 and 2023 and June 30, 2024, property, plant and equipment of the Company of
RMB27,432,000, RMB25,409,000, RMB23, 395,000 and RMB22,388,000, respectively, are pledged to banks as collaterals
for the Company ’s borrowings.
19. RIGHT-OF-USE ASSETS
The Group
Leasehold
lands
Leased
properties Total
RMB’000 RMB ’000 RMB ’000
Carrying amount at January 1, 2021 . . .................... 8 0 , 2 2 7 3 1 , 2 1 6 111,443
A d d i t i o n s ........................................ 3 , 6 7 2 1 , 3 9 7 5 , 0 6 9
T r a n s f e rt oi n v e s t m e n tp r o p e r t i e s ........................ ( 4 2 , 4 2 3 ) — (42,423)
D e p r e c i a t i o nc h a r g e ................................. ( 1 , 0 6 9 ) ( 9 , 9 3 9 ) ( 1 1 , 0 0 8 )
Carrying amount at December 31, 2021 ................... 4 0 , 4 0 7 2 2 , 6 7 4 6 3 , 0 8 1
A d d i t i o n s ........................................ — 10,653 10,653
L e a s em o d i f i c a t i o n s ................................. — (77) (77)
T e r m i n a t i o no fl e a s e s................................ — (7,087) (7,087)
D e p r e c i a t i o nc h a r g e ................................. ( 8 9 9 ) ( 1 0 , 4 9 0 ) ( 1 1 , 3 8 9 )
Carrying amount at December 31, 2022 ................... 3 9 , 5 0 8 1 5 , 6 7 3 5 5 , 1 8 1
A d d i t i o n s ........................................ — 8,666 8,666
L e a s em o d i f i c a t i o n s ................................. — (23) (23)
T e r m i n a t i o no fl e a s e s................................ — (1,376) (1,376)
D e p r e c i a t i o nc h a r g e ................................. ( 8 9 9 ) ( 8 , 7 1 2 ) ( 9 , 6 1 1 )
Carrying amount at December 31, 2023 ................... 3 8 , 6 0 9 1 4 , 2 2 8 5 2 , 8 3 7
A d d i t i o n s ........................................ — 12,043 12,043
L e a s em o d i f i c a t i o n s ................................. — 22 22
T e r m i n a t i o no fl e a s e s................................ — (312) (312)
D e p r e c i a t i o nc h a r g e ................................. ( 4 5 0 ) ( 4 , 9 0 6 ) ( 5 , 3 5 6 )
At June 30, 2024 ................................... 3 8 , 1 5 9 2 1 , 0 7 5 5 9 , 2 3 4
APPENDIX I ACCOUNTANTS ’REPORT
– I-44 –


--- page 631 ---
For the year ended December 31,
For the six months
ended June 30,
2021 2022 2023 2023 2024
RMB’000 RMB ’000 RMB ’000 RMB ’000 RMB ’000
(Unaudited)
Expense relating to short-term leases . . . . . 1,970 3,053 3,184 1,723 1,037
Total cash outflow for leases . . . . . . . . . . 13,332 15,228 12,205 6,319 5,651
For the Track Record Period, the Group leases various la nds, offices and retail stores for its operations. Lease
contracts are entered into for fixed term of 1 month to 50 years. Lease terms are negotiated on an individual basis
and contain a wide range of different terms and conditions. I n determining the lease term and assessing the length of
the non-cancellable period, the Group applies the defin ition of a contract and determines the period for which the
contract is enforceable.
In addition, the Group owns buildings where its manufacturing facilities and office are primarily located. The
Group is the registered owner of these property interests, including the underlying leasehold lands. Lump sum
payments were made upfront to acquire these property int erests. The leasehold land components of these owned
properties are presented separately only if the payments made can be allocated reliably.
The Group regularly entered into short-term leases for certain properties, electronic equipment and
transportation equipment. As at December 31, 2021, 2022 and 2023 and June 30, 2024, the portfolio of short-term
leases is similar to the portfolio of short-term leases to which the short-term lease expense is disclosed above.
The Group’ s lease agreements do not contain any variable lease payments nor any extension or purchase
option for lessee.
Restrictions or covenants on leases
The lease agreements do not impose any covenants other than the security interests in the leased properties
that are held by the lessor.
As at December 31, 2021 and June 30, 2024, the carrying amount of leasehold lands of RMB32,630,000 and
3,476,000 are pledged to banks as security for the Group ’s borrowings and gold loans. As at December 31, 2023, the
carrying amount of leasehold lands of RMB3,513,000 are pledged to banks as security for the Group ’s borrowings.
Rent concessions
During the Track Record Period, certain lessors of the retail stores provided rent concessions that occurred as
a direct consequence of Covid-19 pandemic to the Group through rent reductions.
During the years ended December 31, 2021, 2022 and 2023 and the six months ended June 30, 2023 and
2024, the effects on changes in lease payments due to forgiveness or waiver by the lessors for the relevant leases of
nil, RMB66,000, nil, nil(unaudited) and nil respectivel y were recognised as negative variable lease payments by
applying the practical expedient.
APPENDIX I ACCOUNTANTS ’REPORT
– I-45 –


--- page 632 ---
The Company
Leasehold
lands
RMB’000
Carrying amount at January 1, 2021 ............................................ 2 , 9 7 9
D e p r e c i a t i o nc h a r g e ....................................................... ( 1 0 2 )
Carrying amount at December 31, 2021 .......................................... 2 , 8 7 7
D e p r e c i a t i o nc h a r g e ....................................................... ( 1 0 1 )
Carrying amount at December 31, 2022 .......................................... 2 , 7 7 6
D e p r e c i a t i o nc h a r g e ....................................................... ( 1 0 2 )
Carrying amount at December 31, 2023 .......................................... 2 , 6 7 4
D e p r e c i a t i o nc h a r g e ....................................................... ( 5 1 )
C a r r y i n ga m o u n ta tJ u n e3 0 ,2 0 2 4 .............................................. 2 , 6 2 3
20. INVESTMENT PROPERTIES
The Group
The Group leases out office units, a factory and commerci al property units under operating leases with rentals
payable monthly. The leases typically run for an initial period of 1 to 10 years, with unilateral rights to extend the
lease beyond initial period held by lessees only.
APPENDIX I ACCOUNTANTS ’REPORT
– I-46 –


--- page 633 ---
The Group is not exposed to foreign currency risk as a result of the lease arrangements, as all leases are
denominated in RMB. The lease contracts do not co ntain residual value guarantee and/or lessee ’s option to purchase
the property at the end of lease term.
RMB’000
COST
A tJ a n u a r y1 ,2 0 2 1 ................................................... 4 9 , 5 1 6
T r a n s f e rf r o mp r o p e r t y ,p l a n ta n de q u i p m e n t .................................. 2 0 , 9 4 7
T r a n s f e rf r o mr i g h t - o f - u s ea s s e t s .......................................... 4 6 , 1 0 6
At December 31, 2021, 2022 and 2023 and June 30, 2024 ......................... 116,569
DEPRECIATION
A tJ a n u a r y1 ,2 0 2 1 ................................................... 1 6 , 0 8 6
C h a r g ef o rt h ey e a r ................................................... 3 , 7 2 4
T r a n s f e rf r o mp r o p e r t y ,p l a n ta n de q u i p m e n t .................................. 3 , 9 8 0
T r a n s f e rf r o mr i g h t - o f - u s ea s s e t s .......................................... 3 , 6 8 3
At December 31, 2021 . . . .............................................. 2 7 , 4 7 3
C h a r g ef o rt h ey e a r ................................................... 4 , 2 0 4
At December 31, 2022 . . . .............................................. 3 1 , 6 7 7
C h a r g ef o rt h ey e a r ................................................... 4 , 1 9 7
At December 31, 2023 . . . .............................................. 3 5 , 8 7 4
C h a r g ef o rt h ep e r i o d.................................................. 2 , 0 9 8
At June 30, 2024 ..................................................... 3 7 , 9 7 2
CARRYING VALUES
At December 31, 2021 . . . .............................................. 8 9 , 0 9 6
At December 31, 2022 . . . .............................................. 8 4 , 8 9 2
At December 31, 2023 . . . .............................................. 8 0 , 6 9 5
At June 30, 2024 ..................................................... 7 8 , 5 9 7
The above investment properties are depreciated on a straight-line basis at the following rates per annum:
L e a s e h o l dl a n d s ............. 2 . 0 0 % –2.66%
L e a s e dp r o p e r t i e s ............ 4 . 7 5 %
APPENDIX I ACCOUNTANTS ’REPORT
– I-47 –


--- page 634 ---
Details of the Group ’s investment properties and information about the fair value hierarchy as at the end of
each reporting period are as follows:
As at December 31, As at June 30,
2021 2022 2023 2024
Carrying
Amount
Fair
value at
Level 3
Carrying
Amount
Fair
value at
Level 3
Carrying
Amount
Fair
value at
Level 3
Carrying
Amount
Fair
value at
Level 3
RMB ’000 RMB ’000 RMB ’000 RMB ’000 RMB ’000 RMB ’000 RMB ’000 RMB ’000
Office units located
in Tianjin . . . . . . . 26,822 57,000 24,944 56,000 23,075 54,000 22,140 53,000
Factory located
in Tianjin . . . . . . . 57,953 59,000 56,036 57,000 54,118 55,000 53,160 55,000
Commercial property
units located
in Beijing . . . . . . . 4,321 11,000 3,912 11,000 3,502 11,000 3,297 11,000
89,096 127,000 84,892 124,000 80,695 120,000 78,597 119,000
The fair value of the investment properties has been arrived at based on a valuation carried out by Cushman
& Wakefield Limited, independent qualified valuers not connected with the Group, based on the income approach
and direct comparison approach. The address of Cushman & Wakefield Limited is 27/F, One Island East, Taikoo
Place, 18 Westlands Road, Quarry Bay, Hong Kong.
The fair value of the investment properties except for leasehold land attached to the factory located in Tianjin
was determined based on the income approach, where the market rentals of all lettable units of the properties are
assessed and discounted at the market yield expected by investors for this type of properties. The market rentals are
assessed by reference to the rentals achieved in the lettable units of the properties as well as other lettings of similar
properties in the neighborhood. The discount rate is determined by reference to the yields derived from analysing the
sales transactions of similar properties and adjusted to take into account the market expectation from property
investors to reflect factors specific to the Group ’s investment properties.
The fair value of leasehold land attached to the factory located in Tianjin was determined based on the direct
comparison by making reference to comparable sal es evidence as available in the relevant market.
In estimating the fair value of the properties, the highest and best use of the properties is their current use.
As at December 31, 2021, 2022 and 2023 and June 30, 2024, the carrying amounts of investment properties
of RMB40,443,000, RMB22,492,000, RMB34,943,000 and R MB33,555,000, respectively, are pledged to banks as
collaterals for the Group’ s borrowings and gold loans.
The Company
The Company leases out office units and a factory under operating leases with rentals payable monthly. The
leases typically run for an initial period of 1 to 10 years, with unilateral rights to extend the lease beyond initial
period held by lessees only.
APPENDIX I ACCOUNTANTS ’REPORT
– I-48 –


--- page 635 ---
The Company is not exposed to foreign currency risk as a result of the lease arrangements, as all leases are
denominated in RMB. The lease contracts do not co ntain residual value guarantee and/or lessee ’s option to purchase
the property at the end of lease term.
RMB’000
COST
At January 1, 2021 and December 31, 2021, 2022 and 2023 and June 30, 2024 . . ........ 107,950
DEPRECIATION
A tJ a n u a r y1 ,2 0 2 1 ................................................... 1 9 , 3 8 0
C h a r g ef o rt h ey e a r ................................................... 3 , 7 9 5
At December 31, 2021 . . . .............................................. 2 3 , 1 7 5
C h a r g ef o rt h ey e a r ................................................... 3 , 7 9 5
At December 31, 2022 . . . .............................................. 2 6 , 9 7 0
C h a r g ef o rt h ey e a r ................................................... 3 , 7 8 7
At December 31, 2023 . . . .............................................. 3 0 , 7 5 7
C h a r g ef o rt h ep e r i o d.................................................. 1 , 8 9 3
At June 30, 2024 ..................................................... 3 2 , 6 5 0
CARRYING VALUES
At December 31, 2021 . . . .............................................. 8 4 , 7 7 5
At December 31, 2022 . . . .............................................. 8 0 , 9 8 0
At December 31, 2023 . . . .............................................. 7 7 , 1 9 3
At June 30, 2024 ..................................................... 7 5 , 3 0 0
The above investment properties are depreciated on a straight-line basis at the following rates per annum:
L e a s e h o l dl a n d s ............. 2 . 0 0 % –2.66%
L e a s e dp r o p e r t i e s ............ 4 . 7 5 %
APPENDIX I ACCOUNTANTS ’REPORT
– I-49 –


--- page 636 ---
Details of the Company ’s investment properties and information about the fair value hierarchy as at the end of
each reporting period are as follows:
As at December 31, As at June 30,
2021 2022 2023 2024
Carrying
Amount
Fair
value at
Level 3
hierarchy
Carrying
Amount
Fair
value at
Level 3
hierarchy
Carrying
Amount
Fair
value at
Level 3
hierarchy
Carrying
Amount
Fair
value at
Level 3
hierarchy
RMB ’000 RMB ’000 RMB ’000 RMB ’000 RMB ’000 RMB ’000 RMB ’000 RMB ’000
Office units located
in Tianjin . . . . . . . 26,822 57,000 24,944 56,000 23,075 54,000 22,140 53,000
Factory located
in Tianjin . . . . . . . 57,953 59,000 56,036 57,000 54,118 55,000 53,160 55,000
84,775 116,000 80,980 113,000 77,193 109,000 75,300 108,000
As at December 31, 2021, 2022 and 2023 and June 30, 2024, the carrying amounts of investment properties
of the Company of RMB24,279,000, RMB22,492,000, RMB34,943,000 and RMB33,555,000, respectively, are
pledged to banks as collaterals for the Company ’s borrowings.
APPENDIX I ACCOUNTANTS ’REPORT
– I-50 –


--- page 637 ---
21. INTANGIBLE ASSETS
The Group
Software Trademark Total
RMB’000 RMB ’000 RMB ’000
COST
A tJ a n u a r y1 ,2 0 2 1 ............................. 1 4 , 7 5 5 — 14,755
A d d i t i o n s .................................... 8 9 2 7 8 9 9
D i s p o s a l s.................................... ( 1 , 1 0 9 ) — (1,109)
At December 31, 2021 ........................... 1 4 , 5 3 8 7 1 4 , 5 4 5
A d d i t i o n s .................................... 1 , 1 8 2 — 1,182
At December 31, 2022 ........................... 1 5 , 7 2 0 7 1 5 , 7 2 7
A d d i t i o n s .................................... 1 , 7 0 8 — 1,708
At December 31, 2023 ........................... 1 7 , 4 2 8 7 1 7 , 4 3 5
A d d i t i o n s .................................... 8 8 — 88
At June 30, 2024 . ............................. 1 7 , 5 1 6 7 1 7 , 5 2 3
AMORTISATION
A tJ a n u a r y1 ,2 0 2 1 ............................. 5 , 6 2 7 — 5,627
C h a r g ef o rt h ey e a r............................. 1 , 7 3 2 — 1,732
E l i m i n a t e do nd i s p o s a l s.......................... ( 7 1 9 ) — (719)
At December 31, 2021 ........................... 6 , 6 4 0 — 6,640
C h a r g ef o rt h ey e a r............................. 1 , 5 1 3 1 1 , 5 1 4
At December 31, 2022 ........................... 8 , 1 5 3 1 8 , 1 5 4
C h a r g ef o rt h ey e a r............................. 1 , 6 9 1 1 1 , 6 9 2
At December 31, 2023 ........................... 9 , 8 4 4 2 9 , 8 4 6
C h a r g ef o rt h ep e r i o d ........................... 9 1 5 — 915
At June 30, 2024 . ............................. 1 0 , 7 5 9 2 1 0 , 7 6 1
CARRYING AMOUNT
At December 31, 2021 ........................... 7 , 8 9 8 7 7 , 9 0 5
At December 31, 2022 ........................... 7 , 5 6 7 6 7 , 5 7 3
At December 31, 2023 ........................... 7 , 5 8 4 5 7 , 5 8 9
At June 30, 2024 . ............................. 6 , 7 5 7 5 6 , 7 6 2
The above intangible assets have finite useful lives and are amortised on a straight-line basis over the
following periods:
S o f t w a r e .................. 3 . 2 5 –10 years
T r a d e m a r k ................. 6 . 8 3y e a r s
APPENDIX I ACCOUNTANTS ’REPORT
– I-51 –


--- page 638 ---
The Company
Software
RMB’000
COST
A tJ a n u a r y1 ,2 0 2 1 ................................................... 8 , 7 9 9
A d d i t i o n s .......................................................... 1 5 6
D i s p o s a l s .......................................................... ( 1 , 0 9 2 )
At December 31, 2021 . . . .............................................. 7 , 8 6 3
A d d i t i o n s .......................................................... 2 8 7
At December 31, 2022 . . . .............................................. 8 , 1 5 0
A d d i t i o n s .......................................................... 1 , 4 9 5
At December 31, 2023 . . . .............................................. 9 , 6 4 5
A d d i t i o n s .......................................................... 8 8
At June 30, 2024 ..................................................... 9 , 7 3 3
AMORTISATION
A tJ a n u a r y1 ,2 0 2 1 ................................................... 3 , 3 2 1
C h a r g ef o rt h ey e a r ................................................... 1 , 1 7 3
E l i m i n a t e do nd i s p o s a l s ................................................ ( 7 1 9 )
At December 31, 2021 . . . .............................................. 3 , 7 7 5
C h a r g ef o rt h ey e a r ................................................... 8 4 8
At December 31, 2022 . . . .............................................. 4 , 6 2 3
C h a r g ef o rt h ey e a r ................................................... 9 6 0
At December 31, 2023 . . . .............................................. 5 , 5 8 3
C h a r g ef o rt h ep e r i o d.................................................. 5 3 3
At June 30, 2024 ..................................................... 6 , 1 1 6
CARRYING AMOUNT
At December 31, 2021 . . . .............................................. 4 , 0 8 8
At December 31, 2022 . . . .............................................. 3 , 5 2 7
At December 31, 2023 . . . .............................................. 4 , 0 6 2
At June 30, 2024 ..................................................... 3 , 6 1 7
The above intangible assets have finite useful lives and are amortised on a straight-line basis over the
following periods:
S o f t w a r e .................. 3 . 2 5 –10 years
APPENDIX I ACCOUNTANTS ’REPORT
– I-52 –


--- page 639 ---
22. DEFERRED TAX ASSETS/LIABILITIES
The Group
For the purpose of presentation in the consolidated stat ements of financial position, certain deferred tax assets
and liabilities have been offset. The following is the analysis of the deferred tax balances for the financial reporting
purposes:
As at December 31,
As at
June 30,
2021 2022 2023 2024
RMB’000 RMB’ 000 RMB ’000 RMB ’000
D e f e r r e dt a xa s s e t s .................. 2 6 , 4 8 3 2 4 , 8 0 8 3 4 , 0 6 9 3 6 , 9 7 2
D e f e r r e dt a xl i a b i l i t i e s ................ ( 2 8 ) ( 2 6 ) ( 1 5 ) ( 5 0 )
26,455 24,782 34,054 36,922
The following are the major deferred tax assets rec ognised and movements thereon during the Track Record
Period:
Tax losses
ECL
provision
Fair value
changes of
gold loans
Unrealised
profit on
inventories
Inventory
provision
Refund
liabilities
and
provision
Deferred
income
Lease
liabilities Total
RMB ’000 RMB’ 000 RMB’ 000 RMB ’000 RMB ’000 RMB ’000 RMB ’000 RMB ’000 RMB ’000
At January 1, 2021 . . . . — 9,097 2,460 2,971 3,374 7,381 137 9,061 34,481
Credit (charge) to profit
o rl o s s ......... — 3,288 (324) (672) (3,236) 630 (33) (2,010) (2,357)
At December 31, 2021 . — 12,385 2,136 2,299 138 8,011 104 7,051 32,124
(Charge) credit to profit
o rl o s s ......... — (2,689) 2,228 1,103 27 (1,564) (33) (2,495) (3,423)
At December 31, 2022 . — 9,696 4,364 3,402 165 6,447 71 4,556 28,701
Credit (charge) to profit
or loss . . . . . . . . . 5,354 (486) 4,934 1,293 (153) (1,441) (33) (558) 8,910
At December 31, 2023 . 5,354 9,210 9,298 4,695 12 5,006 38 3,998 37,611
Credit (charge) to profit
or loss . . . . . . . . . 9,529 45 (5,110) (772) 561 (1,420) (5) 1,752 4,580
At June 30, 2024 . . . . . 14,883 9,255 4,188 3,923 573 3,586 33 5,750 42,191
APPENDIX I ACCOUNTANTS ’REPORT
– I-53 –


--- page 640 ---
The following are the major deferred tax liabilities recognised and movements thereon during the Track
Record Period:
Right-of-use
assets
Fair value
changes of
gold loans Total
RMB’000 RMB ’000 RMB ’000
A tJ a n u a r y1 ,2 0 2 1 ............................. ( 7 , 8 0 4 ) ( 5 6 8 ) ( 8 , 3 7 2 )
C r e d i tt op r o f i to rl o s s........................... 2 , 1 3 5 5 6 8 2 , 7 0 3
At December 31, 2021 ........................... ( 5 , 6 6 9 ) — (5,669)
C r e d i tt op r o f i to rl o s s........................... 1 , 7 5 0 — 1,750
At December 31, 2022 ........................... ( 3 , 9 1 9 ) — (3,919)
C r e d i tt op r o f i to rl o s s........................... 3 6 2 — 362
At December 31, 2023 ........................... ( 3 , 5 5 7 ) — (3,557)
C h a r g et op r o f i to rl o s s .......................... ( 1 , 7 1 2 ) — (1,712)
At June 30, 2024 . ............................. ( 5 , 2 6 9 ) — (5,269)
Deferred tax assets have not been recognised in respect of the following items:
As at December 31,
As at
June 30,
2021 2022 2023 2024
RMB’000 RMB’ 000 RMB ’000 RMB ’000
T a xl o s s e s........................ 1 3 , 5 9 6 2 9 , 7 9 9 3 7 , 3 7 2 5 2 , 3 4 0
Deductible temporary differences . . . . . . . . 4,962 10,796 2,356 1,767
No deferred tax asset has been recognised in relation to such deductible temporary difference and tax losses
due to the unpredictability of future profit streams.
Unrecognised tax losses with expiry dates are disclosed in the following table.
As at December 31,
As at
June 30,
2021 2022 2023 2024
RMB’000 RMB’ 000 RMB ’000 RMB ’000
2024 . . .......................... 4 3 9 4 3 9 1 6 7 —
2025 . . .......................... 5 , 6 9 5 5 , 5 4 7 4 , 9 5 6 4 , 2 1 5
2026 . . .......................... 7 , 4 6 2 6 , 7 0 5 1 , 8 8 8 1 , 5 1 9
2027 . . .......................... — 17,108 16,708 16,182
2028 . . .......................... —— 13,653 13,635
2029 . . .......................... ——— 16,789
13,596 29,799 37,372 52,340
APPENDIX I ACCOUNTANTS ’REPORT
– I-54 –


--- page 641 ---
The Company
As at December 31,
As at
June 30,
2021 2022 2023 2024
RMB’000 RMB’ 000 RMB ’000 RMB ’000
Deferred tax assets 150 94 5,456 15,566
The following are the major deferred tax assets and liabilities recognised and movements thereon during the
Track Record Period:
Tax losses
ECL
provision
Inventory
provision
Fair value
changes of
gold loans Total
RMB’000 RMB ’000 RMB’ 000 RMB ’000 RMB ’000
A tJ a n u a r y1 ,2 0 2 1....... — 80 16 (568) (472)
Credit to profit or loss . . . . — 1 53 568 622
At December 31, 2021 . . . . — 81 69 — 150
Credit/(charge) to profit or
l o s s ............... — 13 (69) — (56)
At December 31, 2022 . . . . — 94 —— 94
Credit to profit or loss . . . . 5,354 8 —— 5,362
At December 31, 2023 . . . . 5,354 102 —— 5,456
Credit to profit or loss . . . . 9,529 — 581 — 10,110
At June 30, 2024 ........ 1 4 , 8 8 3 1 0 2 5 8 1 — 15,566
23. INVENTORIES
The Group
As at December 31,
As at
June 30,
2021 2022 2023 2024
RMB’000 RMB’ 000 RMB ’000 RMB ’000
R a wm a t e r i a l s ..................... 5 9 6 , 8 1 1 387,942 533,868 667,678
W o r ki np r o g r e s s ................... 1 , 4 8 0 2 , 5 9 6 6 , 3 4 3 1 , 4 0 0
Finished goods (note) ................ 1 , 4 3 4 , 1 1 7 1 , 280,587 1,612,052 1,326,328
G o o d si nt r a n s i t .................... 3 , 3 2 5 6 , 1 6 4 7 , 2 7 2 9 , 4 8 9
Consignment processing materials . . . . . . . . 5,489 2,972 525 1,433
C o n s u m a b l e s ...................... 7 , 7 6 7 8 , 6 6 4 9 , 5 7 3 1 0 , 1 7 2
2,048,989 1,688,925 2,169,633 2,016,500
Note: Included in the finished goods are items related to consignment arrangement amounted to
RMB2,986,000, RMB1,731,000, RMB854,000 and RMB769,000 as at December 31, 2021, 2022 and
2023 and June 30, 2024.
APPENDIX I ACCOUNTANTS ’REPORT
– I-55 –


--- page 642 ---
The Company
As at December 31,
As at
June 30,
2021 2022 2023 2024
RMB’000 RMB’ 000 RMB ’000 RMB ’000
R a wm a t e r i a l s ..................... 2 4 , 4 2 9 5 , 6 2 9 1 2 5 , 3 5 0 1 8 , 3 0 1
F i n i s h e dg o o d s..................... 1 8 1 , 2 8 7 118,202 116,152 220,797
Consignment processing materials . . . . . . . . 1 ———
C o n s u m a b l e s ...................... 2 4 2 3 2 2 2 3
205,741 123,854 241,524 239,121
24. TRADE RECEIVABLES
The Group
As at December 31,
As at
June 30,
2021 2022 2023 2024
RMB’000 RMB’ 000 RMB ’000 RMB ’000
T r a d er e c e i v a b l e s ................... 1 4 4 , 8 0 6 166,619 186,885 207,154
Less: Allowance for credit losses . . . . . . . . (46,813) (35,697) (36,372) (35,948)
T o t a l ............................ 9 7 , 9 9 3 130,922 150,513 171,206
As at January 1, 2021, gross carrying amount of trade r eceivables from contracts with customers amounted to
RMB122,893,000.
The Group primarily allows a credit period around 3 to 90 days, except for certain credit worthy customers,
where the credit periods are extended to a longer period. The following is an aged analysis of trade receivables net
of allowance for credit losses presented based on dates of delivery or rendering of services at the end of each
reporting period.
As at December 31,
As at
June 30,
2021 2022 2023 2024
RMB’000 RMB’ 000 RMB ’000 RMB ’000
W i t h i n9 0d a y s ..................... 8 6 , 4 2 4 111,332 147,878 163,934
90–1 8 0d a y s ...................... 7 , 1 7 1 1 3 , 1 9 1 2 , 4 5 6 6 , 5 8 2
180 days –1y e a r.................... 4 , 3 9 8 6 , 1 4 4 1 7 9 6 9 0
1–2y e a r s ........................ — 255 ——
T o t a l ............................ 9 7 , 9 9 3 130,922 150,513 171,206
As of December 31, 2021, 2022 and 2023 and June 30, 2024, included in the Group ’s trade receivable
balances are debtors with an aggregate carrying am ount of RMB4,816,000, RMB12,193,000, RMB3,010,000 and
RMB9,312,000 respectively which are past due as at the reporting date. Out of the past due balances,
RMB3,436,000, RMB8,012,000, RMB2,435,000 and RMB2,798,000 has been past due less than 90 days,
RMB1,380,000, RMB4,181,000, RMB575,000 and RMB6,514,00 0 respectively has been past due 90 days or more.
Those past due are not considered as in default as there has not been a significant change in credit quality and the
amounts are considered recoverable.
Details of impairment assessment of trade receivables during the Track Record Period are set out in Note 41.
APPENDIX I ACCOUNTANTS ’REPORT
– I-56 –


--- page 643 ---
25. PREPAYMENTS, DEPOSITS AND OTHER RECEIVABLES
The Group
As at December 31,
As at
June 30,
2021 2022 2023 2024
RMB’000 RMB’ 000 RMB ’000 RMB ’000
Current:
Other receivables
— D e p o s i t s ..................... 4 , 3 9 2 4 , 4 9 7 5 , 5 9 9 6 , 6 0 4
— Payments on behalf of employee . . . . . 930 1,152 1,310 1,310
— O t h e r s ....................... 4 6 6 1 , 8 2 3 2 , 2 6 5 4 , 0 3 7
Less: Allowance for credit losses . . . . . . . . (1,424) (1,814) (2,827) (3,083)
Total other receivables ............... 4 , 3 6 4 5 , 6 5 8 6 , 3 4 7 8 , 8 6 8
Prepayment to suppliers . . . . . . . . . . . . . . . 3,297 7,314 9,880 8,786
Prepayments for listing expenses and
i s s u ec o s t s...................... —— 930 204
P r e p a i dE I T....................... 3 0 , 2 6 5 1 1 , 5 4 8 3 5 , 6 3 4 3 6 , 9 6 2
Deductible input VAT . . . . . . . . . . . . . . . . 116,361 78,947 106,130 84,671
Right to returned goods asset (note) ...... 1 1 5 , 5 3 3 150,373 218,353 241,869
Deferred expenses related to H-share
l i s t i n ga t t e m p t ................... —— 15,098 16,261
Prepaid advertising expenses . . . . . . . . . . . 6,532 6,511 4,594 3,044
Prepaid interest on gold loans . . . . . . . . . . 1,643 841 1,661 2,329
O t h e r s ........................... 7 4 7 7 2 9 7 7 9 1 , 7 2 8
T o t a l ............................ 2 7 8 , 7 4 2 261,921 399,406 404,722
Non-current:
Other receivables
— D e p o s i t s ..................... 5 , 3 3 6 4 , 4 5 5 4 , 1 8 7 4 , 7 8 1
Less: Allowance for credit losses . . . . . . . . (1,378) (1,358) (634) (1,040)
Total other receivables ............... 3 , 9 5 8 3 , 0 9 7 3 , 5 5 3 3 , 7 4 1
Prepayment for acquisition of
non-current assets . . . . . . . . . . . . . . . . . 12,650 9,838 10,307 14,936
Right to returned goods asset (note) . . . . . . 42,321 34,068 27,642 18,067
T o t a l ............................ 5 8 , 9 2 9 4 7 , 0 0 3 4 1 , 5 0 2 3 6 , 7 4 4
Details of impairment assessment of other receivables during the Track Record Period are set out in Note 41.
Note: The amounts included (i) an asset for the Group ’s right to recover products from customers for sale
with a right of return/exchange, and (ii) gold products under lending arrangement to certain
franchisees and provincial-dealers, where they are obliged to return gold products of the same type,
quantity and quality to the Group or settle their obligations in cash or used gold products on the basis
of the selling price of the lent gold products at maturity.
APPENDIX I ACCOUNTANTS ’REPORT
– I-57 –


--- page 644 ---
The Company
As at December 31,
As at
June 30,
2021 2022 2023 2024
RMB’000 RMB’ 000 RMB ’000 RMB ’000
Current:
Other receivables
— D e p o s i t s ..................... 5 0 0 3 5 0 3 5 0 3 5 0
— Payments on behalf of employee . . . . . 20 25 28 19
— O t h e r s ....................... 7 5 7 5 7 5 7 5
Less: Allowance for credit losses . . . . . . . . (183) (236) (266) (266)
Total other receivables ............... 4 1 2 2 1 4 1 8 7 1 7 8
Prepayment to suppliers . . . . . . . . . . . . . . . 321 2,405 428 196
Prepayments for listing expenses and
i s s u ec o s t s...................... —— 930 204
P r e p a i dE I T....................... 4 , 2 3 2 7 , 2 5 5 3 1 , 7 6 4 3 1 , 7 6 4
Deductible input VAT . . . . . . . . . . . . . . . . 58,385 65,029 94,251 68,898
Right to returned goods asset . . . . . . . . . . . 17,104 47,864 83,058 46,159
Deferred costs related to H-share
l i s t i n ga t t e m p t ................... —— 15,098 16,261
Prepaid advertising expenses . . . . . . . . . . . 3,376 4,509 150 604
O t h e r s ........................... 4 0 8 ———
T o t a l ............................ 8 4 , 2 3 8 127,276 225,866 164,264
Non-current:
Other receivables
— D e p o s i t s ..................... 2 , 8 2 0 2 , 8 2 0 2 , 8 2 0 2 , 8 2 0
Less: Allowance for credit losses . . . . . . . . (141) (141) (141) (141)
Total other receivables ............... 2 , 6 7 9 2 , 6 7 9 2 , 6 7 9 2 , 6 7 9
Prepayment for acquisition of
n o n - c u r r e n ta s s e t s................. 7 3 7 1 1 4 9 6 1 , 1 2 7
T o t a l ............................ 2 , 7 5 2 3 , 3 9 0 3 , 1 7 5 3 , 8 0 6
APPENDIX I ACCOUNTANTS ’REPORT
– I-58 –


--- page 645 ---
26. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS
The Group
As at December 31,
As at
June 30,
2021 2022 2023 2024
RMB’000 RMB’ 000 RMB ’000 RMB ’000
F i n a n c i a lp r o d u c t s .................. 6 , 0 1 1 ———
As at December 31, 2021, the financial products were issued by banks in the PRC. The principals and returns
of the financial products are not guaranteed. The financial products were classified as financial assets at FVTPL as
their contractual cash flows are not sole ly payments of principal and interest.
27. PLEDGED/RESTRICTED DEPOSITS/CASH AND CASH EQUIVALENTS
The Group
As at December 31,
As at
June 30,
2021 2022 2023 2024
RMB’000 RMB’ 000 RMB ’000 RMB ’000
Cash and cash equivalents
— C a s ho nh a n d .................. 2 4 1 2 2 0 3 2 9 2 2 5
— Bank balances (note i) ............ 1 3 3 , 7 9 5 200,148 134,822 291,754
— Balances with online payment
p l a t f o r m s..................... 9 0 5 4 6 1 1 , 0 7 3 1 0 , 9 6 5
— Surplus deposits with Shanghai Gold
E x c h a n g e................... 1 8 , 5 7 7 2 4 , 5 3 0 1 9 , 6 4 2 6 1 , 0 9 0
153,518 225,359 155,866 364,034
Pledged/restricted deposits (note ii) ....... 5 6 9 , 4 7 6 369,555 528,795 444,102
Notes:
i. As at December 31, 2021, 2022 and 2023 and June 30, 2024, bank balances of the Group carried
interest at market rates ranging from nil to 1.61%, nil to 1.61%, nil to 1.15% and nil to 1.15% per
annum, respectively.
ii. As at December 31, 2021, 2022 and 2023 and June 30, 2024, pledged/restricted deposits mainly include
bank deposits pledged to banks to secure banking facilities and security deposits for issuance of bills
payable, gold loans and gold trading accounts, etc. The balances carried interest rates ranging from nil
to 2.25%, nil to 2.25%, nil to 2.25% and nil to 2.25% per annum, respectively.
As at December 31, 2021, 2022 and 2023 and June 30, 2024, the carrying amount of pledged/restricted
deposits of the Group of RMB442,706,000, RMB 230,356,000, RMB327,250,000 and RMB239,785,000,
respectively, are pledged to banks as collaterals for the Group ’s borrowings, gold loans and bills payable.
APPENDIX I ACCOUNTANTS ’REPORT
– I-59 –


--- page 646 ---
The Company
As at December 31,
As at
June 30,
2021 2022 2023 2024
RMB’000 RMB’ 000 RMB ’000 RMB ’000
Cash and cash equivalents
— C a s ho nh a n d .................. 3 —— 70
— Bank balances (note i) . . . . . . . . . . . . 20,029 94,144 17,544 58,952
— Surplus deposits with Shanghai Gold
Exchange . . . . . . . . . . . . . . . . . . . 13,921 9,352 7,878 37,091
33,953 103,496 25,422 96,113
Pledged/restricted deposits (note ii) . . . . . . . 216,655 55,700 132,453 119,162
Notes:
i. As at December 31, 2021, 2022 and 2023 and June 30, 2024, bank balances of the Company carried
interest at market rates ranging from nil to 1.61%, nil to 1.61%, nil to 1.15% and nil to 1.15% per
annum, respectively.
ii. As at December 31, 2021, 2022 and 2023 and June 30, 2024, pledged/restricted deposits include bank
deposits pledged to banks to secure banking facilities and security deposits for gold trading accounts.
The balances carried interest rates ranging from nil to 2.25%, nil, nil to 2.25% and nil to 2.25% per
annum, respectively.
As at December 31, 2021, 2022 and 2023 and June 30, 2024, the carrying amount of pledged/restricted
deposits of the Company of RMB151,105,000, nil, RMB30,675,000 and RMB30,328,000, respectively, are pledged
to banks as collaterals for the Company ’s borrowings.
28. TRADE AND BILLS PAYABLES
The Group
As at December 31,
As at
June 30,
2021 2022 2023 2024
RMB’000 RMB’ 000 RMB ’000 RMB ’000
Bills payable (note) .................. —— 470,000 280,000
T r a d ep a y a b l e s..................... 4 5 , 5 6 0 6 4 , 9 5 3 4 1 , 7 8 7 2 2 , 1 9 1
45,560 64,953 511,787 302,191
Note: The bills payable were guaranteed by the cont rolling shareholders of the Company, Mr. Wang
Zhongshan and Ms. Zhang Xiuqin, and certain s ubsidiaries of the Group. The directors of the
Company represented to us, the guarantee provided by Mr. Wang Zhongshan and Ms. Zhang Xiuqin
will be released before the listing of the Company on the Stock Exchange.
APPENDIX I ACCOUNTANTS ’REPORT
– I-60 –


--- page 647 ---
An aged analysis of the Group ’s trade payables presented based on the invoice date as at the end of each
reporting period is as follows:
As at December 31,
As at
June 30,
2021 2022 2023 2024
RMB’000 RMB’ 000 RMB ’000 RMB ’000
W i t h i n1y e a r ...................... 4 4 , 3 5 3 6 4 , 0 4 2 4 0 , 4 9 0 1 9 , 0 9 8
1–2y e a r s ........................ 7 7 0 3 0 1 9 1 4 2 , 6 8 3
2–3y e a r s ........................ 6 3 4 5 2 1 7 0 1 0 1
O v e r3y e a r s ...................... 3 7 4 1 5 8 2 1 3 3 0 9
45,560 64,953 41,787 22,191
All bills payable issued by the Group are with a maturity period of less than one year.
The Company
As at December 31,
As at
June 30,
2021 2022 2023 2024
RMB’000 RMB’ 000 RMB ’000 RMB ’000
T r a d ep a y a b l e s..................... 4 , 5 4 0 2 9 3 1 , 0 6 2 6 4 5
An aged analysis of the Company’ s trade payables, as at the end of each reporting period, based on the
invoice date, is as follows:
As at December 31,
As at
June 30,
2021 2022 2023 2024
RMB’000 RMB’ 000 RMB ’000 RMB ’000
W i t h i n1y e a r ...................... 4 , 3 1 2 2 0 5 9 7 4 5 5 7
1–2y e a r s ........................ 1 4 0 ———
O v e r3y e a r s ...................... 8 8 8 8 8 8 8 8
4,540 293 1,062 645
APPENDIX I ACCOUNTANTS ’REPORT
– I-61 –


--- page 648 ---
29. OTHER PAYABLES AND ACCRUALS
The Group
As at December 31,
As at
June 30,
2021 2022 2023 2024
RMB’000 RMB’ 000 RMB ’000 RMB ’000
Other payables
— deposits received . . . . . . . . . . . . . . . 78,144 78,703 84,329 97,089
— accrued expenses ............... 2 , 0 0 0 4 , 3 9 2 5 , 5 2 6 2 , 7 5 8
— accrued listing expenses and
i s s u ec o s t s ................... —— 529 4,366
— rent and property fees payable . . . . . . 3 365 ——
— o t h e r s....................... 1 , 0 6 2 1 , 1 5 0 1 , 8 9 3 3 , 6 1 0
Total other payables . . . . . . . . . . . . . . . . . 81,209 84,610 92,277 107,823
Rent received in advance . . . . . . . . . . . . . . 2,756 3,274 2,693 1,891
Other tax payable . . . . . . . . . . . . . . . . . . . 8,205 13,734 16,898 50,590
Salaries, welfare and bonus payable . . . . . . 25,088 21,369 27,274 21,999
117,258 122,987 139,142 182,303
The Company
As at December 31,
As at
June 30,
2021 2022 2023 2024
RMB’000 RMB’ 000 RMB ’000 RMB ’000
Other payables
— d e p o s i t sr e c e i v e d ............... 5 4 1 5 5 0 4 8 3 4 5 3
— accrued expenses ............... —— 596 63
— accrued listing expenses and issue
c o s t s ........................ —— 529 4,366
— o t h e r s....................... 9 1 7 9 1 9 2
T o t a lo t h e rp a y a b l e s ................. 5 5 0 5 6 7 1 , 6 1 7 5 , 0 7 4
R e n tr e c e i v e di na d v a n c e.............. 1 , 4 3 2 1 8 4 6 0 4 1 2 0
O t h e rt a xp a y a b l e................... 2 6 7 4 4 6 7 0 9 1 , 1 5 6
Salaries, welfare and bonus payable . . . . . . 547 661 959 521
2,796 1,858 3,889 6,871
APPENDIX I ACCOUNTANTS ’REPORT
– I-62 –


--- page 649 ---
30. LEASE LIABILITIES
The Group
As at December 31,
As at
June 30,
2021 2022 2023 2024
RMB’000 RMB’ 000 RMB ’000 RMB ’000
Lease liabilities payable:
Within one year . . . . . . . . . . . . . . . . . . . . 12,028 9,600 7,711 11,276
Within a period of more than one year
but not exceeding two years . . . . . . . . . . 10,799 4,564 5,692 8,247
Within a period of more than two years
but not exceeding five years . . . . . . . . . . 5,377 4,059 2,589 3,477
28,204 18,223 15,992 23,000
Analysed as:
Amounts due for settlement within one year
shown under current liabilities . . . . . . . . 12,028 9,600 7,711 11,276
Amounts due for settlement after one year
shown under non-current liabilities . . . . . 16,176 8,623 8,281 11,724
The lease liabilities of approximately RMB28,204,000, RMB17,028,000, RMB15,992,000 and
RMB23,000,000, are secured by the rental deposi ts of approximately RMB2,690,000, RMB1,866,000,
RMB2,422,000 and RMB2,212,000, respectively as at December 31, 2021, 2022 and 2023 and June 30, 2024.
The incremental borrowing rates applied to lease liabilities range from 5.22% to 5.88% for each of the years
ended December 31, 2021, 2022 and 2023 respectively and 4.49% to 5.88% for the six months ended June 30, 2024.
APPENDIX I ACCOUNTANTS ’REPORT
– I-63 –


--- page 650 ---
31. BORROWINGS
The Group
As at December 31,
As at
June 30,
2021 2022 2023 2024
RMB’000 RMB’ 000 RMB ’000 RMB ’000
B a n kb o r r o w i n g s ................... 6 4 6 , 9 2 0 489,627 790,041 1,057,726
Bank borrowings relating to bills discounted
w i t hr e c o u r s e .................... 6 9 0 , 0 0 0 340,000 ——
Other borrowings relating to
a sale-and-leaseback transaction . . . . . . . ——— 8,480
Other borrowings pledged by trade
receivables (note iii) ............... ——— 4,173
1,336,920 829,627 790,041 1,070,379
Guaranteed and secured (notes i & ii) . . . . . 1,168,178 579,356 569,820 588,734
Unguaranteed and secured (note i) ....... 4 8 , 5 8 4 — 29,981 308,869
Guaranteed and unsecured (note ii) ....... 1 2 0 , 1 5 8 250,271 190,240 172,776
1,336,920 829,627 790,041 1,070,379
Notes:
i. The secured borrowings were secured by the pledge of certain bank deposits, property, plant and
equipment (including properties owned by Mr. Wang Zhongshan, the controlling shareholder of the
Company), right-of-use assets, investment properties, inventories, patents and/or trade receivables. The
directors of the Company represented to us, the security provided by Mr. Wang Zhongshan will be
released upon the listing of the Company on the Stock Exchange.
ii. The guaranteed bank borrowings and other borrowings were guaranteed by the controlling shareholders
of the Company, Mr. Wang Zhongshan, Ms. Zhang Xiuqin and/or Mr. Wang Guoxin (as at December
31, 2021 only), and certain subsidiaries of the Group. The directors of the Company represented to us,
the guarantee provided by Mr. Wang Zhongshan and Ms. Zhang Xiuqin will be released upon the
listing of the Company on the Stock Exchange.
iii. As at June 30, 2024, trade receivables amounting to RMB4,173,000 were pledged to obtain the
borrowings amounting to RMB4,173,000.
Bank borrowings relating to bills discounted with recourse represented the cash received on bills receivables
discounted to various banks with full recourse relates to discounted bills issued among subsidiaries of the Group for
intra-group transactions.
The carrying amounts of the above bank borrowings are repayable within one year as at December 31, 2021,
2022 and 2023 and June 30, 2024 based on terms set out in the loan agreements.
APPENDIX I ACCOUNTANTS ’REPORT
– I-64 –


--- page 651 ---
The exposure of the Group ’s bank borrowings are as follows:
As at December 31,
As at
June 30,
2021 2022 2023 2024
RMB’000 RMB’ 000 RMB ’000 RMB ’000
F i x e d - r a t eb o r r o w i n g s ................ 1 , 3 3 6 , 9 2 0 829,627 790,041 1,070,379
As at December 31, 2021, 2022 and 2023 and June 30, 2024, borrowings carry interest at 1.78% to 5.83%,
2.08% to 5.83%, 3.60% to 5.51% and 3.25% to 7.92% per annum, respectively.
The Company
As at December 31,
As at
June 30,
2021 2022 2023 2024
RMB’000 RMB’ 000 RMB ’000 RMB ’000
B a n kb o r r o w i n g s ................... 2 7 8 , 9 6 6 230,284 430,554 429,997
Guaranteed and secured (notes i & ii) . . . . . 180,312 100,178 300,456 300,415
Unguaranteed and secured (note i) ....... 4 8 , 5 8 4 — 29,981 100,132
Guaranteed and unsecured (note ii) ....... 5 0 , 0 7 0 130,106 100,117 29,450
278,966 230,284 430,554 429,997
Notes:
i. The secured bank borrowings were secured by the pledge of certain bank deposits, property, plant and
equipment, and/or investment properties.
ii. The guaranteed bank borrowings were guaranteed by the controlling shareholders of the Company, Mr.
Wang Zhongshan and Ms. Zhang Xiuqin, and certain subsidiaries of the Company. The directors of the
Company represented to us, the guarantee provided by Mr. Wang Zhongshan and Ms. Zhang Xiuqin
will be released before the listing of the Company on the Stock Exchange.
The carrying amounts of the above bank borrowings are repayable within one year as at December 31, 2021,
2022 and 2023 and June 30, 2024 based on terms set out in the loan agreements.
The exposure of the Company ’s bank borrowings are as follows:
As at December 31,
As at
June 30,
2021 2022 2023 2024
RMB’000 RMB’ 000 RMB ’000 RMB ’000
F i x e d - r a t eb o r r o w i n g s ................ 2 7 8 , 9 6 6 230,284 430,554 429,997
As at December 31, 2021, 2022 and 2023 and June 30, 2024, borrowings carry interest at 4.00% to 5.83%,
4.00% to 5.83%, 3.60% to 5.51% and 3.55% to 5.51% per annum, respectively.
APPENDIX I ACCOUNTANTS ’REPORT
– I-65 –


--- page 652 ---
32. CONTRACT LIABILITIES
The Group
As at December 31,
As at
June 30,
2021 2022 2023 2024
RMB’000 RMB’ 000 RMB ’000 RMB ’000
Sales of goods ..................... 2 7 , 2 1 5 3 9 , 0 4 4 4 2 , 1 7 3 7 2 , 8 8 7
As at January 1, 2021, the carrying amounts of cont ract liabilities were approximately RMB7,078,000.
The contract liabilities were expected to be recognised as revenue in the next 12 months.
The following table shows how much of the revenue recognised related to carried forward contract liabilities
during the Track Record Period.
For the year ended December 31,
For the six months
ended June 30,
2021 2022 2023 2023 2024
RMB’000 RMB ’000 RMB ’000 RMB ’000 RMB ’000
(Unaudited)
Revenue recognised that was
included in contract liability
balance at the beginning of the
year/period — sales of goods . . . 6,687 26,910 39,006 38,958 41,396
33. GOLD LOANS
The Group
As at December 31,
As at
June 30,
2021 2022 2023 2024
RMB’000 RMB’ 000 RMB ’000 RMB ’000
G o l dl o a n s ........................ 4 8 6 , 9 9 8 394,143 502,508 413,627
The Group borrows gold from bank for 3 months to 12 months and pays a fixed fee to bank for the duration
of the contract based on the value of gold at inception and relevant interest rates at inception. At maturity, the Group
is obliged to deliver gold of the same type, quantity and quality to bank. The Group does not have an option to
settle its obligation in cash. Gold loans representing the obligation to deliver gold are classified as liabilities at
FVTPL at initial recognition.
The fair value of gold loans is determined by reference to quoted market bid price of gold traded in active
liquid markets and classified as Level 2 of the fair value hierarchy.
APPENDIX I ACCOUNTANTS ’REPORT
– I-66 –


--- page 653 ---
The gold loans were secured by the pledge of certain ba nk deposits, property, plant and equipment, right-of-
use assets and/or investment properties and guaranteed by Mr. Wang Zhongshan, Ms. Zhang Xiuqin and/or Mr.
Wang Guoxin, the controlling shareholders of the Company, an d certain subsidiaries of the Group. The directors of
the Company represented to us, the guarantee provided by Mr. Wang Zhongshan, Ms. Zhang Xiuqin and/or Mr.
Wang Guoxin will be released before the listing of the Company on the Stock Exchange.
34. REFUND LIABILITIES
The Group
As at December 31,
As at
June 30,
2021 2022 2023 2024
RMB’000 RMB’ 000 RMB ’000 RMB ’000
Refund liabilities . . . . . . . . . . . . . . . . . . . 110,746 89,376 71,327 49,178
Analysed for reporting purposes as:
Non-current liabilities . . . . . . . . . . . . . . 59,751 47,928 38,384 25,563
Current liabilities . . . . . . . . . . . . . . . . . 50,995 41,448 32,943 23,615
110,746 89,376 71,327 49,178
35. SHARE CAPITAL
Number of
shares
Share
capital
’000 RMB ’000
Ordinary shares of RMB1.00 each
Issued and fully paid:
At January 1, 2021 and December 31, 2021 . . . ....................... 2 2 4 , 9 0 0 224,900
Issue of ordinary shares (note) ................................... 4 , 1 6 7 4 , 1 6 7
At December 31, 2022 and 2023 and June 20,2024 ..................... 2 2 9 , 0 6 7 229,067
Note: In August 2022, the Company issued 4,167,000 ordinar y shares with preferred rights with a par value of
RMB1.00 each to Citic Securities Investment Limited at a cash consideration of RMB50,000,000. In
November 2022, a supplemental agreement was entered into among the Company, Citic Securities Investment
Limited and the controlling shareholders of the C ompany, pursuant to which certain preferred rights
including liquidation preference and joint and several liability guarantee provided by the Company were
removed. Therefore, the shares issued to Citic Securities Investment Limited were reclassified from financial
liabilities to equity, resulting in an increase of share capital of RMB4,167,000, and an amount of
RMB45,833,000, being the excess of the cash consideration of RMB50,000,000 over the par value of
RMB4,167,000 was credited to share premium.
APPENDIX I ACCOUNTANTS ’REPORT
– I-67 –


--- page 654 ---
36. EQUITY-SETTLED SHARE-BASED PAYMENTS
Restricted Stock Units Scheme
On March 28, 2016, a restricted stock unit scheme (the ‘‘RSU Scheme ’’) was approved and adopted by the
shareholders of Mokingran Gold Jewellery Group Limited ( ‘‘Mokingran Limited ’’, the former name of the
Company prior to its conversion to a joint stock company (the ‘‘Conversion’’)).
The restricted stock units ( ‘‘RSUs ’’) were granted as share incentives to qualified employees of Mokingran
Limited and its subsidiaries. In March 2016, Tianjin Jinmeng Enterprise Management Partnership (Limited
Partnership)* ( 天津金夢企業管理合夥企業(有限合夥)), Tianjin Jinyuan Enterprise Management Partnership
(Limited Partnership)* ( 天津金園企業管理合夥企業(有限合夥)) and Tianjin Jinlong Enterprise Management
Partnership (Limited Partnership)* ( 天津金隆企業管理合夥企業(有限合夥)) (collectively, the ‘‘RSU platforms ’’)
were established in the PRC, respectively, as employee incentive platforms to hold the ordinary shares of Mokingran
Limited for the Group ’s employees under the RSU Scheme. Following the Conversion, the RSU platforms were
converted into shareholders of the Company.
Under the RSU Scheme, the RSUs granted will be vested in separate tranches on the third anniversary, the
fourth anniversary and the fifth anniversary of the grant date at the proportion of 60%, 20% and 20%, on condition
that the relevant employees remain in service without an y performance requirements. Once the vesting conditions
underlying the respective RSUs are met, the RSUs are considered duly and validly issued to the holder.
The RSUs were granted to certain directors, supervisors and employees in March 2016 and August 2017,
respectively. Movements of RSUs granted to the dir ectors, supervisors and employees are as follows:
Number of
RSUs
granted
Weighted
average fair
value per
RSU
(RMB)
O u t s t a n d i n ga sa tJ a n u a r y1 ,2 0 2 1 .............................. 9 , 3 8 1 , 0 0 0 5 . 7 5
V e s t e dd u r i n gt h ey e a r...................................... ( 8 , 3 7 2 , 0 0 0 ) 5 . 6 5
F o r f e i t e dd u r i n gt h ey e a r .................................... ( 5 2 , 0 0 0 ) 6 . 5 4
At December 31, 2021 ...................................... 9 5 7 , 0 0 0 6 . 5 4
V e s t e dd u r i n gt h ey e a r...................................... ( 6 6 5 , 0 0 0 ) 6 . 5 4
F o r f e i t e dd u r i n gt h ey e a r .................................... ( 2 9 2 , 0 0 0 ) 6 . 5 4
At December 31, 2022 and 2023 and June 30, 2024 .................. ——
* English name is for identification purpose only.
APPENDIX I ACCOUNTANTS ’REPORT
– I-68 –


--- page 655 ---
Details of RSUs held by the directors and supervisors included in the above table are as follows:
Number of
RSUs
granted
Weighted
average fair
value per
RSU
(RMB)
O u t s t a n d i n ga sa tJ a n u a r y1 ,2 0 2 1 .............................. 5 , 6 8 2 , 0 0 0 5 . 5 7
V e s t e dd u r i n gt h ey e a r...................................... ( 5 , 6 2 2 , 0 0 0 ) 5 . 5 7
At December 31, 2021 ...................................... 6 0 , 0 0 0 6 . 5 4
V e s t e dd u r i n gt h ey e a r...................................... ( 6 0 , 0 0 0 ) 6 . 5 4
At December 31, 2022 and 2023 and June 30, 2024 .................. ——
The fair values of each RSU granted in March 2016 and August 2017 are RMB5.54 and RMB6.54
respectively at the respective grant date. The fair value of each RSU is determined by reference to the fair value of
the underlying ordinary shares of Mokingran Limited o n the date of grant with the assistance of an independent
professional valuation firm and discounted cash flow method under the income approach was used.
Share-based expenses of RMB2,268,000, RMB130,000, nil, nil(unaudited) and nil have been recognised in
profit or loss for the years ended December 31, 2021, 2022 and 2023 and the six months ended June 30, 2023 and
2024, respectively in relation to RSUs granted.
37. RETIREMENT BENEFITS SCHEME
The PRC employees of the Group are members of a state-managed retirement benefits plan operated by the
government of the PRC. The Company and its PRC subsidiaries are required to contribute a specified percentage of payroll
costs to the retirement benefits plan to fund the employee benefits. The only obligation of the Group with respect to the
retirement benefits plan is to ma ke the specified contributions.
The retirement benefits cost charged to profit o r loss of approximately RMB11,742,000, RMB15,431,000,
RMB17,890,000, RMB8,426,000 (unaudited) and RMB9,935,000 for the years ended December 31, 2021, 2022 and 2023
and the six months ended June 30, 2023 and 2024, represents c ontributions paid/payable to the plan by the Group at rates
specified in the rules of the plan.
During the Track Record Period, the Group had no forfeited contributions under the above retirement benefits
scheme which may be used by the Group to reduce the existi ng level of contributions. There were also no forfeited
contributions available as at December 31, 2021, 2022 and 2023 and June 30, 2024 under such scheme which may be used
by the Group to reduce the contribution payable in future years.
APPENDIX I ACCOUNTANTS ’REPORT
– I-69 –


--- page 656 ---
38. RECONCILIATION OF LIABILITIES ARISING FROM FINANCING ACTIVITIES
The table below details changes in the Group ’s liabilities arising from financing activities, including both cash and
non-cash changes. Liabilities arising from financing activities are those for which cash flows were, or future cash flows
will be, classified in the Group ’s consolidated statements of cash flows as cash flows from financing activities:
Borrowings
Lease
liabilities Total
RMB’000 RMB ’000 RMB ’000
A tJ a n u a r y1 ,2 0 2 1 .................................. 1 , 195,642 36,243 1,231,885
A d d i t i o n s ........................................ — 1,397 1,397
Finance costs (Note 10) .............................. 4 2 , 2 8 7 1 , 9 2 6 4 4 , 2 1 3
F i n a n c i n gc a s hf l o w s ................................ 9 8 , 9 9 1 ( 1 1 , 3 6 2 ) 8 7 , 6 2 9
A tD e c e m b e r3 1 ,2 0 2 1 ............................... 1 , 336,920 28,204 1,365,124
A d d i t i o n s ........................................ — 10,653 10,653
L e a s em o d i f i c a t i o n s ................................. — (77) (77)
T e r m i n a t i o no fl e a s e s................................ — (8,754) (8,754)
Finance costs (Note 10) .............................. 3 6 , 8 2 2 1 , 5 2 0 3 8 , 3 4 2
C o v i d - 1 9 - r e l a t e dr e n tc o n c e s s i o n s ....................... — (66) (66)
Other non-cash movements ............................ — (1,082) (1,082)
F i n a n c i n gc a s hf l o w s ................................ ( 544,115) (12,175) (556,290)
A tD e c e m b e r3 1 ,2 0 2 2 ............................... 829,627 18,223 847,850
A d d i t i o n s ........................................ — 8,666 8,666
L e a s em o d i f i c a t i o n s ................................. — (23) (23)
T e r m i n a t i o no fl e a s e s................................ — (1,116) (1,116)
Finance costs (Note 10) .............................. 4 4 , 9 2 7 9 3 5 4 5 , 8 6 2
Other non-cash movements ............................ — (1,672) (1,672)
F i n a n c i n gc a s hf l o w s ................................ ( 8 4 , 5 1 3 ) ( 9 , 0 2 1 ) ( 9 3 , 5 3 4 )
A tD e c e m b e r3 1 ,2 0 2 3 ............................... 790,041 15,992 806,033
A d d i t i o n s ........................................ — 12,043 12,043
L e a s em o d i f i c a t i o n s ................................. — 22 22
T e r m i n a t i o no fl e a s e s................................ — (325) (325)
Finance costs (Note 10) .............................. 2 5 , 2 2 5 5 6 1 2 5 , 7 8 6
Other non-cash movements ............................ — (679) (679)
F i n a n c i n gc a s hf l o w s ................................ 255,113 (4,614) 250,499
At June 30, 2024 ................................... 1 , 070,379 23,000 1,093,379
A tJ a n u a r y1 ,2 0 2 3 .................................. 829,627 18,223 847,850
L e a s em o d i f i c a t i o n s ................................. — 350 350
T e r m i n a t i o no fl e a s e s................................ — (221) (221)
Finance costs (Note 10) .............................. 2 3 , 5 4 2 4 7 0 2 4 , 0 1 2
Other non-cash movements ............................ — (697) (697)
F i n a n c i n gc a s hf l o w s ................................ 278,162 (4,596) 273,566
At June 30, 2023 (Unaudited) .......................... 1 , 131,331 13,529 1,144,860
APPENDIX I ACCOUNTANTS ’REPORT
– I-70 –


--- page 657 ---
39. OPERATING LEASING ARRANGEMENTS
The Group as lessor
Undiscounted lease payments receivable on leases are as follows:
As at December 31,
As at
June 30,
2021 2022 2023 2024
RMB’000 RMB’ 000 RMB ’000 RMB ’000
W i t h i no n ey e a r .................... 2 , 4 3 0 3 , 4 1 6 3 , 7 1 2 1 , 6 2 5
I nt h es e c o n dy e a r .................. 2 , 5 5 2 3 , 0 7 2 9 1 5 2 7 3
I nt h et h i r dy e a r.................... 1 , 7 6 1 ———
6,743 6,488 4,627 1,898
40. CAPITAL COMMITMENTS
As at December 31, 2021, 2022 and 2023 and June 30, 2024, the Group had the following capital commitments:
As at December 31,
As at
June 30,
2021 2022 2023 2024
RMB’000 RMB’ 000 RMB ’000 RMB ’000
Capital expenditure in respect of acquisition of
property, plant and equipment contracted
for but not provided in the Historical
F i n a n c i a lI n f o r m a t i o n................... 1 2 , 0 6 1 8 , 8 3 5 8 , 2 5 2 9 , 9 9 0
41. FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT
Categories of the financial instruments
The Group
As at December 31,
As at
June 30,
2021 2022 2023 2024
RMB’000 RMB’ 000 RMB ’000 RMB ’000
Financial assets:
F i n a n c i a la s s e t sa ta m o r t i s e dc o s t ........ 8 2 9 , 3 0 9 734,591 845,074 991,951
F i n a n c i a la s s e t sa tF V T P L............. 6 , 0 1 1 ———
Financial liabilities:
Financial liabilities at amortised cost ...... 1 , 4 6 3 , 6 8 9 979,190 1,394,105 1,480,393
Lease liabilities .................... 2 8 , 2 0 4 1 8 , 2 2 3 1 5 , 9 9 2 2 3 , 0 0 0
APPENDIX I ACCOUNTANTS ’REPORT
– I-71 –


--- page 658 ---
The Company
As at December 31,
As at
June 30,
2021 2022 2023 2024
RMB’000 RMB’ 000 RMB ’000 RMB ’000
Financial assets:
F i n a n c i a la s s e t sa ta m o r t i s e dc o s t ........ 3 2 0 , 5 6 9 184,965 177,940 373,169
Financial liabilities:
Financial liabilities at amortised cost . . . . . . 1,246,369 1,042,743 1,113,331 1,370,897
Financial risk management objectives and policies
The Group’ s major financial instruments include trade receivables, financial assets at FVTPL, other
receivables, pledged/restricted deposits, cash and cash equivalents, trade and bills payables, other payables and
borrowings. The Company ’s major financial instruments included trade receivables, amounts due from subsidiaries,
other receivables, pledged/restricted deposits, cash and cas h equivalents, trade payables, amounts due to subsidiaries,
other payables and borrowings. Details of these financial instruments are disclosed in respective notes. The risks
associated with these financial instruments include market risk (foreign currency risk, interest rate risk, commodity
price risk and other price risk), credit risk and liquidity risk. The policies on how to mitigate these risks are set out
below. The management of the Group manages and monitors these exposures to ensure appropriate measures are
implemented on a timely and effective manner.
Market risk
(i) Foreign currency risk
Certain transactions of the Group are denominated in foreign currencies, which expose the Group to foreign
currency risk.
The carrying amounts of the Group ’s foreign currency denominated monetary assets and monetary liabilities
as at the end of each reporting period are as follows:
Assets
As at December 31,
As at
June 30,
2021 2022 2023 2024
RMB’000 RMB’ 000 RMB ’000 RMB ’000
US Dollar ( ‘‘USD’’) ................. 3 8 1 1 , 3 4 4 3 , 4 3 8 1 0 , 8 6 2
Euro ( ‘‘EUR’’)..................... 2 1 2 1 2 2 1
H K D ............................ —— 70 481
A u s t r a l i a nD o l l a r ................... —— 88
APPENDIX I ACCOUNTANTS ’REPORT
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--- page 659 ---
Liabilities
As at December 31,
As at
June 30,
2021 2022 2023 2024
RMB’000 RMB’ 000 RMB ’000 RMB ’000
U S D............................ 4 , 1 5 5 1 , 0 9 4 ——
E U R............................ 9 6 9 8 ——
J a p a n e s eY e n...................... 2 1 8 ———
The Group currently does not have a foreign currency hedging policy. However, the management of the
Group will monitor foreign exchange exposure closely and c onsider the usage of hedging instruments when the need
arises. As at December 31 2021, 2022 and 2023, no sensitivity analysis is presented since the management of the
Group considers the exposure of foreign currency risk would be immaterial.
As at June 30, 2024, the following table details the Group ’s sensitivity to a 5% increase and decrease in USD
against RMB. 5% is the sensitivity rate used when reporting foreign currency risk internally to key management
personnel and represents management’ s assessment of the reasonably possible c hange in foreign exchange rates. The
sensitivity analysis includes only outstanding foreign currency denominated monetary items and adjusts their
translation at the end of the reporting period for a 5% change in foreign currency rates. A positive number below
indicates an increase in post-tax profit and other e quity where USD strengthen 5% against RMB. For a 5%
weakening of USD against RMB, there would be an equal and opposite impact on the profit and other
comprehensive income and the amounts below would become negative.
USD Impact
As at
June 30,
2024
RMB’000
Profit or loss/Other comprehensive income 407
(ii) Interest rate risk
The Group ’s and the Company ’s fair value interest rate risk relates primarily to pledged/restricted deposits
(Note 27), fixed-rate borrowings (Note 31), gold loans (Note 33) and lease liabilities (Note 30). The Group ’s and the
Company ’s cash flow interest rate risk are mainly concentrated on the fluctuation of interest rates on bank balances,
which carry prevailing market interest rates. The Group and the Company manage interest rate exposures by
assessing the potential impact arising from any interest rate movements based on interest rate level and outlook. No
sensitivity analysis on cash flow interest rate risk is presented as the management considers the sensitivity on
interest rate risk on bank balances is insignificant.
APPENDIX I ACCOUNTANTS ’REPORT
– I-73 –


--- page 660 ---
(iii) Commodity price risk
The Group is principally engaged in the sales of jewellery including gold products in the PRC. The gold
market is influenced by global as well as regional supply an d demand conditions. A significant decline in prices of
gold could adversely affect the Group’ s financial performance. In order to reduce the commodity price risk, the
Group uses gold loans as well as derivative financial instruments of gold contracts, such as Au (T+D) contracts, to
reduce its exposure to fluctuations in the gold price on gol d products. Should the gold price go up, the Group would
recognise a loss representing the increase in gold price com pared to the contract price, and largely net against the
increase in turnover of gold products as a result of gold price increase.
The Au (T+D) contracts are settled on a daily basis and the differences between the contract price and market
price are immediately recognised in the consolidated statements of profit or loss and other comprehensive income.
The gold loans are settled at maturity which usually mat ure in 3 to 12 months from date of inception and the fair
value changes are immediately recognised in the consolidat ed statements of profit or loss and other comprehensive
income. The gold price exposures are monitored by management in a timely manner.
As at December 31, 2021, 2022 and 2023 and June 30, 2024, if the market price of gold had increased/
decreased by 5%, post-tax profit for the Track Record Pe riod, due to changes in fair values of gold loans, would
have been approximately RMB18,262,000, RMB14,780,000, RMB18,844,000 and RMB15,511,000 lower/higher
respectively.
(iv) Other price risk
The Group is exposed to price risk in respect of its financial products issued by banks classified as financial
assets at FVTPL.
The management of the Group considers the fluctuation in fair value changes on financial products are
insignificant, taking into account their short-term duration.
Credit risk
The Group ’s and the Company’ s exposure to credit risk which will cause a financial loss to the Group due to
failure to discharge an obligation by the counterparties is primarily attributable to trade receivables, other
receivables, pledged/restricted deposits, cash and cash equivalents and financial products measured at FVTPL.
Except for financial products measured at FVTPL, the Group and the Company performed impairment
assessment for financial assets under ECL model. Information about the Group ’s and the Company’ s credit risk
management, maximum credit risk exposures and the relat ed impairment assessment, if applicable, are summarised
as below:
The Group’ s and the Company ’s pledged/restricted deposits and cash and cash equivalents are deposited with
banks or exchange or online payment platforms with hi gh credit ratings and the Group and the Company have
limited exposure to any single financial institution or counterparty.
APPENDIX I ACCOUNTANTS ’REPORT
– I-74 –


--- page 661 ---
In order to minimise the credit risk, the manageme nt of the Group has delegated a team responsible for
determination of credit limits and credit approvals, other monitoring procedures to ensure that follow-up action is
taken to recover overdue debts and su mmarising of the credit-impaired information for further impairment
assessment. The Group ’s trade receivables are due from a large number of customers. As at December 31, 2021,
2022 and 2023 and June 30, 2024, less than 10% of the total trade receivables were due from the Group’ s top five
customers, respectively. The management closely mo nitors the subsequent settlement of the customers.
The Group ’s and the Company’ s internal credit risk grading assessment comprises the following categories:
Internal credit
rating Description Trade receivables
Other financial assets
subject to ECL
assessment
L o wr i s k ........ T h ec o u n t e r p a r t yh a sal o wr i s ko f
default and does not have any past-due
amounts
Lifetime ECL — not
credit-impaired
12m ECL
Doubtful . . . . . . . . There have been significant increases
in credit risk since initial recognition
through information developed
internally or external resources
Lifetime ECL — not
credit-impaired
Lifetime ECL — not
credit-impaired
L o s s ........... T h e r ei se v i d e n c ei n d i c a t i n gt h ea s s e t
is credit-impaired
Lifetime ECL —
credit-impaired
Lifetime ECL —
credit-impaired
Write-off . . . . . . . . There is evidence indicating that the
debtor is in severe financial difficulty
and the Group has no realistic prospect
of recovery
Amount is written off Amount is written off
APPENDIX I ACCOUNTANTS ’REPORT
– I-75 –


--- page 662 ---
The tables below detail the credit risk exposures of the Group’ s and the Company’ s financial assets which are
subject to ECL assessment:
The Group
Gross carrying amount
Internal
credit rating 12m or lifetime ECL
As at December 31,
As at
June 30,
2021 2022 2023 2024
RMB ’000 RMB ’000 RMB’ 000 RMB’ 000
Financial assets at
amortised cost
Trade receivables
(Note 24) ...........
N/A (note i) Lifetime ECL
(provision matrix)
103,673 132,775 150,573 171,292
Loss Lifetime ECL
— credit-impaired
41,133 33,844 36,312 35,862
144,806 166,619 186,885 207,154
Other receivables
(Note 25) ...........
Low risk 12m ECL 10,954 11,927 13,361 16,732
Loss Lifetime ECL
— credit-impaired
170 ———
11,124 11,927 13,361 16,732
Pledged/restricted deposits
(Note 27) ...........
Low risk 12m ECL 569,476 369,555 528,795 444,102
Cash and cash equivalents
(Note 27) ...........
Low risk 12m ECL 153,518 225,359 155,866 364,034
APPENDIX I ACCOUNTANTS ’REPORT
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--- page 663 ---
The Company
Gross carrying amount
Internal
credit rating 12m or lifetime ECL
As at December 31,
As at
June 30,
2021 2022 2023 2024
RMB ’000 RMB ’000 RMB’ 000 RMB’ 000
Financial assets at
amortised cost
Trade receivables . . . . . . . . N/A (note i) Lifetime ECL
(provision matrix)
— 514 29 642
Other receivables (Note 25) . Low risk 12m ECL 3,415 3,270 3,273 3,264
Amounts due from
subsidiaries
— trade (Note 44) .....
N/A (note i) Lifetime ECL
(provision matrix)
66,870 22,362 17,134 82,881
Amounts due from
subsidiaries
— non-trade (Note 44) ..
Low risk 12m ECL —— 36 71,514
Pledged/restricted deposits
(Note 27) ...........
Low risk 12m ECL 216,655 55,700 132,453 119,162
Cash and cash equivalents
(Note 27) ...........
Low risk 12m ECL 33,953 103,496 25,422 96,113
Note:
i. For trade receivables, the Group and the Company have applied the simplified approach in HKFRS 9 to
measure the loss allowance at lifetime ECL. Except for trade receivables relating to customers with
significant doubt on collection of receivables, the Group and the Company determine the ECL on these
items on a collective basis, grouped by debtors ’ aging.
As part of the Group ’s credit risk management, the Group uses debtors ’ aging to assess the impairment
because the debtors consist of customers with common risk ch aracteristics that are representative of the customers ’
abilities to pay all amounts due in accordance with the contractual terms. The following table provides information
about the exposure to credit risk for trade receivables which are assessed on a collective basis by using provision
matrix. In addition, as at December 31, 2021, 2022 and 2023 and June 30, 2024, debtors with gross carrying
amounts of RMB41,133,000, RMB33,844,000, RMB36,312,000 and RMB 35,862,000 were assessed individually.
APPENDIX I ACCOUNTANTS ’REPORT
– I-77 –


--- page 664 ---
The Group
At December 31, 2021 At December 31, 2022 At December 31, 2023 At June 30, 2024
Ageing Loss rate
Trade
receivables Loss rate
Trade
receivables Loss rate
Trade
receivables Loss rate
Trade
receivables
RMB ’000 RMB ’000 RMB ’000 RMB ’000
Within 1 year . . . . . . . 0.07% –0.24% 98,229 0.03% –0.07% 130,706 0.03% –0.04% 150,573 0.03% –0.05% 171,292
1–2y e a r s ......... —— 0.03% –5.14% 269 —— ——
2–3y e a r s ......... —— —— —— ——
More than 3 years . . . . 100.00% 5,444 100.00% 1,800 100.00% — ——
103,673 132,775 150,573 171,292
The loss rates are estimated based on historical observed default rates over the expected life of the debtors
and are adjusted for forward-looking information that is available without undue cost or effort. The grouping is
regularly reviewed by management to ensure relevant information about specific debtors is updated.
The following table shows the movement in lifetime ECL that has been recognised for trade receivables under
the simplified approach.
The Group
Lifetime
ECL (not
credit-
impaired)
Lifetime
ECL
(credit-
impaired) Total
RMB’000 RMB ’000 RMB ’000
A tJ a n u a r y1 ,2 0 2 1 ............................. 2 1 3 4 , 3 9 1 3 4 , 4 1 2
T r a n s f e rt oc r e d i t - i m p a i r e d........................ ( 1 ) 1 —
I m p a i r m e n tl o s s e sr e c o g n i s e d ...................... 2 1 6 1 3 , 3 2 1 1 3 , 5 3 7
I m p a i r m e n tl o s s e sr e v e r s e d........................ — (1,135) (1,135)
Write-offs (note) ............................... — (1) (1)
At December 31, 2021 ........................... 2 3 6 4 6 , 5 7 7 4 6 , 8 1 3
I m p a i r m e n tl o s s e sr e c o g n i s e d ...................... 2 — 2
I m p a i r m e n tl o s s e sr e v e r s e d........................ ( 1 8 5 ) ( 1 0 , 9 3 3 ) ( 1 1 , 1 1 8 )
At December 31, 2022 ........................... 5 3 3 5 , 6 4 4 3 5 , 6 9 7
I m p a i r m e n tl o s s e sr e c o g n i s e d ...................... 1 3 2 , 7 3 5 2 , 7 4 8
I m p a i r m e n tl o s s e sr e v e r s e d........................ ( 6 ) ( 2 , 0 6 7 ) ( 2 , 0 7 3 )
At December 31, 2023 ........................... 6 0 3 6 , 3 1 2 3 6 , 3 7 2
I m p a i r m e n tl o s s e sr e c o g n i s e d ...................... 3 4 — 34
I m p a i r m e n tl o s s e sr e v e r s e d........................ ( 8 ) ( 4 5 0 ) ( 4 5 8 )
At June 30, 2024 . ............................. 8 6 3 5 , 8 6 2 3 5 , 9 4 8
APPENDIX I ACCOUNTANTS ’REPORT
– I-78 –


--- page 665 ---
The following tables show reconciliation of loss allowances that has been recognised for other receivables.
The Group
12m ECL
Lifetime
ECL
(credit-
impaired) Total
RMB’000 RMB ’000 RMB ’000
A tJ a n u a r y1 ,2 0 2 1 ............................. 1 , 8 3 7 1 7 0 2 , 0 0 7
I m p a i r m e n tl o s s e sr e c o g n i s e d ...................... 8 6 9 — 869
I m p a i r m e n tl o s s e sr e v e r s e d........................ ( 7 4 ) — (74)
At December 31, 2021 ........................... 2 , 6 3 2 1 7 0 2 , 8 0 2
I m p a i r m e n tl o s s e sr e c o g n i s e d ...................... 8 8 0 4 8 9 1 , 3 6 9
I m p a i r m e n tl o s s e sr e v e r s e d........................ ( 3 4 0 ) — (340)
Write-offs (note) ............................... — (659) (659)
At December 31, 2022 ........................... 3 , 1 7 2 — 3,172
T r a n s f e rt oc r e d i t - i m p a i r e d........................ ( 1 1 2 ) 1 1 2 —
I m p a i r m e n tl o s s e sr e c o g n i s e d ...................... 8 0 1 — 801
I m p a i r m e n tl o s s e sr e v e r s e d........................ ( 4 0 0 ) — (400)
Write-offs (note) ............................... — (112) (112)
At December 31, 2023 ........................... 3 , 4 6 1 — 3,461
I m p a i r m e n tl o s s e sr e c o g n i s e d ...................... 7 4 7 — 747
I m p a i r m e n tl o s s e sr e v e r s e d........................ ( 8 5 ) — (85)
At June 30, 2024 . ............................. 4 , 1 2 3 — 4,123
The Company
12m ECL
RMB’000
A tJ a n u a r y1 ,2 0 2 1 ................................................... 3 2 0
I m p a i r m e n tl o s s e sr e c o g n i s e d ............................................ 4
At December 31, 2021 . . . .............................................. 3 2 4
I m p a i r m e n tl o s s e sr e c o g n i s e d ............................................ 5 3
At December 31, 2022 . . . .............................................. 3 7 7
I m p a i r m e n tl o s s e sr e c o g n i s e d ............................................ 3 0
At December 31, 2023 and June 30, 2024 .................................... 4 0 7
Note: The Group writes off a trade receivable or other receivable when there is information indicating that
the debtor is in severe financial difficulty and t here is no realistic prospect of recovery, when the
debtor has been placed under liquidation or has entered into bankruptcy proceedings, whichever occurs
earlier.
APPENDIX I ACCOUNTANTS ’REPORT
– I-79 –


--- page 666 ---
Liquidity risk
In the management of the liquidity risk, the management of the Group monitors and maintains a reasonable
level of cash and cash equivalents which is deemed adequate by the management to finance the Group ’s operations
and mitigate the effects of fluctuations in cash flows.
The following tables detail the Group ’s and the Company’ s remaining contractual maturity for financial
liabilities. The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the
earliest date on which the Group or the Company can be required to pay.
The Group
Weighted
average
interest rate
On demand
or within
1 year
Over
1 year but
within
2 years
Over
2 years but
within
5 years
Total
undiscounted
cash flows
Total
carrying
amount
RMB ’000 RMB ’000 RMB ’000 RMB ’000 RMB ’000
As at December 31, 2021
Financial liabilities
Trade and bills payables . . . — 45,560 —— 45,560 45,560
O t h e rp a y a b l e s.......... — 81,209 —— 81,209 81,209
B o r r o w i n g s ............ 1 . 7 8 % –5.83% 1,353,623 —— 1,353,623 1,336,920
Subtotal . . . . . . . . . . . . . . 1,480,392 —— 1,480,392 1,463,689
Lease liabilities ......... 5 . 2 2 % –5.88% 12,407 11,801 6,326 30,534 28,204
Total . . . . . . . . . . . . . . . . 1,492,799 11,801 6,326 1,510,926 1,491,893
Weighted
average
interest rate
On demand
or within
1 year
Over
1 year but
within
2 years
Over
2 years but
within
5 years
Total
undiscounted
cash flows
Total
carrying
amount
RMB ’000 RMB ’000 RMB ’000 RMB ’000 RMB ’000
As at December 31, 2022
Financial liabilities
Trade and bills payables . . . — 64,953 —— 64,953 64,953
O t h e rp a y a b l e s.......... — 84,610 —— 84,610 84,610
B o r r o w i n g s ............ 2 . 0 8 % –5.83% 838,715 —— 838,715 829,627
Subtotal . . . . . . . . . . . . . . 988,278 —— 988,278 979,190
Lease liabilities ......... 5 . 2 2 % –5.88% 9,900 4,984 4,724 19,608 18,223
Total . . . . . . . . . . . . . . . . 998,178 4,984 4,724 1,007,886 997,413
APPENDIX I ACCOUNTANTS ’REPORT
– I-80 –


--- page 667 ---
Weighted
average
interest rate
On demand
or within
1 year
Over
1 year but
within
2 years
Over
2 years but
within
5 years
Total
undiscounted
cash flows
Total
carrying
amount
RMB ’000 RMB ’000 RMB ’000 RMB ’000 RMB ’000
As at December 31, 2023
Financial liabilities
Trade and bills payables . . . — 511,787 —— 511,787 511,787
O t h e rp a y a b l e s.......... — 92,277 —— 92,277 92,277
B o r r o w i n g s ............ 3 . 6 0 % –5.51% 802,593 —— 802,593 790,041
Subtotal . . . . . . . . . . . . . . 1,406,657 —— 1,406,657 1,394,105
Lease liabilities ......... 5 . 2 2 % –5.88% 7,926 6,183 2,986 17,095 15,992
Total . . . . . . . . . . . . . . . . 1,414,583 6,183 2,986 1,423,752 1,410,097
Weighted
average
interest rate
On demand
or within
1 year
Over
1 year but
within
2 years
Over
2 years but
within
5 years
Total
undiscounted
cash flows
Total
carrying
amount
RMB ’000 RMB ’000 RMB ’000 RMB ’000 RMB ’000
As at June 30, 2024
Financial liabilities
Trade and bills payables . . . — 302,191 —— 302,191 302,191
O t h e rp a y a b l e s.......... — 107,823 —— 107,823 107,823
B o r r o w i n g s ............ 3 . 2 5 % –7.92% 1,085,449 —— 1,085,449 1,070,379
Subtotal . . . . . . . . . . . . . . 1,495,463 —— 1,495,463 1,480,393
Lease liabilities ......... 4 . 4 9 % –5.88% 11,591 8,893 3,931 24,415 23,000
Total . . . . . . . . . . . . . . . . 1,507,054 8,893 3,931 1,519,878 1,503,393
APPENDIX I ACCOUNTANTS ’REPORT
– I-81 –


--- page 668 ---
The Company
Weighted
average
interest rate
On demand
or within
1 year
Over
1 year but
within
2 years
Over
2 years but
within
5 years
Total
undiscounted
cash flows
Total
carrying
amount
RMB ’000 RMB ’000 RMB ’000 RMB ’000 RMB ’000
As at December 31, 2021
Financial liabilities
T r a d ep a y a b l e s.......... — 4,540 —— 4,540 4,540
O t h e rp a y a b l e s.......... — 550 —— 550 550
Amounts due to subsidiaries . — 962,313 —— 962,313 962,313
B o r r o w i n g s ............ 4 . 0 0 % –5.83% 287,826 —— 287,826 278,966
Total . . . . . . . . . . . . . . . . 1,255,229 —— 1,255,229 1,246,369
Weighted
average
interest rate
On demand
or within
1 year
Over
1 year but
within
2 years
Over
2 years but
within
5 years
Total
undiscounted
cash flows
Total
carrying
amount
RMB ’000 RMB ’000 RMB ’000 RMB ’000 RMB ’000
As at December 31, 2022
Financial liabilities
T r a d ep a y a b l e s.......... — 293 —— 293 293
O t h e rp a y a b l e s.......... — 567 —— 567 567
Amounts due to subsidiaries . — 811,599 —— 811,599 811,599
B o r r o w i n g s ............ 4 . 0 0 % –5.83% 235,035 —— 235,035 230,284
Total . . . . . . . . . . . . . . . . 1,047,494 —— 1,047,494 1,042,743
Weighted
average
interest rate
On demand
or within
1 year
Over
1 year but
within
2 years
Over
2 years but
within
5 years
Total
undiscounted
cash flows
Total
carrying
amount
RMB ’000 RMB ’000 RMB ’000 RMB ’000 RMB ’000
As at December 31, 2023
Financial liabilities
T r a d ep a y a b l e s.......... — 1,062 —— 1,062 1,062
O t h e rp a y a b l e s.......... — 1,617 —— 1,617 1,617
Amounts due to subsidiaries . — 680,098 —— 680,098 680,098
B o r r o w i n g s ............ 3 . 6 0 % –5.51% 435,856 —— 435,856 430,554
Total . . . . . . . . . . . . . . . . 1,118,633 —— 1,118,633 1,113,331
APPENDIX I ACCOUNTANTS ’REPORT
– I-82 –


--- page 669 ---
Weighted
average
interest rate
On demand
or within
1 year
Over
1 year but
within
2 years
Over
2 years but
within
5 years
Total
undiscounted
cash flows
Total
carrying
amount
RMB ’000 RMB ’000 RMB ’000 RMB ’000 RMB ’000
As at June 30, 2024
Financial liabilities
T r a d ep a y a b l e s.......... — 645 —— 645 645
O t h e rp a y a b l e s.......... — 5,074 —— 5,074 5,074
Amounts due to subsidiaries . — 935,181 —— 935,181 935,181
Borrowings . . . . . . . . . . . . 3.55%-5.51% 430,503 —— 430,503 429,997
Total . . . . . . . . . . . . . . . . 1,371,403 —— 1,371,403 1,370,897
Transfers of financial assets
As at December 31, 2021, 2022 and 2023 and June 30, 2024, bills receivable issued among subsidiaries of the
Group for intra-group transactions amounting to RMB690,000,000, RMB340,000,000, nil and nil were transferred to
banks by discounting those receivables on a full recourse basis to secure bank borrowings amounting to
RMB690,000,000, RMB340,000,000 and nil and nil (see Note 31) and these bills receivable and the related intra-
group payables have been eliminated in the Historical Financial Information.
Fair value measurements of financial instruments
Some of the Group ’s financial assets are measured at fair value for financial reporting purposes. In estimating
the fair value, the Group uses market-observable data t o the extent it is available. Where Level 1 inputs are not
available, the Group determines the appropriate valuat ion techniques and inputs for fair value measurements.
Except for financial assets at FVTPL as set out below, there is no financial instrument measured at fair value
on a recurring basis.
Fair value as at
Financial assets
December 31, June 30, Fair value
hierarchy
Valuation technique(s)
and key input(s)2020 2021 2022 2024
RMB ’000 RMB ’000 RMB ’000 RMB ’000
Financial assets at FVTPL
Financial products . . . . . 6,011 ——— Level 2 Discounted cash flow.
Future cash flows are
estimated based on
expected returns,
discounted at a rate that
reflects the credit risk of
various counterparties.
Management of the Group considers that the carrying amounts of financial assets and financial liabilities
recorded at amortised cost in the Historical Financial Information approximate their fair values.
APPENDIX I ACCOUNTANTS ’REPORT
– I-83 –


--- page 670 ---
42. CAPITAL RISK MANAGEMENT
The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while
maximizing the return to shareholders through the optimization of debt and equity balances. The Group’ s overall strategy
remains unchanged during the Track Record Period.
The capital structure of the Group consists of net debt, wh ich includes borrowings disclosed in Note 31, gold loans
disclosed in Note 33, lease liabilities disclosed in Note 30, net of cash and cash equivalents and equity attributable to
owners of the Company, comprising share capital, retained profits and other reserves.
The management of the Group reviews the capital structure re gularly. As part of this review, the management of the
Group considers the cost of capital and the risks associated with each class of capital. Based on recommendations of the
management, the Group will balance its overall capital structure through new shares issues as well as raising of
borrowings.
43. MAJOR NON-CASH TRANSACTIONS
For sale of gold products, the Group allows customers to use used gold products as part of the consideration for the
transaction price. For the years ended December 31, 2021, 2022 and 2023 and the six months ended June 30, 2023 and
2024, used gold as part of the consideration paid by franchisees and provincial-dealers amounted to RMB8,077,813,000,
RMB5,797,415,000, RMB6,692,698,000, RMB2,316,822,000 (una udited) and RMB2.701,083,000 respectively, and used
gold paid by customers from self-operated stores amounted to RMB111,028,000, RMB96,691,000, RMB114,026,000,
RMB61,379,000 (unaudited) and RMB58,938,000 respectively.
During the years ended December 31, 2021, 2022 and 2023 and the six months ended June 30, 2023 and 2024, the
Group entered into gold loan contracts with physical settlement amounting to RMB590,876,000, RMB478,542,000,
RMB618,107,000, RMB506,658,000 (unaudited) and RMB 346,809,000 respectively and made settlement amounting to
RMB626,001,000, RMB580,310,000, RMB529,477,000, RMB416,933,000 (unaudited) and RMB415,252,000. Such
borrowings and settlements, which are delivered by the inventories, are presented in the consolidated statements of cash
flows as non-cash transactions.
During the years ended December 31, 2021, 2022 and 2023 and the six months ended June 30, 2023 and 2024, the
Group entered into certain new lease agreements for the us e of leased properties. On the lease commencement, the Group
recognised right-of-use assets and lease liabilities of RMB1,397,000, RMB10,653,000, RMB8,666,000, nil (unaudited) and
RMB14,214,000 respectively during the years ended December 31, 2021, 2022 and 2023 and the six months ended June
30, 2023 and 2024.
44. RELATED PARTY DISCLOSURES
(A) Related party transactions
During the Track Record Period, the Group and the Company have entered into the following transactions
with related parties:
The Group
For the year ended December 31,
For the six months
ended June 30,
Relationship Nature of transaction 2021 2022 2023 2023 2024
RMB ’000 RMB ’000 RMB ’000 RMB ’000 RMB ’000
(unaudited)
The controlling
shareholders . . . . .
Short-term lease
expenses
— 24 191 12 179
APPENDIX I ACCOUNTANTS ’REPORT
– I-84 –


--- page 671 ---
Except for short-term lease in which the Group applied recognition exemption, the Group has
recognised an addition of right-of-use assets and lease liabilities of RMB1,480,000 for the lease of retail
stores with the controlling shareholders during the year ended December 31, 2022. The lease was early
terminated on June 30, 2023.
The Group ’s borrowings guaranteed by Mr. Wang Zhongshan, Ms. Zhang Xiuqin and/or Mr. Wang
Guoxin (as at December 31, 2021 only), the controlling shareholders of the Company, and secured by
properties owned by Mr. Wang Zhongshan, the controlling shareholder, as at December 31, 2021, 2022 and
2023 and June 30, 2024 amounted to RMB1,288,336,000, RMB829,627,000, RMB710,020,000 and
RMB620,832,000, respectively. The directors of the Company represented to us, the guarantee and security
provided by Mr. Wang Zhongshan and Ms. Zhang Xiuqin will be released upon the listing of the Company on
the Stock Exchange.
The Group ’s bills payable guaranteed by Mr. Wang Zhongshan and Ms. Zhang Xiuqin, the controlling
shareholders of the Company, as at December 31, 2023 and June 30, 2024 amounted to RMB470,000,000 and
RMB60,000,000. The directors of the Company repre sented to us, the guarantee provided by Mr. Wang
Zhongshan and Ms. Zhang Xiuqin will be released upon the listing of the Company on the Stock Exchange.
The Group’ s gold loans guaranteed by Mr. Wang Zhongshan, Ms. Zhang Xiuqin and/or Mr. Wang
Guoxin (as at December 31, 2021 only), the controlling shareholders of the Company, as at December 31,
2021, 2022 and 2023 and June 30, 2024 amounted to RMB486,998,000, RMB394,143,000, RMB502,508,000
and RMB413,627,000, respectively. The directors of the Company represented to us, the guarantee provided
by Mr. Wang Zhongshan and Ms. Zhang Xiuqin will be released upon the listing of the Company on the
Stock Exchange.
The Company
For the year ended December 31,
For the six months
ended June 30,
Relationship Nature of transaction 2021 2022 2023 2023 2024
RMB ’000 RMB ’000 RMB ’000 RMB ’000 RMB ’000
(unaudited)
Subsidiaries . . . . . Purchase of processing
services, gold
jewellery, raw
materials, etc.
375,751 66,613 181,333 127,975 114,329
Subsidiaries . . . . . Sales of gold jewellery,
raw materials,
machinery, etc.
5,860,620 5,135,197 5, 682,559 3,093,866 2,478,213
Subsidiaries . . . . . Rental income 344 —— — —
The Company’ s borrowings guaranteed by Mr. Wang Zhongshan and Ms. Zhang Xiuqin, the controlling
shareholders of the Company, as at December 31, 2021, 2022 and 2023 and June 30, 2024 amounted to
RMB230,382,000, RMB230,284,000, RMB350,533,000 an d RMB350,484,000 respectively. The directors of
the Company represented to us, the guarantee provided by Mr. Wang Zhongshan and Ms. Zhang Xiuqin will
be released upon the listing of the Company on the Stock Exchange.
APPENDIX I ACCOUNTANTS ’REPORT
– I-85 –


--- page 672 ---
(B) Related party balances
The Company
Amounts due from subsidiaries:
As at December 31,
As at
June 30,
2021 2022 2023 2024
RMB’000 RMB’ 000 RMB ’000 RMB ’000
Trade (note i) . . . . . . . . . . . . . . . . . 66,870 22,362 17,134 82,881
Non-trade (note ii) .............. —— 36 71,514
66,870 22,362 17,170 154,395
Notes:
i. The amounts are aged within one year based on dates of delivery at the end of each reporting
period.
ii. The amounts are unsecured, interest-free, and repayable on demand.
Amounts due to subsidiaries:
As at December 31,
As at
June 30,
2021 2022 2023 2024
RMB’000 RMB’ 000 RMB ’000 RMB ’000
Trade (note i) ................. 6 5 3 , 2 8 3 283,006 23,385 —
Non-trade (note ii) .............. 3 0 9 , 0 3 0 528,593 656,713 935,181
962,313 811,599 680,098 935,181
Notes:
i. The amounts are aged within one year based on the invoice date as at the end of each reporting
period.
ii. The amounts are unsecured, interest-free, and repayable on demand.
APPENDIX I ACCOUNTANTS ’REPORT
– I-86 –


--- page 673 ---
(C) Remuneration of key management personnel of the Group
For the year ended December 31,
For the six months
ended June 30,
2021 2022 2023 2023 2024
RMB’000 RMB ’000 RMB ’000 RMB ’000 RMB ’000
(unaudited)
Salaries and other allowances . . . . . 3,214 3,242 3,394 1,746 1,837
Performance-based bonuses . . . . . . . 1,555 1,575 1,826 788 659
Retirement benefits scheme . . . . . . . 196 214 385 125 170
Equity-settled share-based
p a y m e n t se x p e n s e ........... 1 , 1 3 3 1 2 ———
6,098 5,043 5,605 2,659 2,666
45A. PARTICULARS OF SUBSIDIARIES OF THE COMPANY
During the Track Record Period and as at the date of this report, the Company has direct and indirect equity
interests in the following subsidiaries:
Proportion ownership interest and voting power
held by the Company as at
Name of subsidiaries
Place and date of
incorporation/
establishment
Issued and
fully paid
ordinary share
capital/
registered
capital
December
31, 2021
December
31, 2022
December
31, 2023
June 30,
2024
Date of the
report
Principal
activities
Direct/
indirect
Shandong Yifu (Note i)
山東億福金業珠寶首飾有限公司 .
The PRC
August 2, 2007
RMB
76,614,000.00
100% 100% 100% 100% 100% Jewellery
production
Direct
Shandong Mokingran Jewellery
Limited* (Note ii)
山東夢金園珠寶首飾有限公司 ..
The PRC
April 5, 2004
RMB
60,000,000.00
100% 100% 100% 100% 100% Jewellery
wholesale
Direct
Shandong Mokingran
E-Commerce Limited*
(Note vii)
山東夢金園電子商務有限公司 ..
The PRC
December 12,
2014
RMB
3,000,000.00
100% 100% 100% 100% 100% Jewellery retail Indirect
Shenzhen Mokingran E-
Commerce Limited*
(Note iii)
深圳夢金園電子商務有限公司 ..
The PRC
August 22, 2018
RMB
3,000,000.00
51% 51% 51% 51% 51% Jewellery retail Indirect
Shanghai Yuanjunmeng Diamond
Limited* (Note vii)
上海緣君夢鑽石有限公司 .....
The PRC
December 3, 2014
RMB
1,000,000.00
100% 100% 100% 100% 100% Diamond
wholesale
Indirect
HONG KONG MOKINGRAN
JEWELLERY GROUP
LIMITED (Note iv)
香港夢金園國際珠寶集團
有限公司 .............
Hong Kong
April 25, 2003
HKD
2,000,000.00
100% 100% 100% 100% 100% Jewellery
wholesale
Indirect
Beijing Mokingran Jewellery
Limited* (Note vii)
北京夢金園珠寶首飾有限公司 ..
The PRC
August 21, 2017
RMB
5,000,000.00
100% 100% 100% 100% 100% Jewellery
wholesale
Direct
APPENDIX I ACCOUNTANTS ’REPORT
– I-87 –


--- page 674 ---
Proportion ownership interest and voting power
held by the Company as at
Name of subsidiaries
Place and date of
incorporation/
establishment
Issued and
fully paid
ordinary share
capital/
registered
capital
December
31, 2021
December
31, 2022
December
31, 2023
June 30,
2024
Date of the
report
Principal
activities
Direct/
indirect
Guangdong Mokingran Jewellery
Limited* (Note vii)
廣東夢金園珠寶首飾有限公司 ..
The PRC
August 1, 2017
RMB
2,000,000.00
100% 100% 100% 100% 100% Jewellery
wholesale
Direct
Jinan Mokingran Gold Jewellery
Limited* (Note vii)
濟南夢金園黃金珠寶有限公司 ..
The PRC
June 17, 2011
RMB
5,000,000.00
100% 100% 100% 100% 100% Jewellery
wholesale
Direct
Nanjing Mokingran Jewellery
Limited* (Note vii)
南京夢金園珠寶首飾有限公司 ..
The PRC
September 24,
2013
RMB
5,000,000.00
100% 100% 100% 100% 100% Jewellery
wholesale
Direct
Zhengzhou Mokingran Jewellery
Limited* (Note vii)
鄭州夢金園珠寶首飾有限公司 ..
The PRC
August 3, 2015
RMB
5,000,000.00
100% 100% 100% 100% 100% Jewellery
wholesale
Direct
Shenyang Mokingran Jewellery
Limited* (Note v)
瀋陽市夢金園珠寶首飾有限公司 .
The PRC
April 7, 2015
RMB
5,000,000.00
100% 100% 100% 100% 100% Jewellery
wholesale
Direct
Hangzhou Mokingran Jewellery
Limited* (Note vii)
杭州夢金園珠寶首飾有限公司 ..
The PRC
August 26, 2016
RMB
5,000,000.00
100% 100% 100% 100% 100% Jewellery
wholesale
Direct
Tianjin Mokingran Jewellery
Limited* (Note vi)
天津夢金園珠寶首飾有限公司 ..
The PRC
November 27,
2015
RMB
10,000,000.00
100% 100% 100% 100% 100% Jewellery retail Direct
Tianjin Zongyi Technology
Development Limited*
(Note vii)
天津宗儀科技研發有限公司 ....
The PRC
March 21, 2014
RMB
10,000,000.00
100% 100% 100% 100% 100% Jewellery
wholesale
Direct
Zhongbao Zhengxin Gold &
Silver Jewellery Testing
Limited* (Note vii)
中寶正信金銀珠寶首飾檢測
有限公司 .............
The PRC
March 26, 2013
RMB
50,000,000.00
100% 100% 100% 100% 100% Jewellery
testing
Direct
Changle Chengxin Gold Limited*
(Note vii)
昌樂誠信黃金有限公司 .......
The PRC
September 8, 2003
RMB
40,000,000.00
100% 100% 100% 100% 100% Jewellery retail Direct
Jinan Chengxin Mokingran
Jewellery Limited* (Note vii)
濟南誠信夢金園珠寶首飾
有限公司 .............
The PRC
May 15, 2019
RMB
1,000,000.00
100% 100% 100% 100% 100% Jewellery retail Indirect
Beijing Chengxin Mokingran
Jewellery Limited* (Note vii)
北京誠信夢金園珠寶首飾
有限公司 .............
The PRC
March 9, 2010
RMB
5,000,000.00
100% 100% 100% 100% 100% Jewellery retail Direct
Shenzhen Mokingran Jewellery
Limited* (Note vii)
深圳市夢金園珠寶首飾有限公司 .
The PRC
December 10,
2010
RMB
80,000,000.00
98.50% 100% 100% 100% 100% Jewellery
wholesale
Direct
APPENDIX I ACCOUNTANTS ’REPORT
– I-88 –


--- page 675 ---
Proportion ownership interest and voting power
held by the Company as at
Name of subsidiaries
Place and date of
incorporation/
establishment
Issued and
fully paid
ordinary share
capital/
registered
capital
December
31, 2021
December
31, 2022
December
31, 2023
June 30,
2024
Date of the
report
Principal
activities
Direct/
indirect
Lhasa Jinqianhui Technology
Limited* (Note vii)
拉薩金千匯科技有限公司 .....
The PRC
April 1, 2024
RMB
300,000.00/
RMB
1,000,000.00
——— 51% 51% Jewellery retail Indirect
Changle Mokingran Jewellery
Limited* (Note vii)
昌樂夢金園珠寶有限公司 .....
The PRC
April 11, 2024
RMB
1,000,000.00
——— 100% 100% Jewellery
wholesale
Direct
Shanghai Mokingran Jewellery
Limited* (Notes vii & viii)
上海夢金園黃金珠寶有限公司 ..
The PRC
September 24,
2013
RMB
10,000,000.00
———— — Jewellery
wholesale
Direct
Guangdong Jinmengyuan
Jewellery Limited*
(Notes vii & viii)
廣東金夢園珠寶首飾有限公司 ..
The PRC
August 3, 2015
RMB
10,000,000.00
———— — Jewellery
wholesale
Direct
All subsidiaries now comprising the Group are limited liability companies and have adopted December 31 as their
financial year end date. None of the subsidiaries had any debt securities outstanding as at December 31, 2021, 2022 and
2023 and June 30, 2024 or at any time during the Track Record Period.
Notes:
i. The subsidiary is a limited liability company. The financial statements of Shandong Yifu for the years ended
December 31, 2021 and 2022 were prepared in accordance with Accounting Standards for Business
Enterprises issued by the Ministry of Finance of the PRC and were audited by Beijing Xintuo Zixin Certified
Public Accountants Co., Ltd* ( 北京信拓孜信會計師事務所有限公司) and Changle Zhengfang Certified
Public Accountants Co., Ltd* ( 昌樂正方會計師事務所有限責任公司), respectively. No audited statutory
financial statements were prepared for Shandong Yifu for the year ended December 31, 2023 as there are no
statutory audit requirements.
ii. The subsidiary is a limited liability company. The financial statements of Shandong Mokingran Jewellery
Limited for the year ended December 31, 2021 and 2023 were prepared in accordance with Accounting
Standards for Business Enterprises issued by the Ministry of Finance of the PRC and audited by Shandong
Shiji Yuanfei Certified Public Accountants* (山 東世紀鳶飛會計師事務所). The financial statements of
Shandong Mokingran Jewellery Limited for the year ended December 31, 2022 were prepared in accordance
with Accounting Standards for Business Enterprises i ssued by the Ministry of Finance of the PRC and audited
by Changle Zhengfang Certified Public Accountants Co., Ltd* ( 昌樂正方會計師事務所有限責任公司).
iii. The subsidiary is a limited liability company. The financial statements of Shenzhen Mokingran E-Commerce
Limited for the years ended December 31, 2021 and 2022 were prepared in accordance with Accounting
Standards for Business Enterprises issued by the Ministry of Finance of the PRC and were audited by
Guangdong Xingbai Certified Public Acco untants (General Partnership)* ( 廣東省興百會計師事務所(普通合
夥)). No audited statutory financial statements were p repared for Shenzhen Moki ngran E-Commerce Limited
for the year ended December 31, 2023 as there are no statutory audit requirements.
iv. The subsidiary is a limited liability company. The financial statements of HONG KONG MOKINGRAN
JEWELLERY GROUP LIMITED for the years ended December 31, 2021, 2022 and 2023 were prepared in
accordance with Small and Medium-sized Entity Financial Reporting Standard issued by the HKICPA and
were audited by Chu Sau Wai, Certified Public Accountant (Practising).
APPENDIX I ACCOUNTANTS ’REPORT
– I-89 –


--- page 676 ---
v. The subsidiary is a limited liability company. The fin ancial statements of Shenyang Mokingran Jewellery
Limited for the years ended December 31, 2021 and 2022 were prepared in accordance with Accounting
Standards for Business Enterprises issued by the Min istry of Finance of the PRC and were audited by Changle
Zhengfang Certified Public Accountants Co., Ltd* ( 昌樂正方會計師事務所有限責任公司). No audited
statutory financial statements were prepared for Shenyang Mokingran Jewellery Limited for the year ended
December 31, 2023 as there are no statutory audit requirements.
vi. The subsidiary is a limited liability company. The financial statements of Tianjin Mokingran Jewellery
Limited for the years ended December 31, 2021 and 2022 were prepared in accordance with Accounting
Standards for Business Enterprises issued by the Min istry of Finance of the PRC and were audited by Changle
Zhengfang Certified Public Accountants Co., Ltd* ( 昌樂正方會計師事務所有限責任公司). No audited
statutory financial statements were prepared for Tianjin Mokingran Jewellery Limited for the year ended
December 31, 2023 as there are no statutory audit requirements.
vii. No audited statutory financial statements were pre pared for these subsidiaries for the Track Record Period as
there are no statutory audit requirements.
viii. The subsidiary was deregistered during the year ended December 31, 2021.
* English name is for identification purpose only.
45B. INVESTMENTS IN SUBSIDIARIES
The Company
As at December 31,
As at
June 30,
2021 2022 2023 2024
RMB’000 RMB’ 000 RMB ’000 RMB ’000
C o s to fi n v e s t m e n t s...................... 1 , 7 3 0 , 5 1 0 1 , 733,125 1,725,125 1,726,125
Investments in subsidiaries are stated at cost less accumula ted impairment losses, if any. The increase in investments
in subsidiaries at December 31, 2022 was due to further capital contribution to subsidiaries of RMB2,615,000 during the
year ended December 31, 2022. The decrease in investments in subsidiaries at December 31, 2023 was due to capital
reduction of a subsidiary of RMB8,000,000 during the year ended December 31, 2023. The increase in investments in
subsidiaries at June 30, 2024 was due to capital contribution to a new subsidiary of RMB1,000,000 during the six months
ended June 30, 2024
APPENDIX I ACCOUNTANTS ’REPORT
– I-90 –


--- page 677 ---
46. RESERVES OF THE COMPANY
Share
premium
Share-
based
payments
reserve
Statutory
reserve
(Accumulated
losses)/retained
profits Total
RMB’0000 RMB ’000 RMB ’000 RMB ’000 RMB ’000
A tJ a n u a r y1 ,2 0 2 1 ................. 465,249 68,846 3,726 (1,896) 535,925
Profit and total comprehensive income for
t h ey e a r ....................... ——— 450,632 450,632
Recognition of equity-settled share-based
p a y m e n t s ...................... — 2,268 —— 2,268
Appropriation to statutory reserve . . . . . . . —— 44,873 (44,873) —
— 2,268 44,873 (44,873) 2,268
A tD e c e m b e r3 1 ,2 0 2 1............... 465,249 71,114 48,599 403,863 988,825
Profit and total comprehensive income for
t h ey e a r ....................... ——— 54,917 54,917
I s s u eo fs h a r e s .................... 4 5 , 8 3 3 —— — 45,833
Recognition of equity-settled share-based
p a y m e n t s ...................... — 130 —— 130
Appropriation to statutory reserve . . . . . . . —— 5,492 (5,492) —
D i v i d e n dd e c l a r e d.................. ——— (78,715) (78,715)
45,833 130 5,492 (84,207) (32,752)
A tD e c e m b e r3 1 ,2 0 2 2............... 511,082 71,244 54,091 374,573 1,010,990
Profit and total comprehensive income for
t h ey e a r ....................... ——— 128,999 128,999
Appropriation to statutory reserve . . . . . . . —— 12,900 (12,900) —
A tD e c e m b e r3 1 ,2 0 2 3............... 511,082 71,244 66,991 490,672 1,139,989
Loss and total comprehensive income for
t h ep e r i o d ...................... ——— (30,307) (30,307)
D i v i d e n dd e c l a r e d.................. ——— (91,627) (91,627)
At June 30, 2024 . . ................ 511,082 71,244 66,991 368,738 1,018,055
APPENDIX I ACCOUNTANTS ’REPORT
– I-91 –


--- page 678 ---
47. SUBSEQUENT FINANCIAL STATEMENTS
No audited financial statements have been prepared by the Group, the Company or any of its subsidiaries in respect
of any period subsequent to June 30, 2024.
APPENDIX I ACCOUNTANTS ’REPORT
– I-92 –


--- page 679 ---
The information set out in this Appendix does not form part of the accountants ’ report on the
historical financial information of the Group for each of the three years ended December 31, 2023
and the six months ended June 30, 2024 (the ‘‘Accountants ’ Report ’’) prepared by Deloitte Touche
Tohmatsu, Certified Public Accountants, Hong Kong, the Company’ s Reporting Accountants, as set
out in Appendix I to this prospectus, and is included in this prospectus for information only. The
unaudited pro forma financial information should be read in conjunction with the section headed
‘‘Financial Information ’’in this prospectus and the Accountants’ Report set out in Appendix I to
this prospectus.
A. UNAUDITED PRO FORMA STATEMENT OF ADJUSTED CONSOLIDATED NET
TANGIBLE ASSETS OF THE GROUP ATTRIBUTABLE TO OWNERS OF THE
COMPANY
The following unaudited pro forma statement of adjusted consolidated net tangible assets of
the Group attributable to owners of the Company prepared in accordance with paragraph 4.29 of the
Listing Rules is set out below to illustrate the effect of the Global Offering (as defined in this
prospectus) on the audited consolidated net tangi ble assets of the Group attributable to owners of
the Company as of June 30, 2024 as if the Global Offering had taken place on that date.
The unaudited pro forma statement of adjusted c onsolidated net tangible assets of the Group
attributable to owners of the Company has been prepared for illustrative purposes only and, because
of its hypothetical nature, it may not give a true pi cture of the consolidated net tangible assets of
the Group attributable to owners of the Company as of June 30, 2024 or any future dates following
the Global Offering.
The following unaudited pro forma statement of adjusted consolidated net tangible assets of
the Group attributable to owners of the Company is based on the audited consolidated net tangible
assets of the Group attributable to owners of the Company as of June 30, 2024 as derived from the
Accountants ’ Report, the text of which is set out in Appendix I to this prospectus, and adjusted as
follows:
Audited
consolidated
net tangible
assets of the
Group
attributable to
owners of the
Company as of
June 30, 2024
Estimated net
proceeds from
the Global
Offering
Unaudited pro
forma adjusted
consolidated
net tangible
assets of the
Group
attributable to
owners of the
Company as of
June 30, 2024
Unaudited pro forma
adjusted consolidated net
tangible assets of the
Group attributable to
owners of the Company
as of June 30, 2024
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$12.00 per Offer Share . . . 1,863,550 428,733 2,292,283 8.40 9.07
Based on an Offer Price of
HK$14.40 per Offer Share . . . 1,863,550 521,188 2,384,738 8.73 9.44
APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION
– II-1 –


--- page 680 ---
Notes:
1. The amount is calculated based on the audited consolidated net assets of the Group attributable to owners of
the Company as of June 30, 2024 amounting to approxima tely RMB1,870,162,000, as extracted from the
Accountants ’ Report set out in Appendix I to this prospectus, with adjustments for intangible assets of the
Group attributable to owners of the Company of RMB6,612,000 as of June 30, 2024.
2. The estimated net proceeds from the Global Offering are based on 43,956,800 Offer Shares to be issued at the
Offer Price of HK$12.00 and HK$14.40 per Offer Share, being the low-end and high-end of the stated Offer
Price range, respectively, after deduction of the estim ated listing expenses and share issue costs (including
underwriting fees and other related expenses) expected to be incurred by the Group (excluding the listing
expenses that have been charged to profit or loss during the Track Record Period) subsequent to June 30,
2024. It does not take into account any Shares which ma y be issued upon the exercise of the Over-allotment
Option. For the purpose of calculating the estimated net proceeds from the Global Offering, the translation of
HK dollars into RMB was made at the exchange rate of HK$1.00 to RMB0.9255 as disclosed by the People ’s
Bank of China ( ‘‘PBOC ’’), rate prevailing on November 13, 2024. No representation is made that HK dollars
have been, would have been or may be converted to RMB, or vice versa, at that rate or at any other rates or at
all.
3. The number of shares used for the calculation of unaudited pro forma adjusted consolidated net tangible assets
of the Group attributable to owners of the Company as of June 30, 2024 per Share is based on 273,023,466
shares immediately following completion of the Glob al Offering. It does not take into account any Shares
which may be issued upon the exercise of the Over-allotment Option.
4. The unaudited pro forma adjusted consolidated net ta ngible assets of the Group attributable to owners of the
Company as of June 30, 2024 per Share is converted from RMB into HK dollars at the rate of HK$1.00 to
RMB0.9255 as disclosed by PBOC, rate prevailing on November 13, 2024. No representation is made that the
RMB have been, would have been or may be converted to HK dollars, or vice versa, at that rate or at any
other rates or at all.
5. No adjustment has been made to the unaudited pro for ma adjusted consolidated net tangible assets of the
Group attributable to owners of the Company as of June 30, 2024 to reflect any operating result or other
transactions of the Group entered into subsequent to June 30, 2024.
6. Certain property interests of the Group as at June 30, 2024 have been valued by Cushman & Wakefield
Limited, an independent property valuer. By comparing the valuation of the Group ’s property interests of
approximately RMB119,000,000 provided by Cushman & Wakefield Limited and the carrying amounts of
these properties of approximately RMB78,597,000 as at June 30, 2024, the valuation surplus is approximately
RMB40,403,000 as at June 30, 2024, which was not reflected in the above adjusted consolidated net tangible
assets of the Group attributable to owners of the Company as at June 30, 2024. The revaluation surplus has
not been included in the Historical Financial Information as at June 30, 2024 as set out in Appendix I to this
prospectus. If the revaluation surplus was recorded in the Group ’s consolidated financial statements, the
annual depreciation of the Group would inc rease by approximately RMB1,598,000.
7. No dividend has been declared by the Company subsequent to June 30, 2024.
APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION
– II-2 –


--- page 681 ---
B. INDEPENDENT REPORTING ACCOUNTANTS ’ASSURANCE REPORT ON THE
COMPILATION OF UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following is the text of the independent reporting accountants ’ assurance report received
from Deloitte Touche Tohmatsu, Certified Pu blic Accountants, Hong Kong, the reporting
accountants of the Company, in respect of the Group ’s unaudited pro forma financial information
prepared for the purpose of incor poration in this prospectus.
INDEPENDENT REPORTING ACCOUNTANTS’ ASSURANCE REPORT ON THE
COMPILATION OF UNAUDITED PRO FORMA FINANCIAL INFORMATION
To the Directors of Mokingran Jewellery Group Co., Ltd.
We have completed our assurance engagement to report on the compilation of unaudited pro
forma financial information of Mokingran Jewellery Group Co., Ltd. (the ‘‘Company ’’) and its
subsidiaries (hereinafter collectively referred to as 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 adj usted consolidated net tangible assets as at June
30, 2024 and related notes as set out on pages II-1 to II-2 of Appendix II to the prospectus issued
by the Company dated November 21, 2024 (the ‘‘Prospectus ’’). The applicable criteria on the basis
of which the Directors have compiled the unaudited pro forma financial information are described
on pages II-1 to II-2 of Appendix II to the Prospectus.
The unaudited pro forma financial information has been compiled by the Directors to illustrate
the impact of the proposed initial listing of shares of the Company (the ‘‘Global Offering ’’)o nt h e
Group ’s financial position as at June 30, 2024 as if the Global Offering had taken place at June 30,
2024. As part of this process, information about the Group ’s financial position has been extracted
by the Directors from the Group’ s historical financial informati on for each of the three years ended
December 31, 2023 and the six months ended June 30, 2024, on which an accountants ’ report set
out in Appendix I to the Prospectus has been published.
Directors ’Responsibilities for the Unaudite d Pro Forma Financial Information
The Directors are responsible for compiling the unaudited pro forma financial information in
accordance with paragraph 4.29 of the Rules Go verning 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 Informat ion for Inclusion in Investment Circulars ’’(‘‘AG
7’’) issued by the Hong Kong Institute of Certified Public Accountants (the ‘‘HKICPA’’).
APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION
– II-3 –


--- page 682 ---
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, professi onal competence and due care, confidentiality and
professional behavior.
Our firm applies Hong Kong Standard on Quality Management (HKSQM) 1 ‘‘Quality
Management for Firms that Perform Audits or Reviews of Financial Statements, or Other Assurance
or Related Services Engagements ’’issued by the HKICPA, which requires the firm to design,
implement and operate a system of quality manageme nt including policies and 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 unaudited pro forma financial information and to report our opinion to you. We do
not accept any responsibility for any reports prev iously given by us on any financial information
used in the compilation of the unaudited pro forma financial information beyond that owed to those
to whom those reports were addressed by us at the dates of their issue.
We conducted our engagement in accordance with Hong Kong Standard on Assurance
Engagements 3420 ‘‘Assurance Engagements to Report on the Compilation of Pro Forma Financial
Information Included in a Prospectus ’’issued by the HKICPA. This standard requires that the
reporting accountants plan and perform procedur es to obtain reasonable assurance about whether
the Directors have compiled the unaudited pro forma financial information in accordance with
paragraph 4.29 of the Listing Rules and w ith reference to AG 7 issued by the HKICPA.
For purposes of this engagement, we are not respon sible for updating or reissuing any reports
or opinions on any historical financial information used in compiling the unaudited pro forma
financial information, nor have we, in the course of this engagement, performed an audit or review
of the financial information used in compiling the unaudited pro forma financial information.
The purpose of unaudited pro forma financial information included in 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 the event or transact ion at June 30, 2024 would have been as presented.
APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION
– II-4 –


--- page 683 ---
A reasonable assurance engagement to report o n whether the unaudited pro forma financial
information has been properly compiled on the basis of the applicable criteria involves performing
procedures to assess whether the applicable criteria used by the Directors in the compilation of the
unaudited pro forma financial information provide a reasonable basis for presenting the significant
effects directly attributable to the event or transaction, and to obtain sufficient appropriate evidence
about whether:
. the related pro forma adjustments give appropriate effect to those criteria; and
. the unaudited pro forma financial information reflects the proper application of those
adjustments to the unadjusted financial information.
The procedures selected depend on the reporting accountants ’ judgment, having regard to the
reporting accountants ’ understanding of the nature of the Group, the event or transaction in respect
of which the unaudited pro forma financial information has been compiled, and other relevant
engagement circumstances.
The engagement also involves evaluating the overall presentation of the unaudited pro forma
financial information.
We believe that the evidence we have obtained is sufficient and appropriate to provide a basis
for our opinion.
Opinion
In our opinion:
(a) the unaudited pro forma financial information has been properly compiled on the basis
stated;
(b) such basis is consistent with the accounting policies of the Group; and
(c) the adjustments are appropriate for the purposes of the unaudited pro forma financial
information as disclosed pursuant to paragraph 4.29(1) of the Listing Rules.
Deloitte Touche Tohmatsu
Certified Public Accountants
Hong Kong
November 21, 2024
APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION
– II-5 –


--- page 684 ---
The following is the text of a letter, summary of valuations and valuation report prepared for
the purpose of incorporation in this prospectus received from Cushman & Wakefield Limited, an
independent property valuer, in connection with its opinion of values of the property interests held
by the Group in the PRC as at 31 August 2024.
27/F
One Island East
Taikoo Place
18 Westlands Road
Quarry Bay
Hong Kong
21 November 2024
The Directors
Mokingran Jewellery Group Co., Ltd
No. 15 Ziyuan Road,
Huayuan Industrial Park,
Binhai High-tech Zone,
Tianjin,
The PRC
Dear Sir,
Instructions,
Purpose &
Valuation Date
We refer to the instruction of Mokingran Jewellery Group Co., Ltd (the
‘‘Company ’’) for Cushman & Wakefield Limited (‘‘ C&W’’) to prepare
market valuations of the properties in which the Company and/or its
subsidiaries (together referred to as the ‘‘Group ’’) have interests in the
People’s Republic of China (the ‘‘PRC’’). We confirm that we have carried
out inspections, made relevant enquiries and obtained such further
information as we consider necessary for the purpose of providing the
Company with our opinion of the values of the properties as at 31 August
2024 (the ‘‘valuation date ’’).
Valuation Basis Our valuation of each of the properties represents its market value which in
accordance with The HKIS Valuation Standards 2020 issued by The Hong
Kong Institute of Surveyors is defined as ‘‘the estimated amount for which
an asset or liability should exchange on the valuation date between a
willing buyer and a willing seller in an arm ’s length transaction, after
proper marketing and where the parties had each acted knowledgeably,
prudently and without compulsion ’’.
We confirm that the valuations are undertaken in accordance with The
HKIS Valuation Standards 2020 issued by The Hong Kong Institute of
Surveyors.
In valuing the properties, we have complied with the requirements set out in
Chapter 5 and Practice Note 12 of the Rules governing the Listing of
Securities published by the Stock Exchange of the Hong Kong Limited.
Our valuation of each of the properties is on an entirety interest basis.
APPENDIX III PROPERTY VALUATION REPORT
– III-1 –


--- page 685 ---
Valuation
Assumptions
Our valuations of the properties exclude an estimated price inflated or
deflated by special terms or circumstances such as atypical financing, sale
and leaseback arrangement, special considerations or concessions granted by
anyone associated with the sale, or any element of value available only to a
specific owner or purchaser.
In the course of our valuation of the properties, we have relied on the
information and advice given by the Company ’s legal adviser, Jia Yuan Law
Offices, regarding the titles to the properties and the interests of the
Company in the properties in the PRC. Unless otherwise stated in the
respective legal opinion, in valuing the properties, we have assumed that the
Group has an enforceable title to the properties and has free and
uninterrupted rights to use, occupy or assign the properties for the whole of
the respective unexpired land use term as granted and that any premium
payable has already been fully paid.
In respect of the properties situated in the PRC, the status of titles and grant
of major certificates, approvals an d licences, in accordance with the
information provided by the Company are set out in the notes of the
respective valuation report. We have assumed that all consents, approvals
and licences from relevant government authorities for the developments
have been obtained without onerous conditions or delays. We have also
assumed that the design and construction of the properties are in compliance
with the local planning regulations and have been approved by the relevant
authorities.
No allowances have been made in our valuations for any charges,
mortgages or amounts owing on the properties nor any expenses or taxation
which may be incurred in effecting a sale. Unless otherwise stated, it is
assumed that the properties are free from encumbrances, restrictions and
outgoings of any onerous nature which could affect their values.
Method of
Valuation
In valuing the undeveloped land portion of property no. 1, we have adopted
Market Comparison by making reference to comparable sales evidence as
available in the relevant market.
APPENDIX III PROPERTY VALUATION REPORT
– III-2 –


--- page 686 ---
In valuing the developed portion of property no. 1, and property nos. 2 and
3, we have used Investment Method by capitalising the rental income
derived from the existing tenancies, if any, with due provision for the
reversionary potential of each consti tuent portion of the property at an
appropriate capitalisation rate. We have also cross-checked by Market
Comparison Method by making refere nce to comparable sales evidence as
available in the relevant market. Transactions involving large scale
properties of the same nature and tenancy structure in the same districts are
not frequent. On the other hand, as the investment property portions
generate rental income from letti ng arrangements and such rental
comparables are more readily available, we consider Investment Method,
which is also commonly used in valuing properties for investment purpose,
to be the best method to value these property portions.
Source of
Information
In the course of our valuation, we have relied to a very considerable extent
on the information given to us by the Group and its legal adviser, Jia Yuan
Law Offices regarding the title to the properties and the interests of the
Group in the properties. We have accepted advice given by the Group on
such matters as planning approvals or statutory notices, easements, tenure,
identification of land and buildings, particulars of occupancy, tenancy
details, site and floor areas, site and floor plans, completion date of
buildings, interest attributable to the Group and all other relevant matters.
Dimensions, measurements and areas are based on the copies of documents
or other information provided to us by the Company and are therefore only
approximations. No on-site measurement has been carried out. We have had
no reason to doubt the truth and accuracy of the information provided by
the Company which is material to the valuations. We were also advised that
no material facts have been omitted from the information provided to us.
Title Investigation We have been provided with copies of the title documents relating to the
properties but have not carried out any land title searches. Moreover, we
have not inspected the original documents to verify ownership or to
ascertain any amendments which may not appear on the copies handed to
us. We are also unable to ascertain the title of the properties in the PRC and
we have therefore relied on the advice given by the Company regarding its
interests in the properties.
APPENDIX III PROPERTY VALUATION REPORT
– III-3 –


--- page 687 ---
Site Inspection Ms. Ada Wang (Assistant Manager, MCIREA) of our Tianjin Office and
Mr. Eric Liu (Director, MCIREA) of our Beijing Office, inspected the
exterior and, where possible, the interior of the properties in between June
and September 2024. However, we have not carried out investigation on site
to determine the suitability of the soil conditions and the services etc. of the
properties for any development. Our valuations are prepared on the
assumption that these aspects are satisfactory and that no unexpected
extraordinary expenses or delays will be incurred during the construction
period. No structural survey has been made, but in the course of our
inspection, we did not note any serious defects. We are, however, not able
to report that the properties are free of r ot, infestation or other structural
defects. No test was carried out on any of the services. Our valuations are
prepared on the assumption that these aspects are satisfactory.
Unless otherwise stated, we have not carried out detailed on-site
measurements to verify the site and floor areas of the properties and we
have assumed that the areas shown on the documents handed to us are
correct.
Confirmation of
Independence
We hereby confirm that C&W and the undersigned have no pecuniary or
other interests that could conflict with the proper valuation of the properties
or could reasonably be regarded as being capable of affecting our ability to
give an unbiased opinion.
We also confirm that we are an independent qualified valuer, as referred to
Rule 5.08 of the Rules Governing the Listing of Securities on the Stock
Exchange of Hong Kong Limited.
Intended Use and
User of Report
This valuation report is issued only for the use of the Company for
incorporation into its listing document.
Currency Unless otherwise stated, all monetary amounts stated in our valuation report
are in Renminbi (‘‘ RMB’’), the official currency of the PRC.
We enclose herewith a summary of valuations and our valuation report for your attention.
Yours faithfully,
For and on behalf of
Cushman & Wakefield Limited
Grace S. M. Lam
MRICS, MHKIS, R.P.S.(GP)
Senior Director
Valuation & Advisory Services, Greater China
Note: Grace S.M Lam is a member of the Royal Institution of Chartered Surveyors, a Member of the Hong Kong Institute
of Surveyor and a Registered Professional Surveyor (General Practice). Ms. Lam has over 30 years of experience in
the professional property valuation and advisory serv ices in the Greater China region and various overseas
countries. Ms. Lam has sufficient current national knowledge of the market, and the skills and understanding to
undertake the valuations competently.
APPENDIX III PROPERTY VALUATION REPORT
– III-4 –


--- page 688 ---
SUMMARY OF VALUATIONS
Property
Market value in
existing state as at
31 August 2024
(RMB)
Properties held by the Group for investment in the PRC
1. A development, No. 12 Rongyuan Road,
Huayuan Industrial Park, Binhai High-tech Zone,
Tianjin,
the PRC
55,000,000
2. Levels 5 to 9 of south building,
Levels 3 to 9 of north building and
podium level 3 of a development,
No. 15 Ziyuan Road,
Huayuan Industrial Park,
Binhai High-tech Zone,
Tianjin,
the PRC
53,000,000
3 Units 6001-6002,
No. 59 Xinjiekou North Street,
Xicheng District,
Beijing,
the PRC
11,000,000
Total: 119,000,000
APPENDIX III PROPERTY VALUATION REPORT
– III-5 –


--- page 689 ---
VALUATION REPORT
Properties held by the Group for investment in the PRC
Property Description and tenure
Particulars of
occupancy
Market value in
existing state as at
31 August 2024
1. A development,
No. 12 Rongyuan
Road, Huayuan
Industrial Park,
Binhai High-tech
Zone, Tianjin,
the PRC
The property comprises
a 2-storey warehouse
building erected on a
parcel of land of
20,652.8 sq m.
The existing warehouse
building has a total gross
floor area of 7,555.42 sq
m.
The land use rights of
the property have been
granted for a term of 50
years from 27 May 2017
to 26 May 2067 for
industrial/non-residential
use.
As at the valuation
date, the property was
vacant.
RMB55,000,000
(RENMINBI
FIFTY FIVE
MILLION)
Notes:
(1) According to Certificate of Real Estate Ownership No. 1000037, the real estate ownership of the property with a
total gross floor area of 7,555.42 sq m has been vested in Mokingran Jewellery Group Co., Ltd for a term of 50
years from 27 May 2017 to 26 May 2067 for industrial/non-residential use.
(2) According to Grant Contract of Land Use Rights No. TJ10252016005, the land use rights of the property have been
contracted to be granted to 夢金園黃金珠寶集團有限公司. The details are summarized as follows:
(a) Site area : 20,652.7 sq m
(b) Use : Industrial
(c) Land use term : 50 years for industrial use
(d) Plot ratio : ≥0.6 and ≤1.5 (exclusive of the warehouse building of gross floor area of 7,555.42 sq m)
(3) In valuing the undeveloped land portion of the property, we have used market comparison method with the key input
being an accommodation value of RMB1,070/ sq m. In valuing the existing warehouse building of the property, we
have used investment method with the key input being a capitalization rate of 7%.
(4) We have been provided with a legal opinion on the title to the property issued by the Group ’s PRC legal adviser
which contains, inter-alia, the following information:
(a) Mokingran Jewellery Group Co., Ltd is the legal owner of the property;
(b) The property is subject to a mortgage;
(c) Mokingran Jewellery Group Co., Ltd has the right to o ccupy and use the property and transfer the property
with approval from the mortgagee; and
(d) Mokingran Jewellery Group Co., Ltd has complied with the requirements outlined in the building covenants
of the Grant Contract of Land Use Rights.
APPENDIX III PROPERTY VALUATION REPORT
– III-6 –


--- page 690 ---
VALUATION REPORT
Properties held by the Group for investment in the PRC
Property Description and tenure
Particulars of
occupancy
Market value in
existing state as at
31 August 2024
2 Levels 5 to 9 of
south building,
Levels 3 to 9 of
north building and
podium level 3 of
a development,
No. 15 Ziyuan
Road, Huayuan
Industrial Park,
Binhai High-tech
Zone, Tianjin,
the PRC
The property comprises
various research office
floors of a 10-storey
development completed
in 2015.
The property has a total
gross floor area of 8,236
sq m.
The land use rights of
the property have been
granted for a term of 50
years due to expire on 9
March 2050 for
industrial/non-residential
use.
As at the valuation
date, portions of the
property with a total
gross floor area of
3 , 5 0 0s qmw e r e
subject to various
tenancies with the
latest one due to expire
on 31 August 2026 at a
total monthly rent of
approximately
RMB197,000 exclusive
of value-added tax and
building management
fees.
The remaining portions
of the property were
vacant.
RMB53,000,000
(RENMINBI
FIFTY THREE
MILLION)
Notes:
(1) According to Certificate of Real Estate Ownership No. 1001534, the real estate ownership of the property with a
total gross floor area of 8,236 sq m has been vested in Mokingran Jewellery Group Co., Ltd for a term of 50 years
due to expire on 9 March 2050 for industrial/non-residential use.
(2) In valuing the property, we have used investment method with the key input being a capitalization rate of 6.25%.
(3) We have been provided with a legal opinion on the title to the property issued by the Group ’s PRC legal adviser
which contains, inter-alia, the following information:
(a) Mokingran Jewellery Group Co., Ltd is the legal owner of the property;
(b) The property is subject to a mortgage; and
(c) Mokingran Jewellery Group Co., Ltd has the right to o ccupy and use the property and transfer the property
with approval from the mortgagee.
APPENDIX III PROPERTY VALUATION REPORT
– III-7 –


--- page 691 ---
VALUATION REPORT
Properties held by the Group for investment in the PRC
Property Description and tenure
Particulars of
occupancy
Market value in
existing state as at
31 August 2024
3 Units 6001 –6002,
No. 59 Xinjiekou
North Street,
Xicheng District,
Beijing,
the PRC
The property comprises
two office units of a
6-storey building
completed in 2011.
The property has a total
gross floor area of
507.19 sq m.
The land use rights of
the property have been
granted for a term of 50
years from 27 August
2004 to 26 August 2054
for office use.
As at the valuation
date, the property was
subject to a tenancy for
a term due to expire on
31 August 2025 at a
total monthly rent of
RMB70,000 exclusive
of value-added tax and
building management
fees.
RMB11,000,000
(RENMINBI
ELEVEN
MILLION)
Notes:
(1) According to Certificate of Real Estate Ownership Nos. 057101 and 057103, the real estate ownership of the
property with a total gross floor area of 507.19 sq m h as been vested in Beijing Chengxin Mokingran Jewellery
Limited for a term of 50 years from 27 August 2004 to 26 August 2054 for office use.
(2) In valuing the property, we have used investment method with the key input being a capitalization rate of 6%.
(3) We have been provided with a legal opinion on the title to the property issued by the Group ’s PRC legal adviser
which contains, inter-alia, the following information:
(a) Beijing Chengxin Mokingran Jewellery Limited is the legal owner of the property; and
(b) Beijing Chengxin Mokingran Jewellery Limited has the right to occupy, use and dispose of the property.
APPENDIX III PROPERTY VALUATION REPORT
– III-8 –


--- page 692 ---
1. TAXATION OF SECURITY HOLDERS
The taxation of income and capital gains of holders of H Shares is subject to the laws and
practices of the PRC and of jurisdictions in which holders of H Shares are resident or otherwise
subject to tax. The following summary of certain r elevant taxation provisions is based on current
law and practice, is subject to change and does not constitute legal or tax advice. The discussion
has no intention to cover all possible tax conseque nces resulting from the investment in H Shares,
nor does it take the specific circumstances of any particular investor into account, some of which
may be subject to special regulations. Accordingly, you should consult your own tax adviser
regarding the tax consequences of an investment in H Shares. The discussion is based upon laws
and relevant interpretations in effect as of the date of the Latest Practicable Date, which is subject
to change and may have retrospective effect.
No issues of PRC or Hong Kong taxation other than income tax, capital tax, stamp duty and
estate duty are addressed in this discussion. Prospective investors are urged to consult their
financial advisors regarding the PRC, Hong Kong and other tax consequences of owning and
disposing of H Shares.
(1) The PRC Taxation
A. Taxation on Dividends
Individual Investor
Pursuant to the Individual Income Tax Law of the PRC ( 《中華人民共和國個
人所得稅法》) (the ‘‘IIT Law ’’), which was latest amended on August 31, 2018 and
the Implementation Provisions of the Individual Income Tax Law of the PRC ( 《中
華人民共和國個人所得稅法實施條例》), which was latest amended on December
18, 2018, dividends distributed by PRC enterprises are subject to PRC withholding
tax levied at a flat rate of 20%. For a foreign individual who is not a resident of the
PRC, the receipt of dividends from an enterprise in the PRC is normally subject to
withholding tax of 20% unless specifical ly exempted by the tax authority of the
State Council or reduced by applicable tax treaty.
Meanwhile, according to the Notice on Issues Concerning Differentiated
Individual Income Tax Policies on Dividends and Bonus of Listed Companies ( 《關
於上市公司股息紅利差別化個人所得稅政策有關問題的通知》)i s s u e db yt h e
Ministry of Finance, the State Admini stration of Taxation and the CSRC on
September 7, 2015 and came into effect on September 8, 2015, where an individual
holds more than one year of the shares of a listed company obtained from the
public offering and transfer of the stock market of the listed company, the dividend
and bonus income shall be temporarily exempted from individual income tax.
Where an individual acquires shares of a listed company fro m the public offering
and transfer of the stock market by the listed company, if the holding period is
within one month (inclusive), the dividend income shall be included in the taxable
APPENDIX IV TAXATION AND FOREIGN EXCHANGE
– IV-1 –


--- page 693 ---
income in full; if the holding period is more than one month but less than one year
(inclusive), the dividend income shall be included in the taxable income at the rate
of 50%; the aforesaid income shall be subject to individual income tax at a uniform
rate of 20%.
Pursuant to the Arrangement between the Mainland and the Hong Kong
Special Administrative Region on the Avoidance of Double Taxation and the
Prevention of Fiscal Evasion ( 《內地和香港特別行政區關於對所得避免雙重徵稅和
防止偷漏稅的安排》), which was issued on August 21, 2006, the Chinese
Government may levy taxes on the dividends paid by a Chinese company to Hong
Kong residents in an amount not exceeding 10% of the total dividends payable by
the Chinese company. If a Hong Kong resident directly holds 25% or more of the
equity interest in a Chinese company, then such tax shall not exceed 5% of the total
dividends payable by the Chinese company.
Enterprise Investors
Pursuant to the Enterprise Income Tax Law of the People ’s Republic of China
(《中華人民共和國企業所得稅法》) (the ‘‘EIT Law ( 《企業所得稅法》)’’) amended
by the NPC and became effective on December 29, 2018, and the Implementation
Rules of the Enterprise Income Tax Law of the People ’s Republic of China ( 《中華
人民共和國企業所得稅法實施條例》) amended by the State Council and became
effective on April 23, 2019, a non-resident enterprise is subject to a 10% enterprise
income tax on PRC-sourced income, including dividends paid by a PRC resident
enterprise that issues and lists shares in Hong Kong, if such non-resident enterprise
does not have an establishment or place of business in the PRC or has an
establishment or place of business in the PRC but the PRC-sourced income is not
actually connected with such establishment or place of business in the PRC. Such
withholding tax may be reduced or exempted pursuant to an applicable treaty for
the avoidance of double taxation. Such withholding tax payable by non-resident
enterprises is deducted at source, where the payer, as the obligor for the
withholding tax, is required to withhold the income tax from the amount to be paid
to the non-resident enterprise when such payment is made or due.
The Circular on Issues Relating to the Withholding and Remitting of
Corporate Income Tax by PRC Resident Enterprises on Dividends Distributed to
Overseas Non-Resident Enterp rise Shareholders of H Shares ( 《關於中國居民企業向
境外H股非居民企業股東派發股息代扣代繳企業所得稅有關問題的通知》) (Guo Shui
Han [2008] No. 897), which was issued by the SAT on November 6, 2008, further
clarified that a PRC-resident enterprise must withhold corporate income tax at a rate
of 10% on the dividends of 2008 and onwards that it distributes to overseas
nonresident enterprise shareholders of H Shares. In addition, the Response to
Questions on Levying Corporate Income Tax on Dividends Derived by Nonresident
Enterprise from Holding Stock such as B Shares ( 《關於非居民企業取得B股等股票
APPENDIX IV TAXATION AND FOREIGN EXCHANGE
– IV-2 –


--- page 694 ---
股息徵收企業所得稅問題的批覆》) (Guo Shui Han [2009] No. 394), which was
issued by the SAT and implemented on July 24, 2009, further provides that any
PRC-resident enterprise listed on overseas stock exchanges must withhold and remit
corporate income tax at a rate of 10% on dividends of 2008 and onwards that it
distributes to nonresident enterprises. Such tax rates may be further modified
pursuant to the tax treaty or agreement that China has entered into with the relevant
jurisdictions, where applicable.
Pursuant to the Arrangement between the Mainland and the Hong Kong
Special Administrative Region on the Avoidance of Double Taxation and the
Prevention of Fiscal Evasion ( 《內地和香港特別行政區關於對所得避免雙重徵稅和
防止偷漏稅的安排》), which was issued on August 21, 2006, the Chinese
Government may levy taxes on the dividends paid by a Chinese company to Hong
Kong residents (including natural persons and legal entities) in an amount not
exceeding 10% of the total dividends payable by the Chinese company. If a Hong
Kong resident directly holds 25% or more of the equity interest in a Chinese
company, then such tax shall not exceed 5% of the total dividends payable by the
Chinese company.
Tax agreements
Non-PRC resident investors residing in countries which have entered into
agreements for the avoidance of double taxation with the PRC are entitled to a
reduction of the withholding taxes imp osed on the dividends received from PRC
companies. The PRC has entered into Avoidance of Double Taxation Arrangements
with a number of countries and regions including but not limited to Hong Kong,
Macau, Australia, Canada, France, Germany, Japan, Malaysia, the Netherlands,
Singapore, the United Kingdom and t he United States. Non-PRC resident
enterprises entitled to preferential tax r ates in accordance with the relevant income
tax treaties or arrangements are required to apply to the Chinese tax authorities for
a refund of the withholding tax in excess of the agreed tax rate, and the refund
payment is subject to approval by the Chinese tax authorities.
B. Taxation on Share Transfer
Individual Investor
According to the IIT Law and its implementation provisions, gains realized on
the sale of equity interests in the PRC resident enterprises are subject to income tax
at a rate of 20%.
Pursuant to the Circular of the MOF and SAT on continuing to exempt
Individual Income Tax over Individual Income from Transfer of Shares ( 《財政部、
國家稅務總局關於個人轉讓股票所得繼續暫免徵收個人所得稅的通知》) (Cai Shui
Zi [1998] No. 61) issued by the MOF and the State Administration of Taxation,
APPENDIX IV TAXATION AND FOREIGN EXCHANGE
– IV-3 –


--- page 695 ---
from January 1, 1997, income of individuals from transfer of the shares of listed
enterprises continues to be exempted from individual income tax. Under the latest
Individual Income Tax Law amended on August 31, 2018 and its latest
implementation regulations amended on December 18, 2018, the State
Administration of Taxation has not explic itly stated whether it will continue to
exempt from income tax for the income derived from the transfer of listed shares by
individuals. However, on December 31, 200 9, the MOF, the State Administration of
Taxation and CSRC jointly issued the C ircular on Related Issues on Levying
Individual Income Tax over the Income R eceived by Individuals from the Transfer
of Listed Shares Subject to Sales Limitation ( 《關於個人轉讓上市公司限售股所得
徵收個人所得稅有關問題的通知》) (Cai Shui [2009] No. 167), states that
individuals ’ income from the transfer of listed shares on certain domestic stock
exchanges shall continue to be exempted from individual income tax, except for the
specific restricted shares (as defined in the Supplementary Notice on Issues
Concerning the Levy of Individual Income Tax on Individuals ’ Income from the
Transfer of Restricted Stocks of Listed Companies ( 《關於個人轉讓上市公司限售股
所得徵收個人所得稅有關問題的補充通知》) (Cai Shui [2010] No. 70)). As of the
Latest Practicable Date, no aforesaid provisions had expressly provided that
individual income tax shall be levied from non-Chinese resident individuals on the
transfer of shares in PRC resident enterprises listed on overseas stock exchanges.
To the knowledge of the Company, in practice, the PRC tax authorities have not
levied income tax from non-PRC resident individuals on gains from the transfer of
PRC resident enterprises listed on overseas stock exchange.
Enterprise Investors
Pursuant to the Enterprise Income Tax Law and its implementation rules, if a
non-resident enterprise has not set up an organization or establishment in the PRC,
or has set up an organization or establishment but the income derived has no actual
connection with such organization or est ablishment, it will be subject to a EIT on
its PRC-sourced income at a rate of 10% (including proceeds derived from the sale
of equity securities of PRC resident enterprises). Such income tax for non-resident
enterprises are deducted at source, where the payer of the income are required to
withhold the enterprise income tax from the amount to be paid to the non-resident
enterprise when such payment is made or due. Such withholding tax may be
reduced or exempted to avoid double taxation in accordance with applicable
agreements or protocols.
APPENDIX IV TAXATION AND FOREIGN EXCHANGE
– IV-4 –


--- page 696 ---
C. Stamp Duty
Pursuant to the Stamp Duty Law of the People ’s Republic of China, which was
amended on June 10, 2021 and came into effect on July 1, 2022, the PRC stamp duty is
applicable to all kinds of documents which are legally binding in the PRC and protected
by the PRC laws. Therefore, the PRC stamp duty does not apply to the acquisition or
disposal of H Shares outside the PRC.
D. Estate Duty
As at the Latest Practicable Date, no estate duty has been levied in the PRC under
the PRC laws.
(2) Hong Kong Taxation
A. Taxation on Dividends
No tax is payable in Hong Kong in respect of dividends paid by our Company.
B. Profits Tax
Hong Kong profits tax will not be payable by any Shareholders (other than
Shareholders carrying on a trade, profession or business in Hong Kong and holding the
Shares for trading purposes) on any capital gains made on the sale or other disposal of
the Shares. Shareholders should take advice from their own professional advisers as to
their particular tax position.
C. Stamp Duty
Hong Kong stamp duty will be charged on the sale and purchase of Shares at the
current rate of 0.20% of the consideration for, or (if greater) the value of, the Shares
being sold or purchased, whether or not the sale or purchase is on or off the Stock
Exchange. The Shareholder selling the Shares and the purchaser will each be liable for
one-half of the amount of Hong Kong stamp duty payable upon such transfer. In
addition, a fixed duty of HK$5 is currently payable on any instrument of transfer of
Shares.
D. AFRC Transaction Levy
Starting from January 1, 2022, the AFRC transaction levy will apply to all
securities purchases and sales, which will be calculated based on the interest rate of both
parties at 0.00015%, and be regarded as a transaction cost.
APPENDIX IV TAXATION AND FOREIGN EXCHANGE
– IV-5 –


--- page 697 ---
E. Estate Duty
Hong Kong estate duty was abolished effective from February 11, 2006. No Hong
Kong estate duty is payable by Shareholders in relation to the Shares owned by them
upon death.
2. FOREIGN EXCHANGE
The lawful currency of the PRC is Renminbi, which is currently subject to foreign exchange
control and cannot be freely convertible into foreign exchange. The SAFE, under the authorization
of the PBOC, is empowered with the functions of administering all matters relating to foreign
exchange, including the enforcement of foreign exchange control regulations.
On January 29, 1996, the State Council promulgated the Regulations on Foreign Exchange
Administration of the PRC ( 《中華人民共和國外匯管理條例》) (the ‘‘Regulations on Foreign
Exchange Administration ’’) which became effective on April 1, 1996. The Regulations on Foreign
Exchange Administration classifies all international payments and transfers into current account
items and capital account items. Most of the cu rrent account items are no longer subject to the
SAFE ’s approval, while capital account items are still subject to such approval. The Regulations on
Foreign Exchange Administration were subsequently amended on January 14, 1997 and August 5,
2008. The latest amendment to the Regulations on Fo reign Exchange Administration clearly states
that PRC will not impose any restriction on intern ational payments and transfers under the current
account items.
On June 20, 1996, PBOC promulgated the Provisional Regulations for the Administration of
Settlement, Sale and Payment of Foreign Exchange ( 《結匯、售匯及付匯管理規定》) (the
‘‘Settlement Regulations ’’), which became effective on July 1, 1996. The Settlement Regulations
abolished all other restrictions on convertibility of foreign exchange under current account items,
while retaining the existing restrictions on forei gn exchange transactions under capital account
items.
According to the Announcement on Reforming the RMB Exchange Rate Regime issued by the
People ’s Bank of China (PBOC Announcement [2005] No. 16) on July 21, 2005, starting from July
21, 2005, the PRC will reform the exchange rate regime by moving into a managed floating
exchange rate regime based on market supply and demand with reference to a basket of currencies.
Renminbi is no longer pegged to US dollar. The People’ s Bank of China will announce the closing
price of a foreign currency such as the US dollar traded against the RMB in the interbank foreign
exchange market after the closing of the market on each working day, and will make it the central
parity for the trading against the RMB on the following working day.
Starting from January 4, 2006, the PBOC introduced over-the-counter transactions into the
interbank spot foreign exchange market for the purpose of improving the formation mechanism of
the central parity of Renminbi exchange rates, and the practice of matching was kept at the same
time. In addition to the above, the PBOC introduced the market-maker rule to provide liquidity to
the foreign exchange market. On July 1, 2014, the PBOC further improved the formation
mechanism of the RMB exchange rate by authorizing the China Foreign Exchange Trading Center
APPENDIX IV TAXATION AND FOREIGN EXCHANGE
– IV-6 –


--- page 698 ---
to make inquiries with all the market-makers before the interbank foreign exchange market opens
every day for their offered quotations which are used as samples to calculate the central parity of
the RMB against the USD of the current day, which shall be finally decided on the weighted
average of the prices of all market makers after ex cluding the highest and lowest quotations, and
announce it at 9:15 a.m. on each working day.
On 5 August 2008, the State Council promulgated the amended Regulations on Foreign
Exchange Administration ( 外匯管理條例) (the ‘‘Amended Regulations on Foreign Exchange ’’)
which made significant changes on the supervisory system for foreign exchange in the PRC. Firstly,
the Amended Regulations on Foreign Exchange adopted balanced treatment on the inflow and
outflow of foreign capital. Incomes in foreign currencies overseas can be remitted to the PRC or
remained overseas, and foreign currencies of capital account items and funds for settlement in
foreign currencies can only be used according to the purposes approved by relevant competent
authorities and foreign exchange administrati on. Secondly, the Amended Regulations on Foreign
Exchange improved the RMB exchange mechanism based on market supply and demand. Thirdly,
the Amended Regulations on Foreign Exchange enhanced the monitoring of cross-border capital
flow in foreign currencies, whereby the state could implement necessary protection or controlling
measures on international balance of payments when material imbalance of income and expenses
related to cross-border trading arise or might arise, or serious crises in the domestic economy occur
or might occur. Fourthly, the Amended Regulatio ns on Foreign Exchange enhanced the regulation
and administration on foreign currency trading, and granted extensive authorisation to the SAFE to
enhance its supervisory and administrative capacity.
On August 11, 2015, the PBOC announced to improve the central parity of RMB against U.S.
dollar by authorizing market-makers to provide parity to the China Foreign Exchange Trading
Center with reference to the interbank foreign exchange market closing rate of the previous day, the
supply and demand for foreign currencies as well as changes in exchange rates of major
international currencies.
All foreign exchange income generated from current account transactions of PRC enterprises
may be either retained or sold to financial institut ions engaging in the settlement or sale of foreign
exchange pursuant to relevant rules and regulations of the State. Foreign exchange income from
loans issued by organisations outside the terri tory or from the issuance of bonds and shares (for
example foreign exchange income received by us from the sale of shares overseas) is not required
to be sold to designated foreign exchange banks, but may be deposited into foreign exchange
accounts at the designated foreign exchange banks. P RC enterprises (including foreign investment
enterprises) which need foreign exchange for curre nt item transactions may, without the approval of
the State Administrative of Foreign Exchange, effect exchange and payment through foreign
exchange accounts opened at the designated foreign exchange bank, on the strength of valid
transaction receipts and proof. Foreign investment enterprises which need fo reign exchange for the
distribution of profits to their shareholders and PRC enterprises which, in accordance with the
relevant regulations, are required to pay dividends to their shareholders in foreign exchange (such
as our Company) may, on the strength of resolutions of the board of directors or the shareholders ’
APPENDIX IV TAXATION AND FOREIGN EXCHANGE
– IV-7 –


--- page 699 ---
meeting on the distribution of profits, effect exchange and payment from foreign exchange accounts
at the designated foreign exchange bank, or effect exchange and payment of dividends at the
designated foreign exchange bank.
On October 23, 2014, the State Council promulgated the Decision on Canceling and Adjusting
a Group of Administrative Approval Items and Other Matters (Guo Fa [2014] No. 50) ( 關於取消和
調整一批行政審批項目等事項的決定), which canceled the administrative approval by the SAFE
and its branches over matters concerning the repat riation and settlement of foreign exchange of
overseas-raised funds through overseas listing.
On December 26, 2014, the SAFE issued the No tice on Relevant Issues Concerning the
Foreign Exchange Administration of Overseas Listing ( 關於境外上市外滙管理有關問題的通知),
pursuant to which a domestic issuer shall, within 15 working days after the completion of the initial
offering of shares for its overseas listing, regi ster overseas listing with the Foreign Exchange
Bureau at the place of its incorporation; the pro ceeds from an overseas listing may be remitted to
the corresponding domestic account or deposited in an overseas account, but the use of the
proceeds shall be consistent with the content of the prospectus and other disclosure documents.
Approval by the SAFE is needed to convert the proceeds deposited in the domestic account to
Renminbi. According to the Notice of the State Administration of Foreign Exchange of the PRC on
Revolutionizing and Regulating Capital Account Settlement Management Policies ( 國家外匯管理局
關於改革和規範資本項目結匯管理政策的通知) which was promulgated by the SAFE on June 9,
2016, foreign currency earnings in capital account (including the recalling of raised capital by
overseas listing) may undertake foreign exchange settlement in the banks according to actual
business needs of the domestic institutions. The te ntative percentage of foreign exchange settlement
for foreign currency earnings in capital account of domestic institutions is 100%, subject to adjust
of the SAFE in due time in accordance with international revenue and expenditure situations.
APPENDIX IV TAXATION AND FOREIGN EXCHANGE
– IV-8 –


--- page 700 ---
PRC LAWS AND REGULATIONS
The PRC Legal System
The PRC legal system is based on the PRC Constitution (hereinafter referred to as the
‘‘Constitution ’’) and is made up of written laws, administrative regulations, local regulations,
autonomous regulations, separate regulations, rules and regulations of State Council departments,
rules and regulations of local governments, laws of special administrative regions and international
treaties of which the PRC government is the signatory and other regulatory documents. Court
judgments do not constitute legally binding precedents, although they are used for the purposes of
judicial reference and guidance. According to the Constitution and the Legislation Law of the PRC
(hereinafter referred to as the ‘‘Legislation Law ’’), the National People ’s Congress (hereinafter
referred to as the ‘‘NPC’’) and its Standing Committee are empowered to exercise the legislative
power of the State. The NPC has the power to for mulate and amend basic laws governing State
organs, civil, criminal and other matters. The Standing Committee of the NPC formulates and
amends the laws other than those required to be enacted by the NPC and to supplement and amend
parts of the laws enacted by the NPC during the adjournment of the NPC, provided that such
supplements and amendments are not in conflict with the basic principles of such laws. The State
Council is the highest organ of state administrati on and has the power to formulate administrative
regulations based on the Constitution and laws. The people ’s congresses of the provinces,
autonomous regions and municipalities and their standing committees may formulate local
regulations based on the specific circumstances and actual needs of their respective administrative
areas, provided that such regulations do not cont ravene any provision of the Constitution, laws or
administrative regulations. The people ’s congresses of cities divided into districts and their
respective standing committees may formulate local regulations on aspects such as urban and rural
construction and management, environmental protect ion and historical and cultural protection based
on the specific circumstances and actual needs of such cities, provided that such local regulations
do not contravene any provision of the Constituti on, laws, administrative regulations and local
regulations of their respective provinces or autonomous regions.
Otherwise, if the law provides on the formulation of local regulations by cities divided into
districts, those provisions shall prevail. Such local regulations will become enforceable after being
reported to and approved by the standing committees of the people ’s congresses of the relevant
provinces or autonomous regions. The standing committees of the people ’s congresses of the
provinces or autonomous regions shall examine th e legality of local regulations submitted for
approval, and such approval shall be granted within four months if they are not in conflict with the
Constitution, laws, administrative regulations and local regulations of the relevant provinces or
autonomous regions. Where, during the examination for approval of local regulations of cities
divided into districts by the standing committees of the people ’s congresses of the provinces or
autonomous regions, conflicts are identifie d with the rules and regulations of the people ’s
governments of the provinces or autonomous regions, a decision should be made to resolve the
issue. People ’s congresses of national autonomous areas have the power to enact autonomous
regulations and separate regulations in light of the political, economic and cultural characteristics of
the ethnic groups in the areas concerned.
APPENDIX V SUMMARY OF PRINCIPAL LAWS AND REGULATIONS
– V-1 –


--- page 701 ---
The ministries and commissions of the State Council, PBOC, NAO and the subordinate
institutions with administrative functions directly under the State Council may formulate
departmental rules and regulations within the permissions of their respective departments based on
the laws and administrative regulations, and the decisions and orders of the State Council.
Provisions of departmental rules should be the matters related to the enforcement of the laws and
administrative regulations, and the decisions and orders of the State Council. The people’ s
governments of the provinces, autonomous regions, municipalities and cities or autonomous
prefectures divided into districts may formu late rules and regulations based on the laws,
administrative regulations and local regulati ons of such provinces, autonomous regions and
municipalities.
Pursuant to the Resolution of the Standing Committee of the NPC P roviding an Improved
Interpretation of the Law ( 《全國人民代表大會常務委員會關於加強法律解釋工作的決議》) passed
on June 10, 1981, in cases where the scope of provisions of laws or decrees needs to be further
defined or additional stipulations need to be made, the Standing Committee of the NPC shall
provide interpretations or make stipulations by m eans of decrees. Issues related to the application of
laws in a court trial should be interpreted by the Supreme People ’s Court, issues related to the
application of laws in a prosecution process of the procuratorate should be interpreted by the
Supreme People’ s Procuratorate, and issues related to l aws other than the above-mentioned should
be interpreted by the State Council and the competent authorities. The State Council and its
ministries and commissions are also vested with the power to give interpretations of the
administrative regulations and departmental rules which they have promulgated. At the regional
level, the power to interpret regional regulations is vested in the regional legislative and
administrative authorities which promulgate such regulations.
The PRC Judicial System
Under the Constitution, the Law of Organization of the People ’s Court of the PRC (2018
Revision) ( 《中華人民共和國人民法院組織法(2018 修訂)》) and the Law of Organization of the
People ’s Procuratorate of the PRC (2018 Revision) ( 《中華人民共和國人民檢察院組織法(2018 修
訂)》), the People ’s Courts of the PRC are divided into the Supreme People ’s Court, the local
people ’s courts at all levels and special people ’s courts. The local people ’sc o u r t sa ta l ll e v e l sa r e
divided into three levels, namely the basic people ’s courts, the intermediate people ’s courts and the
higher people ’s courts. The basic people ’s courts may set up certain people ’s tribunals based on the
status of the region, population and cases. The Supreme People ’s Court shall be the highest judicial
organ of the state. The Supreme People ’s Court shall supervise the administration of justice by the
local people’ s courts at all levels and by the special people ’s courts. The people ’s courts at a higher
level shall supervise the judicial work of the people ’s courts at lower levels. The people’ s
procuratorates of the PRC are divided into the Supreme People ’s Procuratorate, the local people ’s
procuratorates at all levels, Military Procuratorates and other special people’ s procuratorates. The
Supreme People’ s Procuratorate shall be the highest procuratorial organ. The Supreme People ’s
Procuratorate shall direct the work of the local people ’s procuratorates at all levels and of the
special people’ s procuratorates; the people ’s procuratorates at higher levels shall direct the work of
those at lower levels.
APPENDIX V SUMMARY OF PRINCIPAL LAWS AND REGULATIONS
– V-2 –


--- page 702 ---
The people ’s courts employ a two-tier appellate system, i.e., judgments or rulings of the
second instance at the people ’s courts are final. A party may appeal against the judgment or ruling
of the first instance of a local people ’s courts. The people ’s procuratorate may present a protest to
the people’ s courts at the next higher level in accordan ce with the procedures stipulated by the
laws. In the absence of any appeal by the parties and any protest by the people ’s procuratorate
within the stipulated period, the judgments or rulings of the people ’s courts are final. Judgments or
rulings of the second instance of the intermediate people ’s courts, the higher people ’s courts and the
Supreme People’ s Court and those of the first instance of the Supreme People ’s Court are final.
However, if the Supreme People ’s Court or the people ’s courts at the next higher level finds any
definite errors in a legally effective final judgment or ruling of the people ’sc o u r ta tal o w e rl e v e l ,
or if the chief judge of a people ’s court at any level finds any definite errors in a legally effective
final judgment or ruling of such court, the case can be retried according to judicial supervision
procedures.
The Civil Procedure Law of the PRC ( 《中華人民共和國民事訴訟法》) (hereinafter referred to
as the ‘‘PRC Civil Procedure Law ’’) adopted on April 9, 1991 and amended five times on October
28, 2007, August 31, 2012, June 27, 2017, December 24, 2021 and September 1, 2023 respectively,
prescribes the conditions for instituting a civil action, the jurisdiction of the people ’s court, the
procedures for conducting a civil action, and the procedures for enforcement of a civil judgment or
ruling. All parties to a civil action conducted within the PRC must abide by the PRC Civil
Procedure Law. A civil case is generally heard by the court located in the defendant ’s place of
domicile. The court of jurisdiction in respect of a civil action may also be chosen by explicit
agreement among the parties to a contract, provided that the people ’s court having jurisdiction
should be located at places directly connecte d with the disputes, such as the plaintiff ’s or the
defendant ’s place of domicile, the place where the contract is executed or signed or the place where
the object of the action is located. Meanwhile, such choice shall not in any circumstances
contravene the regulations of differential j urisdiction and exclusive jurisdiction.
A foreign individual, a person without nati onality, a foreign enterprise or a foreign
organization is given the same litigation rights and obligations as a citizen, a legal person or other
organizations of the PRC when initiating actions or defending against litigations at a people ’s court.
Should a foreign court limit the litigation right s of PRC citizens or enterprises, the PRC court may
apply the same limitations to the citizens or enterprises of such foreign country. A foreign
individual, a person without nationality, a foreign enterprise or a foreign organization must engage
a PRC lawyer in case he or it needs to engage a lawyer for the purpose of initiating actions or
defending against litigations at a people ’s court. In accordance with the international treaties to
which the PRC is a signatory or participant or according to the principle of reciprocity, a people ’s
court and a foreign court may request each other to serve documents, conduct investigation and
collect evidence and conduct other actions on its behalf. A people ’s court shall not accommodate
any request made by a foreign court which will result in the violation of sovereignty, security or
public interests of the PRC.
All parties to a civil action shall perform the legally effective judgments and rulings. If any
party to a civil action refuses to abide by a judgment or ruling made by a people ’s court or an
award made by an arbitration tribunal in the P RC, the other party may apply to the people ’s court
APPENDIX V SUMMARY OF PRINCIPAL LAWS AND REGULATIONS
– V-3 –


--- page 703 ---
for the enforcement of the same within two years s ubject to application for postponed enforcement
or revocation. If a party fails to satisfy within the stipulated period a judgment which the court has
granted an enforcement approval, the court may, upon the application of the other party,
mandatorily enforce the judgment against such party.
Where a party requests for enforcement of an effective judgment or ruling made by a people ’s
court, but the opposite party or his property is not within the territory of the People ’s Republic of
China, the party may directly apply to the foreign court with jurisdiction for recognition and
enforcement of the judgment or ruling, or the people ’s court may, in accordance with the provisions
of international treaties to which the PRC is a signatory or in which the PRC is a participant or
according to the principle of reciprocity, request for recognition and enforcement by the foreign
court. Similarly, for an effective judgment or ruling made by a foreign court that requires
recognition and enforcement by a people ’s court of the PRC, a party may directly apply to an
intermediate people ’s court of the PRC with jurisdiction for recognition and enforcement of the
judgment or ruling, or the foreign court may, in accordance with the provisions of international
treaties to which its country and the PRC are signatories or in which its country is a participant or
according to the principle of reciprocity, reque st for recognition and enforcement by the people ’s
court, unless the people ’s court considers that the recognition or enforcement of such judgment or
ruling would violate the basic legal principles of the PRC, its sovereignty or national security or
would not be in social and public interest.
The Company Law of the People ’s Republic of China
The Company Law of the People ’s Republic of China (hereinafter referred to as the ‘‘PRC
Company Law ’’) was adopted by the Standing Committee of the Eighth NPC at its Fifth Session
on December 29, 1993 and came into effect on July 1, 1994. It was successively amended on
December 25, 1999, August 28, 2004, October 27, 2005, December 28, 2013, October 26, 2018 and
December 29, 2023. The newly revised PRC Company Law has been implemented since July 1,
2024.
A ‘‘joint stock limited company ’’refers to a corporate legal person incorporated in China
under the PRC Company Law with independent legal person properties and entitlements to such
legal person properties. The liability of the company for its own debts is limited to the total amount
of all assets it owns and the liability of its shareholders for the company is limited to the extent of
the shares they subscribe for.
The joint stock limited companies shall carry out business in compliance with the
requirements of laws and administrative regulati ons. They may invest in other limited liability
companies and joint stock limited companies, and its liabilities for an invested company are limited
to the extent of its investment amount. Unless otherwise provided by laws, the joint stock limited
companies shall not assume any joint liability for the debts of an invested company in its capacity
as a capital contributor.
APPENDIX V SUMMARY OF PRINCIPAL LAWS AND REGULATIONS
– V-4 –


--- page 704 ---
Incorporation
A company may be established by promotio n or subscription. A company shall have a
minimum of one but no more than 200 people as its promoters, over half of which must be
residents within the PRC. Companies establi shed by promotion are companies of which the
registered capital is the total share capital subscribed for by all the promoters registered with the
company ’s registration authorities. No share offering shall be made before the shares subscribed for
by promoters are fully paid up. For companies established by share offering, the registered capital
is the total paid-up share capital as registered with the company ’s registration authorities. If laws,
administrative regulations and State Council decisions provide otherwise on paid-in registered
capital and the minimum registered capital, a company should follow such provisions.
For companies incorporated by way of promotion, the promoters shall subscribe in writing for
the shares required to be subscribed for by them and pay up their capital contributions under the
articles of association. Procedures relating to th e transfer of titles to non-monetary assets shall be
duly completed if such assets are to be contributed as capital. Promoters who fail to pay up their
capital contributions in accordance with the foregoing provisions shall assume default liabilities in
accordance with the covenants set out in the promoters ’ agreements. After the promoters have
confirmed the capital contribution under the articles of association, a board of directors and a
supervisory board shall be elected and the board of directors shall apply for registration of
establishment by filing the articl es of association with the company registration authorities, and
other documents as required by the law or administrative regulations.
Where companies are incorporated by subscription, not less than 35% of their total number of
shares must be subscribed for by the promot ers, unless otherwise provided by laws or
administrative regulations. A promoter who offe rs shares to the public must publish a document
and prepare a subscription letter to be completed, signed and sealed by subscribers, specifying the
number and amount of shares to be subscribed for and the subscribers ’ addresses. The subscribers
shall pay up monies for the shares they subscribe for. Where a promoter is offering shares to the
public, such offer shall be underwritten by security companies established under PRC law, and
underwriting agreements shall be entered into. A promoter offering shares to the public shall also
enter into agreements with banks in relation to the receipt of subscription monies. The receiving
banks shall receive and keep in custody the subscription monies, issue receipts to subscribers who
have paid the subscription monies and is obliged to furnish evidence of receipt of those
subscription monies to relevant authorities. After the subscription monies for the share issue have
been paid in full, a capital verification institution established under PRC laws must be engaged to
conduct a capital verification and furnish a certificate thereof. The promoters shall preside over and
convene an inauguration meeting within 30 days from the date of the full payment of subscription
money. The inauguration meeting shall be formed by the promoters and subscribers. Where the
shares issued remain undersubscribed by the deadline stipulated in the document, or where the
promoter fails to convene an inauguration meetin g within 30 days of the subscription monies for
the shares issued being fully paid up, the subscribers may demand that the promoters refund the
subscription monies so paid together with the interest at bank rates of a deposit for the same period.
Within 30 days after the conclusion of the inauguration meeting, the board of directors shall apply
to the company registration authority for regis tration of the establishment of the company. A
APPENDIX V SUMMARY OF PRINCIPAL LAWS AND REGULATIONS
– V-5 –


--- page 705 ---
company is formally established and has the capacity of a legal person after approval of registration
has been given by the relevant company registrat ion authority for industry and commerce and a
business license has been issued.
A company ’s promoters shall be liable for: (1) the debts and expenses incurred in the
establishment process jointly and severally if the company cannot be incorporated; (2) the
subscription monies paid by the subscribers together with interest at bank rates of deposit for the
same period jointly and severally if the company cannot be incorporated; and (3) the compensation
of any damages suffered by the company in the co urse of its establishment as a result of the
promoters ’ fault.
Share Capital
The promoters may make a capital contribution i n currencies, or non-monetary assets such as
in kind or intellectual property rights or land use rights which can be appraised with monetary
value and transferred lawfully, except for assets which are prohibited from being contributed as
capital by the laws or administrative regulations. If a capital contribution is made in non-monetary
assets, a valuation of the assets contributed mu st be carried out pursuant to the provisions of the
laws or administrative regulations on valuati on without any over-valuation or under-valuation.
The issuance of shares shall be conducted in a fair and equitable manner. Each share of the
same class must carry equal rights. Shares issued at the same time and within the same class must
be issued on the same conditions and at the same price. The same price per share shall be paid by
any share subscriber (whether an entity or an individual). The share offering price may be equal to
or greater than the nominal value of the share, but may not be less than the nominal value.
Increase in Share Capital
Pursuant to the relevant provisions of the PRC Company Law, where a company is issuing
new shares, resolutions shall be passed at general meeting in accordance with the articles of
association in respect of the class and amount of th e new shares, the issue price of the new shares,
the commencement and end dates for the issue of the new shares and the class and amount of the
new shares proposed to be issued to existing shareholders.
When a company launches a public issue of new shares to the public upon the approval by
CSRC, a new share offering document and financial accounting report must be announced and a
subscription letter must be prepared. After the new shares issued by the company have been paid
up, the change must be registered with the com pany registration authority and a public
announcement must be made accordingly. Where an increase in registered capital of a company is
made by means of an issue of new shares, the subscription of new shares by shareholders shall be
made in accordance with the relevant provisions on the payment of subscription monies for the
establishment of a company.
APPENDIX V SUMMARY OF PRINCIPAL LAWS AND REGULATIONS
– V-6 –


--- page 706 ---
Reduction of Share Capital
A company shall reduce its registered capital in accordance with the following procedures
prescribed by the PRC Company Law: (1) the company shall prepare a balance sheet and an
inventory of assets; (2) the reduction of registered capital must be approved by shareholders at
general meeting; (3) the company shall notify its creditors within 10 days and publish an
announcement in newspapers or the National Enterp rise Credit Information P ublicity System within
30 days from the day on which the resolution approving the reduction was passed; (4) the creditors
of the company are entitled to require the company to repay its debts or provide guarantees for such
debts within 30 days from receipt of the notification or within 45 days from the date of the
announcement if he/she/it has not received any notification; and (5) the company must apply to the
company registration authority for change in registration.
Repurchase of Shares
Pursuant to the PRC Company Law, a company may not repurchase its own shares other than
for the following purposes: (1) reducing its registered capital; (2) merging with other companies
which hold its shares; (3) granting shares to its employees as incentives; (4) acquiring its shares at
the request of its shareholders who vote in a shareholders ’ general meeting against a resolution
regarding a merger and division; (5) utilizing th e shares for conversion of listed corporate bonds
which are convertible into shares; and (6) where it is necessary for the listed company to safeguard
the value of the company and the interests of its sh areholders. The acquisition by a company of its
own shares on the grounds set out in items (1) to (2) above shall be approved by way of a
resolution of a shareholders ’ general meeting; the acquisition by a company of its own shares in
circumstances as set out in items (3), (5) and (6) above may be approved by way of a resolution at
a board meeting with two-third or more of the direc tors present in accordan ce with the provisions
of the articles of association or the authorization of the shareholders ’ general meeting. Following
the acquisition by a company of its own shares in ac cordance with these requirements, such shares
shall be canceled within ten days from the date of the acquisition under the circumstance in item
(1); such shares shall be transferred or canceled wi thin six months under the circumstances in items
(2) or (4); the total shares held by the Company shall not exceed 10% of the total shares issued by
the Company and such shares shall be transferred or canceled within three years under the
circumstances in items (3), (5) or (6).
A listed company shall perform its information disclosure obligations in accordance with the
provisions of the Securities Law of People ’s Republic of China when acquiring its own shares. The
acquisition by a listed company of its own shares in circumstances as set out in items (3), (5) and
(6) above shall be conduct ed through open centralized trading. The company shall not accept its
own shares as the subject of pledge.
Transfer of Shares
Shares held by shareholders may be transferred legally. Pursuant to the PRC Company Law, a
shareholder should effect a transfer of its shares on a stock exchange established in accordance with
laws or by any other means as required by the State Council. Registered sh ares may be transferred
after the shareholders endorse the back of the share certificates or in other manner specified by laws
APPENDIX V SUMMARY OF PRINCIPAL LAWS AND REGULATIONS
– V-7 –


--- page 707 ---
and administrative regulations. Following the transfer, the company shall enter the names and
addresses of the transferees into its share register. No changes of registration in the share register
described above shall be effected during a period of 20 days prior to convening a shareholders ’
general meeting or 5 days prior to the record date for the purpose of determining entitlements to
dividend distributions, unless otherwise stipul ated by laws on the registration of changes in the
share register of listed companies. The transfer of bearer share certificates shall become effective
upon the delivery of the certificates to the transferee by the shareholder.
Pursuant to the PRC Company Law, shares of the company issued prior to the public issue of
shares may not be transferred within one year of the date of the company ’s listing on a stock
exchange. Directors, supervisors and the senior management of a company shall declare to the
company their shareholdings in it and changes in such shareholdings. During their terms of office,
they may transfer no more than 25% of the total number of shares they hold in the company every
year. They shall not transfer the shares they hold within one year from the date of the company ’s
listing on a stock exchange, nor within six months after they leave their positions in the company.
The articles of association may set out other restrictive provisions in respect of the transfer of
shares in the company held by its directors, supervisors and the senior management.
Shareholders
Under the PRC Company Law, the rights of shareholders include the rights: (1) to receive a
return on assets, participate in significant decision-making and select management personnel; (2) to
petition the people ’s court to revoke any resolution passed on a shareholders ’ general meeting or a
meeting of the board of directors that has been convened or whose voting has been conducted in
violation of the laws, regulations or the articles of association, or any resolution the contents of
which is in violation of the articles of association, provided that such petition shall be submitted
within 60 days of the passing of such resolution; (3) to transfer the shares of the shareholders
legally; (4) to attend or appoint a proxy to attend shareholders ’ general meetings and exercise the
voting rights; (5) to inspect and copy the articles of association, share register, counterfoil of
company debentures, minutes of shareholders ’ general meetings, board resolutions, resolutions of
the board of supervisors and financial and accoun ting reports, and to make suggestions or inquiries
in respect of the company ’s operations; (6) to receive dividends in respect of the number of shares
held; (7) to participate in distribution of residua l properties of the company in proportion to their
shareholdings upon the liquidation of the company; and (8) any other shareholders ’ rights provided
for in laws, administrative regulations, other norma tive regulations and the articles of association.
The obligations of shareholders include the obligation to abide by the company ’s articles of
association, to pay the subscription monies in re spect of the shares subscribed for, to be liable for
the company ’s debts and liabilities to the extent of the amount of subscription monies agreed to be
paid in respect of the shares taken up by them and any other shareholder obligation specified in the
articles of association.
APPENDIX V SUMMARY OF PRINCIPAL LAWS AND REGULATIONS
– V-8 –


--- page 708 ---
Shareholders ’General Meetings
The general meeting is the organ of authority of the company, which exercises its powers in
accordance with relevant provisions of the PRC Company Law. The general meeting may exercise
its powers: (1) to elect and dismiss the directors and supervisors not being representative(s) of
employees and to decide on the matters relating to the remuneration of directors and supervisors;
(2) to review and approve the reports of the board of directors; (3) to review and approve the
reports of the board of supervisors or the reports of the supervisors; (4) to review and approve the
company ’s profit distribution proposals and loss rec overy proposals; (5) to decide on any increase
or reduction of the company ’s registered capital; (6) to decide on the issue of corporate bonds; (7)
to decide on merger, division, dissolution and liquidation of the company or change of its corporate
form; (8) to amend the company ’s articles of association; and (9) to exercise any other authority
stipulated in the articles of association.
Pursuant to the PRC Company Law, a shareholders ’ general meeting is required to be held
once every year within six months after the end of the previous accounting year. An extraordinary
general meeting is required to be held within two months upon the occurrence of any of the
following: (1) the number of directors is less than the number required by law or less than two-
thirds of the number specified in the articles of ass ociation; (2) the total outstanding losses of the
company amounted to one-third of the company’ s total paid-in share capital; (3) shareholders
individually or in aggregate holding 10% or more of the company ’s shares request to convene an
extraordinary general meeting; (4) the board of directors deems necessary; (5) the board of
supervisors so proposes; or (6) any other circumstances as provided for in the articles of
association.
A shareholders ’ general meeting shall be convened by the board of directors and presided over
by the chairman of the board of directors. In the event that the chairman is incapable of performing
or is not performing his duties, the meeting shall be presided over by the vice chairman. In the
event that the vice chairman is incapable of performing or is not performing his duties, a director
recommended by more than half of the directors shall preside over the meeting. Where the board of
directors is incapable of performing or is not performing its duties, the board of supervisors shall
convene and preside over the shareholders ’ general meeting in a timely manner. If the board of
supervisors fails to convene and preside over the shareholders ’ general meeting, shareholders
individually or in aggregate holding 10% or more of the company ’s shares for 90 days or more
consecutively may unilaterally convene and preside over the shareholders ’ general meeting.
In accordance with the PRC Company Law, a notice of the general meeting stating the date
and venue of the meeting and the matters to be considered at the meeting shall be given to all
shareholders 20 days prior to the meeting. A notic e of extraordinary general meeting shall be given
to all shareholders 15 days prior to the meeting. A single shareholder who holds, or several
shareholders who jointly hold, more than one percent of the shares of the company may submit an
interim proposal in writing to the board of directors within ten days before the general meeting. The
board of directors shall notify other shareholders within two days upon receipt of the proposal, and
submit the interim proposal to the general meeting for deliberation, provided that such provisional
proposal is in violation of the requirements under laws, administrative regulations or the Articles of
APPENDIX V SUMMARY OF PRINCIPAL LAWS AND REGULATIONS
– V-9 –


--- page 709 ---
Association, or fall out of the powers of the shareholders ’ general meeting. A general meeting shall
not make any resolution in respect of any matter not set out in the notices. Holders of bearer share
certificates who intend to attend a general meeting shall deposit their share certificates with the
company during the time from five days before t he meeting to the conclusion of the meeting.
Pursuant to the PRC Company Law, shareholders present at a shareholders ’ general meeting
have one vote for each share they hold, save that the Company ’s shares held by the company are
not entitled to any voting rights.
An accumulative voting system may be adopted for the election of directors and supervisors at
the general meeting pursuant to the provisions of th e articles of association or a resolution of the
general meeting. Under the accumulative voting system, each share shall be entitled to the number
of votes equivalent to the number of directors or supervisors to be elected at the general meeting,
and shareholders may consolidate their votes for one or more directors or sup ervisors when casting
a vote.
Pursuant to the PRC Company Law, resolutio ns of the general meeting must be passed by
more than half of the voting rights held by shareho lders present at the meeting, with the exception
of resolutions relating to merger, division or di ssolution of the company, increase or reduction of
registered share capital, change of corporate form or amendments to the articles of association, in
each case of which must be passed by more than two-thirds of the voting rights held by the
shareholders present at the meeting. Where the PRC Company Law and the articles of association
provide that the transfer or acquisition of signifi cant assets or the provision of external guarantees
by the company and such other matters must be approved by way of resolution of the general
meeting, the board of directors shall convene a shareholders ’ general meeting promptly to vote on
such matters. A shareholder may entrust a proxy to attend the general meeting on his/her behalf.
The proxy shall present the shareholders ’ power of attorney to the company and exercise voting
rights within the scope of authorization. Minute s shall be prepared in respect of matters considered
at the general meeting and the chairman and dir ectors attending the meeting shall endorse such
minutes by signature. The minutes shall be kept together with the shareholders ’ attendance register
and the proxy forms.
Board of Directors
A company shall have a board of directors, which shall consist more than 3 members. In the
case of a limited liability company with three hundred or more employees, except when the
supervisory board has been established including a number of employee representatives among its
members as required by law, the company ’s board of directors shall include employee
representatives among its members. Members of the board of directors may include staff
representatives, who shall be democratically elected by the company ’s staff at a staff representative
assembly, general staff meetin g or otherwise. The term of a director shall be stipulated in the
articles of association, provided that no term of office shall last for more than three years. Upon
expiry of the term, a director may serve consecutiv e terms if re-elected. A director shall continue to
perform his/her duties as a director in accordance with the laws, administrative regulations and the
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--- page 710 ---
articles of association until a duly re-elected director takes office, if re-election is not conducted in
a timely manner upon the expiry of his/her term of office or if the resignation of director results in
the number of directors being less than the quorum.
Under the PRC Company Law, the board of directors may exercise its powers: (1) to convene
shareholders ’ general meetings and report on its work to the shareholders ’ general meetings; (2) to
implement the resolutions passed by t he shareholders at the shareholders ’ general meetings; (3) to
decide on the company’ s operational plans and investment proposals; (4) to formulate the
company ’s profit distribution proposals and loss recovery proposals; (5) to formulate proposals for
the increase or reduction of the company ’s registered capital and the issue of corporate bonds; (6) to
formulate proposals for the merger, division or di ssolution of the company or change of corporate
form; (7) to decide on the setup of the company ’s internal management organs; (8) to appoint or
dismiss the company ’s manager and decide on his/her remuneration and, based on the manager ’s
recommendation, to appoint or dismiss any deput y general manager and financial officer of the
company and to decide on their remunerations; (9) to formulate the company ’s basic management
system; and (10) to exercise any other authorit y stipulated in the articles of association.
Meetings of the board of directors shall be co nvened at least twice each year. Notices of
meeting shall be given to all directors and supervisors ten days before the meeting. Interim board
meetings may be proposed to be convened by shareholders representing more than 10% of the
voting rights, more than one-third of the directors or the supervisory board. The chairman shall
convene the meeting within ten days of receiving such proposal and preside over the meeting. The
board of directors may otherwise determine the m eans and the period of notice for convening an
interim board meeting. Meetings of the board of directors shall be held only if more than half of the
directors are present. Resolutions of the board of directors shall be passed by more than half of all
directors. Each director shall have one vote for a resolution to be approved by the board. Directors
shall attend board meetings in person. If a direct or is unable to attend for any reason, he/she may
appoint another director to attend the meeting on his/her behalf by a written power of attorney
specifying the scope of authorization. Meanwhile, the board of directors shall keep minutes of
resolutions passed at board meetings. The minute s shall be signed by the directors present at the
meeting.
If a resolution of the board of directors violates the laws, administrative regulations or the
articles of association or resolutions of the gen eral meeting, and as a result of which the company
sustains serious losses, the directors participati ng in the resolution are liable to compensate the
company. However, if it can be proved that a director expressly objected to the resolution when the
resolution was voted on, and that such objection was recorded in the minutes of the meeting, such
director shall be relieved from that liability.
Under the PRC Company Law, the following person may not serve as a director in a
company: (1) a person who is unable or has limited ability to undertake any civil liabilities; (2) a
person who has been convicted of an offense of corruption, bribery, embezzlement,
misappropriation of property or destruction of the socialist economic order, or who has been
deprived of his political rights due to his crimes, in each case where less than five years have
elapsed since the date of completion of the senten ce and the person is sentenced to probation, it has
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--- page 711 ---
not been more than two years since the expiration of the probation period; (3) a person who has
been a former director, factory manager or manager of a company or an enterprise that has entered
into insolvent liquidation and who was persona lly liable for the insolvency of such company or
enterprise, where less than three years have elapsed since the date of the completion of the
bankruptcy and liquidation of the company or enterprise; (4) a person who has been a legal
representative of a company or an enterprise that has had its business license revoked due to
violations of the law or has been ordered to cl ose down by law and the person was personally
responsible, where less than three years have elapsed since the date of such revocation; and (5) a
person who is liable for a relatively large amount of debts that are overdue and is listed as a person
subject to execution for breach of trust by the People ’s Court.
Where a company elects or appoints a director to which any of the above circumstances, such
election or appointment shall be null and void. A d irector to which any of the above circumstances
applies during his/her term of office shall b e released of his/her duties by the company.
Under the PRC Company Law, the board shall appoint a chairman and may appoint a vice
chairman. The chairman and the vice chairman shall be elected with approval of more than half of
all the directors. The chairman shall convene a nd preside over board meetings and review the
implementation of board resolutions. The vice chairman shall assist the chairman to perform his/her
duties. Where the chairman is incapable of performing, or is not performing his/her duties, the
duties shall be performed by the vice chair man. Where the vice chairman is incapable of
performing, or is not performing his/her duties, a d irector jointly elected by more than half of the
directors shall perform his/her duties.
Supervisory Board
A company shall have a supervisory board comp osed of not less than three members. A joint
stock limited company may, in accordance with its articles of association, instead of having set up a
supervisory board or supervisors, establish an a udit committee which comprises directors of the
Board of Directors and exercises the functions and powers of the supervisory board as stipulated in
this Law. A joint stock limited company with a sm aller scale or fewer shareholders may appoint
one supervisor without establishing a supervisory board to exercise the functions and powers
prescribed for the supervisory board by the Company Law. The supervisory board shall consist of
representatives of the shareholders and an appropriate proportion of representatives of the
company ’s staff, among which the proportion of representatives of the company ’s staff shall not be
less than one-third, and the actual proportion shall be determined in the articles of association.
Representatives of the company ’s staff at the supervisory board shall be democratically elected
by the company ’s staff at the staff representative assembly, general staff meeting or otherwise. The
supervisory board shall appoint a chairman and m ay appoint a vice chairman. The chairman and the
vice chairman of the supervisory board shall be e lected by more than half of all the supervisors.
Directors and senior management members shall not act concurrently as supervisors.
The chairman of the supervisory board shall convene and preside over supervisory board
meetings. Where the chairman of the supervisory board is incapable of performing, or is not
performing his/her duties, the vice chairman of the supervisory board shall convene and preside
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--- page 712 ---
over supervisory board meetings. Where the vice c hairman of the supervisory board is incapable of
performing, or is not performing his/her duties, a supervisor elected by more than half of the
supervisors shall convene and preside over supervisory board meetings.
Each term of office of a supervisor is three years and he/she may serve consecutive terms if
re-elected upon expiry of the term. A supervisor shall continue to perform his/her duties as a
supervisor in accordance with the laws, administrat ive regulations and the articles of association
until a duly re-elected supervisor takes office, if re-election is not conducted in a timely manner
upon the expiry of his/her term of office or if the r esignation of supervisor results in the number of
supervisors being less than the quorum. The supervisory board may exercise its powers: (1) to
review the company ’s financial position; (2) to supervise the directors and senior management in
their performance of their duties and to propose the removal of directors and senior management
who have violated laws, regulations, the articles o f association or resolutions of the shareholders ’
general meetings; (3) when the acts of a director or a senior management personnel are detrimental
to the company ’s interests, to require the director and sen ior management to correct these acts; (4)
to propose the convening of shareholders ’ general meetings and to convene and preside over
shareholders ’ general meetings when the board fails to perform the duty of convening and presiding
over shareholders ’ general meetings under the PRC Company Law; (5) to submit proposals to the
shareholders ’ general meetings; (6) to bring actions against directors and senior management
personnel pursuant to the relevant provisions of the PRC Company Law; and (7) to exercise any
other authority stipulated in the articles of association.
Supervisors may be present at board meetings and make inquiries or proposals in respect of
the resolutions of the board. The supervisory board may investigate any irregularities identified in
the operation of the company and, when necessary, may engage an accounting firm to assist its
work at the cost of the company.
Manager and Senior Management
Under the relevant requirements of the PRC Company Law, a company shall have a manager
who shall be appointed or removed by the board of directors. Other provisions in the articles of
association on the manager ’s powers shall also be complied with. The manager shall be present at
meetings of the board of directors. However, the manager shall have no voting rights at meetings of
the board of directors unless he/she concurrently serves as a director. According to the relevant
requirements of the PRC Company Law, senior management refers to manager, deputy manager,
financial officer, secretary to the board of a liste d company and other personnel stipulated in the
articles of association.
Duties of Directors, Supervisors, General Managers and Other Senior Management
Directors, supervisors and senior management are required under the PRC Company Law to
comply with the relevant laws, admi nistrative regulations and the articles of association, and shall
be obliged to be faithful and diligent towards the Company. Directors, supervisors and senior
management personnel are prohibited from abusing their authority in accepting bribes or other
unlawful income and from misappropriating the company ’s property. Furtherm ore, directors and
senior management are prohibited from: (1) misappropriating company funds; (2) depositing
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--- page 713 ---
company funds into accounts under their own names or the names of other individuals; (3) loaning
company funds to others or providing guarantees in favor of others supported by company ’s
property in violation of the articl es of association or without appr oval of the general meeting or the
board of directors; (4) entering into contracts or transactions with the company in violation of the
articles of association or without approval of the general meeting; (5) using their position to
procure business opportunities for themselves or ot hers that should have otherwise been available to
the company or operating businesses similar to that of the company for their own benefits or on
behalf of others without approval of the general meeting; (6) accepting for their own benefit
commissions from a third party for transactions conducted with the company; (7) unauthorized
divulgence of confidential information of the company; and (8) other acts in violation of their duty
of loyalty to the company. Income generated by d irectors or senior management in violation of
aforementioned shall be returned to the company.
A director, supervisor or senior management who contravenes law, administrative regulation
or the articles of association in the performance of his/her duties resulting in any loss to the
company shall be liable to the company for compensation.
Where a director, supervisor or senior management is required to attend a shareholders ’
general meeting, such director, supervisor or senior management shall attend the meeting and
answer the inquiries from shareholders. Directors and senior management shall furnish all true
information and data to the supervisory board, without impeding the discharge of duties by the
supervisory board or supervisors.
Where a director or senior management contrave nes laws, administrative regulations or the
articles of association in the performance of his/her duties resulting in any loss to the company,
shareholder(s) holding individually or in aggregate more than 1% of the company ’s shares
consecutively for more than 180 days may request in writing that the supervisory board institute
litigation at the people ’s court. Where the supervisory violates the laws or administrative
regulations or the articles of association in the discharge of its duties resulting in any loss to the
company, such shareholder(s) may request in writing that the board of directors institute litigation
at the people ’s court on its behalf. If the supervisory board or the board of directors refuses to
institute litigation after receiving this written request from the shareholde r(s), or fails to institute
litigation within 30 days of the date of receiving the request, or in case of emergency where failure
to institute litigation immediately will result in irrecoverable damage to the company ’s interests,
such shareholder(s) shall have the power to institute litigation directly at the people ’s court in its
own name for the company ’s benefit. For other parties who infringe the lawful interests of the
company resulting in loss to the company, such s hareholder(s) may institute litigation at the
people ’s court in accordance with the procedure described above. Where a director or senior
management contravenes any laws, administrativ e regulations or the articles of association in
infringement of shareholders ’ interests, a shareholder may also institute litigation at the people ’s
court.
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--- page 714 ---
Finance and Accounting
Under the PRC Company Law, a company shall e stablish its own financial and accounting
systems according to the laws, administrative regulations and the regulations of the competent
financial departments under the State Council. At the end of each accounting year, a company shall
prepare a financial report which shall be audited by an accounting firm in accordance with laws.
The financial and accounting reports shall be pre pared in accordance with laws, administrative
regulations and the regulations of the financial departments under the State Council. The company ’s
financial and accounting reports shall be made available for shareholders ’ inspection at the
company within 20 days before the convening of an annual general meeting. A joint stock limited
company that makes public stock offerings shall announce its financial and accounting reports.
When distributing each year’ s profits after taxation, the company shall set aside 10% of its
profits after taxation for the company ’s statutory common reserve fund until the fund has reached
more than 50% of the PRC company ’s registered capital. When the company ’s statutory common
reserve fund is insufficient to make up for the company ’s losses for the previous years, the current
year’s profits shall first be used to make up the losses before any allocation is set aside for the
statutory common reserve fund. After the company has made allocations to the statutory common
reserve fund from its profits after taxation, it ma y, upon passing a resolution at a shareholders ’
general meeting, make further allocations from its profits after taxation to the discretionary common
reserve fund. After the company has made up its losses and made allocations to its discretionary
common reserve fund, the remaining profits after taxation shall be distributed in proportion to the
number of shares held by the shareholders, except for those which are not distributed in a
proportionate manner as provided by the articles of association.
Profits distributed to shareholders by a resolution of a shareholders ’ general meeting or the
board of directors before losses have been made up and allocations have been made to the statutory
common reserve fund in violation of the requirements described above must be returned to the
company. The company shall not be entitled to an y distribution of profits in respect of its own
shares held by it.
The premium over the nominal value per share of the company on issue and other income as
required by relevant governmental department to be treated as the capital reserve fund shall be
accounted for as the capital reserve fund. The common reserve fund of a company shall be applied
to make up the company ’s losses, expand its business operations or increase its capital. The capital
reserve fund. The discretionary reserve fund and the statutory reserve fund shall first be used in
making up the losses of the company, and for any losses left to be set off, the capital reserve fund
may be utilized in accordance with the provisions. Upon the transfer of the statutory common
reserve fund into capital, the balance of the fund shall not be less than 25% of the registered capital
of the company before such transfer. The company shall have no accounting books other than the
statutory books. The company ’s assets shall not be deposited in any account opened under the name
of an individual.
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--- page 715 ---
Appointment and Dismissal of Auditors
Pursuant to the PRC Company Law, the engagement or dismissal of an accounting firm
responsible for the company ’s auditing shall be determined by a shareholders ’ general meeting, the
board of directors or supervisory board in accordance with the articles of association. The
accounting firm should be allowed to make representations when the general meeting, the board of
directors or supervisory board conducts a vote on the dismissal of the accounting firm. The
company should provide true and complete accounting evidence, accounting books, financial and
accounting reports and other accounting informat ion to the engaged accounting firm without any
refusal or withholding or falsification of data.
Profit Distribution
According to the PRC Company Law, a company shall not distribute profits before losses are
covered and the statutory common reserve fund is provided.
Amendments to the Articles of Association
Pursuant to PRC Company Law, the resolution of a shareholders ’ general meeting regarding
any amendment to a company ’s articles of association requires affirmative votes by more than two-
thirds of the votes held by shareholders attending the meeting.
Dissolution and Liquidation
Under the PRC Company Law, a company shall be dissolved for any of the following reasons:
(1) the term of its operation set out in the articles of association has expired or other events of
dissolution specified in the articles of association have occurred; (2) the shareholders have resolved
at a shareholders ’ general meeting to dissolve the company; (3) the company shall be dissolved by
reason of its merger or division; (4) the business license of the company is revoked or the company
is ordered to close down or to be dissolved in accordance with the laws; or (5) the company is
dissolved by the people ’s court in response to the request of shareholders holding shares that
represent more than 10% of the voting rights of all shareholders of the company, on the grounds
that the operation and management of the company has suffered serious difficulties that cannot be
resolved through other means, rendering ongoing existence of the company a cause for significant
losses to the shareholders ’ interests.
In the event of paragraph (1) above, the company may carry on its existence by amending its
articles of association. The amendments to the articles of association in accordance with the
provisions described above shall require the app roval of more than two-thirds of voting rights of
shareholders attending a shareholders ’ general meeting.
Where the company is dissolved under the circumstances set forth in paragraph (1), (2), (4) or
(5) above, it should establish a liquidation com mittee within 15 days of the date on which the
dissolution matter occurs. The liquidation commi ttee shall be composed of directors, unless the
Articles of Association provide ot herwise or the general meeting resolves to elect other person(s). If
a liquidation committee is not established within the stipulated period, the interested parties can
APPENDIX V SUMMARY OF PRINCIPAL LAWS AND REGULATIONS
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--- page 716 ---
apply to the people ’s court for setting up a liquidation committee with designated relevant
personnel to conduct the liquidation. The people ’s court should accept such application and form a
liquidation committee to conduct liquidation in a timely manner.
The liquidation committee may exercise follow ing powers during the liquidation: (1) to sort
out the company ’s assets and to prepare a balance sheet an da ni n v e n t o r yo fa s s e t s ;( 2 )t on o t i f yt h e
company ’s creditors or publish announcements; (3) to deal with any outstanding business related to
the liquidation; (4) to pay any overdue tax together with any tax arising during the liquidation
process; (5) to settle the company ’s claims and liabilities; (6) to handle the company ’s remaining
assets after its debts have been paid off; and (7) to represent the company in any civil procedures.
The liquidation committee shall notify the company ’s creditors within ten days of its
establishment, and publish an announcement in newspapers or the National Enterprise Credit
Information Publicity System within 60 days. A creditor shall lodge his claim with the liquidation
committee within 30 days of receipt of the not ification or within 45 days of the date of the
announcement if he has not received any notification.
A creditor shall report all matters relevant to his claimed creditor ’s rights and furnish relevant
evidence. The liquidation committee shall register such creditor ’s rights. The liquidation committee
shall not make any settlement to creditors during the period of the claim. Upon disposal of the
company ’s property and preparation of the required balance sheet and inventory of assets, the
liquidation committee shall draw up a liquidation plan and submit this plan to a shareholders ’
general meeting or a people ’s court for endorsement. The remaining part of the company ’s assets,
after payment of liquidation expenses, employee w ages, social insurance expenses and statutory
compensation, outstanding taxes and the company ’s debts, shall be distributed to shareholders in
proportion to shares held by them. The company shall continue to exist during the liquidation
period, although it cannot conduct operating activ ities that are not related to the liquidation. The
company ’s property shall not be distributed to shareholders before repayments are made in
accordance with the requirements described above.
Upon liquidation of the company ’s property and preparation of the required balance sheet and
inventory of assets, if the liquidation committee becomes aware that the company does not have
sufficient assets to meet its liabilities, it must apply to a people’ s court for declaration of
bankruptcy in accordance with the laws. After the Company ’s bankruptcy application is accepted by
the People ’s Court, the liquidation committee shall hand over the administration of the liquidation
to the official receiver designated by the People ’s Court.
Upon completion of the liquidation, the liquidation committee shall prepare a liquidation
report and submit it to the shareholders ’ general meeting or the people ’s court for verification, and
to the company registration authority for th e cancelation of company registration, and an
announcement of its termination shall be published. Members of the liquidation committee shall be
faithful in the discharge of their duties and shall perform their liquidation duties in compliance with
laws. Members of the liquidation committee sha ll be prohibited from abusing their authority in
accepting bribes or other unlawful incom e and from misappropriating the company ’s properties.
Members of the liquidation commi ttee who have caused the company or its creditors to suffer from
APPENDIX V SUMMARY OF PRINCIPAL LAWS AND REGULATIONS
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--- page 717 ---
any loss due to intentional fault or gross neglige nce, should be liable for making compensations to
the company or its creditors. In addition, liquid ation of a company declared bankrupt according to
laws shall be processed in accordance with the laws on corporate bankruptcy.
Overseas Listing
Under the Trial Administrative Measures for Overseas Securities Offering and Listing by
Domestic Companies ( 《境內企業境外發行證券和上市管理試行辦法》), (i) a domestic enterprise in
the PRC that directly or indirectly issues securities outside the PRC or lists and trades its securities
outside the PRC shall file a report with the CSRC and submit the relevant materials; if a domestic
enterprise fails to comply with the procedures for filing a report, or h ides important facts or
fabricates any material content in the report, the domestic enterprise may be subject to
administrative penalties such as rectificatio n order, warnings, fines, and so forth, and the
controlling shareholders, actual controllers, officer s in charge and other persons directly responsible
may also be subject to administrative penalties su ch as warnings, fines, and so forth; (ii) the direct
overseas issuance and listing of a domestic enterpr ise refers to the overseas issuance and listing of
shares of a joint stock limited company registered and established in the PRC; and (iii) any
domestic joint stock limited company shall file a report with the CSRC within three working days
after the submission of its application for an overs eas listing. A PRC domestic enterprise that fails
to complete the filing in accordance with the Trial Administrative Measures may be ordered by the
CSRC to make corrections, given a warning an d fined not less than RMB1 million and not more
than RMB10 million.
Loss of Share Certificates
A shareholder may, in accordance with the public notice procedures set out in the PRC Civil
Procedure Law, apply to a people ’s court if his share certificate(s) in registered form is either
stolen, lost or destroyed, for a declaration that such certificate(s) will no longer be valid. After the
people ’s court declares that such certificate(s) will no longer be valid, the shareholder may apply to
the company for the issue of a replacement certificate(s).
Merger and Division
Under the PRC Company Law, a merger agreement shall be signed by merging companies and
the involved companies shall prepare respective balance sheets and inventory of assets. The
companies shall within 10 days of the date of passing the resolution approving the merger notify
their respective creditors and publicly announce the merger in newspapers within 30 days. A
creditor may, within 30 days from the date of reception of the notification, or within 45 days from
the date of the announcement if he has not received such notification, request the company to settle
any outstanding debts or provide corresponding guarantees.
In case of a merger, the credits and debts of the merging parties shall be assumed by the
surviving or the new company. In case of a division, the company ’s assets shall be divided and a
balance sheet and an inventory of assets shall be prepared. When a resolution regarding the
company ’s division is approved, the company should not ify all its creditors within ten days of the
date of passing such resolution and publicly announce the division in newspapers within 30 days.
APPENDIX V SUMMARY OF PRINCIPAL LAWS AND REGULATIONS
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--- page 718 ---
Unless an agreement in writing is reached with creditors before the company ’s division in respect of
the settlement of debts, the liabilities of the company which have accrued prior to the division shall
be jointly borne by the divided companies.
Changes in the registration as a result of the me rger or division shall be registered with the
relevant administration author ity for industry and commerce.
The PRC Securities Laws, Regul ations and Regulatory Regimes
The PRC has promulgated a series of regulati ons that relate to the issue and trading of the
Shares and disclosure of information. In October 1992, the State Council established the Securities
Committee and CSRC. The Securities Committee is responsible for coordinating the drafting of
securities regulations, formulating securities-related policies, planning the development of securities
markets, directing, coordinating and supervising a ll securities related institutions in the PRC and
administering CSRC.
CSRC is the regulatory arm of the Securities Committee and is responsible for the drafting of
regulatory provisions governing se curities markets, supervising securities companies, regulating
public offerings of securities by PRC companies in the PRC or overseas, regulating the trading of
securities, compiling securities-related statistics and undertaking relevant research and analysis. In
April 1998, the State Council consolidated th e Securities Committee and CSRC and reformed
CSRC.
On April 22, 1993, the State Council promulgated the Provisional Regulations on the
Administration of the Issue and Trading of Shares ( 《股票發行與交易管理暫行條例》) govern the
application and approval procedures for public offerings of shares, issuing of and trading of shares,
the acquisition of listed companies, deposit, clearing and transfer of shares, the disclosure of
information, investigation, penalties and dispute resolutions with respect to a listed company.
The PRC Securities Law ( 《中華人民共和國證券法》) (the ‘‘Securities Law ’’) took effect on
July 1, 1999 and was successively amended on August 28, 2004, October 27, 2005, June 29, 2013,
August 31, 2014 and December 28, 2019. The latest Securities Law was implemented on March 1,
2020. It was the first national securities law in the PRC, and is divided into 14 chapters and 226
articles comprehensively regulating activities in the PRC securities market, including the issue and
trading of securities, takeovers by listed compa nies and the duties and responsibilities of the
securities exchanges, securities companies, securities registrati on and clearing institutions and
securities regulatory authorities. Article 224 of the PRC Securities Law provides that domestic
enterprises shall satisfy the relevant requirements of the State Council when it issues shares or lists
and trades shares outside the PRC directly or indirectly. Currently, the issue and trading of foreign
issued securities (including shares) are principally governed by the r egulations and rules
promulgated by the State Council and CSRC.
APPENDIX V SUMMARY OF PRINCIPAL LAWS AND REGULATIONS
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--- page 719 ---
Arbitration and Enforcement of Arbitral Awards
The Arbitration Law of the PRC ( 《中華人民共和國仲裁法》) (the ‘‘PRC Arbitration Law ’’)
was enacted by the Standing Committee of the NPC on August 31, 1994, which became effective
on September 1, 1995 and was amended on August 27, 2009 and September 1, 2017. It is
applicable to, among other matters, economic dis putes involving foreign parties where all parties
have entered into a written agreement to resolve disputes by arbitration before an arbitration
committee constituted in accordance with the P RC Arbitration Law. The PRC Arbitration Law
provides that an arbitration committee may, before the promulgation of arbitration regulations by
the PRC Arbitration Association, formulate interim arbitration provisions in accordance with the
PRC Arbitration Law and the PRC Civil Procedure L aw. Where the involved parties have agreed to
settle disputes by means of arbitration, a people ’s court will refuse to handle a legal proceeding
initiated by one of the parties at such people ’s court, unless the arbitration agreement has lapsed.
Under the PRC Arbitration Law and PRC Civil Procedure Law, an arbitral award shall be final
and binding on the parties involved in the arbitration. If one party fails to comply with the arbitral
award, the other party to the award may apply to a people ’s court for its enforcement. However, the
people ’s court may refuse to enforce an arbitral award made by an arbitration commission if there is
any procedural irregularity (including but not lim ited to irregularity in the composition of the
arbitration tribunal, or the making of an award on matters beyond the scope of the arbitration
agreement or outside the jurisdiction of the arbitration commission).
Any party seeking to enforce an award of a foreign affairs arbitration organ of the PRC
against a party who or whose property is not loca t e dw i t h i nt h eP R Cm a ya p p l yt oaf o r e i g nc o u r t
with jurisdiction over the relevant matters for recognition and enforcement of the award. Likewise,
an arbitral award made by a foreign arbitral body may be recognized and enforced by a PRC court
in accordance with the principle of reciprocity or any international treaties concluded or acceded to
by the PRC.
The PRC acceded to the Convention on the Recognition and Enforcement of Foreign Arbitral
Awards (the ‘‘New York Convention ’’) passed on June 10, 1958 pursuant to a resolution passed by
the Standing Committee of the NPC on December 2, 1986. The New York Convention provides
that all arbitral awards made in a state which is a party to the New York Convention shall be
recognized and enforced by other parties thereto subject to their rights to refuse enforcement under
certain circumstances, including where the enforcement of the arbitral award is against the public
policy of that state. At the time of the PRC ’s accession to the Convention, the Standing Committee
of the NPC declared that (1) the PRC will only a pply the New York Convention to the recognition
and enforcement of arbitral awards made in the territories of other parties based on the principle of
reciprocity; and (2) the New York Convention will only apply to disputes deemed under PRC laws
to be arising from contractual or non-contractual mercantile legal relations. An arrangement for
mutual enforcement of arbitral awards between Hong Kong and the Supreme People ’s Court of
China was reached. The Supreme People ’s Court of China adopted the Arrangements on the Mutual
Enforcement of Arbitral Awards between the Mai nland and the Hong Kong Special Administrative
Region on June 18, 1999, which went into effect on February 1, 2000. The arrangements reflect the
spirit of the New York Convention. Under the arrangements, the awards by the Mainland arbitral
APPENDIX V SUMMARY OF PRINCIPAL LAWS AND REGULATIONS
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--- page 720 ---
bodies recognized by Hong Kong may be enforced in Hong Kong and the awards by the Hong
Kong arbitral bodies may also be enforced in the Mainland China. If the Mainland court finds that
the enforcement of awards made by the Hong Kong arbitral bodies in the Mainland will be against
public interests of the Mainland, the awards may not be enforced.
Shanghai-Hong Kong Stock Connect
On April 10, 2014, CSRC and Hong Kong Securities and Futures Commission (hereinafter
referred to as ‘‘HKSFC ’’) issued the Joint Announcement of China Securities Regulatory
Commission and Hong Kong Securities and Futures Commission — Principles that Should be
Followed when the Pilot Program that Links the Stock Markets in Shanghai and Hong Kong is
Expected to be Implemented and approved in principle the launch of the pilot program that links
the stock markets in Shanghai and Ho ng Kong (hereinafter referred to as ‘‘Shanghai-Hong Kong
Stock Connect ’’) by the Shanghai Stock Exchange (hereinafter referred to as ‘‘SSE’’), the Stock
Exchange, China Securities Depository and Clearing Co., Ltd. (hereinafter referred to as
‘‘CSDCC’’) and HKSCC. Shanghai-Hong Kong Stock Connect comprises the two portions of
Northbound Trading Link and Southbound Trading Link. Southbound Trading Link refers to the
entrustment of China securities houses by China investors to trade stocks listed on the Stock
Exchange within a stipulated range via filing by the securities trading service company established
by the SSE with the Stock Exchange. During the initial period of the pilot program, the stocks of
Southbound Trading Link consist of constituent stocks of the Stock Exchange Hang Seng
Composite Large Cap Index and the Hang Seng Composite MidCap Index as well as stocks of A+H
stock companies concurrently listed on the S tock Exchange and the SSE. The total limit of
Southbound Trading Link is RMB250 billion and the daily limit is RMB10.5 billion. During the
initial period of the pilot program, it is required by HKSFC that China investors participating in
Southbound Trading Link are only limited to institutional investors and individual investors with a
securities account and capital account balance of not less than RMB500,000.
On November 10, 2014, CSRC and HKSFC issued a Joint Announcement, approving the
official launch of Shanghai-Hong Kong Stock Connect by SSE, the Stock Exchange, CSDCC and
HKSCC. Pursuant to the Joint Announcement, trading of stocks under Shanghai-Hong Kong Stock
Connect will commence on November 17, 2014.
On September 30, 2016, CSRC issued the Filing Provision on the Placement of Shares by
Hong Kong Listed Companies with Domestic Original Shareholders under Southbound Trading
Link which came into effect on the same day. The act of the placement of shares by Hong Kong
listed companies with domestic o riginal shareholders under Southbound Trading Link shall be filed
with CSRC. Hong Kong listed companies shall fi le the application materials and approved
documents with CSRC after obtaining approval from the Stock Exchange for their share placement
applications. CSRC will carry out supervision ba sed on the approved opinion and conclusion of the
Hong Kong side.
APPENDIX V SUMMARY OF PRINCIPAL LAWS AND REGULATIONS
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--- page 721 ---
SUMMARY OF MATERIAL DIFFERENCES BETWEEN HONG KONG AND PRC
COMPANY LAW
The Hong Kong law applicable to a company incorporated in Hong Kong is based on the
Companies Ordinance and the Companies (Winding Up and Miscellaneous Provisions) Ordinance
and supplemented by common law and the rules of equity that apply to Hong Kong. As a joint
stock limited company established in the PRC t hat is seeking a listing of Shares on the Stock
Exchange, the Company are governed by the PRC Company Law and all the rules and regulations
promulgated pursuant to the PRC Company Law.
Set out below is a summary of certain material differences between Hong Kong law applicable
to a company incorporated in Hong Kong and the PRC Company Law applicable to a joint stock
limited company incorporated under the PRC Company Law. This summary is, however, not
intended to be an exhaustive comparison.
Incorporation of Corporate
Under Hong Kong company law, a company with share capital, shall be incorporated by the
Registrar of Companies in Hong Kong and the company will acquire an independent corporate
existence upon its incorporation. A company may be incorporated as a public company or a private
company. Pursuant to the Companies Ordinance, the articles of association of a private company
incorporated in Hong Kong shall contain provisions that restrict a member ’s right to transfer shares.
A public company ’s articles of association do not contain such provisions.
Under the PRC Company Law, a joint stock limited company may be incorporated by
promotion or subscription. The amended PRC Company Law which came into effect on July 1,
2024 has no provision on the minimum registered capital of joint stock companies, except that
laws, administrative regulations and State Coun cil decisions have separat e provisions on paid-in
registered capital and the minimum registered capital of joint stock, in which case the company
should follow such provisions.
Share Capital
Under Hong Kong law, the directors of a Hong Kong company may, with the prior approval
of the shareholders if required, issue new shares of the company. The PRC Company Law provides
that any increase in our registered capital must be approved by our shareholders ’ general meeting
and the relevant PRC governmental and regulatory authorities. There are no such minimum capital
requirements on a Hong Kong company under Hong Kong law.
Under the PRC Company Law, the shares may be subscribed for in the form of money or non-
monetary assets (other than assets not entitled to be used as capital contributions under relevant
laws and administrative regulatio ns). For non-monetary assets to b e used as capital contributions,
appraisals and transfer procedures of property rights must be carried out to ensure no over-valuation
or under-valuation of the assets. There is no suc h restriction on subscription of shares by a Hong
Kong company under Hong Kong law.
APPENDIX V SUMMARY OF PRINCIPAL LAWS AND REGULATIONS
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--- page 722 ---
Restrictions on Shareholding and Transfer of Shares
Under PRC law, our Unlisted Shares, which are denominated and subscribed for in Renminbi,
may only be subscribed for and traded by the gover nment or government authorized departments,
PRC legal persons, natural persons, qualified fore ign institutional investors, or eligible foreign
strategic investors. Overseas listed shares, whi ch are denominated in Renminbi and subscribed for
in a foreign currency other than Renminbi, may onl y be subscribed for, and traded by investors
from Hong Kong, Macau or Taiwan or any country and territory outside the PRC, or qualified
domestic institutional investors. However, qualified institutional investors and individual investors
may trade Southbound Hong Kong trading Link and Northbound Shanghai trading Link (or the
Northbound Shenzhen trading Link) shares via participating in Shanghai-Hong Kong Stock Connect
and Shenzhen-Hong Kong Stock Connect.
Under the PRC Company Law, shares in issue prior to the public offering cannot be
transferred within one year from the listing date of the shares on a stock exchange. Shares in a joint
stock limited company held by its directors, supe rvisors and senior management transferred each
year during their term of office shall not exceed 25% of the total shares they held in the company,
and the shares they held in the company cannot be transferred within one year from the listing date
of the shares, and also cannot be transferred within half a year after such person has left office. The
articles of association may set other restrict ive requirements on the transfer of the company ’s shares
held by its directors, supervisors and senior management. There are no such restrictions on
shareholdings and transfers of shares under Hong Kong law apart from six-month lockup on the
company ’s issue of shares and the 12-month lockup on controlling shareholder disposal of shares.
Financial Assistance for Acquisition of Shares
Pursuant to the PRC Company Law, the company shall not provide gifts, loans, guarantees or
other financial assistance to other persons for the acquisition of shares in the company or its parent
company, except for the implementation of the company ’s employee share ownership schemes.
For the interests of the company, upon a resolut ion of the general meeting, or a resolution of
the Board of Directors in accordance with the Articles of Association or the authorization of the
general meeting, the company may provide financia l assistance to other persons for the acquisition
of shares in the company or its parent company, provided that the cumulative total amount of the
financial assistance shall not exceed 10% of the total issued share capital. Resolutions made by the
Board of Directors shall be approved by more than two-thirds of all directors.
Directors, Senior Management and Supervisors
The PRC Company Law, unlike Hong Kong Company Law, does not contain any
requirements relating to the declaration of directors ’ interests in material contracts, restrictions on
companies providing certain benefits to dire ctors and guarantees in respect of directors ’ liability
and prohibitions against compensation for loss of office without shareholders ’ approval.
APPENDIX V SUMMARY OF PRINCIPAL LAWS AND REGULATIONS
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--- page 723 ---
Supervisory Board
Under the PRC Company Law, a joint stock limited company’ s directors and members of the
senior management are subject to the supervision of supervisory board. A joint stock limited
company may, in accordance with its articles of association, instead of having set up a supervisory
board or supervisors, establish an audit committee which comprises directors of the Board of
Directors and exercises the functions and powers o f the supervisory board as stipulated in this Law.
A joint stock limited company with a smaller s cale or fewer shareholders may appoint one
supervisor without establishing a supervisory board to exercise the functions and powers prescribed
for the supervisory board by the Company La w. There is no mandatory requirement for the
establishment of supervisory board for a company incorporated in Hong Kong.
Notice of Shareholders’ General Meetings
Under the PRC Company Law, notice of a shareholders ’ annual general meeting and an
extraordinary general meeting must be given to sh areholders at least 20 days and 15 days before the
meeting, respectively.
For a company incorporated in Hong Kong, the minimum period of notice is 14 days in the
case of an annual general meeting. Further, where a general meeting involves consideration of a
resolution requiring special notice, the compa ny must also give its shareholders notice of the
resolution at least 14 days before the meeting. The notice period for the annual shareholders ’
general meeting is 21 days.
Quorum for Shareholders ’General Meetings
Under the Companies Ordinance, the quoru m for a general meeting must be at least two
members unless the articles of association of the company otherwise provided. For companies with
only one shareholder, the quorum must be one shareholder. The PRC Company Law does not
specify the quorum for a shareholders ’ general meeting.
Voting
Under the Companies Ordinance, an ordinary resolution is passed by a simple majority of
affirmative votes cast by shareholders present i n person, or by proxy, at a general meeting, and a
special resolution is passed by not less than three-fourths of affirmative votes cast by shareholders
present in person, or by proxy, at a general meeting.
Under the PRC Company Law, the passing of any resolution requires more than one-half of
the affirmative votes held by shareh olders present at a shareholders ’ meeting except in cases such
as proposed amendments to the articles of associa tion, increase or decrease of registered capital,
merger, division, dissolution or transformation of corporate form, which require more than two-
thirds of the affirmative votes cast by shareholders present at a shareholders ’ general meeting.
APPENDIX V SUMMARY OF PRINCIPAL LAWS AND REGULATIONS
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--- page 724 ---
Financial Disclosure
Under the PRC Company Law, a joint stock limited company is required to make available at
the company for inspection by shareholders its financial report 20 days before its shareholders ’
annual general meeting. In addition, a joint stock limited company of which the shares are publicly
issued must publish its financial report. The Companies Ordinance requires a company incorporated
in Hong Kong to send to every shareholder a copy of its financial statements, auditors ’ report and
directors ’ report, which are to be presented before the company ’s annual general meeting, not less
than 21 days before such meeting. A joint stock limited company is required under the PRC law to
prepare its financial statements in accordance with the PRC GAAP.
Information on Directors and Shareholders
The PRC Company Law gives shareholders the right to inspect the company ’s articles of
association, minutes of the shareholders ’ general meetings, share register, counterfoil of company
debentures, resolutions of board meetings, resolu tions of the board of supervisors and financial and
accounting reports, which is similar to the shareholders ’ rights of Hong Kong companies under
Hong Kong law.
Receiving Agent
Under the PRC Company Law and Hong Kong law, dividends once declared are debts payable
to shareholders. The limitation period for debt recovery action under Hong Kong law is six years,
while under the PRC laws this limitation period is three years.
Corporate Reorganization
Corporate reorganization involving a company incorporated in Hong Kong may be effected in
a number of ways, such as a transfer of the whole or part of the business or property of the
company in the course of voluntary winding up to another company pursuant to Section 237 of the
Companies (Winding Up and Miscellaneous Provisions) Ordinance or a compromise or arrangement
between the company and its creditors or between the company and its shareholders under Division
2 of Part 13 of the Companies Ordinance, which re quires the sanction of the court. In addition,
subject to the shareholders ’ approval, an intra-group wholly-owned subsidiary company may also be
amalgamated horizontally or vertically under the Companies Ordinance.
Under PRC law, merger, division, dissolution or change the form of a joint stock limited
company has to be approved by shareholders at general meeting.
Statutory Common Reserve Fund Withdrawal
Under the PRC Company Law, when a joint stock limited company allocating the after-tax
profits of the current year, the Company shall allo cate ten (10) percent of its profit to the statutory
common reserve fund. There are no corresponding provisions under Hong Kong law.
APPENDIX V SUMMARY OF PRINCIPAL LAWS AND REGULATIONS
– V-25 –


--- page 725 ---
Dividends
The company has the power in certain circumstances to withhold, and pay to the relevant tax
authorities, any tax payable under PRC law on any dividends or other distributions payable to a
shareholder. Under Hong Kong law, the limitation period for an action to recover a debt (including
the recovery of dividends) is six years, whereas under PRC laws, the relevant limitation period is
three years. The company must not exercise its powers to forfeit any unclaimed dividend in respect
of shares until after the expiry of the applicable limitation period.
Fiduciary Duties
In Hong Kong, directors owe fiduciary duties to the company, including the duty not to act in
conflict with the company ’s interests. Furthermore, the Companies Ordinance has codified the
directors ’ statutory duty of care. Under the PRC Company Law, directors, supervisors and senior
management should be loyal and diligent.
Closure of Register of Shareholders
The Companies Ordinance requires that the re gister of shareholders of a company must not
generally be closed for the registration of transfers of shares for more than 30 days (extendable to
60 days under certain circumstances) in a year. As required by the PRC Company Law, share
transfers shall not be registered within 30 days before the date of a shareholders ’ general meeting
or within five days before the base date set for the purpose of distribution of dividends.
Derivative Action by Minority Shareholders
According to Hong Kong law, as permitted by court, shareholders may initiate a derivative
action on behalf of the company against director s who have any misconduct to the company if the
directors control a majority of votes at a general m eeting, thereby effectively preventing a company
from suing the directors in breach of their duties in its own name.
The PRC Company Law provides shareholders of a joint stock limited company with the right
so that in the event where the directors and senior management violate their obligations and cause
damages to a company, the shareholders individually or jointly holding more than 1% of the shares
in the company for more than 180 consecutive day s may request in writing the supervisory board to
initiate proceedings in the people ’s court. If the supervisory board or the board of directors refuses
to initiate such proceedings, or has not initiated proceedings within 30 days from the date of receipt
of the request, or if under urgent situations, fai lure of initiating immediate proceeding may cause
irremediable damages to the company, the above said shareholders shall, for the benefit of the
company, have the right to initiate proceedings directly to the people ’s court in their own name.
Protection of Minorities
Under Hong Kong law, a shareholder who complains that the business of a company
incorporated in Hong Kong are conducted in a man ner unfairly prejudicial to his interests may
petition to the Court to make an appropriate order to give relief to the unfairly prejudicial conduct.
Alternatively, pursuant to the Companies (Windi ng Up and Miscellaneous Provisions) Ordinance, a
APPENDIX V SUMMARY OF PRINCIPAL LAWS AND REGULATIONS
– V-26 –


--- page 726 ---
shareholder may seek to wind up the company on the just and equitable ground. In addition, on the
application of a specified number of members, the Financial Secretary of Hong Kong may appoint
inspectors who are given extensive statutory powers to investigate the affairs of a company
incorporated or registered in Hong Kong.
According to the PRC Company Law, in the event that the company encounters substantial
difficulties in its operation and management and its continuance shall cause a significant loss to the
interest of its shareholders, and where this cannot be resolved through other means, the
shareholders who hold more than 10% of the total shareholders ’ voting rights of the company may
present a petition to the People ’s Court of the PRC for the dissolution of the company.
Variation of Class Rights
The PRC Company Law has no special provisi on relating to variation of class rights.
However, the PRC Company Law states that the State Council can promulgate individual
regulations relating to other kinds of shares.
Under the Companies Ordinance, no rights attached to any class of shares can be varied
except (i) with the approval of a special resolutio n of the holders of the relevant class at a separate
general meeting; (ii) with the consent in writing o f the holders representing at least 75% of the total
voting rights of the relevant class of shares; or (iii) if there are provisions in the articles of
association relating to the variation of those rig hts, then in accordance with those provisions.
Dispute Arbitration
In Hong Kong, disputes between shareholders on the one hand, and a company incorporated in
Hong Kong or its directors on the other hand, may be resolved through legal proceedings in the
courts.
The PRC Company Law provides that the shareholders may lodge an action in the People ’s
Court of the PRC if any director or senior executive v iolates laws, administra tive regulations or the
articles of association and infringes upon the interests of shareholders.
APPENDIX V SUMMARY OF PRINCIPAL LAWS AND REGULATIONS
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--- page 727 ---
This appendix sets out the summary of the principal provisions of the Articles of Association.
The principal objective of this appendix is to provide potential investors with an overview of the
Articles of Association, hence it does not contai n all information that may be important to potential
investors. As stated in the section headed ‘‘Documents Delivered to the Registrar of Companies and
Available on Display’’ in Appendix VIII to the Prospectus, the full Chinese text of the Articles of
Association is available for inspection.
SHARES
Share Issuance
The shares of the Company shall take the form of registered share certificates.
All the shares issued by the Company shall have a par value, which shall be RMB1 for each
share.
The Company shall issue shares in an open, fair and just manner, and each share of the same
class shall have the equal rights.
The issuing conditions and price for each share of the same class issued at the same time shall
be the same and each share subscribed by any enti ty or individual shall be subscribed at the same
price.
The Company shall fulfill the filing procedures with China Securities Regulatory Commission
(hereinafter referred to as the ‘‘CSRC ’’) in accordance with the laws for offering its shares to both
domestic and foreign investors.
Increase, Decrease and Repurchase of Shares
According to the need of the operation and development and in compliance with the
provisions of the laws and regulations, the Co mpany may increase its capital in any of the
following ways respectively upon resolution by the general meeting:
(I) public offering of shares;
(II) non-public offering of shares;
(III) distributing new shares to existing shareholders;
(IV) converting capital rese rves into share capital;
(V) any other ways stipulated under laws and adm inistrative regulations and permitted by the
CSRC.
The Company may reduce its registered capital. The reduction of registered capital shall
follow the procedures set forth in the Company Law and other regulations and provisions of the
Articles of Association.
APPENDIX VI SUMMARY OF ARTICLES OF ASSOCIATION
– VI-1 –


--- page 728 ---
The Company may not repurchase its own shares, save as under the following circumstances:
(I) reduction of the registered capital of the Company;
(II) merging with another companies holding shares in the Company;
(III) granting shares for employee share ownership schemes or share option incentives;
(IV) being requested to repurchase the shares held by the shareholders who disagree on the
resolution approved at the general meeting in relation to the merger or division of the
Company;
(V) utilizing shares for conversion into convertible corporate bonds issued by the listed
company;
(VI) being deemed necessary by the listed co mpany for the protection of the Company ’s value
and shareholders ’ interests.
Repurchase of the Company ’s shares can be carried out in a public and centralized manner, or
other ways approved by the laws and administrative regulations and the CSRC.
Repurchase of the Company ’s shares in the circumstances as stipulated in items (III), (V) or
(VI) of the preceding paragraph shall be carried out in a public and centralized manner.
If the repurchase is made for reasons set out in items (I) or (II) of the preceding paragraph, the
prior approval shall be obtained from the general meeting in accordance with the provisions of the
Articles of Association. If the repurchase is m ade for reasons set out in items (III), (V) or (VI) of
the preceding paragraph, it shall be resolved at a Board meeting with more than two-thirds of
directors present.
If relevant matters involved in the repurchase of s hares aforementioned are otherwise required
by the laws, administrative regulations, depart mental rules, the Articles of Association and the
Hong Kong Stock Exchange, such requirements and regulations shall prevail.
Share Transfer
Shares of the Company are legally transferable.
All overseas-listed foreign shares shall be transferred in ordinary or common form of transfer
or in written documents of transfer of any other form acceptable to the Board of Directors
(including standard transfer form or form of transfer as prescribed by the Hong Kong Stock
Exchange from time to time). If the transferor or transferee of the Company ’s shares are the
recognized clearing house (hereinafter referred to as the ‘‘Recognized Clearing House ’’) as defined
in the relevant ordinances of Hong Kong laws in force from time to time or its agent, the written
documents of transfer can be signed by hands or in machine printed form. All transfer documents
must be kept at the legal address of the Compan y or other places as the Board of Directors may
designate from time to time.
APPENDIX VI SUMMARY OF ARTICLES OF ASSOCIATION
– VI-2 –


--- page 729 ---
The Company refuses its own stocks as the subject matter of pledge right.
The shares of the Company held by the promoters shall not be transferred within one year
from the Company’ s establishment. The shares which have already been issued prior to the
Company ’s public offering shall not be transfer red within one year after the Company ’s stocks are
listed at the stock exchange.
The directors, supervisors and senior management of the Company shall report to the
Company the shares held by them in the Company and any alterations to the shares so held, and the
shares transferred each year by them during their terms of office shall not exceed 25% of their total
shares of the same type in the Company; the shares of the Company held by them shall not be
transferred within one year after the Company ’s stocks are listed. The aforesaid persons shall not
transfer the shares of the Company held by them for the period of six months after they leave the
Company.
When any shareholder, holding more than 5% of the Company ’s shares, of the Company or
any director, supervisor, senior management of t he Company disposes of his/her/its shares or other
securities with an equity nature in the Company wi thin six months of purchase, or purchases shares
in the Company again within six months after disposal, the proceeds derived therefrom shall be
retained for the benefit of the Company and be revoked by the Board of Directors of the Company.
However, the disposals by brokerage companies holding more than 5% of the shares in the
Company due to the fact that their underwritten shares remain unsubscribed and other
circumstances stipulated by the CSRC s hall not be subject to the restriction.
The shares or other securities with an equity nature held by any director, supervisor, senior
management and natural person shareholder referred to in the preceding paragraph shall include the
shares or other securities with an equity nature held by their spouses, parents and children, and
those held through others ’ accounts.
SHAREHOLDERS AND SHAREHOLDERS ’GENERAL MEETINGS
Shareholders
The Company shall maintain a register of shareholders with the evidences provided by the
securities registration institution, and the register of shareholders shall be sufficient evidence of the
shareholders ’ shareholdings in the Company. A shareholder shall enjoy rights and assume
obligations according to the class of shares held by him; shareholders who hold shares of the same
class shall enjoy the same rights and assume the same obligations.
All of the issuance or transfer of the overseas-listed foreign-invested shares shall be recorded
on the register of shareholders for holders of overseas-listed foreign-invested shares deposited at the
place of listing in accordance with the Articles of Association. Any shareholder who is registered in
the register of shareholders or any person requires h is/her/its name to be registered in the register of
shareholders may apply to the Company for a replacement certificate in respect of such shares (the
‘‘Relevant Shares ’’) if his/her/its share certificate (the ‘‘Original Share Certificate’’ ) is lost.
APPENDIX VI SUMMARY OF ARTICLES OF ASSOCIATION
– VI-3 –


--- page 730 ---
Applications for the replacement of overseas-lis ted foreign share certificates shall be dealt
with in accordance with the law, rules of stock exc hanges and other relevant regulations of the
place where the original register of holders of overseas-listed foreign shares is kept.
The shareholders of the Company shall have the following rights:
(I) to receive dividends and profit distributions in any other form in proportion to the shares
they hold;
(II) to lawfully require, convene, preside over or attend general meetings either in person or
by proxy and exercise the corresponding voting right;
(III) to supervise, manage, make recommendations or make inquiries about the operations of
the Company;
(IV) to transfer, bestow or pledge the shares held by them in accordance with laws, relevant
requirements of the securities regulatory authorities of the place where the Company ’s
shares are listed and provisions of the Articles of Association;
(V) to inspect and duplicate the Articles of Association, the register of shareholders, the
minutes of shareholders ’ general meeting, the resolutions of the Board of Directors, the
resolutions of the Board of Supervisors, and the financial reports of the Company;
shareholders individually or jointly holding more than three percent of the shares of the
Company for more than 180 days in succession may request to inspect the accounting
books and accounting vouchers of the Company. In such case, the request shall be made
in accordance with the requirements of the Company Law;
(VI) in the event of the termination or liquidation of the Company, to participate in the
distribution of the remaining property of the Company in proportion to the shares held by
them;
(VII) to require the Company to buy their shares in the event of their objection to resolutions
of the general meeting concerning merger or division of the Company;
(VIII) to enjoy other rights stipulated by laws, adminis trative regulations, departmental rules or
the Articles of Association.
If any shareholder proposes to inspect the relevant information mentioned in the preceding
article or asks for information, the said shareholder shall provide the Company with written
documents bearing evidence of the class and number of shares held by the said shareholder, and the
Company will provide the information as required by the said shareholder upon verification of the
said shareholder ’s identity.
Where the procedures for convening, or the voting method used at, a shareholders ’ general
meeting or a meeting of the Board of Directors of the Company, violates any law, administrative
regulation or the Articles of Association, or where any resolution contains any content violating the
Articles of Association, the shareholders may, wi thin 60 days from the date on which the resolution
APPENDIX VI SUMMARY OF ARTICLES OF ASSOCIATION
– VI-4 –


--- page 731 ---
is made, request the People ’s Court to revoke such resolution. Non etheless, the aforesaid provision
is not applicable to any minor irregularities in the procedures for convening, or the voting method
used at, a shareholders ’ general meeting or a meeting of the Board of Directors, which do not
materially affect the resolution.
Shareholders who are not notified to participate in the shareholders’ general meeting may,
within 60 days from the date when they know or should have known that the resolution of the
shareholders ’ general meeting has been made, file a request before the People ’s Court to revoke
such resolution; the right of revocation shall lapse if such right is not exercised within one year
from the date on which the resolution is made.
Where the Company incurs losses as a result of violation by directors, supervisors and
members of the senior management of laws, administrative regulations or the Articles of
Association in the course of performing their duties with the Company, the shareholders
individually or in aggregate holding 1% or more of the shares of the Company for more than 180
consecutive days shall be entitled to request in writing the Board of Supervisors to initiate
proceedings to the People’ s Court; where the Company incurs losses as a result of violation by the
Board of Supervisors of any provisions of laws, administrative regulations or the Articles of
Association in the course of performing its duti es with the Company, such shareholders may make a
request in writing to the Board of Director s to initiate proceedings to the People ’s Court.
In the event that the Board of Supervisors or the Board of Directors refuses to initiate
proceedings after receiving the written request of s hareholders stated in the foregoing paragraph, or
fails to initiate such proceedings within 30 days from the date of receiving such request, or in case
of emergency where failure to initiate such proc eedings immediately will result in irreparable
damage to the Company ’s interests, the shareholders described in the preceding paragraph shall
have the right to for the benefit of the Company initiate proceedings to the People ’s Court directly
in their own names.
Where the Company incurs losses as a result of infringement upon the legitimate rights and
interests of the Company by any other persons, the shareholders stated in the preceding paragraph
may initiate proceedings to the People ’s Court pursuant to the provisions of the first two
paragraphs.
Shareholders may initiate proceedings to the People’ s Court in the event that a director or a
senior management member has violated laws, ad ministrative regulations or the Articles of
Association, damaging the i nterests of shareholders.
The shareholders of the Company shall have the following obligations:
(I) to observe laws, administrative regulations and the Articles of Association;
(II) to pay capital contribution as per the shares subscribed for and the method of
subscription;
(III) not to withdraw shares unless in the circumstances stipulated by laws and regulations;
APPENDIX VI SUMMARY OF ARTICLES OF ASSOCIATION
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--- page 732 ---
(IV) not to abuse shareholder ’s right to harm the interests of the Company or other
shareholders; not to abuse the Company ’s position as an independent legal person or
shareholder’s limited liability protection to harm the interests of the creditors of the
Company;
(V) to fulfil other obligations stipulated by laws, administrative regulations and the Articles
of Association.
If any shareholder of the Company abuses his/her shareholder ’s right, thereby causing any loss
to the Company or other shareholders, the said shareholder shall be liable for compensation
according to law.
If any shareholder of the Company abuses the Company ’s position as an independent legal
person or shareholder’ s limited liability protection for the purpose of evading repayment of debts,
thereby seriously damaging the interests of the creditors of the Company, the said shareholder shall
bear joint and several liabilities for the Company ’s debts.
If any shareholder holding more than 5% voting shares of the Company pledges the said
voting shares, the said shareholder shall submit a written report to the Company on the date on
which the said pledge is executed.
The controlling shareholder(s), de facto control ler(s), director(s), supervisor(s) and senior
management(s) of the Company shall not use the connected relations to the detriment of the
interests of the Company; otherwise, they shall b e liable for compensation for any loss incurred to
the Company.
The controlling shareholder(s) and de facto c ontroller(s) of the Company shall perform
fiduciary duty to the Company and general public shareholders thereof. The controlling
shareholder(s) shall exercise capital contributors ’ rights in strict accordance with laws, shall not
damage the legitimate rights and interests of the Company and general public shareholders by such
means as profit distribution, asset reorganization, external investment, fund appropriation, loan and
guarantee and shall not abuse their controlling status to damage the interests of the Company and
general public shareholders.
Except the obligations required in laws, administrative regulations or listing rules of the stock
exchange in the place where the stocks of the Company are listed, when the controlling shareholder
of the Company exercises his/her/its power of shareholder, it shall not make any decision
detrimental to the interests of all or some of sh areholders on the following issues in order to
exercise his/her/its voting right:
(I) to relieve a director or supervisor of his dut y to act honestly in the best interests of the
Company;
(II) to approve the expropriation by a director or supervisor (for his own benefit or for the
benefit of other person(s)), in any manner, of the Company ’s assets, including (but not
limited to) any opportunity beneficial to the Company;
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--- page 733 ---
(III) to approve the expropriation by a director or supervisor (for his own benefit or for the
benefit of other person(s)) of the individual rights of other shareholders, including (but
not limited to) rights to distributions and voting rights save for a restructuring of the
Company submitted to the general meeting for approval in accordance with the Articles
of Association.
The General Meeting
The general meeting is the organ of authority of the Company and shall exercise the following
functions and powers:
(I) to elect or replace the directors or supervisors who are not representatives of the
employees and decide on matters relating to the remuneration of directors and
supervisors;
(II) to consider and approve reports of the Board of Directors;
(III) to consider and approve reports of the Board of Supervisors;
(IV) to consider and approve the Company’ s proposals for profit distribution and for recovery
of losses;
(V) to resolve on any increase or reduction in the Company ’s registered capital;
(VI) to resolve on the issue of bonds by the Company;
(VII) to resolve on issues such as merger, division, dissolution, liquidation or change of the
form of the Company;
(VIII) to amend the Articles of Association of the Company;
(IX) to resolve on the Company ’s appointment, dismissal or non-renewal of accounting firms,
as well as on matters of remuneration of the accounting firms;
(X) to consider and approve the guarantees in a ccordance with the Articles of Association;
(XI) to consider and approve the Company ’s purchase or disposal of major assets within one
year with the aggregate transaction amount exceeding 30% of the latest audited total
assets of the Company;
(XII) to consider and approve major transactions and connected transactions required to be
considered and approved by the shareholders ’ general meeting pursuant to laws,
administrative regulations, the Listing Rules of the Hong Kong Stock Exchange and the
Articles of Association;
(XIII) to consider and approve the change of use of proceeds;
(XIV) to consider and approve share incentive schemes and employee share ownership scheme;
APPENDIX VI SUMMARY OF ARTICLES OF ASSOCIATION
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--- page 734 ---
(XV) to consider and approve the Company ’s external donations exceeding 10% of the
previous year ’s net profit;
(XVI) to consider other matters required to be re solved at the general meeting in accordance
with laws, administrative regulations, depar tmental rules, normative documents, relevant
requirements of securities regulator of the places where the shares of the Company are
listed and the Articles of Association.
The shareholders ’ general meeting may authorize the Board of Directors to decide to issue
shares not exceeding 50% of the issued shares with in three years, but if non-monetary assets are
used as capital contributions, a resolution of the shareholders ’ general meeting shall be required. If
the Board of Directors decides to issue shares in ac cordance with the preceding paragraph, which
results in changes in the registered capital and issued shares of the Company, the amendments to
such matters recorded in the Articles of Association do not need to be further voted on by the
shareholders ’ general meeting. Subject to the laws, regulations and mandatory provisions of the
listing rules of the listing place, the general meeting may authorize or entrust the Board of
Directors to handle the matters authorized or entrusted by it.
Save and except that the Company is in the crisis and so on in the peculiar circumstance, the
Company shall not, without the approval of a general meeting by special resolution, enter into any
contract with any person other than a director, s upervisor, general manager or other senior
management member of the Company whereby the responsibility for the management of the whole
or a substantial part of the business of the Company is delegated to such person.
General meetings are divided into annual general meetings and extraordinary general meetings.
Annual general meetings shall be held once every year within six months after the end of previous
financial year.
In any of the following circumstances, the Company shall convene an extraordinary general
meeting within two months from the date upon which the circumstance occurs:
(I) the number of directors falls short of the quorum stipulated in the Company Law or is
less than two-thirds of the number specified in the Articles of Association;
(II) the outstanding losses of the Company amount to one-third of the Company ’s total paid-
in share capital;;
(III) upon a written request by shareholder(s) tha t individually or collectively holding 10% or
more of the Company’ s shares (actual numbers of shares shall be calculated as per the
shareholdings of the requesting shareholde rs on the date when such a written request is
made);
(IV) the Board deems necessary;
(V) the Board of Supervisors proposes to convene such meeting;
APPENDIX VI SUMMARY OF ARTICLES OF ASSOCIATION
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--- page 735 ---
(VI) when over one-half of all the independen t non-executive directors of the Company agree
to hold the meeting;
(VII) other circumstances stipulated by laws, adm inistrative regulations and the Articles of
Association occur.
Proposal and Notice of Shareholders ’General Meeting
Whenever the Company convenes the annual gen eral meeting, the Board of Directors, the
Board of Supervisors, as well as shareholders individually or jointly holding 1% or more of shares
of the Company shall have the right to propose motions to the Company. The convener of the
Board shall include in the agenda of the meeting the issues raised in the proposals that fall within
the scope of responsibility of the general meeting, unless the proposal violates the provisions of the
laws, administrative regulations or the Articles of Association or does not fall within the scope of
the functions and powers of the Shareholders ’ general meeting.
Shareholders individually or jointly holdin g 3% or more of shares of the Company may bring
forward provisional proposals and submit the same in writing to the convener ten days prior to the
general meeting. the provisional proposals shoul d have clear topics and specific resolutions. The
convener shall issue a supplementary notice of the general meeting within two days of receiving the
proposals to disclose particulars of the provisional proposals, unless the proposal violates the
provisions of the laws, administrative regulations or the Articles of Association or does not fall
within the scope of the functions and powers of the Shareholders ’ general meeting.
Except as provided in the preceding paragraph, the convener shall not amend the proposals set
out in the notice of the shareholders ’ general meeting or put up any new proposals after the
issuance of the notice of the shareholders ’ general meeting.
When the Company convenes an annual general meeting, written notice of the meeting shall
be given at least 21 days before the date of the meeting, and when the Company convenes an
extraordinary general meeting, written notice of the meeting shall be given 15 days before the date
of the meeting.
The period of the despatching of the notice shall exclude the date convening the meeting.
Where relevant laws, regulations and the securities regulatory authorities of the jurisdiction where
the shares of the Company are listed stipulate otherwise, such provisions shall prevail.
Convening of Shareholders ’General Meetings
A shareholders ’ general meeting shall be presided over by the chairman of the Board of
Directors. If the chairman is unable or fails to discharge his/her duties, vice chairman of the Board
of Directors shall preside over the meeting; if th e vice chairman of the Board of Directors is unable
or fails to discharge his/her duties, half or more of the directors shall designate a director to preside
over the meeting.
APPENDIX VI SUMMARY OF ARTICLES OF ASSOCIATION
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--- page 736 ---
If a shareholders ’ general meeting is convened by the Board of Supervisors, the chairman of
the Board of Supervisors shall preside over the meeting. If the chairman of the Board of
Supervisors is unable or fails to discharge his/her duties, half or more of the supervisors shall
designate a supervisor to preside over the meeting.
If a shareholders ’ general meeting is convened by the shareholders themselves, the convener
will nominate a representative to preside over the meeting.
When a shareholders’ general meeting is convened, if the chairman of the meeting contravenes
the rules of procedure, rendering the meeting im possible to proceed, with the consent from more
than half of the attending shareholders with voting rights, one person may be nominated at the
shareholders ’ general meeting to serve as the chairman and the meeting may proceed. Where the
shareholders fail to elect a chairman for any reason s, the shareholder (including his proxy) present
in person or by proxy who holds the largest number of shares carrying the right to vote thereat shall
be the chairman of the meeting.
Voting and Resolutions of Shareholders ’General Meetings
Resolutions of the shareholders’ general meeting are divided into ordinary resolutions and
special resolutions.
Ordinary resolutions of the shareholders ’ general meeting shall be adopted by shareholders in
attendance (including proxies) holding more than half of the voting rights.
Special resolutions of the shareholders’ general meeting shall be adopted by shareholders in
attendance (including proxies) holding a t least two-thirds of the voting rights.
The following matters shall be adopted by or dinary resolution at the general meeting:
(I) the work reports of the Board of Directors and the Board of Supervisors;
(II) the profit distribution plans and plans for making up losses drafted by the Board of
Directors;
(III) the appointment and dismissal and remuneration of the members of the Board of
Directors and the Board of Supervisors and the method of payment of the remuneration;
(IV) the annual report of the Company;
(V) matters other than those requiring the approval by way of special resolutions in
accordance with the laws, administrative regulations, the listing rules of the stock
exchange(s) where the Company ’s shares are listed or the Articles of Association.
The following matters shall be adopted by special resolution at the shareholders ’ general
meeting:
(I) the increase or reduction of the registered capital by the Company;
(II) the division, spin-off, merger, dissolution, liquidation of the Company;
APPENDIX VI SUMMARY OF ARTICLES OF ASSOCIATION
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--- page 737 ---
(III) the amendments to the Articles of Association of the Company;
(IV) the Company’ s purchase or disposal of material assets within one year or the amount of
guarantee individually or aggregately excee ding 30% of the latest audited total assets of
the Company;
(V) equity incentive plans;
(VI) repurchase of shares of the Company;
(VII) other matters required by laws, administrat ive regulations, the listing rules of stock
exchanges on which the Company ’s shares are listed or the Articles of Association, or
resolved at a shareholders ’ general meeting, by an ordinary resolution, to be of a nature
that may have a material impact on the Company and should be adopted by special
resolution.
When a shareholder (or a proxy) exercises his or her voting rights based on the number of
voting shares which he or she represents, each share shall entitle him or her to one vote. When a
poll is held, shareholders (including proxies) hav ing the right to two or more votes need not use all
of their voting rights in the same way as ‘‘for’’, ‘‘against ’’or ‘‘abstain ’’.
No voting rights shall attach to the Company ’s shares held by the Company, and such shares
shall not be counted among the total number of v oting shares present at a general meeting.
Where any shareholder is, under applicable laws and regulations and the listing rules of the
stock exchange where the Company ’s shares are listed, required to abstain from voting on any
particular matter being considered or restricted to voting only for or only against any particular
matter being considered, any votes cast by or on behalf of such shareholder in contravention of
such requirement or restriction shall not be counted.
DIRECTORS AND BOARD OF DIRECTORS
Directors
The directors shall be elected or replaced by th e general meeting, and may be removed from
their office prior to the conclusion of the term thereof by the general meeting. The directors shall
have a term of three years and may be re-elected at the expiration of the term of office.
The term of office of a director shall be calculated from the date when he takes office, until
expiration of the term of office of the Board of the current session. In case of failure to timely elect
a director upon expiration of the director ’s term of office, the existing directors shall continue to
perform their duties in accordance with laws, administrative regulations and departmental rules and
the Articles of Association until the re -elected directors assume their office.
Directors can be concurrently served by managers or other senior management members.
However, the total number of directors who concurrently hold the positions of general manager or
other senior management and directors held by employee representatives shall not exceed one-half
of the total number of directors of the Company.
APPENDIX VI SUMMARY OF ARTICLES OF ASSOCIATION
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--- page 738 ---
A director may resign before the expiry of his/her term of office. The resigning director shall
submit to the Board of Directors a written resignation. Relevant details shall be disclosed by the
Board of Directors within two days. In case that the number of directors falls below the quorum as
a result of the resignation of a director, the incumbent director shall continue to perform his/her
duties in accordance with laws, administrative regulations and departmental rules and the Articles
of Association until the re-elected director assume his/her office.
Independent Non-Executive Directors
The Company shall establish an independen t non-executive director system. The term
‘‘independent non-executive director ’’means a director who does not hold any position in the
Company other than director and who has no relationship with the Company or its substantial
shareholder(s) (only provided under this section that substantial shareholders are those shareholders
individually or jointly holding more than 5% of total number of the Company ’s shares with voting
rights) that could hinder his or her making independent and objective judgments, and who is in
compliance with independence provisions of the listing rules in the place where the Company ’s
shares are listed. Independent non-executive dir ectors shall account for more than one third of the
members of the Board of the Company, at least one of whom shall be a financial or accounting
professional and a person who is ordinarily resident in Hong Kong.
The term of office for independent non-executive directors shall be three years, and eligible to
offer themselves for re-election, but shall not exceed nine years, unless otherwise provided by
relevant laws, regulations and the listing r ules of the stock exchange where the Company’ s shares
are listed.
If an independent non-executive director fails t o meet the conditions of independence or other
circumstance arises which makes it inappropri ate for him or her to perform his or her duties and
responsibilities as an independent non-executive director, thereby causing the failure of the
Company to meet the requirements of the Articles of Association concerning the number of
independent non-executive directors, the Compa ny shall make up the number of independent non-
executive directors in accordance with regulations.
Board
The Company shall have a Board which shall be accountable to the general meetings. The
Board shall consist of seven to nine directors, including not less than three independent non-
executive directors, which should rep resent at least a third of the Board.
The Board shall be accountable to the general meeting and perform the following duties and
powers:
(I) to convene general meetings an d report to general meetings;
(II) to implement resolutions of general meetings;
(III) to formulate medium and long-term strategic plans for the Company ’s development, and
to monitor and adjust their implementation;
APPENDIX VI SUMMARY OF ARTICLES OF ASSOCIATION
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--- page 739 ---
(IV) to determine the Company ’s business objectives, business plans and investment and
financing programs;
(V) to prepare the profit distribution plan and loss makeup plan of the Company;
(VI) to formulate proposals for the Company in respect of increase or reduction of registered
capital, issue of bonds or other securities and the listing thereof;
(VII) to formulate plans for material acquisitions, purchase of shares of the Company, merger,
division, dissolution or transformation of the Company;
(VIII) to determine, within the authority granted by the general meeting, such matters as
external investment, acqui sition and disposal of assets, asset mortgage, external
guarantee, consigned financial manageme nt, connected transactions and external
donations, etc.;
(IX) to determine the establishment and staffing of the corresponding working organizations
of the Board of Directors and the internal management organizations of the Company ;
(X) to decide on appointing or dismissing general manager, secretary to the Board and other
senior management as well as their remunerations, rewards and penalties; to decide on
appointing or dismissing senior managemen t including vice general manager(s) and
secretary to the Board of Directors and chief financial officer of the Company in
accordance with the nominations by gene ral manager, and to decide on their
remunerations, rewards and penalties;
(XI) to set up the basic management system of the Company;
(XII) to formulate the proposals for any amendment to the Articles of Association;
(XIII) to manage information disclosure of the Company;
(XIV) to propose to the general meeting the appointment or replacement of the accounting firms
which provide audit services to the Company;
(XV) to listen to work reports of the general manager of the Company and review his work;
(XVI) to authorize the chairman of the Board of Directors and general manager of the Company
to decide on major matters of the Company within the scope of the authority delegated to
them;
(XVII) to oversee and approve major environmental, social and governance issues, identify
potential risks in business development plans and make decisions based on the
recommendations made;
(XVIII) to exercise other functions and powers conferred by laws, regulations and listing rules of
the stock exchange where the Company ’s shares are listed, shareholders ’ general
meetings and the Arti cles of Association.
APPENDIX VI SUMMARY OF ARTICLES OF ASSOCIATION
– VI-13 –


--- page 740 ---
The Board of Directors ’ resolutions in respect of the matters as set forth in the preceding
paragraph may be passed by the affirmative vote of a simple majority of all the directors.
The Board of Directors shall make explanation to the shareholders ’ general meeting in respect
of auditors ’ report with a non-standard opinion issued by the certified public accountants regarding
the financial statements of the Company.
The rules of procedures of the Board of Directors shall be formulated by the Board of
Directors and be approved by general meetings.
The Board of Directors shall have one chairma n and, as appropriate, a vice chairman, who
shall be elected by the votes of more than one hal fo ft h em e m b e r so ft h eB o a r do fD i r e c t o r s .T h e
chairman and vice chairman of the Board of Directors shall be elected or removed by more than
one half of all directors, and shall hold office fo r a term of three years, who are then eligible to
offer themselves for re-election and re-appointment. The chairman of the Board of Directors shall
exercise the following functions and powers:
(I) to preside over general meetings and to convene and preside over the Board meetings;
(II) to monitor and check the general meetings and the implementation of the resolutions of
the Board of Directors;
(III) to exercise other functions and powers conferred by the Board of Directors.
Meetings of the Board of Directors are divided into regular meetings and extraordinary
meetings. The Board of Directors shall hold at least two regular meetings each year. Meetings shall
be convened by the chairman of the Board.
The notice of Board meeting or extraordinary Board meeting shall be served to all directors,
supervisors, the general manager and the secretar yt ot h eB o a r db ym e a n so fh a n d ,m a i lo rf a c s i m i l e
10 days before the date of the meeting (for regular meetings) or by means of written notice five
days before the date of the meeting (for extraordi nary meetings). If an extraordinary meeting of the
Board of Directors needs to be held as soon as possible due to urgent circumstances, a meeting
notice may be given at any time by telephone or other oral method, provided that the convener
gives an explanation thereof at the meeting and the same is entered into the meeting minutes.
The Board meetings shall only be held when more than half of the directors attend the
meeting. Resolutions adopted at the Board meeting must be approved by more than half of the
directors.
The Board meetings shall be attended by the directors in person. If a director is unable to
attend a meeting in person for any reason, such dir ector may appoint, in writing, another director to
attend the meeting on his/her behalf. The autho rity delegated shall be specified in the power of
attorney. A director who attends the meeting on behalf of another director shall exercise the rights
of the director within the delegated authority. If a director fails to attend a Board meeting in person,
and has not appointed a representative to attend the meeting on his/her behalf, the director shall be
deemed to have waived his/her rights to vote at the meeting.
APPENDIX VI SUMMARY OF ARTICLES OF ASSOCIATION
– VI-14 –


--- page 741 ---
Supervisors may attend meetings of the Board of Directors in a non-voting capacity. The
general manager and the secretary to the Board o f Directors, if they do not concurrently serve as
directors, shall attend meetings of the Board of Directors in a non-voting capacity. When the
meeting convener deems it necessary, he or she may notify other relevant persons to attend a
meeting of the Board of Directors in a non-voting capacity.
Votes at on-site meetings of the Board of Directors (including meetings held by video
conference) shall be held by disclosed ballot. If a director attends an on-site meeting by telephone
conference or by way of other such communication equipment, so long as the directors attending
the meeting in person can clearly hear what he/s he says and communicate with him/her, all the
directors in attendance shall be deemed to have attended the meeting in person. Subject to ensuring
the full expression by the directors of their opini ons at a meeting of the Board of Directors, votings
and resolutions may be adopted by means of correspondence which shall be signed by the directors
in attendance, but a regular meeting of the Boar d of Directors, a meeting at which a substantial
shareholder (for the purpose of this section only, substantial shareholders refer to shareholders who
individually or collectively hol d at least 10% of total shares with voting rights of the Company) or
a director has a conflict of interest in a matter to be considered which the Board of Directors has
determined to be material and a meeting held t o discuss the appointment and dismissal of the
secretary to the Board of the Company shall not be held by means of correspondence. A deadline
shall be set for voting by means of correspondence, and if a director fails to express his/her opinion
within the specified deadline, he/she shall be deemed to abstain.
When a director and the enterprises involved in the resolutions of the Board meeting have
connected relations, such director shall not exercise his/her voting rights on such proposal nor can
he/she exercise any voting rights on behalf of others directors. The meeting may be held if it is
quorate by more than half of the unconnected directors. The resolutions of the Board meeting shall
be passed by more than half of unconnected directors. If the number of unconnected directors
attending the Board meeting is less than three, such matter shall be put forward to the general
meeting for consideration.
The Board of Directors shall keep minutes of re solutions on matters discussed at meetings.
The minutes shall be signed by the directors and the recorder present at the meeting. Custody
period of minutes shall be ten years. The directors shall be liable for the resolutions of the Board of
Directors. If a resolution of the Board of Directors v iolates the laws, regulations or the Articles of
Association and results in the Company sustaining serious losses, the directors participating in the
resolution shall be liable to compensate the Company. However, if it can be proved that a director
expressly objected to the resolution when the resolution was voted on, and that such objection is
recorded in the minutes of the meeting, such director may be released from such liability.
Special Committees under the Board
Special committees, such as the Strategy Comm ittee, the Nomination Committee, the Audit
Committee and the Remuneration and Evaluation Committee, shall be set for the Board. Such
special committees comprise only directors. The independent directors in each of the Audit
Committee, the Nomination Committee and the Remuneration an d Assessment Committee shall
APPENDIX VI SUMMARY OF ARTICLES OF ASSOCIATION
– VI-15 –


--- page 742 ---
form the majority in such committees and the convener of such committees shall be an independent
non-executive director. The convener of the Audit Committee shall be an accounting professional.
The Board is responsible for making the work rules of such special committees, and standardizing
such special committees ’ operations.
Secretary to the Board
The Company shall have a secretary to the Board, who shall be engaged and dismissed by the
Board of Directors. The secretary to the Board shall be a member of the senior management
members of the Company and be accountable to the Company and the Board of Directors
The secretary to the Board shall be a natural person with the necessary professional
knowledge and experience. He or she shall be appointed by the Board of Directors. His or her main
duties shall be as set forth below:
(I) to prepare and deliver reports and documents issued by the Board of Directors and
general meetings as required by competent authorities;
(II) to organize Board meetings and general m eetings, be responsible for recording of the
meetings and keep meeting documents and records;
(III) to handle information disclosure of the Company;
(IV) to ensure that individuals who are entitled to obtain relevant records and documents may
access to them in time;
(V) to perform other duties as stipulated in laws, regulations and these Articles of
Association, and as required by security regulator of locality on which the Company’ s
shares are listed.
General Manager and Other Senior Management Members
The Company shall have one general manager, who shall be nominated by the chairman of the
Board of Directors and be appointed and dismissed by the Board of Directors. The Company shall
have a number of deputy general managers, one secretary to the Board of Directors and one chief
financial officer.
Each term of office of the general manager and the deputy general manager shall be three
years and may be extended if he/she is reappointed.
Persons assuming administrative offices other than director and supervisor in the controlling
shareholder of the Company shall not serve as senior management of the Company.
The general manager shall be accountable to th e Board of Directors and shall exercise the
following functions and powers:
(I) to be in charge of the management on the production and operation of the Company, to
organize and implement the resolutions of the Board of Directors, and to report to the
Board of Directors;
APPENDIX VI SUMMARY OF ARTICLES OF ASSOCIATION
– VI-16 –


--- page 743 ---
(II) to determine the annual business plan and investment plan of the Company;
(III) to determine the plan for establishing internal management organizations of the
Company;
(IV) to determine the general management system of the Company;
(V) to determine the rules and regulations of the Company;
(VI) to propose the Board of Directors to appoint or dismiss vice general manager, chief
financial officer, secretary to the Board and other senior management of the Company;
(VII) to be responsible for handling the major emergencies of the Company;
(VIII) to decide on and handle external affairs on behalf of the Company within the scope of
the Board ’s authorization;
(IX) to research and propose the Company ’s strategic plan and medium- and long-term
development plan;
(X) to draft the plan of the Company ’s annual operation budgets, investment budgets and
finance budgets;
(XI) to decide on transactions that do not meet the following criteria:
1. The total assets related to the transact ion (if it has both book value and assessed
value, the higher will prevail) in the to tal assets upon the latest auditing of the
Company shall be over 10%;
2. The amount of transaction (including deb ts and expenses payable) in the net assets
upon the latest auditing of the Company shall be over 10%;
3. The net assets of subject of transaction (such as equity) related to the transaction (if
it has both book value and assessed value, t he higher will prevail) in the net assets
upon the latest auditing of the listed company shall be over 10%;
4. The profit arising from transaction in the net profit upon auditing in the latest fiscal
year of the Company shall be over 10%;
5. The operating revenue of subjective of tra nsaction (such as equity) in the latest
fiscal year in the operating revenue upon auditing in the latest fiscal year of the
Company shall be over 10%;
6. The net profit of object of transaction (such as stock right) in the latest fiscal year
in the net profit upon auditing in the lates t fiscal year of the Company shall be over
10%.
APPENDIX VI SUMMARY OF ARTICLES OF ASSOCIATION
– VI-17 –


--- page 744 ---
(XII) other functions and powers conferred by t he Articles of Association or the Board of
Directors.
The general manager of the Company may attend the Board meetings, but only the managing
director has a voting right at the Board meeting.
The general manager shall formulate the working rules of the general manager upon the Board
of Directors ’ approval before the implementation of such rules.
Board of Supervisors
The directors, general manager and other sen ior management members of the Company shall
not act concurrently as supervisors.
Each supervisor shall serve for a term of three years. Upon expiry of the term, the supervisor
may be re-appointed upon re-election.
The Company shall have a Board of Supervisors. The Board of Supervisors consists of three
supervisors, including one employee representative supervisor, who shall be elected democratically
at employee representatives ’ meetings of the Company or in other forms. The Board of Supervisors
shall have one chairman. The chairman of the Boa rd of Supervisors shall be elected by the votes of
more than one half of the members of the Board of Supervisors.
The Board of Supervisors shall be accountable to the general meeting and shall exercise the
following functions and powers according to law:
(I) reviewing the regular reports of the Company prepared by the Board of Directors and
submit its written opinions thereon;
(II) examining the financial matters of the Company;
(III) supervising the performance of the directors and senior manag ement in the course of
performing their duties, and proposing the removal of directors or senior management
who violate the laws, administrative regulations or the Articles of Association or
resolutions of shareholders ’ general meeting;
(IV) demanding remedial action of directors, the general manager and senior management if
the act of a director or senior management member is detrimental to the interest of the
Company;
(V) proposing the holding of extraordinary general meetings and, in the event that the Board
of Directors fails to convene and preside ov er a general meeting in accordance with the
Company Law, to convene and preside over such a meeting in accordance with the law;
(VI) proposing motions to shareholders’ general meetings;
(VII) suing directors or senior management memb ers in accordance with the Article 189 of the
Company Law;
APPENDIX VI SUMMARY OF ARTICLES OF ASSOCIATION
– VI-18 –


--- page 745 ---
(VIII) conducting an investigation and, if necessary, e ngaging professional organizations, such
as accounting firms and law firms, to assist if irregularities in the operation of the
Company is found.
All reasonable expenses incurred in respect of the employment of professionals such as
lawyers, registered accountants and practising auditors as required by the Board of Supervisors in
the discharge of its duties shall be borne by the Company.
At least one meeting of the Board of Supervisors shall be held every six months, and the
chairman of the Board of Supervisors shall convene and preside over meetings of the Board of
Supervisors. If the chairman is unable or fails to perform his/her duties, a supervisor selected by
over half of the supervisors shall convene and preside over the meeting.
The Board of Supervisors shall formulate the ru les of procedure for the Board of Supervisors
meetings regarding the procedures for discussion and voting, so as to ensure that the Board of
Supervisors can make reasonable decisions efficiently.
Votes at meetings of the Board of Supervisors shall be held by disclosed ballot and each
supervisor shall have one vote. The resolution of the chairman of the Board of Supervisors shall be
subject to the approval of over half of its members by voting.
The Board of Supervisors shall maintain minute s of the meetings so as to record the decisions
on the matters considered. Participating supervisors shall sign on the minutes. Any supervisor who
has different opinions on the meeting minutes may make written explanation when signing the
minutes.
The minutes of meetings of the Board of Supervisors, together with the meeting notice,
meeting materials, meeting sign-in register, the instruments of appointment of supervisor proxies,
the sound recording of the meeting and the vote ballots shall serve as the Company ’s files and be
kept by the office of the Board of Supervisors for a period of not less than ten years.
FINANCIAL AND ACCOUNTING SYSTEM AND PROFIT DISTRIBUTION
Our Company shall establish it s financial and accounting syst em and internal audit system in
accordance with the laws, administrative regul ations, and the rules stipulated by relevant
authorities.
The Company shall prepare financial reports at the end of each fiscal year. Such reports shall
be audited by an accounting firm in accordance with the law.
The Company shall publish 2 financial reports each fiscal year, namely an interim financial
report within 60 days after the end of the first six months of the fiscal year and an annual financial
report within 120 days after the end of the fiscal year.
The Board of the Company shall place before the shareholders at every annual general
meeting such financial reports as required by relevant laws to be prepared by the Company.
APPENDIX VI SUMMARY OF ARTICLES OF ASSOCIATION
– VI-19 –


--- page 746 ---
The financial reports of the Company shall be made available for inspection by shareholders
twenty-one days prior to an annual general meetin g. Each shareholder of the Company shall have
the right to obtain a copy of the financial reports referred to in this chapter.
The Company shall deliver the reports mentioned in the preceding paragraph to each holder of
overseas listed foreign shares by pre-paid mail at least twenty-one days before the convening of the
annual general meeting. The address of the recipien t shall be the registered address as shown on the
register of members. Subject to the obligations imposed by laws, administrative regulations or
required by the listing rules of the place on which the Company ’s shares are listed, the notice of the
meeting may also be given by way of public announcement (including publishing on the website of
the Company).
The Company shall not maintain a separate accounts book except the one required by law. The
assets of the Company shall not be deposited in any account opened under a personal name.
The Company shall, when distributing the post-tax profit of a fiscal year, extract 10% of the
profit to list it in the statutory reserves of the Company. The Company may not further extract the
statutory reserves when its accumulative amount represents 50% or more of the registered capital of
the Company.
When the statutory reserves of the Company fa lls short to offset the loss of prior years, the
Company shall use the profit earned during the year to offset the loss before extracting the statutory
reserves according to the previous paragraph.
After extracting the statutory reserves out of th e post-tax profit, the Company may, subject to
the resolution of the general meeting, extract the d iscretionary reserve out of the post-tax profit.
As for the remaining after-tax profits after the Company has covered loss and has extracted
statutory reserves, shareholders shall be allocat ed pursuant to the ratio of the shareholding of the
shareholders, except for those all ocations not pursuant to the rati o of the shareholding as provided
by the Articles of Association.
If the shareholders ’ general meeting breaches the preceding paragraph by distributing the
profit to the shareholders before the loss recovery and accrual of the statutory reserves, the
shareholders shall return to the Company the profit distributed in violation of the law.
The company shares held by the Company shall not participate in the profit distribution.
The reserves of the Company are used to offset the losses of the Company, expand business
scale or bolster registered capital. The discretionary reserve and the statutory reserve shall first be
used in making up the losses of the Company, and for any losses left to be set off, the capital
reserve may be utilized in accordance with the provisions.
When the statutory reserve is converted into registered capital, the remaining amount of such
reserve shall not be less than 25% of the registered capital of the Company before the conversion.
APPENDIX VI SUMMARY OF ARTICLES OF ASSOCIATION
– VI-20 –


--- page 747 ---
The Company shall appoint a receiving agent for holders of overseas-listed foreign shares. The
receiving agent shall receive on behalf of such shareholders any dividends or other amounts payable
by the Company to them in respect of the overseas-listed foreign shares, and such payment shall be
kept by the receiving agent on such shareholders ’ behalf for any payment to them.
The receiving agents appointed by the Company shall meet the requirements of the laws of the
place where the Company’ s shares are listed or the relevant regulations of the stock exchange.
The receiving agents appointed b y the Company for holders of overseas-listed foreign shares
listed on the Hong Kong Stock Exchange shall be a trust company registered under the Trustee
Ordinance of Hong Kong.
After the general meeting of the Company makes a r esolution on profit distribution plan, the
Board of the Company shall complete distribution of dividend (or share) within two months after
such general meeting.
The cash dividends and other amounts paid by t he Company to its shareholders of Domestic
Shares shall be distributed in form of Renminbi. The cash dividends and other amounts paid by the
Company to holders of overseas-listed forei gn shares shall be denominated and declared in
Renminbi and paid in foreign currency. The for eign currency for the cash dividends and other
payments by the Company to holders of overseas list ed foreign shares and other holders of foreign
shares shall be handled in accordance with sta te regulations on foreign exchange control.
When distributing dividends to shareholders, the Company shall deduct and withhold the tax
payable on the dividend income on behalf of individual shareholders in accordance with the tax
laws of the PRC.
The Company shall have an internal audit system, arrange special auditors, and conduct the
internal audit supervision of the financial incomes and expenditures and economic activities of the
Company.
The internal audit system of the Company an d the responsibilities of auditors shall be
implemented upon the approval of the Board. The principal of the audit department shall be
responsible for and report to the Board.
Engagement of Accounting Firms
The Company shall engage an accounting firm which complies with the requirements of the
Securities Law to audit the financial statement s, net assets verification and other relevant
consultancy services. The term of office of an a ccounting firm appointed by the Company shall be
one year subject to renewal.
The engagement of an accounting firm by the Company shall be decided by the general
meeting, and the Board shall not engage an accounting firm before any resolution made by the
general meeting.
APPENDIX VI SUMMARY OF ARTICLES OF ASSOCIATION
– VI-21 –


--- page 748 ---
The Company ensures that it will provide true and complete accounting vouchers, accounting
books, financial and accounting report and other accounting materials to the engaged accounting
firm, without any refusal, concealment or misrepresentation.
The auditing fee of an accounting firm shal l be determined by the general meeting.
The Company’ s appointment, removal and non-reappoint ment of an accounting firm shall be
resolved by the general meeting.
Prior notice shall be given to the accounting firm if the Company decides to remove such
accounting firm or not to renew the appointment. Such accounting firm shall be entitled to make
representations at the relevant general meeting. Where the accounting firm resigns its post, it shall
make clear to the general meeting whether there is any impropriety on the part of the Company.
MERGER, DIVISION, CAPITAL INCREASE, CAPITAL REDUCTION, DISSOLUTION
AND LIQUIDATION OF THE COMPANY
Merger, Division, Capital Increase and Capital Reduction
The merger of the Company may take the form of either merger by absorption or a new
consolidation. Under a merger by absorption, a company absorbs another company and the
absorbed company is dissolved. Under a merger by new consolidation, two or more companies
merge into a newly established company and all parties to the merger are dissolved.
In the event of a merger, the parties to the merger shall enter into a merger agreement and
prepare balance sheets and inventories of assets. The Company shall notify its creditors within ten
days from the date of the Company ’s resolution on merger and shall make an announcement in the
newspaper designated by the CSRC or the National Enterprise Credit Information Publicity System
within thirty days from the date of the Company ’s resolution on merger. Creditors may, within
thirty days after receipt of such notice from the Co mpany, or within forty-five days from the date of
the announcement for those who do not receive such notice, to demand that the Company repay
their debts to that creditor or provide a corresponding guarantee for such debts.
When the Company is merged, the claims and debts of each party to the merger shall be
succeeded to the company survivin g the merger or the new company established subsequent to the
merger.
If the Company is divided, its property shall be divided accordingly. When the Company is
divided, it shall prepare a balance sheet and a property list. Within 10 days from the date of
adoption of the resolution on the division, the Company shall notify its creditors and within 30
days it shall make an announcement in the newspapers designated by the CSRC or the National
Enterprise Credit Information Publicity System.
The surviving companies shall be jointly liabl e for the pre-division debts of the Company,
unless provided otherwise in a written agreement on debt repayment reached between the Company
and a creditor prior to the division.
APPENDIX VI SUMMARY OF ARTICLES OF ASSOCIATION
– VI-22 –


--- page 749 ---
The Company shall prepare a balance sheet and an inventory of property when it needs to
reduce its registered capital.
The Company shall notify the creditors within 10 days from the date of making the resolution
to reduce the registered capital, and make an an nouncement in the newspapers or the National
Enterprise Credit Information Publicity Syst em within 30 days. The creditors may require the
Company to repay debts or to provide corresponding guarantees within 30 days after receipt of the
notice or within 45 days after the announcement if the creditors have not received the notice.
The registered capital of the Company after the capital reduction shall not be lower than the
statutory minimum.
Changes in registered particulars arising from a merger or division of the Company shall be
registered with the companies registration authority according to the law. If the Company is
dissolved, it shall be deregistered according to the law. If a new company is established, such
establishment shall be registered according to the law. Increase or decrease of the registered capital
of the Company shall be registered with the companies registration authority according to the law.
Dissolution and Liquidation
The Company may be dissolved for the following reasons:
(I) the term of operation stipulated in the Articles of Association has expired or
circumstances for dissolution specified in the Articles of Association arises;
(II) a resolution for dissolution is passed at a general meeting;
(III) merger or division of the Company entails dissolution;
(IV) the business license is revoked or the Company is ordered to close down or be
deregistered according to the law;
(V) where the Company gets into serious trouble in operation and management and its
continuation may cause substantial loss to the interests of shareholders, and no solution
can be found through any other channel, shareholders representing more than 10% of the
voting rights of all shareholders of the Company may request the People’ s Court to
dissolve the Company.
If the Company has any cause for dissolution specified in the preceding paragraphs, it shall
make public the cause of dissolution through the National Enterprise Credit Information Publicity
System within 10 days.
In the circumstance set out in item (I) above, the Company may continue to subsist by
amending the Articles of Association.
Amendments to the Articles of Association pursuant to the preceding paragraph shall be
subject to the approval of more than two-thirds of the voting rights held by the shareholders
attending the general meeting.
APPENDIX VI SUMMARY OF ARTICLES OF ASSOCIATION
– VI-23 –


--- page 750 ---
If the Company is dissolved pursuant to items (I), (II), (IV) and (V) as mentioned above, it
shall establish a liquidation committee within fif teen days after the circumstance for dissolution
arises. The liquidation committee shall consist of members determined by the directors or the
general meeting. If the Company fails to set up the liquidation committee within the period, the
creditors may apply to the People ’s Court for appointment of relevant persons to form a liquidation
committee and carry out liquidation.
The liquidation committee shall notify creditors within 10 days after its establishment and
within 60 days make a public announcement in a newspaper or on the National Enterprise Credit
Information Publicity System. The creditors shall declare their rights to the liquidation committee
within 30 days after receipt of the notice or within 45 days after the announcement if the creditors
have not received the notice. When declaring the clai ms, the creditors shall explain matters relating
to their rights and provide relevant evidential doc uments. The liquidation committee shall register
the creditor’ s rights.
During the period of declaration of claims, the l iquidation committee s hall not repay any debts
to the creditors.
The liquidation committee shall exercise the fo llowing powers during the liquidation period:
(I) to sort out the assets of the Company and prepare the balance sheet and an inventory of
property;
(II) to inform creditors by notice or announcement;
(III) to deal with the outstanding affairs of the Company in relation to liquidation;
(IV) to pay off outstanding taxes as well as taxes arising in the course of liquidation;
(V) to settle claims and debts;
(VI) to dispose of the remaining assets of the Company after repayment of debts;
(VII) to represent the Company in civil proceedings.
After the liquidation committee has sorted out the assets of the Company and prepared a
balance sheet and an inventory of property, it shall formulate a liquidation plan and submit the
same to the general meeting or the People ’s Court for confirmation.
The Company shall, according to the proportion of the shares held by the shareholders,
distribute the properties of the Company remaining after payment of the liquidation expenses,
employees ’salaries, social insurance expenses and statu tory compensations, outstanding taxes, and
the Company ’s debts.
The Company shall subsist in the course of li quidation but shall not conduct any business
operations unrelated to liquidation. Before liquidation as specified in the preceding paragraphs, the
properties of the Company shall not be distributed to shareholders.
APPENDIX VI SUMMARY OF ARTICLES OF ASSOCIATION
– VI-24 –


--- page 751 ---
Upon liquidation of the Company’ s properties and the preparation of the balance sheet and
inventory of assets, if the liquidation committee becomes aware that the Company does not have
sufficient assets to meet its liabilities, it must apply to the People ’s Court for a declaration for
bankruptcy according to laws. After the People ’s Court has made a declaration of bankruptcy in
respect of the Company, the liquidation committee shall refer the liquidation matters to the
bankruptcy administrator designated by the People ’s Court.
Upon completion of liquidation of the Compan y, the liquidation committee shall prepare a
liquidation report and a statement of the receipts and payments and the financial accounts for the
liquidation period. After verification of the Chines e certified public accountants, it shall submit the
same to the general meeting or the People’ s Court for confirmation, and shall, within 30 days after
obtaining confirmation from the general meeting or the People ’s Court, submit the aforesaid
documents to the companies registration author ity, and apply to cancel the registration of the
Company and announce the termination of the Company.
AMENDMENTS TO THE ARTICLES OF ASSOCIATION
The Company may amend its Articles of Association in accordance with the laws,
administrative regulations and the Articles of Association.
The Company shall amend the Articles of Associa tion in any of the following circumstances:
(I) after amendments are made to the Company Law, the Listing Rules of the Hong Kong
Stock Exchange or other relevant laws and adm inistrative regulations, the Articles of
Association are contrary to the said amendments;
(II) the conditions of the Company have changed and are not consistent with the matters
recorded in the Articles of Association;
(III) the general meeting has resolved to amend the Articles of Association.
Except as otherwise provided in the Articles of As sociation, the Articles of Association shall
be amended by the following procedure:
(I) the Board adopts a resolution in accordance with the Articles of Association and drafts
the amendments, or a shareholder puts forward a resolution to amend the Articles of
Association;
(II) the shareholders are notified of the amendments and a general meeting is convened to
vote thereon;
(III) the amendments submitted to the general meeting for a vote shall be adopted by a special
resolution.
The Board shall revise the Articles of Association in accordance with the resolution of the
shareholders ’ general meeting regarding the revision of the Articles of Association and the approval
opinion from the competent authorities.
APPENDIX VI SUMMARY OF ARTICLES OF ASSOCIATION
– VI-25 –


--- page 752 ---
NOTICES AND ANNOUNCEMENTS
Notices (for the purposes of this chapter, the term ‘‘notice ’’includes company communications
and other written materials) of the Company shall be given or provided by one or more of the
following means:
(I) by hand;
(II) by mail;
(III) by such electronic means as e-mail, fax, etc. or on information media;
(IV) by way of a public announcement;
(V) other manners as recognized by securities regulatory authorities at the place where the
Company ’s shares are listed or as provided in the Articles of Association.
Unless otherwise specified in the Articles of A ssociation, if a notice is issued by the Company
to the holders of overseas-listed foreign shares by way of announcement, the Company shall on the
same day submit an electronic version of such announcement to the Hong Kong Stock Exchange
through the electronic publishing system of the Hong Kong Stock Exchange for immediate release
on the website of the Hong Kong Stock Exchange in accordance with the requirements of the local
listing rules. Such announcement shall also b e published on the website of the Company at the
same time. In addition, the notice shall be delivere d to each of the registered addresses as set forth
in the register of holders of overseas-listed foreign shares by way of personal delivery or pre-paid
mail so as to give the shareholders sufficient notice and time to exercise their rights or take any
action in accordance with the terms of the notice.
Holders of the Company’ s overseas-listed foreign shares may elect in writing to receive
corporate communication that the Company is r equired to deliver to shareholders either by
electronic means or by post, and may also elect to receive either the Chinese or English version
only, or both the Chinese and English versions. Such holders shall have the right to change their
choices as to the manner of receiving and the langua ge versions of the aforesaid information by
giving a written notice to the Company in advance within a reasonable period in accordance with
applicable procedures.
If the listing rules in the place of listing require the Company to send, mail, dispatch, issue,
publish or otherwise provide relevant company documents in both English and Chinese versions,
the Company may, to the extent permitted by laws and regulations and in accordance with
applicable laws and regulations, (if a shareholde r has so indicated) only send him or her the English
versions or Chinese versions of documents if the Company has made appropriate arrangements to
ascertain whether its shareholders wish to only receive English versions or Chinese versions of
documents.
APPENDIX VI SUMMARY OF ARTICLES OF ASSOCIATION
– VI-26 –


--- page 753 ---
A. FURTHER INFORMATION ABOUT OUR GROUP
1. Incorporation of Our Company
Our Company was established in the PRC on September 8, 2000 and was converted to a
joint stock limited company on June 29, 2018.
As of the date of this prospectus, our Company ’s registered office is located at No. 15
Ziyuan Road, Huayuan Industrial Zone, Binhai Hi-Tech District, Tianjin, PRC. Our Company
has established a principal place of business in Hong Kong at 31/F., Tower Two, Times
Square, 1 Matheson Street, Causeway Bay, Hong Kong and has been registered as a non-Hong
Kong company under Part 16 of the Companies Ordinance on September 29, 2023 with the
Registrar of Companies in Hong Kong. Ms. Yu Wing Sze ( 余詠詩), one of our joint company
secretaries, has been appointed as the author ized representative of our Company for the
acceptance of service of process in Hong Kong.
As our Company was established in the PRC, our corporate structure and Articles of
Association are subject to the relevant laws and regulations of the PRC. A summary of the
relevant provisions of our Articles of Association is set out in ‘‘Appendix VI — Summary of
Articles of Association’’ . A summary of certain relevant aspects of the laws and regulations of
the PRC is set out in ‘‘Appendix V — Summary of Principal Laws and Regulations’’ .
2. Changes in Share Capital of Our Company
As of the date of our establishment, our registered share capital was RMB500,000
divided into 500,000 Shares with a nominal value of RMB1.00 each. On June 29, 2018, our
Company was converted into a joint stock company with limited liability and our registered
capital was RMB224,900,000 with a nominal value of RMB1.00 each.
Pursuant to the general meeting of our Company convened and held on August 15, 2022,
our then Shareholders resolved to increase our re gistered capital by RMB4,166,666. A capital
increase agreement was entered into on the same date by and among our Company, CITIC
Securities Investment, Mr. Wang Zhongshan, Ms. Zhang Xiuqin, Mr. Wang Guoxin and Ms.
Wang Na, pursuant to which, CITIC Securities Investment agreed to subscribe for the
increased registered capital of RMB4,166,666 in cash at RMB12 per Share. As a result of such
subscription, our registered capital increas ed from RMB224,900,000 to RMB229,066,666 and
such increase in share capital was registered in August 2022.
Upon completion of the Global Offering and conversion of Unlisted Shares into H
Shares, without taking into account any H Shares which may be issued pursuant to the Over-
allotment Option, our registered share capital will be increased to RMB273,023,466,
comprising 204,760,000 Unlisted Shares and 68,263,466 H Shares, representing 75.00% and
25.00% of our registered capital, respectively.
APPENDIX VII STATUTORY AND GENERAL INFORMATION
– VII-1 –


--- page 754 ---
For further details, see ‘‘History, Development and Corporate Structure ’’and ‘‘Share
Capital ’’of this prospectus. Save as disclosed in the ‘‘History, Development and Corporate
Structure’’in this prospectus and above, there has been no alteration in the share capital of our
Company during the two years immediately preceding the date of this prospectus.
3. Subsidiaries of our Company and Changes in Share Capital of Our Subsidiaries
Certain details of our subsidiaries are set out in ‘‘History, Development and Corporate
Structure — Our Subsidiaries ’’and in the accountants ’ report as set out in Appendix I to this
prospectus. Save for the subsidiaries mentioned in note 45A of the accountants ’ report set out
in Appendix I to this prospectus, our Company has no other subsidiary.
There has been no alteration in the share capital of the subsidiaries of our Company
within two years immediately preceding the date of this prospectus.
4. Shareholders ’Resolutions
In accordance with the Shareholders ’ resolutions of our Company dated September 20,
2023 and November 12, 2024, among other things, the following resolutions were passed by
the Shareholders:
(a) the issue by our Company of H Shares of nominal value of RMB1.00 each and such
H Shares be listed on the Stock Exchange;
(b) the total number of H Shares to be issued pursuant to the Global Offering shall be
no more than 25% of the total issued share capital of the Company (before the
exercise of the Over-allotment Option) after the Listing;
(c) subject CSRC ’s approval, upon completion of the Global Offering, 14,306,666
Unlisted Shares held by certain existing Shareholders will be converted into H
Shares;
(d) subject to the completion of the Global Offering, the conditional adoption of the
Articles of Association, which shall become effective on Listing Date, and the
Board and its authorized persons have been authorized to amend the Articles of
Association in accordance with any comments from the Stock Exchange and other
relevant regulatory authorities; and
(e) authorization of the Board and its author ized persons to handle all matters relating
to, among other things, the Global Offeri ng, the issue and listing of the H Shares.
5. Reorganization
Our Company has not gone through any corporate reorganization for the purpose of the
Listing. For details of history and development of our Company, see ‘‘History, Development
and Corporate Structure’’ in this prospectus.
APPENDIX VII STATUTORY AND GENERAL INFORMATION
– VII-2 –


--- page 755 ---
B. FURTHER INFORMATION ABOUT OUR BUSINESS
1. Summary of Material Contracts
The following contracts (not being contract s entered into in the ordinary course of
business) have been entered into by us or any of our subsidiaries within the two years
preceding the date of this prospectus that are or may be material:
(a) a supplemental agreement (II) to the capital increase agreement (增 資擴股協議之補
充協議(二)) entered into on November 30, 2022 by and among the Company,
CITIC Securities Investment Limited ( 中信証券投資有限公司)( ‘‘CITIC Securities
Investment ’’), Wang Zhongshan ( 王忠善), Zhang Xiuqin (張 秀芹), Wang Guoxin
(王國鑫)a n dW a n gN a( 王娜), pursuant to which, among others, certain clauses
under supplemental agreement (I) ( 補充協議(一)) were terminated;
(b) a supplemental agreement (III) to the capital increase agreement ( 增資擴股協議之
補充協議(三)) entered into on September 26, 2023 by and among the Company,
CITIC Securities Investment, Wang Zhongshan, Zhang Xiuqin, Wang Guoxin and
Wang Na, pursuant to which, among others, certain special rights were terminated;
(c) a cornerstone investment agreement entered into on November 19, 2024 by and
among the Company, Tianjin Haitai Capita l Investment Management Co., Ltd.* ( 天
津海泰資本投資管理有限公司)( ‘‘Tianjin Haitai Capital ’’), CITIC Securities
(Hong Kong) Limited ( 中信證券(香港)有限公司) (the ‘‘Sole Sponsor ’’) and CLSA
Limited ( 中信里昂證券有限公司) (the ‘‘Sponsor-Overall Coordinator’’ ), pursuant
to which Tianjin Haitai Capital agreed to subscribe for or through its wholly-owned
subsidiary, HiTai (Hong Kong) Limited ( 海泰(香港)有限公司) to subscribe for H
Shares at the Offer Price in the aggregate amount of the Hong Kong dollar
equivalent of RMB73,000,000 (inclusive of all taxes, brokerage fees and transaction
levies);
(d) a cornerstone investment agreement entered into on November 19, 2024 by and
among the Company, Matrix Capital Limited ( ‘‘Matrix Capital ’’) (in its capacity as
the investment manager for and on behal f of Matrix Income SP), Matrix Income
SPC (as guarantor), the Sole Sponsor and the Sponsor-Overall Coordinator,
pursuant to which Matrix Capital in its capacity as the investment manager of
Matrix Income SP, agreed to subscribe for H Shares at the Offer Price in the
aggregate amount of the Hong Kong dollar equivalent of RMB40,000,000 (inclusive
of all taxes, brokerage fees and transaction levies);
(e) a cornerstone investment agreement entered into on November 19, 2024 by and
among the Company, Solid Elegance International (Hong Kong) Limited ( ‘‘Solid
Elegance’’), the Sole Sponsor and the Sponsor-Overall Coordinator, pursuant to
APPENDIX VII STATUTORY AND GENERAL INFORMATION
– VII-3 –


--- page 756 ---
which Solid Elegance agreed to subscribe for H Shares at the Offer Price in the
aggregate amount of the Hong Kong dollar equivalent of RMB26,980,000 (inclusive
of all taxes, brokerage fees and transaction levies);
(f) a cornerstone investment agreement e ntered into on November 19, 2024 by and
among the Company, Bright Ambi tion International Limited ( ‘‘Bright Ambition ’’),
the Sole Sponsor and the Sponsor-Overall Coordinator, pursuant to which Bright
Ambition agreed to subscribe for H Shares at the Offer Price in the aggregate
amount of the Hong Kong dollar equivalent of RMB39,980,000 (inclusive of all
taxes, brokerage fees and transaction levies);
(g) a cornerstone investment agreement entered into on November 19, 2024 by and
among the Company, Swift Grace (Hong Kong) Limited ( ‘‘Swift Grace ’’), the Sole
Sponsor and the Sponsor-Overall Coordinator, pursuant to which Swift Grace
agreed to subscribe for H Shares at the Offer Price in the aggregate amount of the
Hong Kong dollar equivalent of RMB16,980,000 (inclusive of all taxes, brokerage
fees and transaction levies);
(h) a non-competition agreement ( 不競爭協議) entered into on November 19, 2024 by
Wang Zhongshan, Zhang Xiuqin, Wang Guoxin, Wang Na, Tianjin Yuanjinmeng
Enterprise Management Consultancy Co., Ltd.* ( 天津園金夢企業管理諮詢有限公
司), Tianjin Jinmeng Enterprise Management Partnership (Limited Partnership)* ( 天
津金夢企業管理合夥企業(有限合夥)), Tianjin Jinyuan Enterprise Management
Partnership (Limited Partnership)* ( 天津金園企業管理合夥企業(有限合夥)),
Tianjin Jinlong Enterprise Management Partnership (Limited Partnership)* ( 天津金
隆企業管理合夥企業(有限合夥)) in favor of the Company (for itself and as trustee
for the benefit of each of its subsidiaries from time to time), details of which are
included in the section headed ‘‘Relationship with Our Controlling Shareholders ’’in
this prospectus; and
(i) the Hong Kong Underwriting Agreement.
APPENDIX VII STATUTORY AND GENERAL INFORMATION
– VII-4 –


--- page 757 ---
2. Our Intellectual Property Rights
(a) Trademarks
(i) Registered Trademarks
As of the Latest Practicable Date, we had registered the following trademarks
which we consider to be or may be material to our business:
No. Trademark
Place of
Registration
Registration
No. Registered Owner Class Expiry Date
1
 PRC 3441121 Shandong Mokingran 14 August 27, 2034
2
 PRC 4254323 Shandong Mokingran 14 October 20, 2027
3
 PRC 5169279 Shandong Mokingran 14 May 27, 2029
4
 PRC 7408053 Shandong Mokingran 14 August 27, 2030
5
 PRC 11261552 Shandong Mokingran 14 December 20, 2033
6
 PRC 18477016 Shandong Mokingran 14 January 6, 2027
7
 PRC 18479927 Shandong Mokingran 35 January 6, 2027
8
 PRC 18620902 Shandong Mokingran 14 January 20, 2027
9
 PRC 18621273 Shandong Mokingran 14 January 20, 2027
10
 PRC 21140167 Shandong Mokingran 14 October 27, 2027
11
 PRC 22051496 Shandong Mokingran 35 January 13, 2028
12
 PRC 44580172 Shandong Mokingran 14 November 27, 2030
13
 PRC 66075986 Shandong Mokingran 14 February 20, 2033
14
 PRC 66070837 Shandong Mokingran 35 January 20, 2033
15
 PRC 3748015 Shandong Yifu 14 November 13, 2025
16
 PRC 3760540 Shandong Yifu 14 December 20, 2025
17
 PRC 5169269 Shandong Yifu 14 May 27, 2029
18
 PRC 18029779 Shandong Yifu 35 November 13, 2026
19
 PRC 66820535 Shandong Yifu 35 May 6, 2033
20
 PRC 14004975 Changle Chengxin 14 April 13, 2025
APPENDIX VII STATUTORY AND GENERAL INFORMATION
– VII-5 –


--- page 758 ---
No. Trademark
Place of
Registration
Registration
No. Registered Owner Class Expiry Date
21
 PRC 14273838 Changle Chengxin 35 May 6, 2025
22
 PRC 16118231 Changle Chengxin 14 March 13, 2026
23
 PRC 16326452 Changle Chengxin 35 March 27, 2026
24
 PRC 16326475 Changle Chengxin 14 March 27, 2026
25
 PRC 24368889 Changle Chengxin 35 May 20, 2028
26
 PRC 55529315 Changle Chengxin 14 November 20, 2031
27
 PRC 63908335 Changle Chengxin 14 October 6, 2032
28
 PRC 63907947 Changle Chengxin 35 October 6, 2032
29
 Hong Kong 306302024 Hong Kong
Mokingran
14, 35 July 23, 2033
(b) Patents
(i) Registered Patents
As of the Latest Practicable Date, we were the registered owner of and had the
right to use the following patents which we consider to be or may be material to
our business:
No. Patent Name Patentee Patent Type Patent Number
Application/
Approval Date Expiry Date
1 (A gold jewellery
welding method)
(‘‘一種黃金飾品焊
接方法’’)
Shandong
Mokingran
Invention 200810139385.4 August 28, 2008 August 28, 2028
2. Bead string nailing
machine
(‘‘珠串釘砂機’’)
Shandong
Mokingran
Invention 201010177060.2 May 10, 2010 May 9, 2030
APPENDIX VII STATUTORY AND GENERAL INFORMATION
– VII-6 –


--- page 759 ---
No. Patent Name Patentee Patent Type Patent Number
Application/
Approval Date Expiry Date
3. Jewellery beading
machine ( ‘‘首飾打珠
璣’’)
Shandong
Mokingran
Invention 200910016919.9 June 24, 2009 June 23, 2029
4. Semi-circular
jewellery former
(‘‘半圓端頭首飾成
型機’’)
Shandong
Mokingran
Invention 201010273643.5 August 30, 2010 August 29, 2030
5. Cross-shaped gold
wire tablet press
(‘‘十字形金線壓片
機’’)
Shandong
Mokingran
Invention 201010273668.5 August 30, 2010 August 29, 2030
6. Thin-wall gold tube
rolling former
(‘‘薄壁金管滾壓成
型機’’)
Shandong
Mokingran
Invention 201010168169.X April 30, 2010 April 29, 2030
7. Flower-shaped
twisted sheet former
(‘‘花形扭片成型
機’’)
Shandong
Mokingran
Invention 201010273649.2 August 30, 2010 August 29, 2030
8. Thin-wall gold tube
automatic shrinking
machine ( ‘‘薄壁金管
自動縮口機’’)
Shandong
Mokingran
Invention 201410097150.9 March 15, 2014 March 14, 2034
9. Automatic
engraving method
based on manual
operation ( ‘‘基於手
工操作的自動刻花
方法’’)
Shandong
Mokingran,
Shandong Yifu
and Shenzhen
Mokingran
Invention ZL201711048426.4 October 31, 2017 October 30, 2037
10. Automatic
engraving
equipment based on
manual operation
(‘‘基於手工操作的
自動刻花 設備’’)
Shandong
Mokingran,
Shandong Yifu
and Shenzhen
Mokingran
Invention ZL201711045721.4 October 31, 2017 October 30, 2037
11. Automatic pricing
method and
automatic pricing
system for gold
jewellery ( ‘‘金飾自
動計價方法及自動
計價系統’’)
Shandong
Mokingran
Invention ZL201810892474.X August 7, 2018 August 6, 2038
APPENDIX VII STATUTORY AND GENERAL INFORMATION
– VII-7 –


--- page 760 ---
No. Patent Name Patentee Patent Type Patent Number
Application/
Approval Date Expiry Date
12. A multi-blade
automatic engraving
machine ( ‘‘一種多刀
頭自動刻花 機’’)
Shandong
Mokingran
Utility model 201721426572.1 October 31, 2017 October 30, 2027
13. A processing device
for decorative chain
pattern ( ‘‘一種裝飾
鏈花紋加工裝置’’)
Shandong
Mokingran,
Shandong Yifu
and Shenzhen
Mokingran
Utility model 201721564995.X November 21, 2017 November 20, 2027
14. A machine tool for
processing patterns
on the surface of
decorative chains
(‘‘一種用於在裝飾
鏈表面加工花紋的
機床’’)
Shandong
Mokingran,
Shandong Yifu
and Shenzhen
Mokingran
Utility model 201721564994.5 November 21, 2017 November 20, 2027
15. An electric hammer
chain machine (‘‘ 一
種電動錘鏈機’’)
Shandong
Mokingran
Utility model 201820894391.X June 8, 2018 June 7, 2028
16. A chain double-
sided sewing
machine ( ‘‘一種鏈條
雙面車花機’’)
Shandong
Mokingran
Utility model 201820963367.7 June 21, 2018 June 20, 2028
17. A semi-automatic
metal marking
equipment ( ‘‘一種半
自動金屬刻印設
備’’)
Shandong
Mokingran
Utility model 201821038175.1 June 29, 2018 June 28, 2028
18. An automatic
twisting machine
(‘‘一種自動扭麻花
機’’)
Shandong
Mokingran
Utility model 201820866591.4 June 5, 2018 June 4, 2028
19. A hammer chain
machine of cam
structure ( ‘‘一種凸
輪結構錘鏈機’’)
Shandong
Mokingran
Utility model 201820963360.5 June 21, 2018 June 20, 2028
20. A kind of automatic
circle forming
cutting and welding
device( ‘‘一種自動圓
環成型裁剪焊接裝
置’’)
Shandong
Mokingran
Utility model 201821740885.9 October 25, 2018 October 24, 2028
APPENDIX VII STATUTORY AND GENERAL INFORMATION
– VII-8 –


--- page 761 ---
No. Patent Name Patentee Patent Type Patent Number
Application/
Approval Date Expiry Date
21. Automatic four-axis
metal bead string
engraving
machine( ‘‘全自動四
軸金屬珠串刻花
機’’)
Shandong Yifu Invention ZL201110196549.9 July 14, 2011 July 13, 2031
22. Automatic metal
bead string
engraving
machine( ‘‘全自動金
屬珠串刻花機’’)
Shandong Yifu Invention ZL201110196642.X July 14, 2011 July 13, 2031
23. Automatic forming
device for half ring
lug jewellery( ‘‘半環
吊耳首飾自動成型
裝置’’)
Shandong Yifu Invention ZL201310066087.8 March 1, 2013 February 28, 2033
24. Automatic grasping
and reversing robot
for jewellery chain
bead ( ‘‘首飾鏈珠自
動抓取反轉 機械
手’’)
Shandong Yifu Invention ZL201310066964.1 March 1, 2013 February 28, 2033
25. Equipment for
making chainrings
with lugs at both
ends ( ‘‘兩端帶有吊
耳的鏈環製作設
備’’)
Shandong Yifu Invention ZL201310066051.X March 1, 2013 February 28, 2033
26. Hydrangea
engraving machine
(‘‘綉球刻花機’’)
Shandong Yifu Utility model 201721213909.0 September 21, 2017 September 20, 2027
27. A kind of spring
clasp ( ‘‘一種彈簧
釦’’)
Shandong Yifu Utility model 202121605595.5 July 14, 2021 July 13, 2031
28. Jewellery Clasp
(2020090205)
Shandong Yifu Appearances 202030512512.2 September 2, 2020 September 1, 2030
29. Jewellery Clasp
(2020090201)
Shandong Yifu Appearances 202030512920.8 September 2, 2020 September 1, 2030
30. Jewellery Clasp
(2020090204)
Shandong Yifu Appearances 202030512946.2 September 2, 2020 September 1, 2030
APPENDIX VII STATUTORY AND GENERAL INFORMATION
– VII-9 –


--- page 762 ---
No. Patent Name Patentee Patent Type Patent Number
Application/
Approval Date Expiry Date
31. Jewellery Clasp
(2020090203)
Shandong Yifu Appearances 202030512500.X September 2, 2020 September 1, 2030
32. Jewellery Clasp
(2020090202)
Shandong Yifu Appearances 202030512502.9 September 2, 2020 September 1, 2030
33. Spring Jewellery
Clasp (1)
Shandong Yifu Appearances 202230576784.8 August 31, 2022 August 30, 2037
34. Spring Jewellery
Clasp (2)
Shandong Yifu Appearances 202230573568.8 August 31, 2022 August 30, 2037
35. Spring Jewellery
Clasp (3)
Shandong Yifu Appearances 202230573607.4 August 31, 2022 August 30, 2037
36. Spring Jewellery
Clasp (4)
Shandong Yifu Appearances 202230576821.5 August 31, 2022 August 30, 2037
37. Spring Jewellery
Clasp (5)
Shandong Yifu Appearances 202230573560.1 August 31, 2022 August 30, 2037
38. Spring Jewellery
Clasp (6)
Shandong Yifu Appearances 202230573589.X August 31, 2022 August 30, 2037
39. Spring Jewellery
Clasp (7)
Shandong Yifu Appearances 202230576767.4 August 31, 2022 August 30, 2037
40. Spring Jewellery
Clasp (8)
Shandong Yifu Appearances 202230576802.2 August 31, 2022 August 30, 2037
41. Spring Jewellery
Clasp (9)
Shandong Yifu Appearances 202230573573.9 August 31, 2022 August 30, 2037
42. Spring Jewellery
Clasp (10)
Shandong Yifu Appearances 202230576783.3 August 31, 2022 August 30, 2037
43. Spring Jewellery
Clasp (11)
Shandong Yifu Appearances 202230574275.1 August 31, 2022 August 30, 2037
44. Spring Jewellery
Clasp (12)
Shandong Yifu Appearances 202230576807.5 August 31, 2022 August 30, 2037
45. Spring Jewellery
Clasp (13)
Shandong Yifu Appearances 202230573582.8 August 31, 2022 August 30, 2037
46. Spring Jewellery
Clasp (14)
Shandong Yifu Appearances 202230576803.7 August 31, 2022 August 30, 2037
APPENDIX VII STATUTORY AND GENERAL INFORMATION
– VII-10 –


--- page 763 ---
No. Patent Name Patentee Patent Type Patent Number
Application/
Approval Date Expiry Date
47. Spring Jewellery
Clasp (15)
Shandong Yifu Appearances 202230573602.1 August 31, 2022 August 30, 2037
48. Spring Jewellery
Clasp (16)
Shandong Yifu Appearances 202230576780.X August 31, 2022 August 30, 2037
49. Spring Jewellery
Clasp (17)
Shandong Yifu Appearances 202230573586.6 August 31, 2022 August 30, 2037
50. Spring Jewellery
Clasp (18)
Shandong Yifu Appearances 202230576777.8 August 31, 2022 August 30, 2037
51. A kind of bangles
clasp forming and
cutting integrated
machine ( 一種手鐲
扣成型 裁剪一體機)
Changle
Chengxin
Utility model 201821950977.x November 23, 2018 November 22, 2028
(c) Copyrights
As of the Latest Practicable Date, we have r egistered the following copyright that
we consider to be or may be material to our business:
No. Name Registered Owner Registration Number Registration Date
1 More pure, more love
(‘‘金純情更濃’’)
Shandong Mokingran 國作登字-2015-F-00204318 June 2, 2015
2. Mokingran Gold Jewellery ID Card
(‘‘夢金園金飾身份證’’)
Shandong Mokingran 國作登字-2015-F-00204321 June 2, 2015
3. Trade-in Week Logo
(‘‘換款周標識’’)
Shandong Mokingran 國作登字-2015-F-00204314 June 2, 2015
4. MOKINGRAN Shandong Mokingran 國作登字-2015-F-00204316 June 2, 2015
5. Mokingran Gold Art
(‘‘夢金園金藝’’)
Shandong Mokingran 國作登字-2015-F-00204322 June 2, 2015
6. Mokingran Seal ( ‘‘夢金園印’’) Shandong Mokingran 國作登字-2015-F-00204871 June 2, 2015
7. More Shine, More Charming
(‘‘越閃耀越女人’’)
Shandong Mokingran 國作登字-2015-F-00204872 June 2, 2015
8. Mokingran Horizontal Signboard
(‘‘夢金園橫向門頭’’)
Shandong Mokingran 國作登字-2018-J-00665974 November 15, 2018
9. Mokingran Shopping Mall
Signboard ( ‘‘夢金園商場店門頭’’)
Shandong Mokingran 國作登字-2018-J-00665973 November 15, 2018
APPENDIX VII STATUTORY AND GENERAL INFORMATION
– VII-11 –


--- page 764 ---
No. Name Registered Owner Registration Number Registration Date
10. Mokingran Standard Signboard
(‘‘夢金園標準門頭’’)
Shandong Mokingran 國作登字-2018-J-00665972 November 15, 2018
11. Repair Desk Glass Screen +
Mokingran Logo ( ‘‘維修台玻璃屏風
+夢金園標志’’)
Shandong Mokingran 國作登字-2018-J-00665969 November 15, 2018
12. Mokingran Logo Image Wall
(‘‘夢金園Logo形 象墻’’)
Shandong Mokingran 國作登字-2018-J-00665967 November 15, 2018
13. Auspice, pray for good luck
(‘‘祈祥.吉兆’’)
Shandong Mokingran 國作登字-2021-F-00180497 August 9, 2021
14. Ancient style, pray for good luck
(‘‘祈祥.古法’’)
Shandong Mokingran 國作登字-2021-F-00180498 August 9, 2021
15. Standard Image Wall
(‘‘標準形象墻’’)
Shandong Mokingran 國作登字-2022-F-10175596 August 24, 2022
16. Signboard & Lintel ( ‘‘門頭、吊楣’’) Shandong Mokingran 國作登字-2022-F-10175601 August 24, 2022
17. Ceiling Moulding ( ‘‘吊頂造型’’) Shandong Mokingran 國作登字-2022-F-10175598 August 24, 2022
18. Wall Combinations ( ‘‘墻面組合’’) Shandong Mokingran 國作登字-2022-F-10175597 August 24, 2022
19. Wall Design ( ‘‘造型墻面’’) Shandong Mokingran 國作登字-2022-F-10175602 August 24, 2022
20. Dreaming in the Clouds
(‘‘夢在雲端’’)
Shandong Mokingran 魯作登字-2023-F-00133242 May 29, 2023
21. Bathed in Sunshine ( ‘‘向陽’’) Shandong Mokingran 魯作登字-2023-F-00133244 May 29, 2023
22. Mokingran -Chinese Crafting Expert
in High-Purity Gold Jewellery
(‘‘夢金園-中國高純度精工金飾
專家’’)
Shandong Mokingran 魯作登字-2023-A-00158487 June 14, 2023
23. Largest Gold Ring
(‘‘最大的金戒指’’)
Shandong Mokingran 魯作登字-2023-F-00156502 June 13, 2023
24. Nine Dragon Wall Inlaid with
Filigree ( ‘‘花絲九龍壁’’)
Shandong Mokingran 魯作登字-2023-F-00156513 June 13, 2023
25. Dream Builder ( ‘‘築夢’’) Shandong Mokingran 魯作登字-2023-F-00156526 June 13, 2023
26. Spring Jewellery Clasp (1) Shandong Yifu 魯作登字-2023-F-00167604 June 20, 2023
27. Spring Jewellery Clasp (2) Shandong Yifu 魯作登字-2023-F-00167617 June 20, 2023
28. Spring Jewellery Clasp (3) Shandong Yifu 魯作登字-2023-F-00167623 June 20, 2023
29. Spring Jewellery Clasp (4) Shandong Yifu 魯作登字-2023-F-00167637 June 20, 2023
APPENDIX VII STATUTORY AND GENERAL INFORMATION
– VII-12 –


--- page 765 ---
No. Name Registered Owner Registration Number Registration Date
30. Spring Jewellery Clasp (5) Shandong Yifu 魯作登字-2023-F-00167642 June 20, 2023
31. Spring Jewellery Clasp (6) Shandong Yifu 魯作登字-2023-F-00167650 June 20, 2023
32. Spring Jewellery Clasp (7) Shandong Yifu 魯作登字-2023-F-00167658 June 20, 2023
33. Spring Jewellery Clasp (8) Shandong Yifu 魯作登字-2023-F-00167661 June 20, 2023
34. Spring Jewellery Clasp (9) Shandong Yifu 魯作登字-2023-F-00167668 June 20, 2023
35. Spring Jewellery Clasp (10) Shandong Yifu 魯作登字-2023-F-00167675 June 20, 2023
36. Spring Jewellery Clasp (11) Shandong Yifu 魯作登字-2023-F-00167683 June 20, 2023
37. Spring Jewellery Clasp (12) Shandong Yifu 魯作登字-2023-F-00167686 June 20, 2023
38. Spring Jewellery Clasp (13) Shandong Yifu 魯作登字-2023-F-00167689 June 20, 2023
39. Spring Jewellery Clasp (14) Shandong Yifu 魯作登字-2023-F-00167691 June 20, 2023
40. Spring Jewellery Clasp (15) Shandong Yifu 魯作登字-2023-F-00167698 June 20, 2023
41. Spring Jewellery Clasp (16) Shandong Yifu 魯作登字-2023-F-00167702 June 20, 2023
42. Spring Jewellery Clasp (17) Shandong Yifu 魯作登字-2023-F-00167706 June 20, 2023
43. Spring Jewellery Clasp (18) Shandong Yifu 魯作登字-2023-F-00167709 June 20, 2023
44. Spring Jewellery Clasp (19) Shandong Yifu 魯作登字-2023-F-00167840 June 20, 2023
45. Spring Jewellery Clasp (20) Shandong Yifu 魯作登字-2023-F-00167843 June 20, 2023
46. Spring Jewellery Clasp (21) Shandong Yifu 魯作登字-2023-F-00167844 June 20, 2023
47. Spring Jewellery Clasp (22) Shandong Yifu 魯作登字-2023-F-00167846 June 20, 2023
48. Spring Jewellery Clasp (23) Shandong Yifu 魯作登字-2023-F-00167848 June 20, 2023
(d) Domain Names
As of the Latest Practicable Date, we have registered the following domain name
that we consider to be or may be material to our business:
No. Domain Name Registrant Expiry Date
1 mokingran.com Shandong Mokingran August 31, 2026
Save as disclosed above, as of the Latest Pr acticable Date, there were no other trade
or service marks, patents, intellectual or industrial property rights which were material in
relation to our business.
APPENDIX VII STATUTORY AND GENERAL INFORMATION
– VII-13 –


--- page 766 ---
C. FURTHER INFORMATION ABOUT OUR DIRECTORS, SUPERVISORS AND
SUBSTANTIAL SHAREHOLDERS
1. Directors, Supervisors and Chief Executive
(i) Disclosure of Interests — Interests and short positions of the Directors,
Supervisors and chief executive of our Company in the Shares, underlying
Shares or debentures of our Company and our associated corporations
Immediately following completion of the Global Offering (assuming that Over-
allotment Option is not exercised), the in terests or short positions of our Directors,
Supervisors and chief executive in the Shares, underlying Shares and debentures of our
Company and its associated corporations, within the meaning of Part XV 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 (includi ng interests and short positions which
he/she is 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 recorded in the register referred to
therein, or which will be required to be not ified to our Company and the Stock Exchange
pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers
contained in the Listing Rules (for this purpose, the relevant provisions of the SFO will
be interpreted as if they apply to the Supervisors), will be as follows:
Interests in Shares and underlying Shares
Name and position Description of Shares (1) Nature of interests
Number of Shares
after the Global
Offering
Approximate
percentage of
interest in our
Company
immediately after
the Global
Offering (2)
Mr. Wang
Zhongshan
(executive
Director)
Unlisted Shares (L) Beneficial owner/
interest in controlled
corporation (3) /Interest
of spouse
164,760,000 60.35%
Ms. Zhang Xiuqin
(executive
Director)
Unlisted Shares (L) Beneficial owner/
interest in controlled
corporation
(3) /Interest
of spouse
164,760,000 60.35%
Mr. Wang Guoxin
(general
manager)
Unlisted Shares (L) Interest in controlled
corporation
(4) /Interest
of spouse
40,000,000 14.65%
APPENDIX VII STATUTORY AND GENERAL INFORMATION
– VII-14 –


--- page 767 ---
Notes:
(1) The Letter ‘‘L’’denotes the person ’s long position in our Shares.
(2) The calculation is based on the total number of 273,023,466 Shares in issue immediately after the
completion of the Global Offering (assuming that the Over-allotment Option is not exercised).
(3) Please see note (2) in the ‘‘Substantial Shareholders ’’section.
(4) Please see note (3) in the ‘‘Substantial Shareholders ’’section.
Save as disclosed above, none of the Directors, Supervisors or chief executive of
our Company has any interests and short positions in our Shares, underlying Shares or
debentures of our Company or any associated corporation (within the meaning of Part
XV of the SFO) which shall be notified to us and the Stock Exchange pursuant to
Divisions 7 and 8 of Part XV of the SFO (includi ng interests and short positions which
he/she is taken, or deemed to have under such provisions of SFO) or which will be
required, pursuant to section 352 of the SFO, to be recorded in the register referred to
therein, or shall be or required to be, pursuant to the Model Code for Securities
Transactions by Directors of Listed Issuers contained in the Listing Rules to be notified
to us and the Stock Exchange, in each case once our Shares are listed. For this purpose,
the relevant provisions of the SFO will be interpreted as if they applied to the
Supervisors.
(ii) Particulars of service agreements and appointment letters
Our Company has entered into a service agreement or an appointment letter with
each of the Directors and Supervisors which contains provisions in relation to, among
other things, compliance of relevant laws and regulations, observation of the Articles of
Association.
The principal particulars of these service agreements are: (a) each of the agreements
is for a term of three years following his/her r espective appointment date; and (b) each of
the agreements is subject to termination in accordance with their respective terms. The
service agreements may be renewed in accordance with our Articles of Association and
the applicable rules.
Save as disclosed above, our Company has not entered, and does not propose to
enter, into any service contracts or appoi ntment letters with any of the Directors or
Supervisors in their respective capacities as Di rectors/Supervisors (other than contracts
expiring or determinable by the employer within one year without the payment of
compensation (other than statutory compensation)).
(iii) Directors ’ and Supervisors ’ remuneration
Save as disclosed in the section headed ‘‘Directors, Supervisors and Senior
Management — Remuneration Policy ’’of this prospectus and under note 14 to the
accountants ’ report set out in Appendix I to this prospectus, no Director or Supervisor
APPENDIX VII STATUTORY AND GENERAL INFORMATION
– VII-15 –


--- page 768 ---
received any other fees, salaries, allowances, share based compensation, pension schemes
contribution and other benefits in kind (if applicable) from our Company in respect of
each of the three years ended December 31, 2021, 2022 and 2023 and the six months
ended June 30, 2024.
Based on the arrangements in force as of the L atest Practicable Date, it is estimated
that the total remuneration paid to the Directors and Supervisors for the year ending
December 31, 2024 will be RMB3.83 million.
During the Track Record Period, no emoluments were paid by the Group to any of
the directors, supervisors, chief executive of the Company or the five highest paid
individuals as an inducement to join or upon joining the Group or as compensation for
loss of office.
There was no arrangement under which a director, supervisor or chief executive of
the Company waived or agreed to waive any remuneration during the Track Record
Period.
Save as disclosed above, during the Track Record Period, no other amounts shall be
paid or payable by us or any of our subsidiaries to the Directors or the five highest
remunerated individuals.
Save as disclosed above and indirect shareholding interest our Directors and
Supervisors held through our Employee Share Ownership Scheme, no Director or
Supervisor is entitled to receive oth er special benefits from our Company.
2. Substantial Shareholders
(i) Interests in the Shares of our Company
For information on the persons (other than our Directors, Supervisors or chief
executive of our Company) who will, immediately following the completion of the
Global Offering (assuming t he Over-allotment Option is not exercised), having or be
deemed or taken to have beneficial interests or short position in our Shares or underlying
Shares which would fall to be disclosed to our Company under the Divisions 2 and 3 of
Part XV of the SFO, or directly or indirectly be interested in 10% or more of the issued
voting shares of any other member of our Company, see ‘‘Substantial Shareholders ’’of
this prospectus.
Save as disclosed in the section headed ‘‘Substantial Shareholders ’’ in this
prospectus, as of the Latest Practicable Date, our Directors were not aware of any
persons who would, immediately followi ng the completion of the Global Offering
(assuming the Over-allotment Option is not e xercised), having or be deemed or taken to
the beneficial interests or short position i n our Shares or underlying Shares which would
APPENDIX VII STATUTORY AND GENERAL INFORMATION
– VII-16 –


--- page 769 ---
fall to be disclosed to our Company under the Divisions 2 and 3 of Part XV of the SFO,
or directly or indirectly be interested in 10% or more of the issued voting shares of any
member of our Group or had optio n in respect of such capital.
(ii) Interests in our Company ’s subsidiaries
Immediately following the completion of the Global Offering, assuming (i) the
Global Offering has become unconditional and all Offer Shares have been issued
pursuant to the Global Offering; and (ii) the Over-allotment Option have not been
exercised, no person (other than our Company) will be interested, dir ectly or indirectly,
in 10% or more in any share class with the right to, in any event, vote at the general
meeting of any other member (other than our Company) of our Group, save as disclosed
as below:
Shenzhen City Gold Chief Executive Technology Culture Co., Ltd.* ( 深圳市金總裁
科技文化有限公司), an Independent Third Party, holds 49% equity interests in Shenzhen
E-commerce. Shenzhen City Gold Chief Ex ecutive Technology Culture Co., Ltd.* ( 深圳
市金總裁科技文化有限公司) is held as to 60% by Li Guanglei (李 廣磊) and 40% by
Wang Bangyou ( 王邦友).
3. Directors ’Competing Interests
Save as disclosed in ‘‘Relationship with our Controlling Shareholders — Delineation of
Businesses — No competition and clear delineation of business ’’in this prospectus, none of
our Company ’s Directors has any interests in any business which competes or is likely to
compete, either directly or indirectly, with our Group ’s business.
4. Agency Fees or Commissions Paid or Payable
Save as disclosed in ‘‘Underwriting ’’section in this prospectus, no commissions,
discounts, brokerages or other special terms were granted within the two years preceding the
date of this prospectus in connection with the issue or sale of any capital or security of any
member of our Group.
5. Disclaimers
Save as disclosed in this prospectus:
(i) none of our Directors, Supervisors, ch ief executive of the Company or any of the
parties listed in ‘‘ —E. Other Information — 7. Qualification of Experts ’’is:
(a) interested in our promotion, or in any assets which, within the two years
immediately preceding the date of this prospectus, have been acquired or
disposed of by or leased to us, or are proposed to be acquired or disposed of
by or leased to our Company; or
APPENDIX VII STATUTORY AND GENERAL INFORMATION
– VII-17 –


--- page 770 ---
(b) materially interested in any contract or arrangement subsisting at the date of
this prospectus which is significant in relation to our business;
(ii) save in connection with the Hong Kong Underwriting Agreement and the
International Underwriting Agreement, none of the parties listed in ‘‘ — E. Other
Information — 7. Qualification of Experts ’’:
(a) is interested legally or beneficially in any shares in any member of our Group;
or
(b) has any right (whether legally enforceable or not) to subscribe for or to
nominate persons to subscribe for any securities in any member of our Group;
(iii) none of our Directors or Supervisors or their close associates or any shareholders of
our Company who to the knowledge of our Directors owns more than 5% of our
issued share capital has any interest in our top five customers or suppliers of each
year/period during the Track Record Period; and
(iv) none of our Directors or Supervisors is a director or employee of a company that
has an interest in the share capital of our Company which, once the H Shares are
listed on the Stock Exchange, would have t o be disclosed pursuant to Divisions 2
and 3 of Part XV of the SFO.
D. EMPLOYEE SHARE OWNERSHIP SCHEME
We have approved and adopted the Employee Share Ownership Scheme in March 2016. The
Employee Share Ownership Scheme is not subject to the provisions of Chapter 17 of the Listing
Rules as the Employee Share Ownership Scheme does not involve the grant of new shares or
awards by our Company after the Listing.
Our Company has established three employee shareholding platforms, namely Jinmeng
Partnership, Jinlong Partnersh ip and Jinyuan Partnership (the ‘‘Employee Shareholding
Platforms ’’). As of the Latest Practicable Date, the three Employee Shareholding Platforms, in
aggregate, held 40,000,000 Shares before the com pletion of the Global Offering. For details of our
Employee Shareholding Platforms, see ‘‘History, Development and Corporate Structure — Our
Employee Shareholding Platforms ’’in this prospectus.
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 under the PRC law.
APPENDIX VII STATUTORY AND GENERAL INFORMATION
– VII-18 –


--- page 771 ---
2. Litigation
During the Track Record Period and as of the Latest Practicable Date, we were not the
defendant of any litigation, arbitration or cla im of material importance and no litigation,
arbitration or claim of material importance was known to our Directors to be pending or
threatened by or against us, that would have a material adverse effect on our business, results
of operations or financial conditions.
3. Sole Sponsor
The Sole Sponsor has made an application on behalf of our Company to the Listing
Committee of the Stock Exchange for the listi ng of, and permission to deal in the H Shares to
be converted from Unlisted Shares and the H Shares to be issued pursuant to the Global
Offering (including the additional H Shares which may be issued pursuant to the exercise of
the Over-allotment Option). All necessary arrangements have been made to enable our H
Shares to be admitted into CCASS. The Sole Sponsor is a wholly-owned subsidiary of CITIC
Securities Company Limited. CIT IC Securities Investment, being a wholly-owned subsidiary
of CITIC Securities Company Limited, is regarded as a member of the sponsor group as
defined under the Listing Rules. CITIC Securiti es Investment will hold approximately 1.53%
of the issued share capital of our Company immediately following the completion of the
Global Offering (assuming the Over-allotme nt Option is not exercised). Based on the
foregoing facts and taking into account all the other criteria applicable to sponsors set out in
Rule 3A.07 of the Listing Rules, the Sole Sponsor is of the view that the shareholding of
CITIC Securities Investment in the Company will not impair its independence and it satisfies
the independence criteria applicable to sponsors set out in Rule 3A.07 of the Listing Rules.
The Sole Sponsor will be paid by our Company a fee of US$700,000 to act as the Sole
Sponsor to our Company in connection with the Listing.
4. Compliance Advisor
Our Company has appointed Rainbow Capital (HK) Limited as our compliance advisor in
compliance with Rule 3A.19 of the Listing Rules.
5. Preliminary Expenses
We have not incurred any material preliminary expenses in relation to the incorporation
of our Company.
6. Taxation of holder of H Shares
The sale, purchase and transfer of H Shares are subject to Hong Kong stamp duty if such
sale, purchase and transfer are affected on th e H Share register of members of our Company,
including in circumstances where such transactions are effected on the Stock Exchange. The
current rate of Hong Kong stamp duty for such sale, purchase and transfer is 0.10% of the
APPENDIX VII STATUTORY AND GENERAL INFORMATION
– VII-19 –


--- page 772 ---
consideration or, if higher, the fair value of the H Shares being sold or transferred. For further
information in relation to taxation, see ‘‘Taxation and Foreign Exchange ’’in Appendix IV to
this prospectus.
7. Qualification of Experts
The following are the qualifications of the experts (as defined under the Listing Rules
and the Companies (Winding Up and Miscellaneous Provisions) Ordinance) who have given
opinions or advice which are contained in this prospectus:
Name Qualification
CITIC Securities (Hong Kong)
Limited
Licensed to conduct type 4 (advising on
securities) and type 6 (ad vising on corporate
finance) regulated activities under the SFO
Jia Yuan Law Offices Legal advisor as to PRC law
Frost & Sullivan (Beijing) Inc.,
Shanghai Branch Co.
Independent industry consultant
Deloitte Touche Tohmatsu Certified Public Accountants under Professional
Accountant Ordinance (Chapter 50 of the Laws
of Hong Kong) and Registered Public Interest
Entity Auditor under Accounting and Financial
Reporting Council Ordinance (Chapter 588 of
the Laws of Hong Kong)
Cushman & Wakefield Limited Property Valuer
As of the Latest Practicable Date, none of the experts named above had any shareholding
interest in our Company or any of our subsidiari es or the right (whether legally enforceable or
not) to subscribe for or to nominate persons to subscribe for securities in any member of our
Group.
8. Consent of Experts
Each of the experts whose names are set out in paragraph 7 above has given and has not
withdrawn its consent to the issue of this prosp ectus with the inclusion of its report and/or
letter and/or opinion (as the case may be) and references to its name included herein in the
form and context in which it respectively appears.
APPENDIX VII STATUTORY AND GENERAL INFORMATION
– VII-20 –


--- page 773 ---
9. Promoters
The promoters of our Company are as follows:
1. Wang Zhongshan
2. Zhang Xiuqin
3. Tianjin Yuanjinmeng
4. Jinmeng Partnership
5. Tianjin Haikai Xinchuang
6. Jinyuan Partnership
7. Jinlong Partnership
8. Ping An Tianyu
9. Huang Yi
10. Chengcheng Dinghui
11. Jiaxing Yugang
Within the two years preceding the date of this prospectus, no cash, securities or other
benefit has been paid, allotted or given nor are any proposed to be paid, allotted or given to
any promoters in connection with the Global Offeri ng and the related transactions described in
this prospectus.
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
(Exemption of Companies and Prospectuses from Compliance with Provisions) Notice
(Chapter 32L of the Laws of Hong Kong).
11. Binding Effect
This prospectus shall have the effect, if an application is made in pursuance of this
prospectus, of rendering all persons concerned bound by all of the provisions (other than the
penal provisions) of Sections 44A and 44B of the Companies (Winding Up and Miscellaneous
Provisions) Ordinance in so far as applicable.
APPENDIX VII STATUTORY AND GENERAL INFORMATION
– VII-21 –


--- page 774 ---
12. No Material Adverse Change
Our Directors confirm that there has been no material adverse change in the financial or
trading position or prospects of our Group since June 30, 2024 (being the date to which the
latest audited consolidated financial statements of our Group were prepared).
13. Related Party Transactions
Our Group entered into the related party transactions within the two years immediately
preceding the date of this prospectus as mentioned in Note 44 of the Accountants ’ Report set
out in Appendix I to this prospectus.
14. Miscellaneous
(a) Save as disclosed in this prospectus, w ithin the two years immediately preceding
the date of this prospectus:
(i) no share or loan capital or debenture of our Company or any of our
subsidiaries has been issued or agreed to be issued or is proposed to be issued
for cash or as fully or partly paid other than in cash or otherwise;
(ii) no share or loan capital of our Company or any of our subsidiaries is under
option or is agreed conditionally or unconditionally to be put under option;
and
(iii) no commissions, discounts, broke rages or other special terms have been
granted or agreed to be granted in connection with the issue or sale of any
share or loan capital of our Company or any of our subsidiaries.
(b) Save as disclosed in this prospectus:
(i) there are no founder, management or deferred shares nor any debentures in our
Company or any of our subsidiaries;
(ii) there is no arrangement under which future dividends are waived or agreed to
be waived;
(iii) there are no contracts for hire or hire purchase of plan to or by us for a period
of over one year which are substantial in relation to our business;
(iv) no commissions, discounts, brokerages or other special terms have been
granted in connection with the issue or sale of any share or loan capital of our
Company or any of its subsidiaries by our Company for subscribing or
agreeing to subscribe, or procuring or agreeing to procure subscriptions, for
any shares in or debentures of our Company or any of our subsidiaries; and
APPENDIX VII STATUTORY AND GENERAL INFORMATION
– VII-22 –


--- page 775 ---
(v) there are no outstanding debentures or convertible debt securities of our
Company or any of our subsidiaries.
(c) none of our Directors or proposed Directors or experts (as named in this
prospectus), have any interest, direct or indirect, in any assets which have been,
within the two years immediately preceding the date of this prospectus, acquired or
disposed of by or leased to, any member of our Group, or are proposed to be
acquired or disposed of by or leased to any member of our Group.
(d) 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.
(e) none of our equity and debt securities is presently listed on any stock exchange or
traded on any trading system and no such listing or permission to list is being or is
proposed to be sought.
APPENDIX VII STATUTORY AND GENERAL INFORMATION
– VII-23 –


--- page 776 ---
DOCUMENTS DELIVERED TO THE REGISTRAR OF COMPANIES IN HONG KONG
The documents attached to the copy of this p rospectus and delivered to the Registrar of
Companies in Hong Kong for registra tion were, among other documents:
(a) the written consents referred to in ‘‘Appendix VII — Statutory and General Information
— E. Other Information — 8. Consent of Experts ’’; and
(b) a copy of each of the material contracts referred to in ‘‘Appendix VII — Statutory and
General Information — B. Further Information about Our Business — 1. Summary of
Material Contracts ’’.
DOCUMENTS AVAILABLE ON DISPLAY
Copies of the following documents will be published on the Stock Exchange ’s website at
www.hkexnews.hk and our Company’ s website at http://www.mokingran.com during a period of
14 days from the date of this prospectus:
(a) the Articles of Association;
(b) the Accountants ’ Report prepared by Deloitte Touche Tohmatsu, the text of which is set
out in Appendix I to this prospectus;
(c) the audited consolidated financial statements of our Company for the three years ended
December 31, 2021, 2022 and 2023 and th e six months ended June 30, 2024;
(d) the report on unaudited pro forma financial information of our Group prepared by
Deloitte Touche Tohmatsu, the text of which is set out in Appendix II to this prospectus;
(e) the property valuation report prepared by Cushman & Wakefield Limited, the text of
which is set out in Appendix III to this prospectus;
(f) the legal opinions issued by Jia Yuan Law Offices, our PRC Legal Advisor, in respect of
the general matters and property interests of our Group;
(g) the industry report prepared by Frost & Sullivan (Beijing) Inc., Shanghai Branch Co., the
summary of which is set forth in ‘‘Industry Overview’’ in this prospectus;
(h) a copy of each of the PRC Company Law, the PRC Securities Law, the Trial
Administrative Measures for Overseas Secu rities Offering and Listing by Domestic
Companies ( 《境內企業境外發行證券和上市管理試行辦法》), together with their
unofficial English translations;
(i) the material contracts referred to in ‘‘Appendix VII — Statutory and General Information
— B. Further Information about Our Business — 1. Summary of Material Contracts ’’;
(j) the written consents referred to in ‘‘Appendix VII — Statutory and General Information
— E. Other Information — 8. Consent of Experts ’’; and
APPENDIX VIII DOCUMENTS DELIVERED TO THE REGISTRAR
OF COMPANIES AND AVAILABLE ON DISPLAY
– VIII-1 –


--- page 777 ---
(k) the service contracts and the let ters of appointment referred to in ‘‘Appendix VII —
Statutory and General Information — C. Further Information about Our Directors,
Supervisors and Substantial Shareholders — 1. Directors, Supervisors and Chief
Executive — (ii) Particulars of service agreements and appointment letters ’’.
APPENDIX VIII DOCUMENTS DELIVERED TO THE REGISTRAR
OF COMPANIES AND AVAILABLE ON DISPLAY
– VIII-2 –


--- page 778 ---
夢金園黃金珠寶集團股份有限公司
MOKINGRAN JEWELLERY GROUP CO., LTD.
夢金園黃金珠寶集團股份有限公司
MOKINGRAN JEWELLERY GROUP CO., LTD.
Sole Sponsor, Sponsor-Overall Coordinator, Sole Global Coordinator, Joint Bookrunner and Joint Lead Manager
GLOBAL
OFFERING
Stock Code: 2585
(A joint stock company incorporated in the People’s Republic of China with limited liability)
