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Stock Code : 6682
(A joint stock company incorporated in the
People’s Republic of China with limited liability)
北京第四範式智能技術股份有限公司
Beijing Fourth Paradigm T echnology Co., Ltd.
GLOBAL
OFFERING
Sole Sponsor, Joint Global Coordinator, Sponsor-Overall Coordinator,
Overall Coordinator, Joint Bookrunner and Joint Lead Manager
Joint Global Coordinators, Overall Coordinators, Joint Bookrunners and Joint Lead Managers
Joint Bookrunners
Joint Lead Managers


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IMPORTANT: If you are in any doubt about any of the contents of this Prospectus, you should obtain professional independent advice.
Beijing Fourth Paradigm Technology Co., Ltd.
ʮ̡
(A joint stock company incorporated in the People’ s Republic of China with limited liability)
Global Offering
Number of Offer Shares under the Global
Offering
: 18,396,000 H Shares (subject to the Over-
allotment Option)
Number of Hong Kong Offer Shares : 1,839,600 H Shares (subject to reallocation)
Number of International Offer Shares : 16,556,400 H Shares (subject to reallocation
and the Over-allotment Option)
Maximum Offer Price : HK$61.16 per H Share, plus brokerage of
1.0%, SFC transaction levy of 0.0027%,
Hong Kong Stock Exchange trading fee of
0.00565% and Accounting and Financial
Reporting Council transaction levy of
0.00015% (payable in full on application in
Hong Kong dollars and subject to refund)
Nominal value : RMB1.00 per H share
Stock code : 6682
Sole Sponsor, Joint Global Coordinator, Sponsor-Overall Coordinator,
Overall Coordinator, Joint Bookrunner and Joint Lead Manager
Joint Global Coordinators, Overall Coordinators, Joint Bookrunners and Joint Lead Managers
Joint Bookrunners
Joint Lead Managers
Hong Kong Exchanges and Clearing Limited, The Stock Exchange of Hong Kong Limited and Hong Kong Securities Clearing Company Limited take no responsib ility for the contents
of this Prospectus, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever 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 the section headed “Documents Delivered to the Registrar of Companies a nd Available on Display” in
Appendix VII to this Prospectus, has been registered by the Registrar of Companies in Hong Kong as required by Section 342C of the Companies (Winding Up and Miscellaneous
Provisions) Ordinance, Chapter 32 of the Laws of Hong Kong. The Securities and Futures Commission of Hong Kong and the Registrar of Companies in Hong Ko ng take no responsibility
as to the contents of this Prospectus or any other documents referred to above.
The Offer Price is expected to be determined by agreement between the Overall Coordinators (on behalf of the Underwriters) and us on the Price Determin ation Date. The Price
Determination Date is expected to be on or around Thursday, September 21, 2023 (Hong Kong time) and, in any event, not later than Wednesday, September 2 7, 2023 (Hong Kong time).
The Offer Price will not be more than HK$61.16 per Offer Share and is currently expected to be not less than HK$55.60 per Offer Share. If, for any reason, t he Offer Price is not agreed
by Wednesday, September 27, 2023 (Hong Kong time) between the Overall Coordinators (on behalf of the Underwriters) and us, the Global Offering will no t proceed and will lapse.
The Overall Coordinators, on behalf of the Underwriters, may, where considered appropriate and with our consent, reduce the number of Hong Kong Offer Shares and/or the
indicative Offer Price range below that is stated in this Prospectus (which is HK$55.60 to HK$61.16) at any time prior to the morning of the last day for l odging applications
under the Hong Kong Public Offering. In such case, notices of the reduction in the number of Hong Kong Offer Shares and/or the indicative Offer Price ran ge will be published
on the website of our Company at www.4paradigm.com and on the website of the Hong Kong Stock Exchange at www.hkexnews.hk as soon as practicable following the decision
to make such reduction, and in any event not later than the morning of the last day for lodging applications under the Hong Kong Public Offering. Further details are set forth
in the sections headed “Structure of the Global Offering” and “How to Apply for Hong Kong Offer Shares” in this Prospectus.
The obligations of the Hong Kong Underwriters under the Hong Kong Underwriting Agreement are subject to termination by the Sole Sponsor (on behalf of t he Underwriters)
if certain events occur prior to 8:00 a.m. on the Listing Date. Please refer to 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 laws in the United States, and may not be of fered, sold, pledged or transferred
within the United States or to, or for the account or benefit of US persons (as defined in Regulation S), except in transactions exempt from, or not subje ct to, the registration requirements
of the U.S. Securities Act. The Offer Shares are being offered and sold outside of the United States in offshore transactions in reliance on Regulation S.
ATTENTION
We have adopted a fully electronic application process for the Hong Kong Public Offering. We will not provide printed copies of this Prospectus or prin ted copies of any application
forms to the public in relation to the Hong Kong Public Offering.
This Prospectus is available at the websites of the Stock Exchange ( www.hkexnews.hk ) and our Company ( www.4paradigm.com ). If you require a printed copy of this Prospectus,
you may download and print from the website addresses above.
IMPORTANT
September 18, 2023


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IMPORTANT NOTICE TO INVESTORS:
FULLY ELECTRONIC APPLICATION PROCESS
We have adopted a fully electronic application process for the Hong Kong
Public Offering. We will not provide printed copies of this Prospectus or printed
copies of any application forms to the public in relation to the Hong Kong Public
Offering.
This Prospectus is available at the website of the Hong Kong Stock Exchange
at www.hkexnews.hk under the “HKEXnews > New Listings > New Listing
Information” section, and our website at www.4paradigm.com. If you require a
printed copy of this Prospectus, you may download and print from the website
addresses above.
To apply for the Hong Kong Offer Shares, you may:
(1) apply online through the HK eIPO White Form service in the IPO App
(which can be downloaded by searching “ IPO App ” in App Store or Google
Play or downloaded at www.hkeipo.hk/IPOApp or
www.tricorglobal.com/IPOApp )o ra t www.hkeipo.hk ;o r
(2) apply through the CCASS EIPO service to electronically cause HKSCC
Nominees to apply on your behalf, including by:
(i) instructing your broker or custodian who is a CCASS Clearing
Participant or a CCASS Custodian Participant to give electronic
application instructions via CCASS terminals to apply for the Hong
Kong Offer Shares on your behalf; or
(ii) (if you are an existing CCASS Investor Participant ) giving electronic
application instructions through the CCASS Internet System
(https://ip.ccass.com ) or through the CCASS Phone System (using the
procedures in HKSCC’s “An Operating Guide for Investor Participants”
in effect from time to time). HKSCC can also input electronic
application instructions for CCASS Investor Participants through
HKSCC’s Customer Service Centre at 1/F., One & Two Exchange
Square, 8 Connaught Place, Central, Hong Kong by completing an input
request.
We will not provide any physical channels to accept any application for the Hong
Kong Offer Shares by the public. The contents of the electronic version of this
Prospectus are identical to the printed Prospectus as registered with the Registrar of
Companies in Hong Kong pursuant to Section 342C of the Companies (Winding Up and
Miscellaneous Provisions) Ordinance.
If you are an intermediary , broker or agent , please remind your customers, clients
or principals, as applicable, that this Prospectus is available online at the website
addresses above.
IMPORTANT


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Please refer to “How to Apply for Hong Kong Offer Shares” for further details on
the procedures through which you can apply for the Hong Kong Offer Shares
electronically.
Y our application through the HK eIPO White Form service or the CCASS EIPO service
must be for a minimum of 100 Hong Kong Offer Shares and in one of the numbers set out in
the table. Y ou are required to pay the amount next to the number you select.
No. of
Hong Kong
Offer Shares
applied for
Amount
payable on
application
No. of
Hong Kong
Offer Shares
applied for
Amount
payable on
application
No. of
Hong Kong
Offer Shares
applied for
Amount
payable on
application
No. of
Hong Kong
Offer Shares
applied for
Amount
payable on
application
HK$ HK$ HK$ HK$
100 6,177.69 2,500 154,442.00 30,000 1,853,303.96 600,000 37,066,079.15
200 12,355.36 3,000 185,330.40 40,000 2,471,071.94 700,000 43,243,759.02
300 18,533.05 3,500 216,218.79 50,000 3,088,839.94 800,000 49,421,438.88
400 24,710.72 4,000 247,107.20 60,000 3,706,607.91 919,800
(1) 56,822,299.35
500 30,888.41 4,500 277,995.59 70,000 4,324,375.90
600 37,066.08 5,000 308,884.00 80,000 4,942,143.89
700 43,243.76 6,000 370,660.79 90,000 5,559,911.88
800 49,421.43 7,000 432,437.59 100,000 6,177,679.85
900 55,599.12 8,000 494,214.38 200,000 12,355,359.72
1,000 61,776.80 9,000 555,991.19 300,000 18,533,039.58
1,500 92,665.20 10,000 617,767.99 400,000 24,710,719.45
2,000 123,553.59 20,000 1,235,535.97 500,000 30,888,399.30
(1) Maximum number of Hong Kong Offer Shares you may apply for.
No application for any other number of the Hong Kong Offer Shares will be considered
and any such application is liable to be rejected.
IMPORTANT


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If there is any change in the following expected timetable of the Hong Kong Public
Offering, we will issue an announcement in Hong Kong to be published on the websites
of the Stock Exchange at www.hkexnews.hk and our Company at www.4paradigm.com .
Hong Kong Public Offering commences ...................... .9:00 a.m. on Monday,
September 18, 2023
Latest time to complete electronic applications under the
HK eIPO White Form service through one of the below ways (2):
(1) the IPO App , which can be downloaded by searching “ IPO App ”
in App Store or Google Play or downloaded at
www.hkeipo.hk/IPOApp or www.tricorglobal.com/IPOApp
(2) the designated website www.hkeipo.hk ..................1 1:30 am on Thursday,
September 21, 2023
Application lists of the Hong Kong Public Offering open (3) ....... 1 1:45 am on Thursday,
September 21, 2023
Latest time to give electronic application instructions
to HKSCC (4) ....................................... .12:00 noon on Thursday,
September 21, 2023
Latest time to complete payment of HK eIPO White Form
applications by effecting Internet banking transfer(s) or
PPS payment transfer(s) .............................. .12:00 noon on Thursday,
September 21, 2023
If you are instructing your broker or custodian who is a CCASS Clearing Participant or
a CCASS Custodian Participant to give electronic application instructions via CCASS
terminals to apply for the Hong Kong Offer Shares on your behalf, you are advised to contact
your broker or custodian for the latest time for giving such instructions which may be
different from the latest time as stated above.
Application lists of the Hong Kong Public Offering close
(3) .... .12:00 noon on Thursday,
September 21, 2023
Expected Price Determination Date (5) .................................. Thursday,
September 21, 2023
(1) Announcement of the Offer Price, an indication of
the level 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 websites of
the Stock Exchange at www.hkexnews.hk and
our Company at www.4paradigm.com on or before (6)(9) ............W ednesday,
September 27, 2023
EXPECTED TIMETABLE (1)
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(2) Announcement of results of allocations in the Hong Kong
Public Offering (including successful applicants’
identification document numbers, where appropriate)
to be available through a variety of channels including the
websites of the Stock Exchange at www.hkexnews.hk
and our Company’s website at www.4paradigm.com
(see “How to Apply for Hong Kong Offer Shares –
11. Publication of Results” in this Prospectus) from (9) ..............W ednesday,
September 27, 2023
(3) A full announcement of the Hong Kong Public Offering
containing (1) and (2) above to be published on the
website of the Stock Exchange at www.hkexnews.hk and
our Company’s website at www.4paradigm.com (7)(9) from ..........W ednesday,
September 27, 2023
Results of allocations for the Hong Kong Public Offering
will be available at the “IPO Results” function in the IPO App or
at the designated results of allocations website at
www.hkeipo.hk/IPOResult or www.tricor.com.hk/ipo/result
with a “search by ID” function from (9) .............................W ednesday,
September 27, 2023
to Tuesday, October 3, 2023
Dispatch of H Share certificates in respect of wholly or
partially successful applications/Deposit of H Share certificates
into CCASS pursuant to the Hong Kong Public Offering
on or before
(6)(9) ..............................................W ednesday,
September 27, 2023
Dispatch of HK eIPO White Form e-Auto Refund payment
instructions/refund cheques on or before (8)(9) .........................W ednesday,
September 27, 2023
Dealings in H Shares on the Stock Exchange to commence on (9) ............. Thursday,
September 28, 2023
Notes:
(1) All times and dates refer to Hong Kong local time and date, except as otherwise stated.
(2) Y ou will not be permitted to submit your application through the IPO App or the designated website at
www.hkeipo.hk after 11:30 a.m. on the last day for submitting applications. If you have already submitted
your application and obtained a payment reference number from the IPO App or the designated website prior
to 11:30 a.m., you will be permitted to continue the application process (by completing payment of application
monies) until 12:00 noon on the last day for submitting applications, when the application lists close.
(3) If there is a typhoon warning signal number 8 or above, a “black” rainstorm warning and/or Extreme
Conditions at any time between 9:00 a.m. and 12:00 noon on Thursday, September 21, 2023, the application
lists will not open on that day. See “How to Apply for Hong Kong Offer Shares – 10. Effect of Bad Weather
and/or Extreme Conditions on the Opening and Closing of the Application Lists” of this Prospectus.
(4) Applicants who apply for Hong Kong Offer Shares by giving electronic application instructions to HKSCC
should refer to “How to Apply for Hong Kong Offer Shares – 6. Applying through the CCASS EIPO Service”
of this Prospectus.
EXPECTED TIMETABLE (1)
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(5) The Price Determination Date is expected to be on or around Thursday, September 21, 2023, and, in any event,
not later than Wednesday, September 27, 2023, or such other date as agreed between parties. If, for any reason,
the Offer Price is not agreed between the Overall Coordinators (for themselves and on behalf of the
Underwriters) and our Company by Wednesday, September 27, 2023, or such other date as agreed between
parties, the Global Offering will not proceed and will lapse.
(6) H Share certificates are expected to be issued on Wednesday, September 27, 2023 but will only become valid
provided that the Global Offering has become unconditional in all respects and neither of the Underwriting
Agreements has been terminated in accordance with its terms, which is scheduled to be at around 8:00 a.m.
on Thursday, September 28, 2023. Investors who trade H Shares on the basis of publicly available allocation
details before the receipt of H Share certificates and before they become valid do so entirely of their own risk.
(7) None of the websites or any of the information contained on the website forms part of this Prospectus.
(8) e-Auto Refund payment instructions/refund cheques will be issued in respect of wholly or partially
unsuccessful applications and in respect of wholly or partially successful applications if the Offer Price is less
than the price per Offer Share payable on application.
(9) In case a typhoon warning signal no. 8 or above, a “black” rainstorm warning signal and/or Extreme Conditions
between Monday, September 18, 2023 and Thursday, September 28, 2023, then the day of (i) announcement
of results of allocations in the Hong Kong Public Offering; (ii) dispatch of H Share certificates and refund
cheques/ HK eIPO White Form e-Auto Refund payment instructions; and (iii) dealings in the H Shares on
the Stock Exchange may be postponed and an announcement may be made in such event.
The above expected timetable is a summary only. Y ou should read carefully the
sections headed “Underwriting”, “Structure of the Global Offering” and “How to Apply
for Hong Kong Offer Shares” of this Prospectus for details relating to the structure of the
Global Offering, procedures on the applications for Hong Kong Offer Shares and the
expected timetable, including conditions, effect of bad weather and/or Extreme
Conditions and the dispatch of refund cheques and H Share certificates.
EXPECTED TIMETABLE (1)
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IMPORTANT NOTICE TO PROSPECTIVE INVESTORS
This Prospectus is issued by us solely in connection with the Hong Kong Public
Offering and the Hong Kong Offer Shares and does not constitute an offer to sell or
a solicitation of an offer to buy any security other than the Hong Kong Offer Shares
offered by this Prospectus pursuant to the Hong Kong Public Offering. This Prospectus
may not be used for the purpose of making, and does not constitute, an offer or
invitation in any other jurisdiction or in any other circumstances. No action has been
taken to permit a public offering of the Hong Kong Offer Shares in any jurisdiction
other than Hong Kong and no action has been taken to permit the distribution of this
Prospectus in any jurisdiction other than Hong Kong. The distribution of this
Prospectus for purposes of a public offering and the offering and sale of the Hong
Kong Offer Shares in other jurisdictions are subject to restrictions and may not be
made except as permitted under the applicable securities laws of such jurisdictions
pursuant to registration with or authorization by the relevant securities regulatory
authorities or an exemption therefrom.
Y ou should rely only on the information contained in this Prospectus to make your
investment decision. The Hong Kong Public Offering is made solely on the basis of the
information contained and the representations made in this Prospectus. We have not
authorized anyone to provide you with information that is different from what is
contained in this Prospectus. Any information or representation not contained nor
made in this Prospectus must not be relied on by you as having been authorized by us,
the Sole Sponsor, the Joint Global Coordinators, the Overall Coordinators, the Joint
Bookrunners, the Capital Market Intermediaries, any of the Underwriters, any of our
or their respective directors, officers, employees, agents, or representatives of any of
them or any other parties involved in the Global Offering.
Page
Expected Timetable ................................................. i
Contents .......................................................... i v
Summary ......................................................... 1
Definitions ........................................................ 3 2
Glossary of Technical Terms .......................................... 5 6
Forward-Looking Statements ......................................... 6 0
Risk Factors ....................................................... 6 2
CONTENTS
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Information about this Prospectus and the Global Offering ................. 1 0 3
Waivers .......................................................... 1 0 9
Directors, Supervisors and Parties Involved in the Global Offering ........... 1 1 5
Corporate Information .............................................. 1 2 1
Industry Overview .................................................. 1 2 3
Regulatory Overview ................................................ 1 3 4
History, Development and Corporate Structure ........................... 1 5 3
Business .......................................................... 1 9 1
Directors, Supervisors and Senior Management ........................... 2 6 8
Relationship with Our Controlling Shareholders .......................... 2 8 7
Substantial Shareholders ............................................. 2 9 1
Cornerstone Investors ............................................... 2 9 4
Share Capital ...................................................... 3 0 1
Financial Information ............................................... 3 0 5
Future Plans and Use of Proceeds ...................................... 3 8 0
Underwriting ...................................................... 3 8 5
Structure of the Global Offering ....................................... 3 9 7
How to Apply for Hong Kong Offer Shares .............................. 4 0 9
APPENDIX I Accountant’s Report .............................. I - 1
APPENDIX II Unaudited Pro Forma Financial Information ........... II-1
APPENDIX III Taxation and Foreign Exchange ..................... III-1
APPENDIX IV Summary of Principal Legal and Regulatory Provisions . . IV-1
APPENDIX V Summary of Articles of Association .................. V - 1
APPENDIX VI Statutory and General Information ................... VI-1
APPENDIX VII Documents Delivered to the Registrar of Companies and
Available on Display ............................. VII-1
CONTENTS
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This summary aims to give you an overview of the information contained in this
Prospectus. As this is a summary, it does not contain all the information that may be
important to you. You should read the entire document before you decide to invest in the
Offer Shares.
There are risks associated with any investment. Some of the particular risks in
investing in the Offer Shares are set out in the section headed “Risk Factors” in this
Prospectus. You should read that section carefully before you decide to invest in the Offer
Shares.
OVERVIEW
We are a leader in enterprise AI. We are an AI software company which focuses on
providing platform-centric AI software which enables enterprises to develop their own
decision-making AI applications. Our enterprise-level solutions are designed to serve
enterprises, rather than individuals. We offer platform-centric AI solutions that can be rapidly
deployed by enterprises on a large scale to uncover hidden patterns in data and
comprehensively enhance their decision-making capabilities.
We were the largest player by revenue in the platform-centric decision-making AI market,
a sub-segment of the AI market, in China in 2022, according to the CIC Report. China’s AI
industry can be categorized into four major segments in terms of fields of application:
decision-making AI, visual AI, speech and semantics AI and AI robots. Decision-making AI
recognizes patterns hidden in data, guides decision-making process on data insights, and
addresses issues that are most pertinent to core business operations. Within the decision-
making AI market, the platform-centric decision-making AI market in China is a vastly
expanding subsegment. As opposed to non-platform-centric solutions, platform-centric
solutions provide end users with an AI development platform in addition to AI applications and
underlying computing infrastructure. Such platforms provide end users with uniform
development standards, high compatibility as well as flexible expansion of applications per
actual demands. The following table sets forth a breakdown of China’s decision-making AI
industry for the periods indicated.
SUMMARY
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Market Size of Decision Making AI Market in China, 2018A-2027E
2026E 2027E2025E2024E2023E20222021202020192018
Platform-centric decision making AI market Non-platform-centric decision making AI market
(RMB billion)
CAGR (2018-2022): 42.2% CAGR (2022-2027E): 27.4%
Non-Platform-centric
CAGR (2018-2022): 87.7% CAGR (2022-2027E): 42.3%
Platform-centric
53.2
210.4
163.8
126.5
96.6
72.4
47.1
26.8
18.8
10.9
135.5
109.7
87.8
69.3
53.5
40.3
21.8
37.6
16.29.9
74.9
54.1
38.727.318.912.85.0 9.42.61.0
Source: CIC Report
We have been leading in the research of advanced AI technologies and the utilization of
these technologies in commercial solutions. For example, according to CIC, our proprietary
AutoML algorithm is a cutting-edge AutoML algorithm in the world. With our AutoML
algorithms, we broke the world records of two Open Graph Benchmark (“OGB”) tasks in April
2021. Our AutoML algorithm also ranks top 1% in Kaggle Structured Data and Image
Classification Competition 2019. For details, see “Business – Our Technology – AutoML.”
We emphasize value creation. Our solutions have created value for enterprises in a myriad
of industries including, but not limited to, finance, retail, manufacturing, energy and power,
telecommunications, transportation, technology, education, media and healthcare. For
example, our AI solutions have successfully helped banks enhance anti-fraud accuracy rate,
retailers forecast sales volume and formulate precision marketing strategies, manufacturers
optimize quality control, and energy companies detect and prevent equipment anomalies and
failures. In 2020, 2021, 2022 and in the three months ended March 31, 2022 and 2023, we had
47, 75, 104, 49 and 62 lighthouse users, namely Global Fortune 500 companies and publicly
listed companies, respectively.
Our platform-centric AI solutions seek to overcome challenges faced by in-house
development of AI capabilities and point solutions that are designed for scenario-specific use
cases, and allow enterprises to benefit from the advancement of AI technologies to the largest
extent possible. We believe, however, that large-scale AI transformation faces the key
challenges including shortage of experts, high total cost of ownership, long deployment time
and data and software incompatibility. Our platform-centric AI solutions seek to overcome
SUMMARY
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challenges faced by in-house development of AI capabilities and point solutions that are
designed for scenario-specific use cases, allowing us to capture the massive market
opportunities in enterprise AI application. For details, see “Business – Our Market
Opportunities” and “Industry Overview – Decision-Making AI Market in China.” Leveraging
our core technologies, we have developed end-to-end enterprise AI solutions, which include
optional bundling infrastructure, operating system, AI developer suites and applications, that
cater for enterprises’ needs across application, platform and infrastructure levels. Sage
Platform is the backbone of our solutions. It allows enterprises to easily build their customized
AI systems that automate the process of machine learning, application, decision-making and
evaluation driven by our AutoML algorithms, featuring quick, simple build-up, low- and/or
no-code environment, and implementation without significant involvement of AI experts. Our
Sage Platform is primarily composed of the following:
 Sage AIOS is an AI operating system featuring a user-friendly interface,
standardized data processing, automated resource management and allocation and
fully compatible middleware that are comparable to personal computer operating
systems. Specifically, Sage AIOS provides a more user-friendly interface to
visualize AI application development and management. Characterized by its
user-friendly interface on which users can easily and conveniently design, develop
and operate numerous AI applications, Sage AIOS is able to empower enterprises to
deploy AI on a large scale. Based on multiple versions of products and underlying
technology previously developed by us, we officially launched Sage AIOS in August
2020, an upgraded and integrated AI operating system with expanded features.
 HyperCycle series with no-code development tools and Sage Studio series with
low-code and no-code development tools are our core platform-centric AI solutions
by which our users can quickly and easily deploy large-scale AI applications.
In addition, we offer ready-to-use AI applications that users could directly deploy to
improve their business operations, primarily in the fields of sales and marketing, risk
management and operating efficiency in general. We also help users develop customized AI
applications on Sage Platform to address their specific business needs.
During the Track Record Period, we have experienced tremendous growth. Our revenue
grew by 114.2% from RMB942.2 million in 2020 to RMB2,018.4 million in 2021, and further
by 52.7% to RMB3,082.6 million in 2022. Our revenue grew by 33.6% from RMB482.3
million for the three months ended March 31, 2022 to RMB644.4 million for the three months
ended March 31, 2023. In line with our revenue growth, we have also experienced increase in
our trade receivables, including trade receivables aged over six months. As of December 31,
2020, 2021, 2022 and March 31, 2023, our trade receivables were RMB262.7 million,
RMB778.3 million, RMB1,493.2 million and RMB1,494.0 million, respectively. For details,
see “– Business Sustainability and Path to Profitability – Working Capital Sufficiency.”
SUMMARY
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OUR COMPETITIVE STRENGTHS
We believe the following strengths contribute to our success and differentiate us from our
competitors:
 Our leading position in platform-centric enterprise AI solutions and core
technologies;
 Our end-to-end AI solutions with strong value proposition, continuously driving
user success;
 High quality, diverse and loyal user base resulting from our levered go-to-market
strategy;
 AI ecosystem to ensure sustainable long-term growth; and
 Strong, experienced and elite management combining academic excellence and
business insights.
OUR STRATEGIES
We intend to pursue the following strategies to achieve our long-term goal of helping
enterprises achieve AI transformation:
 Further strengthen our R&D capabilities;
 Continue to create value for users and establish industry standards;
 Strengthen collaboration with business partners within our ecosystem; and
 Enhance our commercialization capabilities.
OUR ENTERPRISE AI SOLUTIONS
Driven by our mission to empower AI transformation and advance AI for all businesses,
we have developed Sage Platform, a full suite of end-to-end AI solutions that can be rapidly
deployed by enterprises on a large scale to uncover hidden patterns in data and facilitate
decision-making beyond human capability. Our innovative Sage Platform empowers
enterprises with AI development and management capabilities, and enables them to design,
develop, and operate AI applications at scale. The plug-and-play and low- and/or no-code
nature of Sage Platform lowers the barrier of AI deployment, enabling large-scale deployment
within a few days and without involvement of experts or other personnel with significant
experience in AI.
 Sage AIOS is an AI operating system featuring user-friendly interface, standardized
data processing, automated resource management and allocation and fully
compatible middleware that are comparable to personal computer operating systems.
Based on multiple versions of products and underlying technology previously
developed by us, we officially launched Sage AIOS in August 2020, an upgraded and
SUMMARY
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integrated AI operating system with expanded features. Specifically, Sage AIOS
provides a more user-friendly interface to visualize AI application development and
management. Characterized by its user-friendly interface on which users can easily
and conveniently design, develop and operate numerous AI applications, Sage AIOS
is able to empower enterprises to deploy AI on a large scale. In addition, as
compared to the earlier versions, Sage AIOS standardizes the formats of AI data and
resources management, thereby further enhancing the efficiency of AI deployment
on a large scale. The earlier versions of Sage Platform only supports our proprietary
AI developer suites and self-developed applications, while Sage AIOS is able to
support applications developed by other parties, and thus enhances our AI
ecosystem. Major components of Sage AIOS include data kernel and runtime kernel.
Data kernel is a platform for AI data. By defining the standards and formats of data
that are ready for AI applications, data kernel enables users to comprehensively
enhance its data quality and modeling efficiency. Runtime kernel is a centralized
management kernel for multi-layer computation, memory and communication.
Runtime kernel is capable of automatically scheduling and managing heterogeneous
resources without affecting user experience, thereby enhancing computation
resource utilization rates, and optimize the efficiency of developing AI models and
applications.
 Built on Sage AIOS, there are two AI developer suites, for which users can choose
depending on their coding capabilities, one being the HyperCycle series with
no-code development tool and the other one being the Sage Studio series with
low-code and no-code development tools. AI applications in different use cases
require different types of algorithms. Accordingly, at the users’ choice based on the
types of AI applications they want to develop, we offer HyperCycle ML,
HyperCycle CV , HyperCycle OCR, HyperCycle KB, ML Studio, CV Studio, NLP
Studio and Speech Studio, among others.
On top of our Sage Platform, we also offer a large and growing portfolio of
scenario-specific AI applications that address a range of mission-critical use cases and can be
readily installed and deployed. Our AI applications are primarily used in areas including sales
and marketing, risk management and operating efficiency enhancement. Moreover, in June
2021, we launched our enterprise-level AI application store, which is a marketplace for AI
applications at the choice of our users. It integrates a cluster of AI applications developed by
us and our partners in the ecosystem on Sage AIOS using our algorithms and standards, thereby
readily addressing users’ needs for intelligent operations in different use cases. We do not
separately charge the ready-to-use AI applications on our Sage Platform. At our users’ request,
we also offer application development services to help them develop customized AI
applications on Sage Platform based on their business needs.
Based on the needs of users, we also offer optional bundled infrastructure, which
primarily represent SageOne, our software-defined “All-in-One” solutions with pre-built Sage
Platform and applications on servers and other related hardware. SageOne maximizes the
synergistic effect between software and hardware. Leveraging software-defined optimization
of computing, network and storage resources, SageOne improves the output and performance
of our AI solutions as compared to running on conventional and generalized architecture
servers, thereby empowering organizations to rapidly enhance intelligence in their operations.
SUMMARY
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The following diagram illustrates our solution offerings:
Sage
Applications
AI
AAAAAAA
III IIII
Platform-centric
Solutions
HyperCycle KB HyperCycle ML
HyperCycle CV HyperCycle OCR
ML Studio CV Studio
NLP Studio Speech Studio
HyperCycle Studio
No-code platform Low- and/or no-code platform
Sales and Marketing Risk Management Operating Efficiency
Digital Operation Platform
Precision Marketing
Sales Forecast
Anti-fraud Smart Supply Chain
Intelligent Customer ServiceAnti-money Laundering
Operating
System
Data Kernel Runtime Kernel
AIOS
AI Developer
Suites … …
………
Optional Bundling Infrastructure
Anomaly Prediction Smart Production Planning
REVENUE MODEL
We generate our revenue primarily from (i) Sage Platform and applications and (ii)
application development and other services.
The following table sets forth a breakdown of our revenues by types of solutions for the
years/periods indicated:
For the year ended December 31, For the three months ended March 31,
2020 2021 2022 2022 2023
RMB % RMB % RMB % RMB % RMB %
(in thousands, except for percentages)
(unaudited)
Sage Platform and applications
Software licensing 157,888 16.8 356,156 17.6 596,001 19.3 87,170 18.1 103,429 16.1
SageOne 461,041 48.9 658,398 32.7 895,850 29.1 160,682 33.3 168,306 26.1
Sub-total 618,929 65.7 1,014,554 50.3 1,491,851 48.4 247,852 51.4 271,735 42.2
Application development and
other services 323,309 34.3 1,003,845 49.7 1,590,786 51.6 234,409 48.6 372,662 57.8
Total 942,238 100.0 2,018,399 100.0 3,082,637 100.0 482,261 100.0 644,397 100.0
SUMMARY
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As a platform-centric AI solution provider, we have been dedicated to updating our
solutions to provide end users across different industries with unified development
environment, standards and rules and to enhance the compatibility of our solutions. As a result
of our continuous iteration and optimization efforts, Sage Platform can be generally applied by
end users in different industries which do not require significant customization. Our revenue
generated from Sage Platform and applications as a percentage of our total revenue decreased
from 65.7% in 2020 to 50.3% in 2021 and further decreased to 48.4% in 2022, and decreased
from 51.4% in the three months ended March 31, 2022 to 42.2% in the three months ended
March 31, 2023, as the percentage of total revenue attributed to our application development
and other services increased over the same years, driven by the increased demand for
customized AI applications due to the expansion of our user base in 2021 and 2022.
Sage Platform and Applications
Sage Platform and applications are delivered primarily through (i) license of software
installed on-premise at servers of our end users and (ii) SageOne, our “All-in-One” solutions
with pre-installed software on servers and other related hardware, both of which allow our
users to develop their own AI applications on Sage Platform. Our Sage Platform and
applications are offered as a bundle. Users select the types of Sage Platform and applications
and the delivery method based on their needs.
Our Sage Platform and applications are primarily offered through software license and
sale of SageOne, rather than on a subscription basis. We are dedicated to creating value for
users and addressing their business needs with our solutions. After we help them identify the
critical issues, provide solutions and achieve the objectives of business improvement, they will
make repeated purchases from us after identifying incremental business needs for AI
application within their operations, and expanding their use of our solutions. As our users
develop more AI applications for new use cases on our platform and/or increase usage in
existing use cases which require more computing power, they will need to purchase additional
licenses from us for additional computing power, which in turn allows us to capture additional
monetization opportunities after the initial sale. The pricing of Sage Platform and applications
are primarily based on the estimated computing power consumption. Based on communications
with users, we understand their business needs and estimate the computing power consumption
based on the complexity of the use cases, dimensions of the AI models, and the estimated
amount of data involved therein.
 The price of our software license is primarily based on the estimated computing
power consumption by reference to the AI applications our users plan to deploy. We
consider data volume and other specific requests such as the latency, concurrency,
queries per seconds, and the number of replicas, among others.
SUMMARY
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 To complement the sales of software, we also offer SageOne, our software-defined
“All-in-One” solutions with pre-built Sage Platform and applications on servers and
other related hardware. We charge customers of SageOne by taking into account the
number of hardware units, license fees of our software and cost of hardware based
on respective model. Hardware units of SageOne refer to units of different models
of servers.
Application Development and Other Services
At our users’ request, we primarily offer application development services to help them
develop customized AI applications on Sage Platform based on their business needs. We charge
them on a project basis, the pricing of which is primarily based on the manpower consumption
of the relevant services. As our users’ demand for AI applications increases with their business
expansion, they will continue to procure our application development services, allowing us to
capture more service fees on an on-going basis.
OUR CUSTOMERS
We have two main categories of customers: (i) direct customers who are end users
purchasing our solutions directly; and (ii) solution partner customers, who are mainly
third-party system integrators that embed our solutions into their offering to cater for end
users’ specific needs. In 2020, 2021, 2022 and in the three months ended March 31, 2022 and
2023, revenue generated from direct customers accounted for 15%, 43%, 32%, 33% and 22%
of our total revenue, respectively. In 2020, 2021, 2022 and in the three months ended March 31,
2022 and 2023, revenue generated from solution partner customers accounted for 85%, 57%,
68%, 67% and 78% of our total revenue, respectively. We typically grant a credit term ranging
from 3 to 6 months for direct customers and solution partner customers. Our top five customers
in each year or period during the Track Record Period in aggregate accounted for 17.4%,
11.1%, 25.8% and 46.1% of our total revenues in 2020, 2021, 2022 and in the three months
ended March 31, 2023, respectively. Our largest customer in each year or period during the
Track Record Period accounted for approximately 5.2%, 2.8%, 9.6% and 16.8% of our total
revenue in 2020, 2021, 2022 and in the three months ended March 31, 2023, respectively.
Our end users, which are the actual users of our platform, include both our direct
customers and end users which engaged by solutions partners. Certain end users of our
solutions, especially banks and other companies in the finance industry, use system integrators
when selecting suppliers or service providers, to save them from the trouble of directly
negotiating with a large number of different suppliers or service providers and to benefit from
the various other services provided by such system integrators. For lighthouse users, we either
directly enter into contracts with them or through solution partners. Our lighthouse users are
primarily covered by our in-house sales team who promote our solutions to such lighthouse
users, and the ultimate decisions as to choose our solutions are primarily made by the
lighthouse users.
SUMMARY
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The following table sets forth the revenue contribution by industry of our end users during
the Track Record Period.
For the year ended December 31, For the three months ended March 31,
2020 2021 2022 2022 2023
Transaction
Amounts
Percentage
of Total
Revenue
Transaction
Amounts
Percentage
of Total
Revenue
Transaction
Amounts
Percentage
of Total
Revenue
Transaction
Amounts
Percentage
of Total
Revenue
Transaction
Amounts
Percentage
of Total
Revenue
(RMB’000) (RMB’000) (RMB’000) (RMB’000) (RMB’000)
Energy and Power 138,294 14.7% 441,964 21.9% 626,549 20.3% 104,591 21.7% 73,196 11.4%
Finance 292,469 31.0% 576,550 28.6% 519,630 16.9% 92,737 19.2% 127,782 19.8%
Transportation nil nil nil nil 405,016 13.1% 35,293 7.3% 193,238 30.0%
Telecommunication 73,145 7.8% 175,380 8.7% 328,372 10.7% 50,981 10.6% 47,686 7.4%
Technology 64,496 6.9% 138,482 6.9% 298,988 9.7% 46,218 9.6% 33,589 5.2%
Education 66,665 7.1% 124,228 6.2% 235,170 7.6% 36,318 7.5% 42,017 6.5%
Manufacturing 23,833 2.5% 102,461 5.1% 201,686 6.5% 2,107 0.4% 44,981 7.0%
Retail 100,812 10.7% 176,758 8.8% 132,172 4.3% 25,080 5.2% 23,024 3.6%
Healthcare nil nil 57,359 2.8% 101,876 3.3% 45,203 9.4% 402 0.1%
Media 53,955 5.7% 134,660 6.7% 29,698 1.0% 16,307 3.4% 21,809 3.4%
Others 128,569 13.6% 90,556 4.5% 203,480 6.6% 27,425 5.7% 36,672 5.7%
Total 942,238 100.0% 2,018,399 100.0% 3,082,637 100.0% 482,261 100.0% 644,397 100.0%
OUR SUPPLIERS
Our suppliers primarily consist of (i) providers of research and development services, (ii)
providers of implementation services and (iii) providers of servers and cloud services and
providers of other professional services. Our top five suppliers in each year or period during
the Track Record Period in aggregate accounted for 13.7%, 21.7%, 26.4% and 38.3% of our
total purchases in 2020, 2021, 2022, and in the three months ended March 31, 2023,
respectively. Our largest supplier in 2020, 2021, 2022 and in the three months ended March 31,
2023 accounted for approximately 3.4%, 6.5%, 10.1% and 14.7% of our total purchases in the
same years or periods, respectively.
COMPETITION
We face competition in China’s decision-making AI market from other AI solution
providers. The principal competitive factors in our industry include functionality, scope and
performance of solutions, scalability and reliability of services, technology capabilities,
marketing and sales capabilities, user experience, pricing, brand recognition and reputation. In
addition, new and enhanced technology may further increase competition in our industry. We
believe that we are well positioned to compete effectively on the basis of the foregoing factors.
Nevertheless, some of our existing competitors have greater name recognition, broader
global footprint, longer operating histories, larger user bases as well as greater financial,
technical and other resources. See “Risk Factors – Risks Related to Our Business and Industry
– If we fail to compete effectively, our business, financial condition and results of operations
may be materially and adversely affected” in this Prospectus. For more information on the
competitive landscape of our industry, see “Industry Overview.”
SUMMARY
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RISK FACTORS
Our business faces risks including those set out in the section headed “Risk Factors.” As
different investors may have different interpretations and criteria when determining the
significance of a risk, you should read the “Risk Factors” section in its entirety before you
decide to invest in our H Shares. Some of the major risks that we face include:
 AI technologies are constantly evolving. Any flaws or inappropriate usage of AI
technologies, whether actual or perceived, whether intended or inadvertent, whether
committed by us or by other third parties, could have negative impact on our
business, reputation and the general acceptance of AI solutions by the society.
 Our business depends substantially on continuing efforts of our senior management
and other key personnel, as well as a competent pool of talents who support our
existing operations and future growth. If we are unable to retain, attract, recruit and
train such personnel, our business may be materially and adversely affected.
 The industries in which we operate are characterized by constant changes. If we fail
to continuously innovate our technology and provide useful solutions that meet the
expectations of our customers, our business, financial condition and results of
operations may be materially and adversely affected.
 We may not be able to sustain our historical growth rates, and our historical growth
may not be indicative of our future growth or financial results.
 We are investing heavily on our research and development, and such investment may
negatively impact our profitability and operating cash flow in the short term and
may not generate the results we expect to achieve.
 We have recorded net losses, net liabilities and operating cash outflow during the
Track Record Period, and we may not be able to achieve or subsequently maintain
profitability.
 Our solutions are primarily not offered on a recurring subscription basis. If we fail
to retain existing customers, attract new customers or increase the spending by our
customers, our business and results of operations may be materially and adversely
affected.
 If we fail to compete effectively, our business, financial condition and results of
operations may be materially and adversely affected.
 We may be subject to complex and evolving laws and regulations regarding privacy
and data protection. Actual or alleged failure to comply with privacy and data
protection laws and regulations could damage our reputation, deter current and
potential customers from using our solutions and could subject us to significant
legal, financial and operational consequences.
 We are subject to the risks associated with international trade policies, geopolitics
and trade protection measures, and our business, financial condition and results of
operations could be adversely affected. Effective March 2, 2023, BIS added certain
entity(ies) to the Entity List, which restricts their ability to purchase or otherwise
access certain goods, software and technology. Out of an abundance of caution and
unless or until we receive further clarification from BIS, we will assume that all
entities located at the address provided in the Entity List are subject to the Entity
List restrictions in order to comply with relevant restrictions.
 The trading price of our H Shares may be volatile, which could result in substantial
losses to you.
SUMMARY
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SUMMARY OF KEY FINANCIAL INFORMATION
The following tables summarize our consolidated financial results during the Track
Record Period and should be read in conjunction with the section headed “Financial
Information” of this Prospectus and the Accountant’s Report set out in Appendix I to this
Prospectus, together with the respective accompanying notes.
Summary of Statements of Comprehensive Income
For the year ended December 31,
For the three months
ended March 31,
2020 2021 2022 2022 2023
(RMB in thousands)
(Unaudited)
Revenue 942,238 2,018,399 3,082,637 482,261 644,397
Cost of sales (1) (512,503) (1,064,924) (1,595,991) (247,377) (362,835)
Gross profit 429,735 953,475 1,486,646 234,884 281,562
Selling and marketing expenses (1) (247,829) (455,001) (412,152) (80,539) (82,849)
General and administrative expenses (1) (246,493) (541,730) (527,638) (83,178) (101,099)
Research and development expenses (1) (565,674) (1,249,485) (1,650,010) (225,656) (241,457)
Credit loss allowance (1,992) (15,206) (48,914) (7) (5,578)
Other income 42,583 41,627 62,662 13,535 16,161
Other gains, net 29,604 93,514 63,504 18,066 8,429
Operating loss (560,066) (1,172,806) (1,025,902) (122,895) (124,831)
Share of (losses)/profits of investments
accounted for using the equity
method (6,477) 3,802 (3,200) 538 (791)
Finance income 6,038 24,416 46,183 7,539 12,429
Finance costs (188,978) (647,111) (682,175) (161,393) (194,445)
Loss before income tax (749,483) (1,791,699) (1,665,094) (276,211) (307,638)
Income tax (expenses)/credit (727) (10,369) 11,673 8,059 3,742
Loss for the year/period (750,210) (1,802,068) (1,653,421) (268,152) (303,896)
Loss attributable to:
Owners of the Company (749,650) (1,785,655) (1,644,897) (263,626) (291,344)
Non-controlling interests (560) (16,413) (8,524) (4,526) (12,552)
SUMMARY
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Note:
(1) Share-based compensation expenses recognized for the Track Record Period were allocated as follows:
For the year ended December 31,
For the three months ended
March 31,
2020 2021 2022 2022 2023
(RMB in thousands)
(unaudited)
Cost of sales 1,104 4,60 3–––
Selling and marketing
expenses 20,726 98,341 8,756 – –
General and
administrative
expenses 126,467 368,250 278,629 – –
Research and
development expenses 25,368 132,440 146,018 – –
Total 173,665 603,634 433,403 – –
Non-IFRS Measures
To supplement our consolidated financial statements presented in accordance with IFRS,
we use adjusted operating loss (a non-IFRS measure) and adjusted net loss (a non-IFRS
measure) as additional financial measures, which are not required by, or presented in
accordance with, IFRS. We believe that these non-IFRS measures facilitate comparisons of
operating performance from period to period and company to company by eliminating potential
impacts of certain items. We believe that these measures provide useful information to
investors in understanding and evaluating our consolidated results of operations in the same
manner as they help our management. However, presentation of adjusted operating loss (a
non-IFRS measure) and adjusted net loss (a non-IFRS measure) may not be comparable to
similarly titled measures presented by other companies. The use of these non-IFRS measures
has limitations as an analytical tool, and investors should not consider them in isolation from,
or as a substitute for analysis of, our results of operations or financial conditions as reported
under IFRS.
Adjusted Operating Loss and Adjusted Net Loss (non-IFRS measures)
We define adjusted operating loss (a non-IFRS measure) as operating loss by adding back
share-based compensation and listing expenses. We define adjusted net loss (a non-IFRS
measure) as loss for the year/period by adding back share-based compensation, interest
expense on redemption liabilities and listing expenses. The following table reconciles our
adjusted operating loss (a non-IFRS measure) and adjusted net loss (a non-IFRS measure)
presented to the most directly comparable financial measures calculated and presented in
accordance with IFRS, namely operating loss and net loss, respectively, and as a percentage of
our total revenue.
For the year ended December 31,
For the three months ended
March 31,
2020 2021 2022 2022 2023
RMB % RMB % RMB % RMB % RMB %
(RMB in thousands, except for percentage)
(unaudited)
Reconciliation of operating loss and
adjusted operating loss (non-IFRS
measure)
Operating loss (560,066) (59.4) (1,172,806) (58.1) (1,025,902) (33.3) (122,895) (25.5) (124,831) (19.4)
Add:
Share-based compensation 173,665 18.4 603,634 29.9 433,403 14.1 – – – –
Listing expenses – – 672 0.0 44,720 1.5 42,687 8.9 47,985 7.4
Adjusted operating loss (non-IFRS
measure) (386,401) (41.0) (568,500) (28.2) (547,779) (17.8) (80,208) (16.6) (76,846) (11.9)
SUMMARY
–1 2–


--- page 22 ---
For the year ended December 31,
For the three months ended
March 31,
2020 2021 2022 2022 2023
RMB % RMB % RMB % RMB % RMB %
(RMB in thousands, except for percentage)
(unaudited)
Reconciliation of loss for the
year/period and adjusted net loss
(non-IFRS measure)
Loss for the year/period (750,210) (79.6) (1,802,068) (89.2) (1,653,421) (53.6) (268,152) (55.6) (303,896) (47.2)
Add:
Share-based compensation 173,665 18.4 603,634 29.9 433,403 14.1 – – – –
Interest expense on redemption
liabilities 186,240 19.8 638,682 31.6 670,963 21.8 158,684 32.9 190,778 29.6
Listing expenses – – 672 0.0 44,720 1.5 42,687 8.9 47,985 7.4
Adjusted net loss (non-IFRS
measure) (390,305) (41.4) (559,080) (27.7) (504,335) (16.4) (66,781) (13.8) (65,133) (10.1)
Our management considers that (i) share-based compensation, which relates to options
and shares that we awarded to our employees for their contribution to us, is non-cash in nature
and does not result in cash outflow, (ii) interest expense on redemption liabilities is a non-cash
item, and (iii) listing expenses, which relate to this Global Offering. Therefore, by eliminating
the impacts of such items in the calculation of adjusted operating loss (a non-IFRS measure)
and adjusted net loss (a non-IFRS measure), this measure could better reflect our underlying
operating performance and could better facilitate the comparison of operating performance
from year to year and from period to period.
Description of Key Statement of Comprehensive Income Items
In 2020, 2021, 2022 and the three months ended March 31, 2022 and 2023, we had
revenue of RMB942.2 million, RMB2,018.4 million, RMB3,082.6 million, RMB482.3 million
and RMB644.4 million, respectively. Increases in our revenue were primarily driven by the
expansion of our user base and the increased spending of our users. More specifically, our
revenue increased by 33.6% from the three months ended March 31, 2022 to the three months
ended March 31, 2023, primarily attributable to the increase generated by our application
development and other services driven by the expansion of our user base, as well as increased
user spending. Our revenue increased by 52.7% from 2021 to 2022, primarily driven by the
expansion of our user base, as well as increased user spending. Our revenue increased by
114.2% from 2020 to 2021, primarily attributable to the increase generated by our application
development and other services due to (i) the increase of our use cases and users that need
customized AI applications on Sage Platform, and (ii) the recovery from the negative impact
of COVID-19 pandemic. In line with our revenue growth, our gross profit was RMB429.7
million, RMB953.5 million, RMB1,486.6 million, RMB234.9 million and RMB281.6 million
in 2020, 2021, 2022 and the three months ended March 31, 2022 and 2023, respectively. Our
overall gross profit margin increased from 45.6% in 2020 to 47.2% in 2021, primarily due to
the increase of revenue contribution of application development and other services, which had
relatively high gross profit margins, mainly as a result of recovery from the negative impact
of COVID-19, and further to 48.2% in 2022, mainly as a result of the increase of revenue
contribution of software licensing, which had relatively high gross profit margins, as software
licensing requires less on-site services than our other segments, and thus was less affected by
the recurrence of COVID-19 in 2022. Our overall gross profit margin decreased from 48.7%
in the three months ended March 31, 2022 to 43.7% in the three months ended March 31, 2023,
primarily due to the increase of revenue contribution from SageOne and application
development and other services, which had lower gross profit margins compared with software
licensing.
SUMMARY
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In 2020 and 2021, we incurred net loss of RMB750.2 million and RMB1,802.1 million,
respectively. The increases in net losses were primarily due to the increases of: (i) research and
development expenses incurred to develop and enhance our solutions and technology stacks,
(ii) selling and marketing expenses incurred to increase our brand awareness and expand our
user base, (iii) general and administrative expenses, which are mainly attributable to
share-based compensation paid to our employees, and (iv) interest expense on redemption
liabilities in relation to certain nonrecurring preferred rights granted to our investors. Our net
loss decreased from RMB1,802.1 million to RMB1,653.4 million from 2021 to 2022, primarily
due to the decrease of our share-based compensation expenses. Our net loss increased from
RMB268.2 million to RMB303.9 million from the three months ended March 31, 2022 to the
three months ended March 31, 2023, primarily due to the increase of research and development
expenses and interest expense on redemption liabilities in relation to certain nonrecurring
preferred rights granted to our investors.
For details, see “Financial Information – Description of Key Statement of Comprehensive
Income Items.”
Business Sustainability and Path to Profitability
Introduction
We were loss-making during the Track Record Period. In 2020, 2021, 2022 and the three
months ended March 31, 2022 and 2023, we incurred net loss of RMB750.2 million,
RMB1,802.1 million, RMB1,653.4 million, RMB268.2 million and RMB303.9 million,
respectively. The net losses were primarily due to the substantial amount of: (i) research and
development expenses incurred to develop and enhance our solutions and technology stacks,
see “Business – Research and Development,” (ii) selling and marketing expenses incurred to
increase our brand awareness and expand our user base, (iii) general and administrative
expenses, which are mainly attributable to share-based compensation paid to our employees,
and (iv) interest expense on redemption liabilities in relation to certain preferred rights granted
to our investors, which is non-recurring in nature. In 2020, 2021, 2022 and the three months
ended March 31, 2022 and 2023, our adjusted net loss (a non-IFRS measure), which is defined
as loss for the year by adding back share-based compensation, interest expense on redemption
liabilities and listing expenses, amounted to RMB390.3 million, RMB559.1 million,
RMB504.3 million, RMB66.8 million and RMB65.1 million, respectively. Our net loss
increased from RMB750.2 million in 2020 to RMB1,802.1 million in 2021, primarily due to
the substantial amount of (i) share-based compensation paid to our employees recognized as
cost of sales, selling and marketing expenses, general and administrative expenses and research
and development expenses and (ii) interest expense on redemption liabilities in relation to
certain preferred rights granted to our investors, which is non-recurring in nature. Our net loss
decreased from RMB1,802.1 million in 2021 to RMB1,653.4 million in 2022, primarily due to
the decrease of our share-based compensation expenses. Our net loss increased from
RMB268.2 million to RMB303.9 million from the three months ended March 31, 2022 to the
three months ended March 31, 2023, primarily due to the increase of research and development
expenses and interest expense on redemption liabilities in relation to certain non-recurring
preferred rights granted to our investors. As we are still at a relatively early stage of our
monetization efforts, we have been focusing on continuously optimizing our solutions and
expanding our user base.
We plan to continue to enhance our financial performance by (i) effectively attracting and
retaining our users, (ii) continuing to create value for users to further monetize our solutions,
and (iii) effectively managing our cost and expenses, and enhancing operating leverage.
Despite our continued expansion in user base, increase in average revenue per lighthouse user
and enhanced capability to manage our cost and expenses, we may continue to incur net
losses and net operating cash outflow in the near future, including the year ending
December 31, 2023 , mainly due to our continued investments in research and development of
our technologies and solutions, marketing initiatives as well as share-based compensation.
SUMMARY
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Effectively attracting and retaining our users
Effectively attracting new users and retaining existing users is crucial to driving revenue
growths, and ultimately our ability to achieve profitability. The following table sets forth the
numbers of our users and lighthouse users for the years/periods indicated:
For the year ended December 31,
For the three months
ended March 31,
2020 2021 2022 2022 2023
Number of users 156 245 409 125 147
Number of lighthouse users for
the previous year 32 47 75 N/A N/A
Additions 21 33 36 N/A N/A
Less
(1) 6 5 7 N/A N/A
Number of lighthouse users for
the year/period 47 75 104 49 62
Note:
(1) Refers to lighthouse users in the previous year that ceased to be regarded as our lighthouse users in the
given year. However, the business relationship with such users has not been terminated. We have been
providing ongoing supporting services to such lighthouse users under our standard service arrangement.
Such users ceased to be our lighthouse users in the given year solely because we did not generate
revenue from such users in such year from an accounting perspective.
As a result of our effective go-to-market strategy, we had 47, 75, 104, 49 and 62
lighthouse users in 2020, 2021, 2022 and in the three months ended March 31, 2022 and 2023,
respectively. In 2020, 2021 and 2022, we acquired 21, 33 and 36 new lighthouse users,
respectively, illustrating the value of our solutions and our ability to expand our business.
Lighthouse users refer to end users of Sage Platform which are either Global Fortune 500
companies or publicly listed companies. Our lighthouse users contributed 61%, 51%, 60%,
55% and 52% of our total revenue in 2020, 2021, 2022 and in the three months ended
March 31, 2022 and 2023, respectively. Therefore, growth in revenue from lighthouse users is
a key driver in our overall revenue growth. Moreover, our expanding base of lighthouse users
also help us to attract other users, which in turn further drives our revenue growth. Our initial
success with lighthouse users enables us to further penetrate the respective industry and
provide solutions to other players in the industry efficiently. As a result, we have accumulated
a strong and rapidly growing total user base including both lighthouse users and other users,
with 156, 245, 409, 125 and 147 users in 2020, 2021, 2022 and in the three months ended
March 31, 2022 and 2023, respectively. The effectiveness of our go-to-market strategy is
evidenced by the rapid growth in the number of other users during the Track Record Period,
representing a CAGR of 67.3% from 2020 to 2022, as compared to a CAGR of 48.8% for
lighthouse users during the same years, reflecting our ability to penetrate into a larger user base
following initial success with lighthouse users.
We plan to further implement our “go-to-market” strategy by strengthening our
relationships with lighthouse users and further penetrate into a larger user base. We also work
closely with third-party solution partners and leverage their understanding of end users’
demands, thereby developing tailored marketing strategies to acquire more users. As our
existing users, in particular our lighthouse users, benefit from our solutions in more and more
use cases, we will naturally be able to establish industry standards and attract more new users
across sectors. We are able to leverage our experience and success in existing industry and
SUMMARY
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scenario to expand into new industries with similar scenario. For example, successes in
intelligent recommendation scenario in the restaurant industry can be leveraged when we are
entering into other industries, such as fashion, which also have demands for intelligent
recommendation. In addition, we will further optimize and enhance the functions of our
solutions so that they can be applied in new scenarios and verticals. Moreover, we plan to
recruit and retain talents with in-depth industry knowledge to strengthen our sales and
marketing team, thereby leveraging their industry-specific sales experiences to expand users in
new industries.
Continuing to create value for users to further monetize our solutions
We are dedicated to creating value to our users. As a result, we are able to explore
additional monetization opportunities to help us scale up our revenues and to achieve
profitability.
We plan to continue to create value for users and address their business needs by
optimizing our solutions, innovating our technologies, providing satisfying customer services,
among others. After we help them identify the critical issues, provide solutions and achieve the
objectives of business improvement, they usually identify incremental business needs for AI
within their operations and expand their use of our solutions. Moreover, as our users develop
more AI applications for new use cases on our platform and/or increase usage in existing use
cases which require more computing power, they will need to purchase additional licenses from
us for additional computing power, which in turn allows us to capture additional monetization
opportunities after the initial sale. The average revenue per lighthouse user amounted to
RMB12.3 million, RMB13.7 million, RMB17.9 million, RMB5.4 million and RMB5.4 million
in 2020, 2021, 2022 and in the three months ended March 31, 2022 and 2023, respectively,
illustrating our ability to further monetize our solutions. In 2020, 2021, 2022 and in the three
months ended March 31, 2022 and 2023, our revenue generated from existing lighthouse users
amounted to RMB445.8 million, RMB808.2 million, RMB1,300.4 million, RMB199.4 million
and RMB267.0 million, respectively, representing 77.0%, 78.5%, 70.0%, 74.8% and 79.4% of
total revenue generated from lighthouse end users for the same years, respectively. Driven by
our successful value creation for lighthouse users, our overall average revenue per user
amounted to RMB5.8 million, RMB6.9 million, RMB7.5 million, RMB3.9 million and
RMB4.4 million in 2020, 2021, 2022 and in the three months ended March 31, 2022 and 2023,
respectively.
Effectively managing our cost and expenses, and enhancing operating leverage
Our ability to manage and control our costs and operating expenses is critical to the
success of our business and our profitability.
Our cost structure is affected by the mix of our solution offerings. For example, with the
launch of SageOne, we incurred an increased cost of finished goods sold as a percentage of
revenue during the Track Record Period. We expect our cost of revenues as a percentage of
revenue may vary from period to period in the short term as a result of the mix of our solution
offerings, while it will generally decrease in the long term due to the following factors:
 As we continue to optimize our algorithms and to enhance the compatibility of
software and hardware, we expect to improve the computing efficiency of our
solutions, which enables us to enhance user experience while optimizing cost
structure; and
SUMMARY
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 We have invested heavily in developing technology capabilities and infrastructure,
in order to provide highly scalable, standardized and flexible solutions for our users.
The solutions we offer are highly modularized, which allows us to address users’
customized demands effectively and efficiently, and in turn, enabling us to achieve
significant overall cost and operating efficiency.
Our selling and marketing expenses (excluding share-based compensation) accounted for
24.1%, 17.7%, 13.1%, 16.7% and 12.9% of our total revenue in 2020, 2021, 2022 and in the
three months ended March 31, 2022 and 2023, respectively. We expect that our sales and
marketing expenses as a percentage of total revenue will generally decrease in the long term
due to the following factors:
 Our go-to-market strategy starts with market leaders in each industry we target to
enter who are also early adopters of AI. We are able to leverage our experience and
success in existing industry and scenario to expand into new industries with similar
scenario. We demonstrate the value of our solutions through one or a few entry
projects. Once our value has been proven, we are then able to expand our services
quickly to address other business needs of our users. As a result of our go-to-market
strategy, after we succeed with the lighthouse users, we leverage our understanding
of the industries, our reputation established through collaborating with industry
leaders, and our AI ecosystem to further enhance our influence in such industries,
enabling us to further penetrate and provide solutions to other players, without
incurring significant sales and marketing efforts;
 We expect to accumulate a larger user base and higher user stickiness as we
continuously solidify our market leadership. We expect this to enable us to attract
and retain users and, in the long-term, reduce spending on promotions and
advertisements. As our users develop more AI applications for new use cases on our
platform and/or increase usage in existing use cases which require more computing
power, they will need to purchase additional licenses from us for additional
computing power, which in turn allows us to capture additional monetization
opportunities with low marginal cost after the initial sale and improve our
profitability;
 We expect to benefit from more efficient user acquisition through word-of-mouth
referrals and enhanced brand awareness. With our established brand reputation and
large use bases, we expect to continuously generate significant word-of-mouth
referrals and organic user growth; and
 We plan to strengthen our relationships with solution partners to retain and expand
our user base across various industries, which will help improve our sales and
marketing efficiency in the long run.
Our general and administrative expenses (excluding share-based compensation)
accounted for 12.7%, 8.6%, 8.1%, 17.2% and 15.7% of our total revenue in 2020, 2021, 2022
and in the three months ended March 31, 2022 and 2023, respectively. We expect that our
general and administrative expenses as a percentage of total revenue will generally decrease in
the long term, as the major expense component, employee benefit expenses, generally do not
increase proportionally with our revenue growth.
SUMMARY
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Our research and development expenses (excluding share-based compensation) accounted
for 57.3%, 55.3%, 48.8%, 46.8% and 37.5% of our total revenue in 2020, 2021, 2022 and in
the three months ended March 31, 2022 and 2023, respectively. While we will continue to
invest in research and development capabilities to support our long term growth, we expect that
our research and development expenses will generally decrease as a percentage of total revenue
in the long term, as (i) we expect to have stronger bargaining power against our suppliers for
outsourced R&D services as we scale up, and are thus able to obtain more favorable pricing
terms, and (ii) the major expense component, employee benefit expenses, generally do not
increase proportionally with our revenue growth, and thus we are able to enjoy economies of
scale as we scale up. We plan to (i) further strengthen our existing core technologies, and (ii)
invest in the research and development team of new areas which may lead to the next
generation of AI technologies. For example, we are dedicated to developing technologies in the
area of data privacy protection, including privacy preserving learning, which is able to enhance
data privacy in the process of machine learning, and federated learning which entails training
algorithm on local datasets without exchange data samples, thereby enhancing data security
and privacy. For details, see “Business – Research and Development.”
Our future profitability is uncertain and subject to various factors, including our ability
to develop new technologies, enhance user experience, establish effective monetization
strategies, compete effectively and successfully, and continuously grow revenues and our user
base in a cost-effective way by improving our operational efficiency. For details, see “Risk
Factors – Risks Related to Our Business and Industry – We have recorded net losses, net
liabilities and operating cash outflow during the Track Record Period and recorded net current
liabilities as of March 31, 2023, and we may not be able to achieve or subsequently maintain
profitability.”
Working Capital Sufficiency
In line with our revenue growth, we have experienced increase in our trade receivables,
particularly the trade receivables aged over six months, during the Track Record Period. The
following table sets forth the ageing analysis of our trade receivables based on invoice date as
of the dates indicated.
As of December 31,
As of
March 31,
2020 2021 2022 2023
(RMB in thousands)
Up to 3 months 126,601 403,264 957,044 552,954
3 to 6 months 87,412 231,336 278,486 562,433
6 months to 1 year 24,432 128,141 130,321 238,327
Over 1 year 29,564 35,741 188,569 199,604
Less: Credit loss allowance (5,310) (20,161) (61,182) (59,366)
Trade receivable, Net 262,699 778,321 1,493,238 1,493,952
We are exposed to credit risk related to defaults of our customers. For details, see “Risk
Factors – Risk Related to Our Business and Industry – We are subject to credit risk related to
defaults of customers, and any significant default on our receivables could materially and
adversely affect our liquidity, financial condition and results of operations.”
SUMMARY
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We have recorded net cash used in operating activities of RMB452.9 million, RMB770.0
million, RMB779.6 million, RMB169.4 million and RMB461.2 million, in 2020, 2021, 2022
and in the three months ended March 31, 2022 and 2023, respectively, primarily due to the net
loss recorded and increases in our trade receivables, mainly due to our business growth. For
details, see “Financial Information – Liquidity and Capital Resources.” For details of our
ability to improve our net operating cash flow, see “– Key Financial Ratios – Summary of
Consolidated Statements of Cash Flows.”
Our principal capital expenditures relate primarily to (i) property and equipment,
including leasehold improvements, computer and electric equipment, and office furniture and
equipment, and (ii) intangible assets, primarily including software and copyrights and
intangible assets recognized as a result of our acquisition of subsidiaries. In 2020, 2021, 2022
and the three months ended March 31, 2023, we incurred capital expenditures of RMB51.3
million, RMB416.8 million, RMB113.9 million and RMB1.7 million, respectively.
Sufficient working capital is essential to our ability to successfully execute our growth
strategies, and thus to enhance our business sustainability. To ensure working capital
sufficiency, we plan to enhance our working capital management efficiency, improve our
management of trade receivables and increase the focus on trade receivable collection. We also
expect to be able to enjoy economics of scale as we scale up, which will further improve our
net operating cash outflow positions. Furthermore, taking into account (i) the financial
resources available to us, including a total of RMB2,990 million liquid cash resources as of
March 31, 2023 (that include cash and cash equivalents, short-term and long-term bank
deposits, short-term investments measured at fair value through profit or loss, restricted cash),
(ii) the portion of the estimated net proceeds from the Global Offering expected to be used for
working capital and general corporate purposes, (iii) our good track record in being able to
raise money from renowned investors to finance our business, as evidenced by our historical
fund-raising activities, and (iv) our plans to continue to enhance our financial performance, our
Directors believe that we have sufficient working capital for our present requirements and for
the next 12 months from the date of this Prospectus.
KEY OPERATING METRICS
The following table sets forth the key operating metrics for the years/periods indicated:
For the year ended
December 31,
For the three months
ended March 31,
2020 2021 2022 2022 2023
Number of users 156 245 409 125 147
Number of lighthouse
users 47 75 104 49 62
Average revenue per
lighthouse user
(RMB million) 12.3 13.7 17.9 5.4 5.4
As a result of our effective go-to-market strategy, we had 47, 75, 104, 49 and 62
lighthouse users in 2020, 2021, 2022 and in the three months ended March 31, 2022 and 2023,
respectively. Our initial success with lighthouse users enable us to further penetrate the
respective industry and provide solutions to other players in the industry efficiently. As a
result, we have accumulated a strong and rapidly growing total user base including both
lighthouse users and other users, with 156, 245, 409, 125 and 147 users in 2020, 2021, 2022
and in the three months ended March 31, 2022 and 2023, respectively.
SUMMARY
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We are dedicated to creating value to our users. We plan to continue to create value for
users and address their business needs by optimizing our solutions, innovating our
technologies, providing satisfying customer services, among others. After we help them
identify the critical issues, provide solutions and achieve the objectives of business
improvement, they usually identify incremental opportunities within their operations and
expand their use of our solutions. Moreover, as our users develop more AI applications for new
use cases on our platform and/or increase usage in existing use cases which require more
computing power, they will need to purchase additional licenses from us for additional
computing power, which in turn allows us to capture additional monetization opportunities
after the initial sale. The average revenue per lighthouse user amounted to RMB12.3 million,
RMB13.7 million, RMB17.9 million, RMB5.4 million and RMB5.4 million in 2020, 2021,
2022 and in the three months ended March 31, 2022 and 2023, respectively.
Driven by our expanding user base and increasing spending from existing users, we have
experienced tremendous revenue growth during the Track Record Period. Our revenue grew by
114.2% from RMB942.2 million in 2020 to RMB2,018.4 million in 2021 and further by 52.7%
to RMB3,082.6 million in 2022. Our revenue grew by 33.6% from RMB482.3 million for the
three months ended March 31, 2022 to RMB644.4 million for the three months ended
March 31, 2023.
KEY FINANCIAL RATIOS
We believe that our revenue growth, gross profit margin and contribution margin are
important measures of our operation efficiency over time. Revenue growth rate shows the
period-over-period growth rate of our total revenue, and gross profit margin equals revenue
less cost of sales divided by revenue. Contribution margin is defined as a percentage of
contribution bearing to revenue. Contribution is defined as revenue less cost of sales and
selling and marketing expenses. The following table sets forth a summary of our key financial
ratios for the years/periods indicated.
For the year ended
December 31,
For the three months
ended March 31,
2020 2021 2022 2022 2023
%%%%%
Revenue growth 105.0 114.2 52.7 N/A 33.6
Gross profit margin 45.6 47.2 48.2 48.7 43.7
Contribution margin 19.3 24.7 34.9 32.0 30.8
As a result of our continuous business expansion, our revenue experienced rapid growth,
with a growth rate of 105.0%, 114.2%, 52.7% and 33.6% in 2020, 2021, 2022 and in the three
months ended March 31, 2023 compared to the corresponding period in 2022, respectively. Our
overall gross profit margin increased from 45.6% in 2020 to 47.2% in 2021, primarily due to
the increase of revenue contribution of application development and other services, which had
SUMMARY
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relatively high gross profit margins, and further to 48.2% in 2022, mainly as a result of the
increase of revenue contribution of software licensing, which had relatively high gross profit
margins, as software licensing requires less on-site services than our other segments, and thus
was less affected by the recurrence of COVID-19 in 2022. Our overall gross profit margin
decreased from 48.7% in the three months ended March 31, 2022 to 43.7% in the three months
ended March 31, 2023, primarily due to the increase of revenue contribution from SageOne and
application development and other services, which had lower gross profit margins compared
with software licensing. Our contribution margin increased from 19.3% in 2020 to 24.7% in
2021 and 34.9% in 2022. Our contribution margin increased from 2020 to 2022 primarily
because we improved our efficiency in managing cost of sales and selling and marketing
expenses. Our contribution margin decreased from 32.0% for the three months ended March
31, 2022 to 30.8% for the three months ended March 31, 2023, primarily due to the increase
of revenue contribution of SageOne and application development and other services, which had
higher cost of sales compared with software licensing.
Summary of Consolidated Statements of Financial Position
The table below sets forth selected information from our consolidated statements of
financial position as of the dates indicated.
As of December 31,
As of
March 31,
2020 2021 2022 2023
(RMB in thousands)
Total non-current assets 213,667 1,352,969 1,800,817 1,728,552
Total current assets 1,802,342 5,095,715 4,918,167 4,529,263
Total assets 2,016,009 6,448,684 6,718,984 6,257,815
Deficit on total equity (1,182,999) (248,013) (1,461,011) (1,828,895)
Total non-current liabilities 2,937,677 5,939,764 6,628,886 127,370
Total current liabilities 261,331 756,933 1,551,109 7,959,340
Total liabilities 3,199,008 6,696,697 8,179,995 8,086,710
Net current assets/(liabilities) 1,541,011 4,338,782 3,367,058 (3,430,077)
Total equity and liabilities 2,016,009 6,448,684 6,718,984 6,257,815
Non-controlling interests (4,976) 103,008 113,701 102,751
SUMMARY
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We had net current assets of RMB1,541.0 million, RMB4,338.8 million, RMB3,367.1
million, respectively, as of December 31, 2020, 2021 and 2022. We had net current liabilities
of RMB3,430.1 million as of March 31, 2023.
Our net current assets increased from RMB1,541.0 million as of December 31, 2020 to
RMB4,338.8 million as of December 31, 2021, primarily due to an increase in financial assets
at fair value through profit or loss from RMB174.4 million as of December 31, 2020 to
RMB2,535.8 million as of December 31, 2021 primarily as a result of our investments in
wealth management products due to our equity financing activities in 2021.
Our net current assets decreased from RMB4,338.8 million as of December 31, 2021 to
RMB3,367.1 million as of December 31, 2022, primarily attributable to a decrease in the
current portion of financial assets at fair value through profit or loss from RMB2,535.8 million
to RMB1,330.2 million, mainly as a result of our utilization of cash and financial assets in
operating expenditures.
Our net current assets of RMB3,367.1 million as of December 31, 2022 changed to net
current liabilities of RMB3,430.1 million as of March 31, 2023, primarily due to the increase
of redemption liabilities of RMB6,683.9 million, which were reclassified from non-current
redemption liabilities to current redemption liabilities, as the redemption rights may be
exercised within one year under circumstances such as failure to achieve a Qualified IPO.
Our redemption liabilities were RMB2,147.0 million, RMB5,822.2 million, RMB6,493.2
million and RMB6,683.9 million, respectively, as of December 31, 2020, 2021, 2022 and
March 31, 2023. Our redemption liabilities primarily relate to our obligation to repurchase our
own equity instruments in connection with the redemption rights and liquidation preferences
granted to our investors in certain situations. The significant increase of redemption liabilities
as of December 31, 2020 to that as of December 31, 2021 was primarily in connection with our
equity financing activities. We expect to turn our net liabilities position into net assets upon
Listing, as the carrying amount of redemption liabilities will be reclassified from financial
liabilities to equity as a result of the termination of the aforesaid preferred rights.
We recorded accumulated loss of RMB2,068.9 million, RMB2,534.5 million,
RMB4,177.7 million and RMB4,469.0 million as of December 31, 2020, 2021, 2022 and March
31, 2023, respectively, primarily as a result of our net loss from the preceding fiscal years.
Our net liabilities decreased from RMB1,183.0 million as of December 31, 2020 to
RMB248.0 million as of December 31, 2021, primarily driven by (i) an increase in capital
contribution from shareholders of RMB5,055.2 million as a result of our financing activities,
and (ii) an increase in the derecognition of redemption liabilities of RMB1,812.3 million
because, in May 2021, certain investors agreed to terminate the aforesaid preferred rights we
granted to them, partially offset by (i) an increase in the recognition of redemption liabilities
of RMB4,848.8 million related to the aforesaid preferred rights and (ii) an increase in the
comprehensive loss for the year of RMB1,791.1 million. Our net liabilities increased from
RMB248.0 million as of December 31, 2021 to RMB1,461.0 million as of December 31, 2022,
SUMMARY
–2 2–


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primarily driven by an increase in the comprehensive loss for the year of RMB1,656.2 million.
Our net liabilities increased from RMB1,461.0 million as of December 31, 2022 to
RMB1,828.9 million as of March 31, 2023, primarily driven by (i) an increase in the
comprehensive loss for the period of RMB303.5 million and (ii) an increase of repurchase and
cancellation of shares of RMB259.0 million, partially offset by an increase of capital
contribution from shareholders of RMB194.7 million. The share repurchase and increase of
capital contribution was in relation to the 2022 share award scheme, see Note 26 to the
Accountant’s Report in Appendix I to this Prospectus.
For details, see “Financial Information – Discussion of Selected Items from the
Consolidated Statements of Financial Position.”
Summary of Consolidated Statements of Cash Flows
Y ear ended December 31,
For the three months
ended March 31,
2020 2021 2022 2022 2023
(RMB in thousands)
(Unaudited)
Net cash used in operating
activities (452,940) (770,008) (779,589) (169,414) (461,211)
Net cash (used in)/generated
from investing activities (139,083) (3,199,611) 822,387 (140,776) 623,973
Net cash generated from/(used
in) financing activities 942,428 4,210,015 (9,014) (21,210) (64,130)
Net increase/(decrease) in cash
and cash equivalents 350,405 240,396 33,784 (331,400) 98,632
Cash and cash equivalents at
the beginning of the
year/period 703,786 1,052,073 1,292,686 1,292,686 1,326,818
Effects of exchange rate
changes on cash and cash
equivalents (2,118) 217 348 (33) (162)
Cash and cash equivalents at
the end of the year/period 1,052,073 1,292,686 1,326,818 961,253 1,425,288
We have recorded net cash used in operating activities of RMB452.9 million, RMB770.0
million, RMB779.6 million, RMB169.4 million and RMB461.2 million, in 2020, 2021, 2022
and three months ended March 31, 2022 and 2023, respectively, primarily due to the net loss
recorded and increases in our trade receivables, mainly due to our business growth. For details,
see “Financial Information – Liquidity and Capital Resources.”
SUMMARY
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Working Capital
We usually grant a credit term ranging from 3 to 6 months to our customers, whereas our
suppliers, especially the new suppliers, usually grant us shorter credit terms. We believe that
this gap will be gradually reduced considering that (i) as we scale up, we expect to have
stronger bargaining power against our suppliers and are thus able to obtain more favorable
credit terms, and (ii) as we built trust with our customers and gained more bargaining power
as our business developed, we are able to negotiate for shorter credit terms with our customers.
Furthermore, taking into account (i) the financial resources available to us, including a
total of RMB2,990 million liquid cash resources as of March 31, 2023 (that include cash and
cash equivalents, short-term and long-term bank deposits, short-term investments measured at
fair value through profit or loss, restricted cash), (ii) the portion of the estimated net proceeds
from the Global Offering expected to be used for working capital and general corporate
purposes, (iii) our good track record in being able to raise money from renowned investors to
finance our business, as evidenced by our historical fund-raising activities, and (iv) our plans
to continue to enhance our financial performance, for details of which see “– Business
Sustainability and Path to Profitability”, our Directors believe that we have sufficient working
capital for our present requirements and for the next 12 months from the date of this
Prospectus.
GLOBAL OFFERING STATISTICS
The statistics in the following table are based on the assumptions that: (i) the Global
Offering is completed and 18,396,000 Offer Shares are issued and sold in the Global Offering;
(ii) the Over-allotment Option is not exercised; and (iii) 464,060,533 Shares are in issue upon
completion of the Global Offering:
Based on an
Offer Price of
HK$55.60 per
H Share
Based on an
Offer Price of
HK$61.16 per
H Share
Market capitalization of our Shares
(1) HK$25,801,765,635 HK$28,381,942,198
Unaudited pro forma adjusted
consolidated net tangible assets per
Share
(2) HK$12.18 HK$12.39
Notes:
(1) The calculation of the market capitalization of our Shares is based on the assumption that 464,060,533
Shares will be in issue and outstanding immediately following the completion of the Global Offering.
(2) The unaudited pro forma adjusted consolidated net tangible assets per Share is calculated based on
464,060,533 Shares immediately following the completion of the Global Offering and does not take into
account of any Shares which may be issued upon the exercise of the Over-allotment Option. The
unaudited pro forma adjusted consolidated net tangible assets per Share is converted into Hong Kong
dollars at an exchange rate of RMB1.00 to HKD1.0862.
(3) No adjustment has been made to reflect any trading result or other transactions of the Group entered into
subsequent to March 31, 2023.
SUMMARY
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OUR SHAREHOLDING STRUCTURE
Our Controlling Shareholders
Immediately prior to the Global Offering, Dr. Dai as our Controlling Shareholder, by
himself and through his close associates, Ms. Wu, Beijing New Wisdom, Paradigm Investment,
Paradigm Yinyuan, Paradigm Chuqi and Paradigm Tianqin, controlled approximately 40.44%
of our total issued share capital and together, they constitute our Controlling Shareholders (as
defined under the Listing Rules) before the Listing. Immediately following completion of the
Global Offering and assuming the Over-allotment Option is not exercised, Dr. Dai by himself
and through his close associates, being Ms. Wu, Beijing New Wisdom, Paradigm Investment,
Paradigm Yinyuan, Paradigm Chuqi and Paradigm Tianqin, will control approximately 38.84%
of our total issued share capital and they will remain as our Controlling Shareholders upon
Listing.
Pre-IPO Investments
Between August 2015 to June 2021, our Company entered into several rounds of pre-IPO
financing agreements with our Pre-IPO Investors with the aggregate amount of consideration
of approximately US$1.0 billion. For further details of the identity and background of the
Pre-IPO Investors, see “History, Development and Corporate Structure – Pre-IPO Investments”
in this Prospectus.
APPLICATION FOR LISTING ON THE STOCK EXCHANGE
We are applying for the Listing under Rule 8.05(3) of the Listing Rules and satisfy the
market capitalization/revenue test, among other things, with reference to (i) our revenue for the
year ended December 31, 2022, being RMB3,082.6 million, which is significantly over
HK$500 million as required by Rule 8.05(3) of the Listing Rules; and (ii) our expected market
capitalization at the time of the Listing, which, based on the low end of the Offer Price range,
exceeds HK$4 billion as required by Rule 8.05(3) of the Listing Rules.
DIVIDEND
No dividends have been paid or declared by us or our subsidiaries during each of the years
ended December 31, 2020, 2021, 2022 and the three months ended March 31, 2022 and 2023.
SUMMARY
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After completion of the Global Offering, our Shareholders will be entitled to receive
dividends we declare. As of the Latest Practicable Date, we did not have a formal dividend
policy. The Board has approved a dividend policy, which will become effective upon Listing.
Under the dividend policy, we may provide our Shareholders with interim or annual dividends
as the Board deems appropriate. The Board will consider, among other things, the following
factors when proposing dividends and determining the amount of dividends:
 our actual and projected financial performance;
 our estimated working capital requirements, capital expenditure requirements and
future business expansion plan;
 our present and future cash flow;
 other internal and external factors that may have an impact on our business
operations or financial performance and position; and
 other factors that our Board deem relevant.
Any declaration and payment as well as the amount of dividends will be subject to our
constitutional documents, including (where required) the approval of our Shareholders.
PRC laws require that dividends be paid only out of our distributable profits, for which
the PRC laws do not specify the applicable accounting principles. Distributable profit is our
profit as determined under PRC GAAP or IFRS, whichever is lower, less any recovery of
accumulated losses and appropriations to statutory and other reserves that we are required to
make. We do not expect such difference between distributable profits calculated under PRC
GAAP and IFRS, or other differences between PRC GAAP and IFRS to have a material impact
on our financial performance. As a result, we may not have sufficient or any distributable
profits to make dividend distributions to our Shareholders, even if we become profitable. Any
distributable profits not distributed in a given year are retained and available for distribution
in subsequent years. Our PRC Legal Advisor is of the view that after making up losses and
appropriation of statutory reserves, we may distribute after-tax profits. Our dividend
distribution may also be restricted if we incur debt or losses or in accordance with any
restrictive covenants in bank credit facilities, convertible bond instruments or other agreements
that we or our subsidiaries may enter into in the future.
SUMMARY
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FUTURE PLANS AND USE OF PROCEEDS
The aggregate net proceeds that we expect to receive from the Global Offering (after
deducting underwriting fees and estimated expenses in connection with the Global Offering
and assuming an Offer Price of HK$58.38 per Share, being the mid-point of the indicative
range of the Offer Price of HK$55.60 to HK$61.16 per Share) will be approximately HK$885.0
million. We will bear the underwriting commissions, SFC transaction levy and Stock Exchange
trading fee payable by us in connection with the issue of new Shares together with any
applicable fees relating to the Global Offering. We intend to use the net proceeds we will
receive from this offering for the following purposes:
 Approximately 60%, or HK$531.0 million, will be allocated over the next three
years to enhance our fundamental research, technological capabilities and solution
development.
 Approximately 20%, or HK$177.0 million, will be allocated over the next three
years to expand our offerings, build our brand and enter into new industry sectors.
 Approximately 10%, or HK$88.5 million, will be allocated over the next three years
to pursue strategic investment and acquisition opportunities to implement our
long-term growth strategy to develop our solutions and expand and penetrate the
industry verticals we cover.
 Approximately 10%, or HK$88.5 million, will be used for general corporate
purposes.
LISTING EXPENSES
Based on the mid-point Offer Price of HK$58.38 (being the mid-point of our Offer Price
range of HK$55.60 to HK$61.16 per Offer Share), the total listing expenses (including
underwriting commissions) payable by our Company are estimated to be approximately
HK$189.0 million (equivalent to approximately RMB174.0 million), accounting for 17.6% of
our gross proceeds, assuming the Over-allotment Option is not exercised. These listing
expenses mainly include underwriting fees and commissions and professional fees paid to
legal, accounting and other advisors, for their services rendered in relation to the Listing and
the Global Offering, comprising of (i) HK$35.5 million of underwriting-related expenses
(including but not limited to commissions and fees); and (ii) HK$153.5 million of non-
underwriting-related expenses, including HK$134.6 million of fees and expenses of legal
advisors and accountants and HK$18.9 million of other fees and expenses.
As of March 31, 2023, we had incurred RMB106.8 million of listing expenses for the
Global Offering, among which RMB93.4 million was charged to our consolidated statement of
comprehensive income. We estimate that an additional listing expenses of RMB67.2 million
assuming the Over-allotment Option is not exercised will be further incurred by our Group. In
aggregate, we expect to incur RMB174.0 million for the Global Offering, among which
RMB129.3 million is expected to be charged to our consolidated statement of comprehensive
income and RMB44.7 million is directly attributable to the issue of Shares and expected to be
charged against equity upon the Listing.
SUMMARY
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RECENT DEVELOPMENT
Impact of COVID-19
The COVID-19 pandemic and its recurrence have caused temporary disruption to our
solutions to the extent that necessary on-site meetings, deployment and technical support had
to be delayed or cancelled, which has had a negative impact on our results of operations during
the Track Record Period. Despite temporary disruption caused by COVID-19, we have been
able to sustain our strong growth momentum, delivering robust revenue growth during the
Track Record Period. The recurrence of COVID-19 outbreak in some cities, such as Beijing
and Shanghai, further affected our businesses, especially in terms of on-site meetings,
deployment and technical support. As of the Latest Practicable Date, we were not aware of any
material adverse impacts on our business operations.
See “Financial Information – Impact of COVID-19” and “Risk Factors – Risks Related
to Our Business and Industry – The COVID-19 pandemic presents challenges to our business
and the effects of the pandemic could adversely affect our business, financial condition and
results of operations.”
Regulatory Update
Cybersecurity and Data Privacy
On June 10, 2021, the Standing Committee of the National People’s Congress of China
promulgated the PRC Data Security Law, which has become effective on September 1, 2021.
The PRC Data Security Law provides for data security obligations on entities and individuals
carrying out data processing activities, introduces a data classification and hierarchical
protection system based on the importance of data in economic and social development, as well
as the degree of harm it will cause to national security, public interests or legitimate rights and
interests of individuals or organizations when such data is tampered with, destroyed, leaked,
or illegally acquired or used, and provides for a national security review procedure for those
data processing activities which may affect national security and imposes export restrictions on
certain data and information.
On November 14, 2021, the Cyberspace Administration of China (the “CAC”) released
the Network Data Security Management Regulations (Draft for Comment) (the “Draft
Regulations”) ( ၣഖᅰኽτΌ၍ଣૢԷ(ᅄӋจԈᇃ)).
Based on the literal interpretation of the Draft Regulations, our PRC Legal Advisers are
of the view that, if the Draft Regulations remains in its current form after its promulgation, it
may be unlikely that we would be required to undergo a cybersecurity review for the proposed
Listing.
SUMMARY
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Up to the Latest Practicable Date, we had not been notified by any authorities of being
classified as a data processor carrying out data processing activities that influence or may
influence national security, neither had we been subject to any cybersecurity review, enquiry,
investigation or notice by the CAC or any other authorities in connection with the proposed
Listing. We and our PRC Legal Advisor are of the view that, assuming the Draft Regulations
become effective in their current forms, they will not have a material adverse impact on our
business, results of operations, or the proposed Listing. There can be no assurance that the
relevant authorities will not take a view that is contrary to or otherwise different from that of
our PRC Legal Advisor above, and it is also possible that the PRC government authorities may
require us to apply for the cybersecurity review for other reasons. In light of the above
uncertainties, as of the Latest Practicable Date, we had not applied for such cybersecurity
review. We will closely monitor the rule-making process and will assess and determine whether
we are required to apply for the cybersecurity review when and once the Draft Regulations is
formally promulgated.
For details, see “Regulatory Overview – Regulations Relating to Internet Information
Security and Privacy Protection.”
Recent Regulatory Developments Relating to Overseas Listing
On February 17, 2023, the CSRC promulgated the Trial Administrative Measures of
Overseas Securities Offering and Listing by Domestic Companies ( ྤʫΆุྤ̮೯БᗇՎձ
) (the “ Overseas Listing Trial Measures ”) and relevant supporting
guidelines, which came into effect on March 31, 2023. The Overseas Listing Trial Measures
comprehensively improve and reform the existing regulatory regime for overseas offering and
listing of PRC domestic companies’ securities and regulate both direct and indirect overseas
offering and listing of PRC domestic companies’ securities.
Pursuant to the Overseas Listing Trial Measures, where a PRC domestic company submits
an application for initial public offering to competent overseas regulators or overseas stock
exchanges, such issuer must file with the CSRC within three business days after such
application is submitted.
We are also proactively following up changes in laws and regulatory development and
will carry out relevant work to ensure compliance with laws and regulations with the aid of
external counsels.
For details, see “Regulatory Overview – Regulations on Overseas Listing.”
SUMMARY
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U.S. Export Control Laws and Regulations
Effective March 2, 2023, the U.S. Department of Commerce’s Bureau of Industry and
Security (“BIS”) added certain entities to the entity list (the “Entity List”), including
“4Paradigm Technology Co., Ltd.” with aliases “4Paradigm,” “4th Paradigm,” and “Fourth
Paradigm”. The address of such entity was provided as “Building 1, No. 66 Qinghe Middle
Street, Haidian District, Beijing, China.” Out of an abundance of caution and unless or until
we receive further clarification from BIS, we will assume that all entities located at the address
provided in the Entity List are subject to the Entity List restrictions in order to comply with
the relevant restrictions. These entities specifically include: Beijing Fourth Paradigm
Technology Co., Ltd., Fourth Paradigm (Beijing) Data & Technology Co., Ltd., Beijing
Paradigm Empowerment Enterprise Management Co., Ltd., Beijing Xuexian Intelligent
Technology Co., Ltd., Beijing Y untian Xinrui Technology Co., Ltd., Beijing Future Paradigm
Technology Co., Ltd., Zhongyuan Putai (Beijing) Intelligent Technology Co., Ltd., and Zhimei
Xinchuang (Beijing) Technology Co., Ltd. (the “Listed Entities”). However, it is possible that
not all Listed Entities are subject to the restrictions.
The addition of the Listed Entities to the Entity List restricts the ability of those specific
entities, but not of legally distinct entities, such as subsidiaries or affiliates of the Listed
Entities, to purchase, acquire, or otherwise obtain any items subject to the Export
Administration Regulations, 15 C.F.R. Parts 730-774 (“EAR”) without a license from BIS
Specifically, absent a license from BIS, it is prohibited to export, reexport, or transfer any
items subject to the EAR when any Listed Entity is a party to the transaction, including as
purchaser, intermediate consignee, ultimate consignee, or end-user. That is, even if the Listed
Entity is not the intended end user of the item(s) involved, the restrictions would still apply to
the extent the Listed Entity is the purchaser or otherwise involved in a given transaction.
License applications to the Listed Entities will be reviewed with a presumption of denial for
all items subject to the EAR. For further information, see “Regulatory Overview – U.S. Export
Control Laws and Regulations.”
As advised by Jacobson Burton Kelley PLLC (“JBK”), our legal opinion counsel as to
U.S. export control laws, the designation of the Listed Entities to the Entity List should not
have a material impact on the business or operations of our Group. For detailed analysis by
JBK, see “Business – U.S. Export Control Laws and Regulations.”
No Material Adverse Change
We expect to record substantial amount of net losses for the year ending December 31,
2023, which is primarily due to our continued investments in research and development of our
technologies and solutions, marketing initiatives, share-based compensation as well as
estimated interest expense from redemption liabilities. In addition, we expect to record
substantial amount of cash used in operations for the year ending December 31, 2023, primarily
due to the significant amount of estimated loss before income tax.
Our Directors confirm that, as of the date of this Prospectus, there has been no material
adverse change in our financial or trading position, indebtedness, mortgage, contingent
liabilities, guarantees or prospects of our Group since March 31, 2023, the end of the period
reported on in the Accountant’s Report included in Appendix I to this Prospectus.
SUMMARY
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THE A SHARE LISTING
We plan to conduct the offering and listing of A shares at an appropriate time after the
Global Offering. As of the Latest Practicable Date, we have not determined the size and scope
of the contemplated A share offering and have not made any application to any recognized
stock exchange in the PRC for approval for the listing of any A shares. There is no assurance
that we will conduct an A share offering in the future. For details, see “Risk Factors – We plan
to conduct the offering and listing of A shares at an appropriate time after the Global Offering,
but there is no assurance that we will conduct such an A share offering, and the characteristics
of the A share and H share markets are different” and “History, Development and Corporate
Structure – Rights of the Pre-IPO Investors”.
SUMMARY
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In this Prospectus, unless the context otherwise requires, the following terms and
expressions have the meanings set forth below. Certain other terms are explained in the
section headed “Glossary of Technical Terms” in this Prospectus.
“4Paradigm Beijing” Fourth Paradigm (Beijing) Data & Technology Co., Ltd.*
(ୋ̬ᇍό(̏ԯ)ʮ̡), a limited liability
company established in the PRC on May 12, 2015,
formerly known asʮ̡ and a
wholly-owned subsidiary of our Company
“4Paradigm Digital Technology” Fourth Paradigm (Beijing) Digital Technology Co., Ltd.
(ୋ̬ᇍό(̏ԯ)ʮ̡), a limited liability
company established in the PRC on June 10, 2022 and an
indirect wholly-owned subsidiary of our Company
“4Paradigm HK” Fourth Paradigm International Limited, a limited liability
company established in Hong Kong on June 1, 2018 and
an indirect wholly-owned subsidiary of our Company
“4Paradigm Shenzhen” Fourth Paradigm (Shenzhen) Data & Technology Co.,
Ltd.* ( ୋ̬ᇍό(ଉέ)ʮ̡), a limited liability
company established in the PRC on March 11, 2019 and
a direct wholly-owned subsidiary of our Company
“4Paradigm Singapore” Fourth Paradigm Southeast Asia Pte. Ltd., a limited
liability company established in Singapore on July 11,
2018 and an indirect wholly-owned subsidiary of our
Company
“4Paradigm Technology” Beijing Fourth Paradigm Science & Technology Co.,
Ltd.* (ʮ̡), a limited liability
company established in the PRC on September 29, 2016
and a wholly-owned subsidiary of our Company
“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
“AIC” Administration of Industry & Commerce* (၍ଣ
ዚᗫ) of the PRC (now known as the Administration for
Market Regulation* ( ̹ఙ္ຖ၍ଣ҅)) or, where the
context so requires, the State Administration for Industry
& Commerce of the PRC (၍ଣ
ᐼ҅) or its delegated authority at the provincial,
municipal or other local level
DEFINITIONS
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“Articles of Association” or
“Articles”
the articles of association of our Company, as amended,
which shall become effective on the Listing Date, a
summary of which is set out in Appendix V to this
Prospectus
“associate(s)” has the meaning ascribed thereto under the Listing Rules
“Audit Committee” the audit committee of the Board
“Beijing Fourth Paradigm
Technology”
Beijing Fourth Paradigm Technology Co., Ltd.* ( ̏ԯୋ
ʮ̡), the predecessor of our
Company established in the PRC on September 17, 2014
and formerly known as Shenzhen City Qianhai
4Paradigm Information Technology Co., Ltd.* (ۃ
ʮ̡) before April 21, 2021
“Beijing Innovation” Beijing Innovation Works VC Center (Limited
Partnership)* ( ̏ԯ௴อʈఙ௴ุҳ༟ʕː(Υྫ)), a
limited partnership established in the PRC on May 22,
2015, one of our Pre-IPO Investors
“Beijing New Power” Beijing New Power Quality Enterprise Development
Fund (Limited Partnership)* (࢝
ږ(Υྫ)), a limited partnership established in the
PRC on November 8, 2018, one of our Pre-IPO Investors
“Beijing New Wisdom” Beijing New Wisdom Pilot Management Consulting Co.,
Ltd. (ʮ̡), a limited
liability company established in the PRC on April 9,
2020, being the sole general partner of our Employment
Incentive Platform and owned as to 99.0% by Dr. Dai and
1.0% by Ms. Wu, respectively, and one of our Controlling
Shareholders
“Beijing Paradigm
Empowerment”
Beijing Paradigm Empowerment Enterprise Management
Co., Ltd. (ʮ̡), a limited
liability company established in the PRC on January 17,
2023 and an indirect wholly-owned subsidiary of our
Company
DEFINITIONS
–3 3–


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“Beijing Paradigm Pilot” Beijing Paradigm Pilot Technology Co., Ltd. ( ̏ԯᇍό
ʮ̡), a limited liability company
established in the PRC on December 16, 2022 and an
indirect wholly-owned subsidiary of our Company
“Beijing Shijin” Beijing Shijin Enterprise Management Partnership
(Limited Partnership) ( ̏ԯόආΆุ၍ଣΥྫΆุ(ࠢ
Υྫ)), a limited partnership established in the PRC on
March 13, 2023 of which Beijing Paradigm
Empowerment is the sole general partner, and 4Paradigm
Beijing is the sole limited partner, holding 1% and 99%
of the interest, respectively
“Beijing Shijing” Beijing Shijing Enterprise Management Partnership
(Limited Partnership) ( ̏ԯόၚΆุ၍ଣΥྫΆุ(ࠢ
Υྫ)), a limited partnership established in the PRC on
March 13, 2023 of which Beijing Paradigm
Empowerment is the sole general partner, and 4Paradigm
Beijing is the sole limited partner, holding 1% and 99%
of the interest, respectively
“Beijing Shili” Beijing Shili Enterprise Management Partnership
(Limited Partnership) ( ̏ԯόлΆุ၍ଣΥྫΆุ(ࠢ
Υྫ)), a limited partnership established in the PRC on
March 13, 2023 of which Beijing Paradigm
Empowerment is the sole general partner, and 4Paradigm
Beijing is the sole limited partner, holding 1% and 99%
of the interest, respectively
“Beijing Shiqin” Beijing Shiqin Enterprise Management Partnership
(Limited Partnership) ( ̏ԯόාΆุ၍ଣΥྫΆุ(ࠢ
Υྫ)), a limited partnership established in the PRC on
March 13, 2023 of which Beijing Paradigm
Empowerment is the sole general partner, and 4Paradigm
Beijing is the sole limited partner, holding 1% and 99%
of the interest, respectively
“Beijing Shita” Beijing Shita Enterprise Management Partnership
(Limited Partnership) ( ̏ԯό˼Άุ၍ଣΥྫΆุ(ࠢ
Υྫ)), a limited partnership established in the PRC on
March 13, 2023 of which Beijing Paradigm
Empowerment is the sole general partner, and 4Paradigm
Beijing is the sole limited partner, holding 1% and 99%
of the interest, respectively
DEFINITIONS
–3 4–


--- page 44 ---
“Beijing Shixin” Beijing Shixin Enterprise Management Partnership
(Limited Partnership) ( ̏ԯόːΆุ၍ଣΥྫΆุ(ࠢ
Υྫ)), a limited partnership established in the PRC on
March 13, 2023 of which Beijing Paradigm
Empowerment is the sole general partner, and 4Paradigm
Beijing is the sole limited partner, holding 1% and 99%
of the interest, respectively
“Beijing Y untian” Beijing Y untian Xinrui Technology Co., Ltd. ( ̏ԯථ˂
ʮ̡), a limited liability company
established in the PRC on September 27, 2019 and an
indirect wholly-owned subsidiary of our Company
“BIS” the U.S. Department of Commerce’s Bureau of Industry
and Security
“Board” or “Board of Directors” the board of Directors
“Boyu Jingtai” Boyu Jingtai (Shanghai) Equity Investment Partnership
(Limited Partnership)* ( ௹༃౻इ(ɪऎ)ᛆҳ༟ΥྫΆ
ุ(Υྫ)), a limited partnership established in the
PRC on December 28, 2016, one of our Pre-IPO Investors
“Business Day” a day on which banks in Hong Kong are generally open
for normal business to the public and which is not a
Saturday, Sunday or public holiday in Hong Kong
“CAGR” compound annual growth rate
“Capital Market Intermediaries”
or “Capital Market
Intermediary(ies)” or “CMI(s)”
the capital market intermediaries participating in the
Global Offering and has the meaning ascribed thereto
under the Listing Rules
“CCASS” the Central Clearing and Settlement System established
and operated by HKSCC
“CCASS Clearing Participant” a person admitted to participate in CCASS as a direct
clearing participant or general clearing participant
“CCASS Custodian Participant” a person admitted to participate in CCASS as a custodian
participant
DEFINITIONS
–3 5–


--- page 45 ---
“CCASS 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 or a
designated CCASS Participant’s stock account through
causing HKSCC Nominees to apply on your behalf,
including by (i) instructing your broker or custodian who
is a CCASS Clearing Participant or a CCASS Custodian
Participant to give electronic application instructions
via CCASS terminals to apply for the Hong Kong Offer
Shares on your behalf, or (ii) if you are an existing
CCASS Investor Participant, giving electronic
application instructions through the CCASS Internet
System ( https://ip.ccass.com ) or through the CCASS
Phone System (using the procedures in HKSCC’s “An
Operating Guide for Investor Participants” in effect from
time to time). HKSCC can also input electronic
application instructions for CCASS Investor
Participants through HKSCC’s Customer Service Centre
by completing an input request
“CCASS Investor Participant” a person admitted to participate in CCASS as an investor
participant who may be an individual or joint individuals
or a corporation
“CCASS Operational Procedures” the Operational Procedures of HKSCC in relation to
CCASS, containing the practices, procedures and
administrative requirements relating to operations and
functions of CCASS, as from time to time in force
“CCASS Participant” a CCASS Clearing Participant, a CCASS Custodian
Participant or a CCASS Investor Participant
“CDBC Manufacturing Fund” CDBC Manufacturing Transformation and Upgrading
Fund (Limited Partnership) (ږ
(Υྫ)), a limited partnership established in the PRC
on May 26, 2020, one of our Pre-IPO Investors
“CEO” the chief executive officer of our Company
“Chance Talent” Chance Talent Management Limited, a limited liability
company established in the British Virgin Islands on July
4, 2007, one of our Pre-IPO Investors
“Changchun Ideal” Changchun Ideal Technology Information Co., Ltd.*
(ʮ̡), a limited liability
company established in the PRC on August 3, 2022, an
indirect subsidiary of our Company
DEFINITIONS
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“China” or “PRC” the People’s Republic of China which, for the purpose of
this Prospectus and for geographical reference only,
excludes Hong Kong, the Macau Special Administrative
Region of the PRC and Taiwan
“China-UAE Investment” China-UAE Investment Cooperation (HK 1) Company
Limited, a limited liability company established in Hong
Kong on November 27, 2020, one of our former Pre-IPO
Investors
“China-UAE Investment
(Cayman)”
China-UAE Investment Cooperation (Cayman) Holdings
Limited, a limited liability company incorporated in the
Cayman Islands, one of our Pre-IPO Investors
“CIC” China Insights Industry Consultancy Limited, an
independent professional market research and consulting
company
“Cisco China” Cisco China Company Limited* (߅ܠ(ʕ਷)ʮ̡), a
limited liability company established in the PRC on
August 22, 2013, one of our Pre-IPO Investors
“CITIC Construction Investment” CITIC Construction Investment Co., Ltd. (ҳҳ༟
ʮ̡), a limited liability company established in the
PRC on November 27, 2017, one of our Pre-IPO
Investors
“CITIC Securities Investment” CITIC Securities Investment Limited (ࠢ
ʮ̡), a limited liability company established in the PRC
on April 1, 2012, one of our Pre-IPO Investors
“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
DEFINITIONS
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“Company,” “our Company” or
“the Company”
Beijing Fourth Paradigm Technology Co., Ltd. ( ̏ԯୋ̬
ʮ̡), a limited liability company
incorporated in the PRC on September 17, 2014 and
converted into a joint stock limited liability company
incorporated in the PRC on July 9, 2021, whose
predecessor was Beijing Fourth Paradigm Technology ( ̏
ʮ̡)
“connected person(s)” has the meaning ascribed thereto under the Listing Rules
“connected transaction(s)” has the meaning ascribed thereto under the Listing Rules
“Controlling Shareholder(s)” has the meaning ascribed thereto under the Listing Rules
and unless the context otherwise requires, refers to Dr.
Dai, Ms. Wu, Beijing New Wisdom, Paradigm
Investment, Paradigm Yinyuan, Paradigm Chuqi and
Paradigm Tianqin. See the section headed “Relationship
with our Controlling Shareholders” in this Prospectus
“Corporate Governance Code” the Corporate Governance Code set out in Appendix 14 to
the Listing Rules
“CSDC” China Securities Depositary and Clearing Corporation
Limited (ப΂ʮ̡)
“CSRC” the China Securities Regulatory Commission ( ʕ਷ᗇՎ
ึ)
“Director(s)” or “our Director(s)” the director(s) of our Company
“Domestic Share Divestment
Rights”
the divestment rights given by Dr. Dai to certain Pre-IPO
Investors to purchase the Domestic Shares held by such
Pre-IPO Investors in connection with the potential A
share listing of the Company, the details of which is set
forth in “History, Development and Corporate Structure –
Rights of the Pre-IPO Investors”
“Dongkong Jinlong” Foshan City South Sea Dongkong Jinlong Investment
Partnership (Limited Partnership) (છᎀᎲ
ҳ༟ΥྫΆุ(Υྫ)), a limited partnership
established in the PRC on November 8, 2018, one of our
Pre-IPO Investors
DEFINITIONS
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“Dr. Dai” Dr. Dai Wenyuan ( Ꮦ˖଀), the chairman of the Board, an
executive Director, chief executive officer and one of our
Controlling Shareholders
“EAR” the Export Administration Regulations, 15 C.F.R. Parts
730-774
“EIT” enterprise income tax
“EIT Law” Enterprise Income Tax Law of the PRC ( ʕശɛ͏΍ձ਷
ج)
Employee Incentive Platforms” Paradigm Investment and Nanjing Paradigm, the
beneficial interests of which are offered to certain key
employees of our Company pursuant to the Employee
Incentive Scheme, and Paradigm Investment is one of our
Controlling Shareholders
“Employee Incentive Scheme” the employee incentive scheme of our Company
approved and adopted by our Board on April 25, 2021, a
summary of the principal terms of which is set forth in
“Statutory and General Information – Further
information about our Directors, Supervisors, Senior
Management and Substantial Shareholders – 5. Employee
Incentive Scheme” in Appendix VI to this Prospectus
“Entity List” the entity list administrated by BIS
“EpicHust” EpicHust Technology (Wuhan) Co., Ltd.* (Ҧ
(ဏ)ʮ̡), a limited liability company established
in the PRC on March 7, 2012 and owned as to 79.66% by
our Company
“EUR” Euro, the lawful currency of the member states of the
European Union
“Exchange Participant” a person (a) who, in accordance with the Rules of the
Hong Kong Stock Exchange, may trade on or through the
Hong Kong Stock Exchange; and (b) whose name is
entered in a list, register or roll kept by the Hong Kong
Stock Exchange as a person who may trade on or through
the Hong Kong Stock Exchange
DEFINITIONS
–3 9–


--- page 49 ---
“Extreme Conditions” extreme conditions caused by a super typhoon as
announced by the government of Hong Kong
“Fangyuan Chuangying” Ningbo Meishan Bonded Port Area Fangyuan
Chuangying Equity Investment Partnership (Limited
Partnership) (ᛆҳ༟ΥྫΆ
ุ(Υྫ)), a limited partnership established in the
PRC on July 11, 2017, one of our Pre-IPO Investors
“Future Paradigm” Beijing Future Paradigm Technology Co., Ltd. ( ̏ԯ͊Ը
ʮ̡), a limited liability company
established in the PRC on May 28, 2018 and
wholly-owned by our Company
“Global Offering” the Hong Kong Public Offering and the International
Offering
“GREEN Application Form(s)” the application form(s) to be completed by the HK eIPO
White Form Service Provider designated by the
Company
“Group,” “our Group,” “we” or
“us”
our Company and our subsidiaries (or our Company and
any one or more of our subsidiaries, as the context may
require)
“Growing Fame” Growing Fame Holdings Limited, a limited liability
company established in the British Virgin Islands, one of
our Pre-IPO Investors
“GS Asia II” Goldman Sachs Asia Strategic II Pte. Ltd., a limited
liability company established in the Singapore, one of our
Pre-IPO Investors
“Guangkong Zhongying” Zhuhai Guangkong Zhongying Industry Investment Fund
Partnership (Limited Partnership) (ପุҳ
ΥྫΆุ(Υྫ)), a limited partnership
established in the PRC on August 30, 2016, one of our
Pre-IPO Investors
DEFINITIONS
–4 0–


--- page 50 ---
“Guangzhou Jianxin” Guangzhou Jianxin Technology Co., Ltd.* (߅
ப΂ʮ̡), previously known as Guangzhou
Jianxin Automation Technology Co., Ltd.* ( ᄿψ਄อІ
ʮ̡), a limited liability company
established in the PRC on April 6, 2005 and owned as to
66% by our Company
“Guoxin Qidi” Henan Guoxin Qidi Equity Investment Fund (Limited
Partnership) (ږ(Υྫ)), a
limited partnership established in the PRC on August 2,
2017, one of our Pre-IPO Investors
“H Share Registrar” Tricor Investor Services Limited
“H Share(s)” overseas listed foreign share(s) in the share capital of our
Company with a nominal value of RMB1.00 each, which
is/are to be subscribed for and traded in HK dollars and
to be listed on the Hong Kong Stock Exchange
“Hainan BOCOM” Hainan BOCOM International Science and Technology
Innovation Shengxing Equity Investment Partnership
(Limited Partnership) (ᛆҳ༟
ΥྫΆุ(Υྫ)), a limited partnership established in
the PRC on August 31, 2020, one of our Pre-IPO
Investors
“Hainan Y uanfengshang” Hainan Y uanfengshang Technology Partnership (Limited
Partnership) (ҦΥྫΆุ(Υྫ)), a
limited partnership established in the PRC on July 6,
2021, one of our Pre-IPO Investors
“Haitong International
Investment”
Haitong International Investment Holdings Limited, a
limited liability company established in the British Virgin
Islands, one of our Pre-IPO Investors
“Hangzhou Fantong” Hangzhou Fantong Equity Investment Partnership
(Limited Partnership) (ᛆҳ༟ΥྫΆุ(ࠢ
Υྫ)), a limited partnership established in the PRC on
December 7, 2020, one of our Pre-IPO Investors
“Hefei Shanyue” Hefei Shanyue Intelligence Technology Co., Ltd. (ʆ
ʮ̡), a limited liability company
established in the PRC on March 4, 2022 and owned as to
51% by our Company
DEFINITIONS
–4 1–


--- page 51 ---
“HK eIPO White Form ” the application for Hong Kong Offer Shares to be issued
in the applicant’s own name by submitting applications
online through the IPO App or the designated website at
www.hkeipo.hk
“HK eIPO White Form Service
Provider”
the HK eIPO White Form service provider designated
by our Company as specified in the IPO App and on the
designated website at www.hkeipo.hk
“HKSCC” Hong Kong Securities Clearing Company Limited, a
wholly- owned subsidiary of Hong Kong Exchanges and
Clearing Limited
“HKSCC Nominees” HKSCC Nominees Limited, a wholly-owned subsidiary
of HKSCC
“Hong Kong” or “HK” the Hong Kong Special Administrative Region of the
PRC
“Hong Kong dollars” or
“HK dollars” or “HK$”
Hong Kong dollars, the lawful currency of Hong Kong
“Hong Kong Offer Shares” the 1,839,600 H Shares offered by us for subscription at
the Offer Price pursuant to the Hong Kong Public
Offering (subject to adjustment as described in the
section headed “Structure of the Global Offering” in this
Prospectus)
“Hong Kong Public Offering” the offering of the Hong Kong Offer Shares for
subscription by the public in Hong Kong (subject to
adjustment as described in the section headed “Structure
of the Global Offering” in this Prospectus) at the Offer
Price (plus brokerage, SFC transaction levy, Hong Kong
Stock Exchange trading fee and Accounting and
Financial Reporting Council transaction levy), on and
subject to the terms and conditions described in the
section headed “Structure of the Global Offering” in this
Prospectus
“Hong Kong Stock Exchange” or
“Stock Exchange”
The Stock Exchange of Hong Kong Limited, a wholly-
owned subsidiary of Hong Kong Exchanges and Clearing
Limited
“Hong Kong Underwriters” the underwriters listed in the paragraph headed “Hong
Kong Underwriters” in the section headed
“Underwriting” in this Prospectus, being the underwriters
of the Hong Kong Public Offering
DEFINITIONS
–4 2–


--- page 52 ---
“Hong Kong Underwriting
Agreement”
the underwriting agreement dated September 14, 2023
relating to the Hong Kong Public Offering entered into
by, among others, our Company, the Overall Coordinators
and the Hong Kong Underwriters, as further described in
“Underwriting – Underwriting arrangements and
expenses – Hong Kong Public Offering – Hong Kong
Underwriting Agreement”
“HongShan” a reference to the HongShan funds and entities that are
engaged in activities related to investing and are
principally focused on companies located in, or with
connections to, the PRC
“HongShan Hanchen” Shenzhen HongShan Hanchen Equity Investment
Partnership (Limited Partnership) (ᛆ
ҳ༟ΥྫΆุ(Υྫ)), a limited partnership
established in the PRC on September 29, 2019, one of our
Pre-IPO Investors
“HongShan Mingde” Beijing HongShan Mingde Equity Investment Center
(Limited Partnership) (ᛆҳ༟ʕː(ࠢ
Υྫ)), a limited partnership established in the PRC on
June 17, 2015, one of our Pre-IPO Investors
“HongShan V enture” SCC V enture V-Mars (HK) Limited, a limited liability
company established in Hong Kong on December 8,
2014, one of our Pre-IPO Investors and is indirectly
wholly controlled by Mr. Neil Nanpeng Shen, our former
Director
“HongShan Zhisheng” Ningbo Meishan Bonded Zone HongShan Zhisheng
Equity Investment Partnership (Limited Partnership) ( ྐྵ
ᛆҳ༟ΥྫΆุ(Υྫ)),
a limited partnership established in the PRC on August 9,
2017, one of our Pre-IPO Investors
“Hubei Boheng” Hubei Boheng Equity Investment Partnership (Limited
Partnership) (ᛆҳ༟ΥྫΆุ(Υྫ)), a
limited partnership established in the PRC on August 17,
2017, one of our Pre-IPO Investors
DEFINITIONS
–4 3–


--- page 53 ---
“Ideal Technology” Beijing Ideal Information Technology Co., Ltd.* ( ̏ԯଣ
ʮ̡), a limited liability company
established in the PRC on April 17, 2000, formerly
known asʮ̡ and indirectly
owned as to 56.84% by our Company
“IFRS” the International Financial Reporting Standards, which
include standards, amendments and interpretations
promulgated by IASB and the International Accounting
Standards (IAS) and interpretations issued by the
International Accounting Standards Committee (IASC)
“Independent Third Party(ies)” any entity(ies) or person(s) who is not a connected person
of our Company within the meaning of the Hong Kong
Listing Rules
“Interested DSM” the Directors, the Supervisors and the senior management
members of the Company who are interested in any
underlying Shares as disclosed in this prospectus, being
Chen Y uqiang, Y u Zhonghao, Y ang Qiang, Chai Yifei,
Zhou Wenjing, Shao Liling, Pei Misi, Hu Shiwei, Zheng
Zhao and Tu Weiwei
“International Offer Shares” the 16,556,400 H Shares offered by our Company
pursuant to the International Offering (subject to
adjustment as described in the section headed “Structure
of the Global Offering” in this Prospectus) together with
any additional H Shares which may be allotted and issued
by our Company pursuant to the exercise of the Over-
allotment Option
“International Offering” the offering of the International Offer Shares at the Offer
Price outside the United States in offshore transactions in
reliance on Regulation S under the U.S. Securities Act or
any other available exemption from the registration
requirement under the U.S. Securities Act, as further
described in the section headed “Structure of the Global
Offering” in this Prospectus
“International Underwriters” the group of international underwriters who are expected
to enter into the International Underwriting Agreement to
underwrite the International Offering
DEFINITIONS
–4 4–


--- page 54 ---
“International Underwriting
Agreement”
the underwriting agreement relating to the International
Offering expected to be entered into on or about
Thursday, September 21, 2023 by our Company and the
International Underwriters, as further described in the
section headed “Underwriting – International Offering”
in this Prospectus
“IPO” initial public offering
“IPO App ” the mobile application for the HK eIPO White Form
service which can be downloaded by searching
“IPO App ” in App Store or Google Play or
downloaded at www.hkeipo.hk/IPOApp or
www.tricorglobal.com/ IPOApp
“Jiangsu Jiequan” China Life (Jiangsu) Jiequan Health Industry Investment
Fund (Limited Partnership) (ᛆҳ༟ʕː
(Υྫ)), a limited partnership established in the PRC
on December 27, 2019, one of our Pre-IPO Investors
“Jiaxing Chenyue” Jiaxing Chenyue Equity Investment Partnership (Limited
Partnership) (ᛆҳ༟ΥྫΆุ(Υྫ)), a
limited partnership established in the PRC on August 18,
2020, one of our Pre-IPO Investors
“JIC Tech-Inv” JIC Technology Investment Ltd. (ࠢ
ʮ̡), a joint stock limited company established in the
PRC on March 1, 1995, one of our Pre-IPO Investors
“Jinshi Haofeng” Jinshi Haofeng Equity Investment (Hangzhou)
Partnership (Limited Partnership) (ᛆҳ༟(؄
ψ)ΥྫΆุ(Υྫ)), a limited partnership
established in the PRC on October 31, 2016, one of our
Pre-IPO Investors
“Jinshi Jinrui” Jinshi Jinrui Equity Investment (Hangzhou) Partnership
(Limited Partnership) (ᛆҳ༟(ψ)ΥྫΆุ
(Υྫ)), a limited partnership established in the PRC
on February 20, 2017, one of our Pre-IPO Investors
“Jinshi Zhiyu” Jinshi Zhiyu Equity Investment (Hangzhou) Partnership
(Limited Partnership) (ᛆҳ༟(ψ)ΥྫΆุ
(Υྫ)), a limited partnership established in the PRC
on October 31, 2016, one of our Pre-IPO Investors
DEFINITIONS
–4 5–


--- page 55 ---
“Joint Bookrunners” the joint bookrunners as named in the section headed
“Directors, Supervisors and parties involved in the
Global Offering” in this Prospectus
“Joint Global Coordinators” the joint global coordinators 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
“Latest Practicable Date” September 10, 2023, being the latest practicable date for
the purpose of ascertaining certain information contained
in this Prospectus prior to its publication
“LF Beta” LF Beta Limited, a limited liability company established
in Hong Kong on October 23, 2017, one of our Pre-IPO
Investors
“Lianxiang Y angtze River” Hubei Province Lianxiang Y angtze River Technology
Industry Fund Partnership (Limited Partnership) (޲
ΥྫΆุ(Υྫ)), a limited
partnership established in the PRC on May 16, 2018, one
of our Pre-IPO Investors
“Listing” listing of the H Shares on the Main Board of the Hong
Kong Stock Exchange
“Listing Committee” the Listing Committee of the Hong Kong Stock Exchange
“Listing Date” the date, expected to be on or about Thursday, September
28, 2023, on which our H Shares are listed and from
which dealings therein are permitted to take place on the
Hong Kong Stock Exchange
“Listing Rules” or “Hong Kong
Listing Rules”
the Rules Governing the Listing of Securities on the
Hong Kong Stock Exchange, as amended, supplemented
or otherwise modified from time to time
“Lucent Shanghai” Lucent (Shanghai) Investment Center (Limited
Partnership) (ڦ(ɪऎ)ҳ༟ʕː(Υྫ)), a limited
partnership established in the PRC on March 24, 2016,
one of our Pre-IPO Investors
DEFINITIONS
–4 6–


--- page 56 ---
“Main Board” the stock exchange (excluding the option market)
operated by the Hong Kong Stock Exchange which is
independent from and operated in parallel with Growth
Enterprise Market of the Hong Kong Stock Exchange
“Major Awesome” Major Awesome Limited, a limited liability company
established in Hong Kong on May 10, 2021, one of our
Pre-IPO Investors
“MIC Capital” MIC Capital Management 23 RSC Ltd, a limited liability
company established in the United Arab Emirates, one of
our Pre-IPO Investors
“MIIT” Ministry of Industry and Information Technology of the
PRC (ʷ௅)
“Ministry of Finance” or “MOF” Ministry of Finance of the PRC (௅)
“MOFCOM” Ministry of Commerce of the PRC ( ʕശɛ͏΍ձ਷ਠਕ
௅)
“Ms. Wu” Ms. Wu Ming ( юপ), the spouse of Dr. Dai, one of our
Controlling Shareholders
“Nanjing Paradigm” Nanjing Paradigm Enterprises Management Consulting
Partnership (Limited Partnership) (ԯᇍόΆุ၍ଣፔ
༔ΥྫΆุ(Υྫ)), a limited partnership established
in the PRC on December 29, 2022, and an Employee
Incentive Platform of which Paradigm New Wisdom is
the sole general partner
“NDRC” National Development and Reform Commission of the
PRC
* (ึ)
“NIFA No. 1” Beijing NIFA No. 1 Artificial Intelligence Technology
Industry Fund Management Center (Limited Partnership)
(၍ଣʕː (ࠢ
Υྫ)), a limited partnership established in the PRC on
April 28, 2019, one of our Pre-IPO Investors
“Ningbo Huiyuan” Ningbo Huiyuan V enture Capital Partnership (Limited
Partnership) (௴ุҳ༟ΥྫΆุ(Υྫ)), a
limited partnership established in the PRC on February 2,
2018, one of our Pre-IPO Investors
DEFINITIONS
–4 7–


--- page 57 ---
“Nomination Committee” the nomination committee of the Board
“Nongwan Investment” Nongwan (Changsha) Equity Investment Enterprise
(Limited Partnership) ( ༵ᝄ(Ӎ)ᛆҳ༟Άุ(Υ
ྫ)), a limited partnership established in the PRC on
January 17, 2017, one of our Pre-IPO Investors
“Offer Price” the final offer price per Offer Share (exclusive of
brokerage fee of 1%, SFC transaction levy of 0.0027%,
Hong Kong Stock Exchange trading fee of 0.00565% and
Accounting and Financial Reporting Council transaction
levy of 0.00015%) at which the Offer Shares are to be
subscribed for and issued pursuant to the Global Offering
as described in the section headed “Structure of the
Global Offering” in this Prospectus
“Offer Share(s)” the Hong Kong Offer Shares and the International Offer
Shares, with any additional H Shares which may be
allotted and issued pursuant to the exercise of the
Over-allotment Option
“Over-allotment Option” the option granted by us to the International
Underwriters, exercisable by the Overall Coordinators
(on behalf of the International Underwriters) pursuant to
the International Underwriting Agreement, to require our
Company to allot and issue up to an aggregate of
2,759,400 additional H Shares at the Offer Price,
representing 15% of the Offer Shares initially available
under the Global Offering, to cover, among other things,
over-allocations in the International Offering, if any,
exercisable at any time from the date of the International
Underwriting Agreement up to (and including) the date
which is the 30th day from the last day for lodging of
applications under the Hong Kong Public Offering
“Overall Coordinators” the overall coordinators as named in the section headed
“Directors, Supervisors and parties involved in the
Global Offering” in this Prospectus
DEFINITIONS
–4 8–


--- page 58 ---
“Paradigm Chuqi” Tianjin Paradigm Chuqi Management Consulting
Partnership (Limited Partnership) (ᇍό̈փ၍ଣፔ
༔ΥྫΆุ(Υྫ)), a limited partnership established
in the PRC on April 21, 2021 of which Beijing New
Wisdom is the sole general partner, and it is one of our
Controlling Shareholders which is interested in more than
one third of limited partnership interest in Paradigm
Investment
“Paradigm Cloud” Paradigm Cloud (Beijing) Retail Technology Co., Ltd.
(ᇍόථ(̏ԯ)ʮ̡), a limited liability
company established in the PRC on November 6, 2019
and indirectly wholly-owned by our Company
“Paradigm Digital Software
Technology”
Shanghai Paradigm Digital Software Technology Co. Ltd.
(ʮ̡), a limited liability
company established in the PRC on July 19, 2022 and an
indirect wholly-owned subsidiary of our Company
“Paradigm Digital Guangzhou” Paradigm Digital Technology (Guangzhou) Co., Ltd. ( ᇍ
Ҧ(ᄿψ)ʮ̡), a limited liability company
established in the PRC on November 18, 2022 and an
indirect wholly-owned subsidiary of our Company
“Paradigm Digital Hangzhou” Paradigm Digital Technology (Hangzhou) Co., Ltd. ( ᇍό
Ҧ(ψ)ʮ̡), a limited liability company
established in the PRC on December 6, 2022 and an
indirect wholly-owned subsidiary of our Company
“Paradigm Digital Wuhan” Paradigm Digital Technology (Wuhan) Co., Ltd. ( ᇍόᅰ
Ҧ(ဏ)ʮ̡), a limited liability company
established in the PRC on December 1, 2022 and an
indirect wholly-owned subsidiary of our Company
“Paradigm Investment” Paradigm (Tianjin) Management Consulting Partnership
(Limited Partnership) ( ᇍό(ݵ)၍ଣፔ༔ΥྫΆุ(Ϟ
Υྫ)), previously known as Paradigm (Ningbo Free
Trade Zone) Investment Partnership (Limited
Partnership) ( ᇍό(೼ਜ )ҳ༟ΥྫΆุ (Υ
ྫ)), a limited partnership established in the PRC on
March 29, 2018 of which Beijing New Wisdom is the sole
general partner, and it is the Employee Incentive Platform
and one of our Controlling Shareholders
DEFINITIONS
–4 9–


--- page 59 ---
“Paradigm New Wisdom” Beijing Paradigm New Wisdom Enterprises Management
Co., Ltd. (ʮ̡), a limited
liability company established in the PRC on January 12,
2023, being the sole general partner of Nanjing Paradigm
and owned as to 100% by Mr. Y u Hui (ฯ), an
Independent Third Party
“Paradigm Tianqin” Tianjin Paradigm Tianqin Management Consulting
Partnership (Limited Partnership) (ᇍό˂ೞ၍ଣፔ
༔ΥྫΆุ(Υྫ)), a limited partnership established
in the PRC on April 21, 2021 of which Beijing New
Wisdom is the sole general partner, and it is one of our
Controlling Shareholders which is interested in more than
one third of limited partnership interest in Paradigm
Yinyuan
“Paradigm Yinyuan” Tianjin Paradigm Yinyuan Management Consulting
Partnership (Limited Partnership) (ᇍόᒯʩ၍ଣፔ
༔ΥྫΆุ(Υྫ)), a limited partnership established
in the PRC on April 21, 2021 of which Beijing New
Wisdom is the sole general partner, and one of our
Controlling Shareholders
“PBOC” People’s Bank of China ( ʕ਷ɛ͏ვБ), the central bank
of the PRC
“PRC Company Law” Company Law of the People’s Republic of China ( ʕശɛ
ج)
PRC GAAP” generally accepted accounting principles in the PRC
“PRC Government” or “State” the central government of the PRC, including all
governmental subdivisions (including principal,
municipal and other regional or local government
entities) and instrumentalities
“PRC Legal Advisor” JunHe LLP , our legal advisor as to PRC laws
“Pre-IPO Investment(s)” the investment(s) in our Company undertaken by the
Pre-IPO Investors pursuant to the respective equity
transfer agreement(s) and capital increase agreement(s),
details of which are set out in the section headed
“History, Development and Corporate Structure” in this
Prospectus
DEFINITIONS
–5 0–


--- page 60 ---
“Pre-IPO Investor(s)” the investor(s) from whom our Company obtained several
rounds of investments, details of which are set out in the
section headed “History, Development and Corporate
Structure” in this Prospectus
“Price Determination Agreement” the agreement to be entered into by the Overall
Coordinators (for themselves and on behalf of the Hong
Kong Underwriters) and our Company on the Price
Determination Date to record and fix the Offer Price
“Price Determination Date” the date, expected to be on or around Thursday,
September 21, 2023 (Hong Kong time) on which the
Offer Price is determined, or such later time as our
Company and the Overall Coordinators (on behalf of the
Hong Kong Underwriters) may agree, but in any event
not later than Wednesday, September 27, 2023
“Prospectus” this Prospectus being issued in connection with the Hong
Kong Public Offering
“Province” each being a province or, where the context requires, a
provincial-level autonomous region or municipality
under the direct supervision of the central government of
the PRC
“Purui Tianjin” Purui Enterprise Management (Tianjin) Partnership
(Limited Partnership) ( ዎ๿Άุ၍ଣ(ݵ)ΥྫΆุ(Ϟ
Υྫ)), a limited partnership established in the PRC on
February 4, 2021, one of our Pre-IPO Investors
“Qiushi Xingde” Qiushi Xingde (Tianjin) Investment Center (Limited
Partnership) (ྼጳᅃ(ݵ)ҳ༟ʕː(Υྫ)), a
limited partnership established in the PRC on April 11,
2016, one of our Pre-IPO Investors
“Regulation S” Regulation S under the U.S. Securities Act
“Remuneration Committee” the remuneration committee of the Board
“RMB” or “Renminbi” Renminbi, the lawful currency of the PRC
“Ruihui Haina” Beijing Ruihui Haina Technology Industry Fund (Limited
Partnership) (ږ(Υྫ)), a
limited partnership established in the PRC on August 28,
2017, one of our Pre-IPO Investors
DEFINITIONS
–5 1–


--- page 61 ---
“SAFE” State Administration of Foreign Exchange of the PRC ( ʕ
̮ි၍ଣ҅)
“SA T” State Administration of Taxation of the PRC (೼ਕᐼ
҅)
“Securities and Futures
Ordinance” or “SFO”
Securities and Futures Ordinance (Chapter 571 of the
Laws of Hong Kong), as amended, supplemented or
otherwise modified from time to time
“SFC” Securities and Futures Commission of Hong Kong
“SGD” Singapore dollars, the lawful currency of Singapore
“Shanghai-Hong Kong Stock
Connect”
a securities trading and clearing links program developed
by the Hong Kong Stock Exchange, Shanghai Stock
Exchange, HKSCC and CSDC for the establishment of
mutual market access between Hong Kong and Shanghai,
including Southbound Trading and Northbound Trading
“Shanghai Shishuo” Shanghai Shishuo Intelligent Technology Co., Ltd. ( ɪऎ
ʮ̡), a limited liability company
established in the PRC on April 1, 2017 and a wholly-
owned subsidiary of our Company
“Shanghai Yisahai” Shanghai Yisahai Technology Co., Ltd.* (߅
ʮ̡), a limited liability company established in
the PRC on June 9, 2021 and an indirect wholly-owned
subsidiary of our Company
“Share(s)” ordinary share(s) in the capital of our Company with a
nominal value of RMB1.00 each
“Shareholder(s)” holder(s) of the Share(s)
“Shenzhen-Hong Kong Stock
Connect”
a securities trading and clearing links program to be
developed by the Hong Kong Stock Exchange, Shenzhen
Stock Exchange, HKSCC and CSDC for the
establishment of mutual market access between Hong
Kong and Shenzhen
“Shenzhen Linghui” Shenzhen Linghui Cornerstone Equity Investment
Partnership (Limited Partnership) (ᛆ
ΥྫΆุ(Υྫ)), a limited partnership
established in the PRC on June 25, 2018, one of our
Pre-IPO Investors
DEFINITIONS
–5 2–


--- page 62 ---
“Shenzhen Lingyu” Shenzhen Lingyu Cornerstone Equity Investment
Partnership (Limited Partnership) (ᛆ
ҳ༟ΥྫΆุ(Υྫ)), a limited partnership
established in the PRC on May 26, 2016, one of our
Pre-IPO Investors
“Shenzhen Songhe” Shenzhen Songhe Growth Equity Investment Partnership
(Limited Partnership) (ᛆҳ༟ΥྫΆ
ุ(Υྫ)), a limited partnership established in the
PRC on March 18, 2016, one of our Pre-IPO Investors
“Sinovation Fund III” Sinovation Fund III, L.P ., a limited partnership
established in the Cayman Islands on January 27, 2015,
one of our Pre-IPO Investors
“Snowline Technology” Beijing Xuexian Intelligent Technology Co., Ltd. ( ̏ԯ௛
ʮ̡), a limited liability company
established in the PRC on January 18, 2019 and an
indirect wholly-owned subsidiary of our Company
“Sole Sponsor” the sole sponsor as named in the section headed
“Directors, Supervisors and parties involved in the
Global Offering” in this Prospectus
“Stabilizing Manager” China International Capital Corporation Hong Kong
Securities Limited
“State Council” the State Council of the PRC ( ʕശɛ͏΍ձ਷਷ਕ৫)
“Stonebridge 2020” Stonebridge 2020 (Singapore) Pte. Ltd., a limited
liability company established in Singapore, one of our
Pre-IPO Investors
“subsidiary(ies)” has the meaning ascribed thereto under the Listing Rules
“substantial shareholder(s)” has the meaning ascribed thereto under the Listing Rules
“Supervisor(s)” member(s) of our Supervisory Committee
“Supervisory Committee” the supervisory committee 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
DEFINITIONS
–5 3–


--- page 63 ---
“Tibet Lingfeng” Tibet Lingfeng Xinfu V enture Investment Partnership
(Limited Partnership) (௴ุҳ༟ΥྫΆุ
(Υྫ)), a limited partnership established in the PRC
on August 25, 2015, one of our Pre-IPO Investors
“Track Record Period” the periods comprising the three financial years ended
December 31, 2020, 2021, 2022 and the three months
ended March 31, 2023
“Underwriters” the Hong Kong Underwriters and the International
Underwriters
“Underwriting Agreements” the Hong Kong Underwriting Agreement and/or the
International Underwriting Agreement, as the context
may require
“Unlisted Share(s)” 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.” or “United States” the United States of America, its territories, its
possessions and all areas subject to its jurisdiction
“U.S. dollar”, “US$” or “USD” United States dollar, 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
“V alue Global” V alue Global Limited, a limited liability company
incorporated in Hong Kong on June 9, 2017, one of our
Pre-IPO Investors
“Xinhe No. 1” Xinhe No. 1 (Tianjin) Technology Center (Limited
Partnership) (ձɓ໮(ݵ)Ҧʕː(Υྫ)), a
limited partnership established in the PRC on January 26,
2021, one of our Pre-IPO Investors
“YSC Investment I” YSC Investment I (HK) Limited, a limited liability
company established in Hong Kong on January 15, 2015,
one of our Pre-IPO Investors and was owned as to 100%
by YSC Investment I (BVI) Ltd.
DEFINITIONS
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“Zhimei Xinchuang” Zhimei Xinchuang (Beijing) Technology Co., Ltd. ( ౽ద
อ௴(̏ԯ)ʮ̡), a limited liability company
established in the PRC on October 27, 2020, and owned
as to 70% by our Company
“Zhongyi Equity Fund” Zhongyi Equity Fund (Hebei Xiongan) Partnership
(Limited Partnership) (ږ(̏ඪτ)ΥྫΆุ
(Υྫ)), a limited partnership established in the PRC
on December 27, 2019, one of our Pre-IPO Investors
“Zhongyuan Putai” Zhongyuan Putai (Beijing) Intelligent Technology Co.,
Ltd. ( ʕʩ౷इ(̏ԯ)ʮ̡), a limited
liability company established in the PRC on April 14,
2021 and owned as to 51% by our Company
“Zhuhai Hongmai” Zhuhai Hongmai Enterprise Management Partnership
(General Partnership) ( मऎ҃ᒕΆุ၍ଣΥྫΆุ(౷ஷ
Υྫ)), a general partnership established in the PRC on
December 15, 2020, one of our Pre-IPO Investors
“Zhuhai Jiaxun” Zhuhai Jiaxun Equity Investment Fund Partnership
(Limited Partnership) (ΥྫΆุ
(Υྫ)), a limited partnership established in the PRC
on May 22, 2018, one of our Pre-IPO Investors
“Zhuhai Jinyiming” Zhuhai Jinyiming Equity Investment Fund Partnership
(Limited Partnership) (ΥྫΆ
ุ(Υྫ)), a limited partnership established in the
PRC on March 5, 2018, one of our Pre-IPO Investors
“Zhuhai Xuren” Zhuhai Xuren Equity Investment Fund Partnership
(Limited Partnership) (ΥྫΆุ
(Υྫ)), a limited partnership established in the PRC
on August 16, 2018, one of our Pre-IPO Investors
For ease of reference, the names of Chinese laws and regulations, governmental
authorities, institutions, natural persons or other entities (including our subsidiary) have been
included in this Prospectus in both the Chinese and English languages and in the event of any
inconsistency, the Chinese versions shall prevail.
* For identification purposes only
DEFINITIONS
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This glossary contains definitions of certain terms used in this Prospectus in
connection with us and our business. Some of these may not correspond to standard
industry definitions.
“AAAI” the Association for the Advancement of Artificial
Intelligence
“ACL” the Association for Computational Linguistics
“ACM” ACM International Collegiate Programming Contest, an
annual multi-tiered international competitive
programming competition among different universities in
the world and one of the largest and most prestigious
programming contests in the world
“AGV” automated guided vehicle, automated, custom-made
vehicles that are able to transport packets, materials
and/or products in logistical or production factory
environment
“AI” artificial intelligence, simulation of human intelligence
by machines
“AI +” empowering industries with AI solutions
“algorithm” a procedure of formula for solving a problem, based on
conducting a sequence of specified actions
“AutoCV” automated computer vision, the process of automating the
application of computer vision to real-world problems
“AutoML” automated machine learning, the process of automating
the end-to-end process of applying machine learning to
real-world problems
“AutoRL” automated reinforcement learning, the training of
machine learning models to make a sequence of decisions
in a dynamic, uncertain, potentially complex
environment
“CAGR” compound annual growth rate
GLOSSARY OF TECHNICAL TERMS
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“cloud” the computers and connections that support cloud
computing
“cloud computing” the practice of storing computer data and programs on
multiple servers that can be accessed through the internet
“computing power” the ability of a computer to perform an operation
“CV” or “computer vision” computer vision, a field of artificial intelligence that
trains computers to interpret and understand the digital
images or videos
“deep learning” a subset of AI and machine learning that mimics the
working of biological neural systems such as human
brains and uses multi-layered neural networks to deliver
state-of-the-art accuracy in tasks such as object detection
and recognition, speech recognition and natural language
processing. Deep learning differs from traditional
machine learning techniques in that it can automatically
learn representations from data such as images, video or
text, without introducing hand-coded rules or human
domain knowledge. Its highly flexible architecture can
learn directly from raw data and can increase its
predictive accuracy when provided with some data
“derivative-free optimization” a discipline in mathematical optimization that does not
use derivative information in the classical sense to find
optimal solutions.
“enterprise AI” AI technologies and software applied by enterprises to
address their business needs and drive their digital and
automation transformation
“framework” a platform for developing software applications
“GDP” Gross Domestic Product
“GDPR” General Data Protection Regulation, a regulation in EU
law on data protection and privacy in the European Union
and the European Economic Area
“GPU” graphic processing unit, a specialized electronic circuit
designed to rapidly manipulate and alter memory to
accelerate the creation of images
GLOSSARY OF TECHNICAL TERMS
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“heterogeneous computing” systems that use more than one kind of processor or cores
“IaaS” infrastructure as a service, a category of cloud computing
designed to rapidly manipulate and alter memory to
accelerate the creation of images
“IDE” integrated development environment, a software
application that provides comprehensive facilities to
computer programmers for software development
“IT” information technology
“KDD” Knowledge Discovery and Data Mining
“lighthouse user” end users of Sage Platform which are either Global
Fortune 500 companies or publicly listed companies.
Unless otherwise indicated, the number of lighthouse
users for a given period refers to the number of
lighthouse users from which we generated revenue, either
directly or indirectly through solution partners, in that
period
“machine learning” the scientific study of algorithms and statistical models
that computer systems use to effectively perform specific
tasks without being explicitly programmed to do so
“natural language processing” a subfield of linguistics, computer science, and artificial
intelligence concerned with the interactions between
computers and human language, in particular how to
program computers to process and analyze large amounts
of natural language data
“net dollar expansion rate” a fraction, the denominator of which is the revenue
contribution from a designated group of users in the
previous year of a given year and the numerator of which
is the contribution from the same group of users in such
given year, expressed as a percentage. For example, when
calculating net dollar expansion rate of our lighthouse
users in 2021, the denominator is the revenue
contribution of our lighthouse users in 2020, and the
numerator is the revenue contribution of such same group
of lighthouse users in 2021
“NIPS” Neural Information Processing Systems
GLOSSARY OF TECHNICAL TERMS
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“number of users” Unless otherwise indicated, the number of users for a
given period refers to the number of end users of Sage
Platform from which we generated revenue, either
directly or indirectly through solution partners, in that
period
“OCR” optical character recognition
“PC” personal computer, a multi-purpose computer whose size,
capabilities, and price make it feasible for individual use
“platform-centric” a type of AI solutions that come with an AI development
platform in addition to AI applications and underlying
computing infrastructure
“R&D” research and development
“ROI” return on investment
“SKU” stock keeping unit, a distinct type of item for sale
“supervised learning” the machine learning task of learning a function that
maps an input to an output based on example input-output
pairs. It infers a function from labeled training data
consisting of a set of training examples
“TCO” total cost of ownership, the purchase price of an asset
plus the costs of operation
“TensorFlow” a free and open-source software library for machine
learning
“transfer learning” a research field in machine learning that focuses on
storing knowledge gained while solving one problem and
applying it to a different but related problem
GLOSSARY OF TECHNICAL TERMS
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We have included in this Prospectus forward-looking statements. Statements that are not
historical facts, including but not limited to statements about our intentions, beliefs,
expectations or predictions for the future, are forward-looking statements.
This Prospectus contains forward-looking statements and information relating to us and
our subsidiary that are based on the beliefs of our management as well as assumptions made
by and information currently available to our management. When used in this Prospectus, the
words “aim,” “anticipate,” “believe,” “could,” “expect,” “going forward,” “intend,” “may,”
“ought to,” “plan,” “project,” “seek,” “should,” “will,” “would,” “vision,” “aspire,” “target,”
“schedules,” and the negative of these words and other similar expressions, as they relate to us
or our management, are intended to identify forward-looking statements. Such statements
reflect the current views of our management with respect to future events, operations, liquidity
and capital resources, some of which may not materialize or may change. These statements are
subject to certain risks, uncertainties and assumptions, including the risk factors as described
in this Prospectus, some of which are beyond our control and may cause our actual results,
performance or achievements, or industry results, to be materially different from any future
results, performance or achievements expressed or implied by the forward-looking statements.
Y ou are strongly 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:
1. our operations and business prospects;
2. our ability to maintain relationship with, and the actions and developments
affecting, our major customers, suppliers and subcontractors;
3. future developments, trends and conditions in the industries and markets in which
we operate or plan to operate;
4. general economic, political and business conditions in the markets in which we
operate;
5. changes to the regulatory environment in the industries and markets in which we
operate;
6. our ability to maintain the market leading positions;
7. the actions and developments of our competitors;
8. our ability to effectively contain costs and optimize pricing;
9. the ability of third parties to perform in accordance with contractual terms and
specifications;
10. our ability to retain senior management and key personnel and recruit qualified staff;
FORW ARD-LOOKING STATEMENTS
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11. our business strategies and plans to achieve these strategies, including our service
and geographic expansion plans;
12. our ability to defend our intellectual rights and protect confidentiality;
13. the effectiveness of our quality control systems;
14. change or volatility in interest rates, foreign exchange rates, equity prices, trading
volumes, commodity prices and overall market trends; including those pertaining to
the PRC and the industry and markets in which we operate; and
15. capital market developments.
By their nature, certain disclosures relating to these and other risks are only estimates and
should one or more of these uncertainties or risks, among others, materialize, actual results
may vary materially from those estimated, anticipated or projected, as well as from historical
results. Specifically but without limitation, sales could decrease, costs could increase, capital
costs could increase, capital investment could be delayed and anticipated improvements in
performance might not be fully realized.
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, you should not place undue reliance on any forward-looking information. All
forward-looking statements in this Prospectus are qualified by reference to the cautionary
statements in this section as well as the risks and uncertainties discussed in the section headed
“Risk Factors” in this Prospectus.
In this Prospectus, statements of or references to our intentions or those of our Directors
are made as of the date of this Prospectus. Any such information may change in light of future
developments.
FORW ARD-LOOKING STATEMENTS
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An investment in our H Shares involves significant risks. You should carefully
consider all of the information in this Prospectus, including the risks and uncertainties
described below, as well as our financial statements and the related notes, and the
“Financial Information” section, before deciding to invest in our H Shares. The following
is a description of what we consider to be our material risks. Any of the following risks
could have a material adverse effect on our business, financial condition, results of
operations and growth prospects. In any such event, 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 the section
headed “Forward-Looking Statements” in this Prospectus.
RISKS RELATED TO OUR BUSINESS AND INDUSTRY
AI technologies are constantly evolving. Any flaws or inappropriate usage of AI
technologies, whether actual or perceived, whether intended or inadvertent, whether
committed by us or by other third parties, could have negative impact on our business,
reputation and the general acceptance of AI solutions by the society.
AI technologies are constantly evolving. To remain competitive in the AI industry, we
must continue to stay abreast of rapid technological developments and continuously evolving
industry trends. We have invested significantly in our research and development and made
other efforts in response to these constant changes, but we can make no assurance that these
efforts will generate our expected return, or any return at all. Failure to cope with rapid
development of AI technologies may materially and adversely affect our business, financial
condition and results of operations.
AI technologies are still at a preliminary stage of development and will continue to
evolve. Flaws or deficiencies in AI technologies could undermine the accuracy and
thoroughness of the analysis and decisions made by our solutions. There can be no assurance
that we will be able to detect and remedy such flaws or deficiencies in a timely manner, or at
all. If the recommendations, forecasts or analysis that our AI solutions assist in producing are
deficient or inaccurate, we could be subjected to competitive harm, potential legal liability, and
ethical or reputational harm. Any flaws or deficiencies in our AI technologies and solutions,
whether actual or perceived, could materially and adversely affect our business, reputation,
results of operations and prospects.
RISK FACTORS
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Similar to many disruptive innovations, AI technologies present risks and challenges that
could affect user perception and public opinion. Any inappropriate, abusive or premature usage
of AI technologies, whether actual or perceived, whether intended or inadvertent, and whether
by us or by third parties, may dissuade prospective users from adopting AI solutions, may
impair the general acceptance of AI solutions by the society, attract negative publicity and
adversely impact our reputation. It may even violate applicable laws and regulations in China
and other jurisdictions and subject us to legal or administrative proceedings, pressures from
activists and/or other organizations and heightened scrutiny by regulators. Each of the
foregoing events may in turn materially and adversely affect our business, financial condition
and results of operations.
We have recorded net losses, net liabilities and operating cash outflow during the Track
Record Period and recorded net current liabilities as of March 31, 2023, and we may not
be able to achieve or subsequently maintain profitability.
In 2020, 2021, 2022 and the three months ended March 31, 2022 and 2023, we recorded
net losses of RMB750.2 million, RMB1,802.1 million, RMB1,653.4 million, RMB268.2
million and RMB303.9 million, respectively. As of December 31, 2020, 2021, 2022 and March
31, 2023, we had recorded net liabilities of RMB1,183.0 million, RMB248.0 million,
RMB1,461.0 million and RMB1,828.9 million, respectively. We also recorded net current
liabilities of RMB3,430.1 million as of March 31, 2023. In addition, we have recorded net cash
used in operating activities of RMB452.9 million, RMB770.0 million, RMB779.6 million,
RMB169.4 million and RMB461.2 million in 2020, 2021, 2022 and the three months ended
March 31, 2022 and 2023, respectively. We believe that our future abilities to achieve
profitability and generate positive operating cashflow will depend on, among other factors, our
ability to develop new technologies, enhance user experience, establish effective monetization
strategies, compete effectively and successfully, and continuously grow our user base and
revenues in a cost-effective way by improving our operational efficiency. Moreover, our ability
to obtain additional capital in the future, however, is subject to a number of uncertainties,
including those relating to our future business development, financial condition and results of
operations, general market conditions for financing activities by companies in our industry and
macro-economic and other conditions in China and globally. If we cannot obtain sufficient
capital to meet our capital needs, we may not be able to execute our growth strategies, and our
business, financial condition and prospects may be materially and adversely affected.
Accordingly, you should not rely on our historical results of operations as an indication of our
future performance. We also expect our costs and expenses to significantly increase in future
periods as we continue to expand our business and operations. In addition, we expect to incur
substantial costs and expenses as a result of being a public company. If we are unable to
generate adequate revenues and manage our costs and expenses, we may continue to incur
significant losses in the future and our net losses may increase compared to prior years, and
we may not be able to achieve or subsequently maintain profitability.
RISK FACTORS
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Our business depends substantially on continuing efforts of our senior management and
other key personnel, as well as a competent pool of talents who support our existing
operations and future growth. If we are unable to retain, attract, recruit and train such
personnel, our business may be materially and adversely affected.
Our future success depends heavily on continuing efforts of our senior management,
many of whom are difficult to replace. In particular, we rely on the expertise, experience and
vision of our senior management, as well as other members of our senior management team.
We normally enter into a four-year or non-fixed term employment contract with our senior
management members. If any of our senior management becomes unable or unwilling to
continue to contribute their services to us, we may not be able to replace them easily, or at all.
As a result, our business may be severely disrupted, and our financial condition and results of
operations may be materially and adversely affected.
Additionally, our future success also depends on our ability to attract, recruit and train a
large number of qualified employees and retain existing key employees. In particular, we rely
on our top-notch research and development team to develop our advanced technologies and
solutions, and our experienced sales personnel to maintain relationships with our customers. In
order to compete for talents, we may need to offer higher compensation, better training and
more attractive career opportunities and other benefits to our employees, which may be costly
and burdensome. We cannot assure you that we will be able to attract or retain qualified
workforce necessary to support our future growth. Furthermore, any disputes between us and
our employees or any labor-related regulatory or legal proceedings may divert management and
financial resources, negatively impact staff morale, reduce our productivity, or harm our
reputation and future recruiting efforts. In addition, our ability to train and integrate new
employees into our operations may not meet the demands of our growing business. Any of the
above issues related to our workforce may materially and adversely affect our operations and
future growth.
The industries in which we operate are characterized by constant changes. If we fail to
continuously innovate our technology and provide useful solutions that meet the
expectations of our users, our business, financial condition and results of operations may
be materially and adversely affected.
The industries in which we operate are characterized by constant changes, including rapid
technological evolution, frequent introductions of new solutions, continual shifts in users
demands and constant emergence of new industry standards and practices. Thus, our success
will depend, in part, on our ability to respond to these changes in a cost-effective and timely
manner. We need to constantly anticipate the emergence of new technologies and assess their
market acceptance. To remain competitive, we must continue to stay abreast of the
continuously evolving industry trends and rapid technological developments. We have invested
and intend to continue investing significant resources in technologies to enhance our solutions.
Nevertheless, we may not be able to leverage new technologies effectively or adapt our
solutions to meet user needs or emerging industry standards, and our technology approach
might not align with our future development plans or even become obsolete if we are unable
RISK FACTORS
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to adapt in a cost-effective and timely manner to changing market conditions, whether for
technical, legal, financial or other reasons. Our success will depend partially on our ability to
continuously identify, develop, acquire, protect or license advanced and new technologies that
are valuable to our solutions and services. Failure to do so could render our existing solutions
and services obsolete and unappealing, thereby adversely affecting our business prospects.
Moreover, uncertainties regarding the timing and nature of the development of AI
solutions or technologies, or modifications to existing solutions or technologies, could increase
our research and development expenses. Any failure to deliver effective results by our solutions
could reduce the demand for our solutions, result in user dissatisfaction, and adversely affect
our business, financial condition, results of operations and prospects.
We may not be able to sustain our historical growth rates, and our historical growth may
not be indicative of our future growth or financial results.
We have achieved tremendous growth during the Track Record Period. Our total revenue
increased by 114.2% from RMB942.2 million in 2020 to RMB2,018.4 million in 2021, and
further by 52.7% to RMB3,082.6 million in 2022. Our revenue increased by 33.6% from
RMB482.3 million for the three months ended March 31, 2022 to RMB644.4 million for the
three months ended March 31, 2023. However, there is no assurance that we will be able to
maintain our historical growth rates in future periods. Our growth rates may decline for a
number of reasons, including China’s overall economic growth, the ongoing digitalization of
China’s economy, technology development of the AI industry, accumulation of AI experts in
China, awareness of enterprises to deploy AI applications, our investment in technology
innovation and AI solutions, our ability to attract and retain our users, our ability to create
value for users with our innovative enterprise AI solutions, our ability to manage our costs and
enhance operating leverage. We cannot assure you that we will be able to effectively manage
our growth or implement our business strategies. If the market for our solutions does not
develop as we expect or if we fail to address the needs of this dynamic market, our business,
results of operations and financial condition will be materially and adversely affected.
We are investing heavily in our research and development, and such investment may
negatively impact our profitability in the short term and may not generate the results we
expect to achieve.
Our technological capabilities and infrastructure are critical to our success. We have been
investing heavily in our research and development efforts. Our research and development
expenses increased from RMB565.7 million in 2020 to RMB1,249.5 million in 2021 and
further to RMB1,650.0 million in 2022, representing 60.0%, 61.9% and 53.5% of our total
revenues in 2020, 2021 and 2022, respectively. Our research and development expenses
increased from RMB225.7 million for the three months ended March 31, 2022 to RMB241.5
million for the three months ended March 31, 2023, representing 46.8% and 37.5% of our total
revenue during the same periods, respectively. The industries in which we operate are subject
to rapid technological changes and are evolving quickly in terms of technological innovation.
We need to invest significant resources, including financial resources, in research and
development to lead technological advancement in order to make our solutions innovative and
competitive in the market. As a result, we expect that our research and development expenses
will continue to increase in absolute amount. We have incurred losses in the past and may not
be able to achieve or subsequently maintain profitability, partially due to the significant
investment in research and development. In 2020, 2021, 2022 and the three months ended
RISK FACTORS
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March 31, 2022 and 2023, we recorded losses of RMB750.2 million, RMB1,802.1 million,
RMB1,653.4 million, RMB268.2 million and RMB303.9 million, respectively. Furthermore,
research and development activities are inherently uncertain, and we might encounter practical
difficulties in commercializing our research and development results. Our significant
expenditures on research and development may not generate corresponding benefits. Given the
fast pace with which the technology has been and will continue to develop, we may not be able
to timely upgrade our technologies in an cost-effective and timely manner, or at all. New
technologies in our industries could render our technologies, our technological infrastructure
or solutions that we are developing or expect to develop in the future obsolete or unattractive,
thereby limiting our ability to recover related research and development costs, which could
result in a decline in our revenues, profitability and market share.
Our solutions are primarily not offered on a recurring subscription basis. If we fail to
retain existing customers, attract new customers or increase the spending by our
customers, our business and results of operations may be materially and adversely
affected.
Our ability to retain existing customers, attract new customers, as well as increase the
spending by our customers depends on a number of factors, including our ability to offer more
intelligent solutions that address the needs of our customers at competitive prices, the strength
of our technologies and the effectiveness of our sales and marketing efforts. Our Sage Platform
and applications are primarily offered through software license and sale of SageOne, rather
than on a recurring subscription basis. As a result, we may not be able to effectively retain our
users after the initial sale. Our users may purchase additional licenses from us for additional
computing power as they develop more AI applications for new use cases and/or increase usage
in existing use cases which require more computing power on our platform. However there is
no assurance that our users will repurchase from us within a short period of time, or at all. As
a result, we may fail to retain our existing users. If we fail to retain existing customers or attract
new customers, we may not be able to increase our revenue as quickly as we anticipate, or at
all.
As we have been and will continue expanding our customer base and diversifying industry
verticals that we cover, we may fail to provide users with solutions that meet their specific
demands, and we may fail to provide customer support to the level expected by our users. Such
failures could result in user dissatisfaction, decreased overall demand for our solutions and loss
of expected revenue. In addition, our inability to meet customer service expectations may
damage our reputation and could consequently limit our ability to retain existing customers and
attract new customers, which would materially and adversely affect our business and the results
of operations.
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We may be subject to complex and evolving laws and regulations regarding privacy and
data protection. Actual or alleged failure to comply with privacy and data protection laws
and regulations could damage our reputation, deter current and potential users from
using our solutions and subject us to significant legal, financial and operational
consequences.
In recent years, government authorities across the world have been increasingly focusing
on privacy and data protection. Particularly in China, the substantial base of our business
operations, the PRC government has enacted a series of laws and regulations on the protection
of personally identifiable data in the past few years. We may be subject to laws and regulations
regarding privacy and data protection in China and other areas and jurisdictions. In addition,
as our users expand their footprints globally, they may leverage our solutions in other countries
or territories outside China and are thus required to comply with laws and regulations regarding
privacy and data protection in such jurisdictions. As a result, we may be required to upgrade
our solutions to help them comply with such laws and regulations. Up to the Latest Practicable
Date, we had not been subject to any enquiry, investigation, notice, inspection, action or
penalty from the PRC authorities or any other relevant regulatory bodies in relation to our
compliance with privacy and data protection laws and regulations.
We have adopted various measures to ensure legal compliance. See “Business – Data
Privacy and Security” for more information. However, the laws and regulations regarding
privacy and data protection in China, as well as in other jurisdictions, are generally complex
and evolving, with uncertainty as to the interpretation and application thereof. As such, we
cannot assure you that our privacy and data protection measures are, and will be, always
considered sufficient under applicable laws and regulations. Additionally, the effectiveness of
our privacy and data protection measures is also subject to system failure, interruption,
inadequacy, security breaches or cyberattacks. If we are unable to comply with the
then-applicable laws and regulations, or to address any privacy and data protection concerns,
such actual or alleged failure could damage our reputation, deter current and potential users
from using our solutions and could subject us to significant legal, financial and operational
consequences.
On June 10, 2021, the Standing Committee of the National People’s Congress of China
promulgated the PRC Data Security Law, which has become effective on 1 September 2021.
The PRC Data Security Law provides for data security obligations on entities and individuals
carrying out data processing activities, introduces a data classification and hierarchical
protection system based on the importance of data in economic and social development, as well
as the degree of harm it will cause to national security, public interests or legitimate rights and
interests of individuals or organizations when such data is tampered with, destroyed, leaked,
or illegally acquired or used, and provides for a national security review procedure for those
data processing activities which may affect national security and imposes export restrictions on
certain data and information. Furthermore, certain PRC regulatory authorities issued Opinion
on Severely Punishing Illegal Activities in Securities Market, which were available to the
public on July 6, 2021, further emphasized to strengthen cross-border regulatory collaboration,
to improve relevant laws and regulations on data security, cross-border data transmission, and
RISK FACTORS
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confidential information management, and provided that efforts will be made to revise the
regulations on strengthening the confidentiality and archive management relating to the
offering and listing of securities abroad, to implement the responsibility on information
security of companies listed in foreign countries, and to strengthen the standardized
management of cross-border information provision mechanisms and procedures. However,
these opinions were newly issued, and there were no further explanations or detailed rules or
regulations with respect to such opinions, and there are still uncertainties regarding the
interpretation and implementation of these opinions. On July 7, 2022, CAC promulgated the
Measures on Data Export Security Assessment (), which came into
effect on September 1, 2022. Such Measures on Data Export Security Assessment requires data
processors to apply for a security assessment on data export in one of the following scenarios:
(1) where a data processor provides critical data abroad;
(2) where a critical information infrastructure operator or a data processor who
processes the personal information of one million or more individuals transfers such
personal information abroad;
(3) where a data processor has provided personal information of 100,000 individuals or
sensitive personal information of 10,000 individuals in total abroad since January 1
of the previous year; and
(4) other circumstances prescribed by the CAC for which declaration for security
assessment for outbound data transfers is required. According to our self-
assessment, up to the Latest Practicable Date, we believe neither of the above
threshold applies to us, and we did not trigger the government security assessment
under the Measures on Data Export Security Assessment.
On November 14, 2021, the CAC released the Network Data Security Management
Regulations (Draft for Comment) (the “ Draft Regulations ”) ( ၣഖᅰኽτΌ၍ଣૢԷ(ᅄӋ
จԈᇃ)). The Draft Regulations stipulates several requirements for entities who process data
through Internet within PRC, including data processor (i) shall be responsible for the security
of the data it processed and shall undertake data protection obligation; and (ii) shall establish
comprehensive data protection system and technical protection mechanism. At present, the
Draft Regulations had only been released for consultation purposes, and several detail
requirements are newly included in the Draft Regulations, as such there still remain
uncertainties as to its final content, anticipated adoption or effective date, final interpretation
and implementation, and other aspects. We will closely monitor the rule-making process and
will assess and determine whether we are required to apply for the cybersecurity review when
and once the Drafted Regulation is formally promulgated. Even if we endeavor to comply with
relevant laws and regulations, we may not always be able to do so due to a lack of detailed
implementation rules by relevant government authorities. In addition, some provisions under
certain laws and regulations still remain principle and lack specific interpretation up to data
especially to a specific case scenario. These uncertainties may have material adverse impact on
our business operation and financial results.
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On December 28, 2021, the CAC, and 12 other relevant PRC government authorities
published the amended Cybersecurity Review Measures, which became effective on February
15, 2022 and superseded and replaced the current Cybersecurity Review Measures previously
promulgated on April 13, 2020. The Cybersecurity Review Measures provide that (i) data
processors which carry out data processing activities and (ii) any “operator of critical
information infrastructure” which purchase network solutions or services to conduct
cybersecurity review if they will affect or may affect national security. In addition, the relevant
PRC governmental authorities may initiate cybersecurity review if they determine certain
network products, services, or data processing activities affect or may affect national security.
There can be no assurance if we are required to follow the cybersecurity review procedures,
and if so, whether we would be able to complete the applicable cybersecurity review
procedures in a timely manner. In addition, any failure or delay in the completion of the
cybersecurity review procedures or any other noncompliance or perceived noncompliance with
the PRC Cybersecurity Law or related regulations may prevent us from using or providing
certain network solutions and services, and may result in fines or other penalties such as
making certain required rectification, suspending our related business, closing our website or
taking down our operations and reputational damages or proceedings or actions against us by
PRC regulatory authorities, customers or others, which may have a material adverse effect on
our business, operation or financial conditions.
These and other similar legal and regulatory developments could lead to legal and
economic uncertainties, affect how we design our IT systems, how we operate our business,
how we and our business partners process data, which could negatively impact demand for our
solutions. For example, on July 10, 2023, the CAC, consented by NDRC, Ministry of
Education, Ministry of Science and Technology, MIIT, Ministry of Public Security, National
Radio and Television Administration, promulgated the Provisional Administrative Measures
for Generative Artificial Intelligence Services (ج)
Generative Artificial Intelligence Services Measures”), effective on August 15, 2023. The
Generative Artificial Intelligence Services Measures impose compliance requirements for
providers of generative AI services to the general public within the territory of PRC. The
Generative Artificial Intelligence Services Measures provide, among other things, that the
provider of generative AI services of text, image, audio or video to the general public shall (i)
assume the responsibilities as the producers of the AI-generated content thereon, and (ii) any
provider of generative artificial intelligence services with attribute of public opinions or
capable of social mobilization shall conduct security assessment in accordance with the
relevant regulations, and complete the formalities for algorithm filing, change or deregistration
in accordance with Provisions on the Administration of Algorithm-generated
Recommendations for Internet Information Services (֛On
the basis that our SageGPT is only provided to enterprises but not to the general public, our
PRC Legal Advisor is of the view that, based on the textual interpretation of the Generative
Artificial Intelligence Services Measures, it may be unlikely that we would be required to apply
for security assessment or complete the formalities of algorithms filing, change or
deregistration procedure. With our PRC Legal Advisor’s view as mentioned above, we are of
the view that the Generative Artificial Intelligence Services Measures will not have a material
adverse impact on our current and future business operations and financial performance.
Nevertheless, there can be no assurance that the relevant authorities will not take a view that
is contrary to or otherwise different from that of our PRC Legal Advisor, and it is also possible
that the PRC government authorities may require us to apply for security assessment or
complete the filing, change or deregistration formalities of algorithms for other reasons.
We may incur substantial costs to comply with such laws and regulations, to meet the
demands of our users relating to their own compliance with applicable laws and regulations and
to establish and maintain internal compliance policies.
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We are subject to the risks associated with international trade policies, geopolitics and
trade protection measures, and our business, financial condition and results of operations
could be adversely affected. Effective March 2, 2023, BIS added certain entity(ies) to the
Entity List, which restricts their ability to purchase or otherwise access certain goods,
software and technology. Out of an abundance of caution and unless or until we receive
further clarification from BIS, we will assume that all entities located at the address
provided in the Entity List are subject to the Entity List restrictions in order to comply
with relevant restrictions.
Our operations may be negatively affected by any deterioration in the political and
economic relations among countries and sanctions and export controls administered by the
government authorities in the countries in which we operate, and other geopolitical challenges,
including, but not limited to, economic and labor conditions, increased duties, taxes and other
costs and political instability. For example, the U.S. government has imposed export controls
and economic sanctions directly or indirectly affecting China-based technology companies.
Such laws and regulations are likely subject to frequent changes, and their interpretation and
enforcement involves substantial uncertainties, which may be heightened by national security
concerns or driven by political and/or other factors that are out of our control. Therefore, such
restrictions, and similar or more expansive restrictions that may be imposed by the U.S. or
other jurisdictions in the future, may be difficult or costly to comply with and may negatively
affect our and our technology partners’ abilities to acquire technologies, systems, devices or
components that may be critical to our technology infrastructure, service offerings and
business operations.
Effective March 2, 2023, the U.S. Department of Commerce’s Bureau of Industry and
Security (“BIS”) added certain entities to the entity list (the “Entity List”), including
“4Paradigm Technology Co., Ltd.” with aliases “4Paradigm,” “4th Paradigm,” and “Fourth
Paradigm”. The address of such entity was provided as “Building 1, No. 66 Qinghe Middle
Street, Haidian District, Beijing, China.” Out of an abundance of caution and unless or until
we receive further clarification from BIS, we will assume that all entities located at the address
provided in the Entity List are subject to the Entity List restrictions in order to comply with
relevant restrictions. These entities specifically include: Beijing Fourth Paradigm Technology
Co., Ltd., Fourth Paradigm (Beijing) Data & Technology Co., Ltd., Beijing Paradigm
Empowerment Enterprise Management Co., Ltd., Beijing Xuexian Intelligent Technology Co.,
Ltd., Beijing Y untian Xinrui Technology Co., Ltd., Beijing Future Paradigm Technology Co.,
Ltd., Zhongyuan Putai (Beijing) Intelligent Technology Co., Ltd., and Zhimei Xinchuang
(Beijing) Technology Co., Ltd. (the “Listed Entities”). However, it is possible that not all
Listed Entities are subject to the restrictions. For more details of these entities, see “History,
Development and Corporate Structure – Our Principal Subsidiaries” and Note 1 to the
Accountant’s Report in Appendix I to this Prospectus.
The addition of the Listed Entities to the Entity List restricts the ability of those specific
entities, but not of legally distinct entities, such as subsidiaries or affiliates of the Listed
Entities, to purchase, acquire, or otherwise obtain any items subject to the Export
Administration Regulations, 15 C.F.R. Parts 730-774 (“EAR”) without a license from BIS.
Specifically, absent a license from BIS, it is prohibited to export, reexport, or transfer any
items subject to the EAR when any Listed Entity is a party to the transaction, including as
purchaser, intermediate consignee, ultimate consignee, or end-user. That is, even if the Listed
Entity is not the intended end user of the item(s) involved, the restrictions would still apply to
the extent the Listed Entity is the purchaser or otherwise involved in a given transaction.
License applications to the Listed Entities will be reviewed with a presumption of denial for
all items subject to the EAR. For further information, see “Regulatory Overview – U.S. Export
Control Laws and Regulations.” For detailed analysis on the Entity List addition, please see
“Business – U.S. Export Control Laws and Regulations.”
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To address the EAR-related risks after the addition to the Entity List, we have adopted a
series of export control compliance measures for the entire Group, in abundance of caution. We
have developed and are implementing an export control compliance program, focused on
screening of suppliers and customers, monitoring and review of items that are subject to the
EAR and employee training. For further information, see “Business – U.S. Export Control
Laws and Regulations.” However, there can be no assurance that our export control compliance
measures or program can be strictly followed and implemented, or that the implementation of
such export control compliance measures or program would be sufficient for us to address
concerns under the EAR. Failure to comply with the EAR could lead to regulatory
investigations, civil penalties and negatively affect our relationship with our suppliers, which,
in turn, could negatively affect our business operations.
Given the complexity of the U.S. Export Administration Regulations and level of
information required for an exporter, reexporter, or transferor (within China) to determine
whether an item is subject to U.S. law, there may be a non-compliance on the part of suppliers
that might supply us goods incorporating controlled U.S.-origin content (in excess of the
EAR’s de minimis threshold) or that are the foreign-produced direct product of U.S. technology
or software, or are produced by a plant or major component of a plant that itself is a direct
product of specified technology or software. Because the EAR asserts liability broadly to
include parties acting with knowledge or reason to know a violation has occurred, will occur,
or is likely to occur, there is a risk that we could be subject to a potential BIS investigation,
enforcement action, or civil monetary penalties if our suppliers fail to comply with the EAR.
The Entity List designation could have a negative impact on our reputation with U.S.
regulators, businesses, and banking institutions. We believe there is a risk some business
partners, particularly those in the United States or with significant exposure in the United
States, might refuse to engage in certain business with us for a variety of reasons, including
over-compliance with or misunderstanding of the legal effect of the Entity List designation, an
inability to determine whether items being sold are subject to U.S. law, de-risking (particularly
among western financial institutions), and reputational concerns. As of the date of this
Prospectus, none of our material investors, customers, or suppliers have withdrawn their
investment, ceased doing business with us due to the BIS Entity List designation, or notified
us in writing or otherwise of their intention to do so.
Our relationships with suppliers may evolve in the future, and there can be no assurance
that we will maintain our access to all items that are necessary to our business. Furthermore,
as technologies continue to advance, third parties may offer new technologies or products that
could enhance our technology infrastructure or solutions. To the extent that any product or
technology we currently use becomes subject to the EAR or any such new technologies or
products are subject to the EAR, the Listed Entities would not be able to access them if they
remain on the Entity List by then at that time, unless the exporter obtains a license from BIS
(which is subject to a licensing review policy of denial). There can be no assurance that the
Listed Entities would be able to identify alternative supply chain arrangements to access
similar technologies or products of the same quality at similar cost, and we may encounter
increased supplier scrutiny due to the addition to the Entity List. As such, if the Listed Entities
remain on the Entity List on a prolonged basis, our business, results of operations and financial
condition could be negatively affected.
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There is no assurance whether the Entity List designation will be expanded to additional
entities of our Group, or we will be subject to any economic sanctions, such as the Non-SDN
Chinese Military-Industrial Complex Companies (“NS-CMIC”) List which prohibits U.S.
persons (companies and individuals) from purchasing or selling certain publicly traded
securities, or any publicly traded securities that are derivative of such securities or are designed
to provide investment exposure to such securities of entities on the NS-CMIC list. As of the
Date of this Prospectus, we have not been added to the NS-CMIC List, and the Entity List
designation has not been expanded to additional entities of our Group. Despite that we believe
designation of the Listed Entities to the Entity List should not have a material impact on the
business or operations of our Group, if, in addition to the Listed Entities, other subsidiaries of
our Group, or if the entire Group were to become targeted by economic sanctions and/or export
control restrictions, this may result in interruptions of our business and reputational harm to us.
For another example, on August 9, the U.S. President Joe Biden signed an executive order
on “Addressing United States Investments In Certain National Security Technologies And
Products In Countries Of Concern” (the “EO”) and U.S. Department of Treasury issued an
Advance Notice of Proposed Rulemaking (the “ANPRM”) seeking public comment related to
the implementation of the executive order, providing a conceptual framework for outbound
investment controls focused on China, including Hong Kong and Macau, involving certain
technologies, including AI. No detailed rules have yet been proposed, and there are no
currently effective restrictions or notification requirements. As proposed in the ANPRM, the
U.S. Department of Treasury intends to (i) prohibit U.S. investments into covered foreign
persons engaged in the development of software that incorporates an AI system and is designed
to be exclusively (or primarily) used for military, government intelligence, or
mass-surveillance end uses (the “Proposed Prohibited End Uses”), and (ii) require U.S. persons
to notify the U.S. Department of Treasury if undertaking a transaction with a covered foreign
person engaged in the development of software that incorporates an artificial intelligence
system and is designed to be exclusively (or primarily) used for: cybersecurity applications,
digital forensics tools, and penetration testing tools; the control of robotic systems;
surreptitious listening devices that can intercept live conversations without the consent of the
parties involved; non-cooperative location tracking (including international mobile subscriber
identity (IMSI) Catchers and automatic license plate readers); or facial recognition
(the “Proposed Notifiable End Uses”). As our AI solutions are primarily used to empower
enterprises with AI development and management capabilities, and enables them to design,
develop, and operate AI applications at scale, and our AI applications are primarily used in
areas including sales and marketing, risk management and operating efficiency enhancement,
we do not believe that our products would fall into the Proposed Prohibited End Uses or the
Proposed Notifiable End Uses or that we would be categorized as a “covered foreign person”
when the final implementation rules are adopted by the Treasury. In addition, the ANPRM
proposes to exclude from the definition of “covered transaction” certain “excepted
transactions,” including a passive investment into a publicly traded security. However, if the
final implementing rules expand the scope of the covered technologies and products to restrict
transactions by U.S. persons with us or narrows the scope of “excepted transactions”, or if any
similar or more expansive restrictions imposed by the U.S. or other jurisdictions are adopted
in the future, our financing and business activities will be adversely affected, and our business
operations and financial conditions will be impacted as a result.
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If we fail to compete effectively, our business, financial condition and results of operations
may be materially and adversely affected.
With respect to each industry vertical that we have entered into, we compete against
existing players in such verticals, such as certain leading technology companies, non-AI
enterprise solution providers and/or non-platform-centric AI decision-making market
participants. We may also in the future face competition from new market entrants. Such new
entrants may include better-established technology companies that possess substantial financial
resources, sophisticated technological capabilities and broad distribution channels.
Furthermore, we may face competition from global technology companies that seek to enter the
China market, whether independently or through formation of strategic alliances with, or
acquisition of, AI companies in China. Increased competition could result in lower sales, price
reductions, reduced margins and loss of market share. In addition, we may be compelled to
make substantial additional investments in research and development, marketing and sales in
order to respond to such competitive threats, and we cannot assure you that such measures will
be effective. If we are unable to compete successfully, or if competing successfully requires us
to take costly actions in response to the actions of our competitors, our business, financial
condition and results of operations could be adversely affected.
If the market for our solutions fails to grow as we expect, or if our users or potential users
fail to adopt our solutions, our business, operating results, and financial condition could
be adversely affected.
It is difficult to predict user adoption rates and demand for our AI solutions, the entry of
competitive solutions, or the future growth rate and size of the AI industry. Although the
demand for data management, machine learning, analytics platforms and applications has been
growing in recent years, the market for these platforms and applications continues to evolve.
We cannot be sure that the AI industry in China demand will continue to grow or, even if it does
grow, that businesses will adopt our solutions. Our future success will depend in large part on
our ability to further penetrate the markets where we operate. Our ability to further penetrate
such markets depends on a number of factors, including the cost, performance and perceived
value associated with our AI solutions, as well as users’ willingness to adopt our AI solutions.
We have spent, and intend to keep spending, considerable resources to educate potential users
about AI in general and our solutions in particular. However, we cannot be sure that these
expenditures will help our solutions achieve any additional market acceptance. Furthermore,
potential users may be unwilling to invest in novel solutions. If the market fails to grow or
grows slower than we expect or enterprises fail to adopt our AI solutions, our business,
operating results and financial condition could be adversely affected.
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Our brands are integral to our success. If we fail to effectively maintain, promote and
enhance our brands, our business and competitive advantages may be harmed.
We believe that maintaining, promoting and enhancing our key brands, including but not
limited to “4Paradigm” and “4Paradigm Sage”, is critical to our business. Maintaining and
enhancing our brands depend largely on our ability to continue to provide high-quality,
well-designed, useful, reliable and innovative AI solutions, which we cannot assure you we
will do successfully.
We believe the importance of brands recognition will increase as competition in our
market increases. In addition to our ability to provide reliable and useful AI solutions at
competitive prices, successful promotion of our brands will also depend on the effectiveness
of our marketing efforts. We market our AI solutions through our direct sales force, solution
partners, as well as customers and users’ word-of-mouth referrals. Our efforts to market our
brand have incurred significant costs and expenses and we intend to continue such efforts. We
cannot assure you, however, that our selling and marketing expenses will lead to increases in
revenue, and even if they do, such increases in revenue may not be sufficient to offset the
expenses incurred.
Our sales cycles can be long and unpredictable, and our sales efforts require considerable
time and expense.
Our results of operations may fluctuate, in part, because of the complexity of user
problems that our AI solutions address, the resource-intensive nature of our sales efforts, the
length and variability of the sales cycle of our solutions, and the difficulty in making short-term
adjustments to our operating expenses. Our sales cycle primarily consists of initial
communications with users, project evaluation and design, proof of concept and contracts
execution. As we primarily focus on providing services to large-scale lighthouse users, we may
spend significant time in communications with users, project evaluation and design, thereby
resulting in longer sales cycles. Our sales cycles are difficult to predict. The length of our sales
cycle is typically a few months on average can vary substantially from customer to customer
and can extend over one year for some customers. According to CIC, such long sales cycle is
consistent with industry norm of the decision-making AI market in China. Our sales efforts
involve educating our users about the usage, technical capabilities and benefits of our AI
solutions. Users often undertake a prolonged evaluation process, which frequently involves not
only our AI solutions but also those of other companies.
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In addition, the size of potential users may lead to longer sales cycles. Our go-to-market
strategy starts with market leaders in each industry we target to enter, who are also early
adopters of AI. Sales to such large users involve risks that may not exist or that exist but to
a lesser extent in sales cycles of smaller entities, such as longer sales cycles, more complex
user requirements (and higher contractual risk as a result), substantial upfront sales costs, less
favorable terms and less predictability in completing some of our sales. For instance, we invest
resources into sales to large organizations, which typically undertake a significant evaluation
and negotiation process due to their leverage, size, organizational structure and approval
requirements, all of which may lengthen our sales cycle. We may also need to provide more
complicated deployment of our AI solutions or face unexpected deployment challenges with
large organizations. Moreover, large enterprise users often deploy our solutions on a limited
basis at the beginning, but nevertheless demand configuration, integration services and price
negotiations, which increase our upfront investment in the sales effort with no guarantee that
these users will deploy our solutions widely enough across their organization to justify our
substantial upfront investment. We may incur substantial expenses, time and efforts on sales to
large organizations without any assurance that these users will deploy our AI solutions widely
enough across their organization, or at all, to justify our substantial upfront investment. As a
result, it is difficult to predict exactly when, if ever, we will make a sale to a potential customer
or increase sales to our existing customers.
If we are unable to ensure compatibility of our solutions with a variety of hardware and
software platforms and software applications developed by others, including our
partners, we may become less competitive and our results of operations may be harmed.
Our AI solutions may be integrated with a variety of hardware and software platforms and
software applications, and we need to modify and enhance our AI solutions to adapt to changes
in hardware and software technologies in a timely and cost-effective manner. Compatibility of
our solutions and hardware and software developed by others is critical to the performance of
our solutions. Failure to ensure compatibility of our solutions may negatively affect our
competitive edge, and our business results of operations and financial condition would be
harmed.
Changes in the market or our solutions may affect our pricing models and adversely affect
our operating results.
Our pricing models face challenges from evolving market changes. As the market for our
solutions grows, as our competitors introduce new solutions that compete with ours or reduce
their prices, or as we enter into new verticals or international markets, we may be unable to
attract new customers or retain existing customers based on our historical pricing models.
Given our limited operating history and limited experience with our historical pricing models,
we may not be able to accurately predict customer renewal or retention. In addition, regardless
of the pricing model used, certain customers may demand higher price discounts. As a result,
we may be required to reduce our prices, offer shorter contract durations or offer alternative
pricing models, which could adversely affect our revenue, gross margin, profitability, financial
position and cash flow.
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If our expansion into new verticals is not successful, our business, prospects and growth
momentum may be materially and adversely affected.
Leveraging our leading position in the enterprise AI solution market and our core
technologies, we are able to provide innovative AI-empowered solutions to address diversified
needs of our users across different verticals. We have a track record of successfully expanding
into new verticals. We cannot assure you, however, that we will be able to maintain this
momentum in the future. Expanding into new verticals involves new risks and challenges.
Unfamiliarity with new verticals may make it more difficult for us to keep pace with evolving
user demands and preferences. In addition, there may be one or more existing market leaders
in any vertical that we decide to expand into. Such companies may be able to compete more
effectively than us by leveraging their experience in doing business in that vertical as well as
their deeper industry insight and greater brand recognition. We could be subject to additional
regulatory restrictions that are relevant to these businesses. Expansion into any new vertical
may place significant strain on our management and resources, and failure to expand
successfully could have a material adverse effect on our business and prospects.
Our investments or acquisitions may have a material adverse effect on our business,
reputation, financial condition and results of operations.
We have made investments and acquisitions in recent years in companies such as our
acquisitions of Guangzhou Jianxin and Ideal Technology during the Track Record Period. See
“History, Development and Corporate Structure – Major Acquisitions and Investments.” We
expect to continue to evaluate and consider a wide array of investment and acquisition
opportunities that we believe can extend and solidify our leading market position as part of our
overall business strategy. We may be engaged in discussions or negotiations with respect to one
or more of these types of transactions. These transactions involve significant challenges and
risks, including:
 difficulties in integrating the acquired personnel, operations, solutions and/or
services into our operations;
 potential issues with technology, internal controls and financial reporting of the
companies we acquire;
 disruptions of our ongoing business, distractions of the attention of our management
and employees and increase of our expenses;
 loss of skilled professionals and established client relationships of the businesses we
invest in or acquire;
 for investments over which we do not obtain management and operational control,
lack of influence over the controlling partner or shareholder, which may prevent us
from achieving our strategic goals in such investments;
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 new regulatory requirements and compliance risks that we become subject to as a
result of investments or acquisitions in new industries or otherwise;
 actual or alleged misconduct or noncompliance by any company we acquire or
invest in (or by its affiliates) that occurred prior to our acquisition or investment,
which may lead to negative publicity, government inquiry or investigations against
such company or against us;
 unforeseen or hidden liabilities or costs that may adversely affect us following our
acquisition of such targets;
 compliance matters including the antimonopoly and competition laws, rules and
regulations of the PRC and other countries in connection with any proposed
investments and acquisitions;
 the risk that any of our pending or other future proposed investments or acquisitions
does not close;
 the costs of identifying and consummating investments and acquisitions;
 the use of substantial amounts of cash and potentially dilutive issuances of equity
securities;
 the occurrence of significant goodwill impairment charges and amortization
expenses for other intangible assets; and
 uncertainties in achieving the expected benefits of synergies and growth
opportunities in connection with these acquisitions and investments.
Any such negative developments described above could disrupt our existing business and
have a material adverse effect on our business, reputation, financial condition and results of
operations.
Rumors or negative publicity involving our Company, our solutions, our management,
our customers, our business partners or our industry in general may materially and
adversely affect our reputation, business, results of operations and growth prospects.
Negative publicity involving our industry, our Company, our solutions, our management,
our customers or our business partners in the future may also materially and adversely harm
our business and reputation. Although we made efforts to strengthen our responsiveness to
negative publicity events, we cannot preclude media reports of a similar nature or similar
allegations from other parties from being made in the future, nor can we assure you that we will
be able to defuse such negative publicity to the satisfaction of our investors, customers and
business partners or prevent related misconception and other damages caused by such reports.
We may have to incur significant expenses and divert our management’s time and attention in
order to remedy the effects of these negative reports or allegations, which may materially and
adversely affect our results of operations.
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If we fail to obtain and maintain the requisite licenses and approvals required under the
regulatory environment applicable to our business, or if we are required to take actions
that are time consuming or costly in order to obtain and maintain such licenses and
approvals, our business, financial condition and results of operations may be materially
and adversely affected.
Under the current PRC regulatory scheme, a number of governmental authorities,
including but not limited to the MIIT, MPS, CAC, jointly regulate major aspects of our
industries.
As confirmed by our PRC Legal Advisor, as of the Latest Practicable Date, we have
obtained all the requisite licenses and made all the requisite filings with competent
governmental authorities that are material to the operation of the business we engage in China.
However, we cannot assure you that we can successfully update or renew the licenses required
for our business in a timely manner or that these licenses are sufficient to conduct all of our
present or future business. The interpretation and implementation of existing and future laws
and regulations governing our business activities may change from time to time in the future.
If we fail to complete, obtain or maintain any of the required licenses or approvals or make the
necessary filings, we may be subject to various penalties, such as confiscation of the revenue
that was generated through the affected operations, the imposition of fines and the
discontinuation or restriction of our operations. Any such penalties may disrupt our business
operations and materially and adversely affect our business, financial condition and results of
operations.
Export control and economic or trade restrictions that were imposed on our business
partners may affect our business, financial conditions and results of operations.
In recent years, the U.S. government imposed targeted economic and trade restrictions on
a number of Chinese companies and institutions that limit their access to U.S.-origin goods,
software and technologies (collectively, “ Items ”), as well as items that contain a significant
portion of certain U.S.-origin Items or are a direct product of certain U.S.-origin Items. While
we have conducted business with some of these entities, we have no reasons to believe that we
have violated the imposed restrictions because we do not export, re-export, or transfer any
U.S.-origin products, technology, components or software that are subject to the Export
Administration Regulations to any entities listed on the U.S. Commerce Department’s Entity
List. We also believe there is limited impact resulting from such restrictions on our business.
Furthermore, our transactions with these listed entities have represented a negligible portion of
our results of operations.
However, U.S. export controls and trade laws and regulations are complex and likely
subject to frequent changes, and the interpretation and enforcement of the relevant regulations
involve substantial uncertainties, which may be driven by political and/or other factors that are
not within our control or that are heightened by national security concerns. For example, the
U.S. government has tightened certain chip shipments to China. For another example, the PRC
government has recently imposed a sales ban on a U.S. memory chip supplier in China. We did
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not purchase directly from this company during the Track Record Period. If any potential
restrictions, any associated inquiries or investigations, or any other government actions occur,
they may be difficult or costly to comply with and may, among other things, delay or impede
the development of our technology and solutions, and hinder the stability of our supply chain.
They could also result in negative publicity, require significant time and attention of the
management and subject us to fines, penalties or orders that we cease or modify our existing
business practices, if they occur. Any of these events may have an adverse effect on our
business, financial condition and results of operations.
We are subject to anti-corruption, anti-money laundering, anti-bribery and other relevant
laws and regulations.
We are subject to anti-corruption, anti-money laundering, anti-bribery and other relevant
laws and regulations in the jurisdictions where we operate. We may be subject to investigations
and proceedings by governmental authorities for alleged infringements of these laws if our
compliance processes or internal control systems are not conducted or are not operating
properly. These proceedings may result in fines or other liabilities and could have a material
adverse effect on our reputation, business, financial condition and results of operations. If any
of our subsidiaries, employees or other persons engage in fraudulent, corrupt or other unfair
business practices or otherwise violate applicable laws, regulations or internal control policies,
we could become subject to one or more enforcement actions or otherwise be found to be in
violation of such laws, which may result in penalties, fines or sanctions and in turn adversely
affect our reputation, business, financial condition and results of operations.
Uncertainties and changes in government policies in respect of the industries in which we
operate may negatively affect our business, financial condition and results of operations.
Our growth depends in part on government spending and favorable government policies
in respect of the industries in which we operate. However, such policies may be subject to
changes that are beyond our control. There can be no assurance that government policies will
continue. Uncertainties and changes in such policies may have a material adverse impact on our
business, financial condition and results of operations.
We are subject to credit risk related to defaults of customers, and any significant default
on our receivables could materially and adversely affect our liquidity, financial condition
and results of operations.
We are exposed to credit risk related to defaults of our customers. As of December 31,
2020, 2021, 2022 and March 31, 2023, our trade receivables amounted to RMB262.7 million,
RMB778.3 million, RMB1,493.2 million and RMB1,494.0 million, respectively. We may not
be able to collect all such trade receivables due to a variety of factors that are beyond our
control. For example, if the relationship between us and any of our customers is terminated or
deteriorated, or if any of our customers experience financial difficulties in settling the trade
receivables, our corresponding trade receivables recoverability might be adversely affected. As
the amount of provisions made on our trade receivables are recorded as expenses on our results
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of operations, if we are not able to effectively manage the credit risk associated with our trade
receivables, our results of operations may be materially and adversely affected. Moreover, we
usually grant a credit term ranging from 3 to 6 months, whereas our suppliers, especially the
new suppliers, usually grant us shorter credit terms. This mismatch in credit terms may
increase our liquidity risks from time to time.
We are subject to risks and uncertainties associated with our investments in associates
and joint ventures.
We have invested in associated companies and joint ventures and may continue to do so
in the future. The performance of such associates and joint ventures has affected, and will
continue to affect, our results of operations and financial position. Our investments in
associates and joint ventures, recorded as investments accounted for using the equity method,
which amounted to RMB86.6 million, RMB115.2 million, RMB45.9 million and RMB45.2
million, respectively, as of December 31, 2020, 2021, 2022 and March 31, 2023. Our
investments in associates and joint ventures are subject to liquidity risk. Our investments in
associates and joint ventures are not as liquid as other investment products as there is no cash
flow until dividends are received even if the associates or joint ventures reported profits under
the equity method of accounting. Furthermore, our ability to promptly sell one or more of our
interests in our associates or joint ventures in response to changing economic, financial and
investment conditions is limited. The market is affected by various factors, such as general
economic conditions, availability of financing, interest rates and supply and demand, many of
which are beyond our control. We cannot predict whether we will be able to sell any of our
interests in the associates or joint ventures for the price or on the terms set by us, or whether
any price or other terms offered by a prospective purchaser would be acceptable to us. We also
cannot predict the length of time needed to find a purchaser and to complete the relevant
transaction. Therefore, the illiquidity nature of our investment in associates and joint ventures
may significantly limit our ability to respond to adverse changes in the performance of our
associates. The success of an associate or a joint venture depends on a number of factors, some
of which are beyond our control. As a result, we may not be able to realize the anticipated
economic and other benefits from such associates and joint ventures, such as receiving
dividends from them.
We are exposed to changes in the fair value of our financial assets, especially with respect
to fair value measurements for certain of our financial assets that involve the use of
unobservable inputs.
Our results of operations are affected by changes in the fair value of our financial assets.
As of December 31, 2020, 2021, 2022 and March 31, 2023, our financial assets at fair value
though profit or loss were RMB195.3 million, RMB2,781.9 million, RMB1,808.1 million and
RMB1,092.0 million, respectively. In 2020, 2021, 2022 and the three month ended March 31,
2022 and 2023, the amount of fair value change on financial assets at fair value through profit
or loss recognized was RMB18.4 million, RMB85.0 million, RMB51.4 million, RMB18.0
million and RMB8.6 million, respectively. There can be no assurance that we will recognize
fair value gains from financial assets in the future. Furthermore, our financial assets include
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wealth management products, fund investments and unlisted equity securities, which were
issued by licensed financial institutions with unguaranteed return of principal and can be
redeemed on demand at our discretion. As such, we are subject to credit risk arising from such
wealth management products.
Fair value measurements for certain of our financial assets and financial liabilities are
categorized into Level 3, which involve the use of unobservable inputs. As a result, Level 3 fair
value measurements require us to apply significant estimates and assumptions with respect to
the relevant financial assets.
We recognized significant goodwill and other intangible assets during the Track Record
Period and may incur significant impairment charges related to these intangible assets,
and our results of operation may be adversely affected as a result.
As of December 31, 2020, 2021, 2022 and March 31, 2023, we had intangible assets of
RMB19.9 million, RMB395.4 million, RMB457.3 million and RMB448.1 million,
respectively, of which goodwill amounted to nil, RMB259.7 million, RMB335.8 million and
RMB335.8 million, respectively. Due to the frequent changes and development in technology,
the assumptions we used in estimating the cash flow generated from our intangible assets may
change, and the estimated useful life of our intangible assets might also be subject to
significant uncertainty. If any significant changes were to occur, we may incur impairment
charges for our intangible assets, and if any significant impairment charges were made, our
results of operations may be negatively affected.
In addition, our equity investments and acquired businesses may not generate the
financial results we expect. They could result in the occurrence of significant investments and
goodwill impairment charges, as well as amortization expenses for other intangible assets. We
periodically review goodwill and investments for impairment. If we conclude that any of these
equity investments and acquired businesses are impaired, we will write down the asset to its
fair value and take a corresponding charge to our consolidated statements of comprehensive
income. As a result, our results of operations may be negatively affected.
We face inventory obsolescence, shortage or excess risks.
Our inventory mainly includes finished goods, which primarily consist of the servers of
our “All-in-One” solutions, and contract fulfillment cost in relation to our deployment services.
We face inventory obsolescence risks primarily with regard to the finished goods. As of
December 31, 2020, 2021 and 2022 and March 31, 2023, we had inventories of RMB28.2
million, RMB184.5 million, RMB349.9 million and RMB408.4 million, respectively, of which
finished goods accounted for RMB3.2 million, RMB20.6 million, RMB99.4 million and
RMB86.0 million, respectively. We are exposed to inventory obsolescence and inventory
shortage risks as a result of a variety of factors beyond our control, including, changes of user
needs and the inherent uncertainty of the success of solution launches. As a result of
unforeseen or sudden events, we may experience slow movement of our inventories, fail to
utilize or sell our inventories swiftly, or face the risk of inventory obsolescence, and our
business, results of operations, financial condition and prospects may be adversely affected.
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If we cannot fulfill our obligations in respect of contract liabilities, the amount of fee
collecting from customers and our liquidity position may be adversely impacted.
As of December 31, 2020, 2021, 2022 and March 31, 2023, we had contract liabilities of
RMB77.1 million, RMB173.9 million, RMB325.7 million and RMB342.6 million,
respectively. Our contract liabilities mainly arise from the advance payments made by
customers while the underlying services are yet to be provided. If we cannot fulfill our
obligations under these contracts, the amount of fee collecting from customers and our
liquidity position may be adversely impacted.
We may be subject to impairment losses on prepayments and other receivables.
As of December 31, 2020, 2021, 2022 and March 31, 2023, we recorded prepayments and
other receivables of RMB170.0 million, RMB272.0 million, RMB380.1 million and RMB388.7
million, respectively. Our prepayments and other receivables primarily represent our
prepayments to suppliers, deductible value-added input tax, rental, bidding and other deposits,
other receivable from a third party customer, and interest receivables. We may be subject to
impairment losses on prepayments and other receivables if the actual recoverability of
prepayments and other receivables is lower than the expected level, which could adversely
affect our cash flow and our ability to meet our working capital requirements, thereby
adversely affecting our business, financial condition and results of operations.
We have no control over the amount of government economic incentives that we receive.
Similar to many other companies in our industry, we benefit from government economic
incentives. We recognized government grants of RMB18.5 million, RMB5.2 million, RMB5.3
million, RMB0.3 million and RMB1.1 million as other income in 2020, 2021, 2022 and the
three months ended March 31, 2022 and 2023, respectively. However, the timing, amount and
conditions of government economic incentives are within the sole discretion of governmental
authorities. In addition, governmental authorities may require us to perform certain contractual
obligations before we could receive government subsidies. However, there can be no assurance
that we could fully satisfy these conditions or perform such obligations, and it is possible that
such governmental authorities may stop subsidizing us. Any reduction, elimination, repayment
or other negative trend in economic incentives resulting from our failure to perform such
obligations could adversely affect our business, financial condition, results of operations and
prospects.
Our business operations could be harmed by real or perceived material defects or errors
in our solutions.
The technology underlying our AI solutions is inherently complex and may contain
material defects or errors, particularly when new solutions are first introduced, when new
features or capabilities are released or when integrated with new or updated third-party
hardware or software. There can be no assurance that our existing AI solutions will not contain
defects or errors. Any real or perceived errors, failures, vulnerabilities, or bugs in our AI
solutions could result in negative publicity or lead to performance issues, all of which could
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harm our business. Correcting such defects or errors may be costly and time consuming.
Moreover, the harm to our reputation and legal liability related to such real or perceived defects
or errors may be substantial and would harm our business.
If the data used by our users are out of date, inaccurate or lacking credible information,
the performance of our AI solutions will be adversely affected, which could adversely
impact our business.
Low quality or inaccurate data could materially affect the performance of our solutions.
We cannot ensure the accuracy and timeliness of the various sources of data that our users use
in utilizing our AI solutions for various reasons. For example, the information available to our
users may be limited. As a result, the data labels may be out of date, inaccurate or lacking
credible information. In such events, our solutions may not be able to generate satisfactory
results. Consequently, there may be negative conceptions about our solutions and services,
which could adversely affect our reputation, business operations and financial performance.
Our use of open-source technology could impose limitations on our business operations.
We use open-source software in some of our platform and expect to continue to use
open-source software in the future. Although we monitor our use of open-source software to
avoid subjecting our software to conditions we do not intend to be bound, we may face
allegations from others alleging ownership of, or seeking to enforce the terms of, an
open-source license, including by demanding release of the open-source software, derivative
works, or our proprietary source code that was developed using such software. These
allegations could also result in litigation. The terms of many open source licenses have not
been interpreted by courts. There is a risk that these licenses could be construed in a way that
could impose unanticipated conditions or restrictions on our ability to commercialize our
software and platform. In such an event, we may be required to seek licenses from third parties
to continue commercially offering our software, to make our proprietary code generally
available in source code form, to re-engineer our software or to discontinue the sale of our
software if re-engineering could not be accomplished on a timely basis, any of which could
adversely affect our business and revenue.
To address risks relating to our utilization of open-source software, such as risks of
allegations of the ownership of open-source license, we have established an Open Source
Review Board, who leads the formulation and implementation of a series of internal
management protocols regarding utilization of open source software. Measures in such internal
protocols includes, without limitation: (i) before utilize any open-source software, performing
prudent assessment for open-source software to ensure such software is properly licensed and
our expected usage scope of such software is within the authorization of license, so that we can
mitigate the risks relating to allegations of the ownership of open-source license; (ii) strictly
monitoring the utilization of open-source software to manage the license and codes thereof and
ensure the compliance with open source authorizations; and (iii) inspecting the deliverable
software that we developed with open-source software and replacing or amending any
open-source components if there are risks in compliance with open-source licenses.
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The use of open-source software subjects us to a number of other risks and challenges.
Open-source software is subject to further development or modification by anyone. Others may
develop such software to compete with us, or render such software no longer useful. It is also
possible for competitors to develop their own solutions and services using open-source
software, potentially reducing the demand for our solutions and services. With regard to the
potential competition from open-source software developed by others, we believe our core
capabilities that empower us in the competition lie in our self -developed solutions, which
merely involve open-source software in certain basic service support that is not comparable to
our core technologies. Therefore, we manage such competition risks primarily by focusing on
our own development and technologies. If we are unable to successfully address these
challenges, our business and operating results may be adversely affected, and our development
costs may increase.
Our technology infrastructure may experience unexpected system failure, interruption,
inadequacy, security breaches or cyberattacks. Our reputation, business and results of
operations may be harmed by service disruptions or by our failure to timely and
effectively scale and adapt our existing technology and infrastructure.
Our technology infrastructure is supported by servers in geographically dispersed data
centers across China, including various locations Beijing and Inner Mongolia, that are
fault-tolerant, which ensures the high reliability of our platform. We believe that we could
relocate these physical servers to new properties without material disruption to our business,
because we have made data backup in our servers in Beijing, which enables recovery of our
system within a few hours in the event of any disruptions to, including relocations of these
physical servers. Our technology infrastructure may encounter disruptions or other outages
caused by problems or defects in our own technologies and systems, such as malfunctions in
software or network overload. Our technology infrastructure may be vulnerable to damage or
interruption caused by telecommunication failures, power loss, human error or other accidents.
Despite any precautionary measures we may take, the occurrence of unanticipated problems
that affect our technology infrastructure could result in interruptions in the availability of our
solutions. It may be difficult for us to respond to such interruptions in a timely manner, or at
all. Such interruptions may affect the ability of users to use our solutions, which would damage
our reputation, reduce our future revenues, harm our future profits, subject us to regulatory
scrutiny and lead our users to seek alternative solutions.
Furthermore, our infrastructure is also vulnerable to damages from fires, floods,
earthquakes and other natural disasters, power loss and telecommunications failures. Any
network interruption or inadequacy that causes interruptions to our operations, or failure to
maintain the network and server or solve such problems in a timely manner, could reduce our
user satisfaction, which in turn could adversely affect our reputation, business and financial
condition.
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We depend on third party business partners in our business operations. Such
arrangements reduce our control over the quality, development, and deployment of our
solutions and could harm our business.
We engage third parties in our business operations. We procure certain hardware
components from third party vendors. We also outsource certain non-core and less
sophisticated research and development projects as well as deployment of our solutions to third
party vendors. Such arrangements may reduce our direct control over the quality, development
and deployment of our solutions. We may experience operational difficulties with our third
party vendors, including reductions in the availability of production capacity, failures to
comply with product specifications, insufficient quality control and failures to meet
deployment schedules. Our third party vendors may experience disruptions in their operations
due to equipment breakdowns, labor strikes or shortages, natural disasters, material shortages,
cost increases, environmental noncompliance issues or other similar problems. In addition, we
may not be able to renew contracts with our third party vendors or identify substitute partners.
Although arrangements with these vendors may contain provisions for warranty expense
reimbursement, we may remain responsible to the customer for warranty service in certain
events. Any failure of our third party vendors to perform their responsibilities or to be in
compliance with all applicable laws and regulations may have a material negative impact on
our business.
Our exchange, return and warranty policies may adversely affect our results of
operations.
Our policy allows solutions with defects to be returned and exchanged by our customers.
In addition, we offer a limited warranty for our solutions or purchase a limited warranty for our
customers from the third party vendors who supply certain components for hardware products
of our AI solutions. Warranty coverage typically runs for one to five years from the time of
purchase, depending on the solution. We may also be required by law to adopt new or amend
existing return, exchange and warranty policies from time to time. These policies improve user
experience and promote user loyalty, which in turn help us acquire and retain customers.
However, these policies also subject us to additional costs and expenses which we may not
recoup through increased revenue. We cannot assure you that our return, exchange and
warranty policy will not be misused by our customers, which may significantly increase our
costs and may materially and adversely affect our business and results of operations. If we
revise these policies to reduce our costs and expenses, our customers may be dissatisfied,
which may result in loss of existing customers or failure to acquire new users at a desirable
pace, which may materially and adversely affect our results of operations.
We are exposed to the risks associated with doing business internationally.
As we plan to expand our operations to additional overseas markets and regions, we may
have to adapt our business models to the local market due to various legal requirements and
market conditions. Our international operations and expansion efforts may result in increased
costs and are subject to a variety of risks, including increased competition, uncertain
enforcement of our intellectual property rights, unfamiliar market conditions and the
complexity of compliance with Chinese and foreign laws and regulations.
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We also could be significantly affected by other risks associated with international
activities including, but not limited to, economic and labor conditions, increased duties, taxes
and other costs and political instability. Sales of our solutions in foreign countries could be
materially and adversely affected by international trade regulations, including duties, tariffs
and antidumping penalties. We are also exposed to credit and collectability risk on our trade
receivables with customers in certain international markets. There can be no assurance that we
can effectively limit our credit risk and avoid losses.
The COVID-19 pandemic presents challenges to our business and the effects of the
pandemic could adversely affect our business, financial condition and results of
operations.
The COVID-19 pandemic and any recurrence or continuance of the outbreak could
adversely impact our business operations or the business operations of our customers and
partners thus in turn having an adverse impact on our business, results of operations and
financial condition.
Our business operations could be disrupted if any of our employees is suspected of having
these or any other epidemic disease, since it could require our employees to be quarantined
and/or our offices to be closed for disinfection or other remedial measures. There remain
uncertainties about potential continuing impacts on subsequent periods. To the extent the
global spread of COVID-19 and deterioration cannot be contained, the risks and uncertainties
set forth in this Prospectus may be exacerbated or accelerated at a heightened level. For more
detailed discussion of the impact of COVID-19 on our business operations, see “Financial
Information – Impact of COVID-19.”
Confidentiality agreements and non-compete covenants with employees and other third
parties may not adequately prevent the disclosure of trade secrets and other proprietary
information.
We have devoted substantial resources to the development of our technology and
knowhow. Although we enter into employment agreements with confidentiality, non-compete
covenants and intellectual property ownership clauses with our employees, we cannot assure
you that these agreements will not be breached, that we will have adequate remedies for any
breach in time or at all, or that our proprietary technology, know-how or other intellectual
property will not otherwise become known to third parties. In addition, others may
independently discover trade secrets and proprietary information, limiting our ability to assert
any proprietary rights against such parties. Costly and time-consuming litigation could be
necessary to enforce and determine the scope of our proprietary rights, and failure to obtain or
maintain trade secret protection could adversely affect our competitive position.
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Unauthorized use of our intellectual properties by third parties may harm our brands and
reputation, and the expenses incurred in protecting our intellectual property rights may
materially and adversely affect our business.
We regard our copyrights, trademarks, trade secrets and other intellectual properties as
critical to our success and rely on a combination of trademark and copyright laws, trade secrets
protection, restrictions on disclosure and other agreements that restrict the use of our
intellectual properties to protect these rights. Although our contracts with our business partners
prohibit the unauthorized use of our brands, images, characters and other intellectual property
rights, we cannot assure you that they will always comply with these terms. These agreements
may not effectively prevent disclosure of confidential information and may not provide an
adequate remedy in the event of unauthorized disclosure of confidential information. In
addition, third parties may independently discover trade secrets and proprietary information,
limiting our ability to assert any trade secret rights against such parties.
Policing unauthorized use of our proprietary technology, trademarks and other intellectual
property is difficult and expensive, and litigation may be necessary to enforce our intellectual
property rights. Future litigation could result in substantial costs and diversion of our resources
and could disrupt our business, as well as materially and adversely affect our financial
condition and results of operations.
We have designed and adopted strict internal procedures to ensure the adequate protection
of our intellectual property rights, including but not limited to, patents, copyrights, proprietary
technologies, trade secrets and trademarks. Our legal department examines the contract terms
and reviews all relevant documents for our business operations, including licenses and permits
obtained by the counterparties or us to perform contractual obligations and all the necessary
underlying due diligence materials, before we enter into any contract or business arrangements.
In addition, our legal department is responsible for obtaining any requisite governmental
pre-approvals or consent, including preparing and submitting all necessary documents for
filing with relevant government authorities within the prescribed regulatory timelines and
ensuring all necessary application, renewals or filings for trademark, copyright and patent
registration have been timely made to the competent authorities. See “Business – Risk
Management and Internal Control – Compliance and Intellectual Property Risk Management.”
Regarding management of risks relating to third-party vendors whom we engage for certain
non-core and unsophisticated development projects, we take various measures to ensure our
proprietary technologies and other intellectual properties are adequately protected, including
but not limited to: (i) performing due diligence on the third-party vendors before we engage
them and including relevant intellectual properties terms in contracts to prevent any risks and
issues with intellectual properties beforehand; (ii) formulating and implementing
confidentiality policies with respect to our cooperation with third-party vendors to prevent
leaks of our proprietary technologies and trade secrets; and (iii) implementing the same
management standard on product components provided by third parties as those developed by
us, and including relevant contract terms to mitigate our risks arising from such third-parties’
usage of open-source software.
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Trademarks registered, internet search engine keywords purchased and domain names
registered by third parties that are similar to our trademarks, brands or websites could
cause confusion to our customers, divert customers away from our solutions or harm our
reputation.
Competitors and other third parties may register trademarks or purchase internet search
engine keywords or domain names that are similar to ours, in order to divert potential
customers from our platforms to theirs. Preventing such unfair competition activities is
inherently difficult. If we are unable to prevent such activities, competitors and other third
parties may drive potential customers away from our platforms, which could harm our
reputation and materially and adversely affect our results of operations.
We may be subject to intellectual property infringement claims, which could be time
consuming or costly to defend and may result in diversion of our financial and
management resources, and indemnity provisions in various agreements potentially
expose us to substantial liability for intellectual property infringement and other losses.
We cannot be certain that our operations or any aspects of our business do not or will not
infringe upon or otherwise violate trademarks, copyrights or other intellectual property rights
held by third parties. We may from time to time be subject to such proceedings and claims. We
cannot assure you that holders of patents purportedly relating to some aspect of our technology
infrastructure or business, if any such holders exist, would not seek to enforce such patents
against us in China or any other jurisdictions. Further, the application and interpretation of
China’s patent laws and the procedures and standards for granting patents in China are still
evolving and may change from time to time in the future, and we cannot assure you that PRC
courts or regulatory authorities would agree with our analysis. If we are found to have violated
the intellectual property rights of others, we may be subject to liability for our 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. Defending against such
infringement or licensing allegations and claims is costly and time consuming and may divert
management’s time and other resources from our business and operations, and the outcome of
many of these claims and proceedings cannot be predicted. If a judgment, a fine or a settlement
involving a payment of a material sum of money were to occur, or an injunctive relief was
issued against us, it may result in significant monetary liabilities and may materially disrupt
our business and operations by restricting or prohibiting our use of the intellectual property in
question, and our business, financial position and results of operations could be materially and
adversely affected.
Further, our agreements with customers and other third parties generally include
indemnification provisions under which we agree to indemnify them for losses suffered or
incurred as a result of claims of intellectual property infringement, or other liabilities relating
to or arising from our software, services or other contractual obligations. Large indemnity
payments could harm our business, results of operations and financial condition. Although we
normally contractually limit our liability with respect to such indemnity obligations, generally,
those limitations may not be fully enforceable in all situations, and we may still incur
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substantial liability under those agreements. Any dispute with a customer with respect to such
obligations could have adverse effects on our relationship with that customer and other existing
customers and new customers and harm our business and results of operations.
Our risk management and internal control systems may not be adequate or effective.
We have designed and implemented risk management and internal control systems
comprising organizational framework policies and procedures, financial reporting processes,
compliance rules and risk management measures we believe are appropriate for our business
operations. While we seek to improve our risk management and internal control systems on a
continuous basis, we cannot assure you that these systems are sufficiently effective in ensuring,
among other things, accurate reporting of our financial results and the prevention of fraud. See
“Business – Risk Management and Internal Control” for further information on our internal
control policies. Since our risk management and internal control systems depend on
implementation by our employees, and even though we provide relevant internal trainings in
this regard, we cannot assure you that our employees are sufficiently or fully trained to
implement these systems, or that their implementation will be free from error or mistakes. If
we fail to timely update, implement, and modify, or fail to deploy sufficient human resources
to maintain our risk management policies and procedures, our business, financial condition,
results of operations and prospects could be materially and adversely affected.
We may be the subject of anticompetitive, harassing or other detrimental conducts by
third parties that could harm our reputation and cause us to lose market share, customers
and revenues.
We may be the target of anticompetitive, harassing, or other detrimental conduct by third
parties. Such conduct includes complaints, anonymous or otherwise, to regulatory agencies. We
may be subject to government or regulatory investigation as a result of such third-party conduct
and may be required to expend significant time and incur substantial costs to address such
third-party conduct, and there is no assurance that we will be able to conclusively refute each
of the allegations within a reasonable period of time, or at all. Additionally, allegations,
directly or indirectly against us, may be posted online by anyone, whether or not related to us.
The availability of information on social media is virtually immediate, as is its impact. Social
media immediately publish the content their subscribers and participants post, often without
filters or checks on the accuracy of the content posted. Such information posted may be
inaccurate and adverse to us, and it may harm our financial performance, prospects or business.
The harm may be immediate without affording us an opportunity for redress or correction. Our
reputation may be negatively affected as a result of the public dissemination of anonymous
allegations or malicious statements about our business, which in turn may cause us to lose
market share, customers and revenues.
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Misconduct and omissions by our employees or business partners could harm our business
and reputation.
Misconduct and omissions by our employees could subject us to liability or negative
publicity. Although we have implemented strict human resources risk management policies,
and we have in place an employee handbook approved by our management and distributed to
all our employees that contains broad internal rules and guidelines and cover areas such as best
commercial practices, work ethics, fraud prevention mechanisms and regulatory compliance,
there can be no assurance that our employees will not engage in misconducts or omissions that
could materially and adversely affect our business, financial condition and results of
operations.
Misconduct by our business partners could subject us to disruption of business, negative
publicity or liability. Although we maintain strict standards in choosing our business partners,
we cannot assure you our business partners providers will not engage in misconducts or
omissions. Any misconduct by our business partners may affect our operations and reputation,
which may in turn affect our business, results of operations and financial condition.
Noncompliance of third parties involved in our business could adversely affect our
business.
Our business partners, including our various suppliers and customers, as well as other
third parties who have entered into business relationships with our business partners, may be
subject to regulatory penalties or punishments because of their regulatory compliance failures,
which may, directly or indirectly, affect our business. We cannot be certain whether such third
parties have infringed or will infringe any other parties’ legal rights or violate any regulatory
requirements. We cannot rule out the possibility of incurring liabilities or suffering losses due
to any noncompliance by third parties. We cannot assure you that we will be able to identify
irregularities or noncompliances in the business practices of our business partners or other third
parties, or that such irregularities or noncompliance will be corrected in a prompt and proper
manner. The legal liabilities and regulatory actions on our business partners or other third
parties involved in our business may affect our business activities and reputation, which may
in turn affect our results of operations.
Share-based payment may cause shareholding dilution to our existing Shareholders and
have a material and adverse effect on our financial performance.
We adopted a share incentive plan for the benefit of our employees as remuneration for
their services provided to us to incentivize and reward the eligible persons who have
contributed to the success of our Company. For details, see “Appendix VI – Statutory and
General Information – Further Information about Our Directors, Supervisors, Senior
Management and Substantial Shareholders – 5. Employee Incentive Scheme.” In 2020, 2021
and 2022, we incurred share-based compensation of RMB173.7 million, RMB603.6 million
and RMB433.4 million, respectively. We did not incur share-based compensation for the three
months ended March 31, 2023. To further incentivize our employees to contribute to us, we
may grant additional share-based compensation in the future. Issuance of additional Shares
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with respect to such share-based payment may dilute the shareholding percentage of our
existing Shareholders. Expenses incurred with respect to such share-based payment may also
increase our operating expenses and therefore have a material and adverse effect on our
financial performance.
We may be involved in legal proceedings and commercial disputes, which could have a
material adverse effect on our business, financial condition and results of operations.
We may be subject to claims and various legal and administrative proceedings, and, as a
result, penalties and new claims may arise in the future. In addition, agreements we entered
into sometimes include indemnification provisions which may subject us to costs and damages
in the event of a claim against an indemnified third party.
Regardless of the merit of particular claims, legal and administrative proceedings, such
as litigations, injunctions and governmental investigations, may be expensive, time consuming
or disruptive to our operations and distracting to management. In recognition of these
considerations, we may enter into new or further licensing agreements or other arrangements
to settle litigation and resolve such disputes. No assurance can be given that such agreements
can be obtained on acceptable terms or that litigation will not occur. These agreements may
also significantly increase our operating expenses.
Our Directors have confirmed that, during the Track Record Period and up to the Latest
Practicable Date, there were no legal or administrative proceedings pending or threatened
against us or any of our Directors that could, individually or in the aggregate, have a material
effect on our business, financial condition or results of operations. However, new legal or
administrative proceedings and claims may arise in the future and the current legal or
administrative proceedings and claims we face are subject to inherent uncertainties. If one or
more legal or administrative matters were resolved against us or an indemnified third party for
amounts in excess of our management’s expectations or certain injunctions are granted to
prevent us from using certain technologies in our solutions, our business and financial
conditions could be materially and adversely affected. Further, such an outcome could result
in significant compensatory or punitive monetary damages, disgorgement of revenue or profits,
remedial corporate measures, injunctive relief or specific performance against us that could
materially and adversely affect our financial condition and operating results. For further details
regarding our legal proceedings and compliance matters, see the sections headed “Business –
Legal Proceedings and Compliance” and “Business – Licenses and Permits.”
We are subject to strict regulatory requirements in labor-related laws and regulations of
the PRC.
We have been subject to stricter regulatory requirements in terms of entering into labor
contracts with our employees and paying various statutory employee benefits, including
pensions, housing funds, medical insurance, work-related injury insurance, unemployment
insurance and childbearing insurance to designated government agencies for the benefit of our
employees. Pursuant to the PRC Labor Contract Law, or the Labor Contract Law, that became
effective in January 2008 and was amended in December 2012 and its implementing rules that
became effective in September 2008, employers are subject to stricter requirements in terms of
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signing labor contracts, minimum wages, paying remuneration, determining the term of
employees’ probation and unilaterally terminating labor contracts. In the event that we decide
to terminate some of our employees or otherwise change our employment or labor practices,
the Labor Contract Law and its implementation rules may limit our ability to effect those
changes in a desirable or cost-effective manner, which could adversely affect our business and
results of operations. We believe our current practice complies with the Labor Contract Law
and its amendments. However, the relevant governmental authorities may take a different view
and impose fines on us. We also procure that subsidiaries we acquired comply with applicable
labor-related laws and regulations. Failure to do so may result in fines or other penalties by
government authorities.
As the interpretation and implementation of labor-related laws and regulations are still
evolving, our employment practice could inadvertently violate labor-related laws and
regulations in China, which may subject us to labor disputes or government investigations. If
we are deemed to have violated relevant labor laws and regulations, we could be required to
provide additional compensation to our employees and our business, financial condition and
results of operations could be materially and adversely affected.
Certain of the lease agreements of our leased properties have not been registered with the
relevant PRC government authorities as required by PRC law, which may expose us to
potential fines.
As of the Latest Practicable Date, ten of our leased properties for our business operations
in China have not been registered with the relevant PRC government authorities. As advised
by our PRC Legal Advisor, failure to register such lease agreements with relevant PRC
government authorities does not affect the effectiveness of the lease agreements, but the
relevant PRC government authorities may order us to, within a prescribed time limit, register
the lease agreements. Failure to do so may subject us to a fine ranging from RMB1,000 to
RMB10,000 for each lease agreement. We estimate that the aggregate maximum amount of
penalties for not registering such lease agreements would be RMB100,000. As of the Latest
Practicable Date, we had not been ordered by any PRC government authorities to register any
lease agreements.
Failure to renew our current leases at reasonable terms or to locate desirable alternatives
for our offices and facilities could materially and adversely affect our business and results
of operations.
We may not be able to successfully extend or renew such leases upon the expiration of
the current term on commercially reasonable terms, or at all, and may therefore be forced to
relocate our affected operations. This could disrupt our operations and result in significant
relocation expenses, which could adversely affect our business, financial condition and results
of operations. In addition, we compete with other businesses for premises at certain locations
or of desirable sizes. As a result, even though we could extend or renew our leases, rental
payments may significantly increase as a result of the high demand for the leased properties.
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In addition, we may not be able to locate desirable alternative sites for our facilities as our
business continues to grow, and failure in relocating our affected operations could adversely
affect our business and operations.
Turmoil in the banking industry may lead to market-wide liquidity issues and could in
turn negatively impact our business, results of operations and financial condition.
Turmoil in the banking industry, such as the March 2023 failures of Silicon V alley Bank
and Signature Bank, may lead to market-wide liquidity problems and negatively impact our
business. Such failure of banks, government responses and resulting investor concerns
regarding the U.S. or international financial systems could result in less favorable commercial
financing terms, such as higher interest rates or costs and tighter financial and operating
covenants, or systemic limitations on access to credit and liquidity sources, making it more
difficult for us or our customers to acquire financing. Although we do not have deposits at risk
at any of the financial institutions with liquidity or solvency issues, such market-wide liquidity
issues could adversely impact our and our customers’ financial capability, which could
negatively affect our financial position and business growth.
Our limited insurance coverage could expose us to significant costs and business
disruption.
We believe we maintain insurance policies in line with industry standards. We do not
maintain business interruption insurance, key-man life insurance or litigation insurance. Any
uninsured occurrence of business disruption, litigation or natural disaster, or significant
damages to our uninsured equipment or facilities could have a material adverse effect on our
results of operations. Our current insurance coverage may not be sufficient to prevent us from
any loss and there is no certainty that we will be able to successfully claim our losses under
our current insurance policy on a timely basis, or at all. If we incur any loss that is not covered
by our insurance policies, or the compensated amount is significantly less than our actual loss,
our business, financial condition and results of operations could be materially and adversely
affected. If such risk materializes, we may also suffer substantial losses as we do not have
insurance coverage.
We face risks related to natural disasters, health epidemics and other outbreaks of
contagious diseases.
Our business could be adversely affected by natural disasters or outbreaks of epidemics.
These natural disasters, outbreaks of contagious diseases and other adverse public health
developments in any market where we operate could severely disrupt our business operations
by damaging our network infrastructure or information technology system or impacting the
productivity of our workforce, which may adversely affect our financial condition and results
of operations.
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RISKS RELATED TO DOING BUSINESS IN THE PRC
Adverse changes in economic, political and social conditions, could have a material
adverse effect on our business and prospects.
Substantially all of our revenue is derived from our businesses in the PRC. Accordingly,
our financial condition, results of operations and prospects are, to a material extent, subject to
economic, political, and legal developments in the PRC. If the macro-economy condition
experiences significant adverse changes due to any of the foregoing reasons, demand for our
solutions and our ability to maintain our operations may suffer, which will consequently have
a material adverse effect on our financial condition, results of operations and our future
prospects.
Fluctuations in the value of the Renminbi and other currencies may have a material
adverse impact on your investment.
During the Track Record Period, substantially all of our revenues and expenditures were
denominated in Renminbi, while the net proceeds from the Global Offering will be in Hong
Kong dollars. Fluctuations in the exchange rate between the Renminbi and the Hong Kong
dollar will affect the relative purchasing power in Renminbi terms of the proceeds from the
Global Offering. Fluctuations in the exchange rate may also cause us to incur foreign exchange
losses and affect the relative value of any dividend issued by our PRC subsidiaries.
Movements in Renminbi exchange rates are affected by, among other things, changes in
political and economic conditions and China’s foreign exchange regime and policy. With the
development of the foreign exchange market and progress towards interest rate liberalization
and renminbi internationalization, the PRC government may in the future announce further
changes to the exchange rate system, and we cannot assure you that the renminbi will not
appreciate or depreciate significantly in value against other currencies in the future. It is
difficult to predict how market forces or relevant government policies may impact the
exchange rate between the renminbi and other currencies in the future.
To date, we have not entered into any hedging transactions in an effort to reduce our
exposure to foreign currency exchange risks. In any event, the availability and effectiveness of
these hedges may be limited and we may not be able to hedge our exposure successfully, or at
all.
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Restrictions on the remittance of Renminbi into and out of the PRC and governmental
control of currency conversion may limit our foreign exchange transactions, including our
ability to pay dividends and other obligations, and may affect the value of your
investment.
Currently, the conversion and remittance of foreign currencies from RMB are subject to
PRC foreign exchange regulations. It cannot be guaranteed that under a certain exchange rate,
we will have sufficient foreign exchange to meet our foreign exchange requirements. Under the
current PRC foreign exchange control system, foreign exchange transactions under the current
account conducted by us, including the payment of dividends, do not require advance approval
from the SAFE, but we are required to present documentary evidence of such transactions and
conduct such transactions at designated foreign exchange banks within China that have the
licenses to carry out foreign exchange business. Foreign exchange transactions under the
capital account conducted by us, however, must be approved in advance by the SAFE.
Under existing foreign exchange regulations, following the completion of the Global
Offering, we will be able to pay dividends in foreign currencies without prior approval from
the SAFE by complying with certain procedural requirements. However, the foreign exchange
policies regarding payment of dividends in foreign currencies may change from time to time
in the future. In addition, any insufficiency of foreign exchange may restrict our ability to
obtain sufficient foreign exchange for dividend payments to shareholders or to satisfy any other
foreign exchange requirements. If we fail to obtain approval from the SAFE to convert
Renminbi into any foreign exchange for any of the above purposes, our capital expenditure
plans, and even our business, operating results and financial condition, may be materially and
adversely affected.
Policies on foreign investment in the PRC may adversely affect our business and results
of operations.
The investment activities of foreign investors in the PRC are subject to certain regulations
regarding the industry participated and imposed to additional verification procedures by certain
authorities. The Special Management Measures (Negative List) for the Access of Foreign
Investment (2021) (݄(૶ఊ)(2021و), the “Negative
List”) issued by the NDRC and MOFCOM, which set out in a unified manner the restrictive
measures for the access of foreign investments such as the requirements for equity and senior
management, and the industries that are prohibited for foreign investment. The Negative List
covers 12 industries, and any field not covered by the Negative List shall be administered under
the principle of equal treatment to domestic and foreign investment. As of the Latest
Practicable Date, our main business in China does not fall within the Negative List. However,
certain industries are specifically prohibited for foreign investment, which may restrict us from
entering into these industries afterwards. Also, as the Negative List may be updated from time
to time in the future. If we cannot obtain approval from relevant approval authorities to engage
in a business in China that becomes prohibited or restricted for foreign investors, we may need
to sell or restructure our business which has become restricted or prohibited for foreign
investment. If we need to adjust our corporate structure or business line as a result of changes
in government policy on foreign investment, our business, financial condition and results of
operations may be adversely affected.
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If our preferential tax treatments are revoked, become unavailable or if the calculation of
our tax liability is successfully challenged by the PRC tax authorities, we may be required
to pay tax, interest and penalties in excess of our tax provisions, and our results of
operations could be materially and adversely affected.
Operating in the high-technology and software industry, we enjoy various types of
preferential tax treatment according to the prevailing mainland Chinese tax laws. Our mainland
Chinese entities may, if they meet the relevant requirements, qualify for three main types of
preferential treatment, which are high- and new-technology enterprises especially supported by
mainland China, software enterprises and key software enterprises within the scope of the
mainland Chinese national plan.
For a qualified high- and new-technology enterprises, the applicable enterprise income
tax rate is 15%. The high- and new-technology enterprise qualification is reassessed by the
relevant authorities every three years. Moreover, a qualified software enterprise is entitled to
a tax holiday consisting of a two-year tax exemption beginning with the first profit-making
calendar year and a 50% tax reduction for the subsequent three years. The software enterprise
qualification is subject to an annual assessment. If our preferential tax treatments are revoked,
become unavailable or if the calculation of our tax liability is successfully challenged by the
PRC tax authorities, the discontinuation of any of the various types of preferential tax
treatment we enjoy could materially and adversely affect our results of operations. See the
section headed “Financial Information – Description of Key Statement of Comprehensive
Income Items – Taxation – PRC.”
Our operations are subject to and may be affected by changes in PRC tax laws and
regulations.
We are subject to periodic examinations on fulfillment 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 our
business, financial condition and results of operations, as well as our reputation. Furthermore,
PRC tax laws and regulations may be adjusted from time to time. For example, under the
Individual Income Tax Law of the People’s Republic of China (the “IIT Law”) ( ʕശɛ͏΍
), which was amended on June 30, 2011 and came into effect on
September 1, 2011, foreign nationals who have domiciles in the PRC, or have no domicile in
China but have resided in the PRC for one year or more, would be subject to PRC individual
income tax at progressive rates on their income gained within or outside the PRC. The Standing
Committee of NPC has approved the amendment of the IIT Law, which became effective on
January 1, 2019. Under the amended IIT law, foreign nationals who have no domicile in China
but have resided in the PRC for a total of 183 days or more in a tax year would be subject to
PRC individual income tax on their income gained within or outside the PRC. Our ability to
attract and retain highly skilled foreign scientists and research personnel to work in China may
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be materially affected by such tax regulations, which may in turn have a material adverse effect
on our business, financial condition, results of operations, cash flows and prospects. The PRC
tax laws and regulations may change from time to time in the future and may also have an
adverse effect on our business, financial condition and results of operations.
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 tax obligations with respect to the
dividends paid to them by us and the gains realized upon the sale or other disposition of H
Shares.
Non-PRC resident individuals are required to pay PRC individual income tax at a 20%
rate for the income derived in China under the ITT Law and its implementation guidelines.
Accordingly, we are required to withhold such tax from dividend payments, unless applicable
tax treaties between China and the jurisdiction in which the foreign individual resides reduce
or provide an exemption for the relevant tax obligations. However, pursuant to the Circular on
Certain Policy Questions Concerning Individual Income Tax (ࡈ׵
) (Cai Shui Zi [1994] No. 020) issued by the MOF and SA T on
May 13, 1994, the income gained by individual foreigners from dividends and bonuses of
enterprise with foreign investment are exempted from individual income tax for the time being.
In addition, under the ITT Law and its implementation regulations, non-PRC resident
individual holders of H shares are subject to individual income tax at a rate of 20% on gains
realized upon the sale or other disposition of H shares. However, pursuant to Circular of
Declaring that Individual Income Tax Continues to be Exempted over Income of Individuals
from the Transfer of Shares ()
(Cai Shui Zi [1998] No. 61) issued by the MOF and the SA T on March 30, 1998, from January
1, 1997, the income of individuals from the transfer of the shares of listed enterprises continues
to be exempted from individual income tax.
As of the Latest Practicable Date, no aforesaid provisions have expressly provided that
individual income tax shall be levied non-PRC resident individual holders on the transfer of
shares in PRC resident enterprises listed on overseas stock exchanges, and to our knowledge,
no such individual income tax was levied by PRC tax authorities in practice. However, there
is no assurance that the PRC tax authorities will not change these practices which could result
in levying income tax on non-PRC resident individual holders on gains from the sale of H
shares.
For non-PRC resident enterprises that do not have establishments or premises in China,
and for those have establishments or premises in China but whose income is not related to such
establishments or premises, under the EIT Law and its implementation regulations, dividends
paid by us and gains realized by such foreign enterprises upon the sale or other disposition of
H Shares are subject to PRC enterprise income tax at a 10% rate. In accordance with the
Circular on Issues Relating to Withholding of Enterprise Income Tax by PRC Resident
Enterprises on Dividends Paid to Overseas Non-PRC Resident Enterprise Shareholders of H
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Shares (͏ΆุΣྤ̮H੻೼Ϟᗫਪ
) (Guo Shui Han [2008] No. 897) issued by SA T on November 6, 2008, the
withholding tax rate for dividends payable to non-PRC resident enterprise holders of H Shares
will be 10% and we intend to withhold tax at a rate of 10% from dividends paid to non-PRC
resident enterprise holders of our H Shares (including HKSCC Nominees). Non-PRC resident
enterprises that are entitled to be taxed at a reduced rate under an applicable income tax treaty
or arrangement will be required to apply to the PRC tax authorities for a refund of any amount
withheld in excess of the applicable treaty rate, and payment of such refund will be subject to
the PRC tax authorities’ approval.
Despite the arrangements mentioned above, the PRC tax laws and regulations as well as
the interpretation and application of such laws and regulations may change from time to time
in the future which may adversely affect the value of your investment in our H Shares.
It may be difficult to effect service of process upon us or our Directors, Supervisor or
executive officers who reside in China or to enforce against them in China any judgments
obtained from non-PRC courts.
All of our executive Directors, Supervisors and executive officers reside within China,
and substantially all of our assets are located within China. Similar to the difficulties faced by
most of the countries around the world on effecting service of process and enforcing judgment
obtained from foreign countries, it may be difficult for investors to effect service of process
upon us or our executive Directors, Supervisors and officers inside China or to enforce against
us or them in China any judgments obtained from non-PRC courts.
China does not have treaties providing for the reciprocal recognition and enforcement of
judgments of courts of many other countries and regions. Therefore, recognition and
enforcement in China of judgments of a court in any of these non-PRC jurisdictions in relation
to any matter not subject to a binding arbitration provision may be difficult or impossible.
RISKS RELATED TO THE GLOBAL OFFERING
There has been no prior public market for our H Shares and the liquidity and market
price of our H Shares may be volatile.
Prior to the completion of the Global Offering, there has been no public market for our
H Shares. There can be no guarantee that an active trading market for our H Shares will
develop or be sustained after the completion of the Global Offering. The Offer Price is the
result of negotiations between our Company, the Overall Coordinators (for themselves and on
behalf of the Underwriters), which may not be indicative of the price at which our H Shares
will be traded following completion of the Global Offering. The market price of our H Shares
may drop below the Offer Price at any time after completion of the Global Offering.
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The trading price of our H Shares may be volatile, which could result in substantial losses
to you.
The trading price of our H Shares may be volatile and could fluctuate widely in response
to factors beyond our control, including general market conditions of the securities markets in
Hong Kong, China, the United States and elsewhere in the world. In particular, the performance
and fluctuation of the market prices of other companies with business operations located
mainly in mainland China that have listed their securities in Hong Kong may affect the
volatility in the price of and trading volumes for our H Shares. A number of mainland
China-based companies have listed their securities, and some are in the process of preparing
for listing their securities, in Hong Kong. Some of these companies have experienced
significant volatility, including significant price declines after their initial public offerings. The
trading performances of the securities of these companies at the time of or after their offerings
may affect the overall investor sentiment towards mainland China-based companies listed in
Hong Kong and consequently may impact the trading performance of our H Shares. Pursuant
to the applicable PRC law, within the 12 months following the Listing Date, all existing
Shareholders (including the Pre-IPO Investors) could not dispose of any of the Shares held by
them. Due to such lock-up requirement, the liquidity and trading volume of the H Shares in the
short term following the Global Offering may be significantly affected. These factors may
significantly affect the market price and volatility of our H Shares, regardless of our actual
operating performance.
Future sales or perceived sales of substantial amounts of our H Shares in the public
market could have a material adverse effect on the price of our H Shares and our ability
to raise additional capital in the future.
The market price of our H Shares could decline as a result of future sales of a substantial
number of our H Shares or other securities relating to our H Shares in the public market, or the
issuance of new shares or other securities, or the perception that such sales or issuances may
occur. Future sales, or anticipated sales, of substantial amounts of our securities, including any
future offerings, could also materially and adversely affect our ability to raise capital at a
specific time and on terms favorable to us. In addition, our shareholders may experience
dilution in their holdings if we issue more securities in the future. New shares or shares-linked
securities issued by us may also confer rights and privileges that take priority over those
conferred by the H Shares.
Y ou will incur immediate and substantial dilution if the Offer Price of the Offer Shares
is higher than the net tangible asset value per H Share and may experience further
dilution if we issue additional Shares in the future.
The Offer Price of the Offer Shares is higher than the net tangible asset value per H Share
immediately prior to the Global Offering. Therefore, purchasers of the Offer Shares in the
Global Offering will experience an immediate dilution in pro forma consolidated net tangible
asset value. There can be no assurance that if we were to immediately liquidate after the Global
Offering, any assets will be distributed to Shareholders after the creditors’ claims. To expand
our business, we may consider offering and issuing additional Shares in the future. Purchasers
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of the Offer Shares may experience dilution in the net tangible asset value per Share of their
Shares 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.
Our Controlling Shareholders have significant influence over us and their interests may
not always be aligned with the interest of our other Shareholders.
Immediately upon the completion of the Global Offering, without taking into account any
Shares which may be issued pursuant to the exercise of the Over-allotment Option, Dr. Dai,
Ms. Wu, Beijing New Wisdom, Paradigm Investment, Paradigm Yinyuan, Paradigm Chuqi and
Paradigm Tianqin, our Controlling Shareholders, will collectively control approximately
38.84% of the voting power at our general meetings. Our Controlling Shareholders will,
through their voting power at the Shareholders’ meetings and their delegates on the Board,
have significant influence over our business and affairs, including decisions in respect of
mergers or other business combinations, acquisition or disposition of assets, issuance of
additional Shares or other equity securities, timing and amount of dividend payments, and our
management. Our Controlling Shareholders may not act in the best interests of our minority
Shareholders. This concentration of ownership may also discourage, delay or prevent a change
in control of our Company, which could deprive our Shareholders of an opportunity to receive
a premium for the Shares as part of a sale of our Company and may significantly reduce the
price of our H Shares.
Payment of dividends is subject to restrictions under PRC law.
Under PRC law, dividends may be paid only out of distributable profit, for which the PRC
laws do not specify the applicable accounting principles. Distributable profit is our profit as
determined under PRC GAAP or IFRS, whichever is lower, less any recovery of accumulated
losses and appropriations to statutory and other reserves that we are required to make. We may
not have sufficient or any distributable profit to enable us to make dividend distributions to our
Shareholders, including in years in which we are profitable. Any distributable profit not
distributed in a given year is retained and available for distribution in subsequent years. Our
PRC Legal Advisor is of the view that after making up losses and appropriation of statutory
reserves, we may distribute after-tax profits.
In addition, we are required to comply with the dividend distribution rules prescribed by
the PRC regulatory authorities when determining our dividend payout ratios. The PRC
regulatory authorities may further amend the dividend distribution rules for listed companies
in the future, which may significantly affect the amount of capital available to support the
development and growth of our business.
Moreover, as the calculation of distributable profits under PRC GAAP is different from
the calculation under IFRS in certain respects, our subsidiaries may not have distributable
profits as determined under PRC GAAP , even if they have profits for that year as determined
under IFRS, or vice versa. Accordingly, we may not receive sufficient distributions from our
RISK FACTORS
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subsidiaries. Failure by our subsidiaries to pay dividends to us could have a negative impact
on our cash flows and our ability to make dividend distributions to our Shareholders in the
future, including those periods in which our financial statements indicate that our operations
have been profitable.
There will be a gap of several days between pricing and trading of our H Shares, and the
price of our H Shares when trading begins could be lower than the Offer Price.
The initial price to the public of our H Shares sold in the Global Offering is expected to
be determined on the Price Determination Date. However, the Shares will not commence
trading on the Stock Exchange until they are delivered, which is expected to be several
business days after the Price Determination Date. As a result, investors may not be able to sell
or otherwise deal in the Offer Shares during that period. Accordingly, holders of our H Shares
are subject to the risk that the price of the Shares when trading begins could be lower than the
Offer Price as a result of adverse market conditions or other adverse developments that may
occur between the time of sale and the time trading begins.
Certain statistics contained in this Prospectus are derived from a third-party report, and
are not independently verified by us. There can be no assurance of the accuracy or
completeness of certain facts, forecasts and other statistics obtained from various
government publications, market data providers and other independent third-party
sources, including the industry expert report, contained in this Prospectus.
This Prospectus, particularly the section headed “Industry Overview,” contains
information and statistics relating to the artificial intelligence industry. Such information and
statistics have been derived from third-party reports, either commissioned by us or publicly
accessible, and other publicly available sources. We believe that the sources of the information
are appropriate sources for such information, and we have taken reasonable care in extracting
and reproducing such information. However, we cannot guarantee the quality or reliability of
such source materials. The information has not been independently verified by us, the Sole
Sponsor, the Joint Global Coordinators, the Overall Coordinators, the Joint Bookrunners, the
Capital Market Intermediaries, the Joint Lead Managers, the Underwriters or any other party
involved in the Global Offering, and no representation is given as to its accuracy. Collection
methods of such information may be flawed or ineffective, or there may be discrepancies
between published information and market practice, which may result in the statistics being
inaccurate or not comparable to statistics produced for other economies. Y ou should therefore
not place undue reliance on such information. In addition, we cannot assure you that such
information is stated or compiled on the same basis or with the same degree of accuracy as or
consistent with similar statistics presented elsewhere, and such information may not be
complete or up-to-date. In any event, you should consider carefully the importance placed on
such information or statistics.
RISK FACTORS
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Y ou should read the entire Prospectus carefully and should not rely on any information
contained in press articles or other media regarding us and the Global Offering.
We strongly caution you not to rely on any information contained in press articles or other
media regarding us and the Global Offering. Prior to the publication of this Prospectus, there
has been press and media coverage regarding us, our business, our industry and the Global
Offering. There may be additional media coverage regarding us, our business, our industry and
the Global Offering subsequent to the date of this Prospectus but prior to the completion of the
Global Offering. Such press and media coverage may include references to certain information
that does not appear in this Prospectus, including certain operating and financial information
and projections, valuations and other information. None of us or any other person involved in
the Global Offering has authorized the disclosure of any such information in the press or media
and none of us accepts any responsibility for any such press or media coverage or the accuracy
or completeness of any such information or publication. We make no representation as to the
appropriateness, accuracy, completeness or reliability of any such information or publication.
To the extent that any such information is inconsistent or conflicts with the information
contained in this Prospectus, we disclaim responsibility for it and you should not rely on such
information.
We plan to conduct the offering and listing of A shares at an appropriate time after the
Global Offering, but there is no assurance that we will conduct such an A share offering,
and the characteristics of the A share and H share markets are different.
We plan to conduct the offering and listing of A shares at an appropriate time after the
Global Offering, but there is no assurance that we will conduct such an A share offering, and
the characteristics of the A share and H share markets are different. As of the Latest Practicable
Date, we have not determined the size and scope of the contemplated A share offering and have
not made any application to any recognized stock exchange in the PRC for approval for the
listing of any A shares. There is no assurance we will conduct such an A share offering. If we
do not complete the planned A share listing within a specific timeline, certain of our Pre-IPO
Investors who hold Domestic Shares may be entitled to exercise their Domestic Share
Divestment Rights. For details, see “History, Development and Corporate Structure – The A
Share Listing” and “History, Development and Corporate Structure – Rights of the Pre-IPO
Investors”. If an A share offering is conducted by us in the future, following the Global
Offering and the proposed A share offering, our H Shares will be traded on the Hong Kong
Stock Exchange and our A Shares will be traded on the A Share market. Under current PRC
laws and regulations, without approval from relevant regulatory authorities, H Shares and A
shares are neither interchangeable nor fungible, and there is no trading settlement between the
H share and A share markets. The H share and A share markets have different trading
characteristics (including trading volume and liquidity) and investor bases, including different
levels of retail and institutional participation. As a result of these differences, the trading price
of H Shares and A shares may not be the same. Moreover, fluctuations in A share price may
affect H Share price, and vice versa. Prospective investors should therefore not place undue
reliance on the planned offering and listing of A shares in the future when evaluating an
investment in our H Shares.
RISK FACTORS
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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 individually accept full responsibility, includes
particulars given in compliance with the Companies (Winding Up and Miscellaneous
Provisions) Ordinance, the Securities and Futures (Stock Market Listing) Rules and the Listing
Rules for the purpose of giving information to the public with regard to the Group. Our
Directors, having made all reasonable enquiries, confirm that, to the best of their knowledge
and belief, the information contained in this Prospectus is accurate and complete in all material
respects and not misleading or deceptive, and there are no other matters the omission of which
would make any statement in this Prospectus misleading.
UNDERWRITING AND INFORMATION ON THE GLOBAL OFFERING
This Prospectus is published solely in connection with the Hong Kong Public Offering,
which forms part of the Global Offering. The Global Offering comprises the Hong Kong Public
Offering of initially 1,839,600 Offer Shares and the International Offering of initially
16,556,400 Offer Shares (subject to, in each case, reallocation on the basis referred to under
the section headed “Structure of the Global Offering” in this Prospectus and, in case of the
International Offering, to any exercise of the Over-allotment Option).
The listing of our Shares on the Stock Exchange is sponsored by the Sole Sponsor and the
Global Offering is managed by the Overall Coordinators. The Hong Kong Public Offering is
fully underwritten by the Hong Kong Underwriters pursuant to the Hong Kong Underwriting
Agreement. The International Underwriting Agreement relating to the International Offering is
expected to be entered into on or around Thursday, September 21, 2023. Further information
regarding the Underwriters and the Underwriting Agreements are set out in the section headed
“Underwriting” in this Prospectus.
The Hong Kong Offer Shares are offered solely on the basis of the information contained
and representations made in this Prospectus and the GREEN Application Form and on the
terms and subject to the conditions set out herein and therein. No person is authorized to give
any information in connection with the Global Offering or to make any representation not
contained in this Prospectus and the GREEN Application Form, 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 Joint Global Coordinators, the Overall
Coordinator, the Joint Bookrunners, Capital Market Intermediaries, the Joint Lead Managers,
the Underwriters, any of their respective directors, officers, employees, partners, agents,
employees or advisers or any other party involved in the Global Offering.
Neither the delivery of this Prospectus nor any subscription or acquisition made under it
shall, under any circumstances, constitute a representation that there has been no change or
development reasonably likely to involve a change in our affairs since the date of this
Prospectus or imply that the information contained in this Prospectus is correct as of any date
subsequent to the date of this Prospectus.
INFORMATION ABOUT THIS PROSPECTUS AND THE GLOBAL OFFERING
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Further information regarding the structure of the Global Offering, including its
conditions, are set out in the section headed “Structure of the Global Offering”, and the
procedures for applying for our Hong Kong Offer Shares are set out in the section headed “How
to Apply for Hong Kong Offer Shares” in this Prospectus and in the GREEN Application Form.
INFORMATION ON THE CONVERSION OF UNLISTED SHARES INTO H SHARES
The Company has applied for conversion of 115,246,250 Unlisted Shares held by
HongShan V enture, Guoxin Qidi, Purui Tianjin, Beijing Innovation, Zhongyi Equity Fund,
Sinovation Fund III, Ruihui Haina, NIFA No. 1, V alue Global, Shanghai Saixin Business
Consulting Management Center (Limited Partnership), Guangxi Tencent V enture Capital Co.,
Ltd., Hangzhou Fantong, Hubei Boheng, Guangzhou Y uexiu Emerging Industry Phase II
Investment Fund Partnership (Limited Partnership), GS Asia II, Zhuhai Zhongyu Investment
Enterprise (Limited Partnership), Guangkong Zhongying, Fangyuan Chuangying, Haitong
International Investment, Jiaxing Chenyue, Shenzhen Runxin New Vision Strategic Emerging
Industry Private Equity Investment Fund Partnership (Limited Partnership), Cisco China,
Stonebridge 2020, Growing Fame, Guangzhou Y uexiu Nuocheng No. 8 Industrial Investment
Partnership (Limited Partnership), CITIC Construction Investment, Ningbo Huiyuan,
Dongkong Jinlong, and LF Beta. Please refer to the sections headed “History, Development and
Corporate Structure” and “Share Capital” for details of the Shareholders and their interests in
the Company and the relevant procedures for conversion of Unlisted Shares into H Shares.
Such H Shares to be converted from the Unlisted Shares are restricted from trading for a period
of one year after the Listing. The Company has received the filing notice from the CSRC dated
July 3, 2023 in relation to the filing of the conversion of the Unlisted Shares.
CSRC FILING
According to the Overseas Listing Trial Measures, we are required to complete the filing
procedures with the CSRC in connection with the proposed Listing. The Company has received
the filing notice from the CSRC dated July 3, 2023 in relation to the filing of the proposed
Listing.
RESTRICTIONS ON OFFER AND SALE OF THE OFFER SHARES
Each person acquiring the Hong Kong Offer Shares under the Hong Kong Public Offering
will be required to, or be deemed by his/her acquisition of the Hong Kong Offer Shares to,
confirm that he/she is aware of the restrictions on offers and sales of the Shares described in
this Prospectus and the GREEN Application Form.
No action has been taken to permit a public offering of the Offer Shares in any
jurisdiction other than Hong Kong, and no action has been taken to permit the distribution of
this Prospectus in any jurisdiction other than Hong Kong. Accordingly, without limitation to
the following, 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 and 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 Hong Kong Offer Shares have not been publicly offered or sold, directly or
indirectly, in the PRC or the United States.
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APPLICATION FOR LISTING OF THE H SHARES ON THE STOCK EXCHANGE
We have applied to the Listing Committee for the granting of the listing of, and
permission to deal in, the H Shares to be issued by us pursuant to the Global Offering
(including any Shares which may be issued pursuant to the exercise of the Over-allotment
Option) and the H Shares to be converted from Unlisted Shares.
Dealings in the H Shares on the Stock Exchange are expected to commence on Thursday,
September 28, 2023. No part of our share capital is listed on or dealt in on any other stock
exchange and no such listing or permission to list is being or proposed to be sought on the
Stock Exchange or any other stock exchange as of the date of this Prospectus. All the Offer
Shares will be registered on our H Share register of members in order to enable them to be
traded on the Stock Exchange.
Under section 44B(1) of the Companies (Winding Up and Miscellaneous Provisions)
Ordinance, any allotment made in respect of any application will be invalid if the listing of,
and permission to deal in, our H Shares on the Stock Exchange is refused before the expiration
of three weeks from the date of the closing of the application lists, or such longer period (not
exceeding six weeks) as may, within the said three weeks, be notified to the Company by or
on behalf of the Stock Exchange.
PROFESSIONAL TAX ADVICE RECOMMENDED
Potential investors in the Global Offering are recommended to consult their professional
advisers as to the taxation implications of subscribing for, purchasing, holding or disposal of,
and/or dealing in the Offer Shares or exercising rights attached to them. None of us, the Sole
Sponsor, the Joint Global Coordinators, the Overall Coordinator, the Joint Bookrunners, the
Capital Market Intermediaries, the Joint Lead Managers, the Underwriters, any of their
respective directors, officers, employees, partners, agents, advisers or representatives or any
other person or party involved in the Global Offering accepts responsibility for any tax effects
on, or liabilities of, any person resulting from the subscription, purchasing, holding,
disposition of, or dealing in, the Offer Shares or exercising any rights attached to them.
OVER-ALLOTMENT OPTION AND STABILIZATION
Details of the arrangements relating to the Over-allotment Option and stabilization are set
out under the sections headed “Underwriting” and “Structure of the Global Offering” in this
Prospectus.
INFORMATION ABOUT THIS PROSPECTUS AND THE GLOBAL OFFERING
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H SHARE REGISTER OF MEMBERS AND HONG KONG STAMP DUTY
All of the H Shares issued pursuant to applications made in the Hong Kong Public
Offering will be registered on our H Share register of members to be maintained in Hong Kong
by our H Share Registrar, Tricor Investor Services Limited at 17/F, Far East Finance Centre,
16 Harcourt Road, Hong Kong. Our principal register of members will be maintained by us at
our head office in the PRC.
Dealings in the H Shares registered in our H Share register of members will be subject
to the Hong Kong stamp duty. See “Statutory and General Information – Other Information –
Taxation of Holders of H Share” in Appendix VI. Investors should seek professional tax advice
for further details of Hong Kong stamp duty.
Unless otherwise determined by our Board, dividends will be paid to Shareholders whose
names are listed on our H Share register of members in Hong Kong, by ordinary post, at the
Shareholders’ risk in Hong Kong dollars.
REGISTRATION OF SUBSCRIPTION, PURCHASE AND TRANSFER OF H SHARES
We have instructed Tricor Investor Services Limited, 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 PRC Company Law, the Overseas Listing Trial
Measures and our Articles of Association;
 agrees with us, each of our Shareholders, Directors, Supervisors, managers and
officers, and we act 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
administrative regulations concerning our affairs to arbitration, 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 arbitration shall be final and
conclusive;
 agrees with us and each of our Shareholders that the H Shares are freely transferable
by the holders thereof; and
INFORMATION ABOUT THIS PROSPECTUS AND THE GLOBAL OFFERING
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 authorizes us to enter into a contract on his or her behalf with each of our Directors,
Supervisors, managers and officers whereby such Directors, Supervisors, managers
and officers undertake to observe and comply with their obligations to our
Shareholders as stipulated in our Articles of Association. 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 Associates of any of
our Directors or existing Shareholder or a nominee of any of the foregoing.
SHARES WILL BE ELIGIBLE FOR ADMISSION INTO CCASS
Subject to the granting of the listing of, and permission to deal in, the Offer Shares on the
Stock Exchange and our compliance with the stock admission requirements of HKSCC, the H
Shares will be accepted as eligible securities by HKSCC for deposit, clearance and settlement
in CCASS with effect from the date of commencement of dealings in the H Shares on the Stock
Exchange or any other date as determined by HKSCC. Settlement of transactions between
participants of the Stock Exchange is required to take place in CCASS on the second settlement
day after any trading day. All activities under CCASS are subject to the General Rules of
CCASS and CCASS Operational Procedures in effect from time to time. All necessary
arrangements have been made for the H Shares to be admitted into CCASS.
Investors should seek the advice of their stockbrokers or other professional advisers for
details of the settlement arrangements and how such arrangements will affect your rights and
interests as such arrangements may affect their rights and interests.
PROCEDURES FOR APPLICATION FOR HONG KONG OFFER SHARES
The procedures for applying for Hong Kong Offer Shares are set out in the section headed
“How to Apply for Hong Kong Offer Shares” in this Prospectus and on the GREEN
Application Form.
STRUCTURE OF THE GLOBAL OFFERING
Details of the structure of the Global Offering, including its conditions, are set out in the
section headed “Structure of the Global Offering” in this Prospectus.
INFORMATION ABOUT THIS PROSPECTUS AND THE GLOBAL OFFERING
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EXCHANGE RATE CONVERSION
Solely for your convenience, this Prospectus contains translations among certain amounts
denominated in RMB, Hong Kong dollars and USD. No representation is made that the
amounts denominated in one currency could actually be converted into the amounts
denominated in another currency at the rates indicated or at all. Unless indicated otherwise, (i)
the translations between RMB and USD were made at the rate of RMB7.21500 to US$1.00,
being the PBOC rate prevailing on September 8, 2023 (being the most recent published
exchange rate prior to the Latest Practicable Date), (ii) the translations between Hong Kong
dollars and RMB were made at the rate of RMB0.92064 to HK$1.00, being the PBOC rate
prevailing on September 8, 2023; and (iii) the translations between US dollars and Hong Kong
dollars were made at the rate of HK$7.83694 to US$1.00. Any discrepancies in any table
between totals and sums of amounts listed therein are due to rounding.
LANGUAGE
If there is any inconsistency between this Prospectus and the Chinese translation of this
Prospectus, this Prospectus shall prevail. However, the English names of the PRC nationals,
entities, departments, facilities, certificates, titles, laws, regulations and the like are
translations of their Chinese names and are included for identification purposes only. If there
is any inconsistency, the Chinese name prevails.
ROUNDING
Certain amounts and percentage figures included in this Prospectus have been subject to
rounding adjustments, or have been rounded to one or two decimal places. Any discrepancies
in any table, chart or elsewhere between totals and sums of amounts listed therein are due to
rounding.
MARKET SHARE DATA CONVENTION
The statistical and market share information contained in this Prospectus has been derived
from official government publications and other sources, including information or data
provided by China Insights Consultancy. Unless otherwise indicated, the information has not
been verified by us independently. This statistical information may not be consistent with other
statistical information from other sources within or outside the PRC. While reasonable caution
has been made in the process of reproducing the data and statistics extracted from such official
government publications or other sources, the Sole Sponsor and our Company, or any of their
directors, employees, agents, and representatives make no representation to the
appropriateness, accuracy, completeness or reliability of any such statistical and market share
information.
INFORMATION ABOUT THIS PROSPECTUS AND THE GLOBAL OFFERING
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In preparation for the Global Offering, we have sought the following waivers from strict
compliance with the relevant provisions of the Listing Rules:
W AIVER IN RESPECT OF MANAGEMENT PRESENCE IN HONG KONG
Pursuant to Rule 8.12 of the Listing Rules, our Company must have a sufficient
management presence in Hong Kong. This normally means that at least two of our executive
Directors must be ordinarily resident in Hong Kong. Rule 19A.15 of the Listing Rules further
provides that the requirement in Rule 8.12 of the Listing Rules may be waived by having regard
to, among other considerations, our arrangements for maintaining regular communication with
the Hong Kong Stock Exchange.
Our headquarters are based, and most of the business operations of our Company and our
subsidiaries are managed and conducted in the PRC. Our executive Directors ordinarily reside
in the PRC and they play very important roles in our Company’s business operations, it is in
our best interests for them to be based in places where our Group has significant operations.
We consider it practically difficult and commercially unreasonable for us to arrange for two
executive Directors to be ordinarily resident in Hong Kong, either by means of relocation of
existing our executive Directors or appointment of additional executive Directors. Therefore,
our Company does not have, and does not contemplate in the foreseeable future that we will
have sufficient management presence in Hong Kong for the purpose of satisfying the
requirements under Rules 8.12 of the Listing Rules.
Accordingly, pursuant to Rule 19A.15 of the Listing Rules, we have applied to the Hong
Kong Stock Exchange for, and the Hong Kong Stock Exchange has granted us, a waiver from
strict compliance with Rule 8.12 and Rule 19A.15 of the Listing Rules subject to the following
conditions:
(1) We have appointed Mr. Y u Zhonghao and Ms. Y eung Siu Wai Kitty as our authorized
representatives (“ Authorized Representatives ”) pursuant to Rule 3.05 of the
Listing Rules. The Authorized Representatives will act as our Company’s principal
channel of communication with the Hong Kong Stock Exchange. The Authorized
Representatives will be readily contactable by phone, facsimile and email to
promptly deal with enquiries from the Hong Kong Stock Exchange, and will also be
available to meet with the Hong Kong Stock Exchange to discuss any matter within
a reasonable period of time upon request of the Hong Kong Stock Exchange;
(2) When the Hong Kong Stock Exchange wishes to contact our Directors on any
matter, each of the Authorized Representatives will have all necessary means to
contact all of our Directors (including our independent non-executive Directors) and
senior management team promptly at all times. Our Company will also inform the
Hong Kong Stock Exchange promptly in respect of any changes in the authorized
representatives. We have provided the Hong Kong Stock Exchange with the contact
details (i.e. mobile phone number, office phone number and email address) of all
Directors to facilitate communication with the Hong Kong Stock Exchange;
W AIVERS
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(3) All Directors who do not ordinarily reside in Hong Kong possess or can apply for
valid travel documents to visit Hong Kong and can meet with the Hong Kong Stock
Exchange within a reasonable period;
(4) We have appointed Guotai Junan Capital Limited as our compliance advisor (the
“Compliance Advisor ”) upon listing pursuant to Rule 3A.19 of the Listing Rules
for a period commencing on the Listing Date and ending on the date on which we
comply with Rule 13.46 of the Listing Rules in respect of our financial results for
the first full financial year commencing after the Listing Date. The Compliance
Advisor will have access at all times to our Authorized Representatives, our
Directors and our senior management, who will act as the additional channel of
communication with the Hong Kong Stock Exchange when the Authorized
Representatives are not available; and
(5) We have provided the Hong Kong Stock Exchange with the names, mobile phone
numbers, office phone numbers and email addresses of at least two of the
Compliance Advisor’s officers who will act as our Compliance Advisor’s contact
persons between the Hong Kong Stock Exchange and our Company.
W AIVER IN RESPECT OF APPOINTMENT OF JOINT COMPANY SECRETARY
Pursuant to Rules 3.28 and 8.17 of the Listing Rules, we must appoint a company
secretary who, by virtue of his/her academic or professional qualifications or relevant
experience, is, in the opinion of the Hong Kong Stock Exchange, capable of discharging the
functions of the company secretary. Note 1 to Rule 3.28 of the Listing Rules provides that the
Hong Kong Stock Exchange considers the following academic or professional qualifications to
be acceptable:
(a) a member of The Hong Kong Chartered Governance Institute;
(b) a solicitor or barrister as defined in the Legal Practitioners Ordinance (Chapter 159
of the Laws of Hong Kong); and
(c) a certified public accountant as defined in the Professional Accountants Ordinance
(Chapter 50 of the Laws of Hong Kong).
Note 2 to Rule 3.28 of the Listing Rules further provides that the Hong Kong Stock
Exchange considers the following factors in assessing the “relevant experience” of the
individual:
(a) length of employment with the issuer and other issuers and the roles he/she played;
(b) familiarity with the Listing Rules and other relevant laws and regulations including
the SFO, the Companies Ordinance, the Companies (Winding Up and Miscellaneous
Provisions) Ordinance and the Takeovers Code;
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(c) relevant training taken and/or to be taken in addition to the minimum requirement
under Rule 3.29 of the Listing Rules; and
(d) professional qualifications in other jurisdictions.
Our Company has appointed Mr. Xiong Fei (࠭“() Mr. Xiong ”), our vice president, as
one of our joint company secretaries. He has extensive experience in financing and investment
services but presently does not possess any of the qualifications under Rules 3.28 and 8.17 of
the Listing Rules, and may not be able to solely fulfill the requirements of the Listing Rules.
Therefore, we have appointed Ms. Y eung Siu Wai Kitty (“ Ms. Y eung”), who is an associate 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 and to provide assistance to Mr. Xiong for an initial
period of three years from the Listing Date to enable Mr. Xiong 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.
Since Mr. Xiong does not possess the formal qualifications required of a company
secretary under Rule 3.28 of the Listing Rules, we have applied to the Hong Kong Stock
Exchange for, and the Hong Kong Stock Exchange has granted, a waiver from strict compliance
with the requirements under Rules 3.28 and 8.17 of the Listing Rules such that Mr. Xiong may
be appointed as a joint company secretary of our Company. Pursuant to the Guidance Letter
HKEX-GL108-20, the waiver will be for a fixed period of time (“ Waiver Period ”) and on the
following conditions: (i) the proposed company secretary must be assisted by a person who
possesses the qualifications or experience as required under Rule 3.28 (“ Qualified Person ”)
and is appointed as a joint company secretary throughout the Waiver Period; and (ii) the waiver
can be revoked if there are material breaches of the Listing Rules by the issuer. The waiver is
valid for an initial period of three years from the Listing Date, and is granted on the condition
that Ms. Y eung will work closely with Mr. Xiong to jointly discharge the duties and
responsibilities as company secretary and assist Mr. Xiong in acquiring the relevant experience
as required under Rules 3.28 and 8.17 of the Listing Rules. Ms. Y eung will also assist Mr.
Xiong in organizing Board meetings and Shareholders’ meetings of our Company as well as
other matters of our Company which are incidental to the duties of a company secretary. Ms.
Y eung is expected to work closely with Mr. Xiong and will maintain regular contact with Mr.
Xiong, the Directors, the Supervisors and the senior management of our Company. The waiver
will be revoked immediately if Ms. Y eung ceases to provide assistance to Mr. Xiong as a joint
company secretary for the three-year period after the Listing or where there are material
breaches of the Listing Rules by our Company. In addition, Mr. Xiong will comply with the
annual professional training requirement under Rule 3.29 of the Listing Rules and will enhance
his knowledge of the Listing Rules during the three-year period from the Listing. Mr. Xiong
will also be assisted by (a) Compliance Advisor of our Company, particularly in relation to
compliance with the Listing Rules; and (b) the Hong Kong legal advisors of our Company, on
matters concerning our Company’s ongoing compliance with the Listing Rules and the
applicable laws and regulations.
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Before the expiration of the initial three-year period, the qualifications of Mr. Xiong 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 need for ongoing assistance will continue.
We will liaise with the Hong Kong Stock Exchange to enable it to assess whether Mr. Xiong,
having benefited from the assistance of Ms. Y eung for the preceding three years, will have
acquired the skills necessary to carry out the duties of company secretary and the relevant
experience within the meaning of Note 2 to Rule 3.28 of the Listing Rules so that a further
waiver will not be necessary.
W AIVER IN RELATION TO BUSINESS ACQUIRED AFTER THE TRACK RECORD
PERIOD
Rules 4.04(2) and 4.04(4) of the Listing Rules require that the new applicant include in
its accountants’ report the results and balance sheet of any business or subsidiary acquired,
agreed or proposed to be acquired, since the date to which its latest audited accounts have been
made up, in respect of each of the three financial years immediately preceding the issue of the
listing document.
Pursuant to note (4) of Rule 4.04(4) of the Listing Rules, the Stock Exchange may
consider an application for a waiver of Rules 4.04(2) and 4.04(4) of the Listing Rules taking
into account the following factors:
(a) that all the percentage ratios (as defined under Rule 14.04(9) of the Listing Rules)
are less than 5% by reference to the most recent audited financial year of the new
applicant’s trading record period;
(b) if the acquisition will be financed by the proceeds raised from a public offer, the new
applicant has obtained a certificate of exemption from the SFC in respect of the
relevant requirements under paragraphs 32 and 33 of the Third Schedule to the
Companies (Winding Up and Miscellaneous Provisions) Ordinance; and
(c) (i) where a new applicant’s principal activities involve the acquisition of equity
securities (the Stock Exchange may require further information where
securities acquired are unlisted), the new applicant is not able to exercise any
control, and does not have any significant influence over the underlying
company or business to which Rule 4.04(2) and 4.04(4) of the Listing Rules
relate, and has disclosed in its listing document the reasons for the acquisition
and a confirmation that the counterparties and their respective ultimate
beneficial owners are independent of the new applicant and its connected
persons. In this regard, “control” means the ability to exercise or control the
exercise of 30% (or any amount specified in the Hong Kong Code on
Takeovers and Mergers as the level for triggering a mandatory general offer)
or more of the voting power at general meeting, or being in a position to
control the composition of a majority of the board of directors of the
underlying company or business; or
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(ii) with respect to an acquisition of a business (including acquisition of an
associated company and any equity interest in a company other than in the
circumstances covered under sub-paragraph (a) above) or a subsidiary by a
new applicant, the historical financial information of such business or
subsidiary is unavailable, and it would be unduly burdensome for the new
applicant to obtain or prepare such financial information; and the new
applicant has disclosed in its listing document information required for the
announcement for a discloseable transaction under Rules 14.58 and 14.60 of
the Listing Rules on each acquisition. In this regard, “unduly burdensome” will
be assessed based on each new applicant’s specific facts and circumstances
(e.g. why the financial information of the acquisition target is not available and
whether the new applicant or its controlling shareholder has sufficient control
or influence over the seller to gain access to the acquisition target’s books and
records for the purpose of complying with the disclosure requirements under
Rules 4.04(2) and 4.04(4) of the Listing Rules).
Background of the acquisition
Data Element Equity Interest Subscription
In April 2023, 4Paradigm Technology entered into a subscription agreement (the
“Subscription Agreement ”) with Beijing Data Element Intelligent Technology Co., Ltd. ( ̏
ʮ̡)( “ Data Element ”), a limited liability company established in
the PRC, pursuant to which we agree to subscribe for the increased registered capital in Data
Element in an aggregate amount of RMB3,333,333 at a consideration of RMB15 million,
representing approximately 25.0% equity interest in Data Element immediately after the
subscription (the “ Data Element Equity Interest Subscription ”).
The registration with the relevant Administration for Market Registration was completed
on April 27, 2023, and the expected date of settlement of consideration in respect of the Data
Element Equity Interest Subscription is to be agreed among the parties.
To the best knowledge of our Directors, Data Element and its ultimate beneficial owners
are Independent Third Parties. The total consideration payable by us in the Data Element
Equity Interest Subscription was determined through arm’s length negotiation and with
reference to the preliminary series of pre-IPO financing valuation of comparable companies
which engage in big data and document processing businesses as well as Data Element’s
funding needs.
Our Directors considered that the Data Element Equity Interest Subscription is on normal
commercial terms, fair and reasonable and in the interest of our Company and the Shareholders
as a whole.
W AIVERS
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Data Element was founded in 2022 and is principally engaged in offering intelligent
document processing solutions and products with self-developed content processing and
analysis engine for corporate customers in finance, government, retail and manufacturing
sectors. Our Company believes that there is potential business prospect of Data Element
because there is a growing need for enterprises to utilize intelligent document processing tools
in enhancing operational efficiencies, and Data Element is a good match to our long term
strategic business plan.
According to the unaudited management accounts of Data Element, (i) its total assets
amounted to approximately RMB3.5 million as at December 31, 2022, and (ii) its net loss
before and after tax was approximately RMB1.1 million for the year ended December 31, 2022.
Conditions to the waiver granted by the Stock Exchange
We have applied to the Stock Exchange for, and the Stock Exchange has granted a waiver
from strict compliance with Rules 4.04(2) and 4.04(4) of the Listing Rules in respect of the
Data Element Equity Interest Subscription on the following grounds:
(a) Immateriality
Under Rule 14.04(9) of the Listing Rules, all the applicable percentage ratios in
relation to the Data Element Equity Interest Subscription are below 5% by reference to
the most recent audited financial year of the Track Record Period. We consider the Data
Element Equity Interest Subscription to be immaterial in the context of our Company’s
operations as a whole and therefore a waiver from strict compliance with Rules 4.04(2)
and 4.04(4) of the Listing Rules will not affect potential investors’ assessment of our
business and future prospects when considering an investment in our Company.
(b) Acquisition of minority interests only and absence of control
As mentioned above, we only acquired approximately 25.0% equity interest in Data
Element after the Data Element Equity Interest Subscription. As is typical for minority
investments, we will not be able to control a majority of its board of directors of Data
Element, and will not be involved in the daily management of Data Element. In addition,
Data Element has its independent management and operations team, in which our Group
has no participation. Data Element will not be treated as our Company’s subsidiary upon
completion of the Data Element Equity Interest Subscription as we will not control Data
Element. As Data Element will not become subsidiary of our Company, its financial
information will not be consolidated into our Company’s financial information.
(c) Impracticality and undue burden
As (i) we only acquired minority interest in Data Element after the Data Element
Equity Interest Subscription, and will not control Data Element, and (ii) Data Element
will not be consolidated into our financial information, we are unable to provide our
reporting accountant with full access to the financial record of Data Element in order to
fully familiarize with the accounting policies of Data Element and to gather and compile
the necessary financial information and supporting documents to prepare the financial
information of Data Element in strict compliance with Rules 4.04(2) and 4.04(4) of the
Listing Rules. As such, it would be impracticable and unduly burdensome for us to
disclose the financial information of Data Element in the Prospectus in strict compliance
with Rules 4.04(2) and 4.04(4) of the Listing Rules.
W AIVERS
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DIRECTORS
Name Address Nationality
Executive Directors
Dr. Dai Wenyuan ( Ꮦ˖଀) Room 903, Unit 2, Building 6
Block 3, Poly Xishan Linyu
Heilongtan Road
Haidian District, Beijing
PRC
Chinese
Mr. Chen Y uqiang (੶) Room 1301, Unit 4, Level 13
Building 3
West District
Qinghe Jiayuan
Haidian District, Beijing
PRC
Chinese
Mr. Y u Zhonghao ( ɲʕ㒊) No. 1001
10 Dengshikou Avenue East
Dongcheng District, Beijing
PRC
Chinese
Non-Executive Directors
Dr. Y ang Qiang ( เ੶) Flat H, 23/F, Block 5
East Point City
8 Chung Wa Road
Tseung Kwan O, New Territories
Hong Kong
Chinese
Mr. Dou Shuai (܏Room 2205, Building 1
Beijing Palm Springs International
Apartment
No. 8, Chaoyang Park South Road
Chaoyang District, Beijing
PRC
Chinese
Mr. Zhang Jing ( ੵ౺) Flat 6, 25/F, Block 3
11 Hoi Fan Road
Hampton Place
Tai Kok Tsui
Kowloon
Hong Kong
Chinese
DIRECTORS, SUPERVISORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING
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Independent Non-Executive Directors
Mr. Li Jianbin (Ᏽ) 2101, Unit 1, Building No.2
Wanxiangfu, Oak Bay Phase 5
Haidian District, Beijing
PRC
Chinese
Mr. Liu Chijin (ږܵH2 Liying Road
Lixi Garden, 16 Tianzhu Kaifa Street
Shunyi District, Beijing
PRC
American
Ms. Ke Y ele (⮶ᆀ) Flat B, 11/F
Tower 1
Central Park
18 Hoi Ting Road
Kowloon
Hong Kong
Chinese
SUPERVISORS
Name Address Nationality
Mr. Chai Yifei (࠭Room 701, No. 10, Lane 59
Pingyang Road, Minhang District
Shanghai
PRC
Chinese
Ms. Zhou Wenjing ( մ˖᎑) 16, Level 2, Building No. 2
Anhui Dongli
Chaoyang District, Beijing
PRC
Chinese
Ms. Shao Liling (ޛRoom 2802, Unit 2, Level 18,
5 Chaoyang Road
Chaoyang District, Beijing
PRC
Chinese
For details with respect to our Directors and Supervisors, see the section headed
“Directors, Supervisors and Senior Management” in this Prospectus.
DIRECTORS, SUPERVISORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING
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PARTIES INVOLVED IN THE GLOBAL OFFERING
Sole Sponsor China International Capital Corporation
Hong Kong Securities Limited
29/F, One International Finance Centre
1 Harbour View Street
Central
Hong Kong
Joint Global Coordinators, Sponsor-
Overall Coordinator, Overall
Coordinator, Joint Bookrunners,
Joint Lead Managers and Capital
Market Intermediaries
China International Capital Corporation
Hong Kong Securities Limited
29/F, One International Finance Centre
1 Harbour View Street
Central
Hong Kong
Joint Global Coordinators, Overall
Coordinators, Joint Bookrunners,
Joint Lead Managers and
Capital Market Intermediaries
CCB International Capital Limited
12/F, CCB Tower
3 Connaught Road Central
Central
Hong Kong
CMB International Capital Limited
45/F, Champion Tower
3 Garden Road
Central
Hong Kong
China Merchants Securities (HK) Co.,
Limited
48/F, One Exchange Square
8 Connaught Place
Central
Hong Kong
Joint Bookrunners and Capital
Market Intermediaries
Huatai Financial Holdings (Hong Kong)
Limited
62/F, The Center
99 Queen’s Road Central
Hong Kong
ICBC International Securities Limited
37/F, ICBC Tower
3 Garden Road
Hong Kong
BOCI Asia Limited
26/F, Bank of China Tower
1 Garden Road
Central
Hong Kong
DIRECTORS, SUPERVISORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING
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ABCI CAPITAL LIMITED
11/F, Agricultural Bank of China Tower
50 Connaught Road
Central
Hong Kong
BOCOM International Securities Limited
9/F Man Y ee Building
68 Des V oeux Road
Central
Hong Kong
CEB International Capital Corporation
Limited
22/F AIA Central
No. 1 Connaught Road
Central
Hong Kong
China Everbright Securities (HK) Limited
33/F, Everbright Centre
108 Gloucester Road
Wanchai
Hong Kong
Central China International Capital
Limited
Suites 1505-1508, Two Exchange Square
8 Connaught Place
Central
Hong Kong
North Beta International Securities
Limited
Unit 2002, 20/F One IFC
One Habour View Street
Central
Hong Kong
China Sunrise Securities (International)
Limited
Unit 4502, 45/F, The Center
99 Queen’s Road Central
Central
Hong Kong
Futu Securities International
(Hong Kong) Limited
Unit C1-2, 13/F, United Centre
No. 95 Queensway
Hong Kong
CNCB (Hong Kong) Capital Limited
10/F, AIA Central
1 Connaught Road Central
Central
Hong Kong
DIRECTORS, SUPERVISORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING
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Joint Lead Managers and Capital
Market Intermediaries
Orient Securities (Hong Kong) Limited
28th and 29th Floor
100 Queen’s Road Central
Hong Kong
SPDB International Capital Limited
33/F, SPD Bank Tower
One Hennessy, 1 Hennessy Road
Hong Kong
Fosun International Securities Limited
Suite 2101-2105 21/F Champion Tower
3 Garden Road
Central
Hong Kong
Tiger Brokers (HK) Global Limited
1/F, FWD Financial Centre
308 Des V oeux Road
Central
Hong Kong
Valuable Capital Limited
RM 3601-06 & 3617-19
36/F China Merchants Tower
Shun Tak Centre
168-200 Connaught Road
Central
Hong Kong
Riche Bright Securities Limited
Office 2, 7/F, A T Tower
180 Electric Road, North Point
Hong Kong
Legal Advisors to our Company As to Hong Kong law and United States law
Davis Polk & Wardwell
10/F, The Hong Kong Club Building
3A Chater Road
Central
Hong Kong
As to PRC law
JunHe LLP
26/F, HKRI Centre One
HKRI Taikoo Hui 288 Shimen Road (No. 1)
Shanghai
PRC
DIRECTORS, SUPERVISORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING
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As to U.S. export control law
Jacobson Burton Kelley PLLC
1725 I Street, NW
Suite 300
Washington, DC 20006
U.S.
Legal Advisors to the Sole Sponsor and
the Underwriters
As to Hong Kong law and United States law
O’Melveny & Myers
31/F, AIA Central
1 Connaught Road Central
Hong Kong
As to PRC law
Commerce & Finance Law Offices
12-14th Floor, China World Office 2,
No.1 Jianguomenwai Avenue
Beijing, PRC
Reporting Accountant and
Independent Auditor
PricewaterhouseCoopers
Certified Public Accountants and Registered
Public Interest Entity Auditor
22/F, Prince’s Building
Central
Hong Kong
Industry Consultant China Insights Industry Consultancy
Limited
10F, Block B
Jing’an International Center
88 Puji Road, Jing’an District
Shanghai
PRC
Receiving Bank Industrial and Commercial Bank of China
(Asia) Limited
33/F, ICBC Tower
3 Garden Road, Central
Hong Kong
DIRECTORS, SUPERVISORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING
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Registered Office No. L01301-1, Level 13
Building 1, No. 66
Qinghe Middle Street
Haidian District, Beijing
PRC
Headquarters and Principal Place of
Business in the PRC
No. L01301-1, Level 13
Building 1, No. 66
Qinghe Middle Street
Haidian District, Beijing
PRC
Principal Place of Business in Hong Kong 5/F, Manulife Place
348 Kwun Tong Road
Kowloon, Hong Kong
Company’s Website www.4paradigm.com
(The information contained in this website
does not form part of this Prospectus )
Joint Company Secretaries Mr. Xiong Fei (࠭)
Room 1103, Unit 1, Building 1
Xiangshuwan III, Qinghe Town
Haidian District, Beijing
PRC
Ms. Y eung Siu Wai Kitty ( เʃᅆ)
(ACG, HKACG)
5/F, Manulife Place
348 Kwun Tong Road
Kowloon, Hong Kong
Authorized Representatives Mr. Y u Zhonghao ( ɲʕ㒊)
Room 1001, Building 10 East
Dengshi Dongkou Avenue
Dongcheng District, Beijing
PRC
Ms. Y eung Siu Wai Kitty ( เʃᅆ)
(ACG, HKACG)
5/F, Manulife Place
348 Kwun Tong Road
Kowloon, Hong Kong
CORPORATE INFORMATION
– 121 –


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Audit Committee Mr. Li Jianbin (Ᏽ)( Chairman )
Mr. Liu Chijin (ږܵ)
Dr. Y ang Qiang ( เ੶)
Remuneration Committee Ms. Ke Y ele (⮶ᆀ)( Chairlady )
Dr. Y ang Qiang ( เ੶)
Mr. Li Jianbin (Ᏽ)
Nomination Committee Dr. Dai Wenyuan ( Ꮦ˖଀)( Chairman )
Mr. Liu Chijin (ږܵ)
Mr. Li Jianbin (Ᏽ)
Compliance Advisor Guotai Junan Capital Limited
27/F, Low Block
Grand Millennium Plaza
181 Queen’s Road Central
Hong Kong
H Share Registrar Tricor Investor Services Limited
17/F, Far East Finance Centre
16 Harcourt Road
Hong Kong
Principal Banks China Merchants Bank, Haidian Branch
No. 56, North 4th Ring Road West
Beijing, PRC
Industrial and Commercial Bank of
China, Haidian West District Branch
No. 65, North 4th Ring Road West
Beijing, PRC
CORPORATE INFORMATION
– 122 –


--- page 132 ---
The information and statistics set out in this section and other sections of this
prospectus were extracted from different official government publications, available
sources from public market research and other sources form independent suppliers, and
from the independent industry report prepared by CIC. We engaged CIC to prepare the
CIC Report, an independent industry report, in connection with the Global Offering. The
information from official government sources has not been independently verified by us,
the Joint Global Coordinators, Overall Coordinator , Sole Sponsor , Joint Bookrunners,
Capital Market Intermediaries, Joint Lead Managers, any of the Underwriters, any of
their respective directors and advisers, or any other persons or parties involved in the
Global Offering, and no representation is given as to its accuracy. Accordingly the
information from official government sources contained herein may not be accurate and
should not be unduly relied upon.
RAPID DEVELOPMENT OF ARTIFICIAL INTELLIGENCE INDUSTRY
Artificial intelligence is reaching its tipping point of large scale adoption
Artificial intelligence (“AI”) represents a wide-ranging technology that reshapes how
human beings integrate information, analyze data, and derive insights to improve efficiency
and optimize decision-making with the help from machines. After years of development and
field tests, AI has turned into an increasingly adopted technology empowering a variety of
sectors, restructuring certain industry landscapes as a new infrastructure.
AI penetration in the overall economy has been growing but still largely underdeveloped,
mainly due to deterrents such as insufficient data, relatively high cost of adoption, system
security and governance concerns, as well as deployment challenges. In recent years, however,
the market and the society as a whole have been gradually recognizing the transformative effect
of AI. In particular, the below technological and societal progresses have expedited AI’s
commercial applications.
Data accumulation
The world today is substantially digitized and interconnected, resulting in an explosion of
data. 99 zettabytes of data were created, captured, copied and consumed globally in 2022,
which has grown nearly 30 times in the last decade, and will further grow to 264 zettabytes by
2027, according to CIC. Such sheer amount of data give rise to massive opportunities to
uncover the significant insights embedded therein for every organization, yet such amount of
data also present unprecedented challenges for data analysis, which has been increasingly
difficult and costly for human labor to handle. The accumulation of data therefore catalyzed the
adoption of AI. Meanwhile, learning, training and developing from the enriched data, AI keeps
growing smarter and capable of solving real-world problems in a more efficient way.
INDUSTRY OVERVIEW
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Advancement of both computational and algorithmic infrastructure
 Surging computing power : Computing power is closely related to the development
of chips. Most chip firms have their AI chip lineups vastly improved on the
computing power compared to prior generations. According to the CIC Report, the
computing power of newly developed generation of AI chips by major chip firms is
improved to as high as ten times that of the previous generation of the same lineup.
 Reduced time and cost of model training : New algorithms and frameworks have
emerged to boost the efficiency of AI training and industrial deployment. For
example, with transfer learning technology, the insights gained by one trained AI
model are transferrable and reproducible; with automated machine learning
(AutoML), all developers and business line users are enabled to develop and
optimize machine-learning models, reducing heavy reliance on machine-learning
experts.
Improved awareness of deploying AI applications across all sectors
AI continues to transform industries across the globe, and decision makers of all kinds are
taking notice, and making their investments in AI. According to the CIC Report, in 2022, the
global AI spending reached US$199.7 billion, representing a CAGR of 29.4% from US$71.3
billion in 2018, and is expected to expand to US$562.9 billion in 2027 with a CAGR of 23.0%.
It is estimated that more than 15% of the global GDP would be driven by AI by 2030, according
to the CIC Report.
China is pioneering the development of global AI industry
Among the forerunners that are embracing AI with open arms, China is home to a vibrant
market that is now pioneering the global AI industry with transcending boundaries and surging
AI innovations. In terms of the demand side, AI is believed to be an accessible and easy-to-use
instrument that leads to operational efficiency and business success in the digital era for
entities of all sizes in China. China’s significant economic scale and considerable social
activity level bring about a rich variety of application scenarios that are AI-penetrable. There
exists huge demand in China for AI solutions that are tailored for diverse and dynamic
scenarios and real-world tasks, encouraging innovation in both technology and business model.
In terms of the supply side, AI providers in China benefit from large and growing amount of
data derived from the economic scale and social activity level, strong talent pool, advanced
research capabilities and vibrant AI domain players. Moreover, Chinese government’s
supporting policies and regulations, which promote the development of AI technologies, the
education of AI talents and the application of AI solutions, are expected to further drive the
rapid development of China’s AI industry. As a result, China is leading the innovation and
commercialization of AI globally.
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According to the CIC Report, China’s AI spending reached RMB225.5 billion in 2022,
and is estimated to grow to RMB691.0 billion in 2027 with a CAGR of 25.1%. China is a major
AI market with increasing global influences, evidenced by the following facts according to the
CIC Report and “Artificial Intelligence Index Report 2022” by Stanford Institute for
Human-Centered Artificial Intelligence (HAI):
 China was the second largest AI market globally in terms of AI spending in 2022,
capturing approximately 18% of global AI spending.
 With surging demand for AI, the growth of China’s AI spending is expected to reach
a CAGR of 25.1% from 2022 to 2027, outpacing the growth of global AI spending
over the same period.
 China has consistently been the largest market globally in terms of the number of AI
patent application since 2016, with one of the largest talent pools of top-tiered AI
researchers.
 China has consistently been the largest market globally in terms of both the number
of AI journal publications and AI journal citations since 2016.
China’s AI industry can be categorized into four major segments in terms of fields of
application: decision-making AI, visual AI, speech and semantics AI and AI robots. The
following sets forth the definition and typical application scenarios for each of the four
categories:
 Decision-making AI recognizes patterns hidden in data, guides decision-making
process on data insights, and addresses issues that are most pertinent to core
business operations. Typical applications include, but are not limited to, smart sales
and marketing, risk management, and supply chain management.
 Visual AI identifies, tracks and measures objects based on visual data, and translates
such information into insights and judgments. Typical applications include, but are
not limited to, smart access control, public safety surveillance, optical character
recognition (“OCR”).
 Speech and semantics AI aims to recognize, generate and exchange voices, texts and
other language information with human beings to save human labor in certain
repetitive communication scenarios. Typical applications include, but are not limited
to, smart customer service, intelligent transcription, interactive voice response.
 AI robots are designed to replace human beings in performing certain repetitive or
dangerous tasks. Typical AI robots include, but are not limited to, industrial drones,
automated guided vehicles (“AGVs”), surgical robots.
Among the above segments, decision-making AI is expected to be the fastest-growing one
according to the CIC Report. The size of China’s decision-making AI market in terms of AI
spending reached RMB53.2 billion in 2022 and is estimated to grow to RMB210.4 billion in
2027, with a CAGR of 31.7%.
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Market Size Breakdown of China AI Industry by Segment, 2018A-2027E
2018 2019 2020 2021 2022 2023E 2024E 2025E 2026E 2027E
(RMB billion)
AI robots Speech and semantics AI
Visual AI Decision making AI
CAGR (2018-2022) CAGR (2022-2027E)
Decision making AI 48.6% 31.7%
Visual AI 42.6% 21.9%
Speech and semantics AI 31.2% 25.2%
AI robots 32.7% 22.3%
China AI spending 39.7% 25.1%
10.9 18.8 26.8 47.1 53.2 72.4
96.6 126.5
163.8
210.4
23.4 39.1 55.5
86.1 96.8
118.3
144.7
176.2
214.1
120.9
13.3 19.4
23.4
36.0
39.4
51.9
65.6
67.0
81.5
260.7
11.6 16.3
22.3
29.5
36.1
44.5
54.7 81.5
99.8
99.0
59.3
93.6
128.0
198.7 225.5
287.1
361.6
451.2
559.2
691.0
Source: CIC Report
Note: The market size was determined and calculated based on (i) the primary and secondary research performed by
CIC on the status quo and future trends of China’s AI industry, (ii) with references to relevant downstream
vertical industry data publicly released by National Bureau of Statistics and other official organizations and
associations, such as China Banking and Insurance Regulatory Commission and China Association of
Automobile Manufacturers.
DECISION-MAKING AI MARKET IN CHINA
Significant value unleashed by machines in facilitating decision-making
To fully utilize the value contained in data, many organizations have adopted a
data-driven approach to support decision-making in their daily operations. With regard to
distilling insights from massive and ever growing data, it makes a difference if the data
processor is machine instead of human.
Prior to the development of AI and its eventual commercial application, even with enough
data inputs, organizations have had to rely on human perception, experience, judgment and
sometimes even intuition to make decisions. We are currently living in an ever-changing world
where common sense and accumulated experiences can no longer anticipate the risks involved
in making a critical decision, nor can we bear the consequences of making wrong decisions.
Meanwhile, it becomes more and more difficult, costly and ultimately impractical to process
and analyze massive data in the digital era manually.
INDUSTRY OVERVIEW
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The AI-driven decision-making model, without human beings’ limits such as fixed
throughput and cognitive bias, is now automating and augmenting the workforce, and in some
cases even freeing human force from the tradition mode of workflow to improve the reliability
and efficiency of decision-making. With increasingly diverse scenarios penetrated, decision-
making AI can optimize almost all building blocks of enterprise operation from top to bottom,
including, but not limited to, expanding business scale, improving sales and marketing
efficiencies, enhancing operating leverage. For example, in the context of smart sales and
marketing, AI-driven solutions, by increasing the accuracy of targeted marketing, can support
revenue growth for e-commerce companies. AI-driven decision-making is also transforming
risk management in the banking and finance industry. For instance, using AI-based credit risk
models could reduce default rates significantly. More and more industries are embracing the
great impact of the advanced decision-making AI technology.
Distinguished from other AI solution segments, which are primarily focused on
perception and cognition of data patterns, decision-making AI provides predicative analysis
and recommendations to support and guide business actions. It is applied in various real-world
scenarios such as targeted marketing, risk management and day-to-day operations
optimization. The spending on decision-making AI in China is estimated to enjoy significant
growth and to take up a higher proportion in the overall AI spending in the coming five years,
according to CIC.
The platform-centric approach to scale up application of decision-making AI
Despite the favorable market environment of advancing decision-making AI in China,
organizations are often faced with certain key challenges that make it difficult to self-develop
and adopt AI applications:
Shortage of AI experts : The shortage of experienced AI experts and data scientists, has
long been a critical deterrent for organizations to establish in-house AI talent team that can
develop and operate AI infrastructures. For many organizations, shortage of talents is a major
hurdle to develop AI in-house.
High TCO (total cost of ownership) and uncertain ROI (return on investment) : Building
a proprietary AI system, or assembling multiple point-solution AI software applications can be
very costly for most enterprises. For example, CIC estimates that it typically costs a company
an upfront investment of approximately RMB500 million to internally develop a full set of
enterprise-level AI system, which, coupled with costs of continuous maintenance at
approximately RMB50 million per annum, results in a much higher TCO compared to an
annual spending of approximately RMB50 million to RMB100 million, should the company
build an AI system with the same standard through external procurement. Moreover, due to
lack of AI expertise and model training, such internally developed AI systems may consume
even greater investments and cause longer time to value on an ongoing basis, and the
effectiveness and efficiency gain from such systems could still be unsatisfactory, resulting in
highly uncertain ROI.
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Deployment issues : Given the technology- and capital-intensive nature, it could take
significant resources for companies to deploy AI solutions at scale for developing their
customized applications that automate the internal processes such as decision-making. In most
cases companies need to adopt a “trial and error” approach for developing and implementing
in-house developed AI applications or purchased point solutions in order to find the optimal
application portfolio that best suits their business practices. The deployment process takes a
long time. As estimated by CIC, it takes approximately three years on average for enterprises
to establish large-scale AI infrastructure and AI capabilities internally with their current AI
team setup.
Data and system incompatibility : Adoption of outsourced point-solution AI applications
poses the risk of incompatibility between the point solution applications and/or between the
point solution applications and in-house developed AI applications. Moreover, organizations’
increased awareness of data security, data privacy protection and centralized data and system
management adds to the complexity of deploying different point solutions and digesting
multiple data sources.
The rapid emergence of platform-centric AI solutions in China recognized and well
addressed the aforesaid challenges. Unlike point solutions, platform-centric decision-making
AI solutions provide end users with an AI development platform in addition to AI applications
and underlying computing infrastructure. Such an AI development platform provides end users
with uniform development standards, high compatibility as well as flexible expansion of
applications per actual demands. With the plug-and-play feature and infrastructure for further
developing and operating use-case-specific solutions, decision-making AI platforms allow for
much greater flexibility, scalability, compatibility and easier management.
Comparison between decision-making AI platform and point solution approach
Metrics Decision making AI platform Point Solution Approach
Flexibility and
scalability
• Allows for flexible, on-demand AI development
• Modules and applications are transferrable and
reproducible for similar/adjacent scenarios
• Point solutions are mostly fixed, one-off deliverables
• Difficult to meet extra customized demands that need to
be expanded on the original solution
Compatibility of
data and AI
applications
• Different sources of data can be integrated and
uniformly defined on the platform, which
eliminates data inconsistency and information
silos
• Applications are compatible with the
development environment and rules
• Each specific workflow is usually provided by different
vendors and involve only part of the users’ whole
datasets – might create new data silos within an already
fragmented data landscape
• Need to be stitched together  in order to interoperate,
and applications could vary in the basic framework, data
standard, processing rules, etc.
Management of AI
applications
• Features that enable fast and convenient AI
application management are usually provided
upfront
• A uniform security model for all datasets and
applications is pre built-in
• Extra function to manage AI applications is needed
• Deploying an extra security model that functions
effectively across different individual applications can be
much more costly
Source: CIC Report
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Within the decision-making AI market, the platform-centric decision-making AI market in
China is a vastly expanding subsegment. The size of platform-centric decision-making AI
market reached RMB12.8 billion in 2022 in terms of AI spending and is estimated to grow at
a CAGR of 42.3% to RMB74.9 billion in 2027, outgrowing the decision-making AI industry
as a whole. The key difference between non-platform-centric and platform-centric decision
making AI solutions lies in their potential for AI development and deployment to meet
changing demands, namely the expansibility of more AI applications in other use case
scenarios and the compatibility of those AI applications. Non-platform-centric decision-
making AI applications are mostly fixed and one-off deliverables and can hardly adapt to users’
extra demands that require expansions on the original solution, primarily because AI
applications designed for different workflows could also differ in their basic frameworks,
underlying data governance infrastructure, or processing rules, leading to incompatibility of AI
systems. In contrast, the decision-making AI platform underlying platform-centric decision
making AI solutions provide operating environment and tools that allow for flexible AI
development with transferrable and reproducible modules and applications for similar or
adjacent scenarios. It also unifies the development environment and rules of all applications
built on top. This unification saves the translation costs in integrating non-platform-centric
decision-making AI applications that were independently developed, and it allows the AI
systems to be perfectly compatible with each other. In this regard, platform-centric decision-
making AI solutions leave more room for enterprises’ smooth and integrated AI development
and deployment in the future.
Market Size of Decision Making AI Market in China, 2018A-2027E
Platform-centric decision making AI market Non-platform-centric decision making AI market
(RMB billion)
CAGR (2018-2022): 42.2% CAGR (2022-2027E): 27.4%
Non-Platform-centric
CAGR (2018-2022): 87.7% CAGR (2022-2027E): 42.3%
Platform-centric
2026E 2027E2025E2024E2023E20222021202020192018
53.2
210.4
163.8
126.5
96.6
72.4
47.1
26.8
18.8
10.9
135.5
109.7
87.8
69.3
53.5
40.3
21.8
37.6
16.29.9
74.9
54.1
38.727.318.912.85.0 9.42.61.0
Source: CIC Report
Note: The market size was determined and calculated based on further primary and secondary research performed
by CIC on top of China’s AI industry market breakdown presented above.
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Competitive landscape
The following table sets forth the top five players in the platform-centric decision-making
AI market in China by revenue in 2022, according to CIC. The top five players represented a
combined market share of approximately 56.1%, as measured by relevant revenue in 2022.
According to the CIC report, we were the largest platform-centric decision-making AI provider
in China in terms of revenue in 2022.
Ranking Company
Platform-centric
decision-making
AI revenue,
2022
Market share,
2022
(RMB billion) (%)
1 4Paradigm 2.9 22.6
2 Company A (1) 1.6 12.3
3 Company B (2) 1.1 8.9
4 Company C (3) 0.9 6.8
5 Company D (4) 0.7 5.6
Top five in total 7.2 56.1
Source: CIC Report
Note: The revenues of 4Paradigm’s competitors presented above were based on the primary research
performed by CIC as there is no publicly available information regarding their platform-centric
decision-making AI revenue.
Notes:
(1) Company A, founded in 2000 and headquartered in Beijing, is a leading internet platform specializing
in internet-related services and AI solutions, such as AI cloud services and solutions, mobile
applications and services, and intelligent driving. Company A is listed on the Stock Exchange and the
NASDAQ.
(2) Company B, founded in 1999 and headquartered in Hangzhou, is a leading technology company
focusing on retail, consumer services and technology solutions. Company B operates e-commerce
platforms consumer service platforms, cloud services and solutions such as cloud computing, big data
and AI, and other business such as digital media and entertainment. Company B is listed on the Stock
Exchange and New Y ork Stock Exchange.
(3) Company C, founded in 1987 and headquartered in Shenzhen, is a leading technology company which
primarily designs, develops and sells telecommunication solutions (such as telecommunication base
stations) and consumer electronics (such as mobile phones and laptops). Company C is a private
company with a registered capital of approximately RMB40 billion.
(4) Company D, founded in 1998 and headquartered in Shenzhen, is a leading technology company that
provides internet-related services and solutions for both consumers and enterprises. Its business include
communications and social media, digital content, entertainment, AI, cloud services, among others.
Company D is listed on the Stock Exchange.
We believe 4Paradigm differentiates itself from competitors in many ways, at the core of
which is that its business solely focuses on providing pure-play AI solutions.
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According to the CIC Report, 4Paradigm’s major competitors are internet conglomerates
that typically offer AI solutions merely to complement their diversified business portfolios, and
AI solutions account for only a portion of their expansive business scope. For details of the
competitive strengths that contribute to 4Paradigm’s success and differentiate it from its
competitors, see “Business – Competitive Strengths.”
Besides, regarding the nature of AI solutions provided, 4Paradigm focuses on decision-
making with a platform-centric approach, whereas its major competitors show a blended
solution portfolio with a considerable proportion of AI-related revenues generated from visual
and speech and semantics AI solutions, as well as AI applications provided independently of
a platform. This distinction gives rise to 4Paradigm’s reputation for “professionalism” when it
comes to demands for platform-centric decision-making AI solutions.
KEY SUCCESS FACTORS FOR AI SOLUTION PROVIDERS IN CHINA
Value creation for customers
In order to break into a market for any industry or vertical, AI solution providers normally
seek to land on selective customers as a starting point, particularly on industry leaders. They
first establish deep trust and obtain cooperative relationship with these selective customers that
are recognized as “lighthouses” in the respective sectors and verticals. After helping these
lighthouse users identify critical issues, provide solutions and achieve the objectives of
business improvement, AI solution providers typically identify incremental demands and thus
expand their scale of deployment. The AI-empowered improvement of the lighthouse users will
then serve as proof points to keep attracting potential customers in the respective industries and
verticals. Therefore, the ability to create value and help customers achieve continuous success
is of vital importance for decision-making AI firms to pioneer in the industry.
First-mover advantage
Upon helping the lighthouse users achieve business improvement, decision-making AI
providers then can leverage their industry know-how and practical experiences to attract and
serve other customers in the targeted industries. First-mover advantage is a vital factor of the
success in the AI industry. First-movers benefit from training AI for rich application scenarios,
frequently engaging with their lighthouse users, and accumulating industry know-how that in
turn helps them quickly expand their user base, formulating a virtuous cycle. They are
therefore able to iterate smarter AI and to quickly adapt AI solutions to evolving user needs
effectively.
Advanced technology and innovation
Technology capability is crucial for the prosperity of AI solutions providers. In light of
the rapidly evolving nature of the AI industry, the ability to continuously adopt advanced
technologies and to roll out innovative solution and service offerings is essential to maintaining
competitive advantages.
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Talent acquisition and retention
Demand for AI talents has grown rapidly in the past few years. As the industry rapidly
evolves and as AI solutions come to be widely deployed, companies at every level of AI
sophistication become conscious of skill gaps and aim to fill them. The technology-intensive
nature of the AI business also requires experienced and skilled talents. Therefore, the ability
to continue attracting and retaining talents has become a major success factor.
RECENT INDUSTRY DEVELOPMENT
Large language models (“LLMs” for short), as a general AI model, have become a
prominent topic in the AI industry in recent years as they have shown remarkable capabilities
in natural language understanding and generation. Particularly, LLMs have received huge
public attention since the end of 2022 with the launch of several ground-breaking LLM-based
products.
According to CIC, instead of being dominated by a general AI model, the future AI
technologies will likely be more diversified, with general AI models (such as LLMs) and
specialized AI systems (such as decision making AI models) co-existing for different purposes.
LLMs are fundamentally different from decision-making AI models in terms of underlying
technologies and usage scenarios, and therefore, value propositions, which make them more
complementary than competitive in real-world application. The table below demonstrates a
detailed comparison between LLMs and decision making AI models.
Comparison items LLMs Decision making AI models
Value propositions  Provide plausible answers
to generic topics
 Provide predictive
analysis and guide
business decision making
in specified scenarios
Underlying technology  Generative model  Distinctive model
Usage scenarios  Generation of answers
based on retrospection of
massive historical data on
generic topics
 Prediction of future status
based on summarizing
patterns of historical data
on specific events and
real-time input
Data requirements and
TCO
 Extremely large data
scope, typically of largely
diverse and generic topics
 High TCO due to high
training cost of such
massive data
 Adequate data scope,
typically related to
specific business tasks
 Affordable TCO thanks to
training of only the most
relevant data
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Furthermore, products based on a general AI model now are usually accessible on the
public cloud, which could be a potential concern for end users in certain industry verticals that
pay particular attention to data security and privacy, such as public institutions and financial
institutions. Specialized AI systems, however, could be optionally deployed on private cloud
or on premise, which makes them more acceptable to such end users.
SOURCES OF INFORMATION
We commissioned China Insights Consultancy, an independent market research and
consulting firm, to provide an analysis of, and to produce a report (the “CIC Report”) on
China’s AI market. China Insights Consultancy, founded in Hong Kong, provides professional
services including, among others, industry consulting, commercial due diligence and strategic
consulting. We have agreed to pay a fee of RMB1,640,060 to China Insights Consultancy in
connection with the preparation of the CIC Report. The report was prepared independent of the
influence of us and other interested parties. We have extracted certain information from the
CIC Report in this section, as well as elsewhere in this Prospectus, to provide our potential
investors with a more comprehensive presentation of the industry in which we operate.
During the preparation of the CIC Report, China Insights Consultancy performed both
primary and secondary research, and obtained knowledge, statistics, information on and
industry insights into China’s AI market. Primary research involved interviewing key industry
experts and leading industry participants. Secondary research involved analyzing data from
various publicly available data sources.
The market projections in the CIC report are based on the following assumptions: (i) the
overall social, economic, and political environment in China is expected to remain stable
during the forecast period; (ii) relevant key drivers are likely to drive the continued growth of
China’s AI market throughout the forecast period; and (iii) there is no extreme force majeure
or unforeseen industry regulation in which the industry may be affected in either a dramatic or
fundamental way. All forecasts in relation to market size are based on the general economic
conditions as of the Latest Practicable Date.
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Information disclosed in this section is relevant PRC laws, regulations and
regulatory documents in effect which have a significant impact on our operations in the
PRC as of the date of this Prospectus (hereinafter referred to as “PRC Laws”), which are
subject to change in the future, but it does not include a detailed analysis of PRC Laws
related to our business activities and operations in the PRC, or serve as all PRC Laws
applicable to our operations in the PRC.
REGULATIONS AND POLICIES ON INFORMATION INDUSTRY
Policies on Artificial Intelligence
In accordance with the Notice of the State Council on Promulgating “Made in China
2025” Plan (Ι೯ʕ਷Ⴁி2025ٝwhich was promulgated by the State
Council on May 8, 2015 and came into effect on the same date, to fully implement the intention
of the 18th National Congress of CPC and the Second, Third and Fourth Plenary Sessions of
the 18th Central Committee of the CPC and adhere to the path of new industrialization with
Chinese characteristics, the promotion of integrated development of the next generation
information technology and manufacturing technology and regard intelligent manufacturing
are the main directions of comprehensive integration of informationization and
industrialization. And efforts should be made to develop intelligent equipment and intelligent
products, promote intelligent production process, cultivate new production methods, and
comprehensively enhance the intelligent level of research and development, production,
management and service of enterprises.
The Development Plan of New Generation Artificial Intelligence (஝
ྌ) which was promulgated by the State Council on July 8, 2017 and came into effect on the
same date, according to which, the State accelerates the cultivation of an artificial intelligence
industry with a major leading role, promote the in-depth integration of artificial intelligence
and various industrial fields, and form a data-driven, human-machine collaboration, cross-
border integration, and co-creation and sharing of intelligent economic forms. Data and
knowledge have become the first element of economic growth, human-machine collaboration
has become the mainstream mode of production and service, cross-border integration has
become an important economic model, co-creation and sharing has become a basic feature of
economic ecology, personalized demand and customization have become a new trend in
consumption. Develop key basic software such as artificial intelligence-oriented operating
systems, databases, middleware, and development tools, break through core hardware such as
graphics processors, and study image recognition, speech recognition, machine translation,
intelligent interaction, knowledge processing, control decision-making and other intelligent
system solutions and cultivate and expand the basic software and hardware industries for
artificial intelligence applications.
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The Guidelines for the Construction of the National New Generation of AI Open
Innovation Platform (ˏ), promulgated by
Ministry of Science and Technology of the People’s Republic of China on August 1, 2019 and
came into effect on the same date, pointed out that “open and sharing” shall be the important
philosophy in promoting artificial intelligence innovation and industry development in China,
and encouraged to open innovation platforms for companies to do testing, and thus to form
standard and modularized models, middleware and applications for providing services to the
public in the form of open interfaces, model libraries, algorithm packages, etc.
The Guidelines for the Construction of the National New Generation Artificial
Intelligence Innovation and Development Pilot Zone (ܔ
ˏ), promulgated by Ministry of Science and Technology of the People’s Republic of
China on August 29, 2019, amended on September 29, 2020 and came into effect on the same
date, underlines that an environment conducive to the innovation and development of artificial
intelligence shall be created, as well as to promote the construction of artificial intelligence
infrastructure and strengthen the conditional support for the innovation and development of
artificial intelligence.
Regulations on Computer Software
In accordance with the Regulations on the Protection of Computer Software (ၑዚழ΁
ᚐૢԷ) promulgated by the State Council on June 4, 1991 and latest amended on January
30, 2013, with the latest revision effective on March 1, 2013, Chinese citizen, legal person or
other organization is entitled under the copyright of the software he/it has developed, including
the right of publication, right of acknowledgement, right of alteration, right of reproduction,
right of distribution, right of leasing, right of dissemination, right of translation and other
rights that software copyright owners shall have, regardless of whether such software has been
published.
In accordance with the Measures for Registration of Computer Software Copyright (ၑ
جpromulgated by the National Copyright Administration on April 6,
1992 and latest amended on February 20, 2002, with the latest revision effective on the same
date, software copyrights, exclusive software copyright licensing contracts and transfer
contracts shall be registered, and the National Copyright Administration shall be the competent
authority for the administration of software copyright registration and has certified the China
Copyright Protection Centre as the institution responsible for software registration.
Applications that comply with the rules shall be granted registration, and a corresponding
registration certificate shall be issued by the China Copyright Protection Centre.
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National Catalogue for Guidance on Industrial Restructuring
In accordance with the National Catalogue for Guidance on Industrial Restructuring
(2019 V ersion) (ኬͦ፽(2019 ϋ͉)) which was promulgated by the National
Development and Reform Commission on October 30, 2019 amended on December 30, 2021
and came into effect on the same date, big data, cloud computing, software and information
technology service and blockchain information services within the extent permitted by PRC are
under the encouraged category.
Outline of the 14th Five-Y ear Plan for National Economic and Social Development
The Outline of the 14th Five-Y ear Plan for National Economic and Social Development
of the People’s Republic of China and Outlines of Objectives in Perspective of the
Y ear 2035 (ʞϋ஝ྌձ2035ࠅ,)
promulgated by the Standing Committee of the National People’s Congress on March 11, 2021
and came into effect on the same date, points out the focus of key areas include high-end chips,
operating systems, key artificial intelligence algorithms, sensors, and PRC shall speed up
technology R&D, and make breakthroughs in basic theories, basic algorithms, and equipment
materials.
Policies on the Software Industry
The Several Policies on Further Encouraging the Development of the Software and
Integrated Circuit Industries (ഄ) which was
promulgated by the State Council on January 28, 2011 and came into effect on the same date,
specifies a series of policies on tax preference, promotion of investment and scientific research
and talent support for the software industry.
REGULATIONS RELATING TO INTERNET INFORMATION SECURITY AND
PRIV ACY PROTECTION
In accordance with the Law of the Cybersecurity Law of the People’s Republic of China
(جwhich was promulgated by the Standing Committee of the
National People’s Congress on November 7, 2016 and came into effect on June 1, 2017, PRC
adopts graded system for cybersecurity protection, under which network operators are required
to perform the obligations of security protection to ensure that the network is free from
interference, disruption or unauthorized access, and prevent network data from being disclosed,
stolen or tampered. In the event that the network operator fails to fulfill obligation concerning
graded system for cybersecurity protection, the competent authority shall warn such operator
and order it to make rectifications. A fine ranging from RMB10,000 to RMB100,000 shall be
imposed on such operator if it refuses to make rectifications or in case of consequential severe
damage to the network, and a fine ranging from RMB5,000 to RMB50,000 shall be imposed
on the supervisor directly in charge.
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In accordance with the Administrative Measures for the Hierarchical Protection of
Information Security (جwhich was promulgated by the Ministry of
Public Security, State Secrecy Administration State Cryptography Administration, and the
Information Office of the State Council on June 22, 2007 and came into effect on the same date,
and the Guide for the Grading of Information Security and CybersecurityτΌҦஔၣഖ
یܸwhich was promulgated by Standardization Administration of the PRC
on April 28, 2020 and came into effect on November 1, 2020, the hierarchical protection of the
information security at the national level shall follow the principle of “independent grading and
independent protection”. Accordingly, the security protection grade of the information system
shall be determined by entities operating and using an information system in accordance with
the applicable rules. And in the cloud computing environment, based on different service
modes, the cloud computing platform/system is divided into different grading objects.
In accordance with the State Security Law of the People’s Republic of China ( ʕശɛ͏
جwhich was promulgated by Standing Committee of the National People’s
Congress on July 1, 2015 and came into effect on the same date, the PRC government shall
develop network and information security assurance system, enhance network and information
security assurance capabilities, strengthen innovative research and development and
application of network and information technologies and realize the security and controllability
of network and information core technologies, critical infrastructure and information systems
and data in key areas; the PRC government shall also enhance network management, prevent,
deter and punish network criminal acts such as cyber-attacks, network intrusion, network theft
and illegal spread of harmful information in order to safeguard the sovereignty, security and
development interests of the state cyberspace.
In accordance with the Criminal Law of the People’s Republic of China ( ʕശɛ͏΍ձ
جwhich was promulgated by the National People’s Congress on July 6, 1979 and latest
amended on December 26, 2020, with the latest revision effective on March 1, 2021, a network
service provider is subject to criminal liability if such network service provider fails to perform
such obligation to manage information network security as specified by laws and
administrative regulations, and refuses to make corrections when is ordered by a supervisory
authority to do so, and involves any of the specified serious cases.
In accordance with the Data Security Law of the People’s Republic of China ( ʕശɛ͏
جwhich was promulgated by the Standing Committee of the National
People’s Congress on June 10, 2021 and came into effect on September 1, 2021, PRC protects
the rights and interests of individuals and organizations relating to data, encourages the lawful,
reasonable and effective use of data, guarantees the orderly and free flow of data in accordance
with the law, and promotes the development of the digital economy with data as a key element.
And PRC establishes a data classification and hierarchical protection system and data security
review system, under which data processing activities that affect or may affect national security
shall be reviewed for national security. A decision on security review made in accordance with
the law shall be final. Processors of important data shall establish a sound data security
management system throughout the whole process, organize data security education and
training, and take corresponding technical measures and other necessary measures to ensure
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data security, in accordance with the provisions of laws and regulations. To carry out data
processing activities by making use of the Internet or any other information network, the
aforesaid obligations for data security protection shall be performed on the basis of the graded
protection system for cybersecurity. Provided that the national core data management system
is violated, which endangers the sovereignty, security and development interests of PRC, the
relevant competent authority will impose a fine of not less than RMB2 million but not more
than RMB10 million, and may order suspension of the relevant business, stop the business for
rectification, and revoke the relevant business permit or business license as the case may be;
if a crime is constituted, criminal liability will be investigated in accordance with the law.
On November 14, 2021, the CAC released the Network Data Security Management
Regulations (Draft for Comment) (the “Draft Regulations”) ( ၣഖᅰኽτΌ၍ଣૢԷ(ᅄӋจ
Ԉᇃ)). The Draft Regulations, among other things, stipulates that (i) data processors possess
personal information of more than one million users seeking a public listing in a foreign
country, and (ii) data processors seeking a public listing in Hong Kong that influence or may
influence national security, must apply for a cybersecurity review, in accordance with the
relevant stipulations of the State. On 28 December 2021, the CAC and other twelve PRC
regulatory authorities jointly revised and promulgated the Cybersecurity Review Measures
(), which came into effect on 15 February 2022, and the Measures for
Cybersecurity Review() which took effect on 1 June 2020 was
abolished at the same time. The Cybersecurity Review Measures provides that, among others,
(i) the purchase of cyber products and services by critical information infrastructure operators
(the “CIIOs”) and the network platform operators (the “Network Platform Operators”) which
engage in data processing activities that affects or may affect national security shall be subject
to the cybersecurity review by the Cybersecurity Review Office (܃the
department which is responsible for the implementation of cybersecurity review under the
CAC; and (ii) the Network Platform Operators with personal information data of more than one
million users that seek for listing in a foreign country are obliged to apply for a cybersecurity
review by the Cybersecurity Review Office.
However, the Draft Regulations provide no further explanation or interpretation of
“influence or may influence national security.” As advised by our PRC Legal Advisor,
according to the National Security Law (جnational security refers to the condition
in which the state power, sovereignty, unity and territorial integrity, people’s welfare,
sustainable economic and social development and other vital interests of the State shall
relatively face no danger or encounter no internal and external threats, as well as the capability
to safeguard sustainable safety condition. The specific scope of what situations would be
considered “influence or may influence national security” will be subject to the identification
and interpretation of the PRC government authorities. At present, the Draft Regulations had
only been released for consultation purposes, and this requirement is newly included in the
Draft Regulations, as such there still remain uncertainties as to its final content, anticipated
adoption or effective date, final interpretation and implementation, and other aspects.
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Based on the literal interpretation of the Draft Regulations, our PRC Legal Advisers are
of the view that, given that (i) we are a provider of AI solutions, including our AI-empowered
precision marketing services, for corporate users and our primary business is to provide
privatization deployment solutions, in which we will not access any data owned or held by
corporate users; (ii) for cloud-based subscriptions, we offer Sage Platform and other
ready-to-use applications through public cloud services offered by third party vendors and we
are only provided with the administration access which allows us to help users with coding and
system integration upon users’ request for the sole purpose of assisting the users to utilize our
solutions, and not in any way participating or assisting the corporate users with data processing
activities, and we do not access or process any data of our users; (iii) our core technologies are
sub-categories of machine learning and are embedded as operating modules (“operators”) in
our AI developer suites, and we do not own, collect or process data of our users on our servers
during the machine learning process, (iv) we mainly obtain personal information of our
employees, business contacts, candidates who applied for our open positions and visitors with
due legal basis; (v) we do not purchase or acquire in any other way any personal information,
or carry out any other form of cooperation in respect of exchange, cleaning and processing of
personal information, and neither do we process any important data based on the definition
under the Draft Regulations, our business operations do not have a bearing on national security
and would not likely to render the vital interests of the State with danger or encounter internal
or external threats, and hence, if the Draft Regulations remains in its current form after its
promulgation, it may be unlikely that we would be required to undergo a cybersecurity review
for the proposed Listing.
Up to the Latest Practicable Date, we had not been notified by any authorities of being
classified as a data processor carrying out data processing activities that influence or may
influence national security, neither had we been subject to any cybersecurity review, enquiry,
investigation or notice by the CAC or any other authorities in connection with the proposed
Listing. We and our PRC Legal Advisor are of the view that, assuming the Draft Regulations
become effective in their current forms, they will not have a material adverse impact on our
business, results of operations, or the proposed Listing on the basis that (i) as disclosed in
“Business – Data Privacy and Security”, we have implemented comprehensive internal policies
on protecting data privacy and security under the supervision of our Chief Architect, with the
purpose to ensure data and information security and ensure compliance with all applicable laws
and regulations; (ii) as of the Latest Practicable Date, we had not been subject to material fines,
mandatory rectifications or other sanctions imposed by any government authorities in relation
to data and cybersecurity; (iii) during the Track Record Period and as of the Latest Practicable
Date, there had been no material incident of data or personal information leakage, infringement
of data protection and privacy laws and regulations, and there had been no investigation or
other legal proceeding, to the best knowledge of the Company, pending or threatened against
our Group initiated by competent government authorities or third parties, that will materially
and adversely affect our business operations; and (iv) we will continue to pay close attention
to the legislative and regulatory developments in data security and comply with the latest
regulatory requirements. We believe that we are compliant with the regulations and policies in
effect issued by the CAC to date. Nevertheless, there remain uncertainties with respect to any
future development of the relevant regulatory regime. There can be no assurance that the
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relevant authorities will not take a view that is contrary to or otherwise different from that of
our PRC Legal Advisor above, and it is also possible that the PRC government authorities may
require us to apply for the cybersecurity review for other reasons. In light of the above
uncertainties, as of the Latest Practicable Date, we had not applied for such cybersecurity
review. We will closely monitor the rule-making process and will assess and determine whether
we are required to apply for the cybersecurity review when and once the Draft Regulations is
formally promulgated.
On July 10, 2023, the CAC, consented by NDRC Ministry of Education, Ministry of
Science and Technology, MIIT, Ministry of Public Security, National Radio and Television
Administration, promulgated the Provisional Administrative Measures for Generative Artificial
Intelligence Services (جGenerative Artificial Intelligence
Services Measures”), effective on August 15, 2023. The Generative Artificial Intelligence
Services Measures impose compliance requirements for providers of generative AI services to
the general public within the territory of PRC. The Generative Artificial Intelligence Services
Measures provide, among other things, that the provider of generative AI services of text,
image, audio or video to the general public shall (i) assume the responsibilities as the producers
of the AI-generated content thereon, and (ii) any provider of generative artificial intelligence
services with attribute of public opinions or capable of social mobilization shall conduct
security assessment in accordance with the relevant regulations, and complete the formalities
for algorithm filing, change or deregistration in accordance with Provisions on the
Administration of Algorithm-generated Recommendations for Internet Information Services
(֛On the basis that our SageGPT is only provided to
enterprises but not to the general public, our PRC Legal Advisor is of the view that, based on
the textual interpretation of the Generative Artificial Intelligence Services Measures, it may be
unlikely that we would be required to apply for security assessment or complete the formalities
of algorithms filing, change or deregistration procedure. With our PRC Legal Advisor’s view
as mentioned above, we are of the view that the Generative Artificial Intelligence Services
Measures will not have a material adverse impact on our current and future business operations
and financial performance. Nevertheless, there can be no assurance that the relevant authorities
will not take a view that is contrary to or otherwise different from that of our PRC Legal
Advisor, and it is also possible that the PRC government authorities may require us to apply
for security assessment or complete the filing, change or deregistration formalities of
algorithms for other reasons.
REGULATIONS ON OVERSEAS LISTING
Certain PRC regulatory authorities issued Opinion on Severely Punishing Illegal
Activities in Securities Market (จԈ), which were
available to the public on July 6, 2021, further emphasized to strengthen cross-border
regulatory collaboration, to improve relevant laws and regulations on data security, cross-
border data transmission, and confidential information management, and provided that efforts
will be made to revise the regulations on strengthening the confidentiality and archive
management relating to the offering and listing of securities abroad, to implement the
responsibility on information security of companies listed in foreign countries, and to
strengthen the standardized management of cross-border information provision mechanisms
and procedures.
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The CSRC promulgated the Overseas Listing Trial Measures and five related guidelines
on February 17, 2023, which came into effect on March 31, 2023. The Overseas Listing Trial
Measures introduce a new filing regime which requires PRC domestic companies to file with
the CSRC within three business days after the submission of application for initial public
offering to competent overseas regulators or overseas stock exchanges. The Overseas Listing
Trial Measures also provide that overseas listing and offering are explicitly prohibited, if any
of the following applies: (i) such securities offering and listing are explicitly prohibited by
specific laws and regulations; (ii) the proposed securities offering and listing may endanger
national security as reviewed and determined by competent authorities under the State Council;
(iii) the domestic company or its controlling shareholder(s) and the actual controller, have
committed crimes including corruption, bribery, embezzlement, misappropriation of property
or undermining the order of the socialist market economy in the past three years; (iv) the
domestic company is currently under investigations for suspicion of criminal offenses or major
violations of laws and regulations which have not definitive conclusion; or (v) there are
material ownership disputes over equity held by the domestic company’s controlling
shareholder(s) or by other shareholder(s) that are controlled by the controlling shareholder(s)
and/or actual controller.
The CSRC and other three relevant government authorities promulgated the Provisions on
Strengthening the Confidentiality and Archives Administration of Overseas Securities Offering
and Listing by Domestic Companies (੗ձᏦ
) (the “ Provision on Confidentiality ”) on February 24, 2023, and came
into effect on March 31, 2023. Pursuant to the Provision on Confidentiality, when a domestic
company or its overseas listing entity provides or publicly discloses the documents and
materials involving state secrets and working secrets of state organs to the relevant securities
companies, securities service institutions, overseas regulatory authorities and other entities and
individuals, it shall report to the competent department with the examination and approval
authority for approval, and file with the same level secrecy administration department. A
domestic company that plans to, either directly or through its overseas listed entity, publicly
disclose or provide to relevant individuals and entities including securities companies,
securities service providers and overseas regulators, any other documents and materials that,
if leaked, will be detrimental to national security or public interest, shall strictly fulfill relevant
procedures stipulated by applicable national regulations. Domestic companies providing
accounting archives or copies thereof to entities and individuals such as securities companies,
securities service institutions and overseas regulatory authorities shall perform the relevant
procedures according to relevant regulations. The working papers formed within the territory
of the PRC by the securities companies and securities service institutions that provide related
services for the overseas offering and listing of domestic enterprises shall be kept within the
territory of the PRC. Cross-border transferring of such working papers shall go through the
examination and approval formalities in accordance with the relevant regulations.
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REGULATIONS ON INTELLECTUAL PROPERTY RIGHTS
Patent
In accordance with the Patent Law of the People’s Republic of China ( ʕശɛ͏΍ձ਷ਖ਼
جwhich was promulgated by the Standing Committee of the National People’s Congress
on March 12, 1984 and latest amended on October 17, 2020, with the latest revision effective
on June 1, 2021, the Implementation Regulations for the Patent Law of the People’s Republic
of China (ۆwhich was promulgated by the State Council on
June 15, 2001 and latest amended on January 9, 2010, with the latest revision effective on
February 1, 2010, and the Public Announcement on Measures on Filing of Patent Licensing
Contracts (جwhich was promulgated by the State Intellectual
Property Office on June 27, 2011 and came into effect on August 1, 2011, patent in PRC shall
be categorized as invention, utility model and design. The duration of patent rights for an
invention shall be 20 years, the duration of patent rights for a utility model shall be 10 years
and the duration of patent rights for a design shall be 15 years, commencing from the filing
date. Any organization or individual proposing to implement the patent of others shall enter
into a licensing contract with the patentee for implementation and pay royalties to the patentee.
And the State Intellectual Property Office shall be responsible for filing of patent licensing
contracts nationwide. The parties concerned shall complete filing formalities within three
months from the effective date of a patent licensing contract.
Trademark
In accordance with the Trademark Law of the People’s Republic of China ( ʕശɛ͏΍ձ
جwhich was promulgated by Standing Committee of the National People’s Congress
on August 23, 1982, and was latest amended on April 23, 2019, with the latest revision
effective on November 1, 2019, and the Implementation Regulations for the Trademark Law of
the People’s Republic of China (ૢԷ) which was promulgated by
the State Council on August 3, 2002 and was latest amended on April 29, 2014, with the latest
revision effective on May 1, 2014, trademarks approved and registered by the trademark bureau
are registered trademarks, including commodity trademarks, service marks and collective
trademarks, certification marks; trademark registrants are entitled to exclusive rights to use
trademark and are protected by the law. A registered trademark shall be valid for 10 years,
commencing from the date of registration. Use of a trademark identical or similar to a
registered trademark on the same type of commodities without licensing by the trademark
registrant shall be deemed as infringement of exclusive rights to use registered trademarks.
Domain Name
In accordance with the Administrative Measures on Internet Domain Names ( ʝᑌၣਹΤ
جwhich was promulgated by the Ministry of Industry and Information Technology of
the People’s Republic of China on August 24, 2017 and came into effect on November 1, 2017,
the Implementing Rules for the Registration of National Top-level Domain Names (௟ॴ
ۆand Procedural Rules for Resolution of Disputes over National Top-level
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Domain Names (ۆwhich were promulgated by China Internet
Network Information Center on June 18, 2019 and came into effect on the same date, the
domain name registration services shall in principle implement “first apply first register”;
where the corresponding detailed rules for domain name registration stipulate otherwise, such
provisions shall prevail. The applicant shall be deemed as domain name holder via registration.
The domain name disputes shall be accepted and solved by a domain name dispute resolution
body as recognized by the China Internet Network Information Center.
In accordance with the Notice of the Ministry of Industry and Information Technology on
Regulating the Use of Domain Names in Providing Internet-based Information Services ( ʈุ
ٝhereinafter referred to as “Notice”),
which was promulgated by the Ministry of Industry and Information Technology of the
People’s Republic of China on November 27, 2017 and came into effect on January 1, 2018,
the Internet access service provider concerned shall check the real identity information of the
domain name registrant via the Record-filing System, and shall not provide access services if
the Internet-based information service provider fails to provide real identity information or the
identity information provided is inaccurate or incomplete, with the exception of domain names
that have been filed for record with the Record-filing System prior to the effectiveness of this
Notice.
Copyright
In accordance with the Copyright Law of the People’s Republic China ( ʕശɛ͏΍ձ਷
جwhich was promulgated by Standing Committee of the National People’s Congress
on September 7, 1990 and latest amended on November 11, 2020, with latest revision effective
on June 1, 2021, Chinese citizens, legal persons or organizations without legal personality
enjoy copyright over their works, whether published or not, including written works; oral
works; musical, dramatic, opera, dance, acrobatic artistic works; fine arts, architectural works;
photographic works; audio-visual works; graphic works and model works, such as engineering
design plan, product design plan, map, schematic diagram, etc.; computer software and any
other intellectual achievements which comply with the characteristics of the works. Copyright
shall include the following personal rights and property rights: publication right, right of
authorship, right of revision, right to preserve the integrity of work, reproduction right,
distribution right, rental right, exhibition right, performance right, screening right,
broadcasting right, information network transmission right, filming right, adaptation right,
translation right, compilation right, and any other rights enjoyed by a copyright holder.
REGULATIONS IN RELATION TO TAX
Enterprise Income Tax
In accordance with the Enterprise Income Tax Law of the People’s Republic of China ( ʕ
جwhich was promulgated by the Standing Committee of the
National People’s Congress on March 16, 2007, and was latest amended on December 29,
2018, with the latest revision effective on the same date and the Implementation Regulations
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for the Enterprise Income Tax Law of the People’s Republic of China (ה
ૢԷ) which was promulgated by the State Council on December 6, 2007, and was
latest amended on April 23, 2019, with the latest revision effective on the same date, a uniform
income tax rate of 25% will be applied to resident enterprises and non-resident enterprises that
have established institutions and premises in China. Besides enterprises established within the
PRC, enterprises established in accordance with the laws of other judicial districts whose “de
facto management bodies” are within the PRC are considered “resident enterprises” and subject
to the uniform 25% enterprise income tax rate for their income derived from both inside and
outside the PRC. Corporate income tax for key advanced and new technology enterprises
supported by PRC shall be at a reduced tax rate of 15%.
In accordance with the Administrative Measures on Accreditation of High-tech
Enterprises (جwhich was promulgated by the Ministry of Science
and Technology, the Ministry of Finance and the State Administration of Taxation on April 14,
2008 and amended on January 29, 2016 and came into effect on January 1, 2016, high-tech
enterprises referred to in these Measures shall mean resident enterprises registered in China
(excluding Hong Kong, Macau and Taiwan) which are continuously engaging in research and
development and technology commercialization within the realm of the Regions of Advanced
Technologies Strongly Supported by PRC, forming the core independent intellectual property
of the enterprise, and carrying out business activities on such basis, which accredited pursuant
to these Measures may declare and claim tax incentives pursuant to the Enterprise Income Tax
Law (جand its Implementation Regulations, the Administrative
Law of the People’s Republic of China on the Levying and Collection of Taxes, the
Implementation Regulations for the Law of the People’s Republic of China on Administration
of Tax Collection (ۆetc. Upon obtaining the
qualification as a high-tech enterprise, the enterprise shall complete tax reduction and
exemption formalities with the tax authorities in charge and the qualifications of an accredited
high-tech enterprise shall be valid for three years from the date of issuance of the certificate.
Value-added Tax
In accordance with the Provisional Regulations of the People’s Republic of China on
V alue-added Tax (೼ᅲБૢԷ) which was promulgated by the State
Council on December 13, 1993, and was latest amended on November 19, 2017, with the latest
revision effective on the same date, the Detailed Rules for the Implementation Rules for the
Provisional Regulations the People’s Republic of China on V alue-added Tax ( ʕശɛ͏΍ձ਷
ۆwhich was promulgated by the Ministry of Finance on December
25, 1993, and was latest effective on November 1, 2011, In accordance with the Decisions on
Abolishing the PRC Provisional Regulations on Business Tax and Amending the PRC
Provisional Regulations on V alue-Added Tax (ᄻ˟<ʕശɛ͏΍ձ਷ᐄุ೼ᅲБ
ૢԷ>ҷ<೼ᅲБૢԷ>) which was promulgated by the
State Council and effective on November 19, 2017 and the Notice of the Ministry of Finance
and the State Administration of Taxation on the Adjustment to V A T Rates (೼ਕ
ٝwhich was promulgated by the Ministry of Finance and the
State Administration of Taxation on April 4, 2018 and came into effect on May 1, 2018, entities
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and individuals selling goods, services and intangible assets in the People’s Republic of China
are V A T taxpayers and shall pay value-added tax. Taxpayers selling services and intangible
assets are subject to a tax rate of 6%, except in particular circumstances. If a taxpayer is
engaged in sale subject to V A T at the previously applicable rate of 17%, the tax rate is reduced
to 16%. In accordance with the Announcement on Policies for Deepening the V A T Reform
which was issued by the Ministry of Finance, State Taxation Administration and General
Administration of Customs (ʮѓ) on March 20, 2019 and
came into effect on April 1, 2019. If a general V A T taxpayer is engaged in a V A T taxable sale
or imports goods at the previously applicable rate of 16%, the tax rate is reduced to 13%.
In accordance with the Notice of Ministry of Finance and State Administration of
Taxation on V alue-added Tax Policies for Software Products (ழ΁
ٝwhich was promulgated by the Ministry of Finance and the State
Administration of Taxation on October 13, 2011 and came into effect on January 1, 2011, a
value-added tax general taxpayer selling software products developed and produced by itself
shall be subject to levying and collection of value-added tax at the tax rate of 17%, and the
policy of forthwith levy and forthwith refund shall be implemented for the portion of
value-added tax actually paid which exceeds 3%.
Urban Maintenance and Construction Tax
In accordance with Urban Maintenance and Construction Tax Law of People’s Republic
of China (جwhich was promulgated by Standing Committee
of National Peoples Congress on August 11, 2020 and came effect on September 1, 2021 and
the Notice of the State Council on Harmonizing the Urban Maintenance and Construction Tax
and Educational Surcharges for Chinese and Foreign-funded Enterprises and Individuals ( ਷ਕ
ٝwhich was
promulgated by the State Council on October 18, 2010 and latest effective on December 1,
2010, entities and individuals which are subject to consumption tax, V A T and business tax shall
pay urban maintenance and construction tax. The tax rate is 7% for a taxpayer who is domiciled
in a downtown area, and 5% for a taxpayer who is domiciled in a county or town, and 1% for
a taxpayer who is domiciled outside a downtown area, county or town.
REGULATIONS ON LABOR
Labor Relations
The Labor Contract Law of the People’s Republic of China (ج)
which was promulgated by Standing Committee of the National People’s Congress on June 29,
2007, and was latest amended on December 28, 2012, with the latest revision effective on July
1, 2013, governs the establishment of labor relationships between enterprises, individual
economic organizations, private non-enterprise entities etc., in the PRC and their workers and
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the conclusion, performance, variation, rescission or termination of labor contracts, specifies
relevant detailed requirements on terms and contents of labor contracts signed between the
parties, and stipulates the maximum working hours per day and week and the monthly
minimum wage.
Social Insurance and Housing Provident Fund
In accordance with the Social Insurance Law of the People’s Republic of China ( ʕശɛ
جwhich was promulgated by Standing Committee of the National People’s
Congress on October 28, 2010 and was latest amended on December 29, 2018, with the latest
revision effective on the same date, employers are required to contribute, on behalf of their
employees, to a number of social security funds, including funds for basic pension insurance,
unemployment insurance, basic medical insurance, occupational injury insurance, and
maternity insurance. Employers failed to promptly contribute social security premiums in full
amount shall be ordered by the social security premium collection agency to make or
supplement contributions within a stipulated period, and shall be subject to a late payment fine
computed from the due date at the rate of 0.05% per day; where payment is not made within
the stipulated period, the relevant administrative authorities shall impose a fine ranging from
one to three times the amount of the amount in arrears.
In accordance with the Regulations on the Administration of Housing Provident Fund ( И
၍ଣૢԷ) which was promulgated by the State Council on April 3, 1999, and was
latest amended on March 24, 2019, with the latest revision effective on the same date, an
employer shall make registration of contribution to the housing provident fund with the
housing provident fund management center, and go through the formalities of opening housing
provident fund accounts on behalf of its employees. And an employer fails to undertake
contribution registration of housing provident fund or fails to go through the formalities of
opening housing provident fund accounts for its employees, the housing provident fund
management center shall order it to go through the formalities within a prescribed time limit;
where failing to do so at the expiration of the time limit, a fine of not less than RMB10,000
nor more than RMB50,000 shall be imposed. An employer is overdue in the contribution of,
or underpays, the housing provident fund, the housing provident fund management center shall
order it to make the contribution within a prescribed time limit; where the contribution has not
been made after the expiration of the time limit, an application may be made to a people’s court
for compulsory enforcement.
REGULATIONS ON FOREIGN EXCHANGE ADMINISTRATION
General Foreign Exchange Administration
The Foreign Exchange Control Regulations of the People’s Republic of China ( ʕശɛ͏
΍ձ਷̮ි၍ଣૢԷ), promulgated by the State Council on January 29, 1996, and latest
amended on August 5, 2008, with the latest revision effective on the same date, is a
fundamental legal basis for foreign exchange supervision and regulation by relevant authorities
in PRC, according to which, RMB may be freely converted into other currencies for current
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account items (such as foreign exchange transactions in relation to commodity, trade and
service, and dividend distribution), based on real and lawful transactions; but capital account
items (such as share capital transfer, direct investment, securities investment, derivatives or
loan) unless it is approved by the relevant foreign exchange administration department and it
has completed the pre registration with the relevant foreign exchange administration
department.
In accordance with the Circular of SAFE on Further Improving and Adjusting Foreign
Exchange Administration Policies for Direct Investment (ආɓӉҷආձ
) (hereinafter referred to as “Circular 59”) was
promulgated by SAFE on November 19, 2012, became effective on December 17, 2012, and
was further amended on May 4, 2015, approval is not required for the opening of an account
entry in foreign exchange accounts under direct investment. Circular 59 also simplifies the
capital verification and confirmation formalities for foreign invested enterprises (“FIEs”); the
foreign capital and foreign exchange registration formalities required for the foreign investors
to acquire equities from Chinese party and further improve the administration on exchange
settlement of FIEs.
The Notice of the State Administration of Foreign Exchange on Reforming the
Administration of Foreign Exchange Settlement of Capital of Foreign-invested Enterprises ( ਷
ٝhereinafter referred to
as “Circular 19”) was promulgated by SAFE on March 30, 2015, came into effect on June 1,
2015 partially repealed on December 30, 2019 and partially amended by the Notice of the State
Administration of Foreign Exchange of Policies for Reforming and Regulating the Control over
Foreign Exchange Settlement under the Capital Account (ձ஝ᇍ༟͉
ٝpromulgated by SAFE on June 9, 2016 and superseded the Notice
from the State Administration of Foreign Exchange on Reforming the Administration Method
of Settlement of Foreign Exchange Capitals of Foreign-invested Enterprises (hereinafter
referred to as “Circular 142”) from the effective date. Circular 19 specifies that foreign
exchange settlement by foreign-invested enterprise is subject to supervision under foreign
exchange settlement policies, and cancels certain foreign exchange restrictions under Circular
142. However, Circular 19 restates that the use of capital of foreign invested enterprises should
follow the principle of truthfulness and self-use within the business scope of a enterprise.
In accordance with the Notice from the State Administration of Foreign Exchange on
Reforming and Regulating the Policies of Administration of Foreign Exchange Settlement for
Capital Items (ٝhereinafter
referred to as “Circular 16”) which was promulgated by the State Administration of Foreign
Exchange on June 9, 2016 and came into effect on the same date, an enterprise registered in
China may, at its sole discretion, convert its foreign debts in a foreign currency to RMB.
Circular 16 provides a unified standard for foreign exchange under capital items (including but
not limited to foreign currency capital and foreign debt) which may be convertible at the sole
discretion of the enterprise. Such standard is applicable to all enterprises registered in the PRC.
In addition, Circular 16 restates that, unless otherwise specified, an enterprise shall not directly
or indirectly use RMB funds obtained as a result of conversion of foreign currency funds, for
purposes outside the business scope, or for investments wealth management other than
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securities investment or capital protected products of banks in China. Moreover, except within
the business scope, RMB funds obtained as a result of conversion shall not be used as loans
to non-related companies; save for investment in a real estate enterprise, RMB funds obtained
as a result of conversion shall not be used for construction or purchase of real estate which will
not be used by the enterprise.
On October 23, 2019, the State Administration of Foreign Exchange released the Notice
of the State Administration of Foreign Exchange on Further Promoting the Facilitation of
Cross-border Trade and Investment (ٙ
ٝaccording to which, besides foreign-invested enterprises engaged in investment
business, non-investment foreign-invested enterprises are also permitted to make domestic
equity investments with their capital funds in accordance with the laws provided that such
investments do not violate the Special Administrative Measures (Negative List) for Foreign
Investment Access (݄(૶ఊ)) (hereinafter referred to as
“Negative List”) and the target investment projects are genuine and in compliance with laws.
According to the Notice of the SAFE on Optimizing Foreign Exchange Administration to
Support the Development of Foreign-related Business (ܵ
ٝissued by the State Administration of Foreign Exchange on April 10,
2020, eligible enterprises are allowed to make domestic payments by using their capital funds,
foreign credits and the income under capital accounts of overseas listing, without submitting
the evidentiary materials concerning authenticity of such capital for banks in advance;
provided that their capital use is authentic and in compliance with administrative regulations
on the use of income under capital accounts. The bank in charge shall follow the principle of
prudential business development to manage and control relevant business risks, and conduct
post spot checking on the facilitation of payment for the income under capital accounts in
accordance with relevant requirements.
Equity Incentive Plan
In accordance with the Notice of the State Administration of Foreign Exchange on the
Relevant Issues Concerning the Administration of Foreign Exchange for Domestic
Individuals’ Participation in Equity Incentive Programs of Overseas Listed Companies (࢕
ٝwhich
was promulgated by the State Administration of Foreign Exchange on February 15, 2012 and
came into effect on the same date, a PRC citizen who participates in the equity incentive plan
of an overseas listed company or an individual who participates in such plan and has resided
in China for a consecutive period of not less than one year, shall go through relevant
procedures with the State Administration of Foreign Exchange or its local counterpart, through
a qualified PRC agent (which could be a PRC subsidiary of the overseas listed company), save
for a few exceptions. A signing participant shall appoint an overseas trustee to handle matters
in relation to their exercise of share options, purchase and sale of corresponding shares or
interests, and transfer of funds. In addition, in case of any major change of the equity incentive
plan, the PRC agent or overseas trustee or other major changes, the PRC agent shall register
the change with the State Administration of Foreign Exchange in respect of the equity incentive
plan. The PRC agent shall, on behalf of a PRC resident who has the right to exercise the
employee share option, apply to the State Administration of Foreign Exchange or its local
counterpart for an annual quota for foreign exchange payment with respect to foreign currency
payment in relation to exercise by the PRC resident of the employee share option. Foreign
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exchange earnings obtained by a PRC resident from sale of shares according to the equity
incentive plan and the dividend distributed by an overseas listed company shall be remitted to
a bank account opened by the PRC agent in China prior to distribution to the PRC resident.
DIVIDEND DISTRIBUTION
In accordance with the Company Law of the People’s Republic of China ( ʕശɛ͏΍ձ
جwhich was promulgated by the Standing Committee of the National People’s
Congress on December 29, 1993, and was amended on October 26, 2018, and the Foreign
Investment Law of the People’s Republic of China (جhereinafter
referred to as “Foreign Investment Law”), which was promulgated by the National People’s
Congress of the People’s Republic of China on March 15, 2019 and came into effect on
January 1, 2020, foreign-invested enterprises in the PRC may pay dividends only out of their
accumulated profit, if any, determined in accordance with PRC accounting standards and
regulations. A PRC company, including foreign-invested enterprise, is required to set aside as
general reserves at least 10% of its after-tax profit, until the cumulative amount of such
reserves reaches 50% of its registered capital unless the provisions of laws regarding foreign
investment otherwise provided, and shall not distribute any profits until any losses from prior
fiscal years have been offset. Profits retained from prior fiscal years may be distributed
together with distributable profits from the current fiscal year.
REGULATIONS ON ESTABLISHMENT OF COMPANIES AND FOREIGN
INVESTMENT
In accordance with the Foreign Investment Law and the Implementation Regulations for
the Foreign Investment Law of the People’s Republic of China (ྼ
ૢԷ) (hereinafter referred to as “Regulations”), which was promulgated by the State Council
on December 26, 2019 and came into effect on January 1, 2020, any discrepancy between the
Foreign Investment Law and these Regulations and the provisions on foreign investments
formulated before January 1, 2020, the provisions of the Foreign Investment Law and these
Regulations shall prevail. Investments by foreign investors in fields for which investment is
restricted by the Negative List shall comply with the restrictive admission special
administrative measures such as equity requirements, senior management personnel
requirements stipulated by the Negative List.
In accordance with the Measures on Reporting of Foreign Investment Information ( ̮ਠ
جwhich was promulgated by the Ministry of Commerce and State
Administration for Market Regulation on December 30, 2019 and came into effect on
January 1, 2020, foreign investors or foreign investment enterprises shall submit investment
information to the commerce administrative authorities through the Enterprise Registration
System and the National Enterprise Credit Information Publicity System. In accordance with
the Measures for the Security Review of Foreign Investments (جwhich
was promulgated by the National Development and Reform Commission and Ministry of
Commerce on December 19, 2020 and came into effect on January 18, 2021, the office of the
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working mechanism for the security review of foreign investments is set up under the National
Development and Reform Commission, which is led by the National Development and Reform
Commission and the Ministry of Commerce to undertake he routine work of the security review
of foreign investments.
LA WS AND REGULATIONS RELATING TO FULL CIRCULATION OF H SHARES
According to the Overseas Listing Trial Measures and related guidelines,
“Full circulation” represents the shareholders of domestic unlisted shares of domestic
companies, which directly offer and list securities in overseas markets, converting its domestic
unlisted shares into foreign listed shares circulating in overseas markets. “Full circulation”
shall comply with relevant regulations of the CSRC and the shareholders of domestic unlisted
shares shall entrust the domestic company to report the “Full circulation” with CSRC by filing
materials on key compliance issues, including whether the “Full circulation” has fulfilled
adequate internal decision-making procedures, necessary internal approvals and authorizations,
and whether the “Full circulation” involves approval or filing procedures set out in the laws,
regulations and policies for state-owned asset administration, industry supervision and foreign
investment, and if so, whether such approval or filing procedures have been performed.
U.S. EXPORT CONTROL LA WS AND REGULATIONS
The U.S. government imposes export controls for national security, foreign policy, and
other various policy reasons. One of the primary U.S. export control regimes is governed by
the Export Administration Regulations, 15 C.F.R. Parts 730-774 (“EAR”), which are
administered and enforced by the U.S. Department of Commerce’s Bureau of Industry and
Security (“BIS”). BIS is responsible for regulating the export, reexport, or transfer (in-country)
of a diverse range of goods, software, and technology (collectively, “items”) including most
commercial items, “dual-use” items (i.e., those items having both commercial and military or
proliferation applications), and less-sensitive military items.
BIS regulates the export, reexport, and in-country transfer of items that are “subject to the
EAR,” a term of art that includes: (i) all U.S.-origin items wherever they are located in the
world; (ii) any item physically in, or moving in transit through, the United States or U.S.
Foreign Trade Zone (including items of foreign origin); (iii) any foreign-made item containing
more than a de minimis amount of certain controlled U.S.-origin content; and (iv) certain
foreign-made items that are the “direct products” of certain controlled U.S.-origin software or
technology (or are the direct product of a plant or major plant component that is itself the direct
product of such controlled U.S.-origin software or technology). Generally, foreign-made items
that incorporate controlled U.S.-origin content accounting for 25% or less of the value of such
items are not subject to the EAR when exported, reexported, or transferred (in-country) to any
country except for Cuba, Iran, North Korea, or Syria (for which the de minimis threshold is
10%), unless the controlled content is of a certain type for which there is no de minimis
threshold. For purposes of the de minimis analysis, a “controlled” item is any item that would
require a destination-based export license from BIS to be exported to, reexported to, or
transferred (in-country) within the country at issue.
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Items that are subject to the EAR may require a license from BIS prior to the export,
reexport, or transfer (in-country) of the item. Whether an export license is required depends on
the Export Control Classification Number (“ECCN”) of the item at issue, the destination to
which the item is being exported, reexported, or transferred, and the intended end use or end
user of the item.
In particular, BIS maintains several restricted party lists of companies, organizations, and
individuals that may be subject to additional license requirements, regardless of the
classification of the item. For example, parties on the “Entity List,” Supplement No. 4 to 15
C.F.R. Part 744, are generally prohibited from receiving some or all items subject to the EAR,
absent an export license from BIS. License requirements for persons on the Entity List may be
limited to only specific ECCNs of concern, or generally apply to all items subject to the EAR.
A party that exports, reexports, or transfers an item that is subject to the EAR is strictly
liable for violations related to such activity. The EAR also provides a basis for liability for
other parties to a given transaction (i.e., in addition to the exporter). Specifically, parties are
prohibited from (i) causing, aiding, or abetting a violation of the EAR; (ii) soliciting or
attempting a violation of the EAR; (iii) conspiring to bring about or engage in a violation of
the EAR; (iv) misrepresenting or concealing facts to the U.S. government in connection with
activities subject to the EAR; (v) acting with the intent to evade the EAR; (vi) failing to comply
with recordkeeping requirements of the EAR; and (vii) acting with “knowledge” that a
violation of the EAR has occurred or is about to occur. The EAR defines “knowledge” as
including “positive knowledge that the circumstance exists or is substantially certain to occur,”
as well as “an awareness of a high probability of its existence or future occurrence,” which is
“inferred from evidence of the conscious disregard of facts known to a person and is also
inferred from a person’s willful avoidance of facts.”
Effective March 2, 2023, BIS added certain entities to the Entity List, including
“4Paradigm Technology Co., Ltd.” with aliases “4Paradigm,” “4th Paradigm,” and “Fourth
Paradigm”. The address of such entity was provided as “Building 1, No. 66 Qinghe Middle
Street, Haidian District, Beijing, China.”
Out of an abundance of caution and unless or until 4Paradigm receives further
clarification from BIS, we will assume that all entities located at the address provided in the
Entity List are subject to the Entity List restrictions in order to comply with the relevant
restrictions. These entities specifically include: Beijing Fourth Paradigm Technology Co., Ltd.,
Fourth Paradigm (Beijing) Data & Technology Co., Ltd., Beijing Paradigm Empowerment
Enterprise Management Co., Ltd., Beijing Xuexian Intelligent Technology Co., Ltd., Beijing
Y untian Xinrui Technology Co., Ltd., Beijing Future Paradigm Technology Co., Ltd.,
Zhongyuan Putai (Beijing) Intelligent Technology Co., Ltd., and Zhimei Xinchuang (Beijing)
Technology Co., Ltd. (the “Listed Entities”). For more details of these entities, see “History,
Development and Corporate Structure – Our Principal Subsidiaries” and Note 1 to the
Accountant’s Report in Appendix I to this Prospectus. However, it is possible that not all Listed
Entities are subject to the restrictions.
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The Entity List restrictions do not apply to non-listed entities in our Group that are legally
distinct from the Listed Entities (the “Non-listed Entities”). That is, BIS has explicitly advised
that “the licensing and other obligations imposed on an entity by virtue of being listed [on the
Entity List] do not per se apply to its subsidiaries, parent companies, sister companies, or other
legally distinct affiliates that are not listed on the Entity List.” However, a Non-listed Entity
(or any other person) may not act as an agent, a front, or a shell company for a Listed Entity
in order to facilitate transactions that would not otherwise be permissible with the Listed
Entity.
The addition of the Listed Entities to the Entity List restricts those entities’ ability to
purchase, acquire, or otherwise access any items subject to the EAR without a license from
BIS. Specifically, absent a license from BIS, it is prohibited to export, reexport, or transfer any
items subject to the EAR when any Listed Entity is a party to the transaction, including as
purchaser, intermediate consignee, ultimate consignee, or end-user. That is, even if the Listed
Entity is not the intended end user of the item(s) involved, the restrictions would still apply to
the extent the Listed Entity is the purchaser or otherwise involved in a given transaction.
License applications to the Listed Entities will be reviewed with a presumption of denial for
all items subject to the EAR.
The Entity List restrictions applicable to the Listed Entities apply to items subject to the
EAR only where such items would be imported, procured, or obtained by the Listed Entities
post-designation to the Entity List. For example, if the Listed Entities obtained an item subject
to the EAR prior to March 2, 2023, the Listed Entities would not be prohibited from continue
access to and use of such item post-Entity List designation. However, the Listed Entities would
be prohibited from obtaining additional quantities of, or updated versions of, such item as of
March 2, 2023.
REGULATORY OVERVIEW
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OVERVIEW
We are a leader in enterprise AI. We offer platform-centric AI solutions that can be rapidly
deployed by enterprises on a large scale to uncover hidden patterns in data and
comprehensively enhance decision-making capabilities.
Our Group was founded in September 2014. The predecessor of our Company, Beijing
Fourth Paradigm Technology, was established as a limited liability company under the laws of
the PRC by Ms. Wu, the spouse of Dr. Dai, as the sole equity interest holder on September 17,
2014. Ms. Wu has relevant experience in AI technology industries. Prior to being the equity
interest holder of our Company upon its establishment, Ms. Wu was the senior investment
manager at Baidu for approximately five years. Ms. Wu has been employed as a venture partner
of HongShan since June 2018, who is responsible for among others, (a) providing assistance
in sourcing investment opportunities, and execution to completion after the investment
committee of HongShan approves of such investment opportunities, (b) monitoring the
post-investment performance of portfolio companies and (c) offering advice to the investment
team of HongShan with investment advice in technology-related sectors. Ms. Wu does not have
any shareholding or partnership interest in HongShan V enture, HongShan Hanchen, HongShan
Mingde and HongShan Zhisheng and she has never been and will not be involved in making
any decision in respect of the investment in the Company by any entity of HongShan. During
the Track Record Period and as of the Latest Practicable Date, Ms. Wu has not been involved
in the day-to-day management and operation of the Group. Dr. Dai, Chairman of our Board, an
executive Director, Chief Executive Officer and General Manager of the Company, joined our
Group as Chief Executive Officer in January 2015, became a shareholder of Beijing Fourth
Paradigm Technology, our predecessor, in May 2015 and Chairman of the Board in August
2015. For details of the experience of Dr. Dai, please see the section headed “Directors,
Supervisors and Senior Management” in this Prospectus. We were converted into a joint stock
limited company under the laws of the PRC on July 9, 2021.
BUSINESS DEVELOPMENT MILESTONES
The following table summarizes the key business development milestones since our
inception:
Time Milestone
2014 In September, Beijing Fourth Paradigm Technology, being our predecessor,
was established in the PRC
In December, we launched the first commercialized product (Sage Platform
version 1.0) using the framework of AutoML, one of our core technologies
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Time Milestone
2015 We commenced serving users in the finance sector by offering application
development and other services to develop intelligent product
recommendation applications
2016 We started offering Sage Platform version 2.0, an end-to-end AI
application development platform
2018 We commenced serving users in the retail sector by offering Sage Platform
and applications to develop intelligent menu recommendation applications
We started offering Sage Platform version 3.0, an end-to-end AI
application development platform
2019 We commenced serving users in energy sector by offering application
development and other services to develop intelligent reservoir
identification applications
In June, we launched SageOne, our software-defined “All-in-One”
solutions with pre-built Sage Platform and applications on servers and
other related hardware
2020 In February, Sage Platform was awarded ePrivacysealEU, a certification
demonstrating our commitment to compliance with the European Union’s
General Data Protection Regulation (GDPR)
In March, AutoML, one of our core AI technologies, was selected into
Gartner’s report on Top 10 Strategic Technology Trends in 2020
In August, we launched Sage AIOS, an AI operating system featuring
user-friendly interface, standardized data processing, automated resource
management and allocation and fully compatible middleware that are
comparable to personal computer operating system
In November, we were selected as a global representative corporation in
Gartner’s Emerging Technologies and Trends Impact Radar
We commenced serving users in manufacturing sector by offering Sage
Platform and applications to improve the performance of their storage
systems
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Time Milestone
2021 In June, we launched our enterprise-level AI app store, which contains a
cluster of applications on our AI operating system using our algorithms and
standards, and OpenMLDB, an open-source database designed and
optimized to enable data correctness and efficiency for machine learning
driven applications
2022 In October, we were awarded with “Hidden Champions of Beijing” jointly
by Beijing Municipal Bureau of Economy and Information Technology and
Beijing Federation of Industry and Commerce
In November, we were awarded with “Individual Champion Product of the
Manufacturing Industry” jointly by MIIT and China Federation of
Industrial Economics
2023 In March, we launched SageGPT, an enterprise-grade generative AI
product specially designed for business scenarios, featuring multimodal
interaction and enterprise-ready AI tools
OUR PRINCIPAL SUBSIDIARIES
The place of incorporation, date of incorporation and commencement of business,
registered or issued capital, and principal business activities of each of our principal
subsidiaries that made a material contribution to our results of operation or are regarded as
otherwise significant to our business operations during the Track Record Period are shown
below, all of which were incorporated in the PRC:
Name
Date of incorporation
and commencement
of business Principal business activities
4Paradigm Technology September 29, 2016 Investment holding and
investment activities
Shanghai Shishuo April 1, 2017 Sales of AI platform and
provision of AI related
services
4Paradigm Beijing May 12, 2015 Sales of AI platform and
provision of AI related
services
4Paradigm Shenzhen March 11, 2019 Sales of AI platform and
provision of AI related
services
Guangzhou Jianxin April 6, 2005 Provision of intelligent
platform and solutions in
energy and power industry
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Name
Date of incorporation
and commencement
of business Principal business activities
Ideal Technology April 17, 2000 Provision of IT operation
management products and
solutions
CORPORATE DEVELOPMENT AND MAJOR SHAREHOLDING CHANGES
(1) Establishment of Beijing Fourth Paradigm Technology
On September 17, 2014, our predecessor Beijing Fourth Paradigm Technology was
established as a limited liability company under the laws of the PRC, with an initial registered
capital of RMB5,000,000. Ms. Wu was the sole equity interest holder at the time of
establishment.
On May 15, 2015, Beijing Fourth Paradigm Technology increased its registered share
capital to RMB10,204,100. The shareholding structure of Beijing Fourth Paradigm Technology
upon such increase is set forth in the table below:
Shareholders
Registered
capital
subscribed for
Corresponding
equity interest
in our
Company
(RMB) (%)
Dr. Dai 5,204,100 51.0001
Ms. Wu 5,000,000 48.9999
Total 10,204,100 100.00
(2) Pre-IPO Investments
From August 2015 to June 2021, we have entered into several rounds of pre-IPO
financing agreements with our Pre-IPO Investors. For further details, please refer to the
paragraphs headed “– Pre-IPO Investments” in this section.
Our PRC Legal Advisor has confirmed that, all the equity interest transfers and capital
increases as described in “– Pre-IPO Investments” were properly and legally completed and all
necessary approvals, filings and registrations from the relevant PRC authorities have been
obtained and completed.
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(3) Equity interest transfer in May 2018
On May 1, 2018, Ms. Wu entered into an equity interest transfer agreement with Paradigm
Investment, pursuant to which Ms. Wu transferred her 19.42% equity interest in Beijing Fourth
Paradigm Technology to Paradigm Investment, our Employee Incentive Platform, at a nominal
consideration of RMB1. The nominal consideration for the transfer was determined between
the parties taking into account that the transfer was to establish an employee incentive platform
and with reference to the fact that the registered capital had not been paid up by Ms. Wu at the
time of the transfer. Upon completion of the equity interest transfer on June 15, 2018, Ms. Wu
and Paradigm Investment held 11.24% and 19.42% equity interest in Beijing Fourth Paradigm
Technology, respectively.
(4) Equity interest transfer in April 2021
On April 28, 2021, Ms. Wu entered into an equity interest transfer agreement with Dr.
Dai, pursuant to which Ms. Wu transferred her 8.11% equity interest in Beijing Fourth
Paradigm Technology to Dr. Dai at nil consideration. The nil consideration for the transfer was
determined between the parties taking into account that the transfer was a familial arrangement
and with reference to the fact that the registered capital had not been paid up by Ms. Wu at the
time of transfer. Upon completion of the equity interest transfer on April 29, 2021, Dr. Dai held
27.12% equity interest in Beijing Fourth Paradigm Technology and Ms. Wu ceased to hold any
direct equity interest in Beijing Fourth Paradigm Technology.
(5) Equity interest transfer in May 2021
To recognise the vested share incentive to our former employees, Paradigm Investment
entered into an equity interest transfer agreement with Paradigm Yinyuan (the limited
partnership interest of which was mainly held by our former employees via other partnerships
at the time of transfer) on May 24, 2021, pursuant to which Paradigm Investment transferred
its 2.84% equity interest in Beijing Fourth Paradigm Technology to Paradigm Yinyuan at nil
consideration, with reference to the fact that the registered capital had not been paid up at the
time of transfer. Both general partners of Paradigm Investment and Paradigm Yinyuan are
Beijing New Wisdom. Upon completion of the equity interest transfer on May 25, 2021,
Paradigm Yinyuan held 2.84% equity interest in Beijing Fourth Paradigm Technology.
The share incentives were vested through the limited partnership interests of Paradigm
Yinyuan indirectly held by 76 former employees who are Independent Third Parties and Dr.
Y ang Qiang, our non-executive Director and former chief science consultant of the Company
who has been providing us with strategic advice and guidance on product and technology
research and development since November 2014 till now. Given that it has always been the
intention of our Group that Dr. Y ang’s role in the Group is to provide his valuable advice and
insight on product and technology from advisory perspective, which he has been already
performing such function in the capacity as a Director after his directorship appointment in
November 2016, our Company was of the view that it was unnecessary for Dr. Y ang to provide
such advice with another title of chief science consultant. Therefore, after review and
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streamline of our Group’s operation and corporate governance structure, our Group and Dr.
Y ang agreed to terminate title of Dr. Y ang as the chief science consultant in the Company while
he remains as our Director to continue providing advice to our Group. Since there is no
material change in the involvement and nature of advice and guidance provided by Dr. Y ang
to our Group as a result of the change in title, there is no material impact on our Group’s
operations, financial performance and strategic development after Dr. Y ang’s cessation as the
chief science consultant of the Company.
Among the 76 former employees, 44, 26 and 6 individuals were involved in research and
development, sales and marketing, and general and administration, respectively, immediately
before their departure from the Group. These 76 former employees resigned from the Group on
their own accord in pursuit of their career development and there is no disagreement of these
former employees with the Group in respect of their resignation. According to our employees
manual and the employment agreements signed with these former employees, our Group as the
employer has the legal ownership of the intellectual property rights developed by these former
employees during performance of the tasks we assigned to them or if they utilize the resources
or technology provided by us to develop the relevant intellectual property rights in the course
of their employment or within one year after their departure from our Group.
(6) Conversion into a joint stock limited company
On June 23, 2021, our Board passed resolutions approving, among other matters, the
conversion of our Company from a limited liability company into a joint stock limited company
and the change of name of our Company to Beijing Fourth Paradigm Technology Co., Ltd.* ( ̏
ʮ̡). Pursuant to the promoters’ agreement dated July 1, 2021,
entered into by all the then Shareholders, all promoters approved the conversion of the net
assets value of our Company as of May 31, 2021 into 400,000,000 Shares of our Company,
with the remaining RMB554,290,774.33 in net assets included as capital reserves of the
Company.
On July 7, 2021, our Company convened a general meeting, and passed related
resolutions approving the conversion of our Company into a joint stock limited company,
articles of association and relevant procedures. Upon completion of the conversion, the
registered capital of our Company became RMB400,000,000 divided into 400,000,000 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
conversion was completed on July 9, 2021 when our Company obtained a new business license.
REASONS FOR THE LISTING
Our Company is seeking a listing of its H Shares on the Stock Exchange in order to
provide further capital for the development and expansion of our Company’s business, to
strengthen our Company’s working capital and to further raise our business profile and global
presence. For further details of our future plans, please refer to the section headed “Future
Plans and Use of Proceeds” of this Prospectus.
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MAJOR ACQUISITIONS AND INVESTMENTS
Acquisition of Guangzhou Jianxin
In order to strengthen our business coverage in the energy and electric power industry and
facilitate the industry’s AI transformation, 4Paradigm Beijing entered into share purchase
agreements with ten individuals and two limited partnerships established in the PRC, all of
which were Independent Third Parties at the time of acquisition (“ Jianxin Sellers ”) on March
29, 2021, pursuant to which, 4Paradigm Beijing agreed to purchase a total of 66.0% equity
interest of Guangzhou Jianxin at an aggregate consideration of approximately RMB197.98
million.
The consideration for the acquisition of Guangzhou Jianxin was determined by arm’s
length negotiations among the parties, with reference to the fair value of 100% equity interest
of Guangzhou Jianxin in the amount of approximately RMB310 million as of December 31,
2020 with the adoption of discounted cash flow under the income approach and taking into
account the promising prospect of Guangzhou Jianxin with reference to its historical growth in
revenue and net profit as demonstrated below. Based on the annual financial reports of
Guangzhou Jianxin for the years ended December 31, 2018 and 2019 and the audited
consolidated financial statements for the year ended December 31, 2020, its revenue increased
from approximately RMB135.4 million for the year ended December 31, 2018 to
approximately RMB154.2 million and RMB190.7 million for the years ended December 31,
2019 and 2020. Guangzhou Jianxin recorded a net profit which increased from approximately
RMB15.2 million for the year ended December 31, 2018 to approximately RMB28.4 million,
RMB27.0 million for the years ended December 31, 2019 and 2020. As of the Latest
Practicable Date, 4Paradigm Beijing has already paid approximately RMB187.5 million to
Jianxin Sellers. The remaining RMB10.5 million will be paid in installments in accordance
with the share purchase agreements, which specify that the last installment will be paid within
20 business days from the day after the issue of consolidated financial report of Guangzhou
Jianxin for the financial year of 2023.
Guangzhou Jianxin, a national high and new technology enterprise (৷อҦஔΆุ)
established in the PRC on April 6, 2005, is a leading service provider of digital and intelligent
platform in the energy and electric power industry in the PRC. It is principally engaged in sale
of application software and hardware products, application development and consulting
services to customers with primary focus in energy and electric power industry. In particular,
leveraging its 16-year history in the industry and with its self-developed industrial internet
platform, Guangzhou Jianxin offers its customers enterprise asset management products and
services, including but not limited to prognostics and health management and power production
management system, and application services in relation to the system such as operation and
maintenance, monitoring the operation status, troubleshooting and system operation
optimization. Guangzhou Jianxin was listed on National Equities Exchange and Quotations
(the “ NEEQ ”) on October 24, 2016, and subsequently delisted on March 17, 2021. The market
capitalization of Guangzhou Jianxin immediately prior to its delisting on National Equities
Exchange and Quotations was approximately RMB224.7 million, which was calculated based
on the trading price of the last share transfer transaction of Guangzhou Jianxin immediately
prior to its delisting from the NEEQ. Due to the trading mechanism of the NEEQ and its
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relatively low liquidity, the aforementioned market capitalization of Guangzhou Jianxin may
not reflect its actual fair value. Guangzhou Jianxin has five wholly-owned subsidiaries in the
PRC. For details of the subsidiaries of Guangzhou Jianxin, please refer to the paragraph headed
“Corporate Structure Immediately Before Completion of the Global Offering” in this section.
All applicable regulatory approvals have been obtained for the acquisition of Guangzhou
Jianxin. The registration with the relevant Administration for Market Regulation in respect of
the acquisition of 66% equity interest of Guangzhou Jianxin has been completed on March 31,
2021. In accordance with the share purchase agreements, 4Paradigm Beijing has been entitled
to the equity interest holder’s right and obligations of the 66% equity interest in Guangzhou
Jianxin since March 31, 2021. As such, the acquisition of the 66% equity interest in Guangzhou
Jianxin has been properly and legally completed on March 31, 2021. For details of the holders
of the remaining 34% equity interest in Guangzhou Jianxin, please refer to the paragraph
headed “Corporate Structure Immediately Before Completion of the Global Offering” in this
section.
Acquisition of Shanghai Yisahai and capital increase of Ideal Technology
In order to achieve deep integration of IT operation management with AI applications,
facilitating automation transformation and intelligent upgrade of IT operation, as well as
further enhancing the Group’s solution and service offering in the finance industry, 4Paradigm
Technology entered into an acquisition agreement dated June 20, 2021 (the “ Acquisition
Agreement ”) with Mr. Qi Lianxu ( ᄁஹϛ), Ms. Xing Cuixia ( Ԝၯᒳ), and Shanghai
Binhuoming Business Management Partnership (Limited Partnership) (Άุ၍ଣΥ
ྫΆุ(Υྫ), “ Shanghai Binhuoming ”), pursuant to which 4Paradigm Technology
agreed to purchase 100% of equity interest of Shanghai Yisahai, which held 49.38% equity
interest of Ideal Technology before the capital increase by 4Paradigm Technology pursuant to
the Acquisition Agreement, from Mr. Qi and Shanghai Binhuoming for a consideration of
RMB200.0 million.
Pursuant to the Acquisition Agreement, 4Paradigm Technology also agreed to purchase
newly increased registered capital of Ideal Technology of RMB5,555,556 for a consideration
of RMB45.0 million. On completion of the acquisition and the capital increase in June 2021,
4Paradigm Technology in aggregate held 54.44% equity interest of Ideal Technology.
The considerations for the acquisition of Shanghai Yisahai and capital increase of Ideal
Technology in June 2021 were determined by arm’s length negotiations among the parties, with
reference to the fair value of 100% equity interest of Ideal Technology in the amount of
approximately RMB420.9 million as of May 31, 2021 with the adoption of discounted cash
flow under the income approach and taking into account the promising prospect of Ideal
Technology with reference to its revenue growth as demonstrated below. Based on the audited
financial statements of Ideal Technology, it recorded revenue of approximately RMB35.0
million, RMB50.0 million and RMB52.2 million for the years ended December 31, 2018, 2019
and 2020. As of the Latest Practicable Date, 4Paradigm Technology has already paid RMB45.0
million to Ideal Technology and RMB160.0 million to the then shareholders of Shanghai
Yisahai. The remaining RMB40.0 million will be paid in installments in accordance with the
Acquisition Agreement, which specifies that the last installment will be paid within 15 business
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days from the day after the issue of consolidated financial report of Ideal Technology for the
financial year of 2024. To the best knowledge, information and belief of the Group, each of Mr.
Qi, Ms. Xing and Shanghai Binhuoming is an Independent Third Party at the time of
acquisition.
Shanghai Yisahai is a limited liability company established in the PRC on June 9, 2021
and it is an investment holding company which held 44.44% equity interest in Ideal Technology
after completion of the capital increase by 4Paradigm Technology in June 2021 pursuant to the
Acquisition Agreement.
Founded in 2000 and launched as its self-developed IT operation management software
in 2002, Ideal Technology is a leading software developer offering one-stop-shop operation and
maintenance automation solutions for its clients in the finance industry, Idea Technology aims
to assist its enterprise clients in realizing the transformation of digitalization and automation,
improving the efficiency and quality, as well as ensuring the safe, continuous and stable
operation of the clients’ business systems. Ideal Technology provides information technology
automation operation system software and relative application and development services to
customers in finance sector. In particular, through the aforementioned products and/or service,
Ideal Technology assists the data centres of banks to handle batch processing and disaster
recovery through artificial intelligence for information technology operations.
All applicable regulatory approvals have been obtained for the acquisition of Shanghai
Yisahai and capital increase of Ideal Technology. The registration with the relevant
Administration for Market Regulation has been completed on June 23, 2021. The acquisition
of Shanghai Yisahai and capital increase of Ideal Technology has been properly and legally
completed on June 30, 2021 in accordance with the Acquisition Agreement. 4Paradigm
Technology had been entitled to the equity interest holder’s right and obligations of the 54.44%
equity interest in Ideal Technology since June 30, 2021. On December 28, 2022, 4Paradigm
Technology also agreed to purchase newly increased registered capital of Ideal Technology of
RMB3,086,419 for a consideration of RMB25.0 million. As at the Latest Practicable Date,
4Paradigm Technology has already paid RMB25.0 million to Ideal Technology. The capital
increase of Ideal Technology has been properly and legally completed on December 29, 2022
in accordance with the capital increase agreement. On completion of the aforementioned
capital increase, 4Paradigm Technology in aggregate holds 56.84% equity interest of Ideal
Technology. For details of the holders of the remaining 43.16% equity interest in Ideal
Technology, please refer to the paragraph headed “Corporate Structure Immediately Before
Completion of the Global Offering” in this section.
EMPLOYEE INCENTIVE SCHEME
In recognition of the contributions of our current employees and to incentivize them to
further promote our development, Paradigm Investment and Nanjing Paradigm were
established in the PRC as our Employee Incentive Platforms.
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Paradigm Investment was established as a limited partnership in the PRC on March 29,
2018 as our current Employee Incentive Platform. Beijing New Wisdom is the general partner
of Paradigm Investment and is responsible for the management of day-to-day affairs and
exercise of the voting rights of Paradigm Investment. Therefore, in effect, all management
powers and voting rights of Paradigm Investment reside with Dr. Dai, who owns 99% equity
interest of Beijing New Wisdom. As of the Latest Practicable Date, Dr. Dai, as our Controlling
Shareholder, by himself and through his close associates, Ms. Wu, Beijing New Wisdom,
Paradigm Investment, Paradigm Yinyuan, Paradigm Chuqi and Paradigm Tianqin, controlled
approximately 40.44% of our total issued share capital and together, they constitute a group of
our Controlling Shareholder.
The limited partnership interest of Paradigm Investment was subscribed by limited
partnerships which are in turn held by the employees under the Employee Incentive Scheme on
May 24, 2021, and the relevant subscription price was fully settled on May 25, 2021. At the
relevant time, the grantees indirectly owned the registered capital of the Company through
Paradigm Investment in the amount equivalent to 69,613,140 Unlisted Shares underlying the
awards to Paradigm Investment after conversion of the Company into a joint stock company
in July 2021. The share incentives in the Company were vested through limited partnership
interests of Paradigm Investment indirectly held by employees. Following the sale of registered
capital in the Company which is equivalent to 5,650,406 Shares by the grantees through
Paradigm Investment, Paradigm Investment as an Employee Incentive Platform holds
63,962,734 Shares as at the Latest Practicable Date.
Nanjing Paradigm was established as a limited partnership in the PRC on December 29,
2022 as our current Employee Incentive Platform. Paradigm New Wisdom is the general
partner of Nanjing Paradigm and is responsible for the management of day-to-day affairs and
exercise of the voting rights of Nanjing Paradigm. Therefore, in effect, all management powers
and voting right of Nanjing Paradigm reside with Mr. Y u Hui, who owns 100% equity interest
of Paradigm New Wisdom. Mr. Y u Hui is an employee of the Group who is responsible for the
operation system management including human resources management and public relations,
and is an Independent Third Party.
The limited partnership interest of Nanjing Paradigm was subscribed by the employees
under the Employee Incentive Scheme on January 11, 2023, and the relevant subscription price
was settled on January 18, 2023. The Shareholders resolved on December 30, 2022 to allow
Nanjing Paradigm as the Employee Incentive Platform to subscribe for increased registered
capital of the Company, which involved the issue of 13,537,299 Unlisted Shares underlying the
awards to Nanjing Paradigm. The increased registered capital subscribed by Nanjing Paradigm
represented the share incentives in the Company vested through limited partnership interests
of Nanjing Paradigm held by employees. Following the sale of 5,578,755 Shares by Nanjing
Paradigm, Nanjing Paradigm as an Employee Incentive Platform holds 7,958,544 Shares as at
the Latest Practicable Date.
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The above arrangements were to ensure the employees as grantees to have sufficient
funds for settlement of the subscription price of limited partnership interest of Employee
Incentive Platforms and the tax arising from the grant of awards. For the details on changes in
the share capital of our Company, Paradigm Investment, Nanjing Paradigm and information
regarding the terms of the Employee Incentive Scheme, please refer to the sections headed
“Statutory and General Information – Further Information about Our Directors, Supervisors,
Senior Management and Substantial Shareholders – 5. Employee Incentive Scheme” and
“Statutory and General Information – Further Information about Our Company – Changes in
Share Capital” in Appendix VI to this Prospectus.
PRE-IPO INVESTMENTS
From August 2015 to June 2021, our Company entered into several rounds of financing
agreements with our Pre-IPO Investors through subscriptions of increased registered capital of
our Company.
Series A Financing
On August 5, 2015, our Company resolved to allow HongShan V enture to invest in our
Company by subscription of the increased registered capital of our Company. The registration
with AIC in respect of Series A Financing was completed on October 16, 2015. Details are set
forth below:
Name of the Pre-IPO investor Consideration
Registered
capital
subscribed to/
purchased
HongShan V enture US$4,000,000 RMB1,800,724
Total US$4,000,000 RMB1,800,724
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Series A-1 Financing
On January 31, 2016, each of Innovation Works Development Fund III, L.P . and
HongShan V enture entered into a capital increase agreement with our Company and our then
shareholders, pursuant to which each of the aforementioned Pre-IPO Investors agreed to invest
in our Company by subscription of the increased registered capital of our Company. The
registration with AIC in respect of Series A-1 Financing was completed on March 23, 2016.
Details are set forth below:
Name of the Pre-IPO investor Consideration
Registered
capital
subscribed/
purchased
Innovation Works Development Fund III, L.P . US$2,100,000 RMB379,100
HongShan V enture US$1,400,000 RMB252,733
Total US$3,500,000 RMB631,833
Series A-2 Financing
On July 15, 2016, each of Beijing Innovation, HongShan Mingde and Shanghai
Fengshang V enture Capital Partnership (Limited Partnership) (formerly known as Shanghai
Fengshang Equity Investment Fund Partnership (Limited Partnership)) entered into a capital
increase agreement with our Company and our then shareholders, pursuant to which each of the
aforementioned Pre-IPO Investors agreed to invest in our Company by subscription of the
increased registered capital of our Company. The registration with AIC in respect of Series A-2
Financing was completed on November 28, 2016. Details are set forth below:
Name of the Pre-IPO investor Consideration
Registered
capital
subscribed/
purchased
Beijing Innovation RMB39,821,064 RMB605,651
HongShan Mingde RMB19,188,940 RMB291,851
Shanghai Fengshang V enture Capital Partnership
(Limited Partnership) RMB27,000,000 RMB410,651
Total RMB86,010,004 RMB1,308,153
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Series B-1 Financing
On November 11, 2017, each of YSC Investment I, V alue Global Limited, Guangkong
Zhongying, HongShan Zhisheng, Beijing Innovation, Sinovation Fund III and LF Beta entered
into a capital increase agreement with our Company, 4Paradigm Beijing, 4Paradigm
Technology, Shanghai Shishuo and our then shareholders, pursuant to which each of the
aforementioned Pre-IPO Investors agreed to invest in our Company by subscription of the
increased registered capital of our Company. The registration with AIC in respect of Series B-1
Financing was completed on December 19, 2017. Details are set forth below:
Name of the Pre-IPO investor Consideration
Registered
capital
subscribed/
purchased
YSC Investment I US$18,000,000 RMB627,516
V alue Global US$6,000,000 RMB209,172
Guangkong Zhongying US$2,000,000 RMB69,724
HongShan Zhisheng US$6,168,961 RMB215,062
Beijing Innovation US$1,520,120 RMB52,995
Sinovation Fund III US$951,501 RMB33,171
LF Beta US$359,418 RMB12,531
Total US$35,000,000 RMB1,220,171
Series B-2 Financing
On December 28, 2017, each of Hubei Boheng, Zhuhai Rongxiao Equity Investment
Partnership (Limited Partnership) and Chance Talent entered into a capital increase agreement
with our Company, 4Paradigm Beijing, 4Paradigm Technology, Shanghai Shishuo, Dr. Dai and
Ms. Wu, pursuant to which each of the aforementioned Pre-IPO Investors agreed to invest in
our Company by subscription of the increased registered capital of our Company. The
registration with AIC in respect of Series B-2 Financing was completed on June 15, 2018.
Details are set forth below:
Name of the Pre-IPO investor Consideration
Registered
capital
subscribed/
purchased
Hubei Boheng US$5,000,000 RMB174,310
Zhuhai Rongxiao Equity Investment Partnership
(Limited Partnership) US$5,000,000 RMB174,310
Chance Talent US$2,000,000 RMB69,724
Total US$12,000,000 RMB418,344
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Series C Financing
On October 31, 2018, our Company, our then shareholders and our Series C Pre-IPO
Investors entered into a capital increase agreement, pursuant to which each of the
aforementioned Pre-IPO Investors agreed to invest in our Company by subscription of the
increased registered capital of our Company. The registration with AIC in respect of Series C
Financing was completed on March 29, 2019. Details are set forth below:
Name of the Pre-IPO investor Consideration
Registered
capital
subscribed/
purchased
Guoxin Qidi US$49,497,459 RMB771,335
Ningbo Huiyuan US$502,541 RMB7,831
Zhuhai Jiaxun US$28,716,653 RMB447,501
Onew Capital SPC Cayman Corporate US$10,000,000 RMB155,833
Zhuhai Xuren US$14,358,326 RMB223,750
Ruihui Haina US$20,000,000 RMB311,667
BOCOM International Holdings Company Limited US$15,000,000 RMB233,750
CITIC Securities Investment US$2,871,665 RMB44,750
Jinshi Jinrui US$3,589,582 RMB55,938
Jinshi Haofeng US$2,871,665 RMB44,750
Jinshi Zhiyu US$2,871,665 RMB44,750
Nongwan Investment US$4,307,498 RMB67,125
HongShan Zhisheng US$3,000,000 RMB46,750
Total US$157,587,054 RMB2,455,730
Series C-1 Financing
On July 31, 2019, Cisco China, CNCB (Hong Kong) Investment Limited and Nongwan
Investment entered into a capital increase agreement with our Company, 4Paradigm Beijing,
4Paradigm Technology, Shanghai Shishuo, Future Paradigm and Dr. Dai, pursuant to which the
aforementioned Pre-IPO Investors agreed to invest in our Company by subscription of the
increased registered capital of our Company. The registration with AIC in respect of Series C-1
Financing was completed on October 20, 2020. Details are set forth below:
Name of the Pre-IPO investor Consideration
Registered
capital
subscribed/
purchased
Cisco China US$5,000,000 RMB63,295
Nongwan Investment US$500,000 RMB6,329
CNCB (Hong Kong) Investment Limited US$15,000,000 RMB189,885
Total US$20,500,000 RMB259,509
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Series C-2 Financing
On December 20, 2019, each of Shenzhen Songhe, Shenzhen Lingyu and Shenzhen
Linghui entered into a capital increase agreement with our Company, 4Paradigm Beijing,
4Paradigm Technology, Shanghai Shishuo, Future Paradigm and Dr. Dai, pursuant to which
each of the aforementioned Pre-IPO Investors agreed to invest in our Company by subscription
of the increased registered capital of our Company. The registration with AIC in respect of
Series C-2 Financing was completed on October 20, 2020. Details are set forth below:
Name of the Pre-IPO investor Consideration
Registered
capital
subscribed/
purchased
Shenzhen Songhe US$20,000,000 RMB213,867
Shenzhen Lingyu US$20,000,000 RMB213,867
Shenzhen Linghui US$10,000,000 RMB106,933
Total US$50,000,000 RMB534,667
Series D Financing
On November 12, 2020, our Company, 4Paradigm Beijing, 4Paradigm Technology,
Shanghai Shishuo, Dr. Dai and our Series D Pre-IPO Investors entered into a capital increase
agreement, pursuant to which each of the aforementioned Pre-IPO Investors agreed to invest
in our Company by subscription of the increased registered capital of our Company. The
registration with AIC in respect of Series D Financing was completed on February 9, 2021,
April 29, 2021, May 8, 2021 and July 9, 2021, respectively. Details are set forth below:
Name of the Pre-IPO investor Consideration
Registered
capital
subscribed/
purchased
Boyu Jingtai
(1) RMB653,950,000 RMB899,212
PV Ivory Limited (2) US$85,500,000 RMB768,826
Qiushi Xingde (1) US$14,500,000 RMB130,386
Parade II Technology Investment Company
Limited (2) US$80,000,000 RMB719,369
China-UAE Investment (3) US$60,000,000 RMB539,527
HongShan Hanchen (2) US$60,000,000 RMB539,527
CDBC Manufacturing Fund (1) US$45,000,000 RMB404,645
Jiangsu Jiequan (1) US$30,000,000 RMB269,763
Lucent Shanghai (4) RMB196,185,000 RMB269,763
MIC Capital (4) US$21,000,000 RMB188,834
Hangzhou Fantong (4) US$20,000,000 RMB179,842
CPE Investment (Hong Kong) 2018 Limited (4) US$20,000,000 RMB179,842
JIC Tech-Inv (4) US$15,000,000 RMB134,882
Zhuhai Jinyiming (4) US$15,000,000 RMB134,882
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Name of the Pre-IPO investor Consideration
Registered
capital
subscribed/
purchased
Beijing New Power (4) US$15,000,000 RMB134,882
GS Asia II (4) US$14,300,000 RMB128,587
Stonebridge 2020 (4) US$5,700,000 RMB51,255
CITIC Jiantou (Shenzhen) Strategic Emerging
Industry Equity Investment Fund Partnership
(Limited Partnership)
(4) US$8,000,000 RMB71,937
CITIC Construction Investment (4) US$4,000,000 RMB35,968
Fangyuan Chuangying (4) US$10,000,000 RMB89,921
Haitong International Investment (4) US$10,000,000 RMB89,921
Jiaxing Chenyue (4) US$10,000,000 RMB89,921
Lianxiang Y angtze River (4) US$6,900,000 RMB62,046
CITIC Securities Investment (1) US$6,000,000 RMB53,953
Growing Fame (4) US$5,000,000 RMB44,961
Guangkong Zhongying (1) US$2,300,000 RMB20,682
Hainan BOCOM (4) US$2,000,000 RMB17,984
NIFA No. 1 (1) US$2,000,000 RMB17,984
Dongkong Jinlong (4) US$1,500,000 RMB13,488
Ningbo Huiyuan (1) US$1,300,000 RMB11,690
Total US$700,000,000 RMB6,294,480
Notes:
(1) These 8 Series D Pre-IPO Investors completed the registration with AIC on February 9, 2021.
(2) These 3 Series D Pre-IPO Investors completed the registration with AIC on April 29, 2021, among which PV
Ivory Limited transferred all its rights, obligations and interest under the above capital increase agreement to
its related party Xinhe No.1; Parade II Technology Investment Company Limited transferred all its rights,
obligations and interests under the capital increase agreement to its related party Purui Tianjin.
(3) China-UAE Investment completed the registration with AIC on May 8, 2021. China-UAE Investment
transferred its shares in the Company to China-UAE Investment (Cayman), being its sole shareholder, on
December 31, 2022.
(4) These 18 Series D Pre-IPO Investors completed the registration with AIC on July 9, 2021.
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Series D+ Financing
On April 25, 2021, Zhongyi Equity Fund entered into a capital increase agreement with
our Company, 4Paradigm Beijing, 4Paradigm Technology, Shanghai Shishuo and Dr. Dai,
pursuant to which the aforementioned Pre-IPO Investor agreed to invest in our Company by
subscription of the increased registered capital of our Company. The registration with AIC in
respect of Series D+ Financing was completed on July 9, 2021. Details are set forth below:
Name of the Pre-IPO investor Consideration
Registered
capital
subscribed/
purchased
Zhongyi Equity Fund RMB325,000,000 RMB446,890
Total RMB325,000,000 RMB446,890
Series D+2 Financing
On June 30, 2021, our Company resolved to allow Hainan Y uanfengshang to invest in our
Company by subscription of the increased registered capital of our Company. The registration
with AIC in respect of Series D+2 Financing was completed on July 9, 2021. Details are set
forth below:
Name of the Pre-IPO investor Consideration
Registered
capital
subscribed/
purchased
Hainan Y uanfengshang RMB25,000,000 RMB34,376
Total RMB25,000,000 RMB34,376
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Principal terms of the Pre-IPO Investments and Pre-IPO Investors’ Rights
The following table summarizes the key terms of the Pre-IPO Investments to our Company made by the Pre-IPO Investors:
Round
Amount of
registered
capital
increased
Amount of
registered
capital after
each round of
Pre-IPO
Investments
Amount of
consideration
paid
Implied
valuation of
our Company (1)
Date of
agreements/
resolutions
Date of
payment of full
consideration
Cost per Share
paid under the
Pre-IPO
investments
(approximation)
Discount to the
Offer Price
(2)
(approximation)
(RMB) (RMB) (US$)
Series A 1,800,724 12,004,824 US$4,000,000 US$26,666,666 August 5, 2015 December 7,
2016
0.14 98.10%
Series A-1 631,833 12,636,657 US$3,500,000 US$70,000,000 January 31, 2016 June 29, 2016 0.35 95.27%
Series A-2 1,308,153 13,944,810 RMB86,010,004 US$139,863,129 July 15, 2016 November 9,
2016
0.64 91.36%
Series B-1 1,220,171 15,164,981 US$35,000,000 US$435,000,000 November 11,
2017
March 9, 2018 1.83 75.49%
Series B-2 418,344 15,583,325 US$12,000,000 US$447,000,000 December 28,
2017
August 31, 2018 1.83 75.49%
Series C 2,455,730 18,039,055 US$157,587,054 US$1,157,587,054 October 31, 2018 March 25, 2019 4.08 45.17%
Series C-1 259,509 19,051,774 US$20,500,000 US$1,520,500,000 July 31, 2019 March 25, 2020 5.03 32.50%
Series C-2 534,667 19,782,655 US$50,000,000 US$1,850,000,000 December 20,
2019
March 30, 2020 5.95 20.09%
Series D 6,294,480 26,077,135 US$700,000,000 US$2,900,000,000 November 12,
2020
May 28, 2021 7.08 4.97%
Series D+ 446,890 27,827,882 RMB325,000,000 US$2,949,697,989 April 25, 2021 July 13, 2021 7.08 4.97%
Series D+2 34,376 27,862,258 RMB25,000,000 US$2,951,991,742 June 30, 2021 July 12, 2021 7.08 4.97%
Note:
(1) The implied valuation is the value of our Company after the completion of the relevant Pre-IPO Investment, which is equal to the sum of the pre-money valuation and
the amount of the relevant Pre-IPO Investment.
(2) Calculated based on the assumption that the Offer Price is HK$58.38 per Share (being the mid-point of the indicative Offer Price range of HK$55.60 t o HK$61.16).
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(3) The increase from the implied valuation of Series A financing to the implied valuation of Series A-1 financing was mainly because we had a number of m ilestones during
the period between the two financings. For example, we finished forming the core management and technical team and started serving our first lighthou se user in the
finance industry in 2015 by offering application development and other services to develop intelligent product recommendation applications.
(4) The increase from the implied valuation of Series A-1 financing to the implied valuation of Series A-2 financing was mainly because we started offe ring Sage Platform
version 2.0, an end-to-end AI application development platform.
(5) The increase from the implied valuation of Series A-2 financing to the implied valuation of Series B-1 and Series B-2 financings was mainly because we had a number
of milestones during the period between the three financings. For example, we obtained the First Prize of the highest award in the PRC’s AI field, Wu Wen jun AI Science
and Technology Award (௴อɓഃᆤ) in December 2016. We started serving other financial institutions such as securities companies, and we started our
collaboration with Bank A, one of the largest state-owned banks in China, since 2017 and helped Bank A establish risk control AI models by analyzing its users’ historical
transaction information, current transaction information and other relevant data. For details, please refer to the paragraph headed “Business – Us e Cases of Our Solutions”
in this prospectus.
(6) The increase from the implied valuation of Series B-2 financing to the implied valuation of Series C financing was mainly because we had a number of m ilestones during
the period between the two financings. For example, we secured purchase of solutions from Bank A in the amount of approximately RMB20 million in 2018 an d continued
to expand our offering to other users such as insurance companies, started offering Sage Platform version 3.0, an end-to-end AI application developm ent platform, and
partnered with a leading provider of AI-enabled solution around the world to establish AI laboratory, to explore and develop innovative AI platforms by leveraging the
technical strengths and experience of the market player.
(7) The increase from the implied valuation of Series C financing to the implied valuation of Series C-2 financing was mainly because we had a number of m ilestones during
the period between the three financings. For example, we were able to expand our services quickly to address business needs of our users and the number o f our lighthouse
users increased from 18 in 2018 to 32 in 2019 and the average revenue per lighthouse user increased from RMB3.9 million to RMB8.3 million in 2019; and we r ecorded
revenue of more than RMB100 million per annum for the year ended December 31, 2018, and commenced serving users in the retail and energy sectors.
(8) The increase from the implied valuation of Series C-2 financing to the implied valuation of Series D, Series D+ and Series D+2 financings was mainly because we had
a number of milestones during the period between the four financings. For example, we recorded revenue of RMB459.5 million for the year ended December 31, 2019
and experienced tremendous revenue growth of 259.7% when compared to 2018 driven by the increase of number of users and increased spending of our users , and we
launched SageOne, our software-defined “All-in-One” solutions with pre-built Sage Platform and applications on servers and other related hardwar e in 2019. In 2020,
we launched Sage AIOS, an AI operating system featuring user-friendly interface, standardized data processing, automated resource management and allocation and fully
compatible middleware that are comparable to personal computer operation system and commerced serving users in manufacturing sectors, and we were s elected as a
global representative corporation in Gartner’s Emerging Technologies and Trends Impact Radar.
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Basis of determination
of the valuation and
consideration
The valuation and considerations for each round of Pre-
IPO Investments were determined based on arm’s length
negotiation amongst the respective Pre-IPO Investors and
our Group after taking into consideration of the timing of
the investments and the status of our business operations.
Lock-up Period Pursuant to the applicable PRC law, within the 12 months
following the Listing Date, all existing Shareholders
(including the Pre-IPO Investors) could not dispose of any
of the Shares held by them.
Use of proceeds from the
Pre-IPO Investments
We utilized the proceeds from the Pre-IPO Investments for
the principal business of our Group, including but not
limited to research and development activities, the growth
and expansion of our Company’s business and general
working capital purposes. As of the Latest Practicable
Date, approximately 67.0% of the net proceeds from the
Pre-IPO Investments have been utilized.
Strategic benefits to our
Company brought by
the Pre-IPO Investors
At the time of the relevant Pre-IPO Investments, our
Directors were of the view that our Group could benefit
from the additional funds provided by the Pre-IPO
Investors’ investments in our Group and the knowledge
and experience of the Pre-IPO Investors.
Rights of the Pre-IPO Investors
The Pre-IPO Investors (other than Hainan Y uanfengshang, our Pre-IPO Investor in Series
D+2 Financing) were granted customary special rights, including but not limited to (i) right of
first refusal and co-sale, (ii) anti-dilution rights, (iii) liquidation rights, (iv) divestment rights
and (v) information rights under the shareholders agreement dated May 31, 2021 (the
“Shareholders Agreement ”). Pursuant to a termination agreement entered into by our
Company with our Pre-IPO Investors (other than Hainan Y uanfengshang, our Pre-IPO Investor
in Series D+2 Financing) and the then Shareholders of the Company dated July 16, 2021 (the
“Termination Agreement ”), except for the divestment rights as described below, all other
special rights shall cease to be effective and be discontinued upon Listing.
Pursuant to the Termination Agreement, our Pre-IPO Investors (other than Hainan
Y uanfengshang, our Pre-IPO Investor in Series D+2 Financing) have agreed to terminate the
relevant divestment rights granted by the Company and Dr. Dai under the Shareholders
Agreement with effect immediately before submitting the application to CSRC for the initial
public offering and the listing of its overseas-listed foreign shares (H Shares) on the Stock
Exchange by the Company (the “ Listing Application ”), provided such divestment rights shall
automatically be reinstated upon the earliest occurrence of any one of the following events: (a)
the Company withdraws its Listing Application; (b) the Listing Application lapses and the
Company does not submit renewed Listing Application within three months after the lapse; (c)
the Company is unable to obtain approval from the CSRC or the relevant stock exchange
(including but not limited to the Stock Exchange); or (d) the initial public offering and the
listing and trading on stock exchange does not occur within 48 months after the completion of
Series D Financing or 18 months after the date of the Termination Agreement, whichever is
earlier.
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On January 15, 2023 (the day before the automatic reinstatement of divestment rights
under the Shareholders Agreement pursuant to the Termination Agreement as described above),
our Pre-IPO Investors (other than Hainan Y uanfengshang, our Pre-IPO Investor in Series D+2
Financing) and the then Shareholders of the Company signed a supplemental agreement to the
Termination Agreement (the “ Supplemental Agreement ”) to amend the terms of the
Termination Agreement. Pursuant to the Supplemental Agreement, it is agreed that one of the
events which trigger the automatic reinstatement of divestment rights under the Shareholders
Agreement shall be changed from “the initial public offering and listing and trading on stock
exchange does not occur within 48 months after the completion of Series D Financing or 18
months after the date of Termination Agreement, whichever is earlier” to “the initial public
offering and listing and trading on stock exchange does not occur before December 30, 2023”.
Except for such amendment, other terms (including other events which trigger the automatic
reinstatement of divestment rights under the Shareholders Agreement) in the Termination
Agreement remain unchanged.
On September 6, 2023, Dr. Dai, a Controlling Shareholder, entered into a deed of
undertaking in favour of Boyu Jingtai, Xinhe No. 1 and Qiushi Xingde (the “ Right Holders ”),
pursuant to which, each of the Right Holders are entitled to request Dr. Dai to purchase or
cause to purchase the Domestic Shares held by each of them which are not qualified to be
traded on the Stock Exchange (the “ Domestic Share Divestment Rights ”), in the event that
(a) the Company cannot complete an A share listing within 36 months from the Listing Date,
with a valuation of our Company (calculated using the A shares offer price and the total issued
share capital of our Company at the relevant time) immediately prior to the A share listing of
not less than US$7.5 billion, and the number of A shares to be issued being not less than 10%
of the enlarged issued share capital of our Company immediately after the A share listing (the
“Qualified A Share Listing ”), and (b) the Right Holders hold any Domestic Shares which are
not qualified to be traded on the Stock Exchange at the relevant time.
In the event that the Domestic Share Divestment Rights are exercised, the purchase price
to be payable by Dr. Dai for purchasing such Domestic Shares shall be based on a formula
primarily with reference to the price per Domestic Share paid by each of the Right Holders
when they subscribed for the Domestic Shares plus interest calculated based on a specified
interest rate and the duration between the subscription of the Domestic Shares by the Right
Holders and the purchase of the Domestic Shares by Dr. Dai, and any declared but unpaid
dividends.
After due consideration of the offer size of the Global Offering, the liquidity and the
number of H Shares to be converted from Unlisted Shares following the completion of the
Global Offering, in addition to the Domestic Share Divestment Rights offered to the Rights
Holders, Dr. Dai agrees and undertakes to each of the Right Holders to the effect of the
following:
(i) before the later of the completion of the Qualified A Share Listing and the
aforementioned purchase of the Domestic Shares pursuant to the exercise of the
Domestic Share Divestment Right (the “ Long Stop Date ”), without the prior written
approval of the Right Holders, save as otherwise permitted, Dr. Dai will not, either
directly or indirectly, transfer, pledge and create any encumbrance over his interest
in the Shares as at the Listing Date (being 106,164,523 Domestic Shares directly
held by Dr. Dai, and his 99% interest in Beijing New Wisdom which in turn holds
0.3209% partnership interest in Paradigm Investment and 0.0723% partnership
interest in Paradigm Yinyuan); and
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(ii) the Interested DSM shall be permitted to, either directly or indirectly, dispose of no
more than 15% of their interest in the underlying Shares as at the Listing Date
(representing 6,810,172 underlying Domestic Shares in aggregate). The Right
Holders’ prior consent will be required if the Interested DSM, either directly or
indirectly, dispose of their interest over the aforesaid limit before the Long Stop
Date. The Interested DSM have given undertakings to such effect.
Our Shareholders which hold Domestic Shares are subject to significantly different risks,
relating to the lack of liquidity of such Domestic Shares they invested in if our planned A share
listing in the PRC does not proceed, compared to investors in the Global Offering who invest
in H Shares. Domestic Share Divestment Rights offered to Boyu Jingtai, Xinhe No. 1 and
Qiushi Xingde were retained to cater for such risks which investors in the Global Offering are
not subject to. In addition, Dr. Dai as our Controlling Shareholder bears the corresponding
purchase obligation and such purchase will not be funded by our Company. Therefore, the
Domestic Share Divestment Rights offered to Boyu Jingtai, Xinhe No. 1 and Qiushi Xingde do
not fall within Guidance Letter HKEX-GL43-12 issued by the Stock Exchange in October 2012
and can survive the Listing.
Sole Sponsor’s Confirmation
On the bases that (i) the consideration for the Pre-IPO Investments was irrevocably
settled more than 28 clear days before the date of our first submission of the listing application
to the Stock Exchange; and (ii) the special rights granted to the Pre-IPO Investors shall cease
to be effective and be discontinued upon the Listing (save for the divestment rights as
described above), the Sole Sponsor confirms that the Pre-IPO Investments are in compliance
with the Interim Guidance on Pre-IPO Investments issued by the Stock Exchange on October
13, 2010 and as updated in March 2017 and the Guidance Letter HKEX-GL43-12 issued by the
Stock Exchange in October 2012 and as updated in July 2013 and March 2017.
Information about our Pre-IPO Investors
Set out below is a description of our principal Pre-IPO Investors, being private equity
funds and corporations, and that have made meaningful investments in our Company (each
holding more than 1.00% of our total issued and outstanding Shares immediately prior to the
Global Offering.
HongShan V enture
SCC V enture V-Mars (HK) Limited is a limited liability company incorporated in Hong
Kong on December 8, 2014. HongShan V enture has an investment size of US$5.4 million. As
of the Latest Practicable Date, the sole shareholder of HongShan V enture was Sequoia Capital
China V enture Fund V , L.P ., whose general partner is SC China V enture V Management, L.P ..
None of the limited partners of Sequoia Capital China V enture Fund V , L.P . has more than
30.0% of partnership interest in Sequoia Capital China V enture Fund V , L.P .. SC China Holding
Limited is the general partner of SC China V enture V Management, L.P ., and is wholly owned
by SNP China Enterprises Limited, which is in turn wholly owned by Mr. Neil Nanpeng Shen,
our former Director.
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HongShan Hanchen, HongShan Mingde and HongShan Zhisheng
Shenzhen HongShan Hanchen Equity Investment Partnership (Limited Partnership) is a
limited partnership established in the PRC on September 29, 2019. HongShan Hanchen has a
registered capital of approximately RMB12 billion and a paid-in capital of approximately
RMB12.2 billion, focusing on the investments in technology, media and telecommunication,
healthcare, consumer goods and modern services sectors. Shenzhen HongShan Antai Equity
Investment Partnership (Limited Partnership) (ᛆҳ༟ΥྫΆุ(Υྫ))
(“HongShan Antai ”), a limited partnership established in the PRC, is the general partner of
HongShan Hanchen. HongShan Antai is ultimately controlled by Mr. Zhou Kui ( մඃ). The
only limited partner of HongShan Hanchen is Shenzhen HongShan Y uechen Investment
Partnership (Limited Partnership) (ԕҳ༟ΥྫΆุ(Υྫ)), holding
approximately 99.9% of partnership interest in HongShan Hanchen. To the best knowledge of
our Directors, each of Mr. Zhou Kui, HongShan Hanchen’s general partner and limited partner
is an Independent Third Party.
Beijing HongShan Mingde Equity Investment Center (Limited Partnership) is a limited
partnership established in the PRC on June 17, 2015. HongShan Mingde has a registered capital
of approximately RMB6 billion and a paid-in capital of approximately RMB5.1 billion,
focusing on the investments in technology, media and telecommunication, healthcare,
consumer goods and modern services sectors. Beijing HongShan Kunde Investment
Management Center (Limited Partnership) (ӄտᅃҳ༟၍ଣʕː(Υྫ))
(“HongShan Kunde ”), a limited partnership established in the PRC, is the general partner of
HongShan Mingde. HongShan Kunde is ultimately controlled by Mr. Zhou Kui ( մඃ).
HongShan Mingde has two limited partners and its largest limited partner is Beijing HongShan
Shengde Equity Investment Center (Limited Partnership) (ӄସᅃҳ༟ʕː(Υྫ)),
holding approximately 66.7% of partnership interest in HongShan Mingde. To the best
knowledge of our Directors, each of Mr. Zhou Kui, HongShan Mingde’s general partner and
limited partners is an Independent Third Party.
Ningbo Meishan Bonded Zone HongShan Zhisheng Equity Investment Partnership
(Limited Partnership) is a limited partnership established in the PRC on August 9, 2017.
HongShan Zhisheng has a registered capital of approximately RMB7.5 billion and a paid-in
capital of approximately RMB5.7 billion, focusing on the investments in technology, media
and telecommunication, healthcare, consumer goods and modern services sectors. Jiaxing
HongShan Kunsheng Investment Management Partnership (Limited Partnership) (ӄտ
ସҳ༟၍ଣΥྫΆุ(Υྫ)( “ HongShan Kunsheng ”), a limited partnership established
in the PRC, is the general partner of HongShan Zhisheng. HongShan Kunsheng is ultimately
controlled by Mr. Zhou Kui ( մඃ). HongShan Zhisheng has two limited partners and its largest
limited partner is Ningbo Meishan Bonded Zone HongShan Mingsheng Equity Investment
Partnership (Limited Partnership) (ᛆҳ༟ΥྫΆุ(Υྫ)),
holding approximately 60.0% of partnership interest in HongShan Zhisheng. To the best
knowledge of our Directors, each of Mr. Zhou Kui, HongShan Zhisheng’s general partner and
limited partners is an Independent Third Party.
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Boyu Jingtai
Boyu Jingtai (Shanghai) Equity Investment Partnership (Limited Partnership) is a limited
partnership established in the PRC on December 28, 2016. Boyu Jingtai has approximately
RMB7.9 billion assets under management focusing on the investments in consumer goods and
retail, financial services, healthcare, technology, media and business services sectors. Boyu
Jingtai (Shanghai) Enterprise Management Co., Ltd., a limited liability company established in
the PRC, is the general partner of Boyu Jingtai and ultimately controlled by Huang Ailian ( ර
ฌᇳ) and Tao Rong ( ௗፄ). Boyu Jingtai has 22 limited partners and its largest limited partner
is National Council for Social Security Fund (ଣԫึ), an Independent Third
Party. To the best knowledge of our Directors, each of Huang Ailian, Tao Rong, Boyu Jingtai,
its general partner and limited partners is an Independent Third Party.
Guoxin Qidi
Henan Guoxin Qidi Equity Investment Fund (Limited Partnership) is a limited partnership
established in the PRC on August 2, 2017. Guoxin Qidi is a Renminbi venture capital fund with
approximately RMB2.05 billion assets under management. It focuses on the investments in
technology, media and telecommunication, healthcare and new energy sectors. Its invested
companies include Cambricon Technologies Corporation Limited (ʮ
̡) (SHSE: 688256), Shenzhen Vp Information Technology Co., Ltd. (Ҧ
ʮ̡) and Shenzhen Pharmacin Co., Ltd. (ʮ̡). Henan Guoxin
Qidi Fund Management Co., Ltd., a limited liability company established in the PRC, is the
general partner of Guoxin Qidi. Guoxin Qidi has six limited partners and its largest limited
partners are Henan Province Modern Service Industry Investment Fund Co., Ltd. (ତ˾
ʮ̡), Enlightenment Technology Service Co., Ltd. (ਕϞ
ʮ̡) and China State-owned Capital VC Fund Co., Ltd. (΅
ʮ̡), each holding approximately 25.0% of partnership interest in Guoxin Qidi. To the
best knowledge of our Directors, each of Tsinghua University, Guoxin Qidi, its general partner
and limited partners is an Independent Third Party.
Xinhe No. 1
Xinhe No. 1 (Tianjin) Technology Center (Limited Partnership) is a limited partnership
established in the PRC on January 26, 2021. Xinhe No.1 is an investment fund focusing on the
investments in technology, media and telecommunication sectors with a fund size of RMB701
million. Chunhua Mingde (Tianjin) Equity Investment Management Partnership (Limited
Partnership) (ᅃ(ݵ)ᛆҳ༟၍ଣΥྫΆุ(Υྫ)) (“ Chunhua Mingde ”), a
limited partnership established in the PRC, is the general partner of Xinhe No. 1 and is
controlled by its general partner, Chunhua (Tianjin) Equity Investment Management Limited
(ശ(ݵ)ʮ̡)( “ Chunhua Tianjin ”), which is ultimately controlled by
an individual, who is an Independent Third Party. Chunhua Tianjin is a private equity fund
manager registered with the AMAC with the registration number P1001073. Chunhua Xinhe
(Tianjin) Equity Investment Management Partnership (ձ(ݵ)ᛆҳ༟ΥྫΆุ(ࠢ
Υྫ)) (“ Chunhua Xinhe ”), a limited partnership in the PRC, is the limited partner of Xinhe
HISTORY, DEVELOPMENT AND CORPORATE STRUCTURE
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No.1. The general partner of Chunhua Xinhe is Chunhua Mingde, which is also controlled by
Chunhua Tianjin, and Chunhua Xinhe has one limited partner which is Primavera Capital Fund
III L.P ., holding approximately 99.9% of partnership interest in Chunhua Xinhe. Primavera
Capital Fund III L.P . is ultimately controlled by Mr. Fred Zuliu Hu. To the best knowledge of
our Directors, each of Xinhe No.1, its general partner, limited partner, ultimate beneficial
owner and Chunhua Tianjin is an Independent Third Party.
Purui Tianjin
Purui Enterprise Management (Tianjin) Partnership (Limited Partnership) is a limited
partnership established in the PRC on February 4, 2021. Purui Tianjin is an investment fund
focusing on the investments in technology sector with a fund size of RMB600 million. Purui
Management Consulting (Tianjin) Co., Ltd. ( ዎ๿၍ଣፔ༔(ݵ)ʮ̡)( “ Purui
Management ”), a limited liability company established in the PRC, is the general partner of
Purui Tianjin and is ultimately controlled by individuals, who are Independent Third Parties.
Purui Tianjin has one limited partner, Purui Equity Investment (Tianjin) Partnership (Limited
Partnership) (ᛆҳ༟(ݵ)ΥྫΆุ(Υྫ)) (“ Purui Investment ”). Purui
Investment is a limited partnership in the PRC, and Purui Management is also the general
partner of Purui Investment. Purui Investment has one limited partner, Parade II Technology
Investment Company Limited, holding approximately 99.8% of partnership interest in Purui
Investment. Parade II Technology Investment Company Limited is ultimately controlled by
Mr. Fang Fenglei. To the best knowledge of our Directors, each of Purui Tianjin, its general
partner, limited partner and ultimate beneficial owners is an Independent Third Party.
YSC Investment I
YSC Investment I (HK) Limited is a limited liability company incorporated in Hong Kong
on January 15, 2016, which was owned as to 100% by YSC Investment I (BVI) Ltd., which is
held as to approximately 55.6% by Tencent Mobility Limited and 44.4% by Genesis Capital I
LP . Tencent Mobility Limited is a wholly-owned subsidiary of Tencent Holdings Limited, a
company listed on the Stock Exchange (SEHK: 700). The general partner of Genesis Capital
I LP is Genesis Capital Ltd. which is ultimately controlled by Peng Zhijian ( ుқ਺), who was
our former director until July 9, 2021, and currently serves as YSC Investment I’s director.
YSC Investment I is an investment vehicle with an investment size of US$18 million.
Prior to July 9, 2021, Peng Zhijian was a director nominated by YSC Investment I to our
Board as its representative as a result of its investment in our Company and was not involved
in day-to-day management of our Group. For the preparation of the Listing, the Company
reviewed its board composition and Mr. Peng decided to resign as a director of the Company
on his own accord after due consideration to accommodate the Company’s plan for
streamlining the board structure. Mr. Peng does not have any role in the Group or its associates
after the aforementioned resignation.
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China-UAE Investment (Cayman)
China-UAE Investment Cooperation (Cayman) Holdings Limited is held by China-UAE
Investment Cooperation Fund, L.P .. The limited partnership interest of China-UAE Investment
Cooperation Fund L.P . is held as to 50.0% by Seventy Seventh Investment Company L.L.C.,
42.5% by China Development Bank International Holdings Limited (ʮ̡)
and 7.5% by Upright Rhythm Limited. Seventy Seventh Investment Company L.L.C. is
ultimately controlled by the Government of the Emirate of Abu Dhabi, China Development
Bank International Holdings Limited is ultimately controlled by MOF. Upright Rhythm
Limited is ultimately controlled by SAFE. China-UAE Investment (Cayman) is an investment
vehicle focusing on the investment in technology, media and telecommunication sectors with
an investment size of US$60 million. To the best knowledge of our Directors, each of MOF,
China-UAE Investment (Cayman), China-UAE Investment Cooperation Fund L.P ., Seventy
Seventh Investment Company L.L.C., China Development Bank International Holdings
Limited and Upright Rhythm Limited is an Independent Third Party.
Beijing Innovation
Beijing Innovation Works VC Center (Limited Partnership) is a limited partnership
established in the PRC on May 22, 2015. Beijing Innovation has approximately RMB2.5 billion
assets under management focusing on the investments in media and telecommunication,
e-learning, online retail, supply chain management and AI technology sectors. Beijing Hulian
Sinovation V entures Investment Management Limited (ʮ̡),
a limited liability company established in the PRC, is the general partner and sole executive
partner of Beijing Innovation, and is ultimately controlled by Li Puyu ( ҽዾ͗). Beijing
Innovation has 33 limited partners and its largest limited partner is Innovation Works (Xiamen)
VC Partnership (Limited Partnership) ( ௴อʈఙ(ژ)௴ุҳ༟ΥྫΆุ(Υྫ)), holding
approximately 35.1% of partnership interest in Beijing Innovation. To the best knowledge of
our Directors, each of Li Puyu, Beijing Innovation, its general partner and limited partners is
an Independent Third Party.
Zhuhai Hongmai
Zhuhai Hongmai Enterprise Management Partnership (General Partnership) is a general
partnership established in the PRC on December 15, 2020, focusing on the investments in
technology, media and telecommunication sectors with a registered capital of approximately
RMB214.7 million. Zhuhai Jiaxun Equity Interest Investment Fund Partnership (Limited
Partnership) (ΥྫΆุ(Υྫ)) (“ Zhuhai Jiaxun ”), a limited
partnership established in the PRC, is one of the general partners and the sole executive partner
of Zhuhai Hongmai and ultimately controlled by the State-owned Assets Supervision and
Administration Commission of the State Council (ึ)
(“SASAC ”). Zhuhai Hongmai’s other two general partners, Langma No. 27 (Shenzhen) VC
Center (Limited Partnership) (ီɚɤɖ໮(ଉέ)௴ุҳ༟ʕː(Υྫ)) (“ Langma No.
27”) and Langma No. 28 (Shenzhen) VC Center (Limited Partnership) (ီɚɤɞ໮(ଉέ)௴
HISTORY, DEVELOPMENT AND CORPORATE STRUCTURE
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ุҳ༟ʕː(Υྫ)) (“ Langma No. 28 ”), are both ultimately controlled by Xiao Jiancong
(ᑋ). To the best knowledge of our Directors, each of Zhuhai Hongmai, Zhuhai Jiaxun,
Langma No. 27 and Langma No. 28, SASAC and Xiao Jiancong is an Independent Third Party.
Sinovation Fund III
Sinovation Fund III, L.P . is a limited partnership incorporated in the Cayman Islands on
January 27, 2015. Sinovation Fund III has over US$302 million assets under management
focusing on the AI technology, e-learning, consumer goods and business-to-business sales
sectors. Sinovation Fund Management III, L.P . is the general partner of Sinovation Fund III and
ultimately controlled by Kai-Fu Lee ( ҽකూ). Sinovation Fund III has 50 limited partners and
none of which has more than 30.0% of partnership interest in Sinovation Fund III. To the best
knowledge of our Directors, each of Kai-Fu Lee, Sinovation Fund III, its general partner and
limited partners is an Independent Third Party.
CDBC Manufacturing Fund
CDBC Manufacturing Transformation and Upgrading Fund (Limited Partnership) is a
limited partnership established in the PRC on May 26, 2020. CDBC Manufacturing Fund is an
investment fund focusing on the investments in new generation of information technology
(NGIT) and electric power equipment manufacturing industry with a fund size of RMB50.1
billion and its portfolio companies include SenseTime Group Inc. (ʮ̡),
Haier COSMOPlat Co., Ltd. (ʮ̡). CDBC Investment Fund Management
Co., Ltd. (ப΂ʮ̡), a limited liability company established in the
PRC, is the general partner and sole executive partner of CDBC Manufacturing Fund and
ultimately controlled by MOF. CDBC Manufacturing Fund has one limited partner, National
Manufacturing Transformation and Upgrade Fund Co., Ltd. (΅Ϟ
ʮ̡), holding approximately 99.8% of partnership interest in CDBC Manufacturing Fund.
To the best knowledge of our Directors, each of MOF, CDBC Manufacturing Fund, its general
partner and limited partner is an Independent Third Party.
Ruihui Haina
Beijing Ruihui Haina Technology Industry Fund (Limited Partnership) is a limited
partnership established in the PRC on August 28, 2017. Ruihui Haina has approximately RMB5
billion investment under management focusing on the investments in new energy, finance
technology, AI technology, and internet sectors. Its invested companies include JUMSTC
Holding Limited (ʮ̡) and DAS Solar Co., Ltd (Ҧ
(΅)ʮ̡). Jiangxia Xintai (Beijing) Private Equity Fund Management Co., Ltd. (ࢠ
㒥इ(̏ԯ)ʮ̡), a limited liability company established in the PRC, is the
general partner and sole executive partner of Ruihui Haina and controlled by Three Gorges
Capital Holdings Co., Ltd. (ப΂ʮ̡), which is ultimately controlled by the
SASAC, and Beijing Haiguo Xintai Capital Holdings Ltd. (ʮ̡)
which is ultimately controlled by the State-owned Assets Supervision and Administration
Commission of Beijing Haidian People’s Government (਷Ϟ༟ପ္ຖ၍
HISTORY, DEVELOPMENT AND CORPORATE STRUCTURE
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ึ). Ruihui Haina has seven limited partners and its largest limited partners are Beijing
Haidian District State-owned Assets Investment Operation Co., Ltd. ( ̏ԯ̹ऎὅਜ਷Ϟ༟ପҳ
ʮ̡) and Three Gorges Capital Holdings Co., Ltd. (ப΂ʮ̡),
each holding approximately 40.0% of partnership interest in Ruihui Haina. To the best
knowledge of our Directors, each of Three Gorges Capital Holding Co., Ltd., Beijing Haiguo
Xintai Capital Holdings Ltd., Ruihui Haina, its general partner, limited partners and ultimate
beneficial owners is an Independent Third Party.
THE A SHARE LISTING
We plan to conduct the offering and listing of A shares at an appropriate time after the
Global Offering. As of the Latest Practicable Date, we have not determined the size and scope
of the contemplated A share offering and have not made any application to any recognized
stock exchange in the PRC for approval for the listing of any A shares. There is no assurance
that we will conduct an A share offering in the future. For details, see “Risk Factors – We plan
to conduct the offering and listing of A shares at an appropriate time after the Global Offering,
but there is no assurance that we will conduct such an A share offering, and the characteristics
of the A share and H share markets are different” and “History, Development and Corporate
Structure – Rights of the Pre-IPO Investors”.
PUBLIC FLOAT
The 330,418,283 Unlisted Shares (other than those held by HongShan V enture, Guoxin
Qidi, Purui Tianjin, Beijing Innovation, Zhongyi Equity Fund, Sinovation Fund III, Ruihui
Haina, NIFA No. 1, V alue Global, Shanghai Saixin Business Consulting Management Center
(Limited Partnership), Guangxi Tencent V enture Capital Co., Ltd., Hangzhou Fantong, Hubei
Boheng, Guangzhou Y uexiu Emerging Industry Phase II Investment Fund Partnership (Limited
Partnership), GS Asia II, Zhuhai Zhongyu Investment Enterprise (Limited Partnership),
Guangkong Zhongying, Fangyuan Chuangying, Haitong International Investment, Jiaxing
Chenyue, Shenzhen Runxin New Vision Strategic Emerging Industry Private Equity
Investment Fund Partnership (Limited Partnership), Cisco China, Stonebridge 2020, Growing
Fame, Guangzhou Y uexiu Nuocheng No. 8 Industrial Investment Partnership (Limited
Partnership), CITIC Construction Investment, Ningbo Huiyuan, Dongkong Jinlong, and LF
Beta, which will be converted into H Shares and listed following the completion of the Global
Offering), representing approximately 74.14% of our total issued Shares as of the Latest
Practicable Date, or approximately 71.20% of our total issued Shares upon Listing (assuming
the Over-allotment Option is not exercised), or approximately 70.78% 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 listed following the completion of the Global Offering.
The 115,246,250 Unlisted Shares held by HongShan V enture, Guoxin Qidi, Purui Tianjin,
Beijing Innovation, Zhongyi Equity Fund, Sinovation Fund III, Ruihui Haina, NIFA No. 1,
V alue Global, Shanghai Saixin Business Consulting Management Center (Limited Partnership),
Guangxi Tencent V enture Capital Co., Ltd., Hangzhou Fantong, Hubei Boheng, Guangzhou
HISTORY, DEVELOPMENT AND CORPORATE STRUCTURE
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Y uexiu Emerging Industry Phase II Investment Fund Partnership (Limited Partnership), GS
Asia II, Zhuhai Zhongyu Investment Enterprise (Limited Partnership), Guangkong Zhongying,
Fangyuan Chuangying, Haitong International Investment, Jiaxing Chenyue, Shenzhen Runxin
New Vision Strategic Emerging Industry Private Equity Investment Fund Partnership (Limited
Partnership), Cisco China, Stonebridge 2020, Growing Fame, Guangzhou Y uexiu Nuocheng
No. 8 Industrial Investment Partnership (Limited Partnership), CITIC Construction Investment,
Ningbo Huiyuan, Dongkong Jinlong, and LF Beta, representing approximately 25.86% of our
total issued Shares as at the Latest Practicable Date, or approximately 24.83% of our total
issued Shares upon Listing (assuming the Over-allotment Option is not exercised), or
approximately 24.69% of our total issued Shares upon exercise of the Over-allotment Option
in full, will be converted into H Shares and listed following the completion of the Global
Offering. As these entities will not be core connected person of our Company upon Listing, are
not accustomed to take instructions from core connected persons in relation to the acquisition,
disposal, voting or other disposition of their Shares and their acquisition of Shares were not
financed directly or indirectly by core connected persons, the H Shares held by them will be
counted towards the public float for the purpose of Rule 8.08 of the Listing Rules after the
Listing.
Pursuant to the applicable PRC law, within the 12 months following the Listing Date, all
existing Shareholders could not dispose of any of the Shares held by them.
Rule 8.08(1)(a) of the Listing Rules provides that there must be an open market in the
securities for which listing is sought. It normally means that the minimum public float of a
listed issuer must at all times be at least 25% of the issuer’s total issued share capital. Rule
8.08(1)(b) of the Listing Rules provides that where an issuer has one class of securities or more
apart from the class of securities for which listing is sought, the total securities of the issuer
held by the public (on all regulated market(s) including the Stock Exchange) at the time of
listing must be at least 25% of the issuer’s total issued share capital. However, the class of
securities for which listing is sought must not be less than 15% of the issuer’s total number of
issued shares, having an expected market capitalization at the time of listing of not less than
HK$125,000,000.
Based on the above, it is expected that immediately following completion of the Global
Offering and assuming the Over-allotment Option is not exercised, the total number of listed
H Shares held by the public represents approximately 28.80% of our total issued Shares upon
Listing. Therefore, our Company will be able to meet the minimum public float requirement
under Rule 8.08.
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CAPITALIZATION OF OUR COMPANY
Upon completion of the Pre-IPO Investments as described above, a number of capital
increases and equity interest transfers among shareholders of the Company and conversion of
our Company into a joint stock limited company, the table below is a summary of the
capitalization of our Company as of the Latest Practicable Date and the Listing Date (assuming
the Over-Allotment Option is not exercised):
Shareholders
Number of
Shares
Ownership
percentage
as of
the Latest
Practicable
Date
Ownership
percentage
as of the
Listing Date
Dr. Dai
(A) 106,164,523 23.82% 22.88%
Paradigm Investment (A) 63,962,734 14.35% 13.78%
HongShan V enture (B) 32,259,066 7.24% 6.95%
Boyu Jingtai (A) 14,126,295 3.17% 3.04%
Guoxin Qidi (B) 12,117,394 2.72% 2.61%
Xinhe No. 1 (A) 12,077,978 2.71% 2.60%
Purui Tianjin (B) 11,301,027 2.54% 2.44%
Paradigm Yinyuan (A) 10,105,649 2.27% 2.18%
YSC Investment I (A) 9,858,049 2.21% 2.12%
China-UAE Investment (Cayman) (A) 8,475,774 1.90% 1.83%
HongShan Hanchen (A) 8,475,774 1.90% 1.83%
Nanjing Paradigm (A) 7,958,544 1.79% 1.71%
Beijing Innovation (B) 7,115,539 1.60% 1.53%
Zhuhai Hongmai (A) 7,030,079 1.58% 1.51%
Zhongyi Equity Fund (B) 7,020,480 1.58% 1.51%
Sinovation Fund III (B) 6,476,628 1.45% 1.40%
CDBC Manufacturing Fund (A) 6,356,827 1.43% 1.37%
HongShan Mingde (A) 6,352,978 1.43% 1.37%
Ruihui Haina (B) 4,896,176 1.10% 1.06%
Jiangsu Jiequan (A) 4,237,879 0.95% 0.91%
Lucent Shanghai (A) 4,237,879 0.95% 0.91%
NIFA No. 1 (D) 4,162,080 0.93% 0.90%
HongShan Zhisheng (A) 4,112,972 0.92% 0.89%
Qingdao Chuangxin V enture Capital
Enterprise (Limited Partnership) (A) 3,802,047 0.85% 0.82%
BOCOM International Holdings
Company Limited (A) 3,672,128 0.82% 0.79%
Zhuhai Xuren (A) 3,515,032 0.79% 0.76%
Major Awesome (A) 3,442,422 0.77% 0.74%
Gongqingcheng Y uanchun Investment
Management Partnership (Limited
Partnership)
(A) 3,391,428 0.76% 0.73%
Shenzhen Songhe (A) 3,359,773 0.75% 0.72%
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Shareholders
Number of
Shares
Ownership
percentage
as of
the Latest
Practicable
Date
Ownership
percentage
as of the
Listing Date
Shenzhen Lingyu (A) 3,359,773 0.75% 0.72%
V alue Global (B) 3,286,016 0.73% 0.71%
Shanghai Saixin Business Consulting
Management Center (Limited
Partnership)
(B) 3,231,551 0.72% 0.70%
Guangxi Tencent V enture Capital
Co., Ltd. (D) 3,107,791 0.70% 0.67%
MIC Capital (A) 2,966,514 0.67% 0.64%
Hangzhou Fantong (B) 2,825,253 0.63% 0.61%
CPE Investment (Hong Kong) 2018
Limited (A) 2,825,253 0.63% 0.61%
Hubei Boheng (B) 2,738,347 0.61% 0.59%
JIC Tech-Inv (A) 2,118,947 0.48% 0.46%
Zhuhai Jinyiming (A) 2,118,947 0.48% 0.46%
Beijing New Power (A) 2,118,947 0.48% 0.46%
Guangzhou Y uexiu Emerging Industry
Phase II Investment Fund
Partnership (Limited Partnership)
(B) 2,112,208 0.47% 0.46%
Qiushi Xingde (A) 2,048,317 0.46% 0.44%
GS Asia II (B) 2,020,055 0.45% 0.44%
CNCB (Hong Kong) Investment
Limited (A) 1,988,683 0.45% 0.43%
Beijing Lianxiang Smart Internet
Innovation Fund Partnership
(Limited Partnership)
(A) 1,871,693 0.42% 0.40%
Shenzhen Linghui (A) 1,679,879 0.38% 0.36%
Zhuhai Zhongyu Investment
Enterprise (Limited Partnership) (B) 1,678,669 0.38% 0.36%
Zhuhai Huiyuan Investment
Partnership (Limited Partnership) (A) 1,658,357 0.37% 0.36%
CITIC Securities Investment (A) 1,550,588 0.35% 0.33%
Guangkong Zhongying (B) 1,420,246 0.32% 0.31%
Fangyuan Chuangying (B) 1,412,626 0.32% 0.30%
Haitong International Investment (B) 1,412,626 0.32% 0.30%
Jiaxing Chenyue (B) 1,412,626 0.32% 0.30%
Nongwan Investment (A) 1,153,936 0.26% 0.25%
Shenzhen Runxin New Vision
Strategic Emerging Industry Private
Equity Investment Fund Partnership
(Limited Partnership)
(B) 1,130,104 0.25% 0.24%
HISTORY, DEVELOPMENT AND CORPORATE STRUCTURE
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Shareholders
Number of
Shares
Ownership
percentage
as of
the Latest
Practicable
Date
Ownership
percentage
as of the
Listing Date
Chance Talent (A) 1,095,339 0.24% 0.24%
Cisco China (B) 994,342 0.22% 0.21%
Lianxiang Y angtze River (A) 974,720 0.22% 0.21%
Jinshi Jinrui (A) 878,766 0.20% 0.19%
Stonebridge 2020 (B) 805,198 0.18% 0.17%
Tibet Lingfeng (A) 761,572 0.17% 0.16%
Growing Fame (B) 706,321 0.16% 0.15%
Jinshi Haofeng (A) 703,006 0.16% 0.15%
Jinshi Zhiyu (A) 703,006 0.16% 0.15%
Guangzhou Y uexiu Nuocheng No. 8
Industrial Investment Partnership
(Limited Partnership)
(B) 626,139 0.14% 0.13%
CITIC Construction Investment (B) 565,044 0.13% 0.12%
Hainan Y uanfengshang (A) 540,035 0.12% 0.12%
Ningbo Huiyuan (D) 306,668 0.07% 0.07%
Hainan BOCOM (A) 282,522 0.06% 0.06%
Dongkong Jinlong (B) 211,892 0.05% 0.05%
LF Beta (B) 196,857 0.04% 0.04%
Investors taking part in the Global
Offering 18,396,000 (C) – 3.96%
Total 464,060,533 100.00% 100.000%
Remarks
A. The Shares held by these Shareholders are Unlisted Shares and will not be converted to H Shares upon
Listing.
B. The Shares held by these Shareholders are Unlisted Shares and will be converted to H Shares upon
Listing.
C. This refers to the number of Shares to be held by Investors taking part in the Global Offering as of the
Listing Date (assuming the Over-Allotment Option is not exercised).
D. Among 4,162,080 Unlisted Shares held by NIFA No. 1, 3,433,813 Unlisted Shares will be converted to
H Shares upon Listing.
Among 3,107,791 Unlisted Shares held by Guangxi Tencent V enture Capital Co., Ltd., 1,716,985
Unlisted Shares will be converted to H Shares upon Listing.
Among 306,668 Unlisted Shares held by Ningbo Huiyuan, 123,022 Unlisted Shares will be converted
to H Shares upon Listing.
HISTORY, DEVELOPMENT AND CORPORATE STRUCTURE
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CORPORATE STRUCTURE IMMEDIATELY BEFORE COMPLETION OF THE GLOBAL OFFERING
The chart below sets out the shareholding structure of our Group immediately before completion of the Global Offering:
4.25% 3.17% 2.72% 2.71% 2.54%23.82% 14.35% 2.21% 1.90% 1.79%
Paradigm
Investment(2)(A)
HongShan
entities(3)(A)
Boyu
Jingtai(4)(A) Guoxin Qidi(5)(B) Xinhe No. 1(6)(A) Purui
Tianjin(7)(B)
2.27%
Paradigm
Yinyuan(8)(A)
Paradigm
Tianqin(17)
YSC
Investment I(9)(A)
China-UAE
Investment
(Cayman)(10)(A)
Nanjing
Paradigm(24)(A)
31.03%
Other Pre-IPO
Investors(11)(A)(B)(C)
Our Company
4Paradigm Technology Shanghai Shishuo 4Paradigm Beijing
Guangzhou Shibeiyun
Big Data Co., Ltd.
Guangzhou Shibeiyun
Technology Co., Ltd.
Shibeiyun (Beijing)
Technology Co., Ltd.
Zhuhai EpicHust Intelligent
Technology Co., Ltd.
Wuxi EpicHust Intelligent
Technology Co., Ltd.(22)
4Paradigm HK
Beijing
Shijin
Beijing
Shijing
Beijing
Shili
Beijing
Shiqin
Beijing
Shita
GP
LP 99%
Beijing
Shixin
4Paradigm Singapore The 4th Paradigm Europe
B.V.
Paradigm Cloud
100%
100% 100%
4Paradigm Shenzhen(20)
100% 100%
Wuhan Jianxin
Technology Co., Ltd.(19)
Onshore
Offshore
Snowline
Technology
4Paradigm
Digital Technology
100% 100%
Paradigm Digital
Software
Technology
100%
Beijing
Yuntian
100%
Guangzhou
Jianxin(12)
66%
Future
Paradigm
100%
Zhongyuan Putai(13)
51%
100%
100%
100%
Sichuan Shibeiyun
Technology Co., Ltd.
100% 100%
Nanjing Shibeiyun
Technology Co., Ltd.
100%
100%
100%
100% 100%
100% 94%
Shanghai Yisahai
100%
42.10%
14.74%
Ideal Technology(15)
HongShan
Venture(B)
7.24%
GPGP
Beijing New
WisdomParadigm
Chuqi(16)
GP GP
LP 59.59% LP 37.92%
Controlling Shareholders
Zhimei Xinchuang(14)
70%
Beijing Paradigm
Empowerment
100%
Beijing Paradigm
Pilot
100%
Shanghai Fan’an
Technology Co., Ltd.(25)
66.67%
Hefei
Shanyue(20)
51%
99%
Dr Dai(1)(23)(A)
1%
Ms. Wu(23)
79.66%
EpicHust(21)
100%
Paradigm Digital
Wuhan
100%
Paradigm Digital
Guangzhou
100%
Paradigm Digital
Hangzhou
Changchun Ideal
HISTORY, DEVELOPMENT AND CORPORATE STRUCTURE
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Notes:
(1) Dr. Dai is Chairman of the Board, an executive Director, Chief Executive Officer, General Manager and one of our Controlling Shareholders. For fur ther information, please
see the sections headed “Directors, Supervisors and Senior Management – Executive Directors” and “Relationship with our Controlling Shareholders ” in this Prospectus.
(2) Paradigm Investment is a limited partnership established in the PRC on March 29, 2018 as the Employment Incentive Platform and one of our Controlli ng Shareholders. For
further information, please see the section headed “Statutory and General Information – Further Information about Our Directors, Supervisors, Sen ior Management and
Substantial Shareholders – 5. Employee Incentive Schemes” in Appendix VI to this Prospectus.
(3) HongShan entities includes the following entities of HongShan:
i. HongShan Hanchen, a limited partnership established in the PRC on September 29, 2019;
ii. HongShan Mingde, a limited partnership established in the PRC on June 17, 2015; and
iii. HongShan Zhisheng, a limited partnership established in the PRC on August 9, 2017.
For further information, please see the paragraphs headed “– Pre-IPO Investments” in this section.
(4) Boyu Jingtai is a limited partnership established in the PRC on December 28, 2016. For further information, please see paragraphs headed “– Pre-IP O Investments” in this
section.
(5) Guoxin Qidi is a limited partnership established in the PRC on August 2, 2017. For further information, please see the paragraphs headed “– Pre-IPO Investments” in this section.
(6) Xinhe No. 1 is a limited partnership established in the PRC on January 26, 2021. For further information, please see the paragraphs headed “– Pre-IP O Investments” in this
section.
(7) Purui Tianjin is a limited partnership established in the PRC on February 4, 2021. For further information, please see the paragraphs headed “– Pre -IPO Investments” in this
section.
(8) Paradigm Yinyuan is a limited partnership established in the PRC on April 21, 2021 as one of our Controlling Shareholders.
(9) YSC Investment I is a limited liability company incorporated in Hong Kong on January 15, 2015. For further information, please see the paragraphs h eaded “– Pre-IPO
Investments” in this section.
(10) China-UAE Investment (Cayman) is a limited liability company incorporated in the Cayman Islands. For further information, please see the parag raphs headed “– Pre-IPO
Investments” in this section.
(11) The remaining interest is held by the other Pre-IPO Investors. For further information, please see the paragraphs headed “– Pre-IPO Investments ” in this section.
HISTORY, DEVELOPMENT AND CORPORATE STRUCTURE
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(12) The remaining 34% interest in Guangzhou Jianxin is held by Guangzhou Shibei Commercial Partnership (Limited Partnership)* (ԎਠุΥྫΆุ(Υྫ))
(“Guangzhou Shibei ”) as to approximate 23.97% and Guangzhou Jianyun Enterprise Management Center (Limited Partnership)* ( ᄿψ̹਄ථΆุ၍ଣʕː(Υྫ))
(“Guangzhou Jianyun ”) as to approximate 10.03%. The general partner of Guangzhou Shibei is Tang Piaolin (؍who is one of the directors of Guangzhou Jianxin. The
general partners of Guangzhou Jianyun are Tang Piaolin (؍Zhang Zhenghua (ശ), Liu Y ong (ۇZeng Min ( ಀઽ), Jiang Feiyong (ۇ࠭and other 15
Independent Third Parties. Tang Piaolin (؍Zhang Zhenghua (ശ) and Liu Y ong (ۇare the directors of Guangzhou Jianxin, and Zeng Min ( ಀઽ) and Jiang Feiyong
(ۇ࠭are the supervisors of Guangzhou Jianxin.
(13) The remaining 49% interest in Zhongyuan Putai is held by Shanghai Shima New Energy V ehicle Technology Co., Ltd.* (ʮ̡)( “ Shanghai
Shima ”) as to 24.5% and Beijing Zhengchang Intelligent Technology Partnership (Limited Partnership)* (ҦΥྫΆุ(Υྫ)), an Independent Third Party,
as to 24.5%. Shanghai Shima is held as to 90% by Ma Bao ( ৵ᘒ), who is a director of Zhongyuan Putai, and 10% by an Independent Third Party.
(14) The remaining 30% interest in Zhimei Xinchuang is held by Hu Shiwei, our senior management member. Hu Shiwei has agreed to act in concert with the Gr oup. Therefore,
the Group is able to exercise an additional 30% voting power in Zhimei Xinchuang. Please refer to Note 1 to Accountant’s Report included in Appendix I to this Prospectus
for details.
(15) The remaining 43.16% interest in Ideal Technology is held by Qi Lianxu ( ᄁஹϛ) as to 17.58%, Hainan Ideal Technology Partnership (Limited Partnership)* (Ҧ
ΥྫΆุ(Υྫ)) (“ Hainan Ideal Technology ”) as to 17.05% and Hainan Haikuo Technology Partnership (Limited Partnership)* (ҦΥྫΆุ(Υྫ))
(“Hainan Haihuo Technology ”) as to 8.53%. Qi Lianxu ( ᄁஹϛ) is a director of Ideal Technology, and the general partner of Hainan Ideal Technology and Hainan Haihuo
Technology.
(16) As at the Latest Practicable Date, Paradigm Chuqi is interested in 59.59% limited partnership interest in Paradigm Investment. The general part ner of Paradigm Chuqi is Beijing
New Wisdom.
(17) As at the Latest Practicable Date, Paradigm Tianqin is interested in 37.92% limited partnership interest in Paradigm Yinyuan. The general partn er of Paradigm Yinyuan is Beijing
New Wisdom.
(18) 4Paradigm Beijing transferred its 100% equity interest in 4Paradigm Shenzhen to our Company. The registration with AIC for the equity interest t ransfer was completed on
August 26, 2021.
(19) Wuhan Jianxin Technology Co., Ltd. was known as Yichang Jianxin Technology Co., Ltd. before September 9, 2021.
(20) The remaining 49% interest in Hefei Shanyue is held by (Lenovo) Beijing Co., Ltd. ( ᑌซ(̏ԯ)ʮ̡) as to 34% and Lianbao (Hefei) Electronic Technology Co., Ltd. ( ᑌ
ᘒ(٭)ʮ̡) as to 15%, both of which are Independent Third Parties.
(21) The Group acquired 79.66% interest in EpicHust in June 2022. The remaining 20.34% interest in EpicHust is owned as to 7.05% by Wuhan Huagong V entur e Capital Co., Ltd.
(ப΂ʮ̡), 3.84% by Hainan Guangfengyuan Investment Partnership (Limited Partnership) (ᄿᔮ๕ҳ༟ΥྫΆุ(Υྫ)), 3.66% by Wuhan
Gonghua Maisi Software Development Co., Ltd. (ʮ̡), 3.04% by Wuhan Gonghua Digital Technology Co., Ltd. (ʮ̡) and
2.75% by Qianhai Guangmao International Investment Holding (Shenzhen) Co., Ltd. (ٰ(ଉέ)ʮ̡), all of which are Independent Third Parties.
HISTORY, DEVELOPMENT AND CORPORATE STRUCTURE
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(22) The remaining 6% interest in Wuxi EpicHust Intelligent Technology Co., Ltd. is held by Wuxi Hust Industrial Incubation Co., Ltd.* (ʮ̡), an
Independent Third Party.
(23) As at the Latest Practicable Date, our Company is owned as to 23.82% by Dr. Dai, 14.35% by Paradigm Investment and 2.27% by Paradigm Yinyuan. Paradi gm Investment
and Paradigm Yinyuan are both indirectly controlled by Dr. Dai and Ms. Wu, through Beijing New Wisdom, being the sole general partner of Paradigm Inves tment and Paradigm
Yinyuan and owned as to 99% by Dr. Dai and 1% by Ms. Wu, respectively.
(24) Nanjing Paradigm is a limited partnership established in the PRC on December 29, 2022 as the Employment Incentive Platform. For further informat ion, please see the section
headed “Statutory and General Information – Further Information about Our Directors, Supervisors, Senior Management and Substantial Shareholder s – 5. Employee Incentive
Schemes” in Appendix VI to this Prospectus.
(25) Shanghai Fan’an Technology Co., Ltd. (ʮ̡) is a company established in the PRC on June 20, 2023. It is owned as to approximately 66.67% by 4Paradigm
Beijing, our wholly-owned subsidiary, and as to approximately 33.33% by Beijing Xuenuo Technology Co., Ltd. (ʮ̡), an Independent Third Party.
Remarks:
(A) The Shares held by these Shareholders are Unlisted Shares and will not be converted to H Shares upon Listing.
(B) The Shares held by these Shareholders are Unlisted Shares and will be converted to H Shares upon Listing.
HISTORY, DEVELOPMENT AND CORPORATE STRUCTURE
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CORPORATE STRUCTURE IMMEDIATELY FOLLOWING COMPLETION OF THE GLOBAL OFFERING
The chart below sets out the shareholding structure of our Group immediately following completion of the Global Offering (assuming the
Over-allotment Option is not exercised):
22.88%
Paradigm
Investment(2)(A)
HongShan
entities(3)(A) Boyu Jingtai(4)(A) Guoxin Qidi(5)(B) Xinhe No. 1(6)(A) Purui Tianjin(7)(B) YSC
Investment I(9)(A)
China-UAE
Investment
(Cayman)(10)(A)
Other Pre-IPO
Investors(11)(A)(B)(C)
Our Company
4Paradigm Technology Shanghai Shishuo 4Paradigm Beijing
Guangzhou Shibeiyun
Big Data Co., Ltd.
Guangzhou Shibeiyun
Technology Co., Ltd.
4Paradigm HK
4Paradigm Singapore The 4th Paradigm Europe B.V.
100% 100% 100%
Onshore
Offshore
100%
100%
100% 100%
100%
100% 100%
Nanjing
Paradigm(24)(A)
4Paradigm
Digital Technology
HongShan
Venture(B)
Shanghai Yisahai
Ideal Technology(15)
100%
42.10%
14.74%
Wuhan Jianxin Technology
Co., Ltd.(19)
Paradigm Cloud
100% 100%100%
Snowline
Technology
100%
Paradigm Digital
Software Technology
Beijing
Yuntian
100%
Guangzhou
Jianxin(12)
66%
Future
Paradigm
100%
Zhongyuan
Putai(13)
51%
Zhuhai EpicHust Intelligent
Technology Co., Ltd.
Wuxi EpicHust Intelligent
Technology Co., Ltd(22)
100% 94%
13.78% 6.95% 4.08% 3.04% 2.61% 2.60% 2.44%
Paradigm
Yinyuan(8)(A)
2.18% 2.12% 1.83% 29.82% 1.71%
Public Shareholders
taking part in
the Global Offering(B)
3.96%
GPGP
Beijing New
Wisdom
1%
Ms. Wu(23)
Paradigm
Chuqi(16)
GP
LP 59.59%
Controlling Shareholders
70%
Zhimei
Xinchuang(14)
Paradigm
Tianqin(17)
GP
LP 37.92%
99%
Dr Dai(1)(23)(A)
4Paradigm Shenzhen(18)
100%
Hefei
Shanyue(20)
51%79.66%
EpicHust(21)
Changchun Ideal
Sichuan Shibeiyun
Technology Co., Ltd.
100%
Nanjing Shibeiyun
Technology Co., Ltd.
100%
100%
Paradigm Digital
Wuhan
100%
Paradigm Digital
Guangzhou
100%
Paradigm Digital
Hangzhou
Beijing Paradigm
Empowerment
100%
Beijing Paradigm
Pilot
100%
Shibeiyun (Beijing)
Technology Co., Ltd.
100% Beijing
Shijin
Beijing
Shijing
Beijing
Shili
Beijing
Shiqin
Beijing
Shita
GP
LP 99%
Beijing
Shixin
Shanghai Fan’an
Technology Co., Ltd.(25)
66.67%
HISTORY, DEVELOPMENT AND CORPORATE STRUCTURE
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Notes:
For notes (1) to (25), please see the paragraph headed “Corporate Structure Immediately Before Completion of the Global Offering” in this section.
(26) Immediately upon completion of the Global Offering (assuming the Over-allotment Option is not exercised), our Company will be owned as to 38.84% by Dr. Dai, 13.78% by
Paradigm Investment and 2.18% by Paradigm Yinyuan. Paradigm Investment and Paradigm Yinyuan are both indirectly controlled by Dr. Dai and Ms. Wu, thr ough Beijing New
Wisdom, being the sole general partner of Paradigm Investment and Paradigm Yinyuan and owned as to 99% by Dr. Dai and 1% by Ms. Wu, respectively.
Remarks:
(A) The Shares held by these Shareholders are Unlisted Shares.
(B) The Shares held by these Shareholders are H Shares.
HISTORY, DEVELOPMENT AND CORPORATE STRUCTURE
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OUR VISION
To provide world-leading AI platforms and solutions that catalyze progression of society
and growth of enterprises.
OUR MISSION
To empower AI transformation and advance AI for all businesses.
OVERVIEW OF OUR BUSINESS
Who We Are
We are a leader in enterprise AI. We offer platform-centric AI solutions that can be rapidly
deployed by enterprises on a large scale to uncover hidden patterns in data and
comprehensively enhance their decision-making capabilities.
We were the largest player by revenue in the platform-centric decision-making AI market,
a sub-segment of the AI market, in China in 2022, according to the CIC Report. We have been
leading in the research of advanced AI technologies and the utilization of these technologies
in commercial solutions. For example, according to CIC, our proprietary AutoML algorithm is
a cutting-edge AutoML algorithm in the world. For details, see “Our Technology – AutoML.”
With our AutoML algorithms, we broke the world records of two Open Graph Benchmark
(“OGB”) tasks in terms of the accuracy and effectiveness of the algorithm in April 2021. OGB
is a globally recognized collection of benchmark datasets for machine learning on graphs that
AI companies and research institutions utilize to test and evaluate performance of AI models.
Participants include world-famous innovative enterprises and research institutes, such as
Facebook, Alibaba, Stanford University and Cornell University. Our AutoML algorithm also
ranks top 1% in Kaggle Structured Data and Image Classification Competition 2019.
We emphasize value creation. Our solutions have covered a myriad of industries
including, but not limited to, finance, retail, manufacturing, energy and power,
telecommunications, transportation, technology, education, media and healthcare. For
example, our AI solutions have successfully helped banks enhance anti-fraud accuracy rate,
retailers forecast sales volume and formulate precision marketing strategies, manufacturers
optimize quality control, and energy companies detect and prevent equipment anomalies and
failures. In 2020, 2021, 2022 and in the three months ended March 31, 2022 and 2023, we had
47, 75, 104, 49 and 62 lighthouse users, respectively. In 2020, 2021 and 2022, the net dollar
expansion rates of our lighthouse users were 167%, 140% and 126%, respectively. A net dollar
expansion rate above 100% reflects that we have generated increased revenue from the relevant
lighthouse users.
During the Track Record Period, we have experienced tremendous growth. Our revenue
grew by 114.2% from RMB942.2 million in 2020 to RMB2,018.4 million in 2021, and by
52.7% to RMB3,082.6 million in 2022. Our revenue grew by 33.6% from RMB482.3 million
for the three months ended March 31, 2022 to RMB644.4 million for the three months ended
March 31, 2023.
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Our Market Opportunities
We see massive market opportunities in enterprise AI application. As a result of the
advancements in AI-related academic research, surge in computing power and accumulation of
data, AI plays a pivotal role in enterprise decision-making. According to CIC, the total
spending on AI by enterprises in China increased from RMB59.3 billion in 2018 to RMB225.5
billion in 2022, representing a CAGR of 39.7%, and is expected to reach RMB691.0 billion in
2027 at a CAGR of 25.1%.
We believe, however, that large-scale AI transformation faces the following key
challenges:
(i) Shortage of experts . Experienced AI experts, especially in advanced technologies,
are scarce in the market, and hence enterprises face significant difficulty and
uncertainty in in-house development of AI capabilities that are tailored to various
scenarios in their business operations.
(ii) High total cost of ownership . According to CIC, it is estimated that companies need
to spend an average of RMB500 million to develop enterprise AI applications
in-house, which, coupled with costs of ongoing maintenance, procurement of
hardware and engagement of AI experts, results in high total cost of ownership.
(iii) Long deployment time . In the course of developing AI applications in-house or
purchasing point solutions, companies likely need to adopt a “trial and error”
approach in order to find the optimal portfolio of AI applications that suit their
business needs. According to CIC, it is estimated to take three years on average for
enterprises to establish large-scale AI infrastructure and capabilities internally with
their current AI team setup.
(iv) Data and software incompatibility . With point solutions designed to only address a
limited number of scenario-specific problems, enterprises typically need to purchase
multiple point solutions from different vendors for large-scale deployment. These
solutions are often not compatible to each other and may require continuous
refinement by AI engineers. Organizations’ increased awareness of data security and
data privacy protection adds to the complexity of deploying different point solutions
and integrating multiple data sources.
Platform centric solutions are more effective than point solutions in addressing the
challenges above. Platform-centric solution is a new category under AI solution that provides
building blocks, i.e., operating and development systems, runtime environment and
visualization services, to build AI applications which can be tested and utilized for various use
cases. Unlike point solutions that are required for scenario-specific use cases, platform-centric
decision-making AI solutions provide end users with an AI development platform in addition
to AI applications and underlying computing infrastructure. Such an AI development platform
provides end users with uniform development standards, high compatibility as well as flexible
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expansion of applications per actual demands. With the plug-and-play feature and
infrastructure for further developing and operating use-case-specific solutions, decision-
making AI platforms allow for much greater flexibility, scalability, compatibility and easier
management. According to CIC, the market of platform-centric decision-making AI market is
expected to reach RMB74.9 billion in 2027, representing a CAGR of 42.3% from RMB12.8
billion in 2022. As a platform-centric AI solution provider, we believe we are able to capture
the massive market opportunities in enterprise AI application.
Our Core Technologies and Solutions
Our platform-centric AI solutions seek to overcome challenges faced by in-house
development of AI capabilities and point solutions that are designed for scenario-specific use
cases, and allow enterprises to benefit from the advancement of AI technologies to the largest
extent possible.
(i) Ease of use . The low- and/or no-code feature of our platform and the intuitive
interface of our operating system allow users with limited knowledge or experience
in AI to develop, deploy and operate customized AI applications on a firm-wide
basis.
(ii) High return on investments . Our platform-centric AI solutions can be applied for a
wide range of industries and use cases at scale. With real-time operational
intelligence guiding better business decision-making, our solutions also allow users
to realize meaningful economic benefits from additional revenue opportunities and
improved operational efficiency.
(iii) Rapid time to deploy . Due to the plug-and-play and low- and/or no-code nature of
our solutions, large-scale deployment can happen in potentially just a number of
days and need not to involve employees or experts with significant experience in AI.
(iv) Full compatibility . Our platform-centric solutions enable data integration from
different systems and sources. We focus on providing platforms and development
tools for users to fully harness the value of their data, without engaging in collecting
of our users’ data.
Our Core AI Technologies
We have been leading in the research of advanced AI technologies and the utilization of
these technologies in commercial solutions. Core technologies underlying our AI solutions
include:
 AutoML . Our AutoML technology automates the process of machine learning and
enables algorithms to automatically discover new patterns, hence minimizing the
involvement of AI engineers responsible for building, adjusting, maintaining and
refining the AI models.
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 Transfer Learning . Our transfer learning technology expands application of AI to
industries in which data is sensitive or scarce and resolves privacy issues
surrounding application of AI in fields involving sensitive data subjects. It equips
our algorithms with the ability to “transfer” analysis conducted and patterns
discovered in one industry or scenario to another with similarity, hence being able
to provide AI solutions even where data is not readily available or accessible.
 Environment Learning . Our environment learning technology reduces the cost of
model training and ensures safety by training models in a simulated environment. As
compared to traditional simulation technologies, our environment learning
technology is able to build a high-precision simulated environment without
complete domain knowledge, enabling the application of intelligent decision-
making technologies in more use cases.
 AutoRL . Our AutoRL technology automates the process of reinforcement learning,
which refers to the training of machine learning models to make a sequence of
decisions in a dynamic, uncertain, potentially complex environment. Our AutoRL
technology provides an end-to-end and automatic suite of tools for reinforcement
learning. Users are able to develop reinforcement learning algorithms without
extensive prerequisite background or knowledge.
Our End-to-End Enterprise AI Solutions
Leveraging our core technologies, we have developed end-to-end enterprise AI solutions
that cater for enterprises’ needs across application, platform and infrastructure levels.
Sage Platform is the backbone of our solutions. It allows enterprises to easily build their
customized AI systems that automate the process of machine learning, application, decision-
making and evaluation driven by our AutoML algorithms, featuring quick, simple build-up,
low- and/or no-code environment, and implementation without significant involvement of AI
experts.
 Sage AIOS is an AI operating system featuring user-friendly interface, standardized
data processing, automated resource management and allocation and fully
compatible middleware that are comparable to personal computer operating systems.
Major components of Sage AIOS include data kernel and runtime kernel. Data
kernel is a platform for AI data. By defining the standards and formats of data that
are ready for AI applications, data kernel enables users to comprehensively enhance
its data quality and modeling efficiency. Runtime kernel is a centralized
management kernel for multi-layer computation, memory and communication.
Runtime kernel is capable of automatically scheduling and managing heterogeneous
resources without affecting user experience, thereby enhancing computation
resource utilization rates, and optimize the efficiency of developing AI models and
applications.
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 Built on Sage AIOS, there are two AI developer suites, for which users can choose
depending on their coding capabilities, one being the HyperCycle series with
no-code development tool and the other one being the Sage Studio series with
low-code and no-code development tools. AI applications in different use cases
require different types of algorithms. Accordingly, at the users’ choice based on the
types of AI applications they want to develop, we offer HyperCycle ML,
HyperCycle CV , HyperCycle OCR, HyperCycle KB, ML Studio, CV Studio, NLP
Studio and Speech Studio, among others.
In addition, we offer ready-to-use AI software applications that users could directly
deploy to improve their business operations, primarily in the fields of sales and marketing, risk
management and operating efficiency in general. Moreover, we launched our enterprise-level
AI application store in June 2021, which is a marketplace for AI applications at the choice of
our users. It integrates a cluster of both ready-to-use AI applications developed by us and AI
applications developed by our partners in the ecosystem on Sage AIOS using our algorithms
and standards, thereby addressing users’ needs for intelligent operations in different use cases.
For applications developed by ecosystem partners, we also work with them to optimize the
applications and to ensure compatibility with Sage Platform. As a result, relevant legal titles
and intellectual property rights of such applications are jointly owned by our ecosystem
partners and us. Fees charged for such applications are shared by our ecosystem partners and
us at a ratio agreed by both parties. We also provide application development services and help
users develop customized AI applications on Sage Platform to address their specific business
needs.
Based on the needs of users, we also offer optional bundled infrastructure, which
primarily represent SageOne, our software-defined “All-in-One” solutions. SageOne provides
bundled “hardware + software” server infrastructure with pre-built Sage Platform and our
ready-to-use AI applications, including applications developed by us and our ecosystem
partners. SageOne maximizes the synergistic effect between software and hardware.
Leveraging software-defined optimization of computing, network and storage resources,
SageOne improves the output and performance of our AI solutions as compared to running on
conventional and generalized architecture servers, thereby empowering organizations to
rapidly enhance intelligence in their operations.
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The following diagram illustrates our solution offerings:
Sage
Applications
AI
AAAAAAA
III IIII
Platform-centric
Solutions
HyperCycle KB HyperCycle ML
HyperCycle CV HyperCycle OCR
ML Studio CV Studio
NLP Studio Speech Studio
HyperCycle Studio
No-code platform Low- and/or no-code platform
Sales and Marketing Risk Management Operating Efficiency
Digital Operation Platform
Precision Marketing
Sales Forecast
Anti-fraud Smart Supply Chain
Intelligent Customer ServiceAnti-money Laundering
Operating
System
Data Kernel Runtime Kernel
AIOS
AI Developer
Suites … …
………
Optional Bundling Infrastructure
Anomaly Prediction Smart Production Planning
Our Value-oriented Strategy and Success in Commercialization
We believe that the benefits of our solutions speak for themselves. Creating value for
users is a key driver of our success in commercialization.
Our go-to-market strategy starts with market leaders in each industry we target to enter
who are also early adopters of AI. We demonstrate the value of our solutions through one or
a few entry projects. Because of the platform-centric nature of our solutions, once our value
has been proven, we are then able to expand our services quickly to address other business
needs of our users. The number of our lighthouse users has increased from 47 in 2020 to 75
in 2021, and further to 104 in 2022. The number of our lighthouse users has increased from 49
in the three months ended March 31, 2022 to 62 in the three months ended March 31, 2023.
Our average revenue per lighthouse user has increased from RMB12.3 million in 2020 to
RMB13.7 million in 2021, and further to RMB17.9 million in 2022. For the three months ended
March 31, 2022 and 2023, our average revenue per lighthouse user stayed the same as RMB5.4
million.
After we succeed with the lighthouse users, we leverage our understanding of the
industries, our reputation established through collaborating with industry leaders, and our AI
ecosystem to further enhance our influence in such industries, enabling us to further penetrate
and provide solutions to other players, without incurring significant sales and marketing
efforts. Our total number of users has increased from 156 in 2020 to 245 in 2021, and further
to 409 in 2022. Further, our total number of users has increased from 125 in the three months
ended March 31, 2022 to 147 in the three months ended March 31, 2023.
Our revenue is primarily based on the estimated computing power that AI applications
consume on our platform. As users expand AI applications for new use cases on our platform
and/or increase usage in existing use cases which require additional computing power, they will
purchase additional licenses from us, which allows us to capture additional monetization
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opportunities. During the Track Record Period, our revenue grew by 114.2% from RMB942.2
million in 2020 to RMB2,018.4 million in 2021, and further by 52.7% to RMB3,082.6 million
in 2022. Our revenue grew by 33.6% from RMB482.3 million for the three months ended
March 31, 2022 to RMB644.4 million for the three months ended March 31, 2023.
Our AI Ecosystem
We have fostered an ecosystem over time which we believe is important to our long-term
internal and external development. Our ecosystem is comprised of leading universities,
software and AI companies, software developers, AI scientists, solution partners and industry
leaders in a number of business sectors. Our AI ecosystem not only helps us continuously
improve our technology capabilities, but also empowers users with AI knowledge and our
solutions, in turn driving our success in commercialization.
Universities in our ecosystem typically have curriculums in AI, computer science, data
science and big data, professors with well-recognized credentials and experience, and strong
academic influence. We also cooperate with software and AI companies that have proprietary
AI technologies, proven track record of commercial ion, established AI developer team and
sufficient industry experience. In addition, we benefit from working with solution partners who
typically have strong end-user network, and strong user connections and extensive industry
experiences.
For instance, we established “Paradigm Academy” for the purpose of educating
enterprises on AI. We established AutoML.ai, an open source AutoML challenge platform,
which allows us to interact with and learn from top academic institutions, multinational
technology companies and AI scientists in the world. We launched a “Hackathon” in 2019 to
encourage companies to discover new AI application use cases and formulate AI solutions. We
also partner with other leading providers of AI-enabled solutions in the PRC and around the
world to establish AI laboratories, in order to explore and develop innovative AI platforms by
leveraging the technical strengths and experience of different market players.
In addition, we made OpenMLDB and OpenAIOS in our Sage AIOS an open source
platform to share our achievements in AI operating systems with developers across the world.
We launched our enterprise-level AI application store on Sage AIOS in June 2021 which
contains a cluster of AI applications developed by both us and our partners in the ecosystem,
which mainly include software and AI companies in China on Sage AIOS using our algorithms
and standards. The application store enriches the value of our ecosystem at the application
level.
COMPETITIVE STRENGTHS
We believe that the following competitive strengths contribute to our success and
differentiate us from our competitors.
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Our leading position in platform-centric enterprise AI solutions and core technologies
We were the largest player by revenue in the platform-centric decision-making AI market
in China in 2022, according to the CIC Report. We were selected as a Global Representative
V endor of Composite AI in Emerging Technologies and Trends Impact Radar, and a Global
Representative V endor of AutoML in 2020 Top Ten Strategic Technology Trend by Gartner, and
we also ranked No. 1 in the China Predictive and Analytics and Machine Learning in 2020 by
The Forrester Wave.
We have been leading in the research of advanced AI technologies and the utilization of
these technologies in commercial solutions. For example, Dr. Dai and Dr. Y ang are the pioneers
in transfer learning and are well regarded in the AI industry for their achievements and
contributions in steering the direction for the research and development of transfer learning
worldwide. In addition, according to CIC, our proprietary AutoML algorithm is a cutting-edge
AutoML algorithm in the world, and we were the first in the world to launch a commercialized
product using AutoML framework in 2014, and to apply AutoML in a number of use cases
across various industry sectors. For example, according to CIC, we launched the world’s first
commercialized AutoCV product in 2018. More importantly, being a first-mover means we are
well ahead of our competitors in terms of efficiency and accuracy of our algorithms.
Accumulation of use cases and experience over the years makes our solutions difficult, if not
impossible, to be replicated by our competitors.
Our end-to-end AI solutions with strong value proposition, continuously driving user
success
Our focus has always been the value we create for our users and the success of our users.
Our end-to-end solutions directly address the challenges faced by enterprises in large-scale
deployment of AI. We are different from point solutions providers which offer solutions in
predefined use cases and specific industries, making large-scale deployment costly, time-
consuming and burdensome. The low- and/or no-code nature of our solutions empowers users
in any industry with or without AI experience to implement our solutions easily and rapidly
without involvement of AI experts, enabling enterprises to benefit from AI transformation.
Hence, we believe that our AI solutions are the key to widespread AI transformation at
enterprise level. Our strong value proposition and efforts to enable user success are evidenced
by the results we have achieved with our users.
High quality, diverse and loyal user base resulting from our levered go-to-market strategy
Benefiting from a successful go-to-market strategy, we have served a large number of
lighthouse users who are market leaders in the respective industries they operate, including but
not limited to finance, retail, manufacturing, energy and power, telecommunications,
transportation, technology, education, media and healthcare. The purpose of this strategy is to
disrupt conventional industry practices by establishing new market standards for enterprise AI
implementation through collaboration with market leaders of the specific industries, hence
gaining the momentum necessary to subsequently spread our influence to other users in these
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industries. From the users’ perspective, the massive user base covered by these market leaders
amplifies the economic impact and reliability of our AI solutions, which later serve as strong
proof points for other users in those industries. In 2020, 2021, 2022 and in the three months
ended March 31, 2022 and 2023, we had 47, 75, 104, 49 and 62 lighthouse users, respectively.
Our lighthouse users contributed 61%, 51%, 60%, 55% and 52% of our total revenue in 2020,
2021 and 2022 and in the three months ended March 31, 2022 and 2023, respectively.
AI ecosystem to ensure sustainable long-term growth
Our ecosystem connects us to a large number of academic institutions, business partners
and AI scientists in China and around the world. Through our vibrant AI ecosystem, our
solutions can reach a significantly larger base of end users through both in-house sales efforts
and our solution partners. At the same time, we are able to stay abreast with the latest
developments in AI technologies through regularly interacting with the top scientists and
engineers in the field, enabling us to maintain our leadership in the core technologies. In
essence, our ecosystem gives rise to synergy, value and technological advancement that would
not otherwise be available if we were to rely solely on our internal R&D and customer services
resources. We currently have more than 100 companies and thousands of AI scientists and
developers in our ecosystem, and we will continue to expand it.
Strong, experienced and elite management combining academic excellence and business
insights
Our management team is composed of both top AI scientists and business veterans. Our
founder and Chief Executive Officer, Dr Dai Wenyuan, was the first to propose the idea of a
general framework for transfer learning that unifies different transfer learning problems. Prior
to joining our Company, he served as Chief Research and Development Architect at Baidu, and
designed one of China’s earliest AI systems that have achieved significant commercial success.
Dr. Dai and Dr. Y ang Qiang (our co-founder) are the pioneers in transfer learning and are well
regarded in the AI industry for their achievements and contributions in steering the direction
for the research and development of transfer learning worldwide. Mr. Tu Weiwei, Principal
Scientist and Vice President of our Company, and is a renowned scholar in AutoML. He served
as the chairperson and advisor of various international AutoML conferences and workshops,
such as the AutoML workshops at the International Joint Conferences on Artificial Intelligence
in 2021, the KDD in 2020, and the Conference on Neural Information Processing Systems in
2019 and 2020. Two members of our senior management, including Dr. Dai, were world
champions of the International Collegiate Programming Contest (ICPC) held by the
Association for Computing Machinery (ACM), one of the most recognized programming
competitions at university level internationally. At the same time, we understand we need
business talent to bring us to the path of commercialization. Hence, we also have management
team members who on average have more than 10 years of management and business
experience in various industries. We believe that our talent pool will keep playing key roles in
fulfilling our mission as we continue to expand and attract more vision-sharing talent.
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OUR STRATEGIES
We strive to achieve our long-term goal of helping enterprises achieve AI transformation.
To achieve this goal, we intend to pursue the following strategies:
Further strengthen our R&D capabilities
Our success is driven by our capabilities to continuously innovate our offering and
improve our underlying core technologies. As such, we will continue to invest in our research
and development capabilities, particularly with respect to our core technologies, in order to
reinforce our leadership position in the industry. We are also focusing on the research and
development of other cutting-edge AI technologies such as federated learning technology,
which entails training algorithms on local datasets of end users without exchange data samples,
thus enhances data security, and cutting-edge technologies such as large language models and
generative AI to enhance efficiency and productivity. Moreover, in line with our strategy to
create solutions that are easy to use, we intend to introduce additional products, features and
functionalities to our solutions and enrich our pre-built application portfolio such that more
users within an organization could easily benefit from our AI solutions. For example, in March
2023, we launched SageGPT, an enterprise-grade generative AI product specially designed for
business scenarios, which features multimodal interaction and enterprise-ready AI tools.
We also intend to expand our talent pool of data scientists and AI engineers as well as
industry vertical veterans on a continuous basis. We believe that qualified and experienced data
scientists and AI engineers are crucial to sustain our leadership in the core technologies and the
ongoing refinement of our algorithms, platforms and operating systems. We also plans to retain
our existing talent pool by offering competitive compensation. In addition, we seek to fully
leverage the industry knowledge and experience of these veterans to help us design AI
solutions to specifically address future challenges in those industries ahead of time. In
addition, we also plan to strengthen our R&D capabilities by establishing new R&D centers,
procuring additional high performance servers, among others. See also “Future Plans and Use
of Proceeds.”
Continue to create value for users and establish industry standards
We plan to further our “go-to-market” strategy and continue to create value for our users.
We expect our users to continue to expand the number of use cases utilizing our platform-
centric solutions, helping us to continuously acquire valuable experience and industry
know-how which further set us apart from our competitors. As our existing users (plenty of
which are lighthouse users) benefit from our solutions in more and more use cases, we will
naturally be able to establish industry standards and attract more new users both in existing
verticals and new verticals.
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Strengthen collaboration with business partners within our ecosystem
We will continue to empower and work with market leaders as well as our partners within
our ecosystem to develop vertical solutions with industry best practices, which will help us
continue to build up industry know-how and domain knowledge. We aim to strengthen our
relationships with solution partners to retain and expand our user base across various
industries. We also partner with our hardware suppliers to produce industry-tailored integrated
solutions – all in an effort to enhance user stickiness of our solutions. We plan to continue
investing in our ecosystem to attract more use cases utilizing our solutions, bring greater
awareness of our solutions, drive our user net dollar expansion rate and broaden our
distribution footprint across both vertical and horizontal markets.
Enhance our commercialization capabilities
To further strengthen our commercialization capabilities, we intend to expand our
in-house sales and marketing team by recruiting additional talents with experiences in both
sales and marketing and other industries. We believe that these talents can better understand the
business needs of potential users of our solutions, and thus help us create value for users. We
will also promote our solutions and offerings by engaging in more marketing activities through
both offline and online channels. In addition, we plan to expand our user base, enhancing the
penetration of our solutions. Furthermore, we also plan to pursue strategic investments and
acquisitions that are complementary to our business to strengthen our R&D and deployment
capabilities, optimize our solutions and expand our user base.
OUR ENTERPRISE AI SOLUTIONS
Driven by our mission to empower AI transformation and advance AI for all businesses,
we have developed Sage Platform, a full suite of end-to-end AI solutions that can be rapidly
deployed by enterprises on a large scale to uncover hidden patterns in data and facilitate
decision-making beyond human capability. Our innovative Sage Platform empowers
enterprises with AI development and management capabilities, and enables them to design,
develop and operate AI applications at scale. The plug-and-play and low- and/or no-code nature
of Sage Platform lowers the barrier of AI deployment, enabling large-scale deployment within
a few days and without involvement of experts or other personnel with significant experience
in AI. Sage Platform is primarily composed of (i) an AI operating system, and (ii) AI developer
suites, including HyperCycle and Sage Studio.
On top of our Sage Platform, we also offer a large and growing portfolio of
scenario-specific AI applications that address a range of mission-critical use cases and can be
readily installed and deployed. At our users’ request, we also offer application development
services to help them develop customized AI applications on Sage Platform based on their
business needs.
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Sage Platform
Sage AIOS
Sage AIOS is an enterprise-level AI operating system. As a flexible, secured and open
platform, the role of Sage AIOS is analogous to Windows’ role for personal computers. It
connects the underlying IT infrastructure and various AI applications, and provides enterprises
with high concurrency, performance and availability to support the development and launch of
AI applications. Based on multiple versions of products and underlying technology previously
developed by us, we officially launched Sage AIOS in August 2020, an upgraded and integrated
AI operating system with expanded features. Specifically, Sage AIOS provides a more
user-friendly interface to visualize AI application development and management.
Characterized by its user-friendly interface on which users can easily and conveniently design,
develop and operate numerous AI applications, Sage AIOS is able to empower enterprises to
deploy AI on a large scale. In addition, as compared to the earlier versions, Sage AIOS
standardizes the formats of AI data and resources management, thereby further enhancing the
efficiency of AI deployment on a large scale. The earlier versions of Sage Platform only
supports our proprietary AI developer suites and self-developed applications, while Sage AIOS
is able to support applications developed by other parties, and thus enhances our AI ecosystem.
AI operating systems need to address various difficulties in terms of data quality,
modeling efficiency, and computing power management and scheduling in the adoption of AI
applications. Powered by its data kernel and runtime kernel, Sage AIOS is able to address these
needs.
Data Kernel
Data kernel is a platform for AI data. By defining the standards and formats of data that
are ready for AI applications, data kernel enables users to comprehensively enhance its data
quality and modeling efficiency. Moreover, our data kernel synchronizes data from different
sources to ensure consistency. Our data kernel also enables the chronology of data using strict
timestamps, which marks the time when data is generated and processed. Moreover, it applies
closed-loop feedback mechanism in the modeling process by constantly providing feedback of
newly generated business data to train models in real time, thereby enhancing its effectiveness.
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In addition, our data kernel offers functions such as centralized management for data source,
storage and processing, addressing the data-related needs for enterprises in developing AI
applications. The key component of data kernel is our OpenMLDB, an open-source database
designed and optimized to enable data correctness and efficiency for machine-learning-driven
applications.
Runtime Kernel
Runtime kernel is a centralized management kernel for multi-layer computation, memory
and communication. Leveraging our proprietary container freeze and migration technologies,
our runtime kernel is capable of automatically scheduling and managing heterogeneous
resources without affecting user experience, thereby enhancing computation resource
utilization rates, and optimize the efficiency of developing AI models and applications. The
key component of runtime kernel is OpenAIOS, which is able to automatically coordinate AI
tasks among heterogeneous devices. Key features of our runtime kernel include:
 High performance. Our runtime kernel is able to automatically split tasks for
parallel computation, and use different designated computing chips to further
accelerate processing, thereby improving the performance of current AI computing
framework by 500%, according to CIC.
 Cost effective. Our runtime kernel is able to expand memory size through an
automatic scaling strategy without modifying of the existing applications and codes.
As a result, we are able to reduce the overall memory cost while increasing the
success rate of tasks, thereby reducing the TCO for current AI data processing
engines by 90%, according to CIC.
 High utilization rate. Our runtime kernel is able to offer a low-latency and
high-throughput communication framework in the process of machine learning.
Combined with our device virtualization technologies, our runtime kernel is able to
enhance GPU utilization rate by ten times as compared to other mainstream
scheduling frameworks, according to CIC.
AI Developer Suites
We offer AI developer suites equipped with various development tools to enterprises,
assisting them to design and develop AI applications. Based on the needs and background of
users, we provide (i) HyperCycle with no-code development tools and (ii) Sage Studio with
low-code and no-code development tools.
HyperCycle
HyperCycle is an AI development platform that helps enterprises rapidly design, develop
and utilize AI applications. Because of its no-code feature, HyperCycle lowers the barrier to
deploy AI by enterprises in their various business operations as developing AI solutions on the
platform does not require any knowledge or experience in AI, enabling them to develop
standard AI applications at scale.
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We have introduced the HyperCycle methodology which simplifies and standardizes the
AI deployment process into four steps, namely behavior, feedback, learning and application. As
a result, we are able to lower the barrier of quickly applying AI technologies at scale,
empowering the intelligent transformation of organizations.
HyperCycle automatically builds, applies and updates machine learning models
throughout the entire development process. Leveraging HyperCycle, users are able to easily
develop AI applications within simple clicks on the graphical user interface. HyperCycle
provides users with APIs, through which users can connect HyperCycle with their business and
operating systems. Then, they configure the parameters for the modeling process, such as the
scope of data for learning, the scope of data for evaluation and level of computing power. Once
the parameters are set, users can launch the modeling process by a simple click, which will
automatically process and analyze the data input, optimize and iterate models, and develop AI
applications powered by our AutoML algorithms.
AI applications in different use cases require different types of algorithms. Accordingly,
we offer HyperCycle ML, HyperCycle CV , HyperCycle OCR and HyperCycle KB at the users’
choice based on the types of AI applications they want to develop. HyperCycle ML is an
automated machine learning platform for general AI applications. HyperCycle CV is designed
for computer vision algorithms and supports image categorization, target detection and other
use cases. HyperCycle OCR is an optical character recognition platform with AI-empowered
handwritten text, card and bill recognition capabilities. HyperCycle KB is designed for the
development of knowledge base-related applications.
With our proprietary AutoML technologies and guided by the HyperCycle methodology,
HyperCycle achieves automatic machine learning of real-time closed-loop data, continuously
optimizing and enhancing the performance of algorithm training models. Leveraging world-
class capabilities of automatic modeling, real-time deployment and closed-loop data,
HyperCycle improves efficiency and reduces labor and IT cost for the development and
application of AI technologies.
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Sage Studio
Sage Studio is an end-to-end AI application development platform for developers,
assisting them to develop AI applications. At users’ choices, it provides standard, low-code and
no-code AI development tools. Sage Studio is able to cover the entire development process
from data to model, application, and the deployment and launching of AI applications. Featured
with drag and pull development tools, Sage Studio is able to provide one-stop application
development and launch management in the fields of machine learning, computer vision,
natural language processing and speech, among others.
Key modules of Sage Studio include (i) model exploration, (ii) model management, (iii)
application development and (iv) application management. The model exploration module
structures and modularizes model training, and offers a series of operating modules
(“operator”) for coding, running, data visualization and result feedback. According to CIC,
most of the existing machine learning platforms lack the capabilities to support development
of AI applications in various scenarios or to ensure performance when processing large data
volumes. Sage Studio defines the standards for each operator during the modeling process for
AI application in different scenarios, and offers high compatibility. By integrating multiple
self-developed AI algorithms, Sage Studio enables users to process massive volumes of data
without compromising performance.
Similar to HyperCycle, Sage Studio provides users with APIs, through which users can
connect Sage Studio with their business and operating systems. We offer various pre-set
templates of flow process and algorithms, enabling developers to design AI models through
drag and pull. Supported by our self-developed GDBT framework, a distributed parallel
computing framework designed for machine learning computation tasks, we offer a large
number of machine learning algorithms for different use cases. As a result, Sage Studio is able
to enhance computing power efficiency for machine learning with massive data volume,
thereby reducing the total cost of ownership of our users as they scale.
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Furthermore, Sage Studio’s application development module empowers users with the
tools to design, develop, test and launch AI applications with various functions, including
self-learning, batch forecasting and real-time forecasting. As an open platform, Sage Studio is
compatible with various mainstream AI frameworks and algorithms, enabling users to achieve
customized development and integration of AI applications in a rapid and cost-effective
manner. Sage Studio also provides centralized management capabilities for models and
applications from different sources.
Illustrative Example of AI Application Development through HyperCycle ML
Below is an illustrative example of how a hypothetical bank can easily and rapidly deploy
customized AI applications through HyperCycle ML:
1. The bank intends to recommend suitable financial products to its mobile bank APP
users real-time by developing a precise recommendation model. The first step is to
select a suitable template from the homepage of HyperCycle ML.
Choosing suitable AI application templates from homepage
Summary of stages of AI application development
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2. The bank then needs to input (i) behavior data, such as user information, financial
product information and sales record, and (ii) feedback data, being historical
purchase decisions made by users.
Input behavior/feedback data
3. After relevant parameters are confirmed and learning process is activated, machine
will automatically choose the optimal algorithms and start to generate AI models.
Summary of sources of behavior data, feedback data, supplementary data and other relevant parameters
Progress of machine learning
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4. After machine learning is completed, the bank’s precise recommendation model is
launched by just one click.
Launch of precision recommendation model after completion of machine learning
Sage Applications
On top of our Sage Platform, we also offer a large and growing portfolio of
scenario-specific AI applications that address a range of mission-critical use cases and can be
readily installed and deployed. Moreover, we launched our enterprise-level AI application
store, which is a marketplace for AI applications at the choice of our users. It integrates and
is compatible with a cluster of AI applications developed by both us and our partners in the
ecosystem on Sage AIOS using our algorithms and standards, thereby addressing users’ needs
for intelligent operations in different use cases.
Based on their functions, our Sage Applications are primarily categorized into (i) sales
and marketing, (ii) risk management and (iii) operating efficiency applications. The following
table sets forth details of our major Sage Applications:
Category Application Features
Sales and
Marketing
Digital operation
platform
We offer a digital operation platform which
comprises smart recommendation, smart search,
smart push, smart customer service, data
governance and other functions. It enables
organizations to refine their online operations,
optimize user experience and retain their users,
and achieve business growth. Empowering
organizations with AI technologies, it effectively
optimizes the operation of users, which can be
reflected in their key operating metrics such as
retention rate, repurchase rate, average
transaction value and gross merchandise value,
among others.
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Category Application Features
Precision marketing Powered by AI technologies in various scenarios
such as recommendations, marketing,
maintaining user engagement, user portraits,
forecasting, user acquisition and pricing, our
precision marketing solution enables
organizations to analyze sales statistics and
configure marketing strategy, analyze sales
statistics, and thereby increase their sales.
Sales forecasting Our sales forecasting solution analyzes various
types of operating data, including sales, store,
marketing, environment and location data.
Utilizing our AI technologies, it automatically
summarizes rules for sales forecasting, and is
able to accurately predict sales volume, sales
value and sales flow from store level to SKU
level. As a result, we empower users to
formulate sales strategies, and to optimize
inventory and store location planning.
Risk
Management
Anti-fraud We offer an end-to-end intelligent anti-fraud
platform to empower organizations with AI
technologies to solve various kinds of risk and
fraudulent events. By combining machine
learning technology and traditional expert rules,
we help users improve the overall accuracy and
scope of risk management and anti-fraud
management.
Anti-money laundering Our anti-money laundering solution is able to
intelligently identify, analyze and report
suspicious transactions and to sort the flagged
transactions according to risk level to improve
the efficiency of human review. It also addresses
the problems of ‘omission’ and ‘overstatement’
of traditional anti-money laundering methods.
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Category Application Features
Anomaly Prediction Our anomaly prediction application is able to
identify unexpected projects, events or
observations, and thereby provide early warnings
and trend predictions through data mining. It can
be applied in detection and prediction of banking
frauds, equipment faults and text errors.
Operating
Efficiency
Smart supply chain By analyzing consumers’ needs and combining
with our sales forecasting application, our smart
supply chain solution helps enterprises to
manage manufacturing, distribution, stocking and
warehousing. We believe that this smart supply
chain solution is able to empower a number of
industries in which accurate pricing, procurement
and distribution are key to success, as enterprises
rely more and more heavily on AI to make
accurate and timely procurement decisions.
Intelligent customer
service
We offer a conversational AI chatbot developed
based on deep learning technologies, featuring
self-learning, natural language understanding,
knowledge graph, intelligent Q&A, task
dialogues and other core functions. During
communications with end users, the chatbot can
carry out self-learning according to the feedback
from users, and adjust the communication
strategy and the communication result. Our
intelligent customer service help organizations
reduce costs associated with manual customer
services.
Smart Production
Planning
By offering the smart production planning
application, we help users make optimized
production plans. Powered by AI technologies, it
formulates daily production plan for each
product line based on users’ orders,
manufacturing capacity, manufacturing
techniques and raw materials, enhancing their
cost efficiency.
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Furthermore, at our users’ request, we also offer application development services to help
them develop customized AI applications on Sage Platform based on their specific business
needs. For users who have not purchased Sage Platform, customized applications are developed
on our Sage Platform, and the applications are then delivered to users. Such applications cannot
be altered by the users, while users for Sage Platform are able to alter, update and manage AI
models and applications on the platform.
We have been leading in the research of advanced AI technologies and the utilization of
these technologies in commercial solutions. For example, in March 2023, in addition to our
decision-making AI solutions, we launched SageGPT, an enterprise-grade generative AI
product specially designed for business scenarios. SageGPT features multimodal interaction
and enterprise-ready AI tools. It re-defines the way employees of our end-users interact with
business systems. SageGPT is able to connect with the end user’s existing business systems,
AI applications and internal database. With a user-friendly interface, SageGPT is capable of
processing queries and tasks in the forms of video, image, voice, text, etc., transmit such
queries and tasks to the end users’ existing business systems, AI applications and internal
database for processing, and output the responses in requested forms. Similar to Sage Platform
and applications, SageGPT can be delivered through (i) license of software installed
on-premise at servers of end users, and (ii) sale of servers and other related hardware with
pre-installed SageGPT software. Currently SageGPT is not bundled with other products or
services offered by us. SageGPT is compatible with users’ existing business systems, AI
applications and internal database, and does not require purchase of our other products or
services. As of the Latest Practicable Date, SageGPT is still in an early stage of
commercialization. Key advantages of SageGPT include:
 Secure data – SageGPT can be deployed on-premise, and does not require large
external models. Therefore end users’ data are retained and processed on their
premise to ensure security.
 Trusted content – SageGPT process data from trusted source, including end user’s
existing AI applications, business systems and internal database. SageGPT supports
cross-validation of knowledge graph to ensure the reliability and accuracy of content
generated. Original source of the output can be identified for verification.
 Cost-efficiency – As SageGPT is designed for enterprises instead of individuals, we
have streamlined the AI models and generating process of SageGPT which requires
less computing power. SageGPT does not require significant cost and investment by
end users on computing power and hardware.
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Below is a hypothetical and illustrative example of how SageGPT can be used in
industrial design:
Switch plug-ins
Please help me search similar parts
Search complete!
Search similar parts
Search complete!
Could you assemble these together
Assembly completed!
For risks regarding recent regulatory development that may be relevant to our SageGPT,
see “Risk Factors – Risks Related to Our Business and Industry – We may be subject to
complex and evolving laws and regulations regarding privacy and data protection. Actual or
alleged failure to comply with privacy and data protection laws and regulations could damage
our reputation, deter current and potential users from using our solutions and subject us to
significant legal, financial and operational consequences.”
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REVENUE MODEL
We generate our revenue primarily from (i) Sage Platform and applications, which are
charged based on estimated computing power consumption, and (ii) application development
and other services which primarily include application development services to help them
develop customized AI applications on Sage Platform based on their business need. Computing
power consumption is estimated based on data volume, and complexity or dimensions of the
AI models. The following table illustrates the details of our solutions:
Category Deployment Pricing
Sage Platform and
applications
License of software
installed on-premise at
users’ servers
Based on estimated computing
power consumption – license
fees
SageOne (software-defined
“All-in-One” solutions
with pre-built Sage
Platform and
applications on servers
and other related
hardware)
Based on estimated computing
power consumption –
purchase price charged based
on the number of units of
SageOne, and taking into
account of license
Application development
and other services
N/A Project-based – taking into
account the manpower
consumption of the relevant
services
The following table sets forth a breakdown of our revenues by types of solutions for the
years/periods indicated:
For the year ended December 31, For the three months ended March 31,
2020 2021 2022 2022 2023
RMB % RMB % RMB % RMB % RMB %
(RMB in thousands, except for percentages)
(Unaudited)
Sage Platform and
applications
Software licensing 157,888 16.8 356,156 17.6 596,001 19.3 87,170 18.1 103,429 16.1
SageOne 461,041 48.9 658,398 32.7 895,850 29.1 160,682 33.3 168,306 26.1
Sub-total 618,929 65.7 1,014,554 50.3 1,491,851 48.4 247,852 51.4 271,735 42.2
Application
development and
other services 323,309 34.3 1,003,845 49.7 1,590,786 51.6 234,409 48.6 372,662 57.8
Total 942,238 100.0 2,018,399 100.0 3,082,637 100.0 482,261 100.0 644,397 100.0
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As a platform-centric AI solution provider, we have been dedicated to updating our
solutions to provide end users across different industries with unified development
environment, standards and rules and to enhance the compatibility of our solutions. As a result
of our continuous iteration and optimization efforts, Sage Platform can be generally applied by
end users in different industries which do not require significant customization. Our total
revenue increased by 114.2% from RMB942.2 million in 2020 to RMB2,018.4 million in 2021,
primarily driven by expansion in our number of users from 156 in 2020 to 245 in 2021 and the
increased spending of our users, especially the spending of our lighthouse users, evidenced by
the increase of our average revenue per lighthouse user from RMB12.3 million in 2020 to
RMB13.7 million in 2021. Our revenue generated from Sage Platform and applications as a
percentage of our total revenue decreased from 65.7% in 2020 to 50.3% in 2021, as the
percentage of total revenue attributed to our application development and other services
increased over the same years, primarily driven by the increased demand for customized AI
applications due to the expansion of our user base in 2021. The number of users for our
application development and other services increased from 68 in 2020 to 139 in 2021. To a
lesser extent, the increase of revenue contribution by our application development and other
services was also attributable to the recovery from negative impact of COVID-19. Our total
revenue increased by 52.7% from RMB2,018.4 million in 2021 to RMB3,082.6 million in
2022, primarily driven by expansion in our number of users from 245 in 2021 to 409 in 2022.
Our revenue generated from Sage Platform and applications as a percentage of our total
revenue decreased from 50.3% in 2021 to 48.4% in 2022, primarily due to the decrease of
revenue contribution of SageOne, which requires more on-site services than our other
segments, and thus was more affected by the recurrence of COVID-19 in 2022. Our revenue
generated from Sage Platform and applications as a percentage of total revenue decreased from
51.4% in the three months ended March 31, 2022 to 42.2% in the three months ended March
31, 2023 primarily due to the increased revenue contribution from application development and
other services over the same periods, driven by the increased demand for customized AI
applications.
Sage Platform and Applications
The Sage Platform and applications are delivered primarily through (i) license of software
installed on-premise at servers of our end users and (ii) SageOne, our “All-in-One” solutions
with pre-installed software on servers and other related hardware, both of which allow our
users to develop their own AI applications on Sage Platform. Our Sage Platform and
applications are offered as a bundle. Users select the types of Sage Platform and applications
and the delivery method based on their needs.
Our Sage Platform and applications are primarily offered through software license and
sale of SageOne, rather than on a subscription basis. We are dedicated to creating value for
users and addressing their business needs with our solutions. After we help them identify the
critical issues, provide solutions and achieve the objectives of business improvement, they will
make repeated purchases from us after identifying incremental business needs for AI
application within their operations, and expanding their use of our solutions. As our users
develop more AI applications for new use cases on our platform and/or increase usage in
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existing use cases which require more computing power, they will need to purchase additional
licenses from us for additional computing power, which in turn allows us to capture additional
monetization opportunities on a recurring basis. Our ability to create value for users is
evidenced by a net dollar expansion rate of 167%, 140% and 126% for our lighthouse users in
2020, 2021 and 2022, respectively. The pricing of Sage Platform and applications are primarily
based on the estimated computing power consumption. Based on communications with users,
we understand their business needs and estimate the computing power consumption based on
the complexity of the use cases, dimensions of the AI models, and the estimated amount of data
involved therein.
 The price of our software license is primarily based on the estimated computing
power consumption by reference to the AI applications our users plan to deploy. We
consider data volume and other specific requests such as the latency, concurrency,
queries per seconds, and the number of replicas, among others.
 To complement the sales of software, we also offer SageOne, our software-defined
“All-in-One” solutions with pre-built Sage Platform and applications on servers and
other related hardware. We charge customers of SageOne by taking into account the
number of hardware units, license fees of our software and cost of hardware based
on respective model. Hardware units of SageOne refer to units of different models
of servers.
We closely communicate with our users to understand their specific business needs for AI
deployment in order to estimate the amount of computing power that will be consumed by such
clients. Computing power consumption is primarily measured as the number of CPU cores of
servers needed to support our software. For software license, we provide software to be
installed on-premise at servers of our end users. For SageOne, we offer hardware with pre-built
Sage Platform and applications.
In general, computing power consumption is estimated based on a variety of
considerations in relation to the specific use cases and applications that users intend to develop.
Key considerations include (i) estimated data volume, queries per second (being the number of
times a request is sent per second), concurrency (being the number of concurrent tasks) and
number of replica (being the number of copies of data), (ii) types of AI algorithms (such as
content recommendation, forecasting, fraud detection, etc.), and (iii) other use case-specific
requests (such as whether the user is developing an online or offline application, or whether
the analytics is real-time or delayed, etc.). In addition to the key parameters, our estimated
computing power consumption is also, to a lesser extent, affected by other additional
parameters such as the estimated network gateway, latency, the complexity of feature
engineering, among others. Typically, more computing power is required for applications with
larger data volume, more requirements on other parameters, more complex algorithms and
certain specific features such as real-time analytics.
 For software license, we charge customers software license fees based on the
required number of CPU cores multiplied by the agreed license fee for each CPU
core.
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 For SageOne, based on the estimated computing power consumption and the
optimisation effect that could be realised our hardware, we propose to our clients the
appropriate model, configuration and number of hardware required for their needs.
Price for SageOne is charged based on the number of hardware units, which already
covers the license fees for our software. As a result, the price for hardware units may
vary significantly based on the configuration of hardware selected by the users. As
users are increasingly selecting more advanced servers with higher performance to
meet their growing business needs, the price for our Sage One solutions have
increased during the Track Record Period.
We also provide pricing adjustments to our clients based on a myriad of factors including
spending budgets of clients, business relationship and market conditions. When users have
additional needs for our solutions which will require more computing power, they shall
purchase additional licenses for our software to be installed on more CPU cores or additional
units of hardware accordingly.
In 2020, 2021, 2022, and in the three months ended March 31, 2022 and 2023, the number
of our users for software licensing was 70, 96, 88, 42 and 35, respectively, and average revenue
per user was RMB2.3 million, RMB3.6 million, RMB6.6 million, RMB2.1 million and
RMB3.0 million, respectively. Driven by our comprehensive commercialization of SageOne, in
2020, 2021, 2022, and in the three months ended March 31, 2022 and 2023, the number of our
users for SageOne was 57, 66, 83, 24 and 18, respectively, and average revenue per user was
RMB8.1 million, RMB8.8 million, RMB11.0 million, RMB6.7 million and RMB9.4 million,
respectively. We have experienced growth in the number of users for our software licensing and
SageOne from 2020 to 2022, primarily due to our effective go-to-market strategy and business
expansion efforts. The average revenue per user for our software licensing and SageOne also
increased rapidly during the Track Record Period, which was mainly due to their increased
spending of our solutions as they identify incremental business needs for AI within their
operations and expand their use of our solutions, reflecting our continuous value creation to
users.
Application Development and Other Services
At our users’ request, we primarily offer application development services to help them
develop customized AI applications on Sage Platform based on their business needs. We charge
them on a project basis, the pricing of which is primarily based on the manpower consumption
of the relevant services. As our users’ demand for AI applications increases with their business
expansion, they will continue to procure our application development services, allowing us to
capture more service fees on an on-going basis.
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USE CASES OF OUR SOLUTIONS
We emphasize value creation. At our users’ request and based on their business needs, we
work closely with users and help them develop scenario-specific AI applications. Our solutions
have created value for enterprises in a myriad of industries, including, but not limited to
finance, retail, manufacturing, energy and power, telecommunications, transportation,
technology, education, media and healthcare. The following sets forth certain examples of the
key use cases of our solutions:
AI + Finance
According to CIC, the strategy of customer-centered cost optimization and risk
control in the finance industry is getting increasingly important. Our AI solutions help
financial institutions achieve enhanced customer marketing management, internal
operation optimization and risk control while increasing income and reducing
expenditure. Since we first entered into the finance sector in 2015, we have served many
of China’s large state-owned banks and joint stock banks, and other financial institutions
such as securities companies and insurance companies.
Case study
Bank A is one of the largest state-owned banks in China. We started our
collaboration with Bank A since 2017 and have maintained a close business relationship
with it ever since. We provided Bank A with Sage Platform through both software
licensing and SageOne, and offered application development services. Due to its massive
number of transactions, Bank A has devoted significant resources to identifying and
preventing fraudulent activities. We help Bank A establish risk control AI models by
analyzing its users’ historical transaction information, current transaction information
and other relevant data, enabling Bank A to unveil the risks behind each transaction more
effectively. According to the results of an internal test, the accuracy of our AI fraudulent
detection model is approximately 83%, which is over three times more accurate than
Bank A ’s original model based on expert rules before using our solution.
Specifically, to identify and prevent fraudulent transactions, we helped Bank A
develop AI applications to estimate the potential fraudulent risks. Utilizing Sage Studio,
Bank A analyses data such as transaction records, historical fraudulent transactions,
account information, among others. Using Sage Studio, Bank A extracts the
characteristics from such data and re-combines them for model training. Powered by our
AutoML technology, we help Bank A train the anti-fraud model using logic regression
algorithms, which improve the reliability of model training in scenarios with large
amount of discrete variables. Our Sage Studio successfully helped Bank A establish a
machine learning model, and enabled Bank A to develop anti-fraud applications to
automatically identify and prevent fraudulent transactions with AI capabilities. Bank A is
able to easily launch and manage its AI applications on Sage AIOS.
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AI + Retail
We help retail enterprises build an overall decision-making framework supported by
our AI technologies, empowering them to formulate operational strategies based on users’
business needs. We enable AI transformation of the entire business process of users,
optimizing their decision-making process and operational efficiency.
Case study
Company X is a famous chain store operator, and has used our solutions since 2019
as part of its digital transformation strategy. We provided Company X with Sage Platform
through both software licensing and SageOne, and offered application development
services. Utilizing our AI-enabled sales and marketing solutions, we empower Company
X with big data analytics capabilities to formulate precision marketing strategies and
deploy AI at scale. Based on the preferences of different users, our solutions enable
Company X to make real-time and personalized recommendations for promotion
activities. Utilizing Sage Platform, Company X analyses its user information for model
training, such as purchase orders, products added to shipping carts and efficacy of
historical product recommendations. Powered by our AutoML technology, our AI
developer suites help Company X develop a personalized recommendation engine to
predict user preferences and make targeted recommendations and promotions
accordingly. The effectiveness of our solutions is evidenced by the increase in Company’s
per customer transaction amount by 2%, and the increase in its total sales amount by
hundreds of millions of RMB.
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AI + Manufacturing
We enable AI transformation across the entire manufacturing process, thereby
helping our users optimize quality control, arrange and manage manufacturing schedules,
and identify errors and defects.
Case study
Company Y is one of the largest lithium-ion battery manufacturers in the world.
Their products are widely used in electronic vehicles (“EV”) and energy storage
facilities. We have developed a strategic partnership with Company Y since 2020. We
provided Company Y with Sage Platform through both software licensing and SageOne,
and offered application development services. Company Y is seeking to upgrade their
factories and ensure product safety with AI technologies to maintain their competitive
edges. We offered Sage Platform as their main infrastructure for large-scale AI
applications, supporting various AI application scenarios, such as computer vision quality
inspection and equipment controlling. Our Sage AIOS enables Company Y to better
manage the massive amount of operational data. Such data is extracted and analyzed by
our AI developer suites to discover the patterns which can be applied in optimizing
Company Y’s product quality, production safety and customer service quality, among
others. In addition, Sage AIOS enables Company Y to easily launch and manage its AI
applications at a large scale. Furthermore, our AI scientists are working with Company
Y on AI-powered predictive analysis of product safety, trying to address one of the most
difficult challenges faced by the EV industry.
AI + Energy and Power
Using big data and machine learning technologies, we enable users to enhance
operation safety and reliability, better manage equipment and other assets, and identify
and prevent market risks.
Case study
Company Z operates a large-scale hydropower in China. To ensure safety operation,
Company Z established over 100,000 inspection points. Its inspection staff need to
closely monitor thousands of variable operating data on a daily basis. Company Z
endeavors to effectively identify risks, make predictions and early warnings, and enhance
decision making from such data.
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We started collaboration with Company Z in 2019. We provided Company Z with
Sage Platform through SageOne, and offered application development services. Utilizing
our Sage Platform, Company Z developed a forecasting model utilizing historical data
such as the temperatures of rotors and bearing bush. Leveraging our AI developer suites,
Company Z discovers the correlation among the operating condition of equipment and
temperatures of rotors and bearing. Such correlation will be changed in the event of
anomaly. Therefore, our solutions enable Company Z to efficiently monitor operation
safety and enhance the accuracy and timeliness of anomaly alerting. Benefiting from our
solutions, Company Z increased its accuracy of anomaly alerting by more than two times.
As a result, Company Z is able to identify and prevent equipment errors and avoid
significant losses arising from operation disruptions. We also assist Company Z to
establish a data-driven decision making mechanism, ensuring long-term stability of its
core business operations. In addition, Sage AIOS enables Company Z to easily launch and
manage its AI applications at a large scale.
BUSINESS SUSTAINABILITY AND PATH TO PROFITABILITY
Introduction
We were loss-making during the Track Record Period. In 2020, 2021, 2022 and in the
three months ended March 31, 2022 and 2023, we incurred net loss of RMB750.2 million,
RMB1,802.1 million, RMB1,653.4 million, RMB268.2 million and RMB303.9 million,
respectively. The net losses were primarily due to the substantial amount of: (i) research and
development expenses incurred to develop and enhance our solutions and technology stacks,
see “– Research and Development,” (ii) selling and marketing expenses incurred to increase
our brand awareness and expand our user base, (iii) general and administrative expenses, which
are mainly attributable to share-based compensation paid to our employees, and (iv) interest
expense on redemption liabilities in relation to certain preferred rights granted to our investors,
which is non-recurring in nature. In 2020, 2021, 2022 and in the three months ended March 31,
2022 and 2023, our adjusted net loss (a non-IFRS measure), which is defined as loss for the
year by adding back share-based compensation, interest expense on redemption liabilities and
listing expenses, amounted to RMB390.3 million, RMB559.1 million, RMB504.3 million,
RMB66.8 million and RMB65.1 million, respectively. As we are still at a relatively early stage
of our monetization efforts, we have been focusing on continuously optimizing our solutions
and expanding our user base.
We plan to continue to enhance our financial performance by (i) effectively attracting and
retaining our users, (ii) continuing to create value for users to further monetize our solutions,
and (iii) effectively managing our cost and expenses, and enhancing operating leverage.
Despite our continued expansion in user base, increase in average revenue per lighthouse user
and enhanced capability to manage our cost and expenses, we may continue to incur net
losses and net operating cash outflow in the near future, including the year ending
December 31, 2023 , mainly due to our continued investments in research and development of
our technologies and solutions, marketing initiatives as well as share-based compensation.
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Effectively attracting and retaining our users
Effectively attracting and retaining our users is crucial to driving revenue growths, and
ultimately our ability to achieve profitability. The following table sets forth the numbers of our
users and lighthouse users for the years/periods indicated:
For the year ended December 31,
For the three months
ended March 31,
2020 2021 2022 2022 2023
Number of users 156 245 409 125 147
Number of lighthouse
users for the
previous year 32 47 75 N/A N/A
Additions 21 33 36 N/A N/A
Less
(1) 6 5 7 N/A N/A
Number of lighthouse
users for the
year/period 47 75 104 49 62
Note:
(1) Refers to lighthouse users in the previous year that ceased to be regarded as our lighthouse users in the
given year. However, the business relationship with such users has not been terminated. We have been
providing ongoing supporting services to such lighthouse users under our standard service arrangement.
Such users ceased to be our lighthouse users in the given year solely because we did not generate
revenue from such users in such year from an accounting perspective.
As a result of our effective go-to-market strategy, we had 47, 75, 104, 49 and 62
lighthouse users in 2020, 2021, 2022 and in the three months ended March 31, 2022 and 2023,
respectively. In 2020, 2021, 2022 and in the three months ended March 31, 2022 and 2023, we
acquired 21, 33 36 new lighthouse users, respectively, illustrating the value of our solutions
and our ability to expand our business. Our lighthouse users contributed 61%, 51%, 60%, 55%
and 52% of our total revenue in 2020, 2021, 2022 and in the three months ended March 31,
2022 and 2023, respectively. Therefore, growth in revenue from lighthouse users is a key driver
in our overall revenue growth. Moreover, our expanding base of lighthouse users also help us
to attract other users, which in turn further drives our revenue growth. Our initial success with
lighthouse users enables us to further penetrate the respective industry and provide solutions
to other players in the industry efficiently. As a result, we have accumulated a strong and
rapidly growing total user base including both lighthouse users and other users, with 156, 245,
409, 125 and 147 users in 2020, 2021, 2022 and in the three months ended March 31, 2022 and
2023, respectively. The effectiveness of our go-to-market strategy is evidenced by the rapid
growth in the number of other users during the Track Record Period, representing a CAGR of
67.3% from 2020 to 2022, as compared to a CAGR of 48.8% for lighthouse users during the
same years, reflecting our ability to penetrate into a larger user base following initial success
with lighthouse users.
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We plan to further implement our “go-to-market” strategy by strengthening our
relationships with lighthouse users and further penetrate into a larger user base. We also work
closely with third-party solution partners and leverage their understanding of end users’
demands, thereby developing tailored marketing strategies and to acquire more users. As our
existing users (plenty of which are lighthouse users) benefit from our solutions in more and
more use cases, we will naturally be able to establish industry standards and attract more new
users both in existing verticals and new verticals. We are able to leverage our experience and
success in existing industry and scenario to expand into new industries with similar scenario.
For example, successes in intelligent recommendation scenario in the restaurant industry can
be leveraged when we are entering into other industries, such as fashion, which also have
demands for intelligent recommendation. In addition, we will further optimize and enhance the
functions of our solutions so that they can be applied in new scenarios and verticals. Moreover,
we plan to recruit and retain talents with in-depth industry knowledge to strengthen our sales
and marketing team, thereby leveraging their industry-specific sales experiences to expand
users in new industries.
Continuing to create value for users to further monetize our solutions
We are dedicated to creating value to our users. As a result, we are able to explore
additional monetization opportunities to help us scale up our revenues and to achieve
profitability.
We plan to continue to create value for users and address their business needs by
optimizing our solutions, innovating our technologies, providing satisfying customer services,
among others. After we help them identify the critical issues, provide solutions and achieve the
objectives of business improvement, they usually identify incremental business needs for AI
within their operations and expand their use of our solutions. Moreover, as our users develop
more AI applications for new use cases on our platform and/or increase usage in existing use
cases which require more computing power, they will need to purchase additional licenses from
us for additional computing power, which in turn allows us to capture additional monetization
opportunities after the initial sale. Our ability to create value for users is evidenced by a net
dollar expansion rate of 167%, 140% and 126% for our lighthouse users in 2020, 2021 and
2022, respectively. Moreover, the average revenue per lighthouse user amounted to RMB12.3
million, RMB13.7 million, RMB17.9 million, RMB5.4 million and RMB5.4 million in 2020,
2021, 2022, and in the three months ended March 31, 2022 and 2023, respectively, illustrating
our ability to further monetize our solutions. For the years ended December 31, 2020, 2021,
2022 and in the three months ended March 31, 2022 and 2023, our revenue generated from
existing lighthouse users amounted to RMB445.8 million, RMB808.2 million, RMB1,300.4
million, RMB199.4 million and RMB267.0 million, respectively, representing 77.0%, 78.5%
70.0% 74.8% and 79.4% of total revenue generated from lighthouse end users for the same
years, respectively. Driven by our successful value creation for lighthouse users, our overall
average revenue per user amounted to RMB5.8 million, RMB6.9 million, RMB7.5 million,
RMB3.9 million and RMB4.4 million in 2020, 2021, 2022 and in the three months ended
March 31, 2022 and 2023, respectively.
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Effectively managing our cost and expenses, and enhancing operating leverage
Our ability to manage and control our costs and operating expenses is critical to the
success of our business and our profitability.
Our cost structure is affected by the mix of our solution offerings. For example, with the
launch of SageOne, we incurred an increased cost of finished goods sold as a percentage of
revenue during the Track Record Period. We expect our cost of revenues as a percentage of
revenue may vary from period to period in the short term as a result of the mix of our solution
offerings, while it will generally decrease in the long term due to the following factors:
 As we continue to optimize our algorithms and to enhance the compatibility of
software and hardware, we expect to improve the computing efficiency of our
solutions, which enables us to enhance user experience while optimizing cost
structure; and
 We have invested heavily in developing technology capabilities and infrastructure,
in order to provide highly scalable, standardized and flexible solutions for our users.
The solutions we offer are highly modularized, which allows us to address users’
customized demands effectively and efficiently, and in turn, enabling us to achieve
significant overall cost and operating efficiency.
Our selling and marketing expenses (excluding share-based compensation) accounted for
24.1%, 17.7%, 13.1%, 16.7% and 12.9% of our total revenue in 2020, 2021, 2022 and in the
three months ended March 31, 2022 and 2023, respectively. We expect that our sales and
marketing expenses as a percentage of total revenue will generally decrease in the long term
due to the following factors:
 Our go-to-market strategy starts with market leaders in each industry we target to
enter who are also early adopters of AI. We are able to leverage our experience and
success in existing industry and scenario to expand into new industries with similar
scenario. We demonstrate the value of our solutions through one or a few entry
projects. Once our value has been proven, we are then able to expand our services
quickly to address other business needs of our users. As a result of our go-to-market
strategy, after we succeed with the lighthouse users, we leverage our understanding
of the industries, our reputation established through collaborating with industry
leaders, and our AI ecosystem to further enhance our influence in such industries,
enabling us to further penetrate and provide solutions to other players, without
incurring significant sales and marketing efforts;
 We expect to accumulate a larger user base and higher user stickiness as we
continuously solidify our market leadership. We expect this to enable us to attract
and retain users and, in the long-term, reduce spending on promotions and
advertisements. As our users develop more AI applications for new use cases on our
platform and/or increase usage in existing use cases which require more computing
BUSINESS
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power, they will need to purchase additional licenses from us for additional
computing power, which in turn allows us to capture additional monetization
opportunities with low marginal cost after the initial sale and improve our
profitability. Our ability to create value for users is evidenced by a net dollar
expansion rate of 167%, 140% and 126% for our lighthouse users in 2020, 2021 and
2022, respectively;
 We expect to benefit from more efficient user acquisition through word-of-mouth
referrals and enhanced brand awareness. With our established brand reputation and
large use bases, we expect to continuously generate significant word-of-mouth
referrals and organic user growth; and
 We plan to strengthen our relationships with solution partners to retain and expand
our user base across various industries, which will help improve our sales and
marketing efficiency in the long run.
Our general and administrative expenses (excluding share-based compensation)
accounted for 12.7%, 8.6%, 8.1%, 17.2% and 15.7% of our total revenue in 2020, 2021, 2022
and in the three months ended March 31, 2022 and 2023, respectively. We expect that our
general and administrative expenses as a percentage of total revenue will generally decrease in
the long term, as the major expense component, employee benefit expenses, generally do not
increase proportionally with our revenue growth.
Our research and development expenses (excluding share-based compensation) accounted
for 57.3%, 55.3%, 48.8%, 46.8% and 37.5% of our total revenue in 2020, 2021, 2022 and in
the three months ended March 31, 2022 and 2023, respectively. While we will continue to
invest in research and development capabilities to support our long term growth, we expect that
our research and development expenses will generally decrease as a percentage of total revenue
in the long term, as (i) we expect to have stronger bargaining power against our suppliers for
outsourced R&D services as we scale up, and are thus able to obtain more favorable pricing
terms, and (ii) the major expense component, employee benefit expenses, generally do not
increase proportionally with our revenue growth, and thus we are able to enjoy economies of
scale as we scale up. We plan to (i) further strengthen our existing core technologies, and (ii)
invest in the research and development team of new areas which may lead to the next
generation of AI technologies. For example, we are dedicated to developing technologies in the
area of data privacy protection, including privacy preserving learning, which is able to enhance
data privacy in the process of machine learning, and federated learning which entails training
algorithm on local datasets without exchange data samples, thereby enhancing data security
and privacy. For details, see “Business – Research and Development.”
Our future profitability is uncertain and subject to various factors, including our ability
to develop new technologies, enhance user experience, establish effective monetization
strategies, compete effectively and successfully, and continuously grow revenues and our user
base in a cost-effective way by improving our operational efficiency. For details, see “Risk
Factors – Risks Related to Our Business and Industry – We have recorded net losses, net
liabilities and operating cash outflow during the Track Record Period and recorded net current
liabilities as of March 31, 2023, and we may not be able to achieve or subsequently maintain
profitability.”
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OUR TECHNOLOGY
We create and apply advanced technologies to drive the development of our AI solutions.
We believe that our technology is at the core of our innovative solutions and we have made
significant investments in technologies to ensure our market leadership. We believe that our
technologies enable us to deliver more efficient and more cost-effective solutions with higher
performance to users. We have been leading in the research of advanced AI technologies and
the utilization of these technologies in commercial solutions. Being a first-mover means we are
well ahead of our competitors in terms of efficiency and accuracy of our algorithms.
Accumulation of use cases and experience over the years makes our solutions difficult, if not
impossible, to be replicated by our competitors.
Our core technologies include AutoML, transfer learning, environment learning and Auto
RL. These technologies are embedded as operating modules (“operators”) in our AI developer
suites, underlying the AI applications designed and developed by our users. Each of our core
technology is a sub-category of machine learning with different focuses, and we do not own,
collect or process data of our users on our servers during the machine learning process.
AutoML automates the process of machine learning; transfer learning is able to “transfer” the
machine learning process conducted in one scenario to another with similarity; environment
learning and AutoRL optimizes the machine learning process in dynamic, uncertain, and
potentially complex environment. Based on their scenario-specific needs, developers select
operators based on different technologies for module training. Specifically, AutoML are used
in general decision making scenarios, transfer learning is able to optimize modeling processes
in scenarios with insufficient or incomplete samples, and AutoRL together with environment
learning are typically used in scenarios such as optimized manufacturing planning, agile supply
chain and logistics scheduling.
AutoML
Our AutoML technology automates the process of machine learning and enables
algorithms to automatically discover new patterns, hence minimizing the ongoing involvement
of AI engineers responsible for developing, adjusting, maintaining and refining the AI models.
Conventional AI solutions are mostly specific to individual application scenarios and require
AI experts to develop the model from ground up and to continuously refine it. Moreover, the
development of AI algorithms requires complex and time-consuming modeling process, and the
correct deployment of AI requires consistent data to ensure the model in production performing
as good as in the offline modeling process. Specifically, AutoML are used in general decision
making scenarios. Powered by AutoML technology, our AI developer suites enable AI models
to continuously learn and improve by themselves through discovering new patterns, hence
directly reducing the cost, effort and complexity of implementing AI solutions. It also allows
large-scale deployment of AI by enterprises because significant involvement of AI experts is
no longer required. Our AutoML enables our AI developer suites to automatically refine data,
thereby enhancing the efficiency and results of modelling processes. It helps developers screen
and extract useful characteristics from data. During the model training process, leveraging
AutoML technology, our AI developer suites automate parameter tuning and help users greatly
reduce human efforts and costs. It is also constantly self-improving, hence lowering the
barriers for deep learning and significantly improving the training quality of our AI developer
suites.
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As compared to similar technologies applied by our competitors, our proprietary AutoML
algorithm is a cutting-edge AutoML algorithm in the world, according to CIC. With our
AutoML algorithms, we broke the world records of two Open Graph Benchmark (“OGB”) tasks
in April 2021. OGB is a globally recognized collection of benchmark datasets for machine
learning on graphs that AI companies and research institutions utilize to test and evaluate their
AI model performance. Participants of the OGB tasks include world-famous innovative
enterprises and research institutes, such as Facebook, Alibaba, Stanford University and Cornell
University. Our AutoML algorithm also ranks top 1% in Kaggle Structured Data and Image
Classification Competition 2019. See “– Awards and Recognition.” According to CIC, we were
the first in the world to launch a commercialized product using the AutoML framework in
2014, and to apply AutoML in a number of use cases across various industry sectors. For
example, according to CIC, we launched the world’s first commercialized AutoCV product in
2018. Our technology leadership and first-mover advantage have contributed to our initial
success in acquiring lighthouse users, which in turn enable us to further penetrate and provide
solutions to other players in different industries.
Transfer Learning
Our transfer learning technology expands application of AI to industries in which data is
sensitive or scarce and resolves privacy issues surrounding application of AI in fields involving
sensitive data subjects. Due to the lack of labeling data to meet business needs, as well as the
need to improve model effectiveness, transfer learning is now being increasingly recognized.
It equips our AI developer suites with the ability to “transfer” analysis conducted and patterns
discovered in one industry or scenario to another with similarity, hence being able to provide
AI solutions even where data is not readily available or accessible. Transfer learning enables
our AI developer suites with capabilities of taking knowledge learned on one problem, and
leveraging them on a new, similar problem. For instance, with transfer learning technology on
our AI developer suites, knowledge from a model that has learned to recommend books for
people may be useful to kick-start a model meant to recommend music. This facilitates AI
transformation among enterprises because it reduces the scope of data required for our AI
developer suites to produce valuable output and broadens the range of business fields and
scenarios in which AI could make a positive impact. Dr. Dai and Dr. Y ang Qiang (our
co-founder) are the pioneers in transfer learning and are well regarded in the AI industry for
their achievements and contributions in steering the direction for the research and development
of transfer learning worldwide. Moreover, Dr. Y ang currently has the most paper citations in
the filed of transfer learning, according to CIC. Therefore, as compared to some of our
competitors applying similar technologies in China’s platform-centric decision making AI
market, our transfer learning technology is better recognized in the industry, which contributes
to our competitive advantages in acquiring new customers.
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Environment Learning
Our environment learning technology reduces the cost of model training and ensures
safety by training models in a simulated environment. It combines technologies such as
simulation, supervised learning and derivative-free optimization, and learns the simulation
rules and parameters which cannot be performed by humans in a data-driven approach.
Traditional simulation technologies heavily rely on the domain knowledge and expertise of
developers, and thus may not be applied in environment which requires significant domain
knowledge is available. As compared to traditional simulation technologies, our environment
learning technology is able to build a high-precision simulated environment without complete
domain knowledge, enabling users of our AI developer suites to apply intelligent decision-
making technologies in more use cases. Our environment learning technology applies a
data-driven approach to learn simulation rules and parameters that cannot be determined by
human.
AutoRL
Our AutoRL technology automates the process of reinforcement learning, which refers to
the training of machine learning models to make a sequence of decisions in a dynamic,
uncertain, potentially complex environment. Traditional reinforcement learning technologies
require significant cost of learning, development and application, which limits the application
value of reinforcement learning. Our AutoRL operator embedded on our AI developer suites
provides end-to-end and automatic suite of tools for reinforcement learning. The effectiveness
of reinforcement learning is highly dependent on the structure of underlying models, which
require significant scenario-specific knowledge from developers. Powered by AutoRL
technology our AI developer suites are able to automatically generate the structure of neural
network, which refers to a set of algorithms designed to recognize patterns, and effectively
improving the quality of model training. As a result, users are able to develop reinforcement
learning algorithms without extensive prerequisite background or knowledge. Our AI
developer suites enable users to input their actual business needs, and integrate advanced
AutoRL algorithms with AutoML and other technologies such as derivative-free optimization.
In addition, AutoRL equips our AI developer suites with features such as automatic algorithm
selection and dynamic parameter tuning, and enables our AI developer suites to accurately tune
parameters in real-time. AutoRL operator embedded on our AI developer suites enables users
to significantly reduce human efforts while improving the effectiveness of reinforcement
learning while reducing TCO. As a result, our AI developer suites enable users to realize
automatic and refined decision-making at multiple levels in a dynamic, uncertain, potentially
complex environment.
According to CIC, we are currently the pioneer in China’s platform-centric decision-
making AI market that applies environment learning and AutoRL technologies in its operations,
which are rarely applied by other competitors. Thus we are better positioned to acquire new
users with demand for AI application in complex environment.
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Technology Infrastructure
Our information technology infrastructure is designed to satisfy the requirements of our
operations, support the growth of our business and ensure reliability of our operations as well
as security of information on our platform.
We are supported by servers in geographically dispersed areas across China, including
various locations in Beijing and Inner Mongolia which enables the high availability of our
technology infrastructure. In addition, we have in place a comprehensive set of contingency
plans to manage potential risks of any emergency or service disruption. For example, we back
up our operating data regularly, and our staff responsible for database management perform
daily inspection on our backup record to make sure all the operating data is properly archived.
We also test the data recovery capability of our systems, which help us ensure our backup data
can be completely retrieved. We did not experience any material service disruptions during the
Track Record Period and up to the Latest Practicable Date.
We also adopt a highly scalable, cloud-based technology architecture through our
cooperation with trusted cloud computing service providers in China. In addition, the
compatibility of our existing technology architecture and software solutions allows for swift
transition and effective integration across different cloud computing service providers.
Therefore, we do not expect any material technological issues or other hurdles for us to switch
cloud computing service providers. Our cloud-based technology architecture allows us to
process large volumes of data on a real-time basis and ensure high-speed and stable
performances on a large scale to accommodate and support the increased complexity and
diversity of our business operations. We have been enhancing our technology architecture by
increasing the investment in third-party cloud computing services to ensure our cloud
architecture can effectively address our growing business needs.
SALES AND MARKETING
Sales
We believe that our solutions speak for themselves. We are dedicated to creating value for
users as we ultimately share their success. Our go-to-market strategy starts with market leaders
in each industry we target to enter who are also early adopters of AI. We demonstrate the value
of our solutions through one or a few entry projects. Once our value has been proven, we are
then able to expand our services quickly to address other business needs of our users. The
number of our lighthouse users increased from 47 in 2020 to 75 in 2021, and further to 104 in
2022. The number of our lighthouse users has increased from 49 in the three months ended
March 31, 2022 to 62 in the three months ended March 31, 2023. Our average revenue per
lighthouse user has increased from RMB12.3 million in 2020 to RMB13.7 million in 2021, and
further to RMB17.9 million in 2022. For the three months ended March 31, 2022 and 2023, our
average revenue per lighthouse user stayed stable at RMB5.4 million.
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After we succeed with the lighthouse users, we leverage our understanding of the
industries, our reputation established through collaborating with industry leaders, and our
ecosystem to further enhance our influence in such industries, enabling us to further penetrate
and provide solutions to other players, without incurring significant sales and marketing
efforts.
Our sales cycle primarily consists of initial communications with users, project
evaluation and design, proof of concept and contracts execution. As we primarily focus on
providing services to large-scale lighthouse users, we may spend significant time on
communications with users, project evaluation and design, thereby resulting in longer sales
cycles. We leverage both our in-house sales team and third-party solution partners to promote
our solutions. We have established a professional in-house sales team. Our employees have
deep knowledge of the industries and users that they are responsible for. Our in-house sales
team works closely with our product team to ensure that they can propose the best solutions
to address the pain points faced by market participants in the relevant industry verticals. To
encourage and incentivize our in-house sales team, we have designed a compensation structure
that includes a fixed component as well as a performance-based component. We set specific
performance targets for each team member. We evaluate such employee’s performance every
year and pay out performance-based compensation accordingly.
We also work closely with third-party solution partners, which primarily consist of system
integrators, and leverage their understanding of end users’ demands, thereby developing
tailored marketing strategies. For details, see “– Customers and Customer Support” in this
section.
Marketing
We enhance the awareness of our brand and promote our new and existing solutions
through both offline and online channels. We participate in various offline events, such as
industry conferences, product launches and industry salons to showcase our technological
advancements and develop relationships with industry participants. We have collaborated with
several media partners to promote our brand and technology in news reports.
RESEARCH AND DEVELOPMENT
As AI technology continuously undergoes rapid advancements, our abilities to create new
technologies, design new solutions and enhance existing solutions are critical to maintaining
our market leadership. Therefore, we invest substantial resources in research and development
activities. Our research and development expenses were RMB565.7 million, RMB1,249.5
million and RMB1,650.0 million in 2020, 2021 and 2022, respectively. Our research and
development expenses increased from RMB225.7 million for the three months ended March
31, 2022 to RMB241.5 million for the three months ended March 31, 2023, representing 46.8%
and 37.5% of our total revenue during the same periods, respectively. During the Track Record
Period, our investment in research and development was primarily to (i) develop
commercialized products and solutions using our core technologies, demonstrated by, for
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example, our launch of Sage AIOS in 2020, and our launch of enterprise-level AI App Store
in 2021, see also “– Our Enterprise AI Solutions,” (ii) design and test features of our Sage
Platform modules, (iii) develop versatile modules for Sage Platform and applications to
accommodate industry-specific demand for AI applications, and (iv) enhance fundamental
research and explore new areas which may lead to the next generation of AI technologies, such
as federated learning and technologies in the area of data privacy protection, and cutting-edge
technologies such as large language models and generative AI to enhance efficiency and
productivity. See also “– Our Technology.” In the future, we will continue to invest in research
and development activities to enhance our technological capabilities and solution development.
See “Future Plans and Use of Proceeds.” Our research and development staff comprises
computer scientists, researchers and other technology professionals. As of March 31, 2023, our
research and development staff consisted of 1,442 employees, representing 76% of our total
employees.
Dr. Dai and Dr. Y ang Qiang (our co-founder) are the pioneers in transfer learning and are
well regarded in the AI industry for their achievements and contributions in steering the
direction for the research and development of transfer learning worldwide. Our research and
development staff is led by Mr. Chen Y uqiang, our Chief Research Scientist and a pioneering
scholar in the field of transfer learning and AutoML. His works have been published at
renowned academic conferences, including NIPS, AAAI, ACL and KDD.
We focus on building and maintaining a large pool of talented researchers to drive our
research and development efforts. We conduct targeted recruitment among contestants in high
profile programming competitions. Our employees include gold medal winners in prestigious
international programming competitions such as ACM. We provide rigorous training to new
recruits to familiarize them with our platform and thereby closely integrate them into our
research and development staff.
The development of our AI solutions are underpinned by our strong R&D capabilities.
Our continuous investments in research and development activities result in a wealth of
intellectual properties. As of the Latest Practicable Date, we had over 300 patents registered
with the National Intellectual Property Administration of the PRC and over 580 pending patent
applications in the PRC. With our proprietary AutoML algorithms, we broke the world records
of two Open Graph Benchmark (“OGB”) tasks in April 2021. OGB is a globally recognized
collection of benchmark datasets for machine learning on graphs that AI companies and
research institutions utilize to test and evaluate their AI model performance. Participants of the
OGB tasks include world-famous innovative enterprises and research institutes, such as
Facebook, Alibaba, Stanford University and Cornell University. Our AutoML algorithm also
ranks top 1% in Kaggle Structured Data and Image Classification Competition 2019. See “–
Awards and Recognition.” In addition, we have developed other advanced core technologies
including transfer learning, environment learning and AutoRL. For details, See “– Our
Technology.”
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In addition, we are exploring new areas which may lead to the next generation of AI
technologies. For example, we are exploring advanced technologies in the area of AutoML,
including automated graph learning which is designed for analyzing graph data, and automated
semi-supervised learning which is designed for analyzing unlabeled data together with labeled
data to enhance modeling efficacy. We are also dedicated to developing technologies in the area
of data privacy protection, including privacy preserving learning, which is able to enhance data
privacy in the process of machine learning, and federated learning which entails training
algorithm on local datasets without exchange data samples, thereby enhancing data security
and privacy.
DATA PRIV ACY AND SECURITY
We do not own, nor do we collect data of our users. Instead, we offer platform and
algorithm based on which our users run their own AI models on their own data. Also, we
provide enterprise-level AI solutions to organizations and do not serve individuals.
Specifically, (i) we are a provider of AI solutions for corporate users, and our primary business
is to provide privatization deployment solutions, in which we will not access any data owned
or held by corporate users; (ii) for cloud-based subscriptions, we offer Sage Platform and other
ready-to-use applications through public cloud services offered by third party vendors and we
are only provided with the administration access which allows us to help users with coding and
system integration upon users’ request for the sole purpose of assisting the users to utilize our
solutions, and not in any way participating or assisting the corporate users with data processing
activities, and we do not access or process any data of our users; and (iii) our core technologies
are sub-categories of machine learning and are embedded as operating modules (“operators”)
in our AI developer suites, and we do not own, collect or process data of our users on our
servers during the machine learning process. Based on the foregoing, we and our PRC Legal
Advisor are of the view that both the Company’s existing products and solutions, and the
products and solutions that are being developed, and their data privacy features as mentioned
above comply with data privacy and cybersecurity laws in the PRC effectively in all material
respects.
Data security and protection are among our highest priorities. In this regard, we have
designed strict data protection and information security policies to ensure strict compliance
with applicable laws, regulations and prevalent industry practice. We have implemented
comprehensive internal policies on protecting data privacy and security under the supervision
of our Chief Architect, with the purpose to ensure data and information security, optimize data
governance, protect the benefits of our users, business partners, employees and other third
parties, and ensure compliance with all applicable laws and regulations. We have established
a Data and Information Security Committee, members of which include the responsible persons
in various departments such as IT, R&D, Solution Deployment, Human Resources and
Compliance. The committee is responsible for formulating data and information security
strategies, and decision-making in material data and information incidents. We also engage
external legal counsel to review and update our internal policies and ensure continuous
compliance with all applicable laws and regulations.
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We implement a robust internal authentication and authorization system to ensure that our
confidential and important data can only be accessed for authorized use and by authorized
personnel. We have clear and strict authorization and authentication procedures and policies in
place. Our employees only have access to data which is directly relevant and necessary for their
responsibilities and for limited purposes and are required to verify authorization upon every
access attempt.
We have established an all-round information system in reference to data security
requirements, national standards and industry best practices and intend to continually invest
heavily in data security and privacy protection. Our information system applies multiple layers
of safeguards, including both internal and external firewalls, to identity and protect us against
security attacks. We have completed various information security, privacy and compliance
certifications/validations, proving the security and reliability of our data protection
technologies. For example, in December 2020, we passed ISO27001 (international standard for
information security) and obtained the “Information Safety Management System
Certification,” and in February 2020, our Sage Platform obtained the ePrivacyseal, which
illustrates our commitment to comply with the requirements of the GDPR.
During the Track Record Period and up to the Latest Practicable Date, we have not
received any claim from any third party against us on the ground of infringement of such
party’s right to data and privacy protection as provided by any applicable laws and regulations
in the PRC or other jurisdictions. Our PRC Legal Advisor is of the view that the current data
protection practice of the Company meets the requirements of laws and regulations in effect in
material respects, based on the followings: (i) the Company currently does not directly obtain
or store customers’ or users’ information in it primary business; (ii) in the Company’s primary
business, it mainly accesses the personal information of its employees and business contacts
and does not purchase or obtain in any other way any personal information, or carry out any
other form of cooperation in respect of exchange, cleaning and processing of personal
information; (iii) the Company has not received any complaint relating to data privacy or
security measures, nor has it been subject to any government investigation, enquiry, action or
penalty; (iv) the Company has implemented comprehensive internal policies on protecting data
privacy and security under the supervision of our Chief Architect, with the purpose to ensure
data and information security and ensure compliance with all applicable laws and regulations;
(v) during the Track Record Period and as of the Latest Practicable Date, there had been no
material incident of data or personal information leakage, infringement of data protection and
privacy laws and regulations, and there had been no investigation or other legal proceeding, to
the best knowledge of the Company, pending or threatened against the Group initiated by
competent government authorities or third parties, that will materially and adversely affect the
Company’s business operations; and (vi) the Company will continue to pay close attention to
the legislative and regulatory developments in data security and comply with the latest
regulatory requirements. Based on the currently available information and upon (i) discussing
with the management of the Company to understand its business nature and internal policies
on data security, (ii) interviewing the major customers of the Group, and (iii) discussing with
the PRC Legal Advisor and reviewing the PRC Legal Advisor’s analysis set out above, nothing
has come to the attention of the Sole Sponsor as non-legal experts that would render them to
cast doubt on the PRC Legal Advisor’s conclusion above.
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CUSTOMERS AND CUSTOMER SUPPORT
We have two main categories of customers: (i) direct customers who are end users
purchasing our solutions directly; and (ii) solution partner customers, who are mainly
third-party system integrators that embed our solutions into their offering to cater for end
users’ specific needs. In 2020, 2021, 2022 and in the three months ended March 31, 2022 and
2023, revenue generated from direct customers accounted for 15%, 43%, 32%, 33% and 22%
of our total revenue, respectively. We typically grant a credit term ranging from 3 to 6 months
for direct customers.
Certain end users of our solutions, especially those in the finance industry, use system
integrators when selecting suppliers or service providers, to save them from the trouble of
directly negotiating with a large number of different suppliers or service providers and to
benefit from the various other services provided by such system integrators. Such end users
typically lay out the goals they plan to achieve and the budget for their projects and engage
third-party system integrators, instead of engaging us directly. These system integrators
typically embed our solutions into their offering to cater for end users’ specific needs, and
provide various other services to end users, such as implementation services. According to
CIC, engagement with end users through solution partner customers is an industry norm. In
2020, 2021, 2022 and in the three months ended March 31, 2022 and 2023, revenue generated
from such solution partner customers accounted for 85%, 57%, 68%, 67% and 78% of our total
revenue, respectively. We typically grant a credit term ranging from 3 to 6 months for solution
partner customers.
Although a portion of our customers are solution partners, which mainly are system
integrators, not the end users, we do not believe that our business model is a distributorship
model. As discussed above, solution partners are not distributors that we engage to broaden our
sales channels; instead, they are selected by our end users to implement their projects, and the
ultimate decisions as to which service provider to choose are primarily made by the end users.
When we enter into a contract with a solution partner, we recognize such solution partner,
instead of the relevant end user, as our customer. As such, we do not believe that the solution
partners are our distributors, and we do not believe that our business relationship with them
raises any concern in relation to inventory risk, cannibalization or recoverability of accounts
receivables.
We are dedicated to creating value for users as we ultimately share their success. Our
go-to-market strategy starts with market leaders in each industry we target to enter who are also
early adopters of AI. We demonstrate the value of our solutions through one or a few entry
projects. Once our value has been proven, we are then able to expand our services quickly to
address other business needs of these market leaders. After our influence in the business
vertical is established, we collaborate with our solution partners to offer our solutions to other
long-tail users to achieve market penetration.
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We established a dedicated sales team comprising of sales personnel with work
experiences in leading software companies and consulting firms. Our sales team targeting
direct customers is usually industry-focused, whereas our sales team targeting solution partners
is usually region-focused. We have different approaches of establishing relationship with our
target customers depending on our existing commercial relationship with them. We use a
“top-down” strategy for certain customers, where our sales team contacts potential customers’
decision-making level personnel and establish strategic cooperation to design comprehensive
solutions to empower such customers’ enterprise AI transformation. For target customers with
which we have not yet established strong relationship at top level, we use a “bottom-up”
strategy, where our sales personnel contact working level personnel of the customers and
design solutions on a scenario basis.
The following tables set forth a summary of our five largest customers for the periods
indicated.
Five Largest
Customers for
the Y ear
Ended
December 31,
2020 Background
Objects of
Transaction
Y ear of
Commencement
of Relationship
with the
Company
Transaction
Amounts
Percentage
Contribution
to the
Company’s
Total
Revenue
Customer
Type Registered Capital
(RMB’000)
Customer A A company focused
on information
technology
(i) Sage Platform
and applications
and (ii)
application
development and
other services
2020 49,345 5.2% Solution
partner
USD272.3 million
Customer B A company focused
on e-commerce
Sage Platform and
applications
2020 35,990 3.8% Solution
partner
RMB100.0 million
Customer C A company focused
on information
technology
Sage Platform and
applications
2020 27,973 3.0% Solution
partner
RMB60.0 million
Customer D A company focused
on information
technology
Sage Platform and
applications
2020 26,022 2.8% Solution
partner
RMB100.0 million
Customer E An institute focuses
on science and
technology
Application
development and
other services
2019 25,022 2.6% Solution
partner
N/A
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Five Largest
Customers
for the
Y ear Ended
December 31,
2021 Background
Objects of
Transaction
Y ear of
Commencement
of Relationship
with the
Company
Transaction
Amounts
Percentage
Contribution
to the
Company’s
Total
Revenue
Customer
Type Registered Capital
(RMB’000)
Customer F A company focused
on electronic
technology
Sage Platform and
applications
2021 55,874 2.8% Direct
customer
RMB50.0 million
Customer G A company focused
on information
technology
Application
development and
other services
2021 54,864 2.7% Solution
partner
RMB22.3 million
Customer H A company focused
on information
technology
Sage Platform and
applications
2019 38,445 1.9% Solution
partner
US$130.0 million
Customer I A company focused
on information
technology
Sage Platform and
applications
2021 38,153 1.9% Solution
partner
RMB30.0 million
Customer J A company focused
on information
technology
Sage Platform and
applications
2021 37,468 1.8% Solution
partner
RMB58.0 million
Five Largest
Customers for
the Y ear Ended
December 31,
2022 Background
Objects of
Transaction
Y ear of
Commencement
of Relationship
with the
Company
Transaction
Amounts
Percentage
Contribution
to the
Company’s
Total
Revenue
Customer
Type
Registered
Capital
(RMB’000)
Customer K A company focused
on trasportation
solutions
Sage Platform and
applications
2021 295,683 9.6% Solution
partner
RMB110.0 million
Customer L A company focused
on information
technology
Application
development and
other services, Sage
Platform and
applications
2021 138,731 4.5% Solution
partner
RMB54.9 million
Customer H A company focused
on information
technology
Application
development and
other services, Sage
Platform and
applications
2019 136,509 4.4% Solution
partner
US$130.0 million
Customer M A company focused
on information
technology
Sage Platform and
applications
2022 130,245 4.2% Solution
partners
RMB35.0 million
Customer N A company focused
on information
technology
Sage Platform and
applications
2019 93,858 3.0% Solution
partner
RMB62.8 million
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Five Largest
Customers
for the Three
Months Ended
March 31,
2023 Background
Objects of
Transaction
Y ear of
Commencement
of Relationship
with the
Company
Transaction
Amounts
Percentage
Contribution
to the
Company’s
Total
Revenue
Customer
Type Registered Capital
(RMB’000)
Customer K A company focused
on transportation
solutions
Sage Platform and
applications
2021 108,402 16.8% Solution
partner
RMB110.0 million
Customer H A company focused
on information
technology
Sage Platform and
applications
2019 70,442 10.9% Solution
partner
US$130.0 million
Customer O A company focused
on information
technology
Application
development and
other services
2022 47,453 7.4% Solution
partner
RMB90.0 million
Customer P A company focused
on information
technology
Application
development and
other services
2022 37,359 5.8% Solution
partner
RMB100.0 million
Customer Q A company focused
on information
technology
Sage Platform and
applications
2023 33,527 5.2% Solution
partner
RMB50.0 million
Our top five customers in each year or period during the Track Record Period in aggregate
accounted for 17.4%, 11.1%, 25.8% and 46.1% of our total revenues in 2020, 2021, 2022, and
in the three months ended March 31, 2023, respectively. Our largest customer in each year or
period during the Track Record Period accounted for approximately 5.2%, 2.8%, 9.6% and
16.8% of our total revenue for the respective year or period.
We enter into written agreements with our direct customers or solution partners.
Regardless of whether our contracts were entered into directly with our end users or with
solution partners, there was no material difference in the contract terms and the scope of our
services. The value of our contracts with customers can vary substantially from customer to
customer, depending on their business needs. The salient terms and conditions of our
agreements with customers are set out below:
 Deliverables : For sales of our Sage Platform and applications, we typically provide
non-exclusive licenses of use rights of our solutions and maintenance services
related to the solutions. For application development and other services, we
typically develop customized applications based on the customer’s specification.
 Pricing : The price of our software license is primarily based on the estimated
computing power consumption by reference to the AI applications our users plan to
deploy. We charge users of SageOne by taking into account the number of hardware,
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required computing power, license fees of our software and service fees for
deployment, operation and maintenance. For application development and other
services, we typically charge customers on a project basis, the pricing of which is
primarily based on the manpower consumption of the relevant services.
 Customer Support : We typically provide free technical support for one year after the
sale of our solutions and free training to help our customers learn to use and
maintain our solutions.
 Ownership : All intellectual property rights relating to the solutions that we deliver
under the agreement, including but not limited to copyrights, patents ownership of
the proprietary technologies and trademarks, belong to us. The other party may not
conduct any reverse engineering, decompiling, disassembly or use other methods to
obtain the source code and underlying algorithms of the software, hardware and
related technologies provided by us or to otherwise engage in activities that may
harm our proprietary rights.
To the best of our knowledge, during the Track Record Period and up to the Latest
Practicable Date, our customers were Independent Third Parties. As of the Latest Practicable
Date, none of our Directors, their associates or any of our shareholders (who or which to the
knowledge of the Directors owned more than 5% of our issued share capital) had any interest
in any of our five largest customers.
In our ongoing efforts to enhance user satisfaction and improve service quality, we
maintain a dedicated customer support and service team that is focused on real-time
problem-solving with the ultimate goal of increasing user experience and stickiness. In
addition, we also gather feedback on how to improve our solutions and respond to user
suggestions.
As a matter of policy, only hardware products with defects may be returned. Our rigorous
quality control procedures ensure that our products are properly examined before being sold.
As a result, we experienced an immaterial level of product returns during the Track Record
Period. We typically offer a limited warranty for our hardware products. Warranty coverage
typically runs for three to five years after our delivery or customers’ or users’ examination.
Pursuant to the agreement with our third party vendors who supply certain standardized
components for hardware products of SageOne, our third party vendors should compensate us
for liabilities caused by product defects and typically offer us full warranty on the hardware
products affected. Such full warranty coverage typically runs for three to five years from the
time of purchase by us.
During the Track Record Period, major end users of our solutions include companies in
finance, retail, manufacturing, energy and power, telecommunications, transportation,
technology, education, media and healthcare industries, among others.
The following tables set forth a summary of our ten largest end users for the periods
indicated and to the best of the Company’s knowledge.
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Ten Largest
End Users
for the Y ear
Ended
December 31,
2020 Background
Solution/service
provided
Examples of major
use cases (to the
best knowledge of
the Company)
Transaction
Amounts (either
directly with the
Company or
through solution
partners)
(RMB’000)
User A An energy company (i) Sage Platform and
applications and
(ii) application
development and
other services
Intelligent supply
chain inventory
prediction platform
77,984
User B A financial institution Sage Platform and
applications
Intelligent product
recommendation
and big data
decision-making
analytics
44,635
User C A retail company (i) Sage Platform and
applications and
(ii) application
development and
other services
Intelligent product
recommendation
and intelligent
supply chain
management
system
38,099
User D A public service
organization
Sage Platform and
applications
Big data decision-
making analytics
platform
35,990
User E A transportation
infrastructure
company
Sage Platform and
applications
Risk control and big
data decision-
making analytics
platform
27,973
User F A financial institution (i) Sage Platform and
applications and
(ii) application
development and
other services
Anti-money
laundering
platform,
intelligent product
recommendation
and OCR note
recognition
27,107
User G A financial institution (i) Sage Platform and
applications and
(ii) application
development and
other services
Anti-fraud platform,
intelligent product
recommendation
and OCR note
recognition
24,768
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Ten Largest
End Users
for the Y ear
Ended
December 31,
2020 Background
Solution/service
provided
Examples of major
use cases (to the
best knowledge of
the Company)
Transaction
Amounts (either
directly with the
Company or
through solution
partners)
(RMB’000)
User H A financial institution (i) Sage Platform and
applications and
(ii) application
development and
other services
Intelligent product
recommendation
and big data
decision-making
analytics platform
23,600
User I A technology
research institute
Application
development and
other services
High performance
computing
solutions
23,456
User J A financial institution (i) Sage Platform and
applications and
(ii) application
development and
other services
Anti-fraud platform
and OCR note
recognition
22,496
Ten Largest
End Users for
the Y ear Ended
December 31,
2021 Background
Solution/service
provided
Examples of major
use cases (to the
best knowledge of
the Company)
Transaction
Amounts (either
directly with the
Company or
through solution
partners)
(RMB’000)
User A An energy company (i) Sage Platform and
applications and
(ii) application
development and
other services
Intelligent electricity
dispatching,
operation and
maintenance
solutions
127,862
User F A financial institution (i) Sage Platform and
applications and
(ii) application
development and
other services
Anti-fraud platform
and big data
decision-making
analytics platform
81,498
User H A financial institution (i) Sage Platform and
applications and
(ii) application
development and
other services
Intelligent product
recommendation
and big data
decision-making
analytics platform
56,659
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Ten Largest
End Users for
the Y ear Ended
December 31,
2021 Background
Solution/service
provided
Examples of major
use cases (to the
best knowledge of
the Company)
Transaction
Amounts (either
directly with the
Company or
through solution
partners)
(RMB’000)
User K A financial institution (i) Sage Platform and
applications and
(ii) application
development and
other services
Anti-fraud platform
and intelligent
recognition
platform
47,100
User L A public service
organization
(i) Sage Platform and
applications and
(ii) application
development and
other services
Intelligent education
cloud system
43,393
User B A financial institution (i) Sage Platform and
applications and
(ii) application
development and
other services
Anti-fraud platform
and intelligent
recognition
platform
42,747
User M An energy company (i) Sage Platform and
applications and
(ii) application
development and
other services
Intelligent audit
system and big
data decision-
making platform
42,680
User N A telecommunications
company
(i) Sage Platform and
applications and
(ii) application
development and
other services
Supply chain
management,
intelligent
operation and
maintenance
42,360
User O A retail company Sage Platform and
applications
Software platform 33,285
User J A financial institution (i) Sage Platform and
applications and
(ii) application
development and
other services
Anti-fraud platform
and intelligent
recognition
platform
32,675
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Ten Largest
End Users for
the Y ear Ended
December 31,
2022 Background
Solution/service
provided
Examples of major
use cases (to the
best knowledge of
the Company)
Transaction
Amounts (either
directly with the
Company or
through solution
partners)
(RMB’000)
User A An energy company (i) Sage Platform and
applications and
(ii) application
development and
other services
Intelligent operation
and maintenance
169,359
User P A railway vehicle and
equipment
manufacturer
Sage Platform and
applications
Intelligent operating
efficiency
122,743
User Q An energy company (i) Sage Platform and
applications and
(ii) application
development and
other services
Intelligent operation
and maintenance
112,666
User R A railway vehicle and
equipment
manufacturer
Sage Platform and
applications
Intelligent operating
efficiency
97,135
User S An energy company (i) Sage Platform and
applications and
(ii) application
development and
other services
Intelligent operating
efficiency
91,423
User T A telecommunications
company
(i) Sage Platform and
applications and
(ii) application
development and
other services
Intelligent operation
and maintenance
87,873
User M An energy company (i) Sage Platform and
applications and
(ii) application
development and
other services
Risk management/
operating
efficiency
80,745
User U A telecommunications
company
(i) Sage Platform and
applications and
(ii) application
development and
other services
User behavior
analysis and
intelligent
recommendation
74,529
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Ten Largest
End Users for
the Y ear Ended
December 31,
2022 Background
Solution/service
provided
Examples of major
use cases (to the
best knowledge of
the Company)
Transaction
Amounts (either
directly with the
Company or
through solution
partners)
(RMB’000)
User N A telecommunications
company
(i) Sage Platform and
applications and
(ii) application
development and
other services
User behavior
analysis and
intelligent
recommendation
63,831
User V A transportation
service company
(i) Sage Platform and
applications and
(ii) application
development and
other services
Intelligent operation
and maintenance
59,564
Ten Largest
End Users for
the Three
Months Ended
March 31, 2023 Background
Solution/service
provided
Major use cases (to
the best knowledge
of the company)
Transaction
Amounts (either
directly with the
Company or
through solution
partners)
(RMB’000)
User V A transportation
service company
(i) Sage Platform and
applications
(ii) Application
development and
other services
Intelligent operating
efficiency
70,070
User E An energy company (i) Sage Platform and
applications
(ii) Application
development and
other services
Intelligent operating
efficiency and
decision making
44,332
User W A transportation
service company
(i) Sage Platform and
applications
Intelligent operating
efficiency
35,414
User U A telecommunications
company
(i) Sage Platform and
applications
Intelligent operating
efficiency
33,527
User X An equipment
manufacturing
company
(i) Application
development and
other services
Intelligent operating
efficiency and
decision making
26,038
User Y An airline
organisation
(i) Application
development and
other services
Intelligent operation
and risk
management
25,161
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Ten Largest
End Users for
the Three
Months Ended
March 31, 2023 Background
Solution/service
provided
Major use cases (to
the best knowledge
of the company)
Transaction
Amounts (either
directly with the
Company or
through solution
partners)
(RMB’000)
User Z A banking
equipments
provider
(i) Sage Platform and
applications
Intelligent operating
efficiency
23,009
User P A railway vehicle and
equipment
manufacturer
(i) Sage Platform and
applications
Intelligent operating
efficiency
22,924
User AA An insurance
company
(i) Sage Platform and
applications
User behavior
analysis and
intelligent
recommendation
21,416
User AB A transportation
service company
(i) Application
development and
other services
Intelligent
information system
development
19,075
The following table sets forth the revenue contribution by industry of our end users during
the Track Record Period.
For the year ended December 31, For the three months ended March 31,
2020 2021 2022 2022 2023
Transaction
Amounts
Percentage
of Total
Revenue
Transaction
Amounts
Percentage
of Total
Revenue
Transaction
Amounts
Percentage
of Total
Revenue
Transaction
Amounts
Percentage
of Total
Revenue
Transaction
Amounts
Percentage
of Total
Revenue
(RMB’000) (RMB’000) (RMB’000) (RMB’000) (RMB’000)
Energy and Power 138,294 14.7% 441,964 21.9% 626,549 20.3% 104,591 21.7% 73,196 11.4%
Finance 292,469 31.0% 576,550 28.6% 519,630 16.9% 92,737 19.2% 127,782 19.8%
Transportation nil nil nil nil 405,016 13.1% 35,293 7.3% 193,238 30.0%
Telecommunication 73,145 7.8% 175,380 8.7% 328,372 10.7% 50,981 10.6% 47,686 7.4%
Technology 64,496 6.9% 138,482 6.9% 298,988 9.7% 46,218 9.6% 33,589 5.2%
Education 66,665 7.1% 124,228 6.2% 235,170 7.6% 36,318 7.5% 42,017 6.5%
Manufacturing 23,833 2.5% 102,461 5.1% 201,686 6.5% 2,107 0.4% 44,981 7.0%
Retail 100,812 10.7% 176,758 8.8% 132,172 4.3% 25,080 5.2% 23,024 3.6%
Healthcare nil nil 57,359 2.8% 101,876 3.3% 45,203 9.4% 402 0.1%
Media 53,955 5.7% 134,660 6.7% 29,698 1.0% 16,307 3.4% 21,809 3.4%
Others 128,569 13.6% 90,556 4.5% 203,480 6.6% 27,425 5.7% 36,672 5.7%
Total 942,238 100.0% 2,018,399 100.0% 3,082,637 100.0% 482,261 100.0% 644,397 100.0%
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SUPPLIERS AND PROCUREMENT
Our suppliers primarily consist of (i) providers of research and development services, (ii)
providers of implementation services and (iii) others, such as providers of servers and cloud
services and providers of other professional services. Our top five suppliers in each year or
period during the Track Record Period in aggregate accounted for 13.7%, 21.7%, 26.4% and
38.3% of our total purchases in 2020, 2021, 2022 and in the three months ended March 31,
2023, respectively. Our largest supplier in each year or period during the Track Record Period
accounted for approximately 3.4%, 6.5%, 10.1% and 14.7% of our total purchases in 2020,
2021, 2022 and in the three months ended March 31, 2023, respectively.
Key terms of our agreements with providers of research and development services are set
out below:
 R&D services. Our suppliers provide research and development services based on
our requirements as specified in the agreement.
 Delivery and inspection. Our suppliers shall complete the project within the
prescribed time period, and deliver all relevant software and documents. We are
entitled to inspect their work products and provide written comments for suppliers
to address.
 Copyright. We are entitled to all copyrights in relation to the R&D projects,
including but not limited to the technical materials, documents, source codes and
applications.
 Termination . The agreement may be terminated upon mutual consent between the
parties.
Key terms of our agreements with providers of implementation services are set out below:
 Implementation services. We shall provide detailed requirements and explanations in
written for our suppliers to provide implementation services accordingly. We are
entitled to change the implementation cycle, alter the services or terminate the
agreement with prior written notice.
 Pricing and payment. Prices of implementation services are based on the estimated
manpower consumption as agreed by both parties. Fees are typically settled on a
monthly basis.
 Indemnification. Each party shall indemnify the other party for any damages caused
by its fault.
 Termination. The agreement may be terminated upon mutual consent between the
parties, or unilaterally terminated by each party due to breach of agreement by the
other party. In addition, we are also entitled to terminate the agreement with prior
written notice, provided that we shall pay the suppliers all fees and expenses they
have incurred as of the termination date.
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We have established a set of internal measures on selection of suppliers. We take into
account various factors in selecting our suppliers, which primarily include (i) the candidates’
technology skillsets and capabilities, (ii) commercial terms offered by the candidates,
(iii) business background, results of operations and financial positions of the candidates, and
(iv) project-specific demands. When engaging suppliers, our procurement department is
primarily responsible for reviewing the procurement agreements in accordance with our
contract management protocols, which set forth, among others, that procurement exceeding
RMB6 million must be subject to approvals by legal department, finance department or the
chief executive officer.
During the Track Record Period, we have not experienced any significant fluctuation in
prices set by our suppliers, material breach of contract on the part of our suppliers or delay in
delivery of our orders from our suppliers.
As of the Latest Practicable Date, none of our Directors, their associates or any of our
shareholders (who or which to the knowledge of the Directors owned more than 5% of our
issued share capital) had any interest in any of our five largest suppliers.
The following tables set forth a summary of our five largest suppliers for the periods
indicated.
Five Largest
Suppliers for
the Y ear Ended
December 31,
2020 Background
Major Services/
Products
Purchased
Y ear of
Commencement
of
Relationship
with the
Company
Transaction
Amounts
Percentage
of the
Company’s
Total
Purchases Registered Capital
(RMB’000)
Supplier A A company focused on
financial data
services
Hardware 2020 62,504 3.4% RMB50.0 million
Supplier B A company focused on
information
technology
Development
services
2019 54,689 3.0% RMB50.0 million
Supplier C A company focused on
information
technology
Deployment
services
2019 50,599 2.7% RMB34.0 million
Supplier D A company focused on
electric power
Development
services
2018 49,395 2.7% RMB42.6 million
Supplier E A company focused on
information
technology
Development
services
2020 36,390 2.0% RMB80.0 million
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Five Largest
Suppliers for
the Y ear Ended
December 31,
2021 Background
Major Services/
Products
Purchased
Y ear of
Commencement
of
Relationship
with the
Company
Transaction
Amounts
Percentage
of the
Company’s
Total
Purchases Registered Capital
(RMB’000)
Supplier D A company focused on
electric power
Development
services
2018 170,716 6.5% RMB42.6 million
Supplier F A company focused on
information
technology
Development
services
2020 135,215 5.2% RMB80.0 million
Supplier C A company focused on
information
technology
Deployment
services
2019 119,364 4.6% RMB34.0 million
Supplier G A company focused on
information
technology
Deployment
services
2019 77,004 2.9% RMB64.3 million
Supplier H A company focused on
information
technology
Development
services
2020 66,378 2.5% RMB390.3 million
Five Largest
Suppliers for
the Y ear Ended
December 31,
2022 Background
Major Services/
Products
Purchased
Y ear of
Commencement
of
Relationship
with the
Company
Transaction
Amounts
Percentage
of the
Company’s
Total
Purchases Registered Capital
(RMB’000)
Supplier F A company focused on
information technology
Development
services
2020 342,672 10.1% RMB80.0 million
Supplier D A company focused on
electric power
Development
services
2018 220,697 6.5% RMB42.6 million
Supplier I A company focused on
construction services
Hardware 2022 153,226 4.5% RMB100.0 million
Supplier J A company focused on
industrial
manufacturing
Hardware 2022 102,246 3.0% RMB10.0 million
Supplier H A company focused on
information technology
Development
services
2020 75,064 2.2% RMB390.3 million
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Five Largest
Suppliers for
the Three
Months Ended
March 31,
2023 Background
Major Services/
Products
Purchased
Y ear of
Commencement
of
Relationship
with the
Company
Transaction
Amounts
Percentage
Contribution
to the
Company’s
Total
Purchases Registered Capital
(RMB’000)
Supplier I A company focused on
construction services
Hardware 2022 107,945 14.7% RMB100.0 million
Supplier D A company focused on
electric power
Development
services
2018 49,388 6.7% RMB42.6 million
Supplier F A company focused on
information
technology
Development
services
2020 44,512 6.1% RMB80.0 million
Supplier J A company focused on
industrial
Hardware 2022 40,539 5.5% RMB10.0 million
Supplier H A company focused on
information
technology
Development
services
2020 38,905 5.3% RMB390.3 million
Our five largest suppliers shifted from a mix of hardware vendors and development
service providers in 2020 to consisting entirely development service providers in 2021,
primarily because of our increased demand for third party technology services driven by our
enhanced research and development efforts and the expansion of our business.
Our Directors confirmed our negotiations with these companies were on an arm’s length
basis. In addition, the terms of transactions with these companies are in line with market
practice and similar to those with our other customers and suppliers. Except as disclosed above,
none of our other top five suppliers during the Track Record Period were also our customers,
and none of our other top five customers during the Track Record Period were also our
suppliers.
COMPETITION
We face competition in China’s decision-making AI market from other AI solution
providers. The principal competitive factors in our industry include functionality, scope and
performance of solutions, scalability and reliability of services, technology capabilities,
marketing and sales capabilities, user experience, pricing, brand recognition and reputation. In
addition, new and enhanced technology may further increase competition in our industry. We
believe that we are well positioned to compete effectively on the basis of the foregoing factors.
Nevertheless, some of our existing competitors have greater name recognition, broader
global footprint, longer operating histories, larger user bases as well as greater financial,
technical and other resources. See “Risk Factors – Risks Related to Our Business and Industry
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– If we fail to compete effectively, our business, financial condition and results of operations
may be materially and adversely affected” in this Prospectus. For more information on the
competitive landscape of our industry, see “Industry Overview.”
INTELLECTUAL PROPERTY
Intellectual property rights are fundamental to our business. We currently hold many
intellectual properties related to our core solutions, and we devote significant time and
resources to their development and protection. We rely on a combination of patent, trademark,
copyright, domain name, trade secret and other proprietary rights protection laws in China and
other jurisdictions as well as confidentiality procedures and contractual provisions to protect
our intellectual properties. During the Track Record Period, our core technologies were
patented. Such patents are typically valid for 20 years.
As of the Latest Practicable Date, we had over 300 patents registered with the National
Intellectual Property Administration of the PRC and over 580 pending patent applications in
the PRC. We also had 11 registered patent overseas. As of the Latest Practicable Date, we had
over 600 trademarks registered in the PRC, European Union, Singapore and Hong Kong. As of
the Latest Practicable Date, we had over 490 copyrights registered with the National Copyright
Administration of the PRC. See “Appendix VI – Statutory and General Information – Further
Information About Our Business – Intellectual Property Rights” for details of our material
intellectual property rights.
During the Track Record Period and up to the Latest Practicable Date, we did not have
any material disputes or any other pending legal proceedings regarding intellectual property
rights with third parties.
EMPLOYEES
We had 1,904 employees as of March 31, 2023. The following table sets forth a
breakdown of our employees by function as of March 31, 2023.
Function
Number of
Employees Percentage
(%)
Research and development 1,442 76
Sales and marketing 208 11
General and administrative 254 13
Total 1,904 100
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Substantially most of our employees are based in the PRC, primarily located at our
headquarters in Beijing, with some of the rest located in Shenzhen, Shanghai, Guangzhou,
Wuhan and Changchun.
Our success depends on our ability to attract, retain and motivate qualified personnel, and
we believe that our high-quality talent pool is one of the core strengths of our company. We
adopt high standards and strict procedures in our recruitment, including campus recruitment,
online recruitment, internal referral and recruitment through executive search, to satisfy our
demands for different types of talents.
We provide regular and specialized training tailored to the needs of our employees in
different departments. Our employees can also improve their skills through our development
of solutions and mutual learning among colleagues. New employees will receive pre-job
training and general training.
We offer competitive compensation for our employees. In addition, we regularly evaluate
the performance of our employees and reward those who perform well with higher
compensation or promotion.
As required by PRC laws and regulations, we participate in various employee social
security schemes organized by municipal and provincial government, including pension,
maternity insurance, unemployment insurance, work-related injury insurance, health insurance
and housing provident fund. We are required under PRC laws and regulations to make
contributions to employee social security schemes at specified percentages of the salaries,
bonuses and certain allowances of our employees, up to a maximum amount specified by the
local government from time to time. We also procure that subsidiaries we acquired comply with
applicable labor-related laws and regulations.
We enter into standard contracts and agreements regarding confidentiality, intellectual
property, employment, commercial ethics and noncompetition with our executive officers and
full-time employees. These contracts typically include a noncompetition provision effective
during and up to two years after their employment with us and a confidentiality provision
effective during and after their employment with us.
None of our employees are currently represented by labor unions. We believe that we
maintain a good working relationship with our employees, and we have not experienced any
significant labor disputes or any difficulty in recruiting staff for our operations during the
Track Record Period.
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INSURANCE
We consider our insurance coverage to be adequate as we have in place all the mandatory
insurance policies required by PRC laws and regulations and in accordance with the
commercial practices in our industry. Our employee-related insurance consists of pension
insurance, maternity insurance, unemployment insurance, work-related injury insurance and
medical insurance, as required by PRC laws and regulations. We also purchase supplemental
commercial medical insurance for our employees.
In line with general market practice, we do not maintain any business interruption
insurance or product liability insurance, which are not mandatory under PRC laws. We do not
maintain key man life insurance, insurance policies covering damages to our network
infrastructures or information technology systems or any insurance policies for our properties.
See the section headed “Risk Factors – Risks Related to Our Business and Industry – Our
limited insurance coverage could expose us to significant costs and business disruption” in this
Prospectus. During the Track Record Period, we did not make any material insurance claim in
relation to our business.
ENVIRONMENTAL, SOCIAL AND GOVERNANCE MATTERS
We are committed to be a responsible corporate citizen, to abide by applicable laws and
generally accepted ethical principles and to increase the wellness of the society. As we vision
ourselves to provide world-leading AI platforms and solutions that catalyze progression of
society and growth of enterprises, we attach great importance to environmental, social and
governance matters, including environmental sustainability, social responsibility and
governance (“ESG”).
Environment, Climate and Sustainability
Given the nature of our business, we do not operate any production facilities or otherwise
impose any material threats to the environment or the climate. Therefore, we are not subject
to significant environmental or climate-related risks. Nonetheless, we have made significant
efforts towards environmental protection, change and sustainability.
AI for Low Carbon
As we optimize our algorithms, coupled with distributed architecture design and our
all-in-one design, we are able to shorten the training time needed for our AI model and utilize
the hardware resources efficiently, thereby achieving the same results with less computing
power and, in turn, saving electricity consumption. We also strive to empower enterprises to
achieve carbon neutrality and emission peak via our AI solutions. For example, the accuracy
of load forecasting has a huge impact on costs of any power system, and our decision-making
AI solutions, by utilizing technologies such as environmental learning and high-dimensional
computing, are able to significantly reduce the error rate in such forecast, intelligently plan and
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allocate resources within the power system to save power consumption effectively. Moreover,
we believe that as AI and its application develop and mature, AI can solve problems more
efficiently than traditional technologies, ultimately resulting in less energy consumption.
In addition, we make efforts to save electricity energy in our daily office life as a part of
our corporate culture. We operate most of our businesses digitally and utilize cloud-based
services to reduce consumption of paper and renovate our offices with environmental-friendly
materials, in an effort to keep our carbon consumption low. For example, we paint our offices
in light colors and make sure the curtains are open during daytime to reduce use of lighting.
We also arrange our office superintendents to inspect the building regularly and turn down the
lights in empty rooms. We have imposed office policies for air conditioning with
considerations to season, weather and use scenario to manage the energy consumption of air
conditioning and displayed notices adjacent to the air conditioners to remind our employees of
the environmental impact.
In line with our vision for sustainable development, we oversee our environmental
protection performance in aspects such as the use of electricity and water. During the Track
Record Period, our costs of electricity consumption were RMB0.4 million, RMB0.6 million,
RMB1.4 million and RMB0.2 million, in 2020, 2021, 2022 and in the three months ended
March 31, 2023, respectively. During the Track Record Period, our costs of water consumption
were RMB0.09 million, RMB0.05 million, RMB0.08 million and RMB0.01 million, in 2020,
2021, 2022 and in the three months ended March 31, 2023, respectively. We are dedicated to
enhancing the efficiency of electricity and water consumptions in our operations to fulfill our
environmental and social responsibility. The table below sets forth our electricity and water
consumptions and consumption efficiencies during the Track Record Period.
Y ear ended December 31,
Three
months
ended
March 31,
2020 2021 2022 2023
Total electricity consumption
(kWh’000) 359 514 1,434 230
Electricity consumption
(kWh’000)/revenue
(RMB in millions) 0.38 0.26 0.47 0.36
Total water consumption*
(liter’000) 118 71 103 14
Water consumption*
(liter’000)/revenue
(RMB in millions) 0.13 0.04 0.03 0.02
* Our water consumption comprises primarily of the cost of purchasing bottled water in each year
indicated, as other expenses relating to water consumption is negligible.
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AI for Biodiversity
We use our AI technologies to facilitate preservation of biodiversity. Our AI technologies
enable people to identify, analyze and capture images of endangered wild animal with high
accuracy, providing invaluable information sources for animal behavior study, discovery of
wild animal’s living pattern and the environmental ecosystem in general.
Social Responsibility
AI for culture
Significant portions of the history and culture of human being are recorded in antiques
and ancient books. However, we may lost the information embedded in a large number of
ancient books because of technical difficulties in physically preserving these books and in
identification of ancient texts. Learning ancient texts is an extremely difficult tasks for human
beings, whereas AI technologies are at an advantage: By processing large amounts of illegible
texts, our AI solutions are able to discover patterns and rules and therefore learn to identify the
texts in an accurate and efficient manner. For example, our AI solutions empowered the
recovery of ancient Tripitaka.
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AI for education
We established “Paradigm Academy” for the purpose of educating enterprises on AI. We
established AutoML.ai, an open source AutoML challenge platform, which allows us to interact
with and learn from top academic institutions, multinational technology companies and AI
scientists in the world. We made OpenMLDB and OpenAIOS in our Sage AIOS an open source
platform to share our achievements in AI operating systems with developers across the world.
In addition, we are dedicated to nurturing AI talents. We were certified as a cooperating
training center by the China Electronic Information Application Education Center (CEIAEC)
in 2021. We also cooperate with various education and research institutions to provide AI
courses and trainings to teachers and students. In addition, we made a RMB330 thousand
donation to the University of Chinese Academy of Sciences Education Foundation to establish
the “4Paradigm Scholarship,” awarding graduate students with good character who show
academic excellence in fields including but not limited to computer science, mathematics,
automation and software engineering.
Employee care
We believe that having a balanced lifestyle is crucial to achieving a good mindset at work.
Therefore, we encourage employees to maintain good mental and physical health by
participating in sports and recreational activities. With respect to our safety policy, we require
all employees to follow our safety rules and receive safety training, which includes fire drills
and video on evacuation and other fire safety measures.
We nurtured a friendly and inspirational corporate culture that we believe is attractive to
the talented scientists who are keen to our success, and we invest heavily in training and
retaining them. We provide adequate resources to help them succeed, including easy access to
our rich internal resources for training and studying, our invaluable industry-related insights
and opportunities to work in an inclusive community with our similar-minded scientists.
Governance
ESG Governance Scheme
As part of our efforts to promote corporate social responsibility and sustainable
development, we are in the process of optimizing our corporate governance on environmental,
social and corporate governance. We plan to adopt a comprehensive ESG policy and establish
an ESG committee responsible for overseeing and guiding our ESG initiatives. In addition, we
intend to set up an ESG task force led by our legal department, which would be responsible for
the formulation, implementation and evaluation of our ESG initiatives and report to our ESG
committee regularly. Moreover, we plan to engage professional external ESG consultants to
help us establish and improve our ESG policies and standards.
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Each year, the ESG task force will perform identification and evaluation of ESG risk
factors each year, weighing the risks of different ESG factors, including environmental, social
and climate-related risks, by evaluating aspects such as affected scope, frequency of
occurrence, recovery costs, predictability and social awareness, so that we can pinpoint the key
ESG risk factors and formulate mitigation measures accordingly. In such assessment, we may
also use metrics such as percentage of renewable energy used for our solutions, employee air
travel emissions, percentage of suppliers that have an environmental program in place, potable
water use per square foot and/or waste to landfill per square foot.
AI Code of Ethics
We intend to adopt an AI code of ethics that addresses our beliefs in the key ethical values
in the development and use of AI, primarily including integrity and virtuousness, respect for
intellectual property rights and data security and protection.
We upheld integrity and virtuousness as the principles that guide our daily operations,
business engagements, development and use of AI and technologies. We believe technology is
a force for good, we abide by applicable laws and generally acceptable moral values, and we
strive to create value to our users and the society as a whole.
As an innovation-driven company, we are highly committed to protection of intellectual
property rights. We have designed and adopted strict internal procedures to ensure the
protection of our intellectual property rights as well as to operate our business without
violating others. See “– Risk Management and Internal Control – Compliance and Intellectual
Property Risk Management” for details of our data protection policy and measures.
Data security and protection are among our highest priorities. We have implemented
comprehensive internal policies on protecting data privacy and security, including establishing
a Data and Information Security Committee, members of which include the responsible persons
in various departments such as IT, R&D, Solution Deployment, Human Resources and
Compliance. We do not own nor do we collect data of our users in our business operations. See
“– Data Privacy and Security” for details of our data protection policy and measures.
Environmental Management System
Worldwide environmental issues such as climate change, natural resources depletion and
species loss are becoming increasingly prominent. Despite that our operations do not involve
any production facilities or otherwise impose any material threats to the environment, we still
make our best effort to minimize our impacts on the environment. We intend to adopt a
company-wide environmental management system (“EMS”) that aligns with customary
international standards. The ESG committee will be responsible for overseeing, and the ESG
task force will be responsible for implementing the EMS.
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During the Track Record Period and up to the Latest Practicable Date, we had not been
subject to any fines or other penalties due to noncompliance in relation to health, work safety
or environment regulations and had not had any incident, or received any claim for personal
or property damage made by our employees, which had materially and adversely affected our
financial condition or business operations. Given that we operate our business primarily in the
office, and that a majority of our operations are conducted online, we leave limited impact on
the environment with a small carbon footprint. In light of such business nature, environmental-
related and social-related risks and climate-related issues are not likely to have material
negative impacts on our business, strategy and financial performance going forward. During
the Track Record Period and up to the Latest Practicable Date, we had not incurred material
capital expenditures or compliance costs related to climate and environmental protection. In
2020, 2021 and 2022 and the three months ended March 31, 2023, our annual capital
expenditures and compliance costs in this regard amounted to no more than RMB1 million. We
also do not anticipate to incur material capital expenditures or compliance costs related to
climate in the foreseeable future.
PROPERTIES
We occupy certain properties in mainland China, Hong Kong and Singapore. These
properties are used for non-property activities as defined under Rule 5.01(2) of the Listing
Rules. Our headquarters are based in Beijing. According to section 6(2) of the Companies
(Exemption of Companies and Prospectuses from Compliance with Provisions) Notice, this
Prospectus is exempted from compliance with the requirements of section 342(1)(b) of the
Companies (Winding Up and Miscellaneous Provisions) Ordinance in relation to paragraph
34(2) of the Third Schedule to the Companies (Winding Up and Miscellaneous Provisions)
Ordinance, which requires a valuation report with respect to all our interests in land or
buildings, for the reason that, as of March 31, 2023, none of the properties leased by us had
a carrying amount of 15% or more of our consolidated total assets.
We do not own any properties. As of the Latest Practicable Date, we primarily leased
fourteen properties in Beijing, Shanghai, Shenzhen, Changchun, Guangzhou, Wuhan, Chengdu,
Nanjing, Changsha and Wuxi, with an aggregate gross floor area of approximately 20,134.42
square meters in mainland China as our office space. We believe that there is sufficient supply
of properties in mainland China and we do not rely on the existing leases for our business
operations. In addition, we leased several work stations in Hong Kong and Singapore. Our
technology infrastructure is supported by servers in geographically dispersed data centers
across China, including various locations Beijing and Inner Mongolia, that are fault-tolerant,
which ensures the high reliability of our platform. We believe that we could relocate these
servers to new properties without material disruption to our business, because we have made
data backup in our servers in Beijing, which enables recovery of our system within a few hours
in the event of any disruptions, including relocations of to these servers.
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For more information about the risks with respect to our leased properties, see “Risk
Factors – Risks Related to Our Business and Industry – Failure to renew our current leases at
reasonable terms or to locate desirable alternatives for our offices and facilities could
materially and adversely affect our business and results of operations.”
Furthermore, ten of our leased properties for our business operations in China have not
been registered with the relevant PRC government authorities. As advised by our PRC Legal
Advisor, failure to register such lease agreements with relevant PRC government authorities
does not affect the effectiveness of the lease agreements, but the relevant PRC government
authorities may order us to, within a prescribed time limit, register the lease agreements.
Failure to do so may subject us to a fine ranging from RMB1,000 to RMB10,000 for each lease
agreement. See “Risk Factors – Risks Related to Our Business and Industry – Certain of the
lease agreements of our leased properties have not been registered with the relevant PRC
government authorities as required by PRC law, which may expose us to potential fines.”
Though none of our leases have been terminated or voided during the Track Record
Period, if any of our leases are terminated or voided as a result of challenges from third parties
or the government, we would need to seek alternative premises and incur relocation costs. We
believe that there are alternative properties at comparable rental rates available on the market,
the use of which would not materially and adversely affect our business operations.
U.S. EXPORT CONTROL LA WS AND REGULATIONS
Effective March 2, 2023, the U.S. Department of Commerce’s Bureau of Industry and
Security (“BIS”) added certain entities to the entity list (the “Entity List”), including
“4Paradigm Technology Co., Ltd.” with aliases “4Paradigm,” “4th Paradigm,” and “Fourth
Paradigm”. The address of such entity was provided as “Building 1, No. 66 Qinghe Middle
Street, Haidian District, Beijing, China.” Out of an abundance of caution and unless or until
we receive further clarification from BIS, we will assume that all entities located at the address
provided in the Entity List are subject to the Entity List restrictions in order to comply with
the relevant restrictions. These entities specifically include: Beijing Fourth Paradigm
Technology Co., Ltd., Fourth Paradigm (Beijing) Data & Technology Co., Ltd., Beijing
Paradigm Empowerment Enterprise Management Co., Ltd., Beijing Xuexian Intelligent
Technology Co., Ltd., Beijing Y untian Xinrui Technology Co., Ltd., Beijing Future Paradigm
Technology Co., Ltd., Zhongyuan Putai (Beijing) Intelligent Technology Co., Ltd., and Zhimei
Xinchuang (Beijing) Technology Co., Ltd. (the “Listed Entities”). For more details of these
entities, see “History, Development and Corporate Structure – Our Principal Subsidiaries” and
Note 1 to the Accountant’s Report in Appendix I to this Prospectus. However, it is possible that
not all Listed Entities are subject to the restrictions.
The addition of the Listed Entities to the Entity List restricts those entities’ ability to
purchase, acquire, or otherwise access any items subject to Export Administration Regulations,
15 C.F.R. Parts 730-774 (“EAR”) without a license from BIS. Specifically, absent a license
from BIS, it is prohibited to export, reexport, or transfer any items subject to the EAR when
any Listed Entity is a party to the transaction, including as purchaser, intermediate consignee,
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ultimate consignee, or end-user. That is, even if the Listed Entity is not the intended end user
of the item(s) involved, the restrictions would still apply to the extent the Listed Entity is the
purchaser or otherwise involved in a given transaction. License applications to the Listed
Entities will be reviewed with a presumption of denial for all items subject to the EAR. For
further information, see “Regulatory Overview – U.S. Export Control Laws and Regulations.”
As concluded by Jacobson Burton Kelley PLLC (“JBK”), our legal opinion counsel as to
U.S. export control laws, the Entity List restrictions do not apply to non-listed entities in our
Group that are legally distinct from the Listed Entities (the “Non-listed Entities”). That is, BIS
has explicitly advised that “the licensing and other obligations imposed on an entity by virtue
of being listed on the Entity List do not per se apply to its subsidiaries, sister companies, or
other legally distinct affiliates that are not listed on the Entity List.” However, a Non-listed
Entity (or any other person) may not act as an agent, a front, or a shell company for a Listed
Entity in order to facilitate transactions that would not otherwise be permissible with the Listed
Entity.
Further, the Entity List restrictions applicable to the Listed Entities apply to items subject
to the EAR only where such items would be imported, procured, or obtained by the Listed
Entities as of the effective date of the designation on the Entity List. For example, if the Listed
Entities obtained an item subject to the EAR prior to March 2, 2023, the Listed Entities would
not be prohibited from continuing to access or use such item post-Entity List designation.
However, the Listed Entities would be prohibited from obtaining additional quantities of, or
updated versions of, such item as of March 2, 2023.
JBK confirmed that U.S. and non-U.S. persons/companies would not be prohibited from
continuing to export, reexport, or transfer (in-country) items subject to the EAR to the
Non-listed Entities as long as (i) the hardware, software, or technology are not exported,
reexported or transferred, directly or indirectly, to the Listed Entities; (ii) such U.S. origin
items not diverted to the Listed Entities by any other person; and (iii) the Listed Entities are
not the purchaser, intermediate consignee, ultimate consignee or end-user of the items subject
to the EAR. In addition, U.S. or non-U.S. suppliers may continue to provide items even to
Listed Entities provided that: (i) the items are not subject to the EAR; or (ii) the parties obtain
the necessary export licenses from BIS (subject to a licensing policy of denial). Based on JBK’s
legal analysis and conclusions made after reviewing the information we provided and relevant
U.S. law, we do not anticipate that the addition to the BIS Entity List will have a material effect
on our business or research and development operations.
The Listed Entities purchased (prior to the Entity List designation) certain office software
products which are U.S.-origin items. These office software programs are mostly required for
our Group’s day-to-day operations and are not directly used to create and develop our
solutions. These office software programs do not contribute to the revenue of our Group
directly and procurement of such office software programs accounted for nil, 0.004% and
0.013% of our total procurement in 2020, 2021 and 2022, respective. Following the Entity List
designation, the Listed Entities will source this type of software from an alternative Chinese
manufacturer/supplier in the future and are already sourcing such non-U.S. software from
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suppliers in China. Further, the Entity List restrictions would not prohibit even the Listed
Entities from purchasing from U.S. office software suppliers any products and services that are
not subject to the EAR or where no export, reexport, or transfer occurs ( e.g. , certain
Software-as-a-Service products).
The Listed Entities previously purchased U.S.-branded office computers and monitors.
Procurement of such office computers and monitors accounted for 0.04%, 0.03% and 0.04% of
our total procurement in 2020, 2021 and 2022, respectively. Although we have reason to
believe certain of these products may not be subject to the EAR, should the Listed Entities need
to purchase any additional quantities of such products in the future, they will confirm with the
manufacturers in writing that such products are indeed not subject to the EAR. Even if these
products are subject to the EAR, (i) the Listed Entities are not prohibited from continuing to
use those items subject to the EAR which were procured prior to the Entity List designation;
(ii) we believe that going forward, the Listed Entities can source equivalent products not
subject to the EAR from alternative suppliers at a comparable price and in a timely manner;
and (iii) these particular products are used by the Listed Entities only for day-to-day operations
and are not directly used to create and develop our software or technology. For these reasons
and based on information we provided to JBK, JBK concluded that it did not expect the
potential inability of the Listed Entities to source the above-mentioned office computers and
monitors would have a material adverse impact on our business or operations.
To our knowledge, servers and related products incorporating U.S.-branded chips, are the
only items procured by the Listed Entities which may incorporate components subject to the
EAR. These servers and graphic cards include central processing units (CPUs) and AI
accelerators, both of which are hardware components of our SageOne products. CPUs are
general processors and essential for computing workloads, and AI accelerators are components
for improving the speed and efficiency of AI workloads. Our separate U.S. export control
counsel helped us prepare supplier certificates, aimed at collecting the information needed
from the Listed Entities’ suppliers to ascertain whether items supplied to the Listed Entities
may be subject to the EAR or whether these suppliers otherwise expect their supply of items
to the Listed Entities to be affected by Entity List restrictions on the Listed Entities.
Information requested in such certificates included whether items supplied to the Listed
Entities were manufactured or produced in the United States, transited through the United
States, incorporated U.S.-origin components, or the “direct products” of certain controlled
U.S.-origin software or technology (or are the direct product of a plant or major plant
component that is itself the direct product of such controlled U.S.-origin software or
technology). Where the items incorporated U.S.-origin components, suppliers were asked to
provide information on the relative value of the U.S. components, and the particular version or
model of the U.S. items incorporated in the product supplied to us. These supplier certificates
were completed and returned by 19 of the top 20 suppliers of goods and services to the Listed
Entities (the “Top Suppliers”). Purchases from these Top Suppliers represented 47.8% of our
Group’s total procurement in 2022. Based on the supplier certifications completed by the Top
Suppliers, it appears that of this set of suppliers, only the suppliers of servers and graphics
cards may incorporate components subject to the EAR.
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We do not believe that the Entity List restrictions regarding U.S.-branded chips in servers
and graphics cards procured by our Group will have a significant effect on our Group’s
operations and services. As an initial matter, our suppliers report that they do not believe the
U.S.-branded chips incorporated into such products were manufactured in the United States. If
the U.S.-branded processors and devices are not of U.S.-origin, those components should not
be included in the de minimis analysis. As a result, the servers containing such U.S.-branded
chips should not be subject to the EAR. However, should the Listed Entities need to purchase
any additional quantities of such products in the future, they will re-confirm with our suppliers
that such products are indeed not subject to the EAR.
Even if the servers procured by the Listed Entities were subject to the EAR, e.g. , because
the processor and devices incorporated within them are of U.S.-origin, the suppliers of such
servers have reported that there are alternative Chinese-origin processors and devices that can
be used in place of any U.S.-origin items. The Listed Entities are able, therefore, to source
servers containing only chips that are neither U.S.-origin nor otherwise subject to the EAR.
Moreover, SageOne is a software-defined product, designed to optimize computing, network
and storage resources. Where the value of the SageOne products contributed by us primarily
comes from the software developed by us, we optimize the design and architecture of such AIO
solution, we do not significantly rely on the performance of CPUs and AI accelerators from
specific suppliers.
One type of SageOne products already used servers incorporating exclusively Chinese-
origin processors, the functions of which are equivalent to products using servers incorporating
U.S.-branded processors. Moreover, for the year ended December 31, 2022 and the three
months ended March 31, 2023, none of our contracts with customers specifically states that
U.S.-origin chips or processors are required. We also believe it would not cause a significant
delay to begin sourcing servers with only Chinese processors. As stated above, our suppliers
can and already do supply certain products with only Chinese-origin processors and, therefore,
the Listed Entities would need only change the products procured from our existing suppliers
and would not need to seek new suppliers as a result of the Entity-List Designation.
Moreover, sales of AIO products which do not contain U.S.-branded chips accounted for
more than half of sales of our AIO solutions for each of the year ended December 31, 2022,
and the three months ended March 31, 2023. Users of our products which do not contain
U.S.-branded chips include well-recognized companies, demonstrating that such models are
suitable for, and respected by, such lighthouse users. In addition, according to CIC, many
Chinese-manufactured chips have demonstrated comparable performance with U.S.-branded
chips, and the supply of such Chinese chips is adequate. We also conducted our own analyses
comparing the relative performance of AIO products containing Chinese chips and AIO
products containing U.S.-branded chips, and concluded that the performance of these AIO
products are comparable. Moreover, based on the comparison between AIO products
containing Chinese chips and AIO products containing U.S.-branded chips, there is no material
difference between these products in terms of performance, functionality, set-up time,
procurement costs, replacement frequency or maintenance costs. For these reasons, we believe
replacing the U.S.-branded processors and devices with Chinese-origin alternatives would not
have a material adverse impact to our Group’s business operations or financial performance.
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Based on the facts provided and JBK’s legal analysis under the U.S. export control laws,
JBK was of the view that any potential inability of the Listed Entities or their non-listed
affiliates to purchase or procure servers containing U.S.-origin content should not have a
significant adverse impact on the Listed Entities or their affiliates.
The Listed Entities do not plan to procure U.S.-origin items, or other items subject to the
EAR in the future, unless they can do so in compliance with U.S. export controls. We were
unable to identify any items subject to the EAR not currently sourced or used by the Listed
Entities which they would need to use or plan to use in future research and development,
operations, or production activities.
Regarding our research and development activities, we are able to rely on only
Chinese-produced items. Our research and development activities do not rely on U.S.-origin
hardware or software, or hardware or software that is otherwise subject to the EAR.
In light of the above, our Directors are of the view that the Entity List designation of the
Listed Entities should not have any material adverse impact on our business and financial
performance. Such conclusion is made based on a number of conservative assumptions,
including (i) we assumed that all entities located at the address listed on the U.S. Entity List
are subject to the Entity List restrictions. However, it may be the case that the restrictions do
not apply to all such Listed Entities; (ii) we assessed the likely impact of the designation of the
Listed Entities to the U.S. Entity List based on the assumption that servers procured by the
Listed Entities are subject to U.S. export controls, e.g., because the chips used are of
U.S.-origin.; and (iii) we considered the risk that the BIS Entity List designation could be
expanded to cover additional entities in our Group beyond those currently identified. As of the
date of this Prospectus, none of our material investors, customers, or suppliers have withdrawn
their investment, ceased doing business with us due to the BIS Entity List designation, or
notified us in writing or otherwise of their intention to do so. In addition, based on our best
knowledge, we are not aware of (i) any existing customers/suppliers that decided to terminate
their business relationship that or reduce their purchases/supplies from us due to the Entity-List
addition, or due to the restrictions on the Listed Entities’ ability to purchase, acquire, or
otherwise access items subject to the EAR without a license from BIS, or (ii) any potential
customer that chose not to cooperate with us due to the Entity-List addition, or due to the
restrictions on the Listed Entities’ ability to purchase, acquire, or otherwise access items
subject to the EAR without a license from BIS. We are also not aware of any litigation or
arbitration proceedings or other legal actions arising from or in connection with the BIS Entity
List designation. According to CIC, after the Entity-List designation, there is no change in the
overall competitive landscape or our potential market share due to the Entity-list designation
considering that the Entity List designation of the Listed Entities should not have any material
adverse impact on our business and financial performance.
In sum, based on the information provided to JBK for their review and legal compliance
analysis, as supplemented by information provided by our suppliers, JBK concluded that:
(i) many of the hardware and software items procured by the Listed Entities from the Top
Suppliers do not appear to be subject to the EAR; and (ii) those items procured by the Listed
Entities that do appear to be subject to the EAR (or which the Company cannot definitively
confirm are not subject to the EAR) are either not material to the development of the
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Company’s products, or can be replaced with alternative and equivalent items not subject to the
EAR, at a comparable price and in a timely manner. For this reason, JBK is of the view that
the designation of the Listed Entities to the Entity List should not have a material impact on
the business or operations of our Group.
Based on the due diligence performed by the Sole Sponsor, and considering the Directors’
and JBK’s views mentioned above, nothing has come to the attention of the Sole Sponsor that
would cause it to cast any doubt on the views of the Directors, or on the views of JBK.
Internal Control Measures
We have recently established a series of export control compliance measures to address
and mitigate risks related to U.S. export controls, including the following:
 We engaged outside U.S. export controls compliance counsel (separate from JBK)
to advise on the development of a trade controls compliance program to mitigate the
risk of violation U.S. export controls and sanctions.
 On April 7, 2023, we adopted a Global Trade Controls Compliance Policy, as well
as standard operating procedures addressing sanctions and export controls
compliance. The policy and each set of procedures were formally approved by our
management and leadership team.
 On April 7, 2023, our management circulated to all Group employees a management
commitment statement, outlining and restating our commitment to compliance with
applicable export controls. We are in the process of implementing the measures
outlined in the policy and procedures.
 We also adopted standard language for use in our sales contracts and purchase
contracts addressing compliance with applicable export controls and sanctions laws
and regulations. The contractual language requires the Group’s business partners to
comply with all applicable export control and economic and trade sanction laws,
regulations and resolutions formulated by China, the United States, and other
applicable jurisdictions and to disclose to us any connections to restricted persons.
 Our customers must also attest to the accuracy of the information provided regarding
the end-use and end-users of our products, and refrain from selling or exporting our
products to restricted persons or persons in sanctioned or high-risk countries or for
prohibited end uses.
 The Company’s suppliers must attest to the accuracy of the information provided in
the supplier certificates, and that the items supplied are not supplied in violation of
U.S. export control laws.
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 We screened our current customers, suppliers, business partners of the Listed
Entities, and other third parties with which these companies currently do business,
against sanctions and export control restricted party lists maintained by the EU,
United States, and U.K. and determined that none of our existing business partners
are listed on any such lists.
 Our outside U.S. export controls compliance counsel recently conducted two
separate training programs for us on compliance with U.S. sanctions and export
controls. These training programs were attended by our senior executives and
management. Pursuant to the Global Trade Controls Compliance Policy we adopted,
we will continue to conduct trade controls compliance training on a regular basis.
JBK has undertaken a desk-top review of our recently adopted trade controls compliance
measures and are of the view that the trade controls compliance program, upon implementation
and if properly enforced, should provide a reasonable internal control framework for us to
identify and mitigate any material risk relating to the Listed Entities having been added to the
BIS Entity List.
Our Directors, after consulting with its outside U.S. export controls compliance counsel,
are of the view that the trade controls compliance program, upon implementation, is adequately
tailored to address and mitigate the risk of violating U.S. export controls, and the relevant
compliance measures, if properly implemented and enforced, will provide a reasonable internal
control framework for the Company to identify and mitigate any material risk relating to the
Entity List Designation.
LEGAL PROCEEDINGS AND COMPLIANCE
During the Track Record Period and up to the Latest Practicable Date, we had not been
involved in any actual or pending legal, arbitration or administrative proceedings (including
any bankruptcy or receivership proceedings) that we believe would have a material adverse
effect on our business, results of operations, financial condition or reputation and compliance.
According to our PRC Legal Advisor, the business operations we engaged in had been
carried out in compliance with applicable PRC laws and regulations in all material respects
during the Track Record Period and up to the Latest Practicable Date.
LICENSES AND PERMITS
The following table sets forth the details of the material licenses and permits necessary
for the business operations in which we engaged in China.
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License/Permit
Entity Holding the
License/Permit Grant Date Expiration Date
Customs Record Receipt
of Consignees and
Consignors of
Imported and
Exported Goods
4Paradigm Beijing June 21, 2019 Long-term
Work Safety Permit Guangzhou Jianxin December 03,
2021
December 03,
2024
The Construction
Enterprise
Qualification
Certificate
Guangzhou Jianxin December 24,
2021
December 31,
2023
*
Guangdong Province
Qualification
Certificate for Design,
Construction and
Maintenance of Safety
Technology Protection
System
Guangzhou Jianxin September 27,
2021
September 26,
2023
*
* We plan to file application to renew the Construction Enterprise Qualification Certificate and the
Guangdong Province Qualification Certificate for Design Construction and Maintenance of Safety
Technology Protection well in advance of these certificates’ expiration. We do not expect any legal
impediment to the renewal of these certificates.
During the Track Record Period and up to the Latest Practicable Date, we had obtained
all material licenses, permits, approvals and certificates necessary to conduct our actual
business operations from the relevant government authorities in the PRC, and such licenses,
permits, approvals and certificates remained in full effect.
RISK MANAGEMENT AND INTERNAL CONTROL
We have established and currently maintain risk management and internal control systems
consisting of policies and procedures that we consider to be appropriate for our business
operations. We are dedicated to continually improving these systems. We have adopted and
implemented comprehensive risk management policies in various aspects of our business
operations. Our Board of Directors is responsible for the establishment and updating of our
internal control systems, while our senior management monitors the daily implementation of
the internal control procedures and measures with respect to each subsidiary and functional
departments.
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Financial Reporting Risk Management
We have adopted comprehensive accounting policies in connection with our financial
reporting risk management, such as financial management, budget management and financial
statement preparation. We also have procedures in place to carry out such accounting policies,
and our finance department reviews our management accounts in accordance with such
procedures. In addition, we provide ongoing training to our finance staff to ensure that these
policies are well-observed and effectively implemented.
Information System Risk Management
Sufficient maintenance, storage and protection of our data and other related information
are critical to our success. We have implemented relevant internal procedures and controls to
ensure that our data is protected and that leakage and loss of such data are avoided.
We have implemented comprehensive internal policies on protecting data privacy and
security under the supervision of our Chief Architect, and we have established a Data and
Information Security Committee, members of which include the responsible persons in various
departments such as IT, R&D, Solution Deployment, Human Resources and Compliance. The
committee is responsible for formulating data and information security strategies, and
decision-making in material data and information incidents. We also engage external legal
counsel to review and update our internal policies and ensure continuous compliance with all
applicable laws and regulations.
We implement a robust internal authentication and authorization system to ensure that our
confidential and important data can only be accessed for authorized use and by authorized
personnel. We have clear and strict authorization and authentication procedures and policies in
place. Our employees only have access to data which is directly relevant and necessary for their
responsibilities and for limited purposes and are required to verify authorization upon every
access attempt.
We have established an all-round information system in reference to data security
requirements, national standards and industry best practices and intend to continually invest
heavily in data security and privacy protection. Our information system applies multiple layers
of safeguards, including both internal and external firewalls, to identity and protect us against
security attacks. We have completed various information security, privacy and compliance
certifications/validations, proving the security and reliability of our data protection
technologies. For example, in December 2020, we passed ISO27001 (international standard for
information security) and obtained the “Information Safety Management System
Certification,” and in February 2020, our Sage Platform obtained the ePrivacyseal, which
illustrates our commitment to comply with the requirements of the GDPR.
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During the Track Record Period and up to the Latest Practicable Date, we did not
experience any material information leakage or loss of our data. See “– Data Privacy and
Security” in this section for more information about our information security procedures and
policies.
Compliance and Intellectual Property Risk Management
We have designed and adopted strict internal procedures to ensure the compliance of our
business operations with the relevant rules and regulations, as well as the protection of our
intellectual property rights. Our legal department examines the contract terms and reviews all
relevant documents for our business operations, including licenses and permits obtained by the
counterparties or us to perform contractual obligations and all the necessary underlying due
diligence materials, before we enter into any contract or business arrangements. There was no
material and systemic non-compliance during the Track Record Period and as of the Latest
Practicable Date.
We have in place detailed internal procedures to ensure that our in-house legal department
reviews our solutions and services, including upgrades to existing solutions, for regulatory
compliance before they are made available to the general public. Our legal department is also
responsible for obtaining any requisite governmental pre-approvals or consent, including
preparing and submitting all necessary documents for filing with relevant government
authorities within the prescribed regulatory timelines and ensuring all necessary application,
renewals or filings for trademark, copyright and patent registration have been timely made to
the competent authorities.
Internal Control Risk Management
We have designed and adopted strict internal procedures to ensure the compliance of our
business operations with the relevant rules and regulations. We maintain internal procedures to
ensure that we have obtained all material requisite licenses, permits and approvals for our
business operation, and conduct regular reviews to monitor the status and effectiveness of those
licenses and approvals. We obtain requisite governmental approvals or consents, including
preparing and submitting all necessary documents for filing with relevant government
authorities within the prescribed regulatory timelines.
Human Resources Risk Management
We have established internal control and risk management policies covering various
aspects of human resource management such as recruitment, training, work ethics and legal
compliance. We maintain high standards in recruitment with strict procedures to ensure the
quality of new hires and provide specialized training tailored to the needs of our employees in
different departments. We also conduct periodic performance reviews for our employees, and
their remuneration is performance-based. We monitor the implementation of internal risk
management policies on a regular basis to identify, manage and mitigate internal risks in
relation to the potential incompliance with our code of conduct, work ethics, and violations of
our internal policies or illegal acts at all levels of our Group.
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In particular, we have in place a set of comprehensive anti-corruption and anti-bribery
policies within our company (the “Anti-corruption Policy”) to promote and support the
compliance with applicable anti-corruption laws and regulations, providing guidance on
anti-corruption and anti-bribery practices, the whistleblowing channel, as well as the
responsibilities for implementing the policies. All of our employees and third-party agents are
required to understand and comply with the Anti-corruption Policy, and we from time to time
provide anti-corruption trainings to our employees and third-party agents. Under our current
whistleblowing policy, one who becomes aware of any possible violations of applicable law or
the Anti-corruption Policy should report the relevant incidents to the legal department
immediately. Such reports will be treated with confidentiality, and the reported matter will be
investigated and handled in a prompt, independent and fair manner.
Investment Risk Management
Our investment department is responsible for investment project sourcing, screening,
execution and portfolio management. The department sources investment projects in
accordance with our investment strategy, and conducts thorough pre-investment due diligence
to assess the risks, business synergies and potential return of the investment projects.
A W ARDS AND RECOGNITION
The following table sets forth major awards and recognitions we received as of the Latest
Practicable Date.
Award/Recognition Award Y ear Awarding Institution/Authority
Ranked 1st in the IDC 2022
Market Share of Machine
Learning Platforms in China
2022 International Data Corporation
(IDC)
Ranked 1st in the Market Share
of Machine Learning Platforms
in China
2021 International Data Corporation
(IDC)
Ranked 1st in the Market Share
of Intelligent Decision-Making
Solutions in China
2021 International Data Corporation
(IDC)
Global Representative V endor of
Composite AI Emerging
Technologies and Trends
Impact Radar™
2020 Gartner
Global Representative V endor of
AutoML in 2020 Top Ten
Strategic Technology Trends™
2020 Gartner
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Award/Recognition Award Y ear Awarding Institution/Authority
Ranked No. 1 in the China
Predictive and Analytics and
Machine Learning Wave™
2020 The Forrester Wave
World’s 50 Smartest Companies 2020 MIT Technology Review
World Champion of KDD Cup 2020 KDD Presidium
AI 100 2019 & 2020 CB Insights
Ranked Top 1% in Kaggle
Structured Data and Image
Classification Competition
2019 Kaggle
Wu Wenjun AI Science and
Technology Award First Prize
2016 Chinese Association for Artificial
Intelligence
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BOARD OF DIRECTORS
Our Board of Directors comprises nine Directors, including three executive Directors,
three non-executive Directors and three independent non-executive Directors. Our Directors
serve a term of three years and may be re-elected for successive reappointments.
The following table sets out information regarding the Directors:
Name Age Position/Title
Date of
Appointment
as Director
Date of
Joining
Our Group Role and Responsibility
Executive Directors
Dr. Dai Wenyuan
(Ꮦ˖଀)
40 Chairman of the Board,
Executive Director,
Chief Executive
Officer and General
Manager
August 5, 2015 January 2,
2015
Overall strategic planning, business
and technology direction and
operational management
Mr. Chen Y uqiang
(੶)
36 Executive Director
and Chief Research
Scientist
December 19,
2017
March 16,
2015
Overall management of technology
and product research and
development
Mr. Y u Zhonghao
(ɲʕ㒊)
36 Executive Director,
Chief Financial
Officer and
February 9,
2021
May 7, 2018 Overall management of investment
and financing, finance, legal and
post-investment related matters
Vice President
Non-executive Directors
Dr. Y ang Qiang
(เ੶)
61 Non-executive Director November 28,
2016
November 3,
2014
Overall board affairs, and strategic
advice and guidance on product
and technology research and
development
Mr. Dou Shuai
(܏)
33 Non-executive Director February 9,
2021
February 9,
2021
Overall board affairs, and strategic
advice and guidance on the
business operation of the Group
Mr. Zhang Jing
(ੵ౺)
42 Non-executive Director February 9,
2021
February 9,
2021
Overall board affairs, and strategic
advice and guidance on the
business operation of the Group
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Name Age Position/Title
Date of
Appointment
as Director
Date of
Joining
Our Group Role and Responsibility
Independent Non-executive Directors
Mr. Li Jianbin
(Ᏽ)
44 Independent
Non-executive
Director
July 16, 2021 July 16, 2021 Participating in the decision making
for our Company’s significant
events, and advising on issues
relating to corporate governance,
audit and remuneration and
assessment of our Directors,
Supervisors and senior
management
Mr. Liu Chijin
(ږܵ)
61 Independent
Non-executive
Director
July 16, 2021 July 16, 2021 Participating in the decision making
for our Company’s significant
events, and advising on issues
relating to corporate governance,
audit and remuneration and
assessment of our Directors,
Supervisors and senior
management
Ms. Ke Y ele
(⮶ᆀ)
42 Independent
Non-executive
Director
August 8, 2022 August 8, 2022 Participating in the decision making
for our Company’s significant
events, and advising on issues
relating to corporate governance,
audit and remuneration and
assessment of our Directors,
Supervisors and senior
management
Note: Each of our Directors had no relationship with other Directors, Supervisors or members of senior
management of our Company as at the Latest Practicable Date.
Executive Directors
Dr. Dai Wenyuan ( Ꮦ˖଀), aged 40, is Chairman of the Board, an executive Director,
Chief Executive Officer and General Manager of our Company. Dr. Dai has been our Chief
Executive Officer since January 2015 and Chairman of the Board since August 2015. He was
re-designated as our executive Director on July 16, 2021. He is primarily responsible for the
overall strategic planning, business and technology direction and operational management of
our Company.
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Dr. Dai has approximately 14 years of experience in the AI technology industry. Prior to
joining our Company, he served as Chief Research and Development Architect at Baidu Online
Network Technology (Beijing) Co., Ltd.* (ίᇞၣഖҦஔ(̏ԯ)ʮ̡) from May 2009
to May 2013, where he was responsible for the research, development and management of
advertising system of the Baidu search.
Dr. Dai is a renowned scholar in AI and his papers were published in the conference
proceedings of leading organizations such as NIPS, ICML, AAAI and KDD. In April 2005, Dr.
Dai was awarded as a world champion in the 2005 ACM-International Collegiate Programming
Contest World Finals, competing with 77 teams from around the world.
Dr. Dai received a Bachelor’s degree in Computer Science and Technology in July 2006
and a Master’s degree in Computer Application Technology in March 2009 from Shanghai Jiao
Tong University ( ɪऎʹஷɽኪ) in the PRC. He obtained a Ph.D degree in Computer Science
and Engineering from The Hong Kong University of Science and Technology (“ HKUST ”) in
Hong Kong in June 2020.
Mr. Chen Yuqiang (੶), aged 36, is an executive Director and Chief Research
Scientist of our Company. Mr. Chen joined our Group in March 2015 and has served as our
Director since December 2017. He was re-designated as our executive Director on July 16,
2021. He is primarily responsible for the overall management of technology and product
research and development.
Prior to joining our Group, Mr. Chen served as Senior Engineer at Baidu Online Network
Technology (Beijing) Co., Ltd.* (ίᇞၣഖҦஔ(̏ԯ)ʮ̡) from April 2012 to May
2014. He then served as Architect at Beijing Bytedance Network Technology Co., Ltd.* ( ̏ԯ
ʮ̡) from May 2014 to March 2015, where he was responsible for
research and development.
Mr. Chen received a Bachelor’s degree in Computer Science and Technology in July
2009, and a Master’s degree in Computer Applied Technology in March 2012 from Shanghai
Jiao Tong University ( ɪऎʹஷɽኪ) in the PRC.
Mr. Chen currently serves as the supervisor of certain subsidiaries of our Company
including, 4Paradigm Shenzhen, Shanghai Shishuo and 4Paradigm Technology. He also serves
as the director of Snowline Technology, one of the subsidiaries of our Group.
Mr. Yu Zhonghao ( ɲʕ㒊), aged 36, is an executive Director, Chief Financial Officer
and Vice President of our Company. Mr. Y u joined our Group in May 2018 and has served as
our Director since February 2021. He was re-designated as our executive Director on July 16,
2021. He is primarily responsible for the overall management of investment and financing,
finance, legal and post-investment related matters.
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Prior to joining our Group, Mr. Y u worked as Business Analyst at Macquarie Investment
Advisory (Beijing) Company Limited from January 2011 to March 2012. He then joined the
investment banking division of Bank of America Merrill Lynch, Hong Kong Branch in March
2012. Subsequently, Mr. Y u worked at CCB International Asset Management Limited from
April 2014 to August 2018, where his last position was Associate Director and Team Head of
Direct Investment Division.
Mr. Y u received a Bachelor’s degree in Mathematics and Applied Mathematics from
Beihang University (ঘ˂ɽኪ) in the PRC in July 2008. He obtained a Master’s
degree in Mathematics from University of Cambridge in the United Kingdom in October 2010.
Mr. Y u also obtained a Master’s degree in Financial Mathematics from the University of
Chicago in the United States in June 2010.
Non-executive Directors
Dr. Y ang Qiang ( เ੶), aged 61, is a non-executive Director of our Company. Dr. Y ang
joined our Group in November 2014. He was the Chief Science Consultant of the Company
from November 2014 to December 2017. He has served as our Director since November 2016
and was re-designated as our non-executive Director on July 16, 2021. He is primarily
responsible for overall board affairs, and strategic advice and guidance on product and
technology research and development.
Dr. Y ang served at School of Computing Science of Simon Fraser University in Canada
from September 1995 to August 2004 where he last served as a tenured professor. From
September 1989 to August 1995, Dr. Y ang worked at the University of Waterloo in Canada
where his last position was Associate Professor. Beginning in August 2001, he was with
HKUST where he currently serves as Chair Professor of Computer Science and Engineering.
He served as New Bright Professor of Engineering from November 2014 to October 2019 and
Head of the Department of Computer Science and Engineering of HKUST from January 2015
to December 2017. Dr. Y ang was an independent director of WeBank Co., Ltd. (ऎฆ଺
ʮ̡)( “ WeBank ”) from December 2016 to April 2018. Dr. Y ang has served as
an independent non-executive director of China Mobile Limited (NYSE: CHL; SEHK: 941)
since May 2018. From June 2012 to October 2014, Dr. Y ang worked at Huawei Tech.
Investment Co., Ltd. where his last position was the Head of Noah’s Ark Research Lab.
Dr. Y ang is currently a Management Consultant of WeBank.
Dr. Y ang received a Bachelor’s degree in Astrophysics from Peking University ( ̏ԯɽ
ኪ) in the PRC in July 1982, Master’s degrees of Science in Astrophysics and Computer
Science from the University of Maryland, College Park in the United States in May 1984 and
December 1987, respectively, and a Doctor’s degree in Computer Science from the University
of Maryland, College Park in the United States in August 1989.
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Dr. Y ang was the President of International Joint Conference on Artificial Intelligence
(IJCAI) from 2017 to 2019, and a Councilor of the Association for the Advancement of
Artificial Intelligence (AAAI) until 2019. He serves as the AAAI Conference Chair in 2021.
Dr. Y ang is a fellow of several international professional societies, including the Institute of
Electrical and Electronics Engineers, Inc. (IEEE), American Association for the Advancement
of Science (AAAS), International Association for Pattern Recognition (IAPR), AAAI,
Association for Computing Machinery (ACM), Chinese Association for Artificial Intelligence
(CAAI).
Mr. Dou Shuai (܏)aged 33, is a non-executive Director of our Company. Mr. Dou
joined our Group as Director in February 2021 and was re-designated as our non-executive
Director on July 16, 2021. He is primarily responsible for overall board affairs, and strategic
advice and guidance on the business operation of the Group.
Mr. Dou joined Boyu Capital Advisory Company Limited in October 2016, where he
currently serves as Vice President. From June 2014 to October 2016, Mr. Dou worked in Global
Investment Banking Department of J.P . Morgan Securities (Asia Pacific) Limited.
Mr. Dou received a Bachelor’s degree in Economics in July 2012 and a Master’s degree
in Finance in June 2014 from Peking University ( ̏ԯɽኪ) in the PRC.
Mr. Zhang Jing ( ੵ౺), aged 42, is a non-executive Director of our Company. Mr. Zhang
joined our Group as Director in February 2021 and was re-designated as our non-executive
Director on July 16, 2021. He is primarily responsible for overall board affairs, and strategic
advice and guidance on the business operation of the Group.
Mr. Zhang has served at Primavera Capital Limited since June 2010 where his current
position is Partner.
Mr. Zhang received a Bachelor’s degree in Accounting in July 2003 and a Master’s degree
in Business Administration in July 2005 from Tsinghua University ( ૶ശɽኪ) in the PRC.
Independent Non-executive Directors
Mr. Li Jianbin (Ᏽ), aged 44, was appointed as an independent non-executive
Director on July 16, 2021. He is primarily responsible for participating in the decision-making
for our Company’s significant events and advising on issues relating to corporate governance,
audit and remuneration and assessment of our Directors, Supervisors and senior management.
Mr. Li has over 20 years of experience in tax advisory, investment matters and financial
management. He is currently serving as the Managing Partner at the Strategic Investment
Department of a subsidiary of Xiaomi Corporation (SEHK: 1810), a position he has held since
April 2020, and prior to that, between December 2017 and April 2020, he was the Vice
President of the Finance Department where he was responsible for optimizing the capabilities
of the group’s Finance Department, managing its tax matters and overseeing its merger and
DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT
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acquisition projects. From July 2001 to November 2017, he held various positions at
PricewaterhouseCoopers Consultants (Shenzhen) Limited Beijing Branch ( ౷ശ͑༸ፔ༔(ଉ
έ)ʮ̡̏ԯʱʮ̡), where his last position was Tax and Commercial Advisory Partner.
Currently, Mr. Li also serves as an independent non-executive director of Chaoju Eye Care
Holdings Limited (SEHK: 2219).
Mr. Li received a Bachelor’s degree in Laws and Economics from Peking University ( ̏
ԯɽኪ) in the PRC in July 2001. He has been a member of The Chinese Institute of Certified
Public Accountants since September 2010 and a member of the China Certified Tax Agents
Association since March 2013 and received his PRC lawyer’s practicing licence issued by
Ministry of Justice of the PRC in February 2007.
Mr. Liu Chijin (ږܵ)aged 61, was appointed as an independent non-executive
Director on July 16, 2021. He is primarily responsible for participating in the decision-making
for our Company’s significant events and advising on issues relating to corporate governance,
audit and remuneration and assessment of our Directors, Supervisors and senior management.
Since June 2002, Mr. Liu has been the Chairman of the Board and General Manager of
Pan Pacific Beijing Management and Consulting Co., Ltd.* (ʮ̡),
where he is responsible for overall management of the company. Mr. Liu currently also serves
as the Director of Xiamen Fantai Business Investment Management Co., Ltd.* (इ௴ุ
ʮ̡) since March 2014. From May 2018 to December 2019, Mr. Liu also serves
as an independent director of Y ango Group Co., Ltd. (ʮ̡) (SZ: 000671).
Since May 2018, Mr. Liu has served as a director of Sanying Precision Instruments Co., Ltd.
(ʮ̡) (NEEQ: 839222). Since November 2019, Mr. Liu has also
been an independent director of Y ankuang (Shandong) Equity Interest Investment Management
Co., Ltd.* (ᘤ(؇)ப΂ʮ̡).
Mr. Liu received a Bachelor’s degree in Physics from Xiamen University (ɽኪ)i n
the PRC in July 1985 and a Master’s degree in Business Administration from the Harvard
Business School in the United States in June 1997. Mr. Liu obtained both the Professional
Qualification of Independent Director from Shenzhen Stock Exchange and Qualification of
Fund Practitioners from the Asset Management Association of China in July 2016.
Ms. Ke Y ele (⮶ᆀ), aged 42, was appointed as an independent non-executive Director
on August 8, 2022. She is primarily responsible for participating in the decision-making for our
Company’s significant events and advising on issues relating to corporate governance, audit
and remuneration and assessment of our Directors, Supervisors and senior management.
Ms. Ke has been serving as the general manager of the Belle Consumer Fund of Belle
International (China) Limited since May 2021. From January 2012 to January 2016, Ms. Ke
served at Sequoia Capital Consulting (Beijing) Co. Ltd. (ӄ༟͉ᚥਪፔ༔(̏ԯ)ʮ̡),
where her last position was the vice president. She was the founding partner of Shanghai
DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT
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Fengshang Investment Management Co., Ltd. (ʮ̡) (the general
partner of Shanghai Fengshang V enture Capital Partnership (Limited Partnership), one of our
pre-IPO investors until August 2019) from March 2016 to May 2021.
Ms. Ke received a Bachelor’s degree in International Economics and Trade from Fudan
University ( ూ͇ɽኪ) in the PRC in July 2003. Ms. Ke was admitted as a non-practising
member of the Chinese Institute of Certified Public Accountants (՘ึ)i n
September 2006, a registered tax agent of China Certified Tax Agents Association ( ʕ਷ൗ̅
՘ึ) in October 2007 and a non-practising member of Shanghai Institute of Certified
Public Accountants (՘ึ) in December 2009. She was recognized as a
Chartered Financial Analyst by the CFA Institute in July 2015.
SUPERVISORY COMMITTEE
The Supervisory Committee currently consists of three Supervisors as of the date of this
Prospectus. The Supervisors include two shareholder Supervisors and one employee
Supervisor. The shareholder Supervisors and the employee Supervisor are elected at the
Shareholders’ meetings and the staff representative assembly, respectively, for a term of three
years, subject to re-election upon their retirement or resignation. The functions and duties of
the Supervisory Committee include reviewing financial reports, business reports and profit
distribution plans prepared by the Board and overseeing the financial and business performance
of our Group. They are also entitled to appoint certified public accountants and practicing
auditors to re-examine our Company’s financial information where necessary.
The following table sets out information in respect of the Supervisors.
Name Age Position/Title
Date of
Appointment
as Supervisor
Date of
Joining
Our Group Role and Responsibility
Mr. Chai Yifei
(࠭)
42 Chairman of the
Supervisory
Committee,
Shareholders’
Representative
Supervisor
July 9, 2021 October 19,
2015
Supervising the performance of our
Directors and members of senior
management, and performing
other supervisory duties as a
shareholders’ representative
Supervisor
Ms. Zhou Wenjing
(մ˖᎑)
41 Shareholders’
Representative
Supervisor
July 16, 2021 March 19,
2018
Supervising the performance of our
Directors, and members of senior
management and performing
other supervisory duties as a
shareholder’s representative
Supervisor
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Name Age Position/Title
Date of
Appointment
as Supervisor
Date of
Joining
Our Group Role and Responsibility
Ms. Shao Liling
(ޛ)
40 Employee Supervisor July 9, 2021 December 17,
2015
Monitoring financial position of our
Group, and supervising the
performance of Directors and
senior management as a
representative of our employees
Note: Each of our Supervisors had no relationship with other Directors, Supervisors or members of senior
management of our Company as at the Latest Practicable Date.
Supervisors
Mr. Chai Yifei (࠭)aged 42, is Chairman of our Supervisory Committee, a
shareholders’ representative Supervisor and Vice President of our Company. Mr. Chai joined
our Group in October 2015 and is primarily responsible for supervising the performance of our
Directors and members of senior management, and performing other supervisory duties as a
shareholders’ representative Supervisor.
Prior to joining our Group, Mr. Chai served at IBM (China) Co., Ltd. ( ਷ყਠุዚኜ(ʕ
਷)ʮ̡) from August 2007 to January 2014, where his last position was Big Data
Consulting Senior Manager. He was responsible for big data management and analysis for
clients in finance industry, and industry consulting for clients in retail and logistics industries.
He then served at Deloitte Consulting (Shanghai) Co., Ltd. ( ᅃා၍ଣፔ༔(ɪऎ)ʮ̡)
from January 2014 to October 2015, where his last position was Management Consulting
Manager.
Mr. Chai received a Bachelor’s degree in Electronic Information Science and Technology
in July 2003 and a Master’s degree in Computer System Structure from Fudan University ( ూ
͇ɽኪ) in the PRC in July 2007.
Ms. Zhou Wenjing ( մ˖᎑), aged 41, is a shareholders’ representative Supervisor of our
Company. Ms. Zhou joined our Group in March 2018. She is primarily responsible for
supervising the performance of our Directors and members of senior management, and
performing other supervisory duties as a shareholders’ representative Supervisor. She is also in
charge of post-investment matters and serves as Assistant to our Chief Executive Officer.
Prior to joining our Group, Ms. Zhou served at PricewaterhouseCoopers Zhong Tian LLP
Beijing Branch (ה(౷ஷΥྫ)הfrom August 2006 to
August 2011 where her last position was Senior Executive of the Human Resources
Department. She then served as Campus Recruiting, Training and Development Manager at
John Deere (China) Investment Co., Ltd. (ဧ(ʕ਷)ʮ̡) from September 2011
to November 2013. From November 2013 to September 2015, Ms. Zhou worked at Microsoft
DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT
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(China) Co., Ltd. ( ฆழ(ʕ਷)ʮ̡) where her last position was University Recruiter. From
October 2015 to March 2018, Ms. Zhou served as Senior Campus Recruiting Manager at
Sanliuling Technology Co., Ltd. (ʮ̡).
Ms. Zhou received a Bachelor’s degree in Ideology and Political Education from Peking
University ( ̏ԯɽኪ) in the PRC in July 2006.
Ms. Shao Liling (ޛ)aged 40, is our employee Supervisor, and Internal Audit
Director of our Company. Ms. Shao joined our Group in December 2015 and is primarily
responsible for monitoring financial position of our Group and supervising the performance of
Directors and senior management as a representative of our employees.
Prior to joining our Group, Ms. Shao Liling worked at Raffles-BICT International College
(؂–ഺНɻ਷ყኪ৫) from July 2006 to April 2011. She then served as Head of Finance at
Beyondsoft Corporation (ʮ̡) from May 2011 to September 2013. From
September 2013 to May 2015, she worked at Beijing Star World Technology Co., Ltd. ( ̏ԯ
ʮ̡). Ms. Shao also served as a Financial Analysis Manager at Thunder
Software Technology Co., Ltd. (ʮ̡) from June 2015 to December
2015, where she was responsible for financial budgeting and operation analysis. From
December 2015 to October 2016, Ms. Shao served as Senior Finance Manager at 4Paradigm
Beijing where she was responsible for setting up the finance system and building the finance
team. She then served as Senior Finance Manager at Beijing Zsvision Co., Ltd. ( ̏ԯ଺ସᎴ
ʮ̡) from November 2016 to June 2017, where she was responsible for
developing the finance system and internal control. Ms. Shao rejoined 4Paradigm Beijing in
July 2017 and served as deputy Finance Director until August 2021, being responsible for
setting up the finance system and building the finance team. Ms. Shao serves as the Internal
Audit Director since August 2021.
Ms. Shao received a Bachelor’s degree in Management from Renmin University of China
(ʕ਷ɛ͏ɽኪ) in the PRC in January 2009. Ms. Shao obtained the Certificate of Accounting
Profession (ࣣfrom Beijing Municipal Finance Bureau in February 2003, and
subsequently obtained the Preliminary Accountant Title (ॴᔖ၈), Intermediate
Accountant Title (ʕॴᔖ၈), and Senior Accountant Title (৷ॴᔖ၈) from Ministry
of Finance of the PRC in May 2006, January 2016, and December 2022, respectively. In
February 2023, Ms. Shao received the certificate of Certified Internal Auditor from the
Institute of Internal Auditors.
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SENIOR MANAGEMENT
The following table sets out information regarding the members of senior management of
our Company.
Name Age Position/Title
Date of
Appointment
Date of
Joining Our
Group Role and Responsibility
Expiration
Date of
Employment
Contracts of
Senior
Management
Member
Dr. Dai
Wenyuan
(Ꮦ˖଀)
40 Chairman of the
Board, Executive
Director, Chief
Executive Officer
and General
Manager
August 2015,
January
2015,
August 2015
January 2015 Overall strategic planning, business
and technology direction and
operational management
Non-fixed term
Mr. Pei Misi
(ܠ)
43 President July 2019 July 2019 Overall strategic planning, and
management of business and sales
and customer success
June 30, 2027
Mr. Chen
Y uqiang
(੶)
36 Executive Director and
Chief Research
Scientist
December
2017,
March 2015
March 2015 Overall management of technology
and product research and
development
Non-fixed term
Mr. Hu Shiwei
(ਃ)
37 Chief Architect March 2015 March 2015 Overall management of technology
and product architect and design
Non-fixed term
Mr. Y u
Zhonghao
(ɲʕ㒊)
36 Executive Director,
Chief Financial
Officer and Vice
President
February 2021,
January 2021
May 2018
May 2018 Overall management of investment
and financing, finance, legal and
post-investment related matters
September 30,
2025
Mr. Tu Weiwei
(۾۾)
35 Principal Scientist and
Vice President
April 2015 April 2015 Leading our research and
development of machine learning
algorithm and other academic
research
Non-fixed term
Mr. Zheng
Zhao
(ቍ⭦)
(formerly
known as
Mr. Zheng
Meng ( ቍ
ຑ))
34 Vice President October 2018 October 2018 Leading our AI technology structure
planning and relevant product and
technology research
September 30,
2026
Note: Each of our members of senior management had no relationship with other Directors, Supervisors or
members of senior management of our Company as at the Latest Practicable Date.
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Dr. Dai Wenyuan ( Ꮦ˖଀), aged 40, is the Chairman of our Board, an executive Director,
Chief Executive Officer and General Manager of our Company. For details of his biography,
see “– Board of Directors.”
Mr. Pei Misi (ܠ)aged 43, is the President of our Company. Mr. Pei joined our
Group in July 2019. He is primarily responsible for overall strategic planning, and management
of business and sales and customer success.
Prior to joining our Group, Mr. Pei served at SAP (China) Holding Co. Ltd from February
2012 to June 2019, where his last position was Vice President.
Mr. Pei received a Bachelor’s degree in Enterprise Management (International Enterprise
Operation Management) in July 2002 and a Master’s degree in Management Engineering from
Tianjin Normal University (ᇍɽኪ) in the PRC in June 2005.
Mr. Chen Yuqiang (੶), aged 36, is an executive Director and Chief Research
Scientist of our Company. For details of his biography, see “– Board of Directors.”
Mr. Hu Shiwei (ਃ), aged 37, is the Chief Architect of the Company. Mr. Hu joined
our Group as Chief Architect in March 2015 and was the shareholders’ representative
Supervisor from November 2016 to July 2021. He is primarily responsible for overall
management of technology and product architect and design.
Prior to joining our Group, Mr. Hu served as a Senior Research and Development
Engineer at Baidu.com Times Technology (Beijing) Co., Ltd. (˾ၣഖҦஔ(̏ԯ)ʮ
̡) from April 2011 to June 2014, where he was responsible for providing support in relation
to technology architecture. Before joining our Group in March 2015, Mr. Hu served as Head
of Internet Research and Development Department at Beijing Home Link Real Estate Broker
Co., Ltd. (ʮ̡) from June 2014. Mr. Hu currently serves as a
director of Shanghai Fan’an Technology Co., Ltd., one of the subsidiaries of our Group.
Mr. Hu received a Bachelor’s degree in Computer Science and Technology in July 2008
and a master’s degree in Computer Software and Theory in March 2011 from Shanghai Jiao
Tong University ( ɪऎʹஷɽኪ) in the PRC.
Mr. Yu Zhonghao ( ɲʕ㒊), aged 36, is an executive Director, Chief Financial Officer
and Vice President of our Company. For details of his biography, see “– Board of Directors.”
Mr. Tu Weiwei (۾۾)aged 35, is the Principal Scientist and Vice President of our
Company. Mr. Tu joined our Group in April 2015. He is primarily responsible for leading our
research and development of machine learning algorithm and other academic research.
Prior to joining our Group, Mr. Tu served as a Senior Engineer of Research and
Development at Baidu (China) Co., Ltd. (ܓ(ʕ਷)ʮ̡) from July 2012 to March 2015.
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Mr. Tu received a Bachelor’s degree in Computer Science and Technology and a Master’s
degree in Computer Application Technology from Nanjing University (ԯɽኪ) in the PRC
in June 2009 and in June 2012, respectively.
Mr. Zheng Zhao ( ቍ⭦) (formerly known as Mr. Zheng Meng ( ቍຑ)), aged 34, is Vice
President of our Company. Mr. Zheng joined our Group in October 2018. He is primarily
responsible for leading our AI technology structure planning and relevant product and
technology research.
Prior to joining our Group, Mr. Zheng served as a Research Assistant at HKUST from
September 2011 to July 2012, where he was responsible for academic research in the
Department of Computer Science and Engineering. From October 2012 Mr. Zheng worked at
Google Inc., following which he served as Software Engineer at Pinterest Inc. (NYSE: PINS)
from November 2015 to October 2018.
Mr. Zheng received a Bachelor’s degree in Computer Science and Technology from
Shanghai Jiao Tong University ( ɪऎʹஷɽኪ) in the PRC in July 2011. In 2010, Mr. Zheng
was awarded as a world champion in the 2010 ACM-International Collegiate Programming
Contest World Finals, competing with 102 teams from around the world.
Except as disclosed above, each of our Directors, Supervisors and members of senior
management has not been a director of any public company whose securities of which are listed
on any securities market in Hong Kong or overseas in the three years immediately preceding
the date of this Prospectus.
Except as disclosed above, none of our Directors has any interests in any business, which
competes or is likely to compete, either directly or indirectly, with our business which would
require disclosure under Rule 8.10 of the Listing Rules.
Except as disclosed above, none of our Directors, Supervisors and members of the senior
management is related to other Directors, Supervisors and members of the senior management.
Except as disclosed herein, to the best knowledge, information and belief of our Directors
and Supervisors having made all reasonable inquiries, there was no other matter with respect
to the appointment of our Directors and Supervisors that needs to be brought to the attention
of the Shareholders, and there was no information relating to our Directors and Supervisors that
is required to be disclosed pursuant to Rule 13.51(2)(h) to (v) of the Listing Rules as of the
Latest Practicable Date.
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JOINT COMPANY SECRETARIES
Mr. Xiong Fei (࠭)was appointed as Board Secretary and Joint Company Secretary in
July 2021 and August 2021, respectively. Mr. Xiong joined our Group as Vice President in
August 2020, responsible for the Group’s investment and financing activities. Prior to joining
our Group, Mr. Xiong worked as Analyst at Royal Bank of Scotland until February 2010. He
worked at Barclays Capital from March 2010 to September 2012. From September 2012 to
June 2020, Mr. Xiong served at CDH Investments Management (Hong Kong) Limited where
his last position was Executive Director of Private Equity.
Mr. Xiong received a Bachelor’s degree in Economics in July 2007 and a Master’s degree
in Economics in July 2009 from Peking University ( ̏ԯɽኪ) in the PRC.
Ms. Y eung Siu Wai Kitty ( เʃᅆ) was appointed as the other Joint Company Secretary
of our Company in August 2021. Ms. Y eung is a Manager of Corporate Services of Tricor
Services Limited. She has over 14 years of experience in the corporate secretarial field and she
has been providing professional corporate services to Hong Kong listed companies as well as
private and offshore companies.
Ms. Y eung is an Associate of both The Hong Kong Chartered Governance Institute and
The Chartered Governance Institute. Ms. Y eung holds a Bachelor of Social Science (Honours)
in Administration and Public Management from the City University of Hong Kong and a
Master of Corporate Governance from The Open University of Hong Kong (presently known
as Hong Kong Metropolitan University).
BOARD COMMITTEES
Our Board delegates certain responsibilities to various committees. In accordance with
the relevant PRC laws and regulations and the Corporate Governance Code, Appendix 14 to the
Listing Rules, our Company has formed three Board committees, namely the Audit Committee,
the Remuneration Committee and the Nomination Committee.
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Audit Committee
We have established an Audit Committee with written terms of reference in compliance
with Rule 3.21 of the Listing Rules and paragraph C.4 and paragraph D.3 of Part 2 of the
Corporate Governance Code, Appendix 14 to the Listing Rules. The Audit Committee consists
of three Directors, namely Mr. Li Jianbin, Mr. Liu Chijin and Dr. Y ang Qiang. Mr. Li Jianbin,
who holds the appropriate professional qualifications as required under Rules 3.10(2) and 3.21
of the Listing Rules, serves as the Chairman of the Audit Committee. The primary duties of the
Audit Committee include, but not limited to, the following:
 proposing the appointment or change of external auditors to our Board, and
monitoring the independence of external auditors and evaluating their performance;
 guiding internal audit work;
 examining the financial information of our Company, reviewing financial reports
and statements of our Company and giving comments on relevant matters;
 assessing the effectiveness of internal control;
 coordinating the communication among management, internal audit department,
related departments and external audit agency; and
 dealing with other matters that are authorized by the Board or involved in relevant
laws and regulations.
Remuneration Committee
We have established a Remuneration Committee with written terms of reference in
compliance with paragraph E.1 of Part 2 of the Corporate Governance Code, Appendix 14 to
the Listing Rules. The Remuneration Committee consists of three Directors, namely Ms. Ke
Y ele, Dr. Y ang Qiang and Mr. Li Jianbin. Ms. Ke Y ele serves as the Chairlady of the
Remuneration Committee. The primary duties of the Remuneration Committee include, but not
limited to, the following:
 formulating individual remuneration plans for Directors, Supervisors and members
of the senior management in accordance with the terms of reference of the job
responsibilities, the importance of their positions as well as the remuneration
benchmarks for the relevant positions in the other comparable companies;
 examining the criteria of performance evaluation of Directors and the senior
management of our Company, and conducting annual performance evaluation;
 supervising the implementation of the remuneration plan of the Company; and
 dealing with other matters that are authorized by the Board.
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Nomination Committee
We have established a Nomination Committee with written terms of reference in
compliance with paragraph B.3 of Part 2 of the Corporate Governance Code, Appendix 14 to
the Listing Rules. The Nomination Committee consists of three Directors, namely Dr. Dai
Wenyuan, Mr. Liu Chijin and Mr. Li Jianbin. Dr. Dai Wenyuan serves as the Chairman of the
Nomination Committee. The primary duties of the Nomination Committee include, but not
limited to, the following:
 making recommendations to our Board with regards to the size and composition of
our Board based on our Company’s business operation, asset scale and equity
structure;
 researching and developing standards and procedures for the election of our Board
members, general managers and members of the senior management, and making
recommendations to our Board;
 conducting extensive search and providing to our Board suitable candidates for
Directors, general managers and other members of the senior management;
 examining our Board candidates, general manager and members of the senior
management and making recommendations to our Board;
 assessing and reviewing the independence of independent non-executive Directors;
and
 dealing with other matters that are authorized by our Board.
EMPLOYMENT ARRANGEMENT OF SENIOR MANAGEMENT
We normally enter into (i) an employment contract and (ii) a confidentiality and
non-competition agreement with each of our senior management members. The key terms of
such contracts are set forth below.
 Terms: We normally enter into a four-year or non-fixed term employment contract
with our senior management members. For details of the expiration date of the
employment contracts of our senior management members, please refer to the
paragraph headed “— Senior Management” in this section.
 Non-competition : the non-competition obligations shall subsist throughout the
employee’s period of employment and up to two years after termination of
employment. During the non-competition period, without prior written consent from
our Company, the employee shall not (i) instigate, induce, solicit or encourage any
of our employees to terminate the employment relationship with us; (ii) solicit any
of our customers or suppliers to terminate the business relationship with us or
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substantially reduce the transaction amount with us; and (iii) engage in a business
(self-owned or others’) of the same industry as our Company, or hold any position
in any other entity which engages in similar business, develops and sells similar
solutions developed or sold by our Company, or competes with our Company.
Confidentiality
 Confidential information : The employee shall keep confidential information, namely
confidential business-related information of our Company, including but not limited
to any invention, product, computer software, and technical solutions that were
developed in the course of work or based on our Company’s technology or business
information. The employee shall also keep in confidence business secrets and
related business arrangements of our business partners that he or she becomes aware
in the course of work, and any confidential business information that the employee
is responsible to keep for any other third parties.
 Obligation and duration : The employee shall not, without prior written approval
from the Company, divulge, publish, transfer or otherwise disclose any confidential
information to any third party, or any of our employees who is not permitted to
receive such information under the confidentiality policy. Such obligation of
confidentiality shall continue to be effective for the term of his or her employment
and thereafter, and until the relevant information has been publicized by our
Company or otherwise known to the public.
REMUNERATION OF DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT
Our Directors and Supervisors received their remuneration in the form of salaries, social
security, housing benefits and other employee benefits, the employer’s contribution to the
pension plans, discretionary bonuses and share-based compensation.
For the years ended December 31, 2020, 2021, 2022 and the three months ended March
31, 2023, the aggregate amount of emoluments paid or payable to our Directors amounted to
approximately RMB3.6 million, RMB109.5 million, RMB5.6 million and RMB1.4 million.
For the years ended December 31, 2020, 2021, 2022 and the three months ended March
31, 2023, the aggregate amount of emoluments paid or payable to our Supervisors amounted
to approximately RMB1.8 million, RMB8.5 million, RMB5.3 million and RMB1.4 million.
Under the arrangement currently in force, we estimate the total compensation before
taxation to be accrued to our Directors and our Supervisors for the year ending December 31,
2023 to be approximately RMB11.2 million. The actual remuneration of Directors and
Supervisors in 2023 may be different from the expected remuneration.
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For each of the years ended December 31, 2020, 2022 and the three months ended March
31, 2023, there was not any Directors or Supervisors among the five highest paid individuals.
For the year ended December 31, 2021, there were two Directors among the five highest paid
individuals. The total emolument for the remaining individuals among the five highest paid
individuals for the years ended December 31, 2020, 2021, 2022 and the three months ended
March 31, 2023 were RMB138.4 million, RMB96.7 million, RMB404.7 million and RMB4.8
million, respectively.
We confirmed that during the Track Record Period, no remuneration was paid by our
Company to, or receivable by, our Directors, Supervisors or the five highest paid individuals
as an inducement to join or upon joining our Company or as compensation for loss of office
in connection with the management positions of any subsidiary of our Company.
During the Track Record Period, none of our Directors or Supervisors waived any
remuneration. Save as disclosed above, no other payments have been paid, or are payable, by
our Company or any of our subsidiary to our Directors, Supervisors or the five highest paid
individuals during the Track Record Period.
For details regarding the terms of the Employee Incentive Scheme, please refer to the
section headed “Statutory and General Information – Further Information about Our Directors,
Supervisors, Senior Management and Substantial Shareholders – 5. Employee Incentive
Scheme” in Appendix VI to this Prospectus.
CORPORATE GOVERNANCE
Our Company is committed to achieving high standards of corporate governance with a
view to safeguarding the interests of our Shareholders. To accomplish this, our Company
intends to comply with Corporate Governance Code set out in Appendix 14 to the Listing Rules
and the Model Code for Securities Transactions by Directors of Listed Issuers set out in
Appendix 10 to the Listing Rules after the Listing.
Pursuant to code provision C.2.1 of the Corporate Governance Code, companies listed on
the Stock Exchange are expected to comply with, but may choose to deviate from the
requirement that the responsibilities between Chairman and Chief Executive Officer should be
segregated and should not be performed by the same individual. We do not have a separate
Chairman and Chief Executive Officer and Dr. Dai currently performs these two roles. Dr. Dai
has assumed the role of Chief Executive Officer of our Company since 2015. He has extensive
experience in the business operations and management of our Group and in the AI industry. Our
Board believes that, in view of his experience, personal profile and his roles in our Company
as mentioned above, Dr. Dai is the Director best suited to identify strategic opportunities and
focus of the Board due to his extensive understanding of our business as our Chief Executive
Officer. The Board also believes that vesting the roles of both Chairman and Chief Executive
Officer in the same person has the benefit of (i) ensuring consistent leadership within the
Group, (ii) enabling more effective and efficient overall strategic planning and execution of
strategic initiatives of the Board, and (iii) facilitating the flow of information between the
DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT
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management and the Board for the Group. The Board considers that the balance of power and
authority for the present arrangement will not be impaired, and this arrangement will enable the
Company to make and implement decisions promptly and effectively. The Board will continue
to review and consider splitting the roles of Chairman of the Board and Chief Executive Officer
of the Company at a time when it is appropriate by taking into account the circumstances of
the Group as a whole.
Save as disclosed above, our Directors consider that upon Listing, we will comply with
all applicable code provisions of the Corporate Governance Code as set out in Appendix 14 to
the Listing Rules.
BOARD DIVERSITY POLICY
We are committed to promoting the culture of diversity in the Company. We have strived
to promote diversity to the extent practicable by taking into consideration a number of factors
in our corporate governance structure.
We have adopted the 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 Board diversity through the consideration of a number of factors, including but not
limited to gender, age, race, cultural background, educational background, industry experience
and professional experience. Our Directors have a balanced mix of knowledge and skills,
including knowledge and experience in the areas of business management, computer science,
AI technology, legal, economics, investment and accounting. They obtained degrees in various
areas including computer science, law, economics, mathematics, astrophysics, finance. Our
board diversity policy is well implemented as evidenced by the fact that there are Directors
ranging from 32 years old to 61 years old with experience from different industries, sectors and
genders.
We will continue to take steps to promote gender diversity at all levels of our Company,
including but not limited to our Board and the senior management levels. We will encourage
our incumbent Board members to recommend female candidate directors and take other actions
to help achieve greater board diversity, for example inviting some of our outstanding female
staff at mid to senior level to attend and observe Board meeting. 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 prepare themselves for
director duties. We will also continue to ensure that there is gender diversity when recruiting
staff at mid to senior level so that we will have a pipeline of female senior management and
potential successors to our Board in due time to ensure gender diversity of our Board. Our
Group will continue to emphasize training of female talent and providing long-term
development opportunities for our female staff including but not limited to business operation,
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 mid to senior level to
be nominated as a Director in future with a pipeline of female candidates.
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We are committed to adopting a similar approach to promote diversity within
management (including but not limited to the senior management) of the Company to enhance
the effectiveness of corporate governance of the Company as a whole.
Our Nomination Committee is responsible for ensuring the diversity of our Board
members. After the Listing, our Nomination Committee will review the board diversity policy
from time to time, develop and review measurable objectives for implementing the policy, and
monitor the progress on achieving these measurable objectives to ensure its continued
effectiveness. We will disclose in our corporate governance report about the implementation of
the board diversity policy on an annual basis.
COMPLIANCE ADVISOR
We have appointed Guotai Junan Capital Limited as our compliance advisor (the
“Compliance Advisor ”) pursuant to Rule 3A.19 of the Listing Rules. The Compliance Advisor
will provide us with guidance and advice as to compliance with the Listing Rules and other
applicable laws, rules, codes and guidelines. Pursuant to Rule 3A.23 of the Listing Rules, the
Compliance Advisor will advise our Company in certain circumstances including:
(a) before the publication of any regulatory announcement, circular or financial report;
(b) where a transaction, which might be a notifiable or connected transaction, is
contemplated, including share issues and share repurchases;
(c) where we propose to use the proceeds of the Global Offering in a manner different
from that detailed in this Prospectus or where our business activities, developments
or results deviate from any forecast, estimate or other information in this Prospectus;
and
(d) where the Hong Kong Stock Exchange makes an inquiry to our Company regarding
unusual movements in the price or trading volume of its listed securities or any other
matters in accordance with Rule 13.10 of the Listing Rules.
Pursuant to Rule 3A.24 of the Listing Rules, the Compliance Advisor will, on a timely
basis, inform our Company of any amendment or supplement to the Listing Rules that are
announced by the Hong Kong Stock Exchange. The Compliance Advisor will also inform our
Company of any new or amended law, regulation or code in Hong Kong applicable to us, and
advise us on the continuing requirements under the Listing Rules and applicable laws and
regulations.
The term of the appointment will commence on the Listing Date and is expected to end
on the date on which our Company complies with Rule 13.46 of the Listing Rules in respect
of our financial results for the first full financial year commencing after the Listing.
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OUR CONTROLLING SHAREHOLDERS
Immediately prior to the Global Offering, our Company is owned as to 23.82% by Dr.
Dai, 14.35% by Paradigm Investment and 2.27% by Paradigm Yinyuan. Both Paradigm
Investment and Paradigm Yinyuan are indirectly controlled by Dr. Dai and Ms. Wu, through
Beijing New Wisdom, being the sole general partner of Paradigm Investment and Paradigm
Yinyuan and owned as to 99% by Dr. Dai and 1% by Ms. Wu, respectively. Paradigm Chuqi
(whose general partner is Beijing New Wisdom) owns 59.59% limited partnership interest in
Paradigm Investment. Paradigm Tianqin (whose general partner is Beijing New Wisdom) owns
37.92% limited partnership interest in Paradigm Yinyuan. Accordingly, Dr. Dai as our
Controlling Shareholder, by himself and through his close associates, Ms. Wu, Beijing New
Wisdom, Paradigm Investment, Paradigm Yinyuan, Paradigm Chuqi and Paradigm Tianqin,
controlled approximately 40.44% of our total issued share capital as of the Latest Practicable
Date, and together, they constitute our Controlling Shareholders (as defined under the Listing
Rules) before the Listing. As confirmed by HongShan and Ms. Wu, Ms. Wu does not have any
shareholding or partnership interest in SCC V enture V-Mars(HK) Limited, HongShan Hanchen,
HongShan Mingde and HongShan Zhisheng, which are the existing shareholders of the
Company.
Immediately following the completion of the Global Offering and assuming the
Over-allotment Option is not exercised, Dr. Dai (by himself) and through his close associates,
being Ms. Wu, Beijing New Wisdom, Paradigm Investment, Paradigm Yinyuan, Paradigm
Chuqi and Paradigm Tianqin will control approximately 38.84% of our total issued share
capital and they will remain as our Controlling Shareholders upon Listing.
For details of Beijing New Wisdom, Paradigm Investment, Paradigm Yinyuan, Paradigm
Chuqi and Paradigm Tianqin, see the sections headed “Definitions” and “History, Development
and Corporate Structure.”
INDEPENDENCE FROM OUR CONTROLLING SHAREHOLDERS
Our Directors consider that we are capable of carrying on our business independently
from the Controlling Shareholders and their close associates after the Listing, taking into
account the factors below.
Management Independence
We are able to carry on our business independently from the Controlling Shareholders
from a management perspective. Our Board consists of nine Directors, including three
executive Directors, three non-executive Directors and three independent non-executive
Directors.
(a) each Director is aware of his/her fiduciary duties as a director which require, among
other things, that he/she acts for the benefit and in the interest of our Company and
does not allow any conflict between his/her duties as a Director and his/her personal
interests;
RELATIONSHIP WITH OUR CONTROLLING SHAREHOLDERS
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(b) our daily management and operations are carried out by a senior management team,
all of whom have substantial experience in the industry in which our Company is
engaged, and will therefore be able to make business decisions that are in the best
interests of our Group;
(c) we have three independent non-executive Directors and certain matters of our
Company must always be referred to the independent non-executive Directors for
review;
(d) in the event that there is a potential conflict of interest arising out of any transaction
to be entered into between our Group and a Director and/or his/her associate, he/she
shall abstain from voting and shall not be counted towards the quorum for the
voting; and
(e) we have adopted a series of corporate governance measures to manage conflicts of
interest, if any, between our Group and the Controlling Shareholders which would
support our independent management.
Based on the above, our Directors believe that our Board as a whole and together with our
senior management are able to perform the managerial role in our Group independently from
the Controlling Shareholders and their close associates after the Listing.
Operational Independence
We do not rely on the Controlling Shareholders and their close associates for our business
development, staffing, logistics, administration, finance, internal audit, information
technology, sales and marketing, or company secretarial functions. We have our own
departments specializing in these respective areas which have been in operation and are
expected to continue to operate separately and independently from the Controlling
Shareholders and their close associates. In addition, we have our own headcount of employees
for our operations and management for human resources.
We have independent access to suppliers and customers and an independent management
team to handle our day-to-day operations. We are also in possession of all relevant licenses
necessary to carry on and operate our principal businesses and we have sufficient operational
capacity in terms of capital and employees to operate independently.
Based on the above, our Directors believe that we are able to operate independently from
the Controlling Shareholders and their close associates.
RELATIONSHIP WITH OUR CONTROLLING SHAREHOLDERS
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--- page 298 ---
Financial Independence
We have an independent financial system and make financial decisions according to our
Group’s own business needs. We have internal control and accounting systems and an
independent finance department for discharging the treasury function. We do not expect to rely
on the Controlling Shareholders and their close associates for financing after the Listing as we
expect that our working capital will be funded by cash flows generated from operating
activities, bank loans as well as the proceeds from the Global Offering.
We have independent access to suppliers and customers and an independent management
team to handle our day-to-day operations. We are also in possession of all relevant licenses
necessary to carry on and operate our principal businesses and we have sufficient operational
capacity in terms of capital and employees to operate independently.
There is no outstanding financial guarantee/assistance provided by our Controlling
Shareholders to our Group and vice versa as of the Latest Practicable Date, nor do we have any
outstanding share pledges or guarantees provided by our Controlling Shareholders and their
respective close associates on our borrowings.
Based on the above, our Directors are of the view that our Directors and senior
management are capable of carrying on our business independently of, and do not place undue
reliance on, our Controlling Shareholders after the Listing.
INTERESTS OF THE CONTROLLING SHAREHOLDER IN OTHER BUSINESSES
Our Controlling Shareholders and/or our Directors may, from time to time, make minority
investments or hold non-executive board positions in entities that operate in the broader
industries in which our business segments also operate. As our Controlling Shareholders and/or
Directors have no executive or shareholding control over any of these entities, and these
entities have separate businesses with separate management and shareholder bases that control
their entities, our Controlling Shareholders will not inject any of the interested entities into our
Group; and to the extent our Directors hold non-executive board positions or make minority
investments in these entities, we believe that this strengthens the experience and diversity of
our Directors, as a group, and signifies their passion for the industries in which we operate.
Save and except for the interests of the Controlling Shareholders in our Company and its
subsidiaries, the Controlling Shareholders and the Directors confirm that as of the Latest
Practicable Date, they did not have any interest in a business, apart from the business of our
Group, which competes or is likely to compete, directly or indirectly, with our business, which
would require disclosure under Rule 8.10 of the Listing Rules.
RELATIONSHIP WITH OUR CONTROLLING SHAREHOLDERS
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--- page 299 ---
CORPORATE GOVERNANCE
Our Company will comply with the provisions of the Corporate Governance Code in
Appendix 14 to the Listing Rules (the “ Corporate Governance Code ”), which sets out
principles of good corporate governance.
Our Directors recognize the importance of good corporate governance in protection of our
Shareholders’ interests. We would adopt the following measures to safeguard good corporate
governance standards and to avoid potential conflict of interests between our Group and the
Controlling Shareholders:
(a) where a Shareholders’ meeting is to be held for considering proposed transactions
in which the Controlling Shareholders or any of their respective associates has a
material interest, the Controlling Shareholders will not vote on the resolutions and
shall not be counted in the quorum in the voting;
(b) our Company has established internal control mechanisms to identify connected
transactions. Upon the Listing, if our Company enters into connected transactions
with a Controlling Shareholder or any of his/her/its associates, our Company will
comply with the applicable Listing Rules;
(c) the independent non-executive Directors will review, on an annual basis, whether
there is any conflict of interests between the Group and the Controlling Shareholders
(the “ Annual Review ”) and provide impartial and professional advice to protect the
interests of our minority Shareholders;
(d) the Controlling Shareholders will undertake to provide all information necessary,
including all relevant financial, operational and market information and any other
necessary information as required by the independent non-executive Directors for
the Annual Review;
(e) our Company will disclose decisions (with basis) on matters reviewed by the
independent non-executive Directors either in its annual report or by way of
announcements;
(f) where our Directors reasonably request the advice of independent professionals,
such as financial advisors, the appointment of such independent professionals will
be made at our Company’s expenses; and
(g) we have appointed Guotai Junan Capital Limited as our Compliance Advisor to
provide advice and guidance to us in respect of compliance with the Listing Rules,
including various requirements relating to corporate governance.
Based on the above, our Directors are satisfied that sufficient corporate governance
measures have been put in place to manage conflicts of interest between our Group and the
Controlling Shareholders, and to protect minority Shareholders’ interests after the Listing.
RELATIONSHIP WITH OUR CONTROLLING SHAREHOLDERS
– 290 –


--- page 300 ---
SUBSTANTIAL SHAREHOLDERS
So far as our Directors are aware, immediately following completion of the Global
Offering and assuming the Over-allotment Option is not exercised, the following persons will
have interests and/or short positions in the Shares or underlying shares of our Company which
would fall to be disclosed pursuant to the provisions of Divisions 2 and 3 of Part XV of the
SFO:
Shares held as at the
Latest Practicable Date
Shares held immediately
following the Global Offering
Name of
Shareholder Nature of Interest Number
Approximate
percentage of
shareholding
in Unlisted/
H Shares
(to be
converted) (1)
Approximate
percentage of
shareholding
in Unlisted/
H Shares (10)
Approximate
percentage of
shareholding
in the total
share capital
of our
Company (10)
Dr. Dai (3) Beneficial owner 106,164,523 Unlisted
Shares
32.13% 32.13% 22.88%
Interest in controlled
corporations
74,068,383 Unlisted
Shares
22.42% 22.42% 15.96%
Ms. Wu (2) Interest of spouse 180,232,906 Unlisted
Shares
54.55% 54.55% 38.84%
Beijing New
Wisdom (3)(4)
Interest in controlled
corporations
74,068,383 Unlisted
Shares
22.42% 22.42% 15.96%
Paradigm
Investment (3)
Beneficial owner 63,962,734 Unlisted
Shares
19.36% 19.36% 13.78%
Paradigm Chuqi (4) Interest in controlled
corporation
63,962,734 Unlisted
Shares
19.36% 19.36% 13.78%
HongShan
V enture(5)
Beneficial owner 32,259,066 H Shares (1) 27.99% 24.14% 6.95%
SCCV
Shareholders (5)
Interest in controlled
corporations
32,259,066 H Shares (1) 27.99% 24.14% 6.95%
Guoxin Qidi Beneficial owner 12,117,394 H Shares (1) 10.51% 9.07% 2.61%
Guoxin Qidi
Shareholders (6)
Interest in controlled
corporations
12,117,394 H Shares (1) 10.51% 9.07% 2.61%
Purui Tianjin Beneficial owner 11,301,027 H Shares (1) 9.81% 8.46% 2.44%
Purui Tianjin
Shareholders (7)
Interest in controlled
corporations
11,301,027 H Shares (1) 9.81% 8.46% 2.44%
Beijing Innovation Beneficial owner 7,115,539 H Shares (1) 6.17% 5.32% 1.53%
Beijing Innovation
Shareholders (8)
Interest in controlled
corporations
7,115,539 H Shares (1) 6.17% 5.32% 1.53%
Zhongyi Equity
Fund
Beneficial owner 7,020,480 H Shares (1) 6.09% 5.25% 1.51%
SUBSTANTIAL SHAREHOLDERS
– 291 –


--- page 301 ---
Shares held as at the
Latest Practicable Date
Shares held immediately
following the Global Offering
Name of
Shareholder Nature of Interest Number
Approximate
percentage of
shareholding
in Unlisted/
H Shares
(to be
converted) (1)
Approximate
percentage of
shareholding
in Unlisted/
H Shares (10)
Approximate
percentage of
shareholding
in the total
share capital
of our
Company (10)
Zhongyi Equity
Fund
Shareholders
(9)
Interest in controlled
corporations
7,020,480 H Shares (1) 6.09% 5.25% 1.51%
Notes:
(1) The calculation is based on the total number of Shares in issue as at the Latest Practicable Date, including
330,418,283 Unlisted Shares and 115,246,250 Unlisted Shares which will be converted into H Shares upon
completion of the Global Offering.
(2) Ms. Wu is the spouse of Dr. Dai. By virtue of SFO, Ms. Wu is therefore deemed to be interested in the Shares
held by Dr. Dai.
(3) Paradigm Investment and Paradigm Yinyuan are indirectly controlled by Dr. Dai and Ms. Wu, through Beijing
New Wisdom, being the sole general partner of Paradigm Investment and Paradigm Yinyuan. Beijing New
Wisdom is a limited liability company established in the PRC and owned as to 99% by Dr. Dai and 1% by Ms.
Wu, respectively. Paradigm Investment and Paradigm Yinyuan holds 63,962,734 Unlisted Shares and
10,105,649 Unlisted Shares, respectively. By virtue of SFO, each of Dr. Dai and Beijing New Wisdom (through
his/its interest in a controlled corporation or controlled corporations, as the case may be) are deemed to be
interested in the Shares held by each of Paradigm Investment and Paradigm Yinyuan.
(4) Paradigm Chuqi (whose general partner is Beijing New Wisdom) is interested in more than one third of the
limited partnership interest in Paradigm Investment. By virtue of SFO, Paradigm Chuqi is deemed to be
interested in the Shares held by Paradigm Investment.
(5) To the best knowledge of the Company, HongShan V enture is wholly owned by Sequoia Capital China V enture
Fund V , L.P .. SC China V enture V Management, L.P . is the general partner of Sequoia Capital China V enture
Fund V , L.P ., and in turn SC China Holding Limited is the general partner of SC China V enture V Management,
L.P .. SC China Holding Limited is wholly owned by SNP China Enterprises Limited, which is in turn wholly
owned by Mr. Neil Nanpeng Shen, our former Director. By virtue of SFO, each of Sequoia Capital China
V enture Fund V , L.P ., SC China V enture V Management, L.P ., SC China Holding Limited, SNP China
Enterprises Limited and Mr. Neil Nanpeng Shen (through its/his interest in a controlled corporation or
controlled corporations, as the case may be) (together the “ SCCV Shareholders ”) are deemed to be interested
in the Shares held by HongShan V enture.
(6) To the best knowledge of the Company, Henan Guoxin Qidi Fund Management Co., Ltd., a limited liability
company established in the PRC, is the general partner of Guoxin Qidi. Henan Guoxin Qidi Fund Management
Co., Ltd. is owned as to 35% by Guoxin Risk Investment Management (Shenzhen) Co., Ltd., which is in turn
wholly owned by Guoxin Science and Technology Innovation Fund Management Co., Ltd. Guoxin Science and
Technology Innovation Fund Management Co., Ltd. is owned as to 40% by China Guoxin Fund Management
Co., Ltd., which is in turn wholly owned by China Guoxin Holding Co., Ltd. By virtue of SFO, China Guoxin
Holding Co., Ltd., China Guoxin Fund Management Co., Ltd., Guoxin Science and Technology Innovation
Fund Management Co., Ltd., Guoxin Risk Investment Management (Shenzhen) Co., Ltd. and Henan Guoxin
Qidi Fund Management Co., Ltd. (together “ Guoxin Qidi Shareholders ”) are deemed to be interested in the
Shares held by Guoxin Qidi.
SUBSTANTIAL SHAREHOLDERS
– 292 –


--- page 302 ---
(7) To the best knowledge of the Company, the general partner of Purui Tianjin is Purui Management, which is
ultimately controlled by individuals, who are Independent Third Parties. Purui Tianjin has one limited partner,
Purui Investment, the general partner of which is also Purui Management. Purui Investment has one limited
partner, Parade II Technology Investment Company Limited, holding approximately 99.8% of partnership
interest in Purui Investment. Parade II Technology Investment Company Limited is ultimately controlled by
Mr. Fang Fenglei. By virtue of SFO, Purui Management, the individual ultimate controllers of Purui
Management, Purui Investment, Parade II Technology Investment Company Limited, Mr. Fang Fenglei
(together “ Purui Tianjin Shareholders ”) are deemed to be interested in the Shares held by Purui Tianjin.
(8) To the best knowledge of the Company, Beijing Hulian Sinovation V entures Investment Management Limited
(ʮ̡), a limited liability company established in the PRC, is the general
partner and sole executive partner of Beijing Innovation, and is ultimately controlled by Li Puyu ( ҽዾ͗).
Beijing Innovation has 33 limited partners and its largest limited partner is Innovation Works (Xiamen) VC
Partnership (Limited Partnership) ( ௴อʈఙ(ژ)௴ุҳ༟ΥྫΆุ(Υྫ)) (“ Innovation Works
Xiamen ”), holding approximately 35.1% of partnership interest in Beijing Innovation. The executive partner
of Innovation Works Xiamen is Sinovation V entures (Xiamen) Investment Management Limited ( ௴อʈఙ	ข
ʮ̡), which is wholly-owned by Beijing Hulian Sinovation V entures Investment
Management Limited, a limited liability Company controlled by Li Puyu. By virtue of SFO, Beijing Hulian
Sinovation V entures Investment Management Limited, Li Puyu, Innovation Works Xiamen, and Sinovation
V entures (Xiamen) Investment Management Limited (together the “ Beijing Innovation Shareholders ”) are
deemed to be interested in the Shares held by Beijing Innovation.
(9) To the best knowledge of the Company, China Mobile Equity Fund Management Co., Ltd. (၍
ʮ̡), a limited liability company established in the PRC, is the sole executive partner of Zhongyi
Equity Fund, which is in turn held as to 55% by China Mobile Capital Holding Co., Ltd. (ࠢ
ப΂ʮ̡)( “ China Mobile Capital ”). China Mobile Capital is wholly owned by China Mobile
Communications Group Co., Ltd. (ණྠʮ̡). Zhongyi Equity Fund has five limited partners and
its largest limited partner is also China Mobile Capital, holding approximately 43.6% of partnership interest
in Zhongyi Equity Fund. By virtue of SFO, China Mobile Equity Fund Management Co., Ltd., China Mobile
Capital, and China Mobile Communications Group Co., Ltd. (together the “ Zhongyi Equity Fund
Shareholders ”) are deemed to be interested in the Shares held by Zhongyi Equity Fund.
(10) The calculation is based on the total number of 330,418,283 Unlisted Shares and 133,642,250 H Shares in issue
immediately after completion of the Global Offering since 115,246,250 Unlisted Shares will be converted into
H Shares and 18,396,000 H Shares will be issued pursuant to the Global Offering, and assuming that the
Over-allotment Option is not exercised.
For details of the substantial shareholders who will be, directly or indirectly, interested
in 10% or more of the value of any Domestic Shares or H Shares varying rights to vote in all
circumstances at general meetings of any member of our Group, see “Statutory and General
Information – Further Information about our Directors, Supervisors, Senior Management and
Substantial Shareholders – 1. Disclosure of Interests” in Appendix VI to this Prospectus.
Save as disclosed herein, our Directors are not aware of any persons who will,
immediately following completion of the Global Offering (assuming the Over-allotment Option
is not exercised), have interests and/or short positions in Shares or underlying shares which
would fall to be disclosed under the provisions of Divisions 2 and 3 of Part XV of the SFO.
SUBSTANTIAL SHAREHOLDERS
– 293 –


--- page 303 ---
THE CORNERSTONE PLACING
We have entered into cornerstone investment agreements (each a “ Cornerstone
Investment Agreement ”, and together the “ Cornerstone Investment Agreements ”) with the
cornerstone investors set out below (each a “ Cornerstone Investor ”, and together the
“Cornerstone Investors ”), pursuant to which the Cornerstone Investors have agreed to,
subject to certain conditions, subscribe, or cause their designated entities (including qualified
domestic institutional investor as approved by the relevant PRC authorities (“ QDII ”) to
subscribe, at the Offer Price for a certain number of Offer Shares that may be purchased for
an aggregate amount of US$96.8 million (approximately HK$758.4 million) (the
“Cornerstone Placing ”). The calculations in this section, which are based on the exchange rate
as disclosed in the section headed “Information about this Prospectus and the Global Offering”,
are for illustration purpose. The final number of H Shares to be subscribed by the Cornerstone
Investors are subject to the exchange rate to be determined in accordance with the relevant
Cornerstone Investment Agreements and will be set out in the allotment results announcement
in respect of the Global Offering to be issued by the Company.
Assuming an Offer Price of HK$55.60, being the low-end of the Offer Price range set out
in this Prospectus, the total number of Offer Shares to be subscribed by the Cornerstone
Investors would be 13,639,600 Offer Shares, representing approximately (i) 74.14% of the H
Shares offered pursuant to the Global offering (assuming that the Over-allotment Option is not
exercised), (ii) 2.94% of our total issued share capital immediately upon completion of the
Global Offering (assuming the Over-allotment Option is not exercised); and (iii) 2.92% of our
total issued share capital immediately upon completion of the Global Offering and the full
exercise of the Over-allotment Option.
Assuming an Offer Price of HK$58.38, being the mid-point of the Offer Price range set
out in this Prospectus, the total number of Offer Shares to be subscribed by the Cornerstone
Investors would be 12,990,100 Offer Shares, representing approximately (i) 70.61% of the H
Shares offered pursuant to the Global offering (assuming that the Over-allotment Option is not
exercised), (ii) 2.80% of our total issued share capital immediately upon completion of the
Global Offering (assuming the Over-allotment Option is not exercised); and (iii) 2.78% of our
total issued share capital immediately upon completion of the Global Offering and the full
exercise of the Over-allotment Option.
Assuming an Offer Price of HK$61.16, being the high-end of the Offer Price range set out
in this Prospectus, the total number of Offer Shares to be subscribed by the Cornerstone
Investors would be 12,399,500 Offer Shares, representing approximately (i) 67.40% of the H
Shares offered pursuant to the Global offering (assuming that the Over-allotment Option is not
exercised), (ii) 2.67% of our total issued share capital immediately upon completion of the
Global Offering (assuming the Over-allotment Option is not exercised); and (iii) 2.66% of our
total issued share capital immediately upon completion of the Global Offering and the full
exercise of the Over-allotment Option.
CORNERSTONE INVESTORS
– 294 –


--- page 304 ---
Our Company is of the view that the Cornerstone Placing will help to raise the profile of
our Company and to signify that such investors have confidence in our business and prospect.
Our Company became acquainted with each of the Cornerstone Investors in its ordinary course
of operation through the business network of our Group or executive Directors, or through
introduction by certain Underwriters in the Global Offering.
To the best knowledge of our Company, each of the Cornerstone Investors (and for
Cornerstone Investors who will subscribe for our Offer Shares through a QDII, such QDII) (i)
is an Independent Third Party and is not our connected person (as defined in the Listing Rules);
(ii) none of the Cornerstone Investors (and for Cornerstone Investors who will subscribe for
our Offer Shares through a QDII, such QDII) is accustomed to taking instructions from our
Company, the Directors, the Supervisors, chief executive, our Controlling Shareholders,
substantial shareholders, existing Shareholders or any of their respective subsidiaries or their
respective close associates in relation to the acquisition, disposal, voting or other disposition
of the Offer Shares; (iii) none of the subscription of the relevant Offer Shares by any of the
Cornerstone Investors (and for Cornerstone Investors who will subscribe for our Offer Shares
through a QDII, such QDII) is financed by our Company, the Directors, Supervisors, chief
executive, our Controlling Shareholders, substantial shareholders, existing Shareholders or any
of their respective subsidiaries or their respective close associates; (iv) each Cornerstone
Investor will be utilizing their proprietary funding or the proprietary funding of the funds under
their management, as appropriate, 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. The subscription of the
Offer Shares by all Cornerstone Investors under the Cornerstone Investment is not required to
be submitted to the shareholders of Cornerstone Investors’ listed holding company (as the case
may be) for approval.
To the extent that any Cornerstone Investor has engaged a QDII to subscribe for the
relevant Offer Shares on its behalf, such Cornerstone Investor will procure the QDII to comply
with the terms of its Cornerstone Investment Agreement in order to ensure the compliance of
such Cornerstone Investor with its obligations under the Cornerstone Investment Agreement.
The Cornerstone Placing will form part of the International Offering and the Cornerstone
Investors will not subscribe for any Offer Shares under the Global Offering (other than
pursuant to the Cornerstone Investment Agreements). The Offer Shares to be subscribed by the
Cornerstone Investors will rank pari passu in all respect with the fully paid Shares in issue and
will be counted towards the public float of our Company under Rule 8.08 of the Listing Rules.
Immediately following the completion of the Global Offering, none of the Cornerstone
Investors will become a substantial shareholder of the Company, and the Cornerstone Investors
will not have any Board representation in our Company. Other than a guaranteed allocation of
the relevant Offer Shares at the final Offer Price, the Cornerstone Investors do not have any
preferential rights in the Cornerstone Investment Agreements compared with other public
Shareholders. As confirmed by each of the Cornerstone Investors, their subscription under the
Cornerstone Placing would be financed by their own internal resources. There are no side
arrangements between our Company and the Cornerstone Investors or any benefit, direct or
indirect, conferred on the Cornerstone Investors by virtue of or in relation to the Cornerstone
Placing.
CORNERSTONE INVESTORS
– 295 –


--- page 305 ---
The total number of Offer Shares to be subscribed by the Cornerstone Investors may be
affected by reallocation of the Offer Shares between the International Offering and the Hong
Kong Public Offering in the event of over-subscription under the Hong Kong Public Offering
as described in the paragraph headed “Structure of the Global Offering – The Hong Kong
Public Offering – Reallocation” in this Prospectus. The number of Offer Shares to be acquired
by each Cornerstone Investor may be reduced on a pro rata basis in accordance with the terms
of the Cornerstone Investment Agreement to satisfy the short fall, after taking into account the
requirements under Appendix 6 to the Listing Rules as well as the discretion of the Joint Global
Coordinators and the Overall Coordinators (for themselves and on behalf of the International
Underwriters) to exercise the Over-allotment Option.
Details of the actual number of Offer Shares to be allocated to the Cornerstone Investors
will be disclosed in the allotment results announcement of our Company to be published on or
around Wednesday, September 27, 2023. If there is over-allocation in the International
Offering, the settlement of such over-allocation may be effected through delayed delivery of
the Offer Shares to be subscribed by all Cornerstone Investors under the Cornerstone Placing.
Where delayed delivery takes place, each Cornerstone Investor that may be affected by such
delayed delivery has agreed that it shall nevertheless pay for the relevant Offer Shares on or
before 8:00 a.m. on the Listing Date. If there is no over-allocation in the International Offering,
delayed delivery will not take place. As such, there will be no deferred settlement of the
investment amount for the Offer Shares to be subscribed by the Cornerstone Investors pursuant
to the Cornerstone Investment Agreements. For details of the Over-allotment Option, please
refer to the paragraph headed “Structure of the Global Offering – Over-allotment Option” in
this Prospectus.
OUR CORNERSTONE INVESTORS
Set out below in the aggregate number of Offer Shares, and the corresponding percentages
to the Offer Shares and our Company’s total issued share capital under the Cornerstone
Placing:
Based on the Offer Price of HK$55.60 (being the low-end of the Offer Price range)
Investment
Amount
Number of
Offer Shares
(rounded down to
nearest whole
board lot of
100 H Shares)
Approximately % of total
number of Offer Shares
Approximate % of H Shares in
issue immediately following the
completion of Global Offering
Approximately % of total
Shares in issue immediately
following the completion of
Global Offering
Assuming the
Over-allotment
Option is not
exercised
Assuming the
Over-allotment
Option is fully
exercised
Assuming the
Over-allotment
Option is not
exercised
Assuming the
Over-allotment
Option is fully
exercised
Assuming the
Over-allotment
Option is not
exercised
Assuming the
Over-allotment
Option is fully
exercised
(in million) 1 (approximate) (approximate) (approximate) (approximate) (approximate) (approximate)
New China Capital
Management HK$365 6,564,700 35.69 31.03 4.91 4.81 1.41 1.41
Beijing Zhongguancun RMB290 5,665,400 30.80 26.78 4.24 4.15 1.22 1.21
Montage Holdings US$10 1,409,500 7.66 6.66 1.05 1.03 0.30 0.30
Total US$96.8 13,639,600 74.14 64.47 10.21 10.00 2.94 2.92
CORNERSTONE INVESTORS
– 296 –


--- page 306 ---
Based on the Offer Price of HK$58.38 (being the mid-point of the Offer Price range)
Investment
Amount
Number of
Offer Shares
(rounded down to
nearest whole
board lot of
100 H Shares)
Approximately % of total
number of Offer Shares
Approximate % of H Shares in
issue immediately following the
completion of Global Offering
Approximately % of total
Shares in issue immediately
following the completion of
Global Offering
Assuming the
Over-allotment
Option is not
exercised
Assuming the
Over-allotment
Option is fully
exercised
Assuming the
Over-allotment
Option is not
exercised
Assuming the
Over-allotment
Option is fully
exercised
Assuming the
Over-allotment
Option is not
exercised
Assuming the
Over-allotment
Option is fully
exercised
(in million) 1 (approximate) (approximate) (approximate) (approximate) (approximate) (approximate)
New China Capital
Management HK$365 6,252,100 33.99 29.55 4.68 4.58 1.35 1.34
Beijing Zhongguancun RMB290 5,395,600 29.33 25.50 4.04 3.96 1.16 1.16
Montage Holdings US$10 1,342,400 7.30 6.35 1.00 0.98 0.29 0.29
Total US$96.8 12,990,100 70.61 61.40 9.72 9.52 2.80 2.78
Based on the Offer Price of HK$61.16 (being the high-end of the Offer Price range)
Investment
Amount
Number of
Offer Shares
(rounded down to
nearest whole
board lot of
100 H Shares)
Approximately % of total
number of Offer Shares
Approximate % of H Shares in
issue immediately following the
completion of Global Offering
Approximately % of total
Shares in issue immediately
following the completion of
Global Offering
Assuming the
Over-allotment
Option is not
exercised
Assuming the
Over-allotment
Option is fully
exercised
Assuming the
Over-allotment
Option is not
exercised
Assuming the
Over-allotment
Option is fully
exercised
Assuming the
Over-allotment
Option is not
exercised
Assuming the
Over-allotment
Option is fully
exercised
(in million) 1 (approximate) (approximate) (approximate) (approximate) (approximate) (approximate)
New China Capital
Management HK$365 5,967,900 32.44 28.21 4.47 4.38 1.29 1.28
Beijing Zhongguancun RMB290 5,150,300 28.00 24.35 3.85 3.78 1.11 1.10
Montage Holdings US$10.0 1,281,300 6.97 6.06 0.96 0.94 0.28 0.27
Total US$96.8 12,399,500 67.40 58.61 9.28 9.09 2.67 2.66
Note:
1. The calculations are for illustration purposes based on the exchange rate as disclosed in this Prospectus, the
number of H Shares to be subscribed by the Cornerstone Investors are subject to the exchange rate to be
determined in accordance with the relevant Cornerstone Investment Agreements. The Cornerstone Investment
Agreement with Beijing Zhongguancun provides that the HK$:RMB exchange rate shall be agreed amongst the
parties therein at a later date, and where no agreement is reached, at the rate stipulated in the Cornerstone
Investment Agreement which may result in less Offer Shares to be allotted to Beijing Zhongguancun.
CORNERSTONE INVESTORS
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The following information about the Cornerstone Investors was provided to our Company
by the Cornerstone Investors in relation to the Cornerstone Placing.
1. New China Capital Management
New China Capital Management Limited (“ New China Capital Management ”), in its
capacity as investment manager acting as agent on behalf of its discretionary accounts, has
agreed to subscribe for the H Shares of our Company. New China Capital Management was
incorporated in Hong Kong with limited liability. New China Capital Management is licensed
with the Hong Kong Securities and Futures Commission to carry on business in Type 4
(advising on securities) and Type 9 (asset management) regulated activities under the
Securities and Futures Ordinance (Cap. 571). New China Capital Management focuses on
investments in equity securities, fixed income securities, as well as in a wide range of
underlying investment funds. New China Capital Management is wholly-owned by New China
Capital International Management Limited, which is in turn controlled by New China Asset
Management (Hong Kong) Limited ( อശ༟ପ၍ଣ(ಥ)ʮ̡). New China Asset
Management (Hong Kong) Limited is held as to 60% by New China Asset Management
Company Limited (ʮ̡), and 40% by New China Life Insurance
Company Ltd. (ʮ̡), a Company dually listed on the Hong Kong Stock
Exchange (stock code: 1336.HK) and the Shanghai Stock Exchange (stock code: 601336.SH).
New China Asset Management Company Limited is held as to 99.4% by New China Life
Insurance Company Ltd.
2. Beijing Zhongguancun
Beijing Zhongguancun Science City Science and Technology Growth Investment
Partnership (Limited Partnership) (ҳ༟ΥྫΆุ(Υྫ))
(“Beijing Zhongguancun ”) is a limited partnership established in the PRC on December 3,
2021 with assets under management in the amount of approximately RMB5 billion. Beijing
Zhongguancun is held as to 1% by Beijing Zhongguancun Science City Science and
Technology Investment Management Co., Ltd. (ʮ̡)
(general partner of Beijing Zhongguancun) (“ Science City Science and Technology
Investment Management ”) and 99% by Beijing Haidian State-owned Assets Investment
Group Co., Ltd. (ʮ̡), a wholly-owned subsidiary of
Beijing Haidian State-owned Capital Operation Co., Ltd. (ʮ
̡). Science City Science and Technology Investment Management is held as to 100% by
Beijing Zhonggugancun Science City Innovation and Development Co. Ltd. (ኪ
ʮ̡), a wholly-owned subsidiary of Beijing Haidian State-owned Capital
Operation and Management Center ( ̏ԯ̹ऎὅਜ਷Ϟ༟͉຾ᐄ၍ଣʕː). Each of Beijing
Haidian State-owned Capital Operation Co., Ltd. and Beijing Haidian State-owned Capital
Operation and Management Center is a state-owned enterprise supervised by the State-owned
Assets Supervision and Administration Commission of the People’s Government of Haidian
District, Beijing (ึ).
CORNERSTONE INVESTORS
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Beijing Zhongguancun focuses on the investments in the enterprises engaging in 5G,
internet-of-things, artificial intelligence and big data, integrated circuit design, quantum
communication, innovative drugs and high-end medical devices, and disruptive new materials
advanced manufacturing.
For the purpose of the cornerstone investment, Beijing Zhongguancun participates in the
International Offering through an investment scheme, of which Shanghai Haitong Securities
Asset Management Company Limited (ʮ̡)( “ Haitong Asset
Management ”) is the manager. Beijing Zhongguancun has engaged Haitong Asset
Management, an asset manager that is a QDII as approved by the relevant PRC authority, to
subscribe for and hold such Offer Shares on a discretionary basis on its behalf.
3. Montage Holdings
Montage Technology Holdings Company Limited (“ Montage Holdings ”) is a company
incorporated in the Cayman Islands with limited liability. It is a wholly-owned subsidiary of
Montage Technology Co., Ltd. (ʮ̡)( “ Montage Technology ”).
Established in 2004, Montage Technology is a sizeable group in the semiconductor industry,
providing integrated-circuit solutions for cloud computing and data center markets. Montage
Technology has been listed on the Shanghai Stock Exchange (stock code: 688008.SH) since
July 2019. In 2022, based on the consolidated financial statements of Montage Technology, it
has an asset value of RMB10.7 billion, revenue of RMB3.7 billion, and profit of RMB1.3
billion.
CLOSING CONDITIONS
The obligation of each Cornerstone Investor to subscribe for the Offer Shares under the
respective Cornerstone Investment Agreement is subject to, among other things, the following
closing conditions:
(i) the Underwriting Agreements being entered into and having become effective and
unconditional (in accordance with their respective original terms or as subsequently
waived or varied by agreement of the parties thereto) by no later than the time and
date as specified in the Underwriting Agreements, and neither of the Underwriting
Agreements having been terminated;
(ii) the Offer Price having been agreed according to the Underwriting Agreements and
price determination agreement to be signed among the parties thereto in connection
with the Global Offering;
(iii) the Listing Committee having granted the listing of, and permission to deal in, the
H Shares (including the Investor Shares as well as other applicable waivers and
approvals) and such approval, permission or waiver having not been revoked prior
to the commencement of dealings in the H Shares on the Stock Exchange;
CORNERSTONE INVESTORS
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(iv) no laws shall have been enacted or promulgated by any governmental authority
which prohibits the consummation of the transactions contemplated in the Global
Offering or the Cornerstone Investment Agreements and there shall be no orders or
injunctions from a court of competent jurisdiction in effect precluding or prohibiting
consummation of such transactions; and
(v) the respective representations, warranties, undertakings and confirmations of the
relevant Cornerstone Investor under the relevant Cornerstone Investment Agreement
are (as of the date of the respective Cornerstone Investment Agreement) and will be
(as of the Listing Date) accurate and true in all respects and not misleading and that
there is no material breach of the Cornerstone Investment Agreement on the part of
the relevant Cornerstone Investor.
RESTRICTIONS ON 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 including the Listing Date (the
“Lock-up Period ”), dispose of any of the Offer Shares they have purchased pursuant to the
relevant Cornerstone Investment Agreements, 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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This section presents certain information regarding our share capital before and upon
completion of the Global Offering.
BEFORE THE GLOBAL OFFERING
As of the Latest Practicable Date, the registered capital of our Company was
RMB445,664,533, comprising 445,664,533 Unlisted Shares of nominal value RMB1.00 each:
UPON COMPLETION OF THE GLOBAL OFFERING
Immediately following 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
percentage to
total share
capital
(%)
Unlisted Shares in issue 330,418,283 71.20
H Shares converted from Unlisted Shares 115,246,250 24.83
H Shares to be issued under the Global Offering 18,396,000 3.96
Total 464,060,533 100.00
Immediately following completion of the Global Offering, assuming the Over-allotment
Option is fully exercised, the share capital of our Company will be as follows:
Description of Shares
Number of
Shares
Approximate
percentage to
total share
capital
(%)
Unlisted Shares in issue 330,418,283 70.78
H Shares converted from Unlisted Shares 115,246,250 24.69
H Shares to be issued under the Global Offering 21,155,400 4.53
Total 466,819,933 100.00
SHARE CAPITAL
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RANKING
Upon completion of the Global Offering, we would have only one class of Shares. H
Shares and Unlisted Shares are all ordinary Shares in the share capital of our Company.
However, apart from certain qualified domestic institutional investors in the PRC, the qualified
PRC investors under the Shanghai – Hong Kong Stock Connect or the Shenzhen – Hong Kong
Stock Connect and other persons who are entitled to hold our H Shares pursuant to relevant
PRC laws and regulations or upon approvals of any competent authorities, H Shares generally
cannot be subscribed for by or traded between legal or natural persons of the PRC.
Unlisted Shares and H Shares will rank pari passu with each other in all respects and, in
particular, will rank equally for all dividends or distributions declared, paid or made after the
date of this Prospectus. All dividends in respect of the H Shares are to be paid by us in Hong
Kong dollars or in the form of H Shares.
CONVERSION OF OUR UNLISTED SHARES INTO H SHARES
Upon completion of the Global Offering, all our Unlisted Shares (other than those
converting to H Shares) are not listed or traded on any stock exchange. The holders of our
Unlisted Shares may convert their Shares into H Shares provided such conversion shall have
gone through any requisite internal approval process and complied with the regulations
prescribed by the securities regulatory authorities of the State Council and the regulations,
requirements and procedures prescribed by the overseas stock exchange(s) and complete the
filing process procedure with CSRC. The listing of such converted Shares on the Hong Kong
Stock Exchange will also require the approval of the Hong Kong Stock Exchange.
In accordance with the Guidelines on Application for “Full Circulation” of Domestic
Unlisted Shares of H-share Companies ( H΅͡ሗ“ஷ”ˏ)
(“Full Circulation Guidelines ”) published and implemented by the CSRC on November 14,
2019 and the Overseas Listing Trial Measures, domestic unlisted shares of H-share companies
(including domestic unlisted shares held by domestic shareholders prior to the overseas listing,
domestic unlisted shares further issued in the PRC after the overseas listing and unlisted shares
held by foreign shareholders) could be listed and traded on the Hong Kong Stock Exchange
after application to file with the CSRC. The Full Circulation Guidelines are applicable to
domestic companies listed on the Hong Kong Stock Exchange only and not applicable to
companies dual listed in the PRC and on the Hong Kong Stock Exchange.
The Company filed for application for a “full circulation” of the unlisted shares on June
14, 2023 and submitted the application reports, authorization documents of the shareholders of
unlisted shares for which an H-share “full circulation” are applied, explanation about the
compliance of share acquisition and others documents in accordance with the requirements of
the CSRC.
SHARE CAPITAL
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Upon completion of the Global Offering, 115,246,250 Unlisted Shares held by HongShan
V enture, Guoxin Qidi, Purui Tianjin, Beijing Innovation, Zhongyi Equity Fund, Sinovation
Fund III, Ruihui Haina, NIFA No. 1, V alue Global, Shanghai Saixin Business Consulting
Management Center (Limited Partnership), Guangxi Tencent V enture Capital Co., Ltd.,
Hangzhou Fantong, Hubei Boheng, Guangzhou Y uexiu Emerging Industry Phase II Investment
Fund Partnership (Limited Partnership), GS Asia II, Zhuhai Zhongyu Investment Enterprise
(Limited Partnership), Guangkong Zhongying, Fangyuan Chuangying, Haitong International
Investment, Jiaxing Chenyue, Shenzhen Runxin New Vision Strategic Emerging Industry
Private Equity Investment Fund Partnership (Limited Partnership), Cisco China, Stonebridge
2020, Growing Fame, Guangzhou Y uexiu Nuocheng No. 8 Industrial Investment Partnership
(Limited Partnership), CITIC Construction Investment, Ningbo Huiyuan, Dongkong Jinlong,
and LF Beta, will be converted into H Shares on a one-for-one basis. The conversion of these
Unlisted Shares into H Shares have been approved by CSRC on July 3, 2023 and an application
has been made to the Listing Committee for such H Shares to be listed on the Stock Exchange.
Based on the procedures for the conversion of our Unlisted Shares into H Shares as
disclosed in this section, we can apply for the listing of all or any portion of our Unlisted
Shares on the Hong Kong Stock Exchange as H Shares in advance of any proposed conversion
to ensure that the conversion process can be completed promptly upon notice to the Hong Kong
Stock Exchange and delivery of Shares for entry on the H Share register. As any listing of
additional Shares after our initial listing on the Hong Kong Stock Exchange is ordinarily
considered by the Hong Kong Stock Exchange to be a purely administrative matter, it will not
require such prior application for listing at the time of our initial listing in Hong Kong.
No class Shareholder voting is required for the listing and trading of the converted Shares
on the Hong Kong Stock Exchange. Any application for listing of the converted Shares on the
Hong Kong Stock Exchange after our initial listing is subject to prior notification by way of
announcement to inform Shareholders and the public of such proposed conversion.
After all the requisite approvals have been obtained, the following procedures will need
to be completed: the relevant Unlisted Shares will be withdrawn from the Share register and
we will re-register such Shares on our H Share register maintained in Hong Kong and instruct
the H Share Registrar to issue H Share certificates. Registration on our H Share register will
be on the condition that (a) our H Share Registrar lodges with the Hong Kong Stock Exchange
a letter confirming the proper entry of the relevant H Shares on the H Share register of
members and the due dispatch of H Share certificates and (b) the admission of the H Shares
to trade on the Hong Kong Stock Exchange will comply with the Listing Rules and the General
Rules of CCASS and the CCASS Operational Procedures in force from time to time. Until the
converted Shares are re-registered on our H Share register, such Shares would not be listed as
H Shares.
Please refer to “Risk Factors – Risks Related to the Global Offering – Future sales or
perceived sales of substantial amounts of our H Shares in the public market could have a
material adverse effect on the price of our H Shares and our ability to raise additional capital
in the future.”
SHARE CAPITAL
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So far as we are aware, upon completion of the Global Offering, other than the
Shareholders who will convert their Unlisted Shares into H Shares as mentioned above, none
of our Shareholders currently proposes to convert any of their Unlisted Shares into H Shares.
TRANSFER OF SHARES ISSUED PRIOR TO THE GLOBAL OFFERING
Pursuant to the PRC Company Law, our Shares issued prior to the Listing shall not be
transferred within one year from the Listing Date.
For details of the lock-up undertaking given by the Controlling Shareholder pursuant to
Rule 10.07 of the Listing Rules see “Underwriting – Underwriting Arrangements and Expenses
– Undertakings pursuant to the Listing Rules and the Hong Kong Underwriting Agreement –
Undertakings by our Controlling Shareholders.”
REGISTRATION OF SHARES NOT LISTED ON AN OVERSEAS STOCK EXCHANGE
According to the Notice of Centralized Registration and Deposit of Non-overseas Listed
Shares of Companies Listed on an Overseas Stock Exchange (ྤ̮ɪ̹
) issued by the CSRC, our Company is required to
register and deposit our Shares that are not listed on the overseas stock exchange with the
China Securities Depository and Clearing Corporation Limited within 15 business days upon
the Listing and provide a written report to the CSRC regarding the centralized registration and
deposit of our Shares that are not listed on the overseas stock exchange as well as the offering
and listing of our H Shares.
SHAREHOLDERS’ GENERAL MEETING
For details of circumstances under which our general Shareholders’ meeting is required,
see “Appendix IV– Summary of Principal Legal and Regulatory Provisions” and “Appendix V
– Summary of Articles of Association”.
SHARE CAPITAL
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You should read the following discussion and analysis with our consolidated
financial information, including the notes thereto, included in the Accountant’ s Report in
Appendix I to this Prospectus. Our consolidated financial information has been prepared
in accordance with IFRS, which may differ in material aspects from generally accepted
accounting principles in other jurisdictions.
The following discussion and analysis contains forward-looking statements that
reflect our current views with respect to future events and financial performance. These
statements are based on our assumptions and analysis in light of our 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 ,
whether actual outcomes and developments will meet our expectations and predictions
depends on a number of risks and uncertainties, many of which we cannot control or
foresee. In evaluating our business, you should carefully consider all of the information
provided in this Prospectus, including the sections headed “Risk Factors” and
“Business.”
For the purpose of this section, unless the context otherwise requires, references to
2020, 2021 and 2022 refer to our financial years ended December 31 of such years.
Unless the context otherwise requires, financial information described in this section is
described on a consolidated basis.
OVERVIEW
We are a leader in enterprise AI. We offer platform-centric AI solutions that can be rapidly
deployed by enterprises on a large scale to uncover hidden patterns in data and
comprehensively enhance their decision-making capabilities.
We were the largest player by revenue in the platform-centric decision-making AI market,
which is a sub-segment of the overall AI market, in China in 2022, according to the CIC
Report. We have been leading in the research of advanced AI technologies and the utilization
of these technologies in commercial solutions. For example, according to CIC, our proprietary
AutoML algorithm is a cutting-edge AutoML algorithm in the world. With our AutoML
algorithms, we broke the world records of two Open Graph Benchmark (“OGB”) tasks in April
2021. OGB is a globally recognized collection of benchmark datasets for machine learning on
graphs that AI companies and research institutions utilize to test and evaluate their AI model
performance. Participants of the OGB tasks include world-famous innovative enterprises and
research institutes, such as Facebook, Alibaba, Stanford University and Cornell University. Our
AutoML algorithm also ranks top 1% in Kaggle Structured Data and Image Classification
Competition 2019. See “Business – Awards and Recognition.” In addition, our founders are
pioneers are in transfer learning, according to CIC.
FINANCIAL INFORMATION
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We emphasize value creation. Our solutions have covered a myriad of industries
including, but not limited to, finance, retail, manufacturing, energy and power,
telecommunications, transportation, technology, education, media and healthcare. For
example, our AI solutions have successfully helped banks enhance anti-fraud accuracy rate,
retailers forecast sales volume and formulate precision marketing strategies, manufacturers
optimize quality control, and energy companies detect and prevent equipment anomalies and
failures. In 2021, 2022 and the three months ended March 31, 2022 and 2023, we had 75, 104,
49 and 62 lighthouse users, respectively. In 2020, 2021 and 2022, the net dollar expansion rates
of our lighthouse users were 167%, 140% and 126%, respectively.
Our platform-centric AI solutions seek to overcome challenges faced by in-house
development of AI capabilities and point solutions that are designed for scenario-specific use
cases, and allow enterprises to benefit from the advancement of AI technologies to the largest
extent possible. Leveraging our core technologies, we have developed end-to-end enterprise AI
solutions that cater for enterprises’ needs across application, platform and infrastructure levels.
Sage Platform is the backbone of our solutions. It allows enterprises to easily build their
customized AI systems that automate the process of machine learning, application, decision-
making and evaluation driven by our AutoML algorithms, featuring quick, simple build-up,
low- and/or no-code environment and implementation without significant involvement of AI
experts. Our Sage Platform is primarily composed of the following:
 Sage AIOS is an AI operating system featuring a user-friendly interface,
standardized data processing, automated resource management and allocation and
fully compatible middleware that are comparable to personal computer operating
systems.
 HyperCycle series with no-code development tools and Sage Studio series with
low-code and no-code development tools are our core platform-centric AI solutions
by which our users can quickly and easily deploy large-scale AI applications.
In addition, we offer ready-to-use AI applications that users could directly deploy to
improve their business operations, primarily in the fields of sales and marketing, risk
management and operating efficiency in general. We also help users develop customized AI
applications on Sage Platform to address their specific business needs.
During the Track Record Period, we have experienced tremendous growth. Our revenue
grew by 114.2% from RMB942.2 million in 2020 to RMB2,018.4 million in 2021, and further
by 52.7% to RMB3,082.6 million in 2022 and by 33.6% from RMB482.3 million for the three
months ended March 31, 2022 to RMB644.4 million for the three months ended March 31,
2023.
FINANCIAL INFORMATION
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BASIS OF PRESENTATION
The historical financial information of our Group has been prepared in accordance with
International Financial Reporting Standards (“ IFRS ”) issued by the International Accounting
Standards Board. The preparation of the historical financial information in conformity with
IFRS requires the use of certain critical accounting estimates. It also requires management to
exercise its judgment in the process of applying our Group’s accounting policies. The areas
involving a higher degree of judgment or complexity, or areas where assumptions and estimates
are significant to the historical financial information, are disclosed in Note 4 to the
Accountant’s Report included in Appendix I to this Prospectus.
FACTORS AFFECTING OUR RESULTS OF OPERATIONS AND FINANCIAL
CONDITION
General Factors
Our results of operations are affected by a number of general factors affecting the overall
growth and prosperity of the AI industry in China, in particular the decision-making AI market,
including:
 China’s overall economic growth;
 the ongoing digitalization of China’s economy;
 technology development of the AI industry, including, but not limited to, the
innovations in analytical instruments, the development of computing infrastructure
and the accumulation of high quality data;
 accumulation of AI experts in China; and
 awareness of enterprises to deploy AI applications.
Specific Factors Affecting Our Results of Operations
We believe that our results of operations are primarily and more directly affected by the
following specific factors:
Our investment in technology innovation and AI solutions
We have made, and will continue to make, significant investments in technology
development and AI solutions to strengthen our market leadership. We have been leading in the
research of advanced AI technologies and the utilization of these technologies in commercial
solutions. Our ability to attract qualified and experienced talents are crucial to our R&D
efforts. We intend to continue to invest in attracting more talented research and development
personnel by offering competitive compensation, in further developing and applying advanced
AI and other technologies to enhance the functionality and user experience of our AI solutions,
and in strategic investments in and acquisitions of businesses that enhance our technology
capabilities and solution offerings. In 2020, 2021, 2022 and three months ended March 31,
FINANCIAL INFORMATION
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2022 and 2023, we incurred research and development expenses of RMB565.7 million,
RMB1,249.5 million, RMB1,650.0 million, RMB225.7 million and RMB 241.5 million,
respectively, accounting for 60.0%, 61.9%, 53.5%, 46.8% and 37.5% of the revenues for the
respective periods. Going forward, we will continue to prudently invest resources in research
and development on our platform and infrastructure. Given our systematic development
approach and our continuous incorporation of functional improvements, we expect the
investment to build our platform and infrastructure in a scalable manner will support the
long-term growth of our business.
Our ability to attract and retain our users
Our operating results and growth depend on our ability to attract new users. Guided by
our go-to-market strategy, we have served a large number of lighthouse users who are market
leaders in the respective domain they operate in and established market presence in an effective
manner. As a result of our effective strategies, we had 47, 75, 104, 49 and 62 lighthouse users
in 2020, 2021, 2022 and in the three months ended March 31, 2022 and 2023, respectively.
After the initial success with lighthouse users, we leverage our understanding, our
reputation established through collaborating with industry leaders and our AI ecosystem to
further enhance our influence in the industry, enabling us to further penetrate the respective
industry and provide solutions to other players in the industry efficiently.
As a result, we have accumulated a strong and rapidly growing user base. In 2020, 2021
and 2022 and in the three months ended March 31, 2022 and 2023, our number of users was
156, 245, 409, 125 and 147, respectively. We have fostered strong loyalty with our user base
by establishing deep collaboration and effectively addressing their needs. We expect to achieve
continued growth in the foreseeable future as we continue to attract more users.
Our ability to create value for users with our innovative enterprise AI solutions
We are committed to delivering high quality enterprise AI solutions to create value for our
users. Leveraging our advanced technologies, we have developed Sage Platform, a full suite of
end-to-end AI solutions that can be rapidly deployed by enterprises on a large scale primarily
through on-premise deployment and SageOne, our software-defined “All-in-One” solutions
with pre-built Sage Platform and applications on servers and other related hardware. Our future
growth will depend on our ability to innovate and create value for our new and existing users
with our enterprise AI solutions.
Our existing user base represents a significant opportunity for sales expansion. After we
help our users identify the critical issues, provide solutions and achieve the objectives of
business improvement, they usually identify incremental opportunities within their operations
and expand their use of our solutions. Our ability to create value for users is evidenced by a
net dollar expansion rate of 167%, 140% and 126% for our lighthouse users in 2020, 2021 and
2022, respectively. Our average revenue per lighthouse user increased by 11.4% from
RMB12.3 million in 2020 to RMB13.7 million in 2021, and further by 30.7% to RMB17.9
million in 2022. For the three months ended March 31, 2022 and 2023, our average revenue
per lighthouse user stayed stable at RMB5.4 million.
FINANCIAL INFORMATION
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Our ability to manage our costs and enhance operating leverage
Our ability to manage and control our costs and operating expenses is critical to the
success of our business and our profitability. Our gross profit margin remained stable during
the Track Record Period. However, our cost structure is affected by the mix of our solution
offerings and might further impact our gross profit margin. For example, with the launch of
SageOne, we incurred an increased cost of finished goods sold as a percentage of revenue
during the Track Record Period. In addition, we have invested heavily in developing
technology capabilities and infrastructure, in order to provide highly scalable and flexible
solutions for our users. The solutions we offer are highly modularized, which allows us to
address users’ customized demands effectively and efficiently, helping us achieve significant
overall cost and operating efficiency. We also incurred an increasing amount of sales and
marketing expenses to strategically expand our user base and enter into new verticals,
primarily by penetrating lighthouse users. Upon successful penetration of lighthouse users, we
expect to obtain further opportunities within the respective industries without incurring
significant expenses, thereby enhancing our efficiency in sales and marketing. As a result of
our established user base and brand awareness, the efficiency of our sales and marketing
personnel has also been increasing.
We are thus well positioned to scale up our revenues while achieving significant cost
efficiency and operating leverage. For instance, in 2020, 2021, 2022 and in the three months
ended March 31, 2022 and 2023, our selling and marketing expenses (excluding share-based
compensation) as a percentage of our revenues was 24.1%, 17.7%, 13.1%, 16.7% and 12.9%,
respectively, and our general and administrative expenses (excluding share-based
compensation) as a percentage of our revenues was 12.7%, 8.6%, 8.1%, 17.2% and 15.7%,
respectively. Controlling operating expenses to achieve optimal operating efficiency is
important to our success. As our business grows in scale, we expect to have significant
operating leverage and realize structural cost savings to compete efficiently.
KEY OPERATING METRICS
The following table sets forth the key operating metrics for the years/periods indicated:
For the year
ended December 31,
For the three months
ended March 31,
2020 2021 2022 2022 2023
Number of users 156 245 409 125 147
Number of lighthouse
users 47 75 104 49 62
Average revenue per
lighthouse user
(RMB million) 12.3 13.7 17.9 5.4 5.4
Net dollar expansion
rates for lighthouse
users 167% 140% 126% N/A N/A
FINANCIAL INFORMATION
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As a result of our effective go-to-market strategy, we had 47, 75, 104, 49 and 62
lighthouse users in 2020, 2021, 2022 and in the three months ended March 31, 2022 and 2023,
respectively. Our initial success with lighthouse users enable us to further penetrate the
respective industry and provide solutions to other players in the industry efficiently. As a
result, we have accumulated a strong and rapidly growing total user base including both
lighthouse users and other users, with 156, 245, 409, 125 and 147 users in 2020, 2021, 2022
and in the three months ended March 31, 2022 and 2023, respectively.
We are dedicated to creating value to our users. After we help them identify the critical
issues, provide solutions and achieve the objectives of business improvement, they usually
identify incremental opportunities within their operations and expand their use of our solutions.
Our ability to create value for users is evidenced by a net dollar expansion rate of 167%, 140%
and 126% for our lighthouse users in 2020, 2021 and 2022, respectively. Moreover, the average
revenue per lighthouse user amounted to RMB12.3 million, RMB13.7 million, RMB17.9
million, RMB5.4 million and RMB5.4 million in 2020, 2021, 2022 and in the three months
ended March 31, 2022 and 2023, respectively.
Driven by our expanding user base and increasing spending from existing users, we have
experienced tremendous revenue growth during the Track Record Period. Our revenue grew by
114.2% from RMB942.2 million in 2020 to RMB2,018.4 million in 2021 and further by 52.7%
to RMB3,082.6 million in 2022 and by 33.6% from RMB482.3 million for the three months
ended March 31, 2022 to RMB644.4 million for the three months ended March 31, 2023.
IMPACT OF COVID-19
The COVID-19 pandemic and its recurrence have temporarily prevented us from
engaging with end users and solution partners through in-person meetings and providing them
with deployment and technical support services, especially with the lighthouse users, who are
large, established and leading enterprises in various industries and thus tend to implement more
stringent COVID-19-related measures than other businesses. The pandemic has caused
temporary disruption to our solutions to the extent that necessary on-site meetings, deployment
and technical support had to be delayed or cancelled, which had a negative impact on our
results of operations during the Track Record Period. As of the Latest Practicable Date, we
were not aware of any material adverse impacts on our business operations.
Despite temporary disruption caused by COVID-19, we have been able to sustain our
strong growth momentum, delivering robust revenue growth in 2021. As the pandemic persists,
global demand for automation and AI solutions has continued to accelerate as businesses are
increasingly aware of the benefits of going digital. Our revenue increased by 114.2% from
RMB942.2 million in 2020 to RMB2,018.4 million in 2021, as a result of the increasing
demand for our AI solutions and our continuous value creation for end users. Our revenue
increased by 52.7% from RMB2,018.4 million in 2021 to RMB3,082.6 million in 2022. Our
revenue grew by 33.6% from RMB482.3 million for the three months ended March 31, 2022
to RMB644.4 million for the three months ended March 31, 2023. While the pandemic may
have been a stimulus for acceleration of automation and AI transformation, we expect the trend
of AI transformation to continue post pandemic in the long run. Business decision makers are
increasingly aware of the value of high quality AI solutions not only in dealing with pressing
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workforce issues during the pandemic, but also in empowering organizations and optimizing
daily operations. Therefore, the willingness of the whole society and respective vertical
industries to improve efficiency through automation and AI solutions are likely to keep strong.
See “Risk Factors – Risks Related to Our Business and Industry – The COVID-19
pandemic presents challenges to our business and the effects of the pandemic could adversely
affect our business, financial condition and results of operations.”
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Some of our accounting policies require us to apply estimates and assumptions as well as
complex judgments related to accounting items. The estimates and assumptions we use and the
judgments we make in applying our accounting policies have a significant impact on our
financial position and operational results. Our management continuously evaluates such
estimates, assumptions and judgments based on past experience and other factors, including
industry practices and expectations of future events which are deemed to be reasonable under
the circumstances. There has not been any material deviation from our management’s estimates
or assumptions and actual results, and we have not made any material changes to these
estimates or assumptions during the Track Record Period. We do not expect any material
changes to these estimates and assumptions in the foreseeable future. Set forth below are
accounting policies that we believe are of critical importance to us or involve the most
significant estimates, assumptions and judgments used in the preparation of our financial
statements. Our material accounting policies, estimates, assumptions and judgments, which are
important for understanding our financial condition and results of operations, are set forth in
further detail in Note 2 and Note 4 to the Accountant’s Report included in Appendix I to this
Prospectus.
Revenue Recognition
Our revenue is measured at the fair value of the consideration received or receivable, and
represents amounts receivable for goods sold or services supplied, stated net of discounts,
returns and value-added taxes. We recognize revenue when the specific criteria have been met
for each of our activities, as described below. There has been no significant change in the
nature of products/services in relation to each of our revenue streams and the same revenue
recognition policy had been applied throughout the Track Record Period.
(a) Sage Platform and applications
Sage Platform and other ready-to-use applications are delivered primarily as (i) licensed
software installed at the end users’ servers, and (ii) all-in-one solutions with pre-installed
software on server or other related hardware.
For the licensed software provided by us, as the customer can direct the use of and obtain
substantially all of the remaining benefits from the licensed software after it is transferred,
revenue is recognized at a point in time when the licensed software is delivered to the
customer’s designated place, inspected and accepted by the customer.
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For all-in-one solutions with pre-installed software on server or other related hardware,
as we provide significant customized service of interrelating and integrating the software and
server or other related hardware to maximize their synergistic, the contracts generally have a
single performance obligation, and revenue is recognized at a point in time when the software
pre-installed server or other related hardware is delivered to the customer’s designated place,
inspected and accepted by the customer.
To a lesser extent, we also offer cloud-based subscriptions, where Sage Platform and other
ready-to-use applications are delivered to end users for usage with a subscription period, and
the revenue is recognized over the subscription period. Such revenue recognized over
the subscription period was RMB16.6 million, RMB21.5 million, RMB26.5 million,
RMB8.6 million and RMB8.0 million in 2020, 2021, 2022 and in the three months ended
March 31, 2022 and 2023, representing 1.8%, 1.1%, 0.9%, 1.8% and 1.2% of our total revenue
for the same periods, respectively. As compared to software license at users servers and
SageOne “All-in-One” solutions with pre-built Sage Platform and applications on servers and
other related hardware, the cloud-based subscription model requires less investment in
infrastructure by the end user. This subscription model merely accounted for a negligible
portion of our revenue during the Track Record Period. Going forward, we expect to continue
to adopt this model, offering flexible choices to our users with demand for cloud-based Sage
Platform and applications.
(b) Application development and other services
Application development and other services consist of customized AI applications
development, and other services primarily include AI-empowered precision marketing services
which support enterprises to optimize marketing activities.
Application development services primarily take months to complete, the customer
cannot benefit from or control the service during the service process and we generally do not
have an enforceable right to payment for performance completed to date at all times throughout
the duration of the contract, accordingly, revenue is recognized at a point in time when the
integrated promised products and services are finally inspected and accepted by the customer.
We act as an agent in AI-empowered precision marketing services considering the fact
that we are only responsible for matching resources by using our AI technology, not subject to
inventory risk and has no discretion in establishing prices. Therefore, revenue from
AI-empowered precision marketing services is measured on a net basis. Such revenue is
determined based on actual performance of the marketing. Specifically, such revenue is
typically determined (i) on a per-click basis when the relevant marketing content is clicked, (ii)
on a per-impression basis when the relevant marketing content is displayed, or (iii) on a
per-download basis when the relevant marketing content is downloaded. Accordingly, such
revenue is accounted for as variable consideration, which is recognized at a point in time when
the performance is highly probable to be reached, indicated by the actual clicks, displays or
downloads achieved, as applicable. Our revenue attributable to AI-empowered precision
marketing services was RMB30.0 million, RMB31.6 million, RMB3.0 million, RMB1.1
million and RMB0.7 million in 2020, 2021, 2022 and in the three months ended March 31,
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2022 and 2023, representing 3.2%, 1.6%, 0.1%, 0.2% and 0.1% of our total revenue for the
same periods, respectively. Customers of our AI-empowered precision marketing services are
typically advertisement agencies in China.
Contract Balance
Timing of revenue recognition may differ from the timing of invoicing to customers. We
may perform by transferring goods or services to a customer before the customer pays
consideration or before payment is due, and we also may have a right to an amount of
consideration before transferring goods or services to a customer. We recognize a contract asset
or a contract liability in the consolidated balance sheet, depending on the relationship between
our performance and our customer’s payment.
Intangible assets
(a) Goodwill
Goodwill arising from the acquisition of subsidiaries represents the excess of the
consideration transferred, the amount of any non-controlling interest in the acquiree and the
acquisition-date fair value of any previous equity interest in the acquiree over the fair value of
the identified net assets acquired.
For the purpose of impairment testing, goodwill acquired in a business combination is
allocated to each of the cash-generating units (“CGUs”), or groups of CGUs, that is expected
to benefit from the synergies of the combination. Each unit or group of units to which the
goodwill is allocated represents the lowest level within the entity at which the goodwill is
monitored for internal management purposes. Goodwill is monitored at the operating segment
level.
Goodwill impairment reviews are undertaken annually or more frequently if events or
changes in circumstances indicate a potential impairment. The carrying value of the CGU
containing the goodwill is compared to the recoverable amount, which is the higher of value
in use and the fair value less costs of disposal. Any impairment is recognized immediately as
an expense and is not subsequently reversed.
We recorded RMB335.8 million of goodwill in total as of March 31, 2023. The goodwill
balance mainly arose from the acquisitions of Guangzhou Jianxin on March 31, 2021, Ideal
Technology on June 30, 2021 and EpicHust on June 30, 2022, amounting to RMB94.1 million,
RMB165.6 million and RMB76.1 million, respectively. We carry out our annual impairment
test on goodwill by comparing the recoverable amounts of CGU or group of CGUs to the
carrying amounts. Goodwill arising from the acquisition of Guangzhou Jianxin, Ideal
Technology and EpicHust was monitored separately and assessed as separate CGUs for the
purpose of impairment testing.
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CGU of Guangzhou Jianxin
The impairment reviews of the goodwill arising from the acquisition of Guangzhou
Jianxin in March 2021 have been conducted by our management as of December 31, 2021
and 2022 and March 31, 2023. For the purposes of the impairment review, the recoverable
amount of the CGU of Guangzhou Jianxin is determined based on value in use (“VIU”)
calculations by using the discounted cash flow method. For goodwill related to
acquisition of Guangzhou Jianxin, management forecasted that the compound annual
growth rate in the five-year period from the balance sheet date of December 31, 2021 and
2022 and March 31, 2023 was 16.2%, 11.4% and 8.3%, respectively, and the cash flows
beyond the five-year period were extrapolated using the estimated annual growth rates
(“terminal growth rate”) of 3.0%. Pre-tax discount rate of 20.9%, 20.8% and 20.6% was
used to reflect market assessment of time value and the specific risks relating to the CGU
for the impairment review as at December 31, 2021 and 2022 and March 31, 2023,
respectively. The values assigned to the key assumptions and discount rates are consistent
with external information sources. The estimated recoverable amount of the CGU of
Guangzhou Jianxin exceeded its carrying amount by approximately RMB34,180,000,
RMB89,429,000 and RMB126,465,000 as of December 31, 2021 and 2022 and March 31,
2023, respectively, and management therefore concluded such goodwill was not impaired.
The Directors of the Company have considered and assessed that any reasonably possible
changes in key parameters would not cause the carrying amount of the CGU of
Guangzhou Jianxin exceed its recoverable amount.
For sensitivity analysis conducted during the impairment review as at December 31,
2021, had there been a reduction of the revenue compound annual growth rate of the first
five years by 4.3 percentage point, a reduction of terminal growth rate by 3.9 percentage
point, or an increase in pre-tax discount rate by 1.5 percentage point in the VIU
calculations each in isolation, the recoverable amount of the CGU of Guangzhou Jianxin
would be closed to the breakeven point. For sensitivity analysis conducted during the
impairment review as at December 31, 2022, had there been a reduction of the revenue
compound annual growth rate of the first five years by 11.3 percentage point, a reduction
of terminal growth rate by 15.6 percentage point, or an increase in pre-tax discount rate
by 4.3 percentage point in the VIU calculations each in isolation, the recoverable amount
of the CGU of Guangzhou Jianxin would be closed to the breakeven point. For sensitivity
analysis conducted during the impairment review as at March 31, 2023, had the revenue
compound annual growth rate of the first five years been 5% lower, the terminal growth
rate been 1% lower or the pre-tax discount rate been 1% higher each in isolation, the
remaining headroom would be decreased to RMB8,149,000, RMB116,119,000 and
RMB100,516,000, respectively.
CGU of Ideal Technology
The impairment reviews of the goodwill arising from the acquisition of Ideal
Technology in June 2021 have been conducted by our management as of December 31,
2021 and 2022 and March 31, 2023. For the purposes of the impairment review, the
recoverable amount of the CGU of Ideal Technology is determined based on VIU
calculations by using the discounted cash flow method. For goodwill related to
acquisition of Ideal Technology, management forecasted that the compound annual
growth rate in the five-year period from the balance sheet date of December 31, 2021 and
2022 and March 31, 2023 was 26.0%, 23.4% and 23.9%, respectively, and the cash flows
beyond the five-year period were extrapolated using a terminal growth rate of 3.0%.
Pre-tax discount rate of 17.6%, 17.6% and 17.6% was used to reflect market assessment
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of time value and the specific risks relating to the CGU for the impairment reviews as at
December 31, 2021 and 2022 and March 31, 2023, respectively. The values assigned to
the key assumptions and discount rates are consistent with external information sources.
The estimated recoverable amount of the CGU of Ideal Technology exceeded its carrying
amount by approximately RMB34,793,000, RMB39,243,000 and RMB43,959,000 as of
December 31, 2021 and 2022 and March 31, 2023, respectively, and management
therefore concluded such goodwill was not impaired. The Directors of the Company have
considered and assessed that any reasonably possible changes in key parameters would
not cause the carrying amount of the CGU of Ideal Technology exceed its recoverable
amount.
For sensitivity analysis conducted during the impairment review as at December 31,
2021, had there been a reduction of the revenue compound annual growth rate of the first
five years by 2.6 percentage point, a reduction of terminal growth rate by 1.4 percentage
point, or an increase in pre-tax discount rate by 1.1 percentage point in the VIU
calculations each in isolation, the recoverable amount of the CGU of Ideal Technology
would be closed to the breakeven point. For sensitivity analysis conducted during the
impairment review as at December 31, 2022, had there been a reduction of the revenue
compound annual growth rate of the first five years by 2.9 percentage point, a reduction
of terminal growth rate by 1.6 percentage point, or an increase in pre-tax discount rate by
1.3 percentage point in the VIU calculations each in isolation, the recoverable amount of
the CGU of Ideal Technology would be closed to the breakeven point. For sensitivity
analysis conducted during the impairment review as at March 31, 2023, had there been
a reduction of the revenue compound annual growth rate of the first five years by 2.8
percentage point, a reduction of terminal growth rate by 2.5 percentage point, or an
increase in pre -tax discount rate by 1.6 percentage point in the VIU calculations each in
isolation, the recoverable amount of the CGU of Ideal Technology would be closed to the
breakeven point.
CGU of EpicHust
The impairment review of the goodwill arising from the acquisition of EpicHust in
June 2022 has been conducted by the management as at December 31, 2022 and March
31, 2023. For the purposes of the impairment review, the recoverable amount of the CGU
of EpicHust is determined based on VIU calculations by using the discounted cash flow
method. For goodwill related to acquisition of EpicHust, management forecasted that the
revenue compound annual growth rate in the five-year period from the balance sheet date
of December 31, 2022 and March 31, 2023 was 13.3% and 12.1%, respectively, and the
cash flows beyond the five-year period were extrapolated using a terminal growth rate of
3.0%. Pre-tax discount rate of 20.4% and 21.5% was used to reflect market assessment
of time value and the specific risks relating to the CGU for the impairment reviews as at
December 31, 2022 and March 31, 2023, respectively. The values assigned to the key
assumptions and discount rates are consistent with external information sources. The
estimated recoverable amount of the CGU of EpicHust exceeded its carrying amount by
approximately RMB3,980,000 and RMB7,670,000 as at December 31, 2022 and March
31, 2023, respectively, and management therefore concluded such goodwill was not
impaired. As the Group just acquired EpicHust in June 2022 and the acquisition
consideration was determined on an arm’s length basis, the directors of the Company
considered that it is remote for any reasonably possible changes in key parameters that
would exceed the percentage points as disclosed in the sensitivity analysis below and
therefore concluded that any reasonably possible changes in those key parameters would
not cause the carrying amount of the CGU of EpicHust exceed its recoverable amount.
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For sensitivity analysis conducted during the impairment review as at December 31,
2022, had there been a reduction of the revenue compound annual growth rate of the first
five years by 0.7 percentage point, a reduction of terminal growth rate by 0.6 percentage
point, or an increase in pre-tax discount rate by 0.4 percentage point in the VIU
calculations each in isolation, the recoverable amount of the CGU of EpicHust would be
closed to the breakeven point. For sensitivity analysis conducted during the impairment
review as at March 31, 2023, had there been a reduction of the revenue compound annual
growth rate of the first five years by 1.7 percentage point, a reduction of terminal growth
rate by 1.6 percentage point, or an increase in pre-tax discount rate by 0.9 percentage
point in the VIU calculations each in isolation, the recoverable amount of the CGU of
EpicHust would be closed to the breakeven point.
(b) Other intangible assets
Other intangible assets mainly include software and copyright, technology and customer
relationship. They are initially recognized and measured at cost or fair value of intangible
assets acquired through business combination. We amortize these intangible assets with a
limited useful life using the straight-line method over the following periods:
 Software and copyright 3-5 years
 Technology 5 years
 Customer relationship 5-7 years
 Brand name 10 years
When determining the length of useful lives of these intangible assets, management take
into account the (i) estimated period during which such asset can bring economic benefits to
us and (ii) the useful life estimated by comparable companies in the market.
In particular, the Company determined the estimated useful life of customer relationship
with consideration of the historical cooperation period of existing clients, degree of customer
loyalty and historical attrition situation of the customers. In relation to the brand name, the
Company considered the historical presence of the brand, its market share in relevant industry,
and the remaining period of its business license in determining its estimated useful life.
(c) Research and development expenditures
Research expenditures are recognized as an expense as incurred. Development cost is
capitalized only if all of the following conditions are satisfied:
 it is technically feasible to complete the software so that it will be available for use;
 management intends to complete the software and use or sell it;
 there is an ability to use or sell the software;
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 it can be demonstrated how the software will generate probable future economic
benefits;
 adequate technical, financial and other resources to complete the development and
to use or sell the software are available; and
 the expenditure attributable to the software during its development can be reliably
measured.
Other development expenditures that do not meet these criteria are recognized as an
expense as incurred.
Investments and other financial assets
(a) Classification
We classify our financial assets in the following measurement categories:
 those to be measured subsequently at fair value (either through other comprehensive
income, or through profit or loss); and
 those to be measured at amortized cost.
The classification depends on our business model for managing the financial assets and
the contractual terms of the cash flows.
For assets measured at fair value, gains and losses will either be recorded in profit or loss
or other comprehensive income. For investments in debt instruments, this will depend on the
business model in which the investment is held. For investments in equity instruments that are
not held for trading, this will depend on whether we have made an irrevocable election at the
time of initial recognition to account for the equity investment at fair value through other
comprehensive income.
We reclassify debt investments when and only when our business model for managing
those assets changes.
(b) Measurement
At initial recognition, we measure a financial asset at its fair value plus, in the case of a
financial asset not at fair value through profit or loss, transaction costs that are directly
attributable to the acquisition of the financial asset. Transaction costs of financial assets carried
at fair value through profit or loss are expensed in profit or loss.
Financial assets with embedded derivatives are considered in their entirety when
determining whether their cash flows are solely payment of principal and interest.
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Debt instruments
Subsequent measurement of debt instruments depends on our business model for
managing the asset and the cash flow characteristics of the asset. There are three
measurement categories into which we classify our debt instruments:
 Amortized cost : Assets that are held for collection of contractual cash flows
where those cash flows represent solely payments of principal and interest are
measured at amortized cost. A gain or loss on a debt investment that is
subsequently measured at amortized cost and is not part of a hedging
relationship is recognized in profit or loss when the asset is derecognized or
impaired. Interest income from these financial assets is included in finance
income using the effective interest rate method.
 Fair value through other comprehensive income (“FVOCI”) : Assets that are
held for collection of contractual cash flows and for selling the financial assets,
where the assets’ cash flows represent solely payments of principal and
interest, are measured at FVOCI. Movements in the carrying amount are taken
through OCI, except for the recognition of impairment gains or losses, interest
income and foreign exchange gains and losses which are recognized in profit
or loss. When the financial asset is derecognized, the cumulative gain or loss
previously recognized in OCI is reclassified from equity to profit or loss and
recognized in other gains, net. Interest income from these financial assets is
included in finance income using the effective interest rate method. Foreign
exchange gains and losses are presented in other gains, net and impairment
expenses are presented as a separate line item in the consolidated statement of
comprehensive income.
 Fair value through profit or loss : Assets that do not meet the criteria for
amortized cost or FVOCI are measured at fair value through profit or loss. A
gain or loss on a debt investment that is subsequently measured at fair value
through profit or loss and is not part of a hedging relationship is recognized in
profit or loss and presented net in the consolidated statement of comprehensive
income within other gains, net in the period in which it arises.
Equity instruments
We subsequently measure all equity investments at fair value. Where our
management has elected to present fair value gains and losses on equity investments in
other comprehensive income, there is no subsequent reclassification of fair value gains
and losses to profit or loss following the derecognition of the investment. Dividends from
such investments continue to be recognized in profit or loss as other income when our
right to receive payments is established.
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Changes in the fair value of financial assets at fair value through profit or loss are
recognized in the consolidated statement of comprehensive income. Impairment losses
(and reversal of impairment losses) on equity investments measured at FVOCI are not
reported separately from other changes in fair value.
(c) Impairment
We assess on a forward-looking basis for the expected credit losses on financial assets
(including trade receivables, other receivables, term bank deposits, restricted cash and cash and
cash equivalents), which is subject to impairment under IFRS 9. The impairment methodology
applied depends on whether there has been a significant increase in credit risk.
For trade receivables, we apply the simplified approach permitted by IFRS 9, which
requires expected lifetime losses to be recognized from initial recognition of the receivables.
For others, it is measured as either 12-month expected credit losses or lifetime expected
credit loss, depending on whether there has been a significant increase in credit risk since
initial recognition. If a significant increase in credit risk of a receivable has occurred since
initial recognition, then impairment is measured as lifetime expected credit losses.
(d) Derecognition
Financial assets
We derecognize a financial asset if the part being considered for derecognition meets
one of the following conditions: (i) the contractual rights to receive the cash flows from
the financial asset expire; or (ii) the contractual rights to receive the cash flows of the
financial asset have been transferred or we transfer substantially all the risks and rewards
of ownership of the financial asset; or (iii) we retain the contractual rights to receive the
cash flows of the financial asset, but assume a contractual obligation to pay the cash flows
to the eventual recipient in an agreement that meets all the conditions of de-recognition
of transfer of cash flows (“pass-through” requirements) and transfers substantially all the
risks and rewards of ownership of the financial asset.
Where a transfer of a financial asset in its entirety meets the criteria for
derecognition, the difference between the two amounts below is recognized in profit or
loss:
 the carrying amount of the financial asset transferred;
 the sum of the consideration received from the transfer and any cumulative
gain or loss that has been recognized directly in equity.
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If we neither transfer nor retain substantially all the risks and rewards of ownership
and continue to control the transferred asset, we will continue to recognize the asset to
the extent of its continuing involvement and recognize an associated liability.
Other financial liabilities
A financial liability is derecognized when the obligation under the liability is
discharged or canceled or expires. When an existing financial liability is replaced by
another from the same lender on substantially different terms, or the terms of an existing
liability are substantially modified, such an exchange or modification is treated as a
derecognition of the original liability and a recognition of a new liability, and the
difference between the respective carrying amounts is recognized in profit or loss.
Redemption liabilities
A contract that contains an obligation to purchase our equity instruments for cash or
another financial asset gives rise to a financial liability for the present value of the redemption
amount, even if our obligations to purchase is conditional on the counterparty exercising a right
to redeem. We undertake such redemption obligations as certain preferred rights are granted to
investors in our financing process, the redemption liabilities are recognized as financial
liability initially at the present value of the redemption amount and reclassified from equity.
Subsequently, the redemption liabilities are measured at amortized cost with interest charged
in finance costs.
We derecognize the redemption liabilities when, and only when, our obligations are
discharged, cancelled or have expired. When the preferred rights are waived by investors, the
carrying amount of the redemption liability is reclassified to equity.
Share-based payments
(a) Equity-settled share-based payment transactions
We operate certain share incentive plans, under which we receive services from our
employees as consideration for equity instruments (including share options and awarded
shares) of us. The fair value of the services received in exchange for the grant of the equity
instruments is recognized as an expense on the consolidated statement of comprehensive
income with a corresponding increase in equity.
In terms of the options and shares awarded to employees, the total amount to be expensed
is determined by reference to the fair value of the options and shares granted:
 including any market performance conditions;
 excluding the impact of any service and non-market performance vesting conditions;
and
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 including the impact of any non-vesting conditions.
Service and non-marketing performance vesting conditions are included in calculation of
the number of options and shares that are expected to vest. The total amount expensed is
recognized over the vesting period, which is the period over which all of the specified vesting
conditions are to be satisfied.
At the end of each reporting period, we revise our estimates of the number of options and
shares that are expected to vest based on the service and non-marketing vesting performance
conditions. We recognize the impact of the revision to original estimates, if any, in the
consolidated statement of comprehensive income, with a corresponding adjustment to equity.
In some circumstances, employees may provide services in advance of the grant date and
therefore the grant date fair value is estimated for the purposes of recognizing the expense
during the period between service commencement period and grant date.
When the share options are forfeited after the vesting date or are still not exercised at the
expiry date, the amount previously recognized in reserves will continue to be held in reserves.
(b) Cash-settled share-based payment transactions
The cost of cash-settled transactions is measured initially at fair value at the grant date.
This fair value is with recognition of a corresponding liability. The liability is re-measured at
each reporting date up to and at the date of settlement, with any changes in fair value
recognized in profit or loss for the period.
(c) Modifications
Where the terms of the share-based payment plan are modified, the expense that is not yet
recognized for the award is recognized over the remaining vesting period as if the terms had
not been modified. If a modification increases the fair value of the equity instruments granted,
the incremental fair value granted is included in the measurement of the amount recognized for
the services received over the remainder of the vesting period. If we modify the terms or
conditions of our equity instruments granted in a manner that reduces the total fair value of the
share-based payment arrangement, or is not otherwise beneficial to the employee, we shall
nevertheless continue to account for the services received as consideration for the equity
instruments granted as if that modification had not occurred.
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Leases
We assesses whether a contract is or contains a lease at inception of a contract. We
recognize a right-of-use asset and a corresponding lease liability with respect to all lease
agreements in which it is the lessee, except for short-term leases (defined as leases with a lease
term of 12 months or less) and leases of low value assets. For these leases, we recognize the
lease payments as an operating expense on a straight-line basis over the term of the lease, and
payments for these leases are presented in the consolidated statement of cash flows from
operating activities.
The lease liability is initially measured at the present value of the lease payments that are
not paid at the commencement date, discounted by using the interest rate implicit in the lease.
If this rate cannot be readily determined, we use our incremental borrowing rate specific to the
country, term and currency of the contract. In addition, we consider our recent debt issuances
as well as publicly available data for instruments with similar characteristics when calculating
the incremental borrowing rates.
Lease payments include fixed payments, less any lease incentives, variable lease
payments that depend on an index or a rate known at the commencement date, and purchase
options or extension option payments if we are reasonably certain to exercise these options.
V ariable lease payments that do not depend on an index or rate are not included in the
measurement of the lease liability and right-of-use asset and are recognized as an expense in
the consolidated statement of comprehensive income in the period in which the event or
condition that triggers those payments occurs.
A lease liability is remeasured upon a change in the lease term, changes in an index or
rate used to determine the lease payments or reassessment of exercise of a purchase option. The
corresponding adjustment is made to the related right-of-use asset.
The right-of-use assets comprise the initial measurement of the corresponding lease
liability, lease payments made at or before the commencement date and any initial direct costs.
They are subsequently measured at cost less accumulated depreciation and impairment losses.
The right-of-use assets are depreciated starting at the commencement date over the shorter
period of useful life of the underlying asset and lease term.
The lease liability is presented in the ‘Lease liabilities’ line and the right-of-use assets are
presented in the ‘Right-of-use assets’ line in the consolidated balance sheet. In addition, the
principal portion of the lease payments and the interest component are presented within
financing activities in the consolidated statement of cash flows.
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DESCRIPTION OF KEY STATEMENT OF COMPREHENSIVE INCOME ITEMS
The table below sets forth our consolidated statements of comprehensive income for the
years/periods indicated derived from our consolidated statements of comprehensive income set
out in the Accountant’s Report included in Appendix I to this Prospectus:
For the year ended December 31,
For the three months
ended March 31,
2020 2021 2022 2022 2023
(RMB in thousands)
(Unaudited)
Revenue 942,238 2,018,399 3,082,637 482,261 644,397
Cost of sales (1) (512,503) (1,064,924) (1,595,991) (247,377) (362,835)
Gross profit 429,735 953,475 1,486,646 234,884 281,562
Selling and marketing
expenses (1) (247,829) (455,001) (412,152) (80,539) (82,849)
General and administrative
expenses (1) (246,493) (541,730) (527,638) (83,178) (101,099)
Research and development
expenses (1) (565,674) (1,249,485) (1,650,010) (225,656) (241,457)
Credit loss allowance (1,992) (15,206) (48,914) (7) (5,578)
Other income 42,583 41,627 62,662 13,535 16,161
Other gains, net 29,604 93,514 63,504 18,066 8,429
Operating loss (560,066) (1,172,806) (1,025,902) (122,895) (124,831)
Share of (losses)/profits of
investments accounted for
using the equity method (6,477) 3,802 (3,200) 538 (791)
Finance income 6,038 24,416 46,183 7,539 12,429
Finance costs (188,978) (647,111) (682,175) (161,393) (194,445)
Loss before income tax (749,483) (1,791,699) (1,665,094) (276,211) (307,638)
Income tax
(expenses)/credit (727) (10,369) 11,673 8,059 3,742
Loss for the year/period (750,210) (1,802,068) (1,653,421) (268,152) (303,896)
Other comprehensive
income/(loss):
Item that may be
reclassified to profit or
loss
Currency translation
differences 1,451 1,837 (7,162) 459 634
Item that will not be
reclassified to profit or
loss
Share of other
comprehensive income/
(loss) of investments
accounted for using the
equity method – 9,160 4,345 895 (266)
FINANCIAL INFORMATION
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For the year ended December 31,
For the three months
ended March 31,
2020 2021 2022 2022 2023
(RMB in thousands)
(Unaudited)
Other comprehensive
income/(loss) for the
year/period, net of tax 1,451 10,997 (2,817) 1,354 368
Total comprehensive loss
for the year/period (748,759) (1,791,071) (1,656,238) (266,798) (303,528)
Loss attributable to:
Owners of the Company (749,650) (1,785,655) (1,644,897) (263,626) (291,344)
Non-controlling interests (560) (16,413) (8,524) (4,526) (12,552)
(750,210) (1,802,068) (1,653,421) (268,152) (303,896)
Total comprehensive loss
attributable to:
Owners of the Company (748,199) (1,774,658) (1,647,714) (262,272) (290,976)
Non-controlling interests (560) (16,413) (8,524) (4,526) (12,552)
(748,759) (1,791,071) (1,656,238) (266,798) (303,528)
Note:
(1) Share-based compensation expenses recognized for the Track Record Period were allocated as follows:
For the year ended December 31,
For the three months
ended March 31,
2020 2021 2022 2022 2023
(RMB in thousands)
(unaudited)
Cost of sales 1,104 4,603 – – –
Selling and marketing expenses 20,726 98,341 8,756 – –
General and administrative expenses 126,467 368,250 278,629 – –
Research and development expenses 25,368 132,440 146,018 – –
Total 173,665 603,634 433,403 – –
FINANCIAL INFORMATION
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Non-IFRS Measures
To supplement our consolidated financial statements presented in accordance with IFRS,
we use adjusted operating loss (a non-IFRS measure) and adjusted net loss (a non-IFRS
measure) as additional financial measures, which are not required by, or presented in
accordance with, IFRS. We believe that these non-IFRS measures facilitate comparisons of
operating performance from period to period and company to company by eliminating potential
impacts of certain items. We believe that these measures provide useful information to
investors in understanding and evaluating our consolidated results of operations in the same
manner as they help our management. However, presentation of adjusted operating loss (a
non-IFRS measure) and adjusted net loss (a non-IFRS measure) may not be comparable to
similarly titled measures presented by other companies. The use of these non-IFRS measures
has limitations as an analytical tool, and investors should not consider them in isolation from,
or as a substitute for analysis of, our results of operations or financial conditions as reported
under IFRS.
Adjusted Operating Loss (a non-IFRS measure)
We define adjusted operating loss (a non-IFRS measure) as operating loss by adding back
share-based compensation and listing expenses. The following table reconciles our adjusted
operating loss (a non-IFRS measure) presented to the most directly comparable financial
measures calculated and presented in accordance with IFRS, namely operating loss and as a
percentage of our total revenue.
For the year ended December 31, For the three months ended March 31,
2020 2021 2022 2022 2023
RMB % RMB % RMB % RMB % RMB %
(RMB in thousands, except for percentage)
(unaudited)
Reconciliation of
operating loss and
adjusted operating loss
(non-IFRS measure)
Operating loss (560,066) (59.4) (1,172,806) (58.1) (1,025,902) (33.3) (122,895) (25.5) (124,831) (19.4)
Add:
Share-based
compensation 173,665 18.4 603,634 29.9 433,403 14.1 – – – –
Listing expenses – – 672 0.0 44,720 1.5 42,687 8.9 47,985 7.4
Adjusted operating loss
(non-IFRS measure) (386,401) (41.0) (568,500) (28.2) (547,779) (17.8) (80,208) (16.6) (76,846) (11.9)
FINANCIAL INFORMATION
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Adjusted Net Loss (a non-IFRS measure)
We define adjusted net loss (a non-IFRS measure) as loss for the year/period by adding
back share-based compensation, interest expense on redemption liabilities and listing expenses.
The following table reconciles our adjusted net loss (a non-IFRS measure) presented to the
most directly comparable financial measures calculated and presented in accordance with
IFRS, namely loss for the year/period and as a percentage of our total revenue.
For the year ended December 31, For the three months ended March 31,
2020 2021 2022 2022 2023
RMB % RMB % RMB % RMB % RMB %
(RMB in thousands, except for percentage)
(unaudited)
Reconciliation of loss for
the year/period and
adjusted net loss
(non-IFRS measure)
Loss for the year/period (750,210) (79.6) (1,802,068) (89.2) (1,653,421) (53.6) (268,152) (55.6) (303,896) (47.2)
Add:
Share-based
compensation 173,665 18.4 603,634 29.9 433,403 14.1 – – – –
Interest expense on
redemption liabilities 186,240 19.8 638,682 31.6 670,963 21.8 158,684 32.9 190,778 29.6
Listing expenses – – 672 0.0 44,720 1.5 42,687 8.9 47,985 7.4
Adjusted net loss
(non-IFRS measure) (390,305) (41.4) (559,080) (27.7) (504,335) (16.4) (66,781) (13.8) (65,133) (10.1)
Our management considers that (i) share-based compensation, which relates to options
and shares that we awarded to our employees for their contribution to us, is non-cash in nature
and does not result in cash outflow, (ii) interest expense on redemption liabilities is a non-cash
item, and (iii) listing expenses, which relate to this Global Offering. Therefore, by eliminating
the impacts of such items in the calculation of adjusted operating loss (a non-IFRS measure)
and adjusted net loss (a non-IFRS measure), this measure could better reflect our underlying
operating performance and could better facilitate the comparison of operating performance
from year to year and from period to period.
FINANCIAL INFORMATION
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Revenue
During the Track Record Period, we primarily derived revenue from providing (i) Sage
Platform and applications, and (ii) application development and other services. The table below
sets forth a breakdown of our revenue, in absolute amounts and as percentages of total revenue,
for the years/periods indicated:
For the year ended December 31, For the three months ended March 31,
2020 2021 2022 2022 2023
RMB % RMB % RMB % RMB % RMB %
(in thousands, except for percentages)
(unaudited)
Sage Platform and
applications
Software licensing 157,888 16.8 356,156 17.6 596,001 19.3 87,170 18.1 103,429 16.1
SageOne 461,041 48.9 658,398 32.7 895,850 29.1 160,682 33.3 168,306 26.1
Sub-total 618,929 65.7 1,014,554 50.3 1,491,851 48.4 247,852 51.4 271,735 42.2
Application development
and other services 323,309 34.3 1,003,845 49.7 1,590,786 51.6 234,409 48.6 372,662 57.8
Total 942,238 100.0 2,018,399 100.0 3,082,637 100.0 482,261 100.0 644,397 100.0
 Sage Platform and applications . We offer enterprise AI solutions and generate
revenue from sales of our Sage Platform and applications. The Sage Platform and
applications are delivered primarily through (i) license of software installed
on-premise at servers of our end users and (ii) software-defined “All-in-One”
solutions, SageOne, with prebuilt Sage Platform and applications, both of which
allow our users to develop their own AI applications on Sage Platform. As our users
develop more AI applications for new use cases on our platform and/or increase
usage in existing use cases which require more computing power, they will need to
purchase additional licenses from us for additional computing power, which in turn
allows us to capture additional monetization opportunities on a recurring basis. The
price of our software license is primarily based on the estimated computing power
consumption by reference to the AI applications our users plan to deploy. We charge
customers of SageOne by taking into account the number of hardware, required
computing power, license fees of our software and service fees for deployment,
operation and maintenance.
FINANCIAL INFORMATION
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 Application development and other services . At our users’ request, we primarily
offer application development services to help them develop customized AI
applications on Sage Platform based on their business needs. We charge them on a
project basis, the pricing of which is primarily based on the manpower consumption
of the relevant services. In 2020, 2021, 2022 and in the three months ended March
31, 2022 and 2023, the number of our AI application customization project, on a
contract number basis, was 213, 357, 908, 147 and 229, respectively. The average
revenue per contract was RMB1.4 million, RMB2.2 million, RMB1.7 million,
RMB1.6 million and RMB1.6 million in 2020, 2021, 2022 and in the three months
ended March 31, 2022 and 2023, respectively. Based on the business needs of our
users, the contract value of our AI application customization projects varies from
project to project, and may range up to over RMB30 million. As our users’ demand
for AI applications increases with their business expansion, they will continue to
procure our application development services, allowing us to capture more service
fees on an on-going basis. To a lesser extent, we also offer other services, which
primarily include AI-empowered precision marketing services that help enterprises
optimize their marketing activities.
See “Business – Our Enterprise AI Solutions” for more information about our enterprise
AI solutions.
Cost of Sales
Our cost of sales consists primarily of (i) cost of finished goods sold, which primarily
represents procurement cost of hardware components from third-party vendors; (ii) technology
service fees; (iii) employee benefit expenses, which primarily represent wages and benefits of
our implementation and maintenance personnel for our enterprise AI solutions; and (iv) others.
Technology service fees primarily represent technology implementation costs paid to third-
party service providers for delivery, deployment and installation of customized AI applications
that we develop at users’ request. These tasks are not sophisticated but would require large
amounts of manpower. Hence, we decided to outsource to third-party services providers to save
costs and to allow us focus on our core technology R&D operations. Such costs are incurred
at the deployment stage and do not recur after deployment. These service providers are
typically IT and technology outsourcing service providers in China. To the best of our
knowledge, during the Track Record Period and up to the Latest Practicable Date, all of such
service providers were Independent Third Parties. During the Track Record Period and up to
the Latest Practicable Date, other than as disclosed above and to the best of our knowledge,
none of us, our Directors, Supervisors, senior management, or any of our shareholders (who or
which to the knowledge of the Directors owned more than 5% of our issued share capital) and
any of their respective associates had any interest in, or any other past or present relationships
(business, employment, family, trust, financing or otherwise) with such service providers or
their ultimate beneficial owners, as applicable.
FINANCIAL INFORMATION
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The table below sets forth a breakdown of our cost of sales by nature, in absolute amounts
and percentages, for the years/periods indicated:
For the year ended December 31, For the three months ended March 31,
2020 2021 2022 2022 2023
RMB % RMB % RMB % RMB % RMB %
(in thousands, except for percentages)
(unaudited)
Technology service fees 149,793 29.2 491,093 46.1 778,981 48.8 135,987 55.0 200,039 55.1
Cost of finished goods sold 323,595 63.1 434,021 40.8 613,183 38.4 89,965 36.4 128,206 35.3
Employee benefit
expenses
(1) 24,181 4.7 78,644 7.4 154,022 9.7 16,679 6.7 28,542 7.9
Others (2) 14,934 3.0 61,166 5.7 49,805 3.1 4,746 1.9 6,048 1.7
Total 512,503 100.0 1,064,924 100.0 1,595,991 100.0 247,377 100.0 362,835 100.0
Notes:
(1) Include share-based compensation to implementation and maintenance personnel in the amount of RMB1.1
million, RMB4.6 million, nil, nil and nil in 2020, 2021, 2022 and in the three months ended March 31, 2022
and 2023, respectively, accounting for 0.2%, 0.4%, nil, nil and nil of our cost of sales in the respective
year/period.
(2) Others primarily consist of (i) business travel expenses and (ii) cloud services and other technical service fees.
We incur cloud services and other technical service fees in relation to our customized application development
services to address our users’ specific needs.
With the penetration of AI technologies, users have great demand for customized
industry-specific AI applications. In this regard, we have collaborated with third-party service
providers for delivery, deployment and installation of customized AI applications that we
develop at users’ request. During the Track Record Period, the increase in our technology
service fees were primarily attributable to the increased technology implementation costs paid
to third-party service providers to develop customized industry-specific AI applications, which
is in line with the increase in our revenue generated from customized AI application
development services which is categorized under the “application development and other
services” segment. Such increase was primarily attributable to increased demands for
customized industry-specific AI applications from users in verticals we have expanded into,
such as wind power, telecommunication and manufacture. Our revenue generated from
customized AI application development services was RMB293.3 million, RMB972.2 million,
RMB1,587.8 million, RMB233.3 million and RMB372.0 million in 2020, 2021, 2022 and in
the three months ended March 31, 2022 and 2023, respectively.
FINANCIAL INFORMATION
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The table below sets forth a breakdown of our cost of sales, in absolute amounts and
percentages, for the years/periods indicated:
For the year ended December 31, For the three months ended March 31,
2020 2021 2022 2022 2023
RMB % RMB % RMB % RMB % RMB %
(in thousands, except for percentages)
(unaudited)
Sage Platform and
applications
Software licensing 4,986 1.0 19,251 1.8 31,123 2.0 6,458 2.6 6,857 1.9
SageOne 333,985 65.1 478,768 45.0 664,359 41.6 113,030 45.7 131,407 36.2
Subtotal 338,971 66.1 498,019 46.8 695,482 43.6 119,488 48.3 138,264 38.1
Application development
and other services 173,532 33.9 566,905 53.2 900,509 56.4 127,889 51.7 224,571 61.9
Total 512,503 100.0 1,064,924 100.0 1,595,991 100.0 247,377 100.0 362,835 100.0
Gross Profit and Gross Profit Margin
Our gross profit increased by 121.9% from RMB429.7 million in 2020 to RMB953.5
million in 2021, and further by 55.9% to RMB1,486.6 million in 2022, and increased by 19.9%
from RMB234.9 million in the three months ended March 31, 2022 to RMB281.6 million in
the three months ended March 31, 2023 in line with our growth in revenue during the Track
Record Period. Our overall gross profit margin increased from 45.6% in 2020 to 47.2% in
2021, primarily due to the increase of revenue contribution of application development and
other services, which had relatively high gross profit margins, mainly as a result of recovery
from the negative impact of COVID-19. Our overall gross profit margin further increased to
48.2% in 2022, primarily due to the increase of revenue contribution of software licensing,
which had relatively high gross profit margins, as software licensing requires less on-site
services than our other segments, and thus was less affected by the recurrence of COVID-19.
Our overall gross profit margin decreased from 48.7% in the three months ended March 31,
2022 to 43.7% in the three months ended March 31, 2023, primarily due to the increase of
revenue contribution of SageOne and application development and other services, which had
lower gross profit margins compared with software licensing.
FINANCIAL INFORMATION
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The table below sets forth a breakdown of our gross profit and gross profit margin for the
years/periods indicated:
For the year ended December 31, For the three months ended March 31,
2020 2021 2022 2022 2023
Gross
profit
Gross
profit
margin
Gross
profit
Gross
profit
margin
Gross
profit
Gross
profit
margin
Gross
profit
Gross
profit
margin
Gross
profit
Gross
profit
margin
RMB % RMB % RMB % RMB % RMB %
(in thousands, except for percentages)
(unaudited)
Sage Platform and
applications
Software licensing 152,902 96.8 336,905 94.6 564,878 94.8 80,712 92.6 96,572 93.4
SageOne 127,056 27.6 179,630 27.3 231,491 25.8 47,652 29.7 36,899 21.9
Subtotal 279,958 45.2 516,535 50.9 796,369 53.4 128,364 51.8 133,471 49.1
Application development
and other services 149,777 46.3 436,940 43.5 690,277 43.4 106,520 45.4 148,091 39.7
Total 429,735 45.6 953,475 47.2 1,486,646 48.2 234,884 48.7 281,562 43.7
Selling and Marketing Expenses
Our selling and marketing expenses are incurred primarily to increase our brand
awareness and expand our user base. Our selling and marketing expenses consist primarily of
(i) employee benefit expenses, which primarily represents wages and benefits of our selling
and marketing staff, (ii) advertising and marketing expenses and (iii) others. The following
table sets forth a breakdown of our selling and marketing expenses by nature, in absolute
amounts and percentages, for the years/periods indicated:
For the year ended December 31, For the three months ended March 31,
2020 2021 2022 2022 2023
RMB % RMB % RMB % RMB % RMB %
(in thousands, except for percentages)
(unaudited)
Advertising and marketing
expenses 99,570 40.2 167,060 36.7 198,035 48.0 31,370 39.0 36,245 43.7
Employee benefit
expenses (1) 131,605 53.1 246,384 54.2 166,380 40.4 39,805 49.4 36,205 43.7
Others (2) 16,654 6.7 41,557 9.1 47,737 11.6 9,364 11.6 10,399 12.6
Total 247,829 100.0 455,001 100.0 412,152 100.0 80,539 100.0 82,849 100.0
FINANCIAL INFORMATION
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Notes:
(1) Include share-based compensation for selling and marketing staff in the amount of RMB20.7 million,
RMB98.3 million, RMB8.8 million, nil and nil in 2020, 2021, 2022 and in the three months ended March
31, 2022 and 2023, respectively, accounting for 8.4%, 21.6%, 2.1%, nil and nil of our selling and
marketing expenses in the respective year/period.
(2) Others primarily consist of (i) technology service fees, (ii) business travel expenses, (iii) depreciation
of property and equipment, (iv) amortization of intangible assets and (v) depreciation of right-of-use
assets.
Our selling and marketing expenses accounted for 26.3%, 22.5%, 13.4%, 16.7% and
12.9% of our total revenue in 2020, 2021, 2022 and in the three months ended March 31, 2022
and 2023, respectively.
General and Administrative Expenses
Our general and administrative expenses consist primarily of (i) employee benefit
expenses, which primarily represent wages and benefits of our administrative and other staff;
(ii) professional fees and (iii) others.
The table below sets forth a breakdown of our general and administrative expenses by
nature, in absolute amounts and percentages, for the years/periods indicated:
For the year ended December 31, For the three months ended March 31,
2020 2021 2022 2022 2023
RMB % RMB % RMB % RMB % RMB %
(in thousands, except for percentages)
(unaudited)
Employee benefit
expenses (1) 196,907 79.9 465,013 85.8 417,404 79.1 28,418 34.2 36,252 35.9
Professional fees 16,789 6.8 34,177 6.3 61,286 11.6 45,613 54.8 52,059 51.5
Others
(2) 32,797 13.3 42,540 7.9 48,948 9.3 9,147 11.0 12,788 12.6
Total 246,493 100.0 541,730 100.0 527,638 100.0 83,178 100.0 101,099 100.0
Notes:
(1) Include share-based compensation for administrative and other staff in the amount of RMB126.5
million, RMB368.3 million, RMB278.6 million, nil and nil in 2020, 2021, 2022 and in the three months
ended March 31, 2022 and 2023, respectively, accounting for 51.3%, 68.0%, 52.8%, nil and nil of our
general and administrative expenses in the respective year/period.
(2) Others primarily consist of (i) depreciation of property and equipment, (ii) amortization of intangible
assets, (iii) technology service fees, (iv) business travel expenses, and (v) depreciation of right-of-use
assets.
Our general and administrative expenses accounted for 26.2%, 26.8%, 17.1%, 17.2% and
15.7% of our total revenue in 2020, 2021, 2022 and in the three months ended March 31, 2022
and 2023, respectively.
FINANCIAL INFORMATION
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Research and Development Expenses
Our research and development expenses are incurred primarily to develop and enhance
our solutions and technology stacks. The main components of our research and development
expenses include (i) technology service fees, which primarily represent outsourcing costs for
certain non-core and less sophisticated research and development projects, (ii) employee
benefit expenses, which primarily represent wages and benefits of our research and
development staff and (iii) others. To focus on our core research and development activities,
we have outsourced certain non-core and less sophisticated research and development projects
to third-party research and development service providers. We are entitled to all copyrights in
relation to the R&D projects, including but not limited to the technical materials, documents,
source codes and applications. When deciding the types of research and development projects
could be outsourced, we primarily consider two criteria, including (i) not core to our Sage
Platform, such as the development of applications in our AI application store and
miscellaneous product modules and the design of user interfaces, and (ii) not sophisticated but
would require large amounts of manpower, such as product testing.
The following table sets forth the breakdown of our research and development expenses
by nature, in absolute amount and percentages, for the years/periods indicated.
For the year ended December 31, For the three months ended March 31,
2020 2021 2022 2022 2023
RMB % RMB % RMB % RMB % RMB %
(in thousands, except for percentages)
(unaudited)
Technology service fees 289,769 51.2 841,301 67.3 1,218,567 73.9 147,424 65.3 169,932 70.4
Employee benefit
expenses (1) 211,076 37.3 336,487 26.9 369,993 22.4 54,715 24.2 59,699 24.7
Others (2) 64,829 11.5 71,697 5.8 61,450 3.7 23,517 10.5 11,826 4.9
Total 565,674 100.0 1,249,485 100.0 1,650,010 100.0 225,656 100.0 241,457 100.0
Notes:
(1) Include share-based compensation for research and development staff in the amount of RMB25.4
million, RMB132.4 million, RMB146.0 million, nil and nil in 2020, 2021, 2022 and in the three months
ended March 31, 2022 and 2023, respectively, accounting for 4.5%, 10.6%, 8.8%, nil and nil of our
research and development expenses in the respective year/period.
(2) Others primarily consist of (i) depreciation of property and equipment, (ii) amortization of intangible
assets, (iii) cloud services and other technical service fees, (iv) business travel expenses, and
(v) depreciation of right-of-use assets.
FINANCIAL INFORMATION
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Our research and development expenses accounted for 60.0%, 61.9%, 53.5%, 46.8% and
37.5% of our total revenue in 2020, 2021, 2022, and the three months ended March 31, 2022
and 2023, respectively.
Credit Loss Allowance
Our credit loss allowance mainly includes the credit loss allowance on trade receivables,
contract assets and other receivables. In 2020, 2021, 2022 and the three months ended March
31, 2022 and 2023, we had credit loss allowance of RMB2.0 million, RMB15.2 million,
RMB48.9 million, RMB7 thousand and RMB5.6 million, respectively.
Other Income
Our other income consists primarily of (i) government grants, which mainly relate to
contributions to technology development and investments in local business districts, and (ii)
value-added tax and other tax refunds. In 2020, 2021, 2022 and the three months ended
March 31, 2022 and 2023, we had other income of RMB42.6 million, RMB41.6 million,
RMB62.7 million, RMB13.5 million and RMB16.2 million, respectively.
Other Gains, Net
Our other gains, net consist primarily of (i) fair value changes on financial assets at fair
value through profit or loss, (ii) fair value changes on financial liabilities at fair value through
profit or loss, and (iii) net gains on disposal/transfer/dilution of investments accounted for
using the equity method. In 2020, 2021, 2022 and the three months ended March 31, 2022 and
2023, we had other gains, net of RMB29.6 million, RMB93.5 million, RMB63.5 million,
RMB18.1 million and RMB8.4 million, respectively.
Operating Loss
As a result of the foregoing, in 2020, 2021, 2022 and the three months ended March 31,
2022 and 2023, we had operating loss of RMB560.1 million, RMB1,172.8 million,
RMB1,025.9 million, RMB122.9 million and RMB124.8 million, respectively.
Share of (Losses)/Profits of Investments Accounted for Using the Equity Method
In 2020, 2022 and the three months ended March 31, 2023, we had share of losses of
investments accounted for using the equity method of RMB6.5 million, RMB3.2 million and
RMB0.8 million, respectively. In 2021 and the three months ended March 31, 2022, we had
share of profits of investments accounted for using the equity method of RMB3.8 million and
RMB0.5 million, respectively.
Finance Income
Our finance income consist primarily of interest income from bank deposits. In 2020,
2021, 2022 and the three months ended March 31, 2022 and 2023, we had finance income of
RMB6.0 million, RMB24.4 million, RMB46.2 million, RMB 7.5 million and RMB12.4
million, respectively.
FINANCIAL INFORMATION
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Finance Costs
Our finance costs consist primarily of (i) interest expense on redemption liabilities and
(ii) other finance costs. We incurred interest expense on redemption liabilities primarily due to
certain preferred rights historically granted to our investors, which had been amortized with
interests charged. See “Discussion of Selected Items from the Consolidated Statements of
Financial Position – Liabilities – Redemption Liabilities.”
The following table sets forth a breakdown of our finance costs for the years/periods
indicated:
For the year ended December 31, For the three months ended March 31,
2020 2021 2022 2022 2023
RMB % RMB % RMB % RMB % RMB %
(in thousands, except for percentages)
(unaudited)
Interest expense on
redemption
liabilities 186,240 98.6 638,682 98.7 670,963 98.4 158,684 98.3 190,778 98.1
Other finance costs
(1) 2,738 1.4 8,429 1.3 11,212 1.6 2,709 1.7 3,667 1.9
Total 188,978 100.0 647,111 100.0 682,175 100.0 161,393 100.0 194,445 100.0
Note:
(1) Other finance costs primarily consist of (i) interest expense on lease liabilities, (ii) interest expense on
borrowings, and (iii) amortized amounts on payable for acquisition of subsidiaries.
Income Tax (Expenses)/Credit
Our income tax (expenses)/credit consisted primarily of (i) current income tax and (ii)
deferred income tax. In 2020, 2021, 2022 and the three months ended March 31, 2022 and
2023, we recorded income tax expenses of RMB0.7 million and RMB10.4 million and income
tax credit of RMB11.7 million, RMB8.1 million and RMB3.7 million, respectively. In 2020 and
2021, we incurred income tax expenses even though we had losses before income tax mainly
attributable to the temporary tax differences incurred as a result of fair value changes of our
equity investments and financial instruments. In 2022 and the three months ended March 31,
2022 and 2023, we incurred income tax credit mainly attributable to the temporary tax
differences incurred as a result of fair value changes of our financial instruments and the
amortization of our intangible assets acquired through business combination.
TAXATION
PRC
We and our subsidiaries in China are generally subject to a general PRC enterprise income
tax (“EIT”) at the statutory rate of 25%. Fourth Paradigm (Beijing) Data & Technology Co.,
Ltd., one of our subsidiaries in the PRC, enjoyed a three-year preferential tax treatment for
high and new technology enterprises at the reduced EIT rate of 15% during the Track Record
Period, and we consider it can be qualified as a high and new technology enterprise for renewal
of such preferential tax treatment in the foreseeable future.
FINANCIAL INFORMATION
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The State Taxation Administration of the People’s Republic of China announced in
September 2018 that enterprises engaging in research and development activities would be
entitled to claim 175% of their research and development expenses (“Super Deduction”) from
January 1, 2018 to December 31, 2020, and announced in March 2021 the extension of this
preferential claim percentage to December 31, 2023. As announced in March 2022 and
September 2022, technology-based small and medium-sized enterprise would be entitled to
claim 200% of their research and development expenses from January 1, 2022 and other
enterprises would entitle to claim 200% of their research and development expenses from
October 1, 2022 to December 31, 2022. As announced in March 2023, enterprises engaging in
research and development activities would entitle to claim 200% of their research and
development expenses as Super Deduction from January 1, 2023. We have made our best
estimate for the Super Deduction to be claimed for our entities in ascertaining our assessable
profits during the Track Record Period.
Hong Kong
Our subsidiary incorporated in Hong Kong is subject to Hong Kong profits tax of which
the tax rate is 8.25% for assessable profits in the first HK$2 million and 16.5% for any
assessable profits in excess of HK$2 million. No provision for Hong Kong profits tax was
made as we had no estimated assessable profit that was subject to Hong Kong profits tax during
the Track Record Period.
Singapore
Entities incorporated in Singapore are subject to Singapore income tax at a rate of 17%
for taxable income earned in Singapore. No provision for Singapore income tax was made as
we had no estimated assessable profit that were subject to Singapore income tax during the
Track Record Period.
DISCUSSION OF RESULTS OF OPERATIONS
Three Months Ended March 31, 2023 Compared with Three Months Ended March 31,
2022
Revenue
Our revenue increased by 33.6% from RMB482.3 million in the three months ended
March 31, 2022 to RMB644.4 million in the three months ended March 31, 2023, attributable
to (i) an increase by 59.0% in the revenue generated by our application development and other
services from RMB234.4 million in the three months ended March 31, 2022 to RMB372.7
million in the three months ended March 31, 2023, and (ii) an increase by 9.6% in the revenue
generated from our Sage Platform and applications from RMB247.9 million in the three months
ended March 31, 2022 to RMB271.7 million in the three months ended March 31, 2023. Our
revenue increases were primarily driven by the expansion in our number of users from 125 in
the three months ended March 31, 2022 to 147 in the three months ended March 31, 2023, as
well as increased user spending evidenced by the increase of our average revenue per user from
RMB6.7 million to RMB9.4 million in the same periods.
FINANCIAL INFORMATION
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 Sage Platform and applications . Revenue from sales of our Sage Platform and
applications increased by 9.6% from RMB247.9 million in the three months ended
March 31, 2022 to RMB271.7 million in the three months ended March 31, 2023 as
a result of our business expansion efforts. More specifically, revenue from software
licensing increased by 18.7% from RMB87.2 million in the three months ended
March 31, 2022 to RMB103.4 million in the three months ended March 31, 2023,
primarily driven by the growth of our user base and user spending on our software
licensing. Revenue from SageOne increased by 4.7% from RMB160.7 million in the
three months ended March 31, 2022 to RMB168.3 million in the three months ended
March 31, 2023, primarily due to an expansion of our user base for SageOne as it
becomes increasingly well received by users.
 Application development and other services . Revenue from application
development and other services increased by 59.0% from RMB234.4 million in the
three months ended March 31, 2022 to RMB372.7 million in the three months ended
March 31, 2023. We believe that these increases were mainly due to the growth of
our user base.
Cost of Sales
Our cost of sales increased by 46.7% from RMB247.4 in the three months ended March
31, 2022 to RMB362.8 million in the three months ended March 31, 2023. The increase in cost
of sales was primarily due to the increase in technology service fees by 47.1% from RMB136.0
million in the three months ended March 31, 2022 to RMB200.0 million in the three months
ended March 31, 2023, which was due to our increased use of third-party deployment service
providers in line with the increase of our revenue generated from customized AI application
development services.
For Sage Platform and applications, our cost of sales for software licensing increased
slightly from RMB6.5 million in the three months ended March 31, 2022 to RMB6.9 million
in the three months ended March 31, 2023, and our cost of sales for SageOne increased by
16.3% from RMB113.0 million to RMB131.4 million in the same periods. For application
development and other services, our cost of sales for AI applications customization increased
by 75.6% from RMB127.9 million in the three months ended March 31, 2022 to RMB224.6
million in the three months ended March 31, 2023, in line with the increase of our revenue
generated from customized AI application development services.
Gross Profit and Gross Profit Margin
As a result of the foregoing, our overall gross profit increased by 19.9% from RMB234.9
million in the three months ended March 31, 2022 to RMB281.6 million in the three months
ended March 31, 2023. Our gross profit margin decreased from 48.7% for the three months
ended March 31, 2022 to 43.7% for the three months ended March 31, 2023, primarily due to
the increase of revenue contribution from SageOne and application development and other
services, which have lower gross profit margins compared with software licensing. Our gross
FINANCIAL INFORMATION
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profit margin for software licensing kept stable in the three months ended March 31, 2022 and
2023, being 92.6% and 93.4%, respectively. Our gross profit margin for SageOne decreased
from 29.7% in the three months ended March 31, 2022 to 21.9% in the three months ended
March 31, 2023, primarily because some of our SageOne solutions launched recently are at an
early stage of commercialization and have relatively low gross profit margins. For application
development and other services, our gross profit margin decreased from 45.4% in the three
months ended March 31, 2022 to 39.7% in the three months ended March 31, 2023, primarily
because we increased our investment in customer acquisition to pursue long-term business
relationships.
Selling and Marketing Expenses
Our selling and marketing expenses slightly increased by 2.9% from RMB80.5 million in
the three months ended March 31, 2022 to RMB82.8 million in the three months ended March
31, 2023, primarily due to the increase of advertising and marketing expenses from RMB31.4
million to RMB36.2 million in the same periods.
General and Administrative Expenses
Our general and administrative expenses slightly increased by 21.5% from RMB83.2
million in the three months ended March 31, 2022 to RMB101.1 million in the three months
ended March 31, 2023, mainly attributable to the increase of employee benefit expenses from
RMB28.4 million to RMB36.3 million in the same periods, primarily due to the increased
headcounts of general and administrative staff.
Research and Development Expenses
Our research and development expenses increased by 7.0% from RMB225.7 million in the
three months ended March 31, 2022 to RMB241.5 million in the three months ended March 31,
2023. The increase was primarily attributable to the increase of technology service fees from
RMB147.4 million in the three months ended March 31, 2022 to RMB169.9 million in the three
months ended March 31, 2023, illustrating our continuous investments in research and
development activities.
Credit Loss Allowance
Our credit loss allowance increased from 7 thousand in the three months ended March 31,
2022 to RMB5.6 million in the three months ended March 31, 2023, primarily due to provisions
made for individually impaired trade receivables from specific customers identified with
recoverability issues.
Other Income
Our other income increased by 19.4% from RMB13.5 million in the three months ended
March 31, 2022 to RMB16.2 million in the three months ended March 31, 2023, primarily due
to the increase in value-added tax and other tax refunds from RMB10.9 million to RMB13.9
million, primarily as a result of our revenue growth.
FINANCIAL INFORMATION
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Other Gains, Net
Our other gains, net decreased by 53.3% from RMB18.1 million in the three months
ended March 31, 2022 to RMB8.4 million the three months ended March 31, 2023, primarily
due to a decrease in fair value changes on financial assets at fair value through profit or loss
in relation to the wealth management products we held from RMB18.6 million to RMB6.2
million in the same periods.
Operating Loss
As a result of the foregoing, our operating loss increased by 1.6% from RMB122.9
million in the three months ended March 31, 2022 to RMB124.8 million in the three months
ended March 31, 2023.
Share of (Losses)/Profits of Investments Accounted for Using the Equity Method
We recorded RMB0.5 million in share of profits of investments accounted for using the
equity method and RMB0.8 million in share of losses of investments accounted for using the
equity method in the three months ended March 31, 2022 and 2023, respectively.
Finance Income
Our finance income increased by 64.9% from RMB7.5 million in the three months ended
March 31, 2022 to RMB12.4 million in the three months ended March 31, 2023, primarily due
to the increase of our interest income from bank deposits.
Finance Costs
Our finance costs increased by 20.5% from RMB161.4 million in the three months ended
March 31, 2022 to RMB194.4 million in the three months ended March 31, 2023, primarily due
to the increase of interest expense on redemption liabilities resulted from amortization of
certain preferred rights that we granted to investors historically.
Income Tax (Expenses)/Credit
Our income tax credit decreased from RMB8.1 million in the three months ended March
31, 2022 to RMB3.7 million in the three months ended March 31, 2023, primarily due to
impacts of deferred taxes in connection with fair value changes of our financial instruments
and the amortization of our intangible assets acquired through business combination.
FINANCIAL INFORMATION
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Y ear Ended December 31, 2022 Compared with the Y ear Ended December 31, 2021
Revenue
Our revenue increased by 52.7% from RMB2,018.4 million in 2021 to RMB3,082.6
million in 2022, which was attributable to (i) an increase by 47.0% in the revenue generated
from our Sage Platform and applications from RMB1,014.6 million in 2021 to RMB1,491.9
million in 2022, and (ii) an increase by 58.5% in the revenue generated by our application
development and other services from RMB1,003.8 million in 2021 to RMB1,590.8 million in
2022. Our revenue increases were primarily driven by the expansion in our number of users
from 245 in 2021 to 409 in 2022, as well as increased user spending evidenced by the increase
of our average revenue per lighthouse user from 13.7 million in 2021 to 17.9 million.
 Sage Platform and applications . Revenue from sales of our Sage Platform and
applications increased by 47.0% from RMB1,014.6 million in 2021 to RMB1,491.9
million in 2022 as a result of our business expansion efforts. More specifically,
revenue from software licensing increased by 67.3% from RMB356.2 million in
2021 to RMB596.0 million in 2022, primarily driven by the growth of our user base
and user spending on our software licensing. Revenue from SageOne increased by
36.1% from RMB658.4 million in 2021 to RMB895.9 million in 2022, primarily due
to an expansion of our user base for SageOne as it becomes increasingly well
received by users.
 Application development and other services . Revenue from application
development and other services increased by 58.5% from RMB1,003.8 million in
2021 to RMB1,590.8 million in 2022. We believe that these increases were mainly
due to the growth of our user base.
Cost of Sales
Our cost of sales increased by 49.9% from RMB1,064.9 million in 2021 to RMB1,596.0
million in 2022. The increase in cost of sales was primarily due to the increase in technology
service fees by 58.6% from RMB491.1 million in 2021 to RMB779.0 million in 2022, which
was due to our increased use of third-party deployment service providers in line with the
increase of our revenue generated from customized AI application development services.
For Sage Platform and applications, our cost of sales for software licensing increased
significantly from RMB19.3 million in 2021 to RMB31.1 million in 2022 in line with the
revenue growth, and our cost of sales for SageOne increased by 38.8% from RMB478.8 million
in 2021 to RMB664.4 million in 2022. For application development and other services, our cost
of sales for AI applications customization increased by 58.8% from RMB566.9 million in 2021
to RMB900.5 million in 2022, in line with the increase of our revenue generated from
customized AI application development services.
FINANCIAL INFORMATION
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Gross Profit and Gross Profit Margin
As a result of the foregoing, our overall gross profit increased by 55.9% from RMB953.5
million in 2021 to RMB1,486.6 million in 2022, in line with our growth in revenue during the
same periods. Our gross profit margin increased from 47.2% in 2021 to 48.2% in 2022,
primarily due to the increase of revenue contribution of software licensing, which had
relatively high gross profit margins as software licensing requires less on-site services than our
other segments and thus was less affected by the recurrence of COVID-19 in 2022. Our gross
profit margin for software licensing kept stable in 2021 and 2022, being 94.6% and 94.8%,
respectively. Our gross profit margin for SageOne decreased slightly from 27.3% in 2021 to
25.8% in 2022. For application development and other services, our gross profit margin kept
stable in 2021 and 2022, being 43.5% and 43.4%, respectively.
Selling and Marketing Expenses
Our selling and marketing expenses decreased by 9.4% from RMB455.0 million in 2021
to RMB412.2 million in 2022. The decrease was attributable to a decrease in employee benefit
expenses by 32.5% from RMB246.4 million in 2021 to RMB166.4 million in 2022, mainly
attributable to the decrease in employee benefit expenses of RMB80.0 million, in relation to
the decreased share-based compensation in 2022.
General and Administrative Expenses
Our general and administrative expenses slightly decreased by 2.6% from RMB541.7
million in 2021 to RMB527.6 million in 2022, which was mainly attributable to the decrease
in employee benefit expenses of RMB47.6 million, in relation to the decreased share-based
compensation in 2022.
Research and Development Expenses
Our research and development expenses increased by 32.1% from RMB1,249.5 million in
2021 to RMB1,650.0 million in 2022. The increase was primarily attributable to the increase
of technology service fees by 44.8% from RMB841.3 million to RMB1,218.6 million,
illustrating our continuous investments in research and development activities.
Credit Loss Allowance
Our credit loss allowance increased by 221.7% from RMB15.2 million in 2021 to
RMB48.9 million in 2022. The increase was mainly attributable to our significantly increased
trade receivables due to our revenue increases.
FINANCIAL INFORMATION
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Other Income
Our other income increased by 50.5% from RMB41.6 million in 2021 to RMB62.7
million in 2022, primarily due to the increase in value-added tax and other tax refunds from
RMB36.5 million to RMB52.4 million, primarily as a result of our revenue growth.
Other Gains, Net
Our other gains, net decreased by 32.1% from RMB93.5 million in 2021 to RMB63.5
million in 2022, primarily due to a decrease in fair value changes on financial assets at fair
value through profit or loss from RMB85.6 million in 2021 to RMB53.5 million in 2022 in
relation to the wealth management products we held.
Operating Loss
As a result of the foregoing, our operating loss decreased by 12.5% from RMB1,172.8
million in 2021 to RMB1,025.9 million in 2022. Overall, the decrease of our operating loss was
due to the improvement of our operational efficiency.
Share of (Losses)/Profits of Investments Accounted for Using the Equity Method
We recorded RMB3.8 million in share of profits of investments accounted for using the
equity method and RMB3.2 million in share of losses of investments accounted for using the
equity method in 2021 and 2022, respectively.
Finance Income
Our finance income increased by 89.2% from RMB24.4 million in 2021 to RMB46.2
million in 2022, primarily due to the increase of our interest income from bank deposits.
Finance Costs
Our finance costs kept stable, being RMB647.1 million in 2021 and RMB682.2 million
in 2022.
Income Tax (Expenses)/Credit
We incurred income tax expenses of RMB10.4 million in 2021 and income tax credit of
RMB11.7 million in 2022. The change in the tax expenses was primarily due to impacts of
deferred taxes in connection with fair value changes of our financial instruments and the
amortization of our intangible assets acquired through business combination.
FINANCIAL INFORMATION
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Y ear Ended December 31, 2021 Compared with the Y ear Ended December 31, 2020
Revenue
Our revenue increased by 114.2% from RMB942.2 million in 2020 to RMB2,018.4
million in 2021, which was attributable to (i) an increase by 210.5% in the revenue generated
by our application development and other services from RMB323.3 million in 2020 to
RMB1,003.8 million in 2021 and (ii) an increase by 63.9% in the revenue generated from our
Sage Platform and applications from RMB618.9 million to RMB1,014.6 million, over the same
years. Our revenue increases were primarily driven by the expansion in our number of users
from 156 in 2020 to 245 in 2021 and the increased spending of our users, especially the
spending of our lighthouse users, evidenced by the increase of our average revenue per
lighthouse user from RMB12.3 million in 2020 to RMB13.7 million in 2021.
 Sage Platform and applications . Revenue from sales of our Sage Platform and
applications increased by 63.9% from RMB618.9 million in 2020 to RMB1,014.6
million in 2021 as a result of our business expansion efforts. More specifically,
revenue from software licensing increased significantly from RMB157.9 million in
2020 to RMB356.2 million in 2021, primarily driven by the expansion in our number
of users and the increased spending of our users. Revenue from SageOne increased
by 42.8% from RMB461.0 million in 2020 to RMB658.4 million in 2021, primarily
due to an expansion of our user base for SageOne as it becomes increasingly well
received by users.
 Application development and other services . Revenue from application
development and other services increased by 210.5% from RMB323.3 million in
2020 to RMB1,003.8 million in 2021. We believe that these increases were mainly
due to the increase of our use cases and users that need customized AI applications
on Sage Platform. Additionally, our revenue generated from services were
negatively affected by the COVID-19 pandemic in 2020, as lockdown and travel
restrictions in response to the pandemic temporarily prevented us from engaging
with end users and partners through in-person meetings and providing them with
application development and other services.
Cost of Sales
Our cost of sales increased by 107.8% from RMB512.5 million in 2020 to RMB1,064.9
million in 2021. The increase in cost of sales was primarily due to (i) the increase in technology
service fees by 227.8% from RMB149.8 million in 2020 to RMB491.1 million in 2021, which
was due to our increased use of third-party deployment service providers primarily driven by
the increase in our revenue generated from customized AI application development services,
and (ii) the increase in cost of finished goods sold by 34.1% from RMB323.6 million in 2020
to RMB434.0 million in 2021, which was in line with our increased sales of SageOne.
FINANCIAL INFORMATION
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For Sage Platform and applications, our cost of sales for software licensing increased by
286.1% from RMB5.0 million in 2020 to RMB19.3 million in 2021, and our cost of sales for
SageOne increased by 43.4% from RMB334.0 million in 2020 to RMB478.8 million in 2021.
For application development and other services, our cost of sales for AI applications
customization increased by 226.7% from RMB173.5 million in 2020 to RMB566.9 million in
2021. These increases were due to our revenue growth in the respective business segments.
Gross Profit and Gross Profit Margin
As a result of the foregoing, our overall gross profit increased by 121.9% from RMB429.7
million in 2020 to RMB953.5 million in 2021, in line with our growth in revenue during the
same periods. Our gross profit margin increased from 45.6% in 2020 to 47.2% in 2021,
primarily due to the increase of revenue contribution of application development and other
services, which had relatively high gross profit margins, mainly as a result of recovery from
the negative impact of COVID-19. For Sage Platform and applications, our gross profit margin
increased from 45.2% in 2020 to 50.9% in 2021, primarily due to the increase of revenue
contribution of software licensing, which had higher gross profit margins than SageOne. Our
gross profit margin for software licensing decreased slightly from 96.8% in 2020 to 94.6% in
2021. Our gross profit margin for SageOne remained stable, being 27.6% and 27.3%, in 2020
and 2021, respectively. For application development and other services, our gross profit margin
slightly decreased from 46.3% in 2020 to 43.5% in 2021, primarily because we incurred
additional costs to cope with the increased customization demands from new industries we
entered.
Selling and Marketing Expenses
Our selling and marketing expenses increased by 83.6% from RMB247.8 million in 2020
to RMB455.0 million in 2021, which was primarily driven by our efforts to enhance our brand
awareness and our continued investments in engaging with existing customers and attracting
new customers. More specifically, the increase was primarily attributable to (i) an increase in
employee benefit expenses by 87.2% from RMB131.6 million in 2020 to RMB246.4 million in
2021, mainly as a result of the increased compensation level, especially the share-based
compensation of our selling and marketing staff, and (ii) an increase in advertising and
marketing expenses by 67.8% from RMB99.6 million in 2020 to RMB167.1 million in 2021,
including increased advertisement placements, driven by our enhanced sales efforts to
penetrate new verticals.
General and Administrative Expenses
Our general and administrative expenses increased by 119.8% from RMB246.5 million in
2020 to RMB541.7 million in 2021. More specifically, the increase was primarily attributable
to a significant increase in employee benefit expenses from RMB196.9 million in 2020 to
RMB465.0 million in 2021, mainly as a result of the share-based compensation of our general
and administrative staff recognized in 2021.
FINANCIAL INFORMATION
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Research and Development Expenses
Our research and development expenses increased by 120.9% from RMB565.7 million in
2020 to RMB1,249.5 million in 2021, as we continued to increase our research and
development efforts to enhance our fundamental capabilities in technology and to meet the
needs of our business growth. More specifically, the increase was primarily attributable to (i)
a significant increase in technology service fees from RMB289.8 million in 2020 to RMB841.3
million in 2021 as a result of our increased use of third party technology services for
development of certain applications in our AI application store, design of user interfaces and
product testing projects, driven by our enhanced research and development efforts and the
expansion of our business, and (ii) a significant increase in employee benefit expenses from
RMB211.1 million in 2020 to RMB336.5 million in 2021, which was mainly due to the
increased headcounts and increased compensation level, especially the share-based
compensation, of our research and development staff. The increase of our research and
development expenses in 2021 was primarily driven by our investment in R&D activities to
maintain our industry leadership and accommodate users’ demand in light of the penetration of
AI technologies. We incurred expenses to commercialize products and solutions using our core
technologies: For example, we launched our enterprise-level AI app store in June 2021, which
contains a cluster of applications on our AI operating system using our algorithms and
standards. To accommodate users’ increasing demand for AI solutions, we will continue to
incur expenses in the design, testing and development of modules of our Sage Platform and
applications. We also continued to enhance our fundamental research and to explore new areas
which may lead to the next generation of AI technologies. See “Business – Research and
Development.”
Credit Loss Allowance
Our credit loss allowance increased significantly by 663.4% from RMB2.0 million in
2020 to RMB15.2 million in 2021. The increase was mainly attributable to our significantly
increased trade receivables due to our revenue increases.
Other Income
Our other income remained stable in 2020 and 2021, being RMB42.6 million and
RMB41.6 million, respectively.
Other Gains, Net
Our other gains, net increased by 215.9% from RMB29.6 million in 2020 to RMB93.5
million in 2021. The increase was mainly attributable to an increase in our fair value changes
on financial assets at fair value through profit or loss through wealth management products
from RMB12.5 million in 2020 to RMB85.6 million in 2021, primarily due to our increased
purchase of wealth management products using the Series D financing proceeds we received
in 2021 and the increased fair value of such products.
FINANCIAL INFORMATION
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Operating Loss
As a result of the foregoing, our operating loss increased by 109.4% from RMB560.1
million in 2020 to RMB1,172.8 million in 2021. Overall, the increase of our operating loss was
due to the increase in share-based compensation in 2021 and our continuous investment in
research and development.
Share of (Losses)/Profits of Investments Accounted for Using the Equity Method
We recorded RMB6.5 million in share of losses for investments accounted for using the
equity method in 2020 and RMB3.8 million in share of profits for investments accounted for
using the equity method in 2021.
Finance Income
Our finance income increased by 304.4% from RMB6.0 million in 2020 to RMB24.4
million in 2021, primarily due to the increase of our interest income from bank deposits.
Finance Costs
Our finance costs increased by 242.4% from RMB189.0 million in 2020 to RMB647.1
million in 2021, primarily due to a significant increase of interest expense on redemption
liabilities by 242.9% from RMB186.2 million in 2020 to RMB638.7 million in 2021, which
was primarily in connection with our equity financing activities.
Income Tax Expenses
We incurred income tax expenses of RMB0.7 million in 2020 and RMB10.4 million in
2021. The increase of the tax expenses was primarily as a result of temporary tax differences
incurred due to fair value changes of our equity investments and financial instruments.
FINANCIAL INFORMATION
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DISCUSSION OF SELECTED ITEMS FROM THE CONSOLIDATED STATEMENTS
OF FINANCIAL POSITION
The table below sets forth selected information from our consolidated statements of
financial position as of the dates indicated, which has been extracted from the Accountant’s
Report included in Appendix I to this Prospectus:
As of December 31,
As of
March 31,
2020 2021 2022 2023
(RMB in thousands)
ASSETS
Non-current asset
Right-of-use assets 37,814 34,074 70,002 65,669
Property and equipment 47,658 49,807 48,421 45,532
Intangible assets 19,916 395,389 457,306 448,117
Investments accounted for
using the equity method 86,638 115,173 45,865 45,188
Financial assets at fair value
through profit or loss 20,936 246,128 477,889 322,257
Contract assets 705 1,195 16,295 11,816
Long-term bank deposits – 510,203 685,039 789,973
Other non-current assets – 1,000 – –
Total non-current assets 213,667 1,352,969 1,800,817 1,728,552
Current assets
Inventories 28,186 184,499 349,872 408,360
Contract assets 1,193 4,434 31,093 37,909
Trade receivables 262,699 778,321 1,493,238 1,493,952
Prepayments and other
receivables 169,980 272,002 380,064 388,746
Financial assets at fair value
through profit or loss 174,408 2,535,763 1,330,166 769,717
Short-term bank deposits 95,602 20,000 – –
Restricted cash 18,201 8,010 6,916 5,291
Cash and cash equivalents 1,052,073 1,292,686 1,326,818 1,425,288
Total current assets 1,802,342 5,095,715 4,918,167 4,529,263
Total assets 2,016,009 6,448,684 6,718,984 6,257,815
FINANCIAL INFORMATION
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As of December 31,
As of
March 31,
2020 2021 2022 2023
(RMB in thousands)
EQUITY AND
LIABILITIES
Equity attributable to
owners of the Company
Share capital/paid-in capital 8,851 437,706 437,706 445,665
Treasury stock (1,746,224) (4,898,094) (4,898,094) (4,898,094)
Reserves 2,628,252 6,643,834 7,063,334 6,989,785
Accumulated losses (2,068,902) (2,534,467) (4,177,658) (4,469,002)
Non-controlling interests (4,976) 103,008 113,701 102,751
Deficit on total equity (1,182,999) (248,013) (1,461,011) (1,828,895)
Non-current liabilities
Lease liabilities 17,590 11,000 43,721 38,431
Deferred income tax
liabilities 995 25,027 14,324 10,519
Borrowings – 15,000 24,000 23,500
Redemption liabilities 2,147,031 5,822,196 6,493,159 –
Other non-current liabilities 772,061 66,541 53,682 54,920
Total non-current liabilities 2,937,677 5,939,764 6,628,886 127,370
Current liabilities
Trade payables 84,968 321,357 863,234 619,524
Other payables and accruals 73,366 183,863 226,161 169,134
Contract liabilities 77,099 173,881 325,731 342,614
Lease liabilities 21,185 24,364 28,311 27,912
Income tax liabilities – 4,926 1,844 402
Borrowings – 3,752 48,554 61,099
Redemption liabilities – – – 6,683,937
Other current liabilities 4,713 44,790 57,274 54,718
Total current liabilities 261,331 756,933 1,551,109 7,959,340
Total liabilities 3,199,008 6,696,697 8,179,995 8,086,710
Total equity and liabilities 2,016,009 6,448,684 6,718,984 6,257,815
FINANCIAL INFORMATION
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Net Current Assets and Liabilities
The following table sets forth our current assets and liabilities as of the dates indicated:
As of December 31,
As of
March 31,
As of
July 31,
2020 2021 2022 2023
(RMB in thousands)
(unaudited)
Current assets
Inventories 28,186 184,499 349,872 408,360 533,322
Contract assets 1,193 4,434 31,093 37,909 32,912
Trade receivables 262,699 778,321 1,493,238 1,493,952 1,321,017
Prepayments and
other receivables 169,980 272,002 380,064 388,746 573,787
Financial assets at
fair value through
profit or loss 174,408 2,535,763 1,330,166 769,717 691,766
Short-term bank
deposits 95,602 20,000 – – 792,191
Restricted cash 18,201 8,010 6,916 5,291 5,628
Cash and cash
equivalents 1,052,073 1,292,686 1,326,818 1,425,288 968,930
Total current assets 1,802,342 5,095,715 4,918,167 4,529,263 4,919,553
Current liabilities
Trade payables 84,968 321,357 863,234 619,524 578,510
Other payables and
accruals 73,366 183,863 226,161 169,134 185,425
Contract liabilities 77,099 173,881 325,731 342,614 364,809
Lease liabilities 21,185 24,364 28,311 27,912 27,434
Income tax liabilities – 4,926 1,844 402 1,336
Borrowings – 3,752 48,554 61,099 56,786
Redemption
liabilities – – – 6,683,937 3,774,915
Other current
liabilities 4,713 44,790 57,274 54,718 61,270
Total current
liabilities 261,331 756,933 1,551,109 7,959,340 5,050,485
Net current
assets/(liabilities) 1,541,011 4,338,782 3,367,058 (3,430,077) (130,932)
FINANCIAL INFORMATION
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We had net current assets of RMB1,541.0 million, RMB4,338.8 million and RMB3,367.1
million and net current liabilities of RMB3,430.1 million and RMB130.9 million, respectively,
as of December 31, 2020, 2021, 2022, March 31, 2023 and July 31, 2023.
Our net current assets increased from RMB1,541.0 million as of December 31, 2020 to
RMB4,338.8 million as of December 31, 2021, primarily due to (i) an increase in financial
assets at fair value through profit or loss from RMB174.4 million as of December 31, 2020 to
RMB2,535.8 million as of December 31, 2021 primarily as a result of our investments in
wealth management products due to our equity financing activities in 2021 and (ii) an increase
in trade receivables from RMB262.7 million to RMB778.3 million in line with our revenue
growth.
Our net current assets decreased from RMB4,338.8 million as of December 31, 2021 to
RMB3,367.1 million as of December 31, 2022, primarily attributable to a decrease in the
current portion of financial assets at fair value through profit or loss from RMB2,535.8 million
to RMB1,330.2 million, mainly as a result of our utilization of cash and financial assets in
operating expenditures, and partially offset by an increase in trade receivables from RMB778.3
million to RMB1,493.2 million in line with our revenue growth.
Our net current assets of RMB3,367.1 million as of December 31, 2022 changed to net
current liabilities of RMB3,430.1 million as of March 31, 2023, primarily due to the increase
in redemption liabilities of RMB6,683.9 million, which were reclassified from non-current
redemption liabilities to current redemption liabilities, as the redemption rights may be
exercised within one year under circumstances such as failure to achieve a Qualified IPO.
Our current liabilities decreased from RMB3,430.1 million as of March 31, 2023 to
RMB130.9 million as of July 31, 2023, primarily due to the decrease in the current portion of
redemption liabilities from RMB6,683.9 million to RMB3,774.9 million since certain investors
had undertaken that they would not exercise their redemption rights prior to December 31,
2024 so long as the Company has an ongoing listing application.
We expect to turn our net current liabilities position into net current assets upon Listing,
as the carrying amount of redemption liabilities will be reclassified from financial liabilities to
equity as a result of the termination of the preferred rights. We also believe it is unlikely that
we will have significant cash outflows for the settlement of redemption liabilities in the near
future, since certain investors had undertaken that they would not exercise their redemption
rights prior to December 31, 2024 so long as the Company has an ongoing listing application.
To further improve our financial position, we plan to enhance our working capital management
efficiency, improve our management of trade receivables and increase the focus on trade
receivable collection. We also expect to be able to enjoy economics of scale as we scale up,
which will further improve our working capital sufficiency and financial position. See also “–
Liquidity and Capital Resources.”
Assets
Right-of-Use Assets
Our right-of-use assets were RMB37.8 million, RMB34.1 million, RMB70.0 million and
RMB65.7 million respectively, as of December 31, 2020, 2021, 2022 and March 31, 2023. Our
right-of-use assets relate primarily to our leases of our office premises.
FINANCIAL INFORMATION
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Property and Equipment
Our property and equipment consist primarily of computer equipment, furniture, office
equipment and leasehold improvements, which relate mainly to our leased office premises. Our
property and equipment increased from RMB47.7 million as of December 31, 2020 to
RMB49.8 million as of December 31, 2021, which was primarily due to expansion and
leasehold improvements of office spaces and acquisition of server and electric equipment to
meet the needs of the increased number of our employees and our business growth during these
periods. Our property and equipment decreased slightly from RMB49.8 million as of
December 31, 2021 to RMB48.4 million as of December 31, 2022 and further decreased
slightly to RMB45.5 million as of March 31, 2023.
Intangible Assets
Our intangible assets primarily consist of software applications that we purchased for
administrative and research and development purposes, as well as technology, customer
relationship, brand name and goodwill acquired in business acquisitions. We had intangible
assets of RMB19.9 million, RMB395.4 million, RMB457.3 million and RMB448.1 million,
respectively, as of December 31, 2020, 2021, 2022 and March 31, 2023, respectively. From
December 31, 2020 to December 31, 2021, our intangible assets increased significantly, mainly
as a result of our acquisitions of Ideal Technology and Guangzhou Jianxin. See “History,
Development and Corporate Structure – Major Acquisitions and Investments.” More
specifically, we recorded RMB259.7 million of goodwill, RMB37.1 million of technology,
RMB71.7 million of customer relationship and RMB6.4 million of brand name as at December
31, 2021, as a result of these business acquisitions. Guangzhou Jianxin and its subsidiaries are
primarily engaged in provision of intelligent platform and solutions in energy and power
industry. Ideal technology is mainly engaged in provision of digital operation and maintenance
platform and solutions. Goodwill is attributable to the acquired market share and economies of
scale expected to be derived from combining with the operations of the Group following these
acquisitions. From December 31, 2021 to December 31, 2022, our intangible assets increased,
mainly as a result of our acquisition of EpicHust. See Note 33(c) to the Accountant’s Report
in Appendix I to this Prospectus.
Investments Accounted for Using the Equity Method
Investments accounted for using the equity method are related to our investments in
certain associated companies, which amounted to RMB86.6 million, RMB115.2 million,
RMB45.9 million and RMB45.2 million, respectively, as of December 31, 2020, 2021, 2022
and March 31, 2023. The change in our interest in associates throughout the Track Record
Period relates primarily to the operational and financial performance of our associates, as well
as additions, disposals and transfers of our associates. See Note 17 to the Accountant’s Report
in Appendix I to this Prospectus.
The following table sets forth the breakdown of our investments accounted for using the
equity method.
FINANCIAL INFORMATION
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As of December 31,
As of
March 31
2020 2021 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000
Investments accounted for using
the equity method
– Associates 69,898 101,092 45,865 45,188
– Joint ventures 16,740 14,081 – –
86,638 115,173 45,865 45,188
None of associates or joint ventures are individually material to the Group during the
Track Record Period.
Financial Assets at Fair V alue through Profit or Loss
During the Track Record Period, our financial assets at fair value through profit or loss
primarily consist of wealth management products, unlisted equity securities, preferred shares
investments and fund investments. The following table sets forth our financial assets at fair
value through profit or loss as of the dates indicated:
As of December 31,
As of
March 31,
2020 2021 2022 2023
(RMB in thousands)
Non-current
Unlisted equity securities 9,804 19,065 77,173 77,173
Preferred shares investments – 17,000 23,992 23,992
Fund investments 11,132 210,063 376,724 221,092
Current
Wealth management products 174,408 2,535,763 1,330,166 611,709
Fund investments – – – 158,008
Our unlisted equity securities include our long-term investments in unlisted companies,
where our equity ownership is not material, we do not participate in such companies’
day-to-day operations. Our unlisted equity securities increased from RMB9.8 million as of
December 31, 2020 to RMB19.1 million as of December 31, 2021, and further to RMB77.2
million as of December 31, 2022, and remained the same as of March 31, 2023, reflecting our
increasing investments in businesses that are complementary to ours. Our preferred shares
investments include investments in ordinary shares with preferential rights. Our fund
investments include our investment in funds that focus on equity investment in unlisted
companies, and we are limited partners of these funds. Our fund investments increased from
RMB210.1 million as of December 31, 2021 to RMB376.7 million as of December 31, 2022,
and slightly increased from RMB376.7 million as of December 31, 2022 to RMB379.1 million
as of March 31, 2023. For details, see Note 19(iii) to the Accountant’s Report in Appendix I
FINANCIAL INFORMATION
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to this Prospectus. We have been in the past, and expect to continue, prudently evaluating and
considering a wide array of potential investments in emerging businesses that are
complementary to our business to implement our long-term growth strategy, develop our
solutions and expand and penetrate the industry verticals we cover. We select our investment
target companies based on the industry in which the target operates, the target’s strength of
technology and solutions, the target’s business and financial performance and the synergy
between the target and us. During the Track Record Period, we made minority equity
investments in certain private companies, which are measured as financial assets at fair value
through profit or loss. We undertake prudent evaluation and approval process in making
investment decisions. Our investment managers conduct preliminary due diligence and
evaluation on potential investment opportunities presented, and submit the targets that meet
our selection criteria for pre-approval by our chief financial officer. Upon our chief financial
officer’s pre-approval, we organize a project working group and engage third-party
professionals to conduct comprehensive due diligence, negotiate with the target company and
evaluate risks associated with the investment. Investment agreements will be subject to review
and approval by our investment managers and an ad hoc investment committee before
execution. The payment process is also subject to the approval matrix of our finance
management system. After making an investment, we typically conduct on-site visits at our
investee companies on a semi-annual basis and report their operational and financial results to
our chief finance officer regularly, continuing to monitor their business performance.
During the Track Record Period, we predominantly purchased relatively low-risk
wealth-management products which were deposited in or managed by state-owned banks or
other high-quality reputable banks in China. Our wealth management products are mainly
denominated in RMB and have expected rates of return ranging from 1.63% to 6.25%, 2.20%
to 4.74%, 1.60% to 4.43%, 2.20% to 4.00% and 2.70% to 4.00% per annum for the years ended
December 31, 2020, 2021 and 2022 and the three months ended March 31, 2022 and 2023,
respectively. Our wealth management products increased from RMB174.4 million as of
December 31, 2020 to RMB2,535.8 million as of December 31, 2021, primarily due to our
increased purchase of wealth management products and the increased fair value of our
purchased wealth management products. Our wealth management products decreased from
RMB2,535.8 million as of December 31, 2021 to RMB1,330.2 million as of December 31,
2022, and further decreased to RMB611.7 million as of March 31, 2023, primarily because we
partially redeemed our wealth management products in anticipation of the cash needs for the
high level of operating activities. The principal and returns on all these wealth management
products are not guaranteed. As of December 31, 2020, 2021, 2022 and March 31, 2023, risk
profile of all of the wealth management products we purchased are relatively low. Our treasury
management department is responsible for managing our investments in wealth management
products. More specifically, our treasury manager solicits quotes of wealth management
products from banks and formulates an investment plan for cash allocation based on our
treasury management policy. The treasury manager then executes such plan upon approval by
the responsible persons of our treasury management department and finance department, and
our chief financial officer. Our investment strategy related to wealth management products
aims to minimize the financial risks by reasonably and conservatively matching the maturities
of the portfolio to anticipated operating cash needs, and to generate investment returns for the
benefit of our shareholders. We primarily invest in wealth management products with relatively
low risks and the proposed investment must not interfere with our daily operation and business
prospects. We make investment decisions related to wealth management products on a
case-by-case basis after thoroughly considering a number of factors, including but not limited
FINANCIAL INFORMATION
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to macroeconomic environment, general market conditions and the expected profit or potential
loss of the investment. As of March 31, 2023, our wealth management products primarily
include an RMB500.0 million 207-day wealth management product issued by a reputable
state-owned bank. After the Listing, our investments in wealth management products will be
subject to compliance with Chapter 14 of the Listing Rules.
In addition, any investment exceeding RMB8.0 million, through a single transaction or a
series of transactions within one year, and any investment exceeding RMB30.0 million in the
aggregate, in equity securities of other companies, securities that are convertible into equity of
other companies or any operating assets, must be approved by our chief financial officer and
the Board.
In relation to the valuation of the financial assets and liabilities at fair value through profit
or loss categorized within level 3 of fair value measurement, our Directors (i) carried out
independent and sufficient investigation to understand the nature of the financial instruments
in considering the merits of the proposed investment; (ii) reviewed the terms of investment
agreements; (iii) engaged independent and qualified valuers, which are qualified for providing
valuation services under application laws and regulations in PRC, provided necessary financial
and non-financial information so as to enable the valuer to perform valuation procedures and
discussed with the valuer on relevant assumptions to determine the fair value of our investment
in the level 3 financial instruments; and (iv) reviewed the key assumptions with respect to the
valuation exercise, the valuation working papers and results prepared by the valuer. Based on
the aforesaid procedures, the Directors are of the view that the valuation analysis is fair and
reasonable, and our financial statements are properly prepared. In addition, we have a team that
manages the valuation of level 3 instruments for financial reporting purposes. The team
manages the valuation exercise of the investments on a case by case basis. At least once every
year, the team would use valuation techniques to determine the fair value of our level 3
financial instruments.
The Reporting Accountant has carried out necessary audit procedures in accordance with
Hong Kong Standard on Investment Circular Reporting Engagement 200 “Accountants’
Reports on Historical Financial Information in Investment Circulars” issued by the Hong Kong
Institute of Certified Public Accountants. The Reporting Accountant’s opinion on the Historical
Financial Information, as a whole, of the Group for the Track Record Period is set out on pages
I-1 to I-3 of Appendix I to this prospectus.
In relation to the valuation of financial assets and liabilities at fair value through profit
or loss categorized within level 3 of fair value measurement, the Sole Sponsor have conducted
relevant due diligence work including but not limited to; (i) reviewing relevant notes in the
Accountant’s Report as contained in Appendix I and associated valuation reports provided by
the Group; and (ii) interviewing the management of the Company, the Reporting Accountant
about, among others, the process, method, key bases and assumptions for the valuation. Having
considered the work performed by the Directors, the Reporting Accountant and the results of
the relevant due diligence performed as stated above, nothing has come to the Sole Sponsor’s
attention that would cast doubt on the valuation of the Group’s financial assets and liabilities
measured at FVTPL within level 3 of fair value measurement.
FINANCIAL INFORMATION
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Inventories
Our inventories primarily consist of (i) finished goods, which primarily consist of the
servers and other related hardware products of our “All-in-One” solutions, and (ii) contract
fulfillment costs in relation to our deployment services. Contract fulfillment costs represent the
costs incurred to fulfill the obligations under the deployment service contracts when and after
the contracts are entered into, but before the service thereunder is delivered to users. Such costs
primarily consist of employee benefit expenses and technology service fees that are necessary
to perform the contracts, which will be recognized to cost of sales mainly within 3-6 months
when our related performance obligations are satisfied and upon which the related service
contract revenue is recognized. The following table sets forth the breakdown of our inventories
as of the dates indicated:
As of December 31,
As of
March 31,
2020 2021 2022 2023
(RMB in thousands)
Finished goods 3,187 20,633 99,397 86,029
Contract fulfillment costs 24,999 165,786 252,269 322,543
28,186 186,419 351,666 408,572
Less: provision for
impairment – (1,920) (1,794) (212)
Total 28,186 184,499 349,872 408,360
The significant increase in our inventories from RMB28.2 million as of December 31,
2020 to RMB184.5 million as of December 31, 2021 was primarily due to the increase of
contract fulfillment costs, mainly because some of our solution projects’ schedules were
extended as affected by the COVID-19 pandemic. The increase in our inventories from
RMB184.5 million as of December 31, 2021 to RMB349.9 million as of December 31, 2022
and further to RMB408.4 million as of March 31, 2023 was primarily due to the increase of
contract fulfillment costs, driven by our increased contract amounts in line with our business
growth. As of July 31, 2023, RMB153.7 million, accounting for approximately 37.6% of the
RMB408.4 million inventories as of March 31, 2023, had been subsequently settled. We had
not experienced any material recoverability issues for our inventories and do not anticipate to
have any material recoverability issues for our inventories. We do not anticipate to have any
material recoverability issues for our contract fulfillment costs because (i) our management is
of the view that the risk of failure to satisfy our related performance obligations is remote
considering that our business operation and financial conditions are healthy; (ii) our
management is of the view that the risk of material loss under our deployment service contracts
FINANCIAL INFORMATION
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--- page 365 ---
is remote considering our high profile client base and, to the best knowledge of our
management, their healthy financial conditions in general; and (iii) we had not experienced any
material recoverability issues for our contract fulfillment costs throughout the Track Record
Period.
Contract assets
Our contract assets represent our rights to receive consideration for obligations performed
under some of our sales contracts. These considerations are not yet payable by the customers
as they are subject to certain conditions under the relevant contracts, such as lapse of the
warranty period. Our non-current contract assets were RMB0.7 million, RMB1.2 million,
RMB16.3 million and RMB11.8 million as of December 31, 2020, 2021, 2022 and March 31,
2023, respectively, and our current contract assets were RMB1.2 million, RMB4.4 million,
RMB31.1 million and RMB37.9 million as of December 31, 2020, 2021, 2022 and March 31,
2023, respectively. The increase of our contract assets from December 31, 2021 to December
31, 2022 was primarily due to our business growth. As of July 31, 2023, RMB6.3 million,
accounting for approximately 12.7% of the RMB49.7 million as of March 31, 2023, had been
subsequently certified.
In 2020, 2021, 2022 and in the three months ended March 31, 2023, our contract assets
turnover days were 0.7 days, 0.7 days, 3.1 days and 6.8 days, respectively. The contract assets
turnover days is calculated using the average of the opening and closing contract assets balance
divided by revenue for the relevant period and multiplied by the number of days during such
period. The increase of contract assets turnover days from 0.7 days in 2021 to 3.1 days in 2022
and further to 6.8 days in the three months ended March 31, 2023 was primarily because the
balance of our contract assets increased as we had more sales contracts with certain conditions
to receive consideration for obligations performed, driven by our business growth.
Trade Receivables
Our trade receivables consist primarily of outstanding fees due from customers in
connection with the transactions in connection with our solutions.
Throughout the Track Record Period, our trade receivables have generally continued to
increase, which was primarily driven by the overall growth in the volume of transactions
enabled by our solutions during the same period. As of December 31, 2020, 2021, 2022 and
March 31, 2023, our trade receivables were RMB262.7 million, RMB778.3 million,
RMB1,493.2 million and RMB1,494.0 million, representing approximately 28%, 39%, 48%
and 232% of our revenue of the years ended December 31, 2020, 2021, 2022 and the three
months ended March 31, 2023, respectively.
FINANCIAL INFORMATION
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The following table sets forth our trade receivables turnover days for the years/periods
indicated.
For the year ended December 31,
For the three
months ended
March 31,
2020 2021 2022 2023
Trade receivables
turnover days (1) 86 94 134 209
Note:
(1) Trade receivables turnover days is calculated using the average of the opening and closing trade
receivables balance divided by revenue for the relevant period and multiplied by the number of days
during such period.
In 2020, 2021, 2022 and the three months ended March 31, 2023, our trade receivables
turnover days were 86 days, 94 days, 134 days and 209 days, respectively. Our trade
receivables turnover days increased from 86 days in 2020 to 94 days in 2021, as we granted
longer credit terms to certain customers. Our trade receivables turnover days further increased
to 134 days in 2022 primarily because (i) the balance of our trade receivables increased along
with our revenue growth, (ii) our credit terms granted to customers generally increased as we
expanded into new verticals and have more variety in our user cases, and (iii) to a lesser extent,
we tend to accommodate customers’ need for flexible payment schedule in light of the
recurrence of COVID-19 in late 2022. Our trade receivables turnover days increased from
134 days in 2022 to 209 days in the three months ended March 31, 2023 primarily because we
typically enhance our receivable collection efforts towards year end, thus the trade receivables
we recorded in early 2023 were relatively high.
In 2020, 2021, 2022 and the three months ended March 31, 2023, the turnover days of the
aggregated trade receivables and contract assets were 86 days, 95 days, 138 days and 215 days,
respectively.
The following table sets for the ageing analysis of our trade receivables based on invoice
date as of the dates indicated.
As of December 31,
As of
March 31,
2020 2021 2022 2023
(RMB in thousands)
Up to 3 months 126,601 403,264 957,044 552,954
3 to 6 months 87,412 231,336 278,486 562,433
6 months to 1 year 24,432 128,141 130,321 238,327
Over 1 year 29,564 35,741 188,569 199,604
Less: Credit loss allowance (5,310) (20,161) (61,182) (59,366)
Trade receivable, Net 262,699 778,321 1,493,238 1,493,952
FINANCIAL INFORMATION
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Our trade receivables aged three to six months increased from RMB87.4 million as of
December 31, 2020 to RMB231.3 million as of December 31, 2021, and our trade receivables
aged six months to one year increased from RMB24.4 million to RMB128.1 million as of the
same dates, primarily due to the increase of our revenue, and to a lesser extent, due to the
longer credit terms we granted to certain customers. Our trade receivables aged over one year
increased from RMB35.7 million as of December 31, 2021 to RMB188.6 million as of
December 31, 2022, primarily because (i) the balance of our trade receivables increased along
with our revenue growth, (ii) our credit terms granted to customers generally increased as we
expanded into new verticals and have more variety in our user cases, and (iii) to a lesser extent,
we tend to accommodate customers’ need for flexible payment schedule in light of the
recurrence of COVID-19 in late 2022, while most of the collection efforts were more focused
towards the year end in prior years. Our trade receivables aged three to six months increased
from RMB278.5 million as of December 31, 2022 to RMB562.4 million as of March 31, 2023,
and our trade receivables aged six months to one year increased from RMB130.3 million to
RMB238.3 million as of the same dates, primarily because (i) the balance of trade receivables
grew along with our revenue, and (ii) we usually enhance our receivable collection efforts
towards the year end and thus record relatively high level of trade receivables in early 2023.
We recorded credit loss allowance of RMB5.3 million, RMB20.2 million, RMB61.2 million
and RMB59.4 million as of December 31, 2020, 2021, 2022 and March 31, 2023, accounting
for approximately 2%, 3%, 4% and 4% of our trade receivables as at the same dates,
respectively, primarily due to our revenue growth. As of July 31, 2023, RMB753.1 million,
accounting for approximately 50.4% of the RMB1,494.0 million outstanding trade receivables
as of March 31, 2023, had been subsequently settled. As of July 31, 2023, RMB120.0 million,
accounting for approximately 31.1% of the RMB385.5 million outstanding trade receivables
from non-top five customers that had aged more than 180 days as of March 31, 2023, had been
subsequently settled. As of July 31, 2023, RMB40.2 million, accounting for approximately
20.2% of the RMB199.6 million outstanding trade receivables aged over one year as of
March 31, 2023 had been subsequently settled.
We do not anticipate to have any material recoverability issue with trade receivables
primarily because (i) we assess our customers’ credit quality carefully and regularly, taking
into account their business background, the general risks associated with their industries, their
financial position, past experience and other factors; (ii) our trade receivables are mainly due
from a selected group of customers with good credit profiles and no history of material defaults
on their payment obligations in the past; (iii) our long-aging trade receivables as at
December 31, 2022 and as at March 31, 2023 were primarily due from reputable state-owned
enterprises and listed companies with good credit records; (iv) our trade receivable turnover
days in 2020, 2021 and 2022 were 86 days, 94 days and 134 days, respectively, which were all
well within the normal credit terms of 3 to 6 months that we granted to customers; (v) we have
not experienced any material recoverability issues for our trade receivables throughout the
Track Record Period; (vi) we have dedicated internal teams which are responsible for close and
regular monitoring of the credit profiles, operating and financial conditions of our customers
and taking appropriate proactive follow-up actions to ensure the customers’ payments are made
as scheduled; (vii) we also closely monitor the recoverability status of trade receivables,
especially for those long-aging trade receivables, and enhance our collection efforts as
appropriate; (viii) as discussed above, the increase of our trade receivables aged over one year
from RMB35.7 million as of December 31, 2021 to RMB188.6 million as of December 31,
2022 was primarily due to our business expansion and the temporary impact of COVID-19,
which do not indicate any systematic recoverability issues; and (ix) the subsequent settlement
for trade receivables as of March 31, 2023 indicates significant improvement of recoverability,
in that (a) as of July 31, 2023, RMB753.1 million, or approximately 50.4% of the RMB1,494.0
million outstanding trade receivables as of March 31, 2023 had been subsequently settled; (b)
FINANCIAL INFORMATION
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as of July 31, 2023, RMB120.0 million, or approximately 31.1% of the RMB385.5 million
outstanding trade receivables from non-top five customers that had aged more than 180 days
as of March 31, 2023 had been subsequently settled; and (c) as of July 31, 2023, RMB40.2
million, or approximately 20.2% of the outstanding trade receivables aged over one year as of
March 31, 2023 had been subsequently settled. Additionally, we believe adequate credit loss
allowances have been made to appropriately reflect the recoverability issues identified, as (i)
we made credit loss allowances primarily based on the results of our comprehensive
impairment assessment as performed on each reporting date (which takes into account the
historical payment profiles, historical credit loss rates by industry and data published by
external credit rating institution, adjusted to reflect current and forward-looking information on
macroeconomic factors affecting the ability of the customers to settle the receivables), and (ii)
we made credit loss allowances individually once any recoverability issues with particular
customers were identified.
The Reporting Accountant has performed its work on the financial information included
in the Accountant’s Report in accordance with Hong Kong Standard on Investment Circular
Reporting Engagement 200 “Accountants’ Reports on Historical Financial Information in
Investment Circulars” issued by the Hong Kong Institute of Certified Public Accountants. The
Reporting Accountant’s opinion on the Historical Financial Information, as a whole, of the
Group for the Track Record Period is set out on pages I-1 to I-3 of Appendix I to this
Prospectus.
Prepayments and Other Receivables
The following table sets forth our prepayments and other receivables as of the dates
indicated:
As of December 31,
As of
March 31,
2020 2021 2022 2023
(RMB in thousands)
Prepayments to suppliers 130,061 100,861 176,516 197,857
Deductible value-added
input tax 18,739 46,631 80,001 103,664
Rental, bidding and other
deposits 9,034 16,454 17,491 16,926
Interest receivables 7,027 2,722 61 3
Listing expenses to
be capitalized – 45,681 48,967 13,384
Other receivable from a third
party customer – 50,959 47,000 47,000
Others 5,119 8,694 10,028 9,912
Total 169,980 272,002 380,064 388,746
Our prepayments and other receivables consist primarily of (i) prepayments to suppliers,
(ii) deductible value-added input tax, (iii) rental, bidding and other deposits, (iv) interest
receivables, (v) listing expenses to be capitalized, (vi) other receivable from a third party
customer, and (vii) others.
FINANCIAL INFORMATION
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As of December 31, 2019, we had a loan to a third party that primarily engages in
business of IT technology services and system integration, and is a customer of ours. The loan
was repaid in full in 2020. During the Track Record Period and up to the Latest Practicable
Date, other than as disclosed above and to the best of our knowledge, none of us, our Directors,
Supervisors, senior management, or any of our shareholders (who or which to the knowledge
of the Directors owned more than 5% of our issued share capital) and any of their respective
associates had any interest in, or any other past or present relationships (business, employment,
family, trust, financing or otherwise) with such third party or its ultimate beneficial owner.
Before granting the loan, we conducted comprehensive due diligence on such third party, such
as its business background, financial condition, operating history, and payment history in our
business cooperation. Based on the due diligence work, we believe such third party is
creditable considering that, at the time of granting the loan, it had obtained various licenses and
certifications requisite for its business operations, approximately ten years operating history,
sufficient revenue and asset to recover the loan, and a registered capital of RMB20 million, and
we did not experience any material defaults on its payment obligations as a customer.
Therefore, we believe that the risk of default was relatively low. In addition, having considered
that the term of the loan is relatively short, and to increase the yield of our cash on hand as
we closed our Series C Financing before granting the loan, we provided the loan to such third
party which will be used for general corporate and business expansion purposes pursuant to the
relevant loan agreement. Negotiations of the terms of the loan and sales to this company were
conducted separately, and the loan and sales were neither connected nor conditional upon each
other. Our Directors confirmed our negotiations with such company were on an arm’s length
basis. The loan was a one-year term loan with an interest rate at 3.86% per annum with no
collaterals. As of the Latest Practicable Date, the borrower has paid up the principal and the
interest of the loan. Our PRC Legal Advisor advised us that Article 61 of the General Lending
Provisions () issued by the PBOC prohibits any financing arrangements or
lending transactions between non-financial institutions. Further, pursuant to Article 73 of the
General Lending Provisions, the PBOC may impose on the non-compliant lender a fine of one
to five times the income received by the lender from such loans. Our PRC Legal Advisor
further advised that, notwithstanding the General Lending Provisions, the Supreme People’s
Court has made new interpretations concerning financing arrangements and lending
transactions between non-financial institutions in the Provisions of the Supreme People’s Court
on Several Issues concerning the Application of Law in the Trial of Private Lending Cases
() (the “Judicial
Interpretations on Private Lending Cases”) which came into effect on September 1, 2015 and
was amended on December 29, 2020. According to Article 11 of the Judicial Interpretations on
Private Lending Cases, the Supreme People’s Court recognizes the validity and legality of
financing arrangements and lending transactions between non-financial institutions so long as
certain requirements, such as the interest rates charged, are satisfied and there is no violation
of mandatory provisions of laws and regulations. On this basis, our PRC Legal Advisor is of
the view that the relevant loan agreements were legally binding. As at the Latest Practicable
Date, we had not received any notice of claim or was subject to any investigation or penalty
relating to the loans with the third party; and the loan had been fully settled. On this basis, our
PRC Legal Advisor is of the view that the risk of us being penalized for the above mentioned
loan pursuant to the General Lending Provisions by the relevant regulatory authorities is
remote.
FINANCIAL INFORMATION
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Our prepayments and other receivables increased from RMB170.0 million as of
December 31, 2020 to RMB272.0 million as of December 31, 2021, primarily because (i) we
recorded RMB51.0 million in other receivable from a third party customer in 2021, primarily
due to our procurement of hardware to facilitate delivery of Sage Platform and applications to
an end user (see Note 22(a) to the Accountant’s Report in Appendix I to this Prospectus), and
(ii) we recorded RMB45.7 million in listing expenses in 2021.
Our prepayments and other receivables increased from RMB272.0 million as of
December 31, 2021 to RMB380.1 million as of December 31, 2022, primarily because our
prepayments to suppliers increased from RMB100.9 million to RMB176.5 million as of the
same dates, mainly driven by our business growth.
Our prepayments and other receivables increased from RMB380.1 million as of
December 31, 2022 to RMB388.7 million as of March 31, 2023, primarily because our
prepayments to suppliers increased from RMB176.5 million to RMB197.9 million as of the
same dates, mainly driven by our business growth. As of July 31, 2023, RMB234.5 million,
accounting for approximately 60.3% of the RMB388.7 million outstanding prepayments and
other receivables as of March 31, 2023 had been subsequently settled.
Cash and Cash Equivalents
Our cash and cash equivalents were RMB1,052.1 million, RMB1,292.7 million,
RMB1,326.8 million and RMB1,425.3 million, respectively, as of December 31, 2020, 2021,
2022 and March 31, 2023. Our cash and cash equivalents overall remained relatively stable
during the Track Record Period. See “Liquidity and Capital Resources.”
Liabilities
Redemption Liabilities
Our redemption liabilities primarily relate to our obligation to repurchase our own equity
instruments in connection with the redemption rights and liquidation preferences granted to the
investors in certain situations. Since the date of our inception to March 31, 2023, we have
completed several rounds of financing including Series A, Series A-1, Series A-2, Series B-1,
Series B-2, Series C, Series C-1, Series C-2, Series D and Series D+, in the way of capital
increase of the Company and capital transfer from founders to investors. The key terms of the
preferred rights granted to these investors may include: (i) redemption right, a right to require
the Company to redeem their investments under circumstances such as failure to achieve a
Qualified Initial Public Offering (“Qualified IPO”) by the third anniversary of the initial
closing date of Series D, (ii) liquidation preferences, which means in the defined liquidation
events, the distributable liquidation property (after satisfaction of all creditors’ claims and
other preferred claims) shall be distributed in the amount equal to the higher of (a) 100% of
the original investment principal, plus the accumulated dividends or declared but undistributed
dividends (and retained earnings) on the equity held; or (b) the distributable liquidation
property can be distributed according to the equity proportion at that time, and in the priority
FINANCIAL INFORMATION
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order of Series D+/Series D, Series C-2, Series C-1, Series C, Series B, Series A-2, Series A-1
to Series A, and (iii) anti-dilution right, pursuant to which if the Company increases its
registered capital at a price lower than the price paid by the anti-dilution right holders, the
subscription price per unit invested by these holders in the Company will be adjusted. The
redemption rights and liquidation preferences granted to the investors constitute as the
Company’s obligations to repurchase its own equity instruments. These obligations were
recognized as redemption liabilities which are initially measured at fair value (representing the
present value of the expected cash flows for settling the related obligations if these rights are
exercised by the investors) and subsequently measured at amortized cost. Our redemption
liabilities were RMB2,147.0 million, RMB5,822.2 million, RMB6,493.2 million, RMB6,683.9
million and RMB6,797.3 million, respectively, as of December 31, 2020, 2021, 2022, March
31, 2023 and July 31, 2023. The significant increase of redemption rights from that as of
December 31, 2020 to that as of December 31, 2022 was primarily in connection with our
equity financing activities. We expect to turn our net liabilities position into net assets upon
Listing, as the carrying amount of redemption liabilities will be reclassified from financial
liabilities to equity as a result of the termination of the aforesaid preferred rights.
The following table sets forth the carrying amounts of our redemption liabilities.
As of December 31,
As of
March 31,
As of
July 31,
2020 2021 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(unaudited)
Redemption
liabilities
– Non-
current 2,147,031 5,822,196 6,493,159 – 3,022,400
– Current – – – 6,683,937 3,774,915
Total 2,147,031 5,822,196 6,493,159 6,683,937 6,797,315
Other Non-Current Liabilities
Our other non-current liabilities consist primarily of (i) deferred government grants, (ii)
advance from investors, and (iii) payable for acquisition of subsidiaries. We had other
non-current liabilities of RMB772.1 million, RMB66.5 million, RMB53.7 million and
RMB54.9 million, respectively, as of December 31, 2020, 2021, 2022 and March 31, 2023. The
decrease of our other non-current liabilities from December 31, 2020 to December 31, 2021
was primarily attributable to the decrease in advance from investors from RMB771.7 million
as of December 31, 2020 to nil as of December 31, 2021. This decrease in advance from
investors was primarily due to the settlement of the amount of advance from our investors upon
closing of our Series D financing.
FINANCIAL INFORMATION
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Other Payables and Accruals
Our other payables and accruals primarily related to our employee benefits during the
Track Record Period, primarily consisting of payroll payables, taxes payables and accrued
expenses and others. The following table sets forth our other payables, accruals and other
liabilities as of the dates indicated.
As of December 31,
As at
March 31,
2020 2021 2022 2023
(RMB in thousands)
Payroll payables 50,763 75,301 118,223 83,295
Listing expenses payable – 17,313 28,274 25,884
Other taxes payables 19,498 39,718 37,997 23,761
Expense reimbursement 921 6,178 6,998 2,471
Payable to a third party
hardware supplier – 31,000 32,300 32,300
Accrual expenses and others 2,184 14,353 2,369 1,423
73,366 183,863 226,161 169,134
Other payables and accruals were RMB73.4 million, RMB183.9 million, RMB226.2
million and RMB169.1 million as of December 31, 2020, 2021, 2022 and March 31, 2023,
respectively. The significant increase of our other payables and accruals from December 31,
2020 to December 31, 2021 was primarily because (i) we recorded RMB31.0 million in payable
to a third party hardware supplier, primarily due to our procurement of hardware to facilitate
delivery of Sage Platform and applications, and (ii) our payroll payables increased from
RMB50.8 million as of December 31, 2020 to RMB75.3 million as of December 31, 2021, due
to the increase of our employees headcounts in line with our business growth. In 2021, we
cooperated with a hardware supplier to deliver software and hardware together to a customer,
and we acted as an agent for purchasing certain hardware on behalf of the customer while we
acted as a principal in delivering the software to the customer pursuant to the sales agreement
with the customer. For details, see Note 22(a) to the Accountant’s Report in Appendix I to this
Prospectus. Such transaction was a one-time arrangement pursuant to the request of such
customer. The decrease of our other payables and accruals from RMB226.2 million as of
December 31, 2022 to RMB169.1 million as of March 31, 2023 was primarily because of the
decrease of payroll payables from RMB118.2 million to RMB83.3 million as of the same dates,
mainly due to our payment of annual bonus to employees.
FINANCIAL INFORMATION
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Trade Payables
Our trade payables primarily include payables for inventories and outsourcing service
fees. During the Track Record Period, driven by the rapid growth in the volume of transactions
enabled by our solutions, our trade payables has generally continued to increase, from
RMB85.0 million as of December 31, 2020 to RMB321.4 million as of December 31, 2021, and
further to RMB863.2 million in 2022 . The significant increase of our trade payables from that
as of December 31, 2020 to that as of December 31, 2022 was primarily due to the increase
of our procurement amount, driven by our business growth. Our trade payables slightly
decreased from RMB863.2 million as of December 31, 2022 to RMB619.5 million as of March
31, 2023.
The following table sets forth our trade payables turnover days for the years/periods
indicated.
For the year ended
December 31,
For the three
months ended
March 31,
2020 2021 2022 2023
Trade payables turnover
days (1) 36 70 135 184
Note:
(1) Trade payables turnover days is calculated using the average of the opening and closing trade payables
balance divided by cost of sales for the relevant period and multiplied by the number of days during such
period.
In 2020, 2021, 2022 and the three months ended March 31, 2023 our trade payables
turnover days were 36 days, 70 days, 135 days and 184 days, respectively. Our trade payables
turnover days increased throughout the Track Record Period primarily because we built trust
with our suppliers and gained more bargaining power as our business developed, and thus we
were able to negotiate for longer settlement terms in the transactions in connection with our
solutions.
As of July 31, 2023, RMB359.3 million, accounting for approximately 58.0% of the
RMB619.5 million trade payables as of March 31, 2023, had been subsequently settled.
FINANCIAL INFORMATION
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Contract Liabilities
Contract liabilities primarily arise from the advance payments made by our customers
while the underlying services are yet to be provided. We had contract liabilities of RMB77.1
million, RMB173.9 million, RMB325.7 million and RMB342.6 million as of December 31,
2020, 2021, 2022 and March 31, 2023, respectively. The substantial increase in contract
liabilities during the Track Record Period was due to our general business growth and increased
orders from customers, including contracts with prepayments.
As of July 31, 2023, RMB211.3 million, accounting for approximately 61.7% of the
RMB342.6 million outstanding contract liabilities as of March 31, 2023, had been subsequently
recognized as revenue. Due to the generally short-term duration of the relevant contracts, a
majority of the contact liabilities are recognized in the following year.
Lease Liabilities
Lease liabilities represent the present value of outstanding lease payments under our lease
agreements. We recorded non-current lease liabilities of RMB17.6 million, RMB11.0 million,
RMB43.7 million, RMB38.4 million and RMB30.0 million, respectively, as of December 31,
2020, 2021, 2022, March 31, 2023 and July 31, 2023. We recorded current lease liabilities of
RMB21.2 million, RMB24.4 million, RMB28.3 million, RMB27.9 million and RMB27.4
million, respectively, as of December 31, 2020, 2021, 2022, March 31, 2023 and July 31, 2023.
During the Track Record Period, we have obtained the right to use certain office buildings
through lease agreements with terms typically running for an initial period of one to three
years.
KEY FINANCIAL RATIO
We believe that our revenue growth, gross profit margin and contribution margin are
important measures of our operation efficiency over time. Revenue growth rate shows the
period-over-period growth rate of our total revenue, and gross profit margin equals revenue
less cost of sales divided by revenue. Contribution margin is defined as a percentage of
contribution bearing to revenue. Contribution is defined as revenue less the cost of sales and
selling and marketing expenses. The following table sets forth a summary of our key financial
ratios for the years/periods indicated.
For the year ended
December 31,
For the three months
ended March 31,
2020 2021 2022 2022 2023
%%%%%
Revenue growth 105.0 114.2 52.7 N/A 33.6
Gross profit margin 45.6 47.2 48.2 48.7 43.7
Contribution margin 19.3 24.7 34.9 32.0 30.8
FINANCIAL INFORMATION
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As a result of our continuous business expansion, our revenue growth rate was 105.0%,
114.2%, 52.7% and 33.6% in 2020, 2021, 2022 and in the three months ended March 31, 2023
compared to the corresponding period in 2022, respectively. Our overall gross profit margin
increased from 45.6% in 2020 to 47.2% in 2021, primarily due to the increase of revenue
contribution of application development and other services, which had relatively high gross
profit margins, mainly as a result of recovery from the negative impact of COVID-19, and
further to 48.2% in 2022 mainly as a result of the increase of revenue contribution of software
licensing, which had relatively high gross profit margins, as software licensing requires less
on-site services than our other segments, and thus was less affected by the recurrence of
COVID-19 in 2022. Our overall gross profit margin decreased from 48.7% in the three months
ended March 31, 2022 to 43.7% in the three months ended March 31, 2023, primarily due to
the increase of revenue contribution of SageOne, which had relatively low gross profit margins.
Our contribution margin increased from 19.3% in 2020 to 24.7% in 2021 and 34.9% in 2022.
Our contribution margin decreased slightly from 32.0% for the three months ended March 31,
2022 to 30.8% for the three months ended March 31, 2023, primarily due to the increase of
revenue contribution of SageOne and application development and other services, which had
higher cost of sales compared with software licensing. Our contribution margin generally
increased over the Track Record Period primarily because we improved our efficiency in
overall costs and selling and marketing.
LIQUIDITY AND CAPITAL RESOURCES
We have historically funded our cash requirements principally from capital contributions
from shareholders. After the Global Offering, we intend to finance our future capital
requirements through equity financing activities and debt financing activities in a balanced
manner. We do not anticipate any changes to the availability of financing to fund our operation
in the future.
FINANCIAL INFORMATION
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The following table sets forth a summary of our cash flows for the years/periods
indicated.
Y ear ended December 31,
For the three months
ended March 31,
2020 2021 2022 2022 2023
(RMB in thousands)
(unaudited)
Cash used in operating activities
Operating cash flows before
movements in working capital (365,959) (576,136) (516,157) (121,160) (107,265)
Changes in working capital (87,879) (202,298) (285,517) (50,470) (359,020)
Cash used in operations (453,838) (778,434) (801,674) (171,630) (466,285)
Interest received 898 11,113 27,122 5,523 6,578
Income tax paid – (2,687) (5,037) (3,307) (1,504)
Net cash used in operating
activities (452,940) (770,008) (779,589) (169,414) (461,211)
Net cash (used in)/generated from
investing activities (139,083) (3,199,611) 822,387 (140,776) 623,973
Net cash generated from/(used in)
financing activities 942,428 4,210,015 (9,014) (21,210) (64,130)
Net increase/(decrease) in cash
and cash equivalents 350,405 240,396 33,784 (331,400) 98,632
Cash and cash equivalents
at the beginning of the
year/period 703,786 1,052,073 1,292,686 1,292,686 1,326,818
Effects of exchange rate changes
on cash and cash equivalents (2,118) 217 348 (33) (162)
Cash and cash equivalents at the
end of the year/period 1,052,073 1,292,686 1,326,818 961,253 1,425,288
Net Cash Used in Operating Activities
In the three months ended March 31, 2023, our net cash used in operating activities was
RMB461.2 million. The difference between our net cash generated from operating activities
and our loss before taxation primarily result from interest expenses of RMB194.4 million and
partially offset by (i) decrease in trade payables of RMB243.7 million and (ii) increase in
inventories of RMB58.5 million.
In 2022, our net cash used in operating activities was RMB779.6 million. The difference
between our net cash generated from operating activities and our loss before taxation primarily
resulted from (i) share-based payment expenses of RMB433.4 million, (ii) interest expenses of
RMB681.9 million, and (iii) an increase in trade payables of RMB523.0 million partially offset
by (i) an increase in trade receivables of RMB715.9 million and (ii) an increase in inventories
of RMB135.2 million.
FINANCIAL INFORMATION
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In 2021, our net cash used in operating activities was RMB770.0 million. The difference
between our net cash generated from operating activities and our loss before taxation primarily
resulted from (i) share-based payment expenses of RMB603.6 million, (ii) interest expenses of
RMB646.8 million and (iii) increase in trade payables of RMB217.2 million, partially offset
by increase in trade receivables of RMB420.1 million.
In 2020, our net cash used in operating activities was RMB452.9 million. The difference
between our net cash generated from operating activities and our loss before taxation primarily
resulted from (i) interest expenses of RMB188.7 million, (ii) share-based payment expenses of
RMB173.7 million, (iii) increase in trade payables of RMB69.7 million and (iv) increase in
contract liabilities of RMB56.3 million, partially offset by (i) increase in trade receivables of
RMB85.5 million, (ii) increase in prepayments and other receivables of RMB80.6 million, (iii)
decrease in other payables and accruals of RMB23.8 million and (iv) fair value changes on
financial assets at fair value through profit or loss of RMB18.4 million.
Our ability to improve our net operating cash flow is largely depending on our ability to
improve profitability. In this regard, we plan to improve our net operating cash outflow
positions by (i) effectively attracting and retaining our users to drive our revenue growth and
profitability, (ii) continuing to create value for users to explore additional monetization
opportunities that help us scale up our revenues and to achieve profitability, and (iii)
effectively managing our cost and expenses by improving our operational efficiency. For
details of our plan to improve our financial performance, see “Business – Business
Sustainability and Path to Profitability.” With our improving profitability, we also expect our
operating cash flow to improve concurrently. Moreover, we plan to enhance our working
capital management efficiency to improve our net operating cash outflow positions. We plan
to enhance our management of trade receivables by continually monitoring the credit profiles
and operating and financial conditions of our customers and proactively following up on our
customers to ensure their payments as scheduled. We plan to increase the focus on trade
receivable collection when evaluating the performance of our sales team. In addition, as we
built trust with our customers and gained more bargaining power as our business developed,
we are able to negotiate for shorter credit terms with our customers. We also expect to be able
to enjoy economics of scale as we scale up, which will further improve our net operating cash
outflow positions. Specifically, as we scale up, we expect to have stronger bargaining power
against our suppliers and are thus able to obtain more favorable credit terms. That being said,
as our future profitability is subject to various factors, we may continue to incur net losses
and net operating cash outflow in the near future, including the year ending December 31,
2023 .
Net Cash (Used in)/Generated from Investing Activities
In the three months ended March 31, 2023, our net cash generated from investing
activities was RMB624.0 million, consisting primarily of proceeds from disposal of short-term
investments measured at fair value through profit or loss of RMB873.7 million, partially offset
by (i) purchase of short-term investments measured at fair value through profit or loss of
RMB150.0 million, (ii) placement of term bank deposits of RMB100.0 million.
FINANCIAL INFORMATION
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In 2022, our net cash generated from investing activities was RMB822.4 million,
consisting primarily of (i) proceeds from disposal of short-term investments measured at fair
value through profit or loss of RMB3,955.8 million, (ii) withdrawal of term bank deposits of
RMB130.0 million, and (iii) investment income received of RMB71.8 million, partially offset
by (i) purchase of short-term investments measured at fair value through profit or loss of
RMB2,763.5 million, (ii) placement of term bank deposits of RMB270.0 million, and (iii)
purchase of long-term investments measured at fair value through profit or loss of RMB166.7
million.
In 2021, our net cash used in investing activities was RMB3,199.6 million, consisting
primarily of (i) purchase of short-term investments measured at fair value through profit or loss
of RMB7,650.8 million, (ii) placement of term bank deposits of RMB520.0 million and (iii)
acquisition net of cash acquired of RMB254.7 million, partially offset by (i) disposal of
short-term investments measured at fair value through profit or loss of RMB5,321.5 million
and (ii) withdrawal of short-term bank deposits of RMB95.6 million.
In 2020, our net cash used in investing activities was RMB139.1 million, primarily
attributable to (i) purchase of short-term investments measured at fair value through profit or
loss of RMB2,656.2 million, (ii) placement of short-term bank deposits of RMB95.6 million
and (iii) purchase of property and equipment and intangible assets of RMB51.3 million,
partially offset by (i) repayment of loan by a third party of RMB135.0 million and (ii) disposal
of short-term investments measured at fair value through profit or loss of RMB2,553.7 million.
Net Cash Generated from/(Used in) Financing Activities
In the three months ended March 31, 2023, our net cash used in financing activities was
RMB64.1 million, primarily attributable to (i) payments of shares repurchase of RMB259.0
million, (ii) payment of lease liabilities of RMB9.2 million, partially offset by proceeds from
borrowings of RMB18.4 million and (iii) proceeds injected by shareholders of RMB194.7
million.
In 2022, our net cash used in financing activities was RMB9.0 million, primarily
attributable to (i) payment of lease liabilities of RMB28.4 million, and (ii) payment of listing
expenses to be capitalized of RMB22.2 million, partially offset by proceeds from borrowings
of RMB50.6 million.
In 2021, our net cash generated from financing activities was RMB4,210.0 million,
primarily attributable to proceeds injected by founders and investors of RMB4,283.5 million.
In 2020, our net cash generated from financing activities was RMB942.4 million,
primarily attributable to proceeds injected by founders and investors of RMB969.3 million.
FINANCIAL INFORMATION
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Working Capital
Taking into account (i) the financial resources available to us, including a total of
RMB2,990 million liquid cash resources as of March 31, 2023 (that include cash and cash
equivalents, short-term and long-term bank deposits, short-term investments measured at fair
value through profit or loss, restricted cash), (ii) the portion of the estimated net proceeds from
the Global Offering expected to be used for working capital and general corporate purposes,
(iii) our good track record in being able to raise money from renowned investors to finance our
business, as evidenced by our historical fund-raising activities, and (iv) our plans to continue
to enhance our financial performance, for details of which see “Business – Business
Sustainability and Path to Profitability”, our Directors believe that we have sufficient working
capital for our present requirements and for the next 12 months from the date of this
Prospectus.
CAPITAL EXPENDITURES
Our principal capital expenditures relate primarily to (i) property and equipment,
including leasehold improvements, computer and electric equipment, and office furniture and
equipment, and (ii) intangible assets, primarily including software and copyrights and
intangible assets recognized as a result of our acquisition of subsidiaries.
The following table sets forth our capital expenditures for the years/periods indicated.
For the year ended December 31,
For the three months
ended March 31,
2020 2021 2022 2022 2023
(RMB in thousands) (unaudited)
Property and equipment 29,036 15,474 15,544 4,149 1,538
Intangible assets 22,239 401,345 98,389 35 165
Total 51,275 416,819 113,933 4,184 1,703
We expect to finance our capital expenditures through cash generated from operations,
our existing bank borrowings and the net proceeds from the Global Offering. Our current
capital expenditure plans for any future period are subject to change, and we may adjust our
capital expenditures according to our future cash flows, our results of operations and financial
condition, our business plans, market conditions and various other factors. See also “Future
Plans and Use of Proceeds – Use of Proceeds.”
FINANCIAL INFORMATION
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INDEBTEDNESS
During the Track Record Period, our indebtedness mainly consisted of borrowings, lease
liabilities and redemption liabilities. The following table sets forth details of our indebtedness
as of the dates indicated:
As of December 31,
As of
March 31,
As of
July 31,
2020 2021 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(unaudited)
Current
Borrowings – 3,752 48,554 61,099 56,786
Lease liabilities 21,185 24,364 28,311 27,912 27,434
Redemption
liabilities – – – 6,683,937 3,774,915
Non-current
Borrowings – 15,000 24,000 23,500 23,500
Lease liabilities 17,590 11,000 43,721 38,431 29,986
Redemption
liabilities 2,147,031 5,822,196 6,493,159 – 3,022,400
Total 2,185,806 5,876,312 6,637,745 6,834,879 6,935,021
Borrowings
As of December 31, 2020, we did not have any bank borrowings or unutilized banking
facilities. The following table sets forth our interest-bearing borrowings as of the dates
indicated:
As of December 31,
As of
March 31,
As of
July 31,
2020 2021 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(unaudited)
Included in current
liabilities
Secured
borrowings – – 11,000 13,800 14,800
Factoring
borrowings – 3,752 5,894 5,639 4,284
Unsecured
borrowings – – 31,660 41,660 37,702
Total – 3,752 48,554 61,099 56,786
FINANCIAL INFORMATION
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As of December 31,
As of
March 31,
As of
July 31,
2020 2021 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(unaudited)
Included in non-
current liabilities
Secured
borrowings – – 9,000 8,500 8,500
Unsecured
borrowings – 15,000 15,000 15,000 15,000
Total – 15,000 24,000 23,500 23,500
Our current secured borrowings as of December 31, 2022 consist of (i) RMB1.0 million
bank borrowings by one of our subsidiaries, Guangzhou Jianxin, with fixed interest rate of
3.85% per annum and repayable by December 2023; (ii) RMB9.0 million borrowings by one
of our subsidiaries, EpicHust, with fixed interest rates ranging from 4.30%-5.00% per annum
and repayable by April or June 2023; and (iii) RMB1.0 million of RMB10.0 million 3-year
bank borrowings by Guangzhou Jianxin, with interest rate per annum being the sum of 1-year
Loan Prime Rate and 0.8%, 5% among which should be repaid every half year and the
remaining principal should be repaid by September 2025 (“Jianxin Loan”). The borrowings are
guaranteed by us and secured by the pledge over Guangzhou Jianxin’s patent rights. See Note
30(a) to the Accountant’s Report in Appendix I to this Prospectus. Our current secured
borrowings increased from RMB11.0 million as of December 31, 2022 to RMB13.8 million as
of March 31, 2023 because Guangzhou Jianxin had additional interest-bearing bank borrowings
of RMB2.8 million, which are repayable by October 2023. The borrowings are guaranteed by
us and secured by the pledge over Guangzhou Jianxin’s patent rights. Our current secured
borrowings increased from RMB13.8 million as of March 31, 2023 to RMB14.8 million as of
July 31, 2023 due to the increased amount of borrowings by EpicHust.
Our current unsecured borrowings as of December 31, 2022 consist of (i) RMB25.7
million bank borrowings by Guangzhou Jianxin, with fixed interest rates ranging from
4.50%-4.85% per annum, which are guaranteed by the Company and are repayable by May or
June 2023, and (ii) RMB6.0 million bank borrowings by EpicHust, with fixed interest rates
ranging from 4.00%-4.20% per annum, which are unsecured and repayable by November or
December 2023. Our current unsecured borrowings increased from RMB31.7 million as of
December 31, 2022 to RMB41.7 million as of March 31, 2023 because EpicHust had additional
interest bearing bank borrowings of RMB10.0 million, which are repayable by January 2024.
Our current unsecured borrowings decreased from RMB41.7 million as of March 31, 2023 to
RMB37.7 million as of July 31, 2023 primarily due to the decreased amount of borrowings by
Guangzhou Jianxin.
Our non-current secured borrowings as of December 31, 2022 and as of March 31, 2023
consist of a portion of Jianxin Loan, which is repayable by September 2025.
FINANCIAL INFORMATION
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Our non-current unsecured borrowings primarily consist of RMB15.0 million borrowed
by Guangzhou Jianxin, from its non-controlling shareholder, which is unsecured, interest-free
and repayable on demand after June 30, 2024.
For details, see Note 30 to the Accountant’s Report in Appendix I to this Prospectus.
As of the Latest Practicable Date, we had RMB1.2 billion of unutilized banking facilities.
Lease Liabilities
For details of our lease liabilities, see “– Liabilities – Lease Liabilities.”
Redemption Liabilities
For details of our redemption liabilities, see “– Liabilities – Redemption Liabilities.”
Contingent Liabilities
We did not have any material contingent liabilities as of December 31, 2020, 2021, 2022,
March 31, 2023 and July 31, 2023.
Our Directors confirm that as of the Latest Practicable Date, the agreements under our
borrowings did not contain any covenant that would have a material adverse effect on our
ability to make additional borrowings or issue debt or equity securities in the future. Our
Directors further confirm that we had no defaults in bank and other borrowings, nor did we
breach any covenants (that were not waived) during the Track Record Period and up to the
Latest Practicable Date. Our Directors further confirm that during the Track Record Period and
up to the Latest Practicable Date, we did not experience any material difficulties in obtaining
credit facilities, or withdrawal of facilities or requests for early repayment.
Save as otherwise disclosed under sections headed “– Indebtedness” and “– Contractual
Obligations,” we did not have any outstanding loan, capital issued or agreed to be issued, debt
securities, mortgages, charges, debentures, bank overdrafts, loans or other similar
indebtedness, liabilities under acceptances or acceptance credits, hire purchase commitments
or other contingent liabilities as of July 31, 2023, being the latest practicable date for our
indebtedness statement. Our Directors confirm that, as of the Latest Practicable Date, there had
been no material change in our indebtedness since July 31, 2023.
FINANCIAL INFORMATION
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CONTRACTUAL OBLIGATIONS
Capital Commitments
Our capital commitments are related to our equity investment. Our capital expenditure
contracted for but not yet incurred as of December 31, 2020, 2021, 2022 and March 31, 2023
was RMB35.0 million, RMB20.0 million, nil and RMB4.0 million, respectively. We expect to
satisfy our capital commitments using cash from operations, net proceeds to be received from
the Global Offering and bank borrowings available to us.
OFF-BALANCE SHEET COMMITMENTS AND ARRANGEMENTS
As of the Latest Practicable Date, we did not have any material off-balance sheet
commitments or arrangements.
RELATED PARTY TRANSACTIONS AND BALANCES
We enter into transactions with our related parties from time to time. Our Directors are
of the view that each of the related party transactions set out in Note 36 to the Accountant’s
Report included in Appendix I to this Prospectus was conducted in the ordinary course of
business on an arm’s-length basis and with normal commercial terms between the relevant
parties. Our Directors are also of the view that our related party transactions during the Track
Record Period would not distort our track record results or cause our historical results to
become non-reflective of our future performance. Our balances with related parties as of
March 31, 2023 as set out in Note 36 to the Accountant’s Report in Appendix I to this
Prospectus are all trade in nature.
QUALITATIVE AND QUANTITATIVE DISCLOSURE ABOUT MARKET RISKS
We are exposed to a variety of market risks, including foreign currency risk, interest rate
risk and price risk, as well as credit risks and liquidity risks, as set out below. We manage and
monitor these exposures to ensure appropriate measures are implemented in a timely and
effective manner.
Market Risk
(i) Foreign exchange risk
Foreign exchange risk primarily arises from recognized assets and liabilities denominated
in a currency other than the functional currency of entities comprising us. We operate mainly
in the PRC with most of the transactions settled in RMB.
FINANCIAL INFORMATION
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--- page 384 ---
(ii) Interest rate risk
Our interest rate risk primarily arose from redemption liabilities, borrowings, term bank
deposits and cash and cash equivalents. Those carried at floating rates expose us to cash flow
interest rate risk whereas those carried at fixed rates expose us to fair value interest rate risk.
(iii) Price risk
We are exposed to price risk in respect of the long-term investments and short-term
investments held by us and classified in the balance sheet as at fair value through profit or loss.
We are not exposed to commodity price risk. To manage the price risk arising from the
investments, we diversify our portfolio. The investments are managed by management one by
one, either for strategic purposes, or for the purpose of achieving investment yield and
balancing our liquidity level simultaneously. The sensitivity analysis is performed by
management.
Credit Risks
We are exposed to credit risk in relation to our cash and cash equivalents, restricted cash,
term bank deposits, investments in debt instruments measured at fair value through profit or
loss, trade receivables, other receivables and contract assets. The carrying amounts of each
class of the above financial assets and contract assets represent our maximum exposure to
credit risk in relation to financial assets and contract assets.
To manage risk arising from cash and cash equivalents, restricted cash, term bank
deposits and investments in debt instruments measured at fair value through profit or loss, we
only transact with state-owned or reputable financial institutions. There has been no recent
history of default in relation to these financial institutions.
To manage risk arising from trade receivables and contract assets, we have policies in
place to ensure that sales with credit terms are made to counterparties with an appropriate
credit history and the management performs ongoing credit evaluations of its counterparties.
The credit period granted to the customers is usually no more than 90 days and the credit
quality of these customers is assessed by taking into account their financial position, past
experience and other factors.
For other receivables, management makes periodic collective assessments as well as
individual assessment on the recoverability of other receivables based on historical settlement
records and past experiences. In view of the history of cooperation with debtors and the sound
collection history of receivables due from them, management believes that the credit risk
inherent in our outstanding other receivables balances due from them is low.
FINANCIAL INFORMATION
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--- page 385 ---
Liquidity Risks
We aim to maintain sufficient cash and cash equivalents. Due to the dynamic nature of the
underlying business, our policy is to regularly monitor our liquidity risk and to maintain
adequate cash and cash equivalents or adjust financing arrangements to meet our liquidity
requirements.
DIVIDEND
No dividends have been paid or declared by us or our subsidiaries during each of the years
ended December 31, 2020, 2021, 2022 and the three months ended March 31, 2022 and 2023.
After completion of the Global Offering, our Shareholders will be entitled to receive
dividends we declare. As of the Latest Practicable Date, we did not have a formal dividend
policy. The Board has approved a dividend policy, which will become effective upon Listing.
Under the dividend policy, we may provide our Shareholders with interim or annual dividends
as the Board deems appropriate. The Board will consider, among other things, the following
factors when proposing dividends and determining the amount of dividends:
 our actual and projected financial performance;
 our estimated working capital requirements, capital expenditure requirements and
future business expansion plan;
 our present and future cash flow;
 other internal and external factors that may have an impact on our business
operations or financial performance and position; and
 other factors that our Board deem relevant.
Any declaration and payment as well as the amount of dividends will be subject to our
constitutional documents, including (where required) the approval of our Shareholders.
PRC laws require that dividends be paid only out of our distributable profits, for which
the PRC laws do not specify the applicable accounting principles. Distributable profit is our
profit as determined under PRC GAAP or IFRS, whichever is lower, less any recovery of
accumulated losses and appropriations to statutory and other reserves that we are required to
make. We do not expect such difference between distributable profits calculated under PRC
GAAP and IFRS, or other differences between PRC GAAP and IFRS to have a material impact
on our financial performance. As a result, we may not have sufficient or any distributable
profits to make dividend distributions to our Shareholders, even if we become profitable. Any
distributable profits not distributed in a given year are retained and available for distribution
in subsequent years. Our PRC Legal Advisor is of the view that after making up losses and
appropriation of statutory reserves, we may distribute after-tax profits. Our dividend
FINANCIAL INFORMATION
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--- page 386 ---
distribution may also be restricted if we incur debt or losses or in accordance with any
restrictive covenants in bank credit facilities, convertible bond instruments or other agreements
that we or our subsidiaries may enter into in the future.
DISTRIBUTABLE RESERVES
As of March 31, 2023, we did not have any distributable reserves.
LISTING EXPENSES
Our listing expenses mainly include underwriting fees and commissions and professional
fees paid to legal, accounting and other advisors for their services rendered in relation to the
Listing and the Global Offering. Assuming full payment of the discretionary incentive fee, the
estimated total listing expenses (based on the midpoint of the Offer Price Range and assuming
that the Over-allotment Option is not exercised) for the Global Offering are approximately
HK$189.0 million, an equivalent to approximately RMB174.0 million, accounting for 17.6%
of our gross proceeds. These listing expenses comprise of (i) HK$35.5 million of underwriting-
related expenses (including but not limited to commissions and fees); and (ii) HK$153.5
million of non-underwriting-related expenses, including HK$134.6 million of fees and
expenses of legal advisors and accountants and HK$18.9 million of other fees and expenses.
As of March 31, 2023, we had incurred RMB106.8 million of listing expenses for the
Global Offering, among which RMB93.4 million was charged to our consolidated statement of
comprehensive income. We estimate that an additional listing expenses of RMB67.2 million
assuming the Over-allotment Option is not exercised will be further incurred by our Group. In
aggregate, we expect to incur RMB174.0 million for the Global Offering, among which
RMB129.3 million is expected to be charged to our consolidated statement of comprehensive
income and RMB44.7 million is directly attributable to the issue of Shares and expected to be
charged against equity upon the Listing.
UNAUDITED PRO FORMA ADJUSTED NET TANGIBLE ASSETS
The following is an illustrative statement of the unaudited pro forma adjusted
consolidated net tangible assets which has been prepared in accordance with Rule 4.29 of the
Listing Rules for the purpose of illustrating the effect of the Global Offering as if it had taken
place on March 31, 2023 and based on the consolidated net tangible liabilities attributable to
the owners of the Company as at March 31, 2023 as shown in the Accountant’s Report, the text
of which is set out in Appendix I to this Prospectus, and adjusted as described below.
FINANCIAL INFORMATION
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The unaudited pro forma adjusted consolidated net tangible assets has been prepared for
illustrative purposes only and, because of its hypothetical nature, it may not give a true picture
of the consolidated net tangible assets of the Group had the Global Offering been completed
as at March 31, 2023 or at any future dates.
Audited
consolidated net
tangible liabilities
attributable to the
owners of the
Company as at
March 31, 2023 (1)
Estimated net
proceeds from the
Global Offering (2)
Estimated impact
related to the
change of terms
of shares with
preferred rights
upon Listing (3)
Unaudited pro
forma adjusted
consolidated net
tangible assets
attributable to
the owners of
the Company
Unaudited pro
forma adjusted
consolidated net
tangible assets
per Share (4)(5)
RMB’000 RMB’000 RMB’000 RMB’000 RMB HK$
Based on an Offer Price of
HK$55.60 per Share (2,342,475) 862,599 6,683,937 5,204,061 11.21 12.18
Based on an Offer Price of
HK$61.16 per Share (2,342,475) 953,649 6,683,937 5,295,111 11.41 12.39
Notes:
(1) The audited consolidated net tangible liabilities attributable to the owners of the Company as at March 31,
2023 is extracted from the Accountant’s Report as set out in Appendix I, which is based on the audited
consolidated net liabilities attributable to the owners of the Company as at March 31, 2023 of approximately
RMB1,931,646,000, with an adjustment for the intangible assets attributable to the owners of the Company as
at March 31, 2023 of approximately RMB410,829,000.
(2) The estimated net proceeds to be received by the Company from the Global Offering are based on the
indicative Offer Prices of HK$55.60 and HK$61.16 per Share, respectively, after deduction of the underwriting
fees and other related expenses payable by the Company (excluding listing expenses of approximately
RMB93,377,000 which have been charged to our consolidated statement of comprehensive income up to March
31, 2023), and does not take into account any shares which may be issued pursuant to the exercise of the
Over-allotment Option.
(3) Upon the Listing, all preferred rights entitled to the Company’s investors will be terminated and the
redemption liabilities recognized due to these preferred rights will be reclassified to equity. Accordingly, for
the purpose of the unaudited pro forma financial information, the unaudited pro forma adjusted consolidated
net tangible assets attributable to the owners of the Company will be increased by RMB6,683,937,000, being
the carrying amount of the redemption liabilities as at March 31, 2023.
(4) The unaudited pro forma adjusted consolidated net tangible assets per Share is arrived at after the adjustments
referred to in the preceding paragraphs and on the basis that 464,060,533 Shares were in issue, assuming that
the Global Offering has been completed on March 31, 2023 but does not take into account any shares which
may be issued pursuant to the exercise of the Over-allotment Option.
(5) For the purpose of this unaudited pro forma adjusted net tangible assets, the amounts stated in RMB are
converted into Hong Kong dollars at a rate of RMB1.00 to HK$1.0862. No representation is made that
Renminbi amounts have been, could have been or may be converted to Hong Kong dollars, or vice versa, at
that rate.
(6) No adjustment has been made to reflect any trading result or other transactions of the Group entered into
subsequent to March 31, 2023.
FINANCIAL INFORMATION
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--- page 388 ---
NO MATERIAL ADVERSE CHANGE
Our Directors confirm that, as of the date of this Prospectus, there has been no material
adverse change in our financial or trading position, indebtedness, mortgage, contingent
liabilities, guarantees or prospects since March 31, 2023, the end of the period reported on the
Accountant’s Report included in Appendix I to this Prospectus.
DISCLOSURE REQUIRED UNDER THE LISTING RULES
We confirm that, as of the Latest Practicable Date, there were no circumstances that
would give rise to disclosure required under Rules 13.13 to 13.19 of the Listing Rules.
FINANCIAL INFORMATION
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--- page 389 ---
FUTURE PLANS
See “Business – Our Strategies” for a detailed description of our future plans.
USE OF PROCEEDS
Assuming an Offer Price of HK$58.38 per Offer Share (being the midpoint of the stated
range of the Offer Price of between HK$55.60 and HK$61.16 per Offer Share), we estimate
that we will receive net proceeds of approximately HK$885.0 million from the Global Offering
after deducting the underwriting commissions and other estimated expenses in connection with
the Global Offering.
We intend to use the net proceeds we expect to receive from the Global Offering for the
purposes and in the amounts set out below.
 Approximately 60%, or HK$531.0 million, will be allocated over the next three
years to enhance our fundamental research, technological capabilities and solution
development. We plan to further apportion the use of proceeds as follows.
 Approximately 25%, or HK$221.2 million, will be used to strengthen our
research and development team over the next three years, including:
(i) approximately 20%, or HK$177.0 million for the research and
development team of our core technologies. Specifically, we intend to
allocate:
 approximately 11%, or HK$97.3 million for our AutoML
technologies. Advancements in AutoML will lower the barrier for AI
application development, help us attract more developers, and
expand and upgrade our developer suites, especially the HyperCycle
series;
 approximately 3%, or HK$26.5 million for our transfer learning
technologies, which will further enhance the ability of our solutions
to be applied across difference scenarios, thereby reducing the cost
of expansion into new use cases and industry vectors;
 approximately 3%, or HK$26.5 million for our environment
learning technologies, which helps further improve data quality and
reduce the cost of model training;
 approximately 3%, or HK$26.5 million for our AutoRL
technologies, which will further lower the barriers for reinforcement
learning by automating the process.
FUTURE PLANS AND USE OF PROCEEDS
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--- page 390 ---
For details, see “Business – Our Technology.”
(ii) approximately 5%, or HK$44.2 million for the research and development
team of new areas which may lead to the next generation of AI
technologies. For example, we are dedicated to developing technologies
in the area of data privacy protection, including privacy preserving
learning, which is able to enhance data privacy in the process of machine
learning, and federated learning which entails training algorithm on local
datasets without exchange data samples, thereby enhancing data security
and privacy. Moreover, to stay abreast of rapid technological
developments, we will also develop cutting-edge technologies such as
large language models and generative AI to enhance efficiency and
productivity. For details, see “Business – Research and Development.”
To achieve the plans above, we plan to (i) recruit scientists, researchers,
architects and engineers with experience in AI and software development,
and (ii) increase the compensation levels for our present research and
development personnel. To maintain our competitive edges and further
innovate our solutions and technologies, we plan to hire over 600
additional scientists, researchers, architects and engineers over the next
five years. Qualified candidates include both (1) experienced laterals
from renowned AI companies or academic institutions, have published
relevant papers on international journals, or have extensive experience in
commercialization of AI technologies, and (2) outstanding and talented
fresh graduates from leading universities. We believe that qualified and
experienced talents are crucial to sustain our leadership in the core
technologies, including AutoML, transfer learning, environment learning
and AutoRL, and the ongoing refinement of our algorithms, platforms and
operating systems. According to CIC, there are intense competitions for
AI talents in China. To effective retain our R&D personnel and prevent
them from joining our competitors, we intend to gradually increase the
compensation levels for our R&D personnel to keep up with any increase
in industry levels and maintain the competitiveness of our compensation
package. Specifically, we intend to gradually increase their cash salary
and offer share-based incentives to motivate them by providing such
persons an opportunity share our business growth and future success.
 Approximately 35%, or HK$309.7 million, will be used to strengthen our
research and development capabilities. Specifically:
(i) approximately 4%, or HK$35.4 million for the procurement and
installation of equipment, devices and/or software to support our
increasing business needs over the next three years. We serve many
lighthouse users which use our solutions at an increasing scale to meet
their business needs. During our research and development and solution
testing process, we need to simulate the way how users apply our
solutions. Accordingly, we plan to further invest in improving our
technology infrastructure to enhance our computing power and storage
FUTURE PLANS AND USE OF PROCEEDS
– 381 –


--- page 391 ---
capabilities to facilitate our research and development and solution
testing processes. Specifically, we plan to procure approximately 3,000-
5,000 units of high performance computing servers, and to selectively
procure management tool software that can enhance our overall R&D
efficiency.
(ii) approximately 7%, or HK$61.9 million for the establishment of our new
research and development centers. To further enhance our research and
development capabilities and to attract local R&D talents, we plan to
establish over three new research and development centers primarily in
top-tier cities in China in the next three to four years. Under the
management of our headquarter, these new research and development
centers will work with our headquarter and jointly conduct research and
development activities. For details of our research and development
focuses, see “Business – Research and Development.”
(iii) approximately 20%, or HK$177.0 million for strengthening our
relationship with third-party R&D service providers to further expand our
R&D capabilities. During the Track Record Period, we have outsourced
certain non-core and less sophisticated research and development
projects, such as the development of certain applications in our AI
application store and miscellaneous product modules, design of user
interfaces and product testing projects. Accordingly, we incurred
technology service fees of RMB446.3 million, RMB1,336.2 million,
RMB2,002.4 million and RMB370.5 million in 2020, 2021 and 2022 and
the three months ended March 31, 2023, respectively. We intend to
continue to collaborate with such third-party R&D service providers,
such that we can continue to focus on our core research and development
activities.
(iv) approximately 4%, or HK$35.4 million for the cultivation of the
OpenMLDB community to enhance the activeness and engagement of all
AI developers partnerships. We made OpenMLDB in our Sage AIOS an
open source platform to share our achievements in AI operating systems
with developers across the world. We intend to further cultivate the
OpenMLDB community by (1) establishing a dedicated team to manage
the community, communicate with developers, continuously developing
new codes for the open community, and refine codes contributed by
developers, and (2) organizing various types of community events, such
as large-scale developer submits, developer workshops, and other
innovative developer activities (e.g. live-stream discussions).
FUTURE PLANS AND USE OF PROCEEDS
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--- page 392 ---
 Approximately 20%, or HK$177.0 million, will be allocated to expand our offerings,
build our brand and enter into new industry sectors. As of the Latest Practicable
Date, we do not have any concrete plans on the new industry verticals that we will
enter into. We plan to select industries with considerable monetization opportunities
for us, and will conduct careful evaluation and analysis on the expected market size,
competitive landscape and potential challenges before entering into new verticals.
We plan to further apportion the use of proceeds as follows.
 Approximately 12%, or HK$106.2 million, will be used to recruit and retain
talents in various industries to strengthen our sales and marketing team,
thereby leveraging their industry-specific sales experiences to expand our user
base and to increase our customer loyalty, which in turn may increase
customers’ spending on our platform. We plan to hire approximately 300
additional sales and marketing staff in the next five years to support our
business growth.
 Approximately 8%, or HK$70.8 million, will be used to promote our solutions
and offerings by engaging in more marketing activities through both offline
and online channels. Specifically:
(i) approximately 6%, or HK$53.1 million will be allocated for organizing
and sponsoring high impact events over the next three years. We intend
to host two large-scale offline conferences annually, one for developers
and the other for users. We also plan to organize one or more industry
discussions on a weekly basis. Furthermore, we will also sponsor other
influential industry conferences to increase our brand exposure.
(ii) approximately 2%, or HK$17.7 million will be allocated for collaborating
with online media partners to promote our brand awareness among users
and potential users.
 Approximately 10%, or HK$88.5 million, will be allocated over the next three years
to pursue strategic investment and acquisition opportunities to implement our
long-term growth strategy to develop our solutions and expand and penetrate the
industry verticals we cover. We plan to prudently evaluate and consider a wide array
of potential investments in emerging businesses that are complementary to our
business in terms of improving our technological capabilities and expanding our
user base or that can enrich our ecosystem of business partners. Specifically,
relevant considerations including: (i) businesses with technologies that are
complementary to our solutions, ranging from cutting-edge technologies to improve
our overall technology capabilities, to specialized solutions that would allow us to
overall optimize the deployment efficacy and completeness of our solution
offerings; (ii) business with proven industry know-how in both the verticals that we
have already established strong presence and intend to increase the penetration, and
the verticals that we may expand into in the future; and (iii) businesses with
FUTURE PLANS AND USE OF PROCEEDS
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established industry leading position, meaningful scale of established user base and
track record of maintaining healthy and stable financial positions. As such, we may
invest in strategic technology enablers, industry or subsector focused specialized
solution providers that would overall complete and enhance our solution and service
offering. Leveraging such potential strategic investments and acquisitions, we
expect to achieve synergies in terms of optimizing our overall deployment efficacy,
optimizing our technology capabilities and solution offerings, expanding our user
base, among others. We intend to make aforementioned investments and acquisitions
mainly through equity, both controlling or non-controlling, and may consider other
forms of investment such debt or that with convertible features if such is better
suited for the need of the transaction, evaluated on the case-by-case basis. Our
Directors, as advised by CIC, are of the view that there are sufficient number of
potential targets as there are many technology focused companies and solution
providers that meet our criteria. We expect to select our investment target based on
the industry in which the target operates, the target’s strength of technology and
solutions, the target’s business and financial performance and the synergy between
the target and us. See “Financial Information – Discussion of Selected Items from
the Consolidated Statements of Financial Position – Assets – Financial Assets at Fair
V alue through Profit or Loss” for details of our investment approval process. As of
the Latest Practicable Date, we did not identify any investment or acquisition target
in this regard.
 Approximately 10%, or HK$88.5 million, will be used for general corporate
purposes.
If the Offer Price is fixed at the high-end or low-end of the Offer Price range (assuming
the Over-allotment Option is not exercised), the net proceeds will increase or decrease by
approximately HK$49.4 million (after deducting underwriting fees and expenses related to the
Global Offering). We intend to apply the additional or reduced net proceeds to the above uses
on a pro rata basis.
If the Over-allotment Option is exercised in full, we will receive additional proceeds of
approximately HK$148.3 million, HK$155.8 million and HK$163.2 million if the Offer Price
is fixed at the high-end, midpoint and low-end of the Offer Price range, respectively. We intend
to apply the additional net proceeds to the above uses on a pro rata basis.
If the net proceeds of the Global Offering are not immediately used for the purposes
described above, to the extent permitted by the relevant laws and regulations, we will deposit
the net proceeds into short-term demand deposits with licensed commercial banks or other
authorized financial institutions as defined under the SFO, as long as it is deemed to be in the
best interests of the Company. In such event, we will comply with the appropriate disclosure
requirements under the Listing Rules.
FUTURE PLANS AND USE OF PROCEEDS
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HONG KONG UNDERWRITERS
China International Capital Corporation Hong Kong Securities Limited
CCB International Capital Limited
CMB International Capital Limited
China Merchants Securities (HK) Co., Limited
Huatai Financial Holdings (Hong Kong) Limited
ICBC International Securities Limited
BOCI Asia Limited
ABCI SECURITIES COMPANY LIMITED
BOCOM International Securities Limited
CEB International Capital Corporation Limited
China Everbright Securities (HK) Limited
Central China International Capital Limited
North Beta International Securities Limited
China Sunrise Securities (International) Limited
Futu Securities International (Hong Kong) Limited
CNCB (Hong Kong) Capital Limited
Orient Securities (Hong Kong) Limited
SPDB International Capital Limited
Fosun International Securities Limited
Tiger Brokers (HK) Global Limited
V aluable Capital Limited
Riche Bright Securities Limited
UNDERWRITING ARRANGEMENTS AND EXPENSES
The Hong Kong Public Offering
Hong Kong Underwriting Agreement
Pursuant to the Hong Kong Underwriting Agreement, our Company is offering initially
1,839,600 Hong Kong Offer Shares (subject to reallocation) for subscription by the public in
Hong Kong on and subject to the terms and conditions of this Prospectus.
Subject to the Listing Committee granting approval for the listing of, and permission to
deal in, the Shares to be issued pursuant to the Global Offering (including any Shares which
may be issued pursuant to the exercise of the Over-allotment Option), and certain other
conditions set out in the Hong Kong Underwriting Agreement (including but not limited to the
Offer Price being agreed upon between our Company, the Overall Coordinators, (for
themselves and on behalf of the Hong Kong Underwriters), the Hong Kong Underwriters have
agreed severally and not jointly to subscribe or procure subscribers for their respective
applicable proportions of the Hong Kong Offer Shares now being offered which are not taken
up under the Hong Kong Public Offering on and subject to the terms and conditions of this
Prospectus and the Hong Kong Underwriting Agreement. The Hong Kong Underwriting
Agreement is conditional upon and subject to, among other things, the International
Underwriting Agreement having been signed and becoming unconditional and not having been
terminated in accordance with its terms.
UNDERWRITING
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Grounds for Termination
The obligations of the Hong Kong Underwriters to subscribe or procure subscribers for
the Hong Kong Offer Shares under the Hong Kong Underwriting Agreement are subject to
termination. If at any time prior to 8:00 a.m. on the day that trading in Shares commences on
the Hong Kong Stock Exchange:
(a) there develops, occurs, exists or comes into force:
(i) any local, national, regional or international event or circumstance in the
nature of force majeure (including any acts of government, declaration of a
national or international emergency or war, calamity, crisis, epidemic,
pandemic, outbreak of disease, economic sanctions, strikes, lock-outs, fire,
explosion, flooding, earthquake, volcanic eruption, civil commotion, riots,
public disorder, acts of war, outbreak or escalation of hostilities (whether or
not war is declared), acts of God or acts of terrorism) in or affecting Hong
Kong, the PRC, the United States, the United Kingdom or the European Union
(collectively, the “ Relevant Jurisdictions ”); or
(ii) any change or development involving a prospective change, or any event or
series of events likely to result in a change or prospective change, in local,
national, regional or international financial, political, military, industrial,
fiscal, regulatory, currency, credit or market conditions (including conditions
in the stock and bond markets, money and foreign exchange markets, the
interbank markets and credit markets) in or affecting any Relevant
Jurisdictions; or
(iii) any moratorium, suspension or restriction (including any imposition of or
requirement for any minimum or maximum price limit or price range) in or on
trading in securities generally on the Stock Exchange, the Shanghai Stock
Exchange, the Shenzhen Stock Exchange, the New Y ork Stock Exchange, the
NASDAQ Global Market or the London Stock Exchange; or
(iv) any general moratorium on commercial banking activities in Hong Kong
(imposed by the Financial Secretary or the Hong Kong Monetary Authority or
other competent authority), the PRC, New Y ork (imposed at Federal or New
Y ork State level or other competent authority), London, or any other Relevant
Jurisdiction, or any disruption in commercial banking or foreign exchange
trading or securities settlement or clearance services, procedures or matters in
any Relevant Jurisdiction; or
(v) any new law, or any change or any development involving a prospective
change or any event or circumstance likely to result in a change or a
development involving a prospective change in (or in the interpretation or
application by any court or other competent authority of) existing Laws, in
each case, in or affecting any of the Relevant Jurisdictions; or
UNDERWRITING
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(vi) the imposition of sanctions, in whatever form, directly or indirectly, under any
sanction Laws, or regulations in, Hong Kong, the PRC or any other Relevant
Jurisdiction; or
(vii) a change or development involving a prospective change in or affecting taxes
or exchange control, currency exchange rates or foreign investment regulations
(including a material devaluation of the Hong Kong dollar or the Renminbi
against any foreign currencies), or the implementation of any exchange
control, in any of the Relevant Jurisdictions; or
(viii) any litigation or claim of any third party being threatened or instigated against
any member of the Group; or
(ix) a Director, a Supervisor or a member of the Group’s senior management as
named in this Prospectus being charged with an indictable offense or
prohibited by operation of law or otherwise disqualified from taking part in the
management or taking directorship of a company; or
(x) the chairman of the Board, the chief executive officer or the chief financial
officer, any Director or Supervisor of the Company vacating his or her office;
or
(xi) an authority or a political body or organization in any Relevant Jurisdiction
(including, in particular, the CSRC and its local branches and representative
offices) commencing any investigation or other action, or announcing an
intention to investigate or take other action, against any member of the Group
or Director; or
(xii) a contravention by any member of the Group of the Listing Rules or applicable
laws; or
(xiii) a prohibition by an authority on the Company for whatever reason from
offering, allotting, issuing or selling any of the Shares (including the Option
Shares) pursuant to the terms of the Global Offering; or
(xiv) non-compliance of the Prospectus, CSRC filings or any other documents used
in connection with the contemplated offer and sale of the Offer Shares or any
aspect of the Global Offering with the Listing Rules or any other applicable
Laws; or
(xv) the issue or requirement to issue by the Company of any supplement or
amendment to the Prospectus (or to any other documents issued or used in
connection with the contemplated offer and sale of the Shares) pursuant to the
UNDERWRITING
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Companies Ordinance or the Companies (Winding Up and Miscellaneous
Provisions) Ordinance or the Listing Rules or any requirement or request of the
Stock Exchange and/or the SFC; or
(xvi) any change or development involving a prospective change in, or a
materialization of any of the risks set out in the section headed “Risk Factors”
of this Prospectus; or
(xvii) an order or petition for the winding up of any member of the Group or any
composition or arrangement made by any member of the Group with its
creditors or a scheme of arrangement entered into by any member of the Group
or any resolution for the winding-up of any member of the Group or the
appointment of a provisional liquidator, receiver or manager over all or part of
the material assets or undertaking of any member of the Group or anything
analogous thereto occurring in respect of any member of the Group,
which, individually or in the aggregate, in the sole opinion of the Sole Sponsor (1)
has or will have or may have a material adverse effect on the assets, liabilities,
business, general affairs, management, prospects, shareholders’ equity, profits,
losses, results of operations, position or condition, financial or otherwise, or
performance of the Group as a whole; or (2) has or will have or may have a material
adverse effect on the success of the Global Offering or the level of applications
under the Hong Kong Public Offering or the level of interest under the International
Offering; or (3) makes or will make or may make it incapable, inadvisable or
inexpedient or impracticable for the Global Offering to proceed or to market the
Global Offering; or (4) has or will have or may have the effect of making any part
of this Agreement (including underwriting) incapable of performance in accordance
with its terms or preventing the processing of applications and/or payments pursuant
to the Global Offering or pursuant to the underwriting thereof; or
(b) any of the following shall have come to the notice of any of the Sole Sponsor:
(a) that any statement contained in any of the any offering documents and/or in
any notices, announcements, advertisements, communications or other
documents issued or used by or on behalf of the Company in connection with
the Hong Kong Public Offering(collectively, the “Offer Related Documents”)
(including any supplement or amendment thereto) was, when it was issued, or
has become, untrue, incorrect, incomplete in any material respect or
misleading, or that any forecast, estimate, expression of opinion, intention or
expectation contained in any of the Offer Related Documents (including any
supplement or amendment thereto) is not fair and honest and based on
reasonable assumptions; or
UNDERWRITING
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(b) that any matter has arisen or has been discovered which would, had it arisen
or been discovered immediately before the date of this Prospectus, constitute
a material omission from any of the Offer Related Documents (including any
supplement or amendment thereto) or a material misstatement therein; or
(c) any material breach of any of the obligations imposed upon any party to the
Hong Kong Underwriting Agreement or the International Underwriting
Agreement or any of the cornerstone agreements (other than upon any of the
Hong Kong Underwriters or the International Underwriters); or
(d) any event, act or omission which gives or is likely to give rise to any liability
of any of the indemnifying parties pursuant to the Hong Kong Underwriting
Agreement; or
(e) any material adverse change as provided in the Hong Kong Underwriting
Agreement; or
(f) any breach of, or any event or circumstance rendering untrue or incorrect in
any respect, any of the warranties set out in the Hong Kong Underwriting
Agreement; or
(g) that approval by the Listing Committee of the Stock Exchange of the listing of,
and permission to deal in, the H Shares to be issued or sold (including any
additional H Shares that may be issued or sold pursuant to the exercise of the
Over-allotment Option) under the Global Offering is refused or not granted,
other than subject to customary conditions, on or before the Listing Date, or if
granted, the approval is subsequently withdrawn, qualified (other than by
customary conditions) or withheld; or
(h) the Company withdraws any of the Offer Related Documents or the Global
Offering; or
(i) any person (other than the Sole Sponsor) has withdrawn or is subject to
withdrawing its consent to being named in the Prospectus or to the issue of any
of the Hong Kong Public Offering related documents; or
(j) that a material portion of the orders placed or confirmed in the bookbuilding
process, or of the investment commitments made by any cornerstone investors
under agreements signed with such cornerstone investors, have been
withdrawn, terminated or cancelled.
UNDERWRITING
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Undertakings pursuant to the Listing Rules and the Hong Kong Underwriting Agreement
Undertakings by our Company
In accordance with Rule 10.08 of the Listing Rule, we have undertaken to the Hong Kong
Stock Exchange that, no further Shares or securities convertible into equity securities of our
Company (whether or not of a class already listed) may be issued by us or form the subject of
any agreement to such an issue within six months from the Listing Date (whether or not such
issue of Shares or securities will be completed within six months from the Listing Date) except
for the issue of Shares or securities pursuant to the Global Offering (including the
Over-allotment Option) or under any of the circumstances provided under Rule 10.08 of the
Listing Rules.
We have also undertaken to each of the Sole Sponsor, the Joint Global Coordinators, the
Overall Coordinators, the Joint Bookrunners, the Joint Lead Managers, and the Hong Kong
Underwriters that, and each of our Controlling Shareholders undertakes to the same parties to
procure that, except pursuant to the Global Offering (including the Over-allotment Option) or
with the prior written consent of the Sole Sponsor (for themselves and on behalf of the Hong
Kong Underwriters), and unless in compliance with the Listing Rules, we shall not, during a
period of six months from the Listing Date (the “ First Six-Month Period ”) and whether
conditionally or unconditionally:
(i) allot, issue, sell, accept subscription for, offer to allot, issue or sell, contract or agree
to allot, issue or sell, mortgage, charge, pledge, hypothecate, lend, grant or sell any
option, warrant, contract or right to subscribe for or purchase, grant or purchase any
option, warrant, contract or right to allot, issue or sell, or otherwise transfer or
dispose of or create an Encumbrance over, or agree to transfer or dispose of or create
an Encumbrance over, either directly or indirectly, conditionally or unconditionally,
any Shares or other securities of the Company or any shares or other securities of
such other member of the Group, as applicable, 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 shares of such other member of the Group, as applicable), or
deposit any Shares or other securities of the Company or any shares or other
securities of such other member of the Group, as applicable, with a depositary in
connection with the issue of depositary receipts; or
(ii) enter into any swap or other arrangement that transfers to another, in whole or in
part, any of the economic consequences of ownership of any Shares or other
securities of the Company or any shares or other securities of such other member of
the Group, as applicable, 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 shares
of such other member of the Group, as applicable); or
UNDERWRITING
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--- page 400 ---
(iii) enter into any transaction with the same economic effect as any transaction specified
in sub-paragraph (i) or (ii) above; or
(iv) offer to or agree to or announce any intention to effect any transaction specified in
sub-paragraph(i), (ii) or (iii) above, in each case, whether any of the transactions
specified in sub-paragraph (i), (ii) or (iii) above is to be settled by delivery of Shares
or other securities of the Company or shares or other securities of such other
member of the Group, as applicable, or in cash or otherwise (whether or not the issue
of such Shares or other shares or securities will be completed within the First
Six-Month Period). In the event that, during the period of six months commencing
on the date on which the First Six-Month Period expires (the “ Second Six-Month
Period ”), the Company enters into any of the transactions specified in sub-
paragraph (i), (ii) or (iii) above or offers to or agrees to or announces any intention
to effect any such transaction, the Company shall take all reasonable steps to ensure
that it will not create a disorderly or false market in the securities of the Company.
Each of our Controlling Shareholder undertake to each of the Joint Global
Coordinators, the Overall Coordinator, the Hong Kong Underwriters, and the Sole
Sponsor to procure the Company to comply with the foregoing undertakings.
Undertakings by our Controlling Shareholders
Each of our Controlling Shareholders agrees and undertakes to each of the Sole Sponsor,
the Joint Global Coordinators, the Overall Coordinator, the Joint Bookrunners, the Joint Lead
Managers, and the Hong Kong Underwriters and the Company that, within the First Six-Month
Period and the Second Six-Month Period, without the prior written consent of the Sole Sponsor,
the Overall Coordinator (for themselves and on behalf of the Hong Kong Underwriters) and
unless in compliance with the requirements of the Listing Rules, he or it will not:
(i) sell, offer to sell, contract or agree to sell, mortgage, charge, pledge, hypothecate,
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 directly or indirectly, conditionally or unconditionally,
any Shares or other securities of the Company or any interest therein (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 deposit
any Shares or other securities of the Company with a depositary in connection with
the issue of depositary receipts, or
(ii) enter into any swap or other arrangement that transfers to another, in whole or in
part, any of the economic consequences of ownership of any Shares or other
securities of the Company or any interest therein (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
UNDERWRITING
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--- page 401 ---
(iii) enter into any transaction with the same economic effect as any transaction specified
in sub-paragraph (i) or (ii) above, or
(iv) offer to or agree to or announce any intention to effect any transaction specified in
sub-paragraph (i), (ii) or (iii) above, in each case, whether any of the transactions
specified in sub-paragraph (i), (ii) or (iii) above is to be settled by delivery of Shares
or other securities of the Company or in cash or otherwise (whether or not the issue
of such Shares or other securities will be completed within the First Six-Month
Period and the Second Six-Month Period);
Each of our Controlling Shareholder agrees and undertakes to each of the Sole Sponsor,
the Joint Global Coordinators, the Overall Coordinator, the Joint Bookrunners, the Joint Lead
Managers and the Hong Kong Underwriters and the Company that, until the expiry of the
Second Six-Month Period, in the event that he or it enter into any of the transactions specified
in (i), (ii), (iii) or (iv) above or offer to or agree to or announce any intention to effect any such
transaction, he or it will take all reasonable steps to ensure that he or it will not create a
disorderly or false market in the securities of the Company.
Indemnity
Our Company has agreed to indemnify, among others, the Sole Sponsor, the Joint Global
Coordinators, the Overall Coordinators, the Joint Bookrunners, the Joint Lead Manager, and
the Capital Market Intermediaries and the Hong Kong Underwriters for certain losses which
they may suffer, including losses arising from the performance of their obligations under the
Hong Kong Underwriting Agreement and any breach by us of the Hong Kong Underwriting
Agreement, as the case may be.
Sole Sponsor’s Fee
An amount of US$0.5 million is payable by our Company as sponsor fees to the Sole
Sponsor.
Undertakings pursuant to the deed of undertaking between Dr. Dai and certain Pre-IPO
Investors
Dr. Dai and certain of our Directors, Supervisors and senior management made
non-disposal undertakings in favour of certain of our Pre-IPO Investors. See “History,
Development and Corporate Structure – Rights of the Pre-IPO Investors” for details.
The International Offering
In connection with the International Offering, it is expected that our Company and our
Controlling Shareholders will enter into the International Underwriting Agreement with,
among others, the Joint Global Coordinators, the Overall Coordinators, the Joint Bookrunners,
the Joint Lead Managers, and the International Underwriters. Under the International
UNDERWRITING
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--- page 402 ---
Underwriting Agreement, the International Underwriters will, subject to certain conditions set
out therein, severally and not jointly, agree to procure subscribers or purchasers for the
International Offer Shares (excluding, for the avoidance of doubt, the Offer Shares which are
subject to the Over-allotment Option), failing which they agree to subscribe for or purchase
their respective proportions of the International Offer Shares which are not taken up under the
International Offering.
Our Company is expected to grant to the International Underwriters the Over-allotment
Option, exercisable by the Overall Coordinators on behalf of the International Underwriters at
any time from the date of the International Underwriting Agreement until 30 days after the last
day for the lodging of applications under the Hong Kong Public Offering, to require our
Company to issue and allot up to an aggregate of 2,759,400 additional Offer Shares
representing no more than 15% of the initial Offer Shares, at the same price per Offer Share
under the International Offering to cover, among other things, over-allocations (if any) in the
International Offering.
It is expected that the International Underwriting Agreement may be terminated on
similar grounds as the Hong Kong Underwriting Agreement. Potential investors should note
that if the International Underwriting Agreement is not entered into, or is terminated, the
Global Offering will not proceed.
Commission and Expenses
The Underwriters and the Capital Market Intermediaries will, in aggregate, receive a
fixed underwriting commission of 2.3% of the aggregate Offer Price of all the Offer Shares
(under both the Hong Kong Public Offering and the International Offering), including Offer
Shares to be issued pursuant to the Over-allotment Option. Our Company may, at our sole and
absolute discretion, pay to one or more Underwriters or Capital Market Intermediaries a
discretionary incentive fee up to but not exceeding 1.0% of the Offer Price of all the Offer
Shares (including Offer Shares to be issued pursuant to the Over-allotment Option). Assuming
that the discretionary incentive fee will be fully paid, the ratio between the fixed underwriting
commission and discretionary incentive fee is approximately 69.7%:30.3%. For unsubscribed
Hong Kong Offer Shares reallocated to the International Offering, our Company will pay an
underwriting commission at the rate applicable to the International Offering and such
commission will be paid to the relevant International Underwriters and not the Hong Kong
Underwriters.
Assuming the Over-allotment Option is not exercised at all and based on an Offer Price
of HK$58.38 per Offer Share (being the mid-point of the indicative offer price range of
HK$55.60 to HK$61.16 per Offer Share), the aggregate commissions and fees, together with
listing fees, SFC transaction levy, Hong Kong Stock Exchange trading fee, Accounting and
Financial Reporting Council transaction levy, legal and other professional fees and printing and
other expenses, payable by our Company relating to the Global Offering are estimated to be
approximately HK$189.4 million in total.
UNDERWRITING
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Activities by Syndicate Members
We describe below a variety of activities that underwriters of the Hong Kong Public
Offering and the International Offering (together, referred to as “ 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 the stabilizing process.
The Syndicate Members and their affiliates are diversified financial institutions with
relationships in countries around the world. These entities engage in a wide range of
commercial and investment banking, brokerage, funds management, trading, hedging,
investing and other activities for their own account and for the account of others. In the
ordinary course of their various business activities, the Syndicate Members and their respective
affiliates may purchase, sell or hold a broad array of investments and actively trade securities,
derivatives, loans, commodities, currencies, credit default swaps, and other financial
instruments for their own account and for the accounts of their customers. Such investment and
trading activities may involve or relate to assets, securities and/or instruments 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
Group’s loans and other debt.
In relation to the Shares, the activities of the Syndicate Members and their affiliates could
include acting as agent for buyers and sellers of the Shares, entering into transactions with
those buyers and sellers in a principal capacity, proprietary trading in the Shares and entering
into over the counter or listed derivative transactions or listed and unlisted securities
transactions (including issuing securities such as derivative warrants listed on a stock
exchange) which have the Shares as their or part of their underlying assets. Those activities
may require hedging activity by those entities involving, directly or indirectly, buying and
selling the Shares. All such activities could occur in Hong Kong and elsewhere in the world
and may result in the Syndicate Members and their affiliates holding long and/or short
positions in the Shares, in baskets of securities or indices including the Shares, in units of funds
that may purchase the Shares, or in derivatives related to any of the foregoing.
In relation to issues by Syndicate Members or their affiliates of any listed securities
having the Shares as their or part of their underlying assets, whether on the Hong Kong Stock
Exchange or on any other stock exchange, the rules of the relevant exchange may require the
issuer of those securities (or one of its affiliates or agents) to act as a market maker or liquidity
provider in the security, and this will also result in hedging activity in the Shares in most cases.
All of these activities may occur both during and after the end of the stabilizing period
described in “Structure of the Global Offering – The International Offering – Over-allotment
Option” and “Structure of the Global Offering – The International Offering – Stabilization.”
These activities may affect the market price or value of the Shares, the liquidity or trading
volume in the Shares and the volatility of their share price, and the extent to which this occurs
from day to day cannot be estimated.
UNDERWRITING
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It should be noted that when engaging in any of these activities, the Syndicate Members
will be subject to certain restrictions, including the following:
(a) the Syndicate Members (other than the Stabilizing Manager, its affiliates 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) all of them must comply with all applicable laws, including the market misconduct
provisions of the SFO, the provisions prohibiting insider dealing, false trading, price
rigging and stock market manipulation.
Hong Kong Underwriters’ Interests in our Company
Save as otherwise disclosed in this Prospectus and save for its obligations under the Hong
Kong Underwriting Agreement, none of the Hong Kong Underwriters has any shareholding
interests in our Company or the right or option (whether legally enforceable or not) to
subscribe for or to nominate persons to subscribe for securities in our Company.
Following the completion of the Global Offering, the Underwriters and their affiliated
companies may hold a certain portion of the Shares as a result of fulfilling their obligations
under the Underwriting Agreements.
Other Services to our Company
Certain of the Joint Global Coordinators, the Overall Coordinators, the Underwriters or
their respective affiliates have, from time to time, provided and expect to provide in the future
investment banking and other services to our Company and our respective affiliates, for which
such Joint Global Coordinators, Overall Coordinators, Underwriters or their respective
affiliates have received or will receive customary fees and commissions.
Other Services Provided by the Underwriters
The Joint Global Coordinators, the Overall Coordinators, the Joint Bookrunners, the Joint
Lead Managers and the Underwriters may in their ordinary course of business provide
financing to investors subscribing for the Offer Shares offered by this Prospectus. Such Joint
Global Coordinators, Overall Coordinators, Joint Bookrunners, Joint Lead Managers and
Underwriters may enter into hedges and/or dispose of such Offer Shares in relation to the
financing which may have a negative impact on the trading price of our Shares.
UNDERWRITING
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Over-Allotment and Stabilization
Details of the arrangements relating to the stabilization and Over-allotment Option are set
forth in “Structure of the Global Offering – The International Offering – Stabilization,” and
“Structure of the Global Offering – The International Offering – Over-allotment Option.”
Independence of the Sole Sponsor
The Sole Sponsor satisfied the independence criteria set out in Rule 3A.07 of the Listing
Rules.
UNDERWRITING
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--- page 406 ---
THE GLOBAL OFFERING
This Prospectus is published in connection with the Hong Kong Public Offering as part
of the Global Offering. The Global Offering comprises:
(i) the Hong Kong Public Offering of 1,839,600 Offer Shares in Hong Kong as
described below in the paragraph headed “– The Hong Kong Public Offering”
below; and
(ii) the International Offering of an aggregate of initially 16,556,400 Offer Shares
outside the United States in reliance on Regulation S under the U.S. Securities Act
or other available exemption from the registration requirements of the U.S.
Securities Act. At any time from the date of the International Underwriting
Agreement until 30 days after the last day for the lodging of applications under the
Hong Kong Public Offering, the Overall Coordinators, as representatives of the
International Underwriters, have an option to require us to issue and allot up to
2,759,400 additional Offer Shares, representing 15% of the initial number of Offer
Shares to be offered in the Global Offering, at the Offer Price to cover over-
allocations in the International Offering, if any. If the Over-allotment Option is
exercised in full, the Offer Shares will represent approximately 4.53% of our
Company’s enlarged share capital immediately following the completion of the
Global Offering and the exercise of the Over-allotment Option. In the event that the
Over-allotment Option is exercised, a press announcement will be made.
Investors may either
(1) apply for Offer Shares under the Hong Kong Public Offering; or
(2) apply for or indicate an interest for Offer Shares under the International Offering,
but may not do both.
The Offer Shares will represent approximately 3.96% of the enlarged issued share capital
of our Company immediately after completion of the Global Offering without taking into
account the exercise of the Over-allotment Option. If the Over-allotment Option is exercised
in full, the Offer Shares will represent approximately 4.53% of the enlarged issued share
capital immediately after completion of the Global Offering and the exercise of the
Over-allotment Option as set out in “– The International Offering – Over-allotment Option”
below.
The number of Offer Shares to be offered under the Hong Kong Public Offering and the
International Offering may be subject to reallocation as described in the paragraph headed
“– The Hong Kong Public Offering – Reallocation” below.
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China International Capital Corporation Hong Kong Securities Limited, CCB
International Capital Limited, CMB International Capital Limited and China Merchants
Securities (HK) Co., Limited are the Overall Coordinators and Joint Global Coordinators of the
Global Offering.
China International Capital Corporation Hong Kong Securities Limited, CCB
International Capital Limited, China Merchants Securities (HK) Co., Limited, CMB
International Capital Limited, Huatai Financial Holdings (Hong Kong) Limited, ICBC
International Securities Limited, BOCI Asia Limited, ABCI CAPITAL LIMITED, BOCOM
International Securities Limited, CEB International Capital Corporation Limited, China
Everbright Securities (HK) Limited, Central China International Capital Limited, North Beta
International Securities Limited, China Sunrise Securities (International) Limited, Futu
Securities International (Hong Kong) Limited and CNCB (Hong Kong) Capital Limited are the
Joint Bookrunners of the Global Offering.
China International Capital Corporation Hong Kong Securities Limited, CCB
International Capital Limited, China Merchants Securities (HK) Co., Limited, CMB
International Capital Limited, Orient Securities (Hong Kong) Limited, SPDB International
Capital Limited, Fosun International Securities Limited, Tiger Brokers (HK) Global Limited,
V aluable Capital Limited and Riche Bright Securities Limited are the Joint Lead Managers of
the Global Offering.
THE HONG KONG PUBLIC OFFERING
Number of Offer Shares initially offered
Our Company is initially offering 1,839,600 Offer Shares for subscription by the public
in Hong Kong at the Offer Price, representing 10.00% of the total number of Offer Shares
initially available under the Global Offering.
The Hong Kong Public Offering is open to members of the public in Hong Kong as well
as to institutional and professional investors. The Hong Kong Offer Shares will represent
approximately 0.40% of our Company’s registered capital immediately after completion of the
Global Offering, assuming that the Over-allotment Option is not exercised. Professional
investors generally include brokers, dealers, companies (including fund managers) whose
ordinary business involves dealing in shares and other securities and corporate entities which
regularly invest in shares and other securities.
Completion of the Hong Kong Public Offering is subject to the conditions as set out in
“– The International Offering – Conditions of the Hong Kong Public 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. Such allocation could, where appropriate, consist of balloting, which
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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 Offer Shares initially available under the
Hong Kong Public Offering (after taking account of any reallocation referred to below) is to
be divided into two pools for allocation purposes: pool A and pool B. The Offer Shares in pool
A will be allocated on an equitable basis to applicants who have applied for Offer Shares with
an aggregate price of HK$5 million (excluding the brokerage, SFC translation levy, Stock
Exchange trading fee and Accounting and Financial Reporting Council transaction levy
payable) or less. The Offer Shares in pool B will be allocated on an equitable basis to
applicants who have applied for Offer Shares with an aggregate price of more than HK$5
million (excluding the brokerage, SFC transaction levy, Stock Exchange trading fee and
Accounting and Financial Reporting Council transaction levy payable) and up to the total value
in pool B. Investors should be aware that applications in pool A and applications in pool B may
receive different allocation ratios. If Offer Shares in one (but not both) of the pools are
undersubscribed, the surplus Offer Shares will be transferred to the other pool to satisfy
demand in this other pool and be allocated accordingly. For the purpose of this paragraph only,
the “price” for Offer Shares means the price payable on application therefor (without regard to
the Offer Price as finally determined). Applicants can only receive an allocation of Offer
Shares from either pool A or pool B but not from both pools. Multiple or suspected multiple
applications and any application for more than 50% of the 1,839,600 H Shares initially
comprised in the Hong Kong Public Offering (that is 919,800 Hong Kong Offer Shares) will
be rejected.
Reallocation
The allocation of Offer Shares between the Hong Kong Public Offering and the
International Offering is subject to reallocation under the Listing Rules. 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 Offer Shares under the Hong Kong Public
Offering to a certain percentage of the total number of Offer Shares offered under the Global
Offering if the International Offer Shares are fully subscribed or over-subscribed and certain
prescribed total demand levels are reached. In accordance with paragraph 4.2 of Practice Note
18 of the Listing Rules, if the number of Shares validly applied for in the Hong Kong Public
Offering represents (i) 15 times or more but less than 50 times, (ii) 50 times or more but less
than 100 times, and (iii) 100 times or more, of the number of Hong Kong Offer Shares initially
available under the Hong Kong Public Offering, the total number of Hong Kong Offer Shares
available under the Hong Kong Public Offering will be increased to 5,518,800 Shares,
7,358,400 Shares and 9,198,000 Shares, respectively, representing 30.0% (in the case of (i)),
40.0% (in the case of (ii)) and 50.0% (in the case of (iii)), respectively, of the total number of
Offer Shares initially available under the Global Offering (before any exercise of the
Over-allotment Option), reallocation being referred to in this Prospectus as “Mandatory
Reallocation.” In such cases, the number of Offer Shares allocated in the International Offering
will be correspondingly reduced, in such manner as the Overall Coordinators deem appropriate,
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and such additional Offer Shares will be reallocated to Pool A and Pool B. If the Hong Kong
Offer Shares are not fully subscribed, the Overall Coordinators have the authority to reallocate
all or any unsubscribed Hong Kong Offer Shares to the International Offering, in such
proportions as the Overall Coordinators deem appropriate. In addition to any mandatory
reallocation which may be required, the Overall Coordinator may reallocate Shares initially
allocated for the International Offering to the Hong Kong Public Offering to satisfy valid
applications in Pool A and Pool B under the Hong Kong Public Offering in accordance with
Guidance Letter HKEX-GL91-18 issued by the Stock Exchange. In the event that (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 fully
subscribed or oversubscribed as to less than 15 times of the number of Hong Kong Offer Shares
initially available under the Hong Kong Public Offering, up to 1,839,600 Offer Shares may be
reallocated to the Hong Kong Public Offering from the International Offering, so that the total
number of the Shares available under the Hong Kong Public Offering will be increased to
3,679,200 Offer Shares, representing 20.00% of the number of the Offer Shares initially
available under the Global Offering (before any exercise of the Over-allotment Option and in
case of such reallocation, the final Offer Price should be fixed at the bottom end of the
indicative Offer Price range (i.e. HK$55.60 per Offer Share) as stated in this Prospectus). In
the event that the International Offering and the Hong Kong Public Offering are
undersubscribed, the Global Offering shall not proceed unless fully underwritten by the
Underwriters pursuant to the Underwriting Agreements.
Applications
Each applicant under the Hong Kong Public Offering will also be required to give an
undertaking and confirmation in the application submitted by him that he and any person(s) for
whose benefit he is making the application have not applied for or taken up, or indicated an
interest for, and will not apply for or take up, or indicate an interest for, any Offer Shares under
the International Offering, and such applicant’s application is liable to be rejected if the said
undertaking and/or confirmation is breached and/or untrue (as the case may be) or it has been
or will be placed or allocated Offer Shares under the International Offering.
The listing of the Shares on the Hong Kong Stock Exchange is sponsored by the Sole
Sponsor. Applicants under the Hong Kong Public Offering are required to pay, on application,
the maximum price of HK$61.16 per Hong Kong Offer Share in addition to any brokerage, SFC
transaction levy, Stock Exchange trading fee and Accounting and Financial Reporting Council
transaction levy payable on each Hong Kong Offer Share. If the Offer Price, as finally
determined in the manner described in the paragraph headed “– The International Offering –
Pricing of the Global Offering” below, is less than the maximum price of HK$61.16 per Hong
Kong Offer Share, appropriate refund payments (including the brokerage, SFC transaction
levy, Stock Exchange trading fee and Accounting and Financial Reporting Council transaction
levy attributable to the surplus application monies) will be made to successful applicants,
without interest. For further details, see “How to Apply for Hong Kong Offer Shares.”
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References in this Prospectus to applications, GREEN Application Form, application
monies or the procedure for application relate solely to the Hong Kong Public Offering.
THE INTERNATIONAL OFFERING
Number of Offer Shares offered
Subject to reallocation as described above, the International Offering will consist of an
aggregate of 16,556,400 Offer Shares to be initially offered by us, representing 90.0% of the
total number of Offer Shares initially available under the Global Offering and approximately
3.57% of our Company’s enlarged share capital immediately after the completion of the Global
Offering, assuming that the Over-allotment Option is not exercised.
Allocation
The International Offering will include selective marketing of Offer Shares to
institutional and professional investors and other investors anticipated to have a sizeable
demand for such Offer Shares in Hong Kong and other jurisdictions outside the United States
in offshore transaction in reliance on Regulation S. Professional investors generally include
brokers, dealers, companies (including fund managers) whose ordinary business involves
dealing in shares and other securities and corporate entities which regularly invest in shares
and other securities. Allocation of Offer Shares pursuant to the International Offering will be
effected in accordance with the “book-building” process described in the paragraph headed “–
The International Offering – Pricing of the Global Offering” below and based on a number of
factors, including the level and timing of demand, the total size of the relevant investor’s
invested assets or equity assets in the relevant sector and whether or not it is expected that the
relevant investor is likely to buy further Offer Shares, and/or hold or sell its Offer Shares, after
the listing of the Offer Shares on the Hong Kong Stock Exchange. Such allocation is intended
to result in a distribution of the Offer Shares on a basis which would lead to the establishment
of a solid professional and institutional shareholder base to the benefit of our Company and our
Shareholders as a whole.
The Overall Coordinators (for themselves and on behalf of the Underwriters) may require
any investor who has been offered Offer Shares under the International Offering, and who has
made an application under the Hong Kong Public Offering to provide sufficient information to
the Overall Coordinators so as to allow them to identify the relevant application under the
Hong Kong Public Offering and to ensure that it is excluded from any application of Offer
Shares under the Hong Kong Public Offering.
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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 mechanism described in the sub-section
headed “The Hong Kong Public Offering – Reallocation” above, the exercise of the
Over-allotment Option in whole or in part and/or any reallocation of unsubscribed Offer Shares
originally included in the Hong Kong Public Offering.
Over-allotment Option
In connection with the Global Offering, we are expected to grant an Over-allotment
Option to the International Underwriters exercisable by the Overall Coordinators on behalf of
the International Underwriters.
Pursuant to the Over-allotment Option, the Overall Coordinators have the right,
exercisable at any time from the date of the International Underwriting Agreement until 30
days after the last day for the lodging of applications under the Hong Kong Public Offering,
to require our Company to issue and allot up to 2,759,400 additional Offer Shares, representing
15% of the initial Offer Shares, at the same price per Offer Share under the International
Offering to cover over-allocation in the International Offering, if any. If the Over-allotment
Option is exercised in full, the additional Offer Shares will represent approximately 0.59% of
our Company’s enlarged share capital immediately following the completion of the Global
Offering and the exercise of the Over-allotment Option. In the event that the Over-allotment
Option is exercised, an announcement will be made.
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,
any decline in the market price of the securities below the offer price. In Hong Kong and
certain other jurisdictions, the price at which stabilization is effected is not permitted to exceed
the offer price.
In connection with the Global Offering, the Stabilizing Manager or any person acting for
it, on behalf of the Underwriters, may over-allocate or effect short sales or any other stabilizing
transactions with a view to stabilizing or maintaining the market price of the Shares at a level
higher than that which might otherwise prevail in the open market for a limited period after the
Listing Date. Short sales involve the sale by the Stabilizing Manager of a greater number of
Shares than the Underwriters are required to purchase in the Global Offering. “Covered” short
sales are sales made in an amount not greater than the Over-allotment Option. The Stabilizing
Manager may close out the covered short position by either exercising the Over-allotment
Option to purchase additional Shares or purchasing Shares in the open market. In determining
the source of the Shares to close out the covered short position, the Stabilizing Manager will
consider, among others, the price of Shares in the open market as compared to the price at
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which they may purchase additional Shares pursuant to the Over-allotment Option. Stabilizing
transactions consist of certain bids or purchases made for the purpose of preventing or
retarding a decline in the market price of the Shares while the Global Offering is in progress.
Any market purchases of the Shares may be effected on any stock exchange, including the
Hong Kong Stock Exchange, any over-the-counter market or otherwise, provided that they are
made in compliance with all applicable laws and regulatory requirements. However, there is no
obligation on the Stabilizing Manager or any person acting for it to conduct any such
stabilizing activity, which if commenced, will be done at the absolute discretion of the
Stabilizing Manager and may be discontinued at any time. Any such stabilizing activity is
required to be brought to an end within 30 days after the last day for the lodging of applications
under the Hong Kong Public Offering. The number of the Shares that may be over-allocated
will not exceed the number of the Shares that may be issued under the Over-allotment Option,
namely, 2,759,400 Shares, which is 15.00% of the number of Offer Shares initially available
under the Global Offering, in the event that the whole or part of the Over-allotment Option is
exercised.
In Hong Kong, stabilizing activities must be carried out in accordance with the Securities
and Futures (Price Stabilizing) Rules. Stabilizing actions permitted pursuant to the Securities
and Futures (Price Stabilizing) Rules, as amended, include:
(a) over-allocation for the purpose of preventing or minimizing any reduction in the
market price;
(b) selling or agreeing to sell the Shares so as to establish a short position in them for
the purpose of preventing or minimizing any deduction in the market price;
(c) subscribing, or agreeing to subscribe, for the Shares pursuant to the Over-allotment
Option in order to close out any position established under (a) or (b) above;
(d) purchasing, or agreeing to purchase, the Shares for the sole purpose of preventing
or minimizing any reduction in the market price;
(e) selling the Shares to liquidate a long position held as a result of those purchases; and
(f) offering or attempting to do anything described in (b), (c), (d) and (e) above.
In order to effect stabilization actions, the Stabilizing Manager will arrange cover of up
to an aggregate of 2,759,400 H Shares, representing up to 15% of the initial Offer Shares,
through delayed delivery arrangements with investors who have been allocated Offer Shares in
the International Offering. The delayed delivery arrangements (if specifically agreed 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 paid on the Listing Date.
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Both the size of such cover and the extent to which the Over-allotment Option can be
exercised will depend on whether arrangements can be made with investors such that a
sufficient number of H Shares can be delivered on a delayed basis. If no investor in the
International Offering agrees to the delayed delivery arrangements, no stabilizing actions will
be undertaken by the Stabilizing Manager and the Over-allotment Option will not be exercised.
Stabilizing actions by the Stabilizing Manager, or any person acting for it, will be entered
into in accordance with the laws, rules and regulations in place in Hong Kong on stabilization.
As a result of effecting transactions to stabilize or maintain the market price of the Shares,
the Stabilizing Manager, or any person acting for it, may maintain a long position in the Shares.
The size of the long position, and the period for which the Stabilizing Manager, or any person
acting for it, will maintain the long position is at the discretion of the Stabilizing Manager and
is uncertain. In the event that the Stabilizing Manager liquidates this long position by making
sales in the open market, this may lead to a decline in the market price of the Shares.
Stabilizing action by the Stabilizing Manager, or any person acting for it, is not permitted
to support the price of the Shares for longer than the stabilizing period, which begins on the
day on which trading of the Shares commences on the Hong Kong Stock Exchange and ends
on the thirtieth day after the last day for the lodging of applications under the Hong Kong
Public Offering. The stabilizing period is expected to end on Saturday, October 21, 2023. As
a result, demand for the Shares, and their market price, may fall after the end of the stabilizing
period. These activities by the Stabilizing Manager may stabilize, maintain or otherwise affect
the market price of the Shares. As a result, the price of the Shares may be higher than the price
that otherwise may exist in the open market. Any stabilizing action taken by the Stabilizing
Manager, or any person acting for it, may not necessarily result in the market price of the
Shares staying at or above the Offer Price either during or after the stabilizing period. Bids for
or market purchases of the Shares by the Stabilizing Manager, or any person acting for it, may
be made at a price at or below the Offer Price and therefore at or below the price paid for the
Shares by purchasers. A public announcement in compliance with the Securities and Futures
(Price Stabilizing) Rules will be made within seven days of the expiration of the stabilizing
period.
Pricing of the Global Offering
The International Underwriters will be soliciting from prospective investors indications
of interest in acquiring Offer Shares in the International Offering. Prospective professional and
institutional investors will be required to specify the number of Offer Shares under the
International Offering they would be prepared to acquire either at different prices or at a
particular price. This process, known as “book-building,” is expected to continue up to, and to
cease on or around, the last day for lodging applications under the Hong Kong Public Offering.
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Pricing for the Offer Shares for the purpose of the various offerings under the Global
Offering will be fixed on the Price Determination Date, which is expected to be on or around
Thursday, September 21, 2023 and in any event on or before Wednesday, September 27, 2023,
by agreement between the Overall Coordinators (for themselves and on behalf of the Hong
Kong Underwriters) and our Company.
The Offer Price will not be more than HK$61.16 per Share and is expected to be not less
than HK$55.60 per Share unless otherwise announced, as further explained below, not later
than the morning of the last day for lodging applications under the Hong Kong Public Offering.
Prospective investors should be aware that the Offer Price to be determined on the Price
Determination Date may be, but is not expected to be, lower than the indicative Offer
Price range stated in this Prospectus.
The Overall Coordinators (for themselves and on behalf of the Hong Kong Underwriters),
may, where considered appropriate, based on the level of interest expressed by prospective
professional and institutional investors during the book-building process, and with the consent
of our Company, reduce the number of Offer Shares offered in the Global Offering and/or the
indicative Offer Price range below that stated in this Prospectus at any time on or prior to the
morning of the last day for lodging applications under the Hong Kong Public Offering. In such
a case, our Company will, as soon as practicable following the decision to make such
reduction, and in any event not later than the morning of the day which is the last day for
lodging applications under the Hong Kong Public Offering, cause there to be published on the
website of the Hong Kong Stock Exchange ( www.hkexnews.hk ) and on the website of our
Company ( www.4paradigm.com ) notices of the reduction. As soon as practicable of such
reduction of the number of Offer Shares and/or the indicative Offer Price range, our Company
will also issue a supplemental prospectus updating investors of such reduction together with an
update of all financial and other information in connection with such change and, where
appropriate, extend the period under which the Hong Kong Public Offering was open for
acceptance, and give potential investors who had applied for the Offer Shares the right to
withdraw their applications. Upon issue of such a notice, the number of Offer Shares offered
in the Global Offering and/or the revised offer price range will be final and conclusive and the
Offer Price, if agreed upon by the Overall Coordinators, on behalf of the Underwriters, and our
Company, will be fixed within such revised Offer Price range. Applicants should have regard
to the possibility that any announcement of a reduction in the number of Offer Shares being
offered under the Global Offering and/or the indicative Offer Price range may not be made until
the day which is the last day for lodging applications under the Hong Kong Public Offering.
Such notice will also include confirmation or revision, as appropriate, of the Global Offering
statistics as currently set out in this Prospectus, and any other financial information which may
change as a result of such reduction. In the absence of any such notice so published, the Offer
Price, if agreed upon with our Company and the Overall Coordinators (for themselves and on
behalf of the Hong Kong Underwriters), will under no circumstances be set outside the Offer
Price range as stated in this Prospectus.
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In the event of a reduction in the number of Offer Shares being offered under the Global
Offering, the Overall Coordinators (for themselves and on behalf of the Underwriters) may at
its discretion reallocate the number of Offer Shares to be offered under the Hong Kong Public
Offering and the International Offering, provided that the Hong Kong Offer Shares shall not
be less than 10% of the total number of Offer Shares in the Global Offering. The International
Offer Shares and the Hong Kong Offer Shares may, in certain circumstances, be reallocated as
between these offerings at the discretion of the Overall Coordinators (for themselves and on
behalf of the Underwriters).
Assuming an Offer Price of HK$58.38 per Offer Share (being the mid-point of the Offer
Price Range of between HK$55.60 and HK$61.16 per Offer Share), the net proceeds of the
Global Offering accruing to our Company (after deduction of underwriting commissions and
other expenses payable by our Company in relation to the Global Offering, assuming the
Over-allotment Option is not exercised) are estimated to be approximately HK$885.0 million.
The final Offer Price is expected to be announced on Wednesday, September 27, 2023.
The indications of interest in the Global Offering, the results of applications and the basis of
allotment of Offer Shares available under the Hong Kong Public Offering, are expected to be
announced on Wednesday, September 27, 2023 and to be posted on the website of the Hong
Kong Stock Exchange ( www.hkexnews.hk ) and on the website of our Company
(www.4paradigm.com ).
Hong Kong Underwriting Agreement
The Hong Kong Public Offering is fully underwritten by the Hong Kong Underwriters
under the terms of the Hong Kong Underwriting Agreement and is conditional upon the
International Underwriting Agreement being signed and becoming unconditional.
Our Company expects to enter into the International Underwriting Agreement relating to
the International Offering on or around the Price Determination Date.
These underwriting arrangements, and the respective Underwriting Agreements, are
summarized in “Underwriting.”
Admission of the H Shares into CCASS
All necessary arrangements have been made enabling the H Shares to be admitted into
CCASS.
If the Hong Kong Stock Exchange grants the listing of, and permission to deal in, the H
Shares and our Company complies with the stock admission requirements of HKSCC, the H
Shares will be accepted as eligible securities by HKSCC for deposit, clearance and settlement
in CCASS with effect from the date of commencement of dealings in the H Shares on the Hong
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Kong Stock Exchange or any other date HKSCC chooses. Settlement of transactions between
participants of the Hong Kong Stock Exchange is required to take place in CCASS on the
second settlement day after any trading day.
All activities under CCASS are subject to the General Rules of CCASS and CCASS
Operational Procedures in effect from time to time.
Conditions of the Hong Kong Public Offering
Acceptance of all applications for Offer Shares pursuant to the Hong Kong Public
Offering will be conditional on:
(i) the Listing Committee granting listing of, and permission to deal in, the Offer
Shares being offered pursuant to the Global Offering (including the additional Offer
Shares which may be made available pursuant to the exercise of the Over-allotment
Option);
(ii) the Offer Price having been fixed on or around the Price Determination Date;
(iii) the execution and delivery of the International Underwriting Agreement on or
around the Price Determination Date; and
(iv) the obligations of the Underwriters under each of the respective Underwriting
Agreements becoming and remaining unconditional and not having been terminated
in accordance with the terms of the respective agreements.
If, for any reason, the Offer Price is not agreed between our Company and the Overall
Coordinators (for themselves and on behalf of the Underwriters) on or before Wednesday,
September 27, 2023, the Global Offering will not proceed and will lapse.
The consummation of each of the Hong Kong Public Offering and the International
Offering is conditional upon, among other things, the other offering becoming unconditional
and not having been terminated in accordance with its terms.
If the above conditions are not fulfilled or waived prior to the times and dates specified,
the Global Offering will lapse and the Hong Kong Stock Exchange will be notified
immediately. Notice of the lapse of the Hong Kong Public Offering will be published by our
Company on the websites of the Stock Exchange at www.hkexnews.hk and our Company at
www.4paradigm.com on the next day following such lapse. In such eventuality, all application
monies will be returned, without interest, on the terms set out in the section headed “How to
Apply for Hong Kong Offer Shares” in this Prospectus. In the meantime, all application monies
will be held in (a) separate bank account(s) with the receiving bank or other licensed bank(s)
in Hong Kong licensed under the Banking Ordinance (Chapter 155 of the Laws of Hong Kong)
(as amended).
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H Share certificates for the Offer Shares are expected to be issued on Wednesday,
September 27, 2023 but will only become valid certificates of title at 8:00 a.m. on Thursday,
September 28, 2023 provided that (i) the Global Offering has become unconditional in all
respects and (ii) the right of termination as described in the section headed “Underwriting –
Underwriting Arrangements and Expenses – Hong Kong Public Offering – Grounds for
Termination” in this Prospectus has not been exercised.
Dealings in the Shares
Assuming that the Hong Kong Public Offering becomes unconditional at or before 8:00
a.m. in Hong Kong on Thursday, September 28, 2023, it is expected that dealings in the H
Shares on the Hong Kong Stock Exchange will commence at 9:00 a.m. on Thursday, September
28, 2023.
The H Shares will be traded in board lots of 100 H Shares each and the stock code of the
H Shares will be 6682.
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IMPORTANT NOTICE TO INVESTORS:
FULLY ELECTRONIC APPLICATION PROCESS
We have adopted a fully electronic application process for the Hong Kong Public
Offering. We will not provide any printed copies of this Prospectus or any printed copies
of any application forms for use by the public.
This prospectus is available at the website of the Stock Exchange at
www.hkexnews.hk under the “ HKEXnews > New Listings > New Listing Information ”
section, and our website at www.4paradigm.com . If you require a printed copy of this
Prospectus, you may download and print from the website addresses above.
The contents of the electronic version of the prospectus are identical to the printed
prospectus as registered with the Registrar of Companies in Hong Kong pursuant to
Section 342C of the Companies (Winding Up and Miscellaneous Provisions) Ordinance.
Set out below are procedures through which you can apply for the Hong Kong Offer
Shares electronically. We will not provide any physical channels to accept any application
for the Hong Kong Offer Shares by the public.
If you are an intermediary , broker or agent , please remind your customers, clients
or principals, as applicable, that this Prospectus is available online at the website
addresses above.
1. HOW TO APPLY
We will not provide any printed application forms for use by the public.
To apply for Hong Kong Offer Shares, you may:
(1) apply online via the HK eIPO White Form service in the IPO App (which can be
downloaded by searching “ IPO App ” in App Store or Google Play or downloaded
at www.hkeipo.hk/IPOApp or www.tricorglobal.com/IPOApp )o ra t
www.hkeipo.hk ;o r
(2) apply through the CCASS EIPO service to electronically cause HKSCC Nominees
to apply on your behalf, including by:
(i) instructing your broker or custodian who is a CCASS Clearing Participant or
a CCASS Custodian Participant to give electronic application instructions
via CCASS terminals to apply for the Hong Kong Offer Shares on your behalf;
or
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(ii) (if you are an existing CCASS Investor Participant) giving electronic
application instructions through the CCASS Internet System
(https://ip.ccass.com ) or through the CCASS Phone System by calling +852
2979 7888 (using the procedures in HKSCC’s “An Operating Guide for
Investor Participants” in effect from time to time). HKSCC can also input
electronic application instructions for CCASS Investor Participants through
HKSCC’s Customer Service Centre at 1/F, One & Two Exchange Square, 8
Connaught Place, Central, Hong Kong by completing an input request.
If you apply through channel (1) above, the Hong Kong Offer Shares successfully applied
for will be issued in your own name.
If you apply through channels (2)(i) or (2)(ii) above, the Hong Kong Offer Shares
successfully applied for will be issued in the name of HKSCC Nominees and deposited directly
into CCASS to be credited to your or a designated CCASS Participant’s stock account.
None of you or your joint applicant(s) may make more than one application, except where
you are a nominee and provide the required information in your application.
The Company, the Overall Coordinators, the HK eIPO White Form Service Provider and
their respective agents may reject or accept any application in full or in part for any reason at
their discretion.
2. WHO CAN APPLY
Eligibility for the Application
Y ou 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;
 are outside the United States, and are not a United States Person (as defined in
Regulation S under the U.S. Securities Act); and
 are not a legal or natural person of the PRC.
If you are a firm, the application must be in the individual members’ names.
The number of joint applicants may not exceed four.
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Unless permitted by the Listing Rules, you cannot apply for any Hong Kong Offer Shares
if you are:
 an existing beneficial owner of Shares in the Company and/or any its subsidiaries;
 a Director, chief executive officer or supervisor of the Company and/or any of its
subsidiaries;
 a close associate (as defined in the Listing Rules) of any of the above; and
 have been allocated, applied for or indicated an interest in any Placing Shares or
otherwise participated in the International Offering.
Items Required for the Application
If you apply for the Hong Kong Offer Shares online through the HK eIPO White Form
service, you must:
(a) have a valid Hong Kong identity card number/passport number (for individual
applicant) or Hong Kong business registration number/certificate of incorporation
number (for body corporate applicant);
(b) have a Hong Kong address; and
(c) provide a valid e-mail address and a contact telephone number.
If you are applying for the Hong Kong Offer Shares online by instructing your broker or
custodian who is a CCASS Clearing Participant or a CCASS Custodian Participant to give
electronic application instructions via CCASS terminals, please contact them for the items
required for the application.
3. TERMS AND CONDITIONS OF AN APPLICATION
By applying through the application channels specified in this Prospectus, you:
(i) undertake to execute all relevant documents and instruct and authorize the Company
and/or the Overall Coordinators (or their agents or nominees), as agents of the
Company, to execute any documents for you and to do on your behalf all things
necessary to register any Hong Kong Offer Shares allocated to you in your name or
in the name of HKSCC Nominees as required by the Articles of Association;
(ii) agree to comply with the Companies (Winding Up and Miscellaneous Provisions)
Ordinance and the Articles of Association;
(iii) confirm that you have read the terms and conditions and application procedures set
out in this Prospectus and agree to be bound by them;
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(iv) confirm that you have received and read this Prospectus and have only relied on the
information and representations contained in this Prospectus in making your
application and will not rely on any other information or representations except
those in any supplement to this Prospectus;
(v) confirm that you are aware of the restrictions on the Global Offering in this
Prospectus;
(vi) agree that none of the Company, the Overall Coordinators, the Sole Sponsor, the
Joint Bookrunners, the Joint Lead Managers, the Capital Market Intermediaries, the
Underwriters, their respective directors, officers, employees, partners, agents,
advisers and any other parties involved in the Global Offering is or will be liable for
any information and representations not in this Prospectus (and any supplement to
it);
(vii) undertake and confirm that you or the person(s) for whose benefit you have made
the application have not applied for or taken up, or indicated an interest for, and will
not apply for or take up, or indicate an interest for, any Offer Shares under the
International Offering nor participated in the International Offering;
(viii) agree to disclose to the Company, our H Share Registrar, receiving bank(s), the
Overall Coordinators, the Sole Sponsor, the Joint Bookrunners, the Joint Lead
Managers, the Underwriters, the Capital Market Intermediaries and/or their
respective advisers and agents any personal data which they may require about you
and the person(s) for whose benefit you have made the application;
(ix) if the laws of any place outside Hong Kong apply to your application, agree and
warrant that you have complied with all such laws and none of the Company, the
Overall Coordinators and the Underwriters nor any of their respective officers or
advisers will breach any law outside Hong Kong as a result of the acceptance of your
offer to purchase, or any action arising from your rights and obligations under the
terms and conditions contained in this Prospectus;
(x) agree that once your application has been accepted, you may not rescind it because
of an innocent misrepresentation;
(xi) agree that your application will be governed by the laws of Hong Kong;
(xii) represent, warrant and undertake that (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 in Regulation S) or are a person
described in paragraph (h)(3) of Rule 902 of Regulation S;
(xiii) warrant that the information you have provided is true and accurate;
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(xiv) agree to accept the Hong Kong Offer Shares applied for, or any lesser number
allocated to you under the application;
(xv) authorize the Company to place your name(s) or the name of the HKSCC Nominees,
on the Company’s H Share register of members as the holder(s) of any Hong Kong
Offer Shares allocated to you, and the Company and/or its agents to send any H
Share certificate(s) and/or any e-Auto Refund payment instructions and/or any
refund cheque(s) to you or the first-named applicant for joint application by ordinary
post at your own risk to the address stated on the application, unless you have
fulfilled the criteria mentioned in “14. Despatch/Collection of H Share Certificates
and Refund Monies – Personal Collection” in this Prospectus to collect the H Share
certificate(s) and/or refund cheque(s) in person;
(xvi) 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;
(xvii) understand that the Company, the Overall Coordinators will rely on your
declarations and representations in deciding whether or not to make any allotment
of any of the Hong Kong Offer Shares to you and that you may be prosecuted for
making a false declaration;
(xviii) (if the application is made for your own benefit) warrant that no other application
has been or will be made for your benefit by giving electronic application
instructions to HKSCC or to the HK eIPO White Form Service Provider by you
or by any one as your agent or by any other person; and (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 giving
electronic application instructions to HKSCC or to the HK eIPO White Form
Service Provider; and (ii) you have due authority to give electronic application
instructions on behalf of that other person as their agent.
For the avoidance of doubt, the Company and all other parties involved in the preparation
of this Prospectus acknowledge that each applicant and CCASS Participant who gives or causes
to give electronic application instructions is a person who may be entitled to compensation
under Section 40 of the Companies (Winding Up and Miscellaneous Provisions) Ordinance (as
applied by Section 342E of the Companies (Winding Up and Miscellaneous Provisions)
Ordinance).
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4. MINIMUM APPLICATION AMOUNT AND PERMITTED NUMBERS
Y our application through the HK eIPO White Form service or the CCASS EIPO service
must be for a minimum of 100 Hong Kong Offer Shares and in one of the numbers set out in
the table below. Y ou are required to pay the amount next to the number you select.
No. of
Hong Kong
Offer Shares
applied for
Amount
payable on
application
No. of
Hong Kong
Offer Shares
applied for
Amount
payable on
application
No. of
Hong Kong
Offer Shares
applied for
Amount
payable on
application
No. of
Hong Kong
Offer Shares
applied for
Amount
payable on
application
HK$ HK$ HK$ HK$
100 6,177.69 2,500 154,442.00 30,000 1,853,303.96 600,000 37,066,079.15
200 12,355.36 3,000 185,330.40 40,000 2,471,071.94 700,000 43,243,759.02
300 18,533.05 3,500 216,218.79 50,000 3,088,839.94 800,000 49,421,438.88
400 24,710.72 4,000 247,107.20 60,000 3,706,607.91 919,800
(1) 56,822,299.35
500 30,888.41 4,500 277,995.59 70,000 4,324,375.90
600 37,066.08 5,000 308,884.00 80,000 4,942,143.89
700 43,243.76 6,000 370,660.79 90,000 5,559,911.88
800 49,421.43 7,000 432,437.59 100,000 6,177,679.85
900 55,599.12 8,000 494,214.38 200,000 12,355,359.72
1,000 61,776.80 9,000 555,991.19 300,000 18,533,039.58
1,500 92,665.20 10,000 617,767.99 400,000 24,710,719.45
2,000 123,553.59 20,000 1,235,535.97 500,000 30,888,399.30
(1) Maximum number of Hong Kong Offer Shares you may apply for.
No application for any other number of the Hong Kong Offer Shares will be considered
and any such application is liable to be rejected.
5. APPLYING THROUGH THE HK eIPO WHITE FORM SERVICE
General
Applicants who meet the criteria in the paragraph headed “– 2. Who can apply” in this
section may apply through the HK eIPO White Form service for the Hong Kong Offer Shares
to be allotted and registered in their own names through the IPO App or the designated website
at www.hkeipo.hk .
Detailed instructions for application through the HK eIPO White Form service are in the
IPO App or on the designated website. If you do not follow the instructions, your application
may be rejected and may not be submitted to the Company. If you apply through the IPO App
or the designated website, you authorize the HK eIPO White Form Service Provider to apply
on the terms and conditions in this Prospectus, as supplemented and amended by the terms and
conditions of the HK eIPO White Form service.
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Time for Submitting Applications under the HK eIPO White Form Service
Y ou may submit your application to the HK eIPO White Form Service Provider in the
IPO App or at www.hkeipo.hk (24 hours daily, except on the last application day) from 9:00
a.m. on Monday, September 18, 2023 until 11:30 a.m. on Thursday, September 21, 2023 and
the latest time for completing full payment of application monies in respect of such
applications will be 12:00 noon on Thursday, September 21, 2023 or such later time under the
paragraph headed “– 10. Effect of Bad Weather and/or Extreme Conditions on the Opening and
Closing of the Application Lists” in this section.
6. APPLYING THROUGH THE CCASS EIPO SERVICE
General
Y ou may instruct your broker or custodian who is a CCASS Clearing Participant or a
CCASS Custodian Participant to give electronic application instructions via CCASS
terminals to apply for the Hong Kong Offer Shares on your behalf. CCASS Participants may
give electronic application instructions to apply for the Hong Kong Offer Shares and to
arrange payment of the money due on application and payment of refunds under their
participant agreements with HKSCC and the General Rules of CCASS and the CCASS
Operational Procedures.
If you are a CCASS Investor Participant, you may give these electronic application
instructions through the CCASS Internet System ( https://ip.ccass.com ) or through the
CCASS Phone System by calling +852 2979 7888 (using the procedures in HKSCC’s “An
Operating Guide for Investor Participants” in effect from time to time). HKSCC can also input
electronic application instructions for CCASS Investor Participants through HKSCC’s
Customer Service Center at 1/F, One & Two Exchange Square, 8 Connaught Place, Central,
Hong Kong if you complete an input request.
Y ou will be deemed to have authorized HKSCC and/or HKSCC Nominees to transfer the
details of your application to the Company, the Overall Coordinators and our H Share
Registrar.
Applying through the CCASS EIPO Service
Where you have applied through the CCASS EIPO service (either indirectly through a
broker or custodian or directly) and an application is made by HKSCC Nominees on your
behalf:
(i) HKSCC Nominees will only be acting as a nominee for you and is not liable for any
breach of the terms and conditions of this Prospectus;
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(ii) HKSCC Nominees will do the following things on your behalf:
 agree that the Hong Kong Offer Shares to be allotted shall be issued in the
name of HKSCC Nominees and deposited directly into CCASS for the credit
of the CCASS Participant’s stock account on your behalf or your CCASS
Investor Participant’s stock account;
 agree to accept the Hong Kong Offer Shares applied for or any lesser number
allocated;
 undertake and confirm that you have not applied for or taken up, will not apply
for or take up, or indicate an interest for, any Offer Shares under the
International Offering;
 (if the electronic application instructions are given for your benefit) declare
that only one set of electronic application instructions has been given for
your benefit;
 (if you are an agent for another person) declare that you have only given one
set of electronic application instructions for the other person’s benefit and
are duly authorized to give those instructions as their agent;
 confirm that you understand that the Company, the Director, the Overall
Coordinators will rely on your declarations and representations in deciding
whether or not to make any allotment of any of the Hong Kong Offer Shares
to you and that you may be prosecuted if you make a false declaration;
 authorize the Company to place HKSCC Nominees’ name on the Company’s
register of members as the holder of the Hong Kong Offer Shares allotted to
you and to send H Share certificate(s) and/or refund monies under the
arrangements separately agreed between the Company and HKSCC;
 confirm that you have read the terms and conditions and application procedures
set out in this Prospectus and agree to be bound by them;
 confirm that you have received and/or read a copy of this Prospectus and have
relied only on the information and representations in this Prospectus in causing
the application to be made, save as set out in any supplement to this
Prospectus;
 agree that none of the Company, the Joint Global Coordinators, the Overall
Coordinators, the Underwriters, the Capital Market Intermediaries, their
respective directors, officers, employees, partners, agents, advisers and any
other parties involved in the Global Offering, is or will be liable for any
information and representations not contained in this Prospectus (and any
supplement to this Prospectus);
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 agree to disclose your personal data to the Company, our H Share Registrar,
receiving banks, the Joint Global Coordinators, the Overall Coordinators, the
Capital Market Intermediaries, the Underwriters and/or its respective advisers
and agents;
 agree (without prejudice to any other rights which you may have) that once
HKSCC Nominees’ application has been accepted, it cannot be rescinded for
innocent misrepresentation;
 agree that any application made by HKSCC Nominees on your behalf is
irrevocable before the fifth day after the time of the opening of the application
lists (excluding any day which is Saturday, Sunday or public holiday in Hong
Kong), such agreement to take effect as a collateral contract with us and to
become binding when you give the instructions and such collateral contract to
be in consideration of the Company agreeing that it will not offer any Hong
Kong Offer Shares to any person before the fifth day after the time of the
opening of the application lists (excluding any day which is Saturday, Sunday
or public holiday in Hong Kong), except by means of one of the procedures
referred to in this Prospectus. However, HKSCC Nominees may revoke the
application before the fifth day after the time of the opening of the application
lists (excluding for this purpose any day which is a Saturday, Sunday or public
holiday in Hong Kong) if a person responsible for this Prospectus under
Section 40 of the Companies (Winding Up and Miscellaneous Provisions)
Ordinance gives a public notice under that section which excludes or limits that
person’s responsibility for this Prospectus;
 agree that once HKSCC Nominees’ application is accepted, neither that
application nor your electronic application instructions can be revoked, and
that acceptance of that application will be evidenced by the Company’s
announcement of the Hong Kong Public Offering results;
 agree to the arrangements, undertakings and warranties under the participant
agreement between you and HKSCC, read with the General Rules of CCASS
and the CCASS Operational Procedures, for the giving electronic application
instructions to apply for Hong Kong Offer Shares;
 agree with the Company, for itself and for the benefit of each Shareholder (and
so that the Company will be deemed by its acceptance in whole or in part of
the application by HKSCC Nominees to have agreed, for itself and on behalf
of each of the Shareholders, with each CCASS Participant giving electronic
application instructions ) to observe and comply with the Companies
(Winding Up and Miscellaneous Provisions) Ordinance, the Company Law, the
Special Regulations on Listing Overseas, and the Articles of Association;
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 agree with the Company, for itself and for the benefit of each shareholder of
the Company and each director, supervisor, manager and other senior officer of
the Company (and so that the Company will be deemed by its acceptance in
whole or in part of this application to have agreed, for itself and on behalf of
each shareholder of the Company and each director, supervisor, manager and
other senior officer of the Company, with each CCASS Participant giving
electronic application instructions ):
(a) to refer all differences and claims arising from the Articles of Association
of the Company or any rights or obligations conferred or imposed by the
Company Law or other relevant laws and administrative regulations
concerning the affairs of the Company to arbitration in accordance with
the Articles of Association of the Company;
(b) that any award made in such arbitration shall be final and conclusive; and
(c) that the arbitration tribunal may conduct hearings in open sessions and
publish its award;
 agree with the Company (for the Company itself and for the benefit of each
shareholder of the Company) that H Shares in the Company are freely
transferable by their holders;
 authorize the Company to enter into a contract on its behalf with each director
and officer of the Company whereby each such director and officer undertakes
to observe and comply with his obligations to shareholders stipulated in the
Articles of Association of the Company; and
 agree that your application, any acceptance of it and the resulting contract will
be governed by the laws of Hong Kong.
Effect of Applying through the CCASS EIPO Service
By applying through the CCASS EIPO service, you (and, if you are joint applicants, each
of you jointly and severally) are deemed to have done the following things. Neither HKSCC
nor HKSCC Nominees shall be liable to the Company or any other person in respect of the
things mentioned below:
 instructed and authorized HKSCC to cause HKSCC Nominees (acting as nominee
for the relevant CCASS Participants) to apply for the Hong Kong Offer Shares on
your behalf;
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 instructed and authorized HKSCC to arrange payment of the maximum Offer Price,
brokerage, SFC transaction levy, Stock Exchange trading fee and Accounting and
Financial Reporting Council transaction levy by debiting your designated bank
account and, in the case of a wholly or partially unsuccessful application and/or if
the Offer Price is less than the maximum Offer Price per Offer Share initially paid
on application, refund of the application monies (including brokerage, SFC
transaction levy, the Stock Exchange trading fee and Accounting and Financial
Reporting Council transaction levy) by crediting your designated bank account; and
 instructed and authorized HKSCC to cause HKSCC Nominees to do on your behalf
all the things stated in this Prospectus.
Time for Inputting Electronic Application Instructions
(1)
CCASS Clearing/Custodian Participants can input electronic application instructions at
the following times on the following dates:
 Monday, September 18, 2023 – 9:00 a.m. to 8:30 p.m.
 Tuesday, September 19, 2023 – 8:00 a.m. to 8:30 p.m.
 Wednesday, September 20, 2023 – 8:00 a.m. to 8:30 p.m.
 Thursday, September 21, 2023 – 8:00 a.m. to 12:00 noon
CCASS Investor Participants can input electronic application instructions from 9:00
a.m. on Monday, September 18, 2023 until 12:00 noon on Thursday, September 21, 2023 (24
hours daily, except on Thursday, September 21, 2023, the last application day).
The latest time for inputting your electronic application instructions will be 12:00 noon
on Thursday, September 21, 2023, the last application day or such later time as described in
the paragraph headed “– 10. Effect of Bad Weather and/or Extreme Conditions on the Opening
and Closing of the Application Lists” in this section.
Note:
(1) These times are subject to change as HKSCC may determine from time to time with prior notification
to CCASS Clearing/Custodian Participants and/or CCASS Investor Participants.
If you are instructing your broker or custodian who is a CCASS Clearing Participant or
a CCASS Custodian Participant to give electronic application instructions via CCASS
terminals to apply for the Hong Kong Offer Shares on your behalf, you are advised to contact
your broker or custodian for the latest time for giving such instructions which may be
different from the latest time as stated above.
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Personal Data
The following Personal Information Collection Statement applies to any personal data
held by the Company, the H Share Registrar, the receiving bank(s), the Joint Global
Coordinators, the Overall Coordinators, the Sole Sponsor, the Joint Bookrunners, the Joint
Lead Managers, the Capital Market Intermediaries, the Underwriters and any of their
respective advisers and agents about you in the same way as it applies to personal data about
applicants other than HKSCC Nominees. By applying through the CCASS EIPO service, you
agree to all of the terms of the Personal Information Collection Statement below.
Personal Information Collection Statement
This Personal Information Collection Statement informs applicant for, and holder of, the
Hong Kong Offer Shares, of the policies and practices of the Company and its 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 the Hong Kong Offer Shares to
supply correct personal data to the Company or its agents and the H Share Registrar when
applying for the Hong Kong Offer Shares or transferring the Hong Kong Offer Shares into or
out of their names or in procuring the services of the H Share Registrar.
Failure to supply the requested data may result in your application for the Hong Kong
Offer Shares being rejected, or in delay or the inability of the Company or its H Share Registrar
to effect transfers or otherwise render their services. It may also prevent or delay registration
or transfers of the Hong Kong Offer Shares which you have successfully applied for and/or the
dispatch of H Share certificate(s) to which you are entitled.
It is important that the holders of the Hong Kong Offer Shares inform the Company and
the H Share Registrar immediately of any inaccuracies in the personal data supplied.
Purposes
Y our personal data may be used, held, processed, and/or stored (by whatever means) for
the following purposes:
 processing your application and refund check, where applicable, verification of
compliance with the terms and application procedures set out in this Prospectus and
announcing results of allocation of the Hong Kong Offer Shares;
 compliance with applicable laws and regulations in Hong Kong and elsewhere;
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 registering new issues or transfers into or out of the names of the holders of the
Company’s Shares including, where applicable, HKSCC Nominees;
 maintaining or updating the Company’s Register of Members;
 verifying identities of the holders of the Company’s Shares;
 establishing benefit entitlements of holders of the Company’s Shares, such as
dividends, rights issues, bonus issues, etc.;
 distributing communications from the Company and its subsidiaries;
 compiling statistical information and profiles of the holder of the Company’s
Shares;
 disclosing relevant information to facilitate claims on entitlements; and
 any other incidental or associated purposes relating to the above and/or to enable the
Company and the H Share Registrar to discharge their obligations to holders of the
Company’s Shares and/or regulators and/or any other purposes to which the
securities’ holders may from time to time agree.
Transfer of personal data
Personal data held by the Company and its H Share Registrar relating to the holders of
the Hong Kong Offer Shares will be kept confidential but the Company and its H Share
Registrar may, to the extent necessary for achieving any of the above purposes, disclose, obtain
or transfer (whether within or outside Hong Kong) the personal data to, from or with any of
the following:
 the Company’s appointed agents such as financial advisers, receiving bankers and
overseas principal share registrar;
 where applicants for the Hong Kong Offer Shares request a deposit into CCASS,
HKSCC or HKSCC Nominees, who will use the personal data for the purposes of
operating CCASS;
 any agents, contractors or third-party service providers who offer administrative,
telecommunications, computer, payment or other services to the Company or the H
Share Registrar in connection with their respective business operation;
 the Hong Kong Stock Exchange, the SFC and any other statutory regulatory or
governmental bodies or otherwise as required by laws, rules or regulations; and
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 any persons or institutions with which the holders of the Hong Kong Offer Shares
have or propose to have dealings, such as their bankers, solicitors, accountants or
stockbrokers etc.
Retention of personal data
The Company and its H Share Registrar will keep the personal data of the applicants and
holders of the Hong Kong Offer Shares for as long as necessary to fulfil the purposes for which
the personal data were collected. Personal data which is no longer required will be destroyed
or dealt with in accordance with the Personal Data (Privacy) Ordinance.
Access to and correction of personal data
Holders of the Hong Kong Offer Shares have the right to ascertain whether the Company
or the H Share Registrar hold their personal data, to obtain a copy of that data, and to correct
any data that is inaccurate. The Company and the H Share Registrar have the right to charge
a reasonable fee for the processing of such requests. All requests for access to data or
correction of data should be addressed to the Company, at the Company’s 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 Company’s H Share Registrar for the
attention of the privacy compliance officer.
7. W ARNING FOR ELECTRONIC APPLICATIONS
The application for the Hong Kong Offer Shares through the CCASS EIPO service
(directly or indirectly through your broker or custodian) is only a facility provided to CCASS
Participants. Similarly, the application for Hong Kong Offer Shares through the HK eIPO
White Form service is also only a facility provided by the HK eIPO White Form Service
Provider to public investors. Such facilities are subject to capacity limitations and potential
service interruptions and you are advised not to wait until the last application day in making
your electronic applications. The Company, the Directors, the Joint Bookrunners, the Sole
Sponsor, the Joint Global Coordinators, the Overall Coordinators, the Capital Market
Intermediaries and the Underwriters take no responsibility for such applications and provide no
assurance that any CCASS Participant applying through the CCASS EIPO service or person
applying through the HK eIPO White Form service will be allotted any Hong Kong Offer
Shares.
To ensure that CCASS Investor Participants can give their electronic application
instructions , they are advised not to wait until the last minute to input their instructions to the
systems. In the event that CCASS Investor Participants have problems in the connection to
CCASS Phone System or the CCASS Internet System for submission of electronic application
instructions , they should go to HKSCC’s Customer Service Center to complete an input
request form for electronic application instructions before 12:00 noon on Thursday,
September 21, 2023, the last application day, or such time as described in the paragraph headed
“– 10. Effect of Bad Weather and/or Extreme Conditions on the Opening and Closing of the
Application Lists” in this section.
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8. HOW MANY APPLICATIONS YOU CAN MAKE
Multiple applications for the Hong Kong Offer Shares are not allowed except by
nominees. If you are a nominee and apply through the HK eIPO White Form service, in the
box marked “For Nominees”, you must include an account number or some other identification
code for each beneficial owner or, in the case of joint beneficial owners, for each joint
beneficial owner when you fill in the application details. If you do not include this information,
the application will be treated as being made for your own benefit.
All of your applications will be rejected if more than one application through the CCASS
EIPO service (directly or indirectly through your broker or custodian ) or through the HK
eIPO White Form service, is made for your benefit (including the part of the application made
by HKSCC Nominees acting on electronic application instructions ), and the number of Hong
Kong Offer Shares applied by HKSCC Nominees will be automatically reduced by the number
of Hong Kong Offer Shares for which you have given such instructions and/or for which such
instructions have been given for your behalf. If you are suspected of submitting more than one
application for your benefit through the CCASS EIPO service and/or the HK eIPO White
Form service, all of your applications are liable to be rejected.
If you apply by means of the HK eIPO White Form service, once you complete payment
in respect of any electronic application instruction given by you or for your benefit through the
HK eIPO White Form service to make an application for Hong Kong Offer Shares, an actual
application shall be deemed to have been made. For the avoidance of doubt, giving an
electronic application instruction under the HK eIPO White Form service more than once
and obtaining different application reference numbers without effecting full payment in respect
of a particular reference number will not constitute an actual application. However, any
electronic application instructions to make an application for the Hong Kong Offer Shares
given by you or for your benefit to HKSCC will be deemed to be an actual application for the
purposes of considering whether multiple applications have been made.
The H Share Registrar would record all applications into its system and identify suspected
multiple applications with identical names, identification document numbers and reference
numbers according to the Best Practice Note on Treatment of Multiple/Suspected Multiple
Applications (“ Best Practice Note ”) issued by the Federation of Share Registrars Limited.
With regard to the announcement of results of allocations under the section headed
“Results of Applications Made by Giving Electronic Application Instructions to HKSCC via
CCASS”, the list of identification document number(s) may not be a complete list of successful
applicants, only successful applicants whose identification document numbers are provided to
HKSCC by CCASS Participants are disclosed. Applicants who applied for the Offer Shares
through their brokers can consult their brokers to enquire about their application results.
HOW TO APPLY FOR HONG KONG OFFER SHARES
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--- page 433 ---
Since applications are subject to personal information collection statements, beneficial
owner identification codes displayed are redacted. Applicants with beneficial names only but
not identification document numbers are not disclosed due to personal privacy issue.
If an application is made by an unlisted company and:
 the principal business of that company is dealing in securities; and
 you exercise statutory control over that company,
then the application will be treated as being made for your benefit.
“Unlisted company” means a company with no equity securities listed on the Stock
Exchange.
“Statutory control” means you:
 control the composition of the board of directors of the company;
 control more than half of the voting power of the company; or
 hold more than half of the issued share capital of the company (not counting any part
of it which carries no right to participate beyond a specified amount in a distribution
of either profits or capital).
9. HOW MUCH ARE THE HONG KONG OFFER SHARES
The maximum Offer Price is HK$61.16 per Offer Share. Y ou must also pay brokerage of
1.0%, SFC transaction levy of 0.0027%, Hong Kong Stock Exchange trading fee of 0.00565%
and Accounting and Financial Reporting Council transaction levy of 0.00015%. This means
that for one board lot of 100 Hong Kong Offer Shares, you will pay HK$6,177.69.
Y ou must pay the maximum Offer Price, brokerage, SFC transaction levy, Stock
Exchange trading fee and Accounting and Financial Reporting Council transaction levy in full
upon application for the Hong Kong Offer Shares.
Y ou may submit an application through the HK eIPO White Form service or the CCASS
EIPO service in respect of a minimum of 100 Hong Kong Offer Shares. Each application or
electronic application instruction in respect of more than 100 Hong Kong Offer Shares must
be in one of the numbers set out in the table in “– 4. Minimum Application Amount and
Permitted Numbers”, or as otherwise specified in the IPO App or on the designated website
at www.hkeipo.hk .
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If your application is successful, brokerage will be paid to the Exchange Participants (as
defined in the Listing Rules), and the SFC transaction levy, Stock Exchange trading fee and
Accounting and Financial Reporting Council transaction levy are paid to the Stock Exchange
(in the case of the SFC transaction levy and Accounting and Financial Reporting Council
transaction levy, collected by the Stock Exchange on behalf of the SFC and the Accounting and
Financial Reporting Council, respectively).
For further details on the Offer Price, please refer to the paragraph headed “Structure of
the Global Offering – Pricing of the Global Offering” in this Prospectus.
10. EFFECT OF BAD WEATHER AND/OR EXTREME CONDITIONS ON THE
OPENING AND CLOSING OF THE APPLICATION LISTS
The application lists will not open if there is:
 a tropical cyclone warning signal number 8 or above; or
 a “black” rainstorm warning; and/or
 Extreme Conditions,
in force in Hong Kong at any time between 9:00 a.m. and 12:00 noon on Thursday, September
21, 2023. Instead they will open between 11:45 a.m. and 12:00 noon on the next business day
which does not have either of those warnings and/or Extreme Conditions in Hong Kong in
force at any time between 9:00 a.m. and 12:00 noon.
If the application lists do not open and close on Thursday, September 21, 2023 or if there
is/are a tropical cyclone warning signal number 8 or above or a “black” rainstorm warning
signal and/or Extreme Conditions in force in Hong Kong that may affect the dates mentioned
in the section headed “Expected Timetable” in this Prospectus, an announcement will be made
on our website at www.4paradigm.com and the website of the Stock Exchange at
www.hkexnews.hk .
11. PUBLICATION OF RESULTS
The Company expects to announce the final Offer Price, the level of indication of interest
in the International Offering, the level of applications in the Hong Kong Public Offering and
the basis of allocation of the Hong Kong Offer Shares on Wednesday, September 27, 2023 on
the Company’s website at www.4paradigm.com and the website of the Stock Exchange at
www.hkexnews.hk .
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The results of allocations and the Hong Kong identity card/passport/Hong Kong business
registration/ certificate of incorporation numbers of successful applicants under the Hong Kong
Public Offering will be available at the times and dates and in the manner specified below:
 in the announcement to be posted on the Company’s website at
www.4paradigm.com and the Stock Exchange’s website at www.hkexnews.hk by
no later than 8:00 a.m. on Wednesday, September 27, 2023;
 from the “IPO Results” functions in the IPO App or the designated results of
allocations website at www.hkeipo.hk/IPOResult or www.tricor.com.hk/ipo/result
with a “search by ID” function on a 24-hour basis from 8:00 a.m. on Wednesday,
September 27, 2023 to 12:00 midnight, on Tuesday, October 3, 2023; and
 from the allocation results telephone enquiry line by calling +852 3691 8488
between 9:00 a.m. and 6:00 p.m. from Wednesday, September 27, 2023 to Tuesday,
October 3, 2023 (excluding Saturday, Sunday and public holiday in Hong Kong).
If the Company accepts your offer to purchase (in whole or in part), which it may do by
announcing the basis of allocations and/or making available the results of allocations publicly,
there will be a binding contract under which you will be required to purchase the Hong Kong
Offer Shares if the conditions of the Global Offering are satisfied and the Global Offering is
not otherwise terminated. Further details are contained in the section headed “Structure of the
Global Offering” in this Prospectus.
Y ou will not be entitled to exercise any remedy of rescission for innocent
misrepresentation at any time after acceptance of your application. This does not affect any
other right you may have.
12. CIRCUMSTANCES IN WHICH YOU WILL NOT BE ALLOCATED HONG KONG
OFFER SHARES
Y ou should note the following situations in which the Hong Kong Offer Shares will not
be allotted to you:
(i) If your application is revoked:
By applying through the CCASS EIPO service or through the HK eIPO White Form
service, you agree that your application or application made by HKSCC Nominees on your
behalf cannot be revoked on or before the fifth day after the time of the opening of the
application lists (excluding for this purpose any day which is Saturday, Sunday or public
holiday in Hong Kong). This agreement will take effect as a collateral contract with the
Company.
HOW TO APPLY FOR HONG KONG OFFER SHARES
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--- page 436 ---
Y our application or the application made by HKSCC Nominees on your behalf may only
be revoked on or before the fifth day after the time of the opening of the application lists
(excluding any days which is a Saturday, Sunday or public holiday in Hong Kong) in the
following circumstances:
(a) if a person responsible for this Prospectus under Section 40 of the Companies
(Winding Up and Miscellaneous Provisions) Ordinance (as applied by Section 342E
of the Companies (Winding Up and Miscellaneous Provisions) Ordinance) gives a
public notice under that section on or before the fifth day after the time of the
opening of the application lists (excluding any days which is a Saturday, Sunday or
public holiday in Hong Kong) which excludes or limits that person’s responsibility
for this Prospectus; or
(b) if any supplement to this Prospectus is issued, applicants who have already
submitted an application will be notified that they are required to confirm their
applications. If applicants have been so notified but have not confirmed their
applications in accordance with the procedure to be notified, all unconfirmed
applications will be deemed revoked.
If your application or the application made by HKSCC Nominees on your behalf has been
accepted, it cannot be revoked. For this purpose, acceptance of applications which are not
rejected will be constituted by notification in the press of the results of allocation, and where
such basis of allocation is subject to certain conditions or provides for allocation by ballot,
such acceptance will be subject to the satisfaction of such conditions or results of the ballot
respectively.
(ii) If the Company or its agents exercise their discretion to reject your application:
The Company, the Overall Coordinators, the HK eIPO White Form Service Provider and
their respective agents and nominees have full discretion to reject or accept any application, or
to accept only part of any application, without giving any reasons.
(iii) If the allotment of Hong Kong Offer Shares is void:
The allotment of Hong Kong Offer Shares will be void if the Listing Committee of the
Stock Exchange does not grant permission to list the Shares either:
 within three weeks from the closing date of the application lists; or
 within a longer period of up to six weeks if the Listing Committee notifies the
Company of that longer period within three weeks of the closing date of the
application lists.
(iv) If:
 you make multiple applications or suspected multiple applications;
 you or the person for whose benefit you are applying have applied for or taken up,
or indicated an interest for, or have been or will be placed or allocated (including
conditionally and/or provisionally) Hong Kong Offer Shares and International Offer
Shares;
HOW TO APPLY FOR HONG KONG OFFER SHARES
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--- page 437 ---
 your electronic application instructions through the HK eIPO White Form
service are not completed in accordance with the instructions, terms and conditions
in the IPO App or on the designated website;
 your payment is not made correctly;
 the Underwriting Agreements do not become unconditional or are terminated;
 the Company, the Overall Coordinators, believe that by accepting your application,
it or they would violate applicable securities or other laws, rules or regulations; or
 your application is for more than 50% of the Hong Kong Offer Shares initially
offered under the Hong Kong Public Offering.
13. REFUND OF APPLICATION MONIES
If an application is rejected, not accepted or accepted in part only, or if the Offer Price
as finally determined is less than the maximum Offer Price per Offer Share (excluding
brokerage, SFC transaction levy, Stock Exchange trading fee and Accounting and Financial
Reporting Council transaction levy thereon), or if the conditions of the Hong Kong Public
Offering are not fulfilled in accordance with the paragraph headed “Structure of the Global
Offering – Conditions of the Hong Kong Public Offering” in this Prospectus or if any
application is revoked, the application monies, or the appropriate portion thereof, together with
the related brokerage, SFC transaction levy, Stock Exchange trading fee and Accounting and
Financial Reporting Council transaction levy, will be refunded, without interest.
Any refund of your application monies will be made on or before Wednesday, September
27, 2023.
14. DESPATCH/COLLECTION OF H SHARE CERTIFICATES AND REFUND
MONIES
Y ou will receive one H Share certificate for all Hong Kong Offer Shares allotted to you
under the Hong Kong Public Offering (except pursuant to applications made through the
CCASS EIPO service where the H Share certificates will be deposited into CCASS as
described below).
No temporary document of title will be issued in respect of the H Shares. No receipt will
be issued for sums paid on application.
Subject to arrangement on dispatch/collection of H Share certificates and refund monies
as mentioned below, any refund cheques and H Share certificates are expected to be posted on
or before Wednesday, September 27, 2023. The right is reserved to retain any H Share
certificate(s) and any surplus application monies pending clearance of cheque(s) or banker’s
cashier’s order(s).
HOW TO APPLY FOR HONG KONG OFFER SHARES
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--- page 438 ---
H Share certificates will only become valid at 8:00 a.m. on Thursday, September 28, 2023
provided that the Global Offering has become unconditional and the right of termination
described in the section headed “Underwriting” in this Prospectus has not been exercised.
Investors who trade H Shares prior to the receipt of H Share certificates or the H Share
certificates becoming valid do so at their own risk.
Personal Collection
(i) If you apply through the HK eIPO White Form service
If you apply for 500,000 Hong Kong Offer Shares or more and your application is wholly
or partially successful, you may collect your H Share certificate(s) from our H Share Registrar,
Tricor Investor Services Limited at 17/F, Far East Finance Centre, 16 Harcourt Road, Hong
Kong, from 9:00 a.m. to 1:00 p.m. on Wednesday, September 27, 2023, or such other date as
notified by the Company as the date of despatch/collection of H Share certificates/e-Auto
Refund payment instructions/refund cheques.
If you are an individual who is eligible for personal collection, you must not authorize any
other person to collect for you. If you are a corporate applicant which is eligible for personal
collection, your authorized representative must bear a letter of authorization from your
corporation stamped with your corporation’s chop. Both individuals and authorized
representatives must produce, at the time of collection, evidence of identity acceptable to the
H Share Registrar.
If you do not collect your H Share certificate(s) personally within the time specified for
collection, they will be sent to the address specified in your application instructions by
ordinary post at your own risk.
If you apply for less than 500,000 Hong Kong Offer Shares, your H Share certificate(s)
(where applicable) will be sent to the address specified in your application instructions on or
before Wednesday, September 27, 2023 by ordinary post at your own risk.
If you apply and pay the application monies from a single bank account, any refund
monies will be despatched to that bank account in the form of e-Auto Refund payment
instructions. If you apply and pay the application monies from multiple bank accounts, any
refund monies will be despatched to the address as specified in your application instructions
in the form of refund cheque(s) in favour of the applicant (or, in the case of joint applications,
the first-named applicant) by ordinary post at your own risk.
HOW TO APPLY FOR HONG KONG OFFER SHARES
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(ii) If you apply through the CCASS EIPO service
Allocation of Hong Kong Offer Shares
For the purposes of allocating Hong Kong Offer Shares, HKSCC Nominees will not
be treated as an applicant. Instead, each CCASS Participant who gives electronic
application instructions or each person for whose benefit instructions are given will be
treated as an applicant.
Deposit of H Share Certificates into CCASS and Refund of Application Monies
If your application is wholly or partially successful, your H Share certificate(s) will
be issued in the name of HKSCC Nominees and deposited into CCASS for the credit of
your designated CCASS Participant’s stock account or your CCASS Investor Participant’s
stock account on Wednesday, September 27, 2023, or, on any other date determined by
HKSCC or HKSCC Nominees.
The Company expects to publish the application results of CCASS Participants (and
where the CCASS Participant is a broker or custodian , the Company will include
information relating to the relevant beneficial owner), your Hong Kong identity card
number/passport number or other identification code (Hong Kong business registration
number for corporations) and the basis of allotment of the Hong Kong Public Offering in
the manner specified in the paragraph headed “– 11. Publication of Results” in this section
on Wednesday, September 27, 2023. Y ou should check the announcement published by the
Company and report any discrepancies to HKSCC before 5:00 p.m. on Wednesday,
September 27, 2023 or such other date as determined by HKSCC or HKSCC Nominees.
If you have instructed your broker or custodian to give electronic application
instructions on your behalf, you can also check the number of Hong Kong Offer Shares
allotted to you and the amount of refund monies (if any) payable to you with that broker
or custodian .
If you have applied as a CCASS Investor Participant, you can also check the number
of Hong Kong Offer Shares allotted to you and the amount of refund monies (if any)
payable to you via the CCASS Phone System and the CCASS Internet System (under the
procedures contained in HKSCC’s “An Operating Guide for Investor Participants” in
effect from time to time) on Wednesday, September 27, 2023. Immediately following the
credit of the Hong Kong Offer Shares to your stock account and the credit of refund
monies to your bank account, HKSCC will also make available to you an activity
statement showing the number of Hong Kong Offer Shares credited to your CCASS
Investor Participant stock account and the amount of refund monies (if any) credited to
your designated bank account.
HOW TO APPLY FOR HONG KONG OFFER SHARES
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Refund of your application monies (if any) in respect of wholly and partially
unsuccessful applications and/or difference between the Offer Price and the maximum
Offer Price per Offer Share initially paid on application (including brokerage, SFC
transaction levy, Stock Exchange trading fee and Accounting and Financial Reporting
Council transaction levy but without interest) will be credited to your designated bank
account or the designated bank account of your broker or custodian on Wednesday,
September 27, 2023.
15. ADMISSION OF THE H SHARES INTO CCASS
If the Stock Exchange grants the listing of, and permission to deal in, the Shares and we
comply with the stock admission requirements of HKSCC, the H Shares will be accepted as
eligible securities by HKSCC for deposit, clearance and settlement in CCASS with effect from
the date of commencement of dealings in the H Shares or any other date HKSCC chooses.
Settlement of transactions between Exchange Participants (as defined in the Listing Rules) is
required to take place in CCASS on the second settlement day after any trading day.
All activities under CCASS are subject to the General Rules of CCASS and CCASS
Operational Procedures in effect from time to time.
Investors should seek the advice of their stockbroker or other professional adviser for
details of the settlement arrangement as such arrangements may affect their rights and interests.
All necessary arrangements have been made enabling the H Shares to be admitted into
CCASS.
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The following is the text of a report set out on pages I-1 to I-3, received from the
Company’ s reporting accountant, PricewaterhouseCoopers, Certified Public Accountants,
Hong Kong, for the purpose of incorporation in this prospectus. It is prepared and addressed
to the directors of the Company and to the Sole Sponsor pursuant to the requirements of HKSIR
200, Accountants’ Reports on Historical Financial Information in Investment Circulars issued
by the Hong Kong Institute of Certified Public Accountants.
ACCOUNTANT’S REPORT ON HISTORICAL FINANCIAL INFORMATION TO THE
DIRECTORS OF BEIJING FOURTH PARADIGM TECHNOLOGY CO., LTD. AND
CHINA INTERNATIONAL CAPITAL CORPORATION HONG KONG SECURITIES
LIMITED
Introduction
We report on the historical financial information of Beijing Fourth Paradigm Technology
Co., Ltd. (the “Company”) and its subsidiaries (together, the “Group”) set out on pages I-4 to
I-99, which comprises the consolidated balance sheets as at December 31, 2020, 2021 and 2022
and March 31, 2023, the company balance sheets as at December 31, 2020, 2021 and 2022 and
March 31, 2023, and the consolidated statements of comprehensive income, the consolidated
statements of changes in equity and the consolidated statements of cash flows for each of the
years ended December 31, 2020, 2021 and 2022 and the three months ended March 31, 2023
(the “Track Record Period”) and material accounting policy information and other explanatory
information (together, the “Historical Financial Information”). The Historical Financial
Information set out on pages I-4 to I-99 forms an integral part of this report, which has been
prepared for inclusion in the prospectus of the Company dated September 18, 2023 (the
“Prospectus”) in connection with the initial listing of shares of the Company on the Main Board
of The Stock Exchange of Hong Kong Limited.
Directors’ responsibility for the Historical Financial Information
The directors of the Company are responsible for the preparation of Historical Financial
Information that gives a true and fair view in accordance with the basis of preparation set out
in Note 2.1 to the Historical Financial Information, and for such internal control as the
directors determine is necessary to enable the preparation of Historical Financial Information
that is free from material misstatement, whether due to fraud or error.
Reporting accountant’s responsibility
Our responsibility is to express an opinion on the Historical Financial Information and to
report our opinion to you. We conducted our work in accordance with Hong Kong Standard on
Investment Circular Reporting Engagements 200, Accountants’ Reports on Historical
Financial Information in Investment Circulars issued by the Hong Kong Institute of Certified
Public Accountants (“HKICPA”). This standard requires that we comply with ethical standards
and plan and perform our work to obtain reasonable assurance about whether the Historical
Financial Information is free from material misstatement.
APPENDIX I ACCOUNTANT’S REPORT
– I-1 –


--- page 442 ---
Our work involved performing procedures to obtain evidence about the amounts and
disclosures in the Historical Financial Information. The procedures selected depend on the
reporting accountant’s judgement, including the assessment of risks of material misstatement
of the Historical Financial Information, whether due to fraud or error. In making those risk
assessments, the reporting accountant considers internal control relevant to the entity’s
preparation of Historical Financial Information that gives a true and fair view in accordance
with the basis of preparation set out in Note 2.1 to the Historical Financial Information in order
to design procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the entity’s internal control. Our work also
included evaluating the appropriateness of accounting policies used and the reasonableness of
accounting estimates made by the directors, as well as evaluating the overall presentation of
the Historical Financial Information.
We believe that the evidence we have obtained is sufficient and appropriate to provide a
basis for our opinion.
Opinion
In our opinion, the Historical Financial Information gives, for the purposes of the
accountant’s report, a true and fair view of the financial position of the Company as at
December 31, 2020, 2021 and 2022 and March 31, 2023 and the consolidated financial position
of the Group as at December 31, 2020, 2021 and 2022 and March 31, 2023 and of its
consolidated financial performance and its consolidated cash flows for the Track Record Period
in accordance with the basis of preparation set out in Note 2.1 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 comprehensive income, the consolidated statement of
changes in equity and the consolidated statement of cash flows for the three months ended
March 31, 2022 and other explanatory information (the “Stub Period Comparative Financial
Information”). The directors of the Company are responsible for the presentation and
preparation of the Stub Period Comparative Financial Information in accordance with the basis
of preparation set out in Note 2.1 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 International Standard on Review
Engagements 2410, Review of Interim Financial Information Performed by the Independent
Auditor of the Entity issued by the International Auditing and Assurance Standards Board
(“IAASB”). 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 International
Standards on Auditing and consequently does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in an audit. Accordingly, we
do not express an audit opinion. Based on our review, nothing has come to our attention that
causes us to believe that the Stub Period Comparative Financial Information, for the purposes
of the accountant’s report, is not prepared, in all material respects, in accordance with the basis
of preparation set out in Note 2.1 to the Historical Financial Information.
APPENDIX I ACCOUNTANT’S REPORT
– I-2 –


--- page 443 ---
Report on matters under the Rules Governing the Listing of Securities on The Stock
Exchange of Hong Kong Limited (the “Listing Rules”) and the Companies (Winding Up
and Miscellaneous Provisions) Ordinance
Adjustments
In preparing the Historical Financial Information, no adjustments to the Underlying
Financial Statements as defined on page I-4 have been made.
Dividends
We refer to Note 35 to the Historical Financial Information which states that no dividends
have been paid by Beijing Fourth Paradigm Technology Co., Ltd. in respect of the Track
Record Period.
PricewaterhouseCoopers
Certified Public Accountants
Hong Kong
September 18, 2023
APPENDIX I ACCOUNTANT’S REPORT
– I-3 –


--- page 444 ---
I. HISTORICAL FINANCIAL INFORMATION OF THE GROUP
Preparation of Historical Financial Information
Set out below is the Historical Financial Information which forms an integral part of this
accountant’s report.
The financial statements of the Group for the Track Record Period, on which the
Historical Financial Information is based, were audited by PricewaterhouseCoopers in
accordance with International Standards on Auditing issued by the International Auditing and
Assurance Standards Board (the “Underlying Financial Statements”).
The Historical Financial Information is presented in Renminbi (“RMB”) and all values
are rounded to the nearest thousand (RMB’000) except when otherwise indicated.
APPENDIX I ACCOUNTANT’S REPORT
– I-4 –


--- page 445 ---
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Y ear ended December 31,
Three months ended
March 31,
Note 2020 2021 2022 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Unaudited)
Revenue 6 942,238 2,018,399 3,082,637 482,261 644,397
Cost of sales 9 (512,503) (1,064,924) (1,595,991) (247,377) (362,835)
Gross profit 429,735 953,475 1,486,646 234,884 281,562
Selling and marketing expenses 9 (247,829) (455,001) (412,152) (80,539) (82,849)
General and administrative expenses 9 (246,493) (541,730) (527,638) (83,178) (101,099)
Research and development expenses 9 (565,674) (1,249,485) (1,650,010) (225,656) (241,457)
Credit loss allowance 9 (1,992) (15,206) (48,914) (7) (5,578)
Other income 7 42,583 41,627 62,662 13,535 16,161
Other gains, net 8 29,604 93,514 63,504 18,066 8,429
Operating loss (560,066) (1,172,806) (1,025,902) (122,895) (124,831)
Share of (losses)/profits of investments
accounted for using the equity method 17 (6,477) 3,802 (3,200) 538 (791)
Finance income 11 6,038 24,416 46,183 7,539 12,429
Finance costs 11 (188,978) (647,111) (682,175) (161,393) (194,445)
Loss before income tax (749,483) (1,791,699) (1,665,094) (276,211) (307,638)
Income tax (expenses)/credit 12 (727) (10,369) 11,673 8,059 3,742
Loss for the year/period (750,210) (1,802,068) (1,653,421) (268,152) (303,896)
Other comprehensive income/(loss):
Item that may be reclassified to profit or loss
Currency translation differences 1,451 1,837 (7,162) 459 634
Item that will not be reclassified to profit or loss
Share of other comprehensive income/(loss) of
investments accounted for using the equity
method 17 – 9,160 4,345 895 (266)
Other comprehensive income/(loss) for the
year/period, net of tax 1,451 10,997 (2,817) 1,354 368
Total comprehensive loss for the year/period (748,759) (1,791,071) (1,656,238) (266,798) (303,528)
APPENDIX I ACCOUNTANT’S REPORT
– I-5 –


--- page 446 ---
Y ear ended December 31,
Three months ended
March 31,
Note 2020 2021 2022 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Unaudited)
Loss attributable to:
Owners of the Company (749,650) (1,785,655) (1,644,897) (263,626) (291,344)
Non-controlling interests (560) (16,413) (8,524) (4,526) (12,552)
(750,210) (1,802,068) (1,653,421) (268,152) (303,896)
Total comprehensive loss attributable to:
Owners of the Company (748,199) (1,774,658) (1,647,714) (262,272) (290,976)
Non-controlling interests (560) (16,413) (8,524) (4,526) (12,552)
(748,759) (1,791,071) (1,656,238) (266,798) (303,528)
Loss per share for loss attributable
to owners of the Company
(expressed in RMB per share) 13
Basic (4.00) (7.63) (6.15) (0.99) (1.06)
Diluted (4.00) (7.63) (6.15) (0.99) (1.06)
APPENDIX I ACCOUNTANT’S REPORT
– I-6 –


--- page 447 ---
CONSOLIDATED BALANCE SHEETS
As at December 31, As at March 31,
Note 2020 2021 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000
Assets
Non-current assets
Right-of-use assets 14(a) 37,814 34,074 70,002 65,669
Property and equipment 15 47,658 49,807 48,421 45,532
Intangible assets 16 19,916 395,389 457,306 448,117
Investments accounted for
using the equity method 17 86,638 115,173 45,865 45,188
Financial assets at fair value
through profit or loss 19 20,936 246,128 477,889 322,257
Contract assets 6(a) 705 1,195 16,295 11,816
Long-term bank deposits 23(c) – 510,203 685,039 789,973
Other non-current assets – 1,000 – –
213,667 1,352,969 1,800,817 1,728,552
Current assets
Inventories 20 28,186 184,499 349,872 408,360
Contract assets 6(a) 1,193 4,434 31,093 37,909
Trade receivables 21 262,699 778,321 1,493,238 1,493,952
Prepayments and other
receivables 22(a) 169,980 272,002 380,064 388,746
Financial assets at fair value
through profit or loss 19 174,408 2,535,763 1,330,166 769,717
Short-term bank deposits 23(c) 95,602 20,000 – –
Restricted cash 23(b) 18,201 8,010 6,916 5,291
Cash and cash equivalents 23(a) 1,052,073 1,292,686 1,326,818 1,425,288
1,802,342 5,095,715 4,918,167 4,529,263
Total assets 2,016,009 6,448,684 6,718,984 6,257,815
APPENDIX I ACCOUNTANT’S REPORT
– I-7 –


--- page 448 ---
As at December 31, As at March 31,
Note 2020 2021 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000
Equity and liabilities
Equity attributable to owners
of the Company
Share capital/paid-in capital 24 8,851 437,706 437,706 445,665
Treasury stock 25 (1,746,224) (4,898,094) (4,898,094) (4,898,094)
Reserves 25 2,628,252 6,643,834 7,063,334 6,989,785
Accumulated losses (2,068,902) (2,534,467) (4,177,658) (4,469,002)
(1,178,023) (351,021) (1,574,712) (1,931,646)
Non-controlling interests (4,976) 103,008 113,701 102,751
Deficit on total equity (1,182,999) (248,013) (1,461,011) (1,828,895)
Liabilities
Non-current liabilities
Lease liabilities 14(b) 17,590 11,000 43,721 38,431
Deferred income tax liabilities 29 995 25,027 14,324 10,519
Borrowings 30 – 15,000 24,000 23,500
Redemption liabilities 31 2,147,031 5,822,196 6,493,159 –
Other non-current liabilities 32 772,061 66,541 53,682 54,920
2,937,677 5,939,764 6,628,886 127,370
Current liabilities
Trade payables 27 84,968 321,357 863,234 619,524
Other payables and accruals 28 73,366 183,863 226,161 169,134
Contract liabilities 6(b) 77,099 173,881 325,731 342,614
Lease liabilities 14(b) 21,185 24,364 28,311 27,912
Income tax liabilities – 4,926 1,844 402
Borrowings 30 – 3,752 48,554 61,099
Redemption liabilities 31 – – – 6,683,937
Other current liabilities 4,713 44,790 57,274 54,718
261,331 756,933 1,551,109 7,959,340
Total liabilities 3,199,008 6,696,697 8,179,995 8,086,710
Total equity and liabilities 2,016,009 6,448,684 6,718,984 6,257,815
APPENDIX I ACCOUNTANT’S REPORT
– I-8 –


--- page 449 ---
COMPANY BALANCE SHEETS
As at December 31, As at March 31,
Note 2020 2021 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000
Assets
Non-current assets
Property and equipment 61 44 34 33
Investment in a subsidiary – 10,000 1,000,000 1,000,000
Investments accounted for
using the equity method 14,535 34,312 35,628 35,270
Financial assets at fair value
through profit or loss 19 – – 157,449 –
Amounts due from subsidiaries 22(b) 1,145,795 4,851,755 4,707,026 4,624,632
1,160,391 4,896,111 5,900,137 5,659,935
Current assets
Trade receivables 440 261 125 188
Prepayments and other
receivables 22(a) 996 50,814 50,593 15,860
Financial assets at fair value
through profit or loss 19 58,066 1,036,180 – 158,008
Cash and cash equivalents 23(a) 970,833 575,019 585,053 584,603
1,030,335 1,662,274 635,771 758,659
Total assets 2,190,726 6,558,385 6,535,908 6,418,594
Equity and liabilities
Equity attributable to owners
of the Company
Share capital/paid-in capital 24 8,851 437,706 437,706 445,665
Treasury stock 25 (1,746,224) (4,898,094) (4,898,094) (4,898,094)
Reserves 25 2,010,130 5,484,096 5,485,793 5,413,212
Accumulated losses (1,007,273) (326,645) (1,017,482) (1,258,406)
(Deficit on total equity)/total
equity (734,516) 697,063 7,923 (297,623)
APPENDIX I ACCOUNTANT’S REPORT
– I-9 –


--- page 450 ---
As at December 31, As at March 31,
Note 2020 2021 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000
Liabilities
Non-current liabilities
Deferred income tax liabilities 14 4,315 – –
Redemption liabilities 31 2,147,031 5,822,196 6,493,159 –
Other non-current liabilities 32 771,661 – – –
2,918,706 5,826,511 6,493,159 –
Current liabilities
Trade payables 200 522 120 –
Other payables and accruals 28 6,336 34,289 30,206 27,780
Redemption liabilities 31 – – – 6,683,937
Other current liabilities – – 4,500 4,500
6,536 34,811 34,826 6,716,217
Total liabilities 2,925,242 5,861,322 6,527,985 6,716,217
Total equity and liabilities 2,190,726 6,558,385 6,535,908 6,418,594
APPENDIX I ACCOUNTANT’S REPORT
– I-10 –


--- page 451 ---
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Attributable to owners of the Company
Note
Paid-in
capital
(Note 24(a))
Share
capital
(Note 24(b))
Treasury
stock
(Note 25)
Reserves
(Note 25)
Accumulated
losses Subtotal
Non-
controlling
interests
Deficit on
total
equity
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Balance at January 1, 2020 8,057 – (1,313,614) 1,976,894 (1,319,252) (647,915) (4,618) (652,533)
Comprehensive income/(loss)
Loss for the year – – – – (749,650) (749,650) (560) (750,210)
Currency translation differences – – – 1,451 – 1,451 – 1,451
Total comprehensive
income/(loss) for the year – – – 1,451 (749,650) (748,199) (560) (748,759)
Transactions with owners in
their capacity as owners
Capital contribution from
shareholders 794 – – 476,242 – 477,036 – 477,036
Recognition of redemption
liabilities 25 – – (432,610) – – (432,610) – (432,610)
Capital contribution from non-
controlling interests – – – – – – 202 202
Share-based payments 26 – – – 173,665 – 173,665 – 173,665
Total transactions with owners in
their capacity as owners 794 – (432,610) 649,907 – 218,091 202 218,293
Balance at December 31, 2020 8,851 – (1,746,224) 2,628,252 (2,068,902) (1,178,023) (4,976) (1,182,999)
APPENDIX I ACCOUNTANT’S REPORT
– I-11 –


--- page 452 ---
Attributable to owners of the Company
Note
Paid-in
capital
(Note 24(a))
Share
capital
(Note 24(b))
Treasury
stock
(Note 25)
Reserves
(Note 25)
Accumulated
losses Subtotal
Non-
controlling
interests
Deficit on
total
equity
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Balance at January 1, 2021 8,851 – (1,746,224) 2,628,252 (2,068,902) (1,178,023) (4,976) (1,182,999)
Comprehensive income/(loss)
Loss for the year – – – – (1,785,655) (1,785,655) (16,413) (1,802,068)
Currency translation differences – – – 1,837 – 1,837 – 1,837
Share of other comprehensive
income of investments
accounted for using the equity
method 17 – – – 9,160 – 9,160 – 9,160
Total comprehensive
income/(loss) for the year – – – 10,997 (1,785,655) (1,774,658) (16,413) (1,791,071)
Transactions with owners in
their capacity as owners
Capital contribution from
shareholders 24 16,611 37,706 – 5,000,884 – 5,055,201 – 5,055,201
Conversion into a joint stock
company 24 (25,462) 400,000 – (1,694,628) 1,320,090 – – –
Recognition of redemption
liabilities 25 – – (4,848,767) – – (4,848,767) – (4,848,767)
Derecognition of redemption
liabilities 31 – – 1,696,897 115,387 – 1,812,284 – 1,812,284
Share-based payments 26 – – – 582,942 – 582,942 20,692 603,634
Non-controlling interests arising
from business combination 33 – – – – – – 103,705 103,705
Total transactions with owners in
their capacity as owners (8,851) 437,706 (3,151,870) 4,004,585 1,320,090 2,601,660 124,397 2,726,057
Balance at December 31, 2021 – 437,706 (4,898,094) 6,643,834 (2,534,467) (351,021) 103,008 (248,013)
APPENDIX I ACCOUNTANT’S REPORT
– I-12 –


--- page 453 ---
Attributable to owners of the Company
Note
Paid-in
capital
(Note 24(a))
Share
capital
(Note 24(b))
Treasury
stock
(Note 25)
Reserves
(Note 25)
Accumulated
losses Subtotal
Non-
controlling
interests
Deficit
on total
equity
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Balance at January 1, 2022 – 437,706 (4,898,094) 6,643,834 (2,534,467) (351,021) 103,008 (248,013)
Comprehensive loss
Loss for the year – – – – (1,644,897) (1,644,897) (8,524) (1,653,421)
Currency translation differences – – – (7,162) – (7,162) – (7,162)
Share of other comprehensive
income of investments
accounted for using the equity
method 17 – – – 4,345 – 4,345 – 4,345
Total comprehensive loss for the
year – – – (2,817) (1,644,897) (1,647,714) (8,524) (1,656,238)
Transfer of share of other
comprehensive income to
accumulated losses upon
disposal of an associate – – – (2,630) 2,630 – – –
Transactions with owners in
their capacity as owners
Share-based payments 26 – – – 433,403 – 433,403 – 433,403
Non-controlling interests arising
from business combination 33 – – – – – – 10,134 10,134
Deregistration of subsidiaries – – – – (924) (924) 627 (297)
Transactions with non-
controlling interests – – – (8,456) – (8,456) 8,456 –
Total transactions with owners in
their capacity as owners – – – 424,947 (924) 424,023 19,217 443,240
Balance at December 31, 2022 – 437,706 (4,898,094) 7,063,334 (4,177,658) (1,574,712) 113,701 (1,461,011)
APPENDIX I ACCOUNTANT’S REPORT
– I-13 –


--- page 454 ---
Attributable to owners of the Company
Note
Paid-in
capital
(Note 24(a))
Share
capital
(Note 24(b))
Treasury
stock
(Note 25)
Reserves
(Note 25)
Accumulated
losses Subtotal
Non-
controlling
interests
Deficit
on total
equity
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Unaudited)
Balance at January 1, 2022 – 437,706 (4,898,094) 6,643,834 (2,534,467) (351,021) 103,008 (248,013)
Comprehensive income/(loss)
Loss for the period – – – – (263,626) (263,626) (4,526) (268,152)
Currency translation differences – – – 459 – 459 – 459
Share of other comprehensive
income of investments
accounted for using the equity
method 17 – – – 895 – 895 – 895
Total comprehensive
income/(loss) for the period – – – 1,354 (263,626) (262,272) (4,526) (266,798)
Balance at March 31, 2022 – 437,706 (4,898,094) 6,645,188 (2,798,093) (613,293) 98,482 (514,811)
Balance at January 1, 2023 – 437,706 (4,898,094) 7,063,334 (4,177,658) (1,574,712) 113,701 (1,461,011)
Comprehensive income/(loss)
Loss for the period – – – – (291,344) (291,344) (12,552) (303,896)
Currency translation differences – – – 634 – 634 – 634
Share of other comprehensive
loss of investments accounted
for using the equity method 17 – – – (266) – (266) – (266)
Total comprehensive
income/(loss) for the period – – – 368 (291,344) (290,976) (12,552) (303,528)
Transactions with owners in
their capacity as owners
Capital contribution from
shareholders 24 – 13,537 – 181,129 – 194,666 – 194,666
Repurchase and cancellation
of shares 24 – (5,578) – (253,444) – (259,022) – (259,022)
Transactions with
non-controlling interests – – – (1,602) – (1,602) 1,602 –
Total transactions with owners
in their capacity as owners – 7,959 – (73,917) – (65,958) 1,602 (64,356)
Balance at March 31, 2023 – 445,665 (4,898,094) 6,989,785 (4,469,002) (1,931,646) 102,751 (1,828,895)
APPENDIX I ACCOUNTANT’S REPORT
– I-14 –


--- page 455 ---
CONSOLIDATED STATEMENTS OF CASH FLOWS
Y ear ended December 31,
Three months ended
March 31,
Note 2020 2021 2022 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Unaudited)
Cash flows from operating activities
Cash used in operations 37(a) (453,838) (778,434) (801,674) (171,630) (466,285)
Interest received 898 11,113 27,122 5,523 6,578
Income tax paid – (2,687) (5,037) (3,307) (1,504)
Net cash used in operating activities (452,940) (770,008) (779,589) (169,414) (461,211)
Cash flows from investing activities
Purchase of property and equipment and
intangible assets (51,275) (21,147) (15,520) (3,184) (1,703)
Proceeds from disposal of property and
equipment 122 2,240 668 20 60
Placement of term bank deposits (95,602) (520,000) (270,000) (10,000) (100,000)
Withdrawal of term bank deposits – 95,602 130,000 10,000 –
Interest income received from term bank
deposits and loan to third party/related party – 7,405 6,886 – 975
Purchase of short-term investments measured
at fair value through profit or loss (2,656,199) (7,650,820) (2,763,507) (1,230,000) (150,000)
Proceeds from disposal of short-term
investments measured at fair value through
profit or loss 2,553,684 5,321,501 3,955,847 1,081,481 873,709
Investment income received 12,487 53,596 71,795 10,907 932
Purchase of long-term investments measured at
fair value through profit or loss (7,300) (225,800) (166,688) – –
Purchase of investments accounted for using
the equity method (30,000) (15,000) (6,224) – –
Proceeds from disposal of investments
accounted for using the equity method – – 5,300 – –
Dividends received – 7,513 – – –
Acquisition of subsidiaries, net of cash
acquired 33 – (254,701) (126,170) – –
Repayment of loan by a third party 135,000 – – – –
Loan to a related party – – (4,000) – –
Repayment of loan by a related party – – 4,000 – –
Net cash (used in)/generated from investing
activities (139,083) (3,199,611) 822,387 (140,776) 623,973
APPENDIX I ACCOUNTANT’S REPORT
– I-15 –


--- page 456 ---
Y ear ended December 31,
Three months ended
March 31,
Note 2020 2021 2022 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Unaudited)
Cash flows from financing activities
Proceeds injected by shareholders 969,265 4,283,540 – – 194,666
Payments for shares repurchase – – – – (259,022)
Capital contribution from non-controlling
interests 202 – – – –
Payment of listing expenses to be capitalized – (28,368) (22,162) (14,037) (1,932)
Proceeds from borrowings – 29,581 50,554 3,326 18,439
Repayment of borrowings – (46,546) (7,752) (3,752) (6,394)
Interest expenses paid – (713) (1,225) (15) (668)
Payment of lease liabilities 14(b) (27,039) (27,479) (28,429) (6,732) (9,219)
Net cash generated from/(used in) financing
activities 942,428 4,210,015 (9,014) (21,210) (64,130)
Net increase/(decrease) in cash and cash
equivalents 350,405 240,396 33,784 (331,400) 98,632
Cash and cash equivalents at the beginning of
the year/period 703,786 1,052,073 1,292,686 1,292,686 1,326,818
Effects of exchange rate changes on cash and
cash equivalents (2,118) 217 348 (33) (162)
Cash and cash equivalents at the end of the
year/period 23(a) 1,052,073 1,292,686 1,326,818 961,253 1,425,288
APPENDIX I ACCOUNTANT’S REPORT
– I-16 –


--- page 457 ---
II. NOTES TO THE FINANCIAL INFORMATION
1 GENERAL INFORMATION
Beijing Fourth Paradigm Technology Co., Ltd. (the “Company”, formerly known as Shenzhen Qianhai Fourth
Paradigm Data Technology Co., Ltd.) was incorporated in Shenzhen, the People’s Republic of China (the “PRC”) on
September 17, 2014 as a limited liability company, and relocated to Beijing, PRC on April 21, 2021. On July 9, 2021,
the Company was converted into a joint stock company with limited liability under the Company Law of the PRC.
The Company is an investment holding company. The Company and its subsidiaries (collectively, the “Group”)
are primarily engaged in sales of self-developed artificial intelligence (“AI”) platform (“Sage Platform”) and other
ready-to-use applications and provision of application development and other services in the PRC and certain
overseas countries and regions during the Track Record Period.
Mr. Dai Wenyuan is the ultimate controlling shareholder of the Group as at the date of this report.
As at the date of this report, the Company has direct and indirect interests in the following subsidiaries, all
being limited liability companies:
Name of subsidiary
Place and date of
incorporation
Particulars of
issued/registered
capital
Equity interest held as at
Principal activities Note
December 31, March 31, the date
of this
report2020 2021 2022 2023
Subsidiaries directly held:
Fourth Paradigm (Beijing)
Data & Technology
Co., Ltd.
Mainland China,
May 12, 2015
RMB2,000,000,000 100% 100% 100% 100% 100% Sales of AI platform,
provision of AI related
services, research and
development of
technology
(a)
Shanghai Shishuo
Intelligent Technology
Co., Ltd.
Mainland China,
April 1, 2017
RMB500,000,000 100% 100% 100% 100% 100% Research and development
of technology
(e)
Beijing Fourth Paradigm
Science & Technology
Co., Ltd.
Mainland China,
September 29,
2016
RMB500,000 100% 100% 100% 100% 100% Investment holding and
investment activities
(e)
Fourth Paradigm
(Shenzhen) Data &
Technology Co., Ltd.
Mainland China,
March 11, 2019
RMB5,000,000 100% 100% 100% 100% 100% Sales of AI platform and
provision of AI related
services
(e)
Subsidiaries indirectly held:
Paradigm Telian (Beijing)
Technology Co., Ltd.
Mainland China,
December 12,
2018
RMB10,000,000 51% 51% N/A N/A N/A Sales of AI platform and
provision of AI related
services
(e),
(j)
Beijing Xuexian Intelligent
Technology
Co., Ltd.
Mainland China,
January 18, 2019
RMB10,000,000 100% 100% 100% 100% 100% Provision of AI related
services
(e)
Beijing Y untian Xinrui
Technology Co., Ltd.
Mainland China,
September 27,
2019
RMB50,000,000 100% 100% 100% 100% 100% Sales of AI platform and
provision of AI related
services
(e)
Beijing Future Paradigm
Technology Co., Ltd.
Mainland China,
May 28, 2018
RMB500,000 60% 60% 60% 100% 100% Sales of AI platform and
provision of AI related
services
(e)
Paradigm Rongtong
(Beijing) Technology
Co., Ltd.
Mainland China,
February 6, 2018
RMB10,000,000 55% 55% N/A N/A N/A Sales of AI platform and
provision of AI related
services
(e),
(j)
Fourth Paradigm
International Limited
Hong Kong, June 1,
2018
Hong Kong Dollar
(“HKD”) 500,000
100% 100% 100% 100% 100% Sales of AI platform and
provision of AI related
services
(b)
APPENDIX I ACCOUNTANT’S REPORT
– I-17 –


--- page 458 ---
Name of subsidiary
Place and date of
incorporation
Particulars of
issued/registered
capital
Equity interest held as at
Principal activities Note
December 31, March 31, the date
of this
report2020 2021 2022 2023
Fourth Paradigm Southeast
Asia Pte. Ltd.
Singapore, July 11,
2018
Singapore Dollar
(“SGD”) 50,000
100% 100% 100% 100% 100% Sales of AI platform,
provision of AI related
services, research and
development of
technology
(c)
The 4th Paradigm Europe
B.V .
Netherlands,
January 21, 2020
Euro (“EUR”)
100,000
100% 100% 100% 100% 100% Sales of AI platform and
provision of AI related
services
(e)
Zhongyuan Putai (Beijing)
Intelligent Technology
Co., Ltd.
Mainland China,
April 14, 2021
RMB1,000,000 N/A 51% 51% 51% 51% Sales of AI platform and
provision of AI related
services
(e)
Guangzhou Jianxin
Technology Co., Ltd.
(Note 33(a))
Mainland China,
April 6, 2005
RMB30,480,000 N/A 66% 66% 66% 66% Provision of intelligent
platform and solutions in
energy and power
industry
(d)
Nanchang Jianxin
Technology Co., Ltd.
Mainland China,
March 24, 2017
RMB3,000,000 N/A 66% N/A N/A N/A Research and development
of technology
(d),
(f) ,
(j)
Sichuan Shibeiyun
Technology Co., Ltd.
(formerly known as
Sichuan Jianneng Zhixin
Technology Co., Ltd.)
Mainland China,
May 15, 2017
RMB9,000,000 N/A 66% 66% 66% 66% Research and development
of technology
(d),
(f)
Guangzhou Shibeiyun Big
Data Co., Ltd. (formerly
known as Guangzhou
Shibeiyun Technology
Co., Ltd.)
Mainland China,
January 8, 2018
RMB5,000,000 N/A 66% 66% 66% 66% Research and development
of technology
(d),
(f)
Wuhan Jianxin Technology
Co., Ltd. (formerly
known as Yichang
Jianxin Technology Co.,
Ltd.)
Mainland China,
December 19,
2018
RMB10,000,000 N/A 66% 66% 66% 66% Research and development
of technology
(d),
(f)
Guangzhou Shibeiyun
Technology Co., Ltd.
(formerly known as
Shibeiyun (Guangzhou)
Big Data Technology
Co., Ltd.)
Mainland China,
May 25, 2020
RMB20,000,000 N/A 66% 66% 66% 66% Research and development
of technology
(d),
(f)
Shanghai Yisahai
Technology Co., Ltd.
Mainland China,
June 9, 2021
RMB100,000 N/A 100% 100% 100% 100% Investment holding (e)
Beijing Ideal Information
Technology Co., Ltd.
(formerly known as
Changchun Ideal
Technology Information
Co., Ltd.) (Note 33(b))
Mainland China,
April 17, 2000
RMB58,641,975 N/A 54.44% 56.84% 56.84% 56.84% Provision of digital
operation and
maintenance platform
and solutions
(k)
Zhimei Xinchuang
(Beijing) Technology
Co., Ltd.
Mainland China,
October 27, 2020
RMB1,000,000 35% 35% 35% 70% 70% Sales of AI platform and
provision of AI related
services
(e),
(g)
Shanghai Laike Paradigm
Technology Co., Ltd.
Mainland China,
July 19, 2021
RMB10,000,000 N/A 40% 40% 40% N/A Sales of AI platform and
provision of AI related
services
(e),
(g)
Hefei Shanyue Intelligence
Technology Co., Ltd.
Mainland China,
March 4, 2022
RMB20,000,000 N/A N/A 51% 51% 51% Sales of AI platform and
provision of AI related
services
(e)
Fourth Paradigm (Beijing)
Digital Technology
Co., Ltd.
Mainland China,
June 10, 2022
RMB5,000,000 N/A N/A 100% 100% 100% Sales of AI platform and
provision of AI related
services
(e)
APPENDIX I ACCOUNTANT’S REPORT
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Name of subsidiary
Place and date of
incorporation
Particulars of
issued/registered
capital
Equity interest held as at
Principal activities Note
December 31, March 31, the date
of this
report2020 2021 2022 2023
EpicHust Technology
(Wuhan) Co., Ltd.
(Note 33(c))
Mainland China,
March 7, 2012
RMB43,700,000 N/A N/A 79.66% 79.66% 79.66% Provision of intelligent
platform and solutions in
manufacturing industry
(l)
Wuxi EpicHust Intelligent
Technology Co., Ltd.
Mainland China,
April 15, 2016
RMB1,000,000 N/A N/A 74.88% 74.88% 74.88% Provision of intelligent
platform and solutions in
manufacturing industry
(e),
(h)
Zhuhai EpicHust
Intelligent Technology
Co., Ltd.
Mainland China,
October 16, 2009
RMB600,000 N/A N/A 79.66% 79.66% 79.66% Provision of intelligent
platform and solutions in
manufacturing industry
(e),
(h)
Shanghai Paradigm Digital
Software Technology
Co., Ltd.
Mainland China,
July 19, 2022
RMB10,000,000 N/A N/A 100% 100% 100% Sales of AI platform and
provision of AI related
services
(e)
Changchun Ideal
Technology Information
Co., Ltd.
Mainland China,
August 3, 2022
RMB30,000,000 N/A N/A 56.84% 56.84% 56.84% Provision of digital
operation and
maintenance platform
and solutions
(e)
Nanjing Shibeiyun
Technology Co., Ltd.
Mainland China,
August 25, 2022
RMB10,000,000 N/A N/A 66% 66% 66% Research and development
of technology
(d)
Shibeiyun (Beijing)
Technology Co., Ltd.
Mainland China,
September 19,
2022
RMB10,000,000 N/A N/A 66% 66% 66% Research and development
of technology
(d)
Paradigm Digital
Technology (Guangzhou)
Co., Ltd.
Mainland China,
November 18,
2022
RMB5,000,000 N/A N/A 100% 100% 100% Sales of AI platform and
provision of AI related
services
(e)
Paradigm Digital
Technology (Wuhan)
Co., Ltd.
Mainland China,
December 1, 2022
RMB5,000,000 N/A N/A 100% 100% 100% Sales of AI platform and
provision of AI related
services
(e)
Paradigm Digital
Technology (Hangzhou)
Co., Ltd.
Mainland China,
December 6, 2022
RMB5,000,000 N/A N/A 100% 100% 100% Sales of AI platform and
provision of AI related
services
(e)
Paradigm Cloud (Beijing)
Retail Technology Co.,
Ltd. (Note 17(b))
Mainland China,
November 6, 2019
RMB100,000,000 40% 40% 100% 100% 100% Sales of AI platform and
provision of AI related
services
(e)
Beijing Paradigm Pilot
Technology Co., Ltd.
Mainland China,
December 16,
2022
RMB5,000,000 N/A N/A 100% 100% 100% Sales of AI platform and
provision of AI related
services
(e)
Beijing Paradigm
Empowerment Enterprise
Management Co., Ltd.
Mainland China,
January 17, 2023
RMB500,000 N/A N/A N/A 100% 100% Investment holding (e)
Beijing Shiqin Enterprise
Management Partnership
(Limited Partnership)
Mainland China,
March 13, 2023
RMB100,000 N/A N/A N/A 100% 100% Investment holding (e)
Beijing Shita Enterprise
Management Partnership
(Limited Partnership)
Mainland China,
March 13, 2023
RMB100,000 N/A N/A N/A 100% 100% Investment holding (e)
Beijing Shijing Enterprise
Management Partnership
(Limited Partnership)
Mainland China,
March 13, 2023
RMB100,000 N/A N/A N/A 100% 100% Investment holding (e)
Beijing Shijin Enterprise
Management Partnership
(Limited Partnership)
Mainland China,
March 13, 2023
RMB100,000 N/A N/A N/A 100% 100% Investment holding (e)
Beijing Shixin Enterprise
Management Partnership
(Limited Partnership)
Mainland China,
March 13, 2023
RMB100,000 N/A N/A N/A 100% 100% Investment holding (e)
Beijing Shili Enterprise
Management Partnership
(Limited Partnership)
Mainland China,
March 13, 2023
RMB100,000 N/A N/A N/A 100% 100% Investment holding (e)
Shanghai Fan’an
Technology Co., Ltd.
Mainland China,
June 20, 2023
RMB10,000,000 N/A N/A N/A N/A 66.67% Research and development
of technology
(e)
APPENDIX I ACCOUNTANT’S REPORT
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Notes:
(a) The statutory financial statements of Fourth Paradigm (Beijing) Data & Technology Co., Ltd. for the years
ended December 31, 2020, 2021 and 2022 were audited by Da Hua Certified Public Accountants (Special
General Partnership). In December 2022, the paid-in capital of Fourth Paradigm (Beijing) Data & Technology
Co., Ltd. was increased to RMB1,000,000,000 by the Company.
(b) The statutory financial statements of Fourth Paradigm International Limited for the years ended December 31,
2020 and 2021 were audited by Kenneth K.K. Tsang. The statutory financial statements of Fourth Paradigm
International Limited for the year ended December 31, 2022 were audited by Y eung Wai.
(c) The statutory financial statements of Fourth Paradigm Southeast Asia Pte. Ltd. for the year ended
December 31, 2020 were audited by MGI SINGAPORE PAC. The statutory financial statements of Fourth
Paradigm Southeast Asia Pte. Ltd. for the year ended December 31, 2021 were audited by FOZL Assurance
PAC.
(d) The statutory financial statements of Guangzhou Jianxin Technology Co., Ltd. and its subsidiaries for the years
ended December 31, 2021 and 2022 were audited by Peng Sheng Certified Public Accountants (Special
General Partnership).
(e) No audited financial statements were issued for these companies as they are either newly incorporated or not
required to issue audited financial statements under the statutory requirements of their respective places of
incorporation.
(f) These entities are subsidiaries of Guangzhou Jianxin Technology Co., Ltd. which have been acquired by the
Group on March 31, 2021 (Note 33(a)).
(g) As at December 31, 2020, 2021 and 2022, the equity interests of Zhimei Xinchuang (Beijing) Technology Co.,
Ltd. (“Zhimei Xinchuang”) held by the Group was 35%. Another shareholder holding 30% equity interests of
Zhimei Xinchuang has agreed to act in concert with the Group on the operation and investment decision of
Zhimei Xinchuang, the Group therefore has rights to exercise power, receives variable returns from its
involvement, has the ability to affect those returns through its power over Zhimei Xinchuang and is considered
to control Zhimei Xinchuang. In February 2023, the Group has further acquired 35% equity interests of Zhimei
Xinchuang.
As at December 31, 2021 and 2022 and March 31, 2023, the Group controlled Shanghai Laike Paradigm
Technology Co., Ltd. (“Laike Paradigm”) through concerting with a shareholder holding 20% equity interests.
Pursuant to the revised shareholder agreement among all shareholders of Laike Paradigm in May 2023, the
operation and investment decision-making of Laike Paradigm shall be agreed by both the Group and another
shareholder who holds 40% equity interests. Then Laike Paradigm became a joint venture and was measured
using equity method.
(h) These entities are subsidiaries of EpicHust Technology (Wuhan) Co., Ltd. which have been acquired by the
Group on June 30, 2022 (Note 33(c)).
(i) As at December 31, 2020, 2021 and 2022 and March 31, 2023, no subsidiary has non-controlling interests that
are material to the Group.
(j) As at December 31, 2022, Paradigm Rongtong (Beijing) Technology Co., Ltd., Paradigm Telian (Beijing)
Technology Co., Ltd. and Nanchang Jianxin Technology Co., Ltd. have cancelled their registration.
(k) In December 2022, the Group increased capital contribution of RMB25,000,000 to Beijing Ideal Information
Technology Co., Ltd., as a result, the equity interests held by the Group increased from 54.44% to 56.84%. The
statutory financial statements of Beijing Ideal Information Technology Co., Ltd. for the year ended December
31, 2022 were audited by Beijing Zhongyihe Accountant Office Co., Ltd..
(l) The statutory financial statements of EpicHust Technology (Wuhan) Co., Ltd. for the year ended December 31,
2022 were audited by WUYIGE Certified Public Accountants LLP .
2 SUMMARY OF MATERIAL ACCOUNTING POLICIES
The principal accounting policies applied in the preparation of the Historical Financial Information are set out
below. These policies have been consistently applied throughout the Track Record Period, unless otherwise stated.
2.1 Basis of preparation
The Historical Financial Information has been prepared in accordance with International Financial Reporting
Standards (“IFRSs”) issued by the International Accounting Standards Board (“IASB”).
The Historical Financial Information has been prepared under the historical cost convention, except that
certain financial assets/liabilities (including derivative instruments) are carried at fair value.
APPENDIX I ACCOUNTANT’S REPORT
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--- page 461 ---
The preparation of the financial information in conformity with IFRSs requires the use of certain critical
accounting estimates. It also requires management to exercise its judgment in the process of applying the Group’s
accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and
estimates are significant to the Historical Financial Information, are disclosed in Note 4.
All effective standards, amendments to standards and interpretations, which are mandatory for the financial
period ended on March 31, 2023, are consistently applied to the Group throughout the Track Record Period.
As at March 31, 2023, the Group has net liabilities of RMB1,828,895,000 and net current liabilities of
RMB3,430,077,000, primarily due to the significant amount of redemption liabilities amounting to
RMB6,683,937,000 and such amount has been reclassified as current liabilities (Note 31). The Historical Financial
Information has been prepared on a going concern basis as the directors of the Company have given careful
consideration of the following facts and circumstances which may have impact on the current and anticipated future
liquidity of the Group:
 Pursuant to the supplemental agreement as mentioned in Note 31, the respective investors’ rights to
request the Company to settle the redemption liabilities will be reinstated and become exercisable
immediately if the initial public offering, listing and trading of the Company’s shares on a recognized
stock exchange does not occur before December 30, 2023. In May and June 2023, certain investors have
already undertaken that they will not exercise their redemption rights prior to December 31, 2024 on the
conditions that the Company does not suspend/terminate its listing plan and the recognized stock
exchange has not rejected the Company’s listing application (Note 38). Furthermore, all redemption
liabilities will be re-classified to equity upon the successful listing of the Company. Considering the
progress of the Company’s listing application, the directors of the Company are of the view that it is
unlikely that the Group will have significant cash outflows for the settlement of redemption liabilities
in the next twelve months from March 31, 2023;
 The Group has unutilised banking facilities of RMB1,200,000,000 as of the date of this accountant’s
report which can be utilized by the Group as and when any funding needs are arising;
 The Group can withdraw and utilize the long-term deposit with carrying amount of RMB760,000,000
as at March 31, 2023 as and when any funding needs are arising (with limited loss of interests) and the
subsequent realization of the contract liabilities of approximately RMB342,614,000 (included in current
liabilities as at March 31, 2023) as revenue of the Group does not necessary result in any cash outflows
for the same amount; and
 Based on the working capital forecast, the directors of the Company believe that the Group has sufficient
working capital for the present requirements and for the next 12 months from the date of this
accountant’s report.
Having taken into account the above, the directors of the Company believe that the Group will have sufficient
cash resources to satisfy its operations in the next twelve months from March 31, 2023. Accordingly, the directors
of the Company consider that it is appropriate to prepare the Historical Financial Information on a going concern
basis.
Amended standards have not been early adopted
Amended standards that have been issued but not yet effective and not been early adopted by the Group
during the Track Record Period are as follows:
Effective for annual
period beginning on
or after
Amendments to IAS 1 Classification of Liabilities as
Current or Non-current
January 1, 2024
Amendments to IAS 1 Non-current Liabilities with
Covenants
January 1, 2024
Amendments to IFRS 16 Lease Liability in a Sale and
Leaseback
January 1, 2024
Amendments to IAS 7 and IFRS 7 Supplier Finance Arrangements January 1, 2024
Amendments to IAS 21 Lack of Exchangeability January 1, 2025
Amendments to IFRS 10 and
IAS 28
Sale or Contribution of Assets
between an Investor and its
Associate or Joint V enture
To be determined
The directors of the Company are of the view that the above amended standards that have been issued
are not expected to have any significant impact on the Group.
APPENDIX I ACCOUNTANT’S REPORT
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2.2 Principles of consolidation and equity accounting
(a) Subsidiaries
Subsidiaries are entities over which the Group has control. The Group controls an entity when the Group
is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect
those returns through its power to direct the activities of the entity. Subsidiaries are fully consolidated from
the date on which control is transferred to the Group. They are deconsolidated from the date that control
ceases.
Intra-group transactions, balances and unrealized gains on transactions between group companies are
eliminated. Unrealized losses are also eliminated unless the transaction provides evidence of an impairment of
the transferred asset. Accounting policies of subsidiaries have been changed where necessary to ensure
consistency with the policies adopted by the Group.
Non-controlling interests in the results and equity of subsidiaries are shown separately in the
consolidated statement of comprehensive income, consolidated balance sheet and consolidated statement of
changes in equity.
(b) Associates
An associate is an entity over which the Group has significant influence but not control or joint control.
This is generally the case where the Group holds between 20% and 50% of the voting rights. Investments in
associates are accounted for using the equity method of accounting (see (d) below), after initially being
recognized at cost.
(c) Joint arrangements
Under IFRS 11 Joint Arrangements, investments in joint arrangements are classified as either joint
operations or joint ventures. The classification depends on the contractual rights and obligations of each
investor, rather than the legal structure of the joint arrangement. The Group has assessed the nature of its joint
arrangements and determined them to be joint ventures.
Joint ventures
Interests in joint ventures are accounted for using the equity method (see (d) below), after initially
being recognized at cost in the consolidated balance sheet.
(d) Equity method
Under the equity method of accounting, the investments are initially recognized at cost and adjusted
thereafter to recognize the Group’s share of the post-acquisition profits or losses of the investee in profit or
loss, and the Group’s share of movements in other comprehensive income of the investee in other
comprehensive income. Dividends received or receivable from associates and joint ventures are recognized as
a reduction in the carrying amount of the investment.
Where the Group’s share of losses in an equity-accounted investment equals or exceeds its interest in
the entity, including any other unsecured long-term receivables, the Group does not recognize further losses,
unless it has incurred obligations or made payments on behalf of the other entity.
Unrealized gains on transactions between the Group and its associates and joint ventures are eliminated
to the extent of the Group’s interest in these entities. Unrealized losses are also eliminated unless the
transaction provides evidence of an impairment of the asset transferred. Accounting policies of equity-
accounted investees have been changed where necessary to ensure consistency with the policies adopted by the
Group.
The carrying amount of equity-accounted investments is tested for impairment in accordance with the
policy described in Note 2.9.
When an investment in an associate or a joint venture is held by, or is held indirectly through, an entity
of the Group that is a venture capital organisation, or a mutual fund, unit trust and similar entities including
investment-linked insurance funds, the Group may elect to measure that investments at fair value through
profit or loss in accordance with IFRS 9. The Group shall make this election separately for each associate or
joint venture, at initial recognition of the associate or joint venture.
APPENDIX I ACCOUNTANT’S REPORT
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(e) Changes in ownership interests
The Group treats transactions with non-controlling interests that do not result in a loss of control as
transactions with equity owners of the Group. A change in ownership interest results in an adjustment between
the carrying amounts of the controlling and non-controlling interests to reflect their relative interests in the
subsidiary. Any difference between the amount of the adjustment to non-controlling interests and any
consideration paid or received is recognized in equity.
When the Group ceases to consolidate or equity account for an investment because of a loss of control,
joint control or significant influence, any retained interest in the entity is remeasured to its fair value with the
change in carrying amount recognized in profit or loss. This fair value becomes the initial carrying amount for
the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial
asset. In addition, any amounts previously recognized in other comprehensive income in respect of that entity
are accounted for as if the Group had directly disposed of the related assets or liabilities. This may mean that
amounts previously recognized in other comprehensive income are reclassified to profit or loss.
If the ownership interest in a joint venture or an associate is reduced but joint control or significant
influence is retained, only a proportionate share of the amounts previously recognized in other comprehensive
income are reclassified to profit or loss where appropriate.
2.3 Business combination
The acquisition method of accounting is used to account for business combinations not under common control,
regardless of whether equity instruments or other assets are acquired. The consideration transferred for the
acquisition of a subsidiary comprises the:
 fair values of the assets transferred;
 liabilities incurred to the former owners of the acquired business;
 equity interests issued by the Group;
 fair value of any asset or liability resulting from a contingent consideration arrangement; and
 fair value of any pre-existing equity interest in the subsidiary.
Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are,
with limited exceptions, measured initially at their fair values at the acquisition date. The Group recognizes any
non-controlling interest in the acquired entity on an acquisition-by-acquisition basis either at fair value or at the
non-controlling interest’s proportionate share of the acquired entity’s net identifiable assets.
Acquisition-related costs are expensed as incurred.
The excess of the:
 consideration transferred;
 amount of any non-controlling interest in the acquired entity; and
 acquisition-date fair value of any previous equity interest in the acquired entity
over the fair value of the net identifiable assets acquired is recorded as goodwill. If those amounts are less than the
fair value of the net identifiable assets of the business acquired, the difference is recognized directly in profit or loss
as a bargain purchase.
Where settlement of any part of cash consideration is deferred, the amounts payable in the future are
discounted to their present value as at the date of exchange. The discount rate used is the entity’s incremental
borrowing rate, being the rate at which a similar borrowing could be obtained from an independent financier under
comparable terms and conditions. Contingent consideration is classified either as equity or a financial liability.
Amounts classified as a financial liability are subsequently remeasured to fair value with changes in fair value
recognized in profit or loss.
APPENDIX I ACCOUNTANT’S REPORT
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If the business combination is achieved in stages, the acquisition date carrying value of the acquirer’s
previously held equity interest in the acquiree is remeasured to fair value at the acquisition date. Any gains or losses
arising from such remeasurement are recognized in profit or loss.
Any contingent consideration to be transferred by the Group is recognized at fair value at the acquisition date.
Subsequent changes to the fair value of the contingent consideration that is deemed to be an asset or liability is
recognized in accordance with IFRS 9 in profit or loss. Contingent consideration that is classified as equity is not
remeasured, and its subsequent settlement is accounted for within equity.
2.4 Separate financial statements
Investments in subsidiaries are accounted for at cost less impairment. Cost includes direct attributable costs
of investment. The results of subsidiaries are accounted for by the Company on the basis of dividend received and
receivable.
Impairment testing of the investments in subsidiaries is required upon receiving a dividend from these
investments if the dividend exceeds the total comprehensive income of the subsidiary in the period the dividend is
declared or if the carrying amount of the investment in the separate financial statements exceeds the carrying amount
in the consolidated financial statements of the investee’s net assets including goodwill.
2.5 Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief
operating decision-maker (“CODM”). The CODM, who is responsible for allocating resources and assessing
performance of the operating segments, has been identified as the Chief Executive Officer that make strategic
decisions.
2.6 Foreign currency translation
(a) Functional and presentation currency
Items included in the financial statements of each of the Group’s entities are measured using the
currency of the primary economic environment in which the entity operates (the “functional currency”). As the
major operations of the Group are within the mainland China, the Group determined to present the Historical
Financial Information in RMB, which is the Company’s functional currency.
(b) Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates at the
dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions
and from the translation of monetary assets and liabilities denominated in foreign currencies at year end
exchange rates are generally recognized in profit or loss.
Foreign exchange gains and losses that relate to borrowings are presented in the consolidated statement
of comprehensive income, within finance costs. All other foreign exchange gains and losses are presented in
the consolidated statement of comprehensive income on a net basis within other gains/losses, net.
Non-monetary items that are measured at fair value in a foreign currency are translated using the
exchange rates at the date when the fair value was determined. Translation differences on assets and liabilities
carried at fair value are reported as part of the fair value gain or loss.
(c) Group companies
The results and financial position of all the Group entities (none of which has the currency of a
hyper-inflationary economy) that have a functional currency different from the presentation currency are
translated into the presentation currency as follows:
 assets and liabilities for each balance sheet presented are translated at the closing rate at the date
of that balance sheet;
 income and expenses for each statements of comprehensive income are translated at average
exchange rates (unless this average is not a reasonable approximation of the cumulative effect of
rates prevailing on the transaction dates, in which case income and expenses are translated at the
rate on the dates of the transactions); and
 all resulting currency translation differences are recognized in other comprehensive income.
APPENDIX I ACCOUNTANT’S REPORT
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On consolidation, exchange differences arising from the translation of any net investment in foreign
entities are recognized in other comprehensive income.
2.7 Property and equipment
Property and equipment are stated at historical cost less accumulated depreciation. Historical cost includes
expenditure that is directly attributable to the acquisition of the items.
Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as appropriate,
only when it is probable that future economic benefits associated with the item will flow to the Group and the cost
of the item can be measured reliably. The carrying amount of the replaced part is derecognized. All other repairs and
maintenance are charged to profit or loss during the financial period in which they are incurred.
Depreciation on property and equipment is calculated using the straight-line method to allocate their cost to
their residual values over their estimated useful lives, as follows:
 Server and electronic equipment 3-5 years
 Office equipment 3-5 years
 Leasehold improvements Estimated useful lives or remaining lease terms, whichever is
shorter
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each
reporting period.
Construction in progress mainly represents leasehold improvements under construction, which is stated at
actual construction cost less accumulated impairment losses. Construction in progress is transferred to appropriate
categories of property and equipment upon the completion of their respective construction and depreciated over their
respective estimated useful lives.
An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying
amount is greater than its estimated recoverable amount (Note 2.9).
Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are
recognized within other gains/losses, net in the consolidated statement of comprehensive income.
2.8 Intangible assets
(a) Goodwill
Goodwill arising from the acquisition of subsidiaries represents the excess of the consideration
transferred, the amount of any non-controlling interest in the acquiree and the acquisition-date fair value of
any previous equity interest in the acquiree over the fair value of the identified net assets acquired.
For the purpose of impairment testing, goodwill acquired in a business combination is allocated to each
of the cash-generating units (“CGUs”), or groups of CGUs, that is expected to benefit from the synergies of
the combination. Each unit or group of units to which the goodwill is allocated represents the lowest level
within the entity at which the goodwill is monitored for internal management purposes. Goodwill is monitored
at the operating segment level.
Goodwill impairment reviews are undertaken annually or more frequently if events or changes in
circumstances indicate a potential impairment. The carrying value of the CGU containing the goodwill is
compared to the recoverable amount, which is the higher of value in use (“VIU”) and the fair value less costs
of disposal (“FVLCOD”). Any impairment is recognized immediately as an expense and is not subsequently
reversed.
APPENDIX I ACCOUNTANT’S REPORT
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(b) Other intangible assets
Other intangible assets mainly include software and copyright, technology, customer relationship and
brand name. They are initially recognized and measured at cost or fair value of intangible assets acquired
through business combination. The Group amortizes these intangible assets with a limited useful life using the
straight-line method over the following periods:
 Software and copyright 3-5 years
 Technology 5 years
 Customer relationship 5-7 years
 Brand name 10 years
When determining the length of useful lives of these intangible assets, management take into account
the (i) estimated period during which such asset can bring economic benefits to the Group; and (ii) the useful
life estimated by comparable companies in the market.
In particular, the Company determined the estimated useful life of customer relationship with
consideration of the historical cooperation period of existing clients, degree of customer loyalty and historical
attrition situation of the customers. In relation to the brand name, the Company considered the historical
presence of the brand, its market share in relevant industry, and the remaining period of its business license
in determining its estimated useful life.
(c) Research and development expenditures
Research expenditures is recognized as an expense as incurred. Development cost is capitalized only if
all of the following conditions are satisfied:
 it is technically feasible to complete the software so that it will be available for use;
 management intends to complete the software and use or sell it;
 there is an ability to use or sell the software;
 it can be demonstrated how the software will generate probable future economic benefits;
 adequate technical, financial and other resources to complete the development and to use or sell
the software are available; and
 the expenditure attributable to the software during its development can be reliably measured.
Other development expenditures that do not meet these criteria are recognized as an expense as incurred.
2.9 Impairment of non-financial assets
Intangible assets that have an indefinite useful life are not subject to amortization and are tested annually for
impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. Other
assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may
not be recoverable. An impairment loss is recognized for the amount by which the asset’s carrying amount exceeds
its recoverable amount. The recoverable amount is the higher of an asset’s FVLCOD and VIU. For the purposes of
assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows
which are largely independent of the cash inflows from other assets or groups of assets (cash-generating units).
Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the
impairment at the end of each reporting period.
2.10 Investments and other financial assets
2.10.1 Classification
The Group classifies its financial assets in the following measurement categories:
 those to be measured subsequently at fair value (either through other comprehensive income, or
through profit or loss), and
 those to be measured at amortized cost.
APPENDIX I ACCOUNTANT’S REPORT
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The classification depends on the Group’s business model for managing the financial assets and the
contractual terms of the cash flows.
For assets measured at fair value, gains and losses will either be recorded in profit or loss or other
comprehensive income. For investments in debt instruments, this will depend on the business model in which
the investment is held. For investments in equity instruments that are not held for trading, this will depend on
whether the Group has made an irrevocable election at the time of initial recognition to account for the equity
investment at fair value through other comprehensive income.
See Note 18 for details of each type of financial assets.
The Group reclassifies debt investments when and only when its business model for managing those
assets changes.
2.10.2 Measurement
At initial recognition, the Group measures a financial asset at its fair value plus, in the case of a financial
asset not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition
of the financial asset. Transaction costs of financial assets carried at fair value through profit or loss are
expensed in profit or loss.
Financial assets with embedded derivatives are considered in their entirety when determining whether
their cash flows are solely payment of principal and interest.
Debt instruments
Subsequent measurement of debt instruments depends on the Group’s business model for
managing the asset and the cash flow characteristics of the asset. There are three measurement
categories into which the Group classifies its debt instruments:
 Amortized cost: Assets that are held for collection of contractual cash flows where those
cash flows represent solely payments of principal and interest are measured at amortized
cost. A gain or loss on a debt investment that is subsequently measured at amortized cost
and is not part of a hedging relationship is recognized in profit or loss when the asset is
derecognized or impaired. Interest income from these financial assets is included in finance
income using the effective interest rate method.
 Fair value through other comprehensive income (“FVOCI”): Assets that are held for
collection of contractual cash flows and for selling the financial assets, where the assets’
cash flows represent solely payments of principal and interest, are measured at FVOCI.
Movements in the carrying amount are taken through OCI, except for the recognition of
impairment gains or losses, interest income and foreign exchange gains and losses which
are recognized in profit or loss. When the financial asset is derecognized, the cumulative
gain or loss previously recognized in OCI is reclassified from equity to profit or loss and
recognized in other gains/losses, net. Interest income from these financial assets is
included in finance income using the effective interest rate method. Foreign exchange
gains and losses are presented in other gains/losses, net and impairment expenses are
presented as separate line item in the consolidated statement of comprehensive income.
 Fair value through profit or loss: Assets that do not meet the criteria for amortized cost or
FVOCI are measured at fair value through profit or loss. A gain or loss on a debt
investment that is subsequently measured at fair value through profit or loss and is not part
of a hedging relationship is recognized in profit or loss and presented net in the
consolidated statement of comprehensive income within other gains/losses, net in the
period in which it arises.
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Equity instruments
The Group subsequently measures all equity investments at fair value. Where the Group’s
management has elected to present fair value gains and losses on equity investments in other
comprehensive income, there is no subsequent reclassification of fair value gains and losses to profit or
loss following the derecognition of the investment. Dividends from such investments continue to be
recognized in profit or loss as other income when the Group’s right to receive payments is established.
Changes in the fair value of financial assets at fair value through profit or loss are recognized in
the consolidated statement of comprehensive income. Impairment losses (and reversal of impairment
losses) on equity investments measured at FVOCI are not reported separately from other changes in fair
value.
2.10.3 Impairment
The Group assesses on a forward-looking basis for the expected credit losses on financial assets
(including trade receivables, other receivables, term bank deposits, restricted cash and cash and cash
equivalents), which is subject to impairment under IFRS 9. The impairment methodology applied depends on
whether there has been a significant increase in credit risk.
For trade receivables, the Group applies the simplified approach permitted by IFRS 9, which requires
expected lifetime losses to be recognized from initial recognition of the receivables, see Note 3.1(b) for details.
For others, it is measured as either 12-month expected credit losses or lifetime expected credit loss,
depending on whether there has been a significant increase in credit risk since initial recognition. If a
significant increase in credit risk of a receivable has occurred since initial recognition, then impairment is
measured as lifetime expected credit losses.
2.10.4 Derecognition
Financial assets
The Group derecognizes a financial asset, if the part being considered for derecognition meets
one of the following conditions: (i) the contractual rights to receive the cash flows from the financial
asset expire; or (ii) the contractual rights to receive the cash flows of the financial asset have been
transferred, the Group transfers substantially all the risks and rewards of ownership of the financial
asset; or (iii) the Group retains the contractual rights to receive the cash flows of the financial asset, but
assumes a contractual obligation to pay the cash flows to the eventual recipient in an agreement that
meets all the conditions of de-recognition of transfer of cash flows (“pass through” requirements) and
transfers substantially all the risks and rewards of ownership of the financial asset.
Where a transfer of a financial asset in its entirety meets the criteria for derecognition, the
difference between the two amounts below is recognized in profit or loss:
 the carrying amount of the financial asset transferred;
 the sum of the consideration received from the transfer and any cumulative gain or loss that
has been recognized directly in equity.
If the Group neither transfers nor retains substantially all the risks and rewards of ownership and
continues to control the transferred asset, the Group continues to recognize the asset to the extent of its
continuing involvement and recognizes an associated liability.
Other financial liabilities
A financial liability is derecognized when the obligation under the liability is discharged or
canceled or expires. When an existing financial liability is replaced by another from the same lender on
substantially different terms, or the terms of an existing liability are substantially modified, such an
exchange or modification is treated as a derecognition of the original liability and a recognition of a new
liability, and the difference between the respective carrying amounts is recognized in profit or loss.
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2.11 Offsetting financial instruments
Financial assets and liabilities are offset and the net amount is reported in the balance sheet where the Group
currently has a legally enforceable right to offset the recognized amounts, and there is an intention to settle on a net
basis or realize the asset and settle the liability simultaneously. The Group has also entered into arrangements that
do not meet the criteria for offsetting but still allow for the related amounts to be set off in certain circumstances,
such as bankruptcy or the termination of a contract.
2.12 Inventories
Inventories are stated at the lower of cost and net realizable value. Costs of purchased inventory are determined
after deducting rebates and discounts. Net realizable value is the estimated selling price in the ordinary course of
business less the estimated costs of completion and the estimated costs necessary to make the sale.
The Group also recognizes the inventory of contract fulfilment cost from the costs incurred to fulfil a contract
only if those costs meet all of the following criteria:
 the costs relate directly to a contract or to an anticipated contract that the entity can specifically identify;
 the costs generate or enhance resources of the entity that will be used in satisfying (or in continuing to
satisfy) performance obligations in the future; and
 the costs are expected to be recovered.
The contract fulfilment cost recognized shall be amortized to profit or loss on a systematic basis that is
consistent with the transfer to the customer of the services to which the asset relates.
The Group recognizes an impairment loss in profit or loss to the extent that the carrying amount of contract
fulfilment cost recognized exceeds:
 the remaining amount of consideration that the entity expects to receive in exchange for the services to
which the asset relates; less
 the costs that relate directly to providing those services and that have not been recognized as expenses.
2.13 Trade and other receivables
Trade receivables are amounts due from customers for products sold or services performed in the ordinary
course of business. Majority of other receivables are deposits, loan to a third party and other receivable from a third
party customer. If collection of trade and other receivables is expected in one year or less (or in the normal operating
cycle of the business if longer), they are classified as current assets. If not, they are presented as non-current assets.
Trade and other receivables are recognized initially at the amount of consideration that is unconditional unless
they contain significant financing components, when they are recognized at fair value. The Group holds the trade and
other receivables with the objective of collecting the contractual cash flows and therefore measures them
subsequently at amortized cost using the effective interest method. See Notes 2.10.3 and 3.1(b) for a description of
the Group’s impairment policy for trade and other receivables.
2.14 Cash and cash equivalents and restricted cash
For the purpose of presentation in the consolidated statement of cash flows, cash and cash equivalents includes
cash on hand, deposits held at call with financial institutions, other short-term, highly liquid investments with original
maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an
insignificant risk of changes in value.
Cash that is restricted from withdrawal, from use or from being pledged as security is reported separately on
the face of the consolidated balance sheet, and is not included in the total cash and cash equivalents in the
consolidated statement of cash flows.
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2.15 Paid-in capital/share capital and treasury stock
Ordinary shares and paid-in capital/share capital from owners are classified as equity.
Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction from the
proceeds.
Treasury stock is recorded to reflect the carrying amount of the redemption liabilities when it is initially
reclassified from equity, and will be reversed when the redemption liabilities are derecognized upon when the
Group’s obligations in connection with those redemption liabilities are discharged, cancelled or have expired which
will then be reclassified back to equity (Note 2.19).
2.16 Trade and other payables
Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of
business from suppliers. Majority of other payables are payroll payables, listing expenses payables, other taxes
payables and payable to a third party hardware supplier. Trade and other payables are classified as current liabilities
if payment is due within one year (or in the normal operating cycle of the business if longer). If not, they are
presented as non-current liabilities.
Trade and other payables are recognized initially at fair value and subsequently measured at amortized cost
using the effective interest method.
2.17 Borrowings
Borrowings are recognized initially at fair value, net of transaction costs incurred. Borrowings are
subsequently carried at amortized cost; any difference between the proceeds (net of transaction costs) and the
redemption value is recognized in profit or loss over the period of the borrowings using the effective interest method.
Fees paid on the establishment of loan facilities are recognized as transaction costs of the loan to the extent
that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the
draw-down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn
down, the fee is capitalized as a pre-payment for liquidity services and amortized over the period of the facility to
which it relates.
Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement
of the liability for at least 12 months after the end of the reporting period.
2.18 Borrowing costs
General and specific borrowing costs directly attributable to the acquisition, construction or production of
qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended
use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended
use or sale.
Investment income earned on the temporary investment of specific borrowings pending their expenditure on
qualifying assets is deducted from the borrowing costs eligible for capitalization.
All other borrowing costs are recognized in profit or loss in the period in which they are incurred.
2.19 Redemption liabilities
A contract that contains an obligation to purchase the Group’s equity instruments for cash or another financial
asset gives rise to a financial liability for the present value of the redemption amount, even if the Group’s obligations
to purchase is conditional on the counterparty exercising a right to redeem. The Company undertakes such redemption
obligations as certain preferred rights are granted to investors in the Company’s financing process, the redemption
liabilities are recognized as financial liabilities initially at the present value of the redemption amount and
reclassified from equity. Subsequently, the redemption liabilities are measured at amortized cost with interest charged
in finance costs.
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The Group derecognizes the redemption liabilities when, and only when, the Group’s obligations are
discharged, cancelled or have expired. When the preferred rights are waived by investors, the carrying amount of the
redemption liability is reclassified to equity.
2.20 Current and deferred income tax
The income tax expense for the period comprises current and deferred income tax. Income tax is recognized
in profit or loss, except to the extent that it relates to items recognized in other comprehensive income or directly
in equity. In this case, the income tax is also recognized in other comprehensive income or directly in equity,
respectively.
(a) Current income tax
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted
at the balance sheet date in the countries where the Company, its subsidiaries, associates and joint ventures
operate and generate taxable income. Management periodically evaluates positions taken in tax returns with
respect to situations in which applicable tax regulation is subject to interpretation and considers whether it is
probable that a taxation authority will accept an uncertain tax treatment. The Group measures its tax balances
either based on the most likely amount or the expected value, depending on which method provides a better
prediction of the resolution of the uncertainty.
(b) Deferred income tax
Inside basis differences
Deferred income tax is provided in full, using the liability method, on temporary differences
arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated
financial statements. However, deferred income tax liabilities are not recognized if they arise from the
initial recognition of goodwill. Deferred income tax is also not accounted for if it arises from initial
recognition of an asset or liability in a transaction other than a business combination that at the time of
the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined
using tax rates (and laws) that have been enacted or substantively enacted by the end of the reporting
period and are expected to apply when the related deferred income tax asset is realized or the deferred
income tax liability is settled.
Deferred income tax assets are recognized only if it is probable that future taxable amounts will
be available to utilize those temporary differences and losses.
Outside basis differences
Deferred income tax liabilities are provided on taxable temporary differences arising from
investments in subsidiaries, associates and joint ventures, except for deferred income tax liability where
the timing of the reversal of the temporary difference is controlled by the Group and it is probable that
the temporary difference will not reverse in the foreseeable future. Generally, the Group is unable to
control the reversal of the temporary difference for associates. Only when there is an agreement in place
that gives the Group the ability to control the reversal of the temporary difference in the foreseeable
future, deferred income tax liability in relation to taxable temporary differences arising from the
associate’s undistributed profits is not recognized.
Deferred income tax assets are recognized on deductible temporary differences arising from
investments in subsidiaries, associates and joint ventures only to the extent that it is probable the
temporary difference will reverse in the future and there is sufficient taxable profit available against
which the temporary difference can be utilized.
(c) Offsetting
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset
current income tax assets against current income tax liabilities and when the deferred income tax assets and
liabilities relate to income taxes levied by the same taxation authority on either the taxable entity or different
taxable entities where there is an intention to settle the balances on a net basis.
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2.21 Employee benefits
(a) Pension obligations and other social welfare benefits
Full-time employees of the Group in mainland China are entitled to staff welfare benefits including
pension, work-related injury benefits, maternity insurances, medical insurances, unemployment benefits and
housing fund plans through a PRC government-mandated defined contribution plan. Chinese labor regulation
requires that the Group make contributions to the government for these benefits based on certain percentage
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 required contributions.
(b) Employee leave entitlements
Employee entitlements to annual leave are recognized when they accrue to employees. A provision is
made for the estimated liability for annual leave as a result of services rendered by employees up to the balance
sheet date. Employee entitlements to sick leave and maternity leave are not recognized until the time of leave.
(c) Bonus plans
The expected cost of bonuses is recognized as a liability when the Group has a present legal or
constructive obligation for payment of bonus as a result of services rendered by employees and a reliable
estimate of the obligation can be made. Liabilities for bonus plans are expected to be settled within 1 year and
are measured at the amounts expected to be paid when they are settled.
(d) Termination benefits
Termination benefits are payable when employment is terminated by the Group before the normal
retirement date, or when an employee accepts voluntary redundancy in exchange for these benefits. The Group
recognizes termination benefits at the earlier of the following dates: (a) when the Group can no longer
withdraw the offer of those benefits; and (b) when the entity recognizes costs for a restructuring that is within
the scope of IAS 37 and involves the payment of terminations benefits. In the case of an offer made to
encourage voluntary redundancy, the termination benefits are measured based on the number of employees
expected to accept the offer. Benefits falling due more than 12 months after the end of the reporting period
are discounted to present value.
2.22 Share-based payments
(a) Equity-settled share-based payment transactions
The Group operates certain share incentive plans, under which it receives services from employees as
consideration for equity instruments (including share options and awarded shares) of the Company. The fair
value of the services received in exchange for the grant of the equity instruments is recognized as an expense
on the consolidated statement of comprehensive income with a corresponding increase in equity.
In terms of the options and shares awarded to employees, the total amount to be expensed is determined
by reference to the fair value of the options and shares granted:
 including any market performance conditions;
 excluding the impact of any service and non-market performance vesting conditions; and
 including the impact of any non-vesting conditions.
Service and non-marketing performance vesting conditions are included in calculation of the number of
options and shares that are expected to vest. The total amount expensed is recognized over the vesting period,
which is the period over which all of the specified vesting conditions are to be satisfied.
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At the end of each reporting period, the Group revises its estimates of the number of options and shares
that are expected to vest based on the service and non-marketing vesting performance conditions. It recognizes
the impact of the revision to original estimates, if any, in profit or loss, with a corresponding adjustment to
equity.
In some circumstances, employees may provide services in advance of the grant date and therefore the
grant date fair value is estimated for the purposes of recognizing the expense during the period between service
commencement period and grant date.
When the share options are forfeited after the vesting date or are still not exercised at the expiry date,
the amount previously recognized in reserves will continue to be held in reserves.
(b) Cash-settled share-based payment transactions
The cost of cash-settled transactions is measured initially at fair value at the grant date. This fair value
is with recognition of a corresponding liability. The liability is re-measured at each reporting date up to and
at the date of settlement, with any changes in fair value recognized in profit or loss for the period. The Group
did not have any cash-settled share-based payment during the Track Record Period.
(c) Modifications
Where the terms of the share-based payment plan are modified, the expense that is not yet recognized
for the award is recognized over the remaining vesting period as if the terms had not been modified. If a
modification increases the fair value of the equity instruments granted, the incremental fair value granted is
included in the measurement of the amount recognized for the services received over the remainder of the
vesting period. If the Group modifies the terms or conditions of its equity instruments granted in a manner that
reduces the total fair value of the share-based payment arrangement, or is not otherwise beneficial to the
employee, the Group shall nevertheless continue to account for the services received as consideration for the
equity instruments granted as if that modification had not occurred.
2.23 Provisions
Provisions are recognized when the Group has a present legal or constructive obligation as a result of past
events; it is probable that an outflow of resources will be required to settle the obligation; and the amount has been
reliably estimated. Provisions are not recognized for future operating losses.
Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement
is determined by considering the class of obligations as a whole. A provision is recognized even if the likelihood of
an outflow with respect to any one item included in the same class of obligations may be small.
Provisions are measured at the present value of the expenditures expected to be required to settle the obligation
using a pretax rate that reflects current market assessments of the time value of money and the risks specific to the
obligation. The increase in the provision due to passage of time is recognized as interest expense.
2.24 Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable, and represents amounts
receivable for goods sold or services supplied, stated net of discounts, returns and value-added taxes. The Group
recognizes revenue when the specific criteria have been met for each of the Group’s activities, as described below.
(a) Sage Platform and applications
Sage Platform and other ready-to-use applications are delivered primarily as (i) licensed software
installed at the end users’ servers, and (ii) all-in-one server or other related hardware with pre-installed
software.
Revenue from delivering of (i) licensed software installed at the end users’ servers and (ii) all-in-one
server or other related hardware with pre-installed software is recognized at the point in time when control of
the asset is transferred to the customer, generally on delivery of the application software and the all-in-one
server or other related hardware. In other circumstance, Sage Platform and other ready-to-use applications are
delivered to end users for usage with a subscription period, the revenue is recognized over the subscription
period.
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(b) Application development and other services
Application development and other services consist of customized AI applications development, and
other services primarily include AI-empowered precision marketing services which support enterprises to
optimize marketing activities.
Application development services are recognized as revenue upon transfer of control to the customer of
the promised products and services, generally on the acceptance of the integrated promised products and
services by the customer.
The Group acts as an agent in AI-empowered precision marketing services considering the fact that the
Group is only responsible for matching resources by using its AI technology, not subject to inventory risk and
has no discretion in establishing prices. Therefore, revenue from AI-empowered precision marketing services
is measured on a net basis. And the revenue is based on actual performance and accounted for as variable
consideration, which is recognized when the performance is highly probable to be reached.
Contract balance
Timing of revenue recognition may differ from the timing of invoicing to customers. The Group
may perform by transferring goods or services to a customer before the customer pays consideration or
before payment is due, also may has a right to an amount of consideration before transferring goods or
services to a customer. The Group recognizes a contract asset or a contract liability in the balance sheet,
depending on the relationship between the Group’s performance and the customer’s payment.
2.25 Earnings per share
(a) Basic earnings per share
Basic earnings per share is calculated by dividing:
 the profit attributable to owners of the Company, excluding any costs of servicing equity other
than ordinary shares; and
 by the weighted average number of ordinary shares outstanding during the financial year/period,
adjusted for bonus elements in ordinary shares issued during the year/period and excluding
treasury shares.
(b) Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to
take into account:
 the after-income tax effect of interest and other financing costs associated with dilutive potential
ordinary shares; and
 the weighted average number of additional ordinary shares that would have been outstanding
assuming the conversion of all dilutive potential ordinary shares.
2.26 Dividend income
Dividend income is recognized when the right to receive payment is established.
2.27 Leases
The Group assesses whether a contract is or contains a lease at inception of a contract. The Group recognizes
a right-of-use asset and a corresponding lease liability with respect to all lease agreements in which it is the lessee,
except for short-term leases (defined as leases with a lease term of 12 months or less) and leases of low value assets.
For these leases, the Group recognizes the lease payments as an operating expense on a straight-line basis over the
term of the lease, and payments for these leases are presented in the consolidated statement of cash flows from
operating activities.
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The lease liability is initially measured at the present value of the lease payments that are not paid at the
commencement date, discounted by using the interest rate implicit in the lease. If this rate cannot be readily
determined, the Group uses its incremental borrowing rate specific to the country, term and currency of the contract.
In addition, the Group considers its recent debt issuances as well as publicly available data for instruments with
similar characteristics when calculating the incremental borrowing rates.
Lease payments include fixed payments, less any lease incentives, variable lease payments that depend on an
index or a rate known at the commencement date, and purchase options or extension option payments if the Group
is reasonably certain to exercise these options. V ariable lease payments that do not depend on an index or rate are
not included in the measurement of the lease liability and right-of-use asset and are recognized as an expense in the
consolidated statement of comprehensive income in the period in which the event or condition that triggers those
payments occurs.
A lease liability is remeasured upon a change in the lease term, changes in an index or rate used to determine
the lease payments or reassessment of exercise of a purchase option. The corresponding adjustment is made to the
related right-of-use asset.
The right-of-use assets comprise the initial measurement of the corresponding lease liability, lease payments
made at or before the commencement date and any initial direct costs. They are subsequently measured at cost less
accumulated depreciation and impairment losses. The right-of-use assets are depreciated starting at the
commencement date over the shorter period of useful life of the underlying asset and lease term.
The lease liability is presented in the ‘Lease liabilities’ line and the right-of-use assets are presented in the
‘Right-of-use assets’ line in the balance sheet. In addition, the principal portion of the lease payments and the interest
component are presented within financing activities in the consolidated statement of cash flows.
2.28 Dividend distribution
Dividend distribution to the Company’s shareholders is recognized as a liability in the Group’s financial
statements in the period in which the dividends are approved by the Company’s shareholders or directors, where
appropriate.
2.29 Government grant
Grants from the government are recognized at their fair value where there is a reasonable assurance that the
grant will be received and the Group will comply with all attached conditions.
Government grants relating to costs are deferred and recognized in profit or loss over the period necessary to
match them with the costs that they are intended to compensate. Government grants relating to the property and
equipment and other non-current assets are included in the liabilities and are credited to profit or loss on a
straight-line basis over the expected lives of the related assets.
2.30 Interest income
Interest income from financial assets at fair value through profit or loss is included in the net fair value
gains/(losses) on these assets. Interest income on financial assets at amortized cost and financial assets at FVOCI
calculated using the effective interest method is recognized in profit or loss as part of other income. Interest income
is presented as finance income where it is earned from financial assets that are held for cash management purposes.
Any other interest income is included in other income.
Interest income is calculated by applying the effective interest rate to the gross carrying amount of a financial
asset except for financial assets that subsequently become credit-impaired. For credit-impaired financial assets the
effective interest rate is applied to the net carrying amount of the financial asset (after deduction of the loss
allowance).
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3 FINANCIAL RISK MANAGEMENT
3.1 Financial risk factors
The Group’s activities expose it to a variety of financial risks: market risk (including foreign exchange risk,
interest rate risk and price risk), credit risk and liquidity risk. The Group’s overall risk management program focuses
on the unpredictability of financial markets and seeks to minimize potential adverse effects on the Group’s financial
performance. Risk management is carried out by the senior management of the Group.
(a) Market risk
(i) Foreign exchange risk
Foreign exchange risk primarily arises from recognized assets and liabilities denominated in a
currency other than the functional currency of entities comprising the Group. The Group operates
mainly in the PRC with most of the transactions settled in RMB.
If RMB had strengthened/weakened by 5% against United States dollar (“USD”) with all other
variables held constant, the loss before income tax for the years ended December 31, 2020, 2021 and
2022 and the three months ended March 31, 2022 and 2023 would have been approximately
RMB6,608,000, RMB3,053,000, RMB5,418,000, RMB3,768,000 and RMB5,369,000 higher/lower,
respectively, as a result of net foreign exchange losses on translation of net monetary assets denominated
in USD.
(ii) Interest rate risk
The Group’s interest rate risk primarily arose from redemption liabilities, borrowings, term bank
deposits and cash and cash equivalents. Those carried at floating rates expose the Group to cash flow
interest rate risk whereas those carried at fixed rates expose the Group to fair value interest rate risk.
If the interest rate of cash and cash equivalents had been 50 basis points higher/lower, the loss
before income tax for the years ended December 31, 2020, 2021 and 2022 and the three months ended
March 31, 2022 and 2023 would have been approximately RMB5,260,000, RMB6,463,000,
RMB6,634,000, RMB4,806,000 and RMB7,126,000 lower/higher, respectively.
The Group regularly monitors its interest rate risk to ensure there is no undue exposure to
significant interest rate movements.
(iii) Price risk
The Group is exposed to price risk in respect of the long-term investments and short-term
investments held by the Group and classified in the balance sheet as at fair value through profit or loss.
The Group is not exposed to commodity price risk. To manage its price risk arising from the
investments, the Group diversifies its portfolio. The investments are managed by management one by
one, either for strategic purposes, or for the purpose of achieving investment yield and balancing the
Group’s liquidity level simultaneously. The sensitivity analysis is performed by management, see Note
3.3 for details.
(b) Credit risk
The Group is exposed to credit risk in relation to its cash and cash equivalents, restricted cash, term bank
deposits, investments in debt instruments measured at fair value through profit or loss, trade receivables, other
receivables and contract assets. The carrying amounts of each class of the above financial assets and contract
assets represent the Group’s maximum exposure to credit risk in relation to financial assets and contract assets.
To manage risk arising from cash and cash equivalents, restricted cash, term bank deposits and
investments in debt instruments measured at fair value through profit or loss, the Group only transacts with
state-owned or reputable financial institutions. There has been no recent history of default in relation to these
financial institutions.
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To manage risk arising from trade receivables and contract assets, the Group has policies in place to
ensure that sales with credit terms are made to counterparties with an appropriate credit history and the
management performs ongoing credit evaluations of its counterparties. The credit period granted to the
customers is usually no more than 90 days and the credit quality of these customers are assessed by taking into
account their financial position, past experience and other factors.
For other receivables, management makes periodic collective assessments as well as individual
assessment on the recoverability of other receivables based on historical settlement records and past
experiences. In view of the history of cooperation with debtors and the sound collection history of receivables
due from them, management believes that the credit risk inherent in the Group’s outstanding other receivables
balances is low.
Impairment of financial assets and contract assets
The Group performs impairment assessment under the expected credit loss (“ECL”) model on
financial assets at amortized cost (mainly including trade receivables and other receivables) and contract
assets. The amount of ECL is updated at each reporting date to reflect changes in credit risk since initial
recognition.
While cash and cash equivalents, restricted cash and term bank deposits are also subject to the
impairment requirements of IFRS 9, the identified impairment loss was immaterial.
Trade receivables and contract assets
For trade receivables and contract assets, the Group applies the simplified approach permitted by
IFRS 9, which requires expected lifetime losses to be recognized from initial recognition of the trade
receivables and contract assets. To measure the expected credit losses, trade receivables and contract
assets have been grouped based on shared credit risk characteristics, credit rating and aging periods. The
expected loss rates are based on the historical payment profiles, historical credit loss rates by industry
and data published by external credit rating institution, adjusted to reflect current and forward-looking
information on macroeconomic factors affecting the ability of the customers to settle the receivables.
The Group has identified the gross domestic product (GDP), consumer price index (CPI) and broad
money (M2) of mainland China in which it provides services to be the most relevant factors, and
accordingly adjusts the loss rates based on expected changes in those factors. Details of loss allowance
of trade receivables and contract assets as at December 31, 2020, 2021 and 2022 and March 31, 2023
were included in Notes 21 and 6(a), respectively.
Other receivables
Other receivables mainly include deposits, loan to a third party and other receivable from a third
party customer. The management of the Group makes periodic collective assessments as well as individual
assessment on the recoverability of other receivables based on historical settlement records and past
experiences. The Group measures credit risk using Probability of Default (“PD”), Exposure at Default
(“EAD”) and Loss Given Default (“LGD”). This is similar to the approach used for the purposes of
measuring ECL under IFRS 9.
 Other receivables that are not credit-impaired on initial recognition are classified in ‘Stage
1’ and have their credit risk continuously monitored by the Group. The expected credit loss
is measured on a 12-month basis.
 If a significant increase in credit risk (specifically, when the debtor is more than 30 day
past due on its contractual payments) since initial recognition is identified, the financial
instrument is moved to ‘Stage 2’ but is not yet deemed to be credit-impaired. The expected
credit loss is measured on lifetime basis.
 If the financial instrument is credit-impaired (specifically, when the debtor is more than 90
days past due on its contractual payments), the financial instrument is then moved to ‘Stage
3’. The expected credit loss is measured on lifetime basis.
As there has been no significant increase in credit risk since initial recognition, all of the Group’s
other receivables as at December 31, 2020, 2021 and 2022 and March 31, 2023 were classified in Stage
1 and their expected credit losses were measured on a 12-month basis, except for the balance of other
receivable from a third party customer as at December 31, 2022 and March 31, 2023 of which the
expected credit loss was measured on lifetime basis due to the receivable had been long past due
(Note 22(a)).
APPENDIX I ACCOUNTANT’S REPORT
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Write-off policy
Financial assets are written off when there is no reasonable expectation of recovery. Indicators
that there is no reasonable expectation of recovery include ceasing enforcement activity. Where
receivables have been written off, the Group continues to engage in enforcement activity to attempt to
recover the receivable due. Where recoveries are made, these are recognized in profit or loss.
(c) Liquidity risk
The Group aims to maintain sufficient cash and cash equivalents. Due to the dynamic nature of the
underlying business, the policy of the Group is to regularly monitor the Group’s liquidity risk and to maintain
adequate cash and cash equivalents or adjust financing arrangements to meet the Group’s liquidity
requirements.
The table below analyzes the Group’s non-derivative financial liabilities that will be settled on a net
basis into relevant maturity groupings based on the remaining period at each balance sheet date to the
contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows.
Less than
1 year
Between
1 year and
2 years
Between
2 years and
5 years
Over
5 years
Total
contractual
cash flows
Carrying
amount
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Group
At December 31, 2020
Trade payables 84,968 – – – 84,968 84,968
Other payables (excluding
payroll payables and
other taxes payables) 3,105 – – – 3,105 3,105
Lease liabilities 22,525 17,967 – – 40,492 38,775
At December 31, 2021
Borrowings 3,752 – 15,000 – 18,752 18,752
Trade payables 321,357 – – – 321,357 321,357
Other payables (excluding
payroll payables and
other taxes payables) 68,844 – – – 68,844 68,844
Lease liabilities 25,525 6,308 5,096 – 36,929 35,364
Payable for acquisition of
subsidiaries 40,930 30,465 50,465 – 121,860 106,306
At December 31, 2022
Borrowings 49,906 16,378 8,256 – 74,540 72,554
Trade payables 863,234 – – – 863,234 863,234
Other payables (excluding
payroll payables and
other taxes payables) 69,941 – – – 69,941 69,941
Lease liabilities 29,116 25,428 19,986 – 74,530 72,032
Payable for acquisition of
subsidiaries 42,877 42,877 20,000 – 105,754 95,175
At March 31, 2023
Borrowings 62,339 16,367 7,667 – 86,373 84,599
Trade payables 619,524 – – – 619,524 619,524
Other payables (excluding
payroll payables and other
taxes payables) 62,078 – – – 62,078 62,078
Lease liabilities 30,107 25,467 14,543 – 70,117 66,343
Payable for acquisition of
subsidiaries 42,877 42,877 20,000 – 105,754 97,306
For redemption liabilities, please refer to Note 31 for more details.
APPENDIX I ACCOUNTANT’S REPORT
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3.2 Capital management
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going
concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal
capital structure to enhance shareholders’ value in the long-term.
The Group monitors capital by regularly reviewing the capital structure. As a part of this review, the Group
considers the cost of capital and the risks associated with the issued share capital. The Group may adjust the number
of dividends paid to shareholders, return capital to shareholders, issue new shares or repurchase the Company’s
shares. In the opinion of the directors of the Company, the Group’s capital risk is not significant.
Considering the factors as set out in Note 2.1, the directors of the Company believe that the Group’s available
cash and cash equivalents as well as access to borrowing facilities, will be sufficient to fund capital expenditures,
debt servicing, dividend payments and other cash requirements going forward.
3.3 Fair value estimation
The table below analyzes the Group’s financial instruments carried at fair value as at each balance sheet dates,
by level of the inputs to valuation techniques used to measure fair value. Such inputs are categorized into three levels
within a fair value hierarchy as follows:
 Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1);
 Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either
directly (that is, as prices) or indirectly (that is, derived from prices) (level 2); and
 Inputs for the asset or liability that are not based on observable market data (that is, unobservable
inputs) (level 3).
The following tables present the Group’s assets that are measured at fair value at December 31, 2020, 2021
and 2022 and March 31, 2023.
At December 31, 2020:
Level 1 Level 2 Level 3 Total
RMB’000 RMB’000 RMB’000 RMB’000
Assets
Long-term investments measured
at fair value through profit or loss
(Note 19) – – 20,936 20,936
Short-term investments measured
at fair value through profit or loss
(Note 19) – – 174,408 174,408
– – 195,344 195,344
At December 31, 2021:
Level 1 Level 2 Level 3 Total
RMB’000 RMB’000 RMB’000 RMB’000
Assets
Long-term investments measured at
fair value through profit or loss
(Note 19) – – 246,128 246,128
Short-term investments measured at
fair value through profit or loss
(Note 19) – – 2,535,763 2,535,763
– – 2,781,891 2,781,891
APPENDIX I ACCOUNTANT’S REPORT
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At December 31, 2022:
Level 1 Level 2 Level 3 Total
RMB’000 RMB’000 RMB’000 RMB’000
Assets
Long-term investments measured at
fair value through profit or loss
(Note 19) – – 477,889 477,889
Short-term investments measured at
fair value through profit or loss
(Note 19) – – 1,330,166 1,330,166
– – 1,808,055 1,808,055
At March 31, 2023:
Level 1 Level 2 Level 3 Total
RMB’000 RMB’000 RMB’000 RMB’000
Assets
Long-term investments measured at
fair value through profit or loss
(Note 19) – – 322,257 322,257
Short-term investments measured at
fair value through profit or loss
(Note 19) – – 769,717 769,717
– – 1,091,974 1,091,974
The following table presents the changes in level 3 instruments of long-term investments measured at fair
value through profit or loss for the years ended December 31, 2020, 2021 and 2022 and the three months ended March
31, 2022 and 2023.
Y ear ended December 31,
Three months ended
March 31,
2020 2021 2022 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Unaudited)
At the beginning of the
year/period 7,754 20,936 246,128 246,128 477,889
Additions 7,300 225,800 183,992 – –
Transfers – – 67,246 – (158,008)
Disposals – – (17,304) – –
Changes in fair value 5,882 (608) (2,173) (621) 2,376
At the end of the
year/period 20,936 246,128 477,889 245,507 322,257
Net unrealized
gains/(losses) for the
year/period 5,882 (608) (2,477) (621) 2,376
APPENDIX I ACCOUNTANT’S REPORT
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The following table presents the changes in level 3 instruments of short-term investments measured at fair
value through profit or loss for the years ended December 31, 2020, 2021 and 2022 and the three months ended
March 31, 2022 and 2023.
Y ear ended December 31,
Three months ended
March 31,
2020 2021 2022 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Unaudited)
At the beginning of the
year/period 71,900 174,408 2,535,763 2,535,763 1,330,166
Additions 2,656,199 7,650,820 2,763,507 1,230,000 150,000
Transfer –––– 158,008
Acquisition of subsidiaries – – 5,009 – –
Disposals (2,566,171) (5,375,097) (4,027,642) (1,092,388) (874,641)
Changes in fair value 12,480 85,632 53,529 18,628 6,184
At the end of the
year/period 174,408 2,535,763 1,330,166 2,692,003 769,717
Net unrealized
(losses)/gains for the
year/period (7) 32,036 13,770 7,721 5,252
The Group has a team that manages the valuation of level 3 instruments for financial reporting purposes. The
team manages the valuation exercise of the investments on a case by case basis. At least once every year, the team
would use valuation techniques to determine the fair value of the Group’s level 3 instruments. External valuation
experts were involved when necessary.
The valuation of the level 3 instruments mainly included long-term investments measured at fair value through
profit or loss in unlisted equity securities, preferred shares and funds (Note 19) and short-term investments measured
at fair value through profit or loss in wealth management products and funds (Note 19). As these instruments are not
traded in an active market, their fair values have been determined by using various applicable valuation techniques,
including discounted cash flows and market approach etc.
APPENDIX I ACCOUNTANT’S REPORT
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The following table summarizes the quantitative information about the significant unobservable inputs used in
recurring level 3 fair value measurements.
Description
Fair values
Significant
unobservable inputs
Range of inputs
Relationship of
unobservable inputs
to fair values
As at December 31,
As at
March 31, As at December 31,
As at
March 31,
2020 2021 2022 2023 2020 2021 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000
Long-term investments
measured at fair value
through profit or loss:
– Unlisted equity
securities and
preferred shares
investments
9,804 36,065 101,165 101,165 Expected volatility 48.58%-
57.90%
48.80%-
59.33%
45.75%-
72.96%
45.75%-
72.96%
The higher the
expected volatility,
the lower the fair
value
Discount for lack of
marketability
(“DLOM”)
22.00%-
25.00%
21.00%-
25.00%
18.50%-
26.00%
18.50%-
26.00%
The higher the
DLOM, the lower
the fair value
Risk-free rate 2.69%-
2.71%
2.57%-
2.59%
2.24%-
2.52%
2.24%-
2.52%
The higher the risk-
free rate, the
higher the fair
value
– Fund investments (a) 11,132 210,063 376,724 221,092 N/A N/A N/A N/A N/A N/A
20,936 246,128 477,889 322,257
Short-term investments
measured at fair value
through profit or loss:
– Wealth management
products
174,408 2,535,763 1,330,166 611,709 Expected rate of
return
2.38%-
3.42%
2.30%-
4.26%
1.60%-
4.30%
2.70%-
4.00%
The higher the
expected rate of
return, the higher
the fair value
– Fund investments (a) – – – 158,008 N/A N/A N/A N/A N/A N/A
174,408 2,535,763 1,330,166 769,717
Note:
(a) The Group determines the fair values of its fund investments as at the reporting date based on the
reported net asset values of the respective funds as provided by fund managers.
If the fair values of the long-term investments and short-term investments measured at fair value through profit
or loss held by the Group had been 0.5% higher/lower, the loss before income tax for the years ended December 31,
2020, 2021 and 2022 and the three months ended March 31, 2022 and 2023 would have been approximately
RMB977,000, RMB13,909,000, RMB9,040,000, RMB14,688,000 and RMB5,460,000 lower/higher, respectively.
The Group believes that any reasonably possible change in assumptions used for the significant unobservable
inputs would not have any significant impact on the Group’s profit or loss.
There were no transfers between level 1, 2 and 3 of fair value hierarchy classifications during the years ended
December 31, 2020, 2021 and 2022 and the three months ended March 31, 2022 and 2023.
APPENDIX I ACCOUNTANT’S REPORT
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The carrying amounts of the Group’s financial assets that are not measured at fair value including cash and
cash equivalents, restricted cash, term bank deposits, trade receivables and other receivables, and the Group’s
financial liabilities that are not measured at fair value, including borrowings, lease liabilities, trade payables, other
payables, redemption liabilities and payable for acquisition of subsidiaries, approximate their fair values due to their
short maturities or the interest rates are close to the market interest rates.
4 CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS
The preparation of financial statements requires the use of accounting estimates which, by definition, will
seldom equal the actual results. Management also needs to exercise judgment in applying the Group’s accounting
policies.
Estimates and judgments are continually evaluated. They are based on historical experience and other factors,
including expectations of future events that may have a financial impact on the entity and that are believed to be
reasonable under the circumstances.
(a) Fair value of financial assets
Fair value of financial assets, in the absence of an active market, is estimated by using appropriate valuation
techniques. Such valuations were based on certain assumptions about credit risk, volatility and liquidity risks,
associated with the instruments, which are subject to uncertainty and might materially differ from the actual results.
Further details are included in Note 3.3 to the Historical Financial Information.
(b) Impairment of goodwill
The Group tests whether goodwill has suffered any impairment on an annual basis. Judgment is required to
identify any impairment indicators existing for any of the Group’s goodwill to determine appropriate impairment
approaches, i.e., FVLCOD or VIU, for impairment review purposes, and to select key assumptions applied in the
adopted valuation models, including discounted cash flows and market approach. Changing the assumptions selected
by management in assessing impairment could materially affect the result of the impairment test and in turn affect
the Group’s financial condition and results of operations. If there is a significant adverse change in the key
assumptions applied, it may be necessary to take additional impairment charge to the consolidated statement of
comprehensive income.
(c) Business combinations
Business combinations are accounted for under the acquisition method. The determination and allocation of
fair values to the identifiable assets acquired and liabilities assumed is based on various assumptions and valuation
methodologies requiring considerable management judgment. Although the Group believes that the assumptions
applied in the determination are reasonable based on information available at the date of acquisition, actual results
may differ from the forecasted amounts and the difference could be material.
(d) Credit loss allowance for trade receivables
The credit loss allowance for trade receivables are based on assumptions about risk of default and expected
loss rates. The Group uses judgement in making these assumptions and selecting the inputs to the impairment
calculation, based on the Group’s past history, existing market conditions as well as forward looking estimates at the
end of each reporting period. Details of the key assumptions and inputs used are disclosed in Notes 3.1(b) and 21.
(e) Principal versus agent considerations
Determining whether the Group is acting as a principal or as an agent in the provision of certain services to
its customers require judgment and consideration of all relevant facts and circumstances. In evaluation of the Group’s
role as a principal or agent, the Group considers, individually or in combination, whether the Group (i) controls the
specified good or service before it is transferred to the customer, (ii) is primarily responsible for fulfilling the
contract, (iii) is subject to inventory risk, and (iv) has discretion in establishing prices.
APPENDIX I ACCOUNTANT’S REPORT
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(f) Valuation of share-based payments
The fair value of share options and awarded shares at the grant date and the incremental fair value upon
modification are determined by using valuation techniques. Significant estimates on assumptions, such as risk-free
interest rate, volatility, dividend yield and lack of marketability discount are made based on management’s best
estimates. Further details are included in Note 26.
(g) Income taxes
Significant judgment is required in determining the provision for income tax. There are many transactions and
calculations for which the ultimate tax determination is uncertain during the ordinary course of business. The Group
recognizes liabilities for anticipated tax audit issues based on estimates of whether additional tax will be due. Where
the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will
impact the current and deferred income tax assets and liabilities in the year in which such determination is made.
For temporary differences or tax losses which give rise to deferred income tax assets, the Group assesses the
likelihood that the deferred income tax assets could be recovered. Deferred income tax assets are recognized based
on the Group’s estimates and assumptions that they will be recovered from taxable income arising from continuing
operations in the foreseeable future.
5 SEGMENT INFORMATION
The Group’s business activities are sales of Sage Platform and other ready-to-use applications and provision
of application development and other services mainly in the PRC. The Group does not distinguish revenue, costs and
expenses between segments in its internal reporting, and reports costs and expenses by nature as a whole.
The Group’s CODM has been identified as the Chief Executive Officer, who reviews consolidated results when
making decisions about allocating resources and assessing performance of the Group as a whole and hence, the Group
has only one reportable segment. The Group does not distinguish between markets or segments for the purpose of
internal reports. As substantially all of the Group’s non-current assets are all located in the PRC and substantially all
of the Group’s revenue are derived from the PRC, no geographical information is presented.
For the years ended December 31, 2020, 2021 and 2022 and the three months ended March 31, 2022 there was
no revenue derived from transactions with a single external customer which amounted to 10% or more of the Group’s
revenue. For the three months ended March 31, 2023, revenue of approximately RMB108,402,000 and
RMB70,442,000 was derived from two external customers which accounted for more than 10% of the total revenue.
6 REVENUE
Disaggregation of revenue from contracts with customers:
Y ear ended December 31,
Three months ended
March 31,
2020 2021 2022 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Unaudited)
Sage Platform and
applications 618,929 1,014,554 1,491,851 247,852 271,735
Application development
and other services 323,309 1,003,845 1,590,786 234,409 372,662
942,238 2,018,399 3,082,637 482,261 644,397
APPENDIX I ACCOUNTANT’S REPORT
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The Group derives revenue from the transfer of goods and services at a point in time and over time are analyzed
as follows:
Y ear ended December 31,
Three months ended
March 31,
2020 2021 2022 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Unaudited)
Point in time 925,630 1,980,750 3,018,068 468,076 628,295
Over time 16,608 37,649 64,569 14,185 16,102
942,238 2,018,399 3,082,637 482,261 644,397
(a) Contract assets
The Group has recognized the following assets related to contracts with customers:
As at December 31,
As at
March 31,
2020 2021 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000
Contract assets
– Current portion 1,198 4,575 31,976 39,091
– Non-current portion 708 1,195 16,949 12,289
1,906 5,770 48,925 51,380
Credit loss allowance (8) (141) (1,537) (1,655)
1,898 5,629 47,388 49,725
Contract assets are generally the final payments of revenue contracts which are due at the end of the quality
assurance period ( 1 – 3 years). Contract assets are recorded as the Group has no right on these amounts of
consideration when the revenue is recognized.
(b) Contract liabilities
The Group has recognized the following liabilities related to contracts with customers:
As at December 31,
As at
March 31,
2020 2021 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000
Contract liabilities 77,099 173,881 325,731 342,614
Contract liabilities of the Group mainly arise from the advance payments made by customers while the
underlying services are yet to be provided. Due to the generally short-term duration of the relevant contracts, a
majority of the contact liabilities are recognized in the following year.
APPENDIX I ACCOUNTANT’S REPORT
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The substantial increase in contract liabilities during the Track Record Period was due to an increase in overall
contract activities, achievement from the Group’s business expansion and more contract orders were secured (with
prepayments made by customers).
The following table shows the revenue recognized in the current reporting year/period related to carried-
forward contract liabilities:
Y ear ended December 31,
Three months ended
March 31,
2020 2021 2022 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Unaudited)
Revenue recognized that
was included in the
contract liabilities at the
beginning of the
year/period 20,781 73,128 149,365 116,425 52,666
(c) Unsatisfied performance obligations
The following table shows unsatisfied performance obligations resulting from long-term contracts:
As at December 31,
As at
March 31,
2020 2021 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000
Aggregate amount of the transaction
price allocated to long-term
contracts that are partially or fully
unsatisfied 480 26,193 25,104 37,030
Management expects that 51%, 75%, 67% and 78% of the transaction price allocated to unsatisfied
performance obligations as at December 31, 2020, 2021 and 2022 and March 31, 2023 will be recognized as revenue
within one year. The remaining 49%, 25%, 33% and 22% will be recognized over one year.
Other contracts at the end of each reporting period had an original expected duration of one year or less and
thus the Group applied the expedient under IFRS 15 for not disclosing of unsatisfied performance obligations.
7 OTHER INCOME
Y ear ended December 31,
Three months ended
March 31,
2020 2021 2022 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Unaudited)
Government grants 18,518 5,174 5,275 337 1,119
V alue-added tax and other
tax refunds 24,065 36,453 52,397 10,947 13,852
Others – – 4,990 2,251 1,190
42,583 41,627 62,662 13,535 16,161
APPENDIX I ACCOUNTANT’S REPORT
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Government grants primarily relate to grants in connection with the Group’s contributions to technology
development and investments in local business districts. Those grants are not stipulated with any unfulfilled
conditions or contingencies.
8 OTHER GAINS, NET
Y ear ended December 31,
Three months ended
March 31,
2020 2021 2022 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Unaudited)
Fair value changes on
financial assets at fair
value through profit or
loss
– Unlisted equity
securities 2,504 461 2,710 – –
– Preferred shares
investments – – 304 – –
– Fund investments 3,378 (1,069) (5,187) (621) 2,376
– Wealth management
products 12,480 85,632 53,529 18,628 6,184
Fair value changes on
financial liabilities at
fair value through profit
or loss (888) ––––
Foreign exchange
(losses)/gains, net (2,878) (607) 7,398 (713) (922)
Net gains on
disposal/transfer/dilution
of investments
accounted for using the
equity method 13,781 8,086 5,158 – 380
Others 1,227 1,011 (408) 772 411
29,604 93,514 63,504 18,066 8,429
APPENDIX I ACCOUNTANT’S REPORT
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9 EXPENSES BY NATURE
Y ear ended December 31,
Three months ended
March 31,
2020 2021 2022 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Unaudited)
Employee benefit expenses
(Note 10) 563,769 1,126,528 1,107,799 139,617 160,698
Technology service fees 446,308 1,336,218 2,002,438 284,172 370,472
Cost of finished goods sold 323,595 434,021 613,183 89,965 128,206
Advertising and marketing
expenses 99,570 167,060 198,035 31,370 36,245
Depreciation and amortization
– property and equipment 14,103 16,348 16,763 4,240 4,367
– right-of-use assets 27,430 25,958 27,610 6,878 7,062
– intangible assets 5,782 25,872 36,472 8,672 9,354
Cloud service and other
technical service fees 42,303 67,097 35,504 12,876 1,418
Auditor’s remuneration 392 1,095 975 – –
Listing expenses
(Note 22(a)(ii)) – 672 44,720 42,687 47,985
Other professional fees 16,789 32,410 15,591 2,926 4,074
Business travel expenses 9,852 23,531 24,955 2,693 5,166
Credit loss allowance (Note
(a)) 1,992 15,206 48,914 7 5,578
Impairment provision for
inventories (Note 20) – 1,920 1,125 – 52
Others 22,606 52,410 60,621 10,654 13,141
1,574,491 3,326,346 4,234,705 636,757 793,818
Note:
(a) Mainly include the credit loss allowance on trade receivables, contract assets and other receivables.
Please refer to Notes 21, 6(a) and 22(a).
10 EMPLOYEE BENEFIT EXPENSES
Y ear ended December 31,
Three months ended
March 31,
2020 2021 2022 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Unaudited)
Wages, salaries and
bonuses 337,858 431,240 589,119 131,440 145,621
Contributions to pension
plans 15,323 34,466 44,915 11,399 15,280
Other social security costs,
housing benefits and
other employee benefits 35,955 54,705 58,839 13,909 19,548
Share-based payment
expenses (Note 26) 173,665 603,634 433,403 – –
562,801 1,124,045 1,126,276 156,748 180,449
Add/(less): capitalized in
contract fulfilment cost 968 2,483 (18,477) (17,131) (19,751)
563,769 1,126,528 1,107,799 139,617 160,698
APPENDIX I ACCOUNTANT’S REPORT
– I-48 –


--- page 489 ---
Y ear ended December 31,
Three months ended
March 31,
2020 2021 2022 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Unaudited)
Representing amounts
charged to:
– cost of sales 24,181 78,644 154,022 16,679 28,542
– selling and marketing
expenses 131,605 246,384 166,380 39,805 36,205
– general and
administrative
expenses 196,907 465,013 417,404 28,418 36,252
– research and
development expenses 211,076 336,487 369,993 54,715 59,699
563,769 1,126,528 1,107,799 139,617 160,698
(a) Five highest paid individuals
The five individuals whose emoluments were the highest in the Group include none of the directors or
supervisors of the Company for the years ended December 31, 2020 and 2022 and the three months ended March 31,
2022 and 2023 and include two directors of the Company for the year ended December 31, 2021, whose emoluments
are reflected in the note (b) below. The emoluments payable to the five highest paid individuals, excluding the two
highest paid directors for the year ended December 31, 2021, are as follows:
Y ear ended December 31,
Three months ended
March 31,
2020 2021 2022 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Unaudited)
Wages, salaries and
bonuses 11,031 3,977 9,643 3,830 4,599
Contributions to pension
plans 81 76 236 65 72
Other social security costs,
housing benefits and
other employee benefits 310 194 336 96 109
Share-based payment
expenses 126,964 92,417 394,446 – –
138,386 96,664 404,661 3,991 4,780
APPENDIX I ACCOUNTANT’S REPORT
– I-49 –


--- page 490 ---
The emoluments of the five highest paid individuals, excluding the two highest paid directors for the year
ended December 31, 2021, fell within the following bands:
Y ear ended December 31,
Three months ended
March 31,
2020 2021 2022 2022 2023
(Unaudited)
Nil to HKD500,000 –––––
HKD500,001 to HKD1,000,000 –––32
HKD1,000,001 to HKD1,500,000 –––22
HKD1,500,001 to HKD2,000,000 ––––1
HKD4,500,001 to HKD5,000,000 1––––
HKD5,000,001 to HKD5,500,000 1––––
HKD8,500,001 to HKD9,000,000 1––––
HKD10,500,001 to HKD11,000,000 ––1––
HKD18,500,001 to HKD19,000,000 1––––
HKD25,000,001 to HKD25,500,000 –1–––
HKD33,500,001 to HKD34,000,000 –1–––
HKD45,000,001 to HKD45,500,000 ––1––
HKD57,500,001 to HKD58,000,000 –1–––
HKD60,500,001 to HKD61,000,000 ––1––
HKD97,500,001 to HKD98,000,000 ––1––
HKD118,000,001 to HKD118,500,000 1––––
HKD256,000,001 to HKD256,500,000 ––1––
53555
(b) Benefits and interests of directors and supervisors
The remuneration of each director and supervisor of the Company for the year ended December 31, 2020 are
set out as follows:
Wages,
salaries and
bonuses
Contributions
to pension
plans
Other social
security
costs,
housing
benefits and
other
employee
benefits
Share-based
payment
expenses Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Executive directors
– Dai Wenyuan 1,032 39 73 – 1,144
– Chen Y uqiang 2,167 39 73 – 2,279
Non-executive directors
– Wu Ming 98 39 73 – 210
– Y ang Qiang –––––
– W a n g H u a –––––
– J i Y u e –––––
– Peng Zhijian –––––
Supervisor
– Hu Shiwei 1,658 39 73 – 1,770
4,955 156 292 – 5,403
APPENDIX I ACCOUNTANT’S REPORT
– I-50 –


--- page 491 ---
The remuneration of each director and supervisor of the Company for the year ended December 31, 2021 are
set out as follows:
Wages,
salaries and
bonuses
Contributions
to pension
plans
Other social
security
costs,
housing
benefits and
other
employee
benefits
Share-based
payment
expenses Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Executive directors
– Dai Wenyuan 1,009 53 78 42,913 44,053
– Chen Y uqiang 1,890 53 78 3,086 5,107
– Y u Zhonghao (Note
(a)) 1,632 14 52 57,936 59,634
Non-executive directors
– Wu Ming (Note (f)) 50 25 1 – 76
– Y ang Qiang – – – 635 635
–J iY u e (Note (b)) –––––
– Wang Hua (Note (c)) –––––
– Peng Zhijian (Note (f)) –––––
– Neil Nanpeng Shen
(Note (d)) –––––
– Zhang Jing (Note (e)) –––––
– Dou Shuai (Note (e)) –––––
Independent non-executive
directors
– Li Jianbin (Note (g)) –––––
– Liu Chijin (Note (g)) –––––
– Hou Xiaodi (Note (g)) –––––
– Ni Lionel Ming-shuan
(Note (g)) –––––
Supervisors
– Hu Shiwei (Note (h)) 924 25 39 3,086 4,074
– Chai Yifei (Note (i)) 1,889 57 83 – 2,029
– Zhou Wenjing
(Note (i)) 1,509 53 78 – 1,640
– Shao Liling (Note (i)) 623 53 78 – 754
9,526 333 487 107,656 118,002
APPENDIX I ACCOUNTANT’S REPORT
– I-51 –


--- page 492 ---
The remuneration of each director and supervisor of the Company for the year ended December 31, 2022 are
set out as follows:
Wages,
salaries and
bonuses
Contributions
to pension
plans
Other social
security
costs,
housing
benefits and
other
employee
benefits
Share-based
payment
expenses Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Executive directors
– Dai Wenyuan 1,064 58 82 – 1,204
– Chen Y uqiang 2,097 58 83 – 2,238
– Y u Zhonghao 2,030 61 101 – 2,192
Non-executive directors
– Y ang Qiang –––––
– Neil Nanpeng Shen
(Note (d)) –––––
– Zhang Jing –––––
– Dou Shuai –––––
Independent non-executive
directors
– Li Jianbin –––––
– Liu Chijin –––––
– Hou Xiaodi (Note (g)) –––––
– Ni Lionel Ming-shuan
(Note (g)) –––––
– Ke Y ele (Note (j)) –––––
Supervisors
– Chai Yifei 2,090 63 91 – 2,244
– Zhou Wenjing 2,014 58 83 – 2,155
– Shao Liling 789 58 83 – 930
10,084 356 523 – 10,963
APPENDIX I ACCOUNTANT’S REPORT
– I-52 –


--- page 493 ---
The remuneration of each director and supervisor of the Company for the three months ended March 31, 2022
(Unaudited) are set out as follows:
Wages,
salaries and
bonuses
Contributions
to pension
plans
Other social
security
costs,
housing
benefits and
other
employee
benefits
Share-based
payment
expenses Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Executive directors
– Dai Wenyuan 276 14 19 – 309
– Chen Y uqiang 522 14 19 – 555
– Y u Zhonghao 500 14 23 – 537
Non-executive directors
– Y ang Qiang –––––
– Neil Nanpeng Shen –––––
– Zhang Jing –––––
– Dou Shuai –––––
Independent non-executive
directors
– Li Jianbin –––––
– Liu Chijin –––––
– Hou Xiaodi –––––
– Ni Lionel Ming-shuan –––––
Supervisors
– Chai Yifei 522 15 22 – 559
– Zhou Wenjing 418 14 19 – 451
– Shao Liling 182 14 19 – 215
2,420 85 121 – 2,626
APPENDIX I ACCOUNTANT’S REPORT
– I-53 –


--- page 494 ---
The remuneration of each director and supervisor of the Company for the three months ended March 31, 2023
are set out as follows:
Wages,
salaries and
bonuses
Contributions
to pension
plans
Other social
security
costs,
housing
benefits and
other
employee
benefits
Share-based
payment
expenses Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Executive directors
– Dai Wenyuan 261 15 22 – 298
– Chen Y uqiang 521 15 22 – 558
– Y u Zhonghao 507 17 25 – 549
Non-executive directors
– Y ang Qiang –––––
– Zhang Jing –––––
– Dou Shuai –––––
Independent non-executive
directors
– Li Jianbin –––––
– Liu Chijin –––––
– K e Y e l e –––––
Supervisors
– Chai Yifei 520 16 23 – 559
– Zhou Wenjing 520 15 22 – 557
– Shao Liling 234 15 22 – 271
2,563 93 136 – 2,792
Notes:
(a) Mr. Y u Zhonghao was appointed as an executive director in February 2021.
(b) Mr. Ji Y ue resigned from the position of a non-executive director in April 2021.
(c) Mr. Wang Hua resigned from the position of a non-executive director in February 2021.
(d) Mr. Neil Nanpeng Shen was appointed as a non-executive director in April 2021 and tendered
resignation from the position of non-executive director in June 2022.
(e) Mr. Zhang Jing and Mr. Dou Shuai were appointed as non-executive directors in February 2021.
(f) Ms. Wu Ming and Mr. Peng Zhijian resigned from the positions of non-executive directors in July 2021.
(g) Mr. Li Jianbin, Mr. Liu Chijin, Dr. Hou Xiaodi and Dr. Ni Lionel Ming-shuan were appointed as
independent non-executive directors in July 2021. Dr. Hou Xiaodi and Dr. Ni Lionel Ming-shuan
tendered resignation from the positions of independent non-executive directors in June 2022 and July
2022, respectively.
(h) Mr. Hu Shiwei resigned from the position of a supervisor in July 2021.
(i) Mr. Chai Yifei, Ms. Zhou Wenjing and Ms. Shao Liling were appointed as supervisors in July 2021.
(j) Ms. Ke Y ele was appointed as an independent non-executive director in August 2022.
APPENDIX I ACCOUNTANT’S REPORT
– I-54 –


--- page 495 ---
(c) Directors’ and supervisors’ termination benefits
No termination benefits were paid or payable to the directors or supervisors during the years ended December
31, 2020, 2021 and 2022 and the three months ended March 31, 2022 and 2023.
(d) Consideration provided to third parties for making available directors’ and supervisors’ services
No consideration provided to third parties for making available directors’ or supervisors’ services during the
years ended December 31, 2020, 2021 and 2022 and the three months ended March 31, 2022 and 2023.
(e) Information about loans, quasi-loans and other dealings in favor of directors and supervisors, controlled
body corporates by and connected entities with such directors and supervisors
No loans, quasi-loans and other dealings in favor of directors or supervisors, controlled body corporates by and
connected entities with such directors or supervisors subsisted as at December 31, 2020, 2021 and 2022 and
March 31, 2023.
(f) Directors’ and supervisors’ material interests in transactions, arrangements or contracts
No significant transactions, arrangements and contracts in relation to the Group’s business to which the
Company was a party and in which a director or supervisor of the Company had a material interest, whether directly
or indirectly, subsisted as at December 31, 2020, 2021 and 2022 and March 31, 2023.
11 FINANCE INCOME AND FINANCE COSTS
Y ear ended December 31,
Three months ended
March 31,
2020 2021 2022 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Unaudited)
Finance income:
Interest income from bank
deposits 2,709 24,416 46,103 7,539 12,429
Interest income from loan
to a third party 3,32 9––––
Interest income from loan
to a related party – – 80 – –
6,038 24,416 46,183 7,539 12,429
Finance costs:
Interest expense on
redemption liabilities
(Note 31) (186,240) (638,682) (670,963) (158,684) (190,778)
Interest expense on lease
liabilities (Note 14) (2,453) (1,954) (1,552) (387) (801)
Interest expense on
borrowings – (713) (1,225) (15) (668)
Amortized amounts on
payable for acquisition
of subsidiaries – (5,451) (8,201) (2,222) (2,131)
Others (285) (311) (234) (85) (67)
(188,978) (647,111) (682,175) (161,393) (194,445)
APPENDIX I ACCOUNTANT’S REPORT
– I-55 –


--- page 496 ---
12 INCOME TAX EXPENSES/(CREDIT)
The income tax expenses/(credit) of the Group for the years ended December 31, 2020, 2021 and 2022 and the
three months ended March 31, 2022 and 2023 are analyzed as follows:
Y ear ended December 31,
Three months ended
March 31,
2020 2021 2022 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Unaudited)
Current income tax – 3,743 2,180 202 63
Deferred income tax 727 6,626 (13,853) (8,261) (3,805)
Income tax
expenses/(credit) 727 10,369 (11,673) (8,059) (3,742)
The tax on the Group’s loss before income tax differs from the theoretical amount that would arise using the
statutory tax rate applicable to loss of the Group as follows:
Y ear ended December 31,
Three months ended
March 31,
2020 2021 2022 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Unaudited)
Loss before income tax (749,483) (1,791,699) (1,665,094) (276,211) (307,638)
Tax calculated at statutory
income tax rate of 25% in
mainland China (Note (a)) (187,371) (447,925) (416,274) (69,053) (76,910)
Tax effects of:
– Effect of lower tax rates in
other jurisdictions
(Notes (b), (c)) 3,557 10,586 1,946 446 346
– Preferential income tax rate
applicable to subsidiaries
(Note (d)) 19,052 84,832 77,228 3,898 3,942
– Tax losses and temporary
differences for which no
deferred income tax assets
was recognized 98,605 124,459 116,596 20,898 28,792
– Expenses not deductible for
income tax purposes 75,148 264,611 236,310 40,536 48,667
– Super Deduction for research
and development expenses
(Note (e)) (5,912) (15,483) (22,874) (4,520) (7,552)
– Impact of share of results
and net gains on
disposal/transfer/dilution of
investments accounted for
using the equity method (2,345) (3,147) (1,030) (234) 71
– Utilization of previously
unrecognized tax losses (7) (7,564) (3,575) (30) (1,098)
Income tax expenses/(credit) 727 10,369 (11,673) (8,059) (3,742)
APPENDIX I ACCOUNTANT’S REPORT
– I-56 –


--- page 497 ---
Notes:
(a) Enterprise income tax in mainland China (“EIT”)
The income tax provision of the Group in respect of its operations in mainland China was calculated at
tax rate of 25% on the assessable profits for the respective year/period presented, based on the existing
legislation, interpretations and practices in respect thereof.
(b) Hong Kong income tax
The entity incorporated in Hong Kong is subject to Hong Kong profits tax of which the tax rate is 8.25%
for assessable profits in the first HKD2 million and 16.5% for any assessable profits in excess of HKD2
million.
No provision for Hong Kong profits tax was made as the Group had no estimated assessable profit that
was subject to Hong Kong profits tax during the Track Record Period.
(c) Singapore income tax
The entity incorporated in Singapore is subject to Singapore income tax at a rate of 17% for taxable
income earned in Singapore.
No provision for Singapore income tax was made as the Group had no estimated assessable profit that
was subject to Singapore income tax during the Track Record Period.
(d) Preferential EIT Rate
Certain subsidiaries in mainland China are entitled to preferential EIT rate of 15%, mainly include the
follows:
Fourth Paradigm (Beijing) Data & Technology Co., Ltd. was qualified as a “High and New Technology
Enterprise” (“HNTE”) in December 2016 and renewed the qualification in December 2019 and
November 2022, hence it enjoys a preferential income tax rate of 15% for nine years from 2016 to 2024.
Guangzhou Jianxin Technology Co., Ltd. was qualified as a HNTE in December 2020 and hence it
enjoys a preferential income tax rate of 15% for three years from 2020 to 2022. Guangzhou Jianxin
Technology Co., Ltd. is in the progress of renewing the HNTE qualification in 2023.
Beijing Ideal Information Technology Co., Ltd. was qualified as a HNTE in September 2018 and
renewed the qualification in September 2021, hence it enjoys a preferential income tax rate of 15% from
2018 to 2023.
EpicHust Technology (Wuhan) Co., Ltd., a subsidiary acquired in June 2022 (Note 33(c)), was qualified
as a HNTE in December 2020 and hence it enjoys a preferential income tax rate of 15% for three years
from 2020 to 2022. EpicHust Technology (Wuhan) Co., Ltd. is in the progress of renewing the HNTE
qualification in 2023.
Management considers that the above subsidiaries can be continued to be qualified as HNTEs upon
renewal and hence will continue to enjoy the preferential income tax rate of 15% in the foreseeable
future.
(e) Super Deduction for research and development expenses
The State Taxation Administration of the People’s Republic of China announced in September 2018 that
enterprises engaging in research and development activities would entitle to claim 175% of their
research and development expenses (“Super Deduction”) from January 1, 2018 to December 31, 2020,
and announced in March 2021 to extend this preferential claim percentage to December 31, 2023. As
announced in March 2022 and September 2022, technology-based small and medium-sized enterprises
would entitle to claim 200% of their research and development expenses from January 1, 2022 and other
enterprises would entitle to claim 200% of their research and development expenses from October 1,
2022 to December 31, 2022. As announced in March 2023, enterprises engaging in research and
development activities would entitle to claim 200% of their research and development expenses as Super
Deduction from January 1, 2023. The Group has made its best estimate for the Super Deduction to be
claimed for the Group’s entities in ascertaining their assessable profits during the Track Record Period.
APPENDIX I ACCOUNTANT’S REPORT
– I-57 –


--- page 498 ---
(f) Global minimum top-up tax
The Group has adopted International Tax Reform – Pillar Two Model Rules – Amendments to IAS 12
upon their release on May 23, 2023. The amendments provide a temporary mandatory exception from
deferred tax accounting for the top-up tax, which is effective immediately, and require new disclosures
about the Pillar Two exposure from December 31, 2023. The mandatory exception applies
retrospectively and the retrospective application has no impact on the Historical Financial Information.
13 LOSS PER SHARE
The basic loss per share is calculated by dividing the loss attributable to owners of the Company by the
weighted average number of ordinary shares in issue during the respective year/period. In determining the weighted
average number of ordinary shares in issue, 400,000,000 shares issued on July 9, 2021, the date that the Company
was converted into a joint stock company, are treated as if have been in issue since January 1, 2020, moreover, the
contingently returnable shares, i.e. shares with preferred rights, are excluded from the calculation. The impact of
excluded contingently returnable shares was 212,573,619 shares, 203,677,321 shares, 170,286,193 shares,
170,286,193 shares and 170,286,193 shares for the years ended December 31, 2020, 2021 and 2022 and the three
months ended March 31, 2022 and 2023, respectively.
Diluted loss per share is calculated by adjusting the weighted average number of ordinary shares outstanding
to assume conversion of all dilutive potential ordinary shares. As the Group incurred losses for the respective
years/periods, the potential ordinary shares, i.e. shares with preferred rights, were not included in the calculation of
diluted loss per share as their inclusion would be anti-dilutive. Accordingly, diluted loss per share for the years ended
December 31, 2020, 2021 and 2022 and the three months ended March 31, 2022 and 2023 are the same as basic loss
per share of the respective years/periods.
Y ear ended December 31,
Three months ended
March 31,
2020 2021 2022 2022 2023
(Unaudited)
Loss attributable to owners of
the Company (RMB’000) (749,650) (1,785,655) (1,644,897) (263,626) (291,344)
Weighted average number of
ordinary shares in issue
(thousand shares) (a) 187,426 234,029 267,463 267,420 275,378
Basic and diluted loss per share
for loss attributable to owners
of the Company (expressed in
RMB per share) (4.00) (7.63) (6.15) (0.99) (1.06)
Note:
(a) Weighted average number of ordinary shares in issue for the year ended December 31, 2022 and the
three months ended March 31, 2023 were taken into account the effect of the contingently issuable
ordinary shares (Note 26).
APPENDIX I ACCOUNTANT’S REPORT
– I-58 –


--- page 499 ---
14 LEASES
The Group leases certain of its offices under operating lease arrangements, which are negotiated for terms
ranging from 3 months to 3 years.
The consolidated balance sheets include the following amounts relating to leases:
(a) Right-of-use assets
The carrying amounts of the Group’s right-of-use assets and the movements during the years ended December
31, 2020, 2021 and 2022 and the three months ended March 31, 2022 and 2023 are as follows, respectively:
Y ear ended December 31,
Three months ended
March 31,
2020 2021 2022 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Unaudited)
At the beginning of the
year/period 66,451 37,814 34,074 34,074 70,002
Additions 704 14,319 63,364 688 2,729
Acquisition of subsidiaries
(Note 33) – 7,899 174 – –
Depreciation charge (27,430) (25,958) (27,610) (6,878) (7,062)
Terminations (1,911) ––––
At the end of the year/period 37,814 34,074 70,002 27,884 65,669
(b) Lease liabilities
The carrying amounts of the Group’s lease liabilities as at December 31, 2020, 2021 and 2022 and March 31,
2023 are as follows, respectively:
As at December 31,
As at
March 31,
2020 2021 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000
Current 21,185 24,364 28,311 27,912
Non-current 17,590 11,000 43,721 38,431
38,775 35,364 72,032 66,343
The consolidated statements of comprehensive income show the following amounts relating to leases:
Y ear ended December 31,
Three months ended
March 31,
2020 2021 2022 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Unaudited)
Depreciation charge of right-of-
use assets (Note 9) 27,430 25,958 27,610 6,878 7,062
Interest expense (Note 11) 2,453 1,954 1,552 387 801
Expense relating to short-term
leases and variable lease
payments not included in lease
liabilities 860 – 65 – 77
APPENDIX I ACCOUNTANT’S REPORT
– I-59 –


--- page 500 ---
The total cash outflows for leases during the years ended December 31, 2020, 2021 and 2022 and the three
months ended March 31, 2022 and 2023 was RMB27,039,000, RMB27,479,000, RMB28,429,000, RMB6,732,000
and RMB9,219,000, respectively, including principal elements of lease payments of approximately RMB24,586,000,
RMB25,525,000, RMB26,877,000, RMB6,345,000 and RMB8,418,000, respectively, and related interest paid of
approximately RMB2,453,000, RMB1,954,000, RMB1,552,000, RMB387,000 and RMB801,000, during the years
ended December 31, 2020, 2021 and 2022 and the three months ended March 31, 2022 and 2023, respectively.
15 PROPERTY AND EQUIPMENT
The movement information of property and equipment during the Track Record Period is as below:
Server and
electronic
equipment
Office
equipment
Leasehold
improvements
Construction
in progress Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
At January 1, 2020
Cost 14,747 20,928 5,839 2,725 44,239
Accumulated depreciation (4,967) (4,191) (2,129) – (11,287)
Net book amount 9,780 16,737 3,710 2,725 32,952
Y ear ended December 31,
2020
Opening net book amount 9,780 16,737 3,710 2,725 32,952
Additions 6,448 7,743 – 14,845 29,036
Transfer – – 17,570 (17,570) –
Disposals (128) (99) – – (227)
Depreciation charge (Note 9) (4,968) (4,275) (4,860) – (14,103)
Closing net book amount 11,132 20,106 16,420 – 47,658
At December 31, 2020
Cost 20,919 28,457 23,409 – 72,785
Accumulated depreciation (9,787) (8,351) (6,989) – (25,127)
Net book amount 11,132 20,106 16,420 – 47,658
Y ear ended December 31,
2021
Opening net book amount 11,132 20,106 16,420 – 47,658
Additions 3,872 7,121 – 4,481 15,474
Acquisition of subsidiaries
(Note 33) 965 1,017 3,237 – 5,219
Transfer – – 3,874 (3,874) –
Disposals (89) (2,107) – – (2,196)
Depreciation charge (Note 9) (5,812) (5,834) (4,702) – (16,348)
Closing net book amount 10,068 20,303 18,829 607 49,807
At December 31, 2021
Cost 25,252 34,282 30,520 607 90,661
Accumulated depreciation (15,184) (13,979) (11,691) – (40,854)
Net book amount 10,068 20,303 18,829 607 49,807
APPENDIX I ACCOUNTANT’S REPORT
– I-60 –


--- page 501 ---
Server and
electronic
equipment
Office
equipment
Leasehold
improvements
Construction
in progress Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Y ear ended December 31,
2022
Opening net book amount 10,068 20,303 18,829 607 49,807
Additions 6,219 7,153 1,881 291 15,544
Acquisition of subsidiaries 354 147 – – 501
Transfer – – 898 (898) –
Disposals (661) (7) – – (668)
Depreciation charge (Note 9) (4,900) (6,384) (5,479) – (16,763)
Closing net book amount 11,080 21,212 16,129 – 48,421
At December 31, 2022
Cost 29,549 41,564 33,299 – 104,412
Accumulated depreciation (18,469) (20,352) (17,170) – (55,991)
Net book amount 11,080 21,212 16,129 – 48,421
(Unaudited)
Three months ended
March 31, 2022
Opening net book amount 10,068 20,303 18,829 607 49,807
Additions 1,449 1,455 1,245 – 4,149
Disposals (4) (16) – – (20)
Depreciation charge (Note 9) (1,649) (1,230) (1,361) – (4,240)
Closing net book amount 9,864 20,512 18,713 607 49,696
At March 31, 2022
Cost 26,693 35,712 31,765 607 94,777
Accumulated depreciation (16,829) (15,200) (13,052) – (45,081)
Net book amount 9,864 20,512 18,713 607 49,696
Three months ended
March 31, 2023
Opening net book amount 11,080 21,212 16,129 – 48,421
Additions 1,253 15 270 – 1,538
Disposals (41) (19) – – (60)
Depreciation charge (Note 9) (1,218) (1,667) (1,482) – (4,367)
Closing net book amount 11,074 19,541 14,917 – 45,532
At March 31, 2023
Cost 30,735 41,399 33,569 – 105,703
Accumulated depreciation (19,661) (21,858) (18,652) – (60,171)
Net book amount 11,074 19,541 14,917 – 45,532
APPENDIX I ACCOUNTANT’S REPORT
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--- page 502 ---
Depreciation charges were expensed off in the following categories in the consolidated statements of
comprehensive income:
Y ear ended December 31,
Three months ended
March 31,
2020 2021 2022 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Unaudited)
Research and development
expenses 8,257 9,063 9,129 2,615 2,413
General and administrative
expenses 4,479 5,539 5,960 1,135 1,445
Selling and marketing
expenses 1,367 1,746 1,674 490 509
14,103 16,348 16,763 4,240 4,367
16 INTANGIBLE ASSETS
Goodwill
Software
and
copyright Technology
Customer
relationship
Brand
name Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
At January 1, 2020
Cost – 4,561 – – – 4,561
Accumulated amortization – (1,102) – – – (1,102)
Net book amount – 3,459 – – – 3,459
Y ear ended December 31,
2020
Opening net book amount – 3,459 – – – 3,459
Additions – 22,239 – – – 22,239
Amortization charge
(Note 9) – (5,782) – – – (5,782)
Closing net book amount – 19,916 – – – 19,916
At December 31, 2020
Cost – 26,800 – – – 26,800
Accumulated amortization – (6,884) – – – (6,884)
Net book amount – 19,916 – – – 19,916
Y ear ended December 31,
2021
Opening net book amount – 19,916 – – – 19,916
Additions – 5,673 – – – 5,673
Acquisition of subsidiaries
(Note 33) 259,727 4,745 43,000 81,500 6,700 395,672
Amortization charge
(Note 9) – (9,837) (5,895) (9,805) (335) (25,872)
Closing net book amount 259,727 20,497 37,105 71,695 6,365 395,389
At December 31, 2021
Cost 259,727 37,218 43,000 81,500 6,700 428,145
Accumulated amortization – (16,721) (5,895) (9,805) (335) (32,756)
Net book amount 259,727 20,497 37,105 71,695 6,365 395,389
APPENDIX I ACCOUNTANT’S REPORT
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--- page 503 ---
Goodwill
Software
and
copyright Technology
Customer
relationship
Brand
name Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Y ear ended December 31,
2022
Opening net book amount 259,727 20,497 37,105 71,695 6,365 395,389
Additions – 976 – – – 976
Acquisition of subsidiaries
(Note 33) 76,074 339 5,300 15,700 – 97,413
Amortization charge
(Note 9) – (10,562) (9,130) (16,110) (670) (36,472)
Closing net book amount 335,801 11,250 33,275 71,285 5,695 457,306
At December 31, 2022
Cost 335,801 38,533 48,300 97,200 6,700 526,534
Accumulated amortization – (27,283) (15,025) (25,915) (1,005) (69,228)
Net book amount 335,801 11,250 33,275 71,285 5,695 457,306
(Unaudited)
Three months ended
March 31, 2022
Opening net book amount 259,727 20,497 37,105 71,695 6,365 395,389
Additions – 35 – –– 3 5
Amortization charge
(Note 9) – (2,719) (2,150) (3,635) (168) (8,672)
Closing net book amount 259,727 17,813 34,955 68,060 6,197 386,752
At March 31, 2022
Cost 259,727 37,253 43,000 81,500 6,700 428,180
Accumulated amortization – (19,440) (8,045) (13,440) (503) (41,428)
Net book amount 259,727 17,813 34,955 68,060 6,197 386,752
Three months ended
March 31, 2023
Opening net book amount 335,801 11,250 33,275 71,285 5,695 457,306
Additions – 165 – – – 165
Amortization charge
(Note 9) – (2,351) (2,415) (4,420) (168) (9,354)
Closing net book amount 335,801 9,064 30,860 66,865 5,527 448,117
At March 31, 2023
Cost 335,801 38,698 48,300 97,200 6,700 526,699
Accumulated amortization – (29,634) (17,440) (30,335) (1,173) (78,582)
Net book amount 335,801 9,064 30,860 66,865 5,527 448,117
APPENDIX I ACCOUNTANT’S REPORT
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--- page 504 ---
Amortization charges were expensed off in the following categories in the consolidated statements of
comprehensive income:
Y ear ended December 31,
Three months ended
March 31,
2020 2021 2022 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Unaudited)
General and administrative
expenses 3,709 6,280 9,689 2,427 2,205
Research and development
expenses 2,073 9,486 9,397 2,184 2,434
Selling and marketing
expenses – 10,106 17,386 4,061 4,715
5,782 25,872 36,472 8,672 9,354
Impairment of goodwill
The goodwill balance is arisen from the acquisitions of Guangzhou Jianxin Technology Co., Ltd. (“Guangzhou
Jianxin”) on March 31, 2021, Beijing Ideal Information Technology Co., Ltd. (“Ideal Technology”) on June 30, 2021
and EpicHust Technology (Wuhan) Co., Ltd. (“EpicHust”) on June 30, 2022, amounting to RMB94,088,000,
RMB165,639,000 and RMB76,074,000 (Note 33), respectively. Guangzhou Jianxin and its subsidiaries are primarily
engaged in provision of intelligent platform and solutions in energy and power industry. Ideal Technology is mainly
engaged in provision of digital operation and maintenance platform and solutions. EpicHust and its subsidiaries are
primarily engaged in provision of intelligent platform and solutions in manufacturing industry. Goodwill is
attributable to the acquired market share and economies of scale expected to be derived from combining with the
operations of the Group following these acquisitions.
The Group carries out its annual impairment test on goodwill by comparing the recoverable amounts of CGU
or group of CGUs to the carrying amounts. Goodwill arising from the acquisition of Guangzhou Jianxin, Ideal
Technology and EpicHust was monitored separately and assessed as separate CGUs for the purpose of impairment
testing.
CGU of Guangzhou Jianxin
The impairment reviews of the goodwill arising from the acquisition of Guangzhou Jianxin in March
2021 have been conducted by the management as at December 31, 2021 and 2022 and March 31, 2023. For
the purposes of the impairment review, the recoverable amount of the CGU of Guangzhou Jianxin is
determined based on VIU calculations by using the discounted cash flow method. For goodwill related to
acquisition of Guangzhou Jianxin, management forecasted that the revenue compound annual growth rate in
the five-year period from the balance sheet date of December 31, 2021 and 2022 and March 31, 2023 was
16.2%, 11.4% and 8.3%, respectively, and the cash flows beyond the five-year period were extrapolated using
the estimated annual growth rates (“terminal growth rate”) of 3.0%. Pre-tax discount rate of 20.9%, 20.8% and
20.6% was used to reflect market assessment of time value and the specific risks relating to the CGU for the
impairment review as at December 31, 2021 and 2022 and March 31, 2023, respectively. The values assigned
to the key assumptions and discount rates are consistent with external information sources. The estimated
recoverable amount of the CGU of Guangzhou Jianxin exceeded its carrying amount by approximately
RMB34,180,000, RMB89,429,000 and RMB126,465,000 as at December 31, 2021 and 2022 and March 31,
2023, respectively, and management therefore concluded such goodwill was not impaired. The directors of the
Company have considered and assessed that any reasonably possible changes in key parameters would not
cause the carrying amount of the CGU of Guangzhou Jianxin exceed its recoverable amount.
APPENDIX I ACCOUNTANT’S REPORT
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For sensitivity analysis conducted during the impairment review as at December 31, 2021, had there
been a reduction of the revenue compound annual growth rate of the first five years by 4.3 percentage point,
a reduction of terminal growth rate by 3.9 percentage point, or an increase in pre-tax discount rate by 1.5
percentage point in the VIU calculations each in isolation, the recoverable amount of the CGU of Guangzhou
Jianxin would be closed to the breakeven point. For sensitivity analysis conducted during the impairment
review as at December 31, 2022, had there been a reduction of the revenue compound annual growth rate of
the first five years by 11.3 percentage point, a reduction of terminal growth rate by 15.6 percentage point, or
an increase in pre-tax discount rate by 4.3 percentage point in the VIU calculations each in isolation, the
recoverable amount of the CGU of Guangzhou Jianxin would be closed to the breakeven point. For sensitivity
analysis conducted during the impairment review as at March 31, 2023, had the revenue compound annual
growth rate of the first five years been 5% lower, the terminal growth rate been 1% lower or the pre-tax
discount rate been 1% higher each in isolation, the remaining headroom would be decreased to RMB8,149,000,
RMB116,119,000 and RMB100,516,000, respectively.
CGU of Ideal Technology
The impairment reviews of the goodwill arising from the acquisition of Ideal Technology in June 2021
have been conducted by the management as at December 31, 2021 and 2022 and March 31, 2023. For the
purposes of the impairment review, the recoverable amount of the CGU of Ideal Technology is determined
based on VIU calculations by using the discounted cash flow method. For goodwill related to acquisition of
Ideal Technology, management forecasted that the revenue compound annual growth rate in the five-year
period from the balance sheet date of December 31, 2021 and 2022 and March 31, 2023 was 26.0%, 23.4%
and 23.9%, respectively, and the cash flows beyond the five-year period were extrapolated using a terminal
growth rate of 3.0%. Pre-tax discount rate of 17.6%, 17.6% and 17.6% was used to reflect market assessment
of time value and the specific risks relating to the CGU for the impairment reviews as at December 31, 2021
and 2022 and March 31, 2023, respectively. The values assigned to the key assumptions and discount rates are
consistent with external information sources. The estimated recoverable amount of the CGU of Ideal
Technology exceeded its carrying amount by approximately RMB34,793,000, RMB39,243,000 and
RMB43,959,000 as at December 31, 2021 and 2022 and March 31, 2023, respectively, and management
therefore concluded such goodwill was not impaired. The directors of the Company have considered and
assessed that any reasonably possible changes in key parameters would not cause the carrying amount of the
CGU of Ideal Technology exceed its recoverable amount.
For sensitivity analysis conducted during the impairment review as at December 31, 2021, had there
been a reduction of the revenue compound annual growth rate of the first five years by 2.6 percentage point,
a reduction of terminal growth rate by 1.4 percentage point, or an increase in pre-tax discount rate by 1.1
percentage point in the VIU calculations each in isolation, the recoverable amount of the CGU of Ideal
Technology would be closed to the breakeven point. For sensitivity analysis conducted during the impairment
review as at December 31, 2022, had there been a reduction of the revenue compound annual growth rate of
the first five years by 2.9 percentage point, a reduction of terminal growth rate by 1.6 percentage point, or an
increase in pre-tax discount rate by 1.3 percentage point in the VIU calculations each in isolation, the
recoverable amount of the CGU of Ideal Technology would be closed to the breakeven point. For sensitivity
analysis conducted during the impairment review as at March 31, 2023, had there been a reduction of the
revenue compound annual growth rate of the first five years by 2.8 percentage point, a reduction of terminal
growth rate by 2.5 percentage point, or an increase in pre -tax discount rate by 1.6 percentage point in the VIU
calculations each in isolation, the recoverable amount of the CGU of Ideal Technology would be closed to the
breakeven point.
APPENDIX I ACCOUNTANT’S REPORT
– I-65 –


--- page 506 ---
CGU of EpicHust
The impairment review of the goodwill arising from the acquisition of EpicHust in June 2022 has been
conducted by the management as at December 31, 2022 and March 31, 2023. For the purposes of the
impairment review, the recoverable amount of the CGU of EpicHust is determined based on VIU calculations
by using the discounted cash flow method. For goodwill related to acquisition of EpicHust, management
forecasted that the revenue compound annual growth rate in the five-year period from the balance sheet date
of December 31, 2022 and March 31, 2023 was 13.3% and 12.1%, respectively, and the cash flows beyond the
five-year period were extrapolated using a terminal growth rate of 3.0%. Pre-tax discount rate of 20.4% and
21.5% was used to reflect market assessment of time value and the specific risks relating to the CGU for the
impairment reviews as at December 31, 2022 and March 31, 2023, respectively. The values assigned to the key
assumptions and discount rates are consistent with external information sources. The estimated recoverable
amount of the CGU of EpicHust exceeded its carrying amount by approximately RMB3,980,000 and
RMB7,670,000 as at December 31, 2022 and March 31, 2023, respectively, and management therefore
concluded such goodwill was not impaired. As the Group just acquired EpicHust on June 30, 2022 and the
acquisition consideration was determined on an arm’s length basis, the directors of the Company considered
that it is remote for any reasonably possible changes in key parameters that would exceed the percentage points
as disclosed in the sensitivity analysis below and therefore concluded that any reasonably possible changes in
those key parameters would not cause the carrying amount of the CGU of EpicHust exceed its recoverable
amount.
For sensitivity analysis conducted during the impairment review as at December 31, 2022, had there
been a reduction of the revenue compound annual growth rate of the first five years by 0.7 percentage point,
a reduction of terminal growth rate by 0.6 percentage point, or an increase in pre-tax discount rate by 0.4
percentage point in the VIU calculations each in isolation, the recoverable amount of the CGU of EpicHust
would be closed to the breakeven point. For sensitivity analysis conducted during the impairment review as
at March 31, 2023, had there been a reduction of the revenue compound annual growth rate of the first five
years by 1.7 percentage point, a reduction of terminal growth rate by 1.6 percentage point, or an increase in
pre-tax discount rate by 0.9 percentage point in the VIU calculations each in isolation, the recoverable amount
of the CGU of EpicHust would be closed to the breakeven point.
17 INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD
As at December 31,
As at
March 31,
2020 2021 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000
Investments accounted for using the
equity method
– Associates 69,898 101,092 45,865 45,188
– Joint ventures 16,740 14,081 – –
86,638 115,173 45,865 45,188
APPENDIX I ACCOUNTANT’S REPORT
– I-66 –


--- page 507 ---
Y ear ended December 31,
Three months ended
March 31,
2020 2021 2022 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Unaudited)
At the beginning of the
year/period 68,357 86,638 115,173 115,173 45,865
Additions 30,000 15,000 6,224 – –
Disposals (Note (a)) (14,188) – (5,719) – –
Transfers (Note (b)) – – (72,415) – –
Share of (losses)/profits (6,477) 3,802 (3,200) 538 (791)
Share of other comprehensive
income/(loss) – 9,160 4,345 895 (266)
Dividends – (7,513) – – –
Increase in share of net assets
due to the dilution gains
(Note (c)) 8,946 8,086 1,457 – 380
At the end of the year/period 86,638 115,173 45,865 116,606 45,188
In the opinion of the directors of the Company, none of associates or joint ventures are individually material
to the Group during the Track Record Period.
Notes:
(a) In December 2020, the Group entered into an agreement with other shareholders of Shenzhen Huayun
Information System Co., Ltd. (“Huayun”), an associate acquired in January 2018, pursuant to which, the
Group and Huayun reached consensus that the Group’s unpaid contingent consideration of
RMB20,000,000 was no longer to pay, and accordingly the equity interests held by the Group was
reduced from 40.00% to 23.33%, which was deemed as a disposal with a net gain of RMB4,835,000
recognized (Note 8).
During the year ended December 31, 2022, the Group partially disposed its investment in another
associate.
(b) In September 2022, the Group lost significant influence over Huayun through resignation from the board
of Huayun. As a result, the investment of approximately RMB48,641,000 was transferred to financial
assets measured at fair value through profit and loss, with a net gain of RMB6,757,000 recognized.
In December 2022, the Group acquired the remaining 60% equity interests of Paradigm Cloud (Beijing)
Retail Technology Co., Ltd. (“Paradigm Cloud”), a joint venture established in November 2019, at a
total consideration of approximately RMB16,489,000. As a result, the investment of approximately
RMB11,926,000 was transferred to a wholly owned subsidiary of the Group, with a remeasurement loss
of approximately RMB2,637,000 recognized.
During the year ended December 31, 2022, the Group lost significant influence over another associate,
as a result, the investment of approximately RMB11,848,000 was transferred to financial assets
measured at fair value through profit and loss.
(c) Dilution gains of RMB8,946,000 and RMB6,490,000 was recognized due to the assets or cash injected
by Huayun’s controlling shareholder and new shareholders as their capital contributions to Huayun in
December 2020 and January 2021, respectively. As a result, the equity interests held by the Group was
further diluted to 15.56% and 12.97%, respectively. Up to December 31, 2021, Huayun had still been
accounted for as an associate as the Group had significant influence through its board representative in
Huayun and other relevant facts and circumstances, even though the Group’s equity interests in Huayun
is below 20%.
APPENDIX I ACCOUNTANT’S REPORT
– I-67 –


--- page 508 ---
Dilution gains of RMB1,596,000, RMB1,457,000 and RMB380,000 was recognized due to the capital
contribution injected by the new shareholders of Beijing Juyun Weizhi Information Technology Co., Ltd.
(“Juyun”, an associate) in July 2021, August 2022 and March 2023, respectively. As a result, the equity
interests held by the Group was diluted from 4.35% to 3.81%, 3.81% to 3.60% and further to 3.55%,
respectively. Juyun has been accounted for as an associate as the Group has significant influence
through its board representative in Juyun and other relevant facts and circumstances, even though the
Group’s equity interests in Juyun is below 20%.
18 FINANCIAL INSTRUMENTS BY CATEGORY
As at December 31,
As at
March 31,
2020 2021 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000
Assets as per balance sheets
Financial assets at fair value through
profit or loss:
– Wealth management products
(Note 19) 174,408 2,535,763 1,330,166 611,709
– Unlisted equity securities
(Note 19) 9,804 19,065 77,173 77,173
– Preferred shares investments
(Note 19) – 17,000 23,992 23,992
– Fund investments (Note 19) 11,132 210,063 376,724 379,100
Financial assets at amortized cost:
– Trade receivables (Note 21) 262,699 778,321 1,493,238 1,493,952
– Prepayments and other
receivables (excluding
prepayments to suppliers,
deductible value-added input
tax and listing expenses to be
capitalized)
(Note 22 (a)) 21,180 78,829 74,580 73,841
– Long-term bank deposits (Note
23 (c)) – 510,203 685,039 789,973
– Short-term bank deposits
(Note 23 (c)) 95,602 20,000 – –
– Restricted cash (Note 23 (b)) 18,201 8,010 6,916 5,291
– Cash and cash equivalents
(Note 23 (a)) 1,052,073 1,292,686 1,326,818 1,425,288
1,645,099 5,469,940 5,394,646 4,880,319
Liabilities as per balance sheets
Financial liabilities at amortized
cost:
– Trade payables (Note 27) 84,968 321,357 863,234 619,524
– Other payables and accruals
(excluding payroll payables and
other taxes payables) (Note 28) 3,105 68,844 69,941 62,078
– Borrowings (Note 30) – 18,752 72,554 84,599
– Redemption liabilities (Note 31) 2,147,031 5,822,196 6,493,159 6,683,937
– Payable for acquisition of
subsidiaries
(Note 32) – 106,306 95,175 97,306
Lease liabilities (Note 14) 38,775 35,364 72,032 66,343
2,273,879 6,372,819 7,666,095 7,613,787
APPENDIX I ACCOUNTANT’S REPORT
– I-68 –


--- page 509 ---
19 INVESTMENTS
Group
As at December 31,
As at
March 31,
2020 2021 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000
Non-current assets
Long-term investments measured at fair
value through profit or loss
– Unlisted equity securities (i) 9,804 19,065 77,173 77,173
– Preferred shares investments (ii) – 17,000 23,992 23,992
– Fund investments (iii) 11,132 210,063 376,724 221,092
20,936 246,128 477,889 322,257
Current assets
Short-term investments measured at fair
value through profit or loss
– Wealth management products (iv) 174,408 2,535,763 1,330,166 611,709
– Fund investments (iii) – – – 158,008
174,408 2,535,763 1,330,166 769,717
(i) Unlisted equity securities
The following table presents the changes in long-term investments in unlisted equity securities measured at fair
value through profit or loss for the years ended December 31, 2020, 2021 and 2022 and the three months ended March
31, 2022 and 2023. These investments are within level 3 of the fair value hierarchy (Note 3.3).
Y ear ended December 31,
Three months ended
March 31,
2020 2021 2022 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Unaudited)
At the beginning of the
year/period – 9,804 19,065 19,065 77,173
Additions 7,300 8,80 0–––
Transfers (Note 17(b)) – – 55,398 – –
Changes in fair value 2,504 461 2,710 – –
At the end of the year/period 9,804 19,065 77,173 19,065 77,173
(ii) Preferred shares investments
The preferred shares investments in the investee are ordinary shares with preferential rights. The Group has
the right to require and demand the investees to redeem all of the shares held by the Group at guaranteed
predetermined fixed amount upon redemption events which are out of control of issuers. Hence, these investments
are accounted for as debt instruments and are measured at fair value through profit or loss. These investments are
within level 3 of the fair value hierarchy (Note 3.3).
APPENDIX I ACCOUNTANT’S REPORT
– I-69 –


--- page 510 ---
(iii) Fund investments
The Group invested in funds which focus on equity investment in unlisted companies. The returns of the funds
are not guaranteed and their contractual cash flows do not qualify for solely payments of principal and interest, hence
they are measured at fair value through profit or loss. The Group determines the fair values of the fund investments
as at the reporting date based on the reported net asset values of the funds. These investments are within level 3 of
the fair value hierarchy (Note 3.3).
On September 17, 2021, Beijing Paradigm Artificial Intelligence Equity Investment Fund (Limited
Partnership) (“Paradigm Fund”) was incorporated in Beijing, PRC. Fourth Paradigm (Shenzhen) Data & Technology
Co., Ltd., the Company’s wholly owned subsidiary, as a limited partner, paid RMB200,000,000 (40% of the total
capital contribution) on December 13, 2021. The Group has significant influence through its representation on the
investment committee of Paradigm Fund and elected to measure the investment in Paradigm Fund at fair value
through profit or loss in accordance with IFRS 9.
In September 2022, the Group invested RMB160,000,000 in a private fund, Ruiyuan V alue No. 3 Private
Equity Investment Fund. Shenzhen Qianhai Ruijing Kaiyuan Capital Management Co., Ltd. and Citic Securities
Company Limited are the fund manager and the fund trustee, respectively. The Group has no significant influence
over the fund and the fund manager and the Group can redeem its fund shares after a lockup period of 540 days. As
at March 31, 2023, following the cancellation of the lockup period by the fund manager, this fund investment was
classified to current assets as the management planned to withdraw it within one year.
(iv) Wealth management products
The wealth management products are mainly denominated in RMB and have expected rates of return ranging
from 1.63% to 6.25%, 2.20% to 4.74%, 1.60% to 4.43%, 2.20% to 4.00% and 2.70% to 4.00% per annum for the years
ended December 31, 2020, 2021 and 2022 and the three months ended March 31, 2022 and 2023, respectively. The
returns on all these wealth management products are not guaranteed and their contractual cash flows do not qualify
for solely payments of principal and interest, hence they are measured at fair value through profit or loss. None of
these investments are past due.
The fair values are based on cash flows discounted using the expected return as estimated by management and
are within level 3 of the fair value hierarchy (Note 3.3).
(v) Gains/(losses) recognized in profit or loss
Y ear ended December 31,
Three months ended
March 31,
2020 2021 2022 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Unaudited)
Fair value changes on long-term
investments measured at fair
value through profit or loss 5,882 (608) (2,173) (621) 2,376
Fair value changes on short-
term investments measured at
fair value through profit or
loss 12,480 85,632 53,529 18,628 6,184
18,362 85,024 51,356 18,007 8,560
APPENDIX I ACCOUNTANT’S REPORT
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--- page 511 ---
Company
As at December 31,
As at
March 31,
2020 2021 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000
Non-current assets
Long-term investments measured at
fair value through profit or loss
– Fund investments – – 157,449 –
Current asset
Short-term investments measured at
fair value through profit or loss
– Wealth management products 58,066 1,036,180 – –
– Fund investments – – – 158,008
58,066 1,036,180 – 158,008
20 INVENTORIES
As at December 31,
As at
March 31,
2020 2021 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000
Finished goods 3,187 20,633 99,397 86,029
Contract fulfilment cost 24,999 165,786 252,269 322,543
28,186 186,419 351,666 408,572
Less: provision for impairment – (1,920) (1,794) (212)
28,186 184,499 349,872 408,360
Finished goods are mainly server and other related hardware products to be delivered to customers with a quick
turnover. Contract fulfilment cost are recognized from the costs incurred to fulfil contracts of customized AI
applications development services, which will be recognized to cost of sales mainly within 3-6 months when the
Group’s related performance obligations are satisfied and hence the related service contract revenue is recognized.
APPENDIX I ACCOUNTANT’S REPORT
– I-71 –


--- page 512 ---
Provision for impairment was recognized for the amount by which the carrying amount of the inventories
exceeds its net realizable value and was recorded in “cost of sales” in the consolidated statements of comprehensive
income. Provision for impairment movements for the years ended December 31, 2020, 2021 and 2022 and the three
months ended March 31, 2022 and 2023 are as below:
Y ear ended December 31,
Three months ended
March 31,
2020 2021 2022 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Unaudited)
At the beginning of the
year/period – – (1,920) (1,920) (1,794)
Provision for impairment – (1,920) (1,125) – (52)
Written off – – 1,251 512 1,634
At the end of the year/period – (1,920) (1,794) (1,408) (212)
21 TRADE RECEIV ABLES
As at December 31,
As at
March 31,
2020 2021 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000
Third parties 266,643 796,261 1,554,420 1,553,318
Related parties 1,366 2,221 – –
268,009 798,482 1,554,420 1,553,318
Less: credit loss allowance (5,310) (20,161) (61,182) (59,366)
262,699 778,321 1,493,238 1,493,952
The carrying amounts of the Group’s trade receivables are mainly denominated in RMB.
Movements on the Group’s credit loss allowance for trade receivables are as follows:
Y ear ended December 31,
Three months ended
March 31,
2020 2021 2022 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Unaudited)
At the beginning of the
year/period (3,251) (5,310) (20,161) (20,161) (61,182)
Credit loss allowance
(recognized)/reversed, net (2,059) (14,851) (43,695) 365 (5,456)
Receivables written off as
uncollectable – – 2,674 – 7,272
At the end of the year/period (5,310) (20,161) (61,182) (19,796) (59,366)
APPENDIX I ACCOUNTANT’S REPORT
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The Group generally allows a credit period within 90 days to its customers. Aging analysis of trade receivables
based on invoice date is as follows:
As at December 31,
As at
March 31,
2020 2021 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000
Trade receivables
Up to 3 months 126,601 403,264 957,044 552,954
3 to 6 months 87,412 231,336 278,486 562,433
6 months to 1 year 24,432 128,141 130,321 238,327
Over 1 year 29,564 35,741 188,569 199,604
268,009 798,482 1,554,420 1,553,318
The credit loss allowance of trade receivables as at December 31, 2020, 2021 and 2022 and March 31, 2023
were determined as follows:
As at December 31, 2020
Gross carrying
amount
Expected
credit loss rate
Credit loss
allowance
in thousands, except for percentages
For credit loss allowance measured
individually 54,109 3.61% 1,951
For credit loss allowance measured by
industry
– Telecommunication, computer and software 31,549 2.24% 707
– Education, science and technology 156,871 0.94% 1,482
– Wholesale and retail 19,497 5.66% 1,103
– Others 5,983 1.12% 67
213,900 1.57% 3,359
268,009 1.98% 5,310
As at December 31, 2021
Gross carrying
amount
Expected
credit loss rate
Credit loss
allowance
in thousands, except for percentages
For credit loss allowance measured
individually 73,347 2.83% 2,076
For credit loss allowance measured by
industry
– Telecommunication, computer and software 169,239 1.35% 2,282
– Education, science and technology 196,850 1.67% 3,286
– Wholesale and retail 56,814 4.58% 2,602
– Leasing and business services 62,510 0.68% 428
– Manufacturing 38,279 4.56% 1,744
– Others 19,476 1.33% 259
543,168 1.95% 10,601
APPENDIX I ACCOUNTANT’S REPORT
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As at December 31, 2021
Gross carrying
amount
Expected
credit loss rate
Credit loss
allowance
in thousands, except for percentages
For credit loss allowance measured by aging
– Up to 1 year 153,311 2.98% 4,566
– 1 year to 2 years 25,388 6.46% 1,640
– Over 2 years 3,268 39.11% 1,278
181,967 4.11% 7,484
798,482 2.52% 20,161
As at December 31, 2022
Gross carrying
amount
Expected
credit loss rate
Credit loss
allowance
in thousands, except for percentages
For credit loss allowance measured
individually (Note (a)) 255,512 12.12% 30,969
For credit loss allowance measured by
industry
– Telecommunication, computer and software 657,222 1.51% 9,919
– Education, science and technology 308,740 1.75% 5,413
– Wholesale and retail 27,208 4.30% 1,170
– Leasing and business services 1,931 0.78% 15
– Manufacturing 3,155 4.25% 134
– Others 30,752 1.64% 505
1,029,008 1.67% 17,156
For credit loss allowance measured by aging
– Up to 1 year 209,998 2.77% 5,818
– 1 year to 2 years 50,498 6.84% 3,452
– Over 2 years 9,404 40.27% 3,787
269,900 4.84% 13,057
1,554,420 3.94% 61,182
Note:
(a) The expected credit loss for the customers with external credit rating and the credit-impaired receivables are
assessed and measured individually. As at December 31, 2022, more trade receivables became credit-impaired
comparing with those as at December 31, 2021 due to the unfavourable impact of the COVID-19. Accordingly,
the average expected credit loss rate for those trade receivables with credit loss allowance measured
individually has been increased significantly as at December 31, 2022.
APPENDIX I ACCOUNTANT’S REPORT
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As at March 31, 2023
Gross carrying
amount
Expected
credit loss rate
Credit loss
allowance
in thousands, except for percentages
For credit loss allowance measured
individually 236,270 11.14% 26,314
For credit loss allowance measured by
industry
– Telecommunication, computer and software 808,462 1.61% 13,037
– Education, science and technology 214,337 1.84% 3,936
– Wholesale and retail 14,431 4.39% 634
– Leasing and business services 676 1.04% 7
– Manufacturing 2,680 4.37% 117
– Others 29,286 1.57% 461
1,069,872 1.70% 18,192
For credit loss allowance measured by aging
– Up to 1 year 170,126 3.74% 6,370
– 1 year to 2 years 68,710 7.48% 5,138
– Over 2 years 8,340 40.19% 3,352
247,176 6.01% 14,860
1,553,318 3.82% 59,366
22 PREPAYMENTS AND OTHER RECEIV ABLES AND AMOUNTS DUE FROM SUBSIDIARIES
(a) Prepayments and other receivables
Group
As at December 31,
As at
March 31,
2020 2021 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000
Prepayments to suppliers 130,061 100,861 176,516 197,857
Deductible value-added input tax 18,739 46,631 80,001 103,664
Rental, bidding and other deposits 9,034 16,454 17,491 16,926
Interest receivables 7,027 2,722 61 3
Listing expenses to be capitalized
(Note (ii)) – 45,681 48,967 13,384
Other receivable from a third party
customer (Note (i)) – 50,959 47,000 47,000
Others 5,119 8,694 10,028 9,912
169,980 272,002 380,064 388,746
APPENDIX I ACCOUNTANT’S REPORT
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As at December 31, 2020, 2021 and 2022 and March 31, 2023, the carrying amounts of other receivables were
primarily denominated in RMB and approximated their fair values at each of the reporting dates. The expected credit
losses of other receivables that are measured at amortized cost including deposits and other receivable from a third
party customer were measured as either 12 months or lifetime expected credit loss, depending on whether there has
been a significant increase in credit risk since initial recognition. Except for the balance of other receivable from a
third party customer as at December 31, 2022 and March 31, 2023 of which the expected credit loss was measured
on lifetime basis due to the receivable had been long past due, all of the Group’s other receivables as at December
31, 2020, 2021 and 2022 and March 31, 2023 were considered to be of low credit risk, and thus the impairment
provision recognized was limited to 12 months expected losses.
Notes:
(i) During the year ended December 31, 2021, the Group cooperated with a hardware supplier to deliver
software and hardware together to a customer. Pursuant to the sales agreement with the customer, the
Group only acts as an agent for purchasing certain hardware (the “hardware component”) on behalf of
the customer while acts as a principal in delivering the software to the customer. As at December 31,
2021, the entire project was completed and both the Group and the hardware supplier had fulfilled their
performance obligations under the respective sales and purchase contracts. Therefore, the Group’s
amounts recoverable from the customer and the Group’s amounts payable to the hardware supplier in
connection with the hardware component have been recognized as other receivables and other payables
(Note 28), respectively in the consolidated balance sheet. As at March 31, 2023, the other receivables
and other payables have not been settled.
(ii) In accordance with the Guidelines on Application for “Full Circulation” of Domestic Unlisted Shares
of H-share Companies published and implemented by the China Securities Regulatory Commission (the
“CSRC”) on November 14, 2019, the issued domestic unlisted shares of any H-share companies could
only be listed and traded on the Main Board of The Stock Exchange of Hong Kong Limited (the “Stock
Exchange”) subsequent to the CSRC’s approval.
The Company had no intention and did not file any application for a “full circulation” of its domestic
unlisted shares until March 2022. On March 29, 2022, the Company filed an application to the CSRC
for a “full circulation” of its domestic unlisted shares which was approved by the CSRC on June 14,
2022. Upon completion of the initial listing of the Company’s shares on the Stock Exchange and the
global offering, certain of the Company’s domestic unlisted shares will be converted into H shares and
to be listed and traded on the Stock Exchange.
The CSRC’s approval on the “full circulation” of the Company’s domestic unlisted shares and the
resultant change in the Company’s capital structure upon listing are considered as non-adjusting events
subsequent to the year ended December 31, 2021. The Company adjusted the portion of listing expenses
eligible for capitalization prospectively during the year ended December 31, 2022 without adjusting the
accounting estimates previously made before December 31, 2021.
Company
As at December 31,
As at
March 31,
2020 2021 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000
Listing expenses to be capitalized – 45,681 48,967 13,384
Others 996 5,133 1,626 2,476
996 50,814 50,593 15,860
(b) Amounts due from subsidiaries
The amounts due from subsidiaries are unsecured, interest-free and repayable on demand.
APPENDIX I ACCOUNTANT’S REPORT
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23 CASH AND BANK BALANCES
(a) Cash and cash equivalents
Cash and cash equivalents are denominated in the following currencies:
Group
As at December 31,
As at
March 31,
2020 2021 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000
RMB 950,133 1,288,283 1,308,212 1,412,586
USD 100,758 3,971 14,983 9,388
HKD 714 310 1,680 1,604
SGD 408 111 1,935 1,696
EUR 60 11 8 14
1,052,073 1,292,686 1,326,818 1,425,288
Company
As at December 31,
As at
March 31,
2020 2021 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000
RMB 872,928 575,006 585,038 584,589
USD 97,905 13 15 14
970,833 575,019 585,053 584,603
(b) Restricted cash
Restricted cash are denominated in the following currencies:
Group
As at December 31,
As at
March 31,
2020 2021 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000
RMB 18,201 8,010 6,916 5,291
As at December 31, 2020, 2021 and 2022 and March 31, 2023, restricted cash was held at bank as security
deposits mainly for bidding, issuance of letter of guarantee or bank acceptance bills.
APPENDIX I ACCOUNTANT’S REPORT
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(c) Term bank deposits
Term bank deposits are all denominated in RMB:
Group
As at December 31,
As at
March 31,
2020 2021 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000
Short-term bank deposits 95,602 20,000 – –
Long-term bank deposits – 510,203 685,039 789,973
95,602 530,203 685,039 789,973
Short-term bank deposits are bank deposits with original maturities over three months but within twelve
months and redeemable on maturity. Long-term bank deposits are bank deposits with original maturities over
twelve months and redeemable on maturity. The effective interest rates for the short-term bank deposits were
2.28% per annum and 1.98% to 2.28% per annum for the years ended December 31, 2020 and 2021,
respectively. The effective interest rate for the long-term bank deposits was 3.80% per annum, 2.50% to 3.90%
per annum and 2.50% to 3.90% per annum for the years ended December 31, 2021 and 2022 and the three
months ended March 31, 2023, respectively.
24 SHARE CAPITAL/PAID-IN CAPITAL
Group and Company
(a) Paid-in capital
Paid-in capital are generated from founders’ and investors’ capital injection. The excess of total consideration
raised over paid-in capital was credited to the Company’s capital reserve (Note 25).
(b) Share capital
Number of
ordinary shares
Nominal value of
ordinary shares
RMB’000
Authorized and issued:
At January 1, 2021 ––
Issuance of ordinary shares upon conversion into a joint stock
company (Note (i)) 400,000,000 400,000
Capital contribution from shareholders (Note (ii)) 37,705,989 37,706
At December 31, 2021 and 2022 437,705,989 437,706
At January 1, 2023 437,705,989 437,706
Capital contribution from shareholders (Note (iii)) 13,537,299 13,537
Repurchase and cancellation of shares (Note (iii)) (5,578,755) (5,578)
At March 31, 2023 445,664,533 445,665
Notes:
(i) On July 9, 2021, the Company was converted into a joint stock company with limited liability under the
Company Law of the PRC. The net assets of the Company as at May 31, 2021, the conversion base date,
amounting to approximately RMB954,290,000 were converted into 400,000,000 ordinary shares at
RMB1 each, share capital of RMB400,000,000 was recorded accordingly.
(ii) After the conversion into a joint stock company, the Company completed its Series D+ and Series D+2
financing and the foreign exchange registration procedures for the Series D financing, the share capital
of the Company has then been increased by approximately RMB37,706,000 accordingly (with a total
number of 37,705,989 ordinary shares being issued).
(iii) The capital increase and shares repurchase during the three months ended March 31, 2023 were in
relation to the 2022 share award scheme as described in Note 26.
APPENDIX I ACCOUNTANT’S REPORT
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25 TREASURY STOCK AND RESERVES
Group
Reserves
Treasury
stock
(Note (a))
Capital
reserve
Share-based
payment
reserve
Currency
translation
reserve
(Note (b)) Other reserve Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Balance at January 1, 2020 (1,313,614) 1,527,113 450,053 (272) – 1,976,894
Currency translation differences – – – 1,451 – 1,451
Capital contribution from
shareholders – 476,24 2––– 476,242
Recognition of redemption
liabilities (432,610) –––––
Share-based payments – – 173,665 – – 173,665
Balance at December 31, 2020 (1,746,224) 2,003,355 623,718 1,179 – 2,628,252
Balance at January 1, 2021 (1,746,224) 2,003,355 623,718 1,179 – 2,628,252
Currency translation differences – – – 1,837 – 1,837
Capital contribution from
shareholders (Note (c)) – 5,000,88 4––– 5,000,884
Conversion into a joint stock
company – (1,644,690) (49,938) – – (1,694,628)
Recognition of redemption
liabilities (4,848,767) –––––
Derecognition of redemption
liabilities 1,696,897 115,38 7––– 1 15,387
Share-based payments – – 582,942 – – 582,942
Share of other comprehensive
income of investments
accounted for using the equity
method –––– 9,160 9,160
Balance at December 31, 2021 (4,898,094) 5,474,936 1,156,722 3,016 9,160 6,643,834
Balance at January 1, 2022 (4,898,094) 5,474,936 1,156,722 3,016 9,160 6,643,834
Currency translation differences – – – (7,162) – (7,162)
Share-based payments – – 433,403 – – 433,403
Share of other comprehensive
income of investments
accounted for using the equity
method –––– 4,345 4,345
Transfer of share of other
comprehensive income to
accumulated losses upon
disposal of an associate –––– (2,630) (2,630)
Transactions with non-controlling
interests – (8,456) – – – (8,456)
Balance at December 31, 2022 (4,898,094) 5,466,480 1,590,125 (4,146) 10,875 7,063,334
APPENDIX I ACCOUNTANT’S REPORT
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Reserves
Treasury
stock
(Note (a))
Capital
reserve
Share-based
payment
reserve
Currency
translation
reserve
(Note (b)) Other reserve Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Unaudited)
Balance at January 1, 2022 (4,898,094) 5,474,936 1,156,722 3,016 9,160 6,643,834
Currency translation differences – – – 459 – 459
Share of other comprehensive
income of investments
accounted for using the equity
method –––– 8 9 5 8 9 5
Balance at March 31, 2022 (4,898,094) 5,474,936 1,156,722 3,475 10,055 6,645,188
Balance at January 1, 2023 (4,898,094) 5,466,480 1,590,125 (4,146) 10,875 7,063,334
Currency translation differences – – – 634 – 634
Capital contribution from
shareholders – 181,12 9––– 181,129
Repurchase and cancellation of
shares – (253,444) – – – (253,444)
Share of other comprehensive loss
of investments accounted for
using the equity method –––– (266) (266)
Transactions with non-controlling
interests – (1,602) – – – (1,602)
Balance at March 31, 2023 (4,898,094) 5,392,563 1,590,125 (3,512) 10,609 6,989,785
Notes:
(a) Treasury stock is recorded to reflect the carrying amount of the redemption liabilities when it is initially
reclassified from equity (Note 31).
(b) Currency translation reserve represents the difference arising from the translation of the financial statements
of companies within the Group that have a functional currency different from the presentation currency of
RMB for the financial statements of the Company and the Group.
(c) During the year ended December 31, 2021, the Company completed its Series D, Series D+ and Series D+2
financing and the total net proceeds raised in excess of the nominal value of the paid-in capital/share capital
issued of approximately RMB5,000,884,000 has been credited to the Company’s capital reserve.
APPENDIX I ACCOUNTANT’S REPORT
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Company
Reserves
Treasury
stock
Capital
reserve
Share-based
payment
reserve
Other
reserve Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Balance at January 1, 2020 (1,313,614) 1,527,113 6,253 – 1,533,366
Capital contribution from shareholders – 476,242 – – 476,242
Recognition of redemption liabilities (432,610) ––––
Share-based payments – – 522 – 522
Balance at December 31, 2020 (1,746,224) 2,003,355 6,775 – 2,010,130
Balance at January 1, 2021 (1,746,224) 2,003,355 6,775 – 2,010,130
Capital contribution from shareholders – 5,000,884 – – 5,000,884
Conversion into a joint stock company – (1,644,690) (49,938) – (1,694,628)
Recognition of redemption liabilities (4,848,767) ––––
Derecognition of redemption liabilities 1,696,897 115,387 – – 115,387
Share-based payments – – 43,163 – 43,163
Share of other comprehensive income
of investments accounted for using
the equity method – – – 9,160 9,160
Balance at December 31, 2021 and
March 31, 2022 (Unaudited) (4,898,094) 5,474,936 – 9,160 5,484,096
Balance at January 1, 2022 (4,898,094) 5,474,936 – 9,160 5,484,096
Share of other comprehensive income
of investments accounted for using
the equity method – – – 1,697 1,697
Balance at December 31, 2022 (4,898,094) 5,474,936 – 10,857 5,485,793
Balance at January 1, 2023 (4,898,094) 5,474,936 – 10,857 5,485,793
Capital contribution from shareholders – 181,129 – – 181,129
Repurchase and cancellation of shares – (253,444) – – (253,444)
Share of other comprehensive loss of
investments accounted for using the
equity method – – – (266) (266)
Balance at March 31, 2023 (4,898,094) 5,402,621 – 10,591 5,413,212
APPENDIX I ACCOUNTANT’S REPORT
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26 SHARE-BASED PAYMENTS
Share-based payments of the Group mainly relates to (a) options granted to certain co-founders of the Group
without any vesting condition; (b) option rewards granted to certain directors, senior management, core technicians,
key employees and other suitable person identified for their contribution to the Group with vesting conditions; (c)
an acceleration of vesting conditions with modification to prior schemes; and (d) awarded shares granted to certain
senior management, core technicians and key employees identified for their contribution to the Group without any
vesting condition.
Share option schemes
(a) Employee incentive scheme to co-founders – the Scheme 2016
In December 2016, shareholders of the Company granted four co-founders with employee incentive scheme
(the “Scheme 2016”) for the purpose of providing incentives and rewards to eligible participants who contribute to
the Group to the success of the Group’s operations. Eligible participants of the Scheme 2016 include four co-founders
of the Company, who were granted 119,977,292 share options without performance nor service conditions, which
were immediately exercisable with an exercise price of nil. The total expenses for share-based payments granted
under the Scheme 2016 were approximately RMB93,582,000, which were recognized as a one-off expense in profit
or loss for the year ended December 31, 2016.
(b) Employee incentive scheme of Paradigm Investment – the Scheme 2018
Paradigm (Tianjin) Management Consulting Partnership (Limited Partnership) (“Paradigm Investment”) ,
previously known as Paradigm (Ningbo Free Trade Zone) Investment Partnership (Limited Partnership), was
established as the Employee Incentive Platform on March 29, 2018. Ms. Wu Ming, one of the controlling
shareholders, transferred her 19.42% equity interests in the Company to Paradigm Investment at a nominal
consideration of RMB1.
Starting from 2018, eligible participants were entitled to be granted share options in the form of equity
interests in the Employee Incentive Platform, with the purpose of attracting, motivating, retaining and rewarding
certain directors or senior management, core technicians or middle-level management, key employees and other
suitable person identified (the “Scheme 2018”). Through the Scheme 2018, as a maximum, a total of 171,007,476
share options would be granted to the eligible participants through the Employee Incentive Platform, with an exercise
price of nil.
The eligible participants are granted rewards conditional upon the achievement of a performance condition and
remaining in the Group’s employment until that performance condition is satisfied. The length of the vesting period
varies depending on when that performance condition is satisfied, the Company estimates the length of the expected
vesting period at grant date, based on the most likely outcome of the performance condition. Basing on historical
individual performance evaluation results of those eligible participants and considering the performance condition
not difficult to meet, the Scheme 2018 has graded vesting terms and vest in different schedules from the grant date
over 1 year, 3 years, 3.5 years and 4 years. For vesting schedule as one year, all granted rewards are vested on the
first anniversary of the grant date. For vesting schedule as 3 years, 50% of the aggregate number of granted rewards
are vested on the first anniversary of the grant date, 25% of granted rewards are vested on the second anniversary
of the grant date, and the remaining granted rewards are vested on the third anniversary of the grant date. For vesting
schedule as 3.5 years, 25% of the aggregate number of granted rewards are vested on the first half year of the grant
date, every 25% of granted rewards are vested on the remaining 3 years. For vesting schedule as 4 years, the granted
rewards are vested through 4 years with 10% to 60% vested each year unequally to eligible participants. 17,307,015
and 37,446,539 share options were granted for the years ended December 31, 2020 and 2021, respectively, and no
share options were granted for the year ended December 31, 2022 and the three months ended March 31, 2023.
(c) Modifications of the Scheme 2018
On April 25, 2021, the Employee Incentive Platform modified the terms and conditions on which the rewards
granted in the Scheme 2018, primarily included: (i) the service and performance vesting conditions in the Scheme
2018 were cancelled, therefore, the Group accounted for the cancellation as an acceleration of vesting conditions, and
therefore recognized immediately a share-based payment expense of RMB461,400,000 to profit or loss; (ii) the
exercise price per share increased from nil in the Scheme 2018 to RMB35.87 per the underlying share of the Company
and as a compensation of the increase exercise price, the eligible participants obtained the additional number of the
Company’s shares. This modified term would be not otherwise beneficial to the employees, the Group therefore
continued to account for the share-based payment as if that modification had not occurred. A total of 290,984,768
share options accelerated vested in May, 2021, and there is no outstanding share option as at December 31, 2021 and
2022 and March 31, 2023.
APPENDIX I ACCOUNTANT’S REPORT
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Movements in the number of share options granted to co-founders and employees under the Scheme 2016 and
Scheme 2018 are set out as below:
Number of
share options
Outstanding as at January 1, 2020 240,249,219
Granted 17,307,015
Forfeited (2,868,013)
Outstanding as at December 31, 2020 254,688,221
Outstanding as at January 1, 2021 254,688,221
Granted 37,446,539
Forfeited (1,149,992)
Exercised (290,984,768)
Outstanding as at December 31, 2021 and 2022 and March 31, 2023 –
Fair value of share options
The Group has used discounted cash flow method and the straight-line interpolation method to
determine the underlying equity fair value of the Company and adopted the equity allocation model to
determine the fair value of the underlying share capitals. Key assumptions, such as discount rate and
projections of future performance, are determined by the Group with best estimate.
Based on fair value of the underlying share capitals, the Group has used Binomial option-pricing model
to determine the fair value of the share option as of the grant date. Key assumptions are set as below:
Y ear ended December 31,
Three months ended
March 31,
2020 2021 2022 2022 2023
(Unaudited)
Fair value per share
option (RMB) 7.28-8.35 8.35-9.77 N/A N/A N/A
Exercise price
(RMB) – – N/A N/A N/A
Risk-free interest
rate
2.59%-
3.15%
3.10%-
3.19% N/A N/A N/A
Dividend yield – – N/A N/A N/A
Expected volatility 50%-51% 50% N/A N/A N/A
The weighted-average fair value of granted share options was RMB3.16 and RMB3.96 per share for the
years ended December 31, 2020 and 2021, respectively.
Share award scheme
Employee incentive scheme of Nanjing Paradigm - the Scheme 2022
In December 2022, 9,344,614 awarded shares have been granted to eligible employees of the Group without
performance nor service conditions under the overall employee incentive scheme as approved and adopted on April
25, 2021 (the “Scheme 2022”). Nanjing Paradigm Enterprises Management Consulting Partnership (Limited
Partnership) (“Nanjing Paradigm”) was established as the Employee Incentive Platform on December 29, 2022, and
eligible participants were entitled to be granted share awards in the form of equity interests in the Employee Incentive
Platform. The awarded shares vested immediately on the grant date and had a grant date fair value of RMB46.38 per
share. The total expenses for share-based payments granted under the Scheme 2022 were RMB433,403,000, which
were recognized as a one-off expense in profit or loss during the year ended December 31, 2022.
APPENDIX I ACCOUNTANT’S REPORT
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During the three months ended March 31, 2023, the Company issued 13,537,299 ordinary shares to Nanjing
Paradigm as the share capital contributed from eligible participants with shares awarded in December 2022, and then
repurchased 5,578,755 ordinary shares from Nanjing Paradigm to facilitate the consideration and individual income
tax should be paid or borne by eligible participants.
Fair value of awarded shares
The fair value of each awarded share under the Scheme 2022 at the grant date is determined by reference to
the fair value of the Company’s underlying ordinary share. The Group has used the discounted cash flow method to
determine the underlying equity fair value of the Company and adopted equity allocation model to determine the fair
value of underlying ordinary share. Key assumptions, such as discount rate and projections of future performance,
are determined by the Group with best estimate.
The total expenses recognized in profit and loss for the aforementioned share-based payments are
RMB173,665,000, RMB560,721,000, RMB433,403,000, nil and nil for the years ended December 31, 2020, 2021 and
2022 and the three months ended March 31, 2022 and 2023, respectively.
During the year ended December 31, 2021, a Series D investor acquired the Company’s equity interests from
the founder Mr. Dai Wenyuan at the subscription price of Series D financing and was entitled preferred rights as set
out in Note 31. As the transaction price was higher than the fair value of the capital transferred by the founder, a
share-based payment expense of RMB42,913,000 has been recognized accordingly.
27 TRADE PAYABLES
Trade payables primarily include payables for inventories and outsourcing service fees. As at December 31,
2020, 2021 and 2022 and March 31, 2023, the carrying amounts of trade payables were primarily denominated in
RMB.
Trade payables and their aging analysis based on invoice date are as follows:
As at December 31,
As at
March 31,
2020 2021 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000
Up to 3 months 79,059 216,443 710,871 268,935
3 to 6 months 5,906 53,964 65,314 223,688
Over 6 months 3 50,950 87,049 126,901
84,968 321,357 863,234 619,524
28 OTHER PAYABLES AND ACCRUALS
Group
As at December 31,
As at
March 31,
2020 2021 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000
Payroll payables 50,763 75,301 118,223 83,295
Listing expenses payables – 17,313 28,274 25,884
Other taxes payables 19,498 39,718 37,997 23,761
Expense reimbursement 921 6,178 6,998 2,471
Payable to a third party hardware
supplier (Note 22(a)(i)) – 31,000 32,300 32,300
Accrual expenses and others 2,184 14,353 2,369 1,423
73,366 183,863 226,161 169,134
APPENDIX I ACCOUNTANT’S REPORT
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Company
As at December 31,
As at
March 31,
2020 2021 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000
Amount due to a subsidiary 5,112 5,786 1,931 1,892
Payroll payables 1,19 7–––
Listing expenses payables – 17,313 28,274 25,884
Accrual expenses and others 27 11,190 1 4
6,336 34,289 30,206 27,780
The carrying amounts of other payables approximated their fair values as at December 31, 2020, 2021 and
2022 and March 31, 2023. The other payables were primarily denominated in RMB.
29 DEFERRED INCOME TAXES
Deferred income taxes are calculated in full on temporary differences under the liability method using the tax
rates at which are expected to be applied at the time of reversal of the temporary differences.
The amounts of offsetting deferred income tax assets and liabilities are nil, nil, RMB5,650,000 and
RMB8,164,000 as at December 31, 2020, 2021 and 2022 and March 31, 2023, respectively. The analysis of deferred
income tax assets and liabilities before offsetting is as follows:
As at December 31,
As at
March 31,
2020 2021 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000
Deferred income tax assets:
– to be recovered after 12 months – – 4,556 4,965
– to be recovered within 12 months – – 1,094 3,199
– – 5,650 8,164
Deferred income tax liabilities:
– to be settled after 12 months (889) (14,592) (13,977) (12,679)
– to be settled within 12 months (106) (10,435) (5,997) (6,004)
(995) (25,027) (19,974) (18,683)
The gross movement on the deferred income tax assets is as follows:
Y ear ended December 31,
Three months ended
March 31,
2020 2021 2022 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Unaudited)
At the beginning of the
year/period –––– 5,650
Acquisitions of subsidiaries
(Note 33) – 2,27 4–––
(Charged)/credited to profit or
loss – (2,274) 5,650 4,160 2,514
At the end of the year/period – – 5,650 4,160 8,164
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Deferred income tax assets are recognized for deductible temporary differences and tax losses to the extent that
the realization of the related tax benefits through future taxable profits is probable. As at December 31, 2020, 2021
and 2022 and March 31, 2023, the Group did not recognize deferred income tax assets of RMB253,272,000,
RMB374,912,000, RMB478,239,000 and RMB493,361,000, respectively, in respect of deductible temporary
differences and cumulative tax losses amounting to RMB1,159,224,000, RMB1,894,390,000, RMB2,493,785,000 and
RMB2,540,973,000, respectively, that can be carried forward against future taxable income. As at December 31,
2020, 2021 and 2022 and March 31, 2023, tax losses of RMB35,881,000, RMB62,161,000, RMB85,718,000, and
RMB89,977,000, can be carried forward indefinitely, respectively, and the remaining tax losses of
RMB1,111,620,000, RMB1,803,860,000, RMB2,317,620,000 and RMB2,419,204,000 will expire within 5 or 10
years from the respective balance sheet dates.
The gross movement on the deferred income tax liabilities is as follows:
Y ear ended December 31,
Three months ended
March 31,
2020 2021 2022 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Unaudited)
At the beginning of the
year/period (268) (995) (25,027) (25,027) (19,974)
(Charged)/credited to profit or
loss (727) (4,352) 8,203 4,101 1,291
Acquisitions of subsidiaries
(Note 33) – (19,680) (3,150) – –
At the end of the year/period (995) (25,027) (19,974) (20,926) (18,683)
The detailed movements in deferred income tax assets and liabilities during the years/periods are as follows:
Deferred income tax assets:
Credit loss
allowance Tax losses Total
RMB’000 RMB’000 RMB’000
At January 1, 2020 and December 31, 2020 –––
Acquisitions of subsidiaries (Note 33) 798 1,476 2,274
Charged to profit or loss (798) (1,476) (2,274)
At December 31, 2021 –––
At January 1, 2022 –––
Credited to profit or loss – 5,650 5,650
At December 31, 2022 – 5,650 5,650
(Unaudited)
At January 1, 2022 –––
Credited to profit or loss – 4,160 4,160
At March 31, 2022 – 4,160 4,160
At January 1, 2023 – 5,650 5,650
Credited to profit or loss – 2,514 2,514
At March 31, 2023 – 8,164 8,164
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Deferred income tax liabilities:
Fair value
changes of
financial assets
Intangible
assets acquired
in business
combination Total
RMB’000 RMB’000 RMB’000
At January 1, 2020 (268) – (268)
Charged to profit or loss (727) – (727)
At December 31, 2020 (995) – (995)
At January 1, 2021 (995) – (995)
(Charged)/credited to profit or loss (6,757) 2,405 (4,352)
Acquisitions of subsidiaries (Note 33) – (19,680) (19,680)
At December 31, 2021 (7,752) (17,275) (25,027)
At January 1, 2022 (7,752) (17,275) (25,027)
Credited to profit or loss 4,316 3,887 8,203
Acquisitions of subsidiaries (Note 33) – (3,150) (3,150)
At December 31, 2022 (3,436) (16,538) (19,974)
(Unaudited)
At January 1, 2022 (7,752) (17,275) (25,027)
Credited to profit or loss 3,208 893 4,101
At March 31, 2022 (4,544) (16,382) (20,926)
At January 1, 2023 (3,436) (16,538) (19,974)
Credited to profit or loss 240 1,051 1,291
At March 31, 2023 (3,196) (15,487) (18,683)
30 BORROWINGS
As at December 31,
As at
March 31,
2020 2021 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000
Included in current liabilities
Secured borrowings (Note (a)) – – 11,000 13,800
Factoring borrowings – 3,752 5,894 5,639
Unsecured borrowings (Note (b)) – – 31,660 41,660
– 3,752 48,554 61,099
Included in non-current liabilities
Secured borrowings (Note (a)) – – 9,000 8,500
Unsecured borrowings (Note (b)) – 15,000 15,000 15,000
– 15,000 24,000 23,500
Notes:
(a) As at December 31, 2022 and March 31, 2023, the secured borrowings of RMB9,000,000 were borrowed
by EpicHust and bear interests at fixed interest rates ranging from 4.30%-5.00% per annum, which are
repayable by April or June 2023.
As at December 31, 2022 and March 31, 2023, Guangzhou Jianxin has a bank borrowing of
RMB1,000,000 and bank borrowings of RMB3,800,000, respectively, with fixed interest rate 3.85% per
annum, which are repayable by October or December 2023, and a 3-year bank borrowing of
RMB10,000,000 and RMB9,500,000, respectively, with interest rate of 1-year Loan Prime Rate (“LPR”,
announced by National Interbank Funding Center) + 0.8% per annum, which 5% of the principal should
be repaid every half year and the remaining principal should be repaid by September 2025. These
borrowings are guaranteed by the Company and secured by the pledge over Guangzhou Jianxin’s patent
rights.
APPENDIX I ACCOUNTANT’S REPORT
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(b) On April 22, 2021, Guangzhou Jianxin borrowed RMB15,000,000 from its non-controlling shareholder,
Guangzhou Shibei Commercial Partnership (Limited Partnership) (formerly known as Y ulin Shibei
Business Partnership (Limited Partnership)), which is unsecured, interest-free and repayable on demand
after June 30, 2024.
As at December 31, 2022 and March 31, 2023, Guangzhou Jianxin has bank borrowings of
RMB25,660,000 with fixed interest rates ranging from 4.50%-4.85% per annum, which are repayable
by May or June 2023 and guaranteed by the Company.
As at December 31, 2022 and March 31, 2023, EpicHust has bank borrowings of RMB6,000,000 and
RMB16,000,000, respectively, with fixed interest rates ranging from 4.00%-4.20% per annum and
3.75%-4.20% per annum, respectively, which are unsecured and repayable by November or December
2023 or January 2024.
31 REDEMPTION LIABILITIES
Group and Company
Since the date of incorporation of the Company to March 31, 2023, the Company has completed several rounds
of financing including Series A, Series A-1, Series A-2, Series B-1, Series B-2, Series C, Series C-1, Series C-2,
Series D and Series D+ in the way of capital increase of the Company and capital transfer from founders to investors.
The key terms of the preferred rights granted to the abovementioned investors are summarized as follows:
(i) Redemption right
Investors have a right to require the Company to redeem their investments if (a) the Company fails to achieve
a Qualified Initial Public Offering (“Qualified IPO”) by the third anniversary of the initial closing date of Series D
(closed in January 2021) or the Deemed Liquidation Event (as defined in shareholder agreement) occurs; (b) the
Company or the founder is convicted by the judicial authority or the authority with the right to punish that it has
committed any crime or serious illegal act before the Qualified IPO; (c) the labor relation between the founder and
the Group is terminated; (d) the Company has uninformed revenue from off account cash sales or significant internal
control deficiencies due to the founder’s deliberate act; or (e) the founder or the Company has severely violated the
provisions of the transaction documents and fails to take timely remedial action within ten business days after the
investor gives written notice to request the remedy, and has had a significant adverse impact on the Company’s
operations, resulting in the Company’s failure to complete the Qualified IPO within the limited period or the
occurrence of Deemed Liquidation Event.
The redemption amount is the original investment principal from the investors, plus an annual rate of 10% of
the original investment principal for a period of time commencing from the relevant payment date of investments to
the registration change date for the redeemed shares (calculated as 365 days in a calendar year) and any accumulated
or declared but undistributed profit.
(ii) Liquidation preferences
In the event of a Legal Liquidation Event (refers to the liquidation, dissolution or closure of the Company) or
a Deemed Liquidation Event, the distributable liquidation property (after satisfaction of all creditors’ claims and
claims that may be preferred by law in a Legal Liquidation Event and the total consideration received by the
Company or the shareholders in a Deemed Liquidation Event) shall be distributed in the amount equal to the higher
of (1) 100% of the original investment principal, plus the accumulated dividends or declared but undistributed
dividends (and retained earnings) on the equity held; or (2) the distributable liquidation property can be distributed
according to the equity proportion at that time, and in the priority order of Series D+/Series D, Series C-2, Series
C-1, Series C, Series B, Series A-2, Series A-1 to Series A.
(iii) Anti-dilution right
If the Company increases its registered capital at a price lower than the price paid by the Anti-Dilution Right
Holder (the Series D+, Series D, Series C-2, Series C-1, Series C or Series B investors with preferred rights referred)
(the “New Low Financing”), the subscription price per unit invested by the Anti-dilution Right Holder in the
Company will be adjusted.
The Anti-Dilution Right Holder has the right to require the Company to issue new capitals or the founder to
transfer capitals for a nominal consideration or a minimum price permitted by applicable laws or the Company and
the founder to compensate the Anti-Dilution Right Holder in cash and permit the Anti-Dilution Right Holder to
increase capitals then, so that the equity proportion held by the Anti-Dilution Right Holder can reach that can be
subscribed according to the adjusted subscription price per unit.
APPENDIX I ACCOUNTANT’S REPORT
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As at December 31,
As at
March 31,
2020 2021 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000
Redemption liabilities
– Current – – – 6,683,937
– Non-current 2,147,031 5,822,196 6,493,159 –
2,147,031 5,822,196 6,493,159 6,683,937
The redemption rights and liquidation preferences granted to the investors constitute as the Company’s
obligations to repurchase its own equity instruments. These obligations were recognized as redemption liabilities
which are initially measured at fair value (representing the present value of the expected cash flows for settling the
related obligations if these rights are exercised by the investors) and subsequently measured at amortized cost. The
Company applied a redemption discount rate ranged from 10.5% to 13.5% to determine the initial recognition amount
of the redemption liabilities. The anti-dilution right is a derivative financial instrument measured at fair value through
profit or loss, of which the fair value was considered close to nil as the directors of Company expected the New Low
Financing would never occur before the Company’s success in the Qualified IPO.
Pursuant to the preferred rights termination agreement as entered into with respective investors on July 16,
2021, which agreed that the redemption right shall be terminated immediately before submitting the application to
CSRC for the initial public offering and the listing of its overseas-listed foreign shares (H Shares) on the Stock
Exchange by the Company, provided such redemption right shall automatically be reinstated upon the occurrence of
certain agreed uncontrollable events, all redemption liabilities were still being recognized and will be re-classified
to equity upon the successful listing of the Company.
On January 15, 2023, the Company and respective investors signed a supplemental agreement, pursuant to
which, if the initial public offering and listing and trading on stock exchange does not occur before December 30,
2023, the respective investors’ redemption rights shall be reinstated and become exercisable immediately.
Considering the terms of the supplementary agreement, the redemption liabilities have been reclassified as current
liabilities accordingly.
The movements of redemption liabilities during the years ended December 31, 2020, 2021 and 2022 and the
three months ended March 31, 2022 and 2023 are set out below:
Y ear ended December 31,
Three months ended
March 31,
2020 2021 2022 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Unaudited)
At the beginning of the
year/period 1,528,181 2,147,031 5,822,196 5,822,196 6,493,159
Recognition 432,610 4,848,767 – – –
Charged to finance costs
(Note 11) 186,240 638,682 670,963 158,684 190,778
Derecognition (Note (a)) – (1,812,284) – – –
At the end of the year/period 2,147,031 5,822,196 6,493,159 5,980,880 6,683,937
Note:
(a) On May 31, 2021, the Company and certain investors agreed to terminate the abovementioned preferred
rights with immediate effect. The redemption liabilities of approximately RMB1,812,284,000 and the
treasury stock of approximately RMB1,696,897,000 were derecognized, with the difference of
approximately RMB115,387,000 credited to the capital reserve.
APPENDIX I ACCOUNTANT’S REPORT
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32 OTHER NON-CURRENT LIABILITIES
Group
As at December 31,
As at
March 31,
2020 2021 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000
Deferred government grants 400 151 – –
Advance from investors (Note (a)) 771,661 – – –
Payable for acquisition of
subsidiaries (Note 33) – 106,306 95,175 97,306
772,061 106,457 95,175 97,306
Less: current portion of payable for
acquisition of subsidiaries
included in other current
liabilities – (39,916) (41,493) (42,386)
772,061 66,541 53,682 54,920
Company
As at December 31,
As at
March 31,
2020 2021 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000
Advance from investors (Note (a)) 771,661 – – –
Note:
(a) Advance from investors represented the investment considerations received from investors before the
closing date of the transactions as determined in relevant capital purchase agreements.
33 BUSINESS COMBINATION
During the Track Record Period, business combinations mainly comprised the following:
(a) Acquisition of Guangzhou Jianxin
On March 31, 2021, the Group acquired 66% of equity interests of Guangzhou Jianxin and its wholly owned
subsidiaries at a cash consideration of RMB197,976,000, of which RMB156,116,000 was paid immediately and the
remaining shall be repayable by instalments prior to May 2024.
APPENDIX I ACCOUNTANT’S REPORT
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Details of the purchase consideration, the net assets acquired and goodwill as at the acquisition date are as
follows:
As at
March 31,
2021
RMB’000
Purchase consideration
Cash paid 156,116
Present value of deferred consideration 37,674
193,790
Identifiable assets and liabilities:
Cash and cash equivalents 7,756
Trade receivables 100,300
Prepayments and other receivables 7,393
Inventories 27,696
Deferred income tax assets 2,274
Property and equipment 3,838
Right-of-use assets 6,206
Intangible assets
– Customer relationship (Note (i)) 50,700
– Technology (Note (i)) 31,900
– Software 4,712
Other non-current assets 1,000
Deferred income tax liabilities (12,390)
Borrowings (35,417)
Trade payables (18,251)
Other payables and accruals (18,521)
Contract liabilities (1,875)
Lease liabilities (6,257)
Net identifiable assets acquired 151,064
Less: non-controlling interests (51,362)
Add: goodwill (Note (ii)) 94,088
Net assets acquired 193,790
Notes:
(i) The identified intangible assets for the acquisition primarily consist of customer relationship and
technology. They are initially recognized and measured at fair value as they are acquired in business
combinations.
(ii) Goodwill acquired was mainly attributable to the operating synergies and economies of scale expected
to be derived from combining the operations. None of the goodwill is expected to be deductible for
income tax purpose.
The acquired business contributed revenue of approximately RMB247 million and net loss of approximately
RMB29 million to the Group for the period from March 31, 2021, the acquisition date, to December 31, 2021. If the
acquisition had occurred on January 1, 2021, consolidated pro-forma revenue and net loss for the year ended
December 31, 2021 would have been approximately RMB2,043 million and approximately RMB1,810 million,
respectively.
APPENDIX I ACCOUNTANT’S REPORT
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(b) Acquisition of Ideal Technology
On June 30, 2021, the Group acquired 54.44% equity interest in Ideal Technology by way of acquiring from
other shareholders and capital increase at a total cash consideration of RMB245,000,000, of which RMB165,000,000
was paid immediately and the remaining shall be repayable by instalments prior to May 2025.
Details of the purchase consideration, the net assets acquired and goodwill as at the acquisition date are as
follows:
As at
June 30,
2021
RMB’000
Purchase consideration
Cash paid 165,000
Present value of deferred consideration 63,181
228,181
Identifiable assets and liabilities:
Cash and cash equivalents 58,659
Restricted cash 3,446
Trade receivables 10,055
Prepayments and other receivables 2,169
Inventories 17,547
Property and equipment 1,381
Right-of-use assets 1,693
Intangible assets
– Customer relationship (Note (i)) 30,800
– Technology (Note (i)) 11,100
– Brand name (Note (i)) 6,700
– Software 33
Deferred income tax liabilities (7,290)
Borrowings (300)
Trade payables (949)
Other payables and accruals (5,205)
Contract liabilities (13,416)
Lease liabilities (1,538)
Net identifiable assets acquired 114,885
Less: non-controlling interests (52,343)
Add: goodwill (Note (ii)) 165,639
Net assets acquired 228,181
Notes:
(i) The identified intangible assets for the acquisition primarily consist of customer relationship,
technology and brand name. They are initially recognized and measured at fair value as they are
acquired in business combinations.
(ii) Goodwill acquired was mainly attributable to the operating synergies and economies of scale expected
to be derived from combining the operations. None of the goodwill is expected to be deductible for
income tax purpose.
APPENDIX I ACCOUNTANT’S REPORT
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The acquired business contributed revenue of approximately RMB41 million and net loss of approximately
RMB3 million to the Group for the period from June 30, 2021, the acquisition date, to December 31, 2021. If the
acquisition of Ideal Technology had occurred on January 1, 2021, consolidated pro-forma revenue and net loss for
the year ended December 31, 2021 would have been approximately RMB2,044 million and approximately RMB1,813
million, respectively.
(c) Acquisition of EpicHust
On June 30, 2022, the Group acquired 79.66% of equity interests of EpicHust and its subsidiaries at a cash
consideration of RMB118,988,000, of which RMB85,778,000 was paid by June 30, 2022, RMB8,386,000 was paid
in July 2022, and the remaining shall be repayable by instalments prior to June 2024.
Details of the purchase consideration, the net assets acquired and goodwill as at the acquisition date are as
follows:
As at June 30, 2022
RMB’000
Purchase consideration
Cash paid 85,778
Present value of deferred consideration 29,984
115,762
Identifiable assets and liabilities:
Cash and cash equivalents 7,637
Restricted cash 172
Trade receivables 42,258
Prepayments and other receivables 11,108
Inventories 30,474
Contract assets 10,252
Property and equipment 364
Right-of-use assets 174
Intangible assets
– Customer relationship (Note (i)) 15,700
– Technology (Note (i)) 5,300
– Software 339
Deferred income tax liabilities (3,150)
Borrowings (11,000)
Trade payables (18,548)
Other payables and accruals (5,593)
Contract liabilities (34,710)
Lease liabilities (181)
Other current liabilities (774)
Net identifiable assets acquired 49,822
Less: non-controlling interests (10,134)
Add: goodwill (Note (ii)) 76,074
Net assets acquired 115,762
Notes:
(i) The identified intangible assets for the acquisition primarily consist of customer relationship and
technology. They are initially recognized and measured at fair value as they are acquired in business
combinations.
(ii) Goodwill acquired was mainly attributable to the operating synergies and economies of scale expected
to be derived from combining the operations. None of the goodwill is expected to be deductible for
income tax purpose.
APPENDIX I ACCOUNTANT’S REPORT
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The acquired business contributed revenue of approximately RMB88 million and net profit of approximately
RMB9 million to the Group for the period from June 30, 2022, the acquisition date, to December 31, 2022. If the
acquisition of EpicHust had occurred on January 1, 2022, consolidated pro-forma revenue and net loss for the year
ended December 31, 2022 would have been approximately RMB3,119 million and approximately RMB1,669 million,
respectively.
34 CONTINGENCIES AND COMMITMENTS
The Group did not have any material contingent liabilities as at December 31, 2020, 2021 and 2022 and
March 31, 2023.
(a) Capital commitments
Capital expenditure contracted for at the end of the year/period but not yet incurred is as follows:
As at December 31,
As at
March 31,
2020 2021 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000
Investments 35,000 20,000 – 4,000
(b) Operating lease commitments
The Group leases certain offices under short-term operating lease agreements. The Group’s future aggregate
minimum lease payments under operating leases are as follows which are mainly related to short-term leases
exempted from IFRS 16:
As at December 31,
As at
March 31,
2020 2021 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000
Not later than 1 year 30 – 49 172
35 DIVIDENDS
No dividends have been paid or declared by the Company or the companies now comprising the Group during
each of the years ended December 31, 2020, 2021 and 2022 and the three months ended March 31, 2022 and 2023.
36 RELATED PARTY TRANSACTIONS
Parties are considered to be related if one party has the ability, directly or indirectly, to control the other party
or exercise significant influence over the other party in making financial and operation decisions. Parties are also
considered to be related if they are subject to common control. Members of key management and their close family
members of the Group are also considered as related parties.
The following significant transactions were carried out between the Group and its related parties during the
periods presented. In the opinion of the directors of the Company, the related party transactions were carried out in
the normal course of business and at terms negotiated between the Group and the respective related parties.
APPENDIX I ACCOUNTANT’S REPORT
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(a) Names and relationships with related parties
The following companies are related parties of the Group that had significant transactions and/or balances with
the Group during the Track Record Period.
Names of the major related parties Relationship
Huayun Associate of the Group (before resignation from
the board of Huayun) (Note 17(b))
Paradigm Cloud Joint venture of the Group (before acquisition
by the Group) (Note 17(b))
Beijing Paradigm Private Fund Management Co., Ltd.
(formerly known as Beijing Paradigm Fund
Management Co., Ltd.) (“Paradigm Fund
Management”)
Associate of the ultimate controlling
shareholder
Yijing Zhilian (Suzhou) Technology Co., Ltd.
(“Yijing Zhilian”, formerly known as Yijing Zhilian
(Beijing) Technology Co., Ltd.)
Associate of the Group
(b) Significant transactions with related parties
Y ear ended December 31,
Three months ended
March 31,
2020 2021 2022 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Unaudited)
(i) Sales of goods and services
Huayun 1,509 1,957 802 755 —
Paradigm Cloud 2,92 2––– —
4,431 1,957 802 755 —
(ii) Purchases of goods and
services
Huayun 4,775 3,375 1,617 1,022 —
Paradigm Cloud 918 283 – – —
Yijing Zhilian – – 965 – 849
5,693 3,658 2,582 1,022 849
(iii) Loan to a related party
Loan to Yijing Zhilian:
At the beginning of the year/period –––––
Loan advanced – – 4,000 – –
Loans repaid – – (4,000) – –
Interest charged – – 80 – –
Interest received – – (80) – –
At the end of the year/period –––––
APPENDIX I ACCOUNTANT’S REPORT
– I-95 –


--- page 536 ---
(c) Significant balance with related parties
As at December 31,
As at
March 31,
2020 2021 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000
(i) Other receivables from related
parties
Paradigm Fund Management 20 0–––
(ii) Trade receivables from related
parties
Huayun 1,366 2,221 — —
(iii) Trade payables to related
parties
Huayun 1,343 942 — —
Paradigm Cloud 450 750 — —
Yijing Zhilian – – 1,023 1,123
1,793 1,692 1,023 1,123
The other receivables from related parties were non-trade in nature. The trade receivables from related parties
and the trade payables to related parties were trade in nature.
(d) Key management personnel compensation
The remuneration of directors, supervisors and other key management personnel is as follows:
Y ear ended December 31,
Three months ended
March 31,
2020 2021 2022 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Unaudited)
Wages, salaries and bonuses 19,095 18,834 22,586 5,504 5,698
Contributions to pension plans 354 502 590 139 160
Other social security costs,
housing benefits and other
employee benefits 802 795 873 200 225
Share-based payment expenses
(Note 26) 124,614 190,030 38,461 – –
144,865 210,161 62,510 5,843 6,083
APPENDIX I ACCOUNTANT’S REPORT
– I-96 –


--- page 537 ---
37 CASH FLOW INFORMATION
(a) Cash used in operations
Y ear ended December 31,
Three months ended
March 31,
2020 2021 2022 2022 2023
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Unaudited)
Loss before income tax (749,483) (1,791,699) (1,665,094) (276,211) (307,638)
Adjustments for:
– Depreciation and amortization
– property and equipment 14,103 16,348 16,763 4,240 4,367
– right-of-use assets 27,430 25,958 27,610 6,878 7,062
– intangible assets 5,782 25,872 36,472 8,672 9,354
– Credit loss allowance 1,992 15,206 48,914 7 5,578
– Impairment provision for
inventories – 1,920 1,125 – 52
– Share-based payment expenses 173,665 603,634 433,403 – –
– Interest income (6,038) (24,416) (46,183) (7,539) (12,429)
– Interest expenses 188,693 646,800 681,941 161,308 194,378
– Losses/(gains) on disposal of
property and equipment 105 (44) – – –
– Gains on termination of right-
of-use assets (998) ––––
– Fair value changes on
financial assets at fair value
through profit or loss (18,362) (85,024) (51,356) (18,007) (8,560)
– Fair value changes on
financial liabilities at fair
value through profit or loss 88 8––––
– Share of losses/(profits) of
investments accounted for
using the equity method 6,477 (3,802) 3,200 (538) 791
– Net gains on
disposal/transfer/dilution of
investments accounted for
using the equity method (13,781) (8,086) (5,158) – (380)
– Foreign exchange losses, net 3,568 1,197 2,206 30 160
– Decrease/(increase) in contract
assets 53 (3,864) (32,903) (11,391) (2,455)
– Increase in inventories (7,177) (112,990) (135,154) (14,114) (58,540)
– (Increase)/decrease in trade
receivables (85,548) (420,118) (715,904) 123,099 (6,170)
– Increase in prepayments and
other receivables (80,562) (51,306) (78,314) (25,709) (7,123)
– (Increase)/decrease in
restricted cash (17,865) 13,637 1,266 876 1,625
– Increase/(decrease) in trade
payables 69,737 217,189 522,962 (57,940) (243,710)
– (Decrease)/increase in other
payables and accruals (23,810) 73,751 25,691 (62,189) (56,081)
– Increase/(decrease) in contract
liabilities 56,318 81,491 116,857 (1,626) 16,883
– Increase/(decrease) in other
current and non-current
liabilities 975 (88) 9,982 (1,476) (3,449)
Cash used in operations (453,838) (778,434) (801,674) (171,630) (466,285)
APPENDIX I ACCOUNTANT’S REPORT
– I-97 –


--- page 538 ---
(b) Reconciliation of liabilities from financing activities
This section sets out an analysis and the movements of liabilities from financing activities for the years ended
December 31, 2020, 2021 and 2022 and the three months ended March 31, 2022 and 2023, respectively.
Liabilities from financing activities
Redemption
liabilities
(Note 31)
Lease
liabilities
(Note 14)
Borrowings
(Note 30) Total
RMB’000 RMB’000 RMB’000 RMB’000
As at January 1, 2020 1,528,181 65,566 – 1,593,747
Cash flows – (27,039) – (27,039)
Accrued interest expenses 186,240 2,453 – 188,693
Addition of redemption liabilities 432,610 – – 432,610
Addition of new leases – 704 – 704
Termination of leases – (2,909) – (2,909)
As at December 31, 2020 2,147,031 38,775 – 2,185,806
As at January 1, 2021 2,147,031 38,775 – 2,185,806
Cash flows – (27,479) (17,678) (45,157)
Accrued interest expenses 638,682 1,954 713 641,349
Addition of redemption liabilities 4,848,767 – – 4,848,767
Derecognition of redemption
liabilities (1,812,284) – – (1,812,284)
Addition of new leases – 14,319 – 14,319
Acquisition of subsidiaries (Note 33) – 7,795 35,717 43,512
As at December 31, 2021 5,822,196 35,364 18,752 5,876,312
As at January 1, 2022 5,822,196 35,364 18,752 5,876,312
Cash flows – (28,429) 41,577 13,148
Accrued interest expenses 670,963 1,552 1,225 673,740
Addition of new leases – 63,364 – 63,364
Acquisition of subsidiaries (Note 33) – 181 11,000 11,181
As at December 31, 2022 6,493,159 72,032 72,554 6,637,745
(Unaudited)
As at January 1, 2022 5,822,196 35,364 18,752 5,876,312
Cash flows – (6,732) (441) (7,173)
Accrued interest expenses 158,684 387 15 159,086
Addition of new leases – 688 – 688
As at March 31, 2022 5,980,880 29,707 18,326 6,028,913
As at January 1, 2023 6,493,159 72,032 72,554 6,637,745
Cash flows – (9,219) 11,377 2,158
Accrued interest expenses 190,778 801 668 192,247
Addition of new leases – 2,729 – 2,729
As at March 31, 2023 6,683,937 66,343 84,599 6,834,879
APPENDIX I ACCOUNTANT’S REPORT
– I-98 –


--- page 539 ---
(c) Major non-cash investing and financing activities
The major non-cash investing and financing activities during the Track Record Period mainly include (i) the
addition of right-of-use assets and lease liabilities described in Note 14, (ii) the deemed disposals of interests in an
associate due to the agreement on the waiver for settling the unpaid contingent consideration, increase in share of
net assets of associates due to the dilution gains, and transfers of investments accounted for using equity method to
financial assets measured at fair value through profit and loss as described in Note 17, and (iii) the recognition of
redemption liabilities due to the founder’s direct disposal of his equity interest in the Company to a Series D investor
(with preferred rights granted by the Company) as described in Note 26, the interest amortization on redemption
liabilities and the derecognition of redemption liabilities as described in Note 31.
38 SUBSEQUENT EVENTS
In May and June 2023, certain investors have already undertaken that they will not exercise their redemption
rights prior to December 31, 2024 on the conditions that the Company does not suspend/terminate its listing plan and
the recognized stock exchange has not rejected the Company’s listing application. The redemption liabilities in
connection with the abovementioned investors with undertakings amounted to approximately RMB3 billion.
Subsequent to March 31, 2023, the Group has entered into facility agreements with two commercial banks for
strategic comprehensive credit line amounting to RMB1,200,000,000 in total, which are unutilized as of the date of
this accountant’s report and can be utilized by the Group as and when any funding needs are arising.
III SUBSEQUENT FINANCIAL STATEMENTS
No audited financial statements have been prepared by the Company or any of the
companies now comprising the Group in respect of any period subsequent to March 31, 2023
and up to the date of this report. No dividend or distribution has been declared or made by the
Company or any of the companies now comprising the Group in respect of any period
subsequent to March 31, 2023.
APPENDIX I ACCOUNTANT’S REPORT
– I-99 –


--- page 540 ---
The following information does not form part of the Accountant’ s Report from
PricewaterhouseCoopers, Certified Public Accountants, Hong Kong, the Company’ s reporting
accountant, as set out in Appendix I, and is included for information purposes only. The
unaudited pro forma financial information should be read in conjunction with the section
headed “Financial Information” and the Accountant’ s Report set out in Appendix I.
A. UNAUDITED PRO FORMA STATEMENT OF ADJUSTED CONSOLIDATED NET
TANGIBLE ASSETS
The following is an illustrative statement of the unaudited pro forma adjusted
consolidated net tangible assets which has been prepared in accordance with Rule 4.29 of the
Listing Rules for the purpose of illustrating the effect of the Global Offering as if it had taken
place on March 31, 2023 and based on the consolidated net tangible liabilities attributable to
the owners of the Company as at March 31, 2023 as shown in the Accountant’s Report, the text
of which is set out in Appendix I to this Prospectus, and adjusted as described below.
The unaudited pro forma adjusted consolidated net tangible assets has been prepared for
illustrative purposes only and, because of its hypothetical nature, it may not give a true picture
of the consolidated net tangible assets of the Group had the Global Offering been completed
as at March 31, 2023 or at any future dates.
Audited
consolidated net
tangible liabilities
attributable to the
owners of the
Company as at
March 31, 2023 (1)
Estimated net
proceeds from the
Global Offering (2)
Estimated impact
related to the
change of terms
of shares with
preferred rights
upon Listing (3)
Unaudited pro
forma adjusted
consolidated net
tangible assets
attributable to
the owners of
the Company
Unaudited pro
forma adjusted
consolidated net
tangible assets
per Share (4)(5)
RMB’000 RMB’000 RMB’000 RMB’000 RMB HK$
Based on an Offer Price of
HK$55.60 per Share (2,342,475) 862,599 6,683,937 5,204,061 11.21 12.18
Based on an Offer Price of
HK$61.16 per Share (2,342,475) 953,649 6,683,937 5,295,111 11.41 12.39
Notes:
(1) The audited consolidated net tangible liabilities attributable to the owners of the Company as at March 31,
2023 is extracted from the Accountant’s Report as set out in Appendix I, which is based on the audited
consolidated net liabilities attributable to the owners of the Company as at March 31, 2023 of approximately
RMB1,931,646,000, with an adjustment for the intangible assets attributable to the owners of the Company as
at March 31, 2023 of approximately RMB410,829,000.
(2) The estimated net proceeds to be received by the Company from the Global Offering are based on the
indicative Offer Prices of HK$55.60 and HK$61.16 per Share, respectively, after deduction of the underwriting
fees and other related expenses payable by the Company (excluding listing expenses of approximately
RMB93,377,000 which have been charged to our consolidated statement of comprehensive income up to March
31, 2023), and does not take into account any shares which may be issued pursuant to the exercise of the
Over-allotment Option.
APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION
– II-1 –


--- page 541 ---
(3) Upon the Listing, all preferred rights entitled to the Company’s investors will be terminated and the
redemption liabilities recognized due to these preferred rights will be reclassified to equity. Accordingly, for
the purpose of the unaudited pro forma financial information, the unaudited pro forma adjusted consolidated
net tangible assets attributable to the owners of the Company will be increased by RMB6,683,937,000, being
the carrying amount of the redemption liabilities as at March 31, 2023.
(4) The unaudited pro forma adjusted consolidated net tangible assets per Share is arrived at after the adjustments
referred to in the preceding paragraphs and on the basis that 464,060,533 Shares were in issue, assuming that
the Global Offering has been completed on March 31, 2023 but does not take into account any shares which
may be issued pursuant to the exercise of the Over-allotment Option.
(5) For the purpose of this unaudited pro forma adjusted net tangible assets, the amounts stated in RMB are
converted into Hong Kong dollars at a rate of RMB1.00 to HK$1.0862. No representation is made that
Renminbi amounts have been, could have been or may be converted to Hong Kong dollars, or vice versa, at
that rate.
(6) No adjustment has been made to reflect any trading result or other transactions of the Group entered into
subsequent to March 31, 2023.
APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION
– II-2 –


--- page 542 ---
B. REPORT ON UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following is the text of a report received from PricewaterhouseCoopers, Certified
Public Accountants, Hong Kong, for the purpose of incorporation in this prospectus.
INDEPENDENT REPORTING ACCOUNTANT’S ASSURANCE REPORT ON THE
COMPILATION OF UNAUDITED PRO FORMA FINANCIAL INFORMATION
To the Directors of Beijing Fourth Paradigm Technology Co., Ltd.
We have completed our assurance engagement to report on the compilation of unaudited
pro forma financial information of Beijing Fourth Paradigm Technology Co., Ltd. (the
“Company”) and its subsidiaries (collectively the “Group”) by the directors of the Company
(the “Directors”) for illustrative purposes only. The unaudited pro forma financial information
consists of the unaudited pro forma statement of adjusted consolidated net tangible assets of
the Group as at March 31, 2023, and related notes (the “Unaudited Pro Forma Financial
Information”) as set out on pages II-1 to II-2 of the Company’s prospectus dated September 18,
2023, in connection with the proposed initial public offering of the shares of the Company (the
“Prospectus”). The applicable criteria on the basis of which the Directors have compiled the
Unaudited Pro Forma Financial Information are described on pages II-1 to II-2 of the
Prospectus.
The Unaudited Pro Forma Financial Information has been compiled by the Directors to
illustrate the impact of the proposed initial public offering on the Group’s financial position as
at March 31, 2023 as if the proposed initial public offering had taken place at March 31, 2023.
As part of this process, information about the Group’s financial position has been extracted by
the Directors from the Group’s financial information for the three months ended March 31,
2023, on which an accountant’s report has been published.
Directors’ Responsibility for the Unaudited Pro Forma Financial Information
The Directors are responsible for compiling the Unaudited Pro Forma Financial
Information in accordance with paragraph 4.29 of the Rules Governing the Listing of Securities
on The Stock Exchange of Hong Kong Limited (the “Listing Rules”) and with reference to
Accounting Guideline 7, Preparation of Pro Forma Financial Information for Inclusion in
Investment Circulars (“AG 7”) issued by the Hong Kong Institute of Certified Public
Accountants (“HKICPA”).
APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION
– II-3 –


--- page 543 ---
Our Independence and Quality Management
We have complied with the independence and other ethical requirements of the Code of
Ethics for Professional Accountants issued by the HKICPA, which is founded on fundamental
principles of integrity, objectivity, professional competence and due care, confidentiality and
professional behaviour.
Our firm applies Hong Kong Standard on Quality Management (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 management including policies or
procedures regarding compliance with ethical requirements, professional standards and
applicable legal and regulatory requirements.
Reporting Accountant’s Responsibilities
Our responsibility is to express an opinion, as required by paragraph 4.29(7) of the
Listing Rules, on the Unaudited Pro Forma Financial Information and to report our opinion to
you. We do not accept any responsibility for any reports previously given by us on any
financial information used in the compilation of the Unaudited Pro Forma Financial
Information beyond that owed to those to whom those reports were addressed by us at the dates
of their issue.
We conducted our engagement in accordance with Hong Kong Standard on Assurance
Engagements 3420, Assurance Engagements to Report on the Compilation of Pro Forma
Financial Information Included in a Prospectus , issued by the HKICPA. This standard requires
that the reporting accountant plans and performs procedures to obtain reasonable assurance
about whether the Directors have compiled the Unaudited Pro Forma Financial Information in
accordance with paragraph 4.29 of the Listing Rules and with reference to AG 7 issued by the
HKICPA.
For purposes of this engagement, we are not responsible for updating or reissuing any
reports or opinions on any historical financial information used in compiling the Unaudited Pro
Forma Financial Information, nor have we, in the course of this engagement, performed an
audit or review of the financial information used in compiling the Unaudited Pro Forma
Financial Information.
The purpose of unaudited pro forma financial information included in a prospectus is
solely to illustrate the impact of a significant event or transaction on unadjusted financial
information of the entity as if the event had occurred or the transaction had been undertaken
at an earlier date selected for purposes of the illustration. Accordingly, we do not provide any
assurance that the actual outcome of the proposed initial public offering at March 31, 2023
would have been as presented.
APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION
– II-4 –


--- page 544 ---
A reasonable assurance engagement to report on whether the unaudited pro forma
financial information has been properly compiled on the basis of the applicable criteria
involves performing procedures to assess whether the applicable criteria used by the directors
in the compilation of the unaudited pro forma financial information provide a reasonable basis
for presenting the significant effects directly attributable to the event or transaction, and to
obtain sufficient appropriate evidence about whether:
 The related pro forma adjustments give appropriate effect to those criteria; and
 The unaudited pro forma financial information reflects the proper application of
those adjustments to the unadjusted financial information.
The procedures selected depend on the reporting accountant’s judgment, having regard to
the reporting accountant’s understanding of the nature of the company, the event or transaction
in respect of which the unaudited pro forma financial information has been compiled, and other
relevant engagement circumstances.
The engagement also involves evaluating the overall presentation of the unaudited pro
forma financial information.
We believe that the evidence we have obtained is sufficient and appropriate to provide a
basis for our opinion.
Our work has not been carried out in accordance with auditing standards or other
standards and practices generally accepted in the United States of America or auditing
standards of the Public Company Accounting Oversight Board (United States) or standards and
practices of any professional body in any other overseas jurisdiction and accordingly should
not be relied upon as if it had been carried out in accordance with those standards and practices.
Opinion
In our opinion:
(a) the Unaudited Pro Forma Financial Information has been properly compiled by the
Directors on the basis stated;
(b) such basis is consistent with the accounting policies of the Group; and
(c) the adjustments are appropriate for the purposes of the Unaudited Pro Forma
Financial Information as disclosed pursuant to paragraph 4.29(1) of the Listing
Rules.
PricewaterhouseCoopers
Certified Public Accountants
Hong Kong, September 18, 2023
APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION
– II-5 –


--- page 545 ---
TAXATION ON DIVIDENDS
Individual Investor
Pursuant to the Individual Income Tax Law of the PRC (੻೼
) (the “IIT Law”), which was last amended on August 31, 2018 and came into effect on
January 1, 2019 and the Implementation Provisions of the Individual Income Tax Law of the
People’s Republic of China (ૢԷ), which was last
amended on December 18, 2018 and came into effect on January 1, 2019, for income including
interest, dividend and bonus, individuals shall pay individual income tax with applicable
proportional tax rate of 20%. Unless otherwise provided by the competent financial and
taxation authorities under the State Council, all the interest, dividend and bonus received from
enterprises, public institutions, economic organizations and resident individuals in the PRC are
deemed as derived from the PRC whether the payment place is in the PRC. Pursuant to the
Circular on Certain Issues Concerning the Policies of Individual Income Tax (੻
) promulgated by the Ministry of Finance and the State
Administration of Taxation on May 13, 1994 and came into effect on the same date, overseas
individuals are exempted from the individual income tax for dividends or bonuses received
from foreign-invested enterprises.
Enterprise Investors
In accordance with the Enterprise Income Tax Law of the People’s Republic of China
() (the “EIT Law”), which was amended on December 29,
2018 and became effective on the same date, and the Implementation Provisions of the
Enterprise Income Tax Law of the People’s Republic of China (੻೼
ૢԷ), which was amended on April 23, 2019 and became effective on the same date,
a non-resident enterprise is generally subject to a 10% enterprise income tax on PRC-sourced
income (including dividends and bonus received from a PRC resident enterprise that issues
shares in Hong Kong), if it does not have an establishment or premise in the PRC or has an
establishment or premise in the PRC but its PRC-sourced income has no real connection with
such establishment or premise. The aforesaid income tax payable for non-resident enterprises
are deducted at source, where the payer of the income are 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 of Enterprise Income Tax by PRC
Resident Enterprises on Dividends Paid to Overseas Non-PRC Resident Enterprise
Shareholders of H Shares (͏ΆุΣྤ̮H˾ϔ˾ᖮ
) (Guo Shui Han [2008] No. 897), which was issued by the SA T
on November 6, 2008, further clarified that a PRC-resident enterprise must withhold and remit
enterprise income tax at a rate of 10% on the dividends of 2008 and onwards that it distributes
to overseas non-resident enterprise shareholders of H Shares. In addition, the Response to
Questions on Levying Enterprise Income Tax on Dividends Derived by Non-resident Enterprise
from Holding Stock such as B Shares (͏Άุ՟੻B੻೼
ҭᔧ) (Guo Shui Han [2009] No. 394), which was issued by the SA T and came into
APPENDIX III TAXATION AND FOREIGN EXCHANGE
– III-1 –


--- page 546 ---
effect on July 24, 2009, further provides that any PRC-resident enterprise whose shares are
listed on overseas stock exchanges must withhold and remit enterprise income tax at a rate of
10% on dividends of 2008 and onwards that it distributes to non-resident enterprises. Such tax
rates may be further modified pursuant to the tax treaty or agreement that China has entered
into with a relevant country or area, where applicable.
Pursuant 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 (ᅄ೼
τર), which was signed 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. The Fifth Protocol of 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 ( <࠰
τર> ), which came in
to effect on December 6, 2019, adds a criteria for the qualification of entitlement to enjoy
treaty benefits. Although there may be other provisions under the Arrangement, the treaty
benefits under the criteria shall not be granted in the circumstance where one of the essential
purposes of the relevant arrangement or transaction which directly or indirectly brings about
the treaty benefits, after taking into account all relevant facts and conditions, are reasonably
deemed to be to obtain such benefits, except when the grant of benefits under such
circumstance is consistent with relevant objective and goal under the Arrangement. The
application of the dividend clause of the aforesaid tax agreements is subject to the requirements
of PRC tax law documents, such as the Notice of the State Administration of Taxation on the
Issues Concerning the Application of the Dividend Clauses of Tax Agreements (೼ਕᐼ
) (Guo Shui Han [2009] No. 81).
Tax Treaties
Non-PRC resident investors residing in countries which have entered into treaties or
adjustments for the avoidance of double taxation with the PRC or residing in Hong Kong or
Macau are entitled to a reduction of the withholding taxes imposed on the dividends received
from PRC companies. The PRC currently has entered into Avoidance of Double Taxation
Treaties/Arrangements with a number of countries and regions including Hong Kong, Macau,
Australia, Canada, France, Germany, Japan, Malaysia, the Netherlands, Singapore, the United
Kingdom and the United States. Non-PRC resident enterprises entitled to preferential tax rates
in accordance with the relevant income tax agreements 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.
APPENDIX III TAXATION AND FOREIGN EXCHANGE
– III-2 –


--- page 547 ---
TAXATION ON SHARE TRANSFER
V AT and Local Additional Tax
Pursuant to the Notice on Fully Implementing the Pilot Reform for the Transition from
Business Tax to V alue-added Tax () (“Circular
36”), which was implemented on May 1, 2016, entities and individuals engaged in the services
sale in the PRC are subject to V A T and “engaged in the services sale in the PRC” means that
the seller or buyer of the taxable services is located in the PRC. Circular 36 also provides that
transfer of financial products, including transfer of the ownership of marketable securities,
shall be subject to V A T at 6% on the taxable revenue (which is the balance of sales price upon
deduction of purchase price), for a general or a foreign V A T taxpayer. However, individuals
who transfer financial products are exempt from V A T, which is also provided in the Notice of
Ministry of Finance and State Administration of Taxation on Several Tax Exemption Policies
for Business Tax on Sale and Purchase of Financial Commodities by Individuals (௅e
) became effective on
January 1, 2009. According to these regulations, if the holder is a non-resident individual, the
PRC V A T is exempted from the sale or disposal of H shares.
Individual Investor
According to the IIT Law and its implementation provisions, gains realized on the sale of
equity interests in PRC resident enterprises are subject to individual income tax at a rate of
20%.
Pursuant to the Circular of Declaring that Individual Income Tax Continues to be
Exempted over Income of Individuals from the Transfer of Shares (੻
) (Cai Shui Zi [1998] No. 61) issued by the MOF and the
State Administration of Taxation (the “SA T”) and came into effect on March 20, 1998, from
January 1, 1997, income of individuals from transfer of the shares of listed enterprises
continues to be exempted from individual income tax. On December 31, 2009, the MOF, the
SA T and CSRC jointly issued the Notice on Issues Concerning the Levy of Individual Income
Tax on Individuals’ Income from the Transfer of Restricted Stocks of Listed Companies ( ᗫ
) (Cai Shui Zi [2009] No.
167), which became effective on December 31, 2009, states that individuals’ income from the
transfer of listed shares on the Shanghai Stock Exchange and the Shenzhen Stock Exchange
shall continue to be exempted from individual income tax, except for the relevant shares which
are subject to sales restriction (as defined in the Supplementary Notice on Issues Concerning
the Levy of Individual Income Tax on Individuals’ Income from the Transfer of Restricted
Stocks of Listed Companies (ٙ
) (Cai Shui [2010] No. 70) jointly issued by the above three departments on
November 10, 2010).
APPENDIX III TAXATION AND FOREIGN EXCHANGE
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As of the Latest Practicable Date, no aforesaid provisions had expressly provided whether
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 shares of PRC resident enterprises listed on
overseas stock exchange. However, there is no assurance that the PRC tax authorities will not
change these practices which could result in levying income tax on non-PRC resident
individuals on gains from the sale of H shares.
Enterprise Investors
In accordance with the EIT Law and its implementation provisions, a non-resident
enterprise is generally subject to enterprise income tax at the rate of a 10% on PRC-sourced
income, including gains derived from the disposal of equity interests in a PRC resident
enterprise, if it does not have an establishment or premise in the PRC or has an establishment
or premise in the PRC but its PRC-sourced income has no real connection with such
establishment or premise. Such income tax payable for non-resident enterprises are deducted
at source, where the payer of the income 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. Such tax
may be reduced or exempted pursuant to relevant tax treaties or agreements on avoidance of
double taxation.
Stamp Duty
Pursuant to the Provisional Regulations of the People’s Republic of China on Stamp Tax
(೼ᅲБૢԷ), which was issued on August 6, 1988 and amended on
January 8, 2011, and the Detailed Rules for the Implementation of the Provisional Regulations
of the People’s Republic of China on Stamp Tax (Б୚
), which came into effect on October 1, 1988, PRC stamp duty only applies to specific
proof executed or received within the PRC, having legally binding force in the PRC and
protected under the PRC laws, thus the requirements of the stamp duty imposed on the transfer
of shares of PRC listed companies shall not apply to the acquisition and disposal of H Shares
by non-PRC investors outside of the PRC.
According to the Law of the People’s Republic of China on Stamp Duty ( ʕശɛ͏΍
) promulgated on June 10, 2021 and became effective on July 1, 2022, the
purchase and disposal of H shares by non-PRC investors outside of the PRC does not apply to
the relevant provisions of the Law of the People’s Republic of China on Stamp Duty ( ʕശ
).
Estate Duty
As of the Latest Practicable Date, the PRC currently does not impose any estate duty.
APPENDIX III TAXATION AND FOREIGN EXCHANGE
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MAJOR TAXES ON THE COMPANY IN THE PRC
Enterprise Income Tax
According to the Enterprise Income Tax Law of the People’s Republic of China ( ʕശ
), which was amended on December 29, 2018 and became effective
on the same date and the Regulation on the Implementation of the Enterprise Income Tax Law
of the People’s Republic of China (ૢԷ), which was
amended on April 23, 2019 and became effective on the same date, the applicable enterprise
income tax rate of both domestic and foreign investment enterprises shall be 25%. Enterprises
are classified into resident and non-resident enterprises. A resident enterprise shall pay
enterprise income tax on its incomes derived from both inside and outside China, and the
enterprise income tax rate shall be 25%. For a non-resident enterprise having establishments
or premises in the PRC, it shall pay enterprise income tax on its incomes derived from the
establishments or premises inside the PRC as well as on incomes that it earns outside the PRC
but which has real connection with the said establishments or premises, and the enterprise
income tax rate shall be 25%. For a non-resident enterprise having no establishments or
premises inside the PRC, or for a non-resident enterprise whose incomes have no actual
connection to its establishments or premises inside the PRC, it shall pay enterprise income tax
on the incomes derived from the PRC, and the enterprise income tax rate shall be 10%.
Value-Added Tax
According to the Provisional Regulations of the People’s Republic of China on
V alue-Added Tax (೼ᅲБૢԷ) which was promulgated by the State
Council on December 13, 1993, and amended on November 10, 2008, February 6, 2016 and
November 19, 2017, and the Detailed Rules for the Implementation for the Provisional
Regulations the People’s Republic of China on V alue-added Tax (೼ᅲ
) which was promulgated by the Ministry of Finance on December 25, 1993
and subsequently amended on December 15, 2008 and October 28, 2011 (collectively, the “V A T
Law”), all enterprises and individuals that engage in the sale of goods, the provision of
processing, repair and replacement services, sales of service, intangible assets and real estate
and the importation of goods inside of the PRC shall pay value-added tax at the rate of 0%, 6%,
11% and 17% for the different goods it sells and different services it provides, except when
specified otherwise.
According to the Notice on the Adjustment to V A T Rates (ஷ
) (Cai Shui [2018] No. 32), promulgated by the MOF and the SA T on April 4, 2018 and
became effective as of May 1, 2018, the V A T rates of 17% and 11% applicable to the taxpayers
who have V A T taxable sales activities or imported goods are adjusted to 16% and 10%,
respectively.
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According to the Announcement on Relevant Policies for Deepening V alue-Added Tax
Reform (ʮѓ(2019 No. 39 of MOF, SA T and General
Administration of Customs), promulgated by the MOF, the SA T and the General Administration
of Customs on March 20, 2019 and became effective on April 1, 2019, the V A T rates of 16%
and 10% applicable to the taxpayers who have V A T taxable sales activities or imported goods
are adjusted to 13% and 9%, respectively.
TAXATION IN HONG KONG
Tax on Dividends
Under the current practice of the Inland Revenue Department of Hong Kong, no tax is
payable in Hong Kong in respect of dividends paid by us.
Capital Gains and Profit Tax
No tax is imposed in Hong Kong in respect of capital gains from the sale of H Shares.
However, trading gains from the sale of the H Shares by persons carrying on a trade, profession
or business in Hong Kong, where such gains are derived from or arise in Hong Kong from such
trade, profession or business will be subject to Hong Kong profits tax, which is currently
imposed at the maximum rate of 16.5% on corporations and at the maximum rate of 15% on
unincorporated businesses. The gains of certain categories of taxpayers (for example, financial
institutions, insurance companies and securities dealers) are likely to be regarded as deriving
trading gains rather than capital gains unless these taxpayers can prove that the investment
securities are held for long-term investment purposes. Trading gains from sales of H Shares
effected on the Hong Kong Stock Exchange will be considered to be derived from or arise in
Hong Kong. Liability for Hong Kong profits tax would thus arise in respect of trading gains
from sales of H Shares effected on the Hong Kong Stock Exchange realized by persons
carrying on a business of trading or dealing in securities in Hong Kong.
Stamp Duty
Hong Kong stamp duty, currently charged at the ad valorem rate of 0.13% on the higher
of the consideration for or the market value of the H Shares, will be payable by the purchaser
on every purchase and by the seller on every sale of Hong Kong securities, including H Shares
(in other words, a total of 0.26% is currently payable on a typical sale and purchase transaction
involving H Shares). In addition, a fixed stamp duty of HK$5.00 is currently payable on any
instrument of transfer of H Shares. Where one of the parties of the transfer is a resident outside
Hong Kong and does not pay the ad valorem duty due by it, the duty not paid will be assessed
on the instrument of transfer (if any) and will be payable by the transferee. If no stamp duty
is paid on or before the due date, a penalty of up to ten times the duty payable may be imposed.
APPENDIX III TAXATION AND FOREIGN EXCHANGE
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Estate Duty
The Revenue (Abolition of Estate Duty) Ordinance 2005 came into effect on February 11,
2006 in Hong Kong, pursuant to which no Hong Kong estate duty is payable and no estate duty
clearance papers are needed for an application of a grant of representation in respect of holders
of H Shares whose deaths occur on or after February 11, 2006.
FOREIGN EXCHANGE
The lawful currency of the PRC is Renminbi, which is currently subject to foreign
exchange control and cannot be freely converted into foreign currency. The SAFE, with the
authorization of the PBOC, is empowered with the functions of administering all matters
relating to foreign exchange, including the enforcement of foreign exchange control
regulations.
On January 29, 1996, the State Council promulgated the Regulations of the People’s
Republic of China on Foreign Exchange Control ( ʕശɛ͏΍ձ਷̮ි၍ଣૢԷ) (the
“Foreign Exchange Control Regulations”). The Foreign Exchange Control Regulations
classifies all international payments and transfers into current accounts and capital accounts.
Most of the current accounts are not subject to the approval of foreign exchange administration
agencies, while capital accounts are subject to the approval of foreign exchange administration
agencies. The Foreign Exchange Control Regulations were subsequently amended on January
14, 1997 and August 5, 2008. According to the latest amendment to the Foreign Exchange
Control Regulations, PRC will not impose any restriction on international current payments
and transfers.
The Regulations for the Administration of Settlement, Sale and Payment of Foreign
Exchange () promulgated by PBOC on June 20, 1996 and
became effective on July 1, 1996 removes other restrictions on convertibility of foreign
exchange under current accounts, while imposing existing restrictions on foreign exchange
transactions under capital accounts.
According to the Announcement on Improving the Reform of the Renminbi Exchange
Rate Formation Mechanism (ʮѓ), which was
issued by the PBOC and implemented on July 21, 2005, the PRC has started to implement a
managed floating exchange rate system in which the exchange rate would be determined based
on market supply and demand and adjusted with reference to a basket of currencies since July
21, 2005. Therefore, the Renminbi exchange rate was no longer pegged to the U.S. dollar.
PBOC would publish the closing price of the exchange rate of the Renminbi against trading
currencies such as the U.S. dollar in the interbank foreign exchange market after the closing
of the market on each working day, as the central parity of the currency against Renminbi
transactions on the following working day.
APPENDIX III TAXATION AND FOREIGN EXCHANGE
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According to the relevant laws and regulations in the PRC, PRC enterprises (including
foreign investment enterprises) which need foreign exchange for current item transactions may,
without the approval of the foreign exchange administrative authorities, effect payment
through foreign exchange accounts opened at financial institutions that carries foreign
exchange business or operating institutions that carries settlement and sale business, on the
strength of valid receipts and proof. Foreign investment enterprises which need foreign
exchange for the distribution of profits to their shareholders and PRC enterprises which, in
accordance with regulations, are required to pay dividends to their shareholders in foreign
exchange may, on the strength of resolutions of the board of directors or the shareholders’
meeting on the distribution of profits, effect payment from foreign exchange accounts opened
at financial institutions that carries foreign exchange business or institutions that carries
settlement and sale business, or effect exchange and payment at financial institutions that
carries foreign exchange business or institutions that carries settlement and sale business.
On October 23, 2014, the State Council issued the Decision of the State Council on
Canceling and Adjusting a Group of Administrative Approval Items and Other Matters ( ਷
) (Guo Fa [2014] No. 50), which
canceled the administrative approval by the SAFE and its branches for matters concerning the
repatriation and settlement of foreign exchange of overseas-raised funds through overseas
listing foreign shares.
On December 26, 2014, the SAFE issued the Notice of the State Administration of
Foreign Exchange on Issues Concerning the Foreign Exchange Administration of Overseas
Listing () (Hui Fa [2014] No. 54).
Pursuant to the notice, a domestic company shall, within 15 business days of the date of the
end of its overseas listing issuance, register the overseas listing with the Administration of
Foreign Exchange at the place of its establishment; the proceeds from an overseas listing of a
domestic company may be remitted to the 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. A domestic company (except for bank financial institutions) shall
present its certificate of overseas listing to open a “special foreign exchange account for
overseas listing of domestic company” at a local bank for its initial public offering (or
follow-on offering) and repurchase business to handle the exchange, remittance and transfer of
funds for the business concerned.
According to the Notice of the State Administration of Foreign Exchange on Further
Simplifying and Improving Policies for the Foreign Exchange Administration of Direct
Investment () (Hui
Fa [2015] No. 13) promulgated by the SAFE on February 13, 2015, imposed on June 1, 2015
and partially repealed on December 30, 2019, two of the administrative examination and
approval items, being the confirmation of foreign exchange registration under domestic direct
investment and the confirmation of foreign exchange registration under overseas direct
investment have been canceled. Instead, banks shall directly examine and handle foreign
APPENDIX III TAXATION AND FOREIGN EXCHANGE
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--- page 553 ---
exchange registration under domestic direct investment and overseas direct investment
(collectively, the “direct investment”), and the SAFE and its branch offices shall indirectly
regulate the foreign exchange registration of direct investment through banks.
According to the Notice from the State Administration of Foreign Exchange on
Reforming and Regulating the Policies of Administration of Foreign Exchange Settlement for
Capital Account () (Hui Fa
[2016] No. 16) issued by the SAFE and came into effect on June 9, 2016, foreign currency
earnings in capital account that relevant policies of willingness exchange settlement have been
clearly implemented on (including the recalling of foreign exchange capital, foreign loans and
raised capital by overseas listing) may undertake foreign exchange settlement in the banks
according to actual business needs of the domestic institutions. The tentative percentage of
foreign exchange settlement for foreign currency earnings in capital account of domestic
institutions is 100%, subject to adjustment of the SAFE in due time in accordance with
international revenue and expenditure situations.
On January 26, 2017, the SAFE issued the Notice of the State Administration of Foreign
Exchange on Further Promoting the Reform of Foreign Exchange Administration and
Improving the Examination of Authenticity and Compliance (ආɓӉપ
) (Hui Fa [2017] No. 3) to further expand the
scope of settlement for domestic foreign exchange loans, allow settlement for domestic foreign
exchange loans with export background under goods trading, allow repatriation of funds under
domestic guaranteed foreign loans for domestic utilization, allow settlement for domestic
foreign exchange accounts of foreign institutions operating in the Free Trade Pilot Zones, and
adopt the model of full-coverage RMB and foreign currency overseas lending management,
where a domestic institution engages in overseas lending, the sum of its outstanding overseas
lending in RMB and outstanding overseas lending in foreign currencies shall not exceed 30%
of its owner’s equity in the audited financial statements of the preceding year.
On October 23, 2019, the SAFE issued the Notice on Further Facilitating Cross-border
Trade and Investment () (Hui Fa [2019]
No. 28), which canceled restrictions on domestic equity investments made with capital funds
by non-investing foreign-funded enterprises. In addition, restrictions on the use of funds for
foreign exchange settlement of domestic accounts for the realization of assets have been
removed and restrictions on the use and foreign exchange settlement of foreign investors’
security deposits have been relaxed. Eligible enterprises in the pilot area are also allowed to
use revenues under capital, such as capital funds, foreign debts and overseas listing revenues
for domestic payments without providing materials to the bank in advance for authenticity
verification on an item by item basis, while the use of funds should be true, in compliance with
applicable rules and conforming to the current capital revenue management regulations.
APPENDIX III TAXATION AND FOREIGN EXCHANGE
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THE PRC LEGAL SYSTEM
The PRC legal system is based on Constitution of the People’s Republic of China ( ʕ
, the “ Constitution ”), which was adopted on September 20, 1954 and
subsequently amended on January 17, 1975, March 5, 1978, December 4, 1982, April 12, 1988,
March 29, 1993, March 15, 1999, March 14, 2004 and March 11, 2018. The PRC legal system
is made up of written laws, administrative regulations, local regulations, autonomous
regulations, separate regulations, rules and regulations of State Council departments, rules and
regulations of local governments, laws of special administrative regions and international
treaties of which the PRC government is a signatory and other regulatory documents. Court
judgments do not constitute legally binding precedents, although they are used for the purposes
of judicial reference and guidance.
The National People’s Congress (the “ NPC”) and its Standing Committee are empowered
to exercise the legislative power of the State in accordance with the Constitution and the
Legislation Law of the People’s Republic of China (, the
“Legislation Law ”), which was adopted on March 15, 2000 and amended on March 15, 2015.
The NPC has the power to formulate and amend basic laws governing state authorities, civil,
criminal and other matters. The Standing Committee of the NPC formulates and amends laws
other than those required to be enacted by the NPC and to supplement and amend parts of the
laws enacted by the NPC during the adjournment of the NPC, provided that such supplements
and amendments are not in conflict with the basic principles of such laws.
The State Council is the highest organ of state administration and has the power to
formulate administrative regulations based on the Constitution and laws.
The people’s congresses of the provinces, autonomous regions and municipalities and
their respective standing committees may formulate local regulations based on the specific
circumstances and actual needs of their respective administrative areas, provided that such
local regulations do not contravene any provision of the Constitution, laws or administrative
regulations. The people’s congresses of cities divided into districts and their respective
standing committees may formulate local regulations on aspects such as urban and rural
construction and management, environmental protection and historical 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 Constitution, laws, administrative
regulations and local regulations of their respective provinces or autonomous regions. If the
law provides otherwise on the matters concerning 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 but such local regulations shall
conform with the Constitution, laws, administrative regulations, and the relevant local
regulations of the relevant provinces or autonomous regions. The standing committees of the
people’s congresses of the provinces or autonomous regions examine the legality of local
regulations submitted for approval, and such approval should be granted within four months if
APPENDIX IV SUMMARY OF PRINCIPAL LEGAL AND
REGULATORY PROVISIONS
– IV-1 –


--- page 555 ---
they are not in conflict with the Constitution, laws, administrative regulations and local
regulations of such provinces or autonomous regions. Where, during the examination for
approval of local regulations of cities divided into districts by the standing committees of the
people’s congresses of the provinces or autonomous regions, conflicts are identified with the
rules and regulations of the people’s governments of the provinces or autonomous regions
concerned, a handling decision should be made by the standing committees of the people’s
congresses of provinces or autonomous regions to resolve the issue. People’s congresses of
national autonomous areas have the power to enact autonomous regulations and separate
regulations in light of the political, economic and cultural characteristics of the ethnic groups
in the areas concerned. The autonomous regulations and separate regulations of an autonomous
region shall come into force after being reported to and approved by the Standing Committee
of the NPC. The autonomous regulations and separate regulations of an autonomous prefecture
or an autonomous county shall come into force after being reported to and approved by the
standing committee of the people’s congress of the province, autonomous region, or
municipality directly under the Central Government.
The ministries and commissions of the State Council, the People’s Bank of China,
National Audit Office and the subordinate institutions with administrative functions directly
under the State Council may formulate departmental rules within the jurisdiction of their
respective departments based on 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 formulate rules
and regulations based on the laws, administrative regulations and local regulations of such
provinces, autonomous regions and municipalities.
According to the Constitution and the Legislation Law, the power to interpret laws is
vested in the Standing Committee of the NPC. Pursuant to the Resolution of the Standing
Committee of the NPC Providing an Improved Interpretation of the Law (ɽ
Ӕᙄ) implemented on June 10, 1981, the Supreme
People’s Court has the power to give interpretation on issues related to the application of laws
and decrees in a court trial, and issues related to the application of laws and decrees in a
prosecution process of a procuratorate should be interpreted by the Supreme People’s
Procuratorate. If there is any disagreement in principle between Supreme People’s Court’s
interpretations & Supreme People’s Procuratorate’s interpretations, such issues shall be
reported to the Standing Committee of the NPC for interpretation or judgment. The other issues
related to laws and decrees other than the abovementioned should be interpreted by the State
Council and the competent authorities. The State Council and its ministries and commissions
are also vested with the power to give interpretations of the administrative regulations and
departmental rules which they have promulgated. At the regional level, the power to interpret
regional laws is vested in the regional legislative and administrative authorities which
promulgate such laws.
APPENDIX IV SUMMARY OF PRINCIPAL LEGAL AND
REGULATORY PROVISIONS
– IV-2 –


--- page 556 ---
THE PRC JUDICIAL SYSTEM
Under the Constitution and the Law of Organization of the People’s Courts of the People’s
Republic of China (), which is adopted on September 21,
1954 and subsequently amended on July 5, 1979, September 2, 1983, December 2, 1986,
October 31, 2006 and October 26, 2018, the PRC judicial system is made up of the Supreme
People’s Court, the local people’s courts, the military courts and other special people’s courts.
The local people’s courts are comprised of the basic people’s courts, the intermediate
people’s courts and the higher people’s courts. The basic people’s courts may set up civil,
criminal and economic divisions, and certain people’s tribunals based on the facts of the region,
population and cases. The intermediate people’s courts have divisions similar to those of the
basic people’s courts and may set up other special divisions if needed. These two levels of
people’s courts are subject to supervision by people’s courts at higher levels. The Supreme
People’s Court is the highest judicial authority in the PRC. It supervises the administration of
justice by the people’s courts at all levels and special people’s courts. The Supreme People’s
Procuratorate is authorized to supervise the judgment and ruling of the people’s courts at all
levels which have been legally effective, and the people’s procuratorate at a higher level is
authorized to supervise the judgment and ruling of a people’s court at lower levels which have
been legally effective.
Under the Civil Procedure Law of the People’s Republic of China ( ʕശɛ͏΍ձ਷͏
), which is adopted on April 9, 1991 and subsequently amended on October 28,
2007, August 31, 2012, and June 27, 2017, a people’s court takes the rule of the second instance
as the final rule. A party may appeal against the judgment or ruling of the first instance of a
local people’s court. The people’s procuratorate may present a protest to the people’s court at
the next higher level in accordance with the procedures stipulated by the laws. In the absence
of any appeal by the parties and any protest by the people’s procuratorate within the stipulated
period, the judgments or rulings of the people’s court are final. Judgments or rulings of the
second instance of the intermediate people’s courts, the higher people’s courts and the Supreme
People’s Court, and judgments or rulings of the first instance of the Supreme People’s Court
are final. However, if the Supreme People’s Court finds some definite errors in a legally
effective judgment, ruling or conciliation statement of the people’s court at any level, or if the
people’s court at a higher level finds such errors in a legally effective judgment, ruling or
conciliation statement of the people’s court at a lower level, it has the authority to review the
case itself or to direct the lower-level people’s court to conduct a retrial. If the chief judge of
all levels of people’s courts finds some definite errors in a legally effective judgment, ruling
or conciliation statement, and considers a retrial is preferred, such case shall be submitted to
the judicial committee of the people’s court at the same level for discussion and decision.
APPENDIX IV SUMMARY OF PRINCIPAL LEGAL AND
REGULATORY PROVISIONS
– IV-3 –


--- page 557 ---
The Civil Procedure Law of the People’s Republic of China ( ʕശɛ͏΍ձ਷͏ԫൡத
) prescribes the conditions for instituting a civil action, the jurisdiction of the people’s
courts, the procedures for conducting a civil action, and the procedures for enforcement of a
civil judgment or ruling. All parties to a civil action conducted within the PRC must abide by
the PRC Civil Procedure Law. Generally, a civil case is initially 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 substantially connected 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, provided that the
provisions regarding the level of jurisdiction and exclusive jurisdiction shall not be violated.
A foreign individual, a person without nationality, 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 PRC
court. Should a foreign court limit the litigation rights of PRC citizens or enterprises, the PRC
court may apply the same limitations to the citizens and 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 PRC court. In accordance with the international
treaties to which the People’s Republic of China 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.
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 PRC, the other party may apply to the people’s
court for the enforcement of the same within two years subject to application for postponed
enforcement or revocation. If a party fails to satisfy within the stipulated period a judgment
which the court has granted an enforcement approval, the court may, upon the application of
the other party, mandatorily enforce the judgment on the party.
Where a party applies for enforcement of a judgment or ruling made by a people’s court,
and the opposite party or his property is not within the territory of the PRC, the applicant may
directly apply to a foreign court with jurisdiction for recognition and enforcement of the
judgment or ruling. A foreign judgment or ruling may also be recognized and enforced by the
people’s court in accordance with the PRC enforcement procedures if the PRC has entered into,
or acceded to, international treaties with the relevant foreign country, which provided for such
recognition and enforcement, or if the judgment or ruling satisfies the court’s examination
according to the principle of reciprocity, 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 against the social and public interests.
APPENDIX IV SUMMARY OF PRINCIPAL LEGAL AND
REGULATORY PROVISIONS
– IV-4 –


--- page 558 ---
THE PRC SECURITIES LA WS, REGULATIONS
The PRC has promulgated a number of regulations that relate to the issue and trading of
shares and disclosure of information. In October 1992, the State Council established the
Securities Committee and the CSRC. The Securities Committee is responsible for coordinating
the drafting of securities regulations, formulating securities-related policies, planning the
development of securities markets, directing, coordinating and supervising all securities-
related institutions in the PRC and administering the CSRC. The CSRC is the regulatory arm
of the Securities Committee and is responsible for the drafting of regulatory provisions of
securities markets, supervising securities companies, regulating public offerings of securities
by PRC companies in the PRC or overseas, regulating the trading of securities, compiling
securities-related statistics and undertaking relevant research and analysis. In April 1998, the
State Council consolidated the two departments and reformed the CSRC.
The Interim Provisional Regulations on the Administration of Share Issuance and Trading
(၍ଣᅲБૢԷ) stipulates the public offerings of equity securities, trading
in equity securities, the acquisition of listed companies, deposit, clearing and transfer of listed
equity securities, the disclosure of information with respect to a listed company, investigation,
penalties and dispute settlement.
On December 25, 1995, the State Council promulgated the Regulations of the State
Council Concerning Domestic Listed Foreign Shares of Joint Stock Limited Companies ( ਷
). These regulations principally govern the
issue, subscription, trading and declaration of dividends and other distributions of domestic
listed foreign shares and disclosure of information of joint stock limited companies having
domestic listed foreign shares.
The Securities Law of the People’s Republic of China (, the
“PRC Securities Law”) took effect on July 1, 1999 and was revised as of August 28, 2004,
October 27, 2005, June 29, 2013, August 31, 2014 and December 28, 2019, respectively. The
PRC Securities Law, which was revised on December 28, 2019 and came into effect on March
1, 2020, is divided into 14 chapters and 226 articles, regulating, among other things, the issue
and trading of securities, the listing of securities, and takeovers of listed companies.
Article 224 of the PRC Securities Law provides that domestic enterprises which, directly
or indirectly, issue securities or list and trade their securities outside the PRC shall comply with
the relevant regulations of the State Council. Currently, the issue and trading of foreign issued
securities (including shares) are principally governed by the regulations and rules promulgated
by the State Council and the CSRC.
APPENDIX IV SUMMARY OF PRINCIPAL LEGAL AND
REGULATORY PROVISIONS
– IV-5 –


--- page 559 ---
ARBITRATION AND ENFORCEMENT OF ARBITRAL A W ARDS
The Arbitration Law of the People’s Republic of China () (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, respectively. It is applicable to, among other matters, economic disputes
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 PRC
Arbitration Law. The PRC Arbitration Law provides that an arbitration committee may, before
the promulgation of arbitration regulations by the PRC Arbitration Association, formulate
interim arbitration rules in accordance with the PRC Arbitration Law and the PRC Civil
Procedure Law. Where the parties have agreed to settle disputes by means of arbitration, a
people’s court will refuse to handle a legal proceeding initiated by one of the parties at such
people’s court, unless the arbitration agreement is invalid.
Under the PRC Arbitration Law and PRC Civil Procedure Law, an arbitral award shall be
final and binding on the parties involved in the arbitration. If any party fails to comply with
the arbitral award, the other party to the award may apply to a people’s court for its
enforcement. The people’s court can issue a ruling prohibiting the enforcement of an arbitral
award made by an arbitration commission after verification by collegial bench formed by the
people’s court if there is any procedural irregularity (including but not limited to irregularity
in the composition of the arbitration tribunal or arbitration proceedings, the jurisdiction of the
arbitration commission, or the making of an award on matters beyond the scope of the
arbitration agreement).
Any party seeking to enforce an award of a foreign affairs arbitral body of the PRC
against a party who or whose property is not located within the PRC shall apply to a foreign
court with jurisdiction over the case for recognition and enforcement of the award. Likewise,
an arbitral award made by a foreign arbitral body may be recognized and enforced by a PRC
court in accordance with the principle of reciprocity or any international treaties concluded or
acceded to by the PRC.
The PRC acceded to the Convention on the Recognition and Enforcement of Foreign
Arbitral Awards (, the “New Y ork Convention”) adopted on
June 10, 1958 pursuant to a resolution passed by the Standing Committee of the NPC on
December 2, 1986. The New Y ork Convention provides that all arbitral awards made in a state
which is a party to the New Y ork Convention shall be recognized and enforced by other parties
thereto subject to their rights to refuse 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 (i) the PRC will only apply the Convention to the recognition and enforcement of arbitral
awards made in the territories of other parties based on the principle of reciprocity; and (ii) the
New Y ork Convention will only be applied to disputes deemed under PRC laws to be arising
from contractual or non-contractual mercantile legal relations.
APPENDIX IV SUMMARY OF PRINCIPAL LEGAL AND
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--- page 560 ---
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 Mainland and the
Hong Kong Special Administrative Region (ʝੂБ΀൒൒Ӕ
τર) on June 18, 1999, which went into effect on February 1, 2000. The arrangement
reflects the spirit of the New Y ork Convention. Under the arrangements, the awards by the
Mainland arbitral bodies in accordance with the PRC Arbitration Law may be enforced in Hong
Kong, and the awards by the Hong Kong arbitral bodies according to the Arbitration Ordinance
of Hong Kong SAR 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, or the court of Hong Kong SAR decides that the
enforcement of the arbitral awards in Hong Kong SAR will be against public policies of Hong
Kong SAR, the awards may not be enforced. The Supreme People’s Court of China adopted the
Supplementary Arrangements on the Mutual Enforcement of Arbitral Awards between the
Mainland and the Hong Kong Special Administrative Region (ಥ
໾̂τર) (the “Supplementary Arrangements”) on
November 9, 2020. According to the Supplementary Arrangements, before or after the
acceptance of an application for enforcement of an arbitration award, the relevant court may,
upon application and in accordance with the law of the place where the arbitration award is
enforced, adopt preservation or enforcement measures.
Judicial judgment and its enforcement
According to the Arrangement on Mutual Recognition and Enforcement of Judgments in
Civil and Commercial Matters by the Courts of the Mainland China and of the Hong Kong
Special Administrative Region Pursuant to Agreed Jurisdiction by Parties Concerned ( ௰৷
΁кӔ
τર) promulgated by the Supreme People’s Court on July 3, 2008 and implemented on
August 1, 2008, in the case of final judgment, defined with payment amount and enforcement
power, made between the court of Mainland China and the court of the Hong Kong Special
Administrative Region in a civil and commercial case with written jurisdiction agreement, any
party concerned may apply to the People’s Court of China or the court of the Hong Kong
Special Administrative Region for recognition and enforcement based on this arrangement.
“Written jurisdiction agreement” refers to a written agreement defining the exclusive
jurisdiction of either the People’s Court of China or the court of the Hong Kong Special
Administrative Region in order to resolve any dispute with particular legal relation occurred
or likely to occur by the party concerned. Therefore, the party concerned may apply to the
People’s Court of China or the court of the Hong Kong Special Administrative Region to
recognize and enforce the final judgment made in China or Hong Kong that meets certain
conditions of the aforementioned regulations.
APPENDIX IV SUMMARY OF PRINCIPAL LEGAL AND
REGULATORY PROVISIONS
– IV-7 –


--- page 561 ---
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 for
the Prospective Implementation of the Pilot Program that Links the Stock Markets in Shanghai
and Hong Kong is Expected to be Implemented and approved in principle the launch of the
pilot program that links the stock markets in Shanghai and Hong Kong (hereinafter referred to
as “Shanghai-Hong Kong Stock Connect”) by the Shanghai Stock Exchange (hereinafter
referred to as “SSE”), the Stock Exchange, China Securities Depository and Clearing
Corporation Limited (hereinafter referred to as “CSDCC”) and HKSCC. Shanghai-Hong Kong
Stock Connect comprises the two portions of Northbound Trading Link and Southbound
Trading Link. Southbound Trading Link refers to the entrustment of China securities houses by
China investors to trade stocks listed on the Stock Exchange within a stipulated range via filing
by the securities trading service company established by the SSE. 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 LargeCap Index and the Hang Seng Composite MidCap
Index as well as stocks of A+H stock companies concurrently listed on the Stock Exchange and
the SSE. The total limit of Southbound Trading Link is RMB250 billion and the daily limit is
RMB10.5 billion. During the initial period of the pilot program, it is required by HKSFC that
China investors participating in Southbound Trading Link are only limited to institutional
investors and individual investors with a securities account and capital account balance of not
less than RMB500,000.
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 to 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 to domestic original shareholders under Southbound Trading Link shall be
filed with CSRC. Hong Kong listed companies shall file the application materials and approved
documents with CSRC after obtaining approval from the Stock Exchange for their share
placement applications. CSRC will carry out supervision based on the approved opinion and
conclusion of the Hong Kong side.
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--- page 562 ---
THE PRC COMPANY LA W, THE OVERSEAS LISTING TRIAL MEASURES AND THE
GUIDELINES
The Company Law of the People’s Republic of China () (the
“PRC Company Law”) was adopted by the 5th meeting of the Standing Committee of the 8th
National People’s Congress Session on December 29, 1993 and came into effect on July 1,
1994. It was amended on December 25, 1999, August 28, 2004, October 27, 2005, December
28, 2013, and October 26, 2018, respectively. The latest revised PRC Company Law was
implemented on October 26, 2018.
The Overseas Listing Trial Measures which were promulgated by the CSRC on February
17, 2023 and came into effect on March 31, 2023, and were applicable to the overseas offering
and listing of PRC domestic companies’ securities.
The Guidelines for Articles of Association of Listed Companies (ˏ)
(the “Guidelines”) which were issued by the CSRC on December 16, 1997, latest revised on
January 5, 2022 and came into effect on the same date, providing the guidelines for the Articles
of Association. As such, the contents provided in the Guidelines are set out in the Articles of
Association of the Company, the summary of which is set out in the section entitled “Appendix
V – Summary of Articles of Association” in this document.
Set out below is a summary of the major provisions of the Company Law, the Overseas
Listing Trial Measures and the Guidelines applicable to the Company.
General
A “joint stock limited company” (“company”) refers to an enterprise legal person
incorporated in China under the PRC Company Law with independent legal person properties
and entitlements to such legal person properties and with its registered capital divided into
shares of equal par value. The liability of the company for its own debts is limited to all the
properties it owns and the liability of its shareholders for the company is limited to the extent
of the shares they subscribe for.
Incorporation
A joint stock limited company may be established by promotion or subscription. A joint
stock limited company shall have a minimum of two but no more than 200 people as its
promoters, and over half of the promoters must be resident within the PRC. Companies
established by promotion are companies of which the registered capital is the total share capital
subscribed for by all the promoters registered with the company’s registration authorities. No
share offering shall be made before the shares subscribed for by the promoters are fully paid
up. For companies established by subscription, the registered capital is the total paid-up share
capital as registered with the company’s registration authorities. If laws, administrative
regulations and State Council decisions provide otherwise on paid-in registered capital and the
minimum registered capital, the company should follow such provisions.
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--- page 563 ---
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. In the case of capital contributions to be made
in non-cash assets, the formalities for transfer of property rights shall be completed in
accordance with the provisions of the law. 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’ agreement. After the promoters have
subscribed for 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 articles of association with relevant administration for industry and
commerce, and other documents as required by the law or administrative regulations.
After the subscription monies for the share issue have been paid in full, a capital
verification institution established under PRC law must be engaged to conduct a capital
verification and furnish a certificate thereof. The promoters of the company shall preside over
and convene an inauguration meeting within 30 days from the date of the full payment of
subscription monies. The inauguration meeting shall be formed by the promoters and
subscribers. Where the shares issued remain undersubscribed by the cut-off date stipulated in
the share offering prospectus, or where the promoter fails to convene an inauguration meeting
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 of the conclusion
of the inauguration meeting, the board of directors shall apply to the company registration
authority for registration of the establishment of the company. A company is formally
established and has the capacity of a legal person after approval of registration has been given
by the relevant administration for industry and commerce and a business license has been
issued.
A company’s promoter shall be liable for the followings:
(1) the debts and expenses incurred in the establishment process jointly and severally if
the company cannot be incorporated;
(2) the refund of 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 as a result of the
promoters’ fault in the course of its establishment.
According to the Provisional Regulations on the Administration of Share Issuance and
Trading (၍ଣᅲБૢԷ) promulgated by the State Council on April 22,
1993 (which is only applicable to the issuance and trading of shares in the PRC and their
related activities), if a company is established by means of public subscription, all promoters
APPENDIX IV SUMMARY OF PRINCIPAL LEGAL AND
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– IV-10 –


--- page 564 ---
or directors and the lead distributor shall warrant by way of signature of the prospectus to
ensure that the prospectus does not contain any misrepresentation, serious misleading
statements or material omissions, and assume joint and several responsibility for it.
Share Capital
The promoters of a company may make a capital contribution in currencies, or
non-monetary assets such as in kind or intellectual property rights or land use rights which can
be appraised with monetary value and transferred lawfully, except for assets 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 and verification of the fair
value of the assets contributed must be carried out.
The issuance of shares shall be conducted in a fair and equitable manner. The same class
of shares must carry equal rights. For shares issued at the same time and within the same class,
the conditions and price per share must be the same. 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.
A PRC domestic company must file with the CSRC to offer its shares to the overseas
public. According to the Overseas Listing Trial Measures, target investors of overseas offering
and listing by domestic companies shall be overseas investors, unless prescribed in the
Overseas Listing Trial Measures or otherwise stipulated by the state.
Increase in Share Capital
Under the PRC Company Law, where a company is issuing new shares, resolutions shall
be passed at shareholder’s general meeting in accordance with the articles of association in
respect of the class and amount of the 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.
After the issue of new share the company has been paid up, the change must be registered
with the company registration authorities 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.
Reduction of Share Capital
When a company needs to reduce its registered capital, it shall prepare a statement of
financial position and a property list. The company shall inform its creditors within 10 days,
from the date of resolution on reduction in registered capital, and publish an announcement in
the newspaper within 30 days after the resolution approving the reduction of registered capital
APPENDIX IV SUMMARY OF PRINCIPAL LEGAL AND
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– IV-11 –


--- page 565 ---
has been passed. Creditors may within 30 days after receiving the notice, or within 45 days of
the public announcement if no notice has been received, require the company to pay its debts
or provide guarantees covering the debts.
Repurchase of Shares
A company shall not purchase its own shares except under any of the following
circumstances:
(1) Reducing the registered capital of the company;
(2) Merging with another company that holds its shares;
(3) Using shares for employee stock ownership plan or equity incentives;
(4) A shareholder requesting the company to purchase the shares held by him since he
objects to a resolution of the shareholders’ meeting on the combination or division
of the company;
(5) Using shares for converting convertible corporate bonds issued by the listed
company;
(6) It is necessary for a listed company to protect the corporate value and the rights and
interests of shareholders.
A company purchasing its own shares under any of the circumstances set forth in items
(1) and (2) of the preceding paragraph shall be subject to a resolution of the shareholders’
meeting; and a company purchasing its own shares under any of the circumstances set forth in
items (3), (5) and (6) of the preceding paragraph may, pursuant to the articles of association
or the authorization of the shareholders’ meeting, be subject to a resolution of a meeting of the
board of directors at which more than two-thirds of directors are present.
After purchasing its own shares pursuant to the provisions of the first paragraph of this
article, a company shall, under the circumstance set forth in item (1), cancel them within 10
days after the purchase; while under the circumstance set forth in either item (2) or (4), transfer
or cancel them within six months; and while under the circumstance set forth in item (3), (5)
or (6), aggregately hold not more than 10% of the total shares that have been issued by the
company, and transfer or cancel them within three years.
A listed company purchasing its own shares shall perform the obligation of information
disclosure. A listed company purchasing its own shares under any of the circumstances set forth
in items (3), (5) and (6) shall carry out trading in a public and centralized manner.
APPENDIX IV SUMMARY OF PRINCIPAL LEGAL AND
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--- page 566 ---
Transfer of Shares
Shares held by shareholders may be transferred legally. Under the PRC Company Law, a
shareholder should effect a transfer of his shares on a stock exchange established in accordance
with laws or by any other means as required by the State Council. Registered shares may be
transferred after the shareholders endorse the back of the share certificates or in any other
manner specified by the laws or administrative regulations. Following the transfer, the
company shall enter the names and domiciles 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
stipulated 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.
Under the PRC Company Law, shares held by promoters may not be transferred within
one year of the establishment of the company. Shares of the company issued prior to the public
issuance 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 any 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
of 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.
APPENDIX IV SUMMARY OF PRINCIPAL LEGAL AND
REGULATORY PROVISIONS
– IV-13 –


--- page 567 ---
Shareholders
Under the PRC Company Law and the Guidelines, the rights of holders of ordinary shares
of a joint stock limited company include the right:
(1) to receive dividends and profit distributions in any other form in proportion to their
shareholdings;
(2) to lawfully require, convene, preside over or attend general meetings either in
person or by proxy and exercise the corresponding voting right;
(3) to supervise, present suggestions on or make inquiries about the operations of the
Company;
(4) to transfer, gift or pledge their shares in accordance with the laws, administrative
regulations, departmental rules, normative documents and the listing rules of the
stock exchange in the place where the stocks of the company are listed, and the
articles of association;
(5) to acquire relevant information according to the provisions of the articles of
association, including the duplicate of the articles of association, share register,
counterfoil of company debentures, minutes of shareholders’ general meetings,
audited financial statements of the company, reports of directors, accounting firms
and the Supervisory Committee;
(6) 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;
(7) 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;
and
(8) any other shareholders’ rights provided for in laws, administrative regulations, other
regulatory documents and the articles of association.
The obligations of shareholders include the obligation to abide by the articles of
association, to pay the subscription monies in respect of the shares subscribed for, to be liable
for the company’s debts and liabilities to the extent of the amount of his or her subscribed
shares and any other shareholder obligation specified in the articles of association.
APPENDIX IV SUMMARY OF PRINCIPAL LEGAL AND
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--- page 568 ---
Shareholders’ General Meetings
The general meeting is the organ of authority of the company, which exercises its powers
in accordance with the PRC Company Law. The general meeting may exercise its powers:
(1) to decide on the company’s operational objectives and investment plans;
(2) to elect and remove the directors and supervisors (not being representative(s) of
employees) and to decide on the matters relating to the remuneration of directors and
supervisors;
(3) to review and approve the reports of the board of directors;
(4) to review and approve the reports of the supervisory board;
(5) to review and approve the company’s annual financial budgets and final accounts;
(6) to review and approve the company’s profit distribution proposals and loss recovery
proposals;
(7) to decide on any increase or reduction of the company’s registered capital;
(8) to decide on the issue and listing of corporate bonds and other securities;
(9) to decide on merger, division, dissolution and liquidation of the company or change
of its corporate form;
(10) to amend the articles of association; and
(11) to exercise any other authority stipulated in the articles of association.
A shareholders’ general meeting is required to be held once every year. An extraordinary
general meeting is required to be held within two months of the occurrence of any of the
following:
(1) the number of directors is less than the number stipulated by the PRC Company Law
or less than two-thirds of the number specified in the articles of association;
(2) the 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 the convening of an extraordinary general meeting;
APPENDIX IV SUMMARY OF PRINCIPAL LEGAL AND
REGULATORY PROVISIONS
– IV-15 –


--- page 569 ---
(4) the board deems necessary;
(5) the supervisory board proposes to hold; 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 nominated by half or more of the directors shall preside over the meeting.
Where the board of directors is incapable of performing or is not performing its duties to
convene the general meeting, the supervisory board shall convene and preside over
shareholders’ general meeting in a timely manner. If the supervisory board fails to convene and
preside over 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 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 before the meeting. A notice of extraordinary general meeting shall
be given to all shareholders 15 days prior to the meeting. For the issuance of bearer share
certificates, the time and venue of and matters to be considered at the meeting shall be
announced 30 days before the meeting. A single shareholder who holds, or several shareholders
who jointly hold, three percent or more of the shares of the company may submit an interim
proposal in writing to the board of directors ten days before the general meeting is held. The
board of directors shall notify other shareholders within two days upon receipt of the proposal,
and submit the said interim proposal to the general meeting for deliberation. The contents of
the interim proposal shall fall within the scope of powers of the general meeting, and the
proposal shall have a clear agenda and specific matters on which resolutions are to be made.
The general meeting shall not make any resolution in respect of any matter not set out in the
above-mentioned two types of notices. Holders of bearer share certificates who wish to attend
a general meeting shall deposit their share certificates with the company five days before the
meeting and till the conclusion of the meeting.
Under 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 the articles of association or
a resolution of the general meeting. Under the accumulative voting system, each share shall be
APPENDIX IV SUMMARY OF PRINCIPAL LEGAL AND
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– IV-16 –


--- page 570 ---
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 supervisors when casting a vote.
Under the PRC Company Law, resolutions of the general meeting must be passed by more
than half of the voting rights held by shareholders present at the meeting, with the exception
of matters relating to merger, division or dissolution of the company, increase or reduction of
registered share capital, change of corporate form or amendments to the articles of association,
which in each case must be passed by at least 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 significant assets or the provision of
external guarantees by the company and the other matters must be approved by way of
resolution of the general meeting, the directors shall convene a shareholders’ general meeting
promptly to vote on such matters by shareholders’ general meeting.
Minutes shall be prepared in respect of matters considered at the general meeting and the
chairperson and directors attending the meeting shall endorse such minutes by signature. The
minutes shall be kept together with the shareholders’ attendance register and the proxy forms.
Board
A company shall have a board, which shall consist of 5 to 19 members. 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. A director may serve consecutive 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 articles of association until a duly reelected director takes
office, if re-election is not conducted in a timely manner upon the expiry of his/her term of
office or if the resignation of directors results in the number of directors being less than the
quorum.
Under the PRC Company Law, the board of directors may exercise 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 the shareholders at the shareholders’ general
meetings;
(3) to decide on the company’s operational plans and investment proposals;
(4) to formulate proposal for the company’s annual financial budgets and final accounts;
(5) to formulate the company’s profit distribution proposals and loss recovery
proposals;
APPENDIX IV SUMMARY OF PRINCIPAL LEGAL AND
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--- page 571 ---
(6) to formulate proposals for the increase or reduction of the company’s registered
capital and the issue of corporate bonds;
(7) to formulate proposals for the merger, division or dissolution of the company or
change of corporate form;
(8) to decide on the setup of the company’s internal management organs;
(9) 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 deputy
general manager and financial officer of the company and to decide on their
remunerations;
(10) to formulate the company’s basic management system; and
(11) to exercise any other authority stipulated in the articles of association.
Meetings of the board of directors shall be convened at least twice each year. Notices of
meeting shall be given to all directors and supervisors 10 days before the meeting. Interim
board meetings may be proposed to be convened by shareholders representing more than 10%
of the voting rights, more than one-third of the directors or the supervisory board. The
chairman shall convene the meeting within 10 days of receiving such proposal, and preside
over the meeting. The board may otherwise determine the means 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 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 director 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.
If a resolution of the board of directors violates the laws, administrative regulations or the
articles of association or resolutions of the general meeting, and as a result of which the
company sustains serious losses, the directors participating in the resolution are liable to
compensate the company. However, if it can be proved that a director expressly objected to the
resolution when the resolution was voted on, and that such objection was recorded in the
minutes of the meeting, such director shall be relieved from that liability.
Under the PRC Company Law, the following person may not serve as a director in a
company:
 a person who is unable or has limited ability to undertake any civil liabilities;
APPENDIX IV SUMMARY OF PRINCIPAL LEGAL AND
REGULATORY PROVISIONS
– IV-18 –


--- page 572 ---
 a person who has been convicted of an offense of corruption, bribery, embezzlement,
misappropriation of property or destruction of the socialist market 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 sentence;
 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 personally
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;
 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
close down by law and the person was personally responsible, where less than three
years have elapsed since the date of such revocation;
 a person who is liable for a relatively large amount of debts that are overdue.
Where a company elects or appoints a director to which any of the above circumstances
applies, such election or appointment shall be null and void. A director to which any of the
above circumstances applies during his/her term of office shall be released of his/her duties by
the company.
Under the PRC Company Law, the board shall appoint a chairman and may appoint a vice
chairman.
The chairman and the vice chairman shall be elected with approval of more than half of
all the directors. The chairman shall convene and preside over board meetings and review the
implementation of board resolutions. The vice chairman shall assist the chairman to perform
his/her duties. Where the chairman is incapable of performing or is not performing his/her
duties, the duties shall be performed by the vice chairman. Where the vice chairman is
incapable of performing or is not performing his/her duties, a director nominated by more than
half of the directors shall perform his/her duties.
Supervisory Board
A company shall have a supervisory board composed of not less than three members. The
supervisory board shall consist of representatives of the shareholders and an appropriate
proportion of representatives of the company’s staff, of which the proportion of representatives
of the company’s staff shall not be less than one-third, and the actual proportion shall be
determined in the articles of association. Representatives of the company’s staff at the
supervisory board shall be democratically elected by the company’s staff at the staff
representative assembly, general staff meeting or otherwise. Directors and senior management
shall not act concurrently as supervisors.
APPENDIX IV SUMMARY OF PRINCIPAL LEGAL AND
REGULATORY PROVISIONS
– IV-19 –


--- page 573 ---
Each term of office of a supervisor is three years and he/she may serve consecutive terms
if reelected. A supervisor shall continue to perform his/her duties as a supervisor in accordance
with the laws, administrative regulations and the articles of association until a duly re-elected
supervisor takes office, if re-election is not conducted in a timely manner upon the expiry of
his/her term of office or if the resignation of supervisors results in the number of supervisors
being less than the quorum.
The 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, administrative regulations, the articles of association or resolutions of
the shareholders’ general meetings;
(3) when the acts of a director or senior management personnel are detrimental to the
company’s interests, to require the director and senior management to correct these
acts;
(4) to propose the convening of extraordinary shareholders’ general meetings and to
convene and preside over shareholders’ general meetings when the board fails to
perform the duty of convening and presiding over shareholders’ general meetings
under the PRC Company Law;
(5) to submit proposals to the shareholders’ general meetings;
(6) to bring actions against directors and senior management 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.
The supervisory board shall appoint a chairman and may appoint a vice chairman. The
chairman and the vice chairman of the supervisory board shall be elected by more than half of
the supervisors. According to the Reply of the Overseas Listing Department of CSRC and the
Production System Department of the State Commission for Restructuring the Economic
System on Opinions Concerning the Supplement and Amendment to Articles of Association by
Companies to Be Listed in Hong Kong (᜗ҷ։͛ପ᜗Փ̡ᗫ
APPENDIX IV SUMMARY OF PRINCIPAL LEGAL AND
REGULATORY PROVISIONS
– IV-20 –


--- page 574 ---
Ռ), which is promulgated and
implemented on April 3, 1995, the chairman of the supervisory board shall be selected by more
than two-thirds of the 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
over supervisory board meetings. Where the vice chairman of the supervisory board is
incapable of performing or is not performing his/her duties, a supervisor recommended by
more than half of the supervisors shall convene and preside over supervisory board meetings.
Manager and Senior Management
Under the PRC Company Law, a company shall have a manager who shall be appointed
or removed by the board of directors. The manager, who reports to the board of directors, may
exercise his/her powers:
(1) to manage the production and operation and administration of the company and
arrange for the implementation of the resolutions of the board of directors;
(2) to arrange for the implementation of the company’s annual operation plans and
investment proposals;
(3) to formulate proposals for the establishment of the company’s internal management
organs;
(4) to formulate the fundamental management system of the company;
(5) to formulate the company’s specific rules and regulations;
(6) to recommend the appointment or dismissal of any deputy manager and any
financial officer of the company;
(7) to appoint or dismiss management personnel (other than those required to be
appointed or dismissed by the board of directors); and
(8) to exercise any other authority granted by the board of directors or the articles of
association.
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.
APPENDIX IV SUMMARY OF PRINCIPAL LEGAL AND
REGULATORY PROVISIONS
– IV-21 –


--- page 575 ---
According to the PRC Company Law, senior management refers to the manager, deputy
manager, financial officer, secretary to the board of a listed company and other personnel as
stipulated in the articles of association.
Duties of Directors, Supervisors and Senior Management
Directors, supervisors and senior management are required under the PRC Company Law
to comply with the relevant laws, administrative regulations and the articles of association, and
carry out their duties of loyalty and diligence.
Directors, supervisors and senior management are prohibited from abusing their authority
in accepting bribes or other unlawful income and from misappropriating the company’s
property.
Directors and senior management are prohibited from:
(1) misappropriating company funds;
(2) depositing company funds into accounts under their own names or the names of
other individuals to deposit;
(3) loaning company funds to others or providing guarantees in favor of others
supported by company’s property in violation of the articles of association or
without approval of the general meeting or the board of directors;
(4) entering into contracts or transactions with the company in violation of the articles
of association or without approval of the general meeting;
(5) using their position to procure business opportunities for themselves or others that
should have otherwise been available to the company or operating businesses similar
to that of the company for their own benefits or on behalf of others without approval
of the general meeting;
(6) accepting commissions paid by 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 directors or senior management in violation of aforementioned shall
be returned to the company.
APPENDIX IV SUMMARY OF PRINCIPAL LEGAL AND
REGULATORY PROVISIONS
– IV-22 –


--- page 576 ---
A director, supervisor or senior management who contravenes law, administrative
regulation or articles of association in the performance of his/her duties resulting in any loss
to the company shall be liable to the company for compensation.
Where a director, supervisor or senior management is required to attend a shareholders’
general meeting, such director, supervisor or senior management shall attend the meeting and
answer the inquiries from shareholders. Directors and senior management shall furnish 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 contravenes law, administrative regulation or
articles of association in the performance of his/her duties resulting in any loss to the company,
shareholder(s) holding individually or in aggregate no less than 1% of the company’s shares
consecutively for at least 180 days may request in writing that the supervisory board institute
litigation at a people’s court on its behalf. 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 a 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
shareholder(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 a 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 shareholder(s) may institute litigation at a people’s court in accordance with the procedure
described above. Where a director or senior management contravenes any laws, administrative
regulations or the articles of association in infringement of shareholders’ interests, a
shareholder may also institute litigation at a people’s court.
Finance and Accounting
A company shall establish its own financial and accounting systems according to the laws,
administrative regulations and the regulations of the competent financial departments of the
State Council. At the end of each financial year, a company shall prepare a financial report
which shall be audited by an accounting firm in accordance with the laws. The financial and
accounting reports shall be prepared in accordance with the laws, administrative regulations
and the regulations of the financial departments of the State Council.
The company’s financial reports shall be made available for shareholders’ inspection at
the company 20 days before the convening of an annual general meeting. A joint stock limited
company that makes public stock offerings shall publish its financial reports.
APPENDIX IV SUMMARY OF PRINCIPAL LEGAL AND
REGULATORY PROVISIONS
– IV-23 –


--- page 577 ---
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 50% or more of the company’s registered capital. When the company’s statutory
common reserve fund is not sufficient to make up for the company’s losses for the previous
years, the current year’s profits shall first be used to make good 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 may, 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 good 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 good and allocations have been made to
the statutory common reserve fund in violation of the requirements described above must be
returned to the company. The company shall not be entitled to any distribution of profits in
respect of shares held by it.
The premium over the nominal value of the shares of the company earned from the issue
of share and other income as required by CSRC 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 good the company’s losses, expand its business operations or increase its
capital. The capital reserve fund, however, shall not be used to make good the company’s
losses. Upon the transfer of the statutory common reserve fund into capital, the balance of the
fund shall not be less than 25% of the registered capital of the company before such transfer.
The company shall have no accounting books other than the statutory books. The
company’s assets shall not be deposited in any account opened under the name of an individual.
Appointment and Retirement 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
or the board of directors in accordance with the articles of association. The accounting firm
should be allowed to make representations when the general meeting or the board of directors
conduct 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 information to the engaged accounting firm without any refusal or withholding or
falsification of information.
APPENDIX IV SUMMARY OF PRINCIPAL LEGAL AND
REGULATORY PROVISIONS
– IV-24 –


--- page 578 ---
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
at least 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’ general meeting has resolved to dissolve the company;
(3) the company is dissolved by reason of its merger or division;
(4) the business license of the company is revoked or the company is ordered to close
down or to be dissolved in accordance with the laws;
(5) the company is dissolved by a 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.
In the event of paragraph 1 above, the company may carry on its existence by amending
its articles of association. The amendments to the articles of association in accordance with the
provisions described above shall require the approval of more than two-thirds of voting rights
of shareholders attending a shareholders’ general meeting.
Where the company is dissolved under the circumstances set forth in paragraph 1, 2, 4 or
5 above, it should establish a liquidation committee within 15 days of the date on which the
dissolution matter occurs. The liquidation committee shall be composed of directors or any
other person determined by a shareholders’ general meeting. If a liquidation committee is not
established within the prescribed period, the company’s creditors may file an application with
APPENDIX IV SUMMARY OF PRINCIPAL LEGAL AND
REGULATORY PROVISIONS
– IV-25 –


--- page 579 ---
a people’s court to appoint relevant personnel to form a liquidation committee to administer the
liquidation. The people’s court should accept such application and form a liquidation
committee to conduct liquidation in a timely manner.
The liquidation committee may exercise following powers during the liquidation:
(1) to sort out the company’s assets and to prepare a statement of financial position and
an inventory of assets, respectively;
(2) to notify creditors by notice or public notices;
(3) to deal with any outstanding business related to the liquidation;
(4) to pay outstanding tax together with any tax arising during the liquidation process;
(5) to settle claims and liabilities;
(6) to handle the company’s remaining assets after its debts have been paid off;
(7) to represent the company in any civil procedures.
The liquidation committee shall notify the company’s creditors within 10 days of its
establishment, and publish an announcement in newspapers within 60 days.
A creditor shall lodge his claim with the liquidation committee within 30 days of receipt
of the notification or within 45 days of the date of the announcement if he has not received any
notification. 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 statement of
financial position and inventory of assets, the liquidation committee shall draw up a liquidation
plan and submit this plan to a shareholders’ general meeting or a people’s court for
endorsement. The remaining part of the company’s assets, after payment of liquidation
expenses, employee wages, social insurance 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 activities that are not related to the liquidation. The company’s property
shall not be distributed to shareholders before repayments are made in accordance with the
requirements described above.
APPENDIX IV SUMMARY OF PRINCIPAL LEGAL AND
REGULATORY PROVISIONS
– IV-26 –


--- page 580 ---
Upon liquidation of the company’s property and preparation of the required statement of
financial position and inventory of assets, if the liquidation committee becomes aware that the
company does not have sufficient assets to meet its liabilities, it must apply to a people’s court
for a declaration of bankruptcy in accordance with the laws. Following such declaration by the
people’s court, the liquidation committee shall hand over the administration of the liquidation
to the people’s court.
Upon completion of the liquidation, the liquidation committee shall prepare a liquidation
report and submit it to the shareholders’ general meeting or a people’s court for confirmation
of its completion. Following such confirmation, the report shall be submitted to the company
registration authority to cancel the company’s registration, and an announcement of its
termination shall be published. Members of the liquidation committee are required to discharge
their duties in good faith and perform their obligation in compliance with laws. Members of
the liquidation committee shall be prohibited from abusing their authority in accepting bribes
or other unlawful income and from misappropriating the company’s properties. Members of the
liquidation committee are liable to indemnify the company and its creditors in respect of any
loss arising from their willful or gross negligence.
Liquidation of a company declared bankrupt according to laws shall be processed in
accordance with the laws on corporate bankruptcy.
Overseas Listing
Pursuant to the Overseas Listing Trial Measures, where an issuer submits an application
for initial public offering to competent overseas regulators, such issuer must file with the
CSRC within three business days after such application is submitted.
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
A merger agreement shall be signed by merging companies and the involved companies
shall prepare respective statements of financial position and inventory of assets. The
companies shall within 10 days of the date of passing the resolution approving the merger
notify their respective creditors and publicly announce the merger in newspapers within 30
days. A creditor may, within 30 days of receipt of the notification, or within 45 days of the date
APPENDIX IV SUMMARY OF PRINCIPAL LEGAL AND
REGULATORY PROVISIONS
– IV-27 –


--- page 581 ---
of the announcement if he has not received the notification, request the company to settle any
outstanding debts or provide relevant guarantees. In case of a merger, the credits and debts of
the merging parties shall be assumed by the surviving or the new company.
In case of a division, the company’s assets shall be divided and a statement of financial
position and an inventory of assets shall be prepared. When a resolution regarding the
company’s division is approved, the company should notify all its creditors within 10 days of
the date of passing such resolution and publicly announce the division in newspapers within
30 days. 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 business registration of the companies as a result of the merger or division
shall be registered with the relevant administration authority for industry and commerce.
In accordance with the laws, cancelation of a company shall be registered when a
company is dissolved and incorporation of a company shall be registered when a new company
is incorporated.
APPENDIX IV SUMMARY OF PRINCIPAL LEGAL AND
REGULATORY PROVISIONS
– IV-28 –


--- page 582 ---
This Appendix sets out summaries of the main clauses of our Articles of Association
adopted on April 21, 2023 which shall become effective as at the date on which the H shares
are listed on the Stock Exchange. As the main purpose of this Appendix is to provide potential
investors with an overview of the Articles of Association, it may not necessarily contain all
information that is important for prospective investors. As discussed in the appendix headed
“Appendix VII – Documents Delivered to the Registrar of Companies and Available on
Display” to this document, the full document of the Articles of Association in Chinese is
available for examination.
1 DIRECTORS AND BOARD OF DIRECTORS
(1) Power to allocate and issue Shares
The Articles of Association does not contain clauses that authorize the Board of Directors
to allocate or issue shares. The Board of Directors shall prepare suggestions for share allotment
or issue, which are subject to approval by the Shareholders at the general Shareholders’
meeting (“ General Meeting ”) in the form of a special resolution. Any such allotment or issue
shall be in accordance with the procedures stipulated in appropriate laws, administrative
regulations and supervision rules of shares listed region.
(2) Power to dispose assets of our Company or any subsidiary
The Board of Directors shall determine the authority of external investment, acquisition
and sale of assets, asset mortgage, external guarantee matters, entrusted financial management,
connected transactions, external donations, and establish strict review and decision-making
procedures; major investment projects shall be reviewed by relevant experts and professionals
and reported to the General Meeting for approval.
(3) Guarantees of Loans to Directors, Supervisors or other management personnel
The external guarantee matters of the Company shall be submitted to the Board of
Directors or the General Meeting for deliberation.
The following acts of external guarantee of the Company shall be submitted to the
General Meeting for deliberation and approval after being reviewed and approved by the Board
of Directors:
i. any single guarantee for an amount more than 10% of the Company’s net assets
audited in the latest period;
ii. any guarantee to be provided after the total amount of external guarantees provided
by the Company or the subsidiaries it controls has exceeded 50% of the Company’s
net assets as audited in the latest period;
APPENDIX V SUMMARY OF ARTICLES OF ASSOCIATION
– V-1 –


--- page 583 ---
iii. any guarantee to be provided for a party whose ratio of liabilities to assets exceeds
70%;
iv. any guarantee to be provided after the total amount of external guarantees provided
by the Company has exceeded 30% of its total assets as audited in the latest period;
v. the amount guaranteed by the Company within one year exceeds 30% of its latest
audited total assets;
vi. any guarantee to be provided to a Shareholder, or to an ultimate controller or related
party;
vii. other external guarantees that meet the requirements of stock exchange and the
Articles of Association and can take effect only after being reviewed and approved
by the General Meeting.
(4) Provide financial assistance for acquiring the shares of the Company or shares of any
subsidiary
The Company or its subsidiaries (including its subsidiaries) will not provide any financial
assistance to the person who purchases or intends to purchase the company’s shares in the form
of gifts, advances, guarantees, compensation or loans.
(5) Remuneration
The appointment and removal of the members of the Board of Directors and the Board of
Supervisors, as well as their remuneration and payment methods, shall be adopted by the
General Meeting by ordinary resolution.
(6) Appointment, Resignation and Dismissal
The Board of Directors is composed of nine directors, including three independent
directors. The directors of the Company are elected by the General Meeting. At any time, the
Board of Directors should have more than 1/3 independent Directors, and the total number of
independent directors should not be less than three.
The Board of Directors has one chairman. The chairman of the Board of Directors shall
be elected by more than half of all Directors. The Directors shall be elected or replaced by the
General Meeting, and may be removed by the General Meeting through an ordinary resolution
before the expiration of their term of office.
APPENDIX V SUMMARY OF ARTICLES OF ASSOCIATION
– V-2 –


--- page 584 ---
The chairman of the Board and other Directors serve three-year terms, and the director
can be re-elected and reappointed at the end of the term. The general manager or other senior
managers may concurrently serve as directors. However, the total number of directors
concurrently serving as the general manager or other senior managers shall not exceed half of
the total number of directors of the Company.
None of the following persons shall serve as our Director, Supervisor or senior
management:
i. a person who has no civil capacity or has limited civil capacity;
ii. a person who has been sentenced to a term of imprisonment for any of the following
crimes and five years have not elapsed since the date on which execution of the
sentence was completed: embezzlement, bribery, conversion of property,
misappropriation of property, or sabotaging the socialist economic order; or has
been deprived of his/her political rights as a result of a criminal conviction and five
years have not elapsed since the date on which execution of the sentence was
completed;
iii. a person who has served as a director, the factory chief, or the manager of an
insolvent and liquidated company or enterprise and is held personally liable for such
bankruptcy, and three years have not elapsed since the date when the bankruptcy and
liquidation of the company or enterprise are completed;
iv. a person who has served as the legal representative of a company or enterprise
whose business license was revoked or which is ordered to close down due to any
violation of law, and is held personally liable for the revocation, and three years
have not elapsed since the date when the revocation occurs;
v. a person who has a relatively large sum of debt, which was not paid at maturity;
vi. a person who has been banned from entering the securities market by the CSRC and
whose term has not expired;
vii. other contents stipulated by laws, administrative regulations and departmental rules.
The election, appointment or employment of the Directors, Supervisors or other senior
management shall be invalid if such election, appointment or employment is against the
Articles of Association. If the Directors, Supervisors or senior management falls into the
situations provided in the above-mentioned situations during their term of office, they would
be dismissed by our Company.
APPENDIX V SUMMARY OF ARTICLES OF ASSOCIATION
– V-3 –


--- page 585 ---
(7) Borrowing powers
The Board of Directors shall be entitled to develop proposals for our Company to issue
bonds and to list its Shares, and that such bond issues must be approved by the Shareholders
by a special resolution at the General Meeting.
(8) Duties
The directors shall abide by laws, administrative regulations and the Articles of
Association, and shall have the following loyal duties to the Company:
i. shall not abuse their authority by accepting bribes or other illegal income, and shall
not convert company property;
ii. shall not misappropriate company funds;
iii. shall not deposit Company’s assets into accounts held in their own names or in the
name of any other individual;
iv. shall not, in violation of the Articles of Association, loan Company’s funds to any
other person or give Company’s assets as security for the debt of any other person
without the approval of the General Meeting or the Board of Directors;
v. shall not conclude any contract or engage in any transaction with the Company
either in violation of the Articles of Association or without the approval of the
General Meeting;
vi. shall not use the advantages provided by their own positions to pursue business
opportunities that properly belong to the Company to engage in the same business
as the Company either for their own account or for the account of any other person
without the approval of the General Meeting;
vii. shall not accept commissions paid by others for transactions conducted with the
Company as their own;
viii. shall not disclose confidential Company’s information without authorization;
ix. shall not abuse their connected relationships to damage the Company’s interests;
x. laws, administrative regulations, departmental rules and other fiduciary obligations
stipulated in the Articles of Association.
The income obtained by the director in violation of above article shall belong to the
Company. If losses are caused to the Company, it shall be liable for compensation.
APPENDIX V SUMMARY OF ARTICLES OF ASSOCIATION
– V-4 –


--- page 586 ---
Directors shall abide by laws, administrative regulations and the Articles of Association,
and have the following diligent obligations to the Company:
i. shall prudently, earnestly and diligently exercise the powers the Company grants to
them to ensure that the Company conducts its commercial activities in a manner that
complies with the requirements of state laws, administrative regulations and state
economic policies, and that the Company’s commercial activities do not go beyond
the scope of the business activities stipulated in the Company’s business license;
ii. shall treat all Shareholders fairly;
iii. shall maintain a timely awareness of the operation and management of the
Company;
iv. shall sign written statements confirming the regular reports of the Company, and
ensure that the information disclosed by the Company is true, accurate and
complete;
v. shall provide accurate information and materials to the Board of Supervisors and
shall not obstruct the Board of Supervisors or individual Supervisors from
performing its or their duties;
vi. laws, administrative regulations, departmental rules and other obligations of
diligence stipulated in the Articles of Association.
The duty of loyalty assumed by the Directors shall not be automatically relieved within
a reasonable period after the resignation report has not come into effect or has come into effect,
and within a reasonable period after the end of the term of office. The duty of confidentiality
of the Company’s business secrets shall remain valid after the resignation report comes into
effect or the end of the term of office, until the secrets become public information.
Without the provisions of the Articles of Association or the lawful authorization of the
Board of Directors, no Director shall act in his own name on behalf of the Company or the
Board of Directors. When a Director acts in his/her own name, the Director shall declare
his/her position and identity in advance if the third party reasonably believes that the Director
is acting on behalf of the Company or the Board of Directors.
Where any Director or senior officer, in the course of his company duties, violates any
law, administrative regulations or the Articles of Association and causes the Company to suffer
a loss, shareholders individually or jointly holding more than 1% of the Company’s Shares for
more than 180 successive days may make a written request to the Board of Supervisors to bring
a lawsuit in the people’s court; where the Board of Supervisors, in the course of its company
duties, violates any law, administrative regulations or the Articles of Association and causes the
Company to suffer a loss, the shareholders may make a written request to the Board of
Directors to bring a lawsuit in the people’s court.
APPENDIX V SUMMARY OF ARTICLES OF ASSOCIATION
– V-5 –


--- page 587 ---
Where the Board of Supervisors or the Board of Directors refuses to bring a lawsuit after
receiving a written request from the Shareholders prescribed in the preceding paragraph or fails
to bring a lawsuit within 30 days of receiving such a request, or where the situation is so urgent
that failure to bring a lawsuit will lead to irreparable damage to the interests of the Company,
the Shareholders prescribed in the preceding paragraph may bring a lawsuit directly in their
own names for the benefit of the Company.
In the event of any other person infringes upon the legitimate rights and interests of our
Company and causes losses thereto, the shareholder(s) specified in this Articles of Association
may file an action with the competent court pursuant to the provisions of the preceding two
paragraphs.
In the event of a Director or senior management person violates laws, administrative
regulations or our Company’s Articles of Association, thereby damaging the interests of the
Shareholder(s), the Shareholder(s) may file an action with the competent court.
2 MODIFICATION OF THE ARTICLES OF ASSOCIATION
Our Company may amend the Articles of Association based on the provisions of the laws,
administrative regulations and Articles of Association.
Where the amendments to the Articles of Association passed by the General Meetings
need the examination and approval of the competent authorities, these amendments shall be
submitted hereto for approval. Where the amendment of the Articles of Association involves
registration, it shall be necessary to carry out the lawfully prescribed procedures for
registration change.
3 SPECIAL RESOLUTIONS NEEDED TO BE ADOPTED BY ABSOLUTE
MAJORITY VOTE
The resolutions of the General Meeting shall be divided into ordinary resolutions and
special resolutions.
An ordinary resolution may be adopted by a simple majority of the votes held by the
Shareholders (including proxies of Shareholders) attending the General Meeting.
A special resolution can be adopted by a two-thirds majority of the votes held by the
Shareholders (including proxies of Shareholders) attending the General Meeting.
4 VOTING RIGHTS
Shareholders (including proxy) shall exercise their voting rights according to the number
of voting Shares they represent, and each Share shall have one vote.
APPENDIX V SUMMARY OF ARTICLES OF ASSOCIATION
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--- page 588 ---
The General Meeting of Shareholders shall vote by open ballot. The same voting right can
only choose one of on-site, online or other voting methods (if any). In case of repeated voting
with the same voting right, the first voting result shall prevail.
Shareholders attending the General Meeting shall express one of the following opinions
on the proposal submitted for voting: affirmative, negative or abstention. The securities
registration and clearing organization shall be the nominee holder of shares on the
Interconnection Mechanism for Mainland and Hong Kong Stock Markets (if any), except where
declaration is made in accordance with the actual holder’s intent. Where any ballot is not
completed in full, is completed incorrectly or unintelligibly, or has no vote recorded, the voter
shall be deemed to have waived his voting rights and the voting result for his shares shall be
deemed as an “abstention”.
5 RULES ON GENERAL MEETINGS
The General Meetings are divided into annual general meetings and extraordinary general
meetings. The annual general meeting shall be convened once a year and be held within six
months of the end of the previous fiscal year.
6 ACCOUNTING AND AUDITS
(1) Financial and accounting policies
Our Company shall develop its financial accounting policies pursuant to laws,
administrative regulations and rules developed by the competent department.
The Company shall issue a consolidated annual financial audit report for the previous
year in accordance with the Chinese accounting system respectively, and the financial audit
report shall be submitted to the board of directors and the General Meeting for approval after
being audited by the accounting firm engaged by the Company.
The Company shall not establish other accounting books except for the statutory
accounting books. The assets of the Company shall not be deposited in any account opened in
the name of any individual.
(2) Appointment and Dismissal of Accountants
The Company employs an accounting firm that complies with relevant national
regulations to conduct accounting statement audit, net asset verification and other related
consulting services. The employment period is one year, and can be renewed.
The employment of accounting firms by the Company must be decided by the General
Meeting, and the Board of Directors shall not appoint accounting firms before the decision of
the General Meeting.
APPENDIX V SUMMARY OF ARTICLES OF ASSOCIATION
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--- page 589 ---
The Company shall guarantee to provide the accounting firm it employs with true and
complete accounting vouchers, accounting books, financial and accounting reports and other
accounting materials, and shall not refuse, conceal or make false statements.
The Company shall notify the accounting firm 20 days in advance when dismissing or no
longer renewing the accounting firm. The accounting firm shall be allowed to state its opinions
when the General Meeting votes on dismissing the accounting firm. If the accounting firm
proposes to resign, it shall explain to the General Meeting whether the Company has any
improper situation.
7 NOTICE AND AGENDA OF GENERAL SHAREHOLDERS’ MEETINGS
The General Meeting is the authorized organ of our Company
Under any of the following circumstances, the Company shall convene an extraordinary
general meeting within two months:
i. where the number of directors falls below the number prescribed in the Company
Law or below two thirds of the number prescribed in the Articles of Association;
ii. where the Company’s unfunded losses reach one third of total Share capital paid in;
iii. where Shareholders who individually or jointly hold no less than 10% of the
Company’s stock request holding of such a meeting;
iv. where the Board of Directors deems it necessary;
v. where the Board of Supervisors proposes such a meeting;
vi. in any other circumstances prescribed by laws, administrative regulations,
departmental rules, or the Articles of Association.
The General Meeting shall be convened by the Board of Directors.
The Board of Supervisors may request in writing to convene an extraordinary general
meeting. If the Board of Directors agree to convene an extraordinary general meeting, the
notice of convening extraordinary general meeting shall be issued within 5 days after the Board
of Directors makes a resolution. If the Board of Directors made a rejection or does not respond
within 10 days after it receiving the proposal, it shall be viewed as the Board of Directors is
unable to or fails to perform its meeting duty of convening the General Meeting and the Board
of Supervisors may convene and preside over the meeting by its own.
APPENDIX V SUMMARY OF ARTICLES OF ASSOCIATION
– V-8 –


--- page 590 ---
Shareholders who separately or jointly hold 10% or more of the shares may request in
writing to convene an extraordinary general meeting. If the Board of Directors does not issue
a notice of convening the meeting within 10 days after receiving the above written requirement,
or refused to convene, the shareholders who make the request may request the Board of
Supervisors in writing to convene the meeting. If the Board of Supervisors does not issue the
notice about convening the meeting within 5 days after receiving the above written
requirement, the Shareholders who make the request could convene and preside the meeting by
themselves.
If the General Meeting is convened, the Board of Directors, the Board of Supervisors and
Shareholders who separately or jointly hold more than 3% of the shares of our Company may
submit a proposal 10 days before the meeting.
The convener shall notify shareholders by announcement 21 or 20 net working days
(whichever is longer) before the annual general meeting, and the extraordinary general meeting
shall notify shareholders by announcement 15 or 10 net working days (whichever is longer)
before the meeting. In calculating the advance notice period, the Company shall not include the
day of the meeting, but may include the day on which the notice of the meeting is given.
The notice of a General Meeting includes the following:
i. the time, place and duration of the meeting;
ii. matters and proposals submitted to the meeting to review;
iii. explain in obvious words that all shareholders have the right to attend the general
meeting of shareholders and may appoint a proxy in writing to attend the meeting
and participate in the vote, and the shareholder proxy need not be a shareholder of
the company;
iv. share registration date of the shareholders entitled to attend the general meeting;
v. name and telephone number of the permanent contact person for conference affairs;
vi. online or other voting time and voting procedures.
The notice of the General Meeting and the supplementary notice shall fully and
completely disclose all the specific contents of all proposals, as well as all the materials or
explanations required to enable the Shareholders to make a reasonable judgment on the matters
to be discussed. If the matter to be discussed needs the opinion of independent Directors, the
opinions and reasons of independent Directors will be disclosed at the same time when the
notice General Meeting or supplementary notice is issued.
APPENDIX V SUMMARY OF ARTICLES OF ASSOCIATION
– V-9 –


--- page 591 ---
The resolution of the General Meeting includes ordinary resolution and special resolution.
The following matters shall be approved by the General Meeting through ordinary resolutions:
i. work report of the Board of Directors and the Board of Supervisors;
ii. plans of earnings distribution and loss make-up schemes drafted by the Board of
Directors;
iii. appointment or dismissal of the members of the Board of Directors and the Board
of Supervisors, and their payment and payment methods;
iv. annual budget and final account report;
v. annual report of the Company;
vi. other matters other than those approved by special resolution stipulated in the laws,
administrative regulations or the Articles of Association.
The following matters shall be approved by special resolution at the General Meeting:
i. the increase or reduction of the registered capital;
ii. the mergers, spin-offs, dissolutions and liquidations (including voluntary
winding-ups) of the Company;
iii. the amendment to the Articles of Association;
iv. to review and approve the purchases or sell of material assets by the Company
within 12 consecutive months or the guarantee amount exceeds 30% of the latest
audited total assets of the Company;
v. to review the Company’s employee shareholding schemes or share incentives;
vi. other matters stipulated by laws, administrative regulations, the Articles of
Association and the Rules of Procedure of the General Meeting of Shareholders, as
well as other matters that the general meeting determines by ordinary resolution will
have a significant impact on the Company and need to be passed by special
resolution.
APPENDIX V SUMMARY OF ARTICLES OF ASSOCIATION
– V-10 –


--- page 592 ---
If any resolution of the General Meeting or resolution of the Board of Directors violates
laws or administrative regulations, any Shareholder is entitled to request the court to deem it
as invalid.
If the convening procedure or voting formula of the General Meeting or meeting of the
Board of Directors violates any of laws, administrative regulations or the Articles of
Association, or resolution of which violates the Articles of Association, any Shareholder is
entitled to ask the court to overturn within 60 days after the resolution was adopted.
8 SHARE TRANSFERS
The Shares of our Company holding by the funders thereof shall not be transferred within
one year of the date of establishment of our Company.
The Directors, Supervisors, and senior management of our Company shall declare, to our
Company, information on their holdings of the Shares of our Company and the changes thereto.
The Shares transferrable by them during each year of their term of office shall not exceed 25
percent of their total holdings of the Shares of our Company. The Shares that they hold in our
Company shall not be transferred within one year of the date on which the stocks of our
Company are listed and traded. The aforesaid persons shall not transfer their Shares of our
Company within half a year from the date of their resignation.
Where any Director, Supervisor or senior manager of the Company who holds more than
5% of the Company Shares sells company’s stock he holds within 6 months of the relevant
purchase, or purchases any stock he has sold within 6 months of the relevant sale, the proceeds
generated therefrom shall be incorporated into the profits of the Company, and the Board of
Directors of the Company shall recover the proceeds. However, the following circumstances
shall be excluded where a securities company holds more than 5% of the shares due to its
purchase of any remaining Shares under best efforts underwriting or where the provisions of
the securities regulatory authority under the State Council are apply.
Shares or other securities with the nature of equity held by Directors, Supervisors, senior
executives and individual shareholders as mentioned in the preceding paragraph include shares
or other securities with the nature of equity held by their spouses, parents or children, or held
by them by using other people’s accounts. If the Board of Directors of the Company fails to
comply with the above paragraph of this Article, the Shareholders are entitled to request the
Board of Directors to do so within 30 days. If the Board of Directors of the Company fails to
comply within the aforesaid period, the Shareholders are entitled to initiate litigation directly
in the People’s Court in their own names for the interest of the Company. And if the Board of
Directors fails to implement the provisions set forth in this Article, the responsible Directors
shall bear joint and several liability in accordance with law.
APPENDIX V SUMMARY OF ARTICLES OF ASSOCIATION
– V-11 –


--- page 593 ---
9 RIGHTS OF OUR COMPANY TO PURCHASE OUR OUTSTANDING ISSUED
SHARES
The Company shall not repurchase of its Shares. However, exceptions are made in any of
the following cases:
i. to reduce the registered capital of the Company;
ii. to merge with other companies that hold shares in the Company;
iii. to use the shares for employee shareholding schemes or as share incentives;
iv. to acquire the shares of shareholders (upon their request) who vote against any
resolution adopted at any general meetings on the merger or division of the
Company;
v. to use the shares to satisfy the conversion of those corporate bonds convertible into
shares issued by the Company;
vi. to safeguard corporate value and shareholders’ equity as the Company deems
necessary.
The Company may purchase its own Shares through public centralized trading, or through
other means recognized by the laws, administrative regulations, or the CSRC. Where the
Company purchases its own Shares under any of the circumstances specified in Items 3, 5, or
6 of Article 25 of the Articles of Association, centralized trading shall be adopted publicly.
10 POWER FOR ANY SUBSIDIARY OF OUR COMPANY TO OWN SHARES IN ITS
PARENT
There are no provisions in the Articles of Association relating to ownership by subsidiary
of our Company of Shares in its parent.
11 DIVIDEND AND OTHER DISTRIBUTION METHODS
The Company shall distribute profit in cash or shares, as follows:
i. the principle of profit distribution of the Company: the Company implements the
dividend distribution policy of equal shares and interests, and shareholders receive
dividends and other forms of benefit distribution according to the shares. The
Company implements an active profit distribution policy, attaches importance to
reasonable investment returns to investors, and maintains continuity and stability.
The Company may distribute profits by means of cash or shares, and the distribution
of profits shall not exceed the scope of cumulative distributable profits, and shall not
harm the Company’s ability to continue operations. The opinions of independent
APPENDIX V SUMMARY OF ARTICLES OF ASSOCIATION
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--- page 594 ---
non-executive directors, external supervisors (if any) and public investors shall be
fully considered in the decision-making and deliberation of the profit distribution
policy by the Board of Directors, Board of Supervisors and general meetings.
ii. the overall form of the Company’s profit distribution: dividends are distributed in
cash, shares or a combination of the two, and when the Company has the conditions
for cash dividends, the Company should give priority to cash dividends for profit
distribution.
iii. the specific conditions and proportion of the Company’s cash dividends: the
Company mainly adopts the profit distribution policy of cash dividends, that is, if
the Company achieves profits in the current year, and has distributable profits after
making up for losses according to law, withdrawing statutory reserve funds and
surplus reserve funds, the company shall pay cash dividends; the company’s profit
distribution shall not exceed the range of cumulative distributable profits.
After the General Meeting of our Company make a resolution on dividends distribution
plan, the Board of Directors shall complete the distribution within 2 months after the convening
of the General Meeting.
12 SHAREHOLDER PROXIES
Shareholders can attend the General Meeting in person or entrust a proxy to attend and
vote on their behalf.
Any proxy statement issued by a Shareholder who authorizes a proxy to attend the
General Meeting on his behalf shall include the following details:
i. the name of the proxy;
ii. whether the proxy is authorized to vote;
iii. respective instructions on affirmative, negative or abstention voting on each item for
consideration listed in the General Meeting agenda;
iv. the issuance date and valid period of the proxy statement;
v. the signature (or seal) of the Shareholder. Where the Shareholder is a legal person,
the legal person’s seal shall be affixed.
The power of attorney shall indicate whether the shareholder’s proxy can vote according
to his own will if the Shareholder does not give specific instructions. A Shareholder’s proxy
needs not be a Shareholder of the Company.
APPENDIX V SUMMARY OF ARTICLES OF ASSOCIATION
– V-13 –


--- page 595 ---
Where a Shareholder authorizes another person to sign a proxy statement for voting, the
power of attorney for signing authority or other authorization documents shall be notarized.
The notarized power of attorney or other authorization documents shall be lodged at the
Company’s domicile or any other place stipulated in the meeting notice. Where the Shareholder
is a legal person, its legal representative or any person authorized by a resolution of the Board
of Directors or other decision-making body shall attend the General Meeting as its proxy.
If a member is a recognized clearing house (or its agent) as such term is defined in the
relevant regulations from time to time in Hong Kong, it may authorize one or more persons as
it thinks fit to act as its representative at any general meeting; Provided, however, that if more
than one person is so authorized the powers of attorney shall set forth the number and class
number of shares in respect of which each such person has so authorized and shall be signed
by the person or persons who have been duly authorized by the clearing house. A person so
authorized may attend (without production of share certificate by notarial authority and/or
further evidence of due authority) and exercise all rights (including the right to speak and vote)
on behalf of a recognized clearing house (or its alternate) as if that person were an individual
Shareholder of the Company.
13 REVIEW THE REGISTER OF SHAREHOLDERS AND OTHER RIGHTS OF
SHAREHOLDERS
The Company establishes the register of Shareholders according to the certificate
provided by the securities registration authority. The register of Shareholders is sufficient
evidence to prove that the Shareholders hold the Company’s Shares. Shareholders enjoy rights
and assume obligations according to the types of shares they hold. Shareholders holding the
same kind of Shares shall enjoy the same rights and undertake the same obligations.
The Hong Kong branch of the register of Shareholders must be available for inspection
by Shareholders, but the Company may be allowed to suspend the registration of Shareholders
in accordance with the equivalent provisions of Section 632 of the Companies Ordinance (Cap.
622 of the Laws of Hong Kong).
When our Company convenes the General Meeting, pays dividends, goes into liquidation
or is involved in other actions that require the confirmation of identities, the Board of Directors
or the convener of the General Meeting shall determine the Shareholders who enjoy the
relevant rights and interests according to the register of Shareholders.
14 RESTRICTIONS ON RIGHTS OF CONTROLLING SHAREHOLDERS
The controlling Shareholders and actual controllers of the Company shall not use their
connected relationship to damage the legitimate interests of the Company and other
shareholders; Controlling shareholders and actual controllers who violate relevant laws,
regulations and Articles of Association and cause losses to the Company and other
Shareholders shall be liable for compensation.
APPENDIX V SUMMARY OF ARTICLES OF ASSOCIATION
– V-14 –


--- page 596 ---
Controlling Shareholders and ultimate controllers of the Company shall have a duty of
good faith to the Company and other Shareholders. Controlling Shareholders shall exercise
their investors’ rights in strict accordance with the law and shall not damage the lawful
interests of the Company or of public Shareholders in any way such as via the distribution of
profits, an asset reorganization, external investments, the use of Company’s funds or the
provision of a loan guarantee, nor shall they abuse their controlling positions to damage the
interests of the Company or of public Shareholders.
15 PROCEDURES FOR LIQUIDATION
The Company shall be dissolved in accordance with the law under any of the following
circumstances:
i. the term of business operation expires;
ii. the general meeting resolves to dissolve the Company;
iii. dissolution is necessary as a result of the merger or division of the Company;
iv. the Company’s business license is revoked or it is ordered to close down or it is
deregistered according to laws;
v. serious difficulties arise in the operation and management of the Company and its
continued existence would cause material loss to the interests of the shareholders
and such difficulties cannot be resolved through other means, in which case
shareholders holding at least 10% of all shareholders’ voting rights of the Company
may petition a People’s Court to dissolve the Company.
Where the Company is to be dissolved pursuant to Items i, ii, v or vi of above paragraph
of this Article, a liquidation committee shall be established within 15 days from the date when
the event of dissolution occurs. The liquidation committee shall be composed of Directors or
members determined by the General Meeting. Where the Company fails to form a liquidation
committee to liquidate the Company within the prescribed period of time, its creditors may
petition the people’s court to appoint the relevant persons to establish a liquidation committee
and liquidate the Company.
Within 10 days of the establishment of the liquidation committee, the creditors shall be
notified and an announcement shall be published in at least one newspaper within 60 days.
Creditors shall file their claims with the liquidation committee within 30 days of receiving the
notice, or within 45 days of publication of the first notice if any such creditor does not receive
the notice.
APPENDIX V SUMMARY OF ARTICLES OF ASSOCIATION
– V-15 –


--- page 597 ---
In filing their claims, creditors shall provide all relevant details relating thereto and
provide supporting materials. The liquidation committee shall make records of such claims.
The liquidation committee shall not pay out on any creditors’ claims while such claims are still
being filed.
After identifying the Company’s assets and preparing the balance sheet and schedule of
assets, the liquidation committee shall prepare a liquidation plan, which shall be submitted to
the General Meeting or the people’s court for ratification. After paying all liquidation expenses,
staff wages and labor insurance expenses, outstanding taxes, and Company’s debts, the
remaining assets shall be distributed to the Shareholders in proportion to their respective
shareholdings.
During the liquidation, our Company shall continue to exist, but shall not carry out
business activities irrelevant to the liquidation. The property of our Company shall not be
distributed to any Shareholder before full payments have been made out of the property
according to the aforesaid provision.
Where the liquidation committee, after identifying the Company’s assets and preparing
the balance sheet and schedule of assets, discovers that the Company does not have sufficient
assets to repay the Company’s debts in full, the liquidation committee shall file a bankruptcy
petition with the people’s court in accordance with the law.
After our Company is declared bankrupt by ruling of the people’s court, the liquidation
committee shall turn over matters regarding the liquidation to the people’s court.
Upon closure of liquidation of our Company, the liquidation committee shall prepare a
liquidation report, which shall be submitted to our General Meeting or the people’s court for
confirmation. The liquidation committee shall, from the date of the confirmation of the
liquidation report by the General Meeting or the people’s court, submit it to the company
registration authority to apply for cancellation of the Company’s registration and announce the
termination of the Company.
16 OTHER IMPORTANT PROVISIONS FOR OUR COMPANY OR THE
SHAREHOLDERS
(1) General Provisions
Our Company is a permanently existing joint stock limited company.
All the assets of the company are divided into shares of equal value. The Shareholders are
responsible for the Company to the extent of their subscribed Shares, and the Company is
responsible for the Company’s debts with all its assets.
APPENDIX V SUMMARY OF ARTICLES OF ASSOCIATION
– V-16 –


--- page 598 ---
The Articles of Association shall, from the date on which they take effect, be the legally
binding document that regulates the organization and activities of the Company and the
relationship of rights and obligations as between the Company and the Shareholders and among
the Shareholders, and shall be legally binding on the Company, the Shareholders, the Directors,
the Supervisors and senior officers. Based on the Articles of Association, any Shareholder may
bring a lawsuit against another Shareholder, a Director, a Supervisor, a manager or any other
senior officer. Any Shareholder may bring a lawsuit against the Company, and the Company
may bring a lawsuit against any Shareholder, Director, Supervisor, manager or any other senior
officer.
(2) Share and Transfer
In light of the Company’s operational and developmental needs, the Company may
increase its capital in accordance with the laws and regulations and subject to a resolution of
the general meeting, by any of the following methods:
i. a public offering of shares;
ii. a private placement of shares;
iii. allotment of bonus shares to existing shareholders;
iv. conversion of reserve funds to share capital;
v. other methods permitted by laws, administrative regulations and the CSRC.
The Company may reduce its registered capital. Any reduction of the Company’s
registered capital shall be subject to the procedures prescribed in the Company Law, Hong
Kong Listing Rules and other relevant regulations, as well as the Articles of Association.
(3) Shareholders
Shareholders are entitled to rights and assumes obligations pursuant to the classification
and ratio of their shares. Shareholders holding the same classified share have the same rights
and assume the same obligations.
Shareholders of the Company shall enjoy the following rights:
i. the right to dividends and other distributions in proportion to the number of shares
held;
ii. the right to apply for, convene, preside, attend or appoint proxies to attend general
meetings and to exercise the corresponding right to speak and vote;
APPENDIX V SUMMARY OF ARTICLES OF ASSOCIATION
– V-17 –


--- page 599 ---
iii. the right to supervise, present proposals or raise enquiries in respect of the
Company’s business operations;
iv. the right to transfer, give as a gift or pledge the shares it holds in accordance with
laws, administrative regulations and the Articles of Association;
v. the right to inspect the Articles of Association, Register of Shareholders, corporate
bond stubs, minutes of general meetings, resolutions of the Board of Directors and
resolutions of the Board of Supervisors and accounting reports;
vi. in the event of the termination or liquidation of the Company, the right to participate
in the distribution of the remaining property of the Company in proportion to the
number of shares held;
vii. shareholders who object to resolutions of merger or division made by the
shareholders’ general meeting may request the Company to purchase shares held;
viii. the right to inspect the Hong Kong Register of Shareholders of the Company, but the
Company may suspend the registration of shareholders in accordance with the
equivalent provisions of Section 632 of the Companies Ordinance (Cap. 622 of the
Laws of Hong Kong);
ix. Other rights provided for by laws, administrative regulations, departmental rules or
the Articles of Association.
Where any Shareholder demands to read the relevant information or obtain any of the
aforesaid materials, he shall submit to the Company written documents proving the class(es)
and number of shares he holds. the Company shall provide the relevant information or
materials in accordance with the Shareholder’s demand after verifying the Shareholder’s
identity.
Shareholders of the Company shall have the following obligations:
i. to abide by laws, administrative regulations and the Articles of Association;
ii. to pay the share subscription price based on the shares subscribed for by them and
the method of acquiring such shares;
iii. not to return shares unless prescribed otherwise in laws and administrative
regulations;
iv. not to abuse shareholders’ rights to infringe upon the interests of the Company or
other shareholders; not to abuse the Company’s status as an independent legal entity
or the limited liability of shareholders to harm the interests of the Company’s
creditors; Any shareholder who abuses shareholders’ rights and causes the Company
APPENDIX V SUMMARY OF ARTICLES OF ASSOCIATION
– V-18 –


--- page 600 ---
or other shareholders to suffer a loss shall be liable for making compensation in
accordance with the law; Any shareholder who abuses the status of the Company as
an independent legal entity or the limited liability of shareholders to evade debts and
severely harm the interests of the Company’s creditors shall assume joint and
several liability for the Company’s debts;
v. to assume other obligations required by laws, administrative regulations and the
Articles of Association.
(4) The Board of Directors
The Board of Directors shall exercise the following functions and powers:
i. to convene general meetings and report to the general meetings;
ii. to implement resolutions of the general meetings;
iii. to decide on the Company’s business plans and investment plans;
iv. to formulate the annual financial budgets and final accounts of the Company;
v. to formulate the Company’s profit distribution plans and plans on making up losses;
vi. to formulate proposals for the increase or reduction of the Company’s registered
capital, the issuance of bonds or other securities of the Company and listing of
shares of the Company;
vii. to formulate plans for the Company’s major acquisition, repurchase the Shares of the
Company, or merger, division, dissolution or change of corporate form of the
Company;
viii. to decide on matters such as investments, purchase and sale of assets, pledge of
assets, external guarantee, entrustment of financial management, connected
transactions and donations of the Company within the scope of authorization by the
general meeting;
ix. to decide on establishment of internal management organs of the Company;
x. to decide on the appointment or dismissal of the Company’s general manager,
secretary of the board and other members of the senior management and decide on
matters of their remuneration and rewards and punishments. According to the
nomination of the general manager, decide to appoint or dismiss the Company’s
deputy general manager, financial officer and other senior management, and decide
on matters of their remuneration, rewards and punishments;
APPENDIX V SUMMARY OF ARTICLES OF ASSOCIATION
– V-19 –


--- page 601 ---
xi. to formulate the basic management system of the Company;
xii. to formulate proposals to amend the Articles of Association;
xiii. to manage the Company’s disclosures;
xiv. to propose to the general meeting the appointment or replacement of the accounting
firm that provides audit service to the Company;
xv. to listen to the work report of the general manager of the Company and to inspect
the work of the general manager of the Company;
xvi. according to the authorization of the general meetings, to decided to repurchase of
the shares of the Company in accordance with the Articles of Association;
xvii. other functions and powers provided for in laws, administrative regulations,
department regulations and the Articles of Association.
Matters beyond the scope of authorization of the General Meeting shall be submitted to
the General Meeting for deliberation.
Except as otherwise provided in the Articles of Association, meetings of the Board of
Directors shall be held only if more than one half of the directors are present.
(5) Independent Non-executive Director
At any time, the Board of Directors should have more than 1/3 of independent Directors,
and the total number of independent Directors should not be less than three.
(6) Secretary of the Board of Directors
The Company shall appoint a secretary of the Board of Directors, who shall be
responsible for preparing for General Meetings and meetings of the Board of Directors, the
retention of documents, the management of Shareholder materials, etc.
(7) Board of Supervisors
Our Company shall set up a Board of Supervisors.
The Board of Supervisors consists of three Supervisors, including one employee
representative Supervisor and one chairman. The chairman of the Board of Supervisors shall
be elected by two third of all Supervisors.
APPENDIX V SUMMARY OF ARTICLES OF ASSOCIATION
– V-20 –


--- page 602 ---
The Board of Supervisors shall be composed of Shareholder representatives and an
appropriate proportion of company employee representatives. The number of employee
representatives shall be no less than one third of all Supervisors. Employee representatives on
the Board of Supervisors shall be democratically elected by employees through the employee
representative congress, the employee congress, or any other means.
The Board of Supervisors shall exercise the following functions and powers:
i. to review and give written opinions on the periodic reports of the Company prepared
by the Board of Directors;
ii. to examine the Company’s financial matters;
iii. to supervise the performance by the directors and senior management of their duties
to the Company and propose the dismissal of the directors and senior management
who violates laws, administrative regulations, the Articles of Association or the
resolutions of the general meeting;
iv. to demand rectification from the directors and senior management when the acts of
such persons are harmful to the Company’s interests;
v. to propose the convening of extraordinary general meetings; to convene and preside
the general meetings in the event that the Board of Directors fails to perform its
duties to convene and preside the general meetings in accordance with the Company
Law;
vi. to submit proposals to the general meetings;
vii. to file lawsuits against directors and senior management on behalf of the Company
in accordance with the Company Law;
viii. in case of any queries or any abnormal matters during the business operation of the
Company, to investigate, and if necessary, to engage professionals such as
accounting firms or law firms to assist its work with expenses being borne by the
Company;
ix. other functions and powers as specified in Hong Kong Listing Rules and other
relevant regulations, as well as the Articles of Association.
The Supervisors may attend the meetings of the Board of Directors, query or provide
suggestions on the resolution matters of the Board meeting.
APPENDIX V SUMMARY OF ARTICLES OF ASSOCIATION
– V-21 –


--- page 603 ---
(8) General Manager
Our Company has one general manager, appointed or dismissed by the Board of Directors.
The general manager shall be accountable to the Board of Directors and exercise the
following functions and powers:
i. to be in charge of the production, operation and management of the Company, to
organize the implementation of the resolutions of the Board of Directors, and to
report his/her works to the Board of Directors;
ii. to organize the implementation of the Company’s annual business plans and
investment plans;
iii. to draft plans for the establishment of the Company’s internal management
organization;
iv. to draft the Company’s basic management system;
v. to formulate the specific rules and regulations of the Company;
vi. to propose to the Board of Directors appointment or dismissal of deputy general
manager and chief financial officer of the Company;
vii. to appoint or dismiss management personnel other than those required to be
appointed or dismissed by the Board of Directors;
viii. such other functions and powers conferred by the Articles of Association or the
Board of Directors.
(9) Reserves
In distributing its current-year after-tax profits, the Company shall allocate 10% of its
profit to its statutory reserve fund.
Allocations to the Company’s statutory reserve fund may be waived once the cumulative
amount of funds therein exceeds 50% of the Company’s registered capital.
Where the statutory reserve fund is not sufficient to cover any loss made by the Company
in the previous year, the current year’s profit shall be used to cover such loss before any
allocation is made to the statutory reserve fund pursuant to the preceding paragraph.
After an allocation to the statutory reserve fund has been made from the after-tax profit
of the Company, and subject to the adoption of a resolution by the General Meeting, an
allocation may be made to the discretionary reserve fund.
APPENDIX V SUMMARY OF ARTICLES OF ASSOCIATION
– V-22 –


--- page 604 ---
After the Company has covered its losses and made allocations to the reserve funds, any
remaining profit shall be distributed to the shareholders in proportion to their respective
shareholdings unless otherwise stipulated in the Articles of Association.
Where the General Meeting or the Board of Directors, in violation of the preceding
paragraph, distributes profits to the Shareholders before covering Company’s losses and
making an allocation to the Company statutory reserve fund, the profits so distributed must be
returned to the Company.
Profits shall not be distributed to Shares held by the Company itself.
Company reserve funds shall be used to cover Company’s losses, expand production and
operations, or converted to increase the Company’s capital. However, the capital reserve fund
must not be used to cover Company’s losses.
After converting statutory reserve funds into capital, the amount remaining in the
statutory reserve fund shall be no less than 25% of the Company’s registered capital.
APPENDIX V SUMMARY OF ARTICLES OF ASSOCIATION
– V-23 –


--- page 605 ---
FURTHER INFORMATION ABOUT OUR COMPANY
Incorporation
Our Company was established as a limited liability company in the PRC on September 17,
2014 and was converted into a joint stock limited company on July 9, 2021 under the laws of
the PRC. As of the Latest Practicable Date, the registered share capital of our Company is
RMB445,664,533.
Our Company has established a place of business in Hong Kong at 5/F, Manulife Place,
348 Kwun Tong Road, Kowloon, Hong Kong and has been registered as a non-Hong Kong
company in Hong Kong under Part 16 of the Companies Ordinance on August 26, 2021. Ms.
Y eung Siu Wai Kitty, one of our joint company secretaries, and Ms. Cheung Y uet Fan have been
appointed as authorized representatives in Hong Kong and our agents for the acceptance of
service of process in Hong Kong whose correspondence address is the same as our place of
business in Hong Kong.
As we are 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 “Summary of Articles of Association” in Appendix
V to this Prospectus. A summary of certain relevant aspects of the laws and regulations of the
PRC is set out in “Summary of Principal Legal and Regulatory Provisions” in Appendix IV to
this Prospectus.
Changes in Share Capital
On September 17, 2014, the predecessor of our Company, Shenzhen Qianhai Fourth
Paradigm Data Technology Co., Ltd. (ʮ̡) was established
with a registered capital of RMB5 million.
The following sets out the changes in the share capital of our Company during the two
years immediately preceding the date of this Prospectus:
Pursuant to the extraordinary general meeting of the Company dated December 30, 2022,
the Shareholders resolved to allow Nanjing Paradigm as the Employee Incentive Platform to
subscribe for increased registered capital of the Company. The registered capital of our
Company increased from RMB437,705,989 to RMB451,243,288 on December 30, 2022.
Pursuant to the extraordinary general meeting of the Company dated January 17, 2023,
the Shareholders resolved to repurchase 5,578,755 Shares from Nanjing Paradigm as the
Employee Incentive Platform. The registered capital of our Company decreased from
RMB451,243,288 to RMB445,664,533 on January 17, 2023.
APPENDIX VI STATUTORY AND GENERAL INFORMATION
– VI-1 –


--- page 606 ---
For more details, see “History, Development and Corporate Structure – Pre-IPO
Investments.” Save as aforesaid, as of the Latest Practicable Date, there had been no alterations
of our share capital within the two years preceding the date of publication of this Prospectus.
Corporate Reorganization
Our Company has not gone through any corporate reorganization. For details of the
history and development of our Company, see the section headed “History, Development and
Corporate Structure” in this Prospectus.
Resolutions of our Shareholders
Pursuant to a general meeting held on April 21, 2023, among other things, our
Shareholders resolved that:
(a) the issuance by our Company of the H Shares of nominal value of RMB1.00 each
and such H Shares being listed on the Hong Kong Stock Exchange;
(b) the number of H Shares to be issued shall not be more than 15% of the total issued
share capital of our Company as enlarged by the Global Offering, and the grant to
the underwriters (or their representatives) of the Over-allotment Option of not more
than 15% of the number of H Shares issued pursuant to the Global Offering;
(c) subject to the completion of the Global Offering, the conditional adoption of the
Articles of Association which shall become effective on the Listing Date, and
authorization to the Board to amend the Articles of Association in accordance with
the requirements of the relevant laws and regulations and the Listing Rules; and
(d) authorization of the Board to handle matters relating to, among other things, the
Global Offering, the issue and listing of the H Shares.
Pursuant to a general meeting held on June 13, 2023, our Shareholders resolved that
subject to the CSRC’s approval, upon completion of the Global Offering, 115,246,250 Unlisted
Shares held by HongShan V enture, Guoxin Qidi, Purui Tianjin, Beijing Innovation, Zhongyi
Equity Fund, Sinovation Fund III, Ruihui Haina, NIFA No.1, V alue Global, Shanghai Saixin
Business Consulting Management Center (Limited Partnership), Guangxi Tencent V enture
Capital Co., Ltd., Hangzhou Fantong, Hubei Boheng, Guangzhou Y uexiu Emerging Industry
Phase II Investment Fund Partnership (Limited Partnership), GS Asia II, Zhuhai Zhongyu
Investment Enterprise (Limited Partnership), Guangkong Zhongying, Fangyuan Chuangying,
Haitong International Investment, Jiaxing Chenyue, Shenzhen Runxin New Vision Strategic
Emerging Industry Private Equity Investment Fund Partnership (Limited Partnership), Cisco
China, Stonebridge 2020, Growing Fame, Guangzhou Y uexiu Nuocheng No. 8 Industrial
Investment Partnership (Limited Partnership), CITIC Construction Investment, Ningbo
Huiyuan, Dongkong Jinlong, and LF Beta will be converted into H Shares on a one-for-one
basis.
APPENDIX VI STATUTORY AND GENERAL INFORMATION
– VI-2 –


--- page 607 ---
Changes in Share Capital of our Subsidiaries
A summary of the corporate information and the particulars of our subsidiaries in Note
1 to the Accountant’s Report set out in Appendix I to this Prospectus.
The following alterations in the share or registered capital of our subsidiaries have taken
place within two years immediately preceding the date of this Prospectus.
Beijing Yuntian
On May 27, 2022, the registered capital of Beijing Y untian increased from RMB5.0
million to RMB50.0 million.
EpicHust
On June 14, 2022, the registered capital of EpicHust increased from RMB38.0 million to
RMB43.7 million.
Ideal Technology
On December 29, 2022, the registered capital of Ideal Technology increased from
RMB55.6 million to RMB58.6 million.
4Paradigm Beijing
On January 11, 2023, the registered capital of 4Paradigm Beijing increased from
RMB50.0 million to RMB1.0 billion.
On February 17, 2023, the registered capital of 4Paradigm Beijing increased from RMB1
billion to RMB2.0 billion.
Zhongyuan Putai
On June 7, 2023, the registered capital of Zhongyuan Putai decreased from RMB50.0
million to RMB1.0 million.
APPENDIX VI STATUTORY AND GENERAL INFORMATION
– VI-3 –


--- page 608 ---
FURTHER INFORMATION ABOUT OUR BUSINESS
Summary of Material Contracts
We have entered into the following contracts (not being contracts entered into in the
ordinary course of business) within the two years immediately preceding the date of this
Prospectus that are or may be material:
1. the supplemental agreement to the shareholders special rights termination agreement
(ᛆл୞˟՘ᙄʘ໾̂՘ᙄ) dated January 15, 2023 entered into among our
Company, Dai Wenyuan ( Ꮦ˖଀), Paradigm (Tianjin) Management Consulting
Partnership (Limited Partnership) ( ᇍό(ݵ)၍ଣፔ༔ΥྫΆุ(Υྫ)),
Tianjin Paradigm Yinyuan Management Consulting Partnership (Limited
Partnership) (ᇍόᒯʩ၍ଣፔ༔ΥྫΆุ(Υྫ)), SCC V enture V-Mars
(HK) Limited, Sinovation Fund III, L.P ., Beijing Innovation Works VC Center
(Limited Partnership)* ( ̏ԯ௴อʈఙ௴ุҳ༟ʕː(Υྫ)), Beijing HongShan
Mingde Equity Investment Center (Limited Partnership) (ᛆҳ༟ʕ
ː(Υྫ)), YSC Investment I (HK) Limited, V alue Global Limited, Zhuhai
Guangkong Zhongying Industry Investment Fund Partnership (Limited Partnership)
(ΥྫΆุ(Υྫ)), Ningbo Meishan Bonded Zone
HongShan Zhisheng Equity Investment Partnership (Limited Partnership) (ૠʆ
ᛆҳ༟ΥྫΆุ(Υྫ)), LF Beta Limited, Tibet Lingfeng
Xinfu V enture Investment Partnership (Limited Partnership) (௴ุҳ
༟ΥྫΆุ(Υྫ)), Hubei Boheng Equity Investment Partnership (Limited
Partnership) (ᛆҳ༟ΥྫΆุ(Υྫ)), Chance Talent Management
Limited, Henan Guoxin Qidi Equity Investment Fund (Limited Partnership) (਷
ږ(Υྫ)), Ningbo Huiyuan V enture Capital Partnership
(Limited Partnership) (௴ุҳ༟ΥྫΆุ(Υྫ)), Zhuhai Hongmai
Enterprise Management Partnership (General Partnership) ( मऎ҃ᒕΆุ၍ଣΥྫ
Άุ(౷ஷΥྫ)), Major Awesome Limited, Zhuhai Xuren Equity Investment Fund
Partnership (Limited Partnership) (ΥྫΆุ(Υྫ)),
Beijing Ruihui Haina Technology Industry Fund (Limited Partnership) ( ̏ԯြිऎ
ږ(Υྫ)), Bocom International Holdings Company Limited,
CITIC Securities Investment Limited (ʮ̡), Jinshi Jinrui Equity
Investment (Hangzhou) Partnership (Limited Partnership) (ᛆҳ༟(ψ)
ΥྫΆุ(Υྫ)), Jinshi Haofeng Equity Investment (Hangzhou) Partnership
(Limited Partnership) (ᛆҳ༟(
ψ)ΥྫΆุ(Υྫ)), Jinshi Zhiyu
Equity Investment (Hangzhou) Partnership (Limited Partnership)* (ᛆҳ
༟(ψ)ΥྫΆุ(Υྫ)), Nongwan (Changsha) Equity Investment Enterprise
(Limited Partnership) ( ༵ᝄ(Ӎ)ᛆҳ༟Άุ(Υྫ)), Zhuhai Huiyuan
Investment Partnership (Limited Partnership)* ( मऎฯʩҳ༟ΥྫΆุ(Υྫ)),
Beijing NIFA No. 1 Artificial Intelligence Technology Industry Fund Management
Center (Limited Partnership) (၍ଣʕː(Ϟ
Υྫ)), Guangzhou Y uexiu Nuocheng No. 8 Industrial Investment Partnership
(Limited Partnership)* ( ᄿψ൳Ӹፕϓɞ໮ྼุҳ༟ΥྫΆุ(Υྫ)),
APPENDIX VI STATUTORY AND GENERAL INFORMATION
– VI-4 –


--- page 609 ---
Guangzhou Y uexiu Emerging Industry Phase II Investment Fund Partnership
(Limited Partnership)* (ΥྫΆุ(Υྫ)),
Cisco China Company Limited (߅ܠ(ʕ਷)ʮ̡), CNCB (Hong Kong)
Investment Limited (ვ(ಥ)ʮ̡), Shanghai Saixin Business
Consulting Management Center (Limited Partnership)* ( ɪऎᒄอਠਕፔ༔၍ଣʕ
ː(Υྫ)), Beijing Lianxiang Smart Internet Innovation Fund Partnership
(Limited Partnership)* (ΥྫΆุ(Υྫ)),
Shenzhen Songhe Growth Equity Investment Partnership (Limited Partnership) ( ଉ
ᛆҳ༟ΥྫΆุ(Υྫ)), Shenzhen Lingyu Cornerstone Equity
Investment Partnership (Limited Partnership) (ᛆҳ༟ΥྫΆุ
(Υྫ)), Shenzhen Linghui Cornerstone Equity Investment Partnership (Limited
Partnership) (ΥྫΆุ(Υྫ)), Xinhe No.1
(Tianjin) Technology Center (Limited Partnership) (ձɓ໮(ݵ)Ҧʕː(ࠢ
Υྫ)), Qiushi Xingde (Tianjin) Investment Center (Limited Partnership) (ྼጳᅃ
(ݵ)ҳ༟ʕː(Υྫ)), Boyu Jingtai (Shanghai) Equity Investment Partnership
(Limited Partnership)* ( ௹༃౻इ(ɪऎ)ᛆҳ༟ΥྫΆุ(Υྫ)), Pu Rui
Enterprise Management (Tianjin) Partnership (Limited Partnership)* ( ዎ๿Άุ၍ଣ
(ݵ)ΥྫΆุ(Υྫ)), China-UAE Investment Cooperation (Cayman)
Holdings Limited, Shenzhen HongShan Hanchen Equity Investment Partnership
(Limited Partnership) (ᛆҳ༟ΥྫΆุ(Υྫ)), CDBC
Manufacturing Transformation and Upgrading Fund (Limited Partnership) ( ਷කႡ
ږ(Υྫ)), China Life (Jiangsu) Jiequan Health Industry
Investment Fund (Limited Partnership) (ᛆҳ༟ʕː(Υྫ)),
Hangzhou Fantong Equity Investment Partnership (Limited Partnership) (ψᇍΝ
ᛆҳ༟ΥྫΆุ(Υྫ)), Goldman Sachs Asia Strategic II Pte. Ltd.,
Stonebridge 2020 (Singapore) Pte. Ltd., Lucent (Shanghai) Investment Center
(Limited Partnership) (ڦ(ɪऎ)ҳ༟ʕː (Υྫ)), CPE Investment (Hong
Kong) 2018 Limited, MIC Capital Management 23 RSC Ltd, Zhuhai Jinyiming
Equity Investment Fund Partnership (Limited Partnership) (ᛆҳ༟ਿ
ΥྫΆุ(Υྫ)), Shenzhen Runxin New Vision Strategic Emerging Industry
Private Equity Investment Fund Partnership (Limited Partnership)* (อᝈ
ΥྫΆุ (Υྫ)), CITIC Construction
Investment Co., Ltd. (ʮ̡), Ningbo Meishan Bonded Port Area
Fangyuan Chuangying Equity Investment Partnership (Limited Partnership) (ૠ
ᛆҳ༟ΥྫΆุ (Υྫ)), Haitong International
Investment Holdings Limited, Beijing New Power Quality Enterprise Development
Fund (Limited Partnership)* (ږ(Υྫ)), JIC
Technology Investment Ltd. (ʮ̡), Jiaxing Chenyue Equity
Investment Partnership (Limited Partnership) (ᛆҳ༟ΥྫΆุ(Υ
ྫ)), Growing Fame Holdings Limited, Hubei Province Lianxiang Y angtze River
Technology Industry Fund Partnership (Limited Partnership) (Ҧ
ΥྫΆุ(Υྫ)), Hainan BOCOM International Science and
Technology Innovation Shengxing Equity Investment Partnership (Limited
Partnership) (ᛆҳ༟ΥྫΆุ(Υྫ)), Foshan City
South Sea Dongkong Jinlong Investment Partnership (Limited Partnership) ( Нʆ̹
APPENDIX VI STATUTORY AND GENERAL INFORMATION
– VI-5 –


--- page 610 ---
છᎀᎲҳ༟ΥྫΆุ(Υྫ)), Guangxi Tencent V enture Capital Co.,
Ltd.* (ʮ̡), Zhuhai Zhongyu Investment Enterprise
(Limited Partnership)* ( मऎ଺ᚑҳ༟Άุ(Υྫ)), Gongqingcheng Y uanchun
Investment Management Partnership (Limited Partnership)* (ʩ૮ҳ༟၍ଣ
ΥྫΆุ(Υྫ)), Qingdao Chuangxin V enture Capital Enterprise (Limited
Partnership)* (௴㒥௴ุҳ༟Άุ(Υྫ)) and Zhongyi Equity Fund (Hebei
Xiongan) Partnership (Limited Partnership) (ږ(̏ඪτ)ΥྫΆุ(Ϟ
Υྫ)),Fourth Paradigm (Beijing) Data & Technology Co., Ltd.* ( ୋ̬ᇍό(̏ԯ)
ʮ̡), Beijing Fourth Paradigm Science & Technology Co., Ltd.* ( ̏ԯୋ
ʮ̡), Shanghai Shishuo Intelligent Technology Co., Ltd.* ( ɪऎό
ʮ̡), pursuant to which the revival arrangement of certain
shareholders special rights was further amended and agreed among the
aforementioned parties;
2. the cornerstone investment agreement dated September 14, 2023 entered into among
our Company, New China Capital Management Limited, and China International
Capital Corporation Hong Kong Securities Limited, pursuant to which New China
Capital Management Limited agreed to subscribe for H Shares at the Offer Price in
the aggregate amount of HK$365 million;
3. the cornerstone investment agreement dated September 14, 2023 entered into among
our Company, Beijing Zhongguancun Science City Science and Technology Growth
Investment Partnership (Limited Partnership) (ҳ༟Υྫ
Άุ(Υྫ)), and China International Capital Corporation Hong Kong
Securities Limited, pursuant to which Beijing Zhongguancun Science City Science
and Technology Growth Investment Partnership (Limited Partnership) agreed to
subscribe for H Shares at the Offer Price in the aggregate amount of Hong Kong
dollar equivalent of RMB290 million;
4. the cornerstone investment agreement dated September 14, 2023 entered into among
our Company, Montage Technology Holdings Company Limited, and China
International Capital Corporation Hong Kong Securities Limited, pursuant to which
Montage Technology Holdings Company Limited agreed to subscribe for H Shares
at the Offer Price in the aggregate amount of Hong Kong dollar equivalent of US$10
million; and
5. the Hong Kong Underwriting Agreement.
APPENDIX VI STATUTORY AND GENERAL INFORMATION
– VI-6 –


--- page 611 ---
Intellectual Property Rights
Trademarks
As of the Latest Practicable Date, the key trademarks in relation to the business of our
Group as a whole were:
Trademark Registered Owner
4Paradigm Beijing
4Paradigm Beijing
4Paradigm Beijing
4Paradigm Beijing
4Paradigm Beijing
In addition to the trademarks above, our Group had over 600 trademark registrations in
the PRC, European Union, Singapore and Hong Kong.
Patents
As of the Latest Practicable Date, we had over 300 patents registered with the National
Intellectual Property Administration of the PRC and over 580 pending patent applications in
the PRC.
Copyrights
As of the Latest Practicable Date, we had over 490 copyrights registered with the National
Copyright Administration of the PRC.
Domain Name
As of the Latest Practicable Date, the following was the key domain name registration of
our Group:
4paradigm.com
Save as the above, as of the Latest Practicable Date, there were no other intellectual
property rights which were material to our business.
APPENDIX VI STATUTORY AND GENERAL INFORMATION
– VI-7 –


--- page 612 ---
FURTHER INFORMATION ABOUT OUR DIRECTORS, SUPERVISORS, SENIOR
MANAGEMENT AND SUBSTANTIAL SHAREHOLDERS
1. Disclosure of Interests
Save as disclosed below, immediately following the completion of the Global Offering
(assuming that the Over-allotment Option is not exercised), so far as our Directors are aware,
none of our Directors, Supervisors or chief executive has any interests or short positions in our
Shares, underlying shares and debentures of our Company or any associated corporations
(within the meaning of Part XV of the SFO) which will have to be notified to our Company
and the Hong Kong Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO
(including interests and short positions which they are 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 notified to our
Company and the Hong Kong Stock Exchange pursuant to the Model Code for Securities
Transactions by Directors of Listed Companies contained in the Listing Rules.
(a) Interests in our Company
Name Position Nature of Interest
Number of
Shares held (1)
Approximate
percentage of
shareholding in
Unlisted Shares as
at the Latest
Practicable Date (1)
Approximate
percentage of
shareholding in
Unlisted Shares
after the
Global Offering (2)
Approximate
percentage of
shareholding in
the total share
capital of our
Company after the
Global Offering (2)
Dr. Dai (3) Chairman of the
Board, Executive
Director and Chief
Executive Officer
Beneficial owner 106,164,523 32.13% 32.13 22.88%
Interest in controlled
corporations
74,068,383 22.42% 22.42 15.96%
Notes:
(1) The calculation is based on the total number of Shares in issue as at the Latest Practicable Date,
including 330,418,283 Unlisted Shares and 115,246,250 Unlisted Shares which will be converted
into H Shares upon completion of the Global Offering.
(2) The calculation is based on the total number of 330,418,283 Unlisted Shares and 133,642,250 H
Shares in issue immediately after completion of the Global Offering since 115,246,250 Unlisted
Shares will be converted into H Shares and 18,396,000 H Shares will be issued pursuant to the
Global Offering, and assuming that the Over-allotment Option is not exercised.
(3) Immediately after completion of the Global Offering and assuming the Over-allotment Option is
not exercised, Dr. Dai beneficially owns 106,164,523 Unlisted Shares of our Company. In
addition to his direct shareholding, Dr. Dai is also deemed to be interested in 74,068,383 Unlisted
Shares of our Company through the intermediaries he controlled under the SFO. Paradigm
Investment and Paradigm Yinyuan own 63,962,734 Unlisted Shares and 10,105,649 Unlisted
APPENDIX VI STATUTORY AND GENERAL INFORMATION
– VI-8 –


--- page 613 ---
Shares of our Company, respectively. Dr. Dai, through Beijing New Wisdom, being the sole
general partner of Paradigm Investment and Paradigm Yinyuan. Beijing New Wisdom is a limited
liability company established in the PRC and owned as to 99% by Dr. Dai and 1% by Ms. Wu,
respectively.
2. Substantial Shareholders
For the information on the persons who will, immediately following the completion of the
Global Offering, have interests or short positions in our Shares or underlying Shares which
would be required to be disclosed to our Company and the Hong Kong Stock Exchange under
the provisions of Divisions 2 and 3 of Part XV of the SFO, see the section headed “Substantial
Shareholders” in this Prospectus.
So far as set out herein, our Directors are not aware of any persons (other than our
Directors, Supervisors or chief executive) who will, immediately following the completion of
the Global Offering, directly or indirectly, be interested in 10% or more of the nominal value
of any class of share capital carrying rights to vote in all circumstances at general meetings of
any other member of our Group.
3. Service Contracts and Letters of Appointment
Each of the Directors and Supervisors has entered into a service contract or a letter of
appointment with our Company.
Save as disclosed above, we have not entered, and do not propose to enter, into any
service contracts with any of our Directors or Supervisors in their respective capacities as
Directors or Supervisors (other than contracts expiring or determinable by the employer within
one year without any payment of compensation (other than statutory compensation)).
4. Director’s and Supervisors’ Remuneration
Save as disclosed in “Directors, Supervisors and Senior Management” and “Appendix I
– Accountant’s Report – II. Notes to The Financial Information – 10 Employee Benefit
Expenses” for the three financial years ended December 31, 2020, 2021, 2022 and the three
months ended March 31, 2023, none of our Directors or Supervisors received other
remunerations of benefits in kind from us.
5. Employee Incentive Scheme
The following is a summary of the principal terms of the Employee Incentive Scheme
approved and adopted by our Board on April 25, 2021 (the “ Adoption Date ”). The terms of
the Employee Incentive Scheme are not subject to the provisions of Chapter 17 of the Listing
Rules as the Employee Incentive Scheme does not involve the grant of options by our Company
after the Listing. Given the underlying Shares under the Employee Incentive Scheme had
APPENDIX VI STATUTORY AND GENERAL INFORMATION
– VI-9 –


--- page 614 ---
already been issued, there will not be any dilution effect to the issued Shares upon the vesting
of the Shares under the Employee Incentive Scheme. No further award under the Employee
Incentive Scheme will be granted after Listing.
As of the Latest Practicable Date, the Company had established two Employee Incentive
Platforms, namely Paradigm Investment and Nanjing Paradigm, which held 63,962,734
Unlisted Shares and 7,958,544 Unlisted Shares, respectively. For the details of the Employee
Incentive Platforms, please refer to “History, Development and Corporate Structure –
Employee Incentive Scheme” in this Prospectus.
Objectives
The purpose of the Employee Incentive Scheme is to enable the Company to provide
incentives to eligible participants (“ Eligible Participants ”, as defined in the paragraph headed
“Eligibility ” below) and reward them for their contribution or potential contribution to the
Group.
Grant of awards
The Scheme entitles Eligible Participants to be granted awards (“ Awards ”) in the form
of economic interests in the Employee Incentive Platforms, including as the limited partners in
Paradigm Investment through another limited partnership with other Eligible Participants, or as
limited partners of Nanjing Paradigm directly. Upon becoming the limited partners of the
Employee Incentive Platforms, the Eligible Participants indirectly receive economic interest in
the corresponding number of underlying Shares held by the Employee Incentive Platforms.
Eligibility
Pursuant to the scheme documents (the “ Scheme Documents ”), Eligible Participants of
the Scheme include the following classes of persons:
i. Directors or senior management of our Group;
ii. Core technicians, middle-level management and key employees who have made
outstanding or special contributions to the Group; and
iii. Any other suitable person identified by the award working team (“ Award Working
Team”), set up for the daily management of the Scheme.
The Scheme Documents further provide that the following employees may not be selected
as participants to the Scheme:
 Employees who hold shares, positions, or received remuneration in any company
that has a business competition (or potential business competition) with the Group;
and
APPENDIX VI STATUTORY AND GENERAL INFORMATION
– VI-10 –


--- page 615 ---
 Employees who have received warnings, administrative penalties or other
disciplinary actions due to material violation of applicable laws and regulations or
rules of any stock exchange for the preceding three years.
Administration of the Scheme
Our Board retains full discretion over the following matters of the Scheme:
 the selection of participants in the Scheme; and
 the implementation, amendment and termination of the Scheme.
Restrictions on Transfer
Pursuant to the terms of the Scheme, except as otherwise agreed between the Employee
Incentive Platform and the Eligible Participants, and except for written approval by the
Employee Incentive Platform, during the subsistence of the Employee Incentive Platform, the
selected participants may not dispose or transfer their respective interest in the Employee
Incentive Platform.
Lock-up period
Prior to the listing of the Company, except as agreed by the Award Working Team,
a selected participant might not transfer, mortgage, pledge or gift his or her interest, or
dispose in any way his or her limited partnership interest. In the event that the Company
initiates listing plan, except as otherwise agreed between the Employee Incentive
Platform and the selected participants, the lock-up period prohibiting a selected
participant from disposing his or her limited partnership interest will start on the day of
holding the relevant limited partnership interest to (a) the date specified by the CSRC or
stock exchanges in other countries or regions to restrict the transfer of Shares (if any) or
(b) the termination date of any lock-up undertaking given by the Employee Incentive
Platform in respect of transfer of its shares (whichever is the later). Selected participants’
interest in the Employee Incentive Platform will also be automatically locked up from the
day the Company entered into sponsorship and underwriting agreements with securities
companies in respect of the listing of the Company until the date specified by the CSRC
or stock exchanges in other countries or regions to restrict the transfer of shares (if any)
or (b) the termination date of any lock-up undertaking given by the Employee Incentive
Platform in respect of transfer of its shares (whichever is the later).
APPENDIX VI STATUTORY AND GENERAL INFORMATION
– VI-11 –


--- page 616 ---
Company’ s right of disposal
Pursuant to the Scheme, each of the Employee Incentive Platforms might exercise
its right to transfer a selected participant’s interest in the Employee Incentive Platform
either to a designated person or have the Employee Incentive Platform buy back the
interest from the selected participants, in the event of any misconduct which may bring
adverse impact to the Employee Incentive Platform or the Group.
Awards granted
The aggregate number of Shares underlying the awards granted to two Directors (Chen
Y uqiang and Y u Zhonghao), three Supervisors (Chai Yifei, Zhou Wenjing and Shao Liling),
four senior management members, and 357 other employees of our Group amounted to
18,427,925, 1,532,633, 26,202,655 and 36,987,226, respectively. Among which, 41,984,719
Shares underlying the awards were granted to 17 connected persons of the Company, including
the aforementioned Directors and Supervisors, spouse of a Director, certain directors and
supervisors of our subsidiaries namely Guangzhou Jianxin, Zhimei Xinchuang, Zhongyuan
Putai, Beijing Y untian, and Ideal Technology.
Save as disclosed above, no awards under the Employee Incentive Scheme have been
granted to other connected persons of our Group and there is no outstanding number of Shares
underlying the unvested awards granted under the Employee Incentive Scheme. As at the Latest
Practicable Date, all the Awards have been vested and all the selected participants holding
vested Awards have become limited partners of partnerships, which hold limited partnership
interest in the Employee Incentive Platform. All the Awards have been granted and all the
Shares underlying the Awards have been issued to the Employee Incentive Platforms. All the
specific grantees have been identified for all the Shares underlying the Awards.
The table below sets forth the list of Directors, Supervisors and senior management
members of our Group who are grantees of the awards under the Employee Incentive Scheme,
and the number of the underlying Shares of their respective awards:
Name of Director, Supervisor or
senior management member
Number of
Shares underlying the
Awards granted under
the Employee Incentive
Scheme
Chen Y uqiang 11,937,331
Y u Zhonghao 6,490,594
Chai Yifei 1,064,974
Zhou Wenjing 367,845
Shao Liling 99,814
Pei Misi 11,371,038
APPENDIX VI STATUTORY AND GENERAL INFORMATION
– VI-12 –


--- page 617 ---
Name of Director, Supervisor or
senior management member
Number of
Shares underlying the
Awards granted under
the Employee Incentive
Scheme
Hu Shiwei 11,937,331
Zheng Zhao 1,566,879
Tu Weiwei 1,327,407
6. Disclaimers
Saved as disclosed in this Prospectus:
(a) none of our Directors, Supervisors or any of the parties listed in “Qualification of
Experts” of this Appendix is:
(i) 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;
(ii) materially interested in any contract or arrangement subsisting at the date of
this Prospectus which is significant in relation to our business;
(b) save in connection with the Hong Kong Underwriting Agreement and the
International Underwriting Agreement, none of the parties listed in “Qualification of
Experts” of this Appendix:
(i) is interested legally or beneficially in any shares in any member of our Group;
or
(ii) 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;
(c) 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; and
(d) 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 Hong Kong Stock Exchange, would have to be disclosed pursuant to
Divisions 2 and 3 of Part XV of the SFO.
APPENDIX VI STATUTORY AND GENERAL INFORMATION
– VI-13 –


--- page 618 ---
OTHER INFORMATION
Estate Duty
Our Directors have been advised that no material liability for estate duty is likely to be
imposed on our Company or any of our subsidiaries.
Litigation
As of the Latest Practicable Date, no member of our Group was involved in any litigation,
arbitration, administrative proceedings or claims of material importance, and, so far as we are
aware, no litigation, arbitration, administrative proceedings or claims of material importance
are pending or threatened against any member of our Group.
Sole Sponsor
The Sole Sponsor have made an application on our behalf to the Listing Committee for
the listing of, and permission to deal in, our H Shares. All necessary arrangements have been
made to enable the securities to be admitted into CCASS.
The Sole Sponsor satisfy the independence criteria applicable to sponsors set out in Rule
3A.07 of the Listing Rules. The Sole Sponsor will receive a fee of US$500,000 for acting as
a sponsor for the Listing.
Preliminary Expenses
Our Company did not incur any material preliminary expenses.
Qualification of Experts
The qualifications of the experts who have given opinions or advice in this Prospectus are
as follows:
Name Qualification
China International Capital
Corporation Hong Kong
Securities Limited
A corporation licensed to conduct Type 1 (dealing in
securities), Type 2 (dealing in futures contracts), Type 4
(advising on securities), Type 5 (advising on futures
contracts) and Type 6 (advising on corporate finance) of
the regulated activities as defined under the SFO
PricewaterhouseCoopers Certified Public Accountants under Professional
Accountant Ordinance (Cap. 50) and Registered Public
Interest Entity Auditor under Accounting and Financial
Reporting Council Ordinance (Cap. 588)
APPENDIX VI STATUTORY AND GENERAL INFORMATION
– VI-14 –


--- page 619 ---
Name Qualification
JunHe LLP PRC legal advisor
China Insights Industry
Consultancy Limited
Independent industry consultant
Jacobson Burton Kelley
PLLC
Legal advisors as to U.S. export control law to our
Company
Consents of Experts
Each of the experts referred to in “Qualification of Experts” in this Appendix has given
and has not withdrawn its respective written consents to the issue of this Prospectus with the
inclusion of certificates, letters, opinions or reports and the references to its names included
herein in the form and context in which it is respectively included.
None of the experts named above has any of our shareholding interests or rights (whether
legally enforceable or not) or any of our members to subscribe for or to nominate persons to
subscribe for our securities or any of our member.
Compliance Advisor
We have appointed Guotai Junan Capital Limited as our Compliance Advisor upon the
Listing in compliance with Rule 3A.19 of the Hong Kong Listing Rules.
Taxation of Holders of H Shares
The sale, purchase and transfer of H Shares are subject to Hong Kong stamp duty. The
current rate charged on each of the seller and purchaser is HK$1.30 for every HK$1,000 (or
part thereof) of the consideration or, if higher, the fair value of the H Shares being sold or
transferred. For further information in relation to taxation, see “Taxation and Foreign Exchange
– Taxation in Hong Kong” in Appendix III to this Prospectus.
APPENDIX VI STATUTORY AND GENERAL INFORMATION
– VI-15 –


--- page 620 ---
No Material Adverse Change
Save as disclosed in the “Summary – No Material Adverse Change” and “Financial
Information – No Material Adverse Change” to this Prospectus, after all due diligence was
performed as appropriate as the Directors believe, our Directors confirm that, as of the date of
this Prospectus, there has been no material adverse change in our financial position or
prospects since March 31, 2023 and there has been no event that materially and adversely
affected the data set out in the Accountant’s Report in Appendix I to this Prospectus since
March 31, 2023.
Binding Effect
This Prospectus shall have the effect, if any application is made pursuant hereto, of
rendering all persons concerned bound by all the provisions (other than the penal provisions)
of sections 44A and 44B of the Companies (Winding Up and Miscellaneous Provisions)
Ordinance so far as applicable.
Miscellaneous
Save as disclosed in this Prospectus:
(a) within the two years preceding the date of this Prospectus: (i) we have not issued nor
agreed to issue any share or loan capital fully or partly paid either for cash or for
a consideration other than cash; and (ii) no commissions, discounts, brokerage fee
or other special terms have been granted in connection with the issue or sale of any
shares of our Company;
(b) no share or loan capital of our Company is under option or is agreed conditionally
or unconditionally to be put under option;
(c) we have not issued nor agreed to issue any founder shares, management shares or
deferred shares;
(d) there are no arrangements under which future dividends are waived or agreed to be
waived;
(e) there are no procedures for the exercise of any right of pre-emption or transferability
of subscription rights;
(f) there are no contracts for hire or hire purchase of plant to or by us for a period of
over one year which are substantial in relation to our business;
(g) there have been no interruptions in our business which may have or have had a
significant effect on our financial position in the last 12 months;
APPENDIX VI STATUTORY AND GENERAL INFORMATION
– VI-16 –


--- page 621 ---
(h) there are no restrictions affecting the remittance of profits or repatriation of capital
by us into Hong Kong from outside Hong Kong;
(i) no part of the equity or debt securities of our Company, if any, is currently listed on
or dealt in on any stock exchange or trading system, and no such listing or
permission to list on any stock exchange other than the Hong Kong Stock Exchange
is currently being or agreed to be sought;
(j) our Company has no outstanding convertible debt securities or debentures;
(k) our Company is a joint stock limited company and is subject to the PRC Company
Law; and
(l) our Company has adopted a code of conduct regarding Directors’ and Supervisors’
securities transactions on terms as required under the Model Code for Securities
Transactions by Directors of Listed Issuers as set out in Appendix 10 to the Hong
Kong Listing Rules.
Restrictions on Share Repurchases
For details, see the sections headed “Summary of Principal Legal and Regulatory Provisions”
in Appendix IV and “Summary of Articles of Association” in Appendix V to this Prospectus.
Bilingual Prospectus
The English language and Chinese language versions of this Prospectus are being
published separately, in reliance upon the exemption provided by section 4 of the Companies
Ordinance (Exemption of Companies and Prospectuses from Compliance with Provisions)
Notice (Chapter 32L of the Laws of Hong Kong).
Promoters
The promoters of our Company are all of the 50 then shareholders of our Company as at
May 31, 2021 before our conversion into a joint stock limited liability company. Save as
disclosed in this Prospectus, within the two years immediately preceding the date of this
Prospectus, no cash, securities or benefit has been paid, allotted or given, or is proposed to be
paid, allotted or given to the promoters named above in connection with the Global Offering
or the related transactions described in this Prospectus.
APPENDIX VI STATUTORY AND GENERAL INFORMATION
– VI-17 –


--- page 622 ---
DOCUMENTS DELIVERED TO THE REGISTRAR OF COMPANIES IN HONG KONG
The documents attached to the copy of this Prospectus delivered to the Registrar of
Companies in Hong Kong for registration were:
(a) a copy of the GREEN Application Form;
(b) the written consents referred to in “Statutory and General Information – Other
Information – Consents of Experts” in Appendix VI to this Prospectus; and
(c) a copy of each of the material contracts referred to in “Statutory and General
Information – Further Information about our Business – Summary of Material
Contracts” in Appendix VI to this Prospectus.
DOCUMENTS A V AILABLE ON DISPLAY
Copies of the following documents will be available on display on the website of the
Stock Exchange at www.hkexnews.hk and our website at www.4paradigm.com during a
period of 14 days from the date of this Prospectus:
1. the Articles of Association;
2. the Accountant’s Report from PricewaterhouseCoopers on the historical financial
information of our Group for each of the years ended December 31, 2020, 2021,
2022 and the three months ended March 31, 2023, the text of which is set forth in
Appendix I to this Prospectus;
3. the audited consolidated financial statements of our Company for the years ended
December 31, 2020, 2021, 2022 and the three months ended March 31, 2023;
4. the report from PricewaterhouseCoopers on the unaudited pro forma financial
information of our Group as at March 31, 2023, the text of which is set forth in
Appendix II to this Prospectus;
5. the legal opinion issued by Jacobson Burton Kelley PLLC, our legal advisors as to
U.S. export control law;
6. the material contracts referred to in “Statutory and General Information – Further
Information about our Business – Summary of Material Contracts” in Appendix VI
to this Prospectus;
7. the written consents referred to in “Statutory and General Information – Other
Information – Consents of Experts” in Appendix VI to this Prospectus;
APPENDIX VII DOCUMENTS DELIVERED TO THE REGISTRAR OF
COMPANIES AND A V AILABLE ON DISPLAY
– VII-1 –


--- page 623 ---
8. the service contracts and letters of appointment referred to in “Statutory and General
Information – Further Information about our Directors, Supervisors, Senior
Management and Substantial Shareholders – 3. Service Contracts and Letters of
Appointment” in Appendix VI to this Prospectus;
9. the legal opinions issued by JunHe LLP , our PRC Legal Advisor, in respect of,
among other things, the general matters and property interests of our Group under
PRC law;
10. the industry report issued by CIC; and
11. a copy of the following PRC laws, together with unofficial English translations:
(i) the PRC Company Law;
(ii) the PRC Securities Law; and
(iii) the Guidelines for Articles of Association of Listed Companies.
APPENDIX VII DOCUMENTS DELIVERED TO THE REGISTRAR OF
COMPANIES AND A V AILABLE ON DISPLAY
– VII-2 –


--- page 624 ---
北京第四範式智能技術股份有限公司
Beijing Fourth Paradigm T echnology Co., Ltd.
