Laowang Holding Limited - :: HKEX :: HKEXnews ::

The Stock Exchange of Hong Kong Limited and the Securities and Futures Commission take no responsibilityfor the contents of this Application Proof, make no representation as to its accuracy or completeness andexpressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the wholeor any part of the contents of this Application Proof.

Application Proof of

Laowang Holding Limited(the ‘‘Company’’)

(Incorporated in the Cayman Islands with limited liability)

WARNING

The publication of this Application Proof is required by The Stock Exchange of Hong Kong Limited (the‘‘Stock Exchange’’) and the Securities and Futures Commission (the ‘‘Commission’’) solely for the purpose ofproviding information to the public in Hong Kong.

This Application Proof is in draft form. The information contained in it is incomplete and is subject tochange which can be material. By viewing this document, you acknowledge, accept and agree with theCompany, its sponsors, advisors or members of the underwriting syndicate that:

(a) this document is only for the purpose of providing information about the Company to the public inHong Kong and not for any other purposes. No investment decision should be based on theinformation contained in this document;

(b) the publication of this document or any supplemental, revised or replacement pages on the StockExchange’s website does not give rise to any obligation of the Company, its sponsors, advisors ormembers of the underwriting syndicate to proceed with an offering in Hong Kong or any otherjurisdiction. There is no assurance that the Company will proceed with the offering;

(c) the contents of this document or supplemental, revised or replacement pages may or may not bereplicated in full or in part in the actual final listing document;

(d) the Application Proof is not the final listing document and may be updated or revised by the Companyfrom time to time in accordance with the Rules Governing the Listing of Securities on the StockExchange;

(e) this document does not constitute a prospectus, offering circular, notice, circular, brochure oradvertisement offering to sell any securities to the public in any jurisdiction, nor is it an invitation tothe public to make offers to subscribe for or purchase any securities, nor is it calculated to inviteoffers by the public to subscribe for or purchase any securities;

(f) this document must not be regarded as an inducement to subscribe for or purchase any securities,and no such inducement is intended;

(g) neither the Company nor any of its affiliates, sponsors, advisors or members of the underwritingsyndicate is offering, or is soliciting offers to buy, any securities in any jurisdiction through thepublication of this document;

(h) no application for the securities mentioned in this document should be made by any person nor wouldsuch application be accepted;

(i) the Company has not registered and will not register the securities referred to in this document underthe United States Securities Act of 1933, as amended, or any state securities laws of the UnitedStates;

(j) as there may be legal restrictions on the distribution of this document or dissemination of anyinformation contained in this document, you agree to inform yourself about and observe any suchrestrictions applicable to you; and

(k) the application to which this document relates has not been approved for listing and the StockExchange and the Commission may accept, return or reject the application for the subject publicoffering and/or listing.

If an offer or an invitation is made to the public in Hong Kong in due course, prospective investors arereminded to make their investment decisions solely based on the Company’s prospectus registered withthe Registrar of Companies in Hong Kong, copies of which will be distributed to the public during the offerperiod.

If you are in any doubt about any of the contents of this Document, you should seek independent professional advice.

LAOWANG HOLDING LIMITED(Incorporated in the Cayman Islands with limited liability)

[REDACTED]Number of [REDACTED] under

the [REDACTED]: [REDACTED] Shares (subject to the

[REDACTED])Number of [REDACTED] : [REDACTED] Shares (subject to adjustment)Number of [REDACTED] : [REDACTED] Shares (subject to adjustment

and the [REDACTED])Maximum [REDACTED] : HK$[REDACTED] per [REDACTED], plus

brokerage fee of 1.0%, SFC transaction levyof 0.0027% and Hong Kong Stock Exchange[REDACTED] fee of [REDACTED] (payable infull on application in Hong Kong dollarsand subject to refund)

Nominal value : HK$[REDACTED][REDACTED] : [.]

Joint Sponsors

[[REDACTED], [REDACTED] and [REDACTED]]

[To insert logos]

Hong Kong Exchanges and Clearing Limited, The Stock Exchange of Hong Kong Limited and Hong Kong Securities Clearing Company Limited take noresponsibility for the contents of this Document, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoeverfor any loss howsoever arising from or in reliance upon the whole or any part of the contents of this Document.A copy of this Document, having attached thereto the documents specified in ‘‘Appendix V — Documents Delivered to the [REDACTED] of Companies in HongKong and Available for Inspection,’’ has been registered with the [REDACTED] of Companies in Hong Kong as required by Section 342C of the Companies(Winding Up and Miscellaneous Provisions) Ordinance. The Securities and Futures Commission and the [REDACTED] of Companies in Hong Kong take noresponsibility as to the contents of this Document or any other document referred to above.The [REDACTED] is expected to be fixed by agreement between the [REDACTED] (for themselves and on behalf of the [REDACTED]) and us on the [REDACTED].The [REDACTED] is expected to be on or around [REDACTED] and, in any event, not later than [REDACTED] [REDACTED]. The [REDACTED] will be not more thanHK$[REDACTED] per [REDACTED] and is currently expected to be not less than HK$[REDACTED] per [REDACTED], unless otherwise announced. Applicants forthe [REDACTED] are required to pay, upon application, the maximum [REDACTED] of HK$[REDACTED] for each [REDACTED] together with brokerage of 1%, SFCtransaction levy of 0.0027% and Stock Exchange [REDACTED] fee of [REDACTED], subject to refund if the [REDACTED] as finally determined is less thanHK$[REDACTED] per [REDACTED].If, for any reason, the [REDACTED] is not agreed between the [REDACTED] (for themselves and on behalf of the [REDACTED]) and us on or before [REDACTED],the [REDACTED] will not proceed and will lapse. In the case of such event, a notice will be published on the website of the Stock Exchange atwww.hkexnews.hk and our website at www.wanthotpot.com.The [REDACTED] (for themselves and on behalf of the [REDACTED]) may, with the consent of the Company, reduce the number of [REDACTED] being [REDACTED]under the [REDACTED] and/or the indicative [REDACTED] range below that stated in this Document at any time on or prior to the morning of the last day forlodging applications under the [REDACTED]. In such a case, an announcement will be published in the South China Morning Post (in English) and the HongKong Economic Times (in Chinese), on the Hong Kong Stock Exchange’s website at www.hkexnews.hk and on the Company’s website at www.wanthotpot.comas 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 lodgingapplications under the [REDACTED]. For further information, see ‘‘Structure of the [REDACTED]’’ and ‘‘How to Apply for the [REDACTED].’’ If applications for[REDACTED] have been submitted prior to the day which is the last day for lodging applications under the [REDACTED], in the event that the number of[REDACTED] and/or the indicative [REDACTED] range is so reduced, such applications can subsequently be withdrawn.Prior to making an investment decision, [REDACTED] should consider carefully all of the information set out in this Document, including the risk factors setout in ‘‘Risk Factors’’ in this Document. [REDACTED] of the [REDACTED] should note that the obligations of the [REDACTED] under the [REDACTED] tosubscribe, and to procure subscribers for, the [REDACTED], are subject to termination by the [REDACTED] (for themselves and on behalf of the other[REDACTED]) if certain grounds arise prior to 8:00 a.m. on the [REDACTED]. Such grounds are set out in ‘‘[REDACTED] — [REDACTED] Arrangements andExpenses — [REDACTED] — Grounds for Termination.’’ It is important that you refer to that section for further details.The [REDACTED] have not been and will not be registered under the [REDACTED] or any state [REDACTED] in the United States and may not be [REDACTED],sold, pledged or transferred within the United States, or for the account or benefit of U.S. persons, except in transactions exempt from, or not subject to,the registration requirements of the [REDACTED]. The [REDACTED] are being [REDACTED], sold or delivered to outside the United States in accordance with[REDACTED] under the [REDACTED] of 1933 (as amended).

[REDACTED]

IMPORTANT

[REDACTED]

THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BEREAD IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.

[REDACTED]

IMPORTANT


[REDACTED]

EXPECTED TIMETABLE(1)

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[REDACTED]


– ii –


[REDACTED]


– iii –


This Document is issued by Laowang Holding Limited solely in connection with the

[REDACTED] and does not constitute an [REDACTED] to sell or a solicitation of an [REDACTED] to

buy any security other than the [REDACTED] [REDACTED] by this Document pursuant to the

[REDACTED]. This Document may not be used for the purpose of, and does not constitute, an

[REDACTED] or invitation in any other jurisdiction or in any other circumstances. No action has

been taken to permit a [REDACTED] of the [REDACTED] or the distribution of this Document in

any jurisdiction other than Hong Kong. The distribution of this Document for purposes of a

[REDACTED] and the [REDACTED] and sale of the [REDACTED] in other jurisdictions are subject to

restrictions and may not be made except as permitted under the applicable [REDACTED] of such

jurisdictions pursuant to registration with or authorization by the relevant securities regulatory

authorities or an exemption therefrom.

You should rely only on the information contained in this Document to make your

investment decision. The Company has not authorized anyone to provide you with information

that is different from what is contained in this Document. Any information or representation not

made in this Document must not be relied on by you as having been authorized by the

Company, the Joint Sponsors, the [REDACTED], the [REDACTED], the [REDACTED], the

[REDACTED], any of their respective directors, officers, representatives, employees, agents or

professional advisors or any other person or party involved in the [REDACTED]. The contents of

the Company’s website at www.wanthotpot.com do not form part of this Document.

Page

EXPECTED TIMETABLE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i

CONTENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . iv

SUMMARY AND HIGHLIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

GLOSSARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

FORWARD-LOOKING STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

WAIVERS FROM STRICT COMPLIANCE WITH THE LISTING RULES ANDEXEMPTIONS FROM THE COMPANIES (WINDING UP ANDMISCELLANEOUS PROVISIONS) ORDINANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73

INFORMATION ABOUT THIS DOCUMENT AND THE [REDACTED] . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79

DIRECTORS AND PARTIES INVOLVED IN THE [REDACTED] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84

CORPORATE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89

CONTENTS

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Page

INDUSTRY OVERVIEW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91

REGULATORY OVERVIEW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105

HISTORY AND CORPORATE STRUCTURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127

BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 145

RELATIONSHIP WITH CONTROLLING SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 223

CONNECTED TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 229

DIRECTORS AND SENIOR MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 231

SUBSTANTIAL SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 241

SHARE CAPITAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 243

FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 246

FUTURE PLANS AND USE OF [REDACTED] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 286

[REDACTED] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 288

STRUCTURE OF THE [REDACTED] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 301

HOW TO APPLY FOR [REDACTED] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 312

APPENDIX I — ACCOUNTANTS’ REPORT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-1

APPENDIX II — [REDACTED] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II-1

APPENDIX III — SUMMARY OF THE CONSTITUTION OF OUR COMPANYAND CAYMAN ISLANDS COMPANY LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III-1

APPENDIX IV — STATUTORY AND GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . IV-1

APPENDIX V — DOCUMENTS DELIVERED TO THE [REDACTED]OF COMPANIES IN HONG KONG AND AVAILABLE FOR INSPECTION . . . . . V-1

CONTENTS

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This summary aims to give you an overview of the information contained in this

Document. As it is a summary, it does not contain all the information that may be important to

you and is qualified in its entirety by, and should be read in conjunction with, the full text of

this Document. You should read the entire Document before you decide to invest in the

[REDACTED].

There are risks associated with any investment. Some of the particular risks in investing

in the [REDACTED] are set out in ‘‘Risk Factors’’ in this Document. You should read that section

carefully before you decide to invest in the [REDACTED].

OVERVIEW

We are China’s No. 1 Cantonese hot pot chain restaurant. According to the F&S Report, both

of our revenue and number of restaurants ranked first in this sector in 2020, where we occupied

a 1.7% market share in terms of revenue. Our revenue increased from RMB870.9 million in 2018,

to RMB1,094.8 million in 2019, and further to RMB1,124.8 million in 2020. Guided by our slogan

‘‘Heavenly flavors, served with Love (用愛傳遞好味道),’’ we offer our customers the ultimate

experience of food and services, which allows us to be widely recognized in the Eastern China

market and has significantly contributed to our sustainable rapid restaurant expansion

nationwide. As of the Latest Practicable Date, we exclusively operated in Greater China; we had

135 non-franchised chain restaurants in 25 cities across mainland China and one restaurant in

Taipei, all of which were operated by our Group.

We aim to provide our customers with a great and distinctive hot pot experience like

enjoying a hot pot concerto — Laowang Concerto (撈王鍋物協奏曲) — that changes in tempo,

from Allegro, to Andante, and to Presto — three movements corresponding to our stewed chicken

and pork tripe soup (胡椒豬肚雞) as the Allegro, clay pot rice with Chinese sausage and Chinese

bacon (雙臘煲仔飯) as the Andante, and water chestnut and saccharin juice (馬蹄竹蔗水) as the

Presto, during which our customers become the audience.

We operate and manage three self-developed distinctive brands: Want Hotpot (撈王鍋物料

理), Guoji Hotpot (鍋季) and Soup for the Soul (撈王心靈肚雞湯). Our flagship Want Hotpot has its

brand orientation as classy upscale dining, Guoji Hotpot focuses on solo dining scenario, and

Soup for the Soul, a fast casual restaurant that offers quick and light dining for small gathering,

and caters to younger customers’ preferences.

We are a product-first company, upholding rigorous standards when it comes to food safety

and quality. We established a centralized facility, Laowang Gourmet Lab (中央工廠), for research

and development and for the production of certain ingredients to be supplied to our restaurants,

a centralized procurement system for handling purchase orders, and a stringent assessment and

accountability system where food safety is considered a KPI for our restaurant managers and

head chefs. Furthermore, we formulated rigorous standards for supplier selection, and have been

closely monitoring transportation and logistics operations through digital systems. As of the

Latest Practicable Date, more than 80% of our restaurants had exceeded restaurants food safety

requirements upon local authorities’ spot inspections and achieved A-excellent rating, which is

significantly higher than the industry average of only 10%.

SUMMARY AND HIGHLIGHTS

– 1 –


We have been stepping up efforts to enhance our digital wisdom. We implement digital

systems to enable our headquarters to timely inspect, monitor and manage our restaurant

operations, which in turn helps our restaurants adjust their operations swiftly and effectively. As

of the Latest Practicable Date, our Members’ Club had gained and kept a plethora of sticky

customers with over 8.6 million registered members, and among 1.3 million of them who

indicated their age group, around 78.4% of whom were young adults aged 18 to 35; the re-dining

rate of our members within 90 days from the first order was 13.6%.

We provide outstanding dining experience that wins us various awards and recognitions.

According to the F&S Report, as of July 2021, we earned the highest ranking by flavor, services

and atmosphere among all hot pot chain restaurant brands in China who own at least 20

restaurants; the 2019 China Catering Service Industry Annual Report (《中國餐飲報告(2019)》) also

ranked us No. 1 among all hot pot restaurants with respect to the same criteria. China Hospitality

Association (中國飯店協會) awarded us Top Ten China’s Hot Pot Restaurant Brands in 2020 as a

testimony to our high-quality operations management. In addition, more than ten restaurants of

ours were listed as Dianping’s Must-try Restaurants during the Track Record Period.

In addition, we have been proactively exploring other business operations in addition to

restaurant operations, including food delivery business and retail business, to cater to the

changing customers’ needs and the growing demand of ready-to-serve products. We commenced

our food delivery business by cooperating with third parties in 2018. As of the Latest Practicable

Date, we operated food delivery business in most of our restaurants across Greater China. We

strategically introduced our retail business in 2020 to sell the ready-to-serve stewed chicken and

pork tripe soup, by collaborating with local and international supermarkets. To this end, we will

continue to strengthen our supply chain capability to prepare for further expansion in both food

delivery and retail businesses.

OUR COMPETITIVE STRENGTHS

. We are the largest Cantonese hot pot chain restaurant in China, well-positioned to

enjoy the strong momentum of hot pot restaurant market.

. Our success story in penetrating the Eastern China market will facilitate our

sustainable rapid growth nationwide with impressive financial performance.

. We have structured a long-term viable business model to foster scalable growth.

. We position ourselves as a healthy-eating gourmet chain restaurant that stands out

from our competitors.

. Food safety and quality is of paramount importance to us.

. We penetrated the younger generation by leveraging digital platforms.

. Our experienced management team and ‘‘Loving’’ culture will ensure the successful

development of our business.


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OUR BUSINESS STRATEGIES

. Maintain and strengthen our leading position and extend our restaurant network tonew geographic markets

. Further diversify and broaden our business operations through a multi-brand strategy

. Steadily develop our retail business to capture new opportunities in the cateringservice industry

. Continue to strengthen our supply chain capability

OUR BUSINESS OPERATIONS

We are a non-franchised hot pot chain restaurant specializing in serving Cantonese hot pot.In addition and as a supplement to our restaurant operations, we provide consumers with retailand food delivery services.

Our Restaurant Operations

The following table sets forth the features and business scale of our restaurants by brandas of the Latest Practicable Date:

CategoryFlagship Restaurant

Brand Other Restaurant Brands

Brand Want Hotpot Guoji Hotpot Soup for the Soul

Theme cuisines/dish . . . . . . Cantonese hot pot Mini hot pot Fast casual dining

Brand orientation . . . . . . . . Classy upscale

dining

Stylish solo dining and

convenient gathering

Quick and light dining for

small gathering

Target customers . . . . . . . . . Younger customers,

families and groups

Younger customers Younger customers

Average spending

per customer in 2021 . . . . RMB123.9 RMB109.8 RMB108.2

GFA per restaurant . . . . . . .

300 to 700

square meters

165 to 213

square meters

190 to 300

square meters

Number of restaurants as of

the Latest Practicable

Date . . . . . . . . . . . . . . . . 132 2 2

We opened restaurants under these three distinctive brands in 25 cities in mainland China

and in Taipei as of the Latest Practicable Date. The number of our restaurants increased from 59

as of 1 January 2018 to 134 as of 30 June 2021, and further increased to 136 as of the Latest

Practicable Date. We owned and operated 132 Want Hotpot restaurants, two Guoji Hotpot

restaurants and two Soup for the Soul restaurants in Greater China as of the Latest Practicable


– 3 –


Date. Most of our restaurants are located in upscale shopping malls. The following table sets

forth the movement in the number of our restaurants during the Track Record Period and up to

the Latest Practicable Date:

Year ended 31 December

Six

months

ended

30 June

From 1 July

2021 to the

Latest

Practicable

Date2018 2019 2020 2021

Number of restaurants at the beginning

of the period . . . . . . . . . . . . . . . . . 59 76 94 128 134

Newly opened restaurants . . . . . . . . . . 19 19 38 8 4

Closed restaurants . . . . . . . . . . . . . . . 2 1 4 2 2

Net increase . . . . . . . . . . . . . . . . . . . 17 18 34 6 2

Number of restaurants at the end of the

period . . . . . . . . . . . . . . . . . . . . . . 76 94 128 134 136

The following map demonstrates the geographic location of our restaurants in Greater China

as of the Latest Practicable Date:

Beĳing

LocationNumber of

restaurants

ShaanxiJiangsuShanghaiHubeiZhejiangChongqingSichuanFujianGuangdongTaiwan

51

4739

130

42151

Number of restaurantsMore than 30 restaurants (including 30)

Between 5 to 30 restaurants (including 5)

Less than 5 restaurants

Total 136


– 4 –


Restaurant performance

The following table sets forth certain key operational information with respect to our Want

Hotpot restaurants during the Track Record Period:


Six months ended

30 June

2018 2019 2020 2020 2021

Average spending per customer

(Renminbi Yuan)(1) . . . . . . . . . . . . . . . . 120.3 123.7 128.1 130.1 123.9

Total customers served (persons/day)(2) . 22,351 26,800 30,245 19,786 28,907

Table turnover rate (times/day)(3) . . . . . . 3.1 3.0 2.5 2.1 2.4

Average customers per day per

restaurant(4) . . . . . . . . . . . . . . . . . . . . 294 285 236 202 221

Average daily restaurant sales

(RMB’000)(5) . . . . . . . . . . . . . . . . . . . . 35.7 36.1 31.0 27.2 28.5

Notes:

(1) Calculated by dividing gross revenue generated from restaurant operations for the period by total customers served

for the period. For more details on how we calculate total customers, see note (2).

(2) Accordingly, the amounts presented for our total customers served in the table above and elsewhere in the

Document are based on the number of customers recorded in our IT system, which represents our total dine-in

customers.

(3) Calculated by dividing the total dine-in orders served for the period by restaurant operation days, which are the

days we provide dine-in services for the period and average table count during the period.

(4) Calculated by dividing the total customers served for the period by restaurant operation days, which are the days

we provide dine-in services for the period. For more details on how we calculate total customers served, see note 2.

(5) Calculated by dividing the gross revenue from restaurant operations and delivery services for the period by the

actual operating days, which are the days we provide dine-in services and/or delivery services for the period.


– 5 –


The following table sets forth details of same-store sales of our Want Hotpot restaurants

during the Track Record Period:


Six months ended

30 June

2018 2019 2019 2020 2020 2021

Number of same stores(1) . . . . 56 70 79

Same-store sales (RMB’000)(2) 753,251.8 766,526.0 975,907.1 830,484.8 374,604.1 429,532.7

Same-store sales growth . . . . 1.8% (14.9)%(5) 14.7%

Average same-store sales

per day (RMB’000)(3) . . . . . 37.1 37.7 38.4 33.7 28.1 30.2

Same-store table turnover rate

(time/day)(4) . . . . . . . . . . . 3.2 3.1 3.2 2.6 2.2 2.5

Notes:

(1) Includes restaurants that commenced operations prior to the beginning of the periods under comparison and

opened for more than 300 days in both years ended 31 December 2018 and 2019, and in both years ended 31

December 2019 and 2020, and more than 150 days in the six months ended 30 June 2020 and 2021.

(2) Refers to the aggregate gross revenue from restaurant operations and delivery services at our same stores for the

period indicated.


actual operating days, which are the days we provide dine-in services and/or delivery services, at our same stores

for the period.

(4) Calculated by dividing the total dine-in orders served for the period by the product of total restaurant operation

days, which are the days we provide dine-in services for the period and average table count at our same stores

during the period.

(5) Such decrease in same-store sales growth from 2019 to 2020 is primarily due to the decrease in our overall table

turnover rate as a result of shortened operating hours and reduced traffic amid COVID-19.

Other Operations

We commenced our food delivery business by cooperating with third parties in 2018. As of

the Latest Practicable Date, we operated food delivery business in most of our restaurants across

Greater China. According to the F&S Report, the food delivery sector in the PRC has expanded

rapidly from RMB231.3 billion to RMB715.4 billion from 2016 to 2020, and is expected to grow at

a CAGR of 15.1% from 2020 to 2025.

To further extend our brand and strengthen our brand image, we strategically launched our

retail business of ready-to-serve products in 2020. We launched our ready-to-serve products of

our signature dish, the stewed chicken and pork tripe soup that tailored to urban young people’s

demand for fast, convenient and healthy food. According to the F&S Report, the market size of


– 6 –


ready-to-serve business in the PRC increased significantly from RMB150.8 billion to RMB278.6

billion from 2016 to 2020, and is expected to further increase at a CAGR of 18.8% from 2020 to

2025. Going forward, we expect to strengthen our offline retail presence through strategic

collaborations with boutique supermarkets targeting white collar consumers and major

convenience store chains, and will also sell ready-to-serve products at our restaurants

nationwide.

IMPACTS OF THE COVID-19 PANDEMIC

Coronavirus disease 2019, also known as COVID-19, is a contagious disease. COVID-19 was

declared a pandemic by the World Health Organization in March 2020. Hit by COVID-19, the

catering service industry, including us, has undergone such a dramatic shift, in particular during

the rapid escalation of infection control response.

COVID-19 pandemic has changed the landscape of the catering service market in China and

significantly decreased the number of restaurants and the concentration of businesses, but it

also promoted retail business and food delivery business. Since the catering service industry is

highly susceptible to contagious disease for that restaurant, may suffer from temporary closures

and decreased customer traffic, sales of our restaurant operations for a period after the outbreak

of COVID-19 in 2020 had decreased as a result. However, amid sweeping lockdowns and social

distancing measures nationwide, ordering food online seems to have become popular for those

who are working or learning at home, offering the chance to eat a wider variety of food, without

risking unnecessary human contact. In this regard, our revenue generated from food delivery

service increased from RMB27.0 million to RMB59.1 million from 2019 to 2020; while after our

commencement of retail business in 2020, revenue generated from this sector amounted to

RMB3.4 million for the year ended 31 December 2020.

At the epidemic peak of COVID-19 in mainland China, we closed approximately 58% of our

restaurants, of which their restaurant operations and food delivery services had been suspended

for at least ten days from February to March 2020. For restaurants that remained open, same-

store sales was declining due to shortened operating hours and reduced traffic; some of our

opened restaurants primarily provided food delivery and takeaway services. See ‘‘Financial

Information — Factors Affecting Our Results of Operations and Financial Condition and

Comparability — Impact of Contagious Disease’’ in this Document for more details.

OUR CUSTOMERS AND SUPPLIERS

Our Customers

Revenue derived from our five largest customers accounted for less than 5% of our total

revenue for each of the years ended 31 December 2018, 2019 and 2020 and the six months

ended 30 June 2021. All of our five largest customers in 2018, 2019 and 2020 and the six months

ended 30 June 2021 are Independent Third Parties. None of our Directors, their associates or any

of our Shareholders (who, to the knowledge of our Directors, own more than 5% of our share

capital as of the Latest Practicable Date) has any interest in any of our five largest customers

that are required to be disclosed under the Listing Rules.


– 7 –


Our Suppliers

We had 105, 98, 140 and 130 authorized suppliers as of 31 December 2018, 2019 and 2020

and 30 June 2021, respectively. As of the Latest Practicable Date, our business relationships with

our five largest suppliers for the Track Record Period ranged from one to six years. All of our five

largest suppliers during the Track Record Period are Independent Third Parties. None of our

Directors, their associates or any of our current Shareholders (who, to the knowledge of our

Directors, own more than 5% of our share capital as of the Latest Practicable Date) has any

interest in any of our five largest suppliers that is required to be disclosed under the Listing

Rules. During the Track Record Period and as of the Latest Practicable Date, none of our five

largest suppliers is our customers.

Our largest supplier accounted for 12.8%, 14.6%, 18.2% and 17.9% of total purchase

amount for the years ended 31 December 2018, 2019 and 2020 and the six months ended 30

June 2021, respectively. Our five largest suppliers accounted for 50.4%, 39.1%, 44.4% and 52.2%

of total purchase amount for the years ended 31 December 2018, 2019 and 2020 and the six

months ended 30 June 2021, respectively.

OUR EMPLOYEE

We established Laowang Academy (撈王培訓中心) in 2017 as our training institution to

provide systematic training to our employees. We conduct comprehensive online and offline

trainings for all our employees, including our headquarters office personnel, restaurant

management personnel and restaurant staff.

We genuinely care about our employees in every way. We provide our employees with

weekly bulletins and meetings for the members of a team to share their thoughts, learnings or

other ideas, passing our Love and concern on. As a result, our monthly employee turnover rate,

excluding employees left their jobs after less than a month, was 8.3%, 7.5%, 7.2% and 8.0% in

2018, 2019 and 2020 and the six months ended 30 June 2021, respectively, relatively low in our

industry, according to the F&S Report. As of the Latest Practicable Date, we had a total of 3,851

staff, including 2,092 employees and 1,759 outsourced personnel.

In order to incentivize our Directors, senior management and other employees for their

contribution to our Group and to retain suitable personnel in our Group, we adopted the Pre-

[REDACTED] Share Option Scheme on 28 July 2021 and the Share Option Scheme on [date], and

granted options to subscribe for [REDACTED] Shares under the Pre-[REDACTED] Share Option

Scheme. For more details, see ‘‘Appendix IV — Statutory and General Information — D. Other

Information — 14. Share Option Schemes.’’


– 8 –


RISK FACTORS

Our operation involves certain risks and uncertainties as set out in ‘‘Risk Factors’’ in this

Document. You should read that section in its entirety carefully before you decide to invest in

the [REDACTED]. Some of the major risks we encounter include the following:

. We have in recent years experienced and are planning to continue a rapid restaurant

expansion, which may increase risks and uncertainties.

. Our business depends substantially on the market recognition of our brands.

. Dysfunction of food quality control systems could have a material adverse effect on

our reputation and profitability.

. Changes in consumer preferences and discretionary spending patterns could have a

negative effect on our business.

. Our operations are suspectible to changes in our supply; any shortages or

interruptions in food supply may slow down our growth and reduce our profitability.

. Difficulties in employee recruiting and retention in restaurant operations may slow our

expansion.

. Our business operations and financial performance have been and may be

continuously affected by COVID-19.

. Any outbreak of food-borne illnesses, epidemic or contagious diseases would

adversely affect our operations.

. We operate in a highly competitive and fast-changing market and may lose our market

share if we fail to compete successfully.

OUR CONTROLLING SHAREHOLDERS AND PRE-[REDACTED] INVESTORS

Immediately following the completion of the [REDACTED] (assuming that the [REDACTED] is

not exercised and without taking into account any Shares which may be issued upon the exercise

of the options granted under the Pre-[REDACTED] Share Option Scheme or any options which may

be granted under the Share Option Scheme), our founders, namely Mr. Lee, Mr. Chen and Mr.

Chao, and the spouse of Mr. Chen (Ms. Huang Ya-lin) and Mr. Chao (Ms. Wong Wing Sze),

together as a concert group, will be interested in more than 30% of the total issued share capital

of our Company through themselves and their respective wholly-owned investment holding

companies, namely, LYC, Eversun Holdings, CH&H, Lucky-CH, and ZHZ, and are together regarded

as a group of Controlling Shareholders of our Company. Mr. Lee, Mr. Chen, Ms. Huang, Mr. Chao

and Ms. Wong, who directly or indirectly held 29.92%, 7.51%, 1.33%, 4.26% and 2.00% of our

total issued share capital, respectively, as of the Latest Practicable Date, entered into the

Concert Party Agreements on 18 August 2021 to confirm and acknowledge their acting-in-concert

relationship. See ‘‘Relationship with Controlling Shareholders’’ in this Document for more

information.


– 9 –


Our Pre-[REDACTED] investors include Oasis Eagle International Co., Ltd, Blue Alliance

International Limited, Lin Sheng-chih (林勝枝), Tsai Yu-chia (蔡有佳), Cheng Siu-lun (鄭兆倫), Hou

Yu-lin (侯佑霖), Tsai Shan-tsao (蔡勝超), Tsai Chih-chen (蔡志誠), Cheng Pao-lien (鄭寶蓮),

Myrialink Limited, Wu Chen-hung (吳振弘), Lin Chun-hsien (林駿憲), Starry Chance Investments

Limited, Chao Yu-tung (趙育彤), and LWSPV. See ‘‘History and Corporate Structure — Pre-

[REDACTED] Investments’’ in this Document for more information.

SUMMARY OF HISTORICAL FINANCIAL INFORMATION

The following tables set forth a summary of our consolidated financial information duringthe Track Record Period, extracted from the Accountants’ Report set out in Appendix I to thisDocument. The summary of consolidated financial data sets forth below should be read togetherwith, and is qualified in its entirety by reference to, the consolidated financial statements in thisDocument, including the related notes. Our consolidated financial information has been preparedin accordance with IFRS.

Summary Consolidated Statements of Profit or Loss

The following table sets forth the data from our consolidated statements of profit or loss forthe periods indicated.

Year ended 31 DecemberSix months ended

30 June

2018 2019 2020 2020 2021

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000(unaudited)

Revenue . . . . . . . . . . . . . . . . . . . . 870,944 1,094,753 1,124,770 436,434 646,709Other income . . . . . . . . . . . . . . . . 4,997 11,913 6,786 2,627 5,317Raw materials and

consumables used . . . . . . . . . . . (300,008) (381,657) (415,447) (162,457) (234,049)Staff costs . . . . . . . . . . . . . . . . . . (270,267) (320,520) (317,757) (138,597) (192,416)Rental expenses and related

expenses . . . . . . . . . . . . . . . . . . (111,107) (52,395) (52,116) (19,213) (39,251)Utilities expenses . . . . . . . . . . . . . (31,270) (37,735) (37,034) (14,879) (21,260)Depreciation and amortisation . . . . . (38,527) (137,155) (157,608) (73,995) (91,676)[REDACTED] . . . . . . . . . . . . . . . . . . — — — — (7,244)Other operating expenses . . . . . . . . (33,910) (41,363) (44,394) (20,613) (24,874)Other gains and losses . . . . . . . . . . (1,317) (953) (130) 561 172Materials consumed for research

activities . . . . . . . . . . . . . . . . . . (756) (266) (204) (108) (97)Finance costs . . . . . . . . . . . . . . . . — (12,977) (15,735) (7,296) (8,617)

Profit before tax . . . . . . . . . . . . . . 88,779 121,645 91,131 2,464 32,714Income tax expenses . . . . . . . . . . . (29,724) (41,730) (23,690) (1,402) (11,264)

Profit for the year/period . . . . . . . . 59,055 79,915 67,441 1,062 21,450


– 10 –


Selected Consolidated Statements of Financial Position

The following table sets forth selected data from our consolidated statements of financial

position as of the dates indicated.

As of 31 December As of 30 June

20212018 2019 2020

RMB’000 RMB’000 RMB’000 RMB’000

Non-current assets . . . . . . . . . . . . . . . 175,641 469,175 593,150 626,857

Current assets . . . . . . . . . . . . . . . . . . 181,380 206,527 265,237 241,523

Current liabilities . . . . . . . . . . . . . . . . 171,883 228,121 298,800 270,858

Net current assets/(liabilities) . . . . . . . 9,497 (21,594) (33,563) (29,335)

Total assets less current liabilities . . . . 185,138 447,581 559,587 597,522

Total equity . . . . . . . . . . . . . . . . . . . . 169,751 225,237 284,798 306,851

Non-current liabilities . . . . . . . . . . . . . 15,387 222,344 274,789 290,671

Selected Consolidated Statements of Cash Flows

The following table sets forth selected data from our consolidated statements of cash flows

for the periods indicated.


Six months

ended

30 June

20212018 2019 2020

RMB’000 RMB’000 RMB’000 RMB’000

Net cash from operating activities . . . . 119,177 224,165 244,106 61,721

Net cash used in investing activities . . (99,146) (46,515) (111,510) (50,706)

Net cash used in financing activities . . (61,051) (138,717) (109,922) (59,158)

Net (decrease)/increase in cash and

cash equivalents . . . . . . . . . . . . . . (41,020) 38,933 22,674 (48,143)

Cash and cash equivalents at

beginning of the year/period . . . . . . 117,845 76,952 115,584 137,627


end of the year/period . . . . . . . . . . 76,952 115,584 137,627 89,437


– 11 –


Other Financial Information

The following table sets forth our key financial ratios as of the dates or for the periods

indicated.

As of/For the year ended 31 December

As of/For the

six months

ended 30 June

20212018 2019 2020

Return on assets(1) . . . . . . . . . . . . . . . 17.7% 15.5% 8.8% 5.0%

Return on equity(2) . . . . . . . . . . . . . . . 37.2% 40.5% 26.4% 14.5%

Current ratio(3) . . . . . . . . . . . . . . . . . . 1.06 0.91 0.89 0.89

Quick ratio(4) . . . . . . . . . . . . . . . . . . . 0.93 0.77 0.77 0.78

Interest coverage(5) . . . . . . . . . . . . . . — — 110.14 963.18

Notes:

(1) Return on assets is calculated using net profit divided by the average of the beginning and ending balance of total

assets for that period, multiplied by 100%.

(2) Return on equity is calculated using net profit divided by the average of the beginning and ending balance of total

equity for the period, multiplied by 100%.

(3) Current ratio is calculated using total current assets divided by total current liabilities.

(4) Quick ratio is calculated using total current assets less inventories divided by total current liabilities.

(5) Interest coverage is calculated by earnings before interest and tax divided by interest on bank borrowings for each

period.

NON-COMPLIANCE AND LEGAL PROCEEDINGS

During the Track Record Period, we had certain non-compliance incidents including fire

safety. See ‘‘Business — Licenses, Regulatory Approvals and Compliance’’ in this Document for

more details. Our Directors, as advised by our PRC Legal Advisors, confirm that except as

disclosed in this Document, we had complied with the applicable PRC laws and regulations in all

material respects and had obtained all material requisite licenses, approvals and permits as

required by applicable laws and regulations from competent authorities in China during the Track

Record Period and up to the Latest Practicable Date. As of the Latest Practicable Date, we were

not involved in any material litigation, arbitration or administrative proceedings pending, to the

best of our knowledge, information and belief, threatened against us or any of our Directors that

could have a material adverse effect on our business, reputation, financial condition or results of

operations.


– 12 –


DIVIDENDS

We are a holding company incorporated under the laws of the Cayman Islands. As a result,

the payment and amount of any future dividend will depend on the availability of dividends

received from our PRC subsidiaries. PRC laws and regulations require that dividends to be paid

only from net profits which is different from the generally accepted accounting principles in other

jurisdictions, including IFRS. PRC laws also require foreign invested enterprises to set aside at

least 10% of their after-tax profit for the year as statutory reserves which are not allowed to

distribute as cash dividends. The distribution of dividends from us or our subsidiaries may also

be subject to any restrictive covenants in bank credit facilities, convertible bond instruments or

other agreements that we or our subsidiaries may enter into in the future.

For the years ended 31 December 2018, 2019 and 2020 and the six months ended 30 June

2021, we declared dividends of RMB0, RMB26.5 million, RMB11.1 million and RMB0, respectively.

Dividends declared in the past are not indicative of our future dividend policy. All the dividends

declared have been/will be settled before [REDACTED]. The amount of dividends actually

distributed to our Shareholders will depend on our earnings and financial conditions, operating

requirements, capital requirements and any other conditions that our Directors may deem

relevant and will be subject to approval of our Shareholders. Our Board has the absolute

discretion to recommend any dividend. We do not have any pre-determined dividend payout

ratio.

[REDACTED]

Our aggregate [REDACTED] incurred and to be incurred amount to [REDACTED] million

(including [REDACTED]) assuming the [REDACTED] is not exercised and the [REDACTED] of

HK$[REDACTED] per share, being the [REDACTED] of the indicative [REDACTED] range. For the six

months ended 30 June 2021, we incurred [REDACTED] of [REDACTED] million. After 30 June 2021

and up to 31 December 2021, approximately [REDACTED] million (equivalent to HK$[REDACTED]

million) of [REDACTED] is expected to be accounted for as a deduction from equity upon the

[REDACTED] and approximately [REDACTED] million (equivalent to HK$[REDACTED] million) is

expected to charged to our consolidated statements of profit and loss. The [REDACTED] above are

the latest practicable estimate for reference only, and the actual amount may differ from this

estimate. Our Directors do not expect such [REDACTED] to have a material and adverse impact on

our results of operations for the year ending 31 December 2021.

USE OF [REDACTED]

We estimate that we will receive net [REDACTED] of approximately HK$[REDACTED] million

from the [REDACTED] after deducting the [REDACTED] and other estimated [REDACTED] expenses

payable by us and assuming the [REDACTED] of HK$[REDACTED] per Share, being the [REDACTED]

of the indicative [REDACTED] range set forth on the cover page of this Document. We intend to

use the [REDACTED] from the [REDACTED] for the purposes and in the amounts set forth below:

. Approximately [REDACTED], or HK$[REDACTED] million of the net [REDACTED], will be

used to finance the construction of our Laowang Gourmet Lab 2, expected to be

completed by the third quarter of 2023.


– 13 –



used to open new restaurants nationwide and globally, and details of which are

summarized in ‘‘Business — Our Restaurants — Our Flagship — Want Hotpot (撈王鍋物

料理) — Expansion plan of Want Hotpot’’ and ‘‘Business — Our Restaurants — Other

Restaurants’’ in this Document.


used for our working capital and general corporate purposes.

See ‘‘Future Plans and Use of [REDACTED]’’ in this Document for more details.

RECENT DEVELOPMENTS

We do not have any material recent development outside of our ordinary course of

business.

NO MATERIAL ADVERSE CHANGE

After due and careful consideration, our Directors confirm that, up to the date of the

Document, there has been no material adverse change in the financial or trading position or

prospects of us since 30 June 2021, being the latest date of our audited consolidated financial

statements as set out in ‘‘Appendix I — Accountants’ Report’’ to this Document.


– 14 –


In this Document, unless the context otherwise requires, the following terms shall have

the meanings set out below. Certain technical terms are explained in the section headed

‘‘Glossary’’ in this Document.

‘‘Accountants’ Report’’ Our accountants’ report set out in Appendix I to this

Document

‘‘affiliate(s)’’ any other person, directly or indirectly, controlling or

controlled by or under direct or indirect common control with

such specified person

‘‘Articles’’ or

‘‘Articles of Association’’

the amended and restated articles of association of our

Company (as amended from time to time), adopted on [date],

which will become effective upon the [REDACTED], a summary

of which is set out in Appendix III to this Document

‘‘associate(s)’’ has the meaning ascribed thereto under the Listing Rules

‘‘Audit Committee’’ the audit committee of the Board

‘‘Board’’ or ‘‘Board of Directors’’ the board of directors of our Company

‘‘business day(s)’’ or

‘‘Business Day(s)’’

any day (other than a Saturday, Sunday or public holiday) on

which banks in Hong Kong are generally open for business to

the public

‘‘BVI’’ the British Virgin Islands

‘‘Cayman Companies Act’’ or

‘‘Companies Act’’

the Companies Act of the Cayman Islands, as amended or

supplemented or otherwise modified from time to time

‘‘[REDACTED]’’ the Central [REDACTED] and Settlement System established

and operated by [REDACTED]

‘‘[REDACTED]’’ a person admitted to participate in [REDACTED] as a direct

[REDACTED] participant or a general [REDACTED] participant

‘‘[REDACTED]’’ a person admitted to participate in [REDACTED] as a

custodian participant

‘‘[REDACTED]’’ a person admitted to participate in [REDACTED] as an

investor participant who may be an individual, joint

individuals or a corporation

‘‘[REDACTED]’’ a [REDACTED], a [REDACTED] or a [REDACTED]

DEFINITIONS

– 15 –


‘‘CH&H’’ CH&H International Limited, a company incorporated in

Seychelles with limited liability on 21 March 2013, which has

been directly and wholly owned by Mr. Chen since its

incorporation, being one of our Controlling Shareholders

‘‘China’’ or ‘‘the PRC’’ the People’s Republic of China, but for the purpose of this

Document and for geographical reference only and except

where the context requires otherwise, reference in this

Document to China or the PRC do not apply to Hong Kong,

the Macau Special Administrative Region of the PRC and

Taiwan

‘‘close associate(s)’’ has the meaning ascribed to it under the Listing Rules

‘‘Companies Ordinance’’ the Companies Ordinance (Chapter 622 of the Laws of Hong

Kong), as amended or supplemented or otherwise modified

from time to time

‘‘Companies (Winding Up and

Miscellaneous Provisions)

Ordinance’’

the Companies (Winding Up and Miscellaneous Provisions)

Ordinance (Chapter 32 of the Laws of Hong Kong), as

amended, supplemented or otherwise modified from time to

time

‘‘Company’’, ‘‘our Company’’ or

‘‘Laowang Holding’’

Laowang Holding Limited, an exempted company with limited

liability incorporated in the Cayman Islands on 15 April 2015

‘‘Concert Party Agreements’’ the concert party agreement entered into among Mr. Lee, Mr.

Chen and Mr. Chao, our founders on 18 August 2021, and the

other concert party agreement entered into among our

founders, Mr. Chen’s spouse (Ms. Huang Ya-lin) and Mr.

Chao’s spouse (Ms. Wong Wing Sze) on 18 August 2021, for

the purpose of confirming and acknowledging their acting-in-

concert relationship, as described in ‘‘Relationship with

Controlling Shareholders’’ in this Document

‘‘connected person’’ has the meaning ascribed to it under the Listing Rules

‘‘connected transaction’’ has the meaning ascribed to it under the Listing Rules

‘‘Controlling Shareholder(s)’’ has the meaning ascribed to it under the Listing Rules, and

unless the context otherwise requires, refers to, Mr. Lee, Mr.

Chen, Ms. Huang Ya-lin (the spouse of Mr. Chen), Mr. Chao,

Ms. Wong Wing Sze (the spouse of Mr. Chao), LYC, Eversun

Holdings, CH&H, Lucky-CH and ZHZ

‘‘COVID-19’’ a viral respiratory disease caused by the severe acute

respiratory syndrome coronavirus 2, believed to have first

emerged in late 2019

DEFINITIONS

– 16 –


‘‘Deed of Indemnity’’ the deed of indemnity dated [date] and entered into by and

among our Controlling Shareholders, in favor of our Company

(for itself and as trustee for its subsidiaries), further

information of which is set out in ‘‘Appendix IV — Statutory

and General Information — D. Other Information — 15. Estate

Duty and Tax Indemnity’’ in this Document

‘‘Deed of Non-competition’’ the deed of non-competition dated [date] and entered into by

and among our Controlling Shareholders, in favor of our

Company (for itself and as trustee for its subsidiaries),

further information of which is set out in ‘‘Relationship with

Our Controlling Shareholders — Deed of Non-competition’’ in

this Document

‘‘Director(s)’’ the director(s) of our Company

‘‘EIT’’ the PRC enterprise income tax

‘‘EIT Law’’ the PRC Enterprise Income Tax Law (中華人民共和國企業所得

稅法), enacted on 16 March 2007, effective on 1 January

2008, last amended on 29 December 2018 by the Standing

Committee of the National People’s Congress and newly

effective on the same date

‘‘Electronic Application

Instruction(s)’’

instruction given by a [REDACTED] electronically via

[REDACTED] to [REDACTED], being one of the methods to

apply for the [REDACTED]

‘‘Eversun Holdings’’ Eversun Holdings Corporation, a company incorporated in

Belize City, Belize as an international business company with

limited liability on 28 August 2017, which has been indirectly

and wholly owned by Mr. Lee via LYC since its incorporation,

being one of our Controlling Shareholders

‘‘Fire Safety Consultant’’ Guangdong Huayi Fire Safety Testing Co., Ltd.

‘‘Frost & Sullivan’’ Frost & Sullivan (Beijing) Inc., Shanghai Branch Co., a global

provider of market research and analysis, growth strategy

consulting, and corporate training services, which is an

Independent Third Party

‘‘F&S Report’’ the independent market research for the PRC catering service

market prepared by Frost & Sullivan and commissioned by us

‘‘[REDACTED]’’ the [REDACTED] and the [REDACTED]

DEFINITIONS

– 17 –


‘‘Greater China’’ the geographical regions including mainland China, Hong

Kong, the Macau Special Administrative Region of the PRC

and Taiwan

‘‘[REDACTED]’’ the [REDACTED] to be completed by the HK [REDACTED] WhiteForm Service Provider designated by our Company

‘‘Group’’, ‘‘our Group’’, ‘‘we’’,

‘‘our’’ or ‘‘us’’

the Company and its subsidiaries at the relevant time or,

where the context otherwise requires, in respect of the

period before the Company became the holding company of

its present subsidiaries, such subsidiaries and businesses

operated by them or their predecessors (as the case may be)

‘‘HHY’’ HHY International Limited, a company incorporated in


been directly and wholly owned by Mr. Huang Hsin-yuan

since its incorporation

‘‘HK$’’, ‘‘Hong Kong dollars’’,

‘‘HK dollars’’ or ‘‘cents’’

Hong Kong dollars and cents respectively, the lawful currency

of Hong Kong

‘‘[REDACTED]’’ the application for [REDACTED] to be issued in the applicant’s

own name, submitted online through the [REDACTED] App or

the designated website at www.hk[REDACTED].hk

‘‘[REDACTED]’’ the [REDACTED] service provider designated by our Company

as specified in the [REDACTED] App or on the designated

website at www.hk[REDACTED].hk

‘‘[REDACTED]’’ Hong Kong Securities Clearing Company Limited, a wholly

owned subsidiary of Hong Kong Exchanges and Clearing

Limited

‘‘[REDACTED]’’ [REDACTED] Limited, a wholly-owned subsidiary of

[REDACTED]

‘‘Hong Kong’’ or ‘‘HK’’ the Hong Kong Special Administrative Region of the PRC

‘‘[REDACTED]’’ the [REDACTED] Shares being initially [REDACTED] by our

Company for subscription pursuant to the [REDACTED]

(subject to [REDACTED] as described in ‘‘Structure of the

[REDACTED]’’)

‘‘[REDACTED]’’ the [REDACTED] of the [REDACTED] for subscription by the

public in Hong Kong at the [REDACTED] on the terms and

conditions described in this Document

‘‘Hong Kong Share [REDACTED]’’ [REDACTED]

DEFINITIONS

– 18 –


‘‘Hong Kong Stock Exchange’’ or

‘‘Stock Exchange’’

The Stock Exchange of Hong Kong Limited

‘‘Hong Kong Takeovers Code’’ or

‘‘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

‘‘[REDACTED]’’ the [REDACTED] of the [REDACTED] listed in ‘‘[REDACTED] —

[REDACTED]’’ in this Document

‘‘[REDACTED]’’ the [REDACTED] dated [date], relating to the [REDACTED] and

entered into by, among others, the Joint Sponsors, the

[REDACTED], the [REDACTED], [the Controlling Shareholders]

and our Company

‘‘IAS’’ International Accounting Standards

‘‘IFRSs’’ or ‘‘IFRS’’ International Financial Reporting Standards

‘‘Independent Third Party(ies)’’ third party(ies) who is, to the best knowledge of our

Directors having made due and reasonable enquiries, not a

connected person of the Company

‘‘[REDACTED]’’ the [REDACTED] Shares being initially [REDACTED] by our

Company for subscription at the [REDACTED] pursuant to the

[REDACTED] together with, where relevant, any additional

Shares which may be issued by our Company pursuant to the

exercise of the [REDACTED], subject to [REDACTED] as

described in ‘‘Structure of the [REDACTED]’’ in this Document

‘‘[REDACTED]’’ the [REDACTED] of the [REDACTED] by the [REDACTED] at the

[REDACTED] outside the United States in offshore

transactions in accordance with [REDACTED], as further

described in ‘‘Structure of the [REDACTED]’’ in this Document

‘‘[REDACTED]’’ the [REDACTED], led by the [REDACTED], which are expected

to enter into the [REDACTED] to underwrite the [REDACTED]

DEFINITIONS

– 19 –


‘‘[REDACTED]’’ the [REDACTED] relating to the [REDACTED], which is expected

to be entered into by, among others, the Joint Sponsors, the

[REDACTED], the [REDACTED] and our Company on or about

[Friday, 10 December 2021], as further described in the

section headed ‘‘[REDACTED]’’ in this Document

‘‘[REDACTED] App’’ the mobile application for the [REDACTED] service which can

be downloaded by searching ‘‘[REDACTED] App’’ in App Store

or Google Play or downloaded at [REDACTED] or [REDACTED]

[‘‘[REDACTED]’’,

‘‘[REDACTED]’’ or

‘‘[REDACTED]’’]

[.]

‘‘Joint Sponsors’’ China International Capital Corporation Hong Kong Securities

Limited and Huatai Financial Holdings (Hong Kong) Limited

‘‘Laopin Shanghai’’ Laopin (Shanghai) F&B Management Co., Ltd (撈品(上海)餐飲

管理有限公司), a limited liability company incorporated in

Shanghai on 14 August 2013 and a wholly owned subsidiary

of Laowang Samoa

‘‘Laowang Academy’’ our training center, Laowang Academy (撈王培訓中心), which

provides systematic training and session for our employees

‘‘Laowang Classics’’ our signature dishes, Laowang Classics (撈王十大匠心)

‘‘Laowang Concerto’’ our signature dishes, Laowang Concerto (撈王鍋物協奏曲),

which are stewed chicken and pork tripe soup, clay pot rice

with Chinese sausage and Chinese bacon, and water

chestnut and saccharin juice

‘‘Laowang Gourmet Lab’’ our central kitchen owned and operated by our wholly-owned

subsidiary, Suzhou Laohui

‘‘Laowang HK’’ Laowang F&B Management (HK) Limited (撈王餐飲管理(香港)

有限公司), a limited company incorporated in Hong Kong on

26 May 2015 and a directly and wholly owned subsidiary of

our Company

DEFINITIONS

– 20 –


‘‘Laowang International’’ Laowang International Limited, an exempted company with

limited liability incorporated in the Cayman Islands on 2 April

2013 and is owned as to 54% by our Company, 30% by

Singbao International Co., Ltd. (星寶國際股份有限公司,

formerly known as Genome International Biomedical Co., Ltd.

基因國際生醫股份有限公司), and 16% by other shareholders

‘‘Laowang Samoa’’ Laowang Holding Limited, an international company

incorporated in Samoa with limited liability on 28 March

2013 and a directly and wholly owned subsidiary of Laowang

International

‘‘Laowang Shanghai’’ Laowang (Shanghai) F&B Management Co., Ltd

(撈王(上海)餐飲管理有限公司), a limited liability company

incorporated in Shanghai on 24 September 2015 and a

wholly owned subsidiary of Laowang HK

‘‘Latest Practicable Date’’ 23 August 2021, being the latest practicable date prior to the

printing of this Document for the purpose of ascertaining

certain information contained in this Document prior to its

publication

‘‘Love’’ or ‘‘Loving’’ our core value that we support and adopt

‘‘[REDACTED]’’ the [REDACTED] of the Shares on the [REDACTED] of the Stock

Exchange

‘‘[REDACTED] Committee’’ the [REDACTED] Committee of the Stock Exchange

‘‘[REDACTED]’’ the date, expected to be on or about [REDACTED], [REDACTED]

on which the Shares are listed on the Stock Exchange and

from which [REDACTED] in the Shares are permitted to

commence on the Stock Exchange

‘‘Listing Rules’’ or ‘‘Hong Kong

Listing Rules’’

the Rules Governing the Listing of Securities on the Stock

Exchange of Hong Kong Limited, as amended or

supplemented from time to time

‘‘Lucky-CH’’ Lucky-CH Holdings Group Corporation, a company

incorporated in Belize City, Belize as an international

business company with limited liability on 29 August 2017,

which has been indirectly and wholly owned by Mr. Chen via

CH&H since its incorporation, being one of our Controlling

Shareholders

DEFINITIONS

– 21 –


‘‘LYC’’ LYC International Limited, a company incorporated in


been directly and wholly owned by Mr. Lee since its


‘‘[REDACTED]’’ the stock market (excluding the option market) operated by

the Stock Exchange which is independent from and operated

in parallel with GEM of the Stock Exchange

‘‘Members’ Club’’ an online system to turn new customers into loyal customers

with a membership management program with rewards,

discounts, exclusive [REDACTED] and updates on our

restaurants and products

‘‘Memorandum’’ or

‘‘Memorandum of Association’’

the amended and restated memorandum of association of

our Company (as amended from time to time), adopted on

[date], which will become effective upon [REDACTED], a

summary of which is set out in Appendix III to this Document

‘‘MOFCOM’’ Ministry of Commerce of the PRC (中華人民共和國商務部)

‘‘Mr. Chao’’ Mr. Chao Hung-che (趙宏澤), one of our founders and our

Controlling Shareholders

‘‘Mr. Chen’’ Mr. Chen Hsiang (陳湘), one of our founders and our

Controlling Shareholders

‘‘Mr. Lee’’ Mr. Lee Yu-cheng (李裕成), one of our founders, chairman of

the Board, an executive Director and one of our Controlling

Shareholders

‘‘Mr. Liao’’ Mr. Liao Chih-wei (廖志偉), an executive Director, our general

manager and one of our Shareholders

‘‘NT$’’, ‘‘New Taiwan dollars’’ or

‘‘NTD’’

New Taiwan dollars, the lawful currency of Taiwan

‘‘[REDACTED]’’ the final [REDACTED] per [REDACTED] (exclusive of brokerage

of 1.0%, SFC transaction levy of 0.0027% and Stock

Exchange [REDACTED] fee of [REDACTED])

‘‘[REDACTED]’’ the [REDACTED] and the [REDACTED] together with, where

relevant, any additional Shares which may be issued by our

Company pursuant to the exercise of the [REDACTED]

DEFINITIONS

– 22 –


‘‘[REDACTED]’’ the option expected to be granted by our Company to the

[REDACTED], exercisable by the [REDACTED] (for themselves

and on behalf of the [REDACTED]) under the [REDACTED],

pursuant to which our Company may be required to allot and

issue up to an aggregate of [REDACTED] additional Shares at

the [REDACTED] to cover over-allocations in the [REDACTED],

if any, more details of which are described in ‘‘Structure of

the [REDACTED]’’

‘‘PBOC’’ the People’s Bank of China (中國人民銀行), the central bank

of the PRC

‘‘PRC Government’’ or ‘‘State’’ the central government of the PRC and all governmental

subdivisions (including provincial, municipal and other

regional or local government entities) and its organizations

of such government or, as the context requires, any of them

‘‘PRC laws and regulations’’ any and all laws, regulations, statutes, rules, orders,

decrees, notices, and supreme court’s judicial interpretations

and other legislation currently in force and publicly available

in the PRC as of the date hereof

‘‘PRC Legal Advisors’’ Jingtian & Gongcheng

‘‘PRC person’’ under current Taiwan laws, an individual holding a passport

issued by the PRC, a resident of any area of Mainland China

under the effective control or jurisdiction of the PRC, but not

including a special administrative region of the PRC such as

Hong Kong and Macau, if so excluded by applicable laws of

Taiwan, any agency or instrumentality of the PRC and any

corporation, partnership or other entity organized under the

laws of any such area or controlled by, or directly or

indirectly having more than 30% of its capital owned by, or

beneficially owned by any such person, resident, agency or

instrumentality

‘‘Pre-[REDACTED] Share Option

Scheme’’

our pre-[REDACTED] share option scheme approved and

adopted pursuant to the resolutions passed by our Directors

on 28 July 2021, the principal terms of which are summarized

in ‘‘Appendix IV — Statutory and General Information — D.

Other Information — 14. Share Option Schemes — (a). Pre-

[REDACTED] Share Option Scheme’’

DEFINITIONS

– 23 –


‘‘[REDACTED]’’ the date, expected to be on or about [Friday, 10 December

2021], on which the [REDACTED] will be determined and, in

any event, not later than [REDACTED], [REDACTED]

‘‘Document’’ this document being issued in connection with the

[REDACTED]

‘‘[REDACTED]’’ [.]

‘‘[REDACTED]’’ [REDACTED] under the [REDACTED]

‘‘RMB’’or ‘‘Renminbi’’ the lawful currency of the PRC

‘‘SAFE’’ the State Administration of Foreign Exchange of the PRC (中

華人民共和國國家外匯管理局)

‘‘SAIC’’ the State Administration for Industry and Commerce of the

PRC (中華人民共和國國家工商行政管理總局), now known as

State Administration for Market Regulation (國家市場監督管

理總局)

‘‘SAT’’ the State Administration of Taxation of the PRC (中華人民共

和國國家稅務總局)

‘‘Seychelles’’ the Republic of Seychelles

‘‘SFC’’ the Securities and Futures Commission of Hong Kong

‘‘SFO’’ or ‘‘Securities and

Futures Ordinance’’

the Securities and Futures Ordinance (Chapter 571 of the

Laws of Hong Kong), as amended or supplemented from time

to time

‘‘Shanghai Changli’’ Shanghai Changli F&B Management Co., Ltd (上海昌里餐飲管

理有限公司), a limited liability company incorporated in

Shanghai on 6 May 2019 and a wholly owned subsidiary of

Laowang Shanghai

‘‘Share(s)’’ shares in the share capital of our Company with nominal or

par value of HK$[REDACTED] each

‘‘Shareholder(s)’’ holder(s) of Shares

‘‘Share Option Scheme’’ or ‘‘Post-

[REDACTED] Share Option

Scheme’’

our post-[REDACTED] share option scheme conditionally

adopted pursuant to the resolutions passed by our

Shareholders on [date], the principal terms of which are

summarized in ‘‘Appendix IV — Statutory and General

Information — D. Other Information — 14. Share Option

Schemes — (b). Post-[REDACTED] Share Option Scheme’’

DEFINITIONS

– 24 –


‘‘[REDACTED]’’ [.]

‘‘Stew Quartet’’ quadruple flavors abound in one soup, Stew Quartet (一煲四

味) which we creatively developed for our hot pot

‘‘Substantial Shareholder(s)’’ has the meaning ascribed to it under the Listing Rules

‘‘Suzhou Laohui’’ Suzhou Laohui Food Co., Ltd (蘇州撈匯食品有限公司), a

limited liability company incorporated in Suzhou on 30

January 2015 and a wholly owned subsidiary of Laowang

Shanghai

‘‘Taipei’’ City of Taipei, the capital city of Taiwan Region

‘‘Taiwan Legal Advisors’’ Baker & Mckenzie

‘‘Taiwan Stock Exchange’’ The Taiwan Stock Exchange Corporation

‘‘Takeovers Code’’ the Code on Takeovers and Mergers and Share Buy-backs, as

amended from time to time

‘‘Track Record Period’’ the years ended 31 December 2018, 2019 and 2020 and the

six months ended 30 June 2021

‘‘U.S.’’ or ‘‘United States’’ the United States of America, its territories, its possessions

and all areas subject to its jurisdiction

‘‘[REDACTED]’’ the [REDACTED] of 1933, as amended and supplemented or

otherwise modified from time to time, and the rules and

regulations promulgated thereunder



‘‘US$’’, ‘‘USD’’ or ‘‘U.S. dollars’’ United States dollars, the lawful currency of the United

States

‘‘VAT’’ value added tax

‘‘ZHZ’’ ZHZ International Limited, a company incorporated in


been directly and wholly owned by Mr. Chao since its


DEFINITIONS

– 25 –


In this Document, the terms ‘‘core connected person,’’ ‘‘subsidiary’’ and ‘‘substantial

shareholder’’ shall have the meanings given to such terms in the Listing Rules, unless the context

otherwise requires.

The English translation of the Chinese names of the PRC entities, enterprises, nationals,

facilities, regulations included in this Document is for identification purposes only. To the extent

there is any inconsistency between the Chinese names of the PRC entities, enterprises, nationals,

facilities, regulations and their English translations, the Chinese names shall prevail.

DEFINITIONS

– 26 –


In this Document, unless the context otherwise requires, explanations and definitions of

certain terms used in this Document in connection with our Group and our business shall have

the meanings set out below. The terms and their meanings may not always correspond to

standard industry meaning or usage of these terms.

‘‘ASF’’ African swine fever

‘‘CAGR’’ compound annual growth rate

‘‘cash investment

payback period’’

the amount of time it takes for the cumulative net profit plus

depreciation (excluding depreciation of right-of-use assets)

and amortization to cover the costs to open a restaurant

‘‘Da Bin Lo’’ ‘‘having a hot pot’’ in Cantonese (打邊爐), a term derived

from people sitting around a pot, cooking their own food and

sharing the food with joy

‘‘Eastern China’’ for the purpose of this Document, a geographic region of

China that includes the provinces of Shandong, Jiangsu,

Anhui, Zhejiang, Jiangxi and Fujian and the municipality of

Shanghai

‘‘food processing’’ the process by which manufacturers transform raw materials

including condiments into food

‘‘GDP’’ gross domestic product

‘‘GDP per capita’’ gross domestic product divided by the number of people in

the same area

‘‘GFA’’ gross floor area

‘‘GMO’’ genetically modified organism

‘‘initial breakeven period’’ the first month during which a newly-opened restaurant

generates revenue that covers its expenses

‘‘ISO 14001’’, ‘‘ISO 22000’’ and

‘‘ISO 9001’’

international standards that specify requirements for

environmental management, food safety management and

quality management

‘‘KOL’’ key opinion leader, someone who is considered a

connoisseur of a certain topic and whose opinions are

respected by their public

GLOSSARY

– 27 –


‘‘KPI’’ key performance indicator, a business metric used to

evaluate factors that are crucial to the success of an

organization

‘‘logistics-focused food delivery

services platforms’’

the platforms providing logistics-focused food delivery

services to end-consumers, such as Meituan (美團) and Ele

(餓了麼)

‘‘mobile-based payment’’ a money payment made for a product or service through a

portable electronic device; popular mobile payment service

providers in mainland China include WeChat Pay (微信支付),

AliPay (支付寶) and Union Pay (銀聯支付)

‘‘new tier 1 cities’’ or

‘‘new tier one cities’’

for the purpose of this Document, Chengdu, Chongqing,

Hangzhou, Wuhan, Xi’an, Tianjin, Suzhou, Nanjing,

Zhengzhou, Changsha, Dongguan, Shenyang, Qingdao, Hefei

and Foshan

‘‘OA system’’ office automation system, which is used to create, collect,

store, manipulate and relay office information in a data

storage system

‘‘OHSAS 18001’’ an internationally applied standard for occupational health

and safety management system, which has been replaced by

ISO 45001

‘‘POS system(s)’’ point of sales system, a combination of hardware and

software, including but not limited to electronic cash register

systems, receipt printers, display monitors, barcode

scanners, which are used to assist the monetary transaction,

and a tool for business operators to analyze the performance

of a business

‘‘QR code’’ a machine-readable optical label that contains information

about the item to which it is attached

‘‘chain restaurant’’ a catering business model that involves opening a series of

restaurants under the same brand

‘‘tier 1 cities’’ or ‘‘tier one cities’’ for the purpose of this Document, Beijing, Shanghai,

Guangzhou and Shenzhen, which are determined in

accordance with the data published by he National Bureau

of Statistics of China (中華人民共和國國家統計局)

GLOSSARY

– 28 –


‘‘tier 2 cities’’ or ‘‘tier two cities’’ for the purpose of this Document, Ningbo, Kunming, Fuzhou,

Wuxi, Xiamen, Jinan, Dalian, Harbin, Wenzhou, Shijiazhuang,

Quanzhou, Nanning, Changchun, Nanchang, Guiyang, Jinhua,

Changzhou, Huizhou, Jiaxing, Nantong, Xuzhou, Taiyuan,

Zhuhai, Zhongshan, Baoding, Lanzhou, Taizhou, Shaoxing,

Yantai and Langfang, which are determined in accordance

with the data published by the National Bureau of Statistics

of China

‘‘Wi-Fi’’ the name of a wireless networking technology that uses radio

waves to provide wireless high-speed internet and network

connections

GLOSSARY

– 29 –


This Document contains certain forward-looking statements and information relating to us

and our subsidiaries that are based on the beliefs of our management as well as assumptions

made by and information currently available to our management. When used in this Document,

the words ‘‘aim’’, ‘‘anticipate’’, ‘‘believe’’, ‘‘could’’, ‘‘expect’’, ‘‘forecast’’, ‘‘going forward’’,

‘‘intend’’, ‘‘may’’, ‘‘might’’, ‘‘ought to’’, ‘‘plan’’, ‘‘potential’’, ‘‘predict’’, ‘‘project’’, ‘‘seek’’, ‘‘should’’,

‘‘will’’, ‘‘would’’ 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 other risk factors as

described in this Document. You are strongly cautioned that reliance on any forward-looking

statements involves known and unknown risks and uncertainties. The risks and uncertainties

facing our Company that could affect the accuracy of forward-looking statements include, but are

not limited to, the following:

. our operations and business prospects;

. future developments, trends and conditions in the industry and markets in which we

operate;

. our business and operating strategies, plans, objectives and goals and our ability to

successfully implement these strategies, plans, objectives and goals;

. general economic, political and business conditions in the market in which we

operate;

. changes to regulatory and operating conditions and general outlook in the industry

and markets in which we operate;

. changes in the general economic and political conditions in China;

. the effects of the global financial markets and economic crisis;

. our ability to maintain an effective quality control system;

. our ability to continue to maintain our leadership position in the industry;

. our ability to identify and satisfy customers’ demands and preferences;

. our ability to maintain good relationships with business partners;

. our ability to control or reduce costs;

. our dividend policy;

. our capital expenditure plans;

. our expansion plans;

FORWARD-LOOKING STATEMENTS

– 30 –


. our future debt levels and capital needs;

. our planned use of [REDACTED];

. the amount and nature of, and potential for, future development of our business;

. capital market developments;

. the competitive environment of the industry and markets in which we operate;

. the actions and developments of our competitors;

. certain statements in the sections headed ‘‘Industry Overview’’, ‘‘Business’’ and

‘‘Financial Information’’ in this Document with respect to trends in prices, operations,

profit margins, overall market trends and risk management;

. change or volatility in interest rates, foreign exchange rates, equity prices, volumes,

operations, margins, risk management and overall market trends; and

. other statements in this Document that are not historical facts.

By their nature, certain disclosures relating to these and other risks are only estimates and

should one or more of these uncertainties or risks materialize or should underlying assumptions

prove to be incorrect, our financial condition and actual results of operations may be materially

and adversely affected and may vary significantly from those estimated, anticipated or projected,

as well as from historical results. We caution you that a number of important factors could cause

actual outcomes to differ, or to differ materially, from those expressed in any forward-looking

statements and the risks and uncertainties discussed in ‘‘Risk Factors’’ in this Document.

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

Document, 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 Document might not occur in the way we expect or at all.

Accordingly, you should not place undue reliance on any forward-looking information. Moreover,

the inclusion of forward-looking statements should not be regarded as representations by us that

our plans and objectives will be achieved or realized. All forward-looking statements in this

Document are qualified by reference to the cautionary statements in this section.

In this Document, statements of or references to our intentions or those of our Directors are

made as of the date of this Document. Any such information may change in light of future

developments.

FORWARD-LOOKING STATEMENTS

– 31 –


You should carefully consider all of the information in this Document including the risks

and uncertainties described below before making an investment in the [REDACTED]. You should

pay particular attention to the fact that we are an exempted company incorporated in the

Cayman Islands with limited liability, our business is primarily conducted in China, and we are

governed by a legal and regulatory environment that in some respects may differ from that

prevailing in other countries. Our business, financial condition, results of operations and

prospects could be materially and adversely affected by any of these risks. The [REDACTED]

price of our Shares could also decrease significantly due to any of these risks and you may

lose all or part of your investment.

Our operation involves certain risks and uncertainties, many of which are beyond our

control. We have categorized these risks and uncertainties into: (i) risks relating to our business;

(ii) risks relating to our industry; and (iii) risks relating to doing business in China. In addition,

we address risks relating to the [REDACTED] and our Shares and risks relating to this Document

to caution you the risks associated with your investment decision.

RISKS RELATING TO OUR BUSINESS

We have in recent years experienced and are planning to continue a rapid restaurantexpansion, which may increase risks and uncertainties.

We have increased the number of our restaurants from 59 as of 1 January 2018 to 134 as of

30 June 2021. We plan to continue to expand our restaurant network in the PRC and elsewhere in

the world. As a result, we may be required to nurture and maintain our corporate culture, and to

prevent any deterioration to our brands.

Our future growth significantly relies on our ability to open and profitably operate new

restaurants. The challenge of being able to continue a rapid expansion while ensuring a

consistent outstanding quality of our food and services comes along with our rapid growth. As

such, we are exposed to the resulting risks in the following areas:

. An increase in labor costs or labor reserve. As a chain restaurant operator, our

operations are labor-intensive. To achieve rapid expansion, we need sufficient human

resources. There is no assurance that we will be able to attract, retain and develop

sufficient qualified human resources in management, administration, and sales and

marketing for our new restaurants. In addition, we may incur considerate labor costs in

order to retain sufficient labor resources.

. Risks in food supply. The taste of our hot pot depends significantly on the freshness

and quality of ingredients. Any problems of or damages to our food supply chains

could therefore place us at a disadvantage. In addition, it may take a long period to

set up sound food supply chains for our new restaurants, and we may fail to maintain

or upgrade supply chains in a timely and effective manner.

RISK FACTORS

– 32 –


. Intense competition and failure to anticipate market changes. We may face intense

competition when expanding geographically within existing markets or entering into

markets where we have no experience operating in, including overseas market outside

Greater China and smaller cities or remote areas in mainland China. Moreover, we may

fail to anticipate market changes in these locations.

. Delays in obtaining licenses. We may encounter delays in obtaining licenses from

government authorities when opening new restaurants. As a result, there is no

assurance that we will be able to open new restaurants at a pace as we planned, or at

all. Delays or failures in opening new restaurants could materially and adversely affect

our growth and financial and operating results.

. Failure to hold our positions. As our rapid expansion involves some uncertainties, we

cannot assure you that we will be able to assemble high-quality, affordable, and tasty

food, to replicate our distinctive services, and to ensure that all of our employees are

in compliance, in particular in compliance with the laws and regulations in respect of

food safety. As a result, we may fail to hold our positions.

Our expansion plan for the future requires us to build a strong management system in order

to adequately support our future growth. To address these issues, we have upgraded our online

training system, which have standardized our induction procedures and enabled us to train staff

efficiently. We have also reserved a pool of more than 200 restaurant manager candidates. In

addition, we have established our headquarters which is responsible for functions such as food

safety, procurement, growth strategy as well as assessing the performance of restaurants.

However, we cannot assure you that our headquarters will be able to effectively manage all of

our restaurants as we grow in business scale. In addition, there is no assurance that our

management system, as it evolves, will always be able to address our needs at different stages

of our growth. Any significant failure or deterioration to our management system could have a

material adverse effect on our business, financial condition and results of operations. Moreover,

to maintain and develop our operations, supply chains, technologies, labor and so forth may

result in an increase in our expenditures as we may incur additional costs to enhance our

management system.

Our business and growth depend substantially on the sales and profitability of our existingrestaurants.

Any decrease in the sales of our existing restaurants could adversely affect our sales

growth, revenue and profit. To boost sales in our existing restaurants, we need to increase

customer traffic, table turnover rate and the average spending per customer. To achieve such

increases, approaches include: (i) to create unique dishes and course sets, as well as pleasant

dining experience to recall repeat customers; (ii) to enhance marketing efforts by launching

online and offline marketing activities to attract younger customers; (iii) to attract and serve

casual customers during non-peak hours; and (iv) to increase the pricing of our dishes and

course sets. However, we cannot assure you these approaches will be implemented in a timely

and effective manner, nor can we guarantee that the sales in our existing restaurants will not

RISK FACTORS

– 33 –


decrease. We may fail to achieve our targeted sales growth and profitability of our existing

restaurants; under such circumstances, our business, financial condition and results of

operations could be materially and adversely affected.

In addition, if we open new restaurants in our existing markets, the same-restaurant sales

and customer traffic of our existing restaurants neighboring these new restaurants may decline

as a result of an increase in the density of our restaurants across the neighborbood. By

appealing to current customers instead of capturing new customers, we may fail to increase our

market share in a region while might increase our costs of delivery and restaurant management.

We take into consideration our existing restaurants in the vicinity during site selection in order

to restrain the potential cannibalization. See ‘‘Business — Restaurant Expansion Management —

Annual Planning and Site Selection’’ for more details. However, we cannot assure you that these

new restaurants will not cannibalize the business of our existing restaurants.

Sites of our existing restaurants may be or become unattractive, and our new restaurants maynot be able to obtain quality sites at commercially reasonable prices, if at all.

The success of a restaurant depends substantially on its location. There can be no

assurance that our current restaurant locations will continue to be attractive as economic or

demographic conditions change. Any changes in economic and demographic conditions of our

restaurants may disrupt our business operations, thereby adversely affecting our sales and

financial condition.

In addition, as our lease agreements for restaurants are generally fixed for lease terms of

five years or longer, we are exposed to the risks of: (i) operating in times of hardship yet still

having to perform our duties to make rental payments for fixed periods of time; and (ii)

undertaking the uncertainties of other unforeseen events that may occur before a lease term’s

expiration. Therefore, our inability and/or the lack of flexibility to timely terminate these leases

could have a material adverse effect on our business, financial condition and results of

operations.

Our business depends substantially on the market recognition of our brands.

We have built up three brands — Want Hotpot (撈王鍋物料理) as our flagship, and other

brands as Guoji Hotpot (鍋季) and Soup for the Soul (撈王⼼靈肚雞湯). We believe that to

enhance our brands and to expand our customer base are the cornerstones to sustain our

competitive advantage. Negative publicity could be devastating and could materially and

adversely affect the public perception of our brands, and in turn, reduce the sales of our

restaurants. Hence, we are required and will continue to protect and promote our brands’

recognition, which can be achieved by leveraging on, among others:

. our hospitable and ‘‘Loving’’ culture;

. our quality and safe food ingredients;

. our desirable and unique dishes;

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. our pleasant dining environment; and

. our outstanding dining experience provided to our customers.

As we rely heavily on our customers’ recognition of our brands, the value of our brands will

be diminished and our business and results of operations may be materially and adversely

affected if we lose such recognition. Moreover, as we continue to grow our size, expand our food

offerings and services and extend our geographic reach, we may have difficulty in sustaining

such recognition. Therefore, we cannot assure you that the market recognition of our brands will

not be diminished. Any significant diminishment in the market recognition of our brands may

materially and adversely impact our business.

Dysfunction of food quality control systems could have a material adverse effect on ourreputation and profitability.

We are committed to offering outstanding food quality because we believe that the quality

and safety of the food we serve in our restaurants are critical to our success. Our quality control

system mainly consists: (i) the selection and quality management of our suppliers; and (ii) the

quality management at our restaurants. For details of our quality control system, see ‘‘Business

— Food Safety and Quality Control.’’ Due to the scale of our operations and the rapid growth of

our restaurant network, the ability to consistently provide high-quality and safe food to our

customers, which depends significantly on our quality control system, is of great importance to

our business. The success of our quality control system is attributable to many factors, including

its systematic design, its effectiveness in preventing our potential violations of applicable laws

and regulations, and its training courses to our employees with respect to quality control

policies. Therefore, due to our dependence on these factors, there can be no assurance that our

quality control system will always be effective.

In addition, the quality of ingredients or services provided by our suppliers, including the

effectiveness and the efficiency of their quality control systems, is subject to factors beyond our

control. Hence, we cannot assure you that our suppliers will always be able to utilize appropriate

quality control systems and meet our stringent quality control requirements. Any significant

failure or deterioration to our quality control system could have a material adverse effect on our

reputation and business.

We may receive claims for liability, complaints of contaminated food, or reports of unqualifiedor unsafe food from our customers which could result in negative publicity and potentiallysignificant declines in our revenue and customer traffic.

As a market player in the food industry, we encounter an inherent risk of food

contamination and inadequacy of services provided to our customers. Our customers may file

complaints or claims against us on food and/or services we served and provided in our

restaurants. Our food quality depends significantly on the quality of the materials provided by

our suppliers, which can be adversely affected by many factors beyond our control; for example,

any undetected or undiscovered food contamination occurred in our Laowang Gourmet Lab (中央

⼯廠) or amid the transport from Laowang Gourmet Lab to the warehouses and our restaurants

could adversely affect the food quality in our restaurants. There can be no assurance that our

existing suppliers will always be able to meet our stringent quality control requirements. As a

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licensed restaurant operator, we may be held liable of the incident due to the unqualified and/or

unsafe food supplied by our suppliers. Moreover, due to the scale of our operations, we also

face the risk of certain employees not adhering to our mandated quality procedures and

requirements which may lead to food contamination.

Any failure for us to properly supervise food supplies, observe proper hygiene, ensure

cleanliness or meet other quality control requirements or standards in operations could adversely

affect the food quality in our restaurants. These failures could lead to claims for liability,

complaints of contaminated food, reports of unqualified or unsafe food or any other negative

publicity from our customers, which in turn could reduce our customer traffic and subject us to

administrative penalties or claims. During the Track Record Period, we had no material non-

compliance relating to food safety matters. There can be no assurance that we will not receive

defective materials from our suppliers or any food contamination complaints from our customers.

In addition, a chain restaurant like us could be adversely affected by negative publicity

which often arises from news, reports or allegations in printed and online media alleging in

particular food quality and food safety issues within our restaurants. Negative publicity of other

market players in the hot pot restaurant industry or any suppliers in the food industry, as well as

public concern over food safety, may adversely affect the customer perception of and confidence

in our business.

A significant number of complaints or claims against us, even if meritless or unsuccessful,

could force us to divert managerial and operational resources from other main business concerns

to deal with them, which may adversely affect our overall business and operations. Moreover,

negative publicity resulting from these complaints or claims could diminish customer confidence

in our brands. As a result, we may experience significant declines in our revenue and customer

traffic from which we may not be able to recover in a short period.

Our inability to recognize, respond to, or effectively manage the risks of negative commentson social media may harm our reputation and reduce customer confidence.

Social media allows and incents the creation, sharing and exchange of information, ideas

and other forms of expression via virtual communities and networks; any negative comments on

social media against us may adversely affect our business. Some of the contents on social

media, in most cases anonymous, can be lack of authenticity, accuracy and good faith. As a

result, we may encounter negative comments that are neither accurate nor true, and once such

comments arouse widespread public concern, we may fail to respond to or address them in a

timely manner, or at all, which may cause adverse damages to our brand value and brand

momentum and severely harm our results of operations.

Any inadequate or ineffective indemnity provisions in our supply contracts could result indelays or failures in receiving compensation from our suppliers for contaminated materials.

In the event that food safety complaints are filed against us in connection with or as a

result of contaminated materials provided by our suppliers, we may attempt to seek

compensation from the relevant suppliers. However, despite that we have stipulated provisions

in our supply contracts to collect indemnities, lost profits, lost goodwill and/or other indirect or

consequential losses from our suppliers, if any, caused by the contamination of materials

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provided by suppliers, such provisions may be inadequate or ineffective to make up our losses

in a timely manner, if at all, in particular those intangible losses which may take a long period

for businesses to recover and are extremely costly. As a result, we may have to absorb such

losses arising from customers’ complaints and administrative penalties, which could have a

material adverse effect on our business, financial condition and results of operations.

Changes in consumer preferences and discretionary spending patterns could have a negativeeffect on our business.

Our success in the hot pot restaurant industry depends significantly on our ability to

anticipate, identify, interpret and react to the consumer tastes, habits and dining preferences

and to offer products that appeal to those preferences. Yet, consumer preferences in the hot pot

restaurant industry are constantly changing. We may not be able to develop new products to

address such changes in a timely manner, or at all. Our failure to anticipate, interpret and react

to these changes, or failure to generate customer acceptance or recognition of our new menu,

could lead to decreased market demands for our products and a reduced profitability.

To a significant extent, our success also depends on discretionary spending patterns which

are affected by general economic conditions and other factors beyond our control. We may

experience declines in sales during economic downturns or prolonged periods of high

unemployment rates. Any material decrease in the amount of discretionary spending in Greater

China may reduce our revenue substantially.

Our operations are susceptible to changes in our supply; any shortages or interruptions in oursupply may slow down our growth and reduce our profitability.

Disruption of food supplies can occur for a variety of reasons, many of which are beyond

our control, such as adverse weather conditions, international trade disputes, import/export

restrictions, natural disasters, diseases, key suppliers ceasing operations, or unexpected

production shortages; any of the foregoing may materially and adversely impact our business

operations and financial performance. Our suppliers may also be affected by these factors to

produce and transport materials to our restaurants; they may choose to pass on the increased

labor and other kinds of costs to us. We therefore may spend more, compared with on usual

occasions, in purchasing materials.

We may suffer supply shortages, increased food costs, or profit losses if our suppliers fail

to deliver food ingredients and other supplies in a timely manner. Our success depends

significantly on our ability to timely and adequately source high-quality ingredients at

commercially reasonable prices from reliable suppliers meeting our stringent food safety and

quality requirements. Failure of suppliers to adequately perform quality control or timely

distribute supplies to us could subject us to the risks of failing to find suitable alternative

suppliers in a short period on acceptable terms, which could increase our costs, cause shortages

in materials at our restaurants and lead to the unavailability of some menu items, severely

reducing our revenue and customer confidence in us. As a result, we may suffer a significant

reduction of customer traffic. We experienced no material delays or interruptions in securing

food ingredients supply from our key suppliers during the Track Record Period; however, there

can be no assurance that we will be able to maintain stable business relationships with our key

suppliers for a long period.

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Purchase prices of our materials may fluctuate, which may have an adverse effect ourprofitability.

Purchase prices of our materials may fluctuate with the overall market price of materials.

We generally enter into framework agreements with our suppliers without setting the fixed price

of materials we purchase. The aggregate purchases from our five largest suppliers accounted for

50.4%, 39.1%, 44.4% and 52.2% of our total purchases, respectively, and our purchases from our

largest supplier accounted for 12.8%, 14.6%, 18.2% and 17.9% of our total purchases,

respectively, for the years ended 31 December 2018, 2019 and 2020 and the six months ended

30 June 2021.

Our profitability depends significantly on our ability to anticipate and react to changes in

the pricing policies for raw materials and consumables. For the years ended 31 December 2018,

2019 and 2020 and the six months ended 30 June 2021, our raw materials and consumables

used amounted to RMB300.0 million, RMB381.7 million, RMB415.4 million and RMB234.0 million,

respectively. During the Track Record Period, prices of certain materials, such as pork tripe, had

increased. Failure to timely obtain requisite quantities of such material at a reasonable price

may subject us to the inability to serve customers with our signature courses at restaurants. We

do not stipulate any fixed purchase prices in the supply contracts; on the contrary, purchase

prices are specified in each purchase order we place. As a result, we may not be able to

anticipate and react to price changes in the supply market which may adversely affect our

operations.

Since we rely heavily on suppliers/traders based in China to supply ingredients, any

increase in distribution costs or purchase prices or any failure of our suppliers to perform their

duties could significantly increase our total costs. Where increase cannot be passed on to

customers, we may have to absorb such costs, which could have an adverse effect on our

business, financial condition and results of operations.

PRC laws and regulations relating to food prices may affect our profitability.

The PRC Government has promulgated regulations and taken temporary measures to control

price increases or decreases for certain materials that our restaurants’ daily operation relies

heavily on. These measures may increase or decrease our costs and affect our business.

For measures that prevent the price of certain materials from falling, our cost of these

materials may be held up at a higher level than it would be in free markets; though generally we

may benefit from the measures which aim to suppress price increases, and our cost of these

materials may be maintained at a relatively lower level than that in free market. The introduction,

implementation and effect of price-control measures contains uncertainty. As a result, we cannot

assure you that we will benefit from these laws and regulations in saving costs.

Changes in imported food ingredients policies may adversely affect our operations.

International market and international regulatory environment have historically been

affected by geopolitical instability and international competition. Changes or perceived changes

in trade policies, treaties and tariffs could adversely affect the financial and economic conditions

in the jurisdictions where we operate, which will in turn have a material impact on our overseas

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expansion in the future, financial condition and results of operations. During the Track Record

Period, our imported food ingredients primarily comprised pork tripe and beef. We have sourced

our food ingredients from various countries, such as Denmark, Australia, Canada and the United

States through local traders based in China. Government policies favoring domestic companies in

certain foreign markets and trade barriers, including tariffs, taxes, export or import restrictions,

stringent hygiene policies in relation to food products and other restrictions and charges, may

adversely affect our ability to import food ingredients, export our ready-to-serve meals and

implement our global expansion. Moreover, any change in inflation, interest rates, foreign

exchange rates, government policies, trade policies, exchange control regulations, food industry

laws and regulations, social stability, political, legal, economic and diplomatic environment of

the countries in which we operate or our customers locate, or the perception that these changes

would occur, could adversely affect our business, financial condition and results of operations.

Failure to retain or secure key members of our management team or other key personnel andthe deficiency of senior management could harm our business.

Our future success depends heavily on the continuation of outstanding performance of our

key management personnel. We must continue to attract, motivate and retain a sufficient number

of qualified management and operating personnel and ensure that they are in place, so as to

achieve rapid expansion as planned. If our senior management team fails to work together to

overcome the complexities or difficulties in operations, to implement our expansion strategy, or

to promptly deal with changes, we may be unable to grow our business at a speed or in a

manner as we planned.

If one or more of our key personnel are unable or unwilling to continue to work in their

positions, we may not be able to replace them in a short period or at all. Though the entire

talents pool of qualified and experienced management and operating personnel in the hot pot

restaurant industry is growing, we may face significant challenges competing with other market

players to attract and hire such human resources. Therefore, our business may be disrupted and

our results of operations may be materially and adversely affected. Moreover, if any member of

our senior management team or any of our other key personnel joins a competitor or forms a

competing business, our trade secrets and know-how may leak, which could have a material

adverse effect on our business.

Difficulties in employee recruiting and retention in restaurant operations may slow ourexpansion.

Our continued success depends in part upon our ability to attract, motivate and retain a

sufficient number of employees in our restaurants, mainly including restaurant managers,

restaurant head chefs and assistant restaurant managers. We cannot assure you that we will be

able to recruit or retain such employees for enhancing our restaurant operations. Besides, the

increase in employee turnover rate and/or failure to recruit skilled personnel, due to our inability

to provide our employees with salaries at or beyond the hot pot restaurant industry average,

could harm our employee management system. Any increase in labor costs due to the intense

competition in recruiting qualified human resources and the increased minimum wage

requirements and employee benefits may also slow our market growth and harm our restaurant

operations.

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Our business operations and financial performance have been and may be continuouslyaffected by COVID-19.

Coronavirus disease 2019, also known as COVID-19, is a contagious disease. The disease

was then declared a pandemic by the World Health Organization in March 2020. Soon after the

outbreak, the PRC Government had announced certain measures including travel restrictions and

social distancing in certain major cities in the PRC to block the transmission of COVID-19 for

containing the virus quickly. Hit by COVID-19, the catering service industry has undergone a

dramatic shift, in particular during the rapid escalation of infection control response: a number

of restaurants were forced to temporarily close in early 2020. Since the onset of the COVID-19

outbreak, consumers’ purchasing willingness and purchasing power have been dampened amid a

general economic downturn.

Since the catering service industry is highly susceptible to contagious disease for that

restaurants may suffer from temporary closures and decreased customer traffic, sales of our

restaurant operations for a period after the outbreak of COVID-19 in 2020 had decreased as a

result. At the epidemic peak of COVID-19 in mainland China, we temporarily closed approximately

58% of our restaurants, of which their restaurant operations and food delivery services had been

suspended for at least ten days from February to March 2020. For restaurants that remained

open, same-store sales was declining due to shortened operating hours and reduced traffic; a

significant portion of our opened stores primarily provided delivery and takeaway services.

Our sales were negatively impacted by: (i) reduced traffic at shopping malls in affected

areas; and (ii) the spreading of the virus in certain regions within mainland China. The fallouts of

COVID-19 pandemic, echoing some of the other Risk Factors, may also adversely affect our

business, mainly including:

. reduction and volatility in market demands for our services, which may be caused by,

among other things, restaurant closures, shortened operating hours, shifts in business

model and reduced customer traffic due to quarantine, government or self-imposed

restrictions and changes in consumer spending behaviors;

. disruption to the operations of our business partners, including third-party food

processing companies, suppliers and delivery service providers; such disruption may

be caused by business and facilities closures, reductions in operating hours, the

social, economic, political or labor instability in affected areas, transportation delays,

travel restrictions and changes in operating procedures such as mandatory additional

cleaning and safety requirements;

. negative impacts to our business partners’ ability to operate cost-effectively.

Although the virus has been largely contained in most areas in mainland China recently,

imported and sporadic cases have been identified in certain areas in mainland China since the

second half of 2020. The post-pandemic era is of uncertainty and volatility, and we may be

continuously affected by the fallouts of COVID-19. In particular, the steady increase of confirmed

COVID-19 cases outside mainland China could result in broad and strong measures to further

strengthen the control of COVID-19 within mainland China, such as travel restrictions, social

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distancing and quarantine policies. The spreading of COVID-19 outside mainland China and the

rising uncertainties may materially and adversely affect our business, results of operations, cash

flows and financial condition, and further, adversely impact or delay our global expansion plan.

Any outbreak of widespread contagious diseases and natural disasters may materially andadversely affect our business operations.

In recent years, there have been outbreaks of epidemics and pandemics globally. In

addition to the impact of COVID-19 as described above, our business could be materially and

adversely affected by: (i) natural disasters, such as snowstorms, earthquakes, fires or floods; (ii)

the outbreak of other widespread health epidemic, such as swine flu, avian influenza, severe

acute respiratory syndrome, Ebola, or Zika; or (iii) other events, such as wars, acts of terrorism,

environmental accidents, power shortage or communication interruptions. The occurrence of such

a disaster or prolonged outbreak of an epidemic illness or other adverse public health

developments in the countries and regions we operate in could materially disrupt our business

and operations. Such events could also significantly affect our industry and cause a temporary

closure of the facilities we use for our operations, which would severely disrupt our operations

and have a material adverse effect on our business, financial condition, results of operations

and prospects. Our operations could be disrupted if any of our employees were suspected of

having any of the epidemic diseases, since this could require us to quarantine some or all of

such employees or disinfect the facilities used for our operations. In addition, our revenues and

profitability could be materially reduced since that a natural disaster, health epidemic or other

outbreak could harm the Chinese or global economy in general. Our operations could also be

severely disrupted if our customers, suppliers or other participants were affected by such natural

disasters, health epidemics or other outbreaks.

We may not be able to adequately protect our proprietary intellectual property, and we mayunintentionally infringe those of others.

We believe that our trademarks and tradenames are essential to our success and our

competitive position. There is however no assurance that there will be no other restaurants

bearing similar trademarks, brands or logos. Any infringement and unauthorized use of our

trademark and tradenames may damage our reputation. Although we have registered trademarks

and have trademark applications pending in the PRC and elsewhere in the world, these steps

may not be sufficiently adequate to protect our intellectual property rights. In the past, we have

found that certain third parties used or imitated our trademarks or trade names without our

authorization. Any negative publicity regarding the businesses of third parties who used or

imitated our trademarks or trade names may materially and adversely impact our results of

operations. During the Track Record Period, we have initiated legal proceedings against certain

third parties for such infringements, some of which were still pending for judgment as of the

Latest Practicable Date. Such litigation could result in substantial costs and diversion of

resources, which could negatively affect our sales, profitability and prospects. Even if such

litigation is resolved in our favor, we may not be able to successfully enforce the judgment and

remedies awarded by the court and such remedies may not be adequate to compensate us for

our actual or anticipated losses, whether tangible or intangible.

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On the other hand, we may face claims of infringement that could interfere with the use of

our proprietary know-how, concepts, formulas or trade secrets. Defending against such claims

may be costly and, if unsuccessful, we may be prohibited from continuing to use such

proprietary information in the future or be forced to pay damages, royalties or other fees for

using such proprietary information, any of which could negatively affect our sales, profitability

and prospects.

Our restaurants offer food delivery services; failure to deliver caused by the logistics-focusedfood delivery services platforms may materially and adversely affect our reputation andbusiness.

In addition to dine-in services in our restaurants, we offer food delivery services. For the

years ended 31 December 2018, 2019 and 2020, and the six months ended 30 June 2020 and

2021, 1.2%, 2.5%, 5.3%, 8.4% and 3.3% of our total revenue were generated from the food

delivery business, respectively. Our consumers of food delivery services enjoy our gourmet food

from logistics-focused food delivery services platforms. As we are responsible for syncing all

menus on food delivery services platforms and preparing qualified and safe food for our

consumers, we may be held liable for complaints and/or compensation related to the orders on

these platforms.

Interruptions, delays or failures caused by the logistics-focused food delivery services

platforms may materially and adversely impact the experience of our customers and, further,

damage our reputation and business. These interruptions may be caused by unforeseen events

that are beyond our control or the control of the logistics-focused food delivery services

platforms, such as inclement weather, natural disasters, transportation disruptions, and labor

unrest. In addition, food safety or product quality issues may occur when food delivery services

are performed by the logistics-focused food delivery services platforms; any such unfavorable

incidents may result in the return of our food or complaints and, further, harm the reputation of

our overall business image.

Our business depends on the performance of, and our long-term relationships with mobile-based payment service providers and telecommunications companies.

Regarding mobile-based payment, where payers and payees both use digital modes to send

and receive money, the percentage of mobile-based payment in terms of the total payments from

our customers accounted for approximately 95.1%, 97.1%, 98.5% and 98.6% for the years ended

31 December 2018, 2019 and 2020 and the six months ended 30 June 2021, respectively. Our

ability to expand digital payments between us and customers is critical to the success and

continuation of our business. We rely heavily on mobile-based payment service providers in

collecting digital payments through third-party payment solutions they provide and maintain. If

we fail to extend or renew the agreements with these providers on acceptable or favorable terms,

or if they are unwilling or unable to provide us with reliable mobile-based payment solutions, our

business and results of operations would be adversely affected.

In addition, our operation also relies in part on telecommunications companies in the PRC.

In the PRC, almost all leading telecommunications companies are state-owned. Our customers

can access the internet, through 4G or 5G network or Wi-Fi provided by these

telecommunications companies, to visit our official website, and further, to learn our corporate

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culture and vision, which may in turn, benefit our business; they can also order dishes on their

mobile devices by scanning a QR code on the table, or on logistics-focused food delivery

services platforms that we cooperate with, to enjoy our gourmet food, yet to complete such

procedures, we need a running network support from telecommunications companies. Hence, any

failure caused by these telecommunications companies in providing stable network, strong

broadband capacity and speed to us or to our customers, may result in a reduction in traffic to

our official website, and may affect their dining experience when ordering dishes, which may, in

turn, harm our business and results of operations. Moreover, the cost of services provided by

telecommunications companies are affected by factors beyond our control; if such cost increases

significantly, we may suffer a reduction in profit margins.

Failure to comply with applicable fire safety regulations may subject us to penalties andwill negatively affect our operations.

According to the PRC laws and regulations, restaurants, central kitchens and other food

providers in the catering service industry are required to comply with various requirements of fire

safety, including obtaining fire safety inspection approvals, and/or completing fire protection as-

built acceptance check or filing, passing random inspection after the fire protection acceptance

filing and other random inspections in relation to fire safety in daily operations. If we fail to

obtain relevant approvals, pass relevant random inspections or complete other applicable fire

protection procedures on a timely basis or at all, we may be fined, ordered to rectify the non-

compliance, discontinue the operation, and/or use of the affected business site. See ‘‘Regulatory

Overview — Regulations Related to Fire Prevention’’ for more details.

As of the Latest Practicable Date, we had not obtained the fire safety inspection approvals

from fire safety authorities for 14 restaurants in the PRC; we are actively engaging in the

application process in relation to 13 of such restaurants though we may not be able to file the

application for the remaining one restaurant due to the nature of the premises where such

restaurant is located. According to applicable PRC laws and regulations, a restaurant failing to

obtain the fire safety inspection approval before opening may be ordered to discontinue the

operation and be fined ranging from RMB30,000 to RMB300,000. See ‘‘Business — Licenses,

Regulatory Approvals and Compliance’’ for more details.

Despite that we have been and will continue to make proactive efforts to ensure compliance

with applicable fire safety laws and regulations, to timely obtain fire safety inspection approvals

and/or complete other applicable fire protection procedures and to rectify any potential non-

compliance incidents, such efforts may need support and cooperation from third parties,

especially from the lessors of the premises where our current and new restaurants and/or central

kitchens are located. We cannot assure you that these third parties will effectively and timely

cooperate with us or at all. If we are unable to obtain the required approvals or complete other

applicable fire protection procedures for our restaurants and/or central kitchens due to reasons

within or beyond our control, we may be subject to rectification, fines and/or orders to cease our

business operations on the site. In addition, since the laws and regulations on the fire safety are

evolving and the implementation involves uncertainty, there can be no assurance that we have

been and will be timely aware of and able to properly respond to new legislation, interpretation

to current laws and regulations, governmental policies, administrative guidance and

requirements, the failure of which may subject our restaurants and/or central kitchens to

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administrative penalties, such as order of rectification, fines and/or suspension of business,

which will have a material adverse effect on our business, financial condition and results of

operations.

Our historical financial and operating results may not be indicative of future performance, andwe may not be able to achieve or sustain the historical level of our revenue and profitability.

Our historical results and growth may not be indicative of our future performance. Our

financial and operating results may not meet the expectations of public market analysts or

investors, which could cause the future price of our Shares to decline. Our revenue, expenses

and operating results may vary from period to period in response to a variety of factors beyond

our control, which primarily include general economic conditions, emergencies and changes in

policies, laws and regulations that may affect our restaurant operations and our ability to

monitor our costs. Our staff costs may fluctuate from month to month as we are required legally

to pay our employees extra wages if they are asked to work on holidays.

In addition, we may incur costs relating to the [REDACTED], and such may negatively impact

our profit for the year ending on 31 December 2021. Therefore, you may not rely on our historical

results to predict our future financial performance.

Our ability to obtain additional capital is affected by certain uncertainties and risks.

We believe that our current cash and cash equivalents, anticipated cash flow from

operations and the [REDACTED] from the [REDACTED] will be sufficient to meet our anticipated

cash needs for working capital and capital expenditures for at least the next 12 months from the

date of this Document. We may, however, need additional cash resource to finance our

continuing growth and other future developments such as planned investments.

Our additional financing needs will be determined by the timing of opening new

restaurants, our investments to the new restaurants and the cash flow from our operations. If

our cash needs are insufficiently satisfied, we may seek additional financing by selling our

equity or debt securities and/or by obtaining a credit facility.

The additional sale of our equity securities could result in dilution to our Shares. The

incurrence of indebtedness would result in increased debt repayment obligations and operating

and financing covenants that may, among other things, negatively affect our operations and

restrict our ability to pay dividends. If we fail to repay the debt obligations or comply with such

debt covenants, we could be in default under the relevant debt obligations which may materially

and adversely affect our liquidity and financial condition.

Our ability to obtain additional capital on acceptable terms may be reduced by a variety of

uncertainties and risks, including but not limited to:

. investors’ perception of, and demand for, securities of companies in the hot pot

restaurant industry;

. conditions of the Hong Kong capital market and the others in which we may seek to

raise funds;

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. our future results of operations, financial condition and cash flows;

. PRC governmental regulations relating to the foreign investment to the hot pot

restaurant industry in mainland China;

. general economic and political conditions in the PRC;

. PRC government policies relating to the foreign currency borrowings; and

. increased volatility in global financial markets, which could have a negative impact on

our ability to access capital markets and other funding sources and enforce debt

covenants.

We cannot assure you that our future financing will be available in amounts or on terms

acceptable to us, or at all. If we fail to raise additional funds, we may need to sell our debt or

equity securities, reduce our growth to a level that our cash flow can cover and support or defer

our planned expansions.

We may not be able to adequately manage our inventory.

Our food ingredients are perishable, therefore, we may incur ingredients wastage due to

long storage lives and inefficient inventory management. Though we endeavor to reduce our

inventory by ensuring a stable store in/out volume, our efforts may be affected by various factors

beyond our control, including natural disasters, fluctuations in customer traffic, and in the long

run, changes in consumer tastes and dining preferences. We cannot guarantee that our

inventories will be able to swiftly meet market demands in the event of such circumstances, nor

can we assure you that our ingredients wastage will not increase. Excessive inventories may cost

us in cash and lead to their obsolescence, which in turn could increase our operating costs and

reduce our profits.

Information technology system failure or data breach could incur interrupts in operatingsystems which may adversely affect our business.

Third-party management systems, including cloud-based POS system (嘩啦啦POS系統),

Kingdee (金蝶), and Internet service providers our Members’ Club relies on are critical to our

success in business and operations. We rely on third-party management systems to monitor

online payments, manage our inventories, and generate procurement lists. These systems enable

us to timely rectify the insufficient categories in our inventories, and generate our daily revenue

report in a readable format for our management team to review. Hence, any damages to or

failures of our third-party management systems due to computer viruses or network hacking

attacks may have a material adverse effect on our daily operation.

Moreover, our Members’ Club, which aims to stick our customers around to our brands and

thus increases their repeat visit to our restaurants, is built on social media; negative changes in

system of social media may adversely affect our operations. We may encounter systematic errors,

its platform restrictions on advertising, and its platform rules of distributing traffic; such

circumstances may harm the user experience of our customers within our program. Certain

personal information of our customers has been, and will be, collected through our Members’

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Club. Our network security may be breached due to an employee’s error and malfeasance and/or

the actions of third parties. If any actual or perceived breach of security occurs, we may become

subject to litigation or other proceedings which may force us to divert our management from

running business to dealing with crisis, and may cause us to incur significant unplanned losses

and expenses. In addition, our customer confidence in the effectiveness of our security

measures, and in our brands, could be harmed. We may lose customers and suffer financial

losses arising from remediation efforts, investigation costs and system protection measures. Any

of the above could harm our reputation and materially and adversely affect our business and

results of operations.

Unauthorized access to, and theft, destruction, improper use, transfer, or disclosure of ourcustomers and employees’ personal or financial data, or any proprietary or confidentialinformation stored in our or a third party’s information system, could incur substantial costs,subject us to litigation and government investigation, and damage our brand reputation.

We rely on stable computer systems and network infrastructures to monitor the daily

operations and to collect accurate up-to-date financial and operating data for business analysis

and decision making. Any damages to or failure of our computer systems or network

infrastructures caused by computer viruses or network hacking attacks may lead to interruptions

to our operations or inaccuracies in inventories management.

We have been using, and plan to continue to use, digital technologies to improve dining

experiences in our restaurants and drive sales growth. We, directly or indirectly, collect certain

personal data of our customers and consumers when, for example, collecting digital payments

and receiving orders through online platforms; such information will be automatically stored in

information systems that are operated either by us or a third party, and we may utilize the

information in our Members’ Club. In addition, our information technology systems, such as

systems for helping manage internal and external communications and human resources had

stored up personal information of more than 10,000 employees as of the Latest Practicable Date.

As a result, we face inherent risks in storing and handling such information. If our or any of the

third parties’ security systems break down or are compromised, due to our employee’s error,

computer viruses or network hacking attacks, or that these systems fail to comply with

applicable policies, laws and regulations, we may have to encounter unauthorized disclosure,

malicious exposure or any other inappropriate handling of such private information, which could

incur substantial costs and subject us to litigations and government enforcement actions; it may

also result in a loss of customer confidence, and adversely affect our business and reputation.

Moreover, since the PRC Government attaches great importance to the personal data

protection, we may incur substantial costs in upgrading our information systems to comply with

the laws and regulations relating to cybersecurity and data privacy. We may also encounter risks

of breaching the applicable laws and regulations, which could subject us to severe

administrative penalties or even the suspension of business, and our reputation, business and

results of operations will be substantially harmed. As we expect that data privacy will always be

a highest concern of the PRC Government, we cannot assure you that we will not be subject to

potential penalties for breaching the applicable laws and regulations. See ‘‘Regulatory Overview

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— Regulations Related to Information Security and Privacy’’ for more details. In particular, the

uncertainties surrounding cybersecurity review may subject us to the liabilities imposed by data

privacy and protection laws and regulations.

The relevant government authorities may require us to contribute additional social insuranceor housing provident funds, or impose late payment fees or fines on us.

Pursuant to the PRC laws and regulations, we are required to participate in the employee

social welfare plan administered by local governments. Such plan consists of pension insurance,

medical insurance, work-related injury insurance, maternity insurance, unemployment insurance

and housing provident fund. The amount we are required to contribute for each of our employees

under such plan should be calculated based on the employee’s actual salary level of previous

year, and be subject to a minimum and maximum level as from time to time prescribed by

national laws and regulations and local authorities.

During the Track Record Period and up to the Latest Practicable Date, we did not make full

contributions to social insurance and housing provident funds for certain of our employees. As a

result, we may be required by competent authorities to pay the outstanding amount, and may be

subject to late payment fee or fines or enforcement application made to the court. As of the

Latest Practicable Date, no competent government authorities had imposed administrative action,

fine or penalty to us nor had we received any order to settle the outstanding amount. In addition,

we have engaged third-party human resource agencies and made contributions to social

insurance and housing provident funds for some of our employees through such agencies. We

may be ordered to pay social insurance premium and housing provident funds for such

employees by ourselves rather than through the third-party agencies.

We have made a provision of RMB4.0 million, RMB1.6 million, RMB0.8 million and RMB0.5

million for the full amount of our estimated aggregate shortfall of social insurance and housing

provident fund contributions for the years ended 31 December 2018, 2019 and 2020 and the six

months ended 30 June 2021 in our financial statements. We cannot assure you that the

competent local government authorities will not require us to pay the outstanding amount within

a specified time limit or impose late fees or fines on us, which may materially and adversely

affect our financial condition and results of operations.

We employ service outsourcing companies to provide services and personnel for ouroperations and we therefore have limited control over outsourced personnel

Our staff includes the outsourced personnel provided by service outsourcing companies.

During the Track Record Period, we entered into agreements with the service outsourcing

companies, but we did not have any direct labor contract relationship with the outsourced

personnel, and therefore had limited control over the outsourced personnel. If any of the

outsourced personnel fails to follow the instructions, policies and business guidelines

formulated by the service outsourcing companies in accordance with our requirements, our

market reputation, brand image and results of operation may be materially and adversely

affected. Our agreement with the service outsourcing companies may stipulate that we will not

be liable for any obligations of the outsourced personnel. However, if the service outsourcing

companies violate any applicable PRC labor laws and regulations or their employment

agreements with the relevant personnel, those relevant personnel may file a claim against us

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because they render services in our restaurants. Therefore, we may assume legal liability, and

our market reputation, brand image and businesses, financial position and results of operation

may be materially and adversely affected.

Our insurance policies may not provide adequate coverage for all claims associated with ourbusiness operations.

As of the Latest Practicable Date, we had obtained insurance policies that we believe are

customary for businesses of our size and type and are in line with the standard commercial

practices in the PRC and Taiwan. For more details on our insurance policies, see ‘‘Business —

Insurance.’’ However, there are types of losses we may incur that cannot be insured against or

that we believe are not commercially reasonable to insure, such as loss of reputation. If we were

held liable for uninsured losses or amounts and claims for insured losses exceeding the limits of

our insurance coverage, our business and results of operations may be materially and adversely

affected.

We cannot guarantee that we will not be involved in claims, disputes or legal proceedings inour ordinary course of business.

From time to time, we may be involved in claims, disputes and legal proceedings in our

ordinary course of business. These may concern issues relating to, among others, food safety

and quality incidents, environmental matters, breach of contract, employment or labor disputes,

infringement of intellectual property rights and infringement related to safety management in

public places. As of the Latest Practicable Date, we had not been involved in any litigation or

legal proceeding that may materially affect our business and results of operations. Any claims,

disputes or legal proceedings initiated by us or brought against us, with or without merit, may

result in substantial costs and diversion of resources, and if we are unsuccessful, could

materially harm our reputation. Furthermore, our suppliers may not be able to indemnify us in

full and in a timely manner, or at all, when claims, disputes or legal proceedings are filed

against us caused by defective supplies provided by them.

Any unexpected incidents in our restaurants may adversely affect our reputation and business.

We believe that our continued success depends largely on our ability to protect and

enhance the value of our brands. Any unexpected incidents in our restaurants may harm our

reputation and reduce customer confidence in our brands; if we fail to deal with these incidents,

our future expansion could be materially affected. We may encounter and experience unexpected

negative publicity of our restaurants, tort liability, or any other unexpected violations of the PRC

agency regulations from which we may be fined and have a material adverse effect on our

business and restaurant operations.

We are subject to the risks associated with the rental of real estate.

As we lease the premises for all of our restaurants, we are exposed to the risks of the retail

rental market. For information regarding our leased properties, see ‘‘Business — Properties.’’

Accordingly, we are subject to all of the risks generally associated with the rental of real estate,

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including changes in the investment climate for real estate, demographic trends, trade zone

shifts, central business district relocations, supply or demand for the products of our restaurants

and potential liability for environmental contamination.

Our dependence on the rental of real estate may increase our vulnerability to adverse

economic conditions, limit our ability to obtain additional financing, and reduce our cash

availability.

Lessors may, out of our expectation, terminate the lease agreements, and the PRC

Government may acquire any land in the PRC. As a result, we may be subject to compulsory

acquisition, closure or demolition of any of the properties in which our restaurants operate.

During the Track Record Period, we closed one restaurant due to an increase in rent of this

restaurant upon the expiration of the lease agreement. Although we may receive liquidated

damages or compensation if our leases are terminated unexpectedly, we may be forced to

suspend operations of the relevant restaurant and divert our management attention, time and

costs to find an alternative site to relocate our restaurant, which will negatively affect our

business and results of operations.

We generally enter into long-term leases for our restaurants of approximately five years or

longer. Some of our existing lease agreements will expire for the six months ending on 31

December 2021.

We renegotiate the terms and conditions, such as rent, when renewing our leases. We

cannot assure you that we will be able to renew the relevant lease agreements without

substantial additional cost or increase in the rental cost paid by us, if at all. If a lease agreement

is renewed at a rent substantially higher than the historical rate, or any historical favorable

terms granted by the lessor to us are not extended, our business and results of operations may

be materially and adversely affected. If we are unable to renew the leases for the sites of our

restaurants, we may have to close or relocate the restaurant, where we may incur decoration

costs and other expenses and risks. In addition, the revenue and profit, if any, generated from a

relocated restaurant may be less than before the relocation. As a result, any inability to obtain

leases for desirable restaurant locations or renew existing leases on commercially reasonable

terms could have a material adverse effect on our business, financial condition and results of

operations.

The adoption of IFRS 16 has affected our financial condition.

We leased properties for our restaurants, Laowang Gourmet Lab and various apartments for

employees’ housing. We adopted IFRS 16 since 1 January 2019. The adoption of IFRS 16 has a

substantial impact on our financial position as of 31 December 2019 and 2020 and 30 June 2021,

as well as on the financial performance of the entire Track Record Period.

Under IFRS 16, after the initial recognition of right-of-use assets, lease liabilities and

provisions for restoration costs, we, as a lessee, are required to recognize: (i) depreciation of

right-of-use assets; and (ii) interest expenses on lease liabilities. As a result, other rental and

related expenses under otherwise identical circumstances decreased, while depreciation of right-

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of-use assets and finance costs increased. The total amount of depreciation of right-of-use

assets, interest expenses on lease liabilities was higher in the early periods and lower in the

later periods of each lease.

The front-loaded lease expenses recognition pattern under IFRS 16 had no impact on

retained earnings as of 1 January 2019. For more details, see Note 3 to ‘‘Appendix I —

Accountants’ Report.’’

The adoption of IFRS 16 has affected virtually all commonly used financial ratios and

performance metrics, such as current ratio, quick ratio, profit before taxation, profit for the year/

period, cash generated from operations and cash flows from financing activities. The recognition

of right-of-use assets and lease liabilities expanded our consolidated statements of financial

position and will materially affect our related financial ratios, in particular our current ratio and

quick ratio decreased as a result of the recognition of the current portion of the lease liabilities

from the adoption of IFRS 16.

We may not be able to continue to obtain government grants, which are non-recurring innature.


2020 and 2021, we recorded government grants of RMB1.5 million, RMB7.9 million, RMB3.9

million, RMB1.2 million and RMB4.0 million, respectively. Government grants primarily represent

unconditional subsidies received from local PRC Government to support our business

development and are generally non-recurring in nature. We cannot guarantee that we will be

able to continue to obtain government grants, which may have a material adverse effect on our

results of operations and profitability.

Some of our leased properties have title defects. Some of our lease agreements have not beenregistered.

We lease properties mainly for our restaurants’ operations. As of the Latest Practicable

Date, with respect to 11 out of 144 of our leased properties used for restaurants, central kitchen

and offices in the PRC, nine of which the lessors did not provide valid title certificates or

relevant authorization documents evidencing their ownership rights, and two of which the lessors

did not provide relevant authorization documents evidencing their rights to lease the properties.

As a result, there is a risk that these lessors may not have the right to lease such properties to

us, in which case the relevant lease agreements may be deemed invalid or we may face

challenges from the property owners or other third parties regarding our right to lease, occupy

and use the premises. With respect to five out of 144 of our leased properties used for

restaurants, central kitchen and offices that have valid title certificates or relevant authorization

documents evidencing the lessors’ rights to lease such properties in the PRC, their actual usage

does not fit into the prescribed scope of usage shown on such title certificates or relevant

authorization documents. For details, see ‘‘Business — Properties.’’ If any of such properties are

successfully challenged by third party or government authorities, we may be forced to suspend or

relocate relevant restaurants. We may incur additional expenses during the process, and if we

fail to find suitable alternative properties on acceptable terms, our business, financial condition

and results of operations may be materially and adversely affected.

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In addition, under the applicable PRC laws, all lease agreements are required to be

registered with the competent land and real estate administration bureaus. However, as of the

Latest Practicable Date, the lease agreements with respect to some of our leased properties had

not been registered and filed with the competent land and real estate administration bureaus in

the PRC since that the relevant lessors failed to provide necessary documents for us to register

the leases. As advised by our PRC Legal Advisors, failure to complete the registration and filing

of lease agreements will not affect the validity of the lease agreements. However, the competent

PRC authorities may impose a fine ranging from RMB1,000 to RMB10,000 for each of such lease

agreements. See ‘‘Business — Properties.’’

Our profit or loss may be affected by the recoverability of our deferred tax assets.

Hit by COVID-19, many businesses in the catering service industry encounter challenges in

operations, and we are no exception, and to help these businesses, the PRC Government has

introduced specific measures; both the challenges and measures may affect our projections of

future taxable profits. As a result, we are required to consider the projections and probability of

future taxable profits on the recognition of deferred tax assets. As of 31 December 2018, 2019

and 2020 and 30 June 2021, our deferred tax assets amounted to RMB17.2 million, RMB20.7

million, RMB22.1 million and RMB25.1 million, respectively. As deferred tax assets can only be

recognized for deductible temporary differences and unused tax losses carried forward, to the

extent that it is probable that future taxable profits will be available, actions for management are

required to consider the projections and probability of our future taxable profits.

Future profits generated by existing restaurants may be offset by investment costs, such as

upfront costs incurred in establishing new restaurants and subsidiaries for the management and

operation of brands and restaurants, which will increase the uncertainty in the utilization of tax

losses prior to their expiry. Our Directors assumed that it is uncertain that taxable profits will be

available in the foreseeable future against which the tax losses can be utilized for these entities,

and therefore, no deferred tax assets had been recognized for such tax losses during the Track

Record Period.

Any changes in management’s judgment, as well as the future operating results of the

relevant entities, would affect the carrying amounts of deferred tax assets to be recognized and

the recoverability of deferred tax assets recognized in our consolidated financial statements, and

therefore, our financial condition and results of operations could be materially and adversely

affected in future.

Our net current liabilities may expose us to certain liquidity risks and could restrain ouroperational flexibility as well as affect our ability to expand our business.

As of 31 December 2019 and 2020 and the six months ended 30 June 2021, we recorded net

current liabilities of RMB21.6 million, RMB33.6 million and RMB29.3 million, respectively. See

‘‘Financial Information — Working Capital’’ or more details regarding out net current liability

position.

Net current liabilities may expose us to certain liquidity risks and could constrain our

operational flexibility as well as adversely affect our ability to expand our business. Our future

liquidity, the payment of trade and other payables, as and when they become due will primarily

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depend on our ability to maintain adequate cash inflows from our operating activities and

adequate external financing, which will be affected by our future operating performance,

prevailing economic conditions, our financial, business and other factors, many of which are

beyond our control. If we do not have sufficient working capital to meet future financial needs,

we may need to resort to external funding. Our inability to obtain additional external borrowings

on a timely basis or on acceptable terms, or at all, may also force us to abandon our

development and expansion plans, and our business, financial condition and results of

operations may be materially and adversely affected.

We may be required to obtain approvals from Taiwan authority for investment in our Taiwanbranch if the shareholding of the Company at the time of or after the [REDACTED] reaches thethreshold for such approval.

Under current Taiwan laws, regulations and policy, the Company will be required to obtain

an approval from the Investment Commission, Ministry of Economic Affairs of Taiwan for its

investment in its Taiwan branch if, at the time of or after the [REDACTED], more than 30% of its

capital is directly or indirectly owned by, or beneficially owned by any PRC person or it is under

control by any PRC person. Failure to obtain such approval, if needed, may subject us to a

Taiwan authority’s monetary penalty of from NT$120,000 to NT$25,000,000 and be ordered to

rectify within a specific timeline; if the Company still fails to apply for such approval, the Taiwan

authority may order the Company to withdraw its investment and suspend its operation in

Taiwan.

We may be unsuccessful in opening and profitably operating new restaurants, in particular inlocations outside Greater China.

We may face intense competition when expanding geographically within existing markets or

entering into markets where we have little or no experience operating in, including smaller cities

or remote areas in mainland China. We may fail to anticipate market changes in these locations,

or encounter delays in obtaining licenses from government authorities when opening new

restaurants. There is no assurance that we will be able to open new restaurants in a pace as we

planned, or at all. Delays or failures in opening new restaurants could materially and adversely

affect our growth and financial and operating results. If new restaurants are opened, they may be

less profitable than our existing restaurants due to any decrease in average sales or average

spending per customer and/or any increase in construction, occupancy or operating costs.

Moreover, we intend to expand our restaurant network to countries and regions outside

Greater China, yet we have no experience in operating restaurants in such locations; therefore,

operations in restaurants outside Greater China may expose us to various risks and

uncertainties, including, among others:

. difficulty in finding reliable suppliers with adequate supplies of ingredients meeting

our quality standards at acceptable prices;

. political risks, including civil unrest, acts of terrorism, acts of war, regional and global

political or military tensions and strained or altered foreign and regional relations,

which may lead to decreases or losses of property and/or interrupt our business

operations;

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. difficulties in and costs of complying with and enforcing remedies under a wide variety

of complex domestic and international laws, treaties and regulations with respect to

food safety, fire safety and other aspects relating to our business operations;

. inability to obtain and/or maintain all requisite licenses, permits, approvals and

certificates in foreign jurisdictions;

. economic sanctions, trade restrictions, discrimination, protectionism or any other

unfavorable policies against China-based, or even Asian-owned companies;

. exposure to litigation or third-party claims outside Greater China;

. stringent consumer protections in foreign jurisdictions; and

. uncertainties in foreign legal authorities’ interpretation and application of tax laws and

regulations, and possibilities of bearing onerous tax obligations and potentially

unfavorable tax conditions.

As a result of the foregoing factors, it may take a longer period than we planned, or never

be possible, for our restaurants to be opened in countries and regions outside Greater China to

ramp up and reach our expected sales volumes and profit levels, thereby reducing our overall

profitability. In addition, where customers are not familiar with our brands, we may have to

increase expenditures on advertising and promotional activities which could further have a

material adverse effect on our profitability.

Our results of operations may fluctuate significantly due to several factors beyond our control.

Our overall results of operations may fluctuate significantly from time to time affected by

factors beyond our control, including:

. the timing of opening new restaurants;

. pre-opening costs and expenses;

. recruitments or departures of our key personnel;

. increase in operating costs for our newly-opened restaurants, in particular for the first

few months after their openings;

. decrease in revenue and increase in renovation costs when we temporarily closed one

or more existing restaurants for their refurbishment;

. impairment losses incurred in non-current assets such as goodwill;

. fluctuations in food and commodity prices; and

. general market and economic conditions.

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In addition, as a hot pot chain restaurant group, our results of operations are subject to

seasonality. We generally record higher sales during October to February than other months in a

year. Sales from April to June of a year is usually lower than the other months. As a result, our

results of operations for a given period in a fiscal year are not necessarily indicative of the

results of any other periods in the same fiscal year.

RISKS RELATING TO OUR INDUSTRY

We operate in a highly competitive and fast-changing market and may lose our market shareif we fail to compete successfully.

We encounter intense competition in the hot pot restaurant industry and our market share

may be affected by, among other things, food quality and safety, taste, price, dining ambience,

services, location and employees. Our competitors are from a variety of market sectors and a

variety of geographic markets, including locally-owned restaurants and regional and international

chain restaurants. Our competitors also offer dine-in, take-away and food delivery services. There

are a number of well-established competitors with substantially greater financial, marketing,

personnel and other resources than ours, and many of them are well established in the

geographic markets where we have existing restaurants or intend to open new restaurants. In

addition, other companies may develop new restaurants or brands that resemble our concepts

and target customers, and thus increase the competition.

Any inability to successfully compete with the other competitors may prevent us from

increasing or sustaining our revenue and profitability, and further, we may lose our market share.

Moreover, we may need to modify or refine our restaurants and train our employees to offer

pleasant dining experience to our customers, and in a long term, reshape our brand image and

develop our corporate culture to place us at a long-standing competitive advantage. We cannot

assure you that we will be successful in doing so, and the costs incurred may reduce our

profitability.

Failure to comply with laws and regulations in relation to the catering service industry mayharm our business.

Our business is exposed to various risks of non-compliance with the laws and regulations

relating to the catering service industry. See ‘‘Regulatory Overview — Regulations Related to Food

Safety and Licensing Requirement for Food Operation’’ for more details. In accordance with the

applicable laws and regulations in jurisdictions where we operate, we may need to meet the

various requirements in relation to food hygiene and safety, fire safety and so forth, to maintain

various licenses, permits and approvals, including food operation license, fire safety inspection

approvals, liquor license and so forth, or to carry out relevant filing procedures, in order to

smoothly and lawfully operate our restaurant business. If we fail to obtain or to timely update

any of the essential licenses, permits and approvals required for our restaurant operations,

including but not limited to the foregoing, whether for new restaurants or not, we may be subject

to penalties, confiscation of the gains from the relevant restaurants, temporary closures to the

relevant restaurants, or failure to open new restaurants on time, which could materially and

adversely affect our results of operations and slow our expansion plan. As of the Latest

Practicable Date, a small amount of our restaurants had not completed fire protection acceptance

filings that we are obliged to. According to applicable PRC laws and regulations, we may be

RISK FACTORS

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ordered to complete the filing in due course and subject to a fine up to RMB5,000 for each

restaurant that had not completed the timely filing. See ‘‘Regulatory Overview — Regulations

Related to Fire Prevention — Fire Protection As-built Acceptance Check and Filing’’ for more

details.

We may also experience adverse publicity arising from such non-compliance, which could

negatively reduce our brand momentum. There can be no assurance that we will be able to

obtain, renew and/or convert all of the required licenses, permits and approvals upon their

expiration in a timely manner, or at all. Failure to do so will severely disrupt our ongoing

business and subject us to penalties. In addition, our operations can be affected by various

factors, including fire safety, food hygiene and environmental protection. Although we had not

been subject to any material fines or other penalties in relation to any non-compliance during

the Track Record Period, we cannot guarantee that they will not occur, and if we fail to address

them in a timely manner, or at all, we may suffer from fines, confiscation of the gains derived

from the relevant restaurants or the suspension of their operations, and all of the foregoing

would materially and adversely affect our business and results of operations.

Any outbreak of food-borne illnesses, epidemic or contagious diseases would adversely affectour operations.

Our business is susceptible to food-borne illnesses, epidemic and other contagious

diseases that are far beyond our control. We cannot assure you that our internal control

mechanism will be effective enough in preventing any food-borne illnesses, nor can we say that

such illnesses, caused by our food suppliers, distributors or employees, will not occur, and once

occurred, many of our restaurants would be affected. Negative publicity on printed or online

media, in particular on social media, in relation to food-borne illnesses, could materially and

adversely affect the entire catering service industry and we cannot stay immune to it. Moreover,

other illnesses, such as hand, foot and mouth disease and avian influenza, could harm the

supply of our materials, and in turn, increase our costs and decrease our sales. We may be

forced to temporarily or permanently close some of our restaurants, which could severely harm

our business.

We may be affected by epidemic or pandemic significantly. The outbreaks of epidemic and

pandemic had severely impacted the general economic conditions in the PRC and elsewhere in

the world. In June 2009, the World Health Organization declared H1N1 influenza to be a

pandemic. In March 2013, an H7N9 virus was first reported to have infected humans in China.

Any outbreak or spreading of epidemic or pandemic, in particular when it affected areas where

our existing restaurants operate, could result in declines in customer traffic, closures of some of

our restaurants and a huge human resources loss due to quarantine policies, and further, our

financial position and results of operations would be materially affected.

There has been a transmission of ASF in China since early August 2018. To respond to this,

the PRC Government decided to slaughter pigs infected with ASF and prohibit the exchange of

pork products from certain provinces, which had affected the supply of fresh pork and caused

the price of pork to rise. As a result, the continuous transmission of ASF may have adverse

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impacts on the operations of restaurants whose main dishes are served with pork, due to the

limited supply and the rising cost of fresh pork. Therefore, ASF may bring potential threat to the

catering service market in China.

We may be adversely affected by natural or man-made causes or other circumstances beyondour control.

Natural or man-made causes or other circumstances beyond our control may adversely

affect the economy, infrastructure and livelihood of the people and may negatively impact our

business. Natural or man-made causes, including flood, earthquake, sandstorm, snowstorm, fire

or drought, power, water or fuel shortages, failure, malfunction and breakdown of information

management systems, unexpected maintenance or technical problems, potential wars or terrorist

attacks could be life-threatening of our business. For example, natural disasters may result in

losses of lives, injury or destruction of assets and disruption of our business and operation, and

wars and terrorisms may also injure our employees, cause losses of lives, disrupt our business

and suspend our expansion plan. Any of these factors beyond our control could have an adverse

effect on the overall general economic environment, which may input more uncertainties and

risks to the areas where we operate, and further, slow our business growth and negatively impact

our results of operations.

Adverse macro-economic changes in the PRC may have a negative impact on our performanceand financial condition.

Macro-economic factors, including changes in international, national, regional and local

economic conditions, unemployment rate and consumer spending patterns, may affect the hot

pot restaurant industry as a whole. As our existing restaurants are all located in Greater China,

our operations are subject to the PRC macro-economic conditions. Any downturns of Chinese

economy, decreases in disposable consumer income, perceptions of recession and decreases in

customer confidence may lead to a reduction of customer traffic and average spending per

customer at our restaurants which could materially and adversely affect our performance.

Moreover, the occurrence of sovereign debt crisis, banking crisis or other disruptions in the

global financial markets could impact the availability of credit, and may have a material adverse

impact on financings available to us. The turmoil in financial markets, banking systems or

currency exchange rates may significantly restrict our ability to obtain financing from the capital

markets or financial institutions on commercially reasonable terms, or at all, which could

materially and adversely affect our business, financial condition and results of operations.

Any industrywide food safety concerns or emergencies, even no fault of our own, couldadversely affect our business.

The hot pot restaurant industry in China as a whole is subject to concerns over food safety

and quality; in particular, there have been numerous reports and negative publicity related to the

food safety and quality incidents in the hot pot restaurant industry in the PRC. Even though the

reports and allegations are not targeted at us, the hot pot restaurant industry as a whole could

be negatively impacted by these incidents and associated reports and may experience downturn

which may take a long time to recover, and further, our prospects, business, results of

operations and financial condition could be negatively impacted.

RISK FACTORS

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Any failure to protect our customer data, including security breaches of our databases, or theimproper collection, use or disclosure of such data, as well as the uncertainties surrounding thecybersecurity review may subject us to the liabilities imposed by data privacy and protectionlaws and regulations, which may negatively impact our reputation and business.

We are subject to various laws regarding privacy and the collecting, storing, sharing, use,

disclosure and protection of personally identifiable information and data. Specifically, personally

identifiable and other confidential information is increasingly subject to legislation and

regulations in the PRC and international jurisdictions. The PRC government authorities have

enacted a series of laws and regulations related to the protection of privacy and personal

information, under which internet service providers and other network operators are required to

disclose their rules of information collection and usage to the public, to clearly indicate the

purposes, methods and scope of any information collection and usage, and to obtain appropriate

user consent and to establish user information protection systems with appropriate remedial

measures. However, such regulatory framework for privacy issues in China and worldwide is

currently evolving and is likely to remain uncertain in the future.

The PRC Cyber Security Law, effective on 1 June 2017, stipulates that a network operator,

including internet information service providers, among others, must adopt technical measures

and other necessary measures in accordance with applicable laws and regulations as well as

compulsory national standards to safeguard the safety and stability of network operations,

effectively respond to network security incidents, prevent illegal and criminal activities and

maintain the integrity, confidentiality and availability of network data. We have been making

proactive efforts to comply with the applicable laws, regulations and standards; however, there

can be no assurance that our measures will be effective and sufficient to prevent any violations

under the PRC Cyber Security Law. Any failure to comply with the PRC Cyber Security Law with

subject us to warnings, fines, confiscation of illegal revenue, revocation of licenses, cancellation

of filings, shutdown of the website or even criminal liability, where our business, results of

operations and financial condition would be adversely affected. In addition, due to the evolving

regulatory framework of China for the protection of information in cyberspace, we may be subject

to uncertainties of and adjustments to our business practices, which may incur additional

operating expenses and adversely affect our results of operations and financial condition.

The PRC Personal Data Protection Law, which will enter into effect on 1 November 2021,

clarifies the concept and processing rules of personal information, regulates the processing of

sensitive personal information such as facial recognition, emphasizes that personal information

should not be collected excessively, standardizes the installation of image acquisition and

personal identification equipment in public places and requires large internet platforms to

establish and improve their personal information protection compliance system. We cannot

assure you that our existing privacy and personal protection system and technical measures will

be considered sufficient under applicable laws and regulations. If legislation or regulations in

China are amended to the extent that we have to alter our business practices or substantially

revise our privacy policies so as to be comply with the such laws and regulations, or if the PRC

governmental authorities interpret or implement their legislation or regulations in ways that

could negatively affect our business, financial condition and results of operations.

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On 10 July 2021, the CAC has publicly solicited opinions on the Cybersecurity Review

Measures (Revision Draft for Comments) (《網絡安全審查辦法(修訂草案徵求意見稿)》) (the ‘‘DraftCybersecurity Review Measures’’), which stipulates that operators of critical information

infrastructure purchasing network products and services, and data processors (together with the

operators of critical information infrastructure, the ‘‘Operators’’ and each as a ‘‘Operator’’)carrying out data processing activities that affect or may affect national security, shall conduct a

cybersecurity review. According to the Draft Cybersecurity Review Measures, Operator who

controls more than one million users’ personal information must report to the cyber security

review office for a cybersecurity review if they intend to be listed abroad (國外上市). However,

the Draft Cybersecurity Review Measures provides no further explanation or interpretation for

‘‘listed abroad (國外上市).’’ As of the Latest Practicable Date, the Draft Cybersecurity Review

Measures had not been formally adopted.

In addition to laws, regulations and other applicable rules regarding privacy and privacy

advocacy, industry groups or other private parties may propose new and different privacy

standards. Since the interpretation and application of privacy and data protection laws and

privacy standards are still uncertain, these laws or privacy standards might be interpreted and

applied in a manner that is inconsistent with our practices. Any inability to adequately address

privacy concerns, even if unfounded, or to comply with applicable privacy or data protection

laws, regulations and privacy standards, could result in additional cost and liability for us,

damage our reputation, inhibit the visit to the mini programs and accounts of ours on social

media platforms and harm our business.

We are an attractive target and potentially vulnerable to cyber-attacks, computer viruses,

physical or electronic break-ins or similar disruptions. While we have taken steps to protect our

database, including double-firewalls, antivirus walls and web application firewalls, our security

measures could still be breached. Any accidental or willful security breaches or other

unauthorized access to our database could cause confidential information to be stolen and used

for criminal purposes. Security breaches or unauthorized access to confidential information

could also expose us to liability related to the loss of the information, time-consuming and

expensive litigation and negative publicity. If security measures are breached because of third-

party action, employee error, malfeasance or otherwise, or if design flaws in our technology

infrastructure are exposed and exploited, our relationships with consumers could be severely

damaged, we could incur significant liability and our business and operations could be adversely

affected. We cannot guarantee that we will not experience attacks and unexpected interruptions

in the future. Moreover, we can provide no assurance that our current security mechanisms will

be sufficient to protect our IT systems from any third-party intrusions, viruses or hacker attacks,

information or data theft or other similar activities. Any security and privacy breach may lead to

leak and unauthorized disclosure of data and information we aggregate and materially and

adversely affect our brand image, our business, reputation, financial condition and results of

operations.

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RISKS RELATING TO DOING BUSINESS IN CHINA

Changes in economic, political, and social conditions in the PRC could materially andadversely affect our business, financial condition, results of operations and prospects.

A significant portion of our business assets are located in the PRC and a significant majority

of our sales is derived from the PRC. Accordingly, our results of operations, financial position

and prospects are subject, to a significant degree, to the economic, political and legal

developments of the PRC. Political and economic policies of the PRC Government could affect our

business and financial performance and may result in our inability to sustain our growth.

In recent years, the PRC Government implemented a series of new laws, regulations and

policies which imposed stricter standards with respect to, among other things, quality and safety

control and supervision and inspection of enterprises engaged in hot pot restaurant industry.

See ‘‘Regulatory Overview’’ for more details. If the PRC Government continues to impose stricter

regulations on the catering service industry, we could face higher costs than before in order to

comply with those regulations, which could impact our profitability.

The economic growth over the past few decades in China was rapid; however, its continued

growth has faced downward pressure since 2008 and its annual GDP growth rate has declined

from 9.6% in 2011 to 2.3% in 2020, according to the National Bureau of Statistics of China (中華

人民共和國國家統計局). There is no assurance that the future growth will be sustained at similar

rates or at all. The PRC Government’s economic, political and social policies, including those

related to our industry, may materially and adversely affect our business, financial position,

results of operations and prospects.

The PRC legal system has inherent uncertainties that could limit the legal protection availableto you and us.

Our business and operations are primarily conducted in the PRC and are governed by PRC

laws and regulations. In addition, our offshore holding companies and certain transactions

between them may be subject to various PRC laws and regulations. The PRC legal system is

based on written statutes and their interpretation by the Supreme People’s Court. Prior court

decisions may be cited for reference but have limited weight as precedents.

Since the late 1970s, the PRC Government has significantly enhanced the PRC legislation

and regulations to provide protection to various forms of foreign investments in the PRC.

However, recently-enacted laws and regulations may not sufficiently cover all aspects of

economic activities in the PRC. As many of these laws, rules and regulations are relatively new,

and because of the limited volume of published court decisions, the interpretation and

enforcement of these laws, rules and regulations involve uncertainties and may not be as

consistent and predictable as in other jurisdictions.

From time to time, we may have to resort to administrative and court proceedings to

interpret and/or enforce our legal rights. However, since Chinese administrative and court

authorities have significant discretion in interpreting and implementing statutory and contractual

terms, it may be more difficult to evaluate the outcome of administrative and court proceedings,

and the level of legal protection we enjoy, than in more developed legal systems. Any

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administrative and court proceedings in China may be protracted, resulting in substantial costs

and diversion of resources and management attention. Furthermore, the Chinese legal system is

based in part on government policies and internal rules (some of which are not published in a

timely manner or at all) that may have retroactive effect.

As a result, we may not be aware of our violation of these policies and rules until sometime

after the violation. Such uncertainties, including the uncertainty over the scope and effect of our

contractual, property (including intellectual property) and procedural rights, and any failure to

respond to changes in the regulatory environment in China may materially and adversely affect

our business and impede our ability to continue our operations.

Fluctuations in the value of the Renminbi and other currencies may materially and adverselyaffect our results of operations, other comprehensive income, and the value of your investment.

The exchange rate of the Renminbi against the U.S. dollar and other foreign currencies

fluctuates and is affected by, among other things, the policies of the PRC Government and

changes in China’s and international political and economic conditions, as well as supply and

demand in the local market. It is difficult to predict how market forces or government policies

may impact the exchange rate between the Renminbi and the Hong Kong dollar, the U.S. dollar or

other currencies in the future.

There remains significant international pressure on the PRC Government to adopt a more

flexible currency policy, which, together with domestic policy considerations, may result in a

significant appreciation of Renminbi against the U.S. dollar, the Hong Kong dollar or other

foreign currencies.

The [REDACTED] from the [REDACTED] will be received in Hong Kong dollars. As a result, any

appreciation of the Renminbi against the U.S. dollar, the Hong Kong dollar or any other foreign

currencies may result in the decrease in the value of our [REDACTED] from the [REDACTED].

Conversely, any depreciation of the Renminbi may adversely affect the value of, and any

dividends payable on, our Shares in foreign currency. In addition, substantially our revenue and

expenditures are denominated in Renminbi, while a portion of the compensation for our

Taiwanese executives based in mainland China and Taiwan are paid in New Taiwan dollars. While

cash generated from our operations in Taiwan is insufficient, we remit United States dollars to

our account in Taiwan, for the coverage of the compensation payments. Fluctuations in the

exchange rates among Renminbi, the United States dollar and the New Taiwan dollars may cause

us to incur foreign exchange losses. We cannot assure you that Renminbi will not appreciate or

depreciate significantly in value against Hong Kong dollars, New Taiwan dollars or U.S. dollars in

the future. There are limited instruments available for us to reduce our foreign currency risk

exposure at reasonable costs. Any of these factors may materially and adversely affect our

business, financial condition, results of operations and prospects, and may reduce the value of,

and dividends payable on, our Shares in foreign currency terms.

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More stringent restrictions on currency conversion and the remittance of Renminbi into andout of the PRC may affect our foreign exchange transactions and use of revenues, limit ourability to pay dividends and other obligations, and affect the value of your investment.

The Renminbi is not currently a freely convertible currency, as the PRC Government imposes

control on the convertibility of Renminbi into foreign currencies and in certain cases, the

remittance of currency outside China. We receive substantially all of our payments from

customers in Renminbi and will need to convert Renminbi into foreign currencies for the payment

of dividends, if any, to holders of our Shares and to fund our business activities outside China.

Shortages in the availability of foreign currency may restrict the ability of our PRC subsidiaries to

remit sufficient foreign currency to pay dividends or other payments to us, or otherwise satisfy

their foreign currency denominated obligations. Under the PRC’s existing foreign exchange

regulations, following the completion of the [REDACTED], we will be able to pay dividends in

foreign currencies without prior approval from SAFE or its local branches by complying with

certain procedural requirements. However, the PRC Government may take measures at its

discretion in the future to restrict access to foreign currencies for current account transactions if

foreign currencies become scarce in the PRC. We may not be able to pay dividends in foreign

currencies to our Shareholders if the PRC Government restricts access to foreign currencies for

current account transactions. Foreign exchange transactions under our capital account continue

to be subject to significant foreign exchange controls and require the approval of the SAFE or its

local branches. These limitations could affect our ability to obtain foreign exchange through

equity financing, or to obtain foreign exchange for capital expenditures.

We rely mainly on dividends and other distributions on equity paid by our subsidiaries to fundany cash and financing requirements we have, and any limitations on the ability of oursubsidiaries to pay dividends to us could materially and adversely affect our ability to conductour business.

We are a holding company incorporated in the Cayman Islands. We conduct all our business

through our consolidated subsidiaries incorporated in the PRC. We rely on dividends paid by

these consolidated subsidiaries for our cash needs, including the funds necessary to pay any

dividends and other cash distributions to our Shareholders, to service any debt we may incur

and to pay our operating expenses. The payment of dividends by entities established in the PRC

is subject to limitations. Regulations in the PRC currently permit payment of dividends only out

of accumulated profits as determined in accordance with accounting standards and regulations

in the PRC. Each of our PRC subsidiaries is also required to set aside at least 10% of its after-tax

profit based on PRC laws and regulations each year to its general reserves or statutory capital

reserve fund until the aggregate amount of such reserves reaches 50% of its respective

registered capital. Such statutory reserves are not distributable as loans, advances or cash

dividends. We anticipate that in the foreseeable future our PRC subsidiaries will need to

continue to set aside 10% of their respective after-tax profits to their statutory reserves.

Furthermore, if any of our subsidiaries incurs debt on its own behalf in the future, the

instruments governing the debt may restrict its ability to pay dividends or make other

distributions to us. Any limitations on the ability of our subsidiaries to transfer funds to us

could materially and adversely limit our ability to grow, make investments or acquisitions that

could be beneficial to our business, pay dividends and otherwise fund and conduct our

business.

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In addition, under the EIT Law, the Regulation on the Implementation of the Enterprise

Income Tax Law of the PRC (《中華人民共和國企業所得稅法實施條例》), the Notice of the State

Administration of Taxation on Negotiated Reduction of Dividends and Interest Rates (《國家稅務總

局關於下發協定股息稅率情況一覽表的通知》), or Notice 112, which was issued on 29 January 2008

and amended on 29 February 2008, the Arrangement between the Mainland of China and Hong

Kong Special Administrative Region on the Avoidance of Double Taxation and Prevention of Fiscal

Evasion with Respect to Taxes on Income (《內地和香港特別行政區關於對所得避免雙重徵稅和防止

偷漏稅的安排(國稅函[2006]第884號)》) (the ‘‘China-Hong Kong Tax Arrangement’’), which became

effective on 8 December 2006, and the Announcement of the State Administration of Taxation on

Issues Concerning ‘‘Beneficial Owners’’ in Tax Treaties (《國家稅務總局關於稅收協定中‘‘受益所有

人’’有關問題的公告》) (the ‘‘Announcement 9’’), which became effective on 1 April 2018, dividends

from our PRC subsidiaries paid to us through our indirectly wholly-owned subsidiary incorporated

in Hong Kong, which holds our PRC subsidiaries, may be subject to a withholding tax at a rate of

10%, or at a rate of 5% if such Hong Kong subsidiary is considered as a ‘‘beneficial owner’’ that

is generally engaged in substantial business activities and entitled to treaty benefits under the

China-Hong Kong Tax Arrangement. According to the Announcement 9, the PRC tax authorities

must evaluate whether an applicant is qualified as a ‘‘beneficial owner’’ on a case-by-case basis.

We are actively monitoring the withholding tax and evaluating appropriate organizational

changes to minimize the corresponding tax impact.

We may be deemed to be a PRC tax resident under the EIT Law and our global income may besubject to a 25% PRC enterprise income tax.

We are incorporated under the laws of the Cayman Islands and indirectly hold interests in

our PRC operating subsidiaries. Pursuant to the EIT Law, which became effective on 1 January

2008, and was last amended on 29 December 2018, and the Regulation on the Implementation of

the Enterprise Income Tax Law of the PRC (《中華人民共和國企業所得稅法實施條例》), which took

effect on 1 January 2008 and was last amended on 23 April 2019, dividends payable by a foreign-

invested enterprise to its foreign corporate investors who are not deemed a PRC resident

enterprise are subject to a 10% withholding tax, unless such foreign investor’s jurisdiction of

incorporation has a tax treaty with the PRC that provides for a different withholding tax

arrangement.

The EIT Law provides that if an enterprise incorporated outside the PRC has its ‘‘de facto

management bodies’’ within the PRC, such enterprise may be deemed a ‘‘PRC resident enterprise’’

for tax purposes and be subject to an enterprise income tax rate of 25% on its global incomes.

‘‘De facto management body’’ is defined as the body that has the significant and overall

management and control over the business, personnel, accounts and properties of an enterprise.

In April 2009, the SAT promulgated the Notice of the State Administration of Taxation on Issues

Concerning the Determination of Chinese-Controlled Enterprises Registered Overseas as Resident

Enterprises on the Basis of Their Bodies of Actual Management (《國家稅務總局關於境外註冊中資

控股企業依據實際管理機構標準認定為居民企業有關問題的通知》) which was amended on 29

December 2017 to clarify the criteria for the determination of the ‘‘de facto management bodies’’

for foreign enterprises controlled by PRC enterprises. These criterias include: (i) the enterprise’s

premises where its senior officers and senior management departments in charge of routine

production and operation management perform their duties are mainly located in the PRC; (ii)

decisions relating to the enterprise’s financial and human resource matters are made or subject

RISK FACTORS

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to approval by organizations or personnel in the PRC; (iii) the enterprise’s primary assets,

accounting books and records, company seals, and board and shareholders’ meeting minutes are

located or maintained in the PRC; and (iv) 50% or more of voting board members or senior

executives of the enterprise habitually reside in the PRC. However, there have been no official

implementation rules regarding the determination of the ‘‘de facto management bodies’’ for

foreign enterprises which are not controlled by PRC enterprises (including companies like

ourselves). Therefore, it remains unclear how the tax authorities will treat a case such as ours.

We cannot assure you that we will not be considered a PRC resident enterprise for PRC enterprise

income tax purposes and be subject to the uniform 25% enterprise income tax on our global

incomes. In addition, although the EIT Law provides that dividend payments between qualified

PRC resident enterprises are exempted from enterprise income tax, due to the short history of

the EIT Law, it remains unclear as to the detailed qualification requirements for this exemption

and whether dividend payments by our PRC incorporated subsidiary to us will meet such

qualification requirements even if we are considered a PRC resident enterprise for tax purposes.

Furthermore, the EIT Law provides that, (i) if the enterprise that distributes dividends is

domiciled in the PRC; or (ii) if gains are realized from transferring equity interest of enterprises

domiciled in the PRC, then such dividends or capital gains are treated as PRC-sourced income. It

is not clear how ‘‘domicile’’ may be interpreted under the PRC EIT Law, and it may be interpreted

as the jurisdiction where the enterprise is a tax resident. Therefore, if we are considered a PRC

resident enterprise for tax purposes, any dividends we pay to our overseas corporate

Shareholders who are not deemed a PRC resident enterprise as well as gains realized by such

Shareholders from the transfer of our Shares may be regarded as PRC-sourced income and as a

result become subject to PRC withholding tax at a rate of up to 10%.

Dividends payable by us to our foreign investors and gains on the sale of our Shares maybecome subject to withholding taxes under PRC tax laws.

Under the EIT Law and its implementation rules, subject to any applicable tax treaty or

similar arrangement between the PRC and your jurisdiction of residence that provides otherwise,

PRC withholding tax at a rate of 10% is normally applicable to dividends from a PRC source paid

to investors that are ‘‘non-resident enterprises,’’ which do not have an establishment or place of

business in China, or which have such establishment or place of business but whose relevant

income is not effectively connected with the establishment or place of business. Any gain

realized on the transfer of shares by such is generally subject to a 10% PRC income tax if such

gain is regarded as income derived from sources within China.

Under PRC Individual Income Tax Law and its implementation rules, dividends from sources

within China paid to foreign individual investors who are not PRC residents are generally subject

to a PRC withholding tax at a rate of 20%, and gains from PRC sources realized by such investors

on the transfer of shares are generally subject to PRC income tax at a rate of 20% for individuals.

Any PRC tax may be reduced or exempted under applicable tax treaties or similar arrangements.

If we are treated as a PRC resident enterprise as described under the risk factor headed

‘‘— We may be deemed to be a PRC tax resident under the EIT Law and our global income may be

subject to a 25% PRC enterprise income tax,’’ dividends we pay with respect to our Shares, or the

gain realized from the transfer of our Shares, may be treated as income derived from sources

RISK FACTORS

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within China and as a result be subject to the PRC income taxes described above. However,

shareholders who are not PRC tax residents and seek to enjoy preferential tax rates under

applicable tax treaties may apply to the PRC tax authorities to be recognized as eligible for such

benefits in accordance with the Announcement of the SAT on Promulgating the Administrative

Measures for Entitlement to Treaty Benefits for Non-resident Taxpayers (《國家稅務總局關於發布<非

居民納稅人享受稅收協定待遇管理辦法>的公告》) (the ‘‘Circular 35’’), which was issued on 14

October 2019. According to the SAT Circular 35, the preferential tax rate does not automatically

apply. With respect to dividends, the ‘‘beneficial owner’’ tests under the Announcement 9 will

also apply. If determined to be ineligible for the foregoing tax treaty benefits, gains obtained

from sales of our Shares and dividends on our Shares paid to such Shareholders would be

subject to higher PRC tax rates. In such cases, the value of your investment in our Shares may be

materially and adversely affected.

The EIT Law may affect tax exemptions on dividends received by our Shareholders and us, andmay increase the EIT rate we subject to.

Under the EIT Law and its implementing rules, both of which became effective from 1

January 2008, an enterprise established outside the PRC with ‘‘de facto management bodies’’

situated within the PRC could be considered a PRC resident enterprise and will be subject to the

enterprise income tax at the rate of 25% on its global income with any relevant foreign tax paid

available to be claimed as a foreign tax credit. The implementing rules of the EIT Law define the

term ‘‘de facto management bodies’’ as ‘‘establishments that carry out substantial and overall

management and control over the manufacturing and business operations, personnel,

accounting, properties, etc. of an enterprise.’’ The State Administration of Taxation issued the

Notice Regarding the Determination of Chinese-Controlled Offshore Incorporated Enterprises as

PRC Tax Resident Enterprises on the Basis of De Facto Management Bodies (‘‘Guo Shui Fa [2009]No. 82’’, or ‘‘Circular 82’’) (《關於境外註冊中資控股企業依據實際管理機構標準認定為居民企業有關

問題的通知》, 國稅發[2009]82號), on 22 April 2009, which was recently amended on 29

December 2017. The SAT Circular 82 provides certain specific criteria for determining whether

the ‘‘de facto management body’’ of a Chinese-controlled offshore-incorporated enterprise is

located in China. Although the SAT Circular 82 only applies to offshore enterprises controlled by

PRC enterprises, not those controlled by PRC individuals or foreigners, like our Company, the

determining criteria set forth in the SAT Circular 82 may reflect the State Administration of

Taxation’s general position on how the ‘‘de facto management body’’ test should be applied in

determining the tax resident status of offshore enterprises, regardless of whether they are

controlled by PRC enterprises or individuals. If the PRC authorities were to subsequently

determine that we should be so treated and if we derive any global income in future, a 25%

enterprise income tax on our global income could significantly increase our tax burden and

materially and adversely affect our cash flow and profitability. Further, if we are regarded as a

PRC resident enterprise, dividends that we receive from the subsidiary which are considered as

PRC resident enterprises would be exempt from EIT and no withholding tax would be applied

either. However, as there is still uncertainty as to how the EIT Law and its implementation rules

will be interpreted and implemented, we cannot assure you that our income may not be subject

to the EIT Law and that we are eligible for such PRC enterprise income tax exemptions or

reductions.

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In addition, because there remains uncertainty regarding the interpretation and

implementation of the EIT Law and its implementing rules, it is uncertain whether, if we are

regarded as a PRC resident enterprise, dividends we pay with respect to our Shares, or the gain

you may realize from the transfer of our Shares, would be treated as income derived from

sources within the PRC and be subject to a 10% withholding income tax, unless any such foreign

corporate shareholder is qualified for a preferential withholding rate under a tax treaty. For more

details, see the subparagraph headed ‘‘Enterprise income tax’’ under ‘‘Regulatory Overview —

Regulations Related to Tax in the PRC’’ in this Document. If we are required under the EIT Law to

withhold PRC income tax on our dividends payable to our non-PRC corporate shareholders, or if

you are required to pay PRC income tax on the transfer of our Shares, your investment in our

Shares may be materially and adversely affected.

PRC regulations relating to the establishment of offshore special purpose vehicles by PRCresidents may subject our PRC resident Shareholders to personal liability, limit our ability toinject capital into our PRC subsidiaries, limit our PRC subsidiaries’ ability to distribute profits tous, and adversely affect our financial position.

The SAFE promulgated the Circular on Relevant Issues Relating to Domestic Resident’s

Investment and Financing and Roundtrip Investment through Special Purpose Vehicles (《國家

外匯管理局關於境內居民通過特殊目的公司境外投融資及返程投資外匯管理有關問題的通知》), or the

SAFE Circular 37, on 4 July 2014 to replace the Circular of the SAFE on Relevant Issues Concerning

Foreign Exchange Administration for Financing and Return Investments by Domestic Residents

through Special-Purpose Overseas Companies (《國家外匯管理局關於境內居民通過境外特殊目的公

司融資及返程投資外匯管理有關問題的通知》) (the ‘‘Circular 75’’). According to SAFE Circular 37,

PRC residents (including PRC citizens and PRC enterprises) shall apply to the SAFE or its local

bureau to register for foreign exchange for overseas investments before contributing to special

purpose vehicles (the ‘‘SPVs’’) with legitimate domestic and overseas assets or rights and

interests. In the event of any alteration in the basic information of the registered SPVs, such as

the change of a PRC citizen shareholder, name and operating duration; or in the event of any

alternation in key information, such as increases or decreases in the share capital held by PRC

citizens, or equity transfers, swaps, consolidations, or splits, the registered PRC residents shall

timely submit a change in the registration of the foreign exchange for overseas investments with

the foreign exchange bureaus.

We may not at all times be fully aware or informed of the identities of all our beneficiaries

who are PRC nationals and may not always be able to compel our beneficiaries to comply with

the requirements of the SAFE Circular 37. As a result, we cannot assure you that all of our

Shareholders or beneficiaries who are PRC nationals will at all times comply with, or in the future

make or obtain any applicable registrations or approvals required by the SAFE Circular 37 or

other related regulations. Under the applicable rules, failure to comply with the registration

procedures set forth in the SAFE Circular 37 may result in restrictions on the foreign exchange

activities of the relevant PRC enterprise and may also subject the relevant PRC resident to

penalties under the PRC foreign exchange administration regulations.

RISK FACTORS

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You may experience difficulty in effecting service of legal process, enforcing foreignjudgments or bringing original actions in China or Hong Kong based on foreign laws against usand our Directors and senior management.

We are a holding company incorporated in the Cayman Islands. A significant majority of our

assets are located in the PRC. Therefore, it may not be possible for investors to effect service of

process upon us or those persons inside the PRC. The PRC has not entered into treaties or

arrangements providing for the recognition and enforcement of judgments made by courts of

most other jurisdictions.

On 14 July 2006, Hong Kong and the PRC entered into the Arrangement on Reciprocal

Recognition and Enforcement of Judgments in Civil and Commercial Matters by the Courts of the

Mainland and of the Hong Kong Special Administrative Region Pursuant to Choice of Court

Agreements between Parties Concerned (《關於內地與香港特別行政區法院相互認可和執行當事人協

議管轄的民商事案件判決的安排》) (the ‘‘2006 Arrangement’’), pursuant to which a party with a

final court judgment rendered by a Hong Kong court requiring payment of money in a civil and

commercial case according to a choice of court agreement in writing may apply for recognition

and enforcement of the judgment in the PRC, and vice versa. A choice of court agreement in

writing is defined as any agreement in writing entered into between parties after the effective

date of the 2006 Arrangement in which a Hong Kong court or a PRC court is expressly designated

as the court having sole jurisdiction for the dispute. Therefore, it may not be possible to enforce

a judgment rendered by a Hong Kong court in the PRC if the parties in the dispute do not agree

to enter into a choice of court agreement in writing under the 2006 Arrangement. As a result, it

may be difficult or impossible for investors to effect service of process against our assets or

Directors in China in order to seek recognition and enforcement of foreign judgments in China.

On 18 January 2019, the Arrangement on Reciprocal Recognition and Enforcement of

Judgments in Civil and Commercial Matters by the Courts of the Mainland and of the Hong Kong

Special Administrative Region (《關於內地與香港特別行政區法院相互認可和執行民商事案件判決的

安排》) (the ‘‘2019 Arrangement’’) was signed between the Supreme People’s Court of China and

Hong Kong. Comparing with the 2006 Arrangement, the 2019 Arrangement seeks to establish a

bilateral legal mechanism with greater clarity and certainty for reciprocal recognition and

enforcement of judgments between Hong Kong and the PRC in civil and commercial matters

under both Hong Kong and PRC laws. The 2019 Arrangement will apply to judgments made by the

courts of Hong Kong and the PRC on or after its commencement date, which will be announced

by Hong Kong and the PRC after necessary procedures of both places have been completed. The

2006 Arrangement will be superseded upon the effective date of the 2019 Arrangement. However,

the 2006 Arrangement will remain applicable to a ‘‘choice of court agreement in writing’’ as

defined in the 2006 Arrangement which is entered into before the 2019 Arrangement taking

effect. Although the 2019 Arrangement has been signed, it remains unclear as to its effective

date and uncertain as to the outcome and effectiveness of any action brought under the 2019

Arrangement.

RISK FACTORS

– 66 –


PRC regulations of loans and direct capital investments to PRC entities by offshore holdingcompanies may delay or prevent us from using the [REDACTED] of the [REDACTED].

Any loans provided by us to our PRC subsidiaries are subject to PRC regulations, and such

loans must be registered with the local branch of SAFE. Additionally, our capital contributions

must be filed with or approved by the MOFCOM or its local counterpart and registered with the

SAIC or its local branch. We cannot assure you that we will be able to obtain these government

registrations or approvals or to complete filing and registration procedures on a timely basis, if

at all, with respect to future loans or capital contributions by us to our subsidiaries or any of

their respective subsidiaries. If we fail to obtain such approvals or registrations, our ability to

make equity contributions or provide loans to our PRC subsidiaries or to fund their operations

may be materially and adversely affected. This may materially and adversely affect our PRC

subsidiaries’ liquidity, their ability to fund their working capital and expansion projects, and

their ability to meet their obligations and commitments. As a result, this may have a material

adverse effect on our business, financial condition and results of operations.

Inflation in the PRC could materially and adversely affect our profitability and growth.

While the PRC economy as a whole has experienced rapid growth, such growth has become

uneven among various sectors of the economy and in different geographical areas of the country.

Rapid economic growth may lead to an increase in the money supply and accordingly inflation. If

the amounts we charge our customers in our PRC restaurants go up at a rate that is insufficient

to compensate for the rise in our costs, our business may be materially and adversely affected.

RISKS RELATING TO THE [REDACTED] AND OUR SHARES

There has been no public market for our Shares and the market price of our Shares may bevolatile; there is no assurance of an active [REDACTED] market in our Shares.

Prior to the [REDACTED], there has been no public market for our Shares. The initial

[REDACTED] range of our Shares, and the [REDACTED], will be the result of negotiations between

the [REDACTED] (for themselves and on behalf of the [REDACTED]) and us. In addition, while we

have applied to have our Shares [REDACTED] on the Stock Exchange, there can be no guarantee

that (i) an active [REDACTED] market for our Shares will develop or, (ii) if it does, that it will be

sustained following the completion of the [REDACTED], or (iii) that the market price of our Shares

will not decline below the [REDACTED]. You may not be able to resell your shares at a price that

is attractive to you, or at all.

The [REDACTED] prices of our Shares may be volatile and could fluctuate widely in response

to factors beyond our control, including general market conditions of the securities markets in

Hong Kong, the PRC, the United States and elsewhere in the world. In particular, the market price

of our Shares may fluctuate significantly and rapidly as a result of the following factors:

. variations of our results of operations (including variations arising from foreign

exchange rate fluctuations);

. loss of customers;

RISK FACTORS

– 67 –


. changes in securities analysts’ estimates of our financial performance;

. announcement by us of significant acquisitions, greenfield developments, strategic

alliances or joint ventures;

. addition or departure of key personnel;

. fluctuations in stock market price and volume;

. involvement in litigation;

. [REDACTED] price performance of other restaurant companies based in Asia; and

. general economic and stock market conditions.

In addition, stock markets and the shares of other companies [REDACTED] on the Stock

Exchange with significant operations and assets in the PRC have experienced increasing price

and volume fluctuations in recent years, some of which have been unrelated or disproportionate

to the operating performance of such companies. These broad market fluctuations may materially

and adversely affect the market price of our Shares.

Since there will be a gap of several days between pricing and [REDACTED] of our Shares,holders of our Shares are subject to the risk that the price of our Shares could fall during theperiod before [REDACTED] of our Shares begins.

The [REDACTED] of our [REDACTED] is expected to be determined on the [REDACTED].

However, our Shares will not commence [REDACTED] on the Stock Exchange until they are

delivered, which is expected to be several Business Days after the pricing date. As a result,

investors may not be able to sell or [REDACTED] in our Shares during that period. Accordingly,

holders of our Shares are subject to the risk that the price of our Shares may fall before

[REDACTED] begins as a result of adverse market conditions or other adverse developments, that

may occur between the time of sale and the time [REDACTED] begins.

Future issuances or substantial sales of the Shares in the public market could materially andadversely affect the prevailing market price of our Shares and our Company’s ability to raisecapital.

Sales of substantial amounts of Shares in the public market after the completion of the

[REDACTED], or the perception that these sales could occur, could adversely affect the market

price of our Shares. Although our Controlling Shareholders are subject to restrictions on its sales

of Shares within 12 months from the [REDACTED] as described in ‘‘[REDACTED]’’ in this Document,

future sales of a significant number of our Shares by our Controlling Shareholders in the public

market after the [REDACTED], or the perception that these sales may occur, may cause the market

price of our Shares to decline and materially impair our future ability to raise capital through

[REDACTED] of our Shares. We cannot assure you that our Controlling Shareholders will not

dispose of Shares held by them or that we will not issue Shares pursuant to the general mandate

granted to our Directors as described in ‘‘Appendix IV — Statutory and General Information’’ or

otherwise, upon the expiration of restrictions set out above. We cannot predict the effect, if any,

RISK FACTORS

– 68 –


that any future sales of Shares by our Controlling Shareholders, or the availability of Shares for

sale by our Controlling Shareholders, or the issuance of Shares by the Company may have on the

market price of the Shares. Sale or issuance of a substantial amount of Shares by our Controlling

Shareholders or us, or the market perception that such sale or issuance may occur, may

materially and adversely affect the prevailing market price of the Shares.

Our interests may conflict with those of our Controlling Shareholders, who may take actionsthat are not in, or may conflict with, our or our public shareholders’ best interests.

Our interests may conflict with those of our Controlling Shareholders, who may take actions

that are not in, or may conflict with, our or our public shareholders’ best interests. Immediately

following the [REDACTED], our Controlling Shareholders will, in aggregate, beneficially own

approximately [REDACTED] of our Company’s outstanding Shares on a fully-diluted basis, or

approximately [REDACTED] if the [REDACTED] is exercised in full. The interests of our Controlling

Shareholders may differ from the interests of our other Shareholders. If the interests of our

Controlling Shareholders conflict with the interests of our other Shareholders, or if our

Controlling Shareholders cause our business to pursue strategic objectives that conflict with the

interests of our other Shareholders, the non-controlling shareholders may be disadvantaged by

the actions that our Controlling Shareholders choose to cause us to pursue.

Our Controlling Shareholders may have significant influence in determining the outcome of

any corporate transaction or other matter submitted to the Shareholders for approval, including

but not limited to mergers, privatizations, consolidations and the sale of all, or substantially all,

of our assets, election of directors, and other significant corporate actions. Our Controlling

Shareholders have no obligation to consider the interests of our Company or the interests of our

other shareholders other than pursuant to the Deed of Non-competition. See ‘‘Relationship with

Controlling Shareholders — Deed of Non-competition.’’ As such, our Controlling Shareholders’

interests may not necessarily be in line with the best interests of our Company or the interests of

our other Shareholders, which may have a material adverse effect on our Company’s business

operations and the price at which our Shares are traded on the Stock Exchange.

There may be difficulties in protecting your interests under the laws of the Cayman Islands.

Our corporate affairs are governed by, among other things, our Memorandum of Association,

Articles of Association, the Companies Act and common law of the Cayman Islands. The rights of

Shareholders to take actions against our Directors, actions by minority Shareholders and the

fiduciary responsibilities of our Directors to us under Cayman Islands law are, to a large extent,

governed by the common law of the Cayman Islands. The common law of the Cayman Islands is

derived in part from comparatively limited judicial precedent in the Cayman Islands as well as

from English common law, which is persuasive, but not binding, authority on a court in the

Cayman Islands. The laws of the Cayman Islands relating to the protection of the interests of

minority shareholders may differ in some respects from those in other jurisdictions. Such

differences may mean that the remedies available to the minority Shareholders may be different

from those under the laws of other jurisdictions.

RISK FACTORS

– 69 –


Purchasers of the [REDACTED] will experience an immediate dilution and may experiencefurther dilution if our Company issues additional Shares or other securities in the future.

Based on the [REDACTED], the [REDACTED] is expected to be higher than the [REDACTED]

assets value per Share immediately prior to the [REDACTED]. Therefore, the purchasers of the

[REDACTED] will experience an immediate dilution in unaudited [REDACTED] adjusted

consolidated [REDACTED] assets value. See Appendix II to this Document for further details.

Additional funds may be required in the future to finance the expansion or new developments of

the business and operations of our Group or new acquisitions. If additional funds are raised

through the issue of new equity or equity-linked securities of our Company other than on a pro

rata basis to existing Shareholders, the percentage ownership of the Shareholders in our

Company may be diluted or such new securities may confer rights and privileges that take

priority over those conferred by the [REDACTED].

Substantial future sales of our Shares by existing Shareholders in the public market couldmaterially and adversely affect the prevailing market price of the Shares.

Sales of our Shares in the public market, or the perception that these sales may occur, may

cause the market price of our Shares to decline significantly. Divesture in the future of our

Shares by Shareholders, the announcement of any plan to divest our Shares, or hedging activity

by third-party financial institutions in connection with similar derivative or other financing

arrangements entered into by Shareholders, may cause the price of our Shares to decline.

The Shares held by the Controlling Shareholders are subject to lock-up beginning on the

[REDACTED]. There is no assurance that the Controlling Shareholders will not further dispose of

the Shares held by them. We cannot predict the effect, if any, of any future sales of the Shares

by any Substantial Shareholder or Controlling Shareholder, or the availability of the Shares for

sale by any Substantial Shareholder or Controlling Shareholder may have on the market price of

the Shares. Sales of a substantial amount of Shares by any Substantial Shareholder or

Controlling Shareholder or the issue of a substantial amount of new Shares by our Company, or

the market perception that such sales or issue may occur, may materially and adversely affect

the prevailing market price of the Shares.

Dividends declared in the past may not be indicative of our dividend policy in the future, andwe can not assure whether and when the dividends will be declared and paid.

The Board of Directors declared dividends of RMB0, RMB26.5 million, RMB11.1 million and

RMB0 for the years ended 31 December 2018, 2019 and 2020 and the six months ended 30 June

2021, respectively. A declaration of dividends is proposed by our Board of Directors and the

amount of any dividends may depend on various factors, including, without limitation, our

results of operations and earnings, capital requirements and surplus, financial condition, future

prospects and other factors which our Board of Directors may determine to be important. Our

Company may not be able to distribute dividends to the Shareholders as a result of the

abovementioned factors. Accordingly, our historical dividend distributions are not indicative of

our future dividend distribution policy, and potential investors should be aware that the amount

of dividends paid previously should not be used as a reference or basis upon which future

dividends are determined. Accordingly, we cannot assure you as to whether and when we will

RISK FACTORS

– 70 –


distribute dividend in the future. We may not be able to record profits and have sufficient funds

above its funding requirements, other obligations and business plans to declare dividends to the

Shareholders.

Purchasers of our Shares in the [REDACTED] will experience immediate dilution and mayexperience further dilution if we issue additional Shares in the future.

The [REDACTED] of our Shares is higher than the [REDACTED] asset value per Share

immediately prior to the [REDACTED]. Therefore, purchasers of our Shares in the [REDACTED] will

experience an immediate dilution in the [REDACTED] [REDACTED] asset value.

In order to expand our business, we may consider [REDACTED] and issuing additional Shares

in the future. Purchasers of our Shares may experience further dilution in the [REDACTED] asset

value per Share of their Shares if we issue additional Shares in the future at a price which is

lower than the [REDACTED] asset value per Share.

RISKS RELATING TO THIS DOCUMENT

Investors should not place undue reliance on the facts, forecasts and other statistics relatingto the economy and our industry obtained from official resources in this Document.

This Document includes certain statistics that have been extracted from the PRC

Government official sources and publications or other sources. Our Directors believe the sources

of these statistics are appropriate for such statistics and have taken reasonable care in

extracting and reproducing such statistics. Our Directors have no reason to believe that such

statistics are false or misleading or that any fact has been omitted that would render such

statistics false or misleading. These statistics from these sources have not been independently

verified by our Company, the Joint Sponsors, [the [REDACTED], the [REDACTED] and the

[REDACTED], and the [REDACTED]], any of their respective directors or any other parties involved

in the [REDACTED] and therefore, our Company makes no representation as to the accuracy or

completeness of these statistics, as such these statistics should not be unduly relied upon.

Forward-looking statements are subject to risks and uncertainties and should not be undulyrelied upon.

This Document contains certain statements and information that are forward-looking and

uses forward-looking terminology such as ‘‘anticipate’’, ‘‘believe’’, ‘‘could’’, ‘‘going forward’’,

‘‘intend’’, ‘‘plan’’, ‘‘forecast’’, ‘‘project’’, ‘‘seek’’, ‘‘expect’’, ‘‘may’’, ‘‘ought to’’, ‘‘should’’, ‘‘would’’ or

‘‘will’’ and similar expressions. You are cautioned that reliance on any forward-looking statement

involves risks and uncertainties and that any or all of those assumptions may prove to be

inaccurate and as a result, the forward-looking statements based on those assumptions may also

be incorrect. In light of these and other risks and uncertainties, the inclusion of forward-looking

statements in this Document should not be regarded as representations or warranties by us that

our plans and objectives will be achieved and these forward-looking statements should be

considered in light of various important factors, including those set forth in this section. Subject

to the requirements of the Listing Rules, we do not intend to update or otherwise revise the

forward-looking statements in this Document, whether as a result of new information, future

RISK FACTORS

– 71 –


events or otherwise. Accordingly, you should not place undue reliance on any forward-looking

information. All forward-looking statements in this Document are qualified by reference to this

cautionary statement.

Certain statistics contained in this Document are derived from a third-party report and publiclyavailable official sources and they may not be reliable.

This Document, in particular the section headed ‘‘Industry Overview’’ in this Document,

contains information and statistics, including but not limited to information and statistics

relating to the PRC and the hot pot restaurant industry and markets. Such information and

statistics have been derived from various official governments and other publications and from a

third-party report commissioned by us. We believe that the sources of such information are

appropriate sources for such information and have taken reasonable care in extracting and

reproducing such information. We have no reason to believe that such information is false or

misleading in any material respect or that any fact has been omitted that would render such

information false or misleading in any material respect. The information has not been

independently verified by our Company, the Joint Sponsors, [the [REDACTED], the [REDACTED],

the [REDACTED], and the [REDACTED]], any of our or their respective directors, officers or

representatives or any other person involved in the [REDACTED] and no representation is given as

to its accuracy. We cannot assure you that they are stated or compiled on the same basis or with

the same degree of accuracy, as the case may be, in other jurisdictions. Therefore, you should

not unduly rely upon the industry facts and statistics contained in this Document.

Investors should read the entire Document carefully and should not consider any particularstatements in this Document or in published media reports without carefully considering therisks and other information contained in this Document.

We strongly caution you not to rely on any information contained in press articles or other

media regarding us and the [REDACTED]. Prior to the publication of this Document, there may be

press and media coverage regarding us and/or the [REDACTED]. Such press and media coverage

may include references to certain information that does not appear in this Document, including

certain operating and financial information and projections, valuations and other information. We

have not authorized the disclosure of any such information in the press or media and do not

accept any responsibility for any such press or media coverage or the accuracy or completeness

of any such information or publication. We make no representation as to the appropriateness,

accuracy, completeness or reliability of any such information or publication. To the extent that

any such information is inconsistent or conflicts with the information contained in this

Document, we disclaim responsibility for it and you should not rely on such information.

Accordingly, [REDACTED] are cautioned to make their investment decisions on the basis of the

information contained in this Document only and should not rely on any other information.

RISK FACTORS

– 72 –


In preparation for the [REDACTED], we have sought the following waivers from strict

compliance with the applicable provisions of the Listing Rules and exemptions from the

Companies (Winding up and Miscellaneous Provisions) Ordinance:

WAIVER IN RELATION TO MANAGEMENT PRESENCE IN HONG KONG

Rule 8.12 of the Listing Rules requires that a new applicant applying for a primary

[REDACTED] on the Stock Exchange must have a sufficient management presence in Hong Kong.

This normally means that at least two of its executive directors must be ordinarily resident in

Hong Kong. Since our business operations are primarily conducted in the PRC and will continue

to be based in the PRC, our executive Directors and senior management members are and will

continue to be based in the PRC. As such, we will not be able to comply with the requirements of

Rule 8.12 of the Listing Rules for sufficient management presence in Hong Kong.

Accordingly, we have applied to the Stock Exchange for, and [have] been granted, a waiver

from strict compliance with the requirements set out in Rule 8.12 of the Listing Rules subject to

the following conditions:

(a) we have appointed two authorized representatives pursuant to Rule 3.05 of the Listing

Rules who will act as our principal channel of communication with the Stock Exchange.

The two authorized representatives are Mr. Lee, our executive Director, and Ms. Ng Ka

Man (吳嘉雯), our company secretary, respectively. Each of the authorized

representatives will be available to meet with the Stock Exchange in Hong Kong within

a reasonable period upon request and will be readily contactable by home, office,

mobile and other telephone number, email address and correspondence address,

facsimile number, if available, and any other contact details prescribed by the Stock

Exchange from time to time. Each of the authorized representatives has been duly

authorized to communicate on our behalf with the Stock Exchange. Mr. Lee has

confirmed that he possesses valid travel documents to Hong Kong, and he will be able

to meet with the Stock Exchange within a reasonable period, when required. Ms. Ng Ka

Man is ordinarily resident in Hong Kong.

(b) our authorized representatives have means of contacting all Directors promptly at all

times as and when the Stock Exchange wishes to contact our Directors on any matters.

To enhance communication between the Stock Exchange, our authorized

representatives and our Directors, our Company will implement a policy whereby: (i)

each Director will provide his/her office phone number, mobile phone number,

residential phone number, office facsimile number and email address to our

authorized representatives; (ii) each Director will provide valid phone number or

means of communication to our authorized representatives when he/she travels; and

(iii) each of the Directors and our authorized representatives will provide his/her

mobile phone number, office phone number, email address and office facsimile

number to the Stock Exchange;

(c) our Company has, in accordance with Rule 3A.19 of the Listing Rules, also appointed

Red Solar Capital Limited as its compliance advisor, who will act as an additional

channel of communication with the Stock Exchange. The compliance advisor will

WAIVERS FROM STRICT COMPLIANCE WITH THE LISTING RULES AND EXEMPTIONSFROM THE COMPANIES (WINDING UP AND MISCELLANEOUS PROVISIONS) ORDINANCE

– 73 –


advise on on-going compliance requirements and other issues arising under the Listing

Rules and other applicable laws and regulations in Hong Kong for a period

commencing on the [REDACTED] until the date on which our Company complies with

Rule 13.46 of the Listing Rules in respect of our Company’s financial results for the

first full financial year after the [REDACTED];

(d) meetings between the Stock Exchange and our Directors could be arranged through our

authorized representatives or our Company’s compliance advisor, or directly with our

Directors within a reasonable period. Our Company will inform the Stock Exchange

promptly in respect of any change in our authorized representatives and compliance

advisor;

(e) each Director who is not ordinarily resident in Hong Kong has confirmed that he or she

possesses or will be able to apply for valid travel documents to visit Hong Kong and

will be able to meet with the Stock Exchange within a reasonable period upon request

of the Stock Exchange; and

(f) we will also appoint other professional advisors (including legal advisors and

accountants in Hong Kong) after the [REDACTED] to assist us in dealing with any

questions which may be raised by the Stock Exchange and to ensure that there will be

efficient communication with the Stock Exchange.

WAIVER AND EXEMPTION IN RELATION TO THE PRE-[REDACTED] SHARE OPTION SCHEME

The Listing Rules and the Companies (Winding Up and Miscellaneous Provisions) Ordinance

prescribes certain disclosure requirements in relation to the share options granted by our

Company (the ‘‘Share Options Disclosure Requirements’’):

(a) Rule 17.02(1)(b) of the Listing Rules requires our Company to disclose in this

Document full details of all outstanding options and their potential dilution effect on

the shareholdings upon [REDACTED] as well as the impact on the earnings per share

arising from the exercise of such outstanding options;

(b) paragraph 27 of Appendix 1A to the Listing Rules requires our Company to set out in

this Document particulars of any capital of any member of our Group that is under

option, or agreed conditionally or unconditionally to be put under option, including the

consideration for which the option was or will be granted and the price and duration of

the option, and the name and address of the grantee; and

(c) section 342(1) of the Companies (Winding Up and Miscellaneous Provisions) Ordinance

requires all Documents to be issued, circulated or distributed in Hong Kong to include,

among other information, the matters specified in Part I of the Third Schedule to the

Companies (Winding Up and Miscellaneous Provisions) Ordinance. Paragraph 10 of Part

I of the Third Schedule to the Companies (Winding Up and Miscellaneous Provisions)

Ordinance requires our Company to set out in this Document, among other things, the

number, description and amount of any shares in or debentures of our Company which

any person has, or is entitled to be given, an option to subscribe for, together with the


– 74 –


certain particulars of the option, namely (a) the period during which it is exercisable,

(b) the price to be paid for shares and debentures subscribed for under it, (c) the

consideration (if any) given or to be given for it or for the right to it, and (d) the names

and addresses of the persons to whom it was given or, if given to existing

shareholders or debenture holders as such, the relevant shares or debentures.

Guidance Letter HKEX-GL11-09 issued by the Stock Exchange provides that the Stock

Exchange would normally grant waivers from disclosing the names and addresses of certain

grantees if the applicant could demonstrate to the satisfaction of the Stock Exchange that such

disclosures would be irrelevant and unduly burdensome, subject to certain conditions specified

therein.

Pursuant to section 342A of the Companies (Winding Up and Miscellaneous Provisions)

Ordinance, the SFC may issue, subject to such conditions (if any) as the SFC thinks fit, a

certificate of exemption from compliance with the relevant requirements under the Companies

(Winding Up and Miscellaneous Provisions) Ordinance if, having regard to the circumstances, the

SFC considers that the exemption will not prejudice the interest of the investing public and

compliance with any or all of such requirements would be irrelevant or unduly burdensome, or is

otherwise unnecessary or inappropriate.

On 28 July 2021, our Company adopted the Pre-[REDACTED] Share Option Scheme, and has

granted options to 132 grantees thereunder, including two Directors and two members of the

senior management of our Group, to subscribe for an aggregate of [REDACTED] shares. As of the

Latest Practicable Date, no shares have been issued pursuant to the exercise of such options.

Our shares underlying the options granted represent approximately [REDACTED] of the total

number of Shares in issue immediately after completion of the [REDACTED] (assuming no exercise

of the [REDACTED], the options granted under the Pre-[REDACTED] Share Option Scheme or any

options which may be granted under the Share Option Scheme). For more details of our Pre-

[REDACTED] Share Option Scheme, please refer to the section headed ‘‘Appendix IV — Statutory

and General Information — D. Other Information — 14. Share Option Schemes — (a) Pre-

[REDACTED] Share Option Scheme.’’

We have applied to the Stock Exchange and the SFC, respectively, for (i) a waiver from strict

compliance with the disclosure requirements under Rule 17.02(1)(b) of, and paragraph 27 of

Appendix 1A to, the Listing Rules; and (ii) a certificate of exemption under section 342A of the

Companies (Winding Up and Miscellaneous Provisions) Ordinance exempting our Company from

strict compliance with the disclosure requirements under section 342(1) of and paragraph 10(d)

of Part I of the Third Schedule to the Companies (Winding Up and Miscellaneous Provisions)

Ordinance in relation to the options granted under the Pre-[REDACTED] Share Option Scheme, on

the ground that strict compliance with the Share Options Disclosure Requirements would be

unduly burdensome for our Company for the following reasons:

(a) given that 132 grantees are involved, our Directors consider that it would be costly and

unduly burdensome to disclose in this Document full details of all the options granted

by our Company to each of the grantees under the Pre-[REDACTED] Share Option


– 75 –


Scheme, which would significantly increase the cost and time required for information

compilation and document preparation for strict compliance with such disclosure

requirements;

(b) among all grantees under the Pre-[REDACTED] Share Option Scheme, only four grantees

are Directors, members of the senior management of our Group or connected persons

of our Company and the remaining 128 grantees are existing employees of our Group

who are not a Director, member of the senior management of our Group or connected

persons of our Company. The options granted to the Directors, members of the senior

management and connected persons of our Company account for approximately

16.91% of all the options granted under the Pre-[REDACTED] Share Option Scheme.

Strict compliance with the applicable Share Options Disclosure Requirements to

disclose names, addresses, and entitlements of all the grantees on an individual basis

in this Document would require a substantial volume of additional disclosure that does

not provide any material information to the investing public;

(c) material information relating to the options granted under the Pre-[REDACTED] Share

Option Scheme has been disclosed in this Document to provide [REDACTED] with

sufficient information to make an informed assessment of the potential dilutive effect

and impact on earnings per Share of the options in making their investment decision,

and such information include:

(i) a summary of the terms of the Pre-[REDACTED] Share Option Scheme;

(ii) the total number of Shares subject to the options granted under the Pre-

[REDACTED] Share Option Scheme and the percentage of the Shares which such

number represents;

(iii) the potential dilution effect on the shareholding and impact on earnings per

Share upon full exercise of the options granted under the Pre-[REDACTED] Share

Option Scheme;

(iv) full details of the options granted to our Directors, members of the senior

management of our Group and connected persons of the Company under the Pre-

[REDACTED] Share Option Scheme, and such details include all the particulars

required under Rule 17.02(1)(b) of the Listing Rules, paragraph 27 of Appendix IA

to the Listing Rules and paragraph 10(d) of Part I of the Third Schedule to the

Companies (Winding Up and Miscellaneous Provisions) Ordinance;

(v) with respect to the options granted by our Company to employees other than

those referred to in sub-paragraph (iv) above under the Pre-[REDACTED] Share

Option Scheme, details including (1) the aggregate number of such grantees and

number of Shares subject to the options, (2) the amount payable for acceptance

of the grant of options, (3) the vesting schedule, and (4) the exercise period and

exercise price of the options;


– 76 –


(vi) should the Stock Exchange and the SFC grant a waiver and exemption, the

particulars of the waiver and exemption, respectively,

and the above disclosure is consistent with the conditions ordinarily expected by the

Stock Exchange in similar circumstances as set out in Guidance Letter HKEx-GL11-09;

(d) the grant and exercise in full of the options granted under the Pre-[REDACTED] Share

Option Scheme would not cause any material adverse impact to the financial position

of our Company;

(e) our Directors consider that non-compliance with the Share Options Disclosure

Requirements would not prevent our Company from providing its potential investors

with sufficient information for an informed assessment of the activities, assets,

liabilities, financial position, management and prospects of our Group; and

(f) a full list of all the grantees with all the particulars as required under the Share

Options Disclosure Requirements will be made available for public inspection as set

forth in ‘‘Appendix V — Documents Delivered to the [REDACTED] of Companies in Hong

Kong and Available for Inspection — Documents Available for Inspection.’’

In light of the above, our Directors are of the view that the granting of the waiver and

exemption sought under this application will not prejudice the interest of the investing public.

The Stock Exchange [has granted] to our Company a waiver from strict compliance with the

disclosure requirements under Rule 17.02(1)(b) of the Listing Rules and paragraph 27 of Part A of

Appendix 1 to the Listing Rules with respect to the options granted under the Pre-[REDACTED]

Share Option Scheme on the condition that:

(i) a certificate of exemption from strict compliance with the relevant requirements under

the Companies (Winding Up and Miscellaneous Provisions) Ordinance be granted by

the SFC and the particulars of the exemption be disclosed in this Document; and

(ii) disclosure in respect of information referred to in paragraph (c) above has been made

in the Document.

The SFC [has granted] us a certificate of exemption under section 342A of the Companies

(Winding Up and Miscellaneous Provisions) Ordinance from strict compliance with the disclosure

requirements under section 342(1) of and paragraph 10(d) of Part I of the Third Schedule to the

Companies (Winding Up and Miscellaneous Provisions) Ordinance with respect to the options

granted under the Pre-[REDACTED] Share Option Scheme on the condition that:

(a) on an individual basis, full details of the options granted by our Company under the

Pre-[REDACTED] Share Option Scheme to each of our Directors, members of the senior

management of our Group, and connected persons of our Company are disclosed in

this Document, such details to include all the particulars required under paragraph 10

of Part I of the Third Schedule to the Companies (Winding Up and Miscellaneous

Provisions) Ordinance;


– 77 –


(b) in respect of the options granted by our Company under the Pre-[REDACTED] Share

Option Scheme to grantees other than those set out in (a) above, the following details

are disclosed in this Document: (1) the aggregate number of grantees and number of

Shares subject to the options, (2) the amount payable for acceptance of the grant of

options, (3) the vesting schedule, and (4) the exercise period and exercise price of the

options;

(c) a full list of all the grantees (including those persons referred to in (a) above) who

have been granted the options under the Pre-[REDACTED] Share Option Scheme,

containing all the particulars as required under paragraph 10 of Part I of the Third

Schedule to the Companies (Winding Up and Miscellaneous Provisions) Ordinance, will

be made available for public inspection as set forth in ‘‘Appendix V — Documents

Delivered to the [REDACTED] of Companies in Hong Kong and Available for Inspection

— Documents Available for Inspection’’;

(d) the particulars of the exemption will be disclosed in this Document; and

(e) the Company’s Document will be issued on or before [date].

For more details of our Pre-[REDACTED] Share Option Scheme, please refer to ‘‘Appendix IV

— Statutory and General Information — D. Other Information — 14. Share Option Schemes — (a)

Pre-[REDACTED] Share Option Scheme.’’


– 78 –


[REDACTED]

INFORMATION ABOUT THIS DOCUMENT AND THE [REDACTED]

– 79 –


[REDACTED]


– 80 –


[REDACTED]


– 81 –


[REDACTED]


– 82 –


[REDACTED]


– 83 –


DIRECTORS

Name Address Nationality

Executive Directors

Lee Yu-cheng (李裕成) No. 1103, Ln. 366Minghua RoadShanghaiPRC

Chinese

Liao Chih-wei (廖志偉) Room 903, Building 36Xinghu GardenSuzhou Industrial ParkSuzhou, Jiangsu ProvincePRC

Chinese

Non-executive Directors

Huang Kuo-huang (黃國晃) No. 10, Jujin RoadZhongpu TownKunshan, Jiangsu ProvincePRC

Chinese

Tu Chia-pin (杜家濱) 8/F, No. 118Mingcheng 2nd RoadSanmin DistrictKaohsiung CityTaiwan

Chinese

Independent non-executive Directors

Chen Jui-hsing (陳瑞杏) 2/F, No. 13 Ln. 224Guangming StreetXindian DistrictNew Taipei CityTaiwan

Chinese

Wang Chun-chuan (王俊權) 7/F-1, No. 1130Section 4Taiwan BlvdXitun DistrictTaichung CityTaiwan

Chinese

DIRECTORS AND PARTIES INVOLVED IN THE [REDACTED]

– 84 –


Name Address Nationality

Huang Chien-chen (黃建誠) 6/F-1, No. 8, Aly 8, Ln. 330Yanshou StreetSongshan DistrictTaipei CityTaiwan

Chinese

See the section ‘‘Directors and Senior Management’’ for more details of our Directors.


– 85 –


PARTIES INVOLVED IN THE [REDACTED]

Joint Sponsors China International Capital CorporationHong Kong Securities Limited29/F, One International Finance Centre

1 Harbour View Street

Central

Hong Kong

Huatai Financial Holdings (Hong Kong) Limited62/F, The Centre

99 Queen’s Road Central

Central

Hong Kong

[REDACTED] and[REDACTED](in alphabetical order)

[.][address]

[.][address]

[REDACTED](in alphabetical order)

[.][address]

[.][address]

Legal Advisors to the Company As to Hong Kong and U.S. laws:

Akin Gump Strauss Hauer & Feld18/F, Gloucester Tower, The Landmark


Central

Hong Kong

As to PRC law:

Jingtian & Gongcheng45/F, K. Wah Centre

1010 Huaihai Road (M)

Xuhui District

Shanghai, PRC

As to Taiwan law:

Baker & McKenzie15/F, No.168 Dun Hua North Road

Songshan District

Taipei, Taiwan


– 86 –


As to Cayman Islands law:

ApplebySuits 4201–03&12, 42/F

One Island East, Taikoo Place

18 Westlands Road

Quarry Bay

Hong Kong

As to Samoa law:Leung Wai Law FirmLevel 2

Feagaimaleata Building

Beach Road, Tamaligi

Apia

Samoa

Legal Advisors to the JointSponsors and the [REDACTED]

As to Hong Kong and U.S. laws:

Jones Day31/F, Edinburgh Tower, The Landmark


Central

Hong Kong

As to PRC law:

King & Wood Mallesons17/F, One ICC, Shanghai ICC

999 Middle Huai Hai Road

Shanghai, PRC

Auditor and Reporting Accountant Deloitte Touche TohmatsuCertified Public Accountants

35/F, One Pacific Place

88 Queensway

Hong Kong

Compliance Advisor Red Solar Capital LimitedUnit 402B, 4/F.

China Insurance Group Building

No. 141 Des Voeux Central

Central

Hong Kong

Industry Consultant Frost & Sullivan (Beijing) Inc., Shanghai Branch Co.Suite 2504, Wheelock Square

1717 Nanjing West Road

Shanghai, PRC


– 87 –


[REDACTED] [.][address]


– 88 –


Registered Office 71 Fort Street, P.O. Box 500

George Town

Grand Cayman KY1-1106

Cayman Islands

Head Office and Principal Place ofBusiness in the PRC

Unit 01–04, 20th Floor

Tower B Baodi Plaza

588 Dalian Road

Yangpu District

Shanghai, PRC

Principal Place of Business inHong Kong

31/F, Tower Two

Times Square

1 Matheson Street

Causeway Bay

Hong Kong

Company’s Website www.wanthotpot.com(this website address and its contents do not form part of

this Document)

Company Secretary Ng Ka Man (吳嘉雯) (ACS, ACIS)

31/F, Tower Two

Times Square

1 Matheson Street

Causeway Bay

Authorized Representatives Lee Yu-cheng (李裕成)

No. 1103, Ln. 366

Minghua Road

Shanghai

PRC

Ng Ka Man (吳嘉雯)

31/F, Tower Two

Times Square

1 Matheson Street

Causeway Bay

Audit Committee Chen Jui-hsing (陳瑞杏) (chairwoman)

Wang Chun-chuan (王俊權)

Huang Chien-chen (黃建誠)

Nomination Committee Lee Yu-cheng (李裕成) (chairman)

Chen Jui-hsing (陳瑞杏)


Huang Chien-chen (黃建誠)

CORPORATE INFORMATION

– 89 –


Remuneration Committee Huang Chien-chen (黃建誠) (chairman)

Chen Jui-hsing (陳瑞杏)


Hong Kong Share [REDACTED] [REDACTED]

[REDACTED]

Principal Share [REDACTED] andTransfer Office

Appleby Global Services (Cayman) Limited

71 Fort Street

PO BOX 500

George Town

Grand Cayman KY1-1106

Cayman Islands

Principal Banks of our Group Fubon Bank Hongqiao Branch

88 East Ronghua Road

Changning District

Shanghai, PRC

China Everbright Bank Shinan Branch

No. 500 Xietu Road

Huangpu District

Shanghai, PRC

CTBC Bank Shanghai Branch

27/F Shanghai World Financial Center

100 Century Avenue

Pudong New Area

Shanghai, PRC

CTBC Bank Chengde Branch

1/F, No. 17

Sec.1, Chengde Road

Datong District

Taipei, Taiwan

China Merchants Bank Baodi Plaza Branch

No. 423 Jingzhou Road

Yangpu District

Shanghai, PRC

CORPORATE INFORMATION

– 90 –


Certain information and statistics set out in this section and elsewhere in this Document

relating to the industry in which we operate are derived from the F&S Report prepared by Frost &

Sullivan, an independent industry consultant which was commissioned by us. As part of the

preparation of the F&S Report, we commissioned Frost & Sullivan to conduct a customer survey

and employee survey. The information extracted from the F&S Report should not be considered

as a basis for investments in the Shares or as an opinion of Frost & Sullivan as to the value of

any securities or the advisability of investing in our Company. We believe that the sources of

such information and statistics are appropriate for such information and statistics and have

taken reasonable care in extracting and reproducing such information and statistics. We have no

reason to believe that such information and statistics are false or misleading or that any fact has

been omitted that would render such information and statistics false or misleading in any

material respect. Our Directors have confirmed, after making reasonable enquiries and exercising

reasonable care, that there is no adverse change in the market information since the date of

publication of the F&S Report or any of the other reports which may qualify, contradict or have

an impact on the information in this section. No independent verification has been carried out

on such information and statistics by us, the Joint Sponsors, the [REDACTED], the [REDACTED],

the [REDACTED], the [REDACTED] or any other parties (except for Frost & Sullivan) involved in the

[REDACTED] or their respective directors, officers, employees, advisors, or agents, and no

representation is given as to the accuracy or completeness of such information and statistics.

Accordingly, you should not place undue reliance on such information and statistics. Unless and

except for otherwise specified, the market and industry information and data presented in this

section is derived from the F&S Report.1

CATERING SERVICE MARKET IN CHINA

Overview

China has become the world’s second largest catering service market with its annual

catering revenue increased significantly from RMB3.6 trillion in 2016 to RMB4.7 trillion in 2019 at

a CAGR of 9.3%. Due to the outbreak of COVID-19 in early 2020, the revenue of the PRC catering

service market had shrunk to RMB4.0 trillion, yet its resurgence soon afterwards hints strong

1 The contract sum to Frost & Sullivan is RMB480,000 for the preparation and use of the F&S Report, and we believe

that such fees are consistent with the market rate. Frost & Sullivan is an independent global consulting firm, which

was founded in 1961 in New York. In compiling and preparing the F&S Report, Frost & Sullivan has adopted the

following assumptions: (i) China’s economy is likely to maintain steady growth in the next decade; (ii) China’s

social, economic and political environment is likely to remain stable in the forecast period; and (iii) market drivers

like the growing per capita disposable income, increasing urbanization rate, continuous innovation, development of

technology and government support are likely to drive the catering service market.

Frost & Sullivan has conducted detailed primary research which involved discussing the status of the industry with

leading industry participants and industry experts. Frost & Sullivan has also conducted secondary research which

involved reviewing company reports, independent research reports and data based on its own research database.

Frost & Sullivan has obtained the figures for the projected total market size from historical data analysis plotted

against macroeconomic data as well as specific related industry drivers.

Numbers marked with ‘‘~’’ are approximates.

INDUSTRY OVERVIEW

– 91 –


market resilience in confronting the daunting challenge of pandemic and great market potential.

Chinese consumers can afford to eat out more frequently than before, and are willing to pay

more for a better dining experience.

In 2019, there were around eight million foodservice outlets in China, most of which were

full-service restaurants. Chain operation had become the fastest-expanding business model for

the catering service industry in China. In 2019, the revenue generated from chain restaurants in

China reached RMB917.2 billion. Although the COVID-19 pandemic first drove the general

economy in China into a brief downturn and hit the catering service market in China, which

forced temporary closures of a large number of restaurants in early 2020, China’s catering

service market has witnessed a strong rebound as the country has COVID-19 under control since

the second half of 2020. The revenue of catering service market is expected to grow at a CAGR of

14.0% from 2020 to 2025, reaching RMB7.6 trillion in 2025, which is primarily attributable to the

fast-paced lifestyle, the growing household spending, the increasing urbanization rate, the

strong growth of food delivery services, and the development of e-commerce platforms and

technologies in this industry.

The catering service market in China comprises three segments: Chinese cuisine, Western

cuisine and other cuisines, with Chinese cuisine being the leading segment. The market size of

Chinese cuisine increased from RMB2.9 trillion in 2016 to RMB3.7 trillion in 2019 at a CAGR of

8.5%, yet the revenue decreased to RMB3.1 trillion in 2020 due to the outbreak of COVID-19; it is

expected to further increase to RMB5.8 trillion in 2025, representing a CAGR of 13.3% from 2020

to 2025. The following chart illustrates the growth of catering service market in China as a whole

and in segment from 2016 to 2025:

Market Size of China’s Catering Service Industry, Breakdown by Cuisine Type, 2016–2025E

0

2,000

4,000

6,000

8,000

3,579.9 3,964.4 4,271.6 4,672.13,952.7

4,698.45,367.7

6,034.36,766.2

7,621.4

TotalChinese CuisineWestern CuisineOthers

Tota

l Rev

enue

(Bill

ion

RMB)

2016 2017 2018 2019 2020 2022E 2024E 2025E2021E 2023E

1.7% 4.9%

15.5%13.3%

2.5%

14.0%

8.3%

19.1%

TotalChinese Cuisine

Western Cuisine Others

16-20

20-25E

CAGR

3,579.9 3,964.4 4,271.6 4,672.1 3,952.7 4,698.4 5,367.7 6,034.3 6,766.2 7,621.4

162.3 190.1 216.6 250.1 223.4 280.1 335.1 393.8 460.3 539.0510.0 578.9 636.3 711.2 612.4 738.6 856.3 972.5 1,100.8 1,254.9

2,907.6 3,195.4 3,418.7 3,710.8 3,116.9 3,679.7 4,176.3 4,668.0 5,205.1 5,827.5

Source: Frost & Sullivan

INDUSTRY OVERVIEW

– 92 –


Within the category of Chinese cuisine, hot pot is highly welcomed by Chinese consumers.

It accounted for the largest proportion in Chinese cuisine market among all cuisine styles in

mainland China in 2020, with a total market share of 14.1%. The following table illustrates a

detailed breakdown by cuisine type of the revenue of Chinese cuisine market in mainland China

in 2020:

Revenue of Chinese Cuisine Market (Mainland China), Breakdown by Cuisine Type, 2020

Hot pot , 14.1%

Sichuan Cuisine , 13.7%

Jiangzhe Cuisine , 7.3%

Hunan Cuisine, 5.4%

Beĳing Cuisine, 4.0%

Anhui Cuisine, 3.9%

Northeastern Cuisine, 3.8%

Yungui Cuisine, 3.8%

Xinjiang Cuisine, 3.7%

Other, 21.6%

Chinese Barbecue,4.8%

Northwestern Cuisine, 4.0%

Cantonese Cuisine,9.9%

Note: Others include Hakka Cuisine, Jiangxi Cuisine, fusion cuisine, etc.


The catering service market in China has been fragmented, in which the non-franchised

chain restaurants segment is expected to be fast-growing. Non-franchised chain restaurants

accounted for only 4.5% of the PRC catering service market in 2020 due to the challenges of

developing and managing scalable and standardized restaurant operations, primarily including

the considerate upfront capital expenditure of rent and technology investment, and the difficulty

in maintaining consistently standardized operations and high-quality supply chain management.

However, certain factors such as the rising demand for safe and fresh food, increasing focus on

quality of service and food, and that expanding customers recognize brand reputation and brand

value, have offered, and are expected to further offer, immense growth opportunities for non-

franchised chain restaurants. Hence, the projected CAGR from 2020 to 2025 of non-franchised

chain restaurants is 15.4%, primarily attributable to well-developed capital platforms for chain

restaurants, strengthened control over food safety and service quality, and increased brand

awareness and reputation.

INDUSTRY OVERVIEW

– 93 –


Market Size of China’s Catering Service Industry, Breakdown by Operating Model, 2016–2025E

0

2,000

4,000

6,000

8,000

3,579.9 3,964.4 4,271.6 4,672.13,952.7

4,698.45,367.7

6,034.36,766.2

7,621.4To

tal R

even

ue (B

illio

n RM

B)

2016 2017 2018 2019 2020 2022E 2024E 2025E2021E 2023E

Total

Non-chain Restaurants

Non-franchised Chain RestaurantsFranchise Restaurants

TotalNon-franchised

Chain RestaurantsFranchise

RestaurantsNon-chain

Restaurants

16-20

20-25E

CAGR

2.5% 4.5% 3.1%

14.0% 15.4% 14.4%

2.3%

13.9%

3,579.9 3,964.4 4,271.6 4,672.1 3,952.7 4,698.4 5,367.7 6,034.3 6,766.2 7,621.4 150.7 170.2 186.6 207.9 179.4 216.7 250.6 285.1 322.7 367.5 534.3 595.8 644.7 709.3 604.2 722.4 826.7 930.8 1,045.2 1,181.4 2,894.9 3,198.4 3,440.3 3,754.9 3,169.1 3,759.3 4,290.4 4,818.4 5,398.3 6,072.5

CHINESE HOT POT RESTAURANT MARKET

Hot pot is the most popular dine-out option in China within the Chinese cuisine market,

accounting for 14.1% of overall Chinese cuisine market in mainland China in terms of revenue in

2020. Typically, modern hot pot restaurants offer a partitioned pot with differently-flavored

broths in each section. The warm and comforting nature of hot pot, has made it a popular cuisine

enjoyed in social gatherings by friends and families. In addition, the popularity of hot pot is

primarily attributable to the diverse ingredients available, the hot pot restaurants’ ability to

personalize taste preferences and the increasing needs for social dining in China.

Due to its popularity and the overall growth of the PRC catering service market, the hot pot

restaurant market grew from a total revenue of RMB395.5 billion in 2016 to RMB518.8 billion in

2019 at a CAGR of 9.5%, yet the revenue decreased to RMB438.0 billion in 2020 as a result of

COVID-19. Frost & Sullivan believes that, compared with other types of Chinese cuisines, hot pot

chain restaurants present larger growth potential, supported by the popularity of hot pot cuisine

and the unique business model of a hot pot chain restaurant which enables it to reach scalable

and standardized operations. Hot pot chain restaurants, non-franchised and franchise, in total

accounted for 40.2% market share of the entire hot pot restaurant market in terms of revenue in

2020, where non-franchised hot pot chain restaurants and franchise hot pot chain restaurants

accounted for 12.2% and 28.1%, respectively. Frost & Sullivan further anticipates that the

revenue of non-franchised hot pot chain restaurants will increase at a CAGR of 21.9% from 2020

to 2025 and reach RMB143.7 billion in 2025, representing itself the fastest-growing segment in

the entire hot pot restaurant market. Going forward, the hot pot restaurant market is expected to

continue to grow from a total revenue of RMB438.0 billion in 2020 to RMB850.1 billion in 2025 at

a CAGR of 14.2% during the intervening period, higher than that of the entire Chinese cuisine

market as 13.3% during the same period, representing itself as one of the fastest-growing

segments in the Chinese cuisine market. There are three major styles of hot pot in China: spicy

INDUSTRY OVERVIEW

– 94 –


Sichuan, healthy Cantonese, and meaty Peking. The following chart sets forth a breakdown by

style in the hot pot restaurant market in China, in terms of revenue from 2016 to 2025:

Revenue of China’s Hot Pot Restaurant Market (China), Breakdown by Style, 2016–2025E

0

200

400

800

600

1,000

TotalSichuan Hot PotCantonese Hot PotPeking Hot Pot

Others

Tota

l Rev

enue

(Bill

ion

RMB)

2016 2017 2018 2019 2020 2022E 2024E 2025E2021E 2023E

2.6% 2.9% 3.6%

14.2% 14.5% 15.3%

1.6%

13.3%

0.0%

10.8%

TotalSichuan Hot Pot

Cantonese Hot Pot

Peking Hot Pot Others

16-20

20-25E

CAGR

395.5 436.2 473.8 518.8 438.0 521.8 596.9 671.8 754.0 850.1

395.5 436.2 473.8 518.8438.0

521.8596.9

671.8754.0

850.1

253.8 280.7 305.9 335.7 284.1 339.3 389.1 438.9 493.7 557.954.6 60.9 66.8 73.9 63.0 75.8 87.6 99.6 112.9 128.558.3 63.6 68.5 74.3 62.1 73.4 83.3 92.9 103.5 115.828.8 31.0 32.7 34.9 28.8 33.3 37.0 40.4 43.9 48.0


CANTONESE HOT POT RESTAURANT MARKET

Cantonese hot pot restaurant industry has a sound momentum as healthy eating has

become a mainstream and customer expectations began shifting to attributes related to health

and wellness. Compared with other types of hot pot, Cantonese hot pot is more light-flavored

and healthier because it contains more fresh seafood and vegetables with fresh soup. Cantonese

hot pot is also a friendly option to consumers who are not capable of eating much heavy-flavored

and spicy food.

In Cantonese-speaking region, having a hot pot is called ‘‘Da Bin Lo’’ (打邊爐), a term

derived from people sitting around a pot, cooking their own food and sharing the food with joy.

Three traditional ‘‘soup’’ bases for ‘‘Da Bin Lo’’ can be: stewed chicken and pork tripe soup, fish

maw chicken soup, and porridge cooked with chicken stock and rice. Though all hot pot across

China bear some resemblance, Cantonese hot pot possesses distinctive features, which have

won itself popularity among Chinese epicures and a solid market share in the hot pot restaurant

market in China.

The Cantonese hot pot restaurant industry in China witnessed a rapid growth during the

past several years, primarily driven by its health and nutrition attributes, its scenarios consisting

of both solo and gatherings of friends, families and colleagues, and the growing dine-out culture.

As a result, the total revenue generated from Cantonese hot pot restaurant industry increased

from RMB54.6 billion in 2016 to RMB73.9 billion in 2019 at a CAGR of 10.6%, yet the revenue

decreased to RMB63.0 billion in 2020 as a result of COVID-19. It is expected that the total

INDUSTRY OVERVIEW

– 95 –


revenue generated from Cantonese hot pot restaurant industry will reach RMB128.5 billion in

2025, representing a CAGR of 15.3% from 2020 to 2025 and accounting for 15.1% of the overall

hot pot restaurant market in China.

COMPETITIVE LANDSCAPE

Competitive Landscape in Chinese Hot Pot Restaurant Market

The Chinese hot pot restaurant market in the PRC is highly fragmented, with over 0.4 million

hot pot restaurants operated in 2020. The Chinese hot pot restaurant market is intensely

competitive with respect to food quality and consistency, price-value relationship, ambience and

service, location, stable supply of high-quality ingredients and availability of trained employees.

The five largest players in the hot pot restaurant market in the PRC only held an aggregate

market share of 7.9% in terms of 2020 revenue. The table below sets forth the five largest

Chinese hot pot restaurant groups in the PRC in terms of gross revenue.

Ranking Group Description of the brand

Revenue in

2020(1)

Market

share in

2020

RMB billion %

1 Group A A Hong Kong-listed restaurant brand established in

1994, headquartered in Beijing, and focusing on

providing Sichuan hot pot.

25.4 5.8

2 Group B A Hong Kong-listed restaurant brand established in

1998, headquartered in Beijing, and focusing on

providing both mini hot pot and Sichuan hot pot.

5.1 1.2

3 Group C A non-listed non-traditional hot pot restaurant brand

established in 2006, headquartered in Suzhou,

Jiangsu Province.

1.5 0.3

4 Our Group See ‘‘Business’’ for more details. 1.1 0.3

5 Group D A non-listed restaurant brand established in 2001,

headquartered in Zhengzhou, Henan Province, and

focusing on providing Sichuan hot pot.

1.1 0.3

Note:

(1) Revenue refers to the revenue of all non-franchised restaurants of each of these groups in China.


INDUSTRY OVERVIEW

– 96 –


Competitive Landscape in Cantonese Hot Pot Restaurant Market

The competition of Cantonese hot pot restaurant market is stiff, as there are numerous

Cantonese hot pot restaurants and brands all over the PRC. The five largest players only held an

aggregate market share of approximately 5.0% in terms of 2020 revenue. The table below sets

forth the five largest Cantonese hot pot restaurant groups, their total revenue and market shares

in 2020:

Ranking Group Description of the brand

Revenue in

2020(1)

Market

share in

2020

RMB billion %

1 Our Group See ‘‘Business’’ for more details. 1.1 1.7

2 Group E A non-listed restaurant brand established in 1998,

headquartered in Hangzhou, Zhejiang Province.

0.7 1.1

3 Group F A non-listed restaurant brand established in 2016,

headquartered in Shanghai.

0.6 1.0

4 Group G A non-listed restaurant brand established in 2015,

headquartered in Guangzhou, Guangdong Province.

0.6 1.0

5 Group H A listed restaurant brand established in 2004,

headquartered in Shanghai.

0.1 0.2

Note:

(1) Revenue refers to the revenue of all non-franchised restaurants of each of these groups in China.


Our Group ranked first in Cantonese hot pot restaurant market in China in 2020 in terms of

revenue, with a market share of 1.7% in terms of revenue in 2020. In addition, our Group is the

largest player that focuses on serving the hot pot with stewed chicken and pork tripe soup (胡椒

豬肚雞), among all Cantonese hot pot restaurant operators. The Company had the annual

customer traffic at approximately 7.8 million customers in 2020. According to the online reviews

and ratings collected from a China’s leading crowdsourcing review platform, we earned the

highest ranking by flavor, services and atmosphere in China in July 2021 with an aggregate rating

of 95.8 out of 100, outperforming other hot pot chain restaurant groups which own at least 20

restaurants as of July 2021.

INDUSTRY OVERVIEW

– 97 –


Catering Service Market Driving Forces

According to Frost & Sullivan, the total revenue of the catering service market in China, in

particular that of its chain restaurants segment, is expected to enjoy a continuous growth in the

next five years, driven by the following major factors:

. Increasing disposable income and consumption, urbanization and shopping malls

expansion. According to the National Bureau of Statistics of China (中華人民共和國國家

統計局), the per capita annual disposable income of urban households in tier one

cities, new tier one cities and tier two cities in China amounted to RMB67,900,

RMB45,500 and RMB42,700 in 2020, respectively. The per capita annual expenditure

on food of Chinese residents in tier one cities, new tier one cities and tier two cities

amounted to RMB11,500, RMB8,400 and RMB7,900 in 2020, respectively, with a CAGR

of 4.7%, 5.0% and 5.0%, respectively, which is quite high compared to that of

developed countries. The upgraded consumption led to diversified needs for catering

service, including high-quality and healthy food, better restaurant atmosphere, better

services and some other social and leisure needs, and further, drove the

transformation of the entire catering service industry which will benefit mid- to high-

end restaurants. With the rapid urbanization and increasing disposable income in

China, urban residents’ consumption on dining in restaurants has presented a strong

growth momentum. Such urbanization also brought out a rapid expansion in shopping

malls in China. Catering has become increasingly important for shopping malls to

attract traffic, grow customer base, and incentivize customers’ consumption in other

stores within the same shopping mall, and further, to set up their own distinguishing

features and place themselves at a competitive advantage. In 2020, catering service

accounted for approximately 30% of the total area of shopping malls in core

commercial districts. According to the F&S Report, approximately 6,700 shopping

malls are in operation in China; this number is expected to increase to 9,600 in 2025.

Shopping malls can assist and support catering service business because they: (i) set

standardized procedures for catering service providers to follow when opening new

restaurants; (ii) offer complete safety systems integrated with fire safety, power

system and other reliable utilities to help ensure and maintain restaurants’ running

operations; and (iii) provide favorable shopping malls networks which can be utilized

by catering service providers to make most of the opportunities for their own

expansion. The increasing urbanization and robust establishment of shopping malls

are likely to further drive the development of catering service market.

. Prevalent dine-out and fast-paced lifestyle. Rapid economic development in China has

largely changed people’s lifestyle and consuming patterns with an increasing trend of

dining out instead of dining at home. According to Frost & Sullivan, the penetration

rate of dining out had increased from approximately 23.0% in 2016 to 23.8% in 2019.

The rate dropped to 20.0% in 2020 due to COVID-19, yet Frost & Sullivan anticipates

that it will recover and reach 26.0% in 2025. Furthermore, an increasing number of

young consumers, especially white collars, choose to dine out in the restaurants with

shorter dining time. With a rising living standard, consumers in China are expected to

continue to integrate dine-out and fast-paced option into their lifestyle, which will

increase the frequency of dining out and promote dine-out and fast-paced lifestyle.

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. Development of technological platforms. A wide range of new technologies in relation

to the catering service industry such as digital payment and online financial

management system have become more pervasive. The online ordering and digital

payment have made it more convenient and efficient for the transaction between

customers and restaurants. It is expected that restaurants will continue to utilize such

technologies to optimize their operations. The younger generation in China has strong

stickiness to online social media. The development of online social media has also

provided new channels between restaurant operators and consumers to communicate

with each other. Online social media has made it more convenient for consumers to

order food and share comments on food. The younger generation consumers who are

willing to dine in characteristic restaurants with unique food and services, can easily

share their experiences online and hence introduce the restaurants to an increasing

number of customers, and further, to boost traffic and revenue. In addition, the rapid

development of online social media has also created the fan economy of popular

restaurants who have accumulated vast followers on online social media, and thus are

able to promote themselves online, and gain more customer traffic as a result of the

increasing influence of social media platforms.

Dining Preferences Market Trends

Apart from the increasing disposable income and consumption, urbanization, shopping

malls expansion, the prevalent dine-out and fast-paced lifestyle, and the development of

technological platforms, which have been the primary growth drivers of the entire China’s

catering service market, this market has witnessed major shifts in dining preferences as

consumers start to embrace healthy eating and demand ready-to-serve products.

. Rise of health awareness. According to the Institute for Urban and Environmental

Studies of Chinese Academy of Social Sciences (中國社會科學院城市發展與環境研究

所), more than 75% of Chinese residents are sub-healthy. Health matter has become a

hot topic in China as consumption trends towards healthy choices. In particular, the

outbreak of COVID-19 has further heightened concerns about health, where food safety

has played an increasingly important role for catering service providers. As a result, in

recent years, people have been demonstrating particular interest in healthy diet.

Chinese cuisine shows healthy characteristics due to its diverse ingredients and

traditional cooking methods, which is in line with the trend towards healthy diet.

. Increasing demand for ready-to-serve products. The spreading of COVID-19 has largely

contributed to the continued prevalence of home cooking; that people have settled

into routines that involve more home cooking than before may continue after the

pandemic. This shift is driving a change in shopping lists where restaurants can cater

to consumers’ needs with options which can make home cooking simple, fast and

healthy, such as ready-to-serve products. The revenue of ready-to-serve products had

increased from RMB150.8 billion in 2016 to RMB278.6 billion in 2020, representing a

CAGR of 16.6% during the intervening period. As a result, restaurants, especially chain

restaurants, have started to develop their own retail businesses. China’s public health

response to COVID-19 focused on measures to stop the virus spreading within the

general population had forced many restaurants’ temporary closures, during which

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they introduced their own ready-to-serve products to make up the losses. The market

size of ready-to-serve products is expected to increase to approximately RMB658.6

billion in 2025 at a CAGR of 18.8% from 2020 to 2025.

KEY ENTRY BARRIERS AND CHALLENGES

Although there may not be significant entry barriers to operate or manage a single

restaurant, there are significant entry barriers to become a large-scale non-franchised chain

restaurant with multiple restaurant locations. Principal entry barriers include the following:

. Ability to manage growth. A large-scale chain restaurant generally has a large number

of restaurant staff. Despite comprehensive internal policies, due to the labor-intensive

nature of the restaurant business, it is more difficult to ensure that all of the staff

comply with laws and regulations of multiple jurisdictions, especially the detailed and

stringent regulations in relation to food safety.

. Supply chain management. The quality and the taste of hot pot depend significantly on

the freshness and quality of food ingredients. For a large-scale chain restaurant, it is

crucial to have the ability to procure fresh and high quality food ingredients at

favorable prices from reliable suppliers and manage the inventory and logistics for

food ingredients across all of its restaurants. It is also important to ensure high-quality

food ingredients are available at restaurants located in different regions and countries.

New entrants with less supply chain management experience may not be able to

manage their supply chain effectively, which may result in higher costs and having an

adverse effect on the customers’ dining experience.

. Initial set-up capital expenditure. Operating large-scale chain restaurants requires a

large amount of initial investment for rental costs, decoration costs, equipment costs

and staff costs, among others. For new entrants with less capital and less bargaining

power, the initial set-up capital expenditure required for large-scale operations may be

too significant, and the insufficient revenue generated from newly operating

restaurants may create cash flow problems.

. Increasing labor costs and high employee attrition. Employee attrition is a pain point

of the catering service industry at large. Like other restaurants, hot pot restaurants

require a large number of service personnel. Low attrition rates allow restaurants to

maintain their service quality and continued growth. As a result, restaurants may need

to offer high salaries in order to retain experienced personnel.

. Brand recognition and reputation. Brand awareness has become increasingly important

to catering service business as it has great influence on dining decisions. Therefore,

restaurants may need a large customer base to obtain strong brand recognition and

achieve market leading position. In addition, as existing market participants have

already taken up favorable locations in busy areas, such as shopping malls and

popular sites with a high traffic, new entrants may find it difficult to occupy such

locations with promising revenue and to gain market exposure. Considering that

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existing market participants have already established their brand recognition and

reputation and taken up favorable locations, new entrants with newly established

brands may find it hard to gain brand recognition from customers in a short term.

. Standardization and regulatory compliance. Large chain restaurants typically have

more comprehensive and standardized food safety and supply chain management

systems than smaller ones to ensure consistency and quality. With increasing public

concern over food quality and safety, customers may prefer to consume in restaurants

that provide reliable and high-quality food and services. In the meantime, the policies

published by the government also promote standardization in the catering service

industry. Hot pot restaurants that have a strong reputation for food safety and are able

to offer healthy food options are expected to experience strong growth. Meanwhile,

new market players may not have enough resources to establish a comprehensive and

standardized food safety and quality control system. In addition, with the expansion of

large chain restaurants, chain restaurants are facing strict regulatory compliance

requirements in multiple jurisdictions. New entrants without certain level of

standardization and efficient internal control may not able to comply with laws and

regulations of multiple jurisdictions.

. Technology Investment. Rapidly evolving technologies are reinventing the traditional

dining experience at hot pot restaurants and allowing restaurants to operate in

innovative ways. Existing market players are able to continuously invest in

technologies and incorporate new technologies into their operations to offer unique

services for customers and to streamline their operations through reduced costs and

standardized process, and further, to achieve economies of scale. New entrants

without an ability to invest in technology or a sufficient capital support to purchase

the latest technologies may find it hard to achieve standardized and streamlined

operations or to offer unique dining experience compared to their competitors.

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MAJOR RAW MATERIALS MARKET TRENDS

The major ingredients used in our restaurants include pork tripe, chicken, beef, pork, and

vegetables. The price volatilities of such ingredients are subject to factors such as import

policies, domestic supply and demand, seasonality, weather conditions, and natural disasters.

Generally, the average market prices of our major raw materials were stable from 2016 to 2020.

However, the average market prices of pork tripe and pork experienced minor fluctuations during

2016 to 2020, primarily due to the shortage of supply. The following chart illustrates the average

price of our major raw materials in China from 2016 to 2020:

Average Market Price(1) of Our Major Raw Materials (China), 2016–2020

0

20

10

30

40

Pork(3)

Chicken

Beef(3)

Pork Tripe(3)

Vegetables(2)

Unit:

RM

B/KG

2016 2017 2018 2019 2020

32.1 33.1 34.1 36.4 35.126.6 25.6 27.9 32.2 31.314.1 12.8 12.4 16.5 19.912.2 12.3 14.8 15.2 14.74.1 3.7 3.9 4.2 4.7

Source: Ministry of Agriculture, Frost & Sullivan

Notes:

(1) Price provided hereby refers to the wholesale price;

(2) When calculating the average wholesale price of vegetables, Frost & Sullivan selected and referred to the

average wholesale price of 28 types of vegetables in China; and

(3) The average wholesale price of pork, pork tripe, and beef refers to the import price applied by an exchange

rate between USD and RMB 1: 6.9.

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INCREASING COST OF LABOR

In line with the growth of macro-economy in China, the annual income of employees in the

catering service industry in China has increased steadily from 2016 to 2020 at a CAGR of 6.3%.

Labor cost is expected to grow in the next five years due to the developing macro-economy,

growing disposable income, as well as the inflation. The following chart illustrates the trend of

labor cost of the catering service industry in China from 2016 to 2020:

Average Annual Salary of Employees in the Catering Service Industry (China), 2016–2020

0

10

20

30

40

60

5043.0

39.636.9

44.3

34.7

202020192017 20182016

Average Annual Salary(Thousand RMB)

CAGR: +6.3%

Source: National Bureau of Statistics of China, Frost & Sullivan

Note: annual salary refers to average annual salary of private sector employees in accommodation and catering

service industry.

Impact of the COVID-19 Pandemic

COVID-19 was declared a pandemic by the World Health Organization in March 2020. Hit by

COVID-19, the catering service industry has undergone such a dramatic shift, in particular during

the rapid escalation of infection control response. A number of restaurants were forced to

temporarily close in early 2020. The number of restaurants decreased from approximately eight

million units in 2019 to seven million units in 2020. Since the onset of the COVID-19 outbreak,

consumers’ purchasing willingness and purchasing power have been dampened amid a general

economic downturn.

COVID-19 pandemic has changed the landscape of the catering service market in China and

significantly decreased the number of restaurants and the concentration of businesses, but it

also promotes ready-to-serve business and food delivery business. Compared with non-chain

restaurants, chain restaurants are more competitive with standardization in operation and food

quality, and are more likely to survive from the effect of COVID-19. The penetration of chain

restaurants increased from approximately 19.6% in 2019 to approximately 20.1% in 2020.

Driven by the rapid growth and increasing popularity of logistics-focused food delivery

services, the food delivery business in China has witnessed a fast growth during the past several

years. With increasing mobile penetration and benefiting from the fast-paced lifestyle of Chinese

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consumers, food delivery business is expected to continue to grow. The revenue of food delivery

business increased from RMB231.3 billion in 2016 to RMB 715.4 billion in 2020 and is expected

to reach RMB1,443.0 billion in 2025; the penetration rate of this market increased from 6.5% in

2016 to 18.1% in 2020 as well. Restaurants that were able to offer food delivery services have

and are expected to continue to experience a lower impact than the others from COVID-19 since

that their revenue generated from food delivery services could make up a partial loss they

suffered from the pandemic. In addition, Frost & Sullivan anticipates that restaurants that are

able to offer food delivery services, in particular those that have a radiated restaurant network

across China, are expected to benefit from the strong momentum of the food delivery business.

Due to the outbreak of COVID-19, some people have developed a habit of cooking, and are

looking for ready-to-serve products. The revenue of ready-to-serve products experienced a rapid

growth with a year-to-year growth rate at 16.6% from 2016 to 2020. Increasing number of

restaurants have introduced their own ready-to-serve products during the COVID-19 quarantine

period to make up the losses from in-restaurant dining. The revenue of ready-to-serve products is

expected to increase at a CAGR of 18.8% from 2020 to 2025 and reach approximately RMB658.6

billion in 2025.

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This section sets forth a summary of the most significant rules and regulations that affectour business activities in China.

PRC

REGULATIONS RELATED TO FOREIGN INVESTMENT IN CHINA

The establishment, operation and management of companies in China are governed by thePRC Company Law (《中華人民共和國公司法》), as revised in 2005, 2013 and 2018. According tothe PRC Company Law, companies established in the PRC are either limited liability companies orjoint stock limited liability companies. The PRC Company Law applies to both PRC domesticcompanies and foreign investment companies. Pursuant to the Provisional AdministrativeMeasures on Establishment and Modifications (Filing) for Foreign Investment Enterprises (《外商投

資企業設立及變更備案管理暫行辦法》) promulgated by MOFCOM on 8 October 2016, amended on30 July 2017 and 29 June 2018, foreign invested enterprises which are not subject to theapproval requirement under the special entry management measures, shall file with competentcommerce authorities for its establishment and changes. On 1 January 2020, MOFCOM and SAMRpromulgated the Measures for the Reporting of Foreign Investment Information (《外商投資信息報

告辦法》), repealing the Provisional Administrative Measures on Establishment and Modifications(Filing) for Foreign Investment Enterprises. Where foreign investors carry out investment activitiesdirectly or indirectly within China, foreign investors or foreign-funded enterprises shall reportinvestment information to commerce departments. On 23 June 2020, MOFCOM and NDRCpromulgated the Special Administrative Measures (Negative List) for Foreign Investment Access(Edition 2020) (《外商投資准入特別管理措施(負面清單)(2020年版)》), or the Negative List (2020),which became effective on 23 July 2020. The customer food and beverage services and generalfood production and sales were not included in the Negative List (2020). Fields that were notincluded in the Negative List (2020) shall be regulated according to the principle of equaltreatment of domestic and foreign investments.

On 15 March 2019, the National People’s Congress approved the Foreign Investment Law(《中華人民共和國外商投資法》), and on 26 December 2019, the State Council promulgated theImplementing Rules of the Foreign Investment Law (《中華人民共和國外商投資法實施條例》), or theImplementing Rules, to further clarify and elaborate the relevant provisions of the ForeignInvestment Law. The Foreign Investment Law and the Implementing Rules both took effect on 1January 2020 and replaced three previous major laws on foreign investments in China, namelythe Sino-foreign Equity Joint Venture Law (《中華人民共和國中外合資經營企業法》), the Sino-foreign Cooperative Joint Venture Law (《中華人民共和國中外合作經營企業法》) and the WhollyForeign-owned Enterprise Law (《中華人民共和國外資企業法》), together with their respectiveimplementing rules. Pursuant to the Foreign Investment Law, ‘‘foreign investments’’ refer toinvestment activities conducted by foreign investors (including foreign natural persons, foreignenterprises or other foreign organizations) directly or indirectly in the PRC, which include any ofthe following circumstances: (i) foreign investors setting up foreign-invested enterprises in thePRC solely or jointly with other investors, (ii) foreign investors obtaining shares, equity interests,property portions or other similar rights and interests of enterprises within the PRC, (iii) foreigninvestors investing in new projects in the PRC solely or jointly with other investors, and (iv)investment of other methods as specified in laws, administrative regulations, or as stipulated bythe State Council. The Implementing Rules introduce a see-through principle and further providethat foreign-invested enterprises that invest in the PRC shall also be governed by the ForeignInvestment Law and the Implementing Rules.

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REGULATIONS RELATED TO FOOD SAFETY AND LICENSING REQUIREMENT FOR FOOD OPERATION

Food Safety Law and Implementation Rules

In accordance with the Food Safety Law of the PRC (《中華人民共和國食品安全法》), or the

Food Safety Law, as effective on 1 June 2009 and most recently amended on 29 April 2021, the

State Council implemented a licensing system for food production and trading activities. A

person or entity that engages in food production, food selling or catering services shall obtain

the license in accordance with the Food Safety Law.

According to the Food Safety Law, the State Council shall establish a food safety committee

whose duties shall be defined by the State Council. The food safety supervision and

administration department under the State Council shall exercise supervision and administration

over food production and trading activities according to the duties defined by the Food Safety

Law and the State Council. The health administrative department under the State Council shall

organize the implementation of risk monitoring and risk assessment of food safety according to

the duties defined by the Food Safety Law, and shall formulate and issue national food safety

standards together with the food safety supervision and administration department under the

State Council. Other competent departments under the State Council shall carry out relevant food

safety work according to the duties defined by the Food Safety Law.

The Food Safety Law sets out, as penalties for violation, various legal liabilities in the form

of warnings, orders to rectify, confiscations of illegal gains, confiscations of tools, equipment,

raw materials and other articles used for illegal production and operation, fines, recalls and

destructions of food made in violation of laws and regulations, orders to suspend production

and/or operation, revocations of production and/or operation license, and criminal punishment.

The Implementation Rules of the Food Safety Law (《中華人民共和國食品安全法實施條例》), as

effective on 20 July 2009 and last amended on 26 March 2019, further specifies the detailed

measures to be taken for food producers and business operators and the penalties that shall be

imposed should these required measures not be implemented.

Food Operation Licensing

On 4 March 2010, the Ministry of Health promulgated the Administrative Measures on Food

and Beverage Service Licensing (《餐飲服務許可管理辦法》) and Administrative Measures on Food

Safety Supervision in Food and Beverage Services (《餐飲服務食品安全監督管理辦法》). Pursuant to

the Administrative Measures on Food and Beverage Service Licensing, the local food and drug

administrations at various levels are responsible for the administration of food and beverage

service licensing. Catering service providers are required to obtain a catering service license and

are responsible for safety in catering services in accordance with the laws. A service provider

providing catering services at different locations or venues must obtain separate catering service

licenses for each venue. In the event of any change in the operation locations, a new application

for catering service license is required.

On 31 August 2015, China Food and Drug Administration promulgated the Administrative

Measures for Food Operation Licensing (《食品經營許可管理辦法》), which was amended on 17

November 2017. According to the Administrative Measures for Food Operation Licensing, a person

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or entity that engages in food selling and catering services within the PRC (the ‘‘food operator’’)shall obtain a food operation license in accordance with the law. Food operators engaging at

different location or venues must obtain separate food operation licenses for each venue under

the principle of one license for one site. Food and drug administrative authorities shall

implement classified licensing for food operation according to food operators’ types of operation

and the degree of risk of their operation projects.

On 30 September 2015, China Food and Drug Administration promulgated the Announcement

on Using the Food Operation Licenses (《關於啟用〈食品經營許可證〉的公告》). Pursuant to the

Announcement on Using the Food Operation Licenses, the catering service license was replaced

by the food operation license.

The food operation license is valid for five years upon its issuance. Food operators shall

display their original food operation licenses prominently at their sites of operation. If the

licensing items which are indicated on a food operation license change, the food operator shall,

within ten business days after the changes take place, apply with the food and drug

administrative authority which originally issued the license for alteration of the operation

license. Those who engage in food operation activities but failed to obtain a required food

operation license shall be punished by the local food and drug administrative authorities at or

above the county level according to Article 122 of the Food Safety Law, which provided that the

authorities shall confiscate their illegal income, the food or food additives illegally produced or

dealt in, and the tools, equipment, raw materials, and other items used for illegal production or

operation, and impose a fine of not less than RMB50,000 but not more than RMB100,000 on

them if the goods value of the food or food additives illegally produced or dealt in is less than

RMB10,000 or a fine of not less than ten times but not more than 20 times the goods value if the

goods value is RMB10,000 or more.

The Safety of Food Offered through Online Catering Services

Pursuant to the Measures for the Supervision and Administration of the Safety of Food

Offered through Online Catering Services (《網絡餐飲服務食品安全監督管理辦法》) effective on 1

January 2018, which was amended on 23 October 2020, online catering service providers must

have their own physical stores and must have obtained food business licenses according to the

law, and shall carry out business activities pursuant to the business forms and business items

specified on their own food business licenses, and must not do business beyond their business

scope.

Food Recall System

On 11 March 2015, China Food and Drug Administration (now merged into the State

Administration for Market Regulation) has promulgated the Administrative Measures for Food

Recall (《食品召回管理辦法》, effective on 1 September 2015, and amended on 23 October 2020).

According to the Administrative Measures for Food Recall, food producers and operators shall, be

the primary persons responsible for food safety, establish and improve the relevant management

rules, collect and analyze food safety information, and perform the obligations to cease the food

production and business operation, and recall and dispose unsafe food. Where food business

operators find that the food under selling is unsafe, they must immediately suspend the

operations, inform related food producers and operators to stop producing and operating, urging

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the customers to stop consumption by way of notices or announcements and take necessary

measures to prevent food safety risks. Food producers knowing that any food produced or traded

is unsafe must proactively recall such food. After knowing that food producers recall unsafe food,

food operators should immediately adopt the measures such as ceasing to purchase and sell,

sealing up unsafe food, posting the recall announcement issued by the producers in prominent

position of operation premises, and cooperating with food producers to start recalling. Where

food business operators violate the Food Safety Law and the Administrative Measures for Food

Recall and do not immediately suspend operation or proactively recall unsafe food, the food and

drug administrative authorities shall issue warnings to them and impose fines between

RMB10,000 and RMB30,000. Where food operators that violate the Administrative Measures for

Food Recall, or do not cooperate with food producers to recall unsafe food, the market

supervisory and administrative authorities shall issue warnings to them and impose fines

between RMB5,000 and RMB30,000.

REGULATIONS RELATED TO FOOD ADVERTISEMENT

According to the Advertising Law of the PRC (《中華人民共和國廣告法》) promulgated by the

Standing Committee of the National People’s Congress (the ‘‘SCNPC’’) on 27 October 1994 and

most recently amended, on 26 October 2018 and 29 April 2021, advertisement shall not contain

any false or misleading information, and shall not deceive or mislead customers. Each advertiser,

advertising agent or advertisement publisher shall, when engaging in advertising activities,

comply with laws and regulations, act in good faith, and conduct fair competition. In any

advertisement, where there are statements regarding the performance, function, place of origin,

use, quality, ingredients, price, producer, valid period and guarantees of the product, or the

content, provider, form, quality, price and guarantees of the service, such statements shall be

accurate, clear and explicit. Where any content of the advertisement is in violation of the

foregoing provisions, the market regulation department shall order the cessation of the

publishing of advertisements and impose fines of not more than RMB100,000 on the advertiser.

REGULATIONS RELATED TO LIQUOR CIRCULATION

The Guidance of Ministry of Commerce on Promoting Healthy Development of Liquor

Circulation for the ‘‘13th Five-Year’’ Period (《商務部關於「十三五」時期促進酒類流通健康發展的指

導意見》), which was promulgated by MOFCOM on 13 February 2017, stipulates to eliminate the

regional alcohol ban, to clean up and abolish the applicable regulations and practices that

hinder the free circulation of alcohol, and to promote the market formation and circulation of

alcohol.

However, liquor operators may be required by local governments to obtain local licenses for

the distribution of alcoholic products. For example, pursuant to the Administrative Measures of

Shanghai Municipality for Production and Sales of Alcohol Commodities (《上海市酒類商品產銷管

理條例》), which was adopted by the Standing Committee of Shanghai People’s Congress, local

enterprises that engage in alcohol wholesaling must apply to the municipal wine monopoly

bureau for an alcohol wholesale license, while local enterprises that engage in alcohol retailing

must apply to the district (county) wine administrative department for an alcohol retail license.

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REGULATIONS RELATED TO THE SANITATION OF THE PUBLIC ASSEMBLY VENUE

The Regulation for the Administration of Sanitation of the Public Assembly Venue (《公共場所

衛生管理條例》) effective on 1 April 1987 and as amended on 6 February 2016 and 23 April 2019,

and the Implementation Rules for the Regulation for the Administration of Sanitation of the Public

Assembly Venue (《公共場所衛生管理條例實施細則》) effective on 1 May 2011 and as amended on

19 January 2016 and 26 December 2017, were promulgated by the State Council and the Ministry

of Health (later known as National Health Commission of the People’s Republic of China)

respectively. The regulations were adopted to create favorable and sanitary conditions for the

public assembly venues, prevent disease transmission and safeguard people’s health. Depending

on the requirements of the local health and family planning administrations, a restaurant is

required to obtain a public assembly venue hygiene license from the local health authority after

it applies for a business license to operate its business.

The Decision of the State Council on the Integration of Health permits and Food Business

licenses in Public places for Restaurant Services (《國務院關於整合調整餐飲服務場所的公共場所衛

生許可證和食品經營許可證的決定》), which was promulgated by the State Council on 3 February

2016, cancels the hygiene permits issued by the local health authorities for four kinds of public

places, including restaurants, cafes, bars and teahouses, and integrates the contents of the food

safety into the food operation license issued by the food and drug regulatory authorities.

REGULATIONS RELATED TO FIRE PREVENTION

Fire Protection As-built Acceptance Check and Filing

According to the Fire Prevention Law of the PRC (《中華人民共和國消防法》), or the Fire

Prevention Law, promulgated by the National People’s Congress on 29 April 1998 and last

amended on 29 April 2021, the competent housing and urban-rural development authority

replaced fire prevention and rescue departments to monitor and administer the fire protection

as-built acceptance check and filing. With respect to the construction projects that are required

by the competent department of housing and urban-rural development under the State Council to

apply for acceptance checks for fire protection, project owners shall apply to the competent

department of housing and urban-rural development for acceptance checks for fire protection,

and with respect to other construction projects apart from those mentioned above, project

owners shall, after an acceptance check, report its results to the competent department of

housing and urban-rural development for the record or filing, and such department shall conduct

a random inspection thereof. According to the Interim Provisions on the Administration of Fire

Protection Design Review and Acceptance of Construction Projects (《建設工程消防設計審查驗收管

理暫行規定》), effective on 1 June 2020, for the special construction projects, including the

hotels, restaurants, shopping malls and markets with a total construction area of more than

10,000 square meters and the restaurants, teahouses or coffee houses with entertainment

functions and with a total construction area of more than 500 square meters, the construction

entity shall apply for acceptance checks for fire protection, for other construction projects apart

from special construction projects and requiring fire control design in accordance with the

national technical standards on fire control for engineering construction, the construction entity

shall complete the fire protection acceptance filing. Pursuant to the Fire Prevention Law, the

construction project that fails to complete as-built acceptance check or filing on fire prevention

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shall be ordered by the competent government authorities to close down and shall be fined not

less than RMB30,000 but not more than RMB300,000. The construction project that fails to

complete fire protection acceptance filing shall be ordered to rectify and be subject to a fine of

up to RMB5,000. Even if the construction project has completed the fire protection acceptance

filing, it may be randomly inspected by the competent government authorities and if it fails to

pass random inspection by the competent government authorities after the fire protection

acceptance filing, the construction entity shall close down the construction project, and where

rectification is not made, it shall be ordered by the competent government authorities to close

down or cease the business operations and be fined not less than RMB30,000 but not more than

RMB300,000.

Fire Safety Inspection

Pursuant to the Fire Prevention Law (revised in 2019), the employer or the entity occupying

the facility shall apply to the fire prevention and rescue department of the local people’s

government at or above the county level for a fire safety inspection before a public gathering

place is put into use or opens for business. Any public gathering place operated without passing

the fire safety inspection or without satisfying the fire safety requirements, shall be ordered to

discontinue the use, production or operation and be fined not less than RMB30,000 but not more

than RMB300,000.

Pursuant to the Fire Prevention Law amended on 29 April 2021, the fire safety inspection of

public gathering places before they are put into use and open for business shall be subject to

the management of notification and commitment. Before the use or commencement of the

business operations of public gathering places, the construction entities or the entities using

such places shall file an application for fire safety inspection with the fire prevention and rescue

department of the local people’s governments of such places at or above the county level, and

make a commitment that the place meets the fire control technical standards and management

regulations, and submit the requisite materials and be responsible for the authenticity of their

commitments and the submitted materials. The fire prevention and rescue department inspects

the materials submitted by the applicant, if the application materials are complete and conform

to legal forms, approval shall be granted. Fire prevention and rescue department shall, in

accordance with fire control technical standards and management regulations, conduct timely

verification on the public gathering places that have made commitments. If the applicant

chooses not to take the form of notification and commitment, fire prevention and rescue

department shall inspect the site in accordance with fire control technical standards and

management regulations within 10 working days from the date of accepting the application.

Approval shall be given to those meeting the fire control safety requirements through inspection.

Public gathering places shall not be put into use or open for business without approval of fire

prevention and rescue department. If the public gathering places are put into use or open for

business without approval of fire prevention and rescue department, or the use or business

conditions of such places are found to be inconsistent with the contents promised after the

verification of fire prevention and rescue department, such places shall be ordered to

discontinue the use, production or operation and be fined not less than RMB30,000 but not

more than RMB300,000.

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REGULATIONS RELATED TO ENVIRONMENTAL PROTECTION

Environmental Protection Law

The Environmental Protection Law of the PRC (《中華人民共和國環境保護法》), or the

Environmental Protection Law, was promulgated and effective on 26 December 1989, and most

recently revised on 24 April 2014. The Environmental Protection Law has been formulated for the

purpose of protecting and improving both the living and the ecological environment, preventing

and controlling pollution and other public hazards and safeguarding people’s health. According

to the provisions of the Environmental Protection Law, in addition to other applicable laws and

regulations of the PRC, the Ministry of Environmental Protection and its local counterparts are

responsible for administering and supervising environmental protection matters. Pursuant to the

Environmental Protection Law, construction projects that have environmental impact shall be

subject to environmental impact assessment. Installations for the prevention and control of

pollution in construction projects must be designed, built and commissioned together with the

principal construction plan of the project. Such installations shall not be dismantled or left idle

without authorization from the competent government agencies.

Consequences of violations of the Environmental Protection Law include warnings, fines,

rectification within a time limit, forced shutdown, or criminal punishment.

Laws on Environment Impact Assessment

Pursuant to the Law of the People’s Republic of China on Environment Impact Assessment

(《中華人民共和國環境影響評價法》) issued on 28 October 2002 and most recently amended on 29

December 2018, the State Council implemented an environmental impact assessment, or EIA, to

classify construction projects according to the impact of the construction projects on the

environment. Constructing entities shall prepare an environmental impact report, or an EIR, or an

environmental impact statement, or an EIS, or fill out the EIR Form according to the following

rules: (i) for projects with potentially serious environmental impacts, an EIR shall be prepared to

provide a comprehensive assessment of their environmental impacts; (ii) for projects with

potentially mild environmental impacts, an EIS shall be prepared to provide an analysis or

specialized assessment of the environmental impacts; and (iii) for projects with very small

environmental impacts, an EIA is not required but an EIR Form shall be completed.

On 30 November 2020, Ministry of Ecology and Environment of the PRC promulgated the

Classified Administration Catalogue of Environmental Impact Assessments for Construction

Projects (2021 version), or Classified Administration Catalogue (2021 version), which became

effective on 1 January 2021. According to Classified Administration Catalogue (2021 version), the

food and beverage services are not included in the management of environmental impact

assessment of construction projects.

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REGULATIONS RELATED TO CUSTOMER RIGHTS PROTECTION

The PRC Customer Rights and Interests Protection Law (《中華人民共和國消費者權益保護法》),

or the Customer Protection Law, as amended on 25 October 2013 and effective on 15 March 2014,

sets out the obligations of business operators and the rights and interests of the customers.

Pursuant to Customer Protection Law, business operators must guarantee that the commodities

they sell satisfy the requirements for personal or property safety, provide customers with

authentic information about the commodities, and guarantee the quality, function, usage and

term of validity of the commodities. Failure to comply with the Customer Protection Law may

subject business operators to civil liabilities such as refunding purchase prices, replacing or

repairing the commodities, mitigating the damages, compensation, and restoring the reputation,

and subject the business operators or the responsible individuals to criminal penalties if

business operators commit crimes by infringing the legitimate rights and interests of customers.

REGULATIONS RELATED TO INFORMATION SECURITY AND PRIVACY PROTECTION

Pursuant to the Civil Code of the PRC (《中華人民共和國民法典》), which was promulgated by

NPC on 28 May 2020 and came into effect on 1 January 2021, the personal information of a

natural person shall be protected. Any organization or individual shall legally obtain the personal

information of others when necessary and ensure the safety of such personal information, and

shall not illegally collect, use, process or transmit the personal information of others, or illegally

buy or sell, provide or make public the personal information of others.

In recent years, PRC government authorities have enacted laws and regulations on internet

use to protect personal information from any unauthorized disclosure. Pursuant to the Several

Provisions on Regulating the Market Order of Internet Information Services (《規範互聯網信息服務

市場秩序若干規定》), which was promulgated by the Ministry of Industry and Information

Technology (the ‘‘MIIT’’) in December 2011 and became effective in March 2012, internet

information service providers shall not collect any users’ personal information or provide any

such information to third parties without the consent of the users. An internet information

service provider must expressly inform the users of the method, content and purpose of the

collection and processing of such user personal information and may only collect such

information necessary for the provision of its services. An internet information service provider

is also required to properly maintain the users’ personal information, and in case of any leak or

likely leak of the users’ personal information, it must take immediate remedial measures and, in

severe circumstances, immediately report to the telecommunications authorities. In addition, the

NPC promulgated a new National Security Law (《中華人民共和國國家安全法》), which became

effective in July 2015, to replace the former National Security Law and cover various types of

national security including technology security and information security.

The PRC Cyber Security Law (《中華人民共和國網絡安全法》), which was promulgated on 7

November 2016 and became effective on 1 June 2017, prohibits individuals or entities from

obtaining personal information through stealing or other illegal ways, selling or otherwise

illegally disclosing personal information. The PRC Cyber Security Law requires network operators,

including internet information services providers among others, to adopt technical measures and

other necessary measures in accordance with applicable laws, regulations as well as compulsory

national and industrial standards to safeguard the safety and stability of network operations,

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effectively respond to network security incidents, prevent illegal and criminal activities, and

maintain the integrity, confidentiality and availability of network data. Any violation of the

provisions and requirements under the PRC Cyber Security Law may subject internet service

providers to warnings, fines, confiscation of illegal gains, revocation of licenses, cancellation of

filings, closedown of websites or even criminal liabilities. Furthermore, the MIIT’s Rules on

Protection of Personal Information of Telecommunications and Internet Users (《電信和互聯網用户

個人信息保護規定》), which was promulgated in July 2013 and became effective in September

2013, contains detailed requirements on the use and collection of personal information as well

as security measures required to be taken by telecommunications business operators and

internet information service providers.

The Regulations on the Scope of Essential Personal Information for Common Types of Mobile

Internet Applications (《常見類型移動互聯網應用程式必要個人信息範圍規定》), which was

promulgated on 12 March 2021 and came into effect on 1 May 2021, regulate the collection of

personal information by mobile internet applications (APPs) and small programs developed on

the basis of such open platform interfaces that users can use without downloading or installing.

Apps and small programs shall not deny users to use their basic functions because they do not

agree to provide unnecessary personal information. If they fail to comply with the above

regulations, the competent departments will deal with them in accordance with the law.

The Network Security Review Measures (《網絡安全審查辦法》), or Measures, which was

promulgated on 13 April 2020 and became effective on 1 June 2020, stipulates that the

procurement of any network product or service by an operator of critical information

infrastructure that affects or may affect national security shall be subject to a cybersecurity

review under such Measures. On 10 July 2021, the Cyberspace Administration of China (the

‘‘CAC’’), jointly with the relevant authorities, published the Measures for Cybersecurity Review

(Revised Draft for Comments) (《網絡安全審查辦法(修訂草案徵求意見稿)》) for public comment,

with a deadline falling on 25 July 2021 (the ‘‘Draft for Comment’’), which stipulates that operators

of critical information infrastructure purchasing network products and services, and data

processors (together with the operators of critical information infrastructure, the ‘‘Operators’’)

carrying out data processing activities that affect or may affect national security, shall conduct a

cyber security review. Pursuant to Article 6 of the Draft for Comment, any operator who controls

more than one million users’ personal information must go through a cybersecurity review by the

cybersecurity review office if it intends to be listed abroad (original text read as follows:

‘‘掌握超過100萬用戶個人信息的運營者赴國外上市，必須向網絡安全審查辦公室申報網絡安全審查.’’)

However, the Draft for Comment provides no further explanation or interpretation for ‘‘listed

abroad (國外上市).’’ As of the Latest Practicable Date, the Draft for Comment had not been

formally adopted yet.

The Data Security Law of the PRC (《中華人民共和國數據安全法》), which was promulgated by

the Standing Committee of the National People’s Congress on 10 June 2021 and will take effect

from 1 September 2021, stipulates that relevant entities carrying out data processing activities

should comply with laws, regulations and codes of ethics, establish and improve the whole

process data security management system in the process of data processing and strengthen risk

monitoring. Those handling important data shall conduct regular risk assessments and report to

the competent authorities. The Personal Information Protection Law of the PRC (《中華人民共和國

個人信息保護法》), which was promulgated by the Standing Committee of the National People’s

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Congress on 20 August 2021 and will take effect from 1 November 2021, provides detailed rules

for processing personal information and further improves the personal information protection

system.

REGULATIONS RELATED TO PRICING

According to the Pricing Law of the PRC (《中華人民共和國價格法》), which was promulgated

by SCNPC on 29 December 1997 and took effect on 1 May 1998, business operators must, as

required by the government departments in charge of pricing, mark the prices explicitly and

indicate the name, production origin, specifications, and other related particulars clearly.

Business operators may not sell products at a premium or charge any fees that are not explicitly

indicated. Business operators must not commit the specified unlawful pricing activities, such as

colluding with others to manipulate the market price, providing fraudulent discounted price

information, using false or misleading prices to deceive customers to transact, or conducting

price discrimination against other business operators. Failure to comply with the Pricing Law or

other rules or regulations on pricing may subject business operators to administrative sanctions

such as warning, orders to cease unlawful activities, payment of compensation to customers,

confiscation of illegal gains, and/or fines. The business operators may be ordered to suspend

business for rectification, or have their business licenses revoked if the circumstances are

severe.

REGULATIONS RELATED TO INTELLECTUAL PROPERTY RIGHTS

Patent

Patents in the PRC are principally protected under the Patent Law of the PRC (《中華人民共和

國專利法》) which was most recently amended on 17 October 2020 and came into effect on 1 June

2021. The duration of the invention patent right shall be 20 years, and for utility models patent

right, the term shall be 10 years and that of designs patent right shall be 15 years, all

commencing from the application date thereof.

Copyright

Pursuant to the Copyright Law of the PRC (《中華人民共和國著作權法》) promulgated by the

SCNPC on 7 September 1990, implemented on 1 June 1991 and revised on 27 October 2001, 26

February 2010, and 11 November 2020 (the latest revision came into effect on 1 June 2021), and

the Implementing Regulations of the Copyright Law of the PRC (《中華人民共和國著作權法實施條

例》) promulgated by the State Council on 2 August 2002, amended on 8 January 2011, and 30

January 2013 (the latest revision became effective on 1 March 2013), the PRC nationals, legal

persons, and other organizations shall, enjoy copyright in their works, whether published or not,

which include, among others, works of literature, art, natural science, social science, engineering

technology and computer software.

Trademark

Registered trademarks are protected under the Trademark Law of the PRC (《中華人民共和國

商標法》) promulgated on 23 August 1982 and amended on 23 April 2019 and related rules and

regulations. Trademarks are registered with the State Intellectual Property Office, formerly the

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Trademark Office of the SAIC. Where registration is sought for a trademark that is identical or

similar to another trademark which has already been registered or given preliminary examination

and approval for use in the same or similar category of commodities or services, the application

for registration of this trademark may be rejected. Trademark registrations are effective for 10

years, unless otherwise revoked.

Domain Name

Domain names are protected under the Administrative Measures on Internet Domain Names

(《互聯網域名管理辦法》) promulgated by the MIIT on 24 August 2017 and effective as of 1

November 2017. Domain name registrations are handled through domain name service agencies

established under the applicable regulations, and applicants become domain name holders upon

successful registration.

REGULATIONS RELATED TO FOREIGN EXCHANGE AND DIVIDEND DISTRIBUTION

Foreign Currency Exchange

Pursuant to the Foreign Exchange Administration Regulations (《中華人民共和國外匯管理條

例》), as revised on 5 August 2008, Renminbi is freely convertible for current account items,

including the distribution of dividends, interest payments, trade and service-related foreign

exchange transactions, but not for capital account items, such as direct investments, loans,

repatriation of investments and investments in securities outside China, unless prior approval is

obtained from SAFE, and prior registration with SAFE is made.

SAFE promulgated the Notice of the State Administration of Foreign Exchange on Reforming

the Administration of Foreign Exchange Settlement of Capital of Foreign Invested Enterprises

(《國家外匯管理局關於改革外商投資企業外匯資本金結匯管理方式的通知》), or the SAFE Circular 19,

in replacement of the Circular on the Relevant Operating Issues Concerning the Improvement of

the Administration of the Payment and Settlement of Foreign Currency Capital of Foreign-Invested

Enterprises (《國家外匯管理局綜合司關於完善外商投資企業外匯資本金支付結匯管理有關業務操作

問題的通知》). SAFE further promulgated the Notice of the State Administration of Foreign

Exchange on Reforming and Standardizing the Foreign Exchange Settlement Management Policy of

Capital Account (《國家外匯管理局關於改革和規範資本項目結匯管理政策的通知》), or the SAFE

Circular 16, as effective on 9 June 2016, which, among other things, amended certain provisions

of SAFE Circular 19. According to SAFE Circular 19 and SAFE Circular 16, the flow and use of the

Renminbi capital converted from foreign currency denominated registered capital of a foreign

investment company is regulated such that Renminbi capital may not be used for business

beyond its business scope or to provide loans to persons other than affiliates unless otherwise

permitted under its business scope. Violations of SAFE Circular 19 or SAFE Circular 16 could

result in administrative penalties.

Since 2012, SAFE has promulgated several circulars to substantially amend and simplify the

current foreign exchange procedures. Pursuant to these circulars, the opening of foreign

exchange accounts with various special purpose, the reinvestment with RMB proceeds by foreign

investors in the PRC and remittance of profits and dividends in foreign currency foreign

investment to its foreign shareholders are no longer subject to the approval or verification of

SAFE. SAFE also promulgated the Circular on Printing and Distributing the Provisions on Foreign

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Exchange Administration over Domestic Direct Investment by Foreign Investors and the Supporting

Documents (《國家外匯管理局關於印發〈外國投資者境內直接投資外匯管理規定〉及配套文件的通知》)

in May 2013, as amended in October 2018, which specifies that the administration by SAFE or its

local branches over foreign investors’ direct investment in the PRC shall be conducted by way of

registration, and banks shall process foreign exchange business relating to the direct investment

in the PRC based on the registration information provided by SAFE and its branches. In February

2015, SAFE promulgated the Notice on Further Simplifying and Improving the Foreign Exchange

Management Policies for Direct Investment (《國家外匯管理局關於進一步簡化和改進直接投資外匯

管理政策的通知》), or the SAFE Circular 13, which became effect on 1 June 2015. SAFE Circular 13

delegates the power to enforce the foreign exchange registration in connection with inbound and

outbound direct investments under applicable SAFE rules from local branches of SAFE to banks,

thereby further simplifying the foreign exchange registration procedures for inbound and

outbound direct investments. On 18 January 2017, SAFE issued the Circular on Further Advancing

Foreign Exchange Administration Reform to Enhance Authenticity and Compliance Reviews (《國家

外匯管理局關於進一步推進外匯管理改革完善真實合規性審核的通知》), which stipulates several

capital control measures with respect to the outbound remittance of profit from domestic

entities to offshore entities, including (i) under the principle of genuine transaction, banks shall

check board resolutions regarding profit distribution, the original version of tax filing records and

audited financial statements; and (ii) domestic entities shall keep the income into the account

for previous years’ losses before remitting the profits.

Foreign Exchange Registration of Overseas Investment by PRC Resident

In 2014, SAFE issued the Circular on Relevant Issues Relating to Domestic Resident’s

Investment and Financing and Roundtrip Investment through Special Purpose Vehicles

(《國家外匯管理局關於境內居民通過特殊目的公司境外投融資及返程投資外匯管理有關問題的通知》),

or the SAFE Circular 37. SAFE Circular 37 regulates foreign exchange matters in relation to

offshore investments and financing or round-trip investments of residents or entities by way of

special purpose vehicles in China. Under SAFE Circular 37, a ‘‘special purpose vehicle’’ refers to

an offshore entity established or controlled, directly or indirectly, by PRC residents or entities for

the purpose of seeking offshore financing or making offshore investments, using legitimate

onshore or offshore assets or interests, while ‘‘round trip investment’’ refers to direct

investments in China by PRC residents or entities through special purpose vehicles, namely

establishing foreign investment enterprises to obtain ownership, control rights and management

rights. SAFE Circular 37 provides that, before making a contribution into a special purpose

vehicle, PRC residents or entities are required to complete foreign exchange registration with

SAFE or its local branch, and in the event the change of basic information such as the individual

shareholder, name, operation term, etc., or if there is a capital increase, decrease, equity

transfer or swap, merge, spin-off or other amendment of the material items, the PRC residents or

entities shall complete the change of foreign exchange registration formality for offshore

investments.

In 2015, SAFE promulgated the Notice on Further Simplifying and Improving the

Administration of the Foreign Exchange Concerning Direct Investment (《關於進一步簡化和改進直

接投資外匯管理政策的通知》). This notice has amended SAFE Circular 37 by requiring PRC

residents or entities to register with qualified banks rather than SAFE or its local branches in

connection in relation to their establishment or control of an offshore entities for the purpose of

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overseas investment or financing. PRC residents or entities who had contributed legitimate

onshore or offshore interests or assets to special purpose vehicles but had not registered as

required before the implementation of the SAFE Circular 37 must register their ownership

interests or control in the special purpose vehicles with qualified banks. Amendments to the

registration are required if there is any material change with respect to the registered special

purpose vehicle, such as any change of basic information (including change of the PRC

residents, name and operation term), increases or decreases in the investment amount, transfers

or exchanges of shares, or mergers or divisions. Failure to comply with the registration

procedures as set forth in SAFE Circular 37 and the subsequent notice, or making

misrepresentations or failure to disclose the control of the foreign investment enterprise which

is established through round-trip investments, may result in restrictions being imposed on the

foreign exchange activities of the relevant foreign investment enterprise, including payment of

dividends and other distributions, such as proceeds from any reduction in capital, share transfer

or liquidation, to its offshore parent or affiliate, and the capital inflow from the offshore parent,

and may also subject relevant PRC residents or entities to penalties under PRC foreign exchange

administration regulations.

Dividend Distribution

The principal regulations governing distribution of dividends of foreign-invested enterprises

mainly include the PRC Company Law (《中華人民共和國公司法》). Under these laws and

regulations, foreign-invested enterprises in China may pay dividends only out of their

accumulated after-tax profits, if any, determined in accordance with China accounting standards

and regulations. In addition, a PRC company, including a foreign-invested enterprise in China, is

required to allocate at least 10% of its accumulated profits each year, if any, to fund certain

reserve funds until these reserves have reached 50% of the registered capital of the enterprise.

Stock Incentive Plans

On 15 February 2012, SAFE promulgated the Notice on Foreign Exchange Administration of

PRC Residents Participating in Share Incentive Plans of Offshore Listed Companies (《國家外匯管理

局關於境內個人參與境外上市公司股權激勵計劃外匯管理有關問題的通知》), or the Stock Option

Rules, replacing the previous rules issued by SAFE in March 2007. Under the Stock Option Rules

and other applicable rules and regulations, domestic individuals, which means the PRC residents

and non-PRC citizens residing in China for a continuous period of not less than one year, subject

to a few exceptions, who participate in a stock incentive plan in an overseas publicly-listed

company are required to register with SAFE or its local branches and complete certain other

procedures. Participants of a stock incentive plan who are PRC residents must retain a qualified

PRC agent, which could be a PRC subsidiary of the overseas publicly-listed company or another

qualified institution selected by the PRC subsidiary, to conduct the SAFE registration and other

procedures with respect to the stock incentive plan on behalf of its participants. The participants

must also retain an overseas entrusted institution to handle matters in connection with their

exercise of stock options, the purchase and sale of corresponding stocks or interests and fund

transfers. In addition, the PRC agent is required to amend the SAFE registration with respect to

the stock incentive plan if there is any material change to the stock incentive plan, the PRC

agent or the overseas entrusted institution or other material changes. The PRC agents must, on

behalf of the PRC residents who have the right to exercise the employee share options, apply to

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SAFE or its local branches for an annual quota for the payment of foreign currencies in

connection with the PRC residents’ exercise of the employee share options. The foreign exchange

proceeds received by the PRC residents from the sale of shares under the stock incentive plans

granted and dividends distributed by the overseas listed companies must be remitted into the

bank accounts in the PRC opened by the PRC agents before distribution to such PRC residents. In

addition, SAFE Circular 37 provides that PRC residents who participate in a share incentive plan

of an overseas unlisted special purpose company may register with SAFE or its local branches

before exercising rights.

REGULATIONS RELATED TO LABOR

Labor Law and Labor Contracts Law

According to the Labor Law of the PRC (《中華人民共和國勞動法》) promulgated on 5 July 1994

and amended on 27 August 2009 and 29 December 2018, enterprises shall establish and

improve their system of work place safety and sanitation, strictly abide by state rules and

standards on work place safety, and conduct employees training on labor safety and sanitation

in the PRC. Labor safety and sanitation facilities shall comply with statutory standards.

Enterprises and institutions shall provide employees with a safe work place and sanitation

conditions which are in compliance with applicable laws and regulations of labor protection.

The Labor Contract Law of the PRC (《中華人民共和國勞動合同法》) promulgated on 29 June

2007 and amended on 28 December 2012, and the Implementation Rules of the Labor Contract

Law of the PRC (《中華人民共和國勞動合同法實施條例》) promulgated on 18 September 2008 set

out specific provisions in relation to the execution, the terms and the termination of a labor

contract and the rights and obligations of the employees and employers, respectively. At the

time of hiring, the employers shall truthfully inform the employees the scope of work, working

conditions, working place, occupational hazards, work safety, salary and other matters which the

employees request to be informed about.

Social Insurance and Housing Provident Fund

Pursuant to the Social Insurance Law of the PRC (《中華人民共和國社會保險法》) which was

promulgated on 28 October 2010 and with effect from 1 July 2011 and latest amended on 29

December 2018, and the Interim Regulations on the Collection of Social Insurance Fees (《社會保

險費征繳暫行條例》) issued by the State Council on 22 January 1999 and last amended on 24

March 2019, employees shall participate in basic pension insurance, basic medical insurance

and unemployment insurance. Basic pension, medical and unemployment insurance

contributions shall be paid by both employers and employees. Employees shall also participate

in work-related injury insurance and maternity insurance. Work-related injury insurance and

maternity insurance contributions shall be paid by employers rather than employees. Pursuant to

the Notice of the General Office of the State Council on Issuing the Plan for the Pilot Program of

Combined Implementation of Maternity Insurance and Basic Medical Insurance for Employees (《國

務院辦公廳關於印發〈生育保險和職工基本醫療保險合並實施試點方案〉的通知》) and the Opinions

of the General Office of the State Council on Comprehensively Promoting the Implementation of

the Combination of Maternity Insurance and Basic Medical Insurance for Employees (《國務院辦公

廳關於全面推進生育保險和職工基本醫療保險合並實施的意見》) promulgated on 19 January 2017

and 6 March 2019, the maternity insurance and basic medical insurance for employees shall be

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consolidated. According to the Social Insurance Law of PRC, employers must carry out social

insurance registration at the local social insurance agency, provide social insurance and pay or

withhold the relevant social insurance premiums for or on behalf of employees. For employers

failing to conduct social insurance registration, the administrative department of social insurance

shall order them to make corrections within a prescribed time limit; if they fail to do so within

the time limit, employers shall have to pay a penalty over one time but no more than three times

of the amount of the social insurance premium payable by them. Where an employer fails to pay

social insurance premiums in full or on time, the social insurance premium collection agency

shall order it to pay or make up the balance within a prescribed time limit, and shall impose a

daily late fee at the rate of 0.05% of the outstanding amount from the due date; if still failing to

pay within the time limit prescribed, a fine of one time to three times the amount in default will

be imposed on them by the competent administrative department.

Pursuant to the Regulations on the Administration of Housing Provident Fund (《住房公積金

管理條例》) which was promulgated on 3 April 1999 and amended on 24 March 2002 and 24

March 2019, employers shall timely pay the housing provident fund in full and overdue or

insufficient payment shall be prohibited. Employers shall process the housing fund payment and

deposit registration in the housing provident fund administrative center. For enterprises who

violate the above laws and regulations and fail to apply for housing provident fund deposit

registration or open housing provident fund accounts for their employees, the housing provident

fund administrative center shall order the relevant enterprises to make corrections within a

designated period. Those enterprises failing to process registration provident fund accounts for

their employees within designated period shall be subject to a fine ranging from RMB10,000 to

RMB50,000. When enterprises violate those provisions and fail to pay the housing provident

fund in full amount as due, the housing provident fund administrative center will order such

enterprises to pay up the amount within a prescribed period; if those enterprises still fail to

comply with the regulations upon the expiration of the above-mentioned time limit, further

application will be made to the People’s Court for mandatory enforcement.

Pursuant to the Reform Plan of the State Tax and Local Tax Collection Administration System

(《國稅地稅征管體制改革方案》), which was promulgated by the General Office of the Communist

Party of China and the General Office of the State Council of the PRC on 20 July 2018, from 1

January 2019, all the social insurance premiums including the premiums of the basic pension

insurance, unemployment insurance, maternity insurance, work injury insurance and basic

medical insurance will be collected by the tax authorities. According to the Notice of the General

Office of the State Taxation Administration on Conducing the Relevant Work Concerning the

Administration of Collection of Social Insurance Premiums in a Steady, Orderly and Effective

Manner (《國家稅務總局辦公廳關於穩妥有序做好社會保險費征管有關工作的通知》) promulgated on

13 September 2018 and the Urgent Notice of the General Office of the Ministry of Human

Resources and Social Security on Implementing the Spirit of the Executive Meeting of the State

Council in Stabilizing the Collection of Social Insurance Premiums (《人力資源和社會保障部辦

公廳關於貫徹落實國務院常務會議精神切實做好穩定社保費徵收工作的緊急通知》) promulgated on

21 September 2018, all the local authorities responsible for the collection of social insurance

are strictly forbidden to conduct self-collection of historical unpaid social insurance

contributions from enterprises. The Notice of the State Administration of Taxation on

Implementing the Several Measures to Further Support and Serve the Development of Private

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Economy (《國家稅務總局關於實施進一步支持和服務民營經濟發展若干措施的通知》) promulgated

on 16 November 2018, repeats that tax authorities at all levels may not organize self-collection

of arrears of taxpayers including private enterprises in the previous years.

REGULATIONS RELATED TO TAX IN THE PRC

Enterprise Income Tax

The PRC Enterprise Income Tax Law (《中華人民共和國企業所得稅法》) and its implementing

rules provide that dividends paid by a PRC entity to a non-resident enterprise for income tax

purposes is subject to PRC withholding tax at a rate of 10%, subject to reduction by an

applicable tax treaty with China. Pursuant to the Arrangement between Mainland China and the

Hong Kong Special Administrative Region for the Avoidance of Double Taxation and Tax

Evasion on Income (《內地和香港特別行政區關於對所得避免雙重徵稅和防止偷漏稅的安排》), the

withholding tax rate in respect to the payment of dividends by a PRC enterprise to a Hong Kong

enterprise may be reduced to 5% from a standard rate of 10% if the Hong Kong enterprise

directly holds at least 25% of the PRC enterprise. Pursuant to the Notice of the State

Administration of Taxation on the Issues concerning the Application of the Dividend Clauses of Tax

Agreements (《國家稅務總局關於執行稅收協定股息條款有關問題的通知》), or the SAT Circular 81, a

Hong Kong resident enterprise must meet the following conditions, among others, in order to

apply the reduced withholding tax rate: (i) it must be a company; (ii) it must directly own the

required percentage of equity interests and voting rights in the PRC resident enterprise; and (iii)

it must have directly owned such required percentage in the PRC resident enterprise throughout

the 12 months prior to receiving the dividends. In October 2019, the State Administration of

Taxation promulgated the Administrative Measures for Non-resident Taxpayers to Enjoy Treatment

under Tax Treaties (《非居民納稅人享受協定待遇管理辦法》), or the SAT Circular 35, which became

effective on 1 January 2020. SAT Circular 35 provides that non-resident enterprises are not

required to obtain preapproval from the competent tax authority in order to enjoy the reduced

withholding tax. Instead, non-resident enterprises and their withholding agents may, by self-

assessment and on confirmation that the prescribed criteria to enjoy the tax treaty benefits are

met, directly apply the reduced withholding tax rate, and file necessary forms and supporting

documents when performing tax filings, which will be subject to post-tax filing examinations by

the competent tax authorities. Accordingly, we may be able to benefit from the [REDACTED]

withholding tax rate for the dividends received from PRC subsidiaries if it satisfies the conditions

prescribed under SAT Circular 81 and other applicable tax rules and regulations. However,

according to SAT Circular 81 and SAT Circular 35, if the competent tax authorities consider the

transactions or arrangements we have are for the primary purpose of enjoying a favorable tax

treatment, the competent tax authorities may adjust the favorable withholding tax in the future.

If our holding company in the Cayman Islands or any of our subsidiaries outside China were

deemed to be a ‘‘resident enterprise’’ under the PRC Enterprise Income Tax Law, it would be

subject to enterprise income tax on its worldwide income at a rate of 25%.

Value-Added Tax

The Notice of the Ministry of Finance and the State Administration of Taxation on Overall

Implementation of the Pilot Program of Replacing Business Tax with Value-added Tax (《財政部、

國家稅務總局關於全面推開營業稅改徵增值稅試點的通知》), which was promulgated by Ministry of

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Finance and State Administration of Taxation on 23 March 2016, became effective on 1 May 2016

and was last amended on 20 March 2019, provides that the pilot program of replacing business

tax with value-added tax shall be implemented nationwide with effect from 1 May 2016 and all

business tax payers in construction industry, real estate industry, finance industry and consumer

service industry, etc. shall be included in the scope of the pilot program and pay value-added tax

instead of business tax.

Pursuant to The Decision of State Council on Abolition of the Provisional Regulations of the

People’s Republic of China on Business Tax and Revision of the Provisional Regulations of the

People’s Republic of China on Value-added Tax《國務院關於廢止〈中華人民共和國營業稅暫行條例〉

和修改〈中華人民共和國增值稅暫行條例〉的決定》), which was promulgated on 19 November 2017

and became effective on the same day, business tax is officially replaced by value-added tax.

Pursuant to the Provisional Regulations on Value-added Tax of the People’s Republic of

China (《中華人民共和國增值稅暫行條例》) promulgated on 13 December 1993 and last amended

on 19 November 2017 and its implementation rules, all entities or individuals in the PRC engaged

in the sale of goods or processing, repair and assembly services, sales services, intangible

assets, real estate and importation of goods in the People’s Republic of China are required to

pay value-added tax.

TAIWAN

The following is a summary of the most significant aspects of Taiwan laws and regulations

relating to our business operations in Taiwan.

License, Registrations, Approvals and Permits

Food Business Registration

In Taiwan, a restaurant and a company engaging in food businesses shall complete the food

business registration in accordance with the Act Governing Food Safety and Sanitation and the

Regulations Governing the Registration of Food Businesses. Failure to complete the food

business registration may result in an administrative fine of no less than NT$30,000 but no more

than NT$3,000,000 by the competent authority. In severe circumstances, it might lead to cease

or suspension of business, revoke of the registration of all or part of the business items or the

registration of the food businesses.

Foreign Investments, Corporate Registration and Importer and Exporter Registrations

Under the Statute for Investment by Foreign Nationals (外國人投資條例), foreign investors

must apply for and obtain foreign investment approval (‘‘FIA’’) from the Investment Commission

(‘‘IC’’) of the Ministry of Economic Affairs (‘‘MOEA’’) (經濟部投資審議委員會) or the MOEA as the

case may be for the following investments:

1. Establishment of a Taiwan subsidiary, branch or joint venture company;

2. Acquisition of shares from existing Taiwanese companies (other than those shares

listed in the Taiwan Stock Exchange or traded in the Taipei Exchange);

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3. Increase in the amount of equity investment in aforesaid enterprises; and

4. Provision of loan(s) to aforesaid enterprises for a period exceeding one (1) year.

The major procedures for a foreign investor to set up a subsidiary or a branch in Taiwan are

as follows: (i) obtaining the investment approval from the IC or MOEA ; (ii) remitting the capital

and obtaining the capital verification approval from the MOEA; (iii) completing the registration of

the home office of the Taiwan branch (not applicable to the incorporation of a subsidiary); (iv)

completing the corporate/branch registration with the MOEA or the government authority

designated by the MOEA; (v) completing the taxes registration with the tax authority; and (vi) if

applicable, completing the importer/exporter registration with the Bureau of Foreign Trade of the

MOEA.

Health and Food Safety Regulations

In Taiwan, any food business operator (e.g. a restaurant) should comply with requirements

under the Act Governing Food Safety and Sanitation and its relevant regulations. A food business

operator in Taiwan shall, among the requirements regarding food safety, ensure that its

personnel, food premises, sanitation management of facilities and quality assurance system are

in compliance with the Standards of Good Hygiene Practice (食品良好衛生規範準則). Failure to

comply and cure this violation within a specific timeline as requested by the competent authority

may result in a fine of no less than NT$60,000 but no more than NT$200,000,000, and in severe

circumstances, the food business operator may be ordered to cease business, suspend business

for a certain period of time, or cancel all or part of the business items listed in the company

registration, business registration or factory registration, or registration of the food businesses.

If registration of the food businesses is revoked, re-application for new registration shall not be

permitted within one year.

As of the Latest Practicable Date, our restaurant in Taiwan has not been imposed any fine

under any health and food safety regulations.

Investment in the PRC

The Act Governing Relations between the Peoples of the Taiwan Area and Mainland Area (臺

灣地區與大陸地區人民關係條例) (‘‘Relations Act’’) covers a broad spectrum of matters, including

documentation, verification, employment, inheritance, communications, advertisements,

business activities, and civil and criminal procedures.

On November 7, 2002, the Taiwan government lifted several restrictions on Taiwanese trade

and investments in China. In 2002, the Taiwan government also removed its prohibition of direct

investments in China. Prior to 2002, permissible investments in or technical cooperation with

parties in mainland China had to be indirect, i.e., via a third country or territory, with an

exception of investments not exceeding US$1 million.

The Relations Act authorized the MOEA to promulgate the Regulations Governing Permission

of Investment or Technical Cooperation with China (在大陸地區從事投資或技術合作許可辦法), and

the Reviewing Principles of Investment or Technical Cooperation with China (在大陸地區從事投資

或技術合作審查原則) (collectively, ‘‘Investment Regulations’’). Among other things, the

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Investment Regulations set forth a list of items in which Taiwanese personnel or legal persons

may or may not invest or cooperate with the PRC (‘‘Investment List’’). Currently, the Investment

List is divided into two (2) categories: general items (一般類) and prohibited items (禁止類).

‘‘Prohibited items’’ are those items for which Taiwanese investment or technical cooperation is

prohibited because of reasons linked to (a) international conventions, (b) national security, (c)

major infrastructure projects, and (d) industrial developments (such as core technologies and

essential components). Items not identified as prohibited are ‘‘general items’’ for which

investment is permitted with prior approval by the IC of the MOEA.

The Investment Regulations prescribe that any Taiwanese personnel, juridical person,

organization, or other entity desiring to invest or engage in technical cooperation in Mainland

China must first apply to the IC (except in the event that the investment is made to a certain PRC

enterprise with an aggregate amount of less than US$1 million, in such situation only a post-

investment filing (within six (6) months after the investment) with the IC for record is required).

As to the maximum aggregate investment, the IC’s Reviewing Principles establish the following:

(a) The maximum aggregate investment in PRC by any Taiwanese individual: NT$5 million

per year;

(b) By a small and medium-sized enterprise: either (i) 60% of its net value or consolidated

net value or (ii) NT$80 million, whichever is higher;

(c) By other enterprises: 60% of its net value or consolidated net value, whichever is

higher.

The abovementioned maximum aggregate investment amount or investment cap does not

apply to (i) an enterprise that obtains a ‘‘Operational Headquarter Recognition Letter’’ (企業營運

總部認定函) issued by the Industrial Development Bureau, MOEA (經濟部工業局), (ii) a Taiwan

subsidiary of a multi-national corporation (跨國企業) (‘‘MNC’’), or (iii) an investor that (a) holds

10% or more shares in a foreign corporation whose shares are listed on the Taiwan Stock

Exchange or Taipei Exchange or traded on the emerging stock market or (b) acts as a director,

supervisor, officer of such foreign company, and such foreign company has invested in PRC

pursuant to Paragraph 1, Article 4 of the Regulations Governing Permission of Investment or

Technical Cooperation with China. MNC referenced herein means an enterprise (i) whose

worldwide revenues in the previous year reaches US$100 million, (ii) has subsidiaries or

branches in two or more countries, (iii) the parent company/head office exercises effective

control and decision-making over those subsidiaries or branches to engage in cross-border

production and operation, and (iv) the parent company/head office is located outside of Taiwan.

Any inflow of capital from PRC back into Taiwan will be deducted from the investment caps.

REGULATORY OVERVIEW

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Labor and Working Safety

Labor Standards Act

The Labor Standards Act (‘‘LSA’’, 勞動基準法) set forth the local minimum, compulsory and

restrictive requirements and is the basis of major labor laws and regulations in Taiwan.

Employment terms and conditions agreed to by an employer and an employee should be no less

favorable than the minimum/mandatory requirements set forth under the LSA, otherwise they are

null and void and will be superseded by the corresponding provisions prescribed under the LSA.

The requirements for employment conditions under the LSA include ‘‘employment contract

and its termination’’, ‘‘salary’’, ‘‘days off’’, ‘‘work hours and overtime’’, ‘‘break, public holidays,

annual leave and statutory leave’’, ‘‘labor insurance’’, ‘‘retirement and statutory pension

schemes’’, ‘‘compensation for occupational hazards’’ and ‘‘establishment of work rules’’. For

employment terms and conditions not stated in an employment contract or the employer’s work

rules/policies, the legal minimum/mandatory requirements under the LSA shall apply. For

employment terms and conditions provided in an employment contract or the employer’s work

rules/policies which are more favorable than the LSA requirements, such favorable terms and

conditions shall prevail.

Labor Pension Act

There are two separate statutory pension plans now operate in Taiwan — the Old Pension

Plan and the New Pension Plan. The New Pension Plan is the scheme created under the Labor

Pension Act (勞工退休金條例), which became effective on July 1, 2005, and applies to employees

hired on and after July 1, 2005. Employees hired before July 1, 2005 can either elect to remain in

the Old Pension Plan (a scheme under the LSL) or switch to the New Pension Plan.

Whereas the Old Pension Plan was based on centralized pension accounts, the New Pension

Plan creates individual retirement accounts (‘‘IRA’’) and is a defined contribution program:

employers contribute at least 6% of employees’ monthly salary to an IRA for each employees,

and such IRAs follow employees when they transfer from one employer to another. Employees

become eligible for benefits under their IRA upon retirement after reaching age of 60. When an

employee covered by the New Pension Plan changes employment, the amount contributed by the

previous employer remains in place under the same IRA. Consequently, the employment transfer

has no effect on the pension fund already accrued under the New Pension Plan.

Occupational Safety and Health Act and Regulations Governing the Occupational Safetyand Health

According to Article 23 of the Occupational Safety and Health Act (the ‘‘OSH Act’’, 職業安全

衛生法 in Chinese) and Paragraph 1 of Article 12–1 of the Regulations Governing the Occupational

Safety and Health (the ‘‘OSH Regulations’’), an employer shall stipulate an occupational safety

and health management plan based on the scale and characteristics of each business unit.

According to Paragraph 2 of Article 12–1 of the OSH Regulations, an employer having more than

100 employees should stipulate the occupational safety and health management programme. If

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such employer fails to do so and fails to make any improvement within the given period set by

the regulator, pursuant to Article 45 of the OSH Act, it should be subject to an administrative fine

of no less than NT$30,000 and no more than NT$150,000.

According to Article 34 of the OSH Act, an employer should prepare, in consultation with

labor representatives, appropriate safety and health work rules which suit their needs. These

rules shall be posted and implemented after a copy has been submitted to a labor inspection

agency for record. If such employer fails to do so and fails to make any improvement within the

given period set by the regulator, pursuant to Article 45 of the OSH Act, it should be subject to

an administrative fine of no less than NT$30,000 and no more than NT$150,000.

Act of Gender Equality in Employment

According to Article 13 of the Act of Gender Equality in Employment (性別工作平等法), where

an employer hires no less than 30 workers, it shall establish its own measures for prevention of,

compliant handling of and punishment for sexual harassment and post such measures in the

working place. According to Article 38–1 of this Act, an employer failing to do so should be

subject to an administrative fine of NT$ 100,000 to NT$500,000. The name or title of the

responsible person of such employer shall be put on public notice, and shall be ordered to make

improvements within a specified period. In the event improvements are not made within the

specified period, the violating employer will be punished consecutively for each violation after

said period expires.

National Health Insurance Act and Labor Insurance Act

Under the National Health Insurance Act and Labor Insurance Act, an employer should enroll

all employees in the statutory insurance (i.e., national health insurance and labor insurance)

from the first day of their employment.

During the Track Record Period, our restaurant in Taiwan has been punished by Taiwan

regulators pursuant to any labor law, regulation or rule.

Taxes

(a) Business Tax

Business Tax is a form of VAT which is levied on the value of goods and services. According

to the Value-added and Non-value-added Business Tax Act (加值型及非加值型營業稅法), the

current VAT is 5% on businesses generally. With very few exceptions, VAT is applied on the sale

of most kinds of goods and services by a profits-seeking entity (‘‘PSE’’) and is paid by the

purchaser to the seller, and the seller is required to file the VAT return and pays the VAT to tax

authority. The VAT rate is 0% on the export of goods and services. VAT of 5% is applied on the

import of goods and services and is paid by the importer.

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(b) Income Tax

Under the Income Tax Act (所得稅法), PSE income tax applies to any type of PSE regardless

of the form of business, including a company, branch and job site office of foreign legal entities

(although no PSE registration is available for a job site office) but with the exception of

partnerships and sole proprietorships. A PSE established offshore is subject to income tax only

on Taiwan-sourced income. A branch of an offshore PSE is subject to income tax not only on

Taiwan-sourced income but also offshore income booked by the branch. The statutory PSE

income tax rate applicable to us in Taiwan is 20%.

REGULATORY OVERVIEW

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OUR HISTORY

Overview

The Company was incorporated in the Cayman Islands on 15 April 2015 and is the holding

company of our Group. Our history dates back to 2010, when our founders, Mr. Lee, Mr. Chen

and Mr. Chao, started Laowang Cantonese hot pot restaurant business in mainland China and

have accumulated more than a decade’s experience in catering service industry since then. See

‘‘Directors and Senior Management’’ for the relevant experience of Mr. Lee. As of the Latest

Practicable Date, we operated 132 Want Hotpot (撈王鍋物料理) restaurants, two Guoji Hotpot (鍋

季) restaurants, and two Soup for the Soul (撈王心靈肚雞湯) restaurants in Greater China. In

2018, we started food delivery business for our Want Hotpot restaurants. In 2020, we started our

retail business, selling ready-to-serve products.

Milestones

The following table sets forth the key milestones and achievements in our history and

development:

Year Events

2010 . We commenced our operation of Laowang Cantonese hot pot restaurant in

Shanghai.

2012 . We established our headquarters in Shanghai.

. We opened our first Cantonese hot pot restaurant in a shopping mall in

Shanghai, representing our expansion into upscale shopping malls.

2013 . We expanded our restaurant network to Suzhou, Jiangsu Province.

2014 . We established ‘‘Love’’ as the core value of our corporate culture.

. We established our Laowang Gourmet Lab (中央⼯廠) in Suzhou, Jiangsu

Province.

2015 . We expanded our restaurant network to Beijing.

. We established our Company as the holding company of our Group.

. We received the ISO 9001 compliance management system certification.

HISTORY AND CORPORATE STRUCTURE

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Year Events

2017 . We established Laowang Academy (撈王培訓中心) as our training institution.

. We expanded our restaurant network to Taiwan by opening a Want Hotpot

restaurant in Taipei.

2018 . We expanded our restaurant network to Shenzhen, Guangdong Province,

Chongqing and Xi’an, Shaanxi Province.

. We started our food delivery business for our Want Hotpot restaurants.

2019 . We received the ‘‘Best Team Building Project’’ award in the ‘‘2019 Employer

Branding Creativity Awards,’’ recognizing our best practice and outstanding

achievement in employer branding.

2020 . The number of our restaurants in Greater China reached 128.

. Our Laowang Gourmet Lab was accredited by the British Retail Consortium (英

國零售商協會).

. We started our retail business, selling ready-to-serve products.

OUR CORPORATE DEVELOPMENT

As of the Latest Practicable Date, our Group comprised our Company and seven

subsidiaries, including four PRC subsidiaries serving as operating companies, namely Laowang

Shanghai, Suzhou Laohui, Shanghai Changli and Laopin Shanghai, and three subsidiaries

incorporated in Hong Kong, the Cayman Islands and Samoa, respectively, serving as intermediate

investment holding companies, namely Laowang HK, Laowang International and Laowang Samoa.

The following describes our corporate history and development, including material shareholding

changes of our Company.

Our restaurants prior to the establishment of our Company

In 2010, our founders, Mr. Lee, Mr. Chen and Mr. Chao, started Cantonese hot pot

restaurant business in Shanghai under our Laowang brand. Since then, there has been an

expansion of our Laowang restaurant network in China. Prior to the acquisitions of restaurants by

our Company as described below, except for five restaurants which were owned by Independent

Third Parties and had once been managed by us, all of our then 25 Laowang restaurants were

held by registered owner(s) on behalf of either our founders themselves or our founders and

their then business partners (‘‘Previous Business Partners’’), who were all Independent Third

Parties, under the relevant equity entrustment agreements, and such restaurants were under the

control of our founders. As advised by our PRC Legal Advisors, these 25 equity entrustment

agreements did not violate mandatory provisions of applicable PRC laws and regulations and

were binding on the parties thereto. In view of the rapid expansion of our restaurant network in


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the early years, we established our Company as the holding company of our Group in 2015,

started to open our new Laowang restaurants under our Group, and consolidated the 25

previously established Laowang restaurants into our Group through acquisition of such Laowang

restaurants’ business and assets in 2017 and 2018 (‘‘Previous Restaurants Acquisitions’’). We

agreed to pay cash consideration in the aggregate amount of RMB24,847,000 for 11 restaurants

in 2017 and RMB34,965,000 for 14 restaurants in 2018, which were determined with reference to

the valuation of relevant assets appraised by an independent valuer, and were fully settled. The

Previous Restaurants Acquisitions have been properly and legally completed and settled. As

advised by our PRC Legal Advisors, applicable regulatory approvals which should be obtained in

all material aspects in the PRC have been obtained. 11 of the Previous Business Partners were

subsequently employed by our Group, and 13 of them subsequently became shareholders of our

Company.

The Company

The Company was incorporated as an exempted company with limited liability in the

Cayman Islands on 15 April 2015 with an initial authorized share capital of US$50,000 divided

into 50,000 shares of a par value of US$1.00 each, which was subsequently increased to

US$20,000,000 divided into 20,000,000 shares of a par value of US$1.00 each on 9 December

2015 and to US$30,000,000 divided into 30,000,000 shares of a par value of US$1.00 each on

18 July 2018.

From 22 April 2015 to 8 December 2015, Mr. Lee was the sole shareholder of our Company,

holding one share. On 9 December 2015 (‘‘Initial Subscription Date’’), our 16 initial shareholders

(via their respective investment holding vehicles) subscribed for and were issued a total of

2,199,999 shares in our Company at the par value of US$1.00 per share. These 16 initial

shareholders include:

(i) Lion Champion International Co., Ltd. (‘‘LION’’), the then holding vehicle of our three

founders and two of our initial shareholders for our Company’s majority shareholding;

(ii) our three founders themselves (via their respective investment holding vehicles); and

(iii) Hazel Cash Investment Co., Ltd. (‘‘HAZEL’’), the then holding vehicle of our three

founders and two of our initial shareholders for 5% of our shares for share incentive

purpose.

After undergoing two further share issuances which took place in 2016 and 2017,

respectively, as of 1 January 2018, the commencement date of the Track Record Period, our

Company had an issued share capital of 10,700,000 shares, raising a total capital of

US$10,700,000 from our three founders and other shareholders of our Company. Following its

incorporation, the completion of the Previous Restaurants Acquisitions in 2018 as mentioned in

the preceding paragraph and the acquisition of Laowang International as mentioned

subsequently in this section in 2018, our Company has become the holding company of our

Group with our business conducted through our PRC subsidiaries, in particular Laowang

Shanghai. As of the Latest Practicable Date, all of our restaurants and other businesses were

owned and operated by our Group. For details of our shareholding and corporate structure, see

‘‘— Our Corporate and Shareholding Structure’’ below.


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As of 1 January 2018, our Company had 20 registered shareholders. The following table sets

forth the shareholding structure of our Company as of 1 January 2018, the commencement date of

the Track Record Period:

Name of registered shareholder

Percentage of

shareholding in

our Company

%

LION(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51.000

LYC(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.975

CH&H(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.875

ZHZ(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.150

HAZEL(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.000

CHSL Group Limited(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.000

CHJH International Co., Ltd. (‘‘CHJH’’)(7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.500

Others(8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20.500

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100.000

Notes:

(1) LION was previously used as a holding vehicle for our majority shareholding. See below for details.

(2) LYC was directly and wholly owned by Mr. Lee, one of our founders.

(3) CH&H was directly and wholly owned by Mr. Chen, one of our founders.

(4) ZHZ was directly and wholly owned by Mr. Chao, one of our founders.

(5) HAZEL was previously used as a holding vehicle for our shares for share incentive purpose. See below for details.

(6) CHSL Group Limited, a Seychelles company, was directly and wholly owned by Mr. Chen Hsi-lun, one of our initial

shareholders and an Independent Third Party.

(7) CHJH, a Seychelles company, was directly and wholly owned by Ms. Qiu Jianhua, one of our initial shareholders and

an Independent Third Party.

(8) The remaining 20.5% of the issued shares of our Company was held by 13 individual shareholders, all being either

our initial shareholders or our then employee and Independent Third Parties, each holding less than 5% of the

issued shares of our Company either on their own account or via their respective investment holding vehicles.

LION as our founder’s and two initial shareholders’ holding vehicle for our Company’smajority shareholding

LION was incorporated on 5 June 2015 as an international company in Samoa with limited

liability. From the Initial Subscription Date to 19 July 2018, LION was the majority shareholder of

our Company, holding 51% of our issued shares during such period. As of 1 January 2018, LION

was owned as to 59.8% by Key Man Holdings Limited (‘‘Key Man’’), 25.5% by CH&H, 8.8% by HHY


– 130 –


and 5.9% by CHJH. Key Man, a Samoa company, was owned as to 63.2% by LYC and 36.8% by

ZHZ as of 1 January 2018. HHY was wholly owned by Mr. Huang Hsin-yuan, one of our initial

shareholders and an Independent Third Party. CHJH was wholly owned by Ms. Qiu Jianhua, one of

our initial shareholders and an Independent Third Party. As such, our founders, Mr. Lee, Mr. Chen

and Mr. Chao, through LYC, CH&H, ZHZ, Key Man and LION, effectively controlled 67% of our

Company as of the commencement of the Track Record Period. The purpose of setting up LION as

the holding vehicle for our Company’s majority shareholding at that time was to ensure that our

founders, Mr. Lee, Mr. Chen and Mr. Chao, controlled the general meetings of our Company via

LION and hence the management of our Company. As of the Latest Practicable Date, LION did not

hold any issued shares of our Company.

HAZEL as our founders’ and two initial shareholders’ holding vehicle for 5% of ourCompany’s shares for share incentive purpose

HAZEL was incorporated on 14 January 2015 as an international company in Samoa with

limited liability. As of 1 January 2018, it was wholly owned by an employee of our Group as

registered owner on behalf of our founders and two other initial shareholders, namely Mr. Huang

Hsin-yuan and Ms. Qiu Jianhua, and was controlled by our founders. HAZEL was set up by these

initial shareholders mainly as a vehicle to hold initially 5% of the issued shares of our Company

on the Initial Subscription Date so that equity incentives in the form of our shares may be

conveniently provided to our employees and others whom we consider eligible for such equity

incentives by instructing the registered owner to effect transfer of shares to such persons. From

the Initial Subscription Date to 1 January 2018, 1% of the then issued shares was transferred by

HAZEL to one of our then employees as share incentive. As of the Latest Practicable Date, HAZEL

did not hold any issued shares of our Company.

Material shareholding changes of our Company during the Track Record Period

Below sets forth the material shareholding changes of our Company during the Track Record

Period and up to the Latest Practicable Date:

Date Material shareholding changes of our Company(1)

19 July 2018(2) . HAZEL transferred a total of 3.03% of the then issued shares of our

Company to 13 individuals (11 of them being our employees), at US$1.00

per share, as equity incentives to these persons.

. LION transferred 9.195%, 9.5%, 5.725%, 1.0% and 0.58% of the then

issued shares of our Company to the following holding vehicles or spouse

of its ultimate individual shareholders, respectively, at zero

consideration:

1) Eversun Holdings (a Belize company indirectly and wholly owned by

Mr. Lee via LYC)

2) Lucky-CH (a Belize company indirectly and wholly owned by Mr.

Chen via CH&H)


– 131 –



3) Ms. Wong Wing Sze (spouse of Mr. Chao);

4) HHY (a Seychelles company wholly owned by Mr. Huang Hsin-yuan);

and

5) Redlion Holdings Limited (a Belize business company wholly owned

by Ms. Qiu Jianhua).

The purpose of these transfers was to decrease LION’s shareholding in

our Company to 25% as part of our preparation for our proposed Taiwan

[REDACTED] which we subsequently decided not to proceed. See ‘‘—

Proposed Taiwan [REDACTED].’’

20 July 2018(3) . Our Company issued 2,675,000 new shares (representing approximately

25% of the issued shares of our Company immediately before 20 July

2018) to all of our then 35 registered shareholders (including the 13

individuals who received share incentives on 19 July 2018) in proportion

to their then respective shareholdings in our Company (as nearly as

possible without involving fractions) by capitalizing our profit in the

amount of US$2,675,000.

. 34 of our then 35 registered shareholders subscribed for, and our

Company issued to such shareholders, a total of 1,250,000 new shares

(representing approximately 11.68% of the issued shares of our Company

immediately before 20 July 2018) in proportion to their then respective

shareholdings in our Company (as nearly as possible without involving

fractions) at the consideration of US$2.0 per share, raising a total capital

of US$2,500,000. The consideration was fully settled on 20 July 2018.

20 May 2019(4) . Pursuant to the employee share subscription agreements which we

entered into with 15 employees of our Group all dated 7 December 2018,

our Company issued a total of 354,000 new shares (representing

approximately 2.4205% of the issued shares of our Company immediately

before 7 December 2018) to such employees (including Mr. Chao and Mr.

Liao) for cash at the consideration of US$1.6 per share, raising a total

capital of US$566,400. The consideration was fully settled on 10 January

2019 and the issuance was completed on 20 May 2019.

28 October 2019(5) . Our Company issued a total of 1,497,900 new shares (representing 10% of

the issued shares of our Company immediately before 28 October 2019)

to all of our then 69 registered shareholders in proportion to their then

respective shareholdings in our Company (as nearly as possible without

involving fractions) by capitalizing our profit in the amount of

US$1,497,900.


– 132 –



14 October 2020(6) . Our Company issued (i) 1,643,258 new shares (representing

approximately 10% of the issued shares of our Company immediately

before 14 October 2020) to all of our then 74 registered shareholders in

proportion to their then respective shareholdings in our Company as

share dividend of 0.1 share for every issued shares (with all fractional

shares rounded down to the nearest whole share) in satisfaction of part

of the dividend declared for the financial year ended 31 December 2019 in

the amount of US$1,643,258, and (ii) 32 new shares (being the odd

shares arising from this share dividend distribution) to one of our then

registered shareholders, an Independent Third Party, as share dividend.

. The authorized share capital of our Company was increased to (i)

US$30,000,000 divided into 30,000,000 shares of a par value of US$1.00

each, and (ii) NT$900,000,000 divided into 90,000,000 shares of a par

value of NT$10.00 each by the creation of an additional 90,000,000

shares of a par value of NT$10.00 each.

. Following the aforementioned increase in authorized share capital, (i)

54,228,570 shares of a par value of NT$10.00 each were issued by our

Company to the then existing shareholders of our Company, (ii) the

18,076,190 issued shares of a par value of US$1.00 each were

repurchased and cancelled by our Company in consideration for the issue

of 54,228,570 new shares of a par value of NT$10.00 each, and (iii)

immediately following the aforementioned repurchase, all the unissued

shares of a par value of US$1.00 each were cancelled (‘‘Re-denomination

of Share Capital’’).

. Immediately following the Re-denomination of Share Capital, the

authorized share capital of our Company became NT$900,000,000

divided into 90,000,000 shares of a par value of NT$10.0 each. The

purpose of the Re-denomination of Share Capital was to prepare for our

proposed Taiwan [REDACTED] which we subsequently decided not to

proceed.

30 December

2020(7)

. LION transferred its remaining shares in our Company to its ultimate

individual shareholders or their holding vehicles (as the case may be) as

follows:

1) approximately 9.8684% at zero consideration to Eversun Holdings (a

Belize company indirectly and wholly owned by Mr. Lee via LYC);

2) approximately 3.4264% at zero consideration to Lucky-CH (a Belize

company indirectly and wholly owned by Mr. Chen via CH&H);

3) approximately 5.3841% at zero consideration to ZHZ (a Seychelles

company directly and wholly owned by Mr. Chao);


– 133 –



4) approximately 3.4264% at zero consideration to HHY (a Seychelles

company directly and wholly owned by Mr. Huang Hsin-yuan); and

5) approximately 2.3691% at zero consideration to Ms. Qiu Jianhua.

. Following such transfers, LION ceased to be the holding vehicle of our

founders and two initial shareholders for any of our issued shares.

Instead, our founders and two of their spouses entered into the Concert

Party Agreements to confirm and acknowledge their acting-in-concert

relationship. For details, see ‘‘Relationship with Controlling Shareholders.

Note:

(1) This table does not include any transfer of issued shares in respect of less than 5% of our then issued

shares during the Track Record Period and up to the Latest Practicable Date. The last transfer was completed

on 12 August 2021.

(2) As of 19 July 2018, our Company had 35 registered shareholders. From 1 January 2018 to 19 July 2018, there

were 22 incoming registered shareholders and seven outgoing registered shareholder.

(3) As of 20 July 2018, our Company had 35 registered shareholders. From 19 July 2018 to 20 July 2018, there

was no incoming or outgoing registered shareholder.

(4) As of 20 May 2019, our Company had 64 registered shareholders. From 20 July 2018 to 20 May 2019, there

were 30 incoming registered shareholders and one outgoing registered shareholder.

(5) As of 28 October 2019, our Company had 69 registered shareholders. From 20 May 2019 to 28 October 2019,

there were five incoming registered shareholders and no outgoing registered shareholder.

(6) As of 14 October 2020, our Company had 74 registered shareholders. From 28 October 2019 to 14 October

2020, there were 17 incoming registered shareholders and 12 outgoing registered shareholders.

(7) As of 30 December 2020, our Company had 77 registered shareholders. From 14 October 2020 to 30

December 2020, there were four incoming registered shareholders and one outgoing registered shareholder.


– 134 –


As of the Latest Practicable Date, our Company had 90 registered shareholders. From 30

December 2020 to the Latest Practicable Date, there were 22 incoming registered shareholders

and 9 outgoing registered shareholders. The following table sets forth the shareholding structure

of our Company as of the Latest Practicable Date:

Name of ultimate individual

shareholder Name of registered shareholder

Approximate

percentage of

shareholding in

our Company

%

Mr. Lee Eversun Holdings(1) 27.57

Mr. Lee Mr. Lee 2.35

Mr. Chen Lucky-CH(2) 7.01

Mr. Chen Mr. Chen 0.50

Ms. Huang Ya-lin Ms. Huang Ya-lin(3) 1.33

Mr. Chao ZHZ(4) 4.26

Ms. Wong Wing Sze Ms. Wong Wing Sze(5) 2.00

Mr. Chen Hsi-lun(6) Grandmark Holdings Limited(6) 5.91

Mr. Chen Hsi-lun Mr. Chen Hsi-lun 0.15

Others(7) Others(7) 48.93

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100

Notes:

(1) Eversun Holdings was indirectly and wholly owned by Mr. Lee, one of our founders, via LYC.

(2) Lucky-CH was indirectly and wholly owned by Mr. Chen, one of our founders, via CH&H.

(3) Ms. Huang Ya-lin is the spouse of Mr. Chen, one of our founders. She has been one of our shareholders since 20

May 2019.


(5) Ms. Wong Wing Sze is the spouse of Mr. Chao, one of our founders. She has been one of our shareholders since 19

July 2018.

(6) Grandmark Holdings Limited, a Seychelles company, was indirectly and wholly owned by Mr. Chen Hsi-lun via CHSL

Group Limited, a Seychelles company.

(7) The remaining 48.93% of the issued shares of our Company was held by 81 shareholders (including 13 employees

of our Group), holding such shares either on their own account or via their respective investment holding vehicles.


– 135 –


Our Subsidiaries

Laowang HK

Laowang HK was established by our Company on 26 May 2015 as a limited company in Hong

Kong with an initial issued share capital of US$50,000 divided into 50,000 ordinary shares, of

which all the 50,000 ordinary shares were issued to and held by our Company. Its issued share

capital was subsequently increased to US$8,005,100 divided into 8,005,100 ordinary shares on

21 December 2020 by the issue of 7,955,100 ordinary shares to our Company. Since its

incorporation and up to the Latest Practicable Date, Laowang HK had been an intermediate

holding company directly and wholly owned by our Company, and had directly and wholly owned

Laowang Shanghai since its establishment. During the Track Record Period and up to the Latest

Practicable Date, Laowang HK had been operating as an investment holding company and had

not been engaged in any other business activities.

Laowang Shanghai

Laowang Shanghai was established by Laowang HK on 24 September 2015 as a wholly

foreign owned enterprise under PRC laws in Shanghai. Since its establishment and up to the

Latest Practicable Date, Laowang Shanghai had been directly and wholly owned by Laowang HK,

and indirectly and wholly owned by our Company.

The initial registered share capital of Laowang Shanghai was US$2,000,000, and it was

subsequently increased to US$8,000,000 on 7 July 2016. A proposed increase in the registered

capital of Laowang Shanghai in the amount of US$4,000,000 on 19 July 2018 from US$8,000,000

to US$12,000,000, which has never been paid up, was subsequently withdrawn on 28 February

2019 through a corresponding decrease in its registered share capital because we did not want

the existence of unpaid registered share capital to affect Laowang Shanghai’s ability to pay cash

dividend to its shareholders in the future.

Laowang Shanghai is principally engaged in restaurant operations, food delivery business,

and retail business. As of the Latest Practicable Date, Laowang Shanghai was the immediate

holding company of Suzhou Laohui and Shanghai Changli, and operated 132 restaurants of our

Group.

Suzhou Laohui

Suzhou Laohui was established in Suzhou, Jiangsu Province on 30 January 2015 as a limited

liability company with a registered share capital of RMB1,500,000. At the time of its

incorporation, Suzhou Laohui was wholly owned by Mr. Song Xudong, the nominee of our

founders. Mr. Song Xudong is the brother-in-law of Mr. Lee.

On 8 January 2016, Laowang Shanghai entered into a share transfer agreement with Mr.

Song Xudong, pursuant to which Laowang Shanghai acquired 100% of the equity interest in

Suzhou Laohui from Mr. Song Xudong at nil consideration. Upon completion of this transfer,

Suzhou Laohui became a wholly owned subsidiary of Laowang Shanghai. Suzhou Laohui is

principally engaged in operating our Laowang Gourmet Lab which processes and produces

condiments for our Group.


– 136 –


Shanghai Changli

Shanghai Changli was established by Laowang Shanghai on 6 May 2019 as a limited

liability company in Shanghai with a registered share capital of RMB1,800,000. Shanghai Changli

has been a wholly owned subsidiary of Laowang Shanghai since its incorporation. Shanghai

Changli is principally engaged in restaurant operations and food delivery business, and operates

one of our restaurants in Shanghai.

Laowang International

Laowang International was incorporated as an exempted company with limited liability in

the Cayman Islands on 2 April 2013 with an initial authorized share capital of US$2,000,000

divided into 2,000,000 shares of a par value of US$1.00 each. During the Track Record Period

and up to the Latest Practicable Date, Laowang International had been operating as an

investment holding company and had not been engaged in any other business activities.

The purpose of setting up Laowang International at that time was to serve as a holding

company for our Group and its business partners to hold all the equity interest in Laopin

Shanghai (via Laowang Samoa) for the opening of new Laowang restaurants in mainland China.

The following table sets forth the shareholding structure of Laowang International upon its

incorporation on 2 April 2013:

Name of Shareholders

Percentage of

shareholding in

Laowang

International

%

Singbao International Co., Ltd. (星寶國際股份有限公司)(1) . . . . . . . . . . . . . . . . . . . . 30

CH&H(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

ZHZ(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

HHY(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

LYC(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Others(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100

Notes:

(1) Singbao International Co., Ltd is a company listed on the Taiwan Stock Exchange (stock code: 6130)

(2) CH&H was directly and wholly owned by Mr. Chen, one of our founders.


(4) HHY was directly and wholly owned by Mr. Huang Hsin-yuan.

(5) LYC was directly and wholly owned by Mr. Lee, one of our founders.


– 137 –


(6) The remaining 16% of the issued shares of Laowang International was held by six shareholders, namely Michael Hui

Tang SUN, NGAI Sen (魏晨), HSU Ching-Shiang (許慶祥), TONG Yuk Cheung (唐玉祥), MDH Group Limited and An

House Group Limited, all being Independent Third Parties or ultimately owned by Independent Third Parties.

On 15 June 2018, our Company entered into a share transfer agreement with CH&H, ZHZ,

HHY and LYC, pursuant to which our Company acquired all of their equity interests in Laowang

International at the consideration of US$511,111, US$212,963, US$212,963 and US$212,963,

respectively. The consideration for such transfers was determined with reference to the net asset

value of Laowang International and Laopin Shanghai as of 31 December 2017 and the

undistributed profit of Laowang International at the end of 2016. The consideration for the

transfers was fully settled in cash on 22 January 2019. The following table sets forth the

shareholding structure of Laowang International upon completion of the aforementioned equity

transfers on 25 July 2018:

Name of Shareholders

Percentage of

shareholding in

Laowang

International

%

Laowang Holding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54

Singbao International Co., Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100

Laowang Samoa

Laowang Samoa was incorporated in Samoa on 28 March 2013 as an international company

with limited liability with an initial authorized share capital of US$2,000,000 divided into

2,000,000 shares of a par value of US$1.00, of which 1,310,000 shares are issued and held by

Laowang International. Since 11 April 2013 and up to the Latest Practicable Date, Laowang Samoa

had been a wholly owned subsidiary of Laowang International. During the Track Record Period

and up to the Latest Practicable Date, Laowang Samoa had been operating as an investment

holding company holding Laopin Shanghai and had not been engaged in any other business

activities.

Laopin Shanghai

Laopin Shanghai was established by Laowang Samoa on 14 August 2013 as a wholly foreign

owned enterprise company in Shanghai with a registered share capital of US$1,300,000. Laopin

Shanghai has been a wholly owned subsidiary of Laowang Samoa since its incorporation. Laopin

Shanghai is principally engaged in restaurant operations and food delivery business, and

operates two of our restaurants in Shanghai.


– 138 –


ACQUISITION AND DISPOSAL OF SUBSIDIARIES DURING THE TRACK RECORD PERIOD

Save as disclosed above, during the Track Record Period and up to the Latest PracticableDate, we had not conducted any acquisitions, disposals or mergers that we consider to bematerial to us.

PROPOSED TAIWAN [REDACTED]

Our Company started the preparation for a [REDACTED] on the Taiwan Stock Exchange in2017 considering our Taiwanese shareholder base and management, but had never submittedany formal [REDACTED] application to the Taiwan Stock Exchange. We decided not to proceedwith the [REDACTED] attempt in Taiwan and to apply for [REDACTED] on the Hong Kong StockExchange after taking into consideration that we generate a significant majority of our revenuefrom mainland China but very limited amount from Taiwan.

PRE-[REDACTED] INVESTMENTS

All of our Pre-[REDACTED] investors (being investors or existing shareholders who acquiredour Company’s shares after we have decided to apply for [REDACTED] on the Hong Kong StockExchange) (the ‘‘Pre-[REDACTED] Investors’’) were purchasers of our Company’s shares from thenexisting shareholders of our Company.

Background of our Pre-[REDACTED] Investors

Our Pre-[REDACTED] Investors include 11 individual private investors and four corporateinvestors. The background information of our corporate Pre-[REDACTED] Investors is set outbelow.

(i) Oasis Eagle International Co., Ltd is an international business company incorporated inthe Republic of Seychelles. Its ultimate beneficial owner is Lee Yen-ju (李彥儒), aprivate investor who does not hold any position in our Group and is an IndependentThird Party.

(ii) Blue Alliance International Limited is an international business company incorporatedin the Republic of Seychelles. Its ultimate beneficial owner is Lan Yuan-liang (藍元良),a private investor who does not hold any position in our Group and is an IndependentThird Party.

(iii) Myrialink Limited is a BVI business company incorporated in the British Virgin Islands.Its ultimate beneficial owner is Ji Wei (季薇), a private investor who does not hold anyposition in our Group and is an Independent Third Party.

(iv) LWSPV is an exempted company incorporated in the Cayman Islands with limitedliability. It is indirectly wholly owned by China International Capital Corporation (HongKong) Limited, which is in turn a wholly-owned subsidiary of China InternationalCapital Corporation Limited, the shares of which are listed on the Stock Exchange(HKSE: 3908) and on the Shanghai Stock Exchange (SSE: 601995).

(v) Starry Chance Investments Limited is a BVI business company incorporated in theBritish Virgin Islands. Its ultimate beneficial owner is Hu Xiaoyong, a private investorwho does not hold any position in our Group and is an Independent Third Party.


– 139 –


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– 140 –


Public Float

To the best knowledge of our Directors having made due and reasonable enquiries, each of

our Pre-[REDACTED] Investors is an Independent Third Party. Hence, the Shares held by our Pre-

[REDACTED] Investors will be counted towards the public float after the [REDACTED] for the

purpose of Rule 8.24 of the Listing Rules.

Joint Sponsors’ Confirmation

Under the Interim Guidance on Pre-[REDACTED] Investments (HKEx-GL29-12), where the

consideration for completion or divestment of the last pre-[REDACTED] investment is settled

within 28 clear days before the date of the first submission of the [REDACTED] [REDACTED], the

Stock Exchange will generally delay the first day of [REDACTED] until 120 clear days after the later

of the completion or divestment of the last Pre-[REDACTED] investments. The last of the pre-

[REDACTED] investments was settled on 12 August 2021. On the basis that (i) the [REDACTED] is

expected to take place on or after [REDACTED] and will be more than 120 clear days after the

completion of the last of the pre-[REDACTED] Investments; and (ii) the Pre-[REDACTED] Investors

shall have the same information right as the general public after the [REDACTED], the Joint

Sponsors have confirmed that, based on the documents provided by the Company relating to the

pre-[REDACTED] investments, the pre-[REDACTED] investments are in compliance with the Interim

Guidance on Pre-[REDACTED] Investments (HKEx-GL29-12) and the Guidance on Pre-[REDACTED]

investments (HKEx-GL43-12).


– 141 –


OUR CORPORATE AND SHAREHOLDING STRUCTURE

Corporate Structure before the [REDACTED]

The following diagram illustrates our corporate and shareholding structure immediately prior

to the completion of the [REDACTED] (without taking into account any Shares which may be

issued upon the exercise of the options granted under the Pre-[REDACTED] Share Option

Scheme):

4.26%

6.26%

2.00%

4.44% 44.49%

27.57%

29.92% 8.84%

2.35% 7.01% 0.50% 1.33%

100%

100%

100%

5.91%

6.06%

0.15%

100%

100%

100%

100%

100%

100%100%

100% 100% 100%

54%

Lee Yu-cheng(李裕成)(3)

Chen Hsiang(陳湘)(3)

Huang Ya-lin(黃雅玲)(1)(3)

Chao Hung-che(趙宏澤)(3)

Chen Hsi-Iun(陳希倫)

Liao Chih-wei(廖志偉)

Wong Wing Sze(王詠詩)(2)(3)

LYCInternational

Limited(Seychelles)

ZHZInternational

Limited (Seychelles)

EversunHoldings

Corporation(Belize)

CHSLGroup


Other Shareholders(4)

Laowang Holding Limited(Cayman)

Laowang F&B Management (HK) Limited(撈王餐飲管理(香港)有限公司)

(Hong Kong)

Laowang (Shanghai) F&B Management Co., Ltd(撈王(上海)餐飲管理有限公司)

(PRC)

Suzhou Laohui Food Co., Ltd(蘇州撈匯食品有限公司)

(PRC)

Shanghai Changli F&B Management Co., Ltd

(上海昌里餐飲管理有限公司)(PRC)

Laowang International Limited(5)

(Cayman)

Laowang Holding Limited(Samoa)

GrandmarkHoldingsLimited(Belize)

CH&HInternational

Limited(Seychelles)

Lucky-CHHoldings Group

Corporation(Belize)

Laopin Shanghai F&B Management Co., Ltd(撈品(上海)餐飲管理有限公司)

(PRC)

Notes:

(1) Ms. Huang Ya-lin is the spouse of Mr. Chen, one of our founders.

(2) Ms. Wong Wing Sze is the spouse of Mr. Chao, one of our founders.

(3) Pursuant to the Concert Party Agreements, Mr. Lee, Mr. Chen, Ms. Huang Ya-lin, Mr. Chao, and Ms. Wong Wing Szeconfirm and acknowledge the nature of their acting-in-concert relationship. For details, see ‘‘Relationship withControlling Shareholders.’’

(4) None of these 80 Shareholders holds 5% or more of the issued shares of our Company.

(5) For the remaining 46% issued shares of Laowang International, 30% is held by Singbao International Co., Ltd., and16% is held by six shareholders, namely Michael Hui Tang SUN, NGAI Sen (魏晨), HSU Ching-Shiang (許慶祥), TONGYuk Cheung (唐玉祥), MDH Group Limited, and An House Group Limited, all being Independent Third Parties orultimately owned by Independent Third Parties.


– 142 –


Corporate Structure Immediately Following the [REDACTED]

The following diagram illustrates our corporate and shareholding structure immediately

following the completion of the [REDACTED] (assuming the [REDACTED] is not exercised and

without taking into account any Shares which may be issued upon the exercise of the options

granted under the Pre-[REDACTED] Share Option Scheme or any options which may be granted

under the Share Option Scheme):

100%

100%

100%

100%

100%

100%

100%

100%

100%100%

100% 100% 100%

54%

Lee Yu-cheng(李裕成)(3)

Chen Hsiang(陳湘)(4)

Huang Ya-lin(黃雅玲)(1)(3)

Chao Hung-che(趙宏澤)(3)

Chen Hsi-Iun(陳希倫)

Liao Chih-wei(廖志偉)

Wong Wing Sze(王詠詩)(2)(3)

LYCInternational

Limited(Seychelles)

ZHZInternational


EversunHoldings

Corporation(Belize)

CHSLGroup


Other Shareholders(4) Other publicShareholders

Laowang Holding Limited(Cayman)

Laowang F&B Management (HK) Limited(撈王餐飲管理(香港)有限公司)

(Hong Kong)

Laowang (Shanghai) F&B Management Co., Ltd(撈王(上海)餐飲管理有限公司)

(PRC)

Suzhou Laohui Food Co., Ltd(蘇州撈匯食品有限公司)

(PRC)

Shanghai Changli F&B Management Co., Ltd

(上海昌里餐飲管理有限公司)(PRC)

Laowang International Limited(5)

(Cayman)

Laowang Holding Limited(Samoa)

GrandmarkHoldingsLimited(Belize)

CH&HInternational

Limited(Seychelles)

Lucky-CHHoldings Group

Corporation(Belize)

Laopin Shanghai F&B Management Co., Ltd(撈品(上海)餐飲管理有限公司)

(PRC)

[REDACTED]

[REDACTED]

[REDACTED]

[REDACTED] [REDACTED] [REDACTED]

[REDACTED]

[REDACTED] [REDACTED]

[REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED]

[REDACTED]

[REDACTED]

Notes:

(1) Ms. Huang Ya-lin is the spouse of Mr. Chen, one of our founders.

(2) Ms. Wong Wing Sze is the spouse of Mr. Chao, one of our founders.

(3) Pursuant to the Concert Party Agreements, Mr. Lee, Mr. Chen, Ms. Huang Ya-lin, Mr. Chao, and Ms. Wong Wing Sze

confirm and acknowledge the nature of their acting-in-concert relationship. For details, see ‘‘Relationship with Our

Controlling Shareholders.’’

(4) None of these 80 Shareholders will hold 5% or more of the issued shares of the Company.

(5) For the remaining 46% issued shares of Laowang International, 30% is held by Singbao International Co., Ltd., and

16% is held by six shareholders, namely Michael Hui Tang SUN, NGAI Sen (魏晨), HSU Ching-Shiang (許慶祥), TONG

Yuk Cheung (唐玉祥), MDH Group Limited, and An House Group Limited, all being Independent Third Parties or

ultimately owned by Independent Third Parties.


– 143 –


COMPLIANCE WITH PRC LAWS AND REGULATORY REQUIREMENTS

SAFE Registration in the PRC

Pursuant to the Circular of the SAFE on Foreign Exchange Administration of Overseas

Investment, Financing and Round-trip Investments Conducted by Domestic Residents through

Special Purpose Vehicles (《關於境內居民通過特殊目的公司境外投融資及返程投資外匯管理有關問

題的通知》) (the ‘‘SAFE Circular 37’’), promulgated by SAFE which became effective on 14 July

2014, (i) a PRC resident must register with the local SAFE branch in connection with their

contribution of offshore assets or domestic enterprises’ equity interests in an overseas special

purpose vehicle (the ‘‘Overseas SPV’’) that is directly established or indirectly controlled by the

PRC resident for the purpose of conducting overseas investment or financing, and (ii) following

the initial registration, the PRC resident is also required to register with the local SAFE branch for

any major change in respect of the Overseas SPV, including, among other things, a change of

Overseas SPV’s PRC resident shareholder(s), the name of the Overseas SPV, terms of operation,

or any increase or decrease in the Overseas SPV’s capital, share transfer or swap, and merger or

division. Pursuant to SAFE Circular 37, failure to comply with these registration procedures may

result in penalties. In addition, the PRC subsidiaries of that Overseas SPV may be prohibited

from distributing their profits and dividends to their offshore parent company or from carrying

out other subsequent cross-border foreign exchange activities, and the Overseas SPV and its

offshore subsidiary may be restricted in their ability to contribute additional capital to their PRC

subsidiaries.

Pursuant to the Circular of the SAFE on Further Simplification and Improvement in Foreign

Exchange Administration on Direct Investment (《關於進一步簡化和改進直接投資外匯管理政策的

通知》), promulgated by SAFE and effective on 1 June 2015, the power to accept SAFE registration

was delegated from local SAFE to qualified banks.

Our PRC Legal Advisors advised that, on the basis that all our Controlling Shareholders are

offshore entities and individuals, none of them is required to complete the registration under

SAFE Circular 37.


– 144 –


You should read this Document in its entirety before you decide to invest in the

[REDACTED], and not rely solely on key or summarized information. The financial information in

this section has been extracted without material adjustment from ‘‘Appendix I — Accountants’

Report.’’ All market statistics quoted in this Document, unless otherwise specified, are derived

from the F&S Report. For the qualifications of Frost & Sullivan as well as details of the F&S

Report, see ‘‘Industry Overview’’ in this Document.

OUR CORE VALUE

Our core value is Love.

We commit to deliver heavenly flavors with Love, and love our customers, employees,

business partners, as well as shareholders.

OVERVIEW

We are China’s No. 1 Cantonese hot pot chain restaurant. According to the F&S Report, both


a 1.7% market share in terms of revenue. Our revenue increased from RMB870.9 million in 2018,

to RMB1,094.8 million in 2019, and further to RMB1,124.8 million in 2020. Guided by our slogan

‘‘Heavenly flavors, served with Love (用愛傳遞好味道),’’ we offer our customers the ultimate

experience of food and services, which allows us to be widely recognized in the Eastern China

market and has significantly contributed to our sustainable rapid restaurant expansion

nationwide. As of the Latest Practicable Date, we exclusively operated in Greater China; we had

135 non-franchised chain restaurants in 25 cities across mainland China and one restaurant in

Taipei, all of which were operated by our Group.

We value health and wellness and are committed to offering healthy dining options. We

incubated and launched our signature stewed chicken and pork tripe soup (胡椒豬肚雞), where

we created a Stew Quartet (一煲四味) to bring out the best in the soup with multiple healthy

ingredients. We also provide other healthy cuisines that embody the trend of eating healthy to

attract the younger generation. In this sense, we operate and manage three self-developed

distinctive brands with Want Hotpot (撈王鍋物料理) as our flagship, and other brands as Guoji

Hotpot (鍋季) and Soup for the Soul (撈王⼼靈肚雞湯). Our flagship Want Hotpot has its brand

orientation as classy upscale dining, Guoji Hotpot focuses on solo dining scenario, and Soup for

the Soul, a fast casual restaurant that offers quick and light dining for small gathering, and

caters to the younger customers’ preferences.

We are a product-first company, upholding rigorous standards when it comes to food safety

and quality. We established a centralized facility, Laowang Gourmet Lab (中央工廠), for research

and development and for the production of certain ingredients to be supplied to our restaurants,

a centralized procurement system for handling purchase orders, and a stringent assessment and

accountability system where food safety is considered a KPI for our restaurant managers and

head chefs. Furthermore, we formulated rigorous standards for supplier selection, and have been

closely monitoring transportation and logistics operations through digital systems. As of the

BUSINESS

– 145 –


Latest Practicable Date, more than 80% of our restaurants had exceeded restaurants food safety

requirements upon local authorities’ spot inspections and achieved A-excellent rating, which is

significantly higher than the industry average of only 10%.

We have been stepping up efforts to enhance our digital wisdom. We implement digital

systems to enable our headquarters to timely inspect, monitor and manage our restaurant

operations, which in turn helps our restaurants adjust their operations swiftly and effectively. As

of the Latest Practicable Date, our Members’ Club had gained and kept a plethora of sticky

customers with over 8.6 million registered members, and among 1.3 million of them who

indicated their age group, around 78.4% of whom were young adults aged 18 to 35; the re-dining

rate of our members within 90 days from the first order was 13.6%.

We provide outstanding dining experience that wins us various awards and recognitions.

According to the F&S Report, as of July 2021, we earned the highest ranking by flavor, services

and atmosphere among all hot pot chain restaurants in China who own more than 20 restaurants;

the 2019 China Catering Service Industry Annual Report (《中國餐飲報告(2019)》) also ranked us

No. 1 among all hot pot restaurants with respect to the same criteria. China Hospitality

Association (中國飯店協會) awarded us Top Ten China’s Hot Pot Restaurant Brands in 2020 as a

testimony to our high-quality operations management. In addition, more than ten restaurants of

ours were listed as Dianping’s Must-try Restaurants during the Track Record Period.

In addition, we have been proactively exploring other business operations in addition to

restaurant operations to cater to the changing customers’ needs and the growing demand of

ready-to-serve products. We strategically introduced our retail business in 2020 to sell the ready-

to-serve stewed chicken and pork tripe soup, by collaborating with local and international

supermarkets. To this end, we will continue to strengthen our supply chain capability to prepare

for further expansion in retail business nationwide.

OUR COMPETITIVE STRENGTHS

We are the largest Cantonese hot pot chain restaurant in China, well-positioned to enjoy thestrong momentum of hot pot restaurant market.

According to the F&S Report, we ranked first and fourth in the Cantonese hot pot and hot

pot restaurant market in China in terms of revenue in 2020, respectively. The total revenue of

China’s Chinese cuisine market reached RMB3.1 trillion in 2020, where its largest segment the

hot pot market alone generated RMB438.0 billion, representing a 14.1% market share. Frost &

Sullivan anticipates the revenue of the hot pot restaurant market in China will reach RMB850.1

billion in 2025, representing a CAGR of 14.2% from 2020 to 2025.

Within the hot pot restaurant market, Cantonese hot pot restaurant market is the fastest-

growing segment with its revenue reaching RMB63.0 billion in 2020. Frost & Sullivan anticipates

that the total revenue of all Cantonese hot pot restaurants in China will reach RMB128.5 billion in

2025, representing a CAGR of 15.3% from 2020 to 2025, faster than those serving other types of

hot pot; such a sound momentum is primarily attributable to its healthy appearance, which

meets the general public’s rising demand for health-conscious dining experience. Among all five

largest non-franchised Cantonese hot pot chain restaurants, we were the fastest-growing player

in terms of the aggregate new restaurants’ openings from 2018 to 2020; we opened 19, 19, and

BUSINESS

– 146 –


38 restaurants for the three years ended 31 December 2018, 2019 and 2020, respectively. We

had therefore established long-term relationships with leading real estate developers in China,

placing us at a substantial competitive advantage to open new restaurants in upscale shopping

malls and main streets nationwide. The total number of our restaurants increased rapidly from

only 59 as of 1 January 2018 to 136 as of the Latest Practicable Date.

Our success story in penetrating the Eastern China market will facilitate our sustainable rapidgrowth nationwide with impressive financial performance.

The Eastern China market possesses great potential among all regions in China for catering

service businesses. Since our inception, we have been penetrating the Eastern China market and

have developed us into one of the most recognized brands in this region. We opened 116

restaurants in Shanghai, Zhejiang Province and Jiangsu Province as of the Latest Practicable

Date, and our restaurant network had expanded into many smaller cities in addition to tier one,

new tier one, and tier two cities across Eastern China.

Our success story in penetrating the Eastern China market will significantly contribute to

our sustainable rapid restaurant expansion nationwide, enabling us to gain greater market

shares in the catering service industry. We opened 19 Want Hotpot restaurants in cities outside

Eastern China such as Beijing, Shenzhen, Chongqing, Chengdu, Xi’an and Wuhan as of the Latest

Practicable Date, preparing us well for the next phase of rapid growth. Most of these restaurants

reached initial breakeven in their first to second month of operation, many of which have

obtained outstanding results of operations, proving our ability to effectively expand our

restaurant network and profitably operate our restaurants outside our home field. For example,

the average table turnover rate of Want Hotpot restaurants in Shenzhen was as high as 3.48,

3.74, 3.25 and 3.24 in 2018, 2019 and 2020 and the six months ended 30 June 2021,

respectively.

Along with our expansion, we have also achieved industry-leading results of operations and

financials by leveraging our well-established management system and efficient standardized

operations. Our financial statements have shown that the average cash investment payback

period is 13 months for Want Hotpot restaurants. Our total revenue increased by 25.7% from

RMB870.9 million for the year ended 31 December 2018 to RMB1,094.8 million for the year ended

31 December 2019. In 2020, hit by COVID-19, we took flexible and effective measures and

grounded our total revenue to RMB1,124.8 million, representing an increase of 2.7% over the

comparable period in 2019.

We have structured a long-term viable business model to foster scalable growth.

Our experienced management team has established a highly standardized business model

by virtue of successfully managing our supply chains and systematically monitoring our

restaurants and employees. We have also captured opportunities of retail business and food

delivery business to diversify and grow our revenue portfolio: we launched ready-to-serve

products with Laowang features and a spirit of artisan and craftsman (匠⼼) to cater to family

dining and cooking needs, where customers can purchase our ready-to-serve products in certain

supermarkets in China. We have also cooperated with third-party food delivery platforms for our

BUSINESS

– 147 –


food delivery business since 2018. The rapid growth of our food delivery business has extended

our business operations to diversified scenarios where we can reach out to a larger customer

base than before.

Our ability to scale is attributable to the following:

. A centralized food procurement and automated production facility. Laowang Gourmet

Lab, located in Suzhou, Jiangsu Province, is responsible for research and development

and for the production of soups to be supplied to all of our restaurants. Laowang

Gourmet Lab has achieved semi-automated intelligent production where the production

personnel only need to perform simple steps such as producing dipping sauces and

the zest mix and sauces, and the rest of the production is done by automated

equipment. As of the Latest Practicable Date, it possessed a capacity meeting the soup

demand of more than 300 restaurants of ours, and had a vital bearing on our future

expansion.

. Strong supply chain management. In order to ensure the consistency of taste and

quality of our food, we utilize our suppliers’ highly industrialized production process

to achieve standardized food processing. We require our suppliers to not only source

its raw materials from designated suppliers, but also follow each production process

according to our guide, and we have also assigned inspectors to supervise the food

processing on site. As a result, our restaurant staff only needs to perform simple

processing in our restaurants, which we believe had reduced the labor demand of our

restaurants.

. Systematic human resource management. We use Standard Operating Procedures, or

the SOPs, a set of instructions covering all areas of restaurant operations, to ensure

consistency. We also offer tailored systematic trainings for our employees at all levels

in restaurants through an online system. Such systematic training system has helped

us to reserve a pool of more than 200 restaurant manager candidates. In addition, we

have developed a restaurant inspection system which enables us to supervise our

restaurants and assess whether their operations conform to the SOPs; the assessment

will be considered a monthly KPI for our restaurant managers and head chefs. As such,

we request all of our restaurants to manage their operations according to the SOPs to

ensure our customers savor a consistent outstanding dining experience.

We position ourselves as a healthy-eating gourmet chain restaurant that stands out from ourcompetitors.

We differentiate ourselves from traditional spicy hot pot restaurants by offering healthy,

high-quality and unique original cuisines. With increasing public concern over food safety and

wellness, customers demand healthy cooking methods and healthy ingredients when deciding

where and what to eat. We acknowledged and recognized the trend of healthy eating from early

on to launch Cantonese hot pot, a dining option that is healthy and differs from traditional spicy

hot pot. By offering healthy and tasty soup and farm-fresh and high-quality ingredients, we

satisfy needs for both hot pot and healthy dining options.

BUSINESS

– 148 –


With food quality being a deciding factor for customers to review a catering service

provider, and in order to procure high-quality ingredients for ensuring the consistency of the

taste and quality of our food, we have set up stringent supplier selection standards; certain

types of ingredients are procured from selected areas only when we are of the view that the

suppliers in that area can provide high-quality ingredients, after rounds of tests. More

importantly, we have been using selected pork tripe, beef and chicken, among other premium

ingredients. We arrange next-day delivery of farm-fresh ingredients that have a short shelf life,

such as vegetables and fruits and organic mushroom on logs, directly from our suppliers to

restaurants.

Natural taste and health is what we want to bring to our customers. We have set up the

SOPs, which is compiled to instruct all operations in our restaurants, in order to standardize and

streamline the food preparation. For example, to achieve the bounciness in our signature dishes,

the handmade QQ beefballs (活力牛肉丸) and handmade QQ stuffed shrimpballs (爆漿手打蝦丸),

our kitchen staff are required to knead, mix and hit the beef paste or shrimp paste in a bowl by

hand repeatedly until it is glued, which offers some resistance to the bite.

Food safety and quality is of paramount importance to us.

We are committed to ensuring the food safety and quality throughout our business

operations. We have set up systematic standard procedures at our headquarters for, and have

been strictly controlling and managing, the food safety throughout our operations.

We have established comprehensive standards regarding (i) supplier selection, and (ii) the

inspections of various supplied ingredients and other supplies, so as to ensure the safety and

quality of the food. We conduct annual inspections on all of our suppliers with a focus on the

quality of the supplies. We established relationships with selected local logistics services

providers to maintain our daily delivery and storage. We track the delivery vehicles and monitor

the temperatures in real time through digital measures to keep the delivered food safe.

Our stringent accountability system further maintains the safety and quality of our food.

Restaurant managers and head chefs are required to conduct inspections on the cleanliness of

restaurants, staff personal hygiene, and the shelf life of ingredients according to our operations

management checklists, and are held accountable for all food safety issues. In addition, we

conduct dozens of unannounced inspections on a random basis on restaurants to identify and

rectify potential food safety and hygiene issues. If a major food safety issue were identified in a

restaurant, the restaurant would be immediately required to conduct self-inspection and be

closely scrutinized until a rectification is taken. The results of such inspections are considered a

monthly KPI for our restaurant managers and head chefs; hence, any defects in inspections will

lead to an underperformance of the restaurant manager and head chef of that restaurant. In

addition, we pay special attention to water safety. Our restaurants are equipped with U.S. Food

and Drug Administration-compliant 3M Water Filtration Products to supply clean and fresh water

to our water dispensers and icemakers, which further helps ensure the safety and quality of our

food.

Food safety is of paramount importance for us. Our restaurant staff is required to conduct

daily inspections according to our kitchen management checklists. We had more than 35

personnel responsible for food safety as of the Latest Practicable Date; more than 80% of our

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restaurants had exceeded restaurants safe requirements upon local authorities’ spot inspections

and achieved A-excellent rating, which is significantly higher than the industry average of only

10%. In addition, about 30% of our restaurants in Suzhou, Jiangsu Province and Hangzhou,

Zhejiang Province were identified and recognized by local authorities as demonstration catering

service providers of excellent food safety as of the Latest Practicable Date.

We penetrated the younger generation by leveraging digital platforms.

We have accumulated a plethora of sticky customers within our Members’ Club, and we

have been improving our interactions with members as well as the re-dining rate. Our Members’

Club had over 8.6 million registered members, and among 1.3 million of them who indicated their

age group, around 78.4% of whom were young adults aged 18 to 35, and the re-dining rate of our

members within 90 days from the first order was 13.6% as of the Latest Practicable Date. During

the Track Record Period, the revenue generated from our members exceeded 60% of our total

revenue. During the six months ended 30 June 2021, the average increase of the number of our

registered members was as notable as approximately 100,000 per month.

Our core value- and belief-oriented marketing strategies enable us to continue to attract

younger generations. We attach great significance to our branding within the younger

generations. We have collaborated with a variety of brands in the areas of personal beauty

products, entertaining and shared cycles, to cater to younger generations’ interests. These efforts

have proven to be a huge success. For example, our online co-branding campaign with the

cartoon characters of KOBITOS (屁桃君) generated approximately 1.5 million views, and the

offline co-branding course set with KOBITOS cartoon packaging and a soup concentrate molded

in KOBITOS-figure suited and attracted many younger generation audience, both representing our

successful exploration in brand rejuvenation.

We have also collaborated with top KOLs, A-list Internet celebrities and top influencers, who

have millions of dedicated followers on social media and the power to affect the purchasing

decision of others, to expand our influence among the youth. Through these most-viewed

livestreams on third-party platforms, we increased our brand awareness among youngsters,

boosted our customer engagement on social media, generated leads and drove sales and profits.

For example, by collaborating with an A-list celebrity, we had attracted more than 20 million user

traffic and generated approximately RMB3.5 million sales through his live streaming on Double

Twelve (雙十二) shopping festival in 2020 alone.

Our experienced management team and ‘‘Loving’’ culture will ensure the successfuldevelopment of our business.

We are led by an experienced management team with extensive industry expertise and

visionary leadership. Mr. Lee Yu-cheng (李裕成), one of our founders, chairman of the Board, has

over ten years of experience in the hot pot restaurant industry. Each of our Directors and

members of our senior management has extensive experience in the hot pot restaurant industry

and most of them had worked for multinational firms; they provide us with in-depth industry

knowledge in various areas including restaurant operations, branding and marketing, supply

chain management, finance management, and human resources management. Under Mr. Lee’s

sound leadership, our management team effectively executes our corporate strategies, which

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enables us to grow rapidly to become the largest Cantonese hot pot restaurant in China and the

fourth largest hot pot restaurant in China in terms of revenue in 2020 despite the stiff

competition in the catering service industry.

Living by a belief of ‘‘Heavenly flavors, served with Love,’’ Mr. Lee Yu-cheng and our

management team share a vision as to offer our customers the ultimate experience of food and

services. We aim to create a sense of belonging in our workplace and encourage a pursue of

excellence. We believe that our positive and dynamic ‘‘Loving’’ culture and our aligned team will

ensure strategic execution and propel our future growth.

OUR BUSINESS STRATEGIES

With a commitment to deliver heavenly flavors with Love to our customers and to make

proactive efforts to pump up positive energy into their lives, we aim to proceed the following

strategies:

Maintain and strengthen our leading position and extend our restaurant network to newgeographic markets

Most of our restaurants are located in shopping malls in major cities in China. According to

the F&S Report, approximately 6,700 shopping malls are in operation in China; this number is

expected to increase to approximately 9,600 in 2025. With respect to the concession of

restaurants, these shopping malls are likely to take into account offering customers diversified

hot pot dining options where a large percentage of hot pot restaurants offer spicy Sichuan hot

pot. As such, we, the largest Cantonese hot pot chain restaurant in China, believe that there are

tremendous opportunities for us to expand our business operations throughout shopping malls.

In addition, by leveraging our standardized operations, we intend to replicate our well-

established business model to further penetrate our existing markets, while forging ahead to tap

the opportunities in new locations.

We plan to open 32, 49, 75 and 103 restaurants under our brands Want Hotpot, Guoji

Hotpot, and Soup for the Soul in 2021, 2022, 2023 and 2024, respectively. As of the Latest

Practicable Date, a majority of our restaurants were located in Eastern China. We believe that we

will be able to replicate our successful experience in operating and managing restaurants in

Eastern China on our future restaurants expansion nationwide. To this end, we plan to penetrate

other coastal cities by opening more restaurants in tier one, new tier one and tier two cities to

enhance our restaurant network across China.

In the future, we plan to meticulously select strategic locations in cities and countries

outside Greater China where overseas Chinese reside to open new restaurants so as to

progressively optimize our overseas restaurant network.

Further diversify and broaden our business operations through a multi-brand strategy

We operate and manage three distinctive brands, Want Hotpot, Guoji Hotpot and Soup for

the Soul in our portfolio. Our flagship Want Hotpot focuses on Cantonese hot pot for gathering of

families, friends and colleagues. Guoji Hotpot focuses on solo dining scenario and mainly

provides fast and convenient course sets with its signature food as beef and fresh vegetables.

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Soup for the Soul, a fast casual restaurant that offers quick and light dining for small gathering,

represents an exploration in retail business catering to the younger customers’ preferences. Such

multi-brand strategy orients us to satisfy diversified customers’ needs and reach different

audience. We believe that such multi-brand strategy is crucial to our continuing success.

The branding, marketing and scenarios for each of our brands are different and appeal to

various customers. We believe the multi-brand strategy will bring us multiple benefits including

risk diversification and expansion with mitigated risk of cannibalization. We will grow our Guoji

Hotpot and Soup for the Soul based on market conditions in addition to steadily growing our

Want Hotpot. Furthermore, we will continue to launch various hot pot soups and ready-to-serve

products under our brands to expand our business operations to other segments, appeal to

different customers, and further, increase our market share in the catering service industry.

Steadily develop our retail business to capture new opportunities in the catering serviceindustry

Our retail business experienced a significant growth since we commenced it in September

2020. Our ready-to-serve products are primarily sold through local and international

supermarkets, which generated RMB3.4 million and RMB5.7 million in revenue for the year

ended 31 December 2020 and the six months ended 30 June 2021, representing 0.3% and 0.9%

of our total revenue, respectively. Going forward, we expect to strengthen our offline retail

presence through strategic collaborations with boutique supermarkets targeting white collar

consumers and major convenience store chains. We will also sell ready-to-serve products at our

restaurants nationwide. To integrate offline and online retail businesses, we seek to unlock the

world’s largest e-commerce market through mainstream e-commerce platforms. We plan to roll

out our mini program — Laowang Bazaar (撈王商場) on third-party social media apps — for

consumers to purchase or recommend our self-developed products to their friends, through

simple clicks. Our online retail approach will not only make the consumer’s journey easy and

fast, but also support us to exploit massive private domain traffic within ecosystem based on

popular social media, segment high-value consumers, launch targeted campaigns, and systemize

our retail paradigm.

We plan to continuously develop diversified ready-to-serve products including frozen food

and dipping sauces. Regarding frozen food, beyond the stewed chicken and pork tripe soup, we

intend to produce and launch the stewed boneless chicken with assorted pickles and rattan

pepper (青花椒酸菜湯底) and mutton stew with Chinese herbs (慢炖羊肉煲) by the fourth quarter

of 2021, and we seek to promote our brand awareness by offering the frozen meatballs and egg

dumplings, and the packaged dried beancurd sticks. Regarding dipping sauces, we aim to launch

XO sauce (撈王XO醬) and preserved mushroom sauce (撈王菌菇醬) which will attract an eager

audience among consumers. We aim to develop our retail business into a dynamic growth engine

for our revenue growth.

Continue to strengthen our supply chain capability

We intend to strengthen our supply chain capability. During the Track Record Period, we

researched, developed and produced unique soups at Laowang Gourmet Lab and procured semi-

processed food such as meat and seafood from selected third-party suppliers. We plan to

establish Laowang Gourmet Lab 2 in Zhejiang or Jiangsu Province in a near future to replace the

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current Laowang Gourmet Lab due to the latter’s lease expiration to produce zest mix and sauces

for our hot pot soups, process meat and seafood, manufacture ready-to-serve products including

frozen food and dipping sauces, and other kinds of food, in order to significantly boost our

production capacity and support our expansion nationwide.

We will set up regional refrigerated warehouses across mainland China to store

temperature-sensitive food without putting the food safety and quality at risk, and ship them to

our restaurants efficiently. We will continue to arrange next-day delivery of fresh and perishable

food directly from local suppliers. Such measures will enable us to optimize efficiency in supply

chain management, standardize food supply while ensure our food quality and food safety, and

significantly contribute to our restaurant expansion across China.

OUR BUSINESS OPERATIONS

We are China’s No.1 Cantonese hot pot chain restaurant. According to the F&S Report, both


a 1.7% market share in terms of revenue. We operate and manage three self-developed

distinctive restaurant brands with Want Hotpot as our flagship. To a substantially lesser extent,

we also conduct retail business and food delivery business, both relate to our restaurant

operations. During the Track Record Period, we generated revenue amounting to RMB860.5

million, RMB1,067.7 million, RMB1,062.3 million, RMB399.5 million and RMB620.0 million for the

years ended 31 December 2018, 2019 and 2020 and the six months ended 30 June 2020 and

2021, respectively, from our restaurant operations. We also generated revenue amounting to

RMB10.5 million, RMB27.0 million, RMB62.4 million, RMB37.0 million and RMB26.8 million for

the years ended 31 December 2018, 2019 and 2020 and the six months ended 30 June 2020 and

2021, respectively, from our other business operations.

The following table sets forth our revenue, gross profit, and gross profit margin for the

periods indicated.

Year ended 31 December Six months ended 30 June

2018 2019 2020 2020 2021

Revenue

Gross

profit

Gross

profit

margin Revenue

Gross

profit

Gross

profit

margin Revenue

Gross

profit

Gross

profit

margin Revenue

Gross

profit

Gross

profit

margin Revenue

Gross

profit

Gross

profit

margin

RMB’000 RMB’000 % RMB’000 RMB’000 % RMB’000 RMB’000 % RMB’000 RMB’000 % RMB’000 RMB’000 %

unaudited

Our business

operations(1)(2) . 870,944 570,936 65.6 1,094,753 713,096 65.1 1,124,770 709,323 63.1 436,434 273,977 62.8 646,709 412,660 63.8

Notes:

(1) The calculation of business operations includes restaurant operations, delivery services and retail business.

(2) We define gross profit as revenue deducting raw materials and consumables used.

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OUR RESTAURANT OPERATIONS

Overview

We are a non-franchised hot pot chain restaurant specializing in serving Cantonese hot pot.

Cantonese hot pot restaurant industry is with a sound momentum as healthy eating

becomes a mainstream and customer expectations began shifting to attributes related to health

and wellness. In Cantonese-speaking region, having a hot pot is called ‘‘Da Bin Lo (打邊爐),’’ a

term derived from people sitting around a pot, cooking their own food and sharing the food with

joy. Three of the traditional ‘‘soup’’ bases for ‘‘Da Bin Lo’’ can be: stewed chicken and pork tripe

soup, fish maw chicken soup, and porridge cooked with chicken stock and rice. Though all hot

pot across China bear some resemblance, Cantonese hot pot possesses distinctive features,

which have won itself popularity among Chinese epicures and a solid market share in the hot pot

restaurant market in China.

Cantonese hot pot, in general, is gentle on stomach. Unlike spicy Sichuan hot pot, which

buries food in loads of spices and oil and meaty Peking hot pot, which primarily cooks meat in

plain boil water, the soup bases for Cantonese hot pot are generally healthier and milder

because they are commonly found cooked with meat, seafood and offal, together with a little

ginger, white pepper and other Chinese herbs. Cooking these ingredients all together for hours

which helps break down the components long before they make their way through one’s

digestive tract, a safe way to get various ingredients in an easily digestible form, will prepare a

warm and soothing course that is good for the soul. In addition, the soup bases for Cantonese

hot pot provide abundant lean protein and healthy fat that will both satisfy one’s daily nutritional

needs and help improve the overall health. Hence, the soup base in Cantonese hot pot itself is

not only for food to stir in, but also a palatable course. All the foregoing may attribute to a

continuing stable and positive development for Cantonese hot pot restaurant industry.

During the Track Record Period, we generated revenue from restaurant operations includes

Want Hotpot, Guoji Hotpot, Soup for the Soul and other restaurants closed during the year. In

addition, we provided management services to five restaurants. The types of management

services that we provide to these restaurants include staff management, procurement, restaurant

operational management and related services. Associated with the management services, we

also sold food ingredients and raw materials to these five restaurants which were owned by

Independent Third Parties and had once been managed by us. Total revenue we generated from

these five restaurants, including supplies of food ingredients and raw materials were RMB8.7

million, RMB0.5 million and RMB0.2 million for the years ended 31 December 2018, 2019 and

2020, respectively. In 2020, we have completely ceased all management services that we

provided in the history and have no plan to re-launch such services.

During the Track Record Period, substantially all of our revenue generated from restaurant

operations were from our flagship brand Want Hotpot.

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The following table sets forth the features and business scale of our restaurants by brand


Category

Flagship Restaurant

Brand Other Restaurant Brands

Brand Want Hotpot Guoji Hotpot Soup for the Soul

Theme cuisines/dish . . . . . . Cantonese hot pot Mini hot pot Fast casual dining

Brand orientation . . . . . . . . Classy upscale

dining

Stylish solo dining and

convenient gathering

Quick and light dining for small

gathering

Target customers . . . . . . . . . Younger customers,

families and groups

Younger customers Younger customers

Average spending

per customer in 2021 . . . .

RMB123.9 RMB109.8 RMB108.2

GFA per restaurant . . . . . . . 300 to 700

square meters

165 to 213

square meters

190 to 300

square meters

Number of restaurants as of

the Latest Practicable

Date . . . . . . . . . . . . . . . . 132 2 2

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Restaurant Network

The number of our restaurants increased from 59 as of 1 January 2018 to 134 as of 30 June

2021, and further increased to 136 as of the Latest Practicable Date. As of the Latest Practicable

Date, we operated 132 Want Hotpot restaurants, two Guoji Hotpot restaurants, and two Soup for

the Soul restaurants in Greater China. We opened restaurants under these three distinctive

brands in 25 cities in mainland China and in Taipei as of the Latest Practicable Date. Most of our

restaurants are located in upscale shopping malls.

The following map demonstrates the geographic location of our restaurants in Greater China


Beĳing

LocationNumber of

restaurants

ShaanxiJiangsuShanghaiHubeiZhejiangChongqingSichuanFujianGuangdongTaiwan

51

4739

130

42151

Number of restaurantsMore than 30 restaurants (including 30)

Between 5 to 30 restaurants (including 5)

Less than 5 restaurants

Total 136

See ‘‘—Restaurant Performance’’ for a breakdown of restaurants under Want Hotpot and

other restaurant brands by tier of cities during the Track Record Period.

Development and Expansion Plans of Our Restaurant Network

The success of our business depends on the continued healthy expansion of our restaurant

network. We believe there is tremendous opportunity to expand in both existing and new

markets. We have established a highly scalable business model by standardizing key aspects of

effective restaurant operations, such as hiring and training qualified staff, implementing

standardized table service procedures, minimizing food waste, adhering to health and safety

standards and creating operations manual for every staff to follow; we will continue to grow our

restaurant network by following our expansion plans. Our ability to scale is attributable to a

centralized food procurement and automated production facility — Laowang Gourmet Lab, our

strong supply chain management, and systematic human resource management. In particular, we

believe that our standardized operations will enable us to use proven templates and follow fixed

process to replicate and scale our business, and further, enable us to effectively expand into

other locations in mainland China. We plan to open 32, 49, 75 and 103 new restaurants in 2021,

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2022, 2023 and 2024, respectively. We plan to fund such restaurant network expansion with a

mix of cash flow generated from our operations and the [REDACTED] from the [REDACTED]. In the

future, we may also selectively open new restaurants in metropolises outside Greater China

where we expect our brands will resonate with a critical mass of local customers.

We have established a dedicated expansion management team at our headquarters located

in Shanghai, in order to coordinate the expansion of our restaurant network across Greater China

and elsewhere in the world. The operating center, led by Mr. Liao Chih-wei, our executive Director

and general manager who is in charge of our overall business management and expansion of

restaurant network, is responsible for, among other things, selecting sites for new restaurants,

negotiating lease agreements with landlords, guiding the preparation for new restaurant

openings and conducting assessment of compliance with applicable laws and regulations. Our

engineering department supervises and manages the decoration and renovation, performed by

third-party decoration companies, of our restaurants.

In the short term, we may primarily focus on opening more Want Hotpot restaurants

nationwide since we believe that such brand is a highly-recognized flagship of ours and its

restaurant model has a proven track period which is highly replicable. We will continue to

develop our Guoji Hotpot and Soup for the Soul. The actual number, location and timing of new

restaurant openings in any period will be affected by a number of factors, in particular the

duration and impacts of COVID-19. We may make necessary adjustments to the number, location

and timing of planned new restaurant openings depending on the existing market conditions, the

status of preparation for new restaurant openings and other relevant factors. Based on the

estimated growth in Cantonese hot pot restaurant market in China, as well as our (i) leading

position in Cantonese hot pot restaurant market where we benefit from its rapid growth since we

occupy a leading position in this market, (ii) well-established brand reputation, and (iii)

successful and highly standardized business operations model, our Directors are of the view that

there is sufficient demand to support our expansion plan.

OUR RESTAURANTS

Our Flagship — Want Hotpot (撈王鍋物料理)

We commenced our operation of Laowang Cantonese hot pot restaurant in Shanghai in

2010. In 2013, we strategically launched our new brand ‘‘Want Hotpot.’’ With a slogan of ‘‘hearty

stew beyond pork tripe and chicken (有料好鍋底，不止豬肚雞),’’ we have built Want Hotpot into a

renowned and beloved Cantonese hot pot brand which aims to provide classy upscale dining

options for younger customers, families and groups. ‘‘Heavenly flavors, served with Love.’’ is the

key tenet of our business philosophy. We endeavor to love our staff and customers the way

people love their families and stay true to our heart in every detail to cultivate ‘‘a spirit of artisan

and craftsman.’’

Rooted in such business philosophy, we believe our compelling and unique brand

positioning has enabled us to establish a meaningful brand differentiation in the hot pot

restaurant market in China. We have made ourselves stand out from the competition by using

quality and fresh ingredients, enhancing them in ways that are natural and healthy, and serving

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our customers with heavenly flavors. We have been able to deliver outstanding dining experience

for our customers, where they can savor the genuine wholesomeness that comes from our spirit

of artisan and craftsman.

A signature dish in our Want Hotpot restaurants is the stewed chicken and pork tripe soup.

Simmered for eight hours, it delivers a delightful aroma of spices, a pleasantly piquant scent of

pepper, and a warm and hearty stew of a combination of chicken and thinly sliced pork tripe,

which soaked in rich, creamy, smooth and milky white broth. The course, used to be named as

‘‘the phoenix’s reborn,’’ was originally designed to help heal gastric problems and gain vitality for

mothers fresh into their confinement period after childbirth. Passed down to subsequent

generations, it has become a classic Hakka cuisine with strong local characteristics enjoyed by

gourmets from all over the world, which is widely considered beneficial for strengthening the

body, spleen and stomach. Our balanced and healthy stewed chicken and pork tripe soup may

meet increasingly nuanced attributes of health and wellness.

Leveraging the characteristics of our signature dishes, we have been able to diversify our

customer portfolio and develop a stable customer base that comprises both the new generation

and the others.

Laowang Concerto (撈王鍋物協奏曲)

We aim to provide our customers with a great and distinctive hot pot experience like

enjoying a hot pot concerto that changes in tempo, from Allegro, to Andante, and to Presto —

three movements corresponding to our stewed chicken and pork tripe soup as the Allegro, clay

pot rice with Chinese sausage and Chinese bacon (雙臘煲仔飯) as the Andante, and water

chestnut and saccharin juice (馬蹄竹蔗水) as the Presto, during which our customers become the

audience.

♫ Allegro — stewed chicken and pork tripe soup. The first movement of our concerto is

stewed chicken and pork tripe soup. We insist on simmering the stewed chicken and

pork tripe soup for eight hours, and creatively develop a Stew Quartet to bring out the

best in the soup. A quartet, quadruple voices in one musical composition; a Stew

Quartet, quadruple flavors abound in one soup: (i) creamy, smooth and savory flavor

(濃香); (ii) gamey flavor with sweet undertones (甘香); (iii) rich and earthy umami (鮮

香); and (iv) delicately herbaceous flavor (清香).

♪ First voice comes from the original stewed chicken and pork tripe soup, intriguing,

simmered with premium Jinhua ham, Nanfeng pork and other selected ingredients

for eight hours, stimulates appetite and opens the door for a creamy, smooth and

savory flavor.

♪ Second voice comes from the organic mushroom on logs, farm-fresh, harvested

right at the dining table; with such, the audience enjoys a gamey flavor with

sweet undertones, a taste sublime, refreshing the sweet memories of their own.

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♪ Third voice comes from a combination of meat put into the boiling soup, such as

thinly sliced beef (雪花牛肉), thinly sliced pork (雪花豬肉) and handmade stuffed

QQ shrimpballs (爆漿手打蝦丸). For these ingredients, their original and natural

tastes are preserved and highlighted, and further, will let out a rich and earthy

umami, which amplifies all the flavors and satisfies the audience’s appetite.

♪ Fourth voice, simple but indispensable to the quartet, comes from the fresh and

natural vegetables, little refreshing finishing of delicately herbaceous flavor,

which drums up thoughts of spring farms and arouses the audience’s quest for

more energy.

♫ Andante — clay pot rice with Chinese sausage and Chinese bacon. In the second

movement, we believe such slow-cooking dish, though the audience might have to wait

a period of time before the dish is ready, brings extraordinary dining experience and

embraces the audience with warmth, mildness and comfort. Most importantly, this

dish, thoroughly savored, replenishes the energy and contributes to the audience’s

satiety as they just need.

♫ Presto — water chestnut and saccharin juice. In the last movement, we serve our

signature water chestnut and saccharin juice in a Presto to the audience, and hope

they will be elated after such spectrum of ups and downs in our exquisitely-prepared

Laowang Concerto.

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The following images demonstrate our Laowang Concerto, which includes stewed chickenand pork tripe soup, clay pot rice with Chinese sausage and Chinese bacon, and water chestnutand saccharin juice.

Stewed Chicken andPork Tripe Soup(胡椒豬肚雞)

Clay Pot Rice withChinese Sausage and

Chinese Bacon(雙臘煲仔飯)

Water Chestnut andSaccharin Juice(馬蹄竹蔗水)

The following images demonstrate Laowang Classics, our signature dishes:

1 2 3

4

6

7

9

8

10

5

1 Thinly Sliced Beef雪花牛肉

2 Handmade StuffedQQ Shrimpballs爆漿手打蝦丸

3 Water Chestnut andSaccharin Juice馬蹄竹蔗水

4 Hydrangea Tofu繡球豆腐

5 Peanut ButterSmoothie花生冰沙

6 Organic Mushroomon Logs有機松香菇

7 Thinly Sliced Pork雪花豬肉

8 Shrimp Pancake月亮蝦餅

9 Egg Dumplings手工幸福蛋餃

10 Laowang Soy SauceBraised Trinity撈王鹵香三寶

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Ambience and service

The following image demonstrates the typical design of our Want Hotpot restaurants:

The refined and comfortable ambience of our restaurants is integral to our warm and

compassionate brand image. Generally, hot pot is a cuisine enjoyed with family and friends, and

we design our restaurants to make our customers feel relaxed, comfort and entertaining.

Historically, the majority of our restaurants were designed with a black and red theme. As part of

our efforts to upgrade our restaurant ambience and facilities, we rolled out in some of our

restaurants a new modern and fresh restaurant atmosphere with redesigned furniture and more

advanced restaurant appliances in a black, red and gold color theme in modern Chinese style.

Furthermore, we have decorated several restaurants with local features. For example, in our

restaurants in Jiangsu Province and Zhejiang Province, both being known as the Chinese garden

provinces, a landscape Chinese garden style that has evolved over three thousand years which

still can be seen in Suzhou has played a part in our interior design. In addition, in our restaurant

in Liyang, Jiangsu Province, a city famous for its bamboo sea, we use bamboo in this restaurant’s

decoration to present the local features of Liyang. Going forward, we intend to continue to

experiment with different designs and themes to enhance our restaurant atmosphere.

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The following images demonstrate the typical design of our restaurants in Suzhou and

Liyang, Jiangsu Province:

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A typical Want Hotpot restaurant generally covers 300 to 700 square meters and, on

average, accommodates approximately 140 customers with approximately 30 tables. We have

adopted a set of standardized table service procedures to cater to our customers and improve

service efficiency. Orders from our customers are entered into our central IT system, which will

be automatically transmitted to both the restaurant kitchen and cashier, so as to reduce error

and ensure the efficiency of our service. Most of our Want Hotpot restaurants also support smart

QR code menu ordering where our customers can place orders with their smart phones and the

orders will be transmitted to both the restaurant kitchens and cashiers on a real time basis. The

average spending per customer in our Want Hotpot restaurants for the years ended 31 December

2018, 2019 and 2020 and the six months ended 30 June 2021 were RMB120.3, RMB123.7,

RMB128.1 and RMB123.9, respectively.

Development of Want Hotpot during the Track Record Period and as of the LatestPracticable Date

The following table sets forth the movement in the number of our Want Hotpot restaurants

during the Track Record Period and up to the Latest Practicable Date:


Six

months

ended

30 June

From 1 July

2021 to the

Latest

Practicable

Date2018 2019 2020 2021

Want Hotpot

Number of restaurants at the

beginning of the period . . . . . . . . 57 75 93 125 130

Newly opened restaurants . . . . . . . . 19 19 35 7 4

Closed restaurants . . . . . . . . . . . . . 1 1 3 2 2

Net increase/(decrease) . . . . . . . . . 18 18 32 5 2

Number of restaurants at the end of

the period . . . . . . . . . . . . . . . . . 75 93 125 130 132

We opened 35 Want Hotpot restaurants for the year ended 31 December 2020 despite the

headwind of COVID-19. During the Track Record Period, we closed seven of our Want Hotpot

restaurants, primarily due to (i) our own evaluation of their underperformance, (ii) termination of

lease agreement, and (iii) issues attributable to the owner of the property. See ‘‘— Operations

Management — Performance Assessment’’ for more information.

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Expansion plan of Want Hotpot

To open a new Want Hotpot restaurant, we primarily incur costs of interior design,

decoration, fitting up and maintenance. We incurred an average cost of approximately RMB8,000

to RMB9,000 per square meter to open a new Want Hotpot restaurant during the Track Record

Period. The following table sets forth our expansion plan for Want Hotpot restaurants from 2021

to 2024:

Expansion Plan of Want Hotpot

2021E 2022E 2023E 2024E

Number of new openings in

Tier one cites . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 9 8 11

New tier one cities . . . . . . . . . . . . . . . . . . . . . . . 15 10 14 23

Tier two cities . . . . . . . . . . . . . . . . . . . . . . . . . . 10 18 27 26

Other cities(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 11 23 43

Total number of new openings . . . . . . . . . . . . . . . . 32 48 72 103

Estimated average investment cost/restaurant

(RMB’000) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,000 – 3,500

Amounts incurred and committed from 1 January 2021

to the Latest Practicable Date (RMB’000)(2) . . . . . . 58,428

Source of funds . . . . . . . . . . . . . . . . . . . . . . . . . . . Own funding and [REDACTED] from the [REDACTED]

Note:

(1) Include cities other than tier one, new tier one and tier two cities.

(2) Rental deposits for the new restaurants are excluded. From 1 January 2021 to the Latest Practicable Date, rental

deposits amounted to RMB2.5 million.

Other Restaurants

Guoji Hotpot (鍋季)

The brand name Guoji represents hot pot for four seasons. We opened our first Guoji Hotpot

restaurant, the Guoji Hotpot Generation I, in 2017 and provided our customers with handmade

seasonal dishes. Subsequently, we re-positioned Guoji Hotpot to target its customers who prefer

solo dining; we re-designed the course sets consisting of hot pot and desserts to embrace a

seasonal menu; and we re-selected the location and opened our new Guoji Hotpot restaurants at

shopping malls which enjoy larger traffic of younger generations. As such, we upgraded and re-

launched two Guoji Hotpot restaurants in 2020 and 2021, respectively. The new Guoji Hotpot

aims at serving younger customers with mini hot pot in solo dining scenario.

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We embrace a seasonal menu and update our menu options as seasons change. We serve

more than ten types of beef, together with farm-fresh vegetables, to our customers. As Guoji

Hotpot targets customers who prefer solo dining, we strategically offer them mini hot pot

services with course sets. The average spending per customer in our Guoji Hotpot restaurants for

the six months ended 30 June 2021 was RMB109.8. As of the Latest Practicable Date, we

operated two Guoji Hotpot restaurants that cover 165 to 213 square meters, respectively, and

each of them accommodates approximately 50 customers with approximately 30 tables.

The following images demonstrate a signature dish and course set of Guoji Hotpot

restaurants:

The following image demonstrates the typical design of our Guoji Hotpot restaurants:

We provide our customers with comfort dining experience in our Guoji Hotpot restaurants.

Catering to younger customers’ aesthetics, we design our restaurants with a natural burly-wood

theme that touches yellow and green, the colors of four seasons. Guoji Hotpot offers timely

services that customers looking for a solo dining can find a pleasant experience.

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Soup for the Soul (撈王心靈肚雞湯)

Soup for the Soul was launched in 2020 which targets the youth and focuses on quick and

light dining for small gathering of friends and family; it is a fast-casual restaurant brand under

which we offer customers fast-casual dine-in experience with moderately-priced Cantonese food.

We were inspired by the famous series of books called Chicken Soup for the Soul (《心靈雞湯》) to

name this brand.

In our Soup for the Soul restaurants, we combine healthy ingredients with industrialized and

standardized food processing for scale and efficiency, and have derived various classic

Cantonese cuisines, such as roast squab (椒鹽乳鴿) and Char Siu (蜜汁叉燒), to cater to

diversified dining preferences. The average spending per customer in our Soup for the Soul

restaurants for the six months ended 30 June 2021 was RMB108.2.

The Soup for the Soul restaurants are decorated with light yellow and white, and generally

cover 190 to 300 square meters, accommodating approximately 100 customers with around 15 to

30 tables. The following images demonstrate a signature dish and the typical design of our Soup

for the Soul restaurants:

During the Track Record Period, we opened two Guoji Hotpot restaurants in Suzhou, Jiangsu

Province and two Soup for the Soul restaurants in Shanghai and Suzhou, Jiangsu Province.

BUSINESS

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We incurred an average cost of approximately RMB5,000 to RMB7,000 per square meter to

open a new Guoji Hotpot restaurant and approximately RMB10,000 to RMB14,000 per square

meter to open a new Soup for the Soul restaurant during the Track Record Period.

RESTAURANT PERFORMANCE

The following table sets forth certain key operational information with respect to our Want

Hotpot restaurants during the Track Record Period.


Six months ended

30 June

2018 2019 2020 2020 2021

Average spending per customer

(Renminbi Yuan)(1)

Tier one cities . . . . . . . . . . . . . . . . . 118.8 123.5 128.4 130.0 125.2

New tier one cities . . . . . . . . . . . . . . 118.5 120.6 124.0 126.0 119.9

Other cities(2) . . . . . . . . . . . . . . . . . 126.5 129.6 134.7 137.5 128.5

Overall . . . . . . . . . . . . . . . . . . . . . . . 120.3 123.7 128.1 130.1 123.9

Total customers served (persons/day)(3)

Tier one cities . . . . . . . . . . . . . . . . . 10,371 11,482 10,262 7,264 10,025

New tier one cities . . . . . . . . . . . . . . 7,398 9,859 11,612 7,859 11,499

Other(2) cities . . . . . . . . . . . . . . . . . 4,583 5,459 8,370 4,663 7,383

Overall . . . . . . . . . . . . . . . . . . . . . . . 22,351 26,800 30,245 19,786 28,907

Table turnover rate (times/day)(4)

Tier one cities . . . . . . . . . . . . . . . . . 3.3 3.0 2.4 1.9 2.4


Other cities(2) . . . . . . . . . . . . . . . . . 2.7 2.7 2.5 2.1 2.2

Overall . . . . . . . . . . . . . . . . . . . . . . . 3.1 3.0 2.5 2.1 2.4

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Six months ended

30 June

2018 2019 2020 2020 2021

Average customers per day per

restaurant(5)

Tier one cities . . . . . . . . . . . . . . . . . 305 273 214 173 213

New tier one cities . . . . . . . . . . . . . . 296 308 252 231 235

Other cities(2) . . . . . . . . . . . . . . . . . 270 273 246 212 211

Overall . . . . . . . . . . . . . . . . . . . . . . . 294 285 236 202 221

Average daily restaurant sales

(RMB’000)(6)

Tier one cities . . . . . . . . . . . . . . . . . 36.9 34.7 28.5 23.7 27.8


Other cities(2) . . . . . . . . . . . . . . . . . 34.0 35.6 33.0 29.6 27.9

Overall . . . . . . . . . . . . . . . . . . . . . . . 35.7 36.1 31.0 27.2 28.5

Notes:

(1) Calculated by dividing gross revenue generated from restaurant operations for the period by total customers served

for the period in the same region. For more details on how we calculate total customers, see note (3).

(2) Include tier two cities, cities with lower GDP than that of tier two cities, and Taipei.

(3) Accordingly, the amounts presented for our total customers served in the table above and elsewhere in the

Document are based on the number of customers recorded in our IT system, which represents our total dine-in

customers.


days we provide dine-in services, for the period and average table count during the period in the same region.

(5) Calculated by dividing the total customers served for the period by restaurant operation days for the period in the

same region. For more details on how we calculate total customers served, see note 3.


actual operating days, which are the days we provide dine-in services and/or delivery services, for the period in the

same region.

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Our average spending per customer remained stable from RMB120.3 to RMB123.7 for the

years ended 31 December 2018 and 2019, then increased to RMB128.1 for the year ended 31

December 2020 primarily because our customers spent more due to COVID-19 related social

distancing measures. As COVID-19 containment measures became more relaxed, people started

to gather and dine in groups again, which led to the decrease in average spending per customer

from RMB130.1 to RMB123.9 for the six months ended 30 June 2020 to 2021, respectively.

Our table turnover rate remained stable from 3.1 to 3.0 times per day for the years ended 31

December 2018 and 2019, then decreased to 2.5 times per day for the year ended 31 December

2020 due to COVID-19 related containment measures. It gradually resumed to 2.4 times per day

for the six months ended 30 June 2021 from 2.1 times per day for the same period in 2020 as

COVID-19 containment measures became more relaxed and people started to gather and dine in

groups again.

Initial Breakeven Period and Cash Investment Payback Period

In calculating the initial breakeven period and cash investment payback period for our Want

Hotpot restaurants, we assumed that such restaurants would continue to operate and we took

into account (i) the capital expenditure for renovation, construction and purchase of equipment

and facilities, (ii) upfront costs incurred in the opening of restaurants, such as expenses on

cleaning supplies, utensils, uniforms and other miscellaneous expenses, and (iii) the net cash

flows from operations, being the sum of net profit after tax and the amount of depreciation and

amortization.

Initial breakeven period refers to the first month for the revenue of a newly opened

restaurant to cover at least equal to its expenses. Cash investment payback period refers to the

amount of time it takes for the cumulative restaurant-level net profit plus depreciation (excluding

depreciation of right-of-use assets) and amortization to cover the costs to open a restaurant.

Most of our Want Hotpot restaurants opened during the Track Record Period reached initial

breakeven in their first or second month of operation, and for Want Hotpot restaurants, their

typical average cash investment period is 13 months; many of them have obtained outstanding

results of operations, proving our ability to effectively expand our restaurant network and

profitably operate our restaurants outside our home field.

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Same-store Sales

Same-store sales for a given period refers to the revenue of all restaurants that qualified as

same restaurants during that period. We define our same-store to be those restaurants that

opened for at least 300 days in both years ended 31 December 2018 and 2019, and in both years

ended 31 December 2019 and 2020, and for at least 150 days both in the six months ended 30

June 2020 and 2021. The following table sets forth details of same-store sales of our Want Hotpot

restaurants during the Track Record Period.


Six months ended

30 June

2018 2019 2019 2020 2020 2021

Number of same stores(1)

Tier one cities . . . . . . . . . . . . . 24 31 37

New tier one cities . . . . . . . . . . 18 23 25

Other cities(2) . . . . . . . . . . . . . . 14 16 17

Overall . . . . . . . . . . . . . . . . . . . . 56 70 79

Same-store sales (RMB’000)(3)

Tier one cities . . . . . . . . . . . . . 327,852.5 311,911.3 424,034.4 338,053.9 154,974.6 186,729.8

New tier one cities . . . . . . . . . . 256,491.9 275,482.1 338,863.0 294,224.0 136,888.9 158,273.3

Other cities(2) . . . . . . . . . . . . . . 168,907.4 179,132.6 213,009.6 198,206.9 82,740.7 84,529.6

Total . . . . . . . . . . . . . . . . . . . . . 753,251.8 766,525.9 975,907.1 830,484.7 374,604.1 429,532.7

Same-store sales growth (%)

Tier one cities . . . . . . . . . . . . . (4.9) (20.3) 20.5

New tier one cities . . . . . . . . . . 7.4 (13.2) 15.6

Other cities(2) . . . . . . . . . . . . . . 6.1 (7.0) 2.2

Overall . . . . . . . . . . . . . . . . . . . . 1.8 (14.9)(4) 14.7

BUSINESS

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Six months ended

30 June

2018 2019 2019 2020 2020 2021

Average same-store sales per day

(RMB’000)(5)

Tier one cities . . . . . . . . . . . . . 37.7 35.8 37.6 30.5 24.0 28.1

New tier one cities . . . . . . . . . . 39.4 42.3 40.7 36.6 33.0 35.1

Other cities(2) . . . . . . . . . . . . . . 33.1 35.1 36.6 35.8 29.9 27.7

Overall . . . . . . . . . . . . . . . . . . . . 37.1 37.7 38.4 33.7 28.1 30.2

Same-store table turnover rate

(times/day)(6)

Tier one cities . . . . . . . . . . . . . 3.3 3.1 3.3 2.5 1.9 2.4

New tier one cities . . . . . . . . . . 3.4 3.4 3.4 2.9 2.5 2.8

Other cities(2) . . . . . . . . . . . . . . 2.6 2.7 2.8 2.6 2.2 2.2

Overall . . . . . . . . . . . . . . . . . . . . 3.2 3.1 3.2 2.6 2.2 2.5

Notes:

(1) Includes restaurants that commenced operations prior to the beginning of the periods under comparison and

opened for more than 300 days in both years ended 31 December 2018 and 2019, and in both years ended 31

December 2019 and 2020, and more than 150 days in the six months ended 30 June 2020 and 2021.

(2) Include tier two cities, cities with lower GDP than that of tier two cities, and Taipei.

(3) Refers to the aggregate gross revenue from restaurant operations and delivery services at our same stores for the

period indicated.

(4) Such decrease in same-store sales growth from 2019 to 2020 is primarily due to the decrease in our overall table

turnover rate as a result of shortened operating hours and reduced traffic amid COVID-19.

(5) Calculated by dividing the gross revenue from restaurant operations for the period by restaurant operation days,

which are the days we provide dine-in services, at our same stores for the period.


days we provide dine-in services, for the period and average table count at our same stores during the period.

The growth of our same-store sales is primarily affected by same-store table turnover rate

and average spending per customer. During the Track Record Period, the same-store sales of

Want Hotpot remained relatively stable from RMB753.3 million to RMB766.5 million for the years

ended 31 December 2018 and 2019, respectively. It then decreased from RMB975.9 million to

RMB830.5 million, and bounced back from RMB374.6 million to RMB429.5 million for the years

ended 31 December 2019 and 2020 and the six months ended 30 June 2020 and 2021,

respectively. The fluctuation was in line with the fluctuation in table turnover rate.

BUSINESS

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RESTAURANT EXPANSION MANAGEMENT

We have standardized our restaurant expansion to ensure a high-quality and rapid growth.

Our headquarters centralizes certain critical aspects of restaurant management, such as food

safety and quality control, procurement of raw materials, supplier management and compliance

with applicable laws and regulations. These aspects have been standardized and are critical to

achieve our expansion plans. In addition, we outsource certain duties, such as food processing

and logistics, to third-party service providers. To support our expansion, our headquarters closely

monitors the availability and sufficiency of resources and formulates specific work plans to

execute our expansion. Moreover, we will continue to assess the requirements for our expansion

plan and expand our internal resources, and may secure additional third-party service providers

as necessary. We believe that we will be able to continuously expand our restaurant network by

replicating our established managerial and operational procedures, efficiently transferring know-

how and adopting best practices when opening new restaurants.

The following flowchart illustrates the major steps in our restaurant opening process:

Annual Planningand

Site Selection

Lease Arrangement

Project Execution

• Due diligence

• Internal analysis

• Site visit

• Comprehensive analysis of the location

• Negotiation with the commercial property developers

• Signing of lease agreement

• Licenses and compliance

• Restaurant decoration and renovation

• Staff recruitment and training

Restaurant Opening and Review

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Annual Planning and Site Selection

Before initiating an expansion plan for our restaurants, we generally conduct a detailed and

comprehensive due diligence work, including conducting research on the overall market trend

and the development schedule for new shopping malls.

We consider location critical to the continued success of our restaurants, and therefore we

directly manage site selection at our headquarters level. We conduct surveys when identifying

suitable locations for our new restaurants, including exposure of the site, pedestrian counts,

commercial district and extensive reviews of public data in order to collect the necessary

information for our decision-making. We have strong preference for top and mature commercial

districts that enjoy convenient transportation and high customer traffic. In particular, we consider

the following factors:

. location of the commercial district;

. number and nature of competitors in the commercial district;

. our existing restaurants in the vicinity;

. population density in the commercial district;

. spending pattern of customers in the commercial district;

. locations of other restaurants within the commercial district;

. structure of the building, property management team, and availability of parking lots

and advertising billboards; and

. rental costs and estimated return on investment.

To reduce the competition among our own restaurants, we generally avoid opening

restaurants under a same brand within the same commercial district. Our multi-brand and multi-

concepts strategy helps reduce the risks of competition among our restaurants given the

inherent needs of our customers to diversify their dining options. We also take into

consideration the population and the other demographic information to minimize competition

among our own restaurants.

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Lease Arrangement

Our lease arrangements generally last for five years or longer. We do not own any property

for our restaurant sites; we believe such approach, in part, reduces our capital investment

requirements. Our leases typically include a rent-free period of up to four months to facilitate the

interior designs and renovation of the premises. During the Track Record Period, a substantial

portion of the lease agreements for our restaurants were under hybrid rent arrangements,

including both variable payment and fixed payment, and our variable rent payable was calculated

with reference to the sales of the particular restaurant. Some of these leases also include a

minimum rent payment clause, pursuant to which we are required to pay higher than the

minimum rent or the contingent rent calculated with reference to the sales of the restaurant. We

entered into hybrid rent arrangements with shopping malls, which is a common practice in the

catering service industry according to Frost & Sullivan. Other leases were under fixed rent

arrangements. The lease agreement will expire on 30 April 2024 for our Laowang Gourmet Lab in

Suzhou, Jiangsu Province.

Project Execution

New restaurant managers, with the support of our expansion management department, are

responsible for new restaurants’ in-store execution. To ensure the successful ramp up of our new

restaurants in certain region, we typically prefer to select from our restaurant manager

candidates pool in this region to act as new restaurant managers, as these candidates are well-

trained and outstanding personnel within our internal promotion program. We have standardized

the new restaurant opening process, and our expansion management team will supervise and

provide guidance throughout the process. Generally, it takes approximately four months from

signing the lease agreement to the new restaurant opening. Key aspects of our new restaurant

opening process include:

. Licenses and compliance. With the guidance of our expansion management

department, we will commence application for necessary licenses and permits, such

as the business license, food safety license and fire safety inspection approvals. We

regard license and permit applications as one of the first major steps in project

execution.

. Restaurant decoration and renovation. We engage third parties to undertake the

decoration and renovation work based on our interior design style. The restaurant

manager will be responsible for the procurement of some of the decorations according

to the guidance from our headquarters.

. Staff recruitment and training. After recruiting the employees for a new restaurant, weprovide orientation kit for the new employees. The training hours for new restaurantstaff and kitchen staff are approximately 62 and 66 hours, respectively. We alsorelocate a number of employees from our existing restaurants to leverage theirexperience.

BUSINESS

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SEASONALITY

Since we generated substantially all of our revenue from our Want Hotpot restaurants andthere are seasonal patterns for hot pot consumption, our business is subject to seasonalfluctuations. Our overall results of operations are subject to seasonality and thus may fluctuatefrom period to period due to factors including national holidays, weather conditions, andfluctuations in food prices, among others. We generally record higher sales during October toFebruary than other months in a year. Sales from April to June of a year are usually lower thanthe other months. As a result, our results of operations may fluctuate from period to period andcomparison of different periods may not be meaningful.

OTHER OPERATIONS

In addition and as a supplement to our restaurant operations, we provide consumers withretail and food delivery services.

Retail Business

To further extend our brand and strengthen our brand image, we strategically launched ourretail business of ready-to-serve products in 2020. We aim to expand our retail businessnationwide. We launched our ready-to-serve products of our signature dish, the stewed chickenand pork tripe soup that tailored to urban young people’s demand for fast, convenient andhealthy food. According to the F&S Report, the market size of ready-to-serve in the PRC increasedsignificantly from RMB150.8 billion to RMB278.6 billion from 2016 to 2020 at a CAGR of 16.6%,and is expected to further increase at a CAGR of 18.8% from 2020 to 2025.

The retail business is not only a source of our revenue but also a crucial part of our brandrecognition initiatives. In the business exploration phase, our ready-to-serve products areprimarily sold through local and international supermarkets. We produce ready-to-serve productsof our signature dish, the stewed chicken and pork tripe soup. We endeavor to reproduce thesoup our customers can savor at our restaurants by using similar condiments and ingredients,allowing our consumers to make their own Laowang-style soup at home and enjoy the heavenlyflavors, the same as dining at our restaurants. We generated revenue amounting to RMB3.4million and RMB5.7 million for the year ended 31 December 2020 and the six months ended 30June 2021 from our retail business, respectively.

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The following image shows our ready-to-serve products:

Our ready-to-serve products are primarily sold through local and international supermarkets.

During the Track Record Period, the local and international supermarket cooperating with us

purchased our ready-to-serve stewed chicken and pork tripe soup and resold to its retail

customers, who are our end consumers. Pursuant to the agreement between the supermarket and

us, with very limited exceptions, the supermarket is not entitled to product return and we pass

the risk of loss and title of products to it upon the shipment of our products. Revenue generated

from our retail business amounted to RMB3.4 million and RMB5.7 million for the year ended 31

December 2020 and the six months ended 30 June 2021, respectively.

Food Delivery Business

We commenced our food delivery business by cooperating with third party delivery

platforms in 2018. As of the Latest Practicable Date, we operated food delivery business in most

of our restaurants across Greater China. According to the F&S Report, the food delivery sector in

the PRC has expanded rapidly from RMB231.3 billion to RMB715.4 billion from 2016 to 2020 at a

CAGR of 32.6%, and is expected to grow at a CAGR of 15.1% from 2020 to 2025.

BUSINESS

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Our food delivery services are designed to serve consumers in the vicinity after they placed

an order. We offer our food delivery services through food delivery services platforms in Greater

China, and the delivery of our hot pot is primarily performed by these food delivery platforms. For

the years ended 31 December 2018, 2019 and 2020 and the six months ended 30 June 2020 and

2021, our revenue generated from food delivery business amounted to RMB10.5 million, RMB27.0

million, RMB59.1 million, RMB36.6 million and RMB21.0 million, respectively.

OUR CUSTOMERS AND SUPPLIERS

Our Customers

Revenue derived from our five largest customers accounted for less than 5% of our total

revenue for each of the years ended 31 December 2018, 2019 and 2020 and the six months

ended 30 June 2021. All of our five largest customers for the years ended 31 December 2018,

2019 and 2020 and the six months ended 30 June 2021 are Independent Third Parties. None of

our Directors, their associates or any of our Shareholders (who, to the knowledge of our

Directors, own more than 5% of our share capital as of the Latest Practicable Date) has any

interest in any of our five largest customers that are required to be disclosed under the Listing

Rules.

Our Suppliers

We had 105, 98, 140 and 130 authorized suppliers as of 31 December 2018, 2019 and 2020

and 30 June 2021, respectively. We had a credit term that generally last for 30 to 60 days with

our suppliers and we paid cash through bank wire transfer. As of the Latest Practicable Date, our

business relationships with our five largest suppliers for the Track Record Period ranged from

one to six years.

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The table below sets forth the details of our five largest suppliers during the Track Record

Period:

For the six months ended 30 June 2021

Rank Supplier Goods procured Purchase amount

Percentage of

total purchase

RMB’000 %

1 Supplier A . . . . . . . . . . . . . . Condiment 35,767 17.9

2 Supplier B . . . . . . . . . . . . . . Beef 31,439 15.8

3 Supplier C(1) . . . . . . . . . . . . . Pork belly & Pork bones 14,162 7.1

4 Supplier D . . . . . . . . . . . . . . Chicken 12,974 6.5

5 Supplier E . . . . . . . . . . . . . . Leasehold improvement 9,787 4.9

Total . . . . . . . . . . . . . . . . . 104,129 52.2

For the year ended 31 December 2020


Percentage of total

purchase

RMB’000 %



3 Supplier B . . . . . . . . . . . . . . Beef 25,444 7.4


5 Supplier C(1) . . . . . . . . . . . . . Pork belly & Pork bones 15,795 4.6

Total . . . . . . . . . . . . . . . . . 153,163 44.4

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Percentage of total

purchase

RMB’000 %


2 Supplier F . . . . . . . . . . . . . . Beef 26,794 7.3


4 Supplier G . . . . . . . . . . . . . . Seafood 20,354 5.5

5 Supplier H . . . . . . . . . . . . . . Pork belly 17,493 4.8

Total . . . . . . . . . . . . . . . . . 143,639 39.1



Percentage of total

purchase

RMB’000 %

1 Supplier F . . . . . . . . . . . . . . Beef 34,846 12.8




5 Supplier G . . . . . . . . . . . . . . Seafood 22,132 8.2

Total . . . . . . . . . . . . . . . . . 136,900 50.4

Notes:

(1) Supplier C controlled two entitles that supplied goods to our Company.

Our largest supplier accounted for 12.8%, 14.6%, 18.2% and 17.9% of total purchase

amount for the years ended 31 December 2018, 2019 and 2020, and the six months ended 30

June 2021. Our five largest suppliers accounted for 50.4%, 39.1%, 44.4% and 52.2% of total

purchase amount for the years ended 31 December 2018, 2019 and 2020 and the six months

ended 30 June 2021.

All of our five largest suppliers during the Track Record Period are Independent Third

Parties. None of our Directors, their associates or any of our current Shareholders (who, to the

knowledge of our Directors, own more than 5% of our share capital as of the Latest Practicable

BUSINESS

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Date) has any interest in any of our five largest suppliers that is required to be disclosed under

the Listing Rules. During the Track Record Period and as of the Latest Practicable Date, none of

our five largest suppliers is our customers.

ORGANIZATIONAL STRUCTURE

Our internal organization consists of three components, namely our headquarters, regional

groups and restaurants. The following diagram illustrates our organizational structure:

17 REGIONAL GROUPS

Human Resources Development Center

Finance Center

Operation Center

Marketing and Brand

Development Center

Supply Chain Center

Restaurants

Regional Groups

Headquarters

Headquarters

Our headquarters, located in Shanghai, effectively maintains control over critical aspects of

restaurant management, mainly including supply chain management, marketing and brand

development, operations management, finance management and human resources development.

We believe that these aspects of our operations require standardized management to ensure the

quality of our food and services. Moreover, we believe that standardized operations in these

aspects will facilitate our scalable expansion.

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To ensure the quality of food and services provided by our restaurants in various regions,

and to promote the operational efficiency and profitability of our restaurant network, our

headquarters provides comprehensive and systematic support to all the restaurants under our

management, including, among others:

. Supply chain management. We have established a dedicated procurement team at our

headquarters to establish a centralized purchase system for all purchase orders. This

team is also responsible for securing ingredients of high quality and safety at

reasonable cost from designated suppliers.

. Marketing and brand development. We have established a marketing team at our

headquarters, which allows us to plan and coordinate in marketing activities and

develop marketing strategies to attract younger customers.

. Operations management. We rely on standardized operations to maintain the

consistency in the quality of food and services and the overall dining experience

across our restaurant network. We have established a comprehensive set of standards

and specifications regarding various aspects of our restaurant operations, and our

headquarters is responsible for assessing and monitoring the performance of our

restaurants.

. Finance management. We have established a financial management team at our

headquarters to conduct strategic planning, organizing, managing and reviewing of

financial undertakings, which is also responsible for tracking and analyzing our

financials through cloud-based POS system, Kingdee (金蝶) and OA system. Through

such systems and our management, we are able to track our financials in an efficient

way and produce accurate financial statements.

. Human resources development. We offer competitive wages and benefits and are

committed to hiring qualified candidates to support our business growth and

operations. We seek to create a caring and loving culture to stimulate cooperation and

teamwork and encourage growth of employees. We are also committed to increasing

employee engagement level to improve the efficiency and sustainability of our

organization. We established Laowang Academy to provide systematic training to our

employees, which enables us to pool sufficient talents to support our restaurant

expansion.

Regional Groups

At regional level, we set up regional managers to supervise restaurant operations and

regional inspectors to conduct inspections at restaurants. As of 30 June 2021, we had in total 15

regional inspectors; and we had in total 19 regional managers across our restaurant network

responsible for monitoring and managing the restaurant operations within their respective

regions, including 18 regional managers for Want Hotpot restaurants, two of whom also supervise

the operations of Soup for the Soul restaurants, and one regional manager for Guoji Hotpot

restaurants. Furthermore, our regional managers are responsible for budgeting, cost control,

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operational management of the restaurants within their respective regions. They also support

and supervise the individual restaurants to ensure their strict adherence to our uniform

operational standards.

Restaurants

The day-to-day operations of our restaurants are generally managed by restaurant managers.

A restaurant is divided into the dining area and the kitchen; the employees at each restaurant

comprise service staff and kitchen staff. Our restaurant managers manage the dining area and

inspect the kitchen. Our head chefs manage the kitchen of the restaurant. The service staff is

managed by the restaurant manager, and the kitchen staff is directly supervised by the head

chef. Our restaurant managers are responsible for supervising the restaurant staff and handling

customer complaints and emergencies. Furthermore, restaurant managers are required to

implement the rules set out in our manual, which are primarily related to human resource

management, food safety and cash management. Each restaurant manager makes a monthly

report to the relevant regional group, and the report covers key aspects of restaurant operations,

such as sales, costs and expenses, inventory status, maintenance needs and human resources

status. Our head chefs are responsible for food safety such as inspecting the ingredients

provided by third parties upon receiving them.

SUPPLY CHAIN MANAGEMENT

Our ability to maintain consistent quality throughout our restaurant network in part depends

upon our ability to secure a stable supply of high-quality and safe ingredients. We have a

comprehensive set of procurement processes designed to maintain uniform standards and

effective management practices.

We have established a dedicated procurement team at our headquarters to establish a

centralized purchase system for purchase orders. This team is also responsible for securing

ingredients of high quality and safety at reasonable cost from designated suppliers.

Through our strict selection process for ingredients, we purchase imported pork tripe and

beef through our selected traders based in China. After a thorough market analysis and an on-

site visit to the breeding bases, we meticulously select Denmark as the home to source pork

tripe from. During the on-site visit, we found that the pigs were fed a healthy proprietary all-

natural vegetarian diet and raised without the use of antibiotics, steroids, or hormones. This

commitment ensures the superior taste and exceptional quality of pork tripe. We also sourced

selected beef from Australia and the United States through local traders based in China, and we

have also established long-term partnership with the rural cooperatives in Greater China to

procure chicken. With respect to seafood, vegetables, and fruits that have a relatively short shelf

life, we procure them from selected local suppliers to reduce the delivery period, so as to ensure

their freshness upon delivery to our restaurants. We arrange next-day delivery of such

ingredients directly from our suppliers to our restaurants.

Supplier Selection

We place great emphasis on sourcing ingredients from reliable suppliers to ensure the

quality and safety of the ingredients.

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We have formulated a comprehensive set of criteria for selecting suppliers, including their

market reputation, financial condition, qualifications, production capacities and manufacturing

process control, quality control, pricing, quality of products and product recall system. We also

require our suppliers to comply with all applicable food production regulations, and we inspect

their licenses, certifications and other accreditation.

We have established procedures for food safety and quality control when engaging new

suppliers. Our procurement team will first conduct thorough market research to identify

candidates, and then we will select our suppliers from competent candidates, in particular,

those suppliers with well-established distribution networks and good operation track record, to

our selection process. We also assess our new suppliers, through ingredients sampling, before

we engage a new supplier. Moreover, we conduct annual and unscheduled review of the quality

and food safety of purchases.

Supplier Agreement

We generally enter into framework agreements with our suppliers for the supplies of

ingredients, major terms of which are set out as follows:

. Quality. We generally provide specified requirements regarding the quality of the

goods supplied. We require our suppliers, except for small volume seasonal

procurements, to provide an inspection report or a certificate of quality issued by a

third-party inspection agency. We conduct sampling inspection and engage third-party

inspection agencies for quality and pesticide residue inspection.

. Price. We generally do not stipulate the purchase price in the agreement. Prices for

ingredients will be set out in each purchase order based on market price at the time of

purchase. During the Track Record Period, our ingredients were sourced from

suppliers/traders based in China.

. Delivery schedule. We generally stipulate the delivery schedule in the purchase orders

associated with our agreement with suppliers. The delivery schedule depends on the

types of ingredients procured.

. Inspection and acceptance. For ingredients, we generally inspect the supplies within

three working days of delivery to a warehouse designated by us. We are also entitled

to appoint a third party to conduct inspection.

. Payment. Upon inspection and acceptance of the goods, the suppliers shall provide us

with monthly statements for payments. For imported pork tripe, we generally make full

payments within 30 days of receiving the monthly statements provided by the

suppliers. For other ingredients and supplies, we primarily settle the payments within

60 days of receiving the monthly statements provided by the suppliers.

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. Compensation. We enter into quality assurance agreements with our suppliers where

we generally stipulate detailed compensation provisions if there were contamination of

materials provided by our suppliers. With respect to customers’ complaints caused by

contamination of materials provided by our suppliers, the corresponding suppliers

shall compensate for the meal costs and ten times the meal costs as indemnity. With

respect to administrative penalties caused by such contamination, the corresponding

suppliers shall bear such penalties and compensate for our lost profit, lost goodwill

and other indirect or consequential losses.

Supplier Management

Our quality control personnel may provide necessary training to our suppliers to ensure the

food and supplies delivered meet the specified standards. For example, we require our suppliers

to not only source their raw materials from designated suppliers, but also follow each production

process according to our guidelines, and we have also assigned inspectors to supervise the food

processing on site. In addition, we give careful attention to, and are very sensitive of, the source

of some of our ingredients. We have set up stringent supplier selection standards; certain types

of ingredients are procured from selected areas only when we are of the view that the suppliers

in that area can provide the high-quality ingredients, after rounds of tests. We manage our

suppliers and procurement strategies based on the categories of food and supplies, which

primarily include the following:

. Standardized food and supplies, including wheat flour, oil and seasonings. We procure

wheat flour and oil from selected suppliers.

. Fish and meat products, including pork tripe, beef and pork bone products. We

purchase imported pork tripe, beef and pork bone products, and they are our major

meat ingredients. Moreover, we purchase chicken and seafood products from selected

domestic suppliers. Due to the specialized standards and relatively high cost per item,

our centralized procurement team will purchase such ingredients from selected

suppliers that have established stable and long-term relationships with us.

. Farm-fresh products, such as vegetables and fruits. We purchased these ingredients

from local suppliers which sourced from various domestic farms across China.

We generally have more than two qualified suppliers for each type of major ingredients to

reduce reliance on a sole supplier and to reallocate risks. Through our years of operations, we

have identified and established stable business relationships with high-quality suppliers for our

major ingredients. During the Track Record Period, our main ingredients and supplies were

generally sourced from multiple suppliers. During the Track Record Period, we did not experience

any incidents of interruption or delay in our supply chain or failure to secure sufficient quantities

of ingredients that had a material adverse effect on us.

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Our procurement team makes contingent plan to actively manage our supply chain. Such

plan typically includes (i) procurement from alternative suppliers who meet our quality standards

to avoid supply shortages, (ii) expansion of the scope of procurement to hedge against

unexpected market events, and (iii) advanced inventory management system in anticipation of

seasonal fluctuations of the supplies.

Purchase Cost Control

We implement certain measures to control our purchase costs, including (i) integrating a

multi-channel supply resources, including local, domestic and global markets, to achieve a cost-

efficient procurement, (ii) entering into framework agreements with certain suppliers to secure

sufficient supplies, and (iii) stocking certain ingredients according to market conditions and

sales records.

Our large procurement scale, strong brand images and knowledge of price trends for

ingredients, have all strengthened our bargaining power. As a result, we are able to control our

procurement costs effectively. The major ingredients used in our restaurants include pork tripe,

chicken, beef, pork and vegetables. Generally, the average market prices of our major raw

materials were stable from 2015 to 2020, according to the F&S Report. However, the average

market prices of pork and pork tripe experienced minor fluctuations from 2015 to 2020, primarily

due to the changing consumption structure of meat as well as the changes in supply and

demand. Moreover, from 2018 to 2020, the consumer price index in China increased by 5.5%,

according to the National Bureau of Statistics of China; however, our per unit procurement costs

for our major ingredients remained relatively stable during that period, primarily because we

generally do not stipulate the purchase price in the agreement and prices for ingredients in each

purchase order but this is based on market price at the time of purchase.

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As this is customary in the catering service market, we typically do not pass on short-term

price increase of our major ingredients to our customers. The following table sets forth

sensitivity analysis of the impact on our results of operations during the Track Record Period

from hypothetical fluctuations in the price of the major ingredients used based on the extent of

fluctuations during the Track Record Period:

Hypothetical changes in raw materials and consumables used in the six months ended 30 June

2021 10% 5% 3% –3% –5% –10%

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Raw materials and

consumables used . . . . 257,454 245,751 241,070 227,028 222,347 210,644

Change in raw materials

and consumables used

in the six months ended

30 June 2021 . . . . . . . . 23,405 11,702 7,021 (7,021) (11,702) (23,405)

Change in profit before tax (23,405) (11,702) (7,021) 7,021 11,702 23,405

Hypothetical changes in raw materials and consumables used in the six months ended 30 June

2020 10% 5% 3% –3% –5% –10%


Raw materials and




in the six months ended

30 June 2020 . . . . . . . . 16,246 8,123 4,874 (4,874) (8,123) (16,246)


Hypothetical changes in raw materials and consumables used in

2020 10% 5% 3% –3% –5% –10%


Raw materials and




in 2020 . . . . . . . . . . . . 41,545 20,772 12,463 (12,463) (20,772) (41,545)


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2019 10% 5% 3% –3% –5% –10%


Raw materials and




in 2019 . . . . . . . . . . . . 38,166 19,083 11,450 (11,450) (19,083) (38,166)



2018 10% 5% 3% –3% –5% –10%


Raw materials and




in 2018 . . . . . . . . . . . . 30,001 15,000 9,000 (9,000) (15,000) (30,001)


Anti-kickback Measures

An effective set of anti-kickback policies and procedures is critical to ensure the integrity of

our quality control, supply chain management and the control of our costs. Our anti-kickback

measures and initiatives include the following:

. Whistle-blower program. We have implemented a whistle-blower program under which

our employees are encouraged to report instances of briberies directly to the audit

department. We also encourage our suppliers to report us any kickbacks by

announcing a compliant mailbox to them; and

. Anti-kickback deposit. Suppliers with significant procurement transaction amount are

required to pay an anti-kickback deposit.

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Stringent Standards for Ingredients

We manage our suppliers and procurement strategies based on the categories of food and

supplies, and the source of our major ingredients and their shelf life are summarized as follows:

. Pork Tripe. We meticulously select pork tripe from Denmark and source such pork tripe

through local traders based in China; the pigs there were fed a healthy proprietary all-

natural vegetarian diet and raised without the use of antibiotics, or hormones, and the

pork tripe has good hygiene. Frozen pork tripe generally has a shelf life of two years.

We select suppliers/traders in Greater China to help perform the preliminary

processing of the pork tripe, including the cleaning and chopping of the pork tripe,

and such processed frozen pork tripe has a shelf life of one year.

. Chicken. We purchase various chicken products from domestic suppliers. Our trained

quality control staff conducts quality inspection upon delivery on chicken products we

purchased, such as visual inspection on different aspects of the ingredients, including

their color, shape, size, packaging and any indication of spoilage.

. Beef. We, through traders we cooperated with in China, indirectly source beef from

Australia and the United States. Frozen beef usually has a shelf life of two years, and

our trained quality control staff conducts quality inspection upon delivery, on the beef

products we purchased, such as visual inspection on different aspects of the

ingredients including color, shape, size, packaging and any indication of spoilage.

. Pork bone. Our pork bones have a typical shelf life of eighteen months. Our trained

quality control staff conducts quality inspection upon delivery of the pork bones we

purchased, such as visual inspection on different aspects of the ingredients including

color, shape, size, packaging and any indication of spoilage.

. Vegetables. We purchase various farm-fresh vegetables from several major domestic

vegetable production bases and authorized local suppliers. Vegetables have their

typical shelf life from two to five days. To ensure they are fresh and clean, we demand

inspection reports for each batch upon delivery. We also regularly conduct inspection

to ensure that the pesticide residues and other chemical residues on vegetables meet

the national standards.

There has been a transmission of ASF in China since early August 2018. To respond to this,

the PRC Government decided to slaughter pigs infected with ASF and prohibited the exchange of

pork products from certain provinces, which had affected the supply of fresh pork and caused

the price of pork to rise. As a result, the continuous transmission of ASF may have adverse

impacts on the operations of restaurants whose main dishes are served with pork, due to the

limited supply and the rising cost of fresh pork. Therefore, ASF may bring potential threat to the

catering service market in China.

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Inventory Management

We set stringent requirements for the storage of ingredients and supplies in third-party

warehouses. Third-party warehouse inspectors conduct daily inspections of these warehouses to

ensure a strict compliance with our requirements. In addition, our headquarters conducts

inspections on third-party warehouses from time to time. Our third-party warehouses are required

to provide storage facilities at appropriate temperatures or other storage conditions by following

our standards. In addition, they are responsible for security, contamination prevention, fire

prevention and ensuring our inventories are protected from rain. Such warehouses shall be

insured for any losses, caused by earthquake, fire, flood, stealing, of our ingredients and

supplies.

Procurement Procedure

We have established centralized procurement procedures for all purchase orders. We also

have established internal review, approval and monitoring procedures for all purchase orders,

including the centralized purchases made by our procurement department.

MARKETING AND BRAND DEVELOPMENT

Our Customers

We have been able to develop a diversified customer portfolio and have developed a stable

customer base that comprises both the new generation and the others. Want Hotpot, as our

flagship, has its brand orientation as to provide classy upscale dining and its target customers

as younger customers, families and groups. For other restaurants, the target customers of both

Guoji Hotpot and Soup for the Soul are the new generation who pursue a stylish and convenient

gathering and desire ready-to-serve, convenient and tasty food.

Members’ Club

To foster customer loyalty, promote our brand and enhance customer experience, we

launched a Members’ Club in September 2018. Customers may register on our official account or

mini program based on popular social media using their mobile numbers, and then they will

receive articles and notifications of marketing information relating to our new menu items, new

restaurant openings and promotional activities. We keep records of our members’ ordering

history and preferences through the data stored in the cloud-based POS system.

Our members receive one award credit for every Renminbi Yuan spent in our restaurants,

which can be redeemed for certain dishes and cash coupons in our Members’ Club according to

the number of credits accumulated. Generally, the award credit will expire by the end of March of

the following year in which the award credit earned. Our Members’ Club had attracted more than

8.6 million members as of the Latest Practicable Date, and among 1.3 million of them who

indicated their age group in our Members’ Club, around 78.4% of whom are younger customers

aged 18 to 35. We also dedicate to reinstating our churned members by awarding special

coupons to them. During the Track Record Period, our members in aggregate contributed

approximately 60% of our revenue. Other than our Members’ Club, we do not typically have any

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promotional events or discounts across all of our Want Hotpot restaurants and other restaurants.

We request the service provider of cloud-based POS system to keep our members’ data

confidential and regularly release a report for our review.

Targeted Marketing

Our brand and reputation has primarily been built through word-of-mouth recommendation

from satisfied customers and through our high-quality service. We also have been proactively

engaging in marketing activities and getting up our promotional efforts to attract younger

customers. According to the F&S Report, online marketing is getting popular due to the advances

in technology, the rise of social media, and the changes in people’s lifestyles in particular in that

of the generation Z. Younger customers are open to novel marketing ideas and are very keen on

having a hand in fascinating marketing activities. To this end, we actively run our social media

accounts, post certain short videos or go live on popular social media platforms, and launch

online co-branding campaigns with brands that are favorites of younger customers. We aim to

reach our target audience and increase conversion in particular in potential younger customers

group through targeted marketing.

Our targeted marketing mainly encompasses three channels as social media marketing, live-

streaming sales and branding collaborations. As for social media marketing, we post articles

about our new dishes, new openings or other promotional activities through our official account

on popular third-party social media platforms from time to time to strengthen our communication

with customers. As for live-streaming sales, we cooperate with social media influencers who have

a large fan base to sell our products. As for branding collaborations, where our brand and our

partner’s brand in such a strategic alliance contribute their own identities to combine the market

strength, brand awareness and cachet of two brands, we are able to attract target audience and

to boost our reputation. For instance, we collaborate with the KOBITOS (屁桃君) to launch both

online and offline co-branding campaigns. Such in-depth cooperation birthed our specifically-

designed food delivery box packaging and food packaging with the cartoon KOBITOS, and we

also utilized the brand name and cartoon characters of KOBITOS on a series of our course sets.

As such, we present our food prepared with a spirit of artisan and craftsman in a way that the

new generation fancies, so as to attract an increased number of younger customers.

To bring the best of our targeted marketing and to utilize the most of the foregoing facets,

we take into account various factors, such as seasonality, spending patterns and consumer

preferences of different ages and genders, in particular of younger customers, to tailor each

marketing campaign to meet such goals.

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OPERATIONS MANAGEMENT

Standardization

We rely on standardized operations to maintain the consistency in the quality of food and

services and the overall dining experience across our restaurant network. We have established a

comprehensive set of standards and specifications with respect to various aspects of our

restaurant operations, including ingredients storage, food preparation and processing, restaurant

hygiene, food serving, facilities maintenance and employee conduct and our staff training

programs. We believe that standardized operations allow us to efficiently share know-how and

adopt best practices when opening new restaurants, which further enable us to maintain high

and consistent quality of operations among all restaurants across our network. The effective

implementation of standardized operations across our restaurant network is achieved by

leveraging the following:

. Setting up the restaurant Standard Operating Procedures, or the SOPs. We have set up

and have been continuously upgrading our SOPs, which is a set of step-by-step

instructions compiled to help all staff carry out routine operations. Our SOPs, covering

areas such as cash management, operational workflow for each position and other

instructions, aim to, and have enabled us to, achieve efficiency, quality output and

uniformity of performance across our restaurant network.

. Distributing our operations manual and operations management checklists. We

distribute our operations manual and operations management checklists (for dining

areas and kitchens in restaurants) to our restaurants and ask the managerial staff in

our restaurants to manage and review operations matters, such as the cleaning of the

icemaker, refrigerator and tableware, according to the operations manual. The

managerial staff will then fill in the checklist accordingly. The corresponding

managerial staff is required to meet the KPIs set out in the operations manual.

. Internal online operations management system. We require all of our regional

managers, restaurant managers, head chefs and other restaurant managerial staff to

daily inspect the restaurant operations and complete the forms in our internal online

operations management system. For each form, it takes two to three hours to

complete, which covers three operations modules. Each regional manager submits

around 16 forms each month to our headquarters for assessing the restaurants’

performance and ensuring the standardization across our restaurant network is

achieved.

. Online training system and Laowang Academy. We have built an e-learning platform

where our staff can have access to our online training sessions. We upload our

training materials and courses, such as information technology and core value, to our

online training system. We established Laowang Academy to offer training and

development programs for our staff to acquire knowledge related not only to their jobs

but also to their career development, colleague relationships, family relationships, and

so forth. Restaurant managers are responsible for supervising their staff to acquire the

foregoing knowledge and complete training sessions in the online training system.

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. Monthly quiz on operations. We require all of our regional managers, restaurant

managers, head chefs and other restaurant managerial staff to take monthly quiz on

operations. Each monthly quiz has around 50 to 80 questions related to, among

others, the SOPs and quality control, and the employees have around 30 to 40 minutes

to complete the quiz. On average, we have around 250 restaurant managerial staff

each month to take the monthly quiz with a pass rate close to 90%, where the

remaining 10% has to pass a make-up quiz, and the quiz grade will be regarded as

their KPI.

. Incentive policies. We incentivize our employees to better fulfill their job duties so as

to achieve standardized operations across our restaurant network through bonus

based on the performance of restaurants. For example, the bonus for our restaurant

managers and head chefs are calculated based on the revenue, profit, and after-tax

profit of a single restaurant they work at; the bonus for our regional managers and

regional inspectors are calculated based on the overall performance of restaurants

within the region they are in charge of. As such, we utilize incentive policies to

incentivize our managerial staff to operate, manage, and inspect our restaurants

according to the SOPs, which in turn will award them with bonus in return, so as to

help achieve standardization.

Pricing

We offer high-quality food at reasonable price to bring great value to our customers.

Generally, the pricing of our menu items is determined by our headquarters with close attention

to local conditions. We set a price for our menus based on the market price and our target profit

margin. We also closely monitor the pricing of our competitors in the same commercial districts

to evaluate our pricing. We may update our pricing from time to time to reflect market trends and

general economic conditions.

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Performance Assessment

We conduct periodic assessment of the performance of our restaurants. Our comprehensive

assessment covers unannounced inspections and on-site restaurant inspections by secret

customers. This performance-based assessment takes into account a set of indicators, such as

restaurant revenue, hygiene, service, food safety and customer feedback. Secret customers

submit reports covering key areas such as service quality, food quality and restaurant hygiene

after their inspections. Our headquarters also conducts unannounced inspections of our

restaurants from time to time.

In addition, we also incorporate a digital performance assessment mechanism where we

utilize digital measures as follows to timely inspect, assess and support the operations across

our restaurant network:

. Cloud-based POS system. The automatically generated data analyses in our cloud-

based POS system are accurate and precise, which enable our headquarters to keep

abreast of the real-time restaurant operations information, such as the orders, queuing

and customer churn rate, and further, to assess the performance of our restaurants.

. Restaurant inspector system. Our operations management team at our headquarters is

responsible for analyzing reports generated from our restaurant inspector system,

assessing the performance of our restaurants, and interpreting these reports into real

operating value for our restaurants to adjust their operations accordingly and

effectively.

. SQS system. Our restaurants are spot-checked by our headquarters through our SQS

system on a daily basis for assessing the performance of our restaurants. Such spot-

checks help us ensure that the flavor, quality and safety of the food and the quality of

the services meet our stringent standards. Our headquarters can timely identify under-

performing restaurants, and monitor and supervise the operation status of each of our

restaurants in real time.

When we identify an under-performing restaurant, we will investigate the underlying

reasons, which may be related to, among other things, COVID-19 or restaurant location. We then

take corrective actions to address the issues that we have identified, and we will assess the

effectiveness of such corrective actions after a period, such as increasing our marketing efforts.

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2021, and from 1 July 2021 to the Latest Practicable Date, two, one, four, two and two restaurants

were closed, respectively. The table below sets forth a breakdown by brands and by reasons:


Six months

ended

30 June

1 July 2021 to

the Latest

Practicable

Date2018 2019 2020 2021

Number of restaurants closed/disposed of:

Want Hotpot . . . . . . . . . . . . . . . . . . . . 1 1 3 2 2

Due to under-performance . . . . . . . . . 1 0 2 1 1

Due to termination of lease

agreements . . . . . . . . . . . . . . . . . 0 0 1 0 0

Due to other reasons(1) . . . . . . . . . . . 0 1 0 1 1(3)

Other restaurants(2) . . . . . . . . . . . . . . . 1 0 1 0 0

Note:

(1) Other reasons include license issues attributable to the owner of the property and unattractive locations.

(2) Include Guoji Hotpot Generation I and other closed restaurants.

(3) Represents a Want Hotpot restaurant that was briefly closed pending for the Fire Safety Inspection Approval, which

has been granted on 30 August 2021. We will reopen the restaurant in early September 2021.

Customer Feedback Management

We strive to provide best-in-class customer service at our restaurants, which we believe is

the core of customer relationship management.

Generally, we receive feedback or complaints from customers in our restaurants, through (i)

social media, such as food delivery platforms, cloud-based POS system, word-of-mouth marketing

platforms, and microblogging website; and (ii) our customer service call center, online customer

service mailbox and accounts based on popular social media. Our restaurant managers are

responsible for promptly resolving complaints regarding the quality and safety of food and the

quality of services at the restaurant level and are authorized to take remedial actions, including

replacing the dishes that are the subjects of the customers’ complaints, waiving charges on

dishes, discounting final bills or offering complimentary drinks and responding quickly to

negative reviews on social media. Since social media is a critical way to communicate with our

customers and prospects, our restaurants’ ableness to deal with such negative reviews will be

regarded as a KPI to evaluate their performance. During the Track Record Period, we did not

receive any material customer complaint with respect to our restaurants.

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FINANCE MANAGEMENT

Accounting Data

We track key accounting data primarily from three facets as the sales, the procurement and

the food processing. First, with respect to the sales, we adopt the cloud-based POS system to

track and collect sales data generated both at our restaurants and from our food delivery

services; such sales data will be timely transferred to Kingdee for generating our daily revenue

report in a readable format for our finance management team to review, analyze and monitor

daily operations and payments collection. Second, with respect to procurement, first-hand

procurement data from placing procurement order to accepting ingredients and other supplies

provided by our suppliers are collected and stored in Kingdee, which enables us to timely enter

and compile account information, manage our inventories and swiftly generate procurement list.

Third, with respect to food processing, the production personnel in our Laowang Gourmet Lab

input information related to food processing, which is available to our finance management team

to prepare accounts accordingly. Due to effectively tracking and entering accounting data and

analyzing them with know-how, we have been able to control profit and loss, audit financial

information, compile and present daily, monthly, quarterly and annual reports, budgets, business

plans and financial statements, and steadily enhance our finance management capabilities.

Budgets

Each of the departments at our headquarters and our restaurants budgets for its own for the

next year and submits the budgets to our finance management team during October to November

in each year. Our human resources department budgets human resources expenses for the next

year based on hiring plans and the estimated staffing tables built by each of the departments at

our headquarters and our restaurants. The operations department at our headquarters collects

regional scenarios to provide estimated revenue and budgets for the next year, and such

estimation will be examined by our finance management team and then by our general manager.

The expansion management department at our headquarters compiles the restaurants expansion

plan for the next year and then submits it to our operations department for review; after general

manager’s approval, such expansion plan will be carried out. Our Board of Directors makes final

decision on such estimation; once our Board of Directors finds it reasonable and feasible, we

will execute our operations according to such estimation phase by phase. In addition, we identify

the current and desired states of our operations and conduct a gap analysis between the two on

a quarterly basis; we timely adjust our operations according to such gap analysis on a quarterly

basis as well.

Finance Management Systems

We employ cloud-based POS system for tracking sales data, Kingdee for tracking the cost

and supply chain expenses, and OA system for reviewing and approving application and expense

reimbursement. Our cloud-based POS system comprises electronic cash register systems, receipt

printers, display monitors and barcode scanners, and is used to assist the monetary transaction

and the analysis of the performance of our business. The adoption of Kingdee enables us to

carry out bookkeeping, utilizes smart finance and achieves accurate accounting. Our OA system

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enables us to create, collect, store, manipulate and relay office information in a data storage

system, which allows us to track our financials in an efficient way and produce accurate financial

statements.

Settlement and Cash Management

Like most other restaurants, we do not grant any credit terms to our customers. We accept

cash and mobile-based payment at our restaurants. We started to sell prepaid membership cards

to our customers at Guoji Hotpot restaurants in June 2021, where they can buy a prepaid

membership card with certain money on it and then use the card to spend up to that amount at

Guoji Hotpot restaurants. The majority of customers chose to pay through third-party mobile-

based payments during the Track Record Period. As non-cash payments become increasingly

common, risks related to cash management have been and are expected to be maintained at

minimal level. Percentage of cash payments in terms of total payments from our customers was

declining over the Track Record Period: 4.9%, 2.9%, 1.5% and 1.4% for the years ended 31

December 2018, 2019 and 2020 and the six months ended 30 June 2021, respectively.

In addition, to ensure the accuracy of recording and tracking customer spending, we employ

cloud-based POS system in our restaurants. To avoid misappropriation and embezzlement of

cash, we have adopted cash management and delivery system in each of our restaurants.

Restaurant managers are responsible for ensuring that cash received during the day matches the

sales records and is timely transferred to bank accounts on every Monday and Thursday. In

addition, we have installed surveillance cameras in many of our restaurants to monitor the

restaurants’ operations and prevent misconducts. We also monitor the accuracy of sales through

our cloud-based POS system.

During the Track Record Period and up to the Latest Practicable Date, we had not

encountered any incident of cash misappropriation or embezzlement that had a material adverse

impact on our business, results of operations or financial condition.

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HUMAN RESOURCES DEVELOPMENT

We believe our employees lay the foundation for our customers and we have established an

effective and efficient talent development system. We endeavor to cultivate talented and loyal

employees by treating our employees as our families with dignity, respect, fairness and Love. We

motivate our employees with career development opportunities and competitive compensation

package. We believe our training and promotion program allows our employees to envision their

career paths and growth potential with us. We offer tailored promotion paths for our employees

served in dining areas and kitchens, and the promotion of employees at our headquarters is

measured by their performance at their own departments where those outstanding ones will be

recommended for promotion by their departments. All of our employees have a chance to be

promoted to management level regardless of the positions they start in. Some of our restaurant

managers were promoted from and had served in non-managerial positions such as waiters and

waitresses. The following chart sets forth the career path for each type of employee at restaurant

level to be promoted:

Service Track Kitchen Track

Head Chef

Associate Chef

Cook

Regional InspectorRegional Manager

Restaurant Manager

Maitre d’hotel

Supervisor

Management Trainee Waiter/waitress

We reward hard work through our compensation structure. In addition to a base salary,

compensation of our restaurant managers is tied to the revenue of the restaurant where he or

she works, while compensation of our regional managers is tied to the profits of restaurants

located in his or her regions. We offer compensation of our restaurant staff with base salary,

bonus and certain allowances. We also granted restricted stock units as share incentives to

qualified directors and employees, see ‘‘Appendix IV — Statutory and General Information — D.

Other Information — 14. Share Option Schemes — Pre-[REDACTED] Share Option Schemes.’’ Our

staff costs include all salaries and benefits payable to all our employees and staff, including our

Directors and management team, headquarters staff, Laowang Gourmet Lab staff, and restaurants

staff.

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In addition to our promotion scheme and compensation structure, we genuinely care about

our employees in every way. We provide our employees with weekly bulletins and meetings for

the members of a team to share their thoughts, learnings or other ideas, passing our Love and

concern on. As a result, our monthly employee turnover rate, excluding employees left their jobs

after less than a month, was 8.3%, 7.5%, 7.2% and 8.0% in 2018, 2019 and 2020 and the six

months ended 30 June 2021, respectively, which was relatively low in our industry, according to

the F&S Report.

A significant majority of our employees are restaurant staff. As of the Latest Practicable

Date, we had a total of 3,851 staff, including 2,092 employees and 1,759 outsourced personnel.

The table below sets forth our employees by functions as of the Latest Practicable Date:

Number of Staff

Headquarters Level . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116

Management and administrative staff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

Finance and compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

Procurement and supply chain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

Operation management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Food safety and quality control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Marketing and promotion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

Research and development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

Restaurant Level . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,682

Managerial staff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 658

Kitchen staff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,692

Service staff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,332

Laowang Gourmet Lab . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,851

Recruiting and Retention

We are committed to hiring qualified candidates, including experienced restaurant

managers, supporting staff and industry experts, to support our business growth and operations.

We offer competitive wages and benefits, and seek to create a caring and loving corporate

culture to stimulate cooperation and teamwork and to encourage growth of employees. We are

also committed to increasing employee engagement level to improve the efficiency and

sustainability of our organization.

In terms of employee retention, we have implemented a number of initiatives, including

establishing an orientation kit for new employees to instill our corporate values and culture in

new employees, conducting employee training programs to improve their job skills and help with

their career advancement, and encouraging internal communication by conducting employee

surveys.

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We have also been collaborating with various vocational schools and colleges to providestudents with internships and placement opportunities at our restaurants. We believe thesecollaboration initiatives help build a talents pool to provide us with a high-quality supply of bothpart-time and full time employees. We also launched our management trainee program in 2020 toprepare sufficient reserve of talents for our management team.

To build a reserve of talents for our management team to meet the demand of our furtherexpansion, we have launched the following promotion schemes:

. Internal promotion program. We have set up a full set of training sessions to growservice staff and kitchen staff into a qualified restaurant managerial staff. For servicestaff and kitchen staff, we prepare them the training sessions covering our core value,products that we sell, restaurant security and food safety and quality. Our service staffwill also learn how to welcome our customers warmly, collect digital and cashpayments effectively and cleaning the tables quickly, whereas our kitchen staff willstudy how to chop ingredients, handle food and cook clay-pot rice and seafood.Supervisors, restaurant managers and head chefs need to complete the trainingsessions covering communication skills and human resources management. Restaurantmanagers also need to complete the training sessions covering team building, publicrelations management, human resources management, legal affairs management,emotions management and so forth.

. External recruiting program. We also hire qualified candidates from other chainrestaurants brands and employ them as intern restaurant managers. They will bepromoted to restaurant managers once they passed our examinations.

. Management trainee program. We have also been collaborating with various vocationalschools and colleges to provide students with internships and placement opportunitiesat our restaurants. We believe these collaboration initiatives help build a talents poolto provide us with a high-quality supply of both part-time and full time employees. Ingeneral, it takes nine months for a student fresh out school to be a qualified assistantrestaurant manager and another one year to be a qualified restaurant manager, underour delicately designed promotion scheme. We have launched our management traineeprogram in 2020, aiming to pool sufficient talents for our management team.

Laowang Academy

We conduct comprehensive online and offline trainings for all our employees, including ourheadquarters office personnel, restaurant management personnel and restaurant staff.Successful completion of the relevant training programs is required for promotion and careeradvancement at each level. We maintain training and performance assessment records for eachof our employees to motivate their active participation in the training programs, which we believewill improve the standardization and efficiency of our daily operations throughout our Company.We believe our training programs also help promote internal upward mobility, which not onlyincreases employee retention rate, but also produces the management personnel needed for ourrapidly expanding restaurant network.

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Our human resources department is responsible for organizing a series of trainingprograms, including restaurant operations, management skills, communication, food preparationsteps, service posture guidance and hygiene standards.

From time to time, we outsource the function of employing temporary employees at ourrestaurants for the cleaning and dishwashing tasks and some of our restaurant staff at diningareas and kitchens. We collaborated with a few independent third-party service outsourcingcompanies (the ‘‘Service Companies’’) under a service outsourcing arrangement, pursuant towhich a substantial portion of our restaurant staff were employees of the Service Companies,and we paid service fees to the Service Companies.

As advised by our PRC Legal Advisors, we had not been subject to any material penaltiesrelating to PRC labor laws and regulations during the Track Record Period and up to the LatestPracticable Date. As confirmed by the Taiwan government labor authorities, our Taiwan branchhad not in violation of the applicable Taiwan labor laws and regulations during the Track RecordPeriod and up to 9 August 2021. Our Directors confirm that during the Track Record Period andup to the Latest Practicable Date, there were no material labor disputes or strikes that wouldhave a material adverse effect on our business, financial condition or results of operations.

INFORMATION TECHNOLOGY SUPPORT

We endeavor to distinguish ourselves in the catering service industry by implementingadvanced information technology to support our development, so as to focus on enhancingcustomer experience and improving the efficiency of our operations. We believe our informationtechnology infrastructure serves as the foundation of our restaurant network management andfacilitates efficient and standardized restaurant operations for all restaurants across our WantHotpot and other restaurant brands. To this end, we have implemented a set of managementinformation systems, including the following:

. Cloud-based POS system. All of our restaurants use computerized POS systemcontrolled by our headquarters, which is designed to improve operating efficiency,provide standardized and centralized control over menu mix and pricing, collectfinancial and marketing data, and save time and expenses for restaurants andcorporate administration. This system records each order and print the food requestsin the kitchen for efficient food preparation. The data retrieved from cloud-based POSsystem includes the number of customers, dining time, location of the customer’s seat,quantities of each menu item sold, cash and credit card receipts, and membershipcard number, if available. The cloud-based POS system provides us with the real-timedata transmission service, enabling management to monitor and analyze consumptionbehavior, customer spending patterns and inventory data on a timely basis. Byconnecting with our financial management system, our financial department cancollect and analyze our operational results through this system in due course.

. Restaurant inspector system. Our restaurant inspector system enables us to superviseand manage the operation of our restaurants. Our restaurant management team setsup the inspection tasks and submits the inspection results via the restaurant inspectorsystem.

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. Online training system and Laowang Academy. We have built an e-learning platformwhere our staff can have access to our online training sessions. We upload ourtraining materials and courses, such as information technology and core value, to ouronline training system. We established Laowang Academy to offer training anddevelopment programs for our staff to acquire knowledge related not only to their jobsbut also to their career development, colleague relationships, family relationships andso forth. Restaurant managers are responsible for supervising their staff to acquire theforegoing knowledge and complete training sessions in the online training system.

. SQS system. Our restaurants are spot-checked by our headquarters through our SQSsystem on a daily basis for assessing the performance of our restaurants. Such spot-checks help us ensure that the flavor, quality and safety of the food and the quality ofthe services meet our stringent standards. Our headquarters can timely identify under-performing restaurants, and monitor and supervise the operation status of each of ourrestaurants in real time.

The following diagram illustrates our current information technology system:

SQS System/RestaurantInspector System

Finance ManagementSystem

Online Training Systemand Laowang Academy

Cloud-based POS System RestaurantsCustomers

data

Portable ElectronicDevices

Headquarters

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Our integrated IT system enabled us to timely monitor the daily operations throughout our

expansive restaurant networks in a cost-effective fashion. Meanwhile, we recognize the

importance of consumer data protection and endeavor to implement strict measures to protect

and secure confidentiality of our customer data.

LAOWANG GOURMET LAB AND LOGISTICS

Laowang Gourmet Lab

We ensure the consistency of the taste and quality of our food with Laowang Gourmet Lab

in Suzhou, Jiangsu Province. We also outsource certain of our productions to selected third-party

suppliers with high productive capacity and advanced food-processing technology. We have

industrialized our food production process while insisting on certain handmade processes to

avoid that the taste sacrifices for over-industrialization. Notwithstanding we research, develop or

outsource most of our menu items and ingredients at our Laowang Gourmet Lab or from third-

party suppliers, we still have certain handmade food preparations required to be processed at

the kitchens of our restaurants. For example, we prepare different types of zest mix and sauces

for our hot pot soup bases, such as the zest mix for stewed chicken and pork tripe soup base

and the sauce for spicy Taiwan-style soup base, at our own Laowang Gourmet Lab and we deliver

them to our restaurants; therefore, it could be easy for the kitchen staff at our restaurants to

simmer the soup base and ensure a consistent quality and taste in every restaurant.

Laowang Gourmet Lab commenced operation on 30 January 2015 to develop formulas and

provide ingredients and other supplies for all of our Want Hotpot and other restaurants. The

following table sets forth information of the food production capacity, production volume and

utilization rate of our Laowang Gourmet Lab during the Track Record Period:

Year ended/As of 31 December

Six months ended/

As of 30 June

2018 2019 2020 2020 2021

Production capacity (ton)(1) . . . . . . . . . 967 1,108 1,919 959 1,045

Production volume (ton) . . . . . . . . . . . . 642.3 1,051.4 1,089.7 398.7 559.3

Utilization rate (%)(1) . . . . . . . . . . . . . . 66.4 94.9 56.8 41.6 53.5

Note:

(1) Based on one shift per day.

The utilization rate equals the actual production volume divided by the designed production

capacity of Laowang Gourmet Lab.

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Logistics

Our logistics operations coordinate, storage and delivery of supplies throughout our

restaurant network. We have established a logistics system comprising our Laowang Gourmet Lab

and eight third-party warehouses located in the cities of Shanghai, Suzhou, Hangzhou,

Chongqing, Beijing, Shenzhen, Xiamen and Nanjing. Each of these warehouses has one frozen

storage chamber.

We engage large-scale third-party transportation companies with cold-chain food delivery

capabilities to provide logistics services to us. In addition, our suppliers are responsible for

delivering ingredients and supplies to third-party warehouses or to our restaurants directly. Risks

associated with the transportation are assumed by third party transportation companies or

suppliers for domestic transportation, and are covered by insurance policies.

We arrange next-day delivery of ingredients that have a short shelf life, such as farm-fresh

vegetables and fruits and fresh meat and seafood, directly from our suppliers to our restaurants.

For processed food and other supplies, such as pork bone, pork skin and pork tripe, restaurants

in Shanghai will submit the request directly to our headquarters, the other restaurants to

Laowang Gourmet Lab; after receiving the request, our headquarters or Laowang Gourmet Lab will

place orders to suppliers. Within seven to ten days of the placement, our suppliers will deliver

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the ingredients and supplies to third-party warehouses, which will be delivered to our

restaurants. The following diagram illustrates our logistical flow from ordering, production,

warehousing to delivering of our ingredients and supplies:

Logistics

Next-day Deliveryfrom Suppliers

Delivery fromWarehouses

Suppliers

Restaurants

Restaurants

RestaurantsOutside Shanghai/

Inside Shanghai

LaowangGourmet Lab/Headquarters

Suppliers

Third-PartyWarehouses Outside

Shanghai/Inside Shanghai

Restaurantsoutside Shanghai/

Inside Shanghai

Place the order

Place the order

7-10 days

Submit the request

T+1

Food Processing

We arrange next-day delivery of ingredients that have a short shelf life, such as farm-fresh

vegetables and fruits and fresh meat and seafood, directly from our suppliers to our restaurants.

We produce different types of zest mix and sauces for our hot pot soup, such as the zest mix for

stewed chicken and pork tripe soup and the sauce for spicy Taiwan-style soup, at our own

Laowang Gourmet Lab in Suzhou, Jiangsu Province. We also outsource a certain portion of semi-

processed products from our suppliers, such as pork tripe and the zest mix for our ready-to-serve

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products, based on our guidance and proprietary formulas we developed and protected with

strict confidentiality. We engage our suppliers to perform the preliminary processing of our raw

materials, such as the cleaning and chopping of various ingredients. We also engage third-party

suppliers to perform the preliminary processing of our shrimp paste; as such, in our restaurants,

the kitchen staff only needs to knead, mix and hit the shrimp paste in a bowl until it is glued.

Such arrangements ensure the consistency of food quality and taste among different restaurants.

FOOD SAFETY AND QUALITY CONTROL

Food safety and quality control are of paramount importance to our business. When it

comes to ingredients, we never compromise on quality and safety issues. We insist on the

handmade with a spirit of artisan and craftsman and we are committed to delivering heavenly

flavors with Love to our customers. We implement stringent food safety and quality control

standards and measures throughout different aspects of our operations, including (i)

procurement, (ii) food processing, (iii) storage and logistics, and (iv) restaurant operations. We

oversee food safety at our general manager level, with a food safety department that reports

directly to our general manager and handles major issues in relation to food safety. As of the

Latest Practicable Date, our food safety department consists of three managers at our

headquarters. In addition, we have four supporting staff being in charge of the food safety

affairs as well. Mr. Lee Chun-yi, our deputy general manager and a member of the senior

management, is responsible for day-to-day food safety management. Our regional inspectors and

supervisors of operations also conduct regular review and quality monitoring at the operation

level. Our food safety department reports directly to our deputy general manager, and is

independent from the other departments; in addition, it has a veto power over all quality control

related issues and decisions.

Procurement

Our research and development department determines the specific brand or varieties of the

ingredients when there is a need to procure new ingredients; to this end, our procurement

department will then select the suppliers meticulously based on their inquiries. Our selection

criteria includes, among other things, the legal and regulatory qualifications, the goods supplied,

quality and inspection results, production capacity, pricing, the overall management and quality

of operations of the supplier. We conduct detailed due diligence work, including inspecting

ingredients samples and supplier’s facilities before entering into a procurement agreement.

Moreover, we actively conduct unannounced quality inspections and review on our suppliers,

including site visits to the facilities of our suppliers.

Food Processing

We adopt stringent safety and quality standards in each stage of our production process.

We have developed stringent food processing, hygiene and quality control policies and

procedures to ensure the quality and safety of our food. The infrastructure and facilities at our

Laowang Gourmet Lab are designed, constructed, maintained and inspected in accordance with

applicable food safety standards, laws and regulations. We require our personnel involved in

production activities to follow strict hygiene standards. Furthermore, we require that all the raw

materials and consumables used in the production process to be strictly in compliance with

applicable laws and regulations with regard to safety and quality. Our quality inspection staff in

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our Laowang Gourmet Lab and restaurants conducts tests on semi-processed and semi-cooked

products to ensure that they comply with our stringent quality standards before proceeding into

the next stage of production. Major tests include sampling tests to ensure the appearance, color,

odor and taste comply with our safety and quality standards. Material factors to the food quality

at each production step are monitored closely to prevent and rectify any potential occurrence of

production errors.

Storage and Logistics

Our suppliers are responsible for delivering ingredients and other materials to the

designated third-party warehouses and/or to our restaurants. Upon delivery of the ingredients to

third-party warehouses and/or our restaurants, third-party warehouse staff and/or our restaurant

staff will provide storage facilities at appropriate temperatures or other storage conditions by

following our standards. In addition, third-party warehouses are responsible for security,

contamination prevention, fire prevention and ensuring our inventories are protected from rain.

Such warehouses shall be insured for any losses, caused by earthquake, fire, flood and stealing,

of our ingredients and supplies.

We engage third-party transportation companies to deliver the ingredients and supplies

from third-party warehouses to the restaurants. We implement stringent safety policies and

requirements during the transportation of these ingredients and other supplies.

Restaurant Operations

We adopt stringent food safety and quality control standards for all of our restaurants with

respect to (i) inspection of ingredients and supplies delivered directly from the suppliers, the

third-party supply centers or warehouses, to our restaurants; and (ii) food preparation at our

restaurants. In terms of inspection of ingredients and supplies, our restaurant staff will report to

the food safety department on any deviation or irregularity relating to the quality of ingredients,

and they will reject any ingredients and supplies which do not meet our standards after visual

inspection upon delivery to the restaurants. Each of our restaurants is required to document

quality issue, if any, and report to the food safety department for further handling.

In terms of food preparation, we have developed several staff manual laying out operating

procedures and quality standards to regulate different aspects of food preparation conducted at

our restaurants. We require restaurant staff to strictly adhere to the procedures and standards

stipulated in the manual for ensuring the flavor, presentation, quality and hygiene standards of

our dishes meet our standards. We believe this will allow our customers to enjoy the food with

consistent quality and taste at any of the restaurants in our network, which will help retain

existing customers and attract new customers by gaining their confidence in our quality control

system and brand. In particular, our food safety and quality control policies include the

following:

. Continuous training programs. We continuously provide training programs to our

restaurant staff regarding the operating procedures and quality standards.

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. Unannounced inspections by headquarters. Our food safety department conducts

unannounced inspections on our restaurants to identify and rectify potential quality

and food safety issues. An assessment is conducted on a random basis to evaluate

factors including, among other things, the quality control, staff and hygiene of our

restaurants.

. Collection of customer feedback. Our food safety department reviews customer

feedback on the quality of dishes.

. Open kitchen. In order to promote our customers’ dining experience as well as their

trust in the safety and high quality of our food, we adopt an open kitchen policy in a

majority of our restaurants where a part of the kitchen will be displayed for customers

to observe the food preparing process and inspect the hygienic situation.

. SQS system. Our restaurants are spot-checked by our headquarters through our SQS

system on a daily basis for assessing the performance of our restaurants. We believe

such spot-checks help us ensuring the flavor, quality and safety of the food and the

quality of the services meet our stringent standards. Our headquarters can timely

identify under-performing restaurants, and monitor and supervise the operation status

of each of our restaurants in real time.

PRODUCT AND MENU DEVELOPMENT

We constantly seek to improve the taste of our current menu items and develop new dishes,

soup and hot pot sauces to enhance the overall dining experience for our customers. Changing

with seasons, we embrace a seasonal menu and adopt seasonal ingredients to develop new

dishes for our customers.

The Procedure and Process of Our Product and Menu Development

We serve a wide range of customers. To better gratify our customers and be adaptive to the

market changes, we always proactively and actively seek our customers’ feedbacks, and develop

our menu based in part on our customers’ needs.

We seek to develop new menu items and refine our signature dishes to meet our customers’

expectations and attract new customers. Our menus are modified based on the customer

preferences, seasonal variation and feedback from our customers. We continuously develop new

dishes for each of our brands and keep a pool of reserve dishes.

Developing new dishes primarily consists of the following key steps:

. Project proposal. Our research and development department will customize new dishes

for each brand defined by its brand positioning and seasonality. For Want Hotpot, we

develop new dishes as supplements to the serving of our signature dishes, the stewed

chicken and pork tripe soup. For other restaurants, we offer the tailored seasonal

menus to bring the food that are in season in Guoji Hotpot and we focus on developing

the derivative soup of our signature stewed chicken and pork tripe soup in Soup for the

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Soul. Other factors we try to take into consideration for developing new dishes mainly

include brand positioning, target customers, stability of food supply, operation and

standardization.

. Committee approval. Our product committee comprises our general manager, regional

inspectors, and heads of our research and development department, operations

department, marketing department, and procurement department. The product

committee evaluates the new dishes throughout the process and approves the

proposed dishes primarily based on the cost, presentation and taste of the dishes.

. Trial launch and launch. Before launching a new dish in all restaurants, we conduct a

trial launch in certain selected restaurants. We adjust proposed new dish based on the

sales volume generated and feedback collected during the trial launch. We continue to

track the sales volume and collect feedback from our customers after the official

launch, which can help assess the level of market acceptance to the incubated menu

item.

The following diagram illustrates the typical procedures of our product and menu

development:

Development ofLaowang’s

Gourmet Food

Project Proposal

Committee Approval

Trial Launch

Launch

one to two months

Approximately three months

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We curate our menu through the continued efforts of our research and development

department, review of sales performance and our customers’ feedbacks. Once we receive

feedback on a particular dish, we would seek to adjust our dish. Because most of our hot pot

ingredients are served raw and are cooked on the dining table, the feedback we received on our

dishes generally requires us to work with our suppliers to adjust the taste and quality of the

dish.

COMPETITION

According to the F&S Report, we ranked first and fourth in the Cantonese hot pot and hot

pot restaurant market in China in terms of revenue in 2020, respectively. The Chinese hot pot

restaurant market is highly fragmented and intensely competitive with respect to food quality

and its consistency, price-value relationship, ambience and service, location, stable supply of

high-quality ingredients and availability of trained employees. Key success factors in the industry

include unique food offerings, restaurant management abilities, brand image and operation, and

standardization of product offerings and service provision. According to Frost & Sullivan, revenue

of Chinese hot pot restaurant market in China grew at a CAGR of 2.6% from RMB395.5 billion in

2016 to RMB438.0 billion in 2020. It is expected that the revenue of Chinese hot pot restaurant

market will further grow at a CAGR of 14.2% to reach RMB850.1 billion in 2025.

We primarily target younger customers, families and groups with a broad customer base,

and compete against other chain and standalone Chinese hot pot restaurants. Our major

competitors are other Chinese hot pot restaurant brands with their chain restaurants mainly

located in shopping malls.

We believe we are competitively positioned due to our reassuring ingredients, tasty food,

distinctive brand image, successful restaurant network development strategies, scalable and

standardized business models, stable and healthy customer relationship and strong operational

management capabilities.

INTELLECTUAL PROPERTY

We currently operate our restaurant network under Want Hotpot as our flagship and other

restaurant brands as Guoji Hotpot and Soup for the Soul. In connection with such brands, as of

the Latest Practicable Date, we maintained 95 trademark registrations in the PRC, a total of 11

trademark registrations in other jurisdictions, including Hong Kong and Taiwan, and are in the

process of registering nine additional trademarks. We are working to increase, maintain and

enforce our rights in our trademark portfolio, which is important to our reputation and brand

operation and management.

Besides trademarks, as of the Latest Practicable Date, we also maintained two patent

registrations, 17 copyright registrations and a total of five domain name registrations in the PRC.

We are in the process of registering six additional copyrights. For more details, see ‘‘Appendix IV

— Statutory and General Information — 7. Intellectual Property Rights.’’

A number of proprietary know-how and trade secrets are also of significant importance to

our operations, including the formulas for certain ingredients and soup. We did not apply for

patents for our formulas because the protection period currently available under PRC patent law

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is no more than 20 years, and once our formulas are registered as patents, the contents will be

required by the Patent Administration Department to be published to the public after the lapse of

eighteen full months from the date of our patent application, which we believe, would disclose

our secret formulas to the market, bring out more competitors, and would have a material

adverse effect on our business. Our core formulas are tightly controlled by our general manager

and the director of Laowang Gourmet Lab. We rely on trade secrets protection and confidentiality

agreements with our general manager and key personnel of our research and development and

management team to safeguard our interests in this respect.

In mainland China, our research, development and management personnel have entered

into confidentiality agreements with us. The labor contracts they entered into with us also

stipulate terms relating to the ownership of the service works, pursuant to which the copyright of

works wrote or produced for us or other works created for fulfilling the tasks assigned to the

personnel by us, as agreed upon in such labor contracts, shall belong to us. These agreements

typically address intellectual property protection issues and require such personnel to assign to

us all of the inventions, designs, formulas and consolidated know-how they developed during

their employment with us. In addition, according to our policies, in our production process, as an

approach to protect our interests in formulas and to prevent any leak of the formulas, each staff

member only knows the manufacturing procedures and know-how for his or her own part of the

whole production process, instead of one man knows them all which is highly risky.

In the past, we have found that certain third parties had used or imitated our trademarks or

trade names without our authorization to operate restaurants in cities where we do not have a

presence. Our Directors are of the view that these incidents had not had any material adverse

effect on our reputation, prospects, business, results of operations and financial condition. We

have entered into a close cooperation with a PRC law firm to help scan any infringement of our

intellectual property rights and take certain legal actions against such infringement detected.

During the Track Record Period and up to the Latest Practicable Date, we did not experience any

intellectual property dispute or infringement that had a material and adverse impact on us.

AWARDS AND RECOGNITIONS

As a testimony to our achievements and the quality of our services, food and dining

experience, our Group and restaurants have received numerous awards and recognitions. The

table below sets forth our major awards and recognitions received during the Track Record

Period:

Year Awards and recognitions Issuing authority

2021 Top Ten China’s Hot Pot Restaurant Brands China Hospitality Association (中國飯店協會)

2020 Top 100 China’s Most Influential Hot Pot

Restaurant Brands

China Hospitality Association (中國飯店協會)

2020 China’s Top 10 Hot Pot Restaurant in 2020 canyin88 (紅餐網)

2019 Most Influential Catering Service Brands in

Shanghai

China Smart Food & Beverage Innovation

Summit (中國智慧餐飲創新峰會)

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PROPERTIES

Our headquarters is located in Shanghai. We do not own any property but lease all of our

restaurants sites, Laowang Gourmet Lab and headquarters premises. We believe such leasing

strategy reduces our capital investment requirements. We do not intend to acquire any property

for our restaurant sites in the future. Our depreciation of right-of-use assets and other rentals

and related expenses amounted to RMB111.1 million, RMB138.2 million, RMB151.3 million and

RMB95.7 million for the years ended 31 December 2018, 2019 and 2020 and the six months

ended 30 June 2021, respectively, representing approximately 12.8%, 12.6%, 13.4% and 14.8% of

our revenue.

Our leases generally have a term of five years or longer, and a rent-free period for four

months from the beginning of the lease term, with some of the leases providing for a renewal

option if we could agree on the renewal terms and conditions with the lessors. We did not

experience any significant difficulty in renewing our leases in a timely manner during the Track

Record Period and up to the Latest Practicable Date. During the Track Record Period, a

substantial portion of the lease agreements for our restaurants were under hybrid rent

arrangements, which include both variable payment and fixed payment. Some of these leases

also include a minimum rent payment clause where we are required to pay the higher of the

minimum rent and the variable rent. Other leases were under fixed rent arrangements.

According to section 6(2) of the Companies Ordinance (Exemption of Companies and

Prospectuses from Compliance with Provisions) Notice, this Document 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 Group’s interests in land or buildings, for the reason that, as of 30

June 2021, none of the properties held or leased by us had a carrying amount of 15% or more of

our consolidated total assets.

Properties Leased in Mainland China

As of the Latest Practicable Date, we leased 144 properties in mainland China with an

aggregate GFA of approximately 69,000 square meters for business operation and office use,

which are mainly used as restaurants sites, Laowang Gourmet Lab and headquarters premises.

Leased properties subject to potential defects

Some of the above-mentioned leased properties were subject to potential defects as

described below (collectively the ‘‘Defective Leased Properties’’). As of the Latest Practicable

Date:

With respect to 11 out of 144 of our leased properties used for restaurants, central kitchen

and offices in the PRC, nine of which the lessors did not provide valid title certificates or

relevant authorization documents evidencing their ownership rights, and two of which the lessors

did not provide relevant authorization documents evidencing their rights to lease the properties.

As a result, there is a risk that these lessors may not have the right to lease such properties to

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us, in which case the relevant lease agreements may be deemed invalid or we may face

challenges from the property owners or other third parties regarding our right to lease, occupy

and use the premises.

With respect to five out of 144 of our leased properties used for restaurants, central kitchen

and offices that have valid title certificates or relevant authorization documents but the usage

does not fit into the prescribed scope of usage shown on the relevant ownership certificates or

relevant authorization documents, as advised by our PRC Legal Advisors, as the lessee of these

properties, we would not be subject to any fines or penalties simply in this regard but we may

not be able to lease, occupy and use such leased properties if the lease was challenged by any

interested party or if the lessor was penalized by the competent government authority.

Non-registration of Lease Agreements

As of the Latest Practicable Date, some lease agreements had not been registered with

competent authorities. As advised by our PRC Legal Advisors, the non-registration of lease

agreements will not affect the validity of the lease agreements, but the competent local housing

administrative authorities can require us to complete registrations within a specified timeframe

and we may be subject to a fine of between RMB1,000 and RMB10,000 for any delay in making

registration for each of these leasing properties. Therefore, we have the right to use such

properties in accordance with the leasing agreements but we may be subject to the risks of fines

if their lease registrations are not completed as required by competent local housing

administrative authorities. Our Directors are of the view that it is unlikely that our operations

would be materially and adversely affected by the non-registration of our lease agreements,

considering that (i) during the Track Record Period, we were not subject to administrative

penalties by the competent housing administrative authorities for non-registration of lease

agreements; and (ii) the amount of potential penalties accounts for a minimal portion of our total

revenue in 2020.

Our Directors are of view that the defects in these properties will not materially affect our

daily business operations and we will make proactive efforts to rectify these defects timely.

Internal Control Measures

Starting in 2021, we have required all of our lessors to provide the necessary

documentation and valid title certificates before we enter into lease agreements with them and

we will not enter into lease agreements for properties with title defects. Moreover, we have more

stringently required our lessors to register our lease agreements with the competent housing

administrative authorities.

Properties Leased in Taiwan

As of the Latest Practicable Date, we leased one property with a total GFA of approximately

500 square meters for our restaurant in Taiwan. Substantially all of our leased properties in

Taiwan are used as restaurant site and office. Our Taiwan Legal Advisors are of the view that the

lessors are entitled to lease these properties and the leasing agreements are legal and valid.

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INSURANCE

Our Directors consider our insurance coverage to be customary for businesses of our size

and type and in line with the standard commercial practice in the jurisdictions where we have

operations. As of the Latest Practicable Date, our Group had not made, or been the subject of,

any material insurance claim.

We maintain three types of insurances for our restaurant operations in mainland China: (i)

public liability insurance for our restaurants in mainland China to cover the claims arisen from

casualties or property losses of third parties caused by accidents that occur during our

restaurant operations, including but not limited to claims of customers’ falling when dining in

our restaurants; (ii) food safety liability insurance to cover potential food safety risks of the food

served at our restaurants and through food delivery services, including but not limited to claims

of allergic reaction from our customers and consumers; and (iii) property all risks insurance that

covers the risks of losses and damages to the fixed assets, decorations or inventories of our

restaurants in mainland China. In addition, we maintain social insurance and housing provident

fund contributions for our employees.

For our operation in Taiwan, we mainly maintain four types of insurances, which include: (i)

public liability insurance for any bodily injury and loss of or damage to property in the restaurant

and in the office of our Taiwan branch; (ii) commercial fire insurance for any loss of or damage

to the renovation of the restaurant and the ingredients in the restaurants due to fire; (iii)

products liability insurance for any bodily injury resulting from food, beverage and alcohol; and

(iv) employer’s compensation insurance for any bodily injury of employees of our Taiwan branch

as required by local laws and regulations. We believe that we are covered by adequate liability

policies with coverage features and insured limits that we believe are customary for similar

companies in the PRC and Taiwan. However, our insurance coverage may not be adequate to

cover all losses that may occur. See ‘‘Risk Factors — Risks Relating to Our Business — Our

insurance policies may not provide adequate coverage for all claims associated with our

business operations’’ in this Document.

ENVIRONMENTAL, SOCIAL AND GOVERNANCE

We are committed to promoting corporate social responsibility and sustainable development

and integrating it into all major aspects of our business operations. Corporate social

responsibility is viewed as an integral part of our ‘‘Loving’’ culture that will be pivotal to our

ability to create sustainable value for our Shareholders by embracing public interests.

Accordingly, our Board of Directors has adopted a comprehensive policy on environmental,

social and corporate governance responsibilities (the ‘‘ESG Policy’’) in accordance with the

Listing Rules. To be more specific, we will establish an ESG department that is in charge of,

among others, (i) executing the strategies and policies formulated by the Board of Directors, (ii)

preparing ESG reports, and (iii) conducting external or internal assessments. The Board of

Directors and the management team are responsible for developing ESG strategies, as well as

assessing, governing and determining the ESG risks, including environmental-related and social-

related risks and climate-related issues, with which we may involve.

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ESG Measures

We have established the following measures to enhance the communication with

stakeholders and facilitate the fulfillment of social responsibilities and sustainable development:

(a) Environmental and climate issues. We advocate the concept of green development and

continue to promote the low-carbon and eco-friendly operation of our Group, and is

devoted to reducing the use of disposable materials. We proactively monitored

information relating to pollutants emissions and provided the information to

competent government authorities to assess and manage such risks. For example, we

have replaced the plastic utensils and straws with the ones made of recyclable papers

at our restaurants. We have also used delivery boxes made from recyclable materials

in our delivery business. Due to the nature of our operations, we believe the waste we

produced is not hazardous and has minimal impact on the environment. In order to

comply with the applicable environmental laws and regulations, we have undertaken

wastewater and solid waste disposal and processing measures, including but not

limited to: (i) installing proper grease trap for restaurants, a receptacle to intercept

most greases and solids before they enter a wastewater disposal system; (ii) engaging

qualified third-party companies for our restaurants’ daily food waste collection and

disposal and periodic greases collection; and (iii) timely payment of wastewater

processing fees to property management companies. We will continue to reduce the

generation of kitchen waste from the source. To better reduce the carbon footprint in

our restaurant operation and to response to the paperless initiatives, we installed

digital menus in all of our restaurants where customers are required to order food

online by scanning the QR code on each table.

(b) Social issues and employee welfare. To protect the interests and rights of employees,

we have established and improved career development channels and talent training

systems in congruence with our ‘‘Loving’’ culture to facilitate the self-growth of

employees and create a harmonious and progressive working atmospheres. We adhere

to equal recruitment principles and provide our employees trainings on a regular

basis. We strive to provide a safe working environment for our employees. We have

implemented work safety guidelines setting out our work safety policies, accident

prevention and accident reporting. Our Kitchen Management Checklist 2-1 and Kitchen

Management Checklist 2-2 provide clear guidance on various occupational and

restaurant safety matters, which our restaurant staff is required to follow. Our Kitchen

Management Checklist 2-1 comprises: (i) our restaurants’ functional structure for our

employees to understand their roles and responsibilities; (ii) applicable articles

provided in the Food Safety Law of the People’s Republic China (《中華人民共和國食品安

全法》) regarding food production and business operation for our kitchen staff to follow

in daily operations; and (iii) daily, weekly and/or monthly records of training programs,

the validity of our restaurant staff’s health certificates, the use of disinfectant liquid,

the cleaning of material equipment and machinery at our restaurants and so forth. We

have also established monthly Kitchen Management Checklist 2–1, which comprises a

list of inventories stocked in our restaurant kitchens and their expiration dates, for

better managing the inventories in our restaurant. The material equipment and

machinery at our restaurants are subject to periodical maintenance from time to time

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and our employees are required to complete training programs that increase their

awareness of safety in the workplace. Generally, our material equipment and

machinery at restaurants are maintained by manufacturers on a periodic basis. During

the Track Record Period and up to the Latest Practicable Date, we had not encountered

any material safety incidents.

(c) Regulatory compliance. We are subject to environmental protection and occupational

health and safety laws and regulations in mainland China and Taiwan where we

operate our restaurants. During the Track Record Period, we complied with the

applicable environmental and occupational health and safety laws and regulations in

all material respects in mainland China and Taiwan where we operate, and we did not

have any incidents or complaints which had a material and adverse effect on our

business, financial condition or results of operations during the same period.

(d) Social responsibility. Under our ESG Policy, we aim to build a ‘‘Loving’’ community with

our employees, customers and business partners by engaging in various offline

activities for public good. Amid the COVID-19 outbreak, we donated cups of our

signature drinks to medical staff and volunteers who were conducting grassroot

disease prevention work at community level. We took part in ‘‘Earth Hour’’ to switch off

non-essential electric lights for one hour from 7:30 to 8:30 p.m. on one day every

March since 2019 as a symbol of commitment to the planet. We also cooperated with

Smile Angel to release an appealing dish, the handmade QQ tunaballs (Q寶金槍魚丸).

For every handmade QQ tunaballs dish sold in our restaurants in Beijing, we donated

RMB1 to Beijing Smile Angel Children’s, or the Hospital, for the treatment of children

with cleft lip and cleft palate who came from a disadvantaged background. Up to the

Latest Practicable Date, we had contributed RMB20,000 to the Hospital, funding two

children for their treatment.

Cooperating with Zhejiang Xinhua Compassion Education Foundation (浙江省新華愛⼼

教育基⾦會), or the Foundation, we have been contributing to the ‘‘Hope for Pearl’’

program, or the Program, since 2018, for helping the equalizing of education for

children in impoverished parts. Echoing the Program, we, together with Foundation,

jointly initiated a public welfare activity named ‘‘now and always, pearls for little

heroes (珍愛有你，天長第九).’’ Contributing to the Program, we strategically released a

wondrous and unique dish, the rainbow pearl meatballs (雲南五彩珍珠丸), to represent

an image that we regard every child as, and they should be regarded as, a precious

and dazzling pearl. We invite our customers to join us in the fight for equal education

and against discrimination, for every child we treasured. For every rainbow pearl

meatballs dish sold, we correspondingly donate RMB5 to the Program. Up to the Latest

Practicable Date, we had contributed approximately RMB1,170,148 to the Program and

funded 150 children for their tuition fees. In 2018, the image of Laowang supporting

the Program was posted on the screen of Nasdaq Tower in Times Square.

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Based on the above, our Directors are of the view that our ESG policies are sufficient and

effective, and we would continue to proactively monitor and assess the implementation of our

ESG measures. Upon [REDACTED], we will continue to report to our management team on an

annual basis on the implementation of our ESG policy and prepare the ESG report to include

quantitative analysis of our ESG-related matters.

LEGAL PROCEEDINGS

From time to time, we are subject to legal or administrative proceedings, investigations and

claims arising in the ordinary course of our business. As of the Latest Practicable Date, we were

not involved in any material litigation, arbitration or administrative proceedings pending, to the

best of our knowledge, information and belief, threatened against us or any of our Directors that

could have a material adverse effect on our business, reputation, financial condition or results of

operations.

LICENSES, REGULATORY APPROVALS AND COMPLIANCE

In accordance with the applicable laws and regulations in the PRC, we are required to

obtain various approvals, licenses and permits to operate our restaurant business, including the

Food Business License (食品經營許可證) and the Certificate or the Opinion for the Fire Safety

Inspection of Public Gathering Places before the Use or Commencement of the Business

Operations (公眾聚集場所投入使用、營業前消防安全檢查合格證或意見書) (‘‘Fire Safety InspectionApprovals’’), which could be obtained upon satisfactory compliance with, among other things,

the applicable laws and regulations in relation to food safety and fire safety.

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Our Directors confirm that during the Track Record Period and up to the Latest Practicable

Date, we had complied with all applicable laws and regulations that are material to our

operations in those jurisdictions and, as advised by our PRC Legal Advisors and Taiwan Legal

Advisors, we have obtained all material requisite licenses, approvals and permits as required by

applicable laws and regulations from competent regulatory authorities for our operations in those

jurisdictions, except as disclosed below.

Fire Safety

Background

As of the Latest Practicable Date, we had 14 restaurants in operation in the PRC without the

relevant Fire Safety Inspection Approvals, 13 of which we are actively engaging in the application

process, and one of which we may not be able to file the application for the relevant fire safety

inspection approvals due to the nature of the premises where such restaurant is located. The

reasons for non-compliance of fire safety requirements mainly include: (i) the owners of the

leased properties for our restaurants have not completed the required fire safety procedures

which they are obliged to for the entire properties where the relevant restaurants are located,

which may impede our application for Fire Safety Inspection Approvals; (ii) the nature or other

defects of the leased properties where our restaurants are located; or (iii) the relevant staff’s

misunderstandings of the provisions of laws or lack of timely or smooth communication with

local government authorities. During the Track Record Period, none of these 14 restaurants had

actual fire safety concerns. Our Fire Safety Consultant is of the view that all of these 14

restaurants have met the requirements of fire safety laws and regulations, and met the relevant

requirements for the completion of Fire Safety Inspections Approvals. For the years ended 31

December 2018, 2019 and 2020 and the six months ended 30 June 2021, the amount of revenue

attributable to these 14 restaurants in operation without the relevant Fire Safety Inspection

Approvals during their respective non-compliant periods was RMB57.2 million, RMB66.6 million,

RMB66.0 million and RMB52.1 million, respectively.

Potential legal consequences

With respect to the restaurant for which we may not be able to obtain the relevant Fire

Safety Inspection Approval, our PRC Legal Advisors have advised us that we may be subject to

the risk of (i) a potential penalty ranged from RMB30,000 to RMB300,000 per restaurant, and (ii)

closures of such restaurants.

With respect to our 13 restaurants for which we are actively engaging in the application

process of Fire Safety Inspection Approvals, our PRC Legal Advisors have advised us that (i) there

should be no substantial legal impediment for us to obtain Fire Safety Inspection Approvals,

provided that we submit all the requisite documents to the competent government authorities

and pass the on-site inspection in accordance with the applicable PRC laws, regulations,

government policies and the specific requirements of the competent government authorities; and

(ii) after we obtain relevant Fire Safety Inspection Approvals, the risks that we would be subject

to material administrative penalties by the competent government authorities due to such

historical non-compliance are remote. The Fire Safety Consultant has further confirmed that we

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are capable of obtaining Fire Safety Inspection Approvals after we submit all the requisite

documents to the competent government authorities for these 13 restaurants without substantial

obstacle.

We believe that these non-compliances would not have a material adverse effect on our

business, financial condition and results of operations, considering the advice we have obtained

from our PRC Legal Advisors and taking into account that (i) we did not receive any material fines

or penalties with respect to these non-compliances of the 14 restaurants during the Track Record

Period and up to the Latest Practicable Date, as confirmed by our Fire Safety Consultant; (ii) it is

unlikely that we would be required to close or relocate a significant number of such restaurants

by competent authorities at the same time, considering that these properties are geographically

dispersed and under the jurisdiction of different authorities; and (iii) we maintain a pool of

restaurant site candidates, and we believe we would be able to relocate to a different site

relatively easily in the unlikely event that we be required to do so by competent authorities. As a

result, we did not make any provisions in connection with these non-compliances during the

Track Record Period.

Rectifications

To ensure the fire safety of our restaurants, we have adopted an enhanced internal policy

that we will only enter into the lease agreements with the owners of the relevant properties when

the relevant properties where our restaurants are to be located have completed necessary fire

safety procedures.

To ensure that our restaurants operate safely, we have engaged the Fire Safety Consultant

to conduct fire safety inspections and evaluations on each of our restaurants that had not

obtained the relevant Fire Safety Inspection Approvals as of the Latest Practicable Date. The Fire

Safety Consultant’s inspection team is consisted of fire safety specialist engineers, and has

undertaken fire safety evaluation work. The Fire Safety Consultant reviewed and inspected the

following matters through on-site inspection, surveys and document review, which include (i) the

compliance of our fire safety management system with laws and regulations and industry

standards, (ii) the adequacy of the fire safety equipment and system and emergency evacuation

plan of premises on which our restaurants are located, and (iii) the fire protection and heat

insulation capabilities of our restaurant construction materials.

Upon their review, our Fire Safety Consultant concluded that all of our restaurants comply

with fire safety laws and regulations considering that (i) we have established and implemented

fire safety internal control policies in accordance with requirements of competent government

authorities, including those related to fire safety procedures and emergency evacuation

procedures; (ii) these premises are equipped with proper fire safety facilities, equipment and

safety signs, all of which are in good condition; (iii) these premises are in compliance with

building fire protection and safety standards; (iv) no fire safety-related accident, material

administrative penalty or announcement has taken place in relation to these premises; (v) these

premises meet the fire safety compliance requirements and can be used for restaurant

operations; and (vi) upon submission of all the requisite documents, there will not be any

material impediment in obtaining the relevant Fire Safety Inspection Approvals.

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Our Directors confirm that our Group will (i) only open new restaurants after all necessary

licenses, permits and approvals are obtained required under the applicable PRC rules and

regulations going forward, and (ii) engage fire safety consultant during the site selection process

to inspect the proposed sites for opening new restaurants to ensure that the proposed sites

satisfy the requirements of obtaining the relevant Fire Safety Inspection Approvals, completing

fire protection acceptance filing or other necessary fire safety procedures, failing which we will

not select the proposed sites for opening new restaurants.

Internal control measures

During the Track Record Period, we implemented a series of internal control measures in

relation to fire safety, and we have continued to strengthen our internal control systems. Our

internal control system in relation to fire safety is summarized as follows:

. Training. We conduct extensive training for our staff, including periodic training on

general fire safety awareness and knowledge, and training on proper use of fire safety

equipment and emergency evacuation plans. We also conduct fire drills at our

premises to familiarize our staff with our evacuation plans.

. Personnel. We designate personnel at each of our restaurants responsible for fire

safety. We also designate at our headquarters responsible for conducting

unannounced inspection and review of fire safety work at our restaurants.

. Fire safety policies. We implement detailed fire safety measures and procedures with

respect to our restaurants, including frequent inspections of the stoves and electric

appliances in our kitchens, the gas valves, pipes and electrical systems, and the fire

safety equipment that we equip on our premises. We formulate evacuation plans, fire

protection and rescue plans in the event of fire emergency, and also install signs for

fire evacuation.

. Equipment. We equip our premises with the proper fire safety equipment and systems,

and regularly assess the need to upgrade our equipment and facilities to achieve

better ventilation, humidity, fire and heat protection.

. Licenses. We require all of our lessors to provide the relevant documentation needed

for us to timely obtain Fire Safety Inspection Approvals before we enter into any lease

agreement, and we will not commence restaurant operations before we obtain all of

the requisite permits and approvals. We will start the operation of a new restaurant

after passing the fire safety inspections or obtaining permission from the competent

government authorities for the opening, as required.

Our internal policies on restaurant opening

We had the following internal policies on restaurant opening.

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Site selection

Other than the selection criteria as set out in ‘‘— Restaurant Operations — Development and

Expansion Plans of Our Restaurant Network — Site Selection’’ and commercial reasons, we also

require the sites selected are in compliance with all fire safety requirements, and will consider

whether the structure of the building of the site has satisfied the applicable regulatory

requirements including, among others, on fire safety and whether the building of the site has

been equipped with the relevant fire safety facilities. The independent construction company

with professional qualifications in fire safety facilities construction engaged by our Group will

review the floor plans and structure plans to see if there is any fire safety issue.

Substantially all of our restaurants are located in major commercial centers and a majority

of the properties where our restaurants are located are upscale shopping malls developed and

operated by major property developers in the PRC, some of which are listed companies.

Lease agreements

Lease agreements for our restaurants include contractual terms providing that the owners of

the relevant properties shall assist us in providing the required fire safety documents for us to

complete the relevant applications in compliance with the applicable laws and regulations in

relation to fire safety.

Design and decoration

We engage multiple design companies with expertise and experience in designing

restaurants to sketch and provide us with design ideas that comply with fire safety requirements

and food and drug requirements; we also engage multiple construction and decoration

companies with licenses and other professional qualifications to decorate our restaurants. We

start to apply for relevant approvals and other materials at the beginning of the decoration of our

restaurants, and the competent authorities will come to our restaurants by the end of the

decoration for inspections. If the authorities find our restaurants meeting the requirements for

opening, the Fire Safety Inspection Approval will be issued. Our engineering department also

conducts inspections upon the completion of the decoration.

Each of our restaurants shall be designed and constructed in compliance with the

applicable fire safety regulations and shall be equipped with the necessary fire safety facilities.

The decorations are carried out by construction and decoration companies with licenses and

other professional qualifications and are overseen by our engineering team, which is well

experienced in construction and decoration works of restaurants and central kitchens.

With respect to our future restaurants, upon completion of the decoration of our

restaurants, we will apply to competent authorities for inspections after we ensure that they

meet applicable fire safety requirements and food and drug requirements. If there are no major

defects or safety hazards after such inspections by these authorities, a Fire Safety Inspection

Approval will be issued, and our restaurants will commence their operations. All of our

restaurants are supervised and inspected by Fire Departments and Food and Drug

Administrations.

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Views of our Directors and Joint Sponsors

After taking into account the above rectification and enhanced internal control measures,

our Directors are of the view, and the Joint Sponsors agree with our Directors, that our Group’s

enhanced internal control measures, including fire safety measures, are adequate and effective.

Views of our Directors and Joint Sponsors

Our material operations are located in mainland China and Taiwan. During the Track Record

Period, we had complied with all applicable laws and regulations that are material to our

operations in those jurisdictions and had obtained all material licenses, approvals and permits

as required by applicable laws and regulations from competent regulatory authorities for our

operations in those jurisdictions, except as disclosed in this Document. Having considered (i)

the advice of our PRC Legal Advisors and Taiwan Legal Advisors, (ii) the facts and circumstances

leading to the non-compliance incidents as disclosed above, (iii) our enhanced internal control

measures, (iv) the results of the follow-up review by the internal control consultant as disclosed

in ‘‘— Risk Management and Internal Control’’ below, and (v) the non-compliance incidents that

did not involve any dishonesty or fraudulent act on the part of our Directors, our Directors are of

the view, and the Joint Sponsors concur, that (i) we have adequate and effective internal control

procedures in place in accordance with the requirements under the Listing Rules; and (ii) the

non-compliance incidents will not affect the suitability of the Directors under Rules 3.08 and

3.09 of the Listing Rules and the suitability of our Company under Rule 8.04 of the Listing Rules.

RISK MANAGEMENT AND INTERNAL CONTROL

We are exposed to various risks during our operations and have established risk

management systems with relevant policies and procedures related to the management of our

restaurant operations, procurement and food safety and quality that we believe are appropriate

for our business operations. To monitor the ongoing implementation of our risk management

policies and corporate governance measures after the [REDACTED], we have adopted and will

continue to adopt, the following risk management measures:

. empower our audit committee to review and supervise our financial reporting process

and internal control system. Our audit committee consists of three members, namely

Ms. Chen Jui-hsing, Mr. Wang Chun-chuan, and Mr. Huang Chien-chen. For the

qualifications and experience of these committee members, see ‘‘Directors and Senior

Management’’ for more details;

. adopt various policies to ensure compliance with the Listing Rules, including but not

limited to requirements regarding connected transactions and information disclosure;

. appoint Red Solar Capital Limited as our compliance advisor with effect from the

[REDACTED] to advise us on ongoing compliance with the Listing Rules;

. provide anti-corruption and anti-bribery compliance policies in our manual and

implement a whistle-blower program under which our employees are encouraged to

report instances of briberies directly to the audit department; and

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. continue to organize training sessions for our Directors and senior management in

respect of the applicable requirements of the Listing Rules and duties of directors of

companies listed in Hong Kong.

We have engaged an internal control consultant in March 2021 to review the effectiveness

of our internal controls associated with our major business processes, including entity level

controls, financial closing and reporting, revenue and collection, purchasing and payment,

inventory management, fixed assets management, payroll management, treasury management,

tax management, information technology general controls, health, safety and environment

management, research and development management and insurance management. The internal

control consultant identified internal control deficiencies and provided recommendations

accordingly. We have adopted the corresponding remediation actions to improve the

effectiveness of internal control system. The internal control consultant performed a follow up

review with regard to those actions taken by us in July 2021, there are no material deficiencies

identified.

With respect to the system design of the internal control mechanism, our Directors are of

the view that our enhanced internal control system is adequate and effective for our current

operations.

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OUR CONTROLLING SHAREHOLDERS

Immediately following the completion of the [REDACTED] (assuming that the [REDACTED] is

not exercised and without taking into account any Shares which may be issued upon the exercise

of the options granted under the Pre-[REDACTED] Share Option Scheme or any options which may

be granted under the Share Option Scheme), (i) Mr. Lee (by himself and through his direct or

indirect wholly-owned investment holding companies, namely LYC and Eversun Holdings), (ii) Mr.

Chen (by himself and through its direct or indirect wholly-owned investment holding companies,

namely CH&H and Lucky-CH), (iii) Ms. Huang Ya-lin (the spouse of Mr. Chen), (iv) Mr. Chao

(through its wholly-owned investment holding company, namely ZHZ), and (v) Ms. Wong Wing Sze

(the spouse of Mr. Chao) will hold approximately [REDACTED], [REDACTED], [REDACTED],

[REDACTED] and [REDACTED], respectively, or [REDACTED] in aggregate, of our total issued share

capital. See ‘‘History and Corporate Structure — Our Corporate and Shareholding Structure —

Corporate Structure Immediately Following the [REDACTED]’’ for our shareholding structure

immediately following the completion of the [REDACTED].

On 18 August 2021, Mr. Lee, Mr. Chen, Ms. Huang Ya-lin, Mr. Chao, and Ms. Wong Wing Sze

entered into the Concert Party Agreements, pursuant to which, among others, our founders shall

act in concert among themselves in respect of the exercise of their rights as Shareholders of our

Company and shall vote unanimously on all resolutions of the Shareholders of our Company and

two of our founders’ spouses shall act in concert with our founders in this regard. Our founders

and two of their spouses also confirmed and acknowledged that they had been acting in such

manner since they became shareholders of our Company.

Mr. Lee, Mr. Chen, Ms. Huang Ya-lin, Mr. Chao, and Ms. Wong Wing Sze, together as a

concert group, will be interested in more than 30% equity interest, directly and indirectly, in our

Company through themselves and their respective wholly-owned investment holding companies,

namely LYC, Eversun Holdings, CH&H, Lucky-CH and ZHZ, upon [REDACTED]. Accordingly, Mr. Lee,

LYC, Eversun Holdings, Mr. Chen, CH&H, Lucky-CH, Ms. Huang Ya-lin, Mr. Chao, ZHZ, and Ms.

Wong Wing Sze are regarded as a group of Controlling Shareholders of our Group.

COMPETITION

Each of our Controlling Shareholders and our Directors confirms that as of the Latest

Practicable Date, neither he/she/it nor any of his/her/its close associates had 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, and requires disclosure under Rule 8.10 of the Listing Rules.

DEED OF NON-COMPETITION

Each of our Controlling Shareholders has undertaken to us in the Deed of Non-Competition

that he/she/it will not, and will procure his/her/its close associates (other than members of our

Group) not to directly or indirectly be involved in or undertake any business (other than our

business) that directly or indirectly competes, or may compete, with any business engaged by

any member of our Group (the ‘‘Restricted Business’’), or hold interest in any companies or

business that compete directly or indirectly with the business current or from time to time

engaged in by our Group, except where (i) our Controlling Shareholders and their close

associates individually or collectively hold less than [REDACTED] of the total issued share capital

RELATIONSHIP WITH CONTROLLING SHAREHOLDERS

– 223 –


of any public company (whose shares are listed on the Stock Exchange or any other stock

exchange) which is engaged in any business that directly or indirectly competes, or may compete

with the Restricted Business; and (ii) our Controlling Shareholders and their close associates

individually or collectively hold less than 30% of the total issued share capital of any private

company (whose shares are not listed on any stock exchange) which is engaged in any business

that directly or indirectly competes or may compete with the Restricted Business, provided that

our Controlling Shareholders and their close associates do not have the right to nominate 50% or

more members or control the voting rights (including but not limited to control the casting vote)

of the board of directors of such public or private companies (collectively, the ‘‘Minority-InterestCompanies’’).

Save as any investment opportunities which will make the target companies fall under the

Minority-Interest Companies as set out above, each of our Controlling Shareholders has

undertaken that if any new business/investment opportunity relating to the Restricted Business

(the ‘‘Competing Business Opportunity’’) is identified by/made available to him/her/it or any of

his/her/its close associates, he/she/it shall, and shall procure that his/her/its close associates

shall, refer such Competing Business Opportunity to our Company on a timely basis and in the

following manner:

. refer the Competing Business Opportunity to our Company by giving written notice (the

‘‘Offer Notice’’) to our Company of such Competing Business Opportunity within 30

business days of identifying the nature of the Competing Business Opportunity, the

investment or acquisition costs and all other details reasonably necessary for our

Company to consider whether to pursue such Competing Business Opportunity;

. upon receiving the Offer Notice, our Company shall seek approval from a board

committee consisting of Directors who do not have an interest in the Competing

Business Opportunity (the ‘‘Independent Board Committee’’) as to whether to pursue or

decline the Competing Business Opportunity;

. any Director who has actual or potential interest in the Competing Business

Opportunity shall abstain from attending (unless their attendance is specifically

requested by the Independent Board Committee) and voting at, and shall not be

counted in the quorum for, any meeting convened to consider such Competing

Business Opportunity;

. the Independent Board Committee shall consider the financial impact of pursuing the

Competing Business Opportunity offered, whether the nature of the Competing

Business Opportunity is consistent with our Group’s strategies and development plans

and the general market conditions of our business. If appropriate, the Independent

Board Committee may appoint independent financial advisors and legal advisors to

assist in the decision-making process in relation to such Competing Business

Opportunity;

. the Independent Board Committee shall, within 30 Business Days of receipt of the

written notice referred above, inform our Controlling Shareholders in writing on behalf

of our Company its decision whether to pursue or decline the Competing Business

Opportunity;


– 224 –


. our Controlling Shareholders shall be entitled but not obliged to pursue such

Competing Business Opportunity if it or he or she receives a notice from the

Independent Board Committee declining such Competing Business Opportunity or if

the Independent Board Committee fails to respond within such 30 Business Days’

period mentioned above; and

. if there is any material change in the nature, terms or conditions of such Competing

Business Opportunity pursued by our Controlling Shareholders, he/she/it shall refer

such revised Competing Business Opportunity to our Company as if it was a new

Competing Business Opportunity.

The Deed of Non-Competition will lapse automatically if our Controlling Shareholders and

their close associates cease to hold in aggregate, whether directly or indirectly, 30% or above of

our Shares with voting rights or our Shares cease to be [REDACTED] on the Stock Exchange.

In order to promote good corporate governance practices and to improve transparency, the

Deed of Non-Competition includes the following provisions:

. our independent non-executive Directors shall review, at least on an annual basis, the

compliance with the Deed of Non-Competition by our Controlling Shareholders;

. each of our Controlling Shareholders has undertaken to us that he/she/it will provide

and procure his/her/its close associates to provide on best endeavor basis, all

information necessary for the annual review by our independent non-executive

Directors for the enforcement of the Deed of Non-Competition;

. we will disclose the review by our independent non-executive Directors on the

compliance with, and the enforcement of, the Deed of Non-Competition in our annual

report or by way of announcement to the public in compliance with the requirements

of the Listing Rules;

. we will disclose the decisions on matters reviewed by the independent non-executive

Directors (including the reasons for not taking up the Competing Business Opportunity

referred to our Company) either through our annual report or by way of announcement

to the public; and

. in the event that any of our Directors and/or their respective close associates has

material interests in any matter to be deliberated by our Board in relation to the

compliance and enforcement of the Deed of Non-Competition, he/she may not vote on

the resolutions of our Board approving the matter and shall not be counted towards

the quorum for the voting pursuant to the applicable provisions in the Articles of

Association.


– 225 –


INDEPENDENCE FROM OUR CONTROLLING SHAREHOLDERS

Having considered the following factors, our Directors are satisfied that we are capable of

carrying out our business independently from our Controlling Shareholders and their respective

close associates after the [REDACTED].

Management Independence

Our Board comprises two executive Directors, two non-executive Directors and three

independent non-executive Directors. Although Mr. Lee is chairman of the Board, an executive

Director and also a Controlling Shareholder and the sole director of Eversun Holdings, our

management and operational decisions are made by all our executive Directors and senior

management, all of whom have substantial experience in the industry in which we are engaged

and/or in their respective fields of expertise. The balance of power and authority is ensured by

the operation of our senior management team and our Board. See ‘‘Directors and Senior

Management’’ for more details.

Each of our Directors is aware of his fiduciary duties as a Director which require, among

others, that he must act for the benefit of and in the best interests of our Company and not allow

any conflict between his duties as a Director and his personal interests. Although Mr. Lee is a

party to the Concert Party Agreements, he shall fulfill his fiduciary duties when exercising his

rights and powers in his capacity as a Director of our Company. Further, we believe that our

independent non-executive Directors will bring independent judgment to the decision-making

process of our Board. In addition, our Directors shall not vote in any Board resolution approving

any contract or arrangement or any other proposal in which he or any of his close associates has

a material interest and shall not be counted in the quorum present at the particular Board

meeting.

Based on the above, our Directors are satisfied that our Board as a whole together with our

senior management team is able to perform the managerial role in our Group independently.

Operational Independence

Although our Controlling Shareholders will retain a controlling interest in our Company after

the [REDACTED], we have full rights to make all decisions regarding, and to carry out, our own

business operations independently. Our Company (through our subsidiaries) holds or enjoys the

benefit of all the relevant licenses necessary to carry on our business, and has sufficient capital,

equipment, access to customers and suppliers, and employees to operate our business

independently from our Controlling Shareholders and their respective close associates. In

addition, our organizational structure is made up of individual departments, each with specific

areas of responsibilities. We have also established a set of internal control measures to facilitate

the effective operation of our business.

Our Directors do not expect that any significant transactions will be entered into between

our Group and our Controlling Shareholders upon or shortly after the [REDACTED].


– 226 –


Based on the above, our Directors are satisfied that we have been operating independently

from our Controlling Shareholders and their respective close associates during the Track Record

Period and will continue to operate independently.

Financial Independence

During the Track Record Period and up to the Latest Practicable Date, our Group has our

own internal control, accounting and financial management system, accounting and finance

department and we make financial decisions according to our own business needs. In addition,

our Group does not rely on our Controlling Shareholders and/or their close associates by virtue

of their provision of financial assistance.

We received financial assistance from Mr. Lee and his spouse by way of guarantees. As of

30 June 2021, we had banking facilities from four banks in the aggregate amount of RMB120

million and a branch of one of these four banks in the amount of NT$10 million, which were all

unutilized and were guaranteed by either Mr. Lee or Mr. Lee together with his spouse. As of 31

July 2021, being the latest practicable date for determining our indebtedness, our interest-

bearing bank borrowings amounted to RMB0. Our Directors confirm that all guarantees provided

by our Controlling Shareholders will be fully released before or upon the [REDACTED]. Our

Directors believe that we are capable of obtaining financing from external sources without

reliance on our Controlling Shareholders.

Based on the above, our Directors believe that we have the ability to operate independently

of our Controlling Shareholders and their respective close associates from a financial perspective

and are able to maintain financial independence from our Controlling Shareholders and their

respective close associates.

CORPORATE GOVERNANCE MEASURES

Each of our Controlling Shareholders has confirmed that he/she/it fully comprehends his/

her/its obligations to act in our Shareholders’ and our best interests as a whole. Our Directors

believe that there are adequate corporate governance measures in place to manage existing and

potential conflicts of interest. In order to further avoid potential conflicts of interest, we have

implemented the following measures:

(a) as part of our preparation for the [REDACTED], we [have] amended our Articles of

Association to comply with the Listing Rules. In particular, our Articles of Association

provide that, unless otherwise provided, a Director with material interests shall make

full disclosure in respect of matters that conflict or potentially conflict with our

interest and abstain himself/herself from voting and not be counted towards the

quorum on the resolution in which such Director or his/her close associates have a

material interest;

(b) we are committed that our Board should include a balanced composition of executive

and non-executive Directors (including independent non-executive Directors). We have

appointed three independent non-executive Directors and we believe our independent

non-executive Directors possess sufficient experience, and they are free of any

business or other relationship which could interfere in any material manner with the


– 227 –


exercise of their independent judgment and will be able to provide an impartial,

external opinion to protect the interests of our Shareholders. Details of our

independent non-executive Directors are set out in ‘‘Directors and Senior Management

— Directors — Independent Non-executive Directors’’;

(c) in the event that the independent non-executive Directors are requested to review any

conflicts of interests circumstances between our Group on the one hand and our

Controlling Shareholders and/or our Directors on the other hand, our Controlling

Shareholders and/or our Directors shall provide the independent non-executive

Directors with all necessary information, and our Company shall disclose the

decisions of the independent non-executive Directors either through our annual report

or by way of announcements; and

(d) we have appointed Red Solar Capital Limited as our compliance advisor, which will

provide advice and guidance to us in respect of compliance with the applicable laws

and the Listing Rules including various requirements relating to directors’ duties and

corporate governance.


– 228 –


We have entered into certain transactions with a party which will become connected person

upon the [REDACTED] and such transactions will constitute continuing connected transactions for

our Company under the Listing Rules.

RELEVANT CONNECTED PERSON

Sunjuice Holdings Co., Limited (鮮活控股股份有限公司) (‘‘Sunjuice’’), a company listed on

the Taiwan Stock Exchange ([REDACTED]: 1256), is owned as to 27.13%, 18.25% and 0.59% by Mr.

Huang Kuo-huang (黃國晃) (‘‘Mr. Huang’’), Ms. Lin Li-lin (林麗玲), the spouse of Mr. Huang, and

Ms. Huang Chien-ning (黄建寧), the child of Mr. Huang under the age of 18, respectively. Mr.

Huang is a non-executive Director of our Company. Therefore, Sunjuice is a connected person of

our Company because Sunjuice is an associate of Mr. Huang.

FULLY EXEMPT CONTINUING CONNECTED TRANSACTIONS

The continuing connected transactions below are exempt from the reporting, annual review,

announcement, circular and independent Shareholders’ approval requirements pursuant to Rule

14A.76(1) of the Listing Rules.

Purchase of concentrated fruit juice from Sunjuice

(a) Background

Our Group purchased concentrated fruit juice from Sunjuice during the Track Record Period.

There was no master agreement between Sunjuice and our Group in respect of such purchases.

The purchase quantity and purchase prices were specified in the relevant sale and purchase

agreements which we entered into with Sunjuice during the period.

Sunjuice is a company listed on the Taiwan Stock Exchange (stock code: 1256) which

principally engages in the production and sales of fruit juice, fruit grain and fruit powder

products.

(b) Historical transaction amounts

The amount of purchase of concentrated fruit juice by our Group from Sunjuice during the

Track Record Period is as follows:


Six months ended

30 June

2018 2019 2020 2021

RMB’000 RMB’000 RMB’000 RMB’000

Amount of purchase by our

Group from Sunjuice . . . . . . N/A 96 878 387

CONNECTED TRANSACTIONS

– 229 –


(c) Pricing policy

During the Track Record Period, the price of the concentrated fruit juice purchased by our

Group from Sunjuice was determined on arm’s length basis, taking into account factors including

the prevailing market prices and the quality and quantity of the concentrated fruit juice ordered.

Our Directors consider that the transactions entered into by our Group with Sunjuice in respect

of the purchase of concentrated fruit juice during the Track Record Period were in the ordinary

and usual course of our business, on normal commercial terms or better, and were fair and

reasonable and are in the interests of our Company and our Shareholders as a whole.

(d) Implications under the Listing Rules

We expect that the amount of purchase by our Group from Sunjuice for the three years

ending 31 December 2023 will not exceed RMB1,400,000, RMB1,540,000 and RMB1,700,000

(‘‘Annual Caps’’). In view of our historical transactions with Sunjuice, our Directors expect that

the transactions to be entered into by our Group with Sunjuice in respect of the purchase of

concentrated fruit juice after [REDACTED] will be in the ordinary and usual course of our

business, on normal commercial terms or better, and will be fair and reasonable and are in the

interests of our Company and our Shareholders as a whole.

Given that each of the applicable percentage ratios (other than profits ratio) (as defined

under the Listing Rules) in respect of each of the Annual Caps is expected to be less than 5% on

an annual basis and the total annual consideration is expected to be less than HK$3.0 million for

each of the three years ending 31 December 2023, these transactions will constitute de minimis

connected transactions under Rule 14A.76(1) of the Listing Rules and will be exempt from the

reporting, announcement, annual review, circular and independent Shareholders’ approval

requirements under Chapter 14A of the Listing Rules.

CONNECTED TRANSACTIONS

– 230 –


OUR DIRECTORS AND SENIOR MANAGEMENT

Our Board is responsible for and has general power over the management and conduct of

our business. As of the Latest Practicable Date, the Board consisted of two executive Directors,

two non-executive Directors and three independent non-executive Directors. The table below sets

forth certain information regarding members of our Board:

Name AgeDate of Joining

our Group

Date ofAppointment as

DirectorCurrent Position(s) in

our GroupRoles and

Responsibilities

Relationshipwith otherDirector(s)

andthe Senior

Management

Mr. Lee Yu-cheng(李裕成) . . . . . . . . . .

49 He is one of thefounders of ourGroup(1)

22 April 2015 Executive Director andchairman of the Board

Overall strategicplanning of our Groupand the decisionmaking of importantmatters of our Group

none

Mr. Liao Chih-wei(廖志偉) . . . . . . . . . .

45 1 April 2013 22 October 2019 Executive Director andgeneral manager

Overall operation ofour Group, mainlyincluding strategicplanning, overseeingthe implementation ofthe Board ofDirectors’ resolutionsand managing allaspects of ourbusiness operations

none

Mr. Huang Kuo-huang(黃國晃) . . . . . . . . . .

60 14 October 2020 14 October 2020 Non-executiveDirector

Providing advice onthe overall businessdirection of our Group

none

Mr. Tu Chia-pin(杜家濱) . . . . . . . . . .

63 14 October 2020 14 October 2020 Non-executiveDirector

Providing advice onthe overall businessdirection of our Group

none

Ms. Chen Jui-hsing(陳瑞杏) . . . . . . . . . .

50 14 October 2020 14 October 2020 Independent non-executive Director

Supervising andprovidingindependent judgmentto our Board

none

Mr. Wang Chun-chuan(王俊權) . . . . . . . . . .



none

Mr. Huang Chien-chen(黃建誠) . . . . . . . . . .



none

Note:

1. For the history of our Group, see ‘‘History and Corporate Structure’’.

DIRECTORS AND SENIOR MANAGEMENT

– 231 –


BOARD OF DIRECTORS

As of the Latest Practicable Date, the Board consisted of seven Directors, comprising two

executive Directors, two non-executive Directors and three independent non-executive Directors.

The functions and duties of the Board include convening shareholders’ meetings, reporting the

Board’s work at these meetings, implementing the resolutions passed on these meetings,

determining business and investment plans, formulating our annual budget and financial

accounts, and formulating our proposals for profit distributions and for any change in share

capital. In addition, the Board is responsible for exercising other powers, functions and duties in

accordance with the Articles of Association.

Executive Directors

Mr. Lee Yu-cheng (李裕成), aged 49, is one of the founders of our Group and the chairman

of the Board. He was appointed as a Director of our Company on 22 April 2015 and re-designated

as an executive Director on 19 August 2021. He is responsible for the overall strategic planning

of our Group and the decision making of important matters of our Group. Before Mr. Lee founded

our Group, he participated in establishing Jiaduofen (Shanghai) Commodities Co., Ltd. (家多芬(上

海)日用品有限公司) (a company which principally engages in the production and sales of

household products) in Shanghai, and has been serving as its executive director since 2006. Mr.

Lee graduated from Fu-hsin Trade and Arts School (新北市私立復興高級商工職業學校) in Taiwan

majoring in fine arts and crafts in July 1989. Mr. Lee did not hold any directorship in any listed

companies during the last three years.

Mr. Liao Chih-wei (廖志偉), aged 45, joined our Group in 1 April 2013 and was appointed as

a Director of our Company on 22 October 2019 and was formally re-designated as an executive

Director on 19 August 2021. Mr. Liao served as our regional manager covering Suzhou, Nantong,

and Changshu from April 2013 to September 2018, served as our chief operating officer from

March 2018 to April 2019, and has been serving as our general manager since 1 May 2019. He is

responsible for the overall operation of our Group, mainly including strategic planning,

overseeing the implementation of the Board of Directors’ resolutions and managing all aspects

of our business operations. Mr. Liao has more than eight years of experience in food and

beverage industry. Prior to joining our Group, Mr. Liao worked as a marketing specialist in TXC

Corporation (臺灣晶技股份有限公司) (a company listed on the Taiwan Stock Exchange (stock

code: 3042) which principally engages in the design, production and sales of quartz components

and sensor components) in Taiwan from 2003 to 2007, responsible for marketing and worked as

a manager in the Suzhou branch of BenQ Materials Corp. (明基材料股份有限公司) (a company

listed on the Taiwan Stock Exchange (stock code: 8215) which principally engages in computer

and peripheral equipment manufacturing, other basic chemical material manufacturing, and

medical product manufacturing) in Taiwan from 2010 to 2013. Mr. Liao graduated from the Chung

Kuo Institute of Technology (中國技術學院) (currently known as the China University of

Technology (中國技術大學)) in Taiwan majoring in information management in June 2002. Mr.

Liao did not hold any directorship in any listed companies during the last three years.


– 232 –


Mr. Liao served as a supervisor of Nantong Yupinxiang Catering Co., Ltd (南通玉品香餐飲有

限公司) which was deregistered on 10 December 2018. Mr. Liao confirmed that such company

was deregistered due to business termination and was solvent at the time of deregistration and

did not incur any debt and/or liability due to the deregistration, and the deregistration had no

adverse impact on him or our Company.

Non-executive Directors

Mr. Huang Kuo-huang (黃國晃), aged 60, was appointed as a Director of our Company on 14

October 2020 and was formally re-designated as a non-executive Director on 19 August 2021. Mr.

Huang engages in food and beverage industry and a controlling shareholder of Sunjuice Holdings

Co., Limited (鮮活控股股份有限公司), a company listed on the Taiwan Stock Exchange since 2016

(stock code: 1256) which principally engages in the production and sales of fruit juice, fruit grain

and fruit powder products. Mr. Huang is currently the chairman of the board and the general

manager of Sunjuice Holdings Co., Limited. Mr. Huang graduated from the National Chiayi

Institute of Agriculture (國立嘉義農業專科學校) (currently known as the National Chiayi University

(國立嘉義大學)) in Taiwan majoring in agricultural mechanization in June 1986. Save as disclosed

above, Mr. Huang did not hold any directorship in any listed companies during the last three

years.

Mr. Tu Chia-pin (杜家濱), aged 63, was appointed as a Director of our Company on 14

October 2020 and was formally re-designated as a non-executive Director on 19 August 2021. Mr.

Tu has years of experience in the Internet industry. Mr. Tu joined Microsoft Corporation in 1994

as general manager of its Beijing Representative Office and became the president of Microsoft

(China) Co., Ltd. from 1996 to 1998 and the president of Cisco Systems, Inc., China from 1998 to

2005. Mr. Tu has been an independent non-executive director of IDT International Limited (萬威國

際有限公司), a company listed on Hong Kong Stock Exchange (stock code: 167), from 2015 to

2018. Mr. Tu has been an independent director of Wangfujing Group Co., Ltd. (王府井集團股份有

限公司), a company listed on Shanghai Stock Exchange (stock code: 600859), from January 2016

to December 2019.

Mr. Tu has been serving as an independent director of Primax Electronics Ltd. (致伸科技股份

有限公司), a company listed on Taiwan Stock Exchange (stock code: 4915), since 2021. Mr. Tu

graduated from National Chiao Tung University (國立交通大學) (currently known as National Yang

Ming Chiao Tung University (國立陽明交通大學)) in Taiwan, with a bachelor’s degree in control

engineering in June 1981. He also obtained a master’s degree in business administration in June

2006 jointly offered by the Northwestern University’s Kellogg School of Management and the

Hong Kong University of Science and Technology (香港科技大學). Save as disclosed above, Mr. Tu

did not hold any directorship in any listed companies during the last three years.


– 233 –


Mr. Tu served as a director, general manager, or person in charge of the companies set out

in the table below prior to their deregistration, revocation, or dissolution:

Company name

Place of

establishment

Nature of

business Position Status

Date of

deregistration,

revocation or

dissolution

Yuanpei Century (Beijing)

Educational Technology

Co., Ltd. (元培世紀(北

京)教育科技有限公司)

PRC translation director revoked, not

deregistered

26 August 2016

Beijing Yuanpei Century

Translation Co., Ltd.

(北京元培世紀翻譯有限

公司)

PRC translation director revoked, not

deregistered

12 April 2019

Aitasi Technology

(Zhenjiang) Co., Ltd.

(艾塔斯科技(鎮江)有限

公司)

PRC design,

production and

sale of colored

laser printer

general

manager

revoked, not

deregistered

25 May 2018

Shenzhou Longxun

Technology (Beijing)

Co., Ltd. (神州龍訊科

技(北京)有限公司)

PRC computer chip

design

director deregistered 8 November

2012

Chengdu Feihulegou E-

Commerce Co., Ltd.

Branch No. 2 (成都飛虎

樂購電子商務有限公司

第二分公司)

PRC E-commerce person in

charge

deregistered 8 March 2013

Cisco System (China)

Network Technology

Co., Ltd. Wuhan Office

(思科系統(中國)網絡技

術有限公司武漢辦事處)

PRC sale and after-

sale services of

network devices

person in

charge

revoked, not

deregistered

16 March 1999

Moocourses Company

Limited (廣招英有限

公司)

Hong Kong online

education

promotion

director dissolved by

deregistration

22 April 2016

Luckyway (Asia) Limited

(福泰(亞洲)有限公司)

Hong Kong no operation director dissolved by

deregistration

25 July 2014

Mr. Tu confirmed that the above companies were deregistered, revoked or dissolved due to

business termination and were solvent at the time of deregistration, revocation or dissolution did

not incur any debt and/or liability due to the deregistration, revocation or dissolution, and such

deregistration, revocation or dissolution had no adverse impact on him or our Company.


– 234 –


Independent Non-executive Directors

Ms. Chen Jui-hsing (陳瑞杏), aged 50, was appointed as an independent Director of our

Company on 14 October 2020 and was re-designated as an independent non-executive Director

on 19 August 2021. She is responsible for supervising and providing independent judgment to

our Board. As a qualified accountant, Ms. Chen has been serving as special assistant to the

chairman’s office in Mercuries & Associates Holding, Ltd. (三商投資控股股份有限公司), a

company listed on the Taiwan Stock Exchange (stock code: 2905), since 2005. Ms. Chen also

served as an independent director of Success Prime Corporation (卓越成功股份有限公司), a

company listed on the Taiwan Stock Exchange (stock code: 2496), from 2016 to 2019. Ms. Chen

has been qualified as a certified public accountant in Taiwan since March 1994. She graduated

from National Taiwan University (國立臺灣大學) in Taiwan with a bachelor’s degree of

management in accounting in 1993. She also obtained a master’s degree in business

administration from National Taiwan University (國立臺灣大學) in Taiwan in June 2018. Save as

disclosed above, Ms. Chen did not hold any directorship in any listed companies during the last

three years.

Mr. Wang Chun-chuan (王俊權), aged 63, was appointed as an independent Director of our


on 19 August 2021. He is responsible for supervising and providing independent judgment to our

Board. Mr. Wang has more than 20 years of experience in the field of food nutrition. Mr. Wang

has been serving as a professor in food nutrition of Providence University (靜宜大學) in Taiwan

since 1997 and the deputy principal of the university since 2013. Mr. Wang graduated from the

National Taiwan College of Marine Science and Technology (國立台灣海洋學院) (currently known

as the National Taiwan Ocean University (國立台灣海洋大學)) in Taiwan with a bachelor’s degree

in fishery manufacturing (now known as food science) in June 1981. He also graduated from

North Dakota State University, the United States with a master’s degree in food and nutrition in

November 1987 and from Kansas State University, the United States with a degree of doctor of

philosophy in July 1991. Mr. Wang did not hold any directorship in any listed companies during

the last three years.

Mr. Huang Chien-chen (黃建誠), aged 43, was appointed as an independent Director of our


on 19 August 2021. He is responsible for supervising and providing independent judgment to our

Board. Mr. Huang has more than 11 years of experience in legal consulting service. Mr. Huang

has been serving as a partner of AY Commercial Law Offices (安成法律事務所) in Taiwan since

2010. Mr. Huang served as a supervisor and an independent director of APEX International

Financial Engineering Res. and Tech. Co., Ltd. (寶碩財務科技股份有限公司), a company listed on

the Taiwan Stock Exchange (stock code: 5210), from 2010 to 2015 and from 2015 to 2021,

respectively, and has been serving as an independent director of Mao Bao Inc. (毛寶股份有限公

司), a company listed on the Taiwan Stock Exchange (stock code: 1732), since 2017, and Tachan

Securities Co., Ltd. (大展證券股份有限公司), a company listed on the Taiwan Stock Exchange

(stock code: 6020), since 2020. Mr. Huang has been a qualified lawyer in Taiwan since February

2004. He graduated from National Taipei University (國立臺北大學) in Taiwan with a bachelor’s

degree in law and a master’s degree in law in June 2000 and June 2008, respectively, and


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subsequently graduated from University of Minnesota in the United States with a master’s degree

in law in May 2009. Save as disclosed above, Mr. Huang did not hold any directorship in any

listed companies during the last three years.

SENIOR MANAGEMENT

Our senior management is responsible for the day-to-day management and operation of our

business. The table below sets forth certain information regarding members of the senior

management of our Group:

Name AgeDate of Joining

our GroupCurrent Position in

our GroupRoles and

Responsibilities

Relationshipwith Director(s)and other SeniorManagement

Mr. Liao Chih-wei(廖志偉) . . . . . . .

45 1 April 2013 General manager Overall operation of ourGroup, mainly includingstrategic planning,overseeing theimplementation of theBoard of Directors’resolutions andmanaging all aspects ofour business operations

none

Mr. Lu Hao-wei(盧皓偉) . . . . . . .

49 2 April 2018 Chief financialofficer

Financial reporting,financial and treasurymanagement, financeand capital marketactivities and legal andcompliance matters ofour Group

none

Mr. Lee Chun-yi(李俊儀) . . . . . . .

48 1 April 2020 Deputy generalmanager for supplychain management

Overall supply chainmanagement

none

Mr. Liao Chih-wei (廖志偉), aged 45, joined our Group in April 2013 and was appointed as

our general manager on 1 May 2019. For details of his experiences, see ‘‘— Board of Directors —

Executive Directors’’ above.

Mr. Lu Hao-wei (盧皓偉), aged 49, joined our Group as our chief financial officer since 2

April 2018. He is responsible for financial reporting, financial and treasury management, finance

and capital market activities and legal and compliance matters of our Group. Mr. Lu has more

than 18 years of experience in accounting and finance. Prior to joining our Group, Mr. Lu worked

in Deloitte and Touche in Taiwan from 1998 to 2002. Mr. Lu then served as a director of the

accounting department of Clevo Co. (藍天電腦股份有限公司), a company listed on the Taiwan

Stock Exchange (stock code: 2363), from 2003 to 2004. He served as the chief financial officer

and spokesperson of Taihan Precision Technology Corporation (台翰精密科技股份有限公司), a

company listed on the Taipei Exchange (stock code: 1336), from 2004 to 2008, and as chief

financial officer from 2009 to 2010. He later served as a special assistant at the mainland group

department of Mercuries Co., Ltd. (三商行股份有限公司) (currently known as Mercuries &


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Associates, Ltd. (三商投資控股股份有限公司)), a company listed on the Taiwan Stock Exchange

(stock code: 2905) from 2011 to 2014. Mr. Lu subsequently served as a corporate planning senior

manager of Redwood Group Ltd (紅木集團有限公司), a Singapore company listed on the Taipei

Exchange (stock code: 8426) from 2014 to 2016. Mr. Lu subsequently served as a senior manager

of the department of finance and accounting of Simple Mart Retail Co., Ltd. (三商家購股份有限公

司) in 2017. Mr. Lu has been qualified as a certified public accountant in Taiwan since November

2003. He graduated from National Taiwan University (國立臺灣大學) in Taiwan with a bachelor’s

degree in business administration in June 1995, and subsequently graduated from National

Chengchi University (國立政治大學) in Taiwan with a master’s degree in law in December 2016.

Mr. Lee Chun-yi (李俊儀), aged 48, joined our Group as our deputy general manager on

supply chain management since 28 April 2020. He is responsible for overseeing the overall

supply chain of our Group. Mr. Lee has years of experience in food industry. Prior to joining our

Group, Mr. Lee worked as a manager in Shanghai Dingzhen Foodstuff Co., Ltd. (上海頂甄食品股份

有限公司) in Shanghai from 2011 to 2015 and a deputy general manager of the Yanjiao Meat

Product Branch Office of Fortune Ng Fung Food (Hebei) Co., Ltd. (河北福成五豐食品有限公司燕郊

肉類製品分公司) in Hebei Province from 2016 to 2017. He served as a supply chain director in Hai

Di Lao International Food Services Pte. Ltd. from 2018 to 2019. Mr. Lee subsequently worked as

the vice general manager of Zhejiang Baohe Food Co., Ltd. (浙江寶盒食品有限公司) (currently

known as Dongyantang (Hangzhou) Co., Ltd. (東燕堂(杭州)食品有限公司)) in Zhejiang Province

from 2019 to 2020. Mr. Lee graduated from Chung Shan Medical and Dental College (中山醫學院)

(currently known as Chung Shan Medical University (中山醫學大學)) in Taiwan with a bachelor’s

degree of science in nutrition in June 1996.

COMPANY SECRETARY

Ms. Ng Ka Man (吳嘉雯) has been our company secretary since 19 August 2021. Ms. Ng is a

manager of the [REDACTED] Department of TMF Hong Kong Limited, a leading global professional

services firm, where she is primarily responsible for assisting Hong Kong listed companies in

handling company secretarial and compliance work. She has over fifteen years of company

secretarial experience. She is an associate member of The Hong Kong Chartered Governance

Institute (formerly known as The Hong Kong Institute of Chartered Secretaries) and The Chartered

Governance Institute (formerly known as The Institute of Chartered Secretaries and

Administrators) in the United Kingdom. Ms. Ng obtained her master degree in Corporate

Governance from The Open University of Hong Kong in June 2011.

BOARD COMMITTEES

Audit Committee

We established an audit committee with written terms of reference in compliance with the

Corporate Governance Code and Corporate Governance Report as set out in Appendix 14 to the

Listing Rules. The primary duties of the audit committee are to review and supervise our financial

reporting process and internal control system of our Group, oversee the audit process, risk

management process and external audit functions. The audit committee consists of three

members, namely Chen Jui-hsing, Wang Chun-chuan and Huang Chien-chen. The chairwoman of

the audit committee is Chen Jui-hsing.


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Remuneration Committee

We established a remuneration committee with written terms of reference in compliance

with the Corporate Governance Code and Corporate Governance Report as set out in Appendix 14

to the Listing Rules. The primary duties of the remuneration committee are to establish, review

and provide advice to the Board on our Company’s policies and structure concerning the

remuneration of our Directors and senior management and on the establishment of a formal and

transparent procedure for developing remuneration policies, review and approve performance-

based remuneration by reference to corporate goals and objectives, determine the terms of the

specific remuneration package for each executive Director and senior management and ensure

that none of our Directors determines their own remuneration. The remuneration committee

consists of three members, namely Chen Jui-hsing, Wang Chun-chuan and Huang Chien-chen. The

chairman of the remuneration committee is Huang Chien-chen.

Nomination Committee

We established a nomination committee with written terms of reference in compliance with

the Corporate Governance Code and Corporate Governance Report as set out in Appendix 14 to

the Listing Rules. The primary duties of the nomination committee are to make recommendations

to our Board on the appointment of members of the Board. The nomination committee consists of

four members, namely Lee Yu-cheng, Chen Jui-hsing, Wang Chun-chuan and Huang Chien-chen.

The chairman of the nomination committee is Lee Yu-cheng.

CORPORATE GOVERNANCE

We are committed to achieving high standards of corporate governance with a view to

safeguarding the interests of our Shareholders as a whole. Our Directors are aware that upon

[REDACTED], we are expected to comply with the Corporate Governance Code in Appendix 14 to

the Listing Rules.

BOARD DIVERSITY POLICY

We have adopted a board diversity policy (the ‘‘Board Diversity Policy’’) which sets out the

objective and approach to achieve and maintain diversity on our Board in order to enhance the

effectiveness of our Board. The Board Diversity Policy provides that our Company should

endeavor to ensure that our Board members have the appropriate balance of skills, experience

and diversity of perspectives that are required to support the execution of our business strategy.

Pursuant to the Board Diversity Policy, selection of candidates for Directors will be based on a

range of diversified perspectives, including but not limited to professional experience, gender,

age, culture, independence, educational background, knowledge, expertise and length of service

with our Company.

Our nomination committee is responsible for compliance with relevant codes governing

board diversity under the Corporate Governance Code. After [REDACTED], our nomination

committee will review our Board Diversity Policy, as appropriate, to ensure effectiveness of the

policy, discuss any revisions that may be required, monitor the implementation of the policy and


– 238 –


recommend any such revisions to the Board for consideration and approval. We will also report

annually, in the corporate governance report contained in our annual report, on the Board’s

composition under diversified perspectives.

REMUNERATION POLICY


2021, the aggregate amount of fees, salaries, allowances, discretionary bonus, contributions to

defined contribution scheme and other benefits in kind (if applicable) paid by us to our Directors

were RMB0.8 million, RMB4.2 million, RMB3.1 million and RMB1.0 million, respectively.


2021, the aggregate amount of the salaries and allowances, performance-based bonuses,

retirement benefit scheme contributions and share-based payment expenses to the five highest

paid individuals who are neither a director nor the chief executive of our Group were RMB7.7

million, RMB4.3 million, RMB4.3 million and RMB1.8 million, respectively.

During the Track Record Period, no emoluments were paid by our Group to any Director or

any of the five highest paid individuals as an inducement to join or upon joining our Group or as

a compensation for loss of office. None of our Directors had waived any remuneration during the

Track Record Period.

Under the arrangements currently in force, we estimate that the aggregate remuneration

payable to, and benefits in kind receivable by, our Directors (excluding discretionary bonus) for

the year ending 31 December 2021 will be approximately RMB2.6 million.

In order to incentivize our Directors, senior management and other employees for their

contribution to our Group and to retain suitable personnel in our Group, we adopted the Pre-

[REDACTED] Share Option Scheme on 28 July 2021 and the Share Option Scheme on [date], and

granted options to subscribe for [REDACTED] shares under the Pre-[REDACTED] Share Option

Scheme. For more details, see ‘‘Appendix IV — Statutory and General Information — D. Other

Information — 14. Share Option Schemes.’’

Save as disclosed in this Document, no other payments had been made, or are payable, by

any member of our Group to our Directors during the Track Record Period.

MANAGEMENT PRESENCE

We have applied for, and the Stock Exchange [has] granted, a waiver from strict compliance

with the requirement under Rule 8.12 of the Listing Rules in relation to the requirement of

management presence in Hong Kong. Please see ‘‘Waivers from Strict Compliance with the Listing

Rules and Exemptions from the Companies (Winding up and Miscellaneous Provisions) Ordinance

— Waiver in Relation to Management Presence in Hong Kong’’ in this Document for more details.


– 239 –


COMPLIANCE ADVISOR

Our Company has appointed Red Solar Capital Limited as our compliance advisor pursuant

to Rule 3A.19 of the Listing Rules. Pursuant to Rule 3A.23 of the Listing Rules, the compliance

advisor will advise our Company in the following circumstances:

(i) before the publication of any regulatory announcement, circular or financial report;

(ii) where a transaction, which might be a notifiable or connected transaction, is

contemplated, including share issues and share repurchases;

(iii) where we propose to use the [REDACTED] of the [REDACTED] in a manner different from

that detailed in this Document or where our business activities, developments or

results deviate from any forecast, estimate, or other information in this Document; and

(iv) where the Stock Exchange makes an inquiry of our Company concerning unusual

movements in the [REDACTED] or [REDACTED] volume of our Shares.

The term of the appointment of Red Solar Capital Limited will commence on (and including)

the [REDACTED] and end on (and including) 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 [REDACTED].


– 240 –


SUBSTANTIAL SHAREHOLDERS

So far as is known to our Directors, immediately following completion of the [REDACTED]

(assuming the [REDACTED] is not exercised and without taking into account any Shares which

may be issued upon the exercise of the options granted under the Pre-[REDACTED] Share Option

Scheme or any options which may be granted under the Share Option Scheme), the following

persons will have or be deemed or taken to have interests or short positions in our shares or

underlying shares which would be required to be disclosed to us and the Stock Exchange under

the provisions of Divisions 2 and 3 of Part XV of the SFO, or who will be directly or indirectly,

interested in [REDACTED] or more of the issued voting shares of any other member of our Group:

Name Nature of interest

Number of

Shares(2)

Approximate

percentage of

shareholding in

our Company

Mr. Lee(3)(8) . . . . . . . . . . . . Beneficial interest [REDACTED] (L) [REDACTED]

Interest in controlled corporation [REDACTED] (L) [REDACTED]

Interest of persons acting in

concert

[REDACTED] (L) [REDACTED]

Evensun Holdings(3) . . . . . . Beneficial interest [REDACTED] (L) [REDACTED]

Mr. Chen(4)(8) . . . . . . . . . . . Beneficial interest [REDACTED] (L) [REDACTED]

Interest in controlled corporation [REDACTED] (L) [REDACTED]

Interest of spouse [REDACTED] (L) [REDACTED]


concert


Lucky-CH(4) . . . . . . . . . . . . Beneficial interest [REDACTED] (L) [REDACTED]

Ms. Huang Ya-lin(5)(8) . . . . . Beneficial interest [REDACTED] (L) [REDACTED]



concert


Mr. Chao(6)(8) . . . . . . . . . . . Interest in controlled corporation [REDACTED] (L) [REDACTED]



concert


ZHZ(6) . . . . . . . . . . . . . . . . Beneficial interest [REDACTED] (L) [REDACTED]

Ms. Wong Wing Sze(7)(8) . . . Beneficial interest [REDACTED] (L) [REDACTED]



concert


Notes:

(1) Assuming the [REDACTED] is not exercised.

(2) The letter ‘‘L’’ denotes the person’s long position in the Shares.


– 241 –


(3) (a) Mr. Lee is the registered owner of [REDACTED] Shares; and (b) he holds the entire share capital of

Eversun Holdings through LYC and is deemed to be interested in the Shares held by Eversun Holdings.

(4) (a) Mr. Chen is the registered owner of [REDACTED] Shares; (b) he holds the entire share capital of Lucky-CH

through CH&H and is deemed to be interested in the Shares held by Lucky-CH; and (c) he is deemed to be

interested in the Shares held by Ms. Huang Ya-lin, his spouse.

(5) (a) Ms. Huang is the registered owner of [REDACTED] Shares; and (b) she is deemed to be interested in the

Shares held by Mr. Chen, her spouse.

(6) (a) Mr. Chao holds the entire share capital of ZHZ and is deemed to be interested in the Shares held by ZHZ;

and (b) he is deemed to be interested in the Shares held by Ms. Wong Wing Sze, his spouse.

(7) (a) Ms. Wong is the registered owner of [REDACTED] Shares; and (b) she is deemed to be interested in the

Shares held by Mr. Chao, her spouse.

(8) Pursuant to the Concert Party Agreements, Mr. Lee, Mr. Chen, Ms. Huang Ya-lin, Mr. Chao, and Ms. Wong

Wing Sze confirm and acknowledge the nature of their acting-in-concert relationship, and each of them is

deemed to be interested in the Shares that the other persons are interested under section 317 of the SFO.

For details, see ‘‘Relationship with Controlling Shareholders.’’

Save as disclosed above, our Directors are not aware of any other persons who will,

immediately following the [REDACTED] (without taking into account any Shares which may be

issued upon the exercise of the [REDACTED] and any Shares which may be issued upon the

exercise of the options granted under the Pre-[REDACTED] Share Option Scheme or any options

which may be granted under the Share Option Scheme), have interests or short positions in our

Shares or underlying Shares which would be required to be disclosed to us and the Stock

Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO, or who will be directly

or indirectly, interested in [REDACTED] or more of the issued voting shares of any other member

of our Group.


– 242 –


AUTHORIZED AND ISSUED SHARE CAPITAL

The following is a description of the authorized share capital of our Company as of the

Latest Practicable Date and immediately following the completion of the [REDACTED]:

Authorized Share Capital

Shares Total nominal or par value

HK$

As of the Latest Practicable Date . . . . . . . . 1,000,000,000 shares of

HK$[REDACTED] par value each

100,000,000

Immediate following the completion of the

[REDACTED] . . . . . . . . . . . . . . . . . . . . .

[REDACTED] shares of

HK$[REDACTED] par value each

[REDACTED]

Issued Share Capital

The following is a description of the issued share capital of our Company in issue and to be

issued as fully paid or credited as fully paid prior to and immediately following the completion of

the [REDACTED], assuming the [REDACTED] is not exercised:

Shares Description of SharesNominal

or par valueTotal nominalor par value

HK$ HK$

Shares in issue as of the Latest Practicable Date

325,371,420 Shares [REDACTED] 32,537,142

Shares to be issued under the [REDACTED]

[REDACTED] Shares [REDACTED] [REDACTED]

[REDACTED] Shares Total number of Shares in issue

immediately following the completion

of the [REDACTED]


SHARE CAPITAL

– 243 –


The following is a description of the issued share capital of our Company in issue and to be

issued as fully paid or credited as fully paid prior to and immediately following the completion of

the [REDACTED], assuming the [REDACTED] is exercised in full:

Shares Description of SharesNominal orpar value

Total nominalor par value

HK$ HK$

Shares in issue as of the Latest Practicable Date

325,371,420 Shares [REDACTED] 32,537,142

Shares to be issued under the [REDACTED]

[REDACTED] Shares [REDACTED] 12,472,600

[REDACTED] Shares Total number of Shares in issue

immediately following the completion

of the [REDACTED]

[REDACTED] 45,009,742

ASSUMPTIONS

The above table assumes that the [REDACTED] becomes unconditional and the issue of

Shares under the [REDACTED] is made as described herein. It does not take into account any

Shares (i) which may be issued upon exercise of the options granted under the Pre-[REDACTED]

Share Option Scheme or any options which may be granted under the Share Option Scheme, or

(ii) which may be allotted and issued or repurchased by our Company pursuant to the general

mandates granted to our Directors as described below or otherwise.

RANKING

The [REDACTED] and the Shares which may be issued under the [REDACTED] or upon theexercise of the options granted under the Pre-[REDACTED] Share Option Scheme and any optionswhich may be granted under the Share Option Scheme will rank equally with all of the Sharesnow in issue or to be issued, and will qualify and rank equally for all dividends or otherdistributions declares, made or paid on the Shares after the date of this Document.

GENERAL MANDATE TO ISSUE AND REPURCHASE SHARES

Subject to the [REDACTED] becoming unconditional, our Directors have been granted ageneral mandate to issue and repurchase our Shares. For more details of these mandates, see‘‘Appendix IV — Statutory and General Information — A. Further Information about Our Group — 3.Resolutions Passed by Our Shareholders in General Meeting on [date].’’

PRE-[REDACTED] SHARE OPTION SCHEME

Our Company has approved and adopted the Pre-[REDACTED] Share Option Scheme. Theprincipal terms of the Pre-[REDACTED] Share Option Scheme are summarized in ‘‘Appendix IV —

Statutory and General Information — D. Other Information — 14. Share Option Schemes — (a) Pre-[REDACTED] Share Option Scheme.’’

SHARE CAPITAL

– 244 –


SHARE OPTION SCHEME

We have conditionally adopted the Share Option Scheme. The principal terms of the ShareOption Scheme are summarized in ‘‘Appendix IV — Statutory and General Information — D. OtherInformation — 14. Share Option Schemes — (b) Post-[REDACTED] Share Option Scheme.’’

CIRCUMSTANCES UNDER WHICH GENERAL MEETINGS AND CLASS MEETINGS ARE REQUIRED

Our Company has only one class of Shares, namely ordinary shares, and each ranks paripassu with the other Shares.

Pursuant to the Companies Act and the terms of our Memorandum and Articles ofAssociation, our Company may from time to time by shareholders’ ordinary resolution (a)increase its share capital by the creation of new shares of such amount as it thinks expedient;(b) consolidate or divide all or any of its share capital into shares of larger or smaller amountthan its existing shares; (c) divide its unissued shares into several classes and attach to suchshares any preferential, deferred, qualified or special rights, privileges or conditions; (d)subdivide its shares or any of them into shares of an amount smaller than that fixed by theMemorandum; (e) cancel any shares which, at the date of the resolution, have not been taken oragreed to be taken by any person and diminish the amount of its share capital by the amount ofthe shares so cancelled; (f) make provision for the allotment and issue of shares which do notcarry any voting rights; and (g) change the currency of denomination of its share capital. Formore details, see ‘‘Appendix III — Summary of the Constitution of Our Company and CaymanIslands Company Law — 2. Articles of Association — (a) Shares — (iii) Alteration of capital.’’

Pursuant to the Companies Act and the terms of our Memorandum and Articles ofAssociation, if at any time the share capital of the Company is divided into different classes ofshares, all or any of the special rights attached to any class of shares may (unless otherwiseprovided for by the terms of issue of the shares of that class) be varied, modified or abrogatedeither with the consent in writing of the holders of not less than three-fourths in nominal valueof the issued shares of that class or with the sanction of a special resolution passed at aseparate general meeting of the holders of the shares of that class. The provisions of the Articlesrelating to general meetings shall mutatis mutandis apply to every such separate generalmeeting, but so that the necessary quorum (other than at an adjourned meeting) shall be notless than two persons together holding (or, in the case of a member being a corporation, by itsduly authorized representative) or representing by proxy not less than one-third in nominal valueof the issued shares of that class. Every holder of shares of the class shall be entitled on a pollto one vote for every such share held by him, and any holder of shares of the class present inperson or by proxy may demand a poll. For more details, see ‘‘Appendix III — Summary of theConstitution of Our Company and Cayman Islands Company Law — 2. Articles of Association —

(a) Shares — (ii) Variation of rights of existing shares or classes of shares.’’ Further, ourCompany will also hold general meetings from time to time as may be required under theArticles, a summary of which is set out in ‘‘Appendix III — Summary of the Constitution of ourCompany and Cayman Islands Company Law.’’

SHARE CAPITAL

– 245 –


You should read the following discussion and analysis in conjunction with our audited

financial statements included in the Accountants’ Report set out in Appendix I to this

Document, together with the accompanying notes. The Accountants’ Report has been prepared

in accordance with IFRS. You should read the entire Accountants’ Report and not merely rely on

the information contained in this section.

The following discussion and analysis contain forward-looking statements that involve

risks and uncertainties. These statements are based on assumptions and analysis made by us

in light of our experience and perception of historical trends, current conditions and expected

future developments, as well as other factors that we believe are appropriate under the

circumstances. However, whether the actual outcome and developments will meet our

expectations and predictions depends on a number of risks and uncertainties over which we

do not have control. See ‘‘Risk Factors’’ and ‘‘Forward-looking Statements.’’

OVERVIEW

We are China’s No.1 Cantonese hot pot chain restaurant. According to the F&S Report, both


a 1.7% market share in terms of revenue. We operate and manage three self-developed

distinctive brands: Want Hotpot (撈王鍋物料理), Guoji Hotpot (鍋季) and Soup for the Soul (撈王

⼼靈肚雞湯). Our flagship Want Hotpot has its brand orientation as classy upscale dining, Guoji

Hotpot focuses on solo dining scenario, and Soup for the Soul, a fast casual style restaurant that

offers quick and light dining for small gathering, caters to younger customers’ preferences. We

have been proactively exploring other business operations in addition to restaurants operations

to cater to the changing customers’ needs and dining preferences. We strategically introduced

our retail business in 2020 to sell the ready-to-serve stewed chicken and pork tripe soup, by

collaborating with local and international supermarkets. In addition, we commenced our food

delivery business by cooperating with third parties in 2018.

During the Track Record Period, we generated revenue amounting to RMB860.5 million,

RMB1,067.7 million, RMB1,062.3 million, RMB399.5 million and RMB620.0 million for the years

ended 31 December 2018, 2019 and 2020 and the six months ended 30 June 2020 and 2021,

respectively, from our restaurant operations. We also generated revenue amounting to RMB10.5

million, RMB27.0 million, RMB62.4 million, RMB37.0 million, and RMB26.8 million for the years

ended 31 December 2018, 2019 and 2020 and the six months ended 30 June 2020 and 2021,

respectively, from our other business operations.

FINANCIAL INFORMATION

– 246 –


FACTORS AFFECTING OUR RESULTS OF OPERATIONS AND FINANCIAL CONDITION ANDCOMPARABILITY

Our results of operations and the period-to-period comparability of our financial results areaffected by a number of external factors. Our consolidated financial statements may not beindicative of our future earnings, cash flows or financial position for numerous reasons,including those described below:

Impact of Contagious Disease

The COVID-19 pandemic

Coronavirus disease 2019, also known as COVID-19, is a contagious disease. The firstknown case in mainland China was identified in December 2019. COVID-19 was declared apandemic by the World Health Organization in March 2020. Hit by COVID-19, the catering serviceindustry, including us, has undergone such a dramatic shift, in particular during the rapidescalation of infection control response.

Soon after the outbreak, the PRC government had announced certain measures includingtravel restrictions and social distancing in certain major cities in the PRC to block thetransmission of COVID-19 for containing the virus quickly. Due to such measures and otherregulations, a number of restaurants were forced to temporarily close in early 2020. Since theonset of the COVID-19 outbreak, consumers’ purchasing willingness and purchasing power havebeen dampened amid a general economic downturn.

Since the catering industry is highly susceptible to contagious disease for that restaurantsmay suffer from temporary closures and decreased customer traffic, sales generated fromrestaurant operations for a period after the outbreak of COVID-19 in 2020 had decreased.However, amid sweeping lockdowns and social distancing measures nationwide, ordering foodonline seems to have become popular for those who are working or learning at home, offeringthe chance to eat a wider variety of food without risking unnecessary human contact. In thisregard, our revenue generated from food delivery service increased from RMB27.0 million toRMB59.1 million from 2019 to 2020; while after our commencement of retail business in 2020,revenue generated from this sector amounted to RMB3.4 million for the year ended 31 December2020. At the epidemic peak of COVID-19 in mainland China, we closed approximately 58% of ourrestaurants, of which their restaurant operations and food delivery services had been suspendedfor at least ten days from February to March 2020. For restaurants that remained open, same-store sales was declining due to shortened operating hours and reduced traffic; some of ouropened restaurants primarily provided food delivery and takeaway services.

COVID-19 pandemic has changed the landscape of the catering service market in China andsignificantly decreased the number of restaurants and the concentration of businesses, but italso promoted retail business and food delivery business. According to the F&S Report, themarket size of ready-to-serve business in the PRC increased significantly from RMB150.8 billionto RMB278.6 billion from 2016 to 2020, and is expected to further increase at a CAGR of 18.8%from 2020 to 2025. In 2019, most of our restaurants had commenced their food deliverybusiness, and our revenue generated from food delivery business increased from RMB10.5million in 2018 to RMB27.0 million in 2019, and further to RMB59.1 million in 2020 which


– 247 –


occupied 5.3% of our total 2020 revenue. We believe that the sales from our retail business andfood delivery business will significantly increase, and these newly-formed business sectors haveformed and will continue forming a key part of our revenue source for the years to come.

Performance of Our Business

The growth of our revenue is driven by: (i) the expansion of our restaurant network and the

increase of our market share in the hot pot restaurant market, as indicated by that the number of

our restaurants increased from 59 as of 1 January 2018 to 134 as of 30 June 2021; (ii) the

increase of brand exposure through online and offline marketing and brand development

activities, and our cross-industry collaborations; and (iii) the expansion of our delivery and retail

business.

Initial breakeven period and cash investment payback period

In calculating the initial breakeven period and cash investment payback period for our Want

Hotpot restaurants, we assumed that our restaurants would continue to operate and took into

account (i) the capital expenditure for renovation, construction and purchase of equipment and

facilities; (ii) upfront costs incurred in the opening of restaurants, such as expenses on cleaning

supplies, utensils, uniforms and other miscellaneous expenses; and (iii) the net cash flows from

operations, being the sum of net profit before tax and the amount of depreciation and

amortization.

Initial breakeven period refers to the first month for the revenue of a newly opened

restaurant to cover at least equal to its expenses. Cash investment payback period refers to the

amount of time it takes for the cumulative net profit plus depreciation (excluding depreciation of

right-of-use assets) and amortization to cover the costs to open a restaurant.

Most of our Want Hotpot restaurants opened during the Track Record Period and in

operation as of 30 June 2021, reached breakeven in the first full month of operation due to our

effective development strategy. Our financial statements have shown that the average cash

investment payback period is 13 months for Want Hotpot restaurants.

Same-store sales

The growth of our same-store sales is primarily affected by same-store table turnover rate

and average spending per customer. We are committed to further enhancing our financial

performance by achieving higher same-store sales growth through initiatives, such as offering

innovative menu items and course sets, enhancing dining experience, strengthening customer

loyalty, and attracting casual customers during non-peak hours. For more details, see ‘‘Business

— Restaurant Performance — Same-store Sales.’’


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Other Business Operations

Before the first half of 2020, we generated substantially all of our revenue and profits from

operating our restaurants. In response to the market demand, and partly due to the impact of

COVID-19 pandemic that significantly changed the consumers’ dining habit as well as other

spending behavior, we commenced our retail business in 2020 by offering ready-to-serve

products to consumers in local and international supermarkets. We have also enhanced our food

delivery services, which commenced in 2018. The delivery of our food is performed by food

delivery platforms we cooperate with. As of the Latest Practicable Date, we operated food

delivery business in most of our restaurants across Greater China. For more details, see

‘‘Business — Our Business Operations.’’

According to the F&S Report, the market size of ready-to-serve in the PRC is expected to

increase from RMB278.6 billion in 2020 to RMB658.6 billion in 2025 and the market size of food

delivery services will increase from RMB715.4 billion in 2020 to RMB1,443.0 billion in 2025. We

plan to continue diversifying our business operations and revenue sources so as to keep pace of

the new economy in mainland China. As a result, mix of restaurant operations and other

businesses in our portfolio will continue to impact our operating results and financial condition.

Fluctuation of Food Ingredients Costs

Our profitability depends significantly on our ability to anticipate and react to changes in

the pricing policies for raw materials and consumables, mainly including food ingredients, soups

and hot pot sauces. Key food ingredients and consumables for the hot pot and other products we

serve primarily include pork tripe, chicken, beef, pork bone and vegetables. For the years ended

31 December 2018, 2019 and 2020 and the six months ended 30 June 2021, our raw materials

and consumables used amounted to RMB300.0 million, RMB381.7 million, RMB415.4 million and

RMB234.0 million, respectively. Since we rely heavily on suppliers based in China to supply

materials, any increase in distribution costs or purchase prices or any failure of our suppliers to

perform their duties could significantly increase our total costs. Where increase in costs cannot

be passed on to customers, our profitability will be impacted.

The smooth supply of our materials may be affected by factors beyond our control, such as

seasonal shifts, climate conditions, natural disasters and government policies, laws and

regulations, each of which could increase our costs and/or disrupt our supply. Our suppliers

may also be affected by these factors to produce and transport materials to our restaurants; they

may choose to pass on the increased labor and other kinds of costs to us. We therefore may

spend more, compared with usual occasions, for purchasing materials. During the Track Record

Period, prices of certain materials, such as pork tripe, have increased, and failure to timely

obtain requisite quantities of such material at a reasonable price may subject us to the risk of

being unable to serve customers with our signature courses at restaurants. We do not stipulate

any fixed purchase prices in the supply contracts; on the contrary, purchase prices are specified

in each purchase order we place. As such, we have been able to secure and maintain a flexible

position in food procurement.


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Property Lease Costs

We do not own any property but instead lease all of our restaurants sites, apartments for

employees’ housing and Laowang Gourmet Lab (中央⼯廠). We believe this leasing strategy

reduces our capital investment requirements. We do not intend to acquire any property for our

restaurant sites in the future. As of the Latest Practicable Date, we leased 144 properties in

mainland China, which are mainly used as restaurants sites, Laowang Gourmet Lab and

headquarters premises.

We enter into long-term restaurant leases generally last for five years or longer, which

typically include a lease-free period up to four months to facilitate decoration and renovation of

the premises. However, we start to recognize rent expenses immediately on a straight-line basis

over the term of the lease, which includes the initial rent-free period. As a result, our rental

expenses and related expenses is typically higher than our actual rent payment in cash in the

initial period of a lease, and lower than our actual rent payment in cash from the middle to the

end of the lease period.

Our restaurants are primarily located in upscale shopping malls. The upscale location with

strong branding of the malls ensures not only steady customer flow but also per-customer

spending due to strong spending power of the shoppers. We endeavor to manage our rental

expenses and related expenses by establishing strategic partnerships with a number of major

real estate developers in mainland China, Taiwan and overseas locations to open our new

restaurants.

The Adoption of IFRS 16

We leased properties for our restaurants Laowang Gourmet Lab and various apartments for

employees’ housing. We adopted IFRS 16 since 1 January 2019. The adoption of IFRS 16 has an

impact on our financial position as of 31 December 2019 and 2020 and 30 June 2021, as well as

on the financial performance of the entire Track Record Period.

Under IFRS 16, after the initial recognition of right-of-use assets, lease liabilities and

provisions for restoration costs, we, as a lessee, are required to recognize: (i) depreciation of

right-of-use assets; and (ii) interest expenses on lease liabilities. As a result, other rental and

related expenses under otherwise identical circumstances decreased, while depreciation of right-

of-use assets and finance costs increased. The total amount of depreciation of right-of-use

assets, interest expenses on lease liabilities was higher in the early periods and lower in the

later periods of each lease.

The front-loaded lease expenses recognition pattern under IFRS 16 had no impact on

retained earnings as of 1 January 2019. For more details, see Note 3 to ‘‘Appendix I —

Accountants’ Report.’’

The adoption of IFRS 16 has affected virtually all commonly used financial ratios and

performance metrics, such as current ratio, quick ratio, profit before taxation, profit for the year/

period, cash generated from operations and cash flows from financing activities. The recognition

of right-of-use assets and lease liabilities expanded our consolidated statements of financial


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position and will materially affect our related financial ratios, in particular our current ratio and

quick ratio decreased as a result of the recognition of the current portion of the lease liabilities

from the adoption of IFRS 16.

BASIS OF PRESENTATION

The Company was incorporated as an exempted company with limited liability in the

Cayman Islands on 15 April 2015 and became the holding company of our Group. Prior to the

acquisitions of restaurants by our Company as described below, except for five restaurants which

were owned by Independent Third Parties and had once been managed by us, all of our then 25

Laowang restaurants were held by registered owner(s) on behalf of either our founders

themselves or our founders and their then business partners (‘‘Previous Business Partners’’),who were all Independent Third Parties, under the relevant equity entrustment agreements, and

such restaurants were under the control of our founders. As advised by our PRC Legal Advisors,

these 25 equity entrustment agreements did not violate mandatory provisions of applicable PRC

laws and regulations and were binding on the parties thereto. In view of the rapid expansion of

our restaurant network in the early years, we established our Company as the holding company

of our Group in 2015, started to open our new Laowang restaurants under our Group, and

consolidated the 25 previously established Laowang restaurants into our Group through

acquisition of such Laowang restaurants’ business and assets in 2017 and 2018 (‘‘PreviousRestaurants Acquisitions’’). We agreed to pay cash consideration in the aggregate amount of

RMB24,847,000 for 11 restaurants in 2017 and RMB34,965,000 for 14 restaurants in 2018, which

were determined with reference to the valuation of relevant assets appraised by an independent

valuer, and were fully settled. For more details, see ‘‘History and Corporate Structure — Our

Corporate Development — Our restaurants prior to the establishment of our Company.’’ Our

historical financial information has been prepared on the basis that the Company had always

been the holding company of our Group using the principles of merge accounting.

Our historical financial information has been prepared in accordance with the accounting

policies set out in Note 4 to ‘‘Appendix I — Accountants’ Report’’ which conform with the

International Accounting Standards (‘‘IAS’’) issued by the International Accounting Standards

Board (‘‘IASB’’), the IFRSs, amendments to IFRSs and the related interpretations issued by the

IASB, which are effective for our financial year beginning on 1 January 2021, throughout the Track

Record Period, except that we have adopted IFRS 16 Leases on 1 January 2019 and early adopted

the amendments to IFRS 16 COVID-19-Related Rental Concessions and COVID-19 Related Rental

Concessions beyond 30 June 2021 on 1 January 2020. For more details see Note 3 to ‘‘Appendix I

— Accountants’ Report.’’

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

We have identified certain accounting policies that are significant to the preparation of our

consolidated financial statements. A summary of our significant accounting policies is set forth

in Note 4 to ‘‘Appendix I — Accountants’ Report.’’ Some of our accounting policies involve

subjective assumptions and estimates, as well as complex judgments relating to accounting

items. We continually re-evaluate these estimates and judgments based on historical experience

and other factors, including industry practices and our expectations of future events that we

believe to be reasonable under the circumstances. When reviewing our consolidated financial


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statements, you should consider (i) our critical accounting policies, (ii) the judgments and other

uncertainties affecting the application of such policies, and (iii) the sensitivity of reported

results to changes in conditions and assumptions. We set forth below accounting policies that

we believe are critically important to us or involve the most significant estimates, and judgments

used in the preparation of our consolidated financial statements.

Determination on Discount Rates of Lease Contracts

We applied incremental borrowing rates of our relevant group entities in the recognition of

lease liabilities, which require financing spread adjustments and lease specific adjustments

based on the relevant market rates. The assessments of the adjustments in determining the

discount rates involved management judgment, which may significantly affect the amount of

lease liabilities and right-of-use assets. For details of the carrying amounts of lease liabilities,

see Note 5 to ‘‘Appendix I — Accountants’ Report.’’

Useful Lives of Property and Equipment

We determine the estimated useful lives of our property, equipment and right-of-use assets

in calculating the related depreciation and amortization charge. This estimate is based on our

experience of the actual useful lives of property, equipment and right-of-use assets of similar

nature and functions.

We will increase the depreciation and amortization charge where useful lives are shorter

than previously estimated lives, or will write off or write down obsolete assets that have been

abandoned or sold. For details of the useful lives of property, equipment and right-of-use assets,

see Note 5 to ‘‘Appendix I — Accountants’ Report.’’

Estimated Impairment of Property and Equipment and Right-of-use Asset

Property and equipment and right-of-use assets are stated at costs less accumulateddepreciation and impairment, if any. In determining whether an asset is impaired, we have toexercise judgement and make estimation, particularly in assessing: (i) whether the event hasoccurred or any indicator that may affect the asset value; (ii) whether the carrying value of anasset can be supported by the recoverable amount, in the case of value in use, the net presentvalue of future cash flows which are estimated based upon the continued use of the asset; and(iii) the appropriate key assumptions to be applied in estimating the recoverable amountsincluding cash flow projections and an appropriate discount rate. When it is not possible toestimate the recoverable amount of an individual asset (including right-of-use assets), weestimate the recoverable amount of the cash generating unit to which the assets belongs,including allocation of corporate assets when a reasonable and consistent basis of allocationcan be established, otherwise recoverable amount is determined at the smallest group of cashgenerating units, for which the relevant corporate assets have been allocated. Changing theassumptions and estimates, including the discount rates or the growth rate in the cash flowprojections, could materially affect the recoverable amounts.


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DESCRIPTION OF CERTAIN COMPONENTS OF OUR RESULTS OF OPERATIONS

The following table sets forth a summary of our consolidated statement of profit or loss and

other comprehensive income for the periods indicated. Our historical results presented below are

not necessarily indicative of the results that may be expected for any future period.


2018 2019 2020 2020 2021

RMB’000 % RMB’000 % RMB’000 % RMB’000

unaudited

% RMB’000 %

Revenue . . . . . . . . . . 870,944 100.0 1,094,753 100.0 1,124,770 100.0 436,434 100.0 646,709 100.0

Raw materials and

consumables used . . (300,008) (34.4) (381,657) (34.9) (415,447) (36.9) (162,457) (37.2) (234,049) (36.2)

Gross profit(1) . . . . . . . 570,936 65.6 713,096 65.1 709,323 63.1 273,977 62.8 412,660 63.8

Other income . . . . . . . 4,997 0.6 11,913 1.1 6,786 0.6 2,627 0.6 5,317 0.8

Staff costs . . . . . . . . (270,267) (31.0) (320,520) (29.3) (317,757) (28.3) (138,597) (31.8) (192,416) (29.8)

Rental expenses and

related expenses . . . (111,107) (12.8) (52,395) (4.8) (52,116) (4.6) (19,213) (4.4) (39,251) (6.1)

Utilities expenses . . . . (31,270) (3.6) (37,735) (3.4) (37,034) (3.3) (14,879) (3.4) (21,260) (3.3)

Depreciation and

amortization . . . . . (38,527) (4.4) (137,155) (12.5) (157,608) (14.0) (73,995) (17.0) (91,676) (14.2)

[REDACTED] . . . . . . . . — — — — — — — — (7,244) (1.1)

Other operating

expenses . . . . . . . (33,910) (3.9) (41,363) (3.8) (44,394) (3.9) (20,613) (4.7) (24,874) (4.0)

Other gains and losses . (1,317) (0.2) (953) 0.1 (130) 0.0 561 0.1 172 0.0

Materials consumed for

research activities . . (756) (0.1) (266) (0.0) (204) 0.0 (108) 0.0 (97) 0.0

Finance costs . . . . . . — — (12,977) (1.2) (15,735) (1.4) (7,296) (1.7) (8,617) (1.3)

Profit before tax . . . . . 88,779 10.2 121,645 11.1 91,131 8.1 2,464 0.6 32,714 5.1

Income tax expense . . . (29,724) (3.4) (41,730) (3.8) (23,690) (2.1) (1,402) (0.3) (11,264) (1.7)

Profit for the year/

period . . . . . . . . . 59,055 6.8 79,915 7.3 67,441 6.0 1,062 0.2 21,450 3.3

Note:

(1) We define gross profit as revenue deducting raw materials and consumables used.


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Revenue

During the Track Record Period, we generated revenue from restaurant operations, food

delivery business and retail business. Our revenue represents the amount received and

receivable from the three operations net of discounts and sales related taxes. Our revenue was

RMB870.9 million, RMB1,094.8 million, RMB1,124.8 million, RMB436.4 million and RMB646.7

million for the years ended 31 December 2018, 2019 and 2020 and the six months ended 30 June

2020 and 2021, respectively. Substantially all of our revenue generated from our restaurant

operations. For the years ended 31 December 2018, 2019 and 2020 and the six months ended

2020 and 2021, restaurant operation is our largest operation, representing 98.8%, 97.5%, 94.4%,

91.5% and 95.9% of the total revenue, respectively.

Revenue from restaurant operations

Revenue from restaurant operations was derived from our Want Hotpot restaurants, Guoji

Hotpot restaurants, and Soup for the Soul restaurants. We operate a customer loyalty scheme,

our Members’ Club, through which award credits are granted to the customers when they had

spending in the restaurants. The award credits have a valid period between three to 15 months

after the date of grant of award credits. A contract liability is recognized for revenue relating to

the customer loyalty scheme at the time of the initial sales transaction. Revenue from customer

loyalty scheme is recognized when the award credits are redeemed by the customer. For more

details, see Note 6 to ‘‘Appendix I — Accountants’ Report.’’

The following table sets forth a breakdown of our revenue for the periods indicated.


2018 2019 2020 2020 2021

RMB’000 % RMB’000 % RMB’000 % RMB’000 % RMB’000 %(unaudited)

Revenue:Restaurant operations . . 860,492 98.8 1,067,705 97.5 1,062,342 94.4 399,474 91.5 619,953 95.9Food delivery business . 10,452 1.2 27,048 2.5 59,070 5.3 36,625 8.4 21,036 3.3Retail business . . . . . — — — — 3,358 0.3 335 0.1 5,720 0.8

Total . . . . . . . . . . . . 870,944 100.0 1,094,753 100.0 1,124,770 100.0 436,434 100.0 646,709 100.0

Geographical revenue

During the Track Record Period, we generated revenue from restaurant operations in Greater

China. To a lesser extent, we also generated revenue from food delivery and retail business from

the same region.


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We generated substantially all of our revenue from mainland China. The following table sets

forth a breakdown of the revenue by location for the periods indicated.


Revenue 2018 2019 2020 2020 2021

RMB’000 % RMB’000 % RMB’000 % RMB’000 % RMB’000 %unaudited

Mainland China . . . . . . . . 851,264 97.7 1,074,487 98.1 1,106,612 98.4 429,490 98.4 638,439 98.7Taiwan . . . . . . . . . . . . . 19,680 2.3 20,266 1.9 18,158 1.6 6,944 1.6 8,270 1.3

Total . . . . . . . . . . . . . . 870,944 100.0 1,094,753 100.0 1,124,770 100.0 436,434 100.0 646,709 100.0

Raw Materials and Consumables Used

Our raw materials and consumables used consisted of costs for (i) food ingredients from

external suppliers including shipping costs, and (ii) consumables used in our restaurants

including packaging materials. For the years ended 31 December 2018, 2019 and 2020 and the

six months ended 30 June 2020 and 2021, our raw materials and consumables used were

RMB300.0 million, RMB381.7 million, RMB415.4 million, RMB162.5 million and RMB234.0 million,

respectively, representing 34.4%, 34.9%, 36.9%, 37.2% and 36.2% of our revenue for the

respective period.

Gross Profit and Gross Profit Margin


2020 and 2021, our gross profit was RMB570.9 million, RMB713.1 million, RMB709.3 million,

RMB274.0 million and RMB412.7 million, respectively, representing 65.6%, 65.1%, 63.1%, 62.8%

and 63.8% of our revenue for the respective period.

Other income

Other income consisted of government grants, management fee income, interest income

arising from rental deposits, bank interest income and others. For the years ended 31 December

2018, 2019 and 2020 and the six months ended 30 June 2020 and 2021, our other income were

RMB5.0 million, RMB11.9 million, RMB6.8 million, RMB2.6 million and RMB5.3 million,

respectively, representing 0.6%, 1.1%, 0.6%, 0.6% and 0.8% of our revenue for the respective

period.


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The following table sets forth a breakdown of our other income for the periods indicated.


Other income 2018 2019 2020 2020 2021

RMB’000 % RMB’000 % RMB’000 % RMB’000 % RMB’000 %

unaudited

Management fee income . . 2,628 52.6 1,624 13.6 308 4.5 308 11.7 — —

Government grants . . . . . . 1,515 30.3 7,872 66.1 3,883 57.2 1,212 46.1 3,986 75.0

Interest income arising from

rental deposits . . . . . . — — 765 6.4 956 14.2 436 16.6 571 10.7

Bank interest income . . . . 198 4.0 231 1.9 363 5.3 136 5.2 302 5.7

Others . . . . . . . . . . . . . 656 13.1 1,421 12.0 1,276 18.8 535 20.4 458 8.6

Total . . . . . . . . . . . . . . 4,997 100.0 11,913 100.0 6,786 100.0 2,627 100.0 5,317 100.0

Government grants had been the largest segment of the other income since 2019, which

represented local government subsidies in the form of cash reward and with no conditions

imposed by the respective PRC government authorities to support the development of our

Company. Due to the non-recurring nature, we do not believe that the changes in government

grants during the Track Record Period reflect a known trend.

Management fee income represented the fee collected from the management services we

provided to five restaurants that we have ceased to conduct in by mid-2020. The types of

management services that we provide to these restaurants include staff management,

procurement, restaurant operational management and related services.

Interest income arising from rental deposits represented the imputed interest from our

rental deposits.

Bank interest income mainly represented interest earned from our cash and cash

equivalents. The increase in our bank interest income during the Track Record Period is primarily

attributable to a higher average balance of bank balances, cash and term deposits.

Staff Costs

Our staff costs consisted of Directors’ remuneration and other staff costs including salaries

and other benefits, retirement benefit scheme contributions, share-based payment expenses and

labor outsourcing fee. For the years ended 31 December 2018, 2019 and 2020 and the six months

ended 30 June 2020 and 2021, our staff costs were RMB270.3 million, RMB320.5 million,

RMB317.8 million, RMB138.6 million and RMB192.4 million, respectively, representing 31.0%,

29.3%, 28.3%, 31.8% and 29.8% of our revenue for the respective period.


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The following table sets forth a breakdown of our staff costs for the period indicated.


2018 2019 2020 2020 2021

RMB’000 % RMB’000 % RMB’000 % RMB’000 % RMB’000 %

unaudited

Other staff costs:

— Salaries and other

benefits . . . . . . . . . . . 123,764 45.8 156,881 48.9 162,518 51.1 72,185 52.0 99,830 51.8

— Retirement benefit

scheme contributions . . . 13,062 4.8 19,732 6.2 15,279 4.8 9,365 6.8 14,002 7.3

— Share-based payment

expenses . . . . . . . . . . . 9,370 3.5 3,374 1.1 2,704 0.9 1,462 1.1 526 0.3

146,196 54.1 179,987 56.2 180,501 56.8 83,012 59.9 114,358 59.4

Labor outsourcing fee . . . . . . . . 123,275 45.6 136,291 42.5 134,117 42.2 54,455 39.3 77,083 40.1

Directors’ remuneration . . . . . . . 796 0.3 4,242 1.3 3,139 1.0 1,130 0.8 975 0.5

Total staff costs . . . . . . . . . . . 270,267 100.0 320,520 100.0 317,757 100.0 138,597 100.0 192,416 100.0

Rental Expenses and Related Expenses

Our rental expenses and related expenses consisted of the lease payments of office

premises, restaurants and other rental related expenses including apartment for employees’

housing and Laowang Gourmet Lab. Before we adopted IFRS 16, our rental expenses and related

expenses were RMB111.1 million for the year ended 31 December 2018, representing 12.8% of our

revenue for the year. We adopted IFRS 16 since 1 January 2019. For the years ended 2019 and

2020 and the six months ended 30 June 2020 and 2021, our rental expenses and related

expenses were RMB52.4 million, RMB52.1 million, RMB19.2 million and RMB39.3 million,

respectively, representing 4.8%, 4.6%, 4.4% and 6.1% of our revenue for the respective period.

Utilities Expenses

Our utilities expenses consisted of expenses of electricity, gas and water utilities. For the

years ended 31 December 2018, 2019 and 2020 and the six months ended 30 June 2020 and

2021, our utilities expenses were RMB31.3 million, RMB37.7 million, RMB37.0 million, RMB14.9

million and RMB21.3 million, respectively, representing 3.6%, 3.4%, 3.3%, 3.4% and 3.3% of our

revenue for the respective period.

Depreciation and Amortization

Depreciation and amortization primarily consisted of depreciation for our property, plant

and equipment, depreciation of right-of-use assets and amortization of intangible assets. Before

we adopted IFRS 16, our depreciation and amortization were RMB38.5 million for the year ended

31 December 2018, representing 4.4% of our revenue for the year. We adopted IFRS 16 since 1

January 2019. For the years ended 2019 and 2020, and the six months ended 30 June 2020 and


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2021, our depreciation and amortization were RMB137.2 million, RMB157.6 million, RMB74.0

million and RMB91.7 million, respectively, representing 12.5%, 14.0%, 17.0% and 14.2% of our

revenue for the respective period.

Other Operating Expenses

The other operating expenses consisted of (i) business development and promotion

expenses, (ii) daily maintenance expenses, (iii) delivery business and freight expenses, and (iv)

other administrative expenses. The other administrative expenses mainly included expenses

incurred on employee activities, commercial insurance, conference and other miscellaneous

expenses, which individually were not material to us. For the years ended 31 December 2018,

2019 and 2020 and the six months ended 30 June 2020 and 2021, our other operating expenses

were RMB33.9 million, RMB 41.4 million, RMB44.4 million, RMB20.6 million and RMB24.9 million,

respectively, representing 3.9%, 3.8%, 3.9%, 4.7% and 3.8% of our revenue for the respective

period.

Other Gains and Losses

Our other gains and losses consisted of (i) net gain or loss on disposal of property and

equipment, (ii) net gain arising on termination of leases and right-of-use assets, (iii) net foreign

exchange gain or loss, and (iv) investment gain on financial assets at fair value through profit or

loss (‘‘FVTPL’’).

The following table sets forth a breakdown of the other gains and losses for the period

indicated.


Six months ended

30 June

2018 2019 2020 2020 2021

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

(unaudited)

(Loss) gain on disposal of property

and equipment, net . . . . . . . . . . (1,705) (1,735) (1,070) 2 (395)

Gain arising on termination of

leases and right-of-use assets,

net . . . . . . . . . . . . . . . . . . . . . . — 3 806 — 369

Foreign exchange gain (loss), net . . 132 (369) (506) 256 (44)

Investment gain on financial assets

at FVTPL . . . . . . . . . . . . . . . . . . 256 1,148 640 303 242

Total other gains and losses . . . . . . (1,317) (953) (130) 561 172


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Materials consumed for research activities

Our materials consumed for research activities consisted of expenses on raw materials andother consumables used for the purpose of developing new dishes. For the years ended 31December 2018, 2019 and 2020 and the six months ended 30 June 2020 and 2021, our materialsconsumed for research activities was RMB0.8 million, RMB0.3 million, RMB0.2 million, RMB0.1million and RMB0.1 million, respectively.

Finance Costs

Our finance costs mainly represented interests on lease liabilities. For the years ended 31December 2018, 2019 and 2020 and the six months ended 30 June 2020 and 2021, our financecosts were RMB0, RMB13.0 million, RMB15.7 million, RMB7.3 million and RMB8.6 million,respectively, representing 0%, 1.2%, 1.4%, 1.7%, and 1.3% of our revenue for the respectiveperiod.

The following table sets forth a breakdown of the finance costs for the period indicated.


Six months ended

30 June

2018 2019 2020 2020 2021


(unaudited)

Interests on lease liabilities . . — 12,977 14,900 6,839 8,583

Interests on bank borrowings . — —* 835 457 34

— 12,977 15,735 7,296 8,617

* amount less than RMB1,000

Income Tax Expenses

Our income tax expenses consisted of our current and deferred tax expenses subject to a

statutory Enterprise Income Tax (‘‘EIT’’) Law. For the years ended 31 December 2018, 2019 and

2020 and the six months ended 30 June 2020 and 2021, our income tax expenses were RMB29.7

million, RMB41.7 million, RMB23.7 million, RMB1.4 million and RMB11.3 million, respectively.

During the Track Record Period, our PRC subsidiaries were subject to a statutory EIT rate of 25%

under the EIT Law and a 10% withholding tax. In addition to applicable EIT rates, our effective

income tax rates may also be affected by the amounts including expenses not deductible for tax

purpose, deductible temporary differences not recognized, utilization of deductible temporary

differences previously recognized and non-recognized tax losses. During the Track Record Period,

we did not have any assessable income in the Cayman Islands and Hong Kong.

During the Track Record Period and as of the Latest Practicable Date, we fulfilled all of our

tax obligations and did not have any unresolved tax disputes.


– 259 –


PERIOD TO PERIOD COMPARISON OF RESULTS OF OPERATIONS

Six Months Ended 30 June 2020 Compared with Six Months Ended 30 June 2021

Revenue

Our revenue increased by 48.2% from RMB436.4 million for the six months ended 30 June

2020 to RMB646.7 million for the six months ended 30 June 2021. Affected by the COVID-19

outbreak, we gradually suspended our restaurant operations in February and resumed business

operation to normal levels in July 2020 after the relevant pandemic prevention measures were

eased or lifted, which reduced customer traffic of our restaurants and affected our ability to

serve customers and generate revenue for the six months ended 30 June 2020. Moreover, the

number of our restaurants increased from 98 as of 30 June 2020 to 134 as of 30 June 2021,

further drove up our revenue for the six months ended June 30 2021.

Raw materials and consumables used

Our raw materials and consumables used increased by 44.1% from RMB162.5 million for the

six months ended 30 June 2020 to RMB234.0 million for the six months ended 30 June 2021. The

increase in our raw materials and consumables used was in line with the increase in revenue.

Gross profit

As a result of the foregoing, our gross profit increased by 50.6% from RMB274.0 million for

the six months ended 30 June 2020 to RMB412.7 million for the six months ended 30 June 2021.

Other income

Our other income increased by 102.4% from RMB2.6 million for the six months ended 30

June 2020 to RMB5.3 million for the six months ended 30 June 2021. The increase in our other

income was primarily due to government grants received from the PRC government authorities in

connection with the enterprise development support.

Staff costs

Our staff costs increased by 38.8% from RMB138.6 million for the six months ended 30 June

2020 to RMB192.4 million for the six months ended 30 June 2021. The increase in our staff costs

was primarily due to (i) an exemption of social insurance contribution for the six months ended

30 June 2020, including endowment insurance, unemployment insurance and employment injury

insurance pursuant to the notice released by the competent PRC authority due to the outbreak of

COVID-19; (ii) a decrease in bonus payment for the six months ended 30 June 2020 as a result of

COVID-19; and (iii) an increase in the number of our employees for the six months ended 30 June

2021 due to expansion of our restaurant networks.

Rental expenses and related expenses

Our rental expenses and related expenses increased by 104.3% from RMB19.2 million for

the six months ended 30 June 2020 to RMB39.3 million for the six months ended 30 June 2021.

The increase in rental expenses and related expenses was primarily due to (i) an increase in the


– 260 –


number of our restaurants; (ii) an increase in variable rent payments as a result of the increase

in revenue; and (iii) a COVID-19 related rent concession of RMB4.2 million for the six months

ended 30 June 2020.

Utilities expenses

Our utilities expenses increased by 42.9% from RMB14.9 million for the six months ended

30 June 2020 to RMB21.3 million for the six months ended 30 June 2021. The increase in utilities

expenses was in line with our growth in revenue.

Depreciation and amortization

Our depreciation and amortization increased by 23.9% from RMB74.0 million for the six

months ended 30 June 2020 to RMB91.7 million for the six months ended 30 June 2021. The

increase in depreciation and amortization was primarily due to an increase in the number of our

restaurants.

Other operating expenses

Our other operating expenses increased by 20.7% from RMB20.6 million for the six months

ended 30 June 2020 to RMB24.9 million for the six months ended 30 June 2021. The increase in

other operating expenses was primarily due to an increase in transportation expenses.

Other gains and losses

Our other gains and losses decreased by 69.3% from RMB0.6 million for the six months

ended 30 June 2020 to RMB0.2 million for the six months ended 30 June 2021. The decrease in

other gains and losses was primarily due to currency exchange loss.


Our materials consumed for research activities remained stable at RMB0.1 million for the six

months ended 30 June 2020 and 30 June 2021.

Finance costs

Our finance costs increased by 18.1% from RMB7.3 million for the six months ended 30 June

2020 to RMB8.6 million for the six months ended 30 June 2021. The increase in finance costs

was primarily due to an increase in interests on lease liabilities as a result of an increase in the

number of our restaurants.

Income tax expenses

Our income tax expenses increased by 703.4% from RMB1.4 million for the six months

ended 30 June 2020 to RMB11.3 million for the six months ended 30 June 2021. The increase in

income tax expenses was primarily due to the increase in our profit before tax during the

respective period.


– 261 –


Profit for the year

As a result, our profit for the year increased by 1,919.8% from RMB1.1 million for the six

months ended 30 June 2020 to RMB21.5 million for the six months ended 30 June 2021.

Year Ended 31 December 2020 Compared with Year Ended 31 December 2019

Revenue

Our revenue increased by 2.7% from RMB1,094.8 million for the year ended 31 December

2019 to RMB1,124.8 million for the year ended 31 December 2020. The increase in our revenue

was primarily due to an increase in the revenue from food delivery business and retail business

which was slightly offset by the decrease in revenue from restaurant operations.

Our revenue from restaurant operations decreased slightly from RMB1,067.7 million for the

year ended 31 December 2019 to RMB1,062.3 million for the year ended 31 December 2020

primarily due to a decrease in our overall table turnover rate as a result of COVID-19, causing a

decrease in our same-store sales, which was offset by an increase in the number of our

restaurants from 94 as of 31 December 2019 to 128 as of 31 December 2020.

Our revenue from food delivery business increased by 118.4% from RMB27.0 million for the

year ended 31 December 2019 to RMB59.1 million for the year ended 31 December 2020 primarily

due to COVID-19, when an increasing number of consumers prefer ordering food on mobile food

delivery platforms to dining in restaurants for safety concerns. We launched our retail business

in 2020 and generated RMB3.4 million in revenue for the year ended 31 December 2020.



year ended 31 December 2019 to RMB415.4 million for the year ended 31 December 2020. The

increase in our raw materials and consumables used was primarily due to COVID-19 tax-exempt

policy under which certain input value-added taxes were not allowed to deduct from the costs

recorded under raw materials and consumables used.

Gross profit

As a result of foregoing, our gross profit decreased slightly by 0.5% from RMB713.1 million

for the year ended 31 December 2019 to RMB709.3 million for the year ended 31 December 2020.

Other income

Our other income decreased by 43.0% from RMB11.9 million for the year ended 31 December

2019 to RMB6.8 million for the year ended 31 December 2020. The decrease in our other income

was primarily due to a decrease of RMB4.0 million in government grants which are non-recurring

in nature.


– 262 –


Staff costs

Our staff costs decreased by 0.9% from RMB320.5 million for the year ended 31 December

2019 to RMB317.8 million for the year ended 31 December 2020 despite that we hired more

employees as a result of our business expansion, primarily due to an exemption of social

insurance contribution of RMB4.4 million in 2020, including endowment insurance,

unemployment insurance, and employment injury insurance pursuant to the notice released by

the competent PRC authority due to the outbreak of COVID-19.


Our rental expenses and related expenses decreased slightly by 0.5% from RMB52.4 million

for the year ended 31 December 2019 to RMB52.1 million for the year ended 31 December 2020

despite of the increase in the member of our restaurants, primarily due to the COVID-19-related

rent concessions of RMB4.2 million for the year ended 31 December 2020.

Utilities expenses

Our utilities expenses remained relatively stable at RMB37.7 million for the year ended 31

December 2019 and at RMB37.0 million for the year ended 31 December 2020.


Our depreciation and amortization increased by 14.9% from RMB137.2 million for the year

ended 31 December 2019 to RMB157.6 million for the year ended 31 December 2020. The

increase in depreciation and amortization was primarily because of an increase in the leases for

our restaurant premises since that we opened 38 new restaurants in 2020.


Our other operating expenses increased by 7.3% from RMB41.4 million for the year ended 31

December 2019 to RMB44.4 million for the year ended 31 December 2020. The increase in other

operating expenses was in line with our business expansion.


Our other losses decreased by 86.4% from RMB1.0 million loss for the year ended 31

December 2019 to RMB0.1 million loss for the year ended 31 December 2020. The decrease in

other gains and losses was primarily due to (i) the decrease in the net loss on disposal of

property and equipment for the year ended 31 December 2020, and (ii) an increase in the gain on

termination of leases and right-of-use assets, totally amounting to RMB1.5 million.


Our materials consumed for research activities remained relatively stable at RMB0.3 million

for the year ended 31 December 2019 and at RMB0.2 million for the year ended 31 December

2020.


– 263 –


Finance costs

Our finance costs increased by 21.3% from RMB13.0 million for the year ended 31 December

2019 to RMB15.7 million for the year ended 31 December 2020. The increase in finance costs was

primarily due to an increase in interests on lease liabilities of RMB1.9 million as a result of our

restaurant network expansion.

Income tax expenses

Our income tax expenses decreased by 43.2% from RMB41.7 million for the year ended 31

December 2019 to RMB23.7 million for the year ended 31 December 2020. The decrease in

income tax expenses was primarily due to (i) a decrease in our profit before tax during the

respective period, and (ii) a decrease of RMB8.6 million in withholding tax.

Profit for the year

As a result, our profit for the year decreased by 15.6% from RMB79.9 million for the year

ended 31 December 2019 to RMB67.4 million for the year ended 31 December 2020.

Year Ended 31 December 2019 Compared with Year Ended 31 December 2018

Revenue

Our revenue increased by 25.7% from RMB870.9 million for the year ended 31 December

2018 to RMB1,094.8 million for the year ended 31 December 2019. The increase in our revenue

was primarily due to an increase in revenue from restaurant operations and food delivery

business.

Our revenue from restaurant operations increased by 24.1% from RMB860.5 million for the

year ended 31 December 2018 to RMB1,067.7 million for the year ended 31 December 2019

primarily due to (i) an increase in same-store sales, which contributed to an increase in the

popularity and recognition of our brand, and (ii) the revenue generated from our newly-opened

restaurants since we had increased the number of our restaurants from 76 as of 31 December

2018 to 94 as of 31 December 2019.

Our revenue from food delivery business increased by 158.8% from RMB10.5 million for the

year ended 31 December 2018 to RMB27.0 million for the year ended 31 December 2019 primarily

due to a significant increase in delivery orders as a result of both an increase in the marketing

effort and the number of restaurants offering food delivery business.



year ended 31 December 2018 to RMB381.7 million for the year ended 31 December 2019. The

increase in our raw materials and consumables used was in line with the increase in revenue.


– 264 –


Gross profit

As a result of foregoing, our gross profit increased by 24.9% from RMB570.9 million for the

year ended 31 December 2018 to RMB713.1 million for the year ended 31 December 2019.

Other income

Our other income increased significantly from RMB5.0 million for the year ended 31

December 2018 to RMB11.9 million for the year ended 31 December 2019. The increase in our

other income was primarily due to an increase of RMB6.4 million in government grants.

Staff costs

Our staff costs increased by 18.6% from RMB270.3 million for the year ended 31 December

2018 to RMB320.5 million for the year ended 31 December 2019. The increase in our staff costs

was primarily due to an increase in the number of restaurant staff and headquarter employees as

a result of our business expansion.


Our rental expenses and related expenses decreased by 52.8% from RMB111.1 million for

the year ended 31 December 2018 to RMB52.4 million for the year ended 31 December 2019. The

significant decrease in rental expenses and related expenses was primarily due to the adoption

of IFRS 16 in 2019 under which certain items under rental expenses and related expenses were

re-categorized under depreciation and finance cost.

Utilities expenses

Our utilities expenses increased by 20.7% from RMB31.3 million for the year ended 31

December 2018 to RMB37.7 million for the year ended 31 December 2019. The increase in utilities

expenses was in line with growth in revenue.


Our depreciation and amortization increased significantly by 256.0% from RMB38.5 million

for the year ended 31 December 2018 to RMB137.2 million for the year ended 31 December 2019.

The increase in depreciation and amortization was primarily due to the adoption of IFRS 16 in

2019 under which certain items under rental expenses and related expenses were re-categorized

under depreciation and finance cost.


Our other operating expenses increased by 22.0% from RMB33.9 million for the year ended

31 December 2018 to RMB41.4 million for the year ended 31 December 2019. The increase in

other operating expenses was primarily due to expenses to expand third-party delivery service

network and to upgrade our IT system.


– 265 –



Our other gains and losses remained relatively stable from RMB1.3 million in loss for the

year ended 31 December 2018 to RMB1.0 million in loss for the year ended 31 December 2019.


Our materials consumed for research activities decreased by 64.8% from RMB0.8 million for

the year ended 31 December 2018 to RMB0.3 million for the year ended 31 December 2019.

Income tax expenses

Our income tax expenses increased by 40.4% from RMB29.7 million for the year ended 31

December 2018 to RMB41.7 million for the year ended 31 December 2019. The increase in income

tax expenses was primarily due to an increase in our profit before tax during the respective

period.

Profit for the year

As a result, our profit for the year increased by 35.3% from RMB59.1 million for the year

ended 31 December 2018 to RMB79.9 million for the year ended 31 December 2019.

LIQUIDITY AND CAPITAL RESOURCES

During the Track Record Period and up to the Latest Practicable Date, we had historically

funded our cash requirements through a combination of cash generated from operating activities,

bank loans and the proceeds of capital contributions from our shareholders. We had cash and

cash equivalents (including our bank balances and cash and term deposits with original maturity

of less than 3 months) of RMB77.0 million, RMR115.6 million, RMB137.6 million and RMB89.4

million as of 31 December 2018, 2019 and 2020 and 30 June 2021.

In the future, we expect to fund our working capital needs and finance part of our business

expansion through a combination of cash generated from operating activities, the net [REDACTED]

received from the [REDACTED] and other debt and equity financing.


– 266 –


Cash Flow

The following table sets forth a summary of our consolidated cash flow statements for the

periods indicated.


Six months

ended

30 June

20212018 2019 2020

RMB’000 RMB’000 RMB’000 RMB’000

Net cash from operating activities . . . . 119,177 224,165 244,106 61,721

Net cash used in investing activities . . (99,146) (46,515) (111,510) (50,706)

Net cash used in financing activities . . (61,051) (138,717) (109,922) (59,158)

Net cash (decrease)/increase in cash

and cash equivalents . . . . . . . . . . . (41,020) 38,933 22,674 (48,143)


beginning of year/period . . . . . . . . . 117,845 76,952 115,584 137,627


end of the year/period . . . . . . . . . . 76,952 115,584 137,627 89,437

Net cash flow generated from operating activities

Our net cash generated from operating activities was RMB61.7 million for the six months

ended 30 June 2021, which was primarily attributable to our profit before tax of RMB32.7 million,

adjusted for certain non-cash items such as depreciation of right-of-use assets of RMB56.4

million, depreciation of property and equipment of RMB35.0 million and finance costs of RMB8.6

million. The amount was further adjusted by negative changes in working capital, including (i) a

decrease in trade and other payables of RMB32.0 million primarily due to the growing

procurement volume as a result of our business expansion, (ii) an increase in prepayment to

suppliers of RMB10.6 million primarily due to the expansion of our restaurant network, and (iii)

an increase in value-added tax recoverable of RMB18.1 million. Such negative changes were

partially offset by (i) a decrease in inventories of RMB5.4 million, and (ii) decrease in trade and

other receivables of RMB4.7 million.

Our net cash generated from operating activities was RMB244.1 million for the year ended

31 December 2020, which was primarily attributable to our profit before tax of RMB91.1 million,

adjusted for certain non-cash items such as depreciation of right-of-use assets of RMB99.1

million, depreciation of property and equipment of RMB58.0 million and finance costs of RMB15.7

million. The amount was further adjusted by positive changes in working capital, including (i) an

increase in trade and other payables of RMB45.1 million primarily due to the growing

procurement volume as a result of our business expansion and stronger bargaining power over

suppliers, and (ii) a decrease in prepayment to suppliers of RMB4.0 million primarily because we

deferred payments to suppliers to mitigate liquidity risks caused by COVID-19. Such positive

changes were partially offset by (i) an increase in value-added tax recoverable of RMB27.7

million, and (ii) a decrease in trade and other receivables of RMB8.1 million, both of which were

primarily due to the expansion of our restaurant network.


– 267 –




adjusted for certain non-cash items such as depreciation of right-of-use assets and property and

equipment of RMB85.8 million and RMB51.2 million, respectively, and finance costs of RMB13.0

million. The amount was further adjusted by negative changes in working capital, including (i) an

increase in inventories of RMB8.9 million primarily due to the expansion of our restaurant

network, (ii) an increase value-added tax recoverable of RMB7.3 million primarily due to the

expansion of our restaurant network, and (iii) an increase in prepayment to suppliers of RMB8.3

million. Such negative changes were partially offset by an increase in trade and other payables

of RMB11.5 million.



adjusted for certain non-cash items such as depreciation of property and equipment of RMB38.4

million. The amount was further adjusted by positive changes in working capital, including an

increase in trade and other payables of RMB46.0 million. Such positive changes were partially

offset by (i) an increase in prepayment to suppliers of RMB6.7 million, (ii) an increase in trade

and other receivables of RMB12.3 million, (iii) an increase in value-added tax recoverable of

RMB9.6 million, and (iv) an increase in inventories of RMB7.3 million; all of which were primarily

due to the expansion of our restaurant network.

Net cash flow used in investing activities

Our net cash used in investing activities was RMB50.7 million for the six months ended 30

June 2021, which was primarily attributable to: (i) the purchase of financial assets measured at

FVTPL of RMB70.0 million; and (ii) the purchase of property and equipment of RMB48.0 million,

which was partially offset by the proceeds on redemption on financial assets designated at FVTPL

of RMB70.2 million.

Our net cash used in investing activities was RMB111.5 million for the year ended 31

December 2020, which was primarily attributable to: (i) the purchase of financial assets

measured at FVTPL of RMB240.0 million; and (ii) the purchase of property and equipment of

RMB102.8 million, which was partially offset by the proceeds on redemption on financial assets

designated at FVTPL of RMB240.6 million.












– 268 –


Net cash flow used in financing activities

Our net cash used in financing activities was RMB59.2 million for the six months ended 30

June 2021, which was primarily attributable to: (i) the payments of lease liabilities of RMB58.3

million; and (ii) the repayment of bank borrowings of RMB8.5 million, which was partially offset

by new bank borrowings raised of RMB8.5 million.

Our net cash used in financing activities was RMB109.9 million for the year ended 31

December 2020, which was primarily attributable to: (i) the payments of lease liabilities of

RMB95.8 million; (ii) the repayment of bank borrowings of RMB45.6 million, which was partially

offset by new bank borrowings raised of RMB45.6 million.


December 2019, which was primarily attributable to: (i) the payments of lease liabilities of

RMB85.2 million; (ii) dividends paid to shareholders of the Company of RMB26.4 million and (iii)

acquisition of subsidiaries under common control as part of group reorganization of RMB24.2

million, which was partially offset by proceeds on issues of restricted shares under the share-

based payments scheme of RMB2.6 million.


December 2018, which was primarily attributable to: (i) acquisition of subsidiaries under

common control as part of group reorganization of RMB73.1 million, which was partially offset by

issue of new shares of RMB16.6 million.

Working Capital

Taking into account the financial resources available to us, including our bank balance and

cash, bank facilities, cash from our operating activities and estimated net [REDACTED] from the

[REDACTED], our Directors are of the view that we have sufficient working capital to meet our

present needs for the next 12 months from the date of this Document. Based on the above

financial resources available to the Company, the Joint Sponsors concur with the view of our

Directors. As of 30 June 2021, we had bank balances and cash of RMB71.7 million.

Our future cash requirements will depend on many factors, including our income from

operating activities, capital expenditure on property and equipment and intangible assets,

market acceptance of our products or other changing business conditions and future

development, including any investments or acquisitions we may decide to pursue. We may

require additional cash due to changing business conditions or other future developments. If our

existing cash is insufficient to meet our requirements, we may seek to borrow from lending

institutions or selling our equity or debt securities. See ‘‘Risk Factors — Risks Relating to Our

Industry and Business — Our ability to obtain additional capital is affected by certain

uncertainties and risks.’’


– 269 –


Net current assets and liabilities

We had net current assets of RMB9.5 million as of 31 December 2018. We had net current

liabilities of RMB21.6 million, RMB33.6 million and RMB29.3 million as of 31 December 2019 and

2020 and 30 June 2021, respectively.

The table sets forth a breakdown of our current assets and liabilities as of the dates

indicated.

As of 31 DecemberAs of

30 June

2021

As of

31 July

20212018 2019 2020


Current assets

Inventories . . . . . . . . . . . . . . . . 21,156 30,068 35,005 29,589 38,797

Trade and other receivables . . . . . 20,370 21,297 29,395 30,597 31,356

Value-added tax recoverable . . . . 13,351 20,677 48,353 66,490 70,394

Prepayments to suppliers . . . . . . 19,551 18,901 14,857 25,410 25,591

FVTPL . . . . . . . . . . . . . . . . . . . . 30,000 — — — —

Term deposits . . . . . . . . . . . . . . — 3,000 3,000 17,750 23,300

Bank balances and cash . . . . . . . 76,952 112,584 134,627 71,687 69,646

181,380 206,527 265,237 241,523 259,084

Current liabilities

Trade and other payables . . . . . . 135,179 136,317 192,128 165,521 172,214

Contract liabilities . . . . . . . . . . . 764 2,115 2,512 2,000 1,677

Amounts due to related parties . . 24,223 — — — —

Dividend payable . . . . . . . . . . . . 3,315 130 305 305 305

Income tax payable . . . . . . . . . . . 8,402 9,477 9,216 3,389 2,016

Lease liabilities . . . . . . . . . . . . . — 80,082 94,639 99,643 101,504

171,883 228,121 298,800 270,858 277,715

Net current assets/(liabilities) . . . . 9,497 (21,594) (33,563) (29,335) (18,631)

Our net current liabilities decreased from RMB33.6 million as of 31 December 2020 to

RMB29.3 million as of 30 June 2021, primarily due to a decrease in trade and other payables of

RMB26.6 million, which results in a decrease in current liabilities of RMB27.9 million. Our

current assets slightly decreased from RMB265.2 million to RMB 241.5 million primarily due to a

decrease in bank balances and cash of RMB62.9 million as a result of the expansion of our

restaurant network, which is offset by an increase in prepayments to suppliers of RMB10.6

million. Because the decrease in our current liabilities exceeded the decrease in current assets,

we recorded a decrease in net current liabilities as a result.


– 270 –


Our net current liabilities increased from RMB21.6 million as of 31 December 2019 to

RMB33.6 million as of 31 December 2020, primarily due to (i) an increase in trade and other

payables of RMB55.8 million, and (ii) an increase in lease liabilities of RMB14.6 million, which

was partially offset by (i) an increase in value-added tax recoverable of RMB27.7 million, and (ii)

an increase in bank balances and cash of RMB22.0 million as a result of a decrease in dividend

payments.

We had net current assets of RMB9.5 million as of 31 December 2018, compared to net

current liabilities of RMB21.6 million as of 31 December 2019, primarily due to (i) an increase in

lease liabilities of RMB80.1 million and (ii) a decrease in financial assets at FVTPL of RMB30.0

million, which partially was offset by (i) an increase in bank balances and cash of RMB35.6

million due to the maturity of financial products, (ii) a decrease in amounts due to related

parties of RMB24.2 million, and (iii) an increase in value-added tax recoverable of RMB7.3

million.

We had net current liabilities of RMB18.6 million as of 31 July 2021. In the opinion of our

Directors, we will have sufficient funds available from the operating activities to meet in full its

financial obligations as they fall due for at least the next twelve months from the date of

approval of the historical financial information. We also monitor the utilization and repayment of

bank borrowings to ensure the Group with sufficient funds. As of 31 July 2021, we had unutilized

available banking facilities of approximately RMB122 million.

DISCUSSION OF CERTAIN KEY BALANCE SHEET ITEMS

Inventories

Our inventories consisted of food ingredients, condiment products, beverage and other

materials. Our inventories increased by 42.1% from RMB21.2 million as of 31 December 2018 to

RMB30.1 million as of 31 December 2019, and further to RMB35.0 million as of 31 December

2020, primarily because we opened 19 and 38 new restaurants in 2019 and 2020, respectively,

requiring us to maintain inventories at these restaurants. Our inventories decreased by 15.5%

from RMB35.0 million as of 31 December 2020 to RMB29.6 million as of 30 June 2021, primarily

because we stocked extra inventories as of 31 December 2020 to prepare for increased demand

during the holiday seasons.

The following table sets forth our inventory turnover days for the periods indicated.

Year ended 31 DecemberSix months

ended 30 June

20212018 2019 2020

Inventory turnover days(1) . . . . . . . . . . 21 24 29 25

Note:

(1) Inventory turnover days are equal to the average balance of inventory at the beginning and the end of the relevant

period divided by raw materials and consumables used for such period and multiplied by 365 days for the years

ended 31 December 2018, 2019 and 2020 and multiplied by 183 days for the six months ended 30 June 2021.


– 271 –


Our inventory turnover days increased from 21 days in 2018 to 24 days in 2019, and further

increased at 29 days in 2020, primarily due to (i) our new restaurant openings in regions outside

Eastern China, which takes longer for inventories to arrive than that before, and (ii) we stocked

up more reserves as our procurement volumes increased as a result of the expansion of our

restaurant network. Our inventory turnover days decreased from 29 days in 2020 to 25 days for

the six months ended 30 June 2021, primarily because we stocked extra inventories as of 31

December 2020 to prepare for increased demand during the holiday season. We aim to continue

to actively manage our inventory turnover days in the future.

As of 31 July 2021, RMB21.6 million, or 73.0% of our inventories as at 30 June 2021 had

been subsequently used or consumed.

Trade and Other Receivables

Our trade and other receivables primarily consisted of (i) trade receivables and (ii) other

receivables including staff advance, rental deposits, deferred issue costs and others. Trade

receivables primarily represented: (i) trade receivables from third-party payment platforms, which

are normally settled within one business day without credit period granted to customers; and (ii)

trade receivables from shopping malls, which are repayments of rebates from collaborated

promotion events organized by shopping malls. We did not have any past due trade receivables

as of 31 December 2018, 2019 and 2020 and 30 June 2021.

The following table sets forth an aging analysis of our trade receivables and turnover days

of the date indicated.


20212018 2019 2020

RMB’000 RMB’000 RMB’000 RMB’000

0–30 days . . . . . . . . . . . . . . . . . . . . . 10,201 9,673 12,305 8,320

31–90 days . . . . . . . . . . . . . . . . . . . . 616 205 570 54

91–180 days . . . . . . . . . . . . . . . . . . . 54 6 17 220

Over 180 days . . . . . . . . . . . . . . . . . . 94 — — —

Total . . . . . . . . . . . . . . . . . . . . . . . . . 10,965 9,884 12,892 8,594

Trade receivable turnover days(1) . . . . . 6 3 4 3

Note:

(1) Trade receivable turnover days are equal to the average balance of trade receivables at the beginning and the end

of the relevant period divided by revenue for such period and multiplied by 365 days for the years ended 2018,

2019 and 2020 and multiplied by 183 days for the six months ended 30 June 2021.

Our trade receivables decreased by 9.9% from RMB11.0 million as of 31 December 2018 toRMB9.9 million as of 31 December 2019 primarily due to shortened settlement period by thirdparty payment platforms, and increased by 30.4% from RMB9.9 million as of 31 December 2019to RMB12.9 million as of 31 December 2020 primarily because we recorded higher sales on 31December 2020 than that of 2019. Our trade receivables decreased by 33.3% from RMB12.9


– 272 –


million as of 31 December 2020 to RMB8.6 million as of 30 June 2021 primarily because werecorded higher sales on 31 December 2020 than that of 30 June 2021. Correspondingly, ourtrade receivables turnover days decreased from 6 days in 2018 to 3 days in 2019 and slightlyincreased to 4 days in 2020, then slightly decreased to 3 days for the six months ended 30 June2021, primarily because the increase in mobile payment opted by our customers which resultedin shortened settlement period than before. We do not expect to have significant changes in ourtrade receivable turnover days. As of 31 July 2021, we collected RMB7.9 million, or 91.9%, of theRMB8.6 million trade receivables outstanding as of 30 June 2021.

Our other receivables increased by 14.1% from RMB30.7 million as of 31 December 2018 toRMB35.1 million as of 31 December 2019, primarily due to an increase in rental deposits ofRMB6.6 million as a result of the expansion of our restaurant network. Our other receivablesincreased by 32.5% from RMB35.1 million as of 31 December 2019 to RMB46.5 million as of 31December 2020, primarily due to an increase in rental deposits of RMB12.2 million as a result ofthe expansion of our restaurant network. Our other receivables increased by 17.0% from RMB46.5million as of 31 December 2020 to RMB54.4 million as of 30 June 2021, primarily due to anincrease in rental deposits of RMB2.0 million due to (i) the expansion of our restaurant network,(ii) an increase in deferred issue costs of RMB2.3 million, and (iii) an increase in receivables ofwithholding individual income tax for share based payments of RMB3.6 million, which mainlyconsists of a one-off receivables of RMB2.05 million due from Mr. Liao incurred from withholdingtax payables associated with his share incentives from us in 2018. .

Value-added Tax Recoverable

Our value-added tax recoverable increased by 54.9% from RMB13.4 million as of 31December 2018 to RMB20.7 million as of 31 December 2019, primarily due to the expansion ofour restaurant network. Our value-added tax recoverable increased by 133.8% from RMB20.7million as of 31 December 2019 to RMB48.4 million as of 31 December 2020, primarily due to theexpansion of our restaurant network. Our value-added tax recoverable increased by 37.5% fromRMB48.4 million as of 31 December 2020 to RMB66.5 million as of 30 June 2021, primarily due toCOVID-19 tax exempt policy.

Prepayment to Suppliers

Our prepayment to suppliers remained stable at RMB19.6 million as of 31 December 2018and at RMB18.9 million as of 31 December 2019. Our prepayment to suppliers decreased by21.4% from RMB18.9 million as of 31 December 2019 to RMB14.9 million as of 31 December 2020,primarily because we deferred payments to suppliers to mitigate liquidity risks caused by COVID-19. Our prepayments to suppliers increased by 130.3% from RMB14.9 million as of 31 December2020 to RMB25.4 million as of 30 June 2021, primarily because our prepayments to renovationcontractors typically are concentrated in the first six months of the year.

Property and Equipment

Our property and equipment primarily consisted of leasehold improvements, machinery,transportation equipment, furniture and fixtures, and assets under installation. Our property andequipment increased by 11.3% from RMB136.8 million as of 31 December 2018 to RMB152.2million as of 31 December 2019, primarily because that we opened 17 new restaurants in 2019.Our property and equipment increased by 36.9% from RMB152.2 million as of 31 December 2019


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to RMB208.4 million as of 31 December 2020, primarily because we opened 33 new restaurantsin 2020. Our property and equipment increased by 6.1% from RMB208.4 million as of 31December 2020 to RMB221.2 million as of 30 June 2021, primarily because the increase in thenumber of our restaurants.

Right-of-use Assets

Our right-of-use assets primarily represented the leases for our restaurant premises, officepremises, Laowang Gourmet Lab, and other rentals. Upon our adoption of IFRS 16 on 1 January2019, our right-of-use assets amount to RMB271.5 million as of 31 December 2019, primarily dueto upon adoption of IFRS 16 on 1 January 2019. Our right-of-use assets increased by 22.2% fromRMB271.5 million as of 31 December 2019 to RMB331.8 million as of 31 December 2020, primarilydue to the increase in the number of our restaurants in operation during the respective period.Our right-of-use assets increased by 4.7% from RMB331.8 million as of 31 December 2020 toRMB347.5 million as of 30 June 2021, primarily due to the increase in the number of ourrestaurants.

Trade and Other Payables

Our trade and other payables consisted of (i) trade payables and (ii) other payablesincluding accrued payroll, other tax payables, payable for acquisition of property and equipment,other accrued expenses, payments received for subscription of restricted shares by the Directorsand employees and others. Our trade payables mainly represented the procurement of foodingredients, [REDACTED] costs payables and consumables to our Independent Third Partysuppliers. We generally settle trade payables within 30 to 60 days.

The following table sets forth an aging analysis of our trade payables and turnover days asof the date indicated.


20212018 2019 2020

RMB’000 RMB’000 RMB’000 RMB’000

0–60 days . . . . . . . . . . . . . . . . . . . . 47,310 49,478 85,985 59,460

61–180 days . . . . . . . . . . . . . . . . . . . 1,016 666 767 999

181–365 days . . . . . . . . . . . . . . . . . . 90 512 107 155

Over 365 days . . . . . . . . . . . . . . . . . . 129 36 403 457

Total . . . . . . . . . . . . . . . . . . . . . . . . . 48,545 50,692 87,262 61,071

Trade payable turnover days(1) . . . . . . . 58 47 61 58

Note:

(1) Trade payable turnover days are equal to the average balance of trade payables at the beginning and the end of the

relevant period divided by raw materials and consumables used for such period and multiplied by 365 days as of

31 December 2018, 2019 and 2020 and multiplied by 183 days as of 30 June 2021.


– 274 –


Our trade payables increased by 4.4% from RMB48.5 million as of 31 December 2018 to

RMB50.7 million as of 31 December 2019, and further increased by 72.1% to RMB87.3 million as

of 31 December 2020, primarily attributable to the growing procurement volume as a result of our

business expansion. It decreased by 30.0% from RMB87.3 million as of 31 December 2020 to

RMB61.1 million as of 30 June 2021, primarily because we usually stocked more raw materials

during winter in response to the seasonality of our business. Our trade payables turnover days

decreased from 58 days in 2018 to 47 days in 2019, primarily because we implemented stricter

internal control measures to enhance payment process management at the beginning of 2019.

Our trade payables turnover days then increased to 61 days in 2020 and 58 days for the six

months ended 30 June 2021, primarily because that we bargained for longer credit terms with our

suppliers by leveraging our increased procurement volume.

As of 31 July 2021, we have settled RMB43.9 million, or 72.0%, of the trade payables

outstanding as of 30 June 2021, being RMB61.1 million.

Our other payables, including accrued payroll, other tax payables, payable for acquisition of

property and equipment, other accrued expenses, payments received for subscription of

restricted shares, [REDACTED] costs payables and others, remained relatively stable from

RMB86.6 million as of 31 December 2018 to RMB85.6 million as of 31 December 2019. Our other

payables increased by 22.5% from RMB85.6 million as of 31 December 2019 to RMB104.9 million

as of 31 December 2020, primarily due to (i) an increase in payable for acquisition of property

and equipment of RMB13.2 million as a result of the increase in the number of our newly-opened

restaurants and necessary increase in the renovation costs for our newly-opened restaurants;

and (ii) an increase in accrued payroll of RMB12.7 million due to an increase in employee as a

result of the increase in the number of our restaurants. Our other payables remained stable from

RMB104.9 million as of 31 December 2020 to RMB104.5 million as of 30 June 2021.

Our Directors confirm that we did not have any material defaults in payment of trade and

other payables during the Track Record Period.

Income Tax Payables

Our income tax payables increased by 12.8% from RMB8.4 million as of 31 December 2018

to RMB9.5 million as of 31 December 2019, and further decreased by 2.8% from RMB9.5 million

as of 31 December 2019 to RMB9.2 million as of 31 December 2020 primarily due to increase in

profit before tax. Our income tax payables decreased by 63.2% from RMB9.2 million as of 31

December 2020 to RMB3.4 million as of 30 June 2021 primarily due to our profit before tax for

the six months ended 30 June 2021 is lower than that for the year ended 31 December 2020 as a

result of higher sales recorded for the fourth quarter of 2020.


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INDEBTEDNESS AND CONTINGENT LIABILITIES

We had historically funded our cash requirements through a combination of cash generated

from operating activities, bank loans and the proceeds of capital contributions from our

shareholders. The table below sets forth the details of our indebtedness as of the dates

indicated.

As of 31 December As of

30 June

2021

As of

31 July

20212018 2019 2020


Current

Amounts due to related parties . . 24,223 — — — —


Non-current


Bank Borrowings

As of 31 July 2021, being the latest practicable date for determining our indebtedness, our

interest-bearing bank borrowings amounted to RMB0. We had no interest-bearing bank

borrowings as of 30 June 2021 and 31 December 2020, 2019 and 2018, either.

Our Directors confirm that we did not have outstanding or material indebtedness or any

loan capital issued and outstanding or agreed to be issued, bank overdrafts, loans or similar

indebtedness, liabilities under acceptance (other than normal trade bills), acceptance credits,

debentures, mortgages, charges, finance leases or hire purchase commitments, which are either

guaranteed, unguaranteed, secured or unsecured, or guarantees or other contingent liabilities.

Since 30 June 2021 and up to the date of this Document, there has not been any materialadverse change in our indebtedness and contingent liabilities. Our Directors do not foresee anypotential difficulty in obtaining bank borrowings should the need arise. As of 31 July 2021, wedid not have any material contingent liabilities, guarantees or any litigations or claims ofmaterial importance, pending or threatened against any member of our Group that is likely tohave a material adverse effect on our business, financial condition or results of operations.


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CAPITAL EXPENDITURE AND COMMITMENTS

Capital Expenditure

Our capital expenditure primarily represented purchases of property and equipment,purchases of right-of-use assets and purchases of intangible assets. The table below sets forthour capital expenditure for the periods indicated.


20212018 2019 2020

RMB’000 RMB’000 RMB’000 RMB’000

Payments for rental deposits . . . . . . . . — 6,832 10,171 4,383

Purchases of property and

equipment . . . . . . . . . . . . . . . . . . . 69,227 70,082 102,777 48,047

Upfront payments for

right-of-use assets . . . . . . . . . . . . . — 2,514 2,435 391

Collection of rental deposits . . . . . . . . — (1,596) (3,045) (1,818)

Purchases of intangible assets . . . . . . 308 946 260 31

Total capital expenditure . . . . . . . . . . 69,535 78,778 112,598 51,034

Our capital expenditure increased by 13.3% from RMB69.5 million for the year ended 31

December 2018 to RMB78.8 million for the year ended 31 December 2019 primarily due to the

increase in the number of our restaurants. Our capital expenditure increased by 42.9% from

RMB78.8 million for the year ended 31 December 2019 to RMB112.6 million for the year ended 31

December 2020 primarily due to the increase in the number of our restaurants. Our capital

expenditure amounted to RMB51.0 million for the six months ended 30 June 2021.

For the year ending 31 December 2021, our capital expenditure is expected to be

approximately RMB129.6 million, primarily due to an increase in the number of our restaurants.

We plan to finance our future capital expenditure through cash generated from our operating

activities, bank borrowings, and capital contribution from our shareholders and [REDACTED] from

[REDACTED]. Our actual capital expenditure may differ from the amounts disclosed above due to

factors including our future cash flows, results of operations and financial condition.


– 277 –


Capital Commitments

Our capital commitments are mainly related to the acquisition of property and equipment

which had been contracted but not yet provided in the historical financial information. The table

below sets forth our capital commitment as of the dates indicated.


20212018 2019 2020

RMB’000 RMB’000 RMB’000 RMB’000

Capital expenditure in respect of

acquisition of property and

equipment contracted for but not

provided in the Historical Financial

Information. . . . . . . . . . . . . . . . . . . 5,890 69 1,805 5,382

Our Directors believe that our transactions with related parties during the Track Record

Period were conducted on an arm’s length basis and did not distort our results of operations or

make our historical results not reflective of our future performance.

RELATED PARTY TRANSACTIONS

During the Track Record Period, we entered into a number of transactions in relation to the

purchases of red wine and concentrated fruit juice with related companies controlled by our

Controlling Shareholders, other related parties or Directors of our Company. For a discussion of

related party transactions, see Note 34 to ‘‘Appendix I — Accountants’ Report.’’

KEY FINANCIAL RATIOS

The following table sets forth a summary of our major financial ratios as of the dates or for

the periods indicated.

As of/For the year ended 31 December

As of/For the

six months

ended 30 June

2018 2019 2020 2021

Return on assets(1) . . . . . . . . . . . . . . . . . 17.7% 15.5% 8.8% 5.0%

Return on equity(2) . . . . . . . . . . . . . . . . . 37.2% 40.5% 26.4% 14.5%

Current ratio(3) . . . . . . . . . . . . . . . . . . . . 1.06 0.91 0.89 0.89

Quick ratio(4) . . . . . . . . . . . . . . . . . . . . . 0.93 0.77 0.77 0.78

Interest coverage(5) . . . . . . . . . . . . . . . . . — — 110.14 963.18

Notes:

(1) Return on assets is calculated using net profit divided by the average of the beginning and ending balance of total

assets for that period, multiplied by 100%.


– 278 –


(2) Return on equity is calculated using net profit divided by the average of the beginning and ending balance of total

equity for the period, multiplied by 100%.

(3) Current ratio is calculated using total current assets divided by total current liabilities.

(4) Quick ratio is calculated using total current assets less inventories divided by total current liabilities.

(5) Interest coverage is calculated by earnings before interest and tax divided by interest on bank borrowing each

period.

Return on Assets

Our return on assets decreased from 17.7% in 2018 to 15.5% in 2019, mainly because of the

increase in assets due to the adoption of IFRS 16. Our return on assets decreased from 15.5% in

2019 to 8.8% in 2020, mainly because of the decrease in net profit as a result of COVID-19. Our

return on assets was 5.0% for the six months ended 30 June 2021.

Return on Equity

Our return on equity increased from 37.2% in 2018 to 40.5% in 2019, mainly because the

increase in net profit. Our return on equity decreased from 40.5% in 2019 to 26.4% in 2020,

mainly because of the decrease in net profit as a result of COVID-19. Our return on equity was

14.5% for the six months ended 30 June 2021.

Current Ratio

Our current ratio decreased from 1.06 as of 31 December 2018 to 0.91 as of 31 December

2019, mainly because of the increase in current liabilities as a result of the adoption of IFRS 16,

and remained relatively stable at 0.89 as of 31 December 2020 and as of 30 June 2021,

respectively.

Quick Ratio

Our quick ratio decreased from 0.93 as of 31 December 2018 to 0.77 as of 31 December

2019, mainly because of the increase in current liabilities as a result of the adoption of IFRS 16,

and remained relatively stable at 0.77 and 0.78 as of 31 December 2020 and 30 June 2021,

respectively.

Interest Coverage

Our interest coverage increased from 110.14 as of 31 December 2020 to 963.18 as of 30 June

2021, mainly because the decrease in interest on bank borrowings.

OFF-BALANCE SHEET COMMITMENTS AND ARRANGEMENTS

As of the Latest Practicable Date, we had not entered into any off-balance sheet

transactions.


– 279 –


QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to a variety of market risks, including foreign currency risk, interest rate

risk, credit risk and liquidity risk. We manage and monitor these exposures to ensure appropriate

measure are implemented on a timely and effective manner. For more details, see Note 32 to

‘‘Appendix I — Accountants’ Report.’’

Foreign Currency Risk

We undertake certain operating transactions in foreign currencies, including the United

States dollars and New Taiwan dollars, whereas the functional currency of our subsidiaries

operating in the PRC is Renminbi, which exposes us to foreign currency risk. We currently do not

have a foreign currency hedging policy. But our Directors monitor foreign exchange exposure by

closely monitoring the foreign exchange risk profile and will consider hedging significant foreign

currency exposure should the need arise.

The following table sets forth the carrying amounts of our monetary assets and monetary

liabilities as of the year indicated.

The Group

As of 31 December As at 30 June

2018 2019 2020 2021

RMB’000 RMB’000 RMB’000 RMB’000

Assets

USD . . . . . . . . . . . . . . . . . . . . . . 27,025 20,247 19,310 15,389

Liabilities

USD . . . . . . . . . . . . . . . . . . . . . . 1,252 3,883 1,693 2,798

NTD . . . . . . . . . . . . . . . . . . . . . . — — — 17

HK$ . . . . . . . . . . . . . . . . . . . . . . — — — 267

1,252 3,883 1,693 3,082

The Company

As of 31 December As at 30 June

2018 2019 2020 2021

RMB’000 RMB’000 RMB’000 RMB’000

Assets

USD . . . . . . . . . . . . . . . . . . . . . . 23,446 19,901 18,959 15,043

Liabilities

USD . . . . . . . . . . . . . . . . . . . . . . 1,252 3,883 1,693 1,693


– 280 –


Interest Risk

Our interest rate risk arises primarily from cash at banks and lease liabilities. Bank

balances and deposits at variable rates and fixed rates expose us to cash flow interest rate risk

and fair value interest rate risk, respectively. Our bank balances and deposits are placed with

banks and we manage this risk by placing deposits at various maturities and interest rate terms.

Moreover, we are exposed to fair value interest rate risk for the fixed rate lease liabilities. We

are also exposed to fair value interest rate risk for fixed rate lease liabilities. Our cash flow

interest rate risk is mainly concentrated on the fluctuations of the market rates from bank

balances. We currently do not hedge our exposure to cash flow and fair value interest rate risk.

No sensitivity analysis is presented since we consider the exposure of cash flow interest

rate risk arising from variable-rate bank balances and term deposits is insignificant.

Credit Risk

Our credit risk is primarily attributable to our receivables from third-party payment

platforms, rental deposits, other receivables and bank balances.

Our carrying amount of the respective recognized financial assets as stated in the

consolidated statements of financial position at the end of each reporting period represents our

maximum exposure to credit risk which will cause a financial loss to us due to failure to

discharge the obligation by counterparties.

We also consider the probability of default upon initial recognition of asset and whether

there has been a significant increase in credit risk on an ongoing basis. To assess whether there

is a significant increase in credit risk, we compare the risk of default occurring on an asset as of

the end of each reporting period with the risk of default as of the date of initial recognition. We

consider available reasonable and supportive forward-looking information, especially the actual

or expected significant adverse changes in business, financial or economic conditions that are

expected to cause a significant change to the counterparties’ ability to meet its obligation.

We believe that there is no material increase in the credit risk on receivables from third-

party payment platforms, bank balances and term deposits for the Track Record Period and the

risk of default is insignificant. The expected credit loss for receivables from third-party payment

platforms, bank balances and term deposits were insignificant for the Track Record Period.

We have concentration of credit risk on liquid funds deposited with several banks and

receivables from third-party payment platforms. However, such credit risk is limited because the

counterparties have high credit ratings assigned by international credit-rating agencies, and in

turn the expected credit loss is insignificant.

Liquidity Risk

We monitor and maintain a level of cash and cash equivalents deemed adequate by us to

finance our operations and mitigate the effects of fluctuations in cash flows. Taking into account

the cash from the operating activities, our bank balance and cash, bank facilities and estimated

net [REDACTED] from the [REDACTED], our Directors consider that we will have sufficient working


– 281 –


capital to meet in full our financial obligations as they fall due for at least the next 12 months

from the date of this Document. The historical financial information has been prepared on a

going concern basis.

The following table indicates our Group’s and our Company’s remaining contractual maturityfor the financial liabilities and lease liabilities. The table was drawn up based on theundiscounted cash flows of financial liabilities and lease liabilities based on the earliest date onwhich our Group can be required to pay. The table includes both interest and principal cashflows. The undiscounted amount is derived from interest rate at the end of each reporting period.

The Group

Weighted

average

interest rate

On demand or

less than

1 year

Total

undiscounted

cash flows

Total

carrying

amounts

% RMB’000 RMB’000 RMB’000

At 31 December 2018

Trade and other payables . . . . . . . . . . — 61,662 61,662 61,662

Amounts due to related parties . . . . . . — 24,223 24,223 24,223

Dividend payables . . . . . . . . . . . . . . . — 3,315 3,315 3,315

89,200 89,200 89,200

Weightedaverageinterestrate

On demandor less than

1 year

Over1 year

but within2 years

Over2 years

but within5 years

Over5 years

Totalundiscountedcash flows

Totalcarryingamounts

% RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

As 31 December 2019

Trade and other payables — 72,853 — — — 72,853 72,853Dividend payables . . . . . — 130 — — — 130 130Lease liabilities . . . . . . . 4.785% 92,743 79,939 125,633 9,275 307,590 280,088

165,726 79,939 125,633 9,275 380,573 353,071

As 31 December 2020


229,199 95,061 164,647 13,814 502,721 466,577

As 30 June 2021


222,456 100,199 188,882 15,334 526,871 467,316


– 282 –


DIVIDENDS

We are a holding company incorporated under the laws of the Cayman Islands. As a result,

the payment and amount of any future dividend will depend on, among others, the availability of

dividends received from our PRC subsidiaries. PRC laws and regulations require that dividends to

be paid only from net profits which is different from the generally accepted accounting principles

in other jurisdictions, including IFRS. PRC laws also require foreign invested enterprises to set

aside at least 10% of their profit after tax for the year as statutory reserves which are not

allowed to distribute as cash dividends. The distribution of dividends from us or our subsidiaries

may also be subject to any restrictive covenants in bank credit facilities, convertible bond

instruments or other agreements that we or our subsidiaries may enter into in the future.


2021, we declared dividends of RMB0, RMB26.5 million, RMB11.1 million and RMB0, respectively.

Dividends declared in the past are not indicative of our future dividend policy. All the dividends

declared have been/will be settled before [REDACTED]. The amount of dividends actually

distributed to our Shareholders will depend on our earnings and financial conditions, operating

requirements, capital requirements and any other conditions that our Directors may deem

relevant and will be subject to approval of our Shareholders. Our Board has the absolute

discretion to recommend any dividend. We do not have any pre-determined dividend payout

ratio.

DISTRIBUTABLE RESERVES

As of 30 June 2021, we had statutory reserve and retained earnings amounting to RMB171.7

million, which are available for distribution to our equity shareholders.

NO MATERIAL ADVERSE CHANGE

After due and careful consideration, our Directors confirm that, up to the date of the

Document, there has been no material adverse change in the financial or [REDACTED] position or

prospects of us since 30 June 2021, being the latest date of our audited consolidated financial

statements as set out in ‘‘Appendix I — Accountants’ Report’’ to this Document.

[REDACTED] EXPENSE INCURRED AND TO BE INCURRED

Our aggregate [REDACTED] incurred and to be incurred amount to [REDACTED] million

(including [REDACTED]) assuming the [REDACTED] is not exercised and the [REDACTED] of

HK$[REDACTED] per share, being the [REDACTED] of the indicative [REDACTED] range. For the six

months ended 30 June 2021, we incurred [REDACTED] of [REDACTED] million. After 30 June 2021

and up to 31 December 2021, approximately [REDACTED] million (equivalent to HK$[REDACTED]

million) of [REDACTED] is expected to be accounted for as a deduction from equity upon the

[REDACTED] and approximately [REDACTED] million (equivalent to HK$[REDACTED] million) is

expected to charged to our consolidated statements of profit and loss. The [REDACTED] above are

the latest practicable estimate for reference only, and the actual amount may differ from this

estimate. Our Directors do not expect such [REDACTED] to have a material and adverse impact on

our results of operations for the year ending 31 December 2021.


– 283 –


UNAUDITED [REDACTED] STATEMENT OF ADJUSTED CONSOLIDATED [REDACTED] ASSETS OF THEGROUP ATTRIBUTABLE TO OWNERS OF THE COMPANY

[REDACTED]


– 284 –


[REDACTED]

DISCLOSURE REQUIRED UNDER THE LISTING RULES

Our Directors confirm that, as of the Latest Practicable Date, there were no circumstances

that would give rise to a disclosure requirement under Rule 13.13 to 13.19 of the Listing Rules.


– 285 –


FUTURE PLANS AND PROSPECTS

See ‘‘Business — Our Business Strategies’’ for a detailed description of our future plans.

USE OF [REDACTED]

We estimate that we will receive net [REDACTED] from the [REDACTED] of approximatelyHK$[REDACTED] million, after deducting [REDACTED] commissions, fees and estimated expensespayable by us in connection with the [REDACTED], and assuming an [REDACTED] ofHK$[REDACTED] per Share, being the [REDACTED] of the indicative [REDACTED] range stated inthis Document. If the [REDACTED] is set at HK$[REDACTED] per Share, being the [REDACTED] of theindicative [REDACTED] range, the net [REDACTED] from the [REDACTED] will increase byapproximately HK$[REDACTED] million. If the [REDACTED] is set at HK$[REDACTED] per Share,being the [REDACTED] of the indicative [REDACTED] range, the net [REDACTED] from the[REDACTED] will decrease by approximately HK$[REDACTED] million.

We currently intend to apply these net [REDACTED] for the following purposes (assuming an[REDACTED] of HK$[REDACTED] per Share being the [REDACTED] of the indicative [REDACTED]range stated in this Document):

. approximately [REDACTED], or HK$[REDACTED] million of the net [REDACTED], will beused to finance the construction of our Laowang Gourmet Lab 2 (中央⼯廠), expectedto be completed by the third quarter of 2023. The funding includes the investmentcosts in connection with the (i) construction of our Laowang Gourmet Lab 2, and (ii)procurement of kitchen equipment for our Laowang Gourmet Lab 2. We believeestablishing Laowang Gourmet Lab 2 will ensure the smooth transition in research andproduction when the lease of our current Laowang Gourmet Lab expires;

. approximately [REDACTED], or HK$[REDACTED] million of the net [REDACTED], will beused to open new restaurants nationwide and globally. Specifically, we plan to openapproximately 49, 75 and 103 restaurants in 2022, 2023 and 2024, respectively,primarily in new tier 1 cities and tier 2 and other cities. For more details, see‘‘Business — Our Restaurants — Our Flagship — Want Hotpot (撈王鍋物料理) —

Expansion Plan of Want Hotpot’’ and ‘‘Business — Our Restaurants — OtherRestaurants.’’ In connection with our planned restaurant network expansion:

(i) approximately [REDACTED], or HK$[REDACTED] million, will be used over the nextthree years to fund decoration and renovation in connection with the plannedrestaurant expansion;

(ii) approximately [REDACTED], or HK$[REDACTED] million, will be used over the nextthree years in equipment purchase for the new restaurants to be opened; and

(iii) approximately [REDACTED], or HK$[REDACTED] million, will be used over the nextthree years to pay the rental deposit for the new restaurants to be opened duringsuch period;

. approximately [REDACTED], or HK$[REDACTED] million of the net [REDACTED], will beused for our working capital and general corporate purposes.

FUTURE PLANS AND USE OF [REDACTED]

– 286 –


The above allocation of the net [REDACTED] from the [REDACTED] will be adjusted on a prorata basis in the event that the [REDACTED] is fixed at a higher or lower level compared to the[REDACTED] of the indicative [REDACTED] range stated in this Document.

If the [REDACTED] is exercised in full, the net [REDACTED] that we will receive will beapproximately HK$[REDACTED] million, assuming an [REDACTED] of HK$[REDACTED] per Share(being the [REDACTED] of the indicative [REDACTED] range). In the event that the [REDACTED] isexercised in full, we intent to apply the additional net [REDACTED] to the above purposes in theproportions stated above.

To the extent that the net [REDACTED] from the [REDACTED] are not immediately applied tothe above purposes and to the extent permitted by applicable law and regulations, we intend todeposit the net [REDACTED] into short-term demand deposits and/or money market instruments.

FUTURE PLANS AND USE OF [REDACTED]

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The following is the text of a report set out on pages I-1 to I-88, received from the Company’s

reporting accountants, [Deloitte Touche Tohmatsu], Certified Public Accountants, Hong Kong, for

the purpose of incorporation in this document.

ACCOUNTANTS’ REPORT ON HISTORICAL FINANCIAL INFORMATION TO THE DIRECTORS OFLAOWANG HOLDING LIMITED, CHINA INTERNATIONAL CAPITAL CORPORATION HONG KONGSECURITIES LIMITED AND HUATAI FINANCIAL HOLDINGS (HONG KONG) LIMITED

Introduction

We report on the historical financial information of Laowang Holding Limited (the

‘‘Company’’) and its subsidiaries (collectively referred to as the ‘‘Group’’) set out on pages I-4 to

I-88, which comprises the consolidated statements of financial position of the Group as at 31

December 2018, 2019 and 2020, and 30 June 2021, the statements of financial position of the

Company as at 31 December 2018, 2019 and 2020, and 30 June 2021, and the consolidated

statements of profit or loss and other comprehensive income, the consolidated statements of

changes in equity and the consolidated statements of cash flows of the Group for each of the

three years ended 31 December 2020 and the six months ended 30 June 2021 (the ‘‘Track Record

Period’’) and a summary of significant accounting policies and other explanatory information

(together, the ‘‘Historical Financial Information’’). The Historical Financial Information set out on

pages I-4 to 88 forms an integral part of this report, which has been prepared for inclusion in the

document of the Company dated [REDACTED] (the ‘‘Document’’) in connection with the initial

[REDACTED] of shares of the Company on the Main Board of The Stock Exchange of Hong Kong

Limited (the ‘‘Stock Exchange’’).

Directors’ responsibility for the Historical Financial Information

The directors of the Company are responsible for the preparation of the Historical Financial

Information that gives a true and fair view in accordance with the basis of preparation and

presentation set out in Note 2 to the Historical Financial Information, and for such internal

control as the directors of the Company determine is necessary to enable the preparation of the

Historical Financial Information that is free from material misstatement, whether due to fraud or

error.

Reporting accountants’ responsibility

Our responsibility is to express an opinion on the Historical Financial Information and to

report our opinion to you. We conducted our work in accordance with Hong Kong Standard on

Investment Circular Reporting Engagements 200 ‘‘Accountants’ Reports on Historical Financial

Information in Investment Circulars’’ issued by the Hong Kong Institute of Certified Public

Accountants (the ‘‘HKICPA’’). This standard requires that we comply with ethical standards and

plan and perform our work to obtain reasonable assurance about whether the Historical Financial

Information is free from material misstatement.

APPENDIX I ACCOUNTANTS’ REPORT

– I-1 –


Our work involved performing procedures to obtain evidence about the amounts and

disclosures in the Historical Financial Information. The procedures selected depend on the

reporting accountants’ judgement, including the assessment of risks of material misstatement of

the Historical Financial Information, whether due to fraud or error. In making those risk

assessments, the reporting accountants consider internal control relevant to the entity’s

preparation of the Historical Financial Information that gives a true and fair view in accordance

with the basis of preparation and presentation set out in Note 2 to the Historical Financial

Information in order to design procedures that are appropriate in the circumstances, but not for

the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Our

work also included evaluating the appropriateness of accounting policies used and the

reasonableness of accounting estimates made by the directors of the Company, as well as

evaluating the overall presentation of the Historical Financial Information.

We believe that the evidence we have obtained is sufficient and appropriate to provide a

basis for our opinion.

Opinion

In our opinion, the Historical Financial Information gives, for the purposes of the

accountants’ report, a true and fair view of the Group’s and the Company’s financial positions as

at 31 December 2018, 2019 and 2020 and 30 June 2021, and of the Group’s financial performance

and cash flows for the Track Record Period in accordance with the basis of preparation and

presentation set out in Note 2 to the Historical Financial Information.

Review of stub period comparative financial information

We have reviewed the stub period comparative financial information of the Group which

comprises the consolidated statement of profit or loss and other comprehensive income, the

consolidated statement of changes in equity and the consolidated statement of cash flows for

the six months ended 30 June 2020 and other explanatory information (the ‘‘Stub Period

Comparative Financial Information’’). The directors of the Company are responsible for the

preparation and presentation of the Stub Period Comparative Financial Information in accordance

with the basis of preparation and presentation set out in Note 2 to the Historical Financial

Information. Our responsibility is to express a conclusion on the Stub Period Comparative

Financial Information based on our review. We conducted our review in accordance with

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 (the ‘‘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 issued by the IAASB 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 accountants’ report, is not prepared, in all material

respects, in accordance with the basis of preparation and presentation set out in Note 2 to the

Historical Financial Information.


– I-2 –


REPORT ON MATTERS UNDER THE RULES GOVERNING THE [REDACTED] OF SECURITIES ON THESTOCK EXCHANGE 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 [13] to the Historical Financial Information which contains information

about the dividends declared and paid by the Company and the Company’s subsidiaries in

respect of the Track Record Period.

[Deloitte Touche Tohmatsu]Certified Public Accountants

Hong Kong

[Date]


– I-3 –


HISTORICAL FINANCIAL INFORMATION OF THE GROUP

Preparation of Historical Financial Information

Set out below is the Historical Financial Information which forms an integral part of this

accountants’ report.

The consolidated financial statements of the Group for the Track Record Period, on which

the Historical Financial Information is based, have been prepared in accordance with the

accounting policies which conform with International Financial Reporting Standards (‘‘IFRSs’’)

issued by the International Accounting Standards Board (‘‘IASB’’) and were audited by us in

accordance with International Standards on Auditing issued by the IAASB (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.


– I-4 –


CONSOLIDATED STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

Year ended 31 DecemberSix months ended

30 June

Notes 2018 2019 2020 2020 2021

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000(unaudited)

Revenue . . . . . . . . . . . . . 6 870,944 1,094,753 1,124,770 436,434 646,709Other income . . . . . . . . . 7 4,997 11,913 6,786 2,627 5,317Raw materials and

consumables used . . . . (300,008) (381,657) (415,447) (162,457) (234,049)Staff costs . . . . . . . . . . . 10 (270,267) (320,520) (317,757) (138,597) (192,416)Rental expenses and

related expenses . . . . . (111,107) (52,395) (52,116) (19,213) (39,251)Utilities expenses . . . . . . (31,270) (37,735) (37,034) (14,879) (21,260)Depreciation and

amortisation . . . . . . . . 10 (38,527) (137,155) (157,608) (73,995) (91,676)[REDACTED] . . . . . . . . . . . — — — — (7,244)Other operating expenses . (33,910) (41,363) (44,394) (20,613) (24,874)Other gains and losses . . . 8 (1,317) (953) (130) 561 172Material consumed for

research activities . . . . (756) (266) (204) (108) (97)Finance costs . . . . . . . . . 9 — (12,977) (15,735) (7,296) (8,617)

Profit before tax . . . . . . . 88,779 121,645 91,131 2,464 32,714Income tax expenses . . . . 11 (29,724) (41,730) (23,690) (1,402) (11,264)

Profit for the year/period . 10 59,055 79,915 67,441 1,062 21,450

Other comprehensive income (expense)

Item that may bereclassifiedsubsequently toprofit or loss:

Exchange differencearising on translation offoreign operations . . . . 198 406 202 566 (22)

Total comprehensiveincome for the year/period . . . . . . . . . . . . . 59,253 80,321 67,643 1,628 21,428

Profit for the year/periodattributable to:Owners of the Company 53,002 77,949 66,036 653 20,868Non-controlling

interests . . . . . . . . . 6,053 1,966 1,405 409 582

59,055 79,915 67,441 1,062 21,450

Total comprehensiveincome for the year/period attributable to:Owners of the Company 53,200 78,355 66,238 1,219 20,846Non-controlling

interests . . . . . . . . . 6,053 1,966 1,405 409 582

59,253 80,321 67,643 1,628 21,428

Earnings per share . . . . . 14— Basic (RMB cents) . . . 16.93 24.47 20.73 0.20 6.48— Diluted (RMB cents) . . N/A 24.38 20.55 0.20 6.44


– I-5 –


CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

As at 31 DecemberAs at

30 June

Notes 2018 2019 2020 2021

RMB’000 RMB’000 RMB’000 RMB’000

Non-current assetsProperty and equipment . . . . . . . . . . . . 15 136,826 152,221 208,421 221,179Right-of-use assets . . . . . . . . . . . . . . . . 16 — 271,513 331,762 347,497Intangible assets . . . . . . . . . . . . . . . . . 17 327 1,082 872 680Deferred tax assets . . . . . . . . . . . . . . . 18 17,177 20,713 22,143 25,145Rental deposits . . . . . . . . . . . . . . . . . . 20 21,311 23,646 29,952 32,356

175,641 469,175 593,150 626,857

Current assetsInventories . . . . . . . . . . . . . . . . . . . . . 19 21,156 30,068 35,005 29,589Trade and other receivables . . . . . . . . . 20 20,370 21,297 29,395 30,597Value-added tax recoverable . . . . . . . . . 13,351 20,677 48,353 66,490Prepayment to suppliers . . . . . . . . . . . . 19,551 18,901 14,857 25,410Financial assets at fair value through

profit or loss (‘‘FVTPL’’) . . . . . . . . . . . 21 30,000 — — —Term deposits . . . . . . . . . . . . . . . . . . . 22 — 3,000 3,000 17,750Bank balances and cash . . . . . . . . . . . . 22 76,952 112,584 134,627 71,687

181,380 206,527 265,237 241,523

Current liabilitiesTrade and other payables . . . . . . . . . . . 23 135,179 136,317 192,128 165,521Contract liabilities . . . . . . . . . . . . . . . . 26 764 2,115 2,512 2,000Amounts due to related parties . . . . . . . 34 24,223 — — —Dividend payables . . . . . . . . . . . . . . . . 3,315 130 305 305Income tax payables . . . . . . . . . . . . . . . 8,402 9,477 9,216 3,389Lease liabilities . . . . . . . . . . . . . . . . . . 24 — 80,082 94,639 99,643

171,883 228,121 298,800 270,858

Net current assets (liabilities) . . . . . . . . 9,497 (21,594) (33,563) (29,335)


Capital and reservesShare capital . . . . . . . . . . . . . . . . . . . . 27 97,132 110,146 127,383 127,383Reserves . . . . . . . . . . . . . . . . . . . . . . . 65,700 108,415 151,206 172,677

Equity attributable to owners of theCompany . . . . . . . . . . . . . . . . . . . . . 162,832 218,561 278,589 300,060

Non-controlling interests . . . . . . . . . . . . 6,919 6,676 6,209 6,791

Total equity . . . . . . . . . . . . . . . . . . . . 169,751 225,237 284,798 306,851

Non-current liabilitiesLease liabilities . . . . . . . . . . . . . . . . . . 24 — 200,006 251,447 266,762Deferred tax liabilities . . . . . . . . . . . . . 18 7,710 12,776 10,816 10,816Provisions for restoration . . . . . . . . . . . 25 7,677 9,562 12,526 13,093

15,387 222,344 274,789 290,671

185,138 447,581 559,587 597,522


– I-6 –


STATEMENTS OF FINANCIAL POSITION OF THE COMPANY


30 June

Notes 2018 2019 2020 2021

RMB’000 RMB’000 RMB’000 RMB’000

Non-current assetsInterests in subsidiaries . . . . . . . . . . . . 37A 136,871 194,561 253,323 286,480Property and equipment . . . . . . . . . . . . 15 6,409 5,001 3,150 2,232Right-of-use assets . . . . . . . . . . . . . . . . 16 — 6,587 4,685 3,746Intangible assets . . . . . . . . . . . . . . . . . 51 40 15 9Rental deposits . . . . . . . . . . . . . . . . . . 20 271 281 268 273

143,602 206,470 261,441 292,740

Current assetsInventories . . . . . . . . . . . . . . . . . . . . . 379 625 390 279Trade and other receivables . . . . . . . . . 20 515 348 628 2,852Value-added tax recoverable . . . . . . . . . — — — 11Prepayments to suppliers . . . . . . . . . . . 162 39 70 241Bank balances and cash . . . . . . . . . . . . 22 29,367 25,250 25,087 20,018

30,423 26,262 26,175 23,401

Current LiabilitiesTrade and other payables . . . . . . . . . . . 23 5,384 8,425 4,931 9,636Contract liabilities . . . . . . . . . . . . . . . . 20 33 34 11Amounts due to related parties . . . . . . . 34 7,893 — — 3,436Dividend payables . . . . . . . . . . . . . . . . — 130 305 305Lease liabilities . . . . . . . . . . . . . . . . . . 24 — 1,823 2,223 2,395

13,297 10,411 7,493 15,783

Net current assets . . . . . . . . . . . . . . . . 17,126 15,851 18,682 7,618


Capital and reservesShare capital . . . . . . . . . . . . . . . . . . . . 27 97,132 110,146 127,383 127,383Reserves . . . . . . . . . . . . . . . . . . . . . . . 63,596 106,311 149,102 170,573

Total equity . . . . . . . . . . . . . . . . . . . . 160,728 216,457 276,485 297,956

Non-current liabilityLease liabilities . . . . . . . . . . . . . . . . . . 24 — 5,864 3,638 2,402

160,728 222,321 280,123 300,358


– I-7 –


CONSOLIDATE

DSTA

TEMEN

TSOFCHANGES

INEQ

UITY

Attribute

toownersoftheCompan

y

Share

capital

Trea

sury

shares

Share

premium

Merger

rese

rve

(note

b)

Share-

bas

ed

pay

men

t

rese

rve

Other

rese

rves

Exch

ange

rese

rve

Statutory

rese

rve

(note

a)

Retained

earnings

Subtotal

Non-

controlling

interests

Total

RMB’000

RMB’000

RMB’000

RMB’000

RMB’000

RMB’000

RMB’000

RMB’000

RMB’000

RMB’000

RMB’000

RMB’000

At1January2018

.......................

71,608

——

22,947

——

(92)

5,32

127,52

912

7,31

320,393

147,70

6

Profitfortheye

ar......................

——

——

——

——

53,002

53,002

6,053

59,055

Other

comprehen

sive

inco

mefortheye

ar......

——

——

——

198

——

198

—19

8

Totalco

mprehen

sive

inco

mefortheye

ar......

——

——

——

198

—53

,002

53,200

6,053

59,253

Conve

rsionofretained

earnings

into

share

capital

(note

27(iii))...................

17,202

——

——

——

—(17,202)

——

—

Tran

sferredto

statutory

rese

rve.............

——

——

——

—6,816

(6,816

)—

——

Dividen

dsreco

gnised

asdistributionby

asu

bsidiary

(note

c)..................

——

——

——

——

(3,161)

(3,161)

(6,009)

(9,170

)

Rec

ogn

itionofeq

uity-se

ttledsh

are-bas

ed

pay

men

tsto

employe

esan

dad

viso

rs(note

d)

——

——

—9,432

——

—9,432

—9,432

Issu

eofnew

shares

(note

27(i))

............

8,322

—8,322

——

——

——

16,644

—16

,644

Dee

med

distributionan

dac

quisitionofnon-

controllinginterestsas

partoftheGroup

Reo

rgan

isation(note

2)................

——

—(40,596)

——

——

—(40,596)

(13,518)

(54,114)

At31

Dec

ember

2018

....................

97,13

2—

8,322

(17,649)

—9,432

106

12,137

53,352

162,832

6,919

169,751

Profitfortheye

ar......................

——

——

——

——

77,949

77,949

1,966

79,915

Other

comprehen

sive

inco

mefortheye

ar......

——

——

——

406

——

406

—406

Totalco

mprehen

sive

inco

mefortheye

ar......

——

——

——

406

—77

,949

78,355

1,966

80,321

Conve

rsionofretained

earnings

into

share

capital

(note

27(iii))...................

10,587

——

——

——

—(10,587)

——

—

Tran

sferredto

statutory

rese

rve.............

——

——

——

—9,581

(9,581)

——

—

Dividen

dsreco

gnised

asdistribution(note

13)

..

——

——

——

——

(26,506)

(26,506)

—(26,506)

Dividen

dsreco

gnised

asdistributionbya

subsidiary

.........................

——

——

——

——

——

(2,209)

(2,209)

Issu

eofrestricted

shares

under

share-bas

ed

pay

men

tssc

hem

e(note

27(ii))

...........

2,427

(2,427)

——

——

——

——

——

Rec

ogn

itionofeq

uity-se

ttledsh

are-bas

ed

pay

men

ts(note

28)...................

——

——

3,880

——

——

3,880

—3,880


– I-8 –


Attribute

toownersoftheCompan

y

Share

capital

Trea

sury

shares

Share

premium

Merger

rese

rve

(note

b)

Share-

bas

ed

pay

men

t

rese

rve

Other

rese

rves

Exch

ange

rese

rve

Statutory

rese

rve

(note

a)

Retained

earnings

Subtotal

Non-

controlling

interests

Total

RMB’000

RMB’000

RMB’000

RMB’000

RMB’000

RMB’000

RMB’000

RMB’000

RMB’000

RMB’000

RMB’000

RMB’000

At31

Dec

ember

2019

....................

110,146

(2,427)

8,322

(17,649)

3,880

9,432

512

21,718

84,627

218

,561

6,676

225,237

Profitfortheye

ar......................

——

——

——

——

66,036

66,036

1,405

67,441

Other

comprehen

sive

inco

mefortheye

ar......

——

——

——

202

——

202

—202

Totalco

mprehen

sive

inco

mefortheye

ar......

——

——

——

202

—66,036

66,238

1,405

67,643

Conve

rsionofretained

earnings

into

share

capital

(note

27(iii))...................

11,088

——

——

——

—(11,088)

——

—

Tran

sferredto

statutory

rese

rve.............

——

——

——

—7,54

4(7,544)

——

—

Dividen

dsreco

gnised

asdistribution(note

13)

..

——

——

——

——

(11,088)

(11,088)

—(11,088)

Dividen

dsreco

gnised

asdistributionbya

subsidiary

.........................

——

——

——

——

——

(1,872

)(1,872

)

Issu

eofnew

shares

(note

27(i))

............

—*

——

——

——

——

——

—*

Effect

ofre-den

ominationofsh

ares

capital

(note

27(v)).............................

6,459

—(6,459

)—

——

——

——

——

Rep

urchas

edan

dca

nce

llationofrestricted

shares

under

share-bas

edpay

men

tssc

hem

e

(note

27(iv))

........................

(310

)31

0—

——

——

——

——

—

Ves

tingofrestricted

shares

under

share-bas

ed

pay

men

tssc

hem

e(note

27(ii))

...........

—1,059

4,488

—(3,853

)—

——

—1,694

—1,694

Rec

ogn

itionofeq

uity-se

ttledsh

are-bas

ed

pay

men

ts(note

28)...................

——

——

3,18

4—

——

—3,18

4—

3,18

4

At31

Dec

ember

2020....................

127,38

3(1,058

)6,351

(17,649)

3,211

9,432

714

29,262

120,943

278

,589

6,209

284,798

At1January2021.......................

127,38

3(1,058

)6,351

(17,649)

3,211

9,432

714

29,262

120,943

278

,589

6,209

284,798

Profitfortheperiod

.....................

——

——

——

——

20,868

20,868

582

21,450

Other

comprehen

sive

expen

sefortheperiod

...

——

——

——

(22)

——

(22)

—(22)

Totalco

mprehen

sive

inco

mefortheperiod.....

——

——

——

(22)

—20,868

20,846

582

21,428

Rec

ogn

itionofeq

uity-se

ttledsh

are-bas

ed

pay

men

ts(note

28)...................

——

——

625

——

——

625

—625

At30

June2021........................

127,38

3(1,058

)6,351

(17,649)

3,836

9,432

692

29,262

141,811

300,060

6,791

306,851


– I-9 –


Attribute

toownersoftheCompan

y

Share

capital

Trea

sury

shares

Share

premium

Merger

rese

rve

(note

b)

Share-

bas

ed

pay

men

t

rese

rve

Other

rese

rves

Exch

ange

rese

rve

Statutory

rese

rve

(note

a)

Retained

earnings

Subtotal

Non-

controlling

interests

Total

RMB’000

RMB’000

RMB’000

RMB’000

RMB’000

RMB’000

RMB’000

RMB’000

RMB’000

RMB’000

RMB’000

RMB’000

(Unau

dited

)

At1January2020

......................

110,146

(2,427)

8,322

(17,649)

3,880

9,432

512

21,718

84,627

218

,561

6,676

225,237

Profitfortheperiod

.....................

——

——

——

——

653

653

409

1,062

Other

comprehen

sive

inco

mefortheperiod

....

——

——

——

566

——

566

—56

6

Totalco

mprehen

sive

inco

mefortheperiod.....

——

——

——

566

—653

1,219

409

1,628

Rec

ogn

itionofeq

uity-se

ttledsh

are-bas

ed

pay

men

ts(note

28)...................

——

——

1,75

7—

——

—1,75

7—

1,75

7

At30

June2020........................

110,146

(2,427)

8,322

(17,649)

5,637

9,432

1,078

21,718

85,280

221,53

77,085

228,622

*am

ountless

than

RMB1,000

Notes

:

(a)

Accordingto

thePeo

ple’s

Rep

ublicofChina(‘‘PRC’’)

Compan

yLa

wan

dtheArticlesofAss

ociationofthePRCsu

bsidiaries

oftheGroup,thes

eco

mpan

iesarerequired

totran

sfer

10%

oftheirresp

ective

after-tax

profits,ca

lculated

inac

cordan

cewith

the

releva

ntac

counting

principles

and

finan

cial

regu

lations

applica

ble

toen

tities

establish

edin

thePRC,to

thestatutory

surplusrese

rveuntiltherese

rvebalan

cereac

hes

50%

oftheregistered

capital.Th

estatutory

surplusrese

rveca

nbeutilize

d,

uponap

prova

lofthereleva

ntau

thorities

,to

offse

tac

cumulatedloss

esorto

increa

seregistered

capital

ofthes

eco

mpan

ies,

provided

that

such

fundis

maintained

ata

minim

um

of25%

oftheregistered

capital.

(b)

AspartoftheGroupReo

rgan

isationas

setoutin

note

2,theGroupac

quired

54%

equityinterestsin

Laowan

gInternational

Limited

andbusines

soperationofce

rtain

restau

rants

which

were

allunder

common

controlbythe

Controlling

Shareh

olders

(as

defined

innote

1).Merge

rrese

rve

represe

nts

the

difference

betwee

n(i)the

aggreg

ateofca

shco

nsiderationsforsu

chac

quisitions(the‘‘C

ashConsiderations’’)an

dca

rryingam

ounts

ofthenet

asse

tsofsu

chrestau

rants

whicharenotac

quired

by

theGroup(the‘‘N

on-acq

uired

Net

Ass

ets’’),an

d(ii)

theag

greg

ateofthepaid-in/shareca

pital

ofsu

chrestau

rants

andLa

owan

gInternational

whichwas

attributable

toownersoftheCompan

y,non-controllinginterestsofsu

chrestau

rants

andthereleva

ntdeferredtaxim

pac

ts.

RMB40,596,000

ofdee

med

distribution

and

acquisition

ofnon-controlling

interests

during

the

year

ended

31Dec

ember

2018

consists

ofthe

Cas

hConsiderations

amounting

toRMB42,360,000

and

the

Non-acq

uired

Net

Ass

ets

amounting

toRMB17,414

,000,less

the

non-controlling

interests

ofsu

chrestau

rants

amounting

toRMB13

,518

,000

and

the

deferred

taxas

sets

reco

gnised

amountingto

RMB5,660,000.Th

eNon-acq

uired

Net

Ass

etsco

nsistsofca

shan

dca

sheq

uivalen

ts,trad

ean

dother

rece

ivab

les,

prepay

men

tto

suppliers,

trad

ean

dother

pay

ables,

tax

pay

ables

and

provisions

forrestoration,am

ounting

toRMB41,76

5,000,RMB9,499,000,

RMB2,732

,000,RMB29,474

,000,RMB6,148,000an

dRMB960,000,resp

ective

ly,as

attheresp

ective

acquisitiondates

.(c)

This

represe

nted

the

dividen

ds

dec

lared

and

paid

by

Laowan

gInternational

Limited

,a

subsidiary

ofthe

Compan

y,including

RMB3,16

1,000

tothe

Controlling

Shareh

oldersas

setoutin

note

1an

dRMB2,692,000

tonon-controllinginterestsduringtheye

aren

ded

31Dec

ember

2018

before

Laowan

gInternational

Limited

was

acquired

bytheGroupunder

theGroupReo

rgan

isation.Fu

rthermore,duringtheye

aren

ded

31Dec

ember

2018

afterLa

owan

gInternational

Limited

was

acquired

bythe

Group,further

dividen

dwas

dec

laredbyLa

owan

gInternational

Limited

tonon-controllingsh

areh

oldersam

ountedto

RMB3,31

7,000an

dsu

chdividen

dwas

reco

rded

asdividen

dpay

ablesoftheGroupas

at31

Dec

ember

2018

.(d)

Duringtheye

aren

ded

31Dec

ember

2018

,theControllingShareh

olders(asdefined

innote

1)an

dother

2sh

areh

oldersoftheCompan

ytran

sferred

324,210

ordinary

shares

oftheCompan

ythat

they

hold

through

Haz

elCas

hInve

stmen

tCo.,Ltd.,ave

hicle

whichwas

setupto

hold

theissu

edsh

ares

oftheCompan

yfortheControlling

Shareh

oldersan

dother

2sh

areh

oldersoftheCompan

y,to

13individuals(including11

then

employe

esoftheGroup)at

aprice

ofUSD1.0

per

share.

Such

tran

sfer

of

shares

was

issu

edto

the13

individualsas

anince

ntive

fortheirman

agem

entan

dad

viso

ryse

rviceprovided

totheGroup

inresp

ectofthebusines

soperationofthe

Group’s

hotpotrestau

rants

asthes

e13

individualshad

rich

experience

sin

operatinghotpotrestau

rants.Andtherefore

theGroupreco

gnised

share-bas

edpay

men

tsof

RMB9,432

,000

bas

edon

thefair

valueofthe

tran

sferred

shares

,which

was

determined

bydisco

unted

cash

flow

method,an

dcred

ited

inother

rese

rves

asdee

med

capital

contributionbyownersoftheCompan

y.Th

eva

luationwas

carriedoutbyGW

Finan

cial

Adviso

ryService

sLimited

(‘‘GW’’),an

dthead

dress

ofGW

isRoom

604,6/

F,Shan

ghai

Industrial

Inve

stmen

tBuilding,

48–62Hen

nes

syRoad

,Wan

Chai,HongKong.


– I-10 –


CONSOLIDATED STATEMENTS OF CASH FLOWS


Six months ended

30 June

2018 2019 2020 2020 2021


(unaudited)

OPERATING ACTIVITIES

Profit before tax . . . . . . . . . . . . . . . . . . . . 88,779 121,645 91,131 2,464 32,714

Adjustments for:

Finance costs . . . . . . . . . . . . . . . . . . . . — 12,977 15,735 7,296 8,617

Bank interest income . . . . . . . . . . . . . . (198) (231) (363) (136) (302)

Interest income arising from rental

deposits . . . . . . . . . . . . . . . . . . . . . . — (765) (956) (436) (571)

Investment gain on financial assets at

FVTPL . . . . . . . . . . . . . . . . . . . . . . . . (256) (1,148) (640) (303) (242)

Depreciation of property and equipment . 38,424 51,161 58,002 27,355 35,031

Depreciation of right-of-use assets . . . . . — 85,803 99,136 46,409 56,422

Amortisation of intangible assets . . . . . . 103 191 470 231 223

Loss (gain) on disposal of property and

equipment, net . . . . . . . . . . . . . . . . . 1,705 1,735 1,070 (2) 395

Gain arising on termination of leases and

right-of-use assets, net . . . . . . . . . . . — (3) (806) — (369)

Covid-19-related rent concessions . . . . . . — — (4,198) (4,198) —

Foreign exchange (gain) loss, net . . . . . . (132) 369 506 (256) 44

Recognition of equity-settled share-based

payment . . . . . . . . . . . . . . . . . . . . . . 9,432 3,880 3,184 1,757 625

Operating cash flows before movements in

working capital . . . . . . . . . . . . . . . . . . 137,857 275,614 262,271 80,181 132,587

(Increase) decrease in inventories . . . . . . . (7,254) (8,912) (4,937) 9,276 5,416

(Increase) decrease in trade and other

receivables . . . . . . . . . . . . . . . . . . . . . (12,323) (927) (8,098) 2,343 4,690

Increase in value-added tax recoverable . . . (9,578) (7,326) (27,676) (21,901) (18,137)

(Increase) decrease in prepayment to

suppliers . . . . . . . . . . . . . . . . . . . . . . . (6,722) (8,254) 4,044 3,833 (10,553)

Increase (decrease) in trade and other

payables . . . . . . . . . . . . . . . . . . . . . . . 45,951 11,513 45,083 (7,874) (31,979)

Increase (decrease) in contract liabilities . . 763 1,351 397 (1,073) (512)

Cash generated from operations . . . . . . . . 148,694 263,059 271,084 64,785 81,512

Interest received . . . . . . . . . . . . . . . . . . . 198 231 363 136 302

Income taxes paid . . . . . . . . . . . . . . . . . . (29,715) (39,125) (27,341) (845) (20,093)

NET CASH FROM OPERATING ACTIVITIES . . . 119,177 224,165 244,106 64,076 61,721


– I-11 –



Six months ended

30 June

2018 2019 2020 2020 2021


(unaudited)

INVESTING ACTIVITIESPurchase of financial assets measured at

FVTPL . . . . . . . . . . . . . . . . . . . . . . . . . (105,000) (350,000) (240,000) (100,000) (70,000)[REDACTED] on redemption on financial

assets designated at FVTPL . . . . . . . . . . 75,256 381,148 240,640 100,303 70,242[REDACTED] from disposal of property and

equipment . . . . . . . . . . . . . . . . . . . . . . 296 1,473 750 332 183Purchase of property and equipment . . . . . (69,227) (70,082) (102,777) (24,878) (48,047)Purchase of intangible assets . . . . . . . . . . (308) (946) (260) (215) (31)Utilisation of provision . . . . . . . . . . . . . . . (163) (358) (302) — (97)Upfront payments for

right-of-use assets . . . . . . . . . . . . . . . . — (2,514) (2,435) (757) (391)Payments for rental deposits . . . . . . . . . . . — (6,832) (10,171) (3,553) (4,383)Collection of rental deposits . . . . . . . . . . . — 1,596 3,045 1,646 1,818

NET CASH USED IN INVESTING ACTIVITIES . . (99,146) (46,515) (111,510) (27,122) (50,706)

FINANCING ACTIVITIESNew bank borrowings raised . . . . . . . . . . . — 556 45,562 44,362 8,470Repayment of bank borrowings . . . . . . . . . — (556) (45,562) — (8,470)Interest paid . . . . . . . . . . . . . . . . . . . . . . — —* (835) (457) (34)Payments of lease liabilities . . . . . . . . . . . — (85,225) (95,806) (43,394) (58,265)Issue of new shares . . . . . . . . . . . . . . . . . 16,644 — — — —Issued cost paid . . . . . . . . . . . . . . . . . . . — — — — (859)Dividends paid to shareholders of the

Company . . . . . . . . . . . . . . . . . . . . . . . (3,161) (26,376) (10,913) (130) —Dividends paid to non-controlling

shareholders . . . . . . . . . . . . . . . . . . . . (2,694) (5,524) (1,872) — —Acquisition of subsidiaries under common

control as part of the GroupReorganisation . . . . . . . . . . . . . . . . . . . (73,092) (24,223) — — —

[REDACTED] on issues of restricted sharesunder the share-based payments scheme 1,252 2,631 — — —

Repurchase and cancellation of issuedrestricted shares under share-basedpayment scheme . . . . . . . . . . . . . . . . . — — (496) (496) —

NET CASH USED IN FINANCING ACTIVITIES . . (61,051) (138,717) (109,922) (115) (59,158)

NET (DECREASE) INCREASE INCASH AND CASH EQUIVALENTS . . . . . . . . (41,020) 38,933 22,674 36,839 (48,143)

Cash and cash equivalents at beginning ofthe year/period . . . . . . . . . . . . . . . . . . 117,845 76,952 115,584 115,584 137,627

Effect of foreign exchange rate changes . . . 127 (301) (631) 268 (47)

Cash and cash equivalents at end of theyear/period, represented by . . . . . . . . . 76,952 115,584 137,627 152,691 89,437

Bank balances and cash . . . . . . . . . . . . 76,952 112,584 134,627 149,691 71,687Term deposits with original maturity of

less than3 months (note 22) . . . . . . . . . . . . . . — 3,000 3,000 3,000 17,750

76,952 115,584 137,627 152,691 89,437



– I-12 –


NOTES TO THE HISTORICAL FINANCIAL INFORMATION

1. GENERAL INFORMATION

The Company was incorporated as an exempted company with limited liability under the

Companies Act of the Cayman Islands on 15 April 2015. The address of the Company’s registered

office and the principal place of business are disclosed in the section headed ‘‘Corporate

Information’’ in the Document. The founders of the Group, Mr. Lee Yu-cheng, Mr. Chen Hsiang

and Mr. Chao Hung-che entered into a concert party agreement on 18 August 2021, pursuant to

which they agreed, confirmed and acknowledged the nature of their acting-in-concert

relationship, and therefore, have historically and throughout the Track Record Period been

controlling the entities now comprising the Group on a collective basis (the ‘‘Controlling

Shareholders’’).

The Company is an investment holding company with a branch located in Taiwan. Its branch

and subsidiaries are principally engaged in consumer industry of hotpot restaurant operations,

food delivery business and retail business. The Group relies on food delivery retail platforms to

sell its ready-to-serve products online and offline primarily in some of the Group’s self-operated

restaurants and certain local and international supermarkets.

The functional currency of the Company and its major subsidiaries is Renminbi (‘‘RMB’’),

which is the same as the presentation currency of the Historical Financial Information.

2. GROUP REORGANISATION AND BASIS OF PREPARATION AND PRESENTATION OF HISTORICALFINANCIAL INFORMATION

The Historical Financial Information has been prepared based on the accounting policies set

out in note 4 which conform with IFRSs issued by the IASB and the conventions applicable for

the Group Reorganization (as defined below).

Prior to and during the Track Record Period, the Group underwent a series of group

reorganisation (‘‘Group Reorganisation’’). Prior to the completion of the Group Reorganisation, the

principal business and all the entities comprising the Group’s business now were controlled by

the Controlling Shareholders.

The major steps of Group Reorganisation comprised of the following steps:

. On 15 June 2018, the Company acquired 54% shares of Laowang International Limited

(‘‘Laowang International’’) from the four original shareholders with a consideration of

USD1,150,000 (equivalent to RMB7,395,000). Laowang International operated as

investment holding company to hold all the equity interest of Laopin F&B Management

(Shanghai) Limited* (撈品(上海)餐飲管理有限公司) (‘‘Laopin Shanghai’’) via Laowang

Holding Limited (Samoa) (‘‘Laowang Samoa’’). Laowang International was controlled by

the Controlling Shareholders since its incorporation. Upon the completion of the

acquisition, the Company held 54% shares of Laowang International and Laowang

International became a subsidiary of the Company. The consideration was fully settled

during the year ended 31 December 2019;

* English name is for identification purpose only.


– I-13 –


. During the years ended 31 December 2017 and 2018, Laowang F&B Management

(Shanghai) Limited* (撈王(上海)餐飲管理有限公司) (‘‘Laowang Shanghai’’), a wholly-

owned subsidiary of the Company, acquired the business operation of 11 and 14 hotpot

restaurants in the PRC which were controlled by the Controlling Shareholders since

their incorporations, with total consideration of RMB24,847,000 and RMB34,965,000,

respectively. The consideration was fully settled during the year ended 31 December

2019; and

. Shanghai Changli F&B Management Limited* (上海昌里餐飲管理有限公司) (‘‘Shanghai

Changli’’) was incorporated by Laowang Shanghai on 6 May 2019 as a limited company

to operate a hotpot restaurant in Shanghai. Since then, Shanghai Changli became a

wholly-owned subsidiary of the Company.

Prior to the acquisitions of the equity interests in the above mentioned subsidiaries or

restaurants to the Group, all equity interests attributable to parties other than the Controlling

Shareholders are treated as non-controlling interests. Non-controlling interests of these

restaurants were acquired and derecognised during the years ended 31 December 2017 and 2018

following the equity transfers of these restaurants to the Company as aforementioned.

The Company and its subsidiaries and the abovementioned acquisitions of Laowang

International and the business operation of 25 hotpot restaurants are under common control of

the Controlling Shareholders before and after the Group Reorganisation. Therefore, the

abovementioned acquisitions are accounted for as business combination under common control

by applying the principles of merger accounting.

The consolidated statements of profit or loss and other comprehensive income,

consolidated statements of changes in equity and consolidated statements of cash flows for the

Track Record Period include the results, changes in equity and cash flows of the companies

comprising the Group as if the group structure upon completion of Group Reorganisation had

been in existence throughout the Track Record Period, or since their date of incorporation or

acquisition, where there is a shorter period.

No audited statutory financial statements of the Company have been prepared since its date

of incorporation as it is incorporated in the jurisdiction where there is no statutory audit

requirements.

As at 31 December 2019 and 2020, and 30 June 2021, the Group’s net current liabilities

amounted to RMB21,594,000, RMB33,563,000 and RMB29,335,000, respectively. In the opinion

of the directors of the Company, the Group will have sufficient funds available from the operating

activities to meet in full its financial obligations as they fall due for at least the next twelve

months from the date of approval of the Historical Financial Information. The Group also monitors

the utilisation and repayment of bank borrowings to ensure the Group with sufficient funds. As at

30 June 2021, the Group had unutilised available banking facilities of approximately RMB122

million. The Historical Financial Information has been prepared on a going concern basis.



– I-14 –


3. APPLICATION OF NEW AND AMENDMENTS TO IFRSs

Application of new and revised IFRSs

For the purpose of preparing and presenting the Historical Financial Information for the

Track Record Period, the Group has consistently adopted the accounting policies which conform

with the International Accounting Standards (‘‘IASs’’), the IFRSs, amendments to IFRSs and the

related interpretations issued by the IASB, which are effective for the Group’s financial year

beginning on 1 January 2021, throughout the Track Record Period, except that the Group has

adopted IFRS 16 Leases on 1 January 2019 and early adopted both the amendments to IFRS 16

COVID-19-Related Rental Concessions and COVID-19-Related Rental Concessions beyond 30 June

2021 on 1 January 2020.

IFRS 16 Leases

IFRS 16 superseded IAS 17 Leases (‘‘IAS 17’’) and the related interpretations. It introduces a

single accounting model for lessees, which requires a lessee to recognise a right-of-use asset

and a lease liability for all leases, except for leases that have a lease term of 12 months or less

(‘‘short-term leases’’) and leases of low value assets. The lessor accounting requirements are

brought forward from IAS 17 substantially unchanged.

Further details of the nature and effect of the changes to accounting policies and the

transition options applied are set out below:

Definition of a lease

The Group has elected the practical expedient to apply IFRS 16 to contracts that were

previously identified as leases applying IAS 17 and IFRIC 4 Determining whether an Arrangement

contains a Lease and not apply this standard to contracts that were not previously identified as

containing a lease. Therefore, the Group has not reassessed contracts which already existed

prior to the date of initial application.

For contracts entered into or modified on or after 1 January 2019, the Group applies the

definition of a lease in accordance with the requirements set out in IFRS 16 in assessing whether

a contract contains a lease.

As a lessee

The Group has applied IFRS 16 retrospectively with the cumulative effect recognised at the

date of initial application, 1 January 2019.

As at 1 January 2019, the Group recognised additional lease liabilities and right-of-use

assets at amounts equal to the related lease liabilities adjusted by any prepaid or accrued lease

payments by applying IFRS 16.C8(b)(ii) transition. Comparative information has not been

restated.


– I-15 –


When applying the modified retrospective approach under IFRS 16 at transition, the Group

applied the following practical expedients to leases previously classified as operating leases

under IAS 17, on lease-by-lease basis, to the extent relevant to the respective lease contracts:

. relied on the assessment of whether leases are onerous by applying IAS 37 Provisions,

Contingent Liabilities and Contingent Assets as an alternative of impairment review;

and

. excluded initial direct costs from measuring the right-of-use assets at the date of

initial application.

When recognising the lease liabilities for leases previously classified as operating leases,

the Group has applied incremental borrowing rates of the relevant group entities at the date of

initial application. The weighted average incremental borrowing rate applied is 4.785% per

annum.

As at

1 January 2019

RMB’000

Operating lease commitments as at 31 December 2018 (note 29) . . . . . . . . . . . . . 288,708

Lease liabilities discounted at relevant incremental borrowing rate . . . . . . . . . . . 262,992

Less: Recognition exemption — short-term leases . . . . . . . . . . . . . . . . . . . . . . . (9,010)

Lease liabilities relating to operating leases recognised upon

application of IFRS 16 as at 1 January 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . 253,982

Analysed as:

— Current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67,255

— Non-current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 186,727

253,982

The carrying amount of right-of-use assets as at 1 January 2019 comprises the following:

Notes

Right-of-use

assets

RMB’000

Right-of-use assets relating to operating leases recognised

upon application of IFRS 16 . . . . . . . . . . . . . . . . . . . . . . . . . . . 253,982

Restoration costs included in property and equipment

as at 31 December 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (a) 4,253

Reclassified from prepaid rental . . . . . . . . . . . . . . . . . . . . . . . . . . (c) 8,904

Adjustments on rental deposits at 1 January 2019 . . . . . . . . . . . . . (b) 2,550

Less: Accrued lease liabilities at 1 January 2019 . . . . . . . . . . . . . . (d) (16,603)

253,086


– I-16 –


The following adjustments were made to the amounts recognised in the consolidated

statement of financial position at 1 January 2019. Line items that were not affected by the

changes have not been included.

Notes

Carrying amounts

previously

reported at 31

December 2018 Adjustments

Carrying

amounts under

at IFRS 16 at

1 January 2019

RMB’000 RMB’000 RMB’000

Non-current Assets

Rental deposits . . . . . . . . . . (b) 21,311 (2,550) 18,761

Right-of-use assets . . . . . . . . — 253,086 253,086

Property and equipment . . . . (a) 136,826 (4,253) 132,573

Current Asset

Prepayment to suppliers . . . . (c) 19,551 (8,904) 10,647

Current Liabilities

Lease liabilities . . . . . . . . . . — (67,255) (67,255)

Trade and other payables

— other accrued expenses . (d) (26,934) 16,603 (10,331)

Non-current Liability

Lease liabilities . . . . . . . . . . — (186,727) (186,727)

Notes:

(a) In relation to the leases of hotpot restaurants that the Group acts as lessee, the carrying amount of the

estimated costs of restoration previously included in property and equipment as at 1 January 2019 were

included as right-of-use assets.

(b) Before the application of IFRS 16, the Group considered refundable rental deposits paid included in rental

deposits as rights and obligations under leases to which IAS 17 applied. Based on the definition of lease

payments under IFRS 16, such deposits are not payments relating to the right to use of the underlying assets

and were adjusted to right-of-use assets to reflect the discounting effect at transition, and such impact was

adjusted to refundable rental deposits paid and right-of-use assets.

(c) Upfront payments in respect of non-refundable rental of the leasehold properties were classified as

prepayment to suppliers as at 31 December 2018. Upon application of IFRS 16, the relevant prepayment to

suppliers were reclassified to right-of-use assets.

(d) Rent-free period

These relate to accrued lease liabilities for leases of properties in which the lessors provided rent-free

period. The carrying amount of the lease incentive liabilities under trade and other payables as at 1 January

2019 was adjusted to right-of-use assets at transition.

Lease payments increase progressively over lease terms.

These relate to accrued lease liabilities of several operating leases for leases of hotpot restaurants in which

the rentals increase progressively. The carrying amount of the accrued lease liabilities under trade and other

payables as at 1 January 2019 was adjusted to right-of-use assets at transition.


– I-17 –


For the purpose of reporting cash flows from operating activities under indirect method for

the year ended 31 December 2019, movements in working capital have been computed based on

opening consolidated statement of financial position as at 1 January 2019 as disclosed above.

Amendments to IFRS 16 Covid-19-Related Rent Concessions

The Group has applied both the amendments for the first time on 1 January 2020. The

amendments introduce a new practical expedient for lessees to elect not to assess whether a

Covid-19-related rent concession is a lease modification. The practical expedient only applies to

rent concessions occurring as a direct consequence of the Covid-19 that meets all of the

following conditions:

. the change in lease payments results in revised consideration for the lease that is

substantially the same as, or less than, the consideration for the lease immediately

preceding the change;

. any reduction in lease payments affects only payments originally due on or before 30

June 2022; and

. there is no substantive change to other terms and conditions of the lease.

A lessee applying the practical expedient accounts for changes in lease payments resulting

from rent concessions the same way it would account for the changes applying IFRS 16 if the

changes were not a lease modification. Forgiveness or waiver of lease payments are accounted

for as variable lease payments. The related lease liabilities are adjusted to reflect the amounts

forgiven or waived with a corresponding adjustment recognised in the profit or loss in the period

in which the event occurs.

The application of the amendment had no impact to the opening retained profits at 1

January 2020. The Group has benefited from 1 to 5 months waiver of lease payments on several

leases during the year ended 31 December 2020. The Group has derecognised the part of lease

liabilities that has been extinguished by the forgiveness of lease payments using the discount

rates originally applied to these leases respectively, resulting in a decrease in the lease

liabilities of RMB4,198,000, which has been recognised as variable lease payments in profit or

loss for the year ended 31 December 2020.


– I-18 –


New and amendments to IFRSs in issue but not yet effective

At the date of this report, the following new and amendments to IFRSs have been issued

which are not yet effective:

IFRS 17 Insurance Contracts and the related Amendments3

Amendments to IFRS 3 Reference to the Conceptual Framework2

Amendments to IFRS 9, IAS 39,

IFRS 7, IFRS 4 and IFRS 16

Interest Rate Benchmark Reform — Phase 21

Amendments to IFRS 10 and

IAS 28

Sale or Contribution of Assets between an Investor and its

Associate or Joint Venture4

Amendments to IAS 1 Classification of Liabilities as Current or Non-current3

Amendments to IAS 1 and

IFRS Practice Statement 2

Disclosure of Accounting Policies3

Amendments to IAS 8 Definition of Accounting Estimates3

Amendments to IAS 12 Deferred Tax related to Assets and Liabilities arising from

a Single Transaction3

Amendments to IAS 16 Property, Plant and Equipment: Proceeds before Intended

Use2

Amendments to IAS 37 Onerous Contracts — Cost of Fulfilling a Contract2

Amendments to IFRS

Standards

Annual Improvements to IFRS Standards 2018–20202

1 Effective for annual periods beginning on or after 1 January 20212 Effective for annual periods beginning on or after 1 January 20223 Effective for annual periods beginning on or after 1 January 20234 Effective for annual periods beginning on or after a date to be determined

The directors of the Company anticipate that the application of all these new and

amendments to IFRSs will have no material impact on the Group’s financial statements in the

foreseeable future.

4. SIGNIFICANT ACCOUNTING POLICIES

The Historical Financial Information has been prepared in accordance with the following

accounting policies which conform with IFRSs issued by the IASB. In addition, the Historical

Financial Information includes applicable disclosures required by the Rules Governing the

[REDACTED] of Securities of The Stock Exchange of Hong Kong Limited (‘‘Listing Rules’’) and by

the Hong Kong Companies Ordinance.

The Historical Financial Information has been prepared on the historical cost basis except

for certain financial instruments that are measured at fair values at the end of each reporting

period, as explained in the accounting policies set out below.

Historical cost is generally based on the fair value of the consideration given in exchange

for goods and services.


– I-19 –


Fair value is the price that would be received to sell an asset or paid to transfer a liability

in an orderly transaction between market participants at the measurement date, regardless of

whether that price is directly observable or estimated using another valuation technique. In

estimating the fair value of an asset or a liability, the Group takes into account the

characteristics of the asset or liability if market participants would take those characteristics

into account when pricing the asset or liability at the measurement date. Fair value for

measurement and/or disclosure purposes in the Historical Financial Information is determined on

such a basis, except for share-based payment transactions that are within the scope of IFRS 2

‘‘Share-based Payment’’, leasing transactions that are accounted for in accordance with IFRS 16,

and measurements that have some similarities to fair value but are not fair value, such as net

realisable value in IAS 2 ‘‘Inventories’’ or value in use in IAS 36 ‘‘Impairment of Assets’’.

In addition, for financial reporting purposes, fair value measurements are categorised into

Level 1, 2 or 3 based on the degree to which the inputs to the fair value measurements are

observable and the significance of the inputs to the fair value measurement in its entirety, which

are described as follows:

. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or

liabilities that the entity can access at the measurement date;

. Level 2 inputs are inputs, other than quoted prices included within Level 1, that are

observable for the asset or liability, either directly or indirectly; and

. Level 3 inputs are unobservable inputs for the asset or liability.

The principal accounting policies are set out below.

Basis of consolidation

The Historical Financial Information incorporates the financial statements of the Company

and entities controlled by the Company and its subsidiaries. Control is achieved when the

Company:

. has power over the investee;

. is exposed, or has rights, to variable returns from its involvement with the investee;

and

. has the ability to use its power to affect its returns.

The Group reassesses whether or not it controls an investee if facts and circumstances

indicate that there are changes to one or more of the three elements of control listed above.

Consolidation of a subsidiary begins when the Group obtains control over the subsidiary

and ceases when the Group loses control of the subsidiary. Specifically, income and expenses of

a subsidiary acquired or disposed of during the year are included in the consolidated statement

of profit or loss and other comprehensive income from the date the Group gains control until the

date when the Group ceases to control the subsidiary.


– I-20 –


Profit or loss and each item of other comprehensive income are attributed to the owners of

the Company and to the non-controlling interests. Total comprehensive income of subsidiaries is

attributed to the owners of the Company and to the non-controlling interests even if this results

in the non-controlling interests having a deficit balance.

When necessary, adjustments are made to the financial statements of subsidiaries to bring

their accounting policies in line with the Group’s accounting policies.

All intragroup assets and liabilities, equity, income, expenses and cash flows relating to

transactions between members of the Group are eliminated in full on consolidation.

Non-controlling interests in subsidiaries are presented separately from the Group’s equity

therein, which represent present ownership interests entitling their holders to a proportionate

share of net assets of the relevant subsidiaries upon liquidation.

Interests in subsidiaries

Interests in subsidiaries are included in the statements of financial position of the Company

using the equity method of accounting. The results and assets and liabilities of subsidiaries are

incorporated in the Historical Financial Information using the equity method of accounting. The

financial statements of subsidiaries used for equity accounting purposes are prepared using

uniform accounting policies as those of the Group for like transactions and events in similar

circumstances. Under the equity method, an interest in a subsidiary is initially recognised in the

statements of financial position at cost and adjusted thereafter to recognise the Company’s

share of the profit or loss and other comprehensive income of the subsidiary. Changes in net

assets of the subsidiary other than profit of loss and other comprehensive income are not

accounted for unless such changes resulted in changes in ownership interest held by the

Company. When the Company’s share of losses of a subsidiary exceeds the Company’s interest in

that subsidiary (which includes any long-term interests that, in substance, form part of the

Company’s net investment in the subsidiary), the Company discontinues recognising its share of

further losses. Additional losses are recognised only to the extent that the Company has incurred

legal or constructive obligations or made payments on behalf of the subsidiary.

Merger accounting for business combination involving businesses under common control

The Historical Financial Information incorporates the financial statements items of the

combining businesses in which the common control combination occurs as if they had been

combined from the date when the combining businesses first came under the control of the

controlling party.

The net assets of the combining businesses are consolidated using the existing book values

from the controlling party’s perspective. No amount is recognised in respect of goodwill or

bargain purchase gain at the time of common control combination.

The consolidated statements of profit or loss and the other comprehensive income include

the results of each of the combining businesses from the earliest date presented or since the

date when the combining businesses first came under the common control, where there is a

shorter period.


– I-21 –


The Historical Financial Information is presented as if the businesses had been combined at

the beginning of the previous reporting period or when they first came under common control,

whichever is shorter.

Revenue from contracts with customers

The Group recognises revenue when (or as) a performance obligation is satisfied, i.e. when

‘‘control’’ of the goods or services underlying the particular performance obligation is transferred

to the customer.

A performance obligation represents a good or service (or a bundle or goods or services)

that is distinct or a series of distinct goods or services that are substantially the same.

Control is transferred over time and revenue is recognised over time by reference to the

progress towards complete satisfaction of the relevant performance obligation if one of the

following criteria is met:

. the customer simultaneously receives and consumes the benefits provided by the

Group’s performance as the Group performs;

. the Group’s performance creates or enhances an asset that the customer controls as

the Group performs; or

. the Group’s performance does not create an asset with an alternative use to the Group

and the Group has an enforceable right to payment for performance completed to date.

Otherwise, revenue is recognised at a point in time when the customer obtains control of

the distinct good or service.

A contract liability represents the Group’s obligation to transfer goods or services to a

customer for which the Group has received consideration (or an amount of consideration is due)

from the customer.

Contracts with multiple performance obligations (including allocation of transaction price)

For contracts that contain more than one performance obligations, the Group allocates the

transaction price to each performance obligation on a relative standalone selling price basis.

The standalone selling price of the distinct good or service underlying each performance

obligation is determined at contract inception. It represents the price at which the Group would

sell a promised good or service separately to a customer. If a standalone selling price is not

directly observable, the Group estimates it using appropriate techniques such that the

transaction price ultimately allocated to any performance obligation reflects the amount of

consideration to which the Group expects to be entitled in exchange for transferring the

promised goods or services to the customer.


– I-22 –


The Group operates a customer loyalty scheme through which award credits are granted to

the customers when they had spending in the restaurants. The customers can use the award

credits to redeem for foods in the restaurants. The award credits have a valid period between 3

to 15 months after the date of grant of award credits. The grant of award credits is a separate

performance obligation.

The transaction price is allocated between the restaurant operation service provided and

the award credits on a relative standalone selling price basis. The standalone selling price of the

distinct good or service underlying each performance obligation is determined at contract

inception. It represents the price at which the Group would sell a promised good or service

separately to a customer. If a standalone selling price is not directly observable, the Group

estimates it using appropriate techniques such that the transaction price ultimately allocated to

any performance obligation reflects the amount of consideration to which the Group expects to

be entitled in exchange for transferring the promised goods or services to the customer.

The standalone selling price of each award credit is estimated based on the right to be

given when the award credits are redeemed by the customer as evidenced by the Group’s

historical experience.

A contract liability is recognised for revenue relating to the customer loyalty scheme at the

time of the initial sales transaction. Revenue from the customer loyalty scheme is recognised

when the award credits are redeemed by the customer. Revenue for award credits that are not

expected to be redeemed is recognised in proportion to the pattern of rights exercised by

customers.

Advance from customers for which the services have not been rendered are recognised as

contract liabilities until the relevant services are rendered.

Leases

Definition of a lease (upon application of IFRS 16 in accordance with transitions in note 3)

A contract is, or contains, a lease if the contract conveys the right to control the use of an

identified asset for a period of time in exchange for consideration.

For contracts entered into or modified on or after the date of initial application or arising

from business combinations, the Group assesses whether a contract is or contains a lease based

on the definition under IFRS 16 at inception, modification date or acquisition date, as

appropriate. Such contract will not be reassessed unless the terms and conditions of the

contract are subsequently changed.


– I-23 –


The Group as a lessee (upon application of IFRS 16 in accordance with transitions in note 3)

Allocation of consideration to components of a contract

For a contract that contains a lease component and one or more additional lease or non-

lease components, the Group allocates the consideration in the contract to each lease

component on the basis of the relative stand-alone price of the lease component and the

aggregate stand-alone price of the non-lease components.

Non-lease components are separated from lease component and are accounted for by

applying other applicable standards.

Short-term leases

The Group applies the short-term lease recognition exemption to leases of certain office

premises and staff quarters that have a lease term of 12 months or less from the commencement

date and do not contain a purchase option. Lease payments on short-term leases are recognised

as expense on a straight-line basis over the lease term.

Right-of-use assets

The cost of right-of-use asset includes:

. the amount of the initial measurement of the lease liability;

. any lease payments made at or before the commencement date; and

. an estimate of costs to be incurred by the Group in dismantling and removing the

underlying assets, restoring the site on which it is located or restoring the underlying

asset to the condition required by the terms and conditions of the lease.

Right-of-use assets are measured at cost, less any accumulated depreciation and

impairment losses, and adjusted for any remeasurement of lease liabilities other than

adjustments to lease liabilities resulting from Covid-19-related rent concessions in which the

Group applied the practical expedient.

Right-of-use assets are depreciated on a straight-line basis over the shorter of its estimated

useful life and the lease term.

The Group presents right-of-use assets as a separate line item on the consolidated

statement of financial position.

Refundable rental deposits

Refundable rental deposits paid are accounted under IFRS 9 and initially measured at fair

value. Adjustments to fair value at initial recognition are considered as additional lease

payments and included in the cost of right-of-use assets.


– I-24 –


Lease liabilities

At the commencement date of a lease, the Group recognises and measures the lease

liability at the present value of lease payments that are unpaid at that date. In calculating the

present value of lease payments, the Group uses the incremental borrowing rate at the lease

commencement date if the interest rate implicit in the lease is not readily determinable.

The lease payments include fixed payments (including in-substance fixed payments).

Variable lease payments that do not depend on an index or a rate are not included in the

measurement of lease liabilities and right-of-use assets, and are recognised as expense in the

period in which the event or condition that triggers the payment occurs.

After the commencement date, lease liabilities are adjusted by interest accretion and lease

payments.

The Group remeasures lease liabilities (and makes a corresponding adjustment to the

related right-of-use assets) whenever:

. the lease term has changed or there is a change in the assessment of exercise of a

purchase option, in which case the related lease liability is remeasured by discounting

the revised lease payments using a revised discount rate at the date of reassessment.

. the lease payments change due to changes in market rental rates following a market

rent review, in which cases the related lease liability is remeasured by discounting the

revised lease payments using the initial discount rate.

The Group presents lease liabilities as a separate line item on the consolidated statements

of financial position.

Lease modifications

Except for Covid-19-related rent concessions in which the Group applied the practical

expedient, the Group accounts for a lease modification as a separate lease if:

. the modification increases the scope of the lease by adding the right to use one or

more underlying assets; and

. the consideration for the leases increases by an amount commensurate with the stand-

alone price for the increase in scope and any appropriate adjustments to that stand-

alone price to reflect the circumstances of the particular contract.

For a lease modification that is not accounted for as a separate lease, the Group

remeasures the lease liability based on the lease term of the modified lease by discounting the

revised lease payments using a revised discount rate at the effective date of the modification.

The Group accounts for the remeasurement of lease liabilities by making corresponding

adjustments to the relevant right-of-use asset. When the modified contract contains a lease

component and one or more additional lease or non-lease components, the Group allocates the


– I-25 –


consideration in the modified contract to each lease component on the basis of the relative

stand-alone price of the lease component and the aggregate stand-alone price of the non-lease

components.

Covid-19-related rent concessions

In relation to rent concessions that occurred as a direct consequence of the Covid-19

pandemic, the Group has elected to apply the practical expedient not to assess whether the

change is a lease modification if all of the following conditions are met:

. the change in lease payments results in revised consideration for the lease that is

substantially the same as, or less than, the consideration for the lease immediately

preceding the change;

. any reduction in lease payments affects only payments originally due on or before 30

June 2022; and

. there is no substantive change to other terms and conditions of the lease.

A lessee applying the practical expedient accounts for changes in lease payments resulting

from rent concessions the same way it would account for the changes applying IFRS 16 if the

changes are not a lease modification. Forgiveness or waiver of lease payments are accounted for

as variable lease payments. The related lease liabilities are adjusted to reflect the amounts

forgiven or waived with a corresponding adjustment recognised in the profit or loss in the period

in which the event occurs.

The Group as a lessee (prior to 1 January 2019)

Leases are classified as finance leases whenever the terms of the lease transfer

substantially all the risks and rewards of ownership to the leases. All other leases are classified

as operating leases.

Operating lease payments are recognised as an expenses on a straight-line basis over the

lease term. Contingent rental arising under operating leases are recognised as an expense in the

period in which they are incurred.

Foreign currencies

In preparing the financial statements of each individual group entity, transactions in

currencies other than the functional currency of that entity (foreign currencies) are recognised at

the rates of exchanges prevailing on the dates of the transactions. At the end of the reporting

period, monetary items denominated in foreign currencies are retranslated at the rates prevailing

at that date. Non-monetary items that are measured in terms of historical cost in a foreign

currency are not retranslated.

Exchange differences arising on the settlement of monetary items, and on the retranslation

of monetary items, are recognised in profit or loss in the period in which they arise.


– I-26 –


For the purpose of presenting the Historical Financial Information, the assets and liabilities

of the Group’s operations are translated into the presentation currency of the Group (i.e. RMB)

using exchange rates prevailing at the end of each reporting period. Income and expenses items

are translated at the average exchange rates for the period, unless exchange rates fluctuate

significantly during that period, in which case the exchange rates at the date of transactions are

used. Exchange differences arising, if any, are recognised in other comprehensive income and

accumulated in equity under the heading of exchange reserve (attributed to non-controlling

interests as appropriate).

Borrowing costs

All borrowing costs not directly attributable to the acquisition, construction or production of

qualifying assets are recognised in profit or loss in the period in which they are incurred.

Government grants

Government grants are not recognised until there is reasonable assurance that the Group

will comply with the conditions attaching to them and that the grants will be received.

Government grants related to income that are receivable as compensation for expenses or

losses already incurred or for the purpose of giving immediate financial support to the Group

with no future related costs are recognised in profit or loss in the period in which they become

receivable. Such grants are presented under ‘‘other income’’.

Employee benefits

Retirement benefit costs

Payments to defined contribution retirement benefit plans are recognised as an expense

when employees have rendered service entitling them to the contributions

Termination benefits

A liability for a termination benefit is recognised at the earlier of when the Group entity can

no longer withdraw the [REDACTED] of the termination benefit and when it recognises any related

restructuring costs.

Short-term employee benefits

Short-term employee benefits are recognised at the undiscounted amount of the benefits

expected to be paid as and when employees rendered the services. All short-term employee

benefits are recognised as an expense unless another IFRS requires or permits the inclusion of

the benefit in the cost of an asset.

A liability is recognised for benefits accruing to employees (such as wages and salaries,

annual leave and sick leave) after deducting any amount already paid.


– I-27 –


Share-based payments

Equity-settled share-based payments transactions

Shares granted to employees

Equity-settled share-based payments to employees and others providing similar services are

measured at the fair value of the equity instruments at the grant date.

The fair value of the equity-settled share-based payments determined at the grant date

without taking into consideration all non-market vesting conditions is expensed on a straight-line

basis over the vesting period, based on the Group’s estimate of equity instruments that will

eventually vest, with a corresponding increase in equity (share-based payments reserve). At the

end of each reporting period, the Group revises its estimate of the number of equity instruments

expected to vest based on assessment of all relevant non-market vesting conditions. The impact

of the revision of the original estimates, if any, is recognised in profit or loss such that the

cumulative expense reflects the revised estimate, with a corresponding adjustment to the share-

based payments reserve.

When shares granted and vested, the amount previously recognised in share-based

payments reserve will be transferred to share premium.

Taxation

Income tax expense represents the sum of the tax currently payable and deferred tax.

The tax currently payable is based on taxable profit for the year. Taxable profit differs from

profit before tax because of income or expense that are taxable or deductible in other years and

items that are never taxable or deductible. The Group’s liability for current tax is calculated using

tax rates that have been enacted or substantively enacted by the end of the reporting period.

Deferred tax is recognised on temporary differences between the carrying amounts of assets

and liabilities in the Historical Financial Information and the corresponding tax bases used in the

computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable

temporary differences. Deferred tax assets are generally recognised for all deductible temporary

differences to the extent that it is probable that taxable profits will be available against which

those deductible temporary differences can be utilised. Such deferred tax assets and liabilities

are not recognised if the temporary difference arises from the initial recognition (other than in a

business combination) of assets and liabilities in a transaction that affects neither the taxable

profit nor the accounting profit.

Deferred tax liabilities are recognised for taxable temporary differences associated with

investments in subsidiaries except where the Group is able to control the reversal of the

temporary difference and it is probable that the temporary difference will not reverse in the

foreseeable future. Deferred tax assets arising from deductible temporary differences associated

with such investments are only recognised to the extent that it is probable that there will be

sufficient taxable profits against which to utilise the benefits of the temporary differences and

they are expected to reverse in the foreseeable future.


– I-28 –


The carrying amount of deferred tax assets is reviewed at the end of each reporting period

and reduced to the extent that it is no longer probable that sufficient taxable profits will be

available to allow all or part of the asset to be recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply

in the period in which the liability is settled or the asset is realised, based on tax rate (and tax

laws) that have been enacted or substantively enacted by the end of the reporting period.

The measurement of deferred tax liabilities and assets reflects the tax consequences that

would follow from the manner in which the Group expects, at the end of the reporting period, to

recover or settle the carrying amount of its assets and liabilities.

For the purposes of measuring deferred tax for leasing transactions in which the Group

recognises the right-of-use assets and the related lease liabilities, the Group first determines

whether the tax deductions are attributable to the right-of-use assets or the lease liabilities.

For leasing transactions in which the tax deductions are attributable to the lease liabilities,

the Group applies IAS 12 Income Taxes requirements to the leasing transaction as a whole.

Temporary differences relating to right-of-use assets and lease liabilities are assessed on a net

basis. Excess of depreciation on right-of-use assets over the lease payments for the principal

portion of lease liabilities resulting in net deductible temporary differences.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set

off current tax assets against current tax liabilities and when they relate to income taxes levied

to the same taxable entity by the same taxation authority.

Current and deferred tax are recognised in profit or loss, except when they relate to items

that are recognised in other comprehensive income or directly in equity, in which case, the

current and deferred tax are also recognised in other comprehensive income or directly in equity,

respectively. Where current tax or deferred tax arises from the initial accounting for a business

combination, the tax effect is included in the accounting for the business combination.

Property and equipment

Property and equipment are tangible assets that are held for use in the production or

supply of goods or services, or for administrative purposes other than assets under installation.

Property and equipment are stated in the consolidated statements of financial position at cost

less subsequent accumulated depreciation and subsequent accumulated impairment losses, if

any.

Assets in the course of construction for production, supply or administrative purposes are

carried at cost, less any recognised impairment loss. Costs include any costs directly attributable

to bringing the asset to the location and condition necessary for it to be capable of operating in

the manner intended by management. Depreciation of these assets, on the same basis as other

property assets, commences when the assets are ready for their intended use.


– I-29 –


Depreciation is recognised so as to write off the cost of assets other than assets under

installation less their residual values over their estimated useful lives, using the straight-line

method. The estimated useful lives, residual values and depreciation method are reviewed at the

end of each reporting period, with the effect of any changes in estimate accounted for on a

prospective basis.

An item of property and equipment is derecognised upon disposal or when no future

economic benefits are expected to arise from the continued use of the asset. Any gain or loss

arising on the disposal or retirement of an item of property and equipment is determined as the

difference between the sales [REDACTED] and the carrying amount of the asset and is recognised

in profit or loss.

Intangible assets

Intangible assets acquired separately

Intangible assets with finite useful lives that are acquired separately are carried at costs

less accumulated amortisation and any accumulated impairment losses. Amortisation for

intangible assets with finite useful lives is recognised on a straight-line basis over their

estimated useful lives. The estimated useful life and amortisation method are reviewed at the

end of each reporting period, with the effect of any changes in estimate being accounted for on a

prospective basis.

An intangible asset is derecognised on disposal, or when no future economic benefits are

expected from use or disposal. Gains and losses arising from derecognition of an intangible

asset, measured as the difference between the net disposal [REDACTED] and the carrying amount

of the asset, are recognised in profit or loss when the asset is derecognised.

Impairment on property and equipment, right-of-use assets and intangible assets

At the end of the reporting period, the Group reviews the carrying amounts of its property

and equipment, right-of-use assets and intangible assets with finite useful lives to determine

whether there is any indication that these assets have suffered an impairment loss. If any such

indication exists, the recoverable amount of the relevant asset is estimated in order to determine

the extent of the impairment loss (if any).

The recoverable amount of property and equipment, right-of-use assets and intangible

assets are estimated individually. When it is not possible to estimate the recoverable amount

individually, the Group estimates the recoverable amount of the cash-generating unit to which

the asset belongs.

In testing a cash-generating unit for impairment, corporate assets are allocated to relevant

cash-generating unit when a reasonable and consistent basis of allocation can be established, or

otherwise they are allocated to the smallest group of cash generating units for which a

reasonable and consistent allocation basis can be established. The recoverable amount is

determined for the cash-generating unit or group of cash-generating units to which the corporate

asset belongs, and is compared with the carrying amount of the relevant cash- generating unit or

group of cash-generating units.


– I-30 –


Recoverable amount is the higher of fair value less costs of disposal and value in use. In

assessing value in use, the estimated future cash flows are discounted to their present value

using a pre-tax discount rate that reflects current market assessments of the time value of money

and the risks specific to the asset (or a cash-generating unit) for which the estimates of future

cash flows have not been adjusted.

If the recoverable amount of an asset (or a cash-generating unit) is estimated to be less

than its carrying amount, the carrying amount of the asset (or a cash-generating unit) is reduced

to its recoverable amount. For corporate assets or portion of corporate assets which cannot be

allocated on a reasonable and consistent basis to a cash-generating unit, the Group compares

the carrying amount of a group of cash-generating units, including the carrying amounts of the

corporate assets or portion of corporate assets allocated to that group of cash-generating units,

with the recoverable amount of the group of cash-generating units. In allocating the impairment

loss, the impairment loss is allocated first to reduce the carrying amount of any goodwill (if

applicable) and then to the other assets on a pro-rata basis based on the carrying amount of

each asset in the unit or the group of cash-generating units. The carrying amount of an asset is

not reduced below the highest of its fair value less costs of disposal (if measurable), its value in

use (if determinable) and zero. The amount of the impairment loss that would otherwise have

been allocated to the asset is allocated pro rata to the other assets of the unit or the group of

cash-generating units. An impairment loss is recognised immediately in profit or loss.

Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-

generating unit or a group of cash-generating units) is increased to the revised estimate of its

recoverable amount, but so that the increased carrying amount does not exceed the carrying

amount that would have been determined had no impairment loss been recognised for the asset

(or cash-generating unit or a group of cash-generating units) in prior years. A reversal of an

impairment loss is recognised immediately in profit or loss.

Inventories

Inventories are stated at the lower of cost and net realisable value. Costs of inventories are

determined on a weighted average method. Net realisable value represents the estimated selling

price for inventories less all estimated costs of completion and costs necessary to make the

sale.

Provisions

Provisions are recognised when the Group has a present obligation (legal or constructive)

as a result of a past event, it is probable that the Group will be required to settle that obligation,

and a reliable estimate can be made of the amount of the obligation.

The amount recognised as a provision is the best estimate of the consideration required to

settle the present obligation at the end of the reporting period, taking into account the risks and

uncertainties surrounding the obligation. When a provision is measured using the cash flows

estimated to settle the present obligation, its carrying amount is the present value of those cash

flows (where the effect of the time value of money is material).


– I-31 –


Restoration provisions

Provisions for the costs to restore leased assets to their original condition, as required by

the terms and conditions of the lease, are recognised at the date of inception of the lease at the

directors of the Company’s best estimate of the expenditure that would be required to restore the

assets. Estimates are regularly reviewed and adjusted as appropriate for new circumstances.

Financial instruments

Financial assets and financial liabilities are recognised when a group entity becomes a

party to the contractual provisions of the instrument. All regular way purchases or sales of

financial assets are recognised and derecognised on a trade date basis. Regular way purchases

or sales are purchases or sales of financial assets that require delivery of assets within the time

frame established by regulation or convention in the market place.

Financial assets and financial liabilities are initially measured at fair value except for trade

receivables arising from contracts with customers which are initially measured in accordance

with IFRS 15. Transaction costs that are directly attributable to the acquisition or issue of

financial assets and financial liabilities (other than financial assets at fair value through profit or

loss (‘‘FVTPL’’)) are added to or deducted from the fair value of the financial assets or financial

liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the

acquisition of financial assets at FVTPL are recognised immediately in profit or loss.

The effective interest method is a method of calculating the amortised cost of a financial

asset or financial liability and of allocating interest income and interest expense over the

relevant period. The effective interest rate is the rate that exactly discounts estimated future

cash receipts and payments (including all fees and points paid or received that form an integral

part of the effective interest rate, transaction costs and other premiums or discounts) through

the expected life of the financial asset or financial liability, or, where appropriate, a shorter

period, to the net carrying amount on initial recognition.

Financial assets

Classification and subsequent measurement of financial assets

Financial assets that meet the following conditions are subsequently measured at amortised

cost:

. the financial asset is held within a business model whose objective is to collect

contractual cash flows; and

. the contractual terms give rise on specified dates to cash flows that are solely

payments of principal and interest on the principal amount outstanding.

All other financial assets are subsequently measured at FVTPL.


– I-32 –


Amortised cost and interest income

Interest income is recognised using the effective interest method for financial assets

measured subsequently at amortised cost. Interest income is calculated by applying the effective

interest rate to the gross carrying amount of a financial asset, except for financial assets that

have subsequently become credit-impaired. For financial assets that have subsequently become

credit-impaired, interest income is recognised by applying the effective interest rate to the

amortised cost of the financial asset from the next reporting period. If the credit risk on the

credit-impaired financial instrument improves so that the financial asset is no longer credit-

impaired, interest income is recognised by applying the effective interest rate to the gross

carrying amount of the financial asset from the beginning of the reporting period following the

determination that the asset is no longer credit-impaired.

Financial assets at FVTPL

Financial assets that do not meet the criteria for being measured at amortised cost or

FVTOCI or designated as FVTOCI are measured at FVTPL.

Financial assets at FVTPL are measured at fair value at the end of each reporting period,

with any fair value gains or losses recognised in profit or loss. The net gain or loss recognised in

profit or loss excludes any dividend or interest earned on the financial asset and is included in

the ‘‘other gains and losses’’ line item.

Impairment of financial assets

The Group performs impairment assessment under expected credit loss (‘‘ECL’’) model on

financial assets (including trade and other receivables, term deposits and bank balances and

cash) which are subject to impairment assessment under IFRS 9. The amount of ECL is updated

at each reporting date to reflect changes in credit risk since initial recognition.

Lifetime ECL represents the ECL that will result from all possible default events over the

expected life of the relevant instrument. In contrast, 12-month ECL (‘‘12m ECL’’) represents the

portion of lifetime ECL that is expected to result from default events that are possible within 12

months after the reporting date. Assessments are done based on the Group’s historical credit

loss experience, adjusted for factors that are specific to the debtors, general economic

conditions and an assessment of both the current conditions at the reporting date as well as the

forecast of future conditions.

The Group always recognises lifetime ECL for trade receivables. The ECL on these assets are

assessed individually.

For all other instruments, the Group measures the loss allowance equal to 12m ECL, unless

there has been a significant increase in credit risk since initial recognition, in which case the

Group recognises lifetime ECL. The assessment of whether lifetime ECL should be recognised is

based on significant increases in the likelihood or risk of a default occurring since initial

recognition.


– I-33 –


Significant increase in credit risk

In assessing whether the credit risk has increased significantly since initial recognition, the

Group compares the risk of a default occurring on the financial instrument as at the reporting

date with the risk of a default occurring on the financial instrument as at the date of initial

recognition. In making this assessment, the Group considers both quantitative and qualitative

information that is reasonable and supportable, including historical experience and forward-

looking information that is available without undue cost or effort.

In particular, the following information is taken into account when assessing whether credit

risk has increased significantly:

. an actual or expected significant deterioration in the financial instrument’s external (if

available) or internal credit rating;

. significant deterioration in external market indicators of credit risk, e.g. a significant

increase in the credit spread, the credit default swap prices for the debtor;

. existing or forecast adverse changes in business, financial or economic conditions that

are expected to cause a significant decrease in the debtor’s ability to meet its debt

obligations;

. an actual or expected significant deterioration in the operating results of the debtor;

. an actual or expected significant adverse change in the regulatory, economic, or

technological environment of the debtor that results in a significant decrease in the

debtor’s ability to meet its debt obligations.

Irrespective of the outcome of the above assessment, the Group presumes that the credit

risk has increased significantly since initial recognition when contractual payments are more

than 30 days past due, unless the Group has reasonable and supportable information that

demonstrates otherwise.

Despite the aforegoing, the Group assumes that the credit risk on a debt instrument has not

increased significantly since initial recognition if the debt instrument is determined to have low

credit risk at the reporting date. A debt instrument is determined to have low credit risk if (i) it

has a low risk of default, (ii) the borrower has a strong capacity to meet its contractual cash flow

obligations in the near term and (iii) adverse changes in economic and business conditions in

the longer term may, but will not necessarily, reduce the ability of the borrower to fulfil its

contractual cash flow obligations. The Group considers a debt instrument to have low credit risk

when it has an internal or external credit rating of ‘‘investment grade’’ as per globally understood

definitions.

The Group regularly monitors the effectiveness of the criteria used to identify whether there

has been a significant increase in credit risk and revises them as appropriate to ensure that the

criteria are capable of identifying significant increase in credit risk before the amount becomes

past due.


– I-34 –


Definition of default

For internal credit risk management, the Group considers an event of default occurs when

information developed internally or obtained from external sources indicates that the debtor is

unlikely to pay its creditors, including the Group, in full (without taking into account any

collaterals held by the Group).

Irrespective of the above, the Group considers that default has occurred when a financial

asset is more than 90 days past due unless the Group has reasonable and supportable

information to demonstrate that a more lagging default criterion is more appropriate.

Credit-impaired financial assets

A financial asset is credit-impaired when one or more events that have a detrimental impact

on the estimated future cash flows of that financial asset have occurred. Evidence that a

financial asset is credit-impaired includes observable data about the following events:

(a) significant financial difficulty of the issuer or the borrower;

(b) a breach of contract, such as a default or past due event;

(c) the lender(s) of the borrower, for economic or contractual reasons relating to the

borrower’s financial difficulty, having granted to the borrower a concession(s) that the

lender(s) would not otherwise consider; or

(d) it is becoming probable that the borrower will enter bankruptcy or other financial

reorganisation.

Write-off policy

The Group writes off a financial asset when there is information indicating that the

counterparty is in severe financial difficulty and there is no realistic prospect of recovery, for

example, when the counterparty has been placed under liquidation or has entered into

bankruptcy proceedings. Financial assets written off may still be subject to enforcement

activities under the Group’s recovery procedures, taking into account legal advice where

appropriate. A write-off constitutes a derecognition event. Any subsequent recoveries are

recognised in profit or loss.

Measurement and recognition of ECL

The measurement of ECL is a function of the probability of default, loss given default (i.e.

the magnitude of the loss if there is a default) and the exposure at default. The assessment of

the probability of default and loss given default is based on historical data and forward-looking

information. Estimation of ECL reflects an unbiased and probability-weighted amount that is

determined with the respective risks of default occurring as the weights.

Generally, the ECL is the difference between all contractual cash flows that are due to the

Group in accordance with the contract and the cash flows that the Group expects to receive,

discounted at the effective interest rate determined at initial recognition.


– I-35 –


The Group measures ECL on an individual basis.

Interest income is calculated based on the gross carrying amount of the financial asset

unless the financial asset is credit-impaired, in which case interest income is calculated based

on amortised cost of the financial asset.

The Group recognises an impairment gain or loss in profit or loss for all financial

instruments by adjusting their carrying amount, with the exception of trade and other receivables

where the corresponding adjustment is recognised through a loss allowance account.

Derecognition of financial assets

The Group derecognises a financial asset only when the contractual rights to the cash flows

from the asset expire, or when it transfers the financial asset and substantially all the risks and

rewards of ownership of the asset to another entity.

On derecognition of a financial asset measured at amortised cost, the difference between

the asset’s carrying amount and the sum of the consideration received and receivable is

recognised in profit or loss.

Financial liabilities and equity

Classification as debt or equity

Debt and equity instruments are classified as either financial liabilities or as equity in

accordance with the substance of the contractual arrangements and the definitions of a financial

liability and an equity instrument.

Equity instruments

An equity instrument is any contract that evidences a residual interest in the assets of the

Group after deducting all of its liabilities. Equity instruments issued by the Company are

recognised at the [REDACTED] received, net of direct issue costs.

Financial liabilities at amortised cost

Financial liabilities including trade and other payables, amounts due to related parties/

subsidiaries are subsequently measured at amortised cost, using the effective interest method.

Derecognition of financial liabilities

The Group derecognises financial liabilities when, and only when, the Group’s obligations

are discharged, cancelled or have expired. The difference between the carrying amount of the

financial liability derecognised and the consideration paid and payable is recognised in profit or

loss.


– I-36 –


5. KEY SOURCES OF ESTIMATION UNCERTAINTY

In the application of the Group’s accounting policies, which are described in note 4, the

management of the Group is required to make judgements, estimates and assumptions about the

carrying amounts of assets and liabilities that are not readily apparent from other sources. The

estimates and underlying assumptions are based on historical experience and other factors that

are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an on-going basis. Revisions to

accounting estimates are recognised in the period in which the estimate is revised if the revision

affects only that period, or in the period of the revision and future periods if the revision affects

both current and future periods.

The following are the key assumptions concerning the future, and other key sources of

estimation uncertainty at the end of each reporting period, that have a significant risk of causing

a material adjustment to the carrying amounts of assets within the next twelve months.

Determination on discount rates of lease contracts

The Group applies incremental borrowing rates of the relevant group entities in the

recognition of lease liabilities, which require financing spread adjustments and lease specific

adjustments based on the relevant market rates. The assessments of the adjustments in

determining the discount rates involved management judgment, which may significantly affect

the amount of lease liabilities and right-of-use assets. As at 31 December 2019 and 2020, and 30

June 2021, the carrying amounts of right-of-use assets amounted to RMB271,513,000,

RMB331,762,000 and RMB347,497,000, respectively, and the carrying amounts of lease

liabilities amounted to RMB280,088,000, RMB346,086,000 and RMB366,405,000, respectively.

Useful lives of property and equipment

The Group determines the estimated useful lives of its property and equipment in

calculating the related depreciation charge. This estimate is based on the management’s

experience of the actual useful lives of property and equipment of similar nature and functions.

The Group will increase the depreciation charge where useful lives are shorter than

previously estimated lives, or will write off or write down obsolete assets that have been

abandoned or sold. As at 31 December 2018, 2019 and 2020, and 30 June 2021, the carrying

amounts of property and equipment were RMB136,826,000, RMB152,221,000, RMB208,421,000

and RMB221,179,000, respectively. Details of the useful lives of property and equipment is

disclosed in note 15.

Estimated impairment of property and equipment and right-of-use asset

Property and equipment and right-of-use assets are stated at costs less accumulated

depreciation and impairment, if any. In determining whether an asset is impaired, the Group has

to exercise judgement and make estimation, particularly in assessing: (1) whether an event has

occurred or any indicator that may affect the asset value; (2) whether the carrying value of an

asset can be supported by the recoverable amount, in the case of value in use, the net present


– I-37 –


value of future cash flows which are estimated based upon the continued use of the asset; and

(3) the appropriate key assumptions to be applied in estimating the recoverable amounts

including cash flow projections and an appropriate discount rate. When it is not possible to

estimate the recoverable amount of an individual asset (including right-of-use assets), the Group

estimates the recoverable amount of the cash generating unit to which the assets belongs,

including allocation of corporate assets when a reasonable and consistent basis of allocation

can be established, otherwise recoverable amount is determined at the smallest group of cash

generating units, for which the relevant corporate assets have been allocated. Changing the

assumptions and estimates, including the discount rates or the growth rate in the cash flow

projections, could materially affect the recoverable amounts.

6. REVENUE AND SEGMENT INFORMATION

During the Track Record Period, the Group’s revenue which represents the amount received

and receivable from the hotpot restaurant operation, food delivery business and retail business,

net of discounts and sales related taxes, are as follows:


Six months ended

30 June

2018 2019 2020 2020 2021


(unaudited)

At a point in time:

Hotpot restaurant operation . . 860,492 1,067,705 1,062,342 399,474 619,953

Food delivery business . . . . . 10,452 27,048 59,070 36,625 21,036

Retail business . . . . . . . . . . . — — 3,358 335 5,720

870,944 1,094,753 1,124,770 436,434 646,709

For hotpot restaurant operation and food delivery business, revenue is recognised when the

related services have been rendered to customers. Revenue from the retail business is

recognised when the goods are delivered and accepted by customers as the control is

transferred to customers.

The transaction price is allocated between the hotpot restaurant operation service provided

and the award credits earned by the members of the Group under the customer loyalty scheme

on a relative stand-alone selling price basis. The amount of transaction price allocated to the

award credit of the customer loyalty scheme is calculated based on the stand-alone selling price

of unredeemed award credits and expected redemption rate which are estimated with reference

to the historical experience and data. Such amount is recognised as contract liabilities at the

time of the initial sales transaction and is released when the award credit is redeemed. As

disclosed in note 26, as at 31 December 2018, 2019 and 2020, and 30 June 2021, contract

liabilities related to customer loyalty scheme of RMB723,000, RMB1,670,000, RMB1,890,000 and

RMB1,006,000 was recognised by the Group, respectively.


– I-38 –


Information reported to the chief executive of the Company, the chief operating decision

maker (the ‘‘CODM’’), for the purpose of resource allocation and performance assessment. The

CODM focuses on the operating results of the Group as a whole as the Group’s resources are

integrated and no discrete operating segment financial information is reviewed. Accordingly, only

entity-wide disclosures and geographical information are presented.

Geographical information

The geographical information of the Group’s revenue, determined based on geographical

location of operation, during the Track Record Period is as follows:


Six months ended

30 June

2018 2019 2020 2020 2021


(unaudited)

Mainland China* . . . . . . . . . . 851,264 1,074,487 1,106,612 429,490 638,439

Taiwan . . . . . . . . . . . . . . . . . 19,680 20,266 18,158 6,944 8,270

870,944 1,094,753 1,124,770 436,434 646,709

The geographical information of the Group’s non-current assets, excluding deferred tax

assets and rental deposits, as at 31 December 2018, 2019 and 2020, and 30 June 2021 is listed

as follow:

As at 31 December As at 30 June

2018 2019 2020 2021

RMB’000 RMB’000 RMB’000 RMB’000

Mainland China* . . . . . . . . . . . . 130,693 413,188 533,206 563,369

Taiwan . . . . . . . . . . . . . . . . . . . 6,460 11,628 7,849 5,987

137,153 424,816 541,055 569,356

* Geopolitician area under the direct jurisdiction of the PRC, excluding Taiwan.

No service provided or goods sold to a single customer contributed to 10% or more of total

revenue of the Group during the Track Record Period.


– I-39 –


7. OTHER INCOME


Six months ended

30 June

2018 2019 2020 2020 2021


(unaudited)

Management fee income

(note i) . . . . . . . . . . . . . . . 2,628 1,624 308 308 —

Government grants (note ii) . . 1,515 7,872 3,883 1,212 3,986

Interest income arising from

rental deposits . . . . . . . . . — 765 956 436 571

Bank interest income . . . . . . . 198 231 363 136 302

Others . . . . . . . . . . . . . . . . . 656 1,421 1,276 535 458

4,997 11,913 6,786 2,627 5,317

Notes:

(i) The amounts represent income earned by the Group from provision of industry research, related consultingservice, staff training, restaurant operational management and related services, to independent third partieswho operate hotpot restaurants. The Group ceased to provide such services during the year ended 31December 2020.

(ii) The amounts mainly represent government grants received from the PRC government authorities inconnection with the enterprise development support during the Track Record Period, which had noconditions imposed by the respective PRC government authorities.

8. OTHER GAINS AND LOSSES


Six months ended

30 June

2018 2019 2020 2020 2021


(unaudited)

(Loss) gain on disposal of

property and equipment,

net . . . . . . . . . . . . . . . . . . (1,705) (1,735) (1,070) 2 (395)

Gain arising on termination of

leases and right-of-use

assets, net . . . . . . . . . . . . — 3 806 — 369

Foreign exchange gain (loss),

net . . . . . . . . . . . . . . . . . . 132 (369) (506) 256 (44)

Investment gain on financial

assets at FVTPL . . . . . . . . . 256 1,148 640 303 242

(1,317) (953) (130) 561 172


– I-40 –


9. FINANCE COSTS


Six months ended

30 June

2018 2019 2020 2020 2021


(unaudited)

Interests on lease liabilities . . — 12,977 14,900 6,839 8,583

Interests on bank borrowings . — —* 835 457 34

— 12,977 15,735 7,296 8,617


10. PROFIT FOR THE YEAR/PERIOD

Profit for the year/period over the Track Record Period has been arrived at after charging

(crediting):


Six months ended

30 June

2018 2019 2020 2020 2021


(unaudited)

Depreciation of property and

equipment . . . . . . . . . . . . . . . . . . . 38,424 51,161 58,002 27,355 35,031

Depreciation of right-of-use assets . . . . — 85,803 99,136 46,409 56,422

Amortisation of intangible assets . . . . . 103 191 470 231 223

Total depreciation and amortisation . . . 38,527 137,155 157,608 73,995 91,676

Directors’ remuneration (note 12) . . . . . 796 4,242 3,139 1,130 975

Other staff costs:

— salaries and other benefits . . . . . . . 123,764 156,881 162,518 72,185 99,830

— retirement benefit scheme

contributions . . . . . . . . . . . . . . . . . 13,062 19,732 15,279 9,365 14,002

— share-based payment expenses . . . . 9,370 3,374 2,704 1,462 526

Subtotal . . . . . . . . . . . . . . . . . . . . . . 146,196 179,987 180,501 83,012 114,358

Labor outsourcing fee . . . . . . . . . . . . . 123,275 136,291 134,117 54,455 77,083

Total staff costs . . . . . . . . . . . . . . . . . 270,267 320,520 317,757 138,597 192,416

Auditor’s remuneration . . . . . . . . . . . . 371 1,358 418 205 127

Covid-19-related rent concessions

(note i) . . . . . . . . . . . . . . . . . . . . . — — (4,198) (4,198) —


– I-41 –


Notes:

(i) For the year ended 31 December 2020 and six months ended 30 June 2020, Covid-19-related rent

concessions amounted to RMB4,198,000 and RMB4,198,000 (unaudited) have been offset against rental

expenses and related expenses.

(ii) During the year ended 31 December 2020 and six months ended 30 June 2020, pursuant to the notice

released by the relevant PRC authority, certain domestic subsidiaries of the Group have been fully or partially

waived to undertake a number of social securities including endowment insurance, unemployment insurance

and employment injury insurance, totaling approximately RMB4,362,000 and RMB3,360,000 (unaudited),

respectively.

11. INCOME TAX EXPENSES


Six months ended

30 June

2018 2019 2020 2020 2021


(unaudited)

PRC Enterprise Income Tax (‘‘EIT’’) . . . . 28,520 36,662 25,120 2,378 14,266

Deferred tax charge (credit) (note 18) . 1,204 5,068 (1,430) (976) (3,002)

Total income tax expenses . . . . . . . . . 29,724 41,730 23,690 1,402 11,264

The Company is not subject to income tax or capital gain tax under the law of Cayman

Islands.

No provision of Hong Kong Profit Tax and Taiwan Profit Tax was made in the Historical

Financial Information as the Group had no assessable profit subject to Hong Kong Profit Tax and

Taiwan Profit Tax during the Track Record Period.

Under the Law of the PRC on Enterprise Income Tax (‘‘EIT Law’’) and Implementation

Regulation of the EIT Law, the tax rate of the PRC subsidiaries is 25% during the Track Record

Period.

Under the EIT Law, withholding tax is also imposed on dividends declared and paid to non-

PRC resident in respect of profits earned by the PRC subsidiaries from 1 January 2008 onwards.

As at 31 December 2018, 2019 and 2020, and 30 June 2021, deferred tax liabilities of

RMB7,710,000, RMB12,776,000, RMB10,816,000 and RMB10,816,000 were recognised in respect

of the undistributed earnings expected to be distributed in the foreseeable future with a

withholding tax rate of 10%. Deferred tax liabilities have not been provided for the remaining

undistributed earnings amounting to RMB0, RMB0, RMB74,626,000 and RMB107,789,000 as at 31

December 2018, 2019 and 2020, and 30 June 2021, respectively, as the Group is able to control

the timing of the reversal of the temporary differences and it is probable that the temporary

differences will not be reversed in the foreseeable future.

Taxation arising in other jurisdictions is calculated at the rates prevailing in the relevant

jurisdictions.


– I-42 –


Income tax expenses for the Track Record Period can be reconciled to profit before tax per

the consolidated statements of profit or loss and other comprehensive income as follows:


Six months ended

30 June

2018 2019 2020 2020 2021


(unaudited)

Profit before tax . . . . . . . . . . . . . . . . 88,779 121,645 91,131 2,464 32,714

Tax at the applicable tax rate of 25% . . 22,195 30,411 22,783 616 8,179

Tax effect of expenses not deductible

for tax purposes . . . . . . . . . . . . . . 1,031 840 55 80 1,994

Tax effect of deductible temporary

differences not recognised . . . . . . . 323 970 803 88 34

Utilisation of deductable temporary

differences previously not

recognised . . . . . . . . . . . . . . . . . . — (229) (1,231) — —

Withholding tax . . . . . . . . . . . . . . . . . 5,673 8,604 — — —

Tax effect of tax losses not recognised 502 1,134 1,280 618 1,057

Income tax expenses for the

year/period . . . . . . . . . . . . . . . . . . 29,724 41,730 23,690 1,402 11,264

12. DIRECTORS’, CHIEF EXECUTIVE’S AND EMPLOYEES’ EMOLUMENTS

Directors’ and the chief executive’s emoluments

Mr. Liao Chih-wei is the chief executive of the Company and his emolument disclosed below

included those for services rendered by him as the chief executive of the Company and other

group entities.


– I-43 –


Details of the emoluments paid or payable to the individuals who were appointed as the

directors and chief executive of the Company (including emoluments for services as employees/

directors of the group entities prior to becoming the directors of the Company), during the Track

Record Period, disclosed pursuant to the applicable Listing Rules and Hong Kong Companies

Ordinance, are as follows:

Date of appointment

as a director of

the Company Directors’ fee

Salaries and

allowances

Performance-

based

bonuses

Retirement

benefit scheme

contributions

Share-based

payment

expenses Total


(note i)

Year ended 31 December 2018

Executive directors:

Mr. Lee Yu-cheng . . . . . 22 April 2015 — — — — — —

Mr. Chao Hung-che . . . . 9 December 2015 — 662 134 — — 796

Non-executive directors:

Mr. Chen Hsiang . . . . . . 9 December 2015 — — — — — —

Mr. Chien Hung-chang . . 1 November 2018 — — — — — —

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 662 134 — — 796

Date of appointment

as a director of


Salaries and

allowances

Performance-

based

bonuses

Retirement

benefit scheme

contributions

Share-based

payment

expenses Total


(note i)




Mr. Liao Chih-wei . . . . . 22 October 2019 — 779 2,139 29 506 3,453

Mr. Chao Hung-che . . . . 9 December 2015 — 645 144 — — 789


Mr. Chen Hsiang

(note iv) . . . . . . . . . 9 December 2015 — — — — — —


Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 1,424 2,283 29 506 4,242


– I-44 –


Date of appointment

as a director of


Salaries and

allowances

Performance-

based

bonuses

Retirement

benefit scheme

contributions

Share-based

payment

expenses Total


(note i)




Mr. Liao Chih-wei . . . . . 22 October 2019 — 959 1,605 41 480 3,085

Mr. Chao Hung-che

(note ii) . . . . . . . . . . 9 December 2015 — — — — — —


Mr. Huang Kuo-huang . . 14 October 2020 — — — — — —

Mr. Tu Chia-pin . . . . . . . 14 October 2020 — — — — — —

Mr. Chien Hung-chang

(note iii) . . . . . . . . . 1 November 2018 — — — — — —

Independent non-executive directors:

Ms. Chen Jui-hsing . . . . 14 October 2020 18 — — — — 18

Mr. Wang Chun-chuan . . 14 October 2020 18 — — — — 18

Mr. Huang Chien-chen . . 14 October 2020 18 — — — — 18

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 959 1,605 41 480 3,139

Date of appointment

as a director of


Salaries and

allowances

Performance-

based

bonuses

Retirement

benefit scheme

contributions

Share-based

payment

expenses Total


(note i)

Six months ended 30 June 2020 (unaudited)



Mr. Liao Chih-wei . . . . . 22 October 2019 — 490 327 18 295 1,130

Mr. Chao Hung-che

(note ii) . . . . . . . . . . 9 December 2015 — — — — — —

Non-executive director:


Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 490 327 18 295 1,130


– I-45 –


Date of appointment

as a director of


Salaries and

allowances

Performance-

based

bonuses

Retirement

benefit scheme

contributions

Share-based

payment

expenses Total


(note i)

Six months ended 30 June 2021


Mr. Lee Yu-cheng . . . . . 28 May 2015 — — — — — —

Mr. Liao Chih-wei . . . . . 22 October 2019 — 490 230 30 99 849


Mr. Huang Kuo-huang . . 14 October 2020 — — — — — —

Mr. Tu Chia-pin . . . . . . . 14 October 2020 — — — — — —

Independent non-executive directors:

Ms. Chen Jui-hsing . . . . 14 October 2020 42 — — — — 42

Mr. Wang Chun-chuan . . 14 October 2020 42 — — — — 42

Mr. Huang Chien- chen . . 14 October 2020 42 — — — — 42

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . 126 490 230 30 99 975

Notes:

(i) Performance-based bonus is determined based on their duties and responsibilities of the relevant individuals

within the Group and the Group’s performance.

(ii) Mr. Chao Hung-che had resigned as executive director of the Company, with effect from 14 October 2020.

(iii) Mr. Chien Hung-chang had resigned as non-executive director of the Company, with effect from 14 October 2020.

(iv) Mr. Chen Hsiang had resigned as non-executive director of the Company, with effect from 22 October 2019.

The executive directors’ and chief executive’s emoluments shown above were paid for their

services in connection with the management of the affairs of the Company and the Group during

the Track Record Period.

The non-executive directors’ and independent non-executive directors’ emoluments shown

above were mainly for their services as directors of the Company during the Track Record Period.

During the Track Record Period, there was no arrangement under which a director or the

chief executive waived or agreed to waive any emolument, and no emoluments were paid by the

Group to any of the directors of the Company as an inducement to join or upon joining the Group

or as compensation for loss of office.

During the Track Record Period, certain directors and chief executive signed a share

subscription agreement with the Company in respect of their services to the Group under the

share-based payments scheme of the Company. Details of the share-based payments scheme are

set out in note 28.


– I-46 –


Five highest paid employees

The five highest paid employees of the Group included 1, 2, 1, 1 (unaudited) and 1 directors

of the Company whose emoluments are set out above for the Track Record Period. The

emoluments of the remaining 4, 3, 4, 4 (unaudited) and 4 employees for each of the Track Record

Period, were as follows:


Six months ended

30 June

2018 2019 2020 2020 2021


(unaudited)

Salaries and allowances . . . . . . . 965 1,087 1,148 630 737

Performance-related bonuses . . . . 6,625 1,897 1,811 408 617

Retirement benefit scheme

contributions . . . . . . . . . . . . . 131 108 156 74 88

Share-based payment expenses . . — 1,214 1,152 784 308

7,721 4,306 4,267 1,896 1,750

The numbers of the five highest paid individuals (including directors of the Company) are

within the following bands (presented in Hong Kong Dollar (‘‘HK$’’)):


Six months ended

30 June

2018 2019 2020 2020 2021

(unaudited)

Nil to HK$1,000,000 . . . . . . . . . . 2 1 1 4 4

HK$1,000,001 to HK$1,500,000 . . — 1 2 1 1

HK$1,500,001 to HK$2,000,000 . . 1 2 1 — —

HK$2,500,001 to HK$3,000,000 . . 1 — — — —

HK$3,500,001 to HK$4,000,000 . . 1 1 1 — —

5 5 5 5 5

During the Track Record Period, no emoluments were paid by the Group to the five highest

paid individuals as an inducement to join or upon joining the Group or as compensation for loss

of office.


– I-47 –


13. DIVIDENDS


Six months ended

30 June

2018 2019 2020 2020 2021


(unaudited)

Dividend declared to the owners

of the Company by:

— the Company . . . . . . . . . . . . . — 26,506 11,088 — —

— Laowang International . . . . . . . 3,161 — — — —

3,161 26,506 11,088 — —

During the year ended 31 December 2018 and before it was acquired by the Group under the

Group Reorganisation, Laowang International declared dividends amounting to RMB3,161,000 to

the Controlling Shareholders. The rate of dividend and number of shares ranking for dividend are

not presented as such information is not meaningful having regards to the purpose of this report.

During the year ended 31 December 2018, 2019 and 2020, and the six months ended 30

June 2020 and 2021, the Company declared dividends of USD0, USD0.25 (equivalent to RMB1.77),

USD0.10 (equivalent to RMB0.67), USD0 (unaudited) and USD0 per share, respectively.


– I-48 –


14. EARNINGS PER SHARE

The calculation of basic and diluted earnings per share attributable to owners of the

Company is based on the following data:


Six months ended

30 June

2018 2019 2020 2020 2021

(unaudited)

Earnings:

Profit for the year/period

attributable to owners of the

Company for the purpose of

basic and diluted earnings

per share (RMB’000) . . . . . . . . 53,002 77,949 66,036 653 20,868

Number of shares:

Weighted average number of

ordinary shares for the purpose

of basic earnings per share . . . . 312,986,088 318,596,220 318,605,393 318,596,220 321,944,220

Effect of dilutive potential ordinary

shares:

Share-based payments scheme . — 1,112,910 2,811,410 3,657,006 2,234,918

Weighted average number of

ordinary shares for the purpose

of diluted earnings per share . . 312,986,088 319,709,130 321,416,803 322,253,226 324,179,138

For the years ended 31 December 2019 and 2020, and six months ended 30 June 2020 and

2021, the weighted average number of shares have been arrived at after adjusting the treasury

shares of the Company.

For calculation of diluted earnings per share of the Group for the year ended 31 December

2019 and 2020, and six months ended 30 June 2020 and 2021, the potential impact of

outstanding share-based payments scheme of the Company as detailed in note 28 is taken into

consideration in the calculation.

The number of ordinary shares for the purpose of calculating basic earnings per share has

been determined on the assumption that the bonus element in issue of new shares, conversion

of retained earnings into share capital and re-denomination of share capital as set out in note 27

and the New Shares Issuance and Repurchase as described in Appendix IV to the Document had

been effective on 1 January 2018.


– I-49 –


15. PROPERTY AND EQUIPMENT

The Group

Leasehold

improvements Machinery

Transportation

equipment

Furniture and

fixtures

Assets under

installation Total


COST

At 1 January 2018 . . . . . 108,375 58,239 9 3,705 — 170,328

Additions . . . . . . . . . . . 8,660 3,816 788 798 51,364 65,426

Transfers . . . . . . . . . . . 33,159 17,014 — 1,191 (51,364) —

Disposals . . . . . . . . . . . (1,382) (964) — (169) — (2,515)

At 31 December 2018 . . . 148,812 78,105 797 5,525 — 233,239

Effect on application of

IFRS 16 . . . . . . . . . . (7,677) — — — — (7,677)

At 1 January 2019 . . . . . 141,135 78,105 797 5,525 — 225,562

Additions . . . . . . . . . . . 4,912 5,626 5 1,434 62,040 74,017

Transfers . . . . . . . . . . . 39,004 17,393 — — (56,397) —

Disposals . . . . . . . . . . . (3,143) (3,217) — (225) — (6,585)

At 31 December 2019 . . . 181,908 97,907 802 6,734 5,643 292,994

Additions . . . . . . . . . . . 13,892 3,229 — 3,385 95,516 116,022

Transfers . . . . . . . . . . . 59,869 35,223 — — (95,092) —

Disposals . . . . . . . . . . . (5,239) (3,752) — (400) — (9,391)

At 31 December 2020 . . . 250,430 132,607 802 9,719 6,067 399,625

Additions . . . . . . . . . . . 6,206 272 — 1,106 40,783 48,367

Transfers . . . . . . . . . . . 17,908 9,525 — 465 (27,898) —

Disposals . . . . . . . . . . . (5,507) (3,503) (23) (1,375) — (10,408)

At 30 June 2021 . . . . . . 269,037 138,901 779 9,915 18,952 437,584


– I-50 –


Leasehold


Transportation

equipment

Furniture and

fixtures

Assets under

installation Total


DEPRECIATION

At 1 January 2018 . . . . . 37,955 19,295 2 1,251 — 58,503

Provided for the year . . . 24,774 12,311 49 1,290 — 38,424

Eliminated on disposals . (240) (194) — (80) — (514)

At 31 December 2018 . . . 62,489 31,412 51 2,461 — 96,413

Effect on application of

IFRS 16 . . . . . . . . . . (3,424) — — — — (3,424)

At 1 January 2019 . . . . . 59,065 31,412 51 2,461 — 92,989


Eliminated on disposals . (1,765) (1,422) — (190) — (3,377)

At 31 December 2019 . . . 89,076 47,525 211 3,961 — 140,773


Eliminated on disposals . (4,570) (2,856) — (145) — (7,571)

At 31 December 2020 . . . 121,960 63,250 371 5,623 — 191,204

Provided for the period . 22,674 11,065 88 1,204 — 35,031

Eliminated on disposals . (5,122) (3,324) (23) (1,361) — (9,830)

At 30 June 2021 . . . . . . 139,512 70,991 436 5,466 — 216,405

CARRYING VALUES

At 31 December 2018 . . . 86,323 46,693 746 3,064 — 136,826

At 31 December 2019 . . . 92,832 50,382 591 2,773 5,643 152,221

At 31 December 2020 . . . 128,470 69,357 431 4,096 6,067 208,421

At 30 June 2021 . . . . . . 129,525 67,910 343 4,449 18,952 221,179


– I-51 –


The Company

Leasehold


Furniture and

fixtures Toal

RMB’000 RMB’000 RMB’000 RMB’000

Cost

At 1 January 2018 . . . . . . . . . . . . . . . . . . . . . . . 4,102 2,503 62 6,667

Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,245 87 1 1,333

At 31 December 2018 . . . . . . . . . . . . . . . . . . . . . 5,347 2,590 63 8,000

Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 334 116 34 484

At 31 December 2019 . . . . . . . . . . . . . . . . . . . . . 5,681 2,706 97 8,484

Disposals . . . . . . . . . . . . . . . . . . . . . . . . . . . . — (6) — (6)

At 31 December 2020 . . . . . . . . . . . . . . . . . . . . 5,681 2,700 97 8,478

Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 4 — 4

At 30 June 2021 . . . . . . . . . . . . . . . . . . . . . . . . 5,681 2,704 97 8,482

DEPRECIATION

At 1 January 2018 . . . . . . . . . . . . . . . . . . . . . . . 190 97 1 288

Provided for the year . . . . . . . . . . . . . . . . . . . . . 891 403 9 1,303

At 31 December 2018 . . . . . . . . . . . . . . . . . . . . . 1,081 500 10 1,591

Provided for the year . . . . . . . . . . . . . . . . . . . . . 1,248 629 21 1,898

Eliminated on disposals . . . . . . . . . . . . . . . . . . . — (6) — (6)

At 31 December 2019 . . . . . . . . . . . . . . . . . . . . . 2,329 1,123 31 3,483

Provided for the year . . . . . . . . . . . . . . . . . . . . . 1,205 610 30 1,845

At 31 December 2020 . . . . . . . . . . . . . . . . . . . . 3,534 1,733 61 5,328

Provided for the year . . . . . . . . . . . . . . . . . . . . . 605 302 15 922

At 30 June 2021 . . . . . . . . . . . . . . . . . . . . . . . . 4,139 2,035 76 6,250

CARRYING VALUES

At 31 December 2018 . . . . . . . . . . . . . . . . . . . . . 4,266 2,090 53 6,409

At 31 December 2019 . . . . . . . . . . . . . . . . . . . . . 3,352 1,583 66 5,001

At 31 December 2020 . . . . . . . . . . . . . . . . . . . . 2,147 967 36 3,150

At 30 June 2021 . . . . . . . . . . . . . . . . . . . . . . . . 1,542 669 21 2,232


– I-52 –


The above items of property and equipment, except for assets under installation, are

depreciated on a straight-line basis over the following estimated useful lives after taking into

account their estimated residual values:

Useful lives

Estimated

residual values

Leasehold improvements . . . . . . . . . . . . . . Shorter of the relevant lease term

or their estimated useful lives

0%

Machinery . . . . . . . . . . . . . . . . . . . . . . . . . 5–10 years 5%

Transportation equipment . . . . . . . . . . . . . . 5 years 5%

Furniture and fixtures . . . . . . . . . . . . . . . . . 2–5 years 0–5%

Based on the result of the assessment by the directors of the Company, there were no

significant impairments of property and equipment as at 31 December 2018, 2019 and 2020, and

30 June 2021, respectively.

16. RIGHT-OF-USE ASSETS

The Group

Leasedproperties

RMB’000

Carrying valuesAt 1 January 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 253,086

Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109,926

Decrease due to termination of lease . . . . . . . . . . . . . . . . . . . . . . . . . . (5,696)

Depreciation charge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (85,803)

At 31 December 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 271,513

Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 165,181



At 31 December 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 331,762

Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74,633



At 30 June 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 347,497


– I-53 –



Six months ended

30 June

2019 2020 2020 2021

RMB’000 RMB’000 RMB’000 RMB’000

(unaudited)

Expenses relating to short-term leases . . . . . 10,406 12,088 5,689 8,559

Variable lease payments not included in the

measurement of lease liabilities . . . . . . . . 11,230 7,841 2,542 3,649

Total cash outflow for leases (note) . . . . . . . 109,375 118,170 52,382 70,864

Note: Amount includes payments of principal and interest portion of lease liabilities, variable lease payments,

short-term leases and payments of lease payments on or before lease commencement date. These amounts

could be presented in operating, investing or financing cash flows.

The Company

Leaseproperties

RMB’000

Carrying ValuesAt 1 January 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,525

Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106


At 31 December 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,587


At 31 December 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,685

Depreciation charge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (939)

At 30 June 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,746

During the Track Record Period, the Group and the Company lease various properties for

their operations. Lease contracts are entered into for fixed term of 1 month to 10 years. Lease

terms are negotiated on an individual basis and contain a wide range of different terms and

conditions. In determining the lease term and assessing the length of the non-cancellable

period, the Group and the Company apply the definition of a contract and determines the period

for which the contract is enforceable.

The Group regularly entered into short-term leases for staff quarters. As at 31 December

2019 and 2020, and 30 June 2021, the portfolio of short-term leases is similar to the portfolio of

short-term leases to which the short-term lease expense disclosed above.

Based on the result of the assessment by the directors of the Company, there were no

significant impairment of right-of-use assets as at 31 December 2018, 2019 and 2020, and 30

June 2021, respectively.


– I-54 –


The Group

Variable lease payments

Leases of restaurants are either with only fixed lease payments or contain variable leasepayment that are ranging from 2% to 11%, 3% to 13%, 3% to 13%, 3% to 13% (unaudited) and 3%to 13% of sales and minimum annual lease payments that are fixed over the lease term duringthe year ended 31 December 2018, 2019 and 2020, the six months ended 30 June 2020 and2021, respectively. The payment terms are common in restaurants in the areas where the Groupoperates. The amounts of fixed and variable lease payments paid/payable to relevant lessorsduring the Track Record Period are as follows:

For the year ended 31 December 2019Number ofLeases

Fixedpayments

Variablepayments

Totalpayments

RMB’000 RMB’000 RMB’000

Leases for restaurants with variable leasepayments . . . . . . . . . . . . . . . . . . . . . . . . 50 40,749 11,230 51,979

Leases for restaurants without variable leasepayments . . . . . . . . . . . . . . . . . . . . . . . . 53 38,927 — 38,927

Leases for office premises without variablelease payments . . . . . . . . . . . . . . . . . . . . 181 18,469 — 18,469

284 98,145 11,230 109,375


Number of

Leases

Fixed

payments

Variable

payments

Total

payments

RMB’000 RMB’000 RMB’000

Leases for restaurants with variable lease

payments . . . . . . . . . . . . . . . . . . . . . . . . 67 46,191 7,841 54,032

Leases for restaurants without variable lease

payments . . . . . . . . . . . . . . . . . . . . . . . . 78 44,024 — 44,024

Leases for office premises without variable

lease payments . . . . . . . . . . . . . . . . . . . . 195 20,114 — 20,114

340 110,329 7,841 118,170


Number of

Leases

Fixed

payments

Variable

payments

Total

payments

(unaudited) RMB’000 RMB’000 RMB’000


payments . . . . . . . . . . . . . . . . . . . . . . . . 58 22,253 2,542 24,795


payments . . . . . . . . . . . . . . . . . . . . . . . . 62 17,856 — 17,856


lease payments . . . . . . . . . . . . . . . . . . . . 167 9,731 — 9,731

287 49,840 2,542 52,382


– I-55 –



Number of

Leases

Fixed

payments

Variable

payments

Total

payments

RMB’000 RMB’000 RMB’000


payments . . . . . . . . . . . . . . . . . . . . . . . . 65 25,569 3,649 29,218


payments . . . . . . . . . . . . . . . . . . . . . . . . 87 29,667 — 29,667


lease payments . . . . . . . . . . . . . . . . . . . . 139 11,979 — 11,979

291 67,215 3,649 70,864

The overall financial effect of using variable payment terms is that higher rental costs are

incurred by stores with higher sales. Variable rental expenses are included in ‘‘rental expenses

and related expenses’’ in the consolidated statements of profit or loss and other comprehensive

income and are expected to continue to represent a similar proportion of restaurants revenue in

future years.

Restrictions or covenants on leases

As at 31 December 2019 and 2020, and 30 June 2021, the Group’s lease liabilities of

RMB280,088,000, RMB346,086,000 and RMB366,405,000 are recognised with related right-of-

use assets of RMB271,513,000, RMB331,762,000 and RMB347,497,000, respectively. The

Company’s lease liabilities of RMB7,687,000, RMB5,861,000 and RMB4,797,000 are recognised

with related right-of-use assets of RMB6,587,000, RMB4,685,000 and RMB3,746,000,

respectively. These lease agreements do not impose any covenants other than the security

interests in the leased assets that are held by the lessor. Leased assets may not be used as

security for borrowing purposes.

Rent concessions

During both the year ended 31 December 2020 and the six months ended 30 June 2020,

lessors of restaurant premises provided rent concessions to the Group through rent reductions

ranging from 50% to 100% over 1 to 5 months.

These rent concessions occurred as a direct consequence of Covid-19 pandemic and met all

of the conditions in IFRS 16.46B, and the Group applied the practical expedient not to assess

whether the changes constitute lease modifications. The effects on changes in lease payments

due to forgiveness or waiver by the lessors for the relevant leases of RMB4,198,000 and

RMB4,198,000 (unaudited) were recognised as negative variable lease payments for the year

ended 31 December 2020 and the six months ended 30 June 2020, respectively.


– I-56 –


17. INTANGIBLE ASSETS

The Group

Software

RMB’000

COST

At 1 January 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 134

Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 308

At 31 December 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 442

Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 946

At 31 December 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,388

Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 260

At 31 December 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,648

Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

At 30 June 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,679

AMORTISATION

At 1 January 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

Provided for the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103

At 31 December 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115


At 31 December 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 306


At 31 December 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 776

Provided for the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 223

At 30 June 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 999

CARRYING VALUES

At 31 December 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 327

At 31 December 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,082

At 31 December 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 872

At 30 June 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 680

The above intangible assets have finite useful lives. Such intangible assets are amortised

on a straight-line basis over the following periods:

Useful lives

Software . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3–5 years


– I-57 –


18. DEFERRED TAXATION

The Group

The following are the major deferred tax assets (liabilities) recognised and movements

thereon during the Track Record Period:

Property and

equipment

acquired under

the Group

Reorganisation

Customer

loyalty

scheme

Distributable

profits of

subsidiaries

Right-of-use

assets/lease

liabilities

Accrued

expenses and

others Total


At 1 January 2018 . . . . . . 2,323 — (3,484) — 4,725 3,564

Credit (charge) to

profit or loss . . . . . . . 60 181 (5,673) — 4,228 (1,204)

Transferred to tax payable

upon profits distributed – — 1,447 — — 1,447

Credit into reserves . . . . . 5,660 — — — — 5,660

At 31 December 2018 . . . . 8,043 181 (7,710) — 8,953 9,467

Effect of application of

IFRS 16 . . . . . . . . . . . — — — 5,007 (5,007) —

At 1 January 2019 . . . . . . 8,043 181 (7,710) 5,007 3,946 9,467

(Charge) credit to

profit or loss . . . . . . . (322) 237 (8,604) 2,759 862 (5,068)


upon profits distributed — — 3,538 — — 3,538

At 31 December 2019 . . . . 7,721 418 (12,776) 7,766 4,808 7,937

(Charge) credit to

profit or loss . . . . . . . (1,670) 55 — 2,921 124 1,430


upon profits distributed — — 1,960 — — 1,960

At 31 December 2020 . . . 6,051 473 (10,816) 10,687 4,932 11,327

(Charge) credit to profit or

loss . . . . . . . . . . . . . (1,230) (221) — 1,253 3,200 3,002

At 30 June 2021 . . . . . . . 4,821 252 (10,816) 11,940 8,132 14,329


– I-58 –


The unrecognised tax losses with expiry dates as disclosed in the following table:


2018 2019 2020 2021

RMB’000 RMB’000 RMB’000 RMB’000

2027 . . . . . . . . . . . . . . . . . 1,583 1,583 1,583 1,583

2028 . . . . . . . . . . . . . . . . . 2,008 2,008 2,008 2,008

2029 . . . . . . . . . . . . . . . . . — 4,536 4,536 4,536

2030 . . . . . . . . . . . . . . . . . — — 5,120 5,120

2031 . . . . . . . . . . . . . . . . . — — — 4,228

3,591 8,127 13,247 17,475

The tax losses were arising in Taiwan with 10 years expiration time.

As at 31 December 2018, 2019 and 2020, and 30 June 2021, the Group had unused tax

losses of RMB3,591,000, RMB8,127,000, RMB13,247,000 and RMB17,475,000, respectively,

available for offset against future profits. No deferred tax asset has been recognised in respect

of such tax losses due to the unpredictability of future profit streams of these loss-making

subsidiaries and it is not probable that taxable profit will be available against which the tax

losses can be utilised.

As at 31 December 2018, 2019 and 2020, and 30 June 2021, the Group had deductible

temporary differences of RMB1,325,000, RMB4,289,000, RMB2,577,000 and RMB2,713,000,

respectively. No deferred tax asset has been recognised in relation to such deductible temporary

difference as it is not probable that taxable profit will be available against which the deductible

temporary differences can be utilised.

19. INVENTORIES

The Group


2018 2019 2020 2021

RMB’000 RMB’000 RMB’000 RMB’000

Food ingredients . . . . . . . . . 16,986 23,617 28,429 23,817

Condiment products . . . . . . 3,367 5,449 5,415 4,772

Beverage . . . . . . . . . . . . . . 652 776 882 691

Other materials . . . . . . . . . . 151 226 279 309

21,156 30,068 35,005 29,589


– I-59 –


20. TRADE AND OTHER RECEIVABLES

The Group


2018 2019 2020 2021

RMB’000 RMB’000 RMB’000 RMB’000

Trade receivables (note i) . . . . . . . 10,965 9,884 12,892 8,594

Other receivables

Staff advance (note ii) . . . . . . . 5,755 5,763 4,942 4,932

Rental deposits

— current . . . . . . . . . . . . . . . . 1,383 5,650 11,561 11,179

— non-current . . . . . . . . . . . . . 21,311 23,646 29,952 32,356

Deferred issue costs (note iii) . . — — — 2,338

Receivables of withholding

individual income tax for

share based payments

(note iv) . . . . . . . . . . . . . . . — — — 3,554

Receivables of management fee . 2,267 — — —

30,716 35,059 46,455 54,359

Total trade and

other receivables . . . . . . . . . . . 41,681 44,943 59,347 62,953

Trade and other receivables

disclosed in the consolidated

statements of financial position

as:

— current . . . . . . . . . . . . . . . . 20,370 21,297 29,395 30,597

— non-current . . . . . . . . . . . . . 21,311 23,646 29,952 32,356

41,681 44,943 59,347 62,953


– I-60 –


The Company


2018 2019 2020 2021

RMB’000 RMB’000 RMB’000 RMB’000

Trade receivables . . . . . . . . . . . . 349 209 484 112

Other receivables

Staff advance . . . . . . . . . . . . . 166 139 144 402

Rental deposits — non-currents . 271 281 268 273

Deferred issue costs

(note iii) . . . . . . . . . . . . . . . — — — 2,338

437 420 412 3,013

Total trade and other receivables . 786 629 896 3,125

Trade and other receivables

disclosed in the statements of

financial position as:

— current . . . . . . . . . . . . . . . . 515 348 628 2,852

— non-current . . . . . . . . . . . . . 271 281 268 273

786 629 896 3,125

As at 1 January 2018, the Group’s trade receivables from contracts with customers of the

Group amounted to RMB15,539,000.

Notes:

i) Majority of trade receivables were due from third party payment platforms which are normally settled within 1

business day. Except for the receivables from shopping malls, representing the compensation of promotion

activities conducted by the shopping malls so that discounts had been offered to the Group’s customers,

which were normally settled within 90 days, there are no credit period granted to customers. No ECL has

been provided for trade receivables. Further details on the Group’s credit policy and ECL assessment are set

out in note 32b.

ii) Staff advance made to staff was solely for daily business operation purpose, which will be charged to profit

or loss when such amount has been incurred for the business development activities. The staff is required to

pay back the excess, if any, to the Group immediately after such activities.

iii) Deferred issue costs represent the qualifying portion of issue costs incurred up to 30 June 2021, which will

be debited to equity of the Group as share issue costs in respect of the issue of new shares upon the

[REDACTED] and [REDACTED] of the shares of the Company on the Stock Exchange.

iv) As at 30 June 2021, included in the amount of RMB2,050,000 was due from Mr. Liao Chih-wei, an executive

director of the Company. This is also the maximum balance outstanding that is due from Mr. Liao Chih-wei

during the six months ended 30 June 2021. The amount was non-trade in nature, unsecured, unguaranteed,

interest-free and repayable on demand and as represented by the directors of the Company, such balance

will be settled prior to the [REDACTED] of the shares of the Company on the Stock Exchange.


– I-61 –


The following is an aged analysis of trade receivables of the Group presented based on the

revenue recognition date.


2018 2019 2020 2021

RMB’000 RMB’000 RMB’000 RMB’000

0–30 days . . . . . . . . . . . . . 10,201 9,673 12,305 8,320

31–90 days . . . . . . . . . . . . 616 205 570 54

91–180 days . . . . . . . . . . . . 54 6 17 220

Over 180 days . . . . . . . . . . . 94 — — —

10,965 9,884 12,892 8,594

21. FINANCIAL ASSETS AT FVTPL

The Group


2018 2019 2020 2021

RMB’000 RMB’000 RMB’000 RMB’000

Unlisted financial products . . 30,000 — — —

These investments were issued by banks in the PRC with no guarantee on their return but

were principal protected. The returns of these investments were determined by reference to the

performance of the expected return rates stated in the contracts. The change in fair value arising

from these financial assets at FVTPL are recognised as ‘‘investment gain on financial assets at

FVTPL’’ included in ‘‘other gains and losses’’ in note 8.

22. TERM DEPOSITS/BANK BALANCES AND CASH

(A) Term deposits

The Group

Term deposits as at 31 December 2019 and 2020, and 30 June 2021 represented the

short-term bank deposits with original maturity of less than 3 months, carrying interest at

effective interest rates of 1.5%, 1.5% and ranging from 1.5% to 2.025% per annum,

respectively. No term deposits were placed by the Group as at 31 December 2018.

(B) Bank balances and cash

The Group

Bank balances carry interest at market rates ranging from 0.01% to 0.35% per annum

as at 31 December 2018, 2019 and 2020, and 30 June 2021, respectively.


– I-62 –


The Group’s term deposits, bank balances and cash that were denominated in

currencies other than functional currencies of the relevant group entities, were retranslated

to RMB and stated for reporting purpose as below:


2018 2019 2020 2021

RMB’000 RMB’000 RMB’000 RMB’000

Analysis of term deposits,

bank balances and cash

by currency:

Denominated in USD . . . 27,025 20,247 19,310 15,389

The Company

Bank balances carry interest at market rates ranging from 0.01% to 0.35% per annum

as at 31 December 2018, 2019 and 2020, and 30 June 2021, respectively.

The Company’s bank balances and cash that are denominated in currency other than

the functional currency:


2018 2019 2020 2021

RMB’000 RMB’000 RMB’000 RMB’000

Analysis of bank balances

and cash by currency:

Denominated in USD 23,446 19,901 18,959 15,043


– I-63 –


23. TRADE AND OTHER PAYABLES

The Group


2018 2019 2020 2021

RMB’000 RMB’000 RMB’000 RMB’000

Trade payables (note ii) . . . . . . . . 48,545 50,692 87,262 61,071

Other payables

Accrued payroll . . . . . . . . . . . . 46,116 50,161 62,862 49,908

Other tax payables . . . . . . . . . . 467 620 551 4,417

Payable for acquisition of

property and equipment . . . . 7,819 11,754 24,999 25,319

Other accrued expenses . . . . . . 26,934 12,683 8,529 10,590

Payments received for

subscription of restricted

shares (note i) . . . . . . . . . . . 1,252 3,883 1,693 1,693

[REDACTED] costs payables . . . . — — — 5,705

Others . . . . . . . . . . . . . . . . . . 4,046 6,524 6,232 6,818

86,634 85,625 104,866 104,450

135,179 136,317 192,128 165,521

The Company


2018 2019 2020 2021

RMB’000 RMB’000 RMB’000 RMB’000

Trade payables . . . . . . . . . . . . . . 890 721 739 108

Other payables

Accrued payroll . . . . . . . . . . . . 617 726 838 664

Other tax payables . . . . . . . . . . 103 97 113 —

Other accrued expenses . . . . . . 2,522 2,998 1,548 1,466

Payments received for

subscription of restricted

shares (note i) . . . . . . . . . . . 1,252 3,883 1,693 1,693

[REDACTED] costs payables . . . . — — — 5,705

4,494 7,704 4,192 9,528

5,384 8,425 4,931 9,636

Note i: The amount represented the payments received for subscription of restricted shares from the directors and

employees as detailed in note 28. The Company recorded such payments received as liabilities since the

Company is obligated to repurchase the relevant restricted shares from the directors and/or employees at

the original subscription price if the directors and/or employees resigned from the Group before the

restricted shares are vested. When the restricted shares are vested, the corresponding liabilities would be

transferred to treasury shares and share premium.


– I-64 –


Note ii: As at 31 December 2018, 2019 and 2020, and 30 June 2021, the balances of trade nature amounting to

RMB28,000, RMB40,000, RMB94,000 and RMB53,000 payable to a related party, Shanghai Aotu

International Trading Limited* (上海澳途國際貿易有限公司) (‘‘Shanghai Aotu’’), were included in trade

payables. Shanghai Aotu was a related party because Mr. Lee Yu-cheng holds 27% equity interest in

Shanghai Aotu and has significant influence over Shanghai Aotu.

As at 31 December 2020 and 30 June 2021, the balances of trade nature amounting to RMB25,000 and

RMB30,000 payable to a related party, Sunjuice Holdings Co., Limited* (鮮活控股股份有限公司)

("Sunjuice"), were included in trade payables. Sunjuice was a related party since 14 October 2020 when

Mr. Huang Kuo-huang, who can exercise control over Sunjuice, became the non-executive director of the

Company.

The credit period on purchases of goods ranged from 30 to 60 days during the Track RecordPeriod.

The following is an aged analysis of the trade payables of the Group, presented based onthe invoice date, at the end of each reporting period:


2018 2019 2020 2021

RMB’000 RMB’000 RMB’000 RMB’000

0–60 days . . . . . . . . . . . . . 47,310 49,478 85,985 59,46061–180 days . . . . . . . . . . . . 1,016 666 767 999181–365 days . . . . . . . . . . . 90 512 107 155Over 365 days . . . . . . . . . . . 129 36 403 457

48,545 50,692 87,262 61,071

24. LEASE LIABILITIES

The Group


2019 2020 2021

RMB’000 RMB’000 RMB’000

Lease liabilities payable:Within one year . . . . . . . . . . . . . . . . . . . 80,082 94,639 99,643Within a period of more than one year

but not exceeding two years . . . . . . . . 70,027 85,425 89,131Within a period of more than two years

but not exceeding five years . . . . . . . . 120,980 154,871 163,030More than five years . . . . . . . . . . . . . . . 8,999 11,151 14,601

280,088 346,086 366,405

Less: Amount due for settlementwithin one year shown undercurrent liabilities . . . . . . . . . . . . . . . . (80,082) (94,639) (99,643)

Amount shown under non-currentliabilities . . . . . . . . . . . . . . . . . . . . . . 200,006 251,447 266,762



– I-65 –


The Company


2019 2020 2021

RMB’000 RMB’000 RMB’000

Lease liabilities payable:

Within one year . . . . . . . . . . . . . . . . . . . 1,823 2,223 2,395

Within a period of more than one year but

not more than two years . . . . . . . . . . . 2,223 2,570 2,402

Within a period of more than two years

but not more than five years . . . . . . . . 3,641 1,068 —

7,687 5,861 4,797

Less: Amount due within one year shown

under current liabilities . . . . . . . . . . . . (1,823) (2,223) (2,395)

Amount shown under non-current

liabilities . . . . . . . . . . . . . . . . . . . . . . 5,864 3,638 2,402

25. PROVISIONS FOR RESTORATION

The Group


2018 2019 2020 2021

RMB’000 RMB’000 RMB’000 RMB’000

Provisions for restoration . . . 7,677 9,562 12,526 13,093

The provisions are related to costs expected to be incurred to restore the leasehold

properties according to lease agreements.


– I-66 –


The movements in provisions for restoration during the Track Record Period are as follows:

Provision for

restoration

RMB’000

At 1 January 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,230

Additional provisions in the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,570

Utilisation of provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,123)

At 31 December 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,677


Utilisation of provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (358)

At 31 December 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,562



At 31 December 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,526

Additional provisions in the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 664


At 30 June 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,093

The provisions relate to costs to be incurred to restore the leasehold properties into original

condition according to lease agreements.

26. CONTRACT LIABILITIES

The Group


2018 2019 2020 2021

RMB’000 RMB’000 RMB’000 RMB’000

Customer loyalty scheme

(note) . . . . . . . . . . . . . . . 723 1,670 1,890 1,006

Advance from customers . . . 41 445 622 994

764 2,115 2,512 2,000

As at 1 January 2018, contract liabilities of the Group amounted to RMB1,000, representing

only the advance from customers while no contract liabilities in relation to the customer loyalty

scheme as the Group began the customer loyalty scheme in September 2018.

Note: The award credits which can be used in future purchases and consumptions in the restaurants arising from

the customer loyalty scheme represents the transaction price allocated to unsatisfied performance

obligation at the end of each reporting period.


– I-67 –


The following table shows revenue recognised that was included in the balance of contract

liabilities at the beginning of the year/period.


Six months

ended 30 June

2018 2019 2020 2021

RMB’000 RMB’000 RMB’000 RMB’000

Customer loyalty scheme . . . — 723 1,670 1,890

Advance from customers . . . 1 41 445 622

1 764 2,115 2,512

The transaction price allocated to the remaining performance obligation (unsatisfied or

partially unsatisfied) as at 31 December 2018, 2019 and 2020, and 30 June 2021 was expected to

recognised as revenue within one year and the relevant contract liabilities were classified as

current liabilities.

The award credits will expire before 31 March of the next year upon granted to customers

and the customer can redeem anytime before expiration. The contract liabilities related to

customer loyalty scheme as disclosed above represented the Group’s expectation on the rate of

redemption made by customers.

For contract liabilities relate to the advance consideration received from the customers,

revenue is recognised when the performance obligation is satisfied through service rendered.

27. SHARE CAPITAL

Par value

Number

of shares

Nominal

amount

Authorised

At 1 January 2018 . . . . . . . . . . . . . . . . . . . . . USD1 20,000,000 USD20,000,000

Increased . . . . . . . . . . . . . . . . . . . . . . . . . . USD1 10,000,000 USD10,000,000

At 31 December 2018 and 2019 . . . . . . . . . . . USD1 30,000,000 USD30,000,000

Re-denomination of share capital from par

value of USD1 each to NTD10 each (note v)

— increased . . . . . . . . . . . . . . . . . . . . . . . NTD10 90,000,000 NTD900,000,000

— repurchased and cancelled . . . . . . . . . . . USD1 (30,000,000) USD(30,000,000)

At 31 December 2020 and 30 June 2021 . . . . . NTD10 90,000,000 NTD900,000,000


– I-68 –


Par value

Number

of shares

Nominal

amount

Shown in

Historical

Financial

Information as

RMB’000

Issued:At 1 January 2018 . . . . . . . . . . . . USD1 10,700,000 USD10,700,000 71,608Issue of new shares (note i) . . . . USD1 1,250,000 USD1,250,000 8,322Conversion of retained earnings

into share capital (note iii) . . . . USD1 2,675,000 USD2,675,000 17,202

As at 31 December 2018 . . . . . . . USD1 14,625,000 USD14,625,000 97,132Issue of restricted shares under

share-based payments scheme(note ii) . . . . . . . . . . . . . . . . . USD1 354,000 USD354,000 2,427

Conversion of retained earningsinto share capital (note iii) . . . . USD1 1,497,900 USD1,497,900 10,587

As at 31 December 2019 . . . . . . . USD1 16,476,900 USD16,476,900 110,146Repurchase and cancellation of

issued restricted shares fromemployees (note iv) . . . . . . . . . USD1 (44,000) USD(44,000) (310)

Conversion of retained earningsinto share capital (note iii) . . . . USD1 1,643,258 USD1,643,258 11,088

Issue of new shares (note i) . . . . USD1 32 USD32 —*Re-denomination of share

capital and issue of new shares(note v)— repurchased and cancelled . . USD1 (18,076,190) USD(18,076,190) (120,924)— allotment and issued . . . . . . NTD10 54,228,570 NTD542,285,700 127,383

As at 31 December 2020 and30 June 2021 . . . . . . . . . . . . . NTD10 54,228,570 NTD542,285,700 127,383

Notes:

i) Pursuant to the resolutions of the shareholders of the Company on 6 June 2018 and 14 October 2020, theCompany issued 1,250,000 and 32 ordinary shares to existing shareholders for a subscription price ofUSD2.0 and USD1.0 per share, respectively.

ii) On 20 May 2019, under the share-based payments scheme (as disclosed in note 28), the Company issued354,000 shares to directors and employees of the Group for a subscription price of USD1.6 per share.

iii) On 20 July 2018, 30 October 2019 and 28 October 2020, the Company issued in aggregate 2,675,000,1,497,900 and 1,643,258 ordinary shares, respectively, to all the existing shareholders of the Company inproportion to their then respective shareholdings in the Company by converting the Company’s retainedearnings into share capital of the Company.

iv) On 25 September 2020, the Company repurchased and cancelled 14,000 and 30,000 unvested restrictedshares from a resigned employee of the Group and a resigned director of the Company at the originalsubscription price of USD1.6 per share with an aggregate consideration of USD70,400 (equivalent toRMB496,000).



– I-69 –


v) Pursuant to the resolution of the shareholders of the Company on 28 October 2020, the authorised sharecapital of the Company increased from USD30,000,000 divided into 30,000,000 shares of par value of USD1each to the aggregate of (i) USD30,000,000 divided into 30,000,000 shares of par value of USD1 each and(ii) NTD900,000,000 divided into 90,000,000 shares with a par value of NTD10 each by the creation of90,000,000 shares with a par value of NTD10 each.

As at 28 October 2020, 54,228,570 shares with par value of NTD10 each in the Company were allotted andissued to the existing shareholders.

Immediately after the abovementioned allotment and issurance having been effected, the Companyrepurchased 18,076,190 shares with a par value USD1 each. The net effect of the re-denomination of theCompany’s share capital of RMB6,459,000 is debited to share premium.

Following the abovementioned share repurchase, the authorised but unissued shares capital of the Companywas reduced by the cancellation of 30,000,000 shares of a par value of USD1 each, such that the authorisedshare capital of the Company became NTD900,000,000 divided into 90,000,000 shares with a par value ofNTD10 each.

28. SHARE-BASED PAYMENT TRANSACTIONS

On 4 December 2018, the directors of the Company resolved to issue 80,000 restricted

shares of the Company to two directors (including 30,000 and 50,000 restricted shares to Mr.

Chao Hung-che and Mr. Liao Chih-wei) and 274,000 restricted shares of the Company to certain

employees of the Group at a subscription price of USD1.6 per share under such share-based

payments scheme. On 10 January 2019, such restricted shares were granted to these directors

and employees with the following conditions.

The restricted shares shall initially be unvested and subject to repurchase by the Company

at the subscription price paid by the directors and employees upon voluntary or involuntary

termination of employment. Half of the restricted shares shall vest on 31 December 2020 and the

remaining portion of the restricted shares shall vest on 31 December 2021.

The eligible directors and employees shall not sell, assign, transfer, pledge, hypothecate or

otherwise dispose of any unvested shares.

The total expenses recognised in the consolidated statements of profit or loss and other

comprehensive income for restricted shares granted to directors and employees are RMB0,

RMB3,880,000, RMB3,184,000, RMB1,757,000 (unaudited) and RMB625,000 for the year ended

31 December 2018, 2019 and 2020, and for the six months ended 30 June 2020 and 2021,

respectively.

The restricted shares were valued by the directors of the Company with reference to the

valuation carried out by GW, on the grant date of the restricted shares. The address of GW is

Room 604, 6/F, Shanghai Industrial Investment Building, 48–62 Hennessy Road, Wan Chai, Hong

Kong. The fair value of the restricted shares was determined by discounted cash flow. The fair

value of the restricted shares was determined to be RMB36.36 per share.


– I-70 –


The following table summarised the Company’s unvested restricted shares movement.

Number of

unvested

restricted shares

Weighted

average grant

date fair value

per share

RMB’000

Unvested as at 1 January 2018 and 31 December 2018 . . . . . . — N/A

Issue of unvested restricted shares . . . . . . . . . . . . . . . . . . . 354,000 36.36

Unvested as at 31 December 2019 . . . . . . . . . . . . . . . . . . . . 354,000 36.36

Forfeited (note 27(iv)) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (44,000) 36.36

Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (155,000) 36.36

Unvested as at 31 December 2020 and 30 June 2021 . . . . . . . 155,000 36.36

29. OPERATING LEASES

During the year ended 31 December 2018, the Group made rental payments under operating

leases as follows:

Year ended

31 December

2018

RMB’000

Minimum lease payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84,471

Contingent rental payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,839

93,310

At 31 December 2018, the Group had commitments for future minimum lease payments

under non-cancellable operating leases which fall due as follows:

At 31 December

2018

RMB’000

Within one year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86,963

In the second to fifth years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 198,607

Over five years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,138

288,708


– I-71 –


30. CAPITAL COMMITMENTS

The Group


2018 2019 2020 2021

RMB’000 RMB’000 RMB’000 RMB’000

Capital expenditure in

respect of acquisition of

property and equipment

contracted for but not

provided in the Historical

Financial Information. . . . . 5,890 69 1,805 5,382

31. RECONCILIATION OF ASSETS AND LIABILITIES ARISING FROM FINANCING ACTIVITIES

The table below details changes in the Group’s assets and liabilities arising from financing

activities, including both cash and non-cash. Assets and Liabilities arising financing activities

are those for which cash flows were or future cash flows will be, classified in the Group’s

consolidated statements of cash flows as cash flows from financing activities.


– I-72 –


Bankborrowings

Leaseliabilities

Amounts dueto relatedparties

Dividendspayables

Payablesreceived forsubscriptionof restricted

sharesAccrued

issue cost Total

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

At 1 January 2018 . . . . . . . . . . . . — — 13,190 — — — 13,190Net financing cash flows . . . . . . . — — (73,092) (5,855) 1,252 — (77,695)Non-cash changes

Deemed distribution andacquisition of non-controlling interests as partof the Group Reorganisation . — — 84,035 — — — 84,035

Dividend declared . . . . . . . . . — — — 9,170 — — 9,170

At 31 December 2018 . . . . . . . . . — — 24,223 3,315 1,252 — 28,790Effect of adopt IFRS 16 . . . . . . . . — 253,982 — — — — 253,982

At 1 January 2019 . . . . . . . . . . . . — 253,982 24,223 3,315 1,252 — 282,772Net financing cash flows . . . . . . . — (85,225) (24,223) (31,900) 2,631 — (138,717)Non-cash changes

Finance costs . . . . . . . . . . . . — 12,977 — — — — 12,977Recognition of lease liabilities . — 103,995 — — — — 103,995Termination of lease . . . . . . . . — (5,641) — — — — (5,641)Dividend declared . . . . . . . . . — — — 28,715 — — 28,715

At 31 December 2019 . . . . . . . . . — 280,088 — 130 3,883 — 284,101Net financing cash flows . . . . . . . (835) (95,806) — (12,785) (496) — (109,922)Non-cash changes

Finance costs . . . . . . . . . . . . 835 14,900 — — — — 15,735Recognition of lease liabilities . — 157,659 — — — — 157,659Termination of lease . . . . . . . . — (6,557) — — — — (6,557)Covid-19-related rent

concessions . . . . . . . . . . . — (4,198) — — — — (4,198)Vesting of restricted shares

under share-based payments — — — — (1,694) — (1,694)Dividend declared . . . . . . . . . — — — 12,960 — — 12,960

At 31 December 2020 . . . . . . . . . — 346,086 — 305 1,693 — 348,084Net financing cash flows . . . . . . . (34) (58,265) — — — (859) (59,158)Non-cash changes

Finance costs . . . . . . . . . . . . 34 8,583 — — — — 8,617Recognition of lease liabilities . — 72,828 — — — — 72,828Termination of lease . . . . . . . . — (2,827) — — — — (2,827)Issue cost accrued . . . . . . . . . — — — — — 2,338 2,338

At 30 June 2021 . . . . . . . . . . . . . — 366,405 — 305 1,693 1,479 369,882

(Unaudited)At 31 December 2019 . . . . . . . . . — 280,088 — 130 3,883 — 284,101Net financing cash flows . . . . . . . 43,905 (43,394) — (130) (496) — (115)Non-cash changes

Finance costs . . . . . . . . . . . . 457 6,839 — — — — 7,296Recognition of lease liabilities . — 51,989 — — — — 51,989Covid-19-related rent

concessions . . . . . . . . . . . — (4,198) — — — — (4,198)

At 30 June 2020 . . . . . . . . . . . . 44,362 291,324 — — 3,387 — 339,073


– I-73 –


32. FINANCIAL INSTRUMENTS

a. Categories of financial instruments

The Group


2018 2019 2020 2021

RMB’000 RMB’000 RMB’000 RMB’000

Financial assets

Amortised cost . . . . . . . . . . . . . 118,633 160,527 196,974 150,052

FVTPL . . . . . . . . . . . . . . . . . . . 30,000 — — —

148,633 160,527 196,974 150,052

Financial liabilities

Amortised cost . . . . . . . . . . . . . 89,200 72,983 120,491 100,911

Lease Liabilities . . . . . . . . . . . . — 280,088 346,086 366,405

The Company


2018 2019 2020 2021

RMB’000 RMB’000 RMB’000 RMB’000

Financial assets

Amortised cost . . . . . . . . . . . . . 30,153 25,879 25,983 20,805

Financial liabilities

Amortised cost . . . . . . . . . . . . . 10,035 4,734 2,737 11,247

Lease liabilities . . . . . . . . . . . . — 7,687 5,861 4,797

b. Financial risk management objectives and policies

The Group’s and the Company’s major financial instruments include trade and other

receivables, rental deposits, financial assets at FVTPL, term deposits, bank balances and cash,

trade and other payables, amounts due to related parties, lease liabilities and dividend

payables. Details of these financial instruments are disclosed in respective notes.

The risks associated with these financial instruments include market risk (currency risk and

interest rate risk), credit risk and liquidity risk. The policies on how to mitigate these risks are

set out below. The directors of the Company manage and monitor these exposures to ensure

appropriate measures are implemented on a timely and effective manner.


– I-74 –


Market risk

Currency risk

The carrying amounts of the Group’s and the Company’s monetary assets and monetary

liabilities which are denominated in a currency other than the functional currency of the

relevant group entities at the end of each reporting period are as follows:

The Group


2018 2019 2020 2021

RMB’000 RMB’000 RMB’000 RMB’000

Assets

USD . . . . . . . . . . . . . . 27,025 20,247 19,310 15,389

Liabilities

USD . . . . . . . . . . . . . . 1,252 3,883 1,693 2,798

NTD . . . . . . . . . . . . . . — — — 17

HK$ . . . . . . . . . . . . . . — — — 267

1,252 3,883 1,693 3,082

The Company


2018 2019 2020 2021

RMB’000 RMB’000 RMB’000 RMB’000

Assets

USD . . . . . . . . . . . . . . 23,446 19,901 18,959 15,043

Liabilities

USD . . . . . . . . . . . . . . 1,252 3,883 1,693 1,693

The Group and the Company currently do not have a foreign currency hedging policy,

but the directors of the Company monitor foreign exchange exposure by closely monitoring

the foreign exchange risk profile and will consider hedging significant foreign currency

exposure should the need arise.

No sensitivity analysis on currency risk is presented as the management of the Group

considered that there would not be a significant change of prevailing exchange rate and the

exposure of currency rate risk of the Group and the Company is insignificant.


– I-75 –


Interest rate risk

The Group’s interest rate risk arises primarily from cash at banks and lease liabilities.Bank balances and deposits at variable rates and fixed rates expose the Group to cash flowinterest rate risk and fair value interest rate risk, respectively. The Group’s bank balancesand deposits are placed with banks and the management of the Group manages this risk byplacing deposits at various maturities and interest rate terms. The Group is also exposed tofair value interest rate risk for fixed rate lease liabilities. The Group’s cash flow interest raterisk is mainly concentrated on the fluctuations of the market rates from bank balances. TheGroup currently does not hedge its exposure to cash flow and fair value interest rate risk.

Sensitivity analysis

No sensitivity analysis is presented since the management of the Group consider theexposure of cash flow interest rate risk arising from variable-rate bank balances and termdeposits is insignificant.

Credit risk and impairment assessment

Credit risk refers to the risk that the Group’s counterparties default on their contractualobligations resulting in financial losses to the Group. The Group’s credit risk exposures areprimarily attributable to its receivables from third-party payment platforms, rental deposits,other receivables and bank balances.

The Group’s carrying amount of the respective recognised financial assets as stated inthe consolidated statements of financial position at the end of each reporting periodrepresent the Group’s maximum exposure to credit risk which will cause a financial loss tothe Group due to failure to discharge the obligation by counterparties.

The Group also considers the probability of default upon initial recognition of assetand whether there has been a significant increase in credit risk on an ongoing basis. Toassess whether there is a significant increase in credit risk, the Group compares the risk ofdefault occurring on an asset as at the end of each reporting period with the risk of defaultas at the date of initial recognition. It considers available reasonable and supportiveforward-looking information, especially the actual or expected significant adverse changesin business, financial or economic conditions that are expected to cause a significantchange to the counterparties’ ability to meet its obligation.

The management of the Group believes that there is no material increase in the creditrisk on receivables from third-party payment platforms, bank balances and term deposits forthe Track Record Period and the risk of default is insignificant. The ECL for receivables fromthird-party payment platforms, bank balances and term deposits were insignificant for theTrack Record Period.

The Group have concentration of credit risk on liquid funds which are deposited withseveral banks and receivables from third-party payment platforms. However, the credit riskon bank balance and receivables from third-party payment platforms is limited because thecounterparties are with high credit ratings assigned by international credit-rating agencies,and ECL is insignificant.


– I-76 –


In determining the ECL for rental deposits, trade receivables from shopping malls and

other receivables, the management of the Group has taken into account the historical

default experience and forward-looking information, as appropriate. The management of the

Group has assessed that rental deposits, trade receivables from shopping malls and other

receivables have not had a significant increase in credit risk since initial recognition and

risk of default is insignificant, and therefore, the ECL of rental deposits, trade receivables

from shopping malls and other receivables is considered insignificant by management

during the Track Record Period.

Liquidity risk

The management of the Group monitors and maintains a level of cash and cash

equivalents deemed adequate by the management of the Group to finance the Group’s

operations and mitigate the effects of fluctuations in cash flows.

The directors of the Company are satisfied that the Group will have sufficient funds

available from the operating activities to meet in full its financial obligations as they fall

due for at least the next twelve months from the date of approval of the Historical Financial

Information. The Group also monitors the utilisation and repayment of bank borrowings to

ensure the Group with sufficient funds. As at 30 June 2021, the Group had unutilised

available banking facilities of RMB122 million. The Historical Financial Information has been

prepared on a going concern basis.

The following table details the Group’s and the Company’s remaining contractual

maturity for its financial liabilities and lease liabilities. The table has been drawn up based

on the undiscounted cash flows of financial liabilities and lease liabilities based on the

earliest date on which the Group and the Company can be required to pay.

The table includes both interest and principal cash flows. The undiscounted amount is

derived from interest rate at the end of each reporting period.

The Group

Weighted

average

interest rate

On demand or

less than

1 year

Total

undiscounted

cash flows

Total

carrying

amounts

% RMB’000 RMB’000 RMB’000

At 31 December 2018

Trade and other payables . . . . . . . . . . — 61,662 61,662 61,662

Amounts due to related parties . . . . . . — 24,223 24,223 24,223

Dividend payables . . . . . . . . . . . . . . . — 3,315 3,315 3,315

89,200 89,200 89,200


– I-77 –




1 year

Over1 year

but within2 years

Over2 years

but within5 years

Over5 years



% RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

As 31 December 2019


165,726 79,939 125,633 9,275 380,573 353,071

As 31 December 2020


229,199 95,061 164,647 13,814 502,721 466,577

As 30 June 2021


217,766 100,199 188,882 15,334 522,181 467,316


– I-78 –


The Company



1 year

Over 1 yearbut within2 years

Over2 years but

within5 years



% RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

As 31 December 2018

Trade and other payables . . . . . . . . . — 2,142 — — 2,142 2,142Amounts due to related parties . . . . . . — 7,893 — — 7,893 7,893

10,035 — — 10,035 10,035

As 31 December 2019

Trade and other payables . . . . . . . . . — 4,604 — — 4,604 4,604Dividend payables . . . . . . . . . . . . . . — 130 — — 130 130Lease liabilities . . . . . . . . . . . . . . . . 4.785% 2,152 2,451 3,765 8,368 7,687

6,886 2,451 3,765 13,102 12,421

As 31 December 2020

Trade and other payables . . . . . . . . . — 2,432 — — 2,432 2,432Dividend payables . . . . . . . . . . . . . . — 305 — — 305 305Lease liabilities . . . . . . . . . . . . . . . . 4.785% 2,451 2,684 1,081 6,216 5,861

5,188 2,684 1,081 8,953 8,598

As 30 June 2021

Trade and other payables . . . . . . . . . — 7,506 — — 7,506 7,506Amounts due to related parties . . . . . . — 3,436 — — 3,436 3,436Dividend payables . . . . . . . . . . . . . . — 305 — — 305 305Lease liabilities . . . . . . . . . . . . . . . . 4.785% 2,568 2,412 — 4,980 4,797

13,815 2,412 — 16,227 16,044

c. Fair value measurements of financial instruments

The management of the Group considers that the carrying amounts of financial assets

and financial liabilities recorded at amortised cost in the Historical Financial Information

approximate their fair values at the end of each reporting period based on discounted cash

flow analysis.

Some of the Group’s financial assets are measured at fair value at the end of each

reporting period. The following table gives information about how the fair values of these

financial assets are determined (in particular, the valuation technique(s) and inputs used),

as well as the level of the fair value hierarchy into which the fair value measurements are

categorised (Levels 1 to 3) based on the degree to which the inputs to the fair value

measurements is observable.


– I-79 –


Fair value at 31 December

Fair value at

30 June Fair value

hierarchy

Valuation

technique and

key inputsFinancial assets 2018 2019 2020 2021

RMB’000 RMB’000 RMB’000 RMB’000

Unlisted financial

products . . . . . .

30,000 Nil Nil Nil Level 2 Discounted cash flows

Future cash flows

are estimated

based on expected

return of the

financial products

There were no transfers between level 1 and level 2 of the fair value hierarchy during

the Track Record Period.

33. CAPITAL RISK MANAGEMENT

The Group manages its capital to ensure that entities in the Group will be able to continue

as a going concern while maximising the return to shareholders through the optimisation of the

debt and equity balance. The Group’s overall strategy remains unchanged during the Track

Record Period.

The capital structure of the Group consists of net debt, which includes lease liabilities

disclosed in note 24, net of cash and cash equivalents and equity attributable to owners of the

Company, comprising issued share capital, share premium, other reserves and retained earnings.

The director’s of the Company review the capital structure on a regular basis and considers

the cost of capital and the risks associated with each class of capital. Based on

recommendations of the directors of the Company, the Group will balance its overall capital

structure through the maturity of lease liabilities as well as new share issues and increase of

banking facilities or redemption of existing debt.


– I-80 –


34. RELATED PARTY TRANSACTIONS

(A) Related party balances

Save as disclosed elsewhere in the Historical Financial Information, the Group duringthe TRP has the following related party balances.

Amounts due to related parties

The Group

Relationship(notes)


30 June20212018 2019 2020

RMB’000 RMB’000 RMB’000 RMB’000

Kunshan Baihexiang Restaurant Limited*(昆山佰合香餐飲有限公司) . . . . . . . . . . . . . . . (i) 1,950 — — —

Suzhou Zhengmeixiang Restaurant Limited*(蘇州正美香餐飲有限公司) . . . . . . . . . . . . . . . (i) 3,060 — — —

Suzhou Yuquanxiang Restaurant Limited*(蘇州市玉泉香餐飲有限公司) . . . . . . . . . . . . . . (i) 3,030 — — —

Beijing Laohui Restaurant Limited*(北京撈匯餐飲有限公司) . . . . . . . . . . . . . . . . . (i) 730 — — —

Suzhou Junge Restaurant Limited*(蘇州市君閣餐飲有限公司) . . . . . . . . . . . . . . . (i) 2,810 — — —

Suzhou Haoyouyuan Restaurant Limited*(蘇州市好友圓餐飲有限公司) . . . . . . . . . . . . . . (i) 4,750 — — —

CH&H International Limited . . . . . . . . . . . . . . . . (ii) 3,507 — — —

ZHZ International Limited . . . . . . . . . . . . . . . . . (iii) 1,462 — — —

LYC International Limited . . . . . . . . . . . . . . . . . (iv) 1,462 — — —

HHY International Limited . . . . . . . . . . . . . . . . . (i) 1,462 — — —

24,223 — — —

The Company

Relationship

(notes)


30 June

20212018 2019 2020

RMB’000 RMB’000 RMB’000 RMB’000

CH&H International Limited . . . . . . . . . . . . . . . . (ii) 3,507 — — —

ZHZ International Limited . . . . . . . . . . . . . . . . . (iii) 1,462 — — —

LYC International Limited . . . . . . . . . . . . . . . . . (iv) 1,462 — — —

HHY International Limited . . . . . . . . . . . . . . . . . (i) 1,462 — — —

Laowang Shanghai . . . . . . . . . . . . . . . . . . . . . . — — — 3,436

7,893 — — 3,436



– I-81 –


These amounts were non-trade in nature, unsecured, unguaranteed, interest free and

repayable on demand.

Notes:

(i) Being companies controlled by the Controlling Shareholders.

(ii) Being the company controlled by Mr. Chen Hsiang.

(iii) Being the company controlled by Mr. Chao Hung-che.

(iv) Being the company controlled by Mr. Lee Yu-cheng.

(B) Related party transactions

Saved as disclosed elsewhere in the Historical Financial Information, the Group also

has the following significant related party transactions.

Nature of

transactions


Six months ended

30 June

2018 2019 2020 2020 2021


Shanghai Aotu . . . Purchase of

red wine

73 124 175 63 63

Sunjuice . . . . . . . Purchase of

concentrated

fruit juice

N/A N/A 265 N/A 387

Mr. Lee Yu-cheng had provided personal guarantees to banks in respect of the Group’s

banking facilities during the Track Record Period as follows:


Effective period Amount

RMB’000

From 20 September 2018 to 30 September 2019 . . . . . . . . . . . . . . . . . . . . 30,000


– I-82 –




RMB’000

From 23 April 2019 to 31 January 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,000



RMB’000

From 26 February 2020 to 31 August 2020 . . . . . . . . . . . . . . . . . . . . . . . . . 10,000

From 26 February 2020 to 2 December 2020 . . . . . . . . . . . . . . . . . . . . . . . 10,000

From 29 April 2020 to 30 April 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,000

From 8 May 2020 to 29 April 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,321

From 2 December 2020 to 31 December 2023 . . . . . . . . . . . . . . . . . . . . . . 20,000

From 2 December 2020 to 31 December 2024 . . . . . . . . . . . . . . . . . . . . . . 20,000

82,321

For the six months ended 30 June 2020 (unaudited)


RMB’000

From 26 February 2020 to 31 August 2020 . . . . . . . . . . . . . . . . . . . . . . . . . 10,000

From 26 February 2020 to 2 December 2020 . . . . . . . . . . . . . . . . . . . . . . . 10,000


From 8 May 2020 to 29 April 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,321

42,321



RMB’000

From 27 April 2021 to 26 April 2022 (note) . . . . . . . . . . . . . . . . . . . . . . . . 20,000


From 23 June 2021 to 30 April 2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,314

From 25 June 2021 to 26 May 2022 (note) . . . . . . . . . . . . . . . . . . . . . . . . . 30,000

82,314

Note: Mr. Lee Yu Cheng, together with his spouse, provided personal guarantees to such bank facilities.


– I-83 –


During the year ended 31 December 2020, Mr. Lee Yu-cheng, together with his spouse,

has provided personal guarantees to a bank in respect of any unpaid loans of the Group

from such bank with amount not exceeding RMB30,000,000, effective from 10 March 2020

to 31 December 2021.

The remuneration of directors and other members of key management of the Group

during the Track Record Period were as follows:


Six months ended

30 June

2018 2019 2020 2020 2021


(unaudited)

Salaries and other allowances . . . 1,444 2,080 2,012 960 1,117

Performance-based bonuses . . . . 3,011 2,470 1,836 327 238

Retirement benefit scheme

contributions . . . . . . . . . . . . . 49 87 116 61 74

Equity-settled share-based

payment expenses . . . . . . . . . . — 1,416 1,056 598 219

4,504 6,053 5,020 1,946 1,648

35. PARTICULARS OF SUBSIDIARIES OF THE COMPANY

As at the date of this report, particulars of the Company’s subsidiaries are as follow:

Name ofsubsidiaries Principal activities

Place of incorporation/establishment and

operation

Date ofincorporation/establishment

Paid-in/sharecapital/

registeredcapital

Equity interest attributable toowners of the Company Notes


30 June Date ofthis report2018 2019 2020 2021

Laowang F&BManagement(HK) Limited . . .

Investment holding Hong Kong 26 May 2015 USD8,005,100 100% 100% 100% 100% 100% (b)

LaowangInternational . . .

Investment holding the Cayman Islands 2 April 2013 USD2,000,000 54% 54% 54% 54% 54% (c)

Laowang Samoa . . . Investment holding Samoa 28 March 2013 USD2,000,000 100% 100% 100% 100% 100% (c)

Laopin Shanghai . . . Retail of food andbeverage

the PRC 14 August 2013 USD1,300,000 100% 100% 100% 100% 100% (a)

LaowangShanghai . . . . .

Retail of food andbeverage

the PRC 24 September 2015 USD8,000,000 100% 100% 100% 100% 100% (a)

Suzhou Laohui FoodLimited* (蘇州撈匯食品有限公司) .

Food manufacturingand sales business

the PRC 30 January 2015 RMB1,500,000 100% 100% 100% 100% 100% (c)

Shanghai Changli . . Retail of food andbeverage

the PRC 6 May 2019 RMB1,800,000 N/A 100% 100% 100% 100% (c)

None of the subsidiaries had issued any debt securities during the Track Record Period.



– I-84 –


Notes:

a) The statutory financial statements for each of the years ended 31 December 2018, 2019 and 2020 wereprepared in accordance with the Accounting Standards for Business Enterprises and financial regulationsapplicable in the PRC and were audited by 上海榮審會計師事務所有限責任公司 Certified Public AccountantsLLP, certified public accountants registered in the PRC.

b) The financial statements of Laowang F&B Management (HK) Limited for each of the years ended 31 December2018, 2019 and 2020 were prepared in accordance with the Hong Kong Financial Reporting Standards andthe Hong Kong Companies Ordinance and were audited by Lam Yu Chung, CPA (Practising), a certified publicaccountant registered in Hong Kong.

c) No statutory financial statements have been prepared for each of the three years ended 31 December 2018,2019 and 2020 as there were no statutory audit requirements for these subsidiaries.

36. FINANCIAL INFORMATION OF THE COMPANY

(A) Interests in subsidiaries


2018 2019 2020 2021

RMB’000 RMB’000 RMB’000 RMB’000

Cost of investments

in subsidiaries (note) . . . . . . 53,460 53,460 53,460 53,460

Share of profits and other

comprehensive income, net of

dividend received . . . . . . . . . 83,411 141,101 199,863 233,020

136,871 194,561 253,323 286,480

Note: During the year ended 31 December 2018, the Controlling Shareholders transferred 324,210 Company’s

ordinary shares that they hold to 13 individuals (including 11 then employees of the Group) at a price of

USD1.0 per share, as an incentive for their management and advisory service provided to the Group in

respect of Laowang Shanghai’s business operation of the hotpot restaurants. The Company recorded

shareholder contribution in other reserves and cost of investments in subsidiaries amounting to

RMB9,432,000, respectively.


– I-85 –


(B) Movement of the Company’s share premium and reserves

Share

premium

Treasury

shares

Share-

based

payment

reserve

Other

reserves

Exchange

reserve

Retained

earnings Total


At 1 January 2018 . . . . . . . . . . . . . . . . . . — — — — (92) 32,577 32,485

Total comprehensive income for

the year . . . . . . . . . . . . . . . . . . . . . . — — — — 198 46,770 46,968

Conversion of retained earnings into share

capital (note 27(iii)) . . . . . . . . . . . . . . — — — — — (17,202) (17,202)


payments to employees and advisors . . . — — — 9,432 — — 9,432

Deemed distribution as part of the Group

Reorganisation (note 2) . . . . . . . . . . . . — — — (16,409) — — (16,409)

Issue of new shares (note 27(i)) . . . . . . . . 8,322 — — — — — 8,322

At 31 December 2018 . . . . . . . . . . . . . . . 8,322 — — (6,977) 106 62,145 63,596

Total comprehensive income for the year . . — — — — 406 77,949 78,355


capital (note 27(iii)) . . . . . . . . . . . . . . — — — — — (10,587) (10,587)

Dividends recognised as distribution

(note 13) . . . . . . . . . . . . . . . . . . . . . — — — — — (26,506) (26,506)

Issue of restricted shares under share-

based payments scheme (note 27(ii)) . . . — (2,427) — — — — (2,427)


payments (note 28) . . . . . . . . . . . . . . — — 3,880 — — — 3,880

At 31 December 2019 . . . . . . . . . . . . . . . 8,322 (2,427) 3,880 (6,977) 512 103,001 106,311

Total comprehensive income for the year . . — — — — 202 66,036 66,238


capital (note 27(iii)) . . . . . . . . . . . . . . — — — — — (11,088) (11,088)

Dividends recognised as distribution

(note 13) . . . . . . . . . . . . . . . . . . . . . — — — — — (11,088) (11,088)

Effect of re-denomination of share capital

(note 27(v)) . . . . . . . . . . . . . . . . . . . . (6,459) — — — — — (6,459)


– I-86 –


Share

premium

Treasury

shares

Share-

based

payment

reserve

Other

reserves

Exchange

reserve

Retained

earnings Total


Repurchase and cancellation of

restricted shares under share-based

payments scheme (note 27(iv)) . . . . — 310 — — — — 310

Vesting of restricted shares under share-

based payments scheme (note 28) . . . . 4,488 1,059 (3,853) — — — 1,694


payments (note 28) . . . . . . . . . . . . . . — — 3,184 — — — 3,184

At 31 December 2020 . . . . . . . . . . . . . . . 6,351 (1,058) 3,211 (6,977) 714 146,861 149,102

Total comprehensive income for the period . — — — — (22) 20,868 20,846


payments (note 28) . . . . . . . . . . . . . . — — 625 — — — 625

At 30 June 2021 . . . . . . . . . . . . . . . . . . . 6,351 (1,058) 3,836 (6,977) 692 167,729 170,573

For the six months ended 30 June 2020 (unaudited)

At 1 January 2020 . . . . . . . . . . . . . . . . . 8,322 (2,427) 3,880 (6,977) 512 103,001 106,311

Total comprehensive income for the period . — — — — 566 653 1,219


payments (note 28) . . . . . . . . . . . . . . — — 1,757 — — — 1,757

At 30 June 2020 (unaudited) . . . . . . . . . . 8,322 (2,427) 5,637 (6,977) 1,078 103,654 109,287

37. DIRECTORS’ REMUNERATION

Under the arrangement currently in force, the aggregate amount of the directors’

remuneration and benefits in kind for the year ending 31 December 2021 is estimated to be

approximately RMB2.6 million (excluding discretionary bonus).


– I-87 –


38. SUBSEQUENT FINANCIAL STATEMENTS

[No audited financial statements of the Group, the Company or any of its subsidiaries have

been prepared in respect of any period subsequent to 30 June 2021 and up to the date of this

report.]

39. EVENTS AFTER THE REPORTING PERIOD

Except as disclosed elsewhere of the Historical Financial Information, the Group has the

following event entered into subsequent to 30 June 2021:

(i) On [28 July] 2021, the pre-[REDACTED] share option scheme was approved and adopted

by the Board of Directors of the Company. [The principal term of the pre-[REDACTED]

share option scheme is set out in the section headed ‘‘Statutory and General

Information’’ in Appendix IV to the Document].

(ii) Pursuant to the resolutions of the shareholders of the Company on [date], it was

resolved, among other matters, that:

(a) the authorised share capital of the Company be increased from NT$900,000,000

divided into 90,000,000 shares of a par value of NT$10.0 each, to (i)

NT$900,000,000 divided into 90,000,000 shares of a par value of NT$10.0 each,

and (ii) HK$[REDACTED] divided into [REDACTED] shares of a par value of

HK$[REDACTED], by the creation of an additional [REDACTED] shares of a par value

of HK$[REDACTED] each;

(b) following the aforementioned increase in authorised share capital, [325,371,420]

shares with a par value of HK$[REDACTED] each be allotted and issued to all the

[91] shareholders standing on the register of members of the Company in

proportion to their respective shareholdings in the Company immediately before

such issuance, credited as fully paid (the ‘‘New Shares Issuance’’);

(c) as consideration for the New Shares Issuance, the [54,228,570] shares of a par

value of NT$10.0 each be repurchased by the Company at a consideration of

NT$[10.0] per share and be cancelled immediately upon repurchase (the

‘‘Repurchase’’);

(d) upon completion of the Repurchase, the [35,771,430] unissued NT Shares be

cancelled so that the authorised share capital of the Company will be reduced to

HK$[REDACTED] divided into [REDACTED] shares of a par value of HK$[0.1] each, in

accordance with section 13 of the Companies Act of the Cayman Islands;


– I-88 –


[REDACTED]

APPENDIX II [REDACTED]

– II-1 –


[REDACTED]


– II-2 –


[REDACTED]


– II-2.1 –


[REDACTED]


– II-2.2 –


[REDACTED]


– II-2.3 –


Set out below is a summary of certain provisions of the Memorandum and Articles of

Association of the Company and of certain aspects of Cayman Islands company law.

The Company was incorporated in the Cayman Islands as an exempted company with limited

liability on 15 April 2015 under the Companies Act. The Company’s constitutional documents

consist of its Amended and Restated Memorandum of Association (Memorandum) and its

Amended and Restated Articles of Association (Articles).

1. MEMORANDUM OF ASSOCIATION

(a) The Memorandum provides, inter alia, that the liability of members of the Company is

limited and that the objects for which the Company is established are unrestricted

(and therefore include acting as an investment company), and that the Company shall

have and be capable of exercising any and all of the powers at any time or from time

to time exercisable by a natural person or body corporate whether as principal, agent,

contractor or otherwise and, since the Company is an exempted company, that the

Company will not trade in the Cayman Islands with any person, firm or corporation

except in furtherance of the business of the Company carried on outside the Cayman

Islands.

(b) By special resolution the Company may alter the Memorandum with respect to any

objects, powers or other matters specified in it.

2. ARTICLES OF ASSOCIATION

The Articles were adopted on [date] with effect from the [REDACTED]. A summary of certain

provisions of the Articles is set out below.

(a) Shares

(i) Classes of shares

The share capital of the Company consists of ordinary shares.

(ii) Variation of rights of existing shares or classes of shares

Subject to the Companies Act, if at any time the share capital of the Company is divided

into different classes of shares, all or any of the special rights attached to any class of shares

may (unless otherwise provided for by the terms of issue of the shares of that class) be varied,

modified or abrogated either with the consent in writing of the holders of not less than three-

fourths in nominal value of the issued shares of that class or with the sanction of a special

resolution passed at a separate general meeting of the holders of the shares of that class. The

provisions of the Articles relating to general meetings shall mutatis mutandis apply to every such

separate general meeting, but so that the necessary quorum (other than at an adjourned

meeting) shall be not less than two persons together holding (or, in the case of a member being

a corporation, by its duly authorized representative) or representing by proxy not less than one-

APPENDIX III SUMMARY OF THE CONSTITUTION OF OUR COMPANYAND CAYMAN ISLANDS COMPANY LAW

– III-1 –


third in nominal value of the issued shares of that class. Every holder of shares of the class shall

be entitled on a poll to one vote for every such share held by him, and any holder of shares of

the class present in person or by proxy may demand a poll.

Any special rights conferred upon the holders of any shares or class of shares shall not,

unless otherwise expressly provided in the rights attaching to the terms of issue of such shares,

be deemed to be varied by the creation or issue of further shares ranking pari passu therewith.

(iii) Alteration of capital

The Company may, by an ordinary resolution of its members: (a) increase its share capital

by the creation of new shares of such amount as it thinks expedient; (b) consolidate or divide all

or any of its share capital into shares of larger or smaller amount than its existing shares; (c)

divide its unissued shares into several classes and attach to such shares any preferential,

deferred, qualified or special rights, privileges or conditions; (d) subdivide its shares or any of

them into shares of an amount smaller than that fixed by the Memorandum; (e) cancel any

shares which, at the date of the resolution, have not been taken or agreed to be taken by any

person and diminish the amount of its share capital by the amount of the shares so cancelled;

(f) make provision for the allotment and issue of shares which do not carry any voting rights; and

(g) change the currency of denomination of its share capital.

(iv) Transfer of shares

Subject to the Companies Act and the requirements of The Stock Exchange of Hong Kong

Limited (the ‘‘Stock Exchange’’), all transfers of shares shall be effected by an instrument of

transfer in the usual or common form or in such other form as the Board may approve and may

be under hand or, if the transferor or transferee is a [REDACTED] House or its nominee(s), under

hand or by machine imprinted signature, or by such other manner of execution as the Board may

approve from time to time.

Execution of the instrument of transfer shall be by or on behalf of the transferor and the

transferee, provided that the Board may dispense with the execution of the instrument of

transfer by the transferor or transferee or accept mechanically executed transfers. The transferor

shall be deemed to remain the holder of a share until the name of the transferee is entered in

the register of members of the Company in respect of that share.

The Board may, in its absolute discretion, at any time and from time to time remove any

share on the principal register to any branch register or any share on any branch register to the

principal register or any other branch register. Unless the Board otherwise agrees, no shares on

the principal register shall be removed to any branch register nor shall shares on any branch

register be removed to the principal register or any other branch register. All removals and other

documents of title shall be lodged for registration and registered, in the case of shares on any

branch register, at the relevant registration office and, in the case of shares on the principal

register, at the place at which the principal register is located.


– III-2 –


The Board may, in its absolute discretion, decline to register a transfer of any share (not

being a fully paid up share) to a person of whom it does not approve or on which the Company

has a lien. It may also decline to register a transfer of any share issued under any share option

scheme upon which a restriction on transfer subsists or a transfer of any share to more than four

joint holders.

The Board may decline to recognise any instrument of transfer unless a certain fee, up to

such maximum sum as the Stock Exchange may determine to be payable, is paid to the

Company, the instrument of transfer is properly stamped (if applicable), is in respect of only one

class of share and is lodged at the relevant registration office or the place at which the principal

register is located accompanied by the relevant share certificate(s) and such other evidence as

the Board may reasonably require is provided to show the right of the transferor to make the

transfer (and if the instrument of transfer is executed by some other person on his behalf, the

authority of that person so to do).

The register of members may, subject to the Listing Rules, be closed at such time or for

such period not exceeding in the whole 30 days in each year as the Board may determine.

Fully paid shares shall be free from any restriction on transfer (except when permitted by

the Stock Exchange) and shall also be free from all liens.

(v) Power of the Company to purchase its own shares

The Company may purchase its own shares subject to certain restrictions and the Board

may only exercise this power on behalf of the Company subject to any applicable requirement

imposed from time to time by the Articles or any, code, rules or regulations issued from time to

time by the Stock Exchange and/or the Securities and Futures Commission of Hong Kong.

Where the Company purchases for redemption a redeemable Share, purchases not made

through the market or by tender shall be limited to a maximum price and, if purchases are by

tender, tenders shall be available to all members alike.

(vi) Power of any subsidiary of the Company to own shares in the Company

There are no provisions in the Articles relating to the ownership of shares in the Company

by a subsidiary.

(vii) Calls on shares and forfeiture of shares

The Board may, from time to time, make such calls as it thinks fit upon the members in

respect of any monies unpaid on the shares held by them respectively (whether on account of

the nominal value of the shares or by way of premium) and not by the conditions of allotment of

such shares made payable at fixed times. A call may be made payable either in one sum or by

instalments. If the sum payable in respect of any call or instalment is not paid on or before the

day appointed for payment thereof, the person or persons from whom the sum is due shall pay

interest on the same at such rate not exceeding 20% per annum as the Board shall fix from the

day appointed for payment to the time of actual payment, but the Board may waive payment of


– III-3 –


such interest wholly or in part. The Board may, if it thinks fit, receive from any member willing to

advance the same, either in money or money’s worth, all or any part of the money uncalled and

unpaid or instalments payable upon any shares held by him, and in respect of all or any of the

monies so advanced the Company may pay interest at such rate (if any) not exceeding 20% per

annum as the Board may decide.

If a member fails to pay any call or instalment of a call on the day appointed for payment,

the Board may, for so long as any part of the call or instalment remains unpaid, serve not less

than 14 days’ notice on the member requiring payment of so much of the call or instalment as is

unpaid, together with any interest which may have accrued and which may still accrue up to the

date of actual payment. The notice shall name a further day (not earlier than the expiration of 14

days from the date of the notice) on or before which the payment required by the notice is to be

made, and shall also name the place where payment is to be made. The notice shall also state

that, in the event of non-payment at or before the appointed time, the shares in respect of which

the call was made will be liable to be forfeited.

If the requirements of any such notice are not complied with, any share in respect of which

the notice has been given may at any time thereafter, before the payment required by the notice

has been made, be forfeited by a resolution of the Board to that effect. Such forfeiture will

include all dividends and bonuses declared in respect of the forfeited share and not actually

paid before the forfeiture.

A person whose shares have been forfeited shall cease to be a member in respect of the

forfeited shares but shall, nevertheless, remain liable to pay to the Company all monies which,

at the date of forfeiture, were payable by him to the Company in respect of the shares together

with (if the Board shall in its discretion so require) interest thereon from the date of forfeiture

until payment at such rate not exceeding 20% per annum as the Board may prescribe.

(b) Directors

(i) Appointment, retirement and removal

At any time or from time to time, the Board shall have the power to appoint any person as a

Director either to fill a casual vacancy on the Board or as an additional Director to the existing

Board subject to any maximum number of Directors, if any, as may be determined by the

members in general meeting. Any Director so appointed to fill a casual vacancy shall hold office

only until the first general meeting of the Company after his appointment and be subject to re-

election at such meeting. Any Director so appointed as an addition to the existing Board shall

hold office only until the first annual general meeting of the Company after his appointment and

be eligible for re-election at such meeting. Any Director so appointed by the Board shall not be

taken into account in determining the Directors or the number of Directors who are to retire by

rotation at an annual general meeting.

At each annual general meeting, one third of the Directors for the time being shall retire

from office by rotation. However, if the number of Directors is not a multiple of three, then the

number nearest to but not less than one third shall be the number of retiring Directors. The

Directors to retire in each year shall be those who have been in office longest since their last re-


– III-4 –


election or appointment but, as between persons who became or were last re-elected Directors

on the same day, those to retire shall (unless they otherwise agree among themselves) be

determined by lot.

No person, other than a retiring Director, shall, unless recommended by the Board for

election, be eligible for election to the office of Director at any general meeting, unless notice in

writing of the intention to propose that person for election as a Director and notice in writing by

that person of his willingness to be elected has been lodged at the head office or at the

registration office of the Company. The period for lodgment of such notices shall commence no

earlier than the day after despatch of the notice of the relevant meeting and end no later than

seven days before the date of such meeting and the minimum length of the period during which

such notices may be lodged must be at least seven days.

A Director is not required to hold any shares in the Company by way of qualification nor is

there any specified upper or lower age limit for Directors either for accession to or retirement

from the Board.

A Director may be removed by an ordinary resolution of the Company before the expiration

of his term of office (but without prejudice to any claim which such Director may have for

damages for any breach of any contract between him and the Company) and the Company may by

ordinary resolution appoint another in his place. Any Director so appointed shall be subject to

the ‘‘retirement by rotation’’ provisions. The number of Directors shall not be less than two.

The office of a Director shall be vacated if he:

(aa) resigns;

(bb) dies;

(cc) is declared to be of unsound mind and the Board resolves that his office be vacated;

(dd) becomes bankrupt or has a receiving order made against him or suspends payment or

compounds with his creditors generally;

(ee) is prohibited from being or ceases to be a director by operation of law;

(ff) without special leave, is absent from meetings of the Board for six consecutive

months, and the Board resolves that his office is vacated;

(gg) has been required by the stock exchange of the Relevant Territory (as defined in the

Articles) to cease to be a Director; or

(hh) is removed from office by the requisite majority of the Directors or otherwise pursuant

to the Articles.

From time to time the Board may appoint one or more of its body to be managing director,

joint managing director or deputy managing director or to hold any other employment or

executive office with the Company for such period and upon such terms as the Board may


– III-5 –


determine, and the Board may revoke or terminate any of such appointments. The Board may

also delegate any of its powers to committees consisting of such Director(s) or other person(s)

as the Board thinks fit, and from time to time it may also revoke such delegation or revoke the

appointment of and discharge any such committees either wholly or in part, and either as to

persons or purposes, but every committee so formed shall, in the exercise of the powers so

delegated, conform to any regulations that may from time to time be imposed upon it by the

Board.

(ii) Power to allot and issue shares and warrants

Subject to the provisions of the Companies Act, the Memorandum and Articles and without

prejudice to any special rights conferred on the holders of any shares or class of shares, any

share may be issued with or have attached to it such rights, or such restrictions, whether with

regard to dividend, voting, return of capital or otherwise, as the Company may by ordinary

resolution determine (or, in the absence of any such determination or so far as the same may not

make specific provision, as the Board may determine). Any share may be issued on terms that,

upon the happening of a specified event or upon a given date and either at the option of the

Company or the holder of the share, it is liable to be redeemed.

The Board may issue warrants to subscribe for any class of shares or other securities of the

Company on such terms as it may from time to time determine.

Where warrants are issued to bearer, no certificate in respect of such warrants shall be

issued to replace one that has been lost unless the Board is satisfied beyond reasonable doubt

that the original certificate has been destroyed and the Company has received an indemnity in

such form as the Board thinks fit with regard to the issue of any such replacement certificate.

Subject to the provisions of the Companies Act, the Articles and, where applicable, the

rules of any stock exchange of the Relevant Territory (as defined in the Articles) and without

prejudice to any special rights or restrictions for the time being attached to any shares or any

class of shares, all unissued shares in the Company shall be at the disposal of the Board, which

may offer, allot, grant options over or otherwise dispose of them to such persons, at such times,

for such consideration and on such terms and conditions as it in its absolute discretion thinks

fit, but so that no shares shall be issued at a discount.

Neither the Company nor the Board shall be obliged, when making or granting any allotment

of, offer of, option over or disposal of shares, to make, or make available, any such allotment,

offer, option or shares to members or others whose registered addresses are in any particular

territory or territories where, in the absence of a registration statement or other special

formalities, this is or may, in the opinion of the Board, be unlawful or impracticable. However, no

member affected as a result of the foregoing shall be, or be deemed to be, a separate class of

members for any purpose whatsoever.


– III-6 –


(iii) Power to dispose of the assets of the Company or any of its subsidiaries

While there are no specific provisions in the Articles relating to the disposal of the assets

of the Company or any of its subsidiaries, the Board may exercise all powers and do all acts and

things which may be exercised or done or approved by the Company and which are not required

by the Articles or the Companies Act to be exercised or done by the Company in general meeting,

but if such power or act is regulated by the Company in general meeting, such regulation shall

not invalidate any prior act of the Board which would have been valid if such regulation had not

been made.

(iv) Borrowing powers

The Board may exercise all the powers of the Company to raise or borrow money, to

mortgage or charge all or any part of the undertaking, property and uncalled capital of the

Company and, subject to the Companies Act, to issue debentures, debenture stock, bonds and

other securities of the Company, whether outright or as collateral security for any debt, liability

or obligation of the Company or of any third party.

(v) Remuneration

The Directors shall be entitled to receive, as ordinary remuneration for their services, such

sums as shall from time to time be determined by the Board or the Company in general meeting,

as the case may be, such sum (unless otherwise directed by the resolution by which it is

determined) to be divided among the Directors in such proportions and in such manner as they

may agree or, failing agreement, either equally or, in the case of any Director holding office for

only a portion of the period in respect of which the remuneration is payable, pro rata. The

Directors shall also be entitled to be repaid all expenses reasonably incurred by them in

attending any Board meetings, committee meetings or general meetings or otherwise in

connection with the discharge of their duties as Directors. Such remuneration shall be in

addition to any other remuneration to which a Director who holds any salaried employment or

office in the Company may be entitled by reason of such employment or office.

Any Director who, at the request of the Company, performs services which in the opinion of

the Board goes beyond the ordinary duties of a Director may be paid such special or extra

remuneration as the Board may determine, in addition to or in substitution for any ordinary

remuneration as a Director. An executive Director appointed to be a managing director, joint

managing director, deputy managing director or other executive officer shall receive such

remuneration and such other benefits and allowances as the Board may from time to time

decide. Such remuneration shall be in addition to his ordinary remuneration as a Director.

The Board may establish, either on its own or jointly in concurrence or agreement with

subsidiaries of the Company or companies with which the Company is associated in business, or

may make contributions out of the Company’s monies to, any schemes or funds for providing

pensions, sickness or compassionate allowances, life assurance or other benefits for employees

(which expression as used in this and the following paragraph shall include any Director or


– III-7 –


former Director who may hold or have held any executive office or any office of profit with the

Company or any of its subsidiaries) and former employees of the Company and their dependents

or any class or classes of such persons.

The Board may also pay, enter into agreements to pay or make grants of revocable or

irrevocable, whether or not subject to any terms or conditions, pensions or other benefits to

employees and their dependents, or to any of such persons, including pensions or benefits

additional to those, if any, to which such employees or former employees or their dependents

are or may become entitled under any such scheme or fund as mentioned above. Such pension

or benefit may, if deemed desirable by the Board, be granted to an employee either before and

in anticipation of, or upon or at any time after, his actual retirement.

(vi) Compensation or payments for loss of office

Payments to any present Director or past Director of any sum by way of compensation for

loss of office or as consideration for or in connection with his retirement from office (not being a

payment to which the Director is contractually or statutorily entitled) must be approved by the

Company in general meeting.

(vii) Loans and provision of security for loans to Directors

The Company shall not directly or indirectly make a loan to a Director or a director of any

holding company of the Company or any of their respective close associates, enter into any

guarantee or provide any security in connection with a loan made by any person to a Director or

a director of any holding company of the Company or any of their respective close associates, or,

if any one or more of the Directors hold(s) (jointly or severally or directly or indirectly) a

controlling interest in another company, make a loan to that other company or enter into any

guarantee or provide any security in connection with a loan made by any person to that other

company.

(viii) Disclosure of interest in contracts with the Company or any of its subsidiaries

With the exception of the office of auditor of the Company, a Director may hold any other

office or place of profit with the Company in conjunction with his office of Director for such

period and upon such terms as the Board may determine, and may be paid such extra

remuneration for that other office or place of profit, in whatever form, in addition to any

remuneration provided for by or pursuant to any other Articles. A Director may be or become a

director, officer or member of any other company in which the Company may be interested, and

shall not be liable to account to the Company or the members for any remuneration or other

benefit received by him as a director, officer or member of such other company. The Board may

also cause the voting power conferred by the shares in any other company held or owned by the

Company to be exercised in such manner in all respects as it thinks fit, including the exercise in

favour of any resolution appointing the Directors or any of them to be directors or officers of

such other company.


– III-8 –


No Director or intended Director shall be disqualified by his office from contracting with the

Company, nor shall any such contract or any other contract or arrangement in which any Director

is in any way interested be liable to be avoided, nor shall any Director so contracting or being so

interested be liable to account to the Company for any profit realized by any such contract or

arrangement by reason only of such Director holding that office or the fiduciary relationship

established by it. A Director who is, in any way, materially interested in a contract or

arrangement or proposed contract or arrangement with the Company shall declare the nature of

his interest at the earliest meeting of the Board at which he may practically do so.

There is no power to freeze or otherwise impair any of the rights attaching to any share by

reason that the person or persons who are interested directly or indirectly in that share have

failed to disclose their interests to the Company.

A Director shall not vote or be counted in the quorum on any resolution of the Board in

respect of any contract or arrangement or proposal in which he or any of his close associate(s)

has/have a material interest, and if he shall do so his vote shall not be counted, nor shall he be

counted in the quorum for that resolution, but this prohibition shall not apply to any of the

following matters:

(aa) the giving of any security or indemnity to the Director or his close associate(s) in

respect of money lent or obligations incurred or undertaken by him or any of them at

the request of or for the benefit of the Company or any of its subsidiaries;

(bb) the giving of any security or indemnity to a third party in respect of a debt or

obligation of the Company or any of its subsidiaries for which the Director or his close

associate(s) has/have himself/themselves assumed responsibility in whole or in part

whether alone or jointly under a guarantee or indemnity or by the giving of security;

(cc) any proposal concerning an [REDACTED] of shares, debentures or other securities of or

by the Company or any other company which the Company may promote or be

interested in for subscription or purchase, where the Director or his close associate(s)

is/are or is/are to be interested as a participant in the [REDACTED] or sub-[REDACTED]

of the [REDACTED];

(dd) any proposal or arrangement concerning the benefit of employees of the Company or

any of its subsidiaries, including the adoption, modification or operation of either: (i)

any employees’ share scheme or any share incentive or share option scheme under

which the Director or his close associate(s) may benefit; or (ii) any of a pension fund

or retirement, death or disability benefit scheme which relates to Directors, their close

associates and employees of the Company or any of its subsidiaries and does not

provide in respect of any Director or his close associate(s) any privilege or advantage

not generally accorded to the class of persons to which such scheme or fund relates;

and


– III-9 –


(ee) any contract or arrangement in which the Director or his close associate(s) is/are

interested in the same manner as other holders of shares, debentures or other

securities of the Company by virtue only of his/their interest in those shares,

debentures or other securities.

(ix) Proceedings of the Board

The Board may meet anywhere in the world for the despatch of business and may adjourn

and otherwise regulate its meetings as it thinks fit. Questions arising at any meeting shall be

determined by a majority of votes. In the case of an equality of votes, the chairman of the

meeting shall have a second or casting vote.

(c) Alterations to the constitutional documents and the Company’s name

To the extent that the same is permissible under Cayman Islands law and subject to the

Articles, the Memorandum and Articles of the Company may only be altered or amended, and the

name of the Company may only be changed, with the sanction of a special resolution of the

Company.

(d) Meetings of member

(i) Special and ordinary resolutions

A special resolution of the Company must be passed by a majority of not less than three-

fourths of the votes cast by such members as, being entitled so to do, vote in person or by proxy

or, in the case of members which are corporations, by their duly authorised representatives or,

where proxies are allowed, by proxy at a general meeting of which notice specifying the intention

to propose the resolution as a special resolution has been duly given.

Under the Companies Act, a copy of any special resolution must be forwarded to the

[REDACTED] of Companies in the Cayman Islands within 15 days of being passed.

An ‘‘ordinary resolution’’, by contrast, is a resolution passed by a simple majority of the

votes of such members of the Company as, being entitled to do so, vote in person or, in the case

of members which are corporations, by their duly authorised representatives or, where proxies

are allowed, by proxy at a general meeting of which notice has been duly given.

A resolution in writing signed by or on behalf of all members shall be treated as an ordinary

resolution duly passed at a general meeting of the Company duly convened and held, and where

relevant as a special resolution so passed.

(ii) Voting rights and right to demand a poll

Subject to any special rights, restrictions or privileges as to voting for the time being

attached to any class or classes of shares at any general meeting: (a) on a poll every member

present in person or by proxy or, in the case of a member being a corporation, by its duly

authorised representative shall have one vote for every share which is fully paid or credited as


– III-10 –


fully paid registered in his name in the register of members of the Company but so that no

amount paid up or credited as paid up on a share in advance of calls or instalments is treated

for this purpose as paid up on the share; and (b) on a show of hands every member who is

present in person (or, in the case of a member being a corporation, by its duly authorised

representative) or by proxy shall have one vote. Where more than one proxy is appointed by a

member which is a [REDACTED] House (as defined in the Articles) or its nominee(s), each such

proxy shall have one vote on a show of hands. On a poll, a member entitled to more than one

vote need not use all his votes or cast all the votes he does use in the same way.

At any general meeting a resolution put to the vote of the meeting is to be decided by poll

save that the chairman of the meeting may, pursuant to the Listing Rules, allow a resolution to

be voted on by a show of hands. Where a show of hands is allowed, before or on the declaration

of the result of the show of hands, a poll may be demanded by (in each case by members

present in person or by proxy or by a duly authorised corporate representative):

(A) at least two members;

(B) any member or members representing not less than one-tenth of the total voting rights

of all the members having the right to vote at the meeting; or

(C) a member or members holding shares in the Company conferring a right to vote at the

meeting on which an aggregate sum has been paid equal to not less than one-tenth of

the total sum paid up on all the shares conferring that right.

Should a [REDACTED] House or its nominee(s) be a member of the Company, such person or

persons may be authorised as it thinks fit to act as its representative(s) at any meeting of the

Company or at any meeting of any class of members of the Company provided that, if more than

one person is so authorised, the authorization shall specify the number and class of shares in

respect of which each such person is so authorised. A person authorised in accordance with this

provision shall be deemed to have been duly authorised without further evidence of the facts

and be entitled to exercise the same rights and powers on behalf of the [REDACTED] House or its

nominee(s) as if such person were an individual member including the right to vote individually

on a show of hands.

Where the Company has knowledge that any member is, under the Listing Rules, required to

abstain from voting on any particular resolution or restricted to voting only for or only against

any particular resolution, any votes cast by or on behalf of such member in contravention of such

requirement or restriction shall not be counted.

(iii) Annual general meetings

The Company must hold an annual general meeting each year other than the year of the

Company’s adoption of the Articles. Such meeting must be held not more than 15 months after

the holding of the last preceding annual general meeting, or such longer period as may be

authorised by the Stock Exchange at such time and place as may be determined by the Board.


– III-11 –


(iv) Requisition of general meetings

Extraordinary general meetings may be convened on the requisition of one or more

members holding, at the date of deposit of the requisition, not less than one tenth of the paid

up capital of the Company having the right of voting at general meetings. Such requisition shall

be made in writing to the Board or the secretary of the Company for the purpose of requiring an

extraordinary general meeting to be called by the Board for the transaction of any business

specified in such requisition. Such meeting shall be held within two months after the deposit of

such requisition. If within 21 days of such deposit, the Board fails to proceed to convene such

meeting, the requisitionist(s) himself (themselves) may do so in the same manner, and all

reasonable expenses incurred by the requisitionist(s) as a result of the failure of the Board shall

be reimbursed to the requisitionist(s) by the Company.

(v) Notices of meetings and business to be conducted

An annual general meeting of the Company shall be called by at least 21 days’ notice in

writing, and any other general meeting of the Company shall be called by at least 14 days’ notice

in writing. The notice shall be exclusive of the day on which it is served or deemed to be served

and of the day for which it is given, and must specify the time, place and agenda of the meeting

and particulars of the resolution(s) to be considered at that meeting and, in the case of special

business, the general nature of that business.

Except where otherwise expressly stated, any notice or document (including a share

certificate) to be given or issued under the Articles shall be in writing, and may be served by the

Company on any member personally, by post to such member’s registered address or (in the case

of a notice) by advertisement in the newspapers. Any member whose registered address is

outside Hong Kong may notify the Company in writing of an address in Hong Kong which shall be

deemed to be his registered address for this purpose. Subject to the Companies Act and the

Listing Rules, a notice or document may also be served or delivered by the Company to any

member by electronic means.

Although a meeting of the Company may be called by shorter notice than as specified

above, such meeting may be deemed to have been duly called if it is so agreed:

(i) in the case of an annual general meeting, by all members of the Company entitled to

attend and vote thereat; and

(ii) in the case of any other meeting, by a majority in number of the members having a

right to attend and vote at the meeting holding not less than 95% of the total voting

rights in the Company.

All business transacted at an extraordinary general meeting shall be deemed special

business. All business shall also be deemed special business where it is transacted at an annual

general meeting, with the exception of certain routine matters which shall be deemed ordinary

business.


– III-12 –


(vi) Quorum for meetings and separate class meetings

No business shall be transacted at any general meeting unless a quorum is present when

the meeting proceeds to business, and continues to be present until the conclusion of the

meeting.

The quorum for a general meeting shall be two members present in person (or in the case

of a member being a corporation, by its duly authorised representative) or by proxy and entitled

to vote. In respect of a separate class meeting (other than an adjourned meeting) convened to

sanction the modification of class rights the necessary quorum shall be two persons holding or

representing by proxy not less than one-third in nominal value of the issued shares of that class.

(vii) Proxies

Any member of the Company entitled to attend and vote at a meeting of the Company is

entitled to appoint another person as his proxy to attend and vote instead of him. A member who

is the holder of two or more shares may appoint more than one proxy to represent him and vote

on his behalf at a general meeting of the Company or at a class meeting. A proxy need not be a

member of the Company and shall be entitled to exercise the same powers on behalf of a

member who is an individual and for whom he acts as proxy as such member could exercise. In

addition, a proxy shall be entitled to exercise the same powers on behalf of a member which is a

corporation and for which he acts as proxy as such member could exercise if it were an

individual member. On a poll or on a show of hands, votes may be given either personally (or, in

the case of a member being a corporation, by its duly authorized representative) or by proxy.

The instrument appointing a proxy shall be in writing under the hand of the appointor or of

his attorney duly authorised in writing, or if the appointor is a corporation, either under seal or

under the hand of a duly authorised officer or attorney. Every instrument of proxy, whether for a

specified meeting or otherwise, shall be in such form as the Board may from time to time

approve, provided that it shall not preclude the use of the two-way form. Any form issued to a

member for appointing a proxy to attend and vote at an extraordinary general meeting or at an

annual general meeting at which any business is to be transacted shall be such as to enable the

member, according to his intentions, to instruct the proxy to vote in favour of or against (or, in

default of instructions, to exercise his discretion in respect of) each resolution dealing with any

such business.


– III-13 –


(e) Accounts and audit

The Board shall cause proper books of account to be kept of the sums of money received

and expended by the Company, and of the assets and liabilities of the Company and of all other

matters required by the Companies Act (which include all sales and purchases of goods by the

company) necessary to give a true and fair view of the state of the Company’s affairs and to

show and explain its transactions.

The books of accounts of the Company shall be kept at the head office of the Company or

at such other place or places as the Board decides and shall always be open to inspection by

any Director. No member (other than a Director) shall have any right to inspect any account, book

or document of the Company except as conferred by the Companies Act or ordered by a court of

competent jurisdiction or authorised by the Board or the Company in general meeting.

The Board shall from time to time cause to be prepared and laid before the Company at its

annual general meeting balance sheets and profit and loss accounts (including every document

required by law to be annexed thereto), together with a copy of the Directors’ report and a copy

of the auditors’ report, not less than 21 days before the date of the annual general meeting.

Copies of these documents shall be sent to every person entitled to receive notices of general

meetings of the Company under the provisions of the Articles together with the notice of annual

general meeting, not less than 21 days before the date of the meeting.

Subject to the rules of the stock exchange of the Relevant Territory (as defined in the

Articles), the Company may send summarized financial statements to members who have, in

accordance with the rules of the stock exchange of the Relevant Territory, consented and elected

to receive summarized financial statements instead of the full financial statements. The

summarized financial statements must be accompanied by any other documents as may be

required under the rules of the stock exchange of the Relevant Territory, and must be sent to

those members that have consented and elected to receive the summarised financial statements

not less than 21 days before the general meeting.

The Company shall appoint auditor(s) to hold office until the conclusion of the next annual

general meeting on such terms and with such duties as may be agreed with the Board. The

auditors’ remuneration shall be fixed by the Company in general meeting or by the Board if

authority is so delegated by the members.

The members may, at a general meeting remove the auditor(s) by a special resolution at any

time before the expiration of the term of office of the auditor(s) and shall, by an ordinary

resolution, at that meeting appoint new auditor(s) in place of the removed auditor(s) for the

remainder of the term.

The auditors shall audit the financial statements of the Company in accordance with

generally accepted accounting principles of Hong Kong, the International Accounting Standards

or such other standards as may be permitted by the Stock Exchange.


– III-14 –


(f) Dividends and other methods of distribution

The Company in general meeting may declare dividends in any currency to be paid to the

members but no dividend shall be declared in excess of the amount recommended by the Board.

Except in so far as the rights attaching to, or the terms of issue of, any share may otherwise

provide:

(i) all dividends shall be declared and paid according to the amounts paid up on the

shares in respect of which the dividend is paid, although no amount paid up on a

share in advance of calls shall for this purpose be treated as paid up on the share;

(ii) all dividends shall be apportioned and paid pro rata in accordance with the amount

paid up on the shares during any portion(s) of the period in respect of which the

dividend is paid; and

(iii) the Board may deduct from any dividend or other monies payable to any member all

sums of money (if any) presently payable by him to the Company on account of calls,

instalments or otherwise.

Where the Board or the Company in general meeting has resolved that a dividend

should be paid or declared, the Board may resolve:

(aa) that such dividend be satisfied wholly or in part in the form of an allotment of

shares credited as fully paid up, provided that the members entitled to such

dividend will be entitled to elect to receive such dividend (or part thereof) in cash

in lieu of such allotment; or

(bb) that the members entitled to such dividend will be entitled to elect to receive an

allotment of shares credited as fully paid up in lieu of the whole or such part of

the dividend as the Board may think fit.

Upon the recommendation of the Board, the Company may by ordinary resolution in respect

of any one particular dividend of the Company determine that it may be satisfied wholly in the

form of an allotment of shares credited as fully paid up without offering any right to members to

elect to receive such dividend in cash in lieu of such allotment.

Any dividend, bonus or other sum payable in cash to the holder of shares may be paid by

cheque or warrant sent through the post. Every such cheque or warrant shall be made payable to

the order of the person to whom it is sent and shall be sent at the holder’s or joint holders’ risk

and payment of the cheque or warrant by the bank on which it is drawn shall constitute a good

discharge to the Company. Any one of two or more joint holders may give effectual receipts for

any dividends or other monies payable or property distributable in respect of the shares held by

such joint holders.


– III-15 –


Whenever the Board or the Company in general meeting has resolved that a dividend be

paid or declared, the Board may further resolve that such dividend be satisfied wholly or in part

by the distribution of specific assets of any kind.

The Board may, if it thinks fit, receive from any member willing to advance the same, and

either in money or money’s worth, all or any part of the money uncalled and unpaid or

instalments payable upon any shares held by him, and in respect of all or any of the monies so

advanced may pay interest at such rate (if any) not exceeding 20% per annum, as the Board may

decide, but a payment in advance of a call shall not entitle the member to receive any dividend

or to exercise any other rights or privileges as a member in respect of the share or the due

portion of the shares upon which payment has been advanced by such member before it is

called up.

All dividends, bonuses or other distributions unclaimed for one year after having been

declared may be invested or otherwise used by the Board for the benefit of the Company until

claimed and the Company shall not be constituted a trustee in respect thereof. All dividends,

bonuses or other distributions unclaimed for six years after having been declared may be

forfeited by the Board and, upon such forfeiture, shall revert to the Company.

No dividend or other monies payable by the Company on or in respect of any share shall

bear interest against the Company.

The Company may exercise the power to cease sending cheques for dividend entitlements

or dividend warrants by post if such cheques or warrants remain uncashed on two consecutive

occasions or after the first occasion on which such a cheque or warrant is returned undelivered.

(g) Inspection of corporate records

For so long as any part of the share capital of the Company is [REDACTED] on the Stock

Exchange, any member may inspect any register of members of the Company maintained in Hong

Kong (except when the register of members is closed) without charge and require the provision

to him of copies or extracts of such register in all respects as if the Company were incorporated

under and were subject to the Hong Kong Companies Ordinance.

(h) Rights of minorities in relation to fraud or oppression

There are no provisions in the Articles concerning the rights of minority members in relation

to fraud or oppression. However, certain remedies may be available to members of the Company

under Cayman Islands law, as summarized in paragraph 3(f) of this Appendix.


– III-16 –


(i) Procedures on liquidation

A resolution that the Company be wound up by the court or be wound up voluntarily shall

be a special resolution.

Subject to any special rights, privileges or restrictions as to the distribution of available

surplus assets on liquidation for the time being attached to any class or classes of shares:

(i) if the Company is wound up, the surplus assets remaining after payment to all

creditors shall be divided among the members in proportion to the capital paid up on

the shares held by them respectively; and

(ii) if the Company is wound up and the surplus assets available for distribution among

the members are insufficient to repay the whole of the paid-up capital, such assets

shall be distributed, subject to the rights of any shares which may be issued on

special terms and conditions, so that, as nearly as may be, the losses shall be borne

by the members in proportion to the capital paid up on the shares held by them,

respectively.

If the Company is wound up (whether the liquidation is voluntary or compelled by the

court), the liquidator may, with the sanction of a special resolution and any other sanction

required by the Companies Act, divide among the members in specie or kind the whole or any

part of the assets of the Company, whether the assets consist of property of one kind or different

kinds, and the liquidator may, for such purpose, set such value as he deems fair upon any one

or more class or classes of property to be so divided and may determine how such division shall

be carried out as between the members or different classes of members and the members within

each class. The liquidator may, with the like sanction, vest any part of the assets in trustees

upon such trusts for the benefit of members as the liquidator thinks fit, but so that no member

shall be compelled to accept any shares or other property upon which there is a liability.

(j) Subscription rights reserve

Provided that it is not prohibited by and is otherwise in compliance with the Companies

Act, if warrants to subscribe for shares have been issued by the Company and the Company does

any act or engages in any transaction which would result in the subscription price of such

warrants being reduced below the par value of the shares to be issued on the exercise of such

warrants, a subscription rights reserve shall be established and applied in paying up the

difference between the subscription price and the par value of such shares.


– III-17 –


3. CAYMAN ISLANDS COMPANY LAW

The Company was incorporated in the Cayman Islands as an exempted company on 15 April

2015 subject to the Companies Act. Certain provisions of Cayman Islands company law are set

out below but this section does not purport to contain all applicable qualifications and

exceptions or to be a complete review of all matters of the Companies Act and taxation, which

may differ from equivalent provisions in jurisdictions with which interested parties may be more

familiar.

(a) Company operations

An exempted company such as the Company must conduct its operations mainly outside the

Cayman Islands. An exempted company is also required to file an annual return each year with

the [REDACTED] of Companies of the Cayman Islands and pay a fee which is based on the amount

of its authorised share capital.

(b) Share capital

Under the Companies Act, a Cayman Islands company may issue ordinary, preference or

redeemable shares or any combination thereof. Where a company issues shares at a premium,

whether for cash or otherwise, a sum equal to the aggregate amount or value of the premiums on

those shares shall be transferred to an account, to be called the ‘‘share premium account.’’ At

the option of a company, these provisions may not apply to premiums on shares of that company

allotted pursuant to any arrangements in consideration of the acquisition or cancellation of

shares in any other company and issued at a premium. The share premium account may be

applied by the company subject to the provisions, if any, of its memorandum and articles of

association, in such manner as the company may from time to time determine including, but

without limitation, the following:

(i) paying distributions or dividends to members;

(ii) paying up unissued shares of the company to be issued to members as fully paid

bonus shares;

(iii) any manner provided in section 37 of the Companies Act;

(iv) writing-off the preliminary expenses of the company; and

(v) writing-off the expenses of, or the commission paid or discount allowed on, any issue

of shares or debentures of the company.

Notwithstanding the foregoing, no distribution or dividend may be paid to members out of

the share premium account unless, immediately following the date on which the distribution or

dividend is proposed to be paid, the company will be able to pay its debts as they fall due in the

ordinary course of business.


– III-18 –


Subject to confirmation by the court, a company limited by shares or a company limited by

guarantee and having a share capital may, if authorised to do so by its articles of association, by

special resolution reduce its share capital in any way.

(c) Financial assistance to purchase shares of a company or its holding company

There are no statutory prohibitions in the Cayman Islands on the granting of financial

assistance by a company to another person for the purchase of, or subscription for, its own, its

holding company’s or a subsidiary’s shares. Therefore, a company may provide financial

assistance provided the directors of the company, when proposing to grant such financial

assistance, discharge their duties of care and act in good faith, for a proper purpose and in the

interests of the company. Such assistance should be on an arm’s-length basis.

(d) Purchase of shares and warrants by a company and its subsidiaries

A company limited by shares or a company limited by guarantee and having a share capital

may, if so authorised by its articles of association, issue shares which are to be redeemed or are

liable to be redeemed at the option of the company or a member and, for the avoidance of

doubt, it shall be lawful for the rights attaching to any shares to be varied, subject to the

provisions of the company’s articles of association, so as to provide that such shares are to be

or are liable to be so redeemed. In addition, such a company may, if authorised to do so by its

articles of association, purchase its own shares, including any redeemable shares; an ordinary

resolution of the company approving the manner and terms of the purchase will be required if

the articles of association do not authorise the manner and terms of such purchase. A company

may not redeem or purchase its shares unless they are fully paid. Furthermore, a company may

not redeem or purchase any of its shares if, as a result of the redemption or purchase, there

would no longer be any issued shares of the company other than shares held as treasury shares.

In addition, a payment out of capital by a company for the redemption or purchase of its own

shares is not lawful unless, immediately following the date on which the payment is proposed to

be made, the company shall be able to pay its debts as they fall due in the ordinary course of

business.

Shares that have been purchased or redeemed by a company or surrendered to the

company shall not be treated as cancelled but shall be classified as treasury shares if held in

compliance with the requirements of Section 37A(1) of the Companies Act. Any such shares shall

continue to be classified as treasury shares until such shares are either cancelled or transferred

pursuant to the Companies Act.

A Cayman Islands company may be able to purchase its own warrants subject to and in

accordance with the terms and conditions of the relevant warrant instrument or certificate. Thus

there is no requirement under Cayman Islands law that a company’s memorandum or articles of

association contain a specific provision enabling such purchases. The directors of a company

may under the general power contained in its memorandum of association be able to buy, sell

and deal in personal property of all kinds.

A subsidiary may hold shares in its holding company and, in certain circumstances, may

acquire such shares.


– III-19 –


(e) Dividends and distributions

Subject to a solvency test, as prescribed in the Companies Act, and the provisions, if any,

of the company’s memorandum and articles of association, a company may pay dividends and

distributions out of its share premium account. In addition, based upon English case law which

is likely to be persuasive in the Cayman Islands, dividends may be paid out of profits.

For so long as a company holds treasury shares, no dividend may be declared or paid, and

no other distribution (whether in cash or otherwise) of the company’s assets (including any

distribution of assets to members on a winding up) may be made, in respect of a treasury share.

(f) Protection of minorities and shareholders’ suits

It can be expected that the Cayman Islands courts will ordinarily follow English case law

precedents (particularly the rule in the case of Foss v. Harbottle and the exceptions to that rule)

which permit a minority member to commence a representative action against or derivative

actions in the name of the company to challenge acts which are ultra vires, illegal, fraudulent

(and performed by those in control of the Company) against the minority, or represent an

irregularity in the passing of a resolution which requires a qualified (or special) majority which

has not been obtained.

Where a company (not being a bank) is one which has a share capital divided into shares,

the court may, on the application of members holding not less than one-fifth of the shares of the

company in issue, appoint an inspector to examine the affairs of the company and, at the

direction of the court, to report on such affairs. In addition, any member of a company may

petition the court, which may make a winding up order if the court is of the opinion that it is just

and equitable that the company should be wound up.

In general, claims against a company by its members must be based on the general laws of

contract or tort applicable in the Cayman Islands or be based on potential violation of their

individual rights as members as established by a company’s memorandum and articles of

association.

(g) Disposal of assets

There are no specific restrictions on the power of directors to dispose of assets of a

company, however, the directors are expected to exercise certain duties of care, diligence and

skill to the standard that a reasonably prudent person would exercise in comparable

circumstances, in addition to fiduciary duties to act in good faith, for proper purpose and in the

best interests of the company under English common law (which the Cayman Islands courts will

ordinarily follow).

(h) Accounting and auditing requirements

A company must cause proper records of accounts to be kept with respect to: (i) all sums of

money received and expended by it; (ii) all sales and purchases of goods by it and (iii) its assets

and liabilities.


– III-20 –


Proper books of account shall not be deemed to be kept if there are not kept such books as

are necessary to give a true and fair view of the state of the company’s affairs and to explain its

transactions.

If a company keeps its books of account at any place other than at its registered office or

any other place within the Cayman Islands, it shall, upon service of an order or notice by the Tax

Information Authority pursuant to the Tax Information Authority Act (2013 Revision) of the

Cayman Islands, make available, in electronic form or any other medium, at its registered office

copies of its books of account, or any part or parts thereof, as are specified in such order or

notice.

(i) Exchange control

There are no exchange control regulations or currency restrictions in effect in the Cayman

Islands.

(j) Taxation

The Cayman Islands currently levy no taxes on individuals or corporations based upon

profits, income, gains or appreciations and there is no taxation in the nature of inheritance tax

or estate duty. There are no other taxes likely to be material to the Company levied by the

Government of the Cayman Islands save for certain stamp duties which may be applicable, from

time to time, on certain instruments.

(k) [REDACTED] on transfers

No [REDACTED] is payable in the Cayman Islands on transfers of shares of Cayman Islands

companies save for those which hold interests in land in the Cayman Islands.

(l) Loans to directors

There is no express provision prohibiting the making of loans by a company to any of its

directors. However, the company’s articles of association may provide for the prohibition of such

loans under specific circumstances.

(m) Inspection of corporate records

The members of a company have no general right to inspect or obtain copies of the register

of members or corporate records of the company. They will, however, have such rights as may be

set out in the company’s articles of association.


– III-21 –


(n) Register of members

A Cayman Islands exempted company may maintain its principal register of members and

any branch registers in any country or territory, whether within or outside the Cayman Islands, as

the company may determine from time to time. There is no requirement for an exempted

company to make any returns of members to the [REDACTED] of Companies in the Cayman

Islands. The names and addresses of the members are, accordingly, not a matter of public record

and are not available for public inspection. However, an exempted company shall make available

at its registered office, in electronic form or any other medium, such register of members,

including any branch register of member, as may be required of it upon service of an order or

notice by the Tax Information Authority pursuant to the Tax Information Authority Act (2013

Revision) of the Cayman Islands.

(o) Register of Directors and officers

Pursuant to the Companies Act, the Company is required to maintain at its registered office

a register of directors, alternate directors and officers which is not available for inspection by

the public. A copy of such register must be filed with the [REDACTED] of Companies in the

Cayman Islands and any change must be notified to the [REDACTED] within 30 days of any

change in such directors or officers, including a change of the name of such directors or officers.

(p) Winding up

A Cayman Islands company may be wound up by: (i) an order of the court; (ii) voluntarily by

its members; or (iii) under the supervision of the court.

The court has authority to order winding up in a number of specified circumstances

including where, in the opinion of the court, it is just and equitable that such company be so

wound up.

A voluntary winding up of a company (other than a limited duration company, for which

specific rules apply) occurs where the company resolves by special resolution that it be wound

up voluntarily or where the company in general meeting resolves that it be wound up voluntarily

because it is unable to pay its debt as they fall due. In the case of a voluntary winding up, the

company is obliged to cease to carry on its business from the commencement of its winding up

except so far as it may be beneficial for its winding up. Upon appointment of a voluntary

liquidator, all the powers of the directors cease, except so far as the company in general meeting

or the liquidator sanctions their continuance.

In the case of a members’ voluntary winding up of a company, one or more liquidators are

appointed for the purpose of winding up the affairs of the company and distributing its assets.

As soon as the affairs of a company are fully wound up, the liquidator must make a report

and an account of the winding up, showing how the winding up has been conducted and the

property of the company disposed of, and call a general meeting of the company for the

purposes of laying before it the account and giving an explanation of that account.


– III-22 –


When a resolution has been passed by a company to wind up voluntarily, the liquidator or

any contributory or creditor may apply to the court for an order for the continuation of the

winding up under the supervision of the court, on the grounds that: (i) the company is or is likely

to become insolvent; or (ii) the supervision of the court will facilitate a more effective, economic

or expeditious liquidation of the company in the interests of the contributories and creditors. A

supervision order takes effect for all purposes as if it was an order that the company be wound

up by the court except that a commenced voluntary winding up and the prior actions of the

voluntary liquidator shall be valid and binding upon the company and its official liquidator.

For the purpose of conducting the proceedings in winding up a company and assisting the

court, one or more persons may be appointed to be called an official liquidator(s).The court may

appoint to such office such person or persons, either provisionally or otherwise, as it thinks fit,

and if more than one person is appointed to such office, the court shall declare whether any act

required or authorized to be done by the official liquidator is to be done by all or any one or

more of such persons. The court may also determine whether any and what security is to be

given by an official liquidator on his appointment; if no official liquidator is appointed, or during

any vacancy in such office, all the property of the company shall be in the custody of the court.

(q) Reconstructions

Reconstructions and amalgamations may be approved by a majority in number representing

75% in value of the members or creditors, depending on the circumstances, as are present at a

meeting called for such purpose and thereafter sanctioned by the courts. Whilst a dissenting

member has the right to express to the court his view that the transaction for which approval is

being sought would not provide the members with a fair value for their shares, the courts are

unlikely to disapprove the transaction on that ground alone in the absence of evidence of fraud

or bad faith on behalf of management, and if the transaction were approved and consummated

the dissenting member would have no rights comparable to the appraisal rights (i.e. the right to

receive payment in cash for the judicially determined value of their shares) ordinarily available,

for example, to dissenting members of a United States corporation.

(r) Take-overs

Where an offer is made by a company for the shares of another company and, within four

months of the offer, the holders of not less than 90% of the shares which are the subject of the

offer accept, the offeror may, at any time within two months after the expiration of that four-

month period, by notice require the dissenting members to transfer their shares on the terms of

the offer. A dissenting member may apply to the Cayman Islands courts within one month of the

notice objecting to the transfer. The burden is on the dissenting member to show that the court

should exercise its discretion, which it will be unlikely to do unless there is evidence of fraud or

bad faith or collusion as between the offeror and the holders of the shares who have accepted

the offer as a means of unfairly forcing out minority members.


– III-23 –


(s) Indemnification

Cayman Islands law does not limit the extent to which a company’s articles of association

may provide for indemnification of officers and directors, save to the extent any such provision

may be held by the court to be contrary to public policy, for example, where a provision purports

to provide indemnification against the consequences of committing a crime.

4. GENERAL

Appleby, the Company’s legal advisor on Cayman Islands law, has sent to the Company a

letter of advice which summarises certain aspects of Cayman Islands company law. This letter,

together with a copy of the Companies Act, is available for inspection as referred to in the

paragraph headed ‘‘Documents Available for Inspection’’ in Appendix. Any person wishing to have

a detailed summary of Cayman Islands company law or advice on the differences between it and

the laws of any jurisdiction with which he is more familiar is recommended to seek independent

legal advice.


– III-24 –


A. FURTHER INFORMATION ABOUT OUR GROUP

1. Incorporation

Our Company was incorporated as an exempted company with limited liability in the

Cayman Islands under the Companies Act on 15 April 2015. The registered office of our Company

is at 71 Fort Street, P.O. Box 500, George Town, Grand Cayman KY1-1106, the Cayman Islands. Our

Company has established its principal place of business in Hong Kong at 31/F, Tower Two, Time

Square, 1 Matheson Street, Causeway Bay, Hong Kong, and was registered as a non-Hong Kong

company under Part 16 of the Companies Ordinance on 26 August 2021, with Ms. Ng Ka Man (吳

嘉雯) appointed as an authorized representative of our Company for acceptance of service of

process and notices on behalf of our Company in Hong Kong.

As our Company was incorporated in the Cayman Islands, our corporate structure and

operation are subject to the Companies Act and its constitution which comprises the

Memorandum and Articles of Association. A summary of the certain provisions of the

Memorandum and Articles of Association and relevant aspects of Cayman Islands company law

is set out in Appendix III to this Document.

2. Changes in the Share Capital of our Company

As of the date of incorporation of our Company on 15 April 2015, the authorized share

capital of our Company was US$50,000 divided into 50,000 shares of a par value of US$1.00

each, which was increased to US$20,000,000 divided into 20,000,000 shares of a par value of

US$1.00 each on 9 December 2015 by the creation of an additional 19,950,000 shares of a par

value of US$1.00 each, and further to US$30,000,000 divided into 30,000,000 shares of a par

value of US$1.00 each on 18 July 2018 by the creation of an additional 10,000,000 shares of a

par value of US$1.00 each.

Below sets out the changes in the authorized and issued share capital of our Company

within two years immediately preceding the date of this Document:

(a) On 28 October 2019, our Company issued a total of 1,497,900 new shares

(representing 10% of the issued shares of our Company immediately before such

issuance) to all of our then 69 shareholders in proportion to their then respective

shareholdings in our Company (as nearly as possible without involving fractions) by

capitalizing the profit of our Company in the amount of US$1,497,900.

(b) On 20 May 2019, pursuant to the employee share subscription agreements which we

entered into with 15 employees of our Group all dated 7 December 2018, our Company

issued a total of 354,000 new shares (representing approximately 2.4205% of the

issued shares of our Company immediately before 7 December 2018) to such

employees (including Mr. Chao and Mr. Liao) for cash at the consideration of US$1.6

per share, raising a total capital of US$566,400. The consideration was fully settled on

10 January 2019 and the issuance was completed on 20 May 2019.

APPENDIX IV STATUTORY AND GENERAL INFORMATION

– IV-1 –


(c) On 14 October 2020:

(1) our Company issued (i) 1,643,258 new shares (representing approximately 10% of

the issued shares of our Company immediately before such issuance) to all of our

then 74 registered shareholders in proportion to their then respective

shareholdings in our Company as share dividend of 0.1 share for every issued

shares (with all fractional shares rounded down to the nearest whole share) in

satisfaction of part of the dividend declared for the financial year ended 31

December 2019 in the amount of US$1,643,258, and (ii) 32 new shares (being the

odd shares arising from this share dividend distribution) to one of our then

registered shareholders, an Independent Third Party, as share dividend.

(2) the authorized share capital of our Company was increased from US$30,000,000

divided into 30,000,000 shares of a par value of US$1.00 each to (i)

US$30,000,000 divided into 30,000,000 shares of a par value of US$1.00 each,

and (ii) NT$900,000,000 divided into 90,000,000 shares of a par value of

NT$10.00 each, by the creation of an additional 90,000,000 shares of a par value

of NT$10.00 each; and

(3) following the aforementioned increase in authorized share capital, (i) 54,228,570

shares of a par value of NT$10.00 each were issued by our Company for cash at

par to the then existing shareholders of our Company, (ii) the 18,076,190 issued

shares of a par value of US$1.00 each were repurchased at par and cancelled by

our Company in consideration for the issue of 54,228,570 shares of a par value of

NT$10.00 each, and (iii) immediately following the aforementioned repurchase all

the unissued shares of a par value of US$1.00 each were cancelled.

(d) Pursuant to the resolutions passed by the Shareholders of our Company on [date]

referred to in paragraph 3 below:

(1) the authorized share capital of our Company was increased from NT$900,000,000

divided into 90,000,000 shares of a par value of NT$10.00 each (‘‘NT Shares’’), to(i) NT$900,000,000 divided into 90,000,000 NT Shares of a par value of

NT$10.00 each, and (ii) HK$[REDACTED] divided into [REDACTED] Shares of a par

value of HK$[REDACTED] each, by the creation of an additional [REDACTED] Shares

of a par value of HK$[REDACTED] each;

(2) 325,371,420 Shares of a par value of HK$[REDACTED] each be allotted and issued

to our 90 shareholders standing on the register of members of our Company in

proportion to their respective shareholdings in our Company immediately before

such issuance, credited as fully paid;

(3) as consideration for the aforementioned issuance of new shares, the 54,228,570

issued NT Shares of a par value of NT$10.0 each be repurchased by the Company

at a consideration of NT$10.0 per share and be cancelled immediately upon

repurchase; and


– IV-2 –


(4) upon completion of the aforementioned share repurchase, the 35,771,430

unissued NT Shares be cancelled so that the authorized share capital of the

Company will be reduced to HK$[REDACTED] divided into [REDACTED] Shares of a

par value of HK$[REDACTED] each, in accordance with section 13 of the

Companies Act.

Immediately following completion of the [REDACTED], assuming that the [REDACTED] is not

exercised and without taking into account any Shares which may be issued upon the exercise of

the options granted under the Pre-[REDACTED] Share Option Scheme or any options which may be

granted under the Post-[REDACTED] Share Option Scheme, the authorized share capital of our

Company will be HK$[REDACTED] divided into [REDACTED] Shares, of which [REDACTED] Shares

will be allotted and issued fully paid or credited as fully paid and 566,171,080 Shares will remain

unissued.

Other than to issue Shares pursuant to the general mandate as referred to ‘‘— 3.

Resolutions Passed by Our Shareholders in General Meeting on [date]’’ in this Appendix and to

issue Shares upon the exercise of the options granted under the Pre-[REDACTED] Share Option

Scheme or any options which may be granted under the Post-[REDACTED] Share Option Scheme,

there is no present intention to issue any Shares and, without the prior approval of the

Shareholders in general meeting, no issue of Shares will be made which would effectively alter

the control of our Company.

Save as disclosed above, there has been no alteration in the share capital of our Company

within two years immediately preceding the date of this Document.

3. Resolutions Passed by Our Shareholders in General Meeting on [date]

Pursuant to the resolutions passed by our Shareholders in the extraordinary general

meeting held on [date], it was resolved, among other matters, that:

(a) (as a special resolution) subject to and conditional upon the approval of the

[REDACTED] of Companies in the Cayman Islands, the Chinese name of ‘‘撈王控股有限

公司’’ be adopted as the dual foreign name of the Company;

(b) (as a special resolution) the Memorandum and Articles of Association be adopted as

the new memorandum and articles of association of the Company in substitution of

and to the exclusion of the existing articles of association of our Company with effect

from the [REDACTED];

(c) the authorized share capital of our Company be increased from NT$900,000,000

divided into 90,000,000 shares of a par value of NT$10.00 each, to (i)

NT$900,000,000 divided into 90,000,000 shares of a par value of NT$10.00 each, and

(ii) HK$[REDACTED] divided into [REDACTED] shares of a par value of HK$[REDACTED]

each, by the creation of an additional [REDACTED] shares of a par value of

HK$[REDACTED] each;


– IV-3 –


(d) following the aforementioned increase in authorized share capital, 325,371,420 shares

with a par value of HK$[REDACTED] each be allotted and issued to our 90 Shareholders

standing on the register of members of our Company in proportion to their respective

shareholdings in our Company immediately before such issuance, credited as fully

paid (the ‘‘New Shares Issuance’’);

(e) as consideration for the New Shares Issuance, the 54,228,570 issued shares of a par

value of NT$10.0 each be repurchased by the Company and be cancelled immediately

upon repurchase (the ‘‘NT Share Repurchase,’’ together with the New Share Issuance,

the ‘‘Second Re-denomination of Share Capital’’);

(f) upon completion of the NT Share Repurchase, the 35,771,430 unissued NT Shares be

cancelled so that the authorized share capital of the Company will be reduced to

HK$[REDACTED] divided into [REDACTED] shares of a par value of HK$[REDACTED] each,

in accordance with section 13 of the Companies Act;

(g) conditional on (i) the [REDACTED] Committee of the Stock Exchange granting

[REDACTED] of, and permission to [REDACTED] in, the Shares in issue and to be issued

as mentioned in this Document and such approval not subsequently having been

withdrawn or revoked prior to the commencement of [REDACTED] in the Shares on the

Stock Exchange; (ii) the [REDACTED] having been determined; (iii) the execution and

delivery of the [REDACTED] on or about the [REDACTED]; and (iv) the obligations of the

[REDACTED] under the [REDACTED] becoming unconditional and remaining

unconditional (including, if relevant, as a result of the waiver of any condition(s) by

the [REDACTED]) and the [REDACTED] not being terminated in accordance with the

terms thereof or otherwise, in each case on or before such dates as may be specified

in the [REDACTED]:

(1) the [REDACTED] and the [REDACTED] be approved and our Directors be authorized

to effect the same and to allot and issue the Shares pursuant to the [REDACTED]

and such number of [REDACTED] as may be required to be allotted and issued

upon the exercise of the [REDACTED];

(2) the proposed [REDACTED] be approved and our Directors be authorized to

implement the [REDACTED]; and

(3) the rules of the Post-[REDACTED] Share Option Scheme, the principal terms of

which are set out in ‘‘— 14. Share Option Schemes — Post-[REDACTED] Share

Option Scheme’’ in this Appendix, be approved and adopted with effect from the

[REDACTED], and our Directors be authorized to make such further amendments to

the rules of the Post-[REDACTED] Share Option Scheme as may be acceptable or

not objected to by the Stock Exchange, and at our Directors’ absolute discretion

to grant options to subscribe for Shares thereunder and to allot, issue and

[REDACTED] with Shares pursuant to the exercise of options which may be granted

under the Post-[REDACTED] Share Option Scheme and to take all such steps as

may be necessary, desirable or expedient to implement the Post-[REDACTED]

Share Option Scheme;


– IV-4 –


(h) a general unconditional mandate be given to our Directors to exercise all powers of our

Company to allot, issue and [REDACTED] with (otherwise than by way of rights issue,

scrip dividend schemes or similar arrangements providing for allotment of Shares in

lieu of the whole or part of any dividend in accordance with the Articles of Association,

or pursuant to the exercise of the options granted under the Pre-[REDACTED] Share

Option Scheme or any options which may be granted under the Post-[REDACTED] Share

Option Scheme, or under the [REDACTED] or upon the exercise of the [REDACTED])

Shares with an aggregate number not exceeding the sum of (i) 20% of the aggregate

number of issued Shares immediately following completion of the [REDACTED] but

excluding any Shares which may be issued pursuant to the exercise of the [REDACTED],

the options granted under the Pre-[REDACTED] Share Option Scheme or any options

which may be granted under the Post-[REDACTED] Share Option Scheme, and (ii) the

aggregate number of such Shares purchased by our Company pursuant to the authority

granted to our Directors as referred to in sub-paragraph (j) below. Such mandate will

remain in effect during the period from the passing of the resolution until:

(i) the conclusion of the next annual general meeting of our Company;

(ii) the date by which the next annual general meeting of our Company is required to

be held by the Articles of Association or any applicable laws and regulations; or

(iii) the passing of an ordinary resolution by our Shareholders revoking or varying the

authority given to our Directors, whichever occurs first (the ‘‘Applicable Period’’);

(i) a general unconditional mandate (the ‘‘Repurchase Mandate’’) be granted to our

Directors to exercise all powers of our Company to repurchase, in accordance with all

applicable laws and regulations, Shares on the Stock Exchange or any other stock

exchange on which the Shares may be listed (and which is recognized by the SFC and

the Stock Exchange for this purpose) with an aggregate number not exceeding 10% of

the aggregate number of issued Shares immediately following the completion of the

[REDACTED] but excluding any Shares which may be issued pursuant to the exercise of

the [REDACTED], the options granted under the Pre-[REDACTED] Share Option Scheme

or any options which may be granted under the Post-[REDACTED] Share Option Scheme.

Such Repurchase Mandate will remain in effect during the Applicable Period;

(j) the general mandate to allot, issue and [REDACTED] with Shares pursuant to sub-

paragraph (h) above be extended to include the number of Shares repurchased by our

Company pursuant to the Repurchase Mandate; and

(k) the form and substance of each of the service agreements made between each of our

Directors and our Company be approved.


– IV-5 –


4. Changes in the Share Capital of Our Subsidiaries

Please refer to the list of subsidiaries in the Accountants’ Report, the text of which is set

out in Appendix I to this Document. Save for the subsidiaries mentioned in the Accountants’

Report, we do not have any other subsidiaries.

On 21 December 2020, the issued share capital of Laowang HK was increased from

US$50,000 to US$8,005,100. Other than that, there have been no alterations in the share capital

or registered capital (as the case may be) of our subsidiaries within two years immediately

preceding the date of this Document.

5. Repurchase of Our Shares by Our Company

This paragraph includes information required by the Stock Exchange to be included in this

Document concerning the repurchase by our Company of its own shares.

(a) Provisions of the Listing Rules

The Listing Rules permit companies with a primary [REDACTED] on the [REDACTED] of the

Stock Exchange to repurchase their shares on the Stock Exchange subject to certain restrictions,

the most important of which are summarized below:

(i) Shareholders’ approval

All proposed repurchases by a company with a primary [REDACTED] on the Stock Exchange

of its own shares (which must be fully paid up in the case of Shares) must be approved by an

ordinary resolution of shareholders (which complies with Rule 10.06(1)(c) of the Listing Rules) in

general meeting duly convened and held, either by way of general mandate or by specific

approval of a particular transaction. The company should have previously sent to its

shareholders an Explanatory Statement complying with Rule 10.06(1)(b) of the Listing Rules.

Pursuant to the resolutions passed by our Shareholders on [date], conditional upon the

same conditions to be satisfied and/or waived as stated in the section headed ‘‘Structure of the

[REDACTED],’’ the Repurchase Mandate was given to our Directors to exercise all the powers of

our Company to repurchase, on the Stock Exchange and/or on any other stock exchange on

which the shares of our Company may be listed and which is recognized by the SFC and the

Stock Exchange for this purpose in accordance with all applicable laws and requirements of the

Stock Exchange (or of such other stock exchange), Shares in aggregate not exceeding 10% of the

total number of Shares in issue immediately after completion of the [REDACTED] (assuming the

[REDACTED] is not exercised and without taking into account any Shares that may be allotted and

issued upon the exercise of the options granted under the pre-[REDACTED] Share Option Scheme

or any options which may be granted under the Share Option Scheme). The Repurchase Mandate

will remain effective until the conclusion of the next annual general meeting of our Company, or

the date by which the next annual general meeting of our Company is required by the Articles or

any applicable law(s) to be held, or the passing of an ordinary resolution by our Shareholders in

a general meeting revoking, renewing or varying the mandate given to our Directors, whichever

occurs first.


– IV-6 –


(ii) Source of funds

Repurchases must be funded out of funds legally available for the purpose in accordance

with the Articles, the Listing Rules and the applicable laws of Hong Kong and the Companies Act.

A listed company must not repurchase its own shares on the Stock Exchange for a consideration

other than cash or for settlement otherwise than in accordance with the trading rules of the

Stock Exchange. Subject to the foregoing, any repurchase by our Company may be made out of

profits of our Company, out of share premium, or out of the proceeds of a fresh issue of shares

made for the purpose of the repurchase or, subject to the Companies Act, out of capital. Any

amount of premium payable on the purchase over the par value of the Shares to be repurchased

must be out of profits of our Company, out of our Company’s share premium account before or at

the time the Shares are repurchased, or, subject to the Companies Act, out of capital.

(iii) Trading restrictions

The total number of shares which a listed company may repurchase on the Stock Exchange

is the number of shares representing up to a maximum of 10% of the aggregate number of shares

in issue and to be issued immediately following the completion of the [REDACTED]. A listed

company may not issue or announce a proposed issue of new shares for a period of 30 days

immediately following a repurchase, whether on the Stock Exchange or otherwise, (other than an

issue of shares pursuant to an exercise of warrants, share options or similar instruments

requiring the company to issue shares which were outstanding prior to such repurchase) without

the prior approval of the Stock Exchange. In addition, a listed company is prohibited from

repurchasing its shares on the Stock Exchange if the repurchase price is higher by 5% or more

than the average closing market price for the five preceding trading days on which its shares

were traded on the Stock Exchange. The Listing Rules also prohibit a listed company from

repurchasing its shares on the Stock Exchange if the repurchase would result in the number of

listed shares which are in the hands of the public falling below the relevant prescribed minimum

percentage as required by the Stock Exchange. A listed company is required to procure that any

broker appointed by it to effect a repurchase of its shares shall disclose to the Stock Exchange

such information with respect to the repurchase made on behalf of the listed company as the

Stock Exchange may request.

(iv) Status of repurchased shares

All repurchased shares (whether effected on the Stock Exchange or otherwise) will be

automatically delisted and the certificates for those shares must be cancelled and destroyed as

soon as practicable following settlement of any such repurchase. Under the Companies Act, a

company’s repurchased shares may be treated as cancelled. If so cancelled, the amount of that

company’s issued share capital shall be reduced by the aggregate nominal value of the

repurchased shares accordingly although the authorized share capital of the company will not be

reduced.


– IV-7 –


(v) Suspension of repurchase

A listed company may not make any repurchase of shares after inside information has come

to its knowledge until the information has been made publicly available. In particular, during the

period of one month immediately preceding the earlier of (a) the date of the board meeting (as

such date is first notified to the Stock Exchange in accordance with the Listing Rules) for the

approval of a listed company’s results for any year, half-year, quarterly or any other interim

period (whether or not required under the Listing Rules), and (b) the deadline for a listed

company to announce its results for any year or half-year under the Listing Rules, or quarterly or

any other interim period (whether or not required under the Listing Rules) and ending on the

date of the results announcement, the listed company may not repurchase its shares on the

Stock Exchange other than in exceptional circumstances. In addition, the Stock Exchange may

prohibit a repurchase of shares on the Stock Exchange if a listed company has breached the

Listing Rules.

(vi) Reporting requirements

Certain information relating to repurchases of shares on the Stock Exchange or otherwise

must be submitted for publication to the Stock Exchange not later than 30 minutes before the

earlier of the commencement of the morning trading session or any pre-opening session on the

business day on which the Stock Exchange is open for the business of dealing in securities

following any day on which the listed company makes a repurchase. In addition, a listed

company’s annual report is required to disclose details regarding repurchases of shares made

during the financial year being reviewed, including the number of shares repurchased each

month, the purchase price per share or the highest and lowest price paid for all such

repurchases, where relevant, and the aggregate prices paid by the listed company for such

repurchase.

(vii) Core connected persons

A listed company is prohibited from knowingly repurchasing shares on the Stock Exchange

from a ‘‘core connected person,’’ that is, a director, chief executive or substantial shareholder of

our Company or any of our subsidiaries or their respective close associates, and a core

connected person is prohibited from knowingly selling his/her/its shares to the listed company,

on the Stock Exchange.

(b) Reasons for repurchases

Our Directors believe that it is in the best interest of our Company and our Shareholders for

our Directors to have general authority from our Shareholders to repurchase Shares in the

market. Such repurchases may, depending on market conditions and funding arrangements at

the time, lead to an enhancement of the net asset value per Share and/or earnings per Share

and will only be made if our Directors believe that such repurchases will benefit our Company

and our Shareholders.


– IV-8 –


(c) Funding of repurchases

In repurchasing Shares, our Company may only apply funds legally available for such

purpose in accordance with the Articles of Association, the Listing Rules and the applicable laws

and regulations of the Cayman Islands.

Repurchases must be funded out of funds legally available for the purpose in accordance

with the Articles, the Listing Rules and the applicable laws of Hong Kong and the Companies Act.

A listed company must not repurchase its own shares on the Stock Exchange for a consideration

other than cash or for settlement otherwise than in accordance with the trading rules of the

Stock Exchange. Subject to the foregoing, any repurchase by our Company may be made out of

profits of our Company, out of share premium, or out of the proceeds of a fresh issue of shares

made for the purpose of the repurchase or, subject to the Companies Act, out of capital. Any

amount of premium payable on the purchase over the par value of the shares to be repurchased

must be out of profits of our Company, out of our Company’s share premium account before or at

the time the Shares are repurchased, or, subject to the Companies Act, out of capital.

On the basis of the current financial position of our Group as disclosed in this Document

and taking into account the current working capital position of our Group, our Directors consider

that, if the Repurchase Mandate were to be exercised in full, it might have a material adverse

effect on the working capital and/or the gearing position of our Group as compared with the

position disclosed in this Document. However, our Directors do not propose to exercise the

Repurchase Mandate to such an extent as would, in the circumstances, have a material adverse

effect on the working capital requirements of our Group or the gearing levels which in the

opinion of our Directors are from time to time appropriate for our Group.

(d) Share Capital

The exercise in full of the Repurchase Mandate, on the basis of [REDACTED] Shares in issue

immediately after the [REDACTED] (but taking no account of Shares which may be issued

pursuant to the exercise of the [REDACTED], the options granted under the Pre-[REDACTED] Share

Option Scheme or any options which may be granted under the Post-[REDACTED] Share Option

Scheme), would result in up to [REDACTED] Shares being repurchased by our Company during the

period in which the Repurchase Mandate remains in force prior to:

(i) the conclusion of our next annual general meeting;

(ii) the end of the period within which we are required by any applicable law or our

Articles of Association to hold our next annual general meeting; or

(iii) the date when the repurchase mandate is varied or revoked by an ordinary resolution

of our Shareholders in general meeting,

whichever is the earliest.


– IV-9 –


(e) General

None of our Directors nor, to the best of their knowledge after having made all reasonable

enquiries, any of their close associates, has a present intention, in the event that the

Repurchase Mandate is approved by the Shareholder, to sell any Shares to our Company or our

subsidiaries.

Our Directors have undertaken to the Stock Exchange that, so far as the same may be

applicable, they will exercise the Repurchase Mandate in accordance with the Listing Rules, the

Articles of Association and the applicable laws and regulations of the Cayman Islands.

No core connected person (as defined in the Listing Rules) of our Company has notified our

Company that he/she/it has a present intention to sell Shares to our Company, or has

undertaken not to do so, if the Repurchase Mandate is exercised.

If, as a result of a shares repurchase pursuant to the Repurchase Mandate, a Shareholder’s

proportionate interest in the voting rights of our Company is increased, such increase will be

treated as an acquisition for the purpose of the Takeovers Code. As a result, a Shareholder, or a

group of Shareholders acting in concert (within the meaning under the Takeovers Code),

depending on the level of increase of such Shareholders’ interest, could obtain or consolidate

control of our Company and may become obliged under Rule 26 of the Takeovers Code to make a

mandatory offer unless a whitewash waiver is obtained. Save as disclosed above, our Directors

are not aware of any consequences which would arise under the Takeovers Code if the

Repurchase Mandate is exercised.

Our Directors will not exercise the Repurchase Mandate if the repurchase would result in

the number of Shares which are in the hands of the public falling below [REDACTED] of the total

number of Shares in issue (or such other percentage as may be prescribed as the minimum

public shareholding under the Listing Rules).


– IV-10 –


B. FURTHER INFORMATION ABOUT OUR BUSINESS

6. Summary of Material Contracts

The following contracts (not being contracts in the ordinary course of business) have been

entered into by members of our Group within the two years preceding the date of this Document

and are or may be material:

(a) the Deed of Non-Competition;

(b) the Deed of Indemnity; and

(c) the [REDACTED].

7. Intellectual Property Rights

(i) Trademarks

As of the Latest Practicable Date, we have been the registrant or beneficial owner of the

following trademarks which, in the opinion of our Directors, are material to our business:

No. Trademark

Place of

registration

Registration

number Class Registration date Expiry date Registrant

1 PRC 20002005 35 7 July 2017 6 July 2027 The Company

2 PRC 9801160 43 7 October 2012 6 October 2022 The Company

3 PRC 11985267 43 21 June 2014 20 June 2024 The Company

4 PRC 12322856 29 7 September 2014 6 September 2024 The Company



7 PRC 18412275 31 28 December 2016 27 December 2026 Laowang Shanghai




– IV-11 –


No. Trademark

Place of

registration

Registration


10 PRC 18412929 29 28 December 2016 27 December 2026 The Company



13 PRC 20677013 1 14 September 2017 13 September 2027 Laowang Shanghai















– IV-12 –


No. Trademark

Place of

registration

Registration




















– IV-13 –


No. Trademark

Place of

registration

Registration



45 PRC 21092076 35 21 October 2017 20 October 2027 Laowang Holding

46 PRC 16077739 43 7 March 2016 6 March 2026 Laowang Holding

47 PRC 22701286 43 21 February 2018 20 February 2028 The Company

48 PRC 21091663 43 28 October 2017 27 October 2027 Laowang Shanghai




52 PRC 13689183 43 21 November 2016 20 November 2026 The Company

53 PRC 20164206 43 7 October 2017 6 October 2027 The Company

54 PRC 18714280 35 14 May 2017 13 May 2027 The Company







– IV-14 –


No. Trademark

Place of

registration

Registration






64 PRC 19666092 8 7 June 2017 6 June 2027 Laowang Shanghai



67 PRC 20679436 44 7 November 2017 6 November 2027 Laowang Shanghai

68 PRC 16431799 43 21 April 2016 20 April 2027 The Company




72 PRC 11968095 43 14 August 2016 13 August 2026 The Company

73 PRC 12108453 43 21 July 2014 20 July 2024 The Company

74 PRC 11985266 43 21 March 2015 20 March 2025 The Company



– IV-15 –


No. Trademark

Place of

registration

Registration


76 PRC 18877274 43 14 March 2018 13 March 2028 The Company





81 撈匯 PRC 41074542 43 7 May 2020 6 May 2030 Suzhou Laohui

82 撈匯 PRC 41088526 29 7 May 2020 6 May 2030 Suzhou Laohui

83 Taiwan 01620001 43 12 April 2013 31 December 2023 The Company

84 撈王火鍋豬肚雞

Laowang Hotpot

Macao N/080359 43 5 November 2013 29 May 2021 The Company


Laowang Hotpot

Malaysia 2013061420 43 29 October 2013 29 October 2023 The Company


Laowang Hotpot

Singapore T1306324H 43 19 April 2013 19 April 2023 The Company


Laowang Hotpot

United

States

85906764 43 17 April 2013 5 August 2024 The Company


Laowang Hotpot

Hong Kong 302581489 43 17 April 2013 16 April 2023 The Company


Laowang Hotpot

Australia 1552700 43 19 April 2013 19 April 2023 The Company


Laowang Hotpot

Japan 5627755 43 8 May 2013 1 November 2023 The Company


– IV-16 –


No. Trademark

Place of

registration

Registration


91 Taiwan 01537731 44 16 September 2012 15 September 2022 The Company

92 PRC 48358585 43 28 March 2021 27 March 2031 Laowang HK











103 Taiwan 02113803 29, 30,

32, 33, 43

1 January 2021 31 December 2030 Laowang HK

104 Taiwan 02113804 29, 30,

32, 33, 43

1 January 2021 31 December 2030 Laowang HK


– IV-17 –


No. Trademark

Place of

registration

Registration




As of the Latest Practicable Date, we have applied for the registration of the following

trademarks which, in the opinion of our Directors, are material to our business:

No. Trademark

Place of

application

Application

number Class Application date Applicant

1 PRC 53487191 35 2 February 2021 Laowang HK

2 PRC 53487576 43 2 February 2021 Laowang HK

3 PRC 53700353 43 10 February 2021 The Company

4 PRC 52462228 43 24 December 2020 The Company



7 Hong Kong 305648095 29 4 June 2021 The Company

8 Hong Kong 305648103 43 4 June 2021 The Company

9 Taiwan 110012900 43 26 February 2021 The Company


– IV-18 –


(ii) Domain Names

As of the Latest Practicable Date, we have registered the following domain names which, in

the opinion of our Directors, are material to our business:

No. Registrant Domain name Registration date Expiry date

1 Laowang Shanghai wanthotpot.com 10 October 2020 10 October 2021

2 Laowang Shanghai laowanghotpot.com.cn 30 September 2020 30 September 2021

3 Laowang Shanghai laowangworld.com 30 September 2020 30 September 2021

4 Laowang Shanghai laowangchina.com 14 December 2011 14 December 2021

5 Laowang HK 撈王.商標 2 August 2017 2 August 2023

As of the Latest Practicable Date, we did not have any domain name which is pending

approval for its application.

(iii) Patent

As of the Latest Practicable Date, we have registered the following patents which, in the

opinion of our Directors, are material to our business:

No. Patent Patentee

Place of

registration Patent number Class Application date

1 A new type of meal preparation

cabinet (一種新型備餐櫃)

Laowang Shanghai PRC ZL201620586053.0 Utility model 13 June 2016

2 Meal preparation cabinet

(備餐櫃)

Laowang Shanghai PRC ZL201630257828.5 Design 13 June 2016

As of the Latest Practicable Date, we did not have any patent which is pending approval for

its application.


– IV-19 –


(iv) Copyrights

As of the Latest Practicable Date, we have registered the following copyrights which, in the

opinion of our Directors, are material to our business:

No. Copyright Registrant

Place of

registration Registrant number Class

Registration

date

1 撈王，用愛傳遞

好味道之一

Laowang

Shanghai

PRC 國作登字-2017-F-00383635 Works of fine art 25 May 2017


好味道之二

Laowang

Shanghai



好味道之三

Laowang

Shanghai


4 撈王用愛傳遞

好味道（長）

Mr. Chao(1) PRC 國作登字-2016-I-00280384 Cinematographic works and

works created in a way

similar to cinematography

6 June 2016

5 撈王用愛傳遞

好味道（短）

Mr. Chao(1) PRC 國作登字-2016-I-00280385 Cinematographic works and

works created in a way

similar to cinematography

6 June 2016

6 撈王輔助圖形 Laowang

Shanghai

PRC 國作登字-2016-F-00326214 Works of fine art 14 October 2016

7 撈王校徽 Laowang

Shanghai

PRC 國作登字-2017-F-00412090 Works of fine art 5 December 2017

8 撈王 Mr. Chao(1) PRC 國作登字-2016-F-00252149 Works of fine art 11 January 2016

9 撈王 Mr. Chao(1) PRC 國作登字-2016-F-00252233 Works of fine art 12 January 2016

10 撈王三大基石之一 Laowang

Shanghai


11 撈王三大基石之二 Laowang

Shanghai


12 撈王三大基石之三 Laowang

Shanghai


13 赤鼎 Laowang

Holding

PRC 國作登字-2018-F-00579099 Works of fine art 10 July 2018

14 鍋季 Laowang

Holding

PRC 國作登字-2019-F-00743298 Works of fine art 12 March 2019


– IV-20 –


No. Copyright Registrant

Place of

registration Registrant number Class

Registration

date

15 Q寶 Laowang HK PRC 國作登字-2020-F-01022190 Works of fine art 15 April 2020

16 撈王鍋物料理

（圖組）

Laowang HK PRC 國作登字-2021-F-00046487 Works of fine art 26 February

2021

17 撈王有料好鍋底

（圖組）

Laowang HK PRC 國作登字-2021-F-00106773 Works of fine art 17 May 2021

Note:

(1) The copyright transfer from Mr. Chao to Laowang HK is planned to be completed in February 2022.

As of the Latest Practicable Date, we have applied for the registration of the following

copyrights which, in the opinion of our Directors, are material to our business:

No. Copyright Applicant

Place of

registration Class

First publication

date

1 Laowang HK PRC Works of fine art 21 August 2020






8. Related party transactions

For details of the related party transactions of our Group entered into within two years

immediately preceding the date of this Document, please refer to the ‘‘Appendix I — Accountants’

Report.’’


– IV-21 –


C. FURTHER INFORMATION ABOUT OUR DIRECTORS AND SUBSTANTIAL SHAREHOLDERS

9. Directors

(a) Particulars of Directors’ service contracts

Each of our Directors has entered into a service contract with our Company on [date]. Such

service contract is for an initial fixed term of three years commencing from the [REDACTED], and

is subject to termination in accordance with their respective terms. Such service contract may be

renewed in accordance with our Articles of Association and the applicable rules.

Save as disclosed above, none of our Directors has entered, or has proposed to enter a

service contract with any member of our Group (other than contracts expiring or determinable by

the employer within one year without the payment of compensation (other than statutory

compensation).

(b) Directors’ remuneration


2021, the aggregate amount of fees, salaries, allowances, discretionary bonus, contributions to

defined contribution scheme and other benefits in kind (if applicable) paid by us to our Directors

were approximately RMB0.8 million, RMB4.2 million, RMB3.1 million and RMB1.0 million,

respectively.

Save as disclosed above, no other payments have been paid or are payable by any member

of our Group to any of our Directors in respect of the years ended 31 December 2018, 2019 and

2020 and the six months ended 30 June 2021.

Under the current arrangements, our Directors will be entitled to receive compensation

(including remuneration and benefits in kind) from our Company for the year ending 31 December

2021 under the arrangements in force as of the date of this Document which is expected to be

approximately RMB2.6 million in aggregate.

None of our Directors or any past directors of any member of our Group has been paid any

sum of money for each of the three years ended 31 December 2020 and the six months ended 30

June 2021 (i) as an inducement to join or upon joining our Group, or (ii) for loss of office as a

director of any member of our Group or of any other office in connection with the management of

affairs of any member of our Group.

There has been no arrangement under which any Director has waived or agreed to waive

future emoluments, nor has there been any waiver of emoluments by any Director during the

three years ended 31 December 2020 and the six months ended 30 June 2021.


– IV-22 –


(c) Interests and short positions of Directors and chief executive in the shares,underlying shares or debentures of our Company and its associated corporations

Immediately following the completion of the [REDACTED] (without taking into account any

Shares which may be allotted and issued pursuant to the exercise of the [REDACTED], the options

granted under the Pre-[REDACTED] Share Option Scheme and any options which may be granted

under the Post-[REDACTED] Share Option Scheme), the interests or short positions of our

Directors and chief executive in the shares, underlying shares or debentures of our Company and

our associated corporations (within the meaning of Part XV of the SFO) which (i) will have to be

notified to our Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the

SFO (including interests and short positions in which they are taken or deemed to have under

such provisions of the SFO), (ii) will be required, pursuant to section 352 of the SFO, to be

entered in the register referred to therein, or (iii) which will be required to be notified to our

Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by

Directors of Listed Issuers contained in the Listing Rules, in each case once the Shares are

listed, will be as follows:

Our Company

Director Nature of interest Number of Shares(1)

Approximate

percentage of

shareholding in

our Company

Mr. Lee(2)(3) . . . . . . . . . . Beneficial interest [REDACTED] (L) [REDACTED]

Interest in controlled

corporation


Interest of persons acting

in concert


Mr. Liao . . . . . . . . . . . . Beneficial interest [REDACTED] (L) [REDACTED]

Mr. Huang Kuo-huang . . . Beneficial interest [REDACTED] (L) [REDACTED]

Mr. Tu Chia-pin . . . . . . . Beneficial interest [REDACTED] (L) [REDACTED]

Notes:

(1) The letter ‘‘L’’ denotes our Directors’ long position in the Shares.

(2) Our Company will be held as to approximately [REDACTED] by Mr. Lee and [REDACTED] by Eversun Holdings

immediately following the completion of the [REDACTED] (without taking into account any Shares which may be

allotted and issued upon exercise of the [REDACTED], the options granted under the Pre-[REDACTED] Share Option

Scheme and any options which may be granted under the Post-[REDACTED] Share Option Scheme). Eversun

Holdings is wholly owned by Mr. Lee via LYC. Accordingly, Mr. Lee is deemed to be interested in all the Shares held

by Eversun Holdings.


– IV-23 –


(3) Pursuant to the Concert Party Agreements, Mr. Lee, Mr. Chen, Ms. Huang Ya-lin, Mr. Chao, and Ms. Wong Wing Sze

confirm and acknowledge the nature of their acting-in-concert relationship, and each of them is deemed to be

interested in the Shares that the other persons are interested under section 317 of the SFO. For details, see

‘‘Relationship with Controlling Shareholders.’’

Associated corporations

To the best knowledge of our Directors, none of our Directors has interests or short

positions in the share capital or debentures of the associated corporations of our Company.

10. Substantial Shareholders

Save as disclosed in ‘‘Substantial Shareholders’’ in this Document, immediately following

the completion of the [REDACTED] (but without taking into account the exercise of the Over-

allotment Option, the options granted under the Pre-[REDACTED] Share Option Scheme and any

options which may be granted under the Post-[REDACTED] Share Option Scheme), our Directors or

chief executive are not aware of any other person, other than a Director or chief executive of our

Company, who has an interest or short position in the Shares or the underlying Shares which

would fall to be disclosed to our Company and the Stock Exchange under the provisions of

Divisions 2 and 3 of Part XV of the SFO, or is, directly or indirectly, interested in 10% or more of

the nominal value of any class of share capital carrying rights to vote in all circumstances at

general meetings of any member of our Group.

11. Personal Guarantees

Save as disclosed in ‘‘Relationship with Controlling Shareholders — Independence from our

Controling Shareholders — Financial Independence,’’ as of the Latest Practicable Date, our

Directors have not provided personal guarantees in favor of lenders in connection with banking

facilities granted or to be granted to any member of our Group.

12. Directors’ Competing Interest

None of our Directors is interested in any business apart from our Group’s business which

competes or is likely to compete, directly or indirectly, with the business of our Group.

13. Disclaimers

Save as disclosed in this Document and as of the Latest Practicable Date:

(a) so far as is known to our Directors, none of any other person (not being a Director or

the chief executive of our Company) who will, immediately following completion of the

[REDACTED], have interests and/or short positions in the shares or underlying shares

of our Company which would fall to be disclosed to our Company pursuant to the

provisions of Divisions 2 and 3 of Part XV of the SFO, or, who are, directly or indirectly,

interested in 10% or more of the issued voting shares of any members of our Group;

(b) none of our Directors or the chief executive of our Company had any interest or short

position in the shares, underlying shares or debentures of our Company, our

subsidiary or any of the associated corporation (within the meaning of Part XV of the


– IV-24 –


SFO) which will have to be notified to our Company and the Stock Exchange pursuant

to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions

which he/she is deemed to have under such provisions of the SFO), or which will be

required, pursuant to section 352 of the SFO, to be entered in the register referred to

therein, or which will be required to be notified to our Company and the Stock

Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed

Issuers, in each case once the Shares are listed;

(c) none of our Directors nor any of the parties listed in the paragraph headed ‘‘22.

Consents of Experts’’ in this Appendix was interested, directly or indirectly, in the

promotion of, or in any assets which had been, within the two years immediately

preceding the date of this Document, acquired or disposed of by or leased to our

Company or any of our subsidiaries, or were proposed to be acquired or disposed of

by or leased to our Company or any member of our Group, nor will any Director apply

for the [REDACTED] either in his own name or in the name of a nominee;

(d) none of our Directors nor any of the parties listed in the paragraph headed ‘‘22.

Consents of Experts’’ in this Appendix was materially interested in any contract or

arrangement subsisting at the date of this Document which was significant to the

business of our Group taken as a whole;

(e) in accordance with the [REDACTED], none of the experts referred to in the paragraph

headed ‘‘22. Consents of Experts’’ in this Appendix:

(iv) was interested legally or beneficially in any shares of any member of our Group;

or

(v) had any right (whether legally enforceable or not) to subscribe for or to nominate

persons to subscribe for shares in any member of our Group; and

(f) so far as is known to our Directors, none of our Directors, their respective associates

(as defined under the Listing Rules) or Shareholders of our Company who held more

than 5% of the total Shares as of the Latest Practicable Date had any interest in the

five largest customers or the five largest suppliers of our Group.


– IV-25 –


D. OTHER INFORMATION

14. Share Option Schemes

(a) Pre-[REDACTED] Share Option Scheme

Pursuant to the resolution passed by our Directors on 28 July 2021 (the ‘‘Pre-[REDACTED]Scheme Adoption Date’’), we approved and adopted the rules of the Pre-[REDACTED] Share Option

Scheme. The principle terms of the Pre-[REDACTED] Share Option Scheme are as follows:

Purpose

The purpose of the Pre-[REDACTED] Share Option Scheme is to provide incentive or reward

to any Director, officer and/or full-time or part-time employee of any member of our Group or any

branch office thereof (‘‘Eligible Employees’’) for their contribution to, and continuing efforts to

promote the interests of, our Company and for such other purposes as our Board may approve

from time to time. In determining the basis of eligibility of each Eligible Employee, our Board

would take into account such factors as our Board may at its discretion consider appropriate.

Conditions of the Pre-[REDACTED] Share Option Scheme

The Pre-[REDACTED] Share Option Scheme shall take effect on the Pre-[REDACTED] Scheme

Adoption Date. Any exercise of an option is conditional upon:

(i) the [REDACTED] Committee granting approval of the [REDACTED] of, and permission to

[REDACTED] in, the Shares which may fall to be issued pursuant to the exercise of any

options granted thereunder;

(ii) the commencement of [REDACTED] in the Shares on the [REDACTED] of the Stock

Exchange; and

(iii) any such conditions as may be specified in the relevant offer letter being satisfied or

waived by our Board.

Who may participate

Our Board may, at any time during the life of the Pre-[REDACTED] Share Option Scheme,

offer the grant to any Eligible Employee as our Board may at its absolute discretion select

options to subscribe for such number of Shares as our Board may determine.

Administration

Subject to the Pre-[REDACTED] Share Option Scheme and the Listing Rules, the chairman of

our Board has the exclusive right: (A) to propose to our Board for approval (i) the Eligible

Employees, (ii) the number of Shares in respect of which options are to be granted to such

Eligible Employees, (iii) the date of grant of such options, and (iv) any other terms and

conditions of such options; and (B) to determine the subscription price of the options, the Pre-

[REDACTED] Share Option Scheme shall be subject to the administration of our Board whose


– IV-26 –


decisions as to all matters arising in relation to the Pre-[REDACTED] Share Option Scheme or its

interpretation or effect (save as otherwise provided therein) shall be final, conclusive and

binding on all parties. Our Board shall have the right:

(i) to interpret and construe the provisions of the Pre-[REDACTED] Share Option Scheme;

(ii) to consider and approve by a resolution of a simple majority of the members of our

Board present in a duly constituted Board meeting in which not less than two-third (2/

3) of all the members of our Board are present (‘‘Simple Majority of Vote’’) (i) the

Eligible Employees, (ii) the number of Shares in respect of which options are to be

granted to such Eligible Employees, (iii) the date of grant of such options, and (iv) any

other terms and conditions of such options, as proposed by the chairman to our

Board;

(iii) to make such appropriate and equitable adjustments to the terms and conditions of

options granted under the Pre-[REDACTED] Share Option Scheme as it deems

necessary;

(iv) to amend, add to and/or delete any of the provisions of the Pre-[REDACTED] Share

Option Scheme; and

(v) to make such other decisions, determinations or regulations as it shall deem

appropriate in the administration of the Pre-[REDACTED] Share Option Scheme.

When options may be granted

Subject to the termination provisions in the Pre-[REDACTED] Share Option Scheme, options

may be granted by our Company to Eligible Employees on or after the Pre-[REDACTED] Scheme

Adoption Date, but no further options may be granted after the expiry of one year of the Pre-

[REDACTED] Scheme Adoption Date or the Latest Practicable Date (whichever is the earlier), but

in all other respects the provisions of the Pre-[REDACTED] Share Option Scheme shall remain in

full force and effect to the extent necessary to give effect to the exercise of any options granted

prior thereto or otherwise as may be required in accordance with the provisions of the Pre-

[REDACTED] Share Option Scheme, and options which are granted before the expiry of one year of

the Pre-[REDACTED] Scheme Adoption Date or the Latest Practicable Date (whichever is the

earlier) may continue to be exercisable thereafter in accordance with their terms of issue.

Grant of options

Subject to compliance with the provisions of the Pre-[REDACTED] Share Option Scheme, and

the Listing Rules, our Board shall have absolute power to decide by a Simple Majority of Vote

whether to approve any grant of options proposed by the chairman of our Board, with

consideration of factors including but not limited to seniority, work performance, overall

contribution to our Group, special merit and potential development of the Eligible Employee

proposed by the chairman of our Board.

Each offer of grant of option shall be in writing made to an Eligible Employee by an offer

letter in such form as our Board may from time to time determine.


– IV-27 –


Acceptance of an offer of grant of option

An offer of grant of options shall be deemed to have been accepted by the Eligible

Employee and the option to which the offer relates shall be deemed to have been granted and to

have taken effect when the duplicate or a copy of the offer letter comprising acceptance of the

option duly signed by the grantee of the option together with the payment in favor of our

Company of the option price by way of consideration for the grant thereof are received by our

Company within the period stipulated in the offer letter, and the option to which the offer relates

shall be deemed to have been granted on the date on which such option is accepted. Such

payment of the option price shall in no circumstances be refundable and shall not be deemed to

be a part payment of the subscription price.

Any offer of grant of option may be accepted in respect of all or less than the number of

Shares in respect of which it is offered. To the extent that an offer of grant of options is not

accepted in the manner indicated above, it will be deemed to have been irrevocably declined

and the offer will lapse. The terms and conditions of the options set out in the offer letter may

only be amended with the written consent of our Company and the relevant grantee.

Maximum number of Shares available for subscription

The maximum number of Shares in respect of which options may be granted under the Pre-

[REDACTED] Share Option Scheme shall be [REDACTED] new shares as adjusted as a result of the

Second Re-denomination of Share Capital, representing approximately 2.56% of the issued share

capital of our Company as of the Pre-[REDACTED] Scheme Adoption Date.

In the event of any alteration to the capital structure of our Company, the maximum number

of Shares in respect of which options may be granted will be adjusted, in such manner as the

auditors of our Company or the independent financial advisor to our Company (acting as experts

and not as arbitrators) shall certify to be fair and reasonable.

Option price

The amount payable for the acceptance of the grant of options shall be the sum of RMB1.00

which shall be paid upon such acceptance. This consideration shall not be refundable to the

grantee(s) and shall not be deemed to be a part of the subscription price.


– IV-28 –


Vesting of options

Options shall vest in the relevant grantee in accordance with the following vesting schedule

and vesting period and the fulfillment of any additional vesting condition(s) as may be specified

in the offer letter:

Date (each, a ‘‘Vesting Date’’)

Percentage of options vested in

the grantee on the Vesting Date

31 December 2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30%

31 December 2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30%

31 December 2024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40%

Exercise of options

An option may, subject to the terms and conditions upon which such option is granted, be

exercised in whole or in part on or after (but not before) the relevant Vesting Date according to

the terms of the [REDACTED] Share Option Scheme and the relevant offer letter (including but not

limited to the provisions on additional vesting conditions) by the grantee (or his/her legal

personal representatives) before its expiry or lapse by giving notice in writing to our Company

stating that the option is thereby exercised and the number of Shares in respect of which it is

exercised, provided that the number of Shares shall be equal to the size of a [REDACTED] for

[REDACTED] in Shares on the [REDACTED] of the Stock Exchange or an integral number thereof.

Such notice must be accompanied by a remittance, to the order of our Company or its authorized

agent, for the full amount of the aggregate subscription price for the Shares in respect of which

the notice is given. Upon the giving of such notice and the payment of the subscription price,

the exercise of options shall become irrevocable. Within ten business days after receipt of the

notice and the remittance and (in the event of any alteration to the capital structure of our

Company) receipt of the auditors’ or the independent financial advisor’s certificate in the Pre-

[REDACTED] Share Option Scheme (if applicable), our Company shall allot and issue the relevant

Shares to the grantee (or his/her legal personal representatives) credited as fully paid and issue

to the grantee (or his/her legal personal representatives) a share certificate in respect of the

Shares so allotted.

Notwithstanding any of the foregoing, our Board reserves the right to allow for an earlier

exercise of an option for any grantee. In addition, our Board shall be entitled to cancel, revoke or

terminate any outstanding option (or any part thereof) granted to any grantee (to the extent not

already exercised) without compensation if such grantee commits a material breach of his/her

employment or director contract with our Company or any of our subsidiaries or our Group’s work

regulations or the provisions of the [REDACTED] Share Option Scheme, or is guilty of any serious

misconduct, or appears either to be unable to pay or to have no reasonable prospect of being

able to pay his/her debts or has become bankrupt or has made any arrangement or composition

with his/her creditors generally, or has been convicted of any criminal offence involving his/her

integrity or honesty, or breaches his/her confidentiality obligation under the [REDACTED] Share

Option Scheme.


– IV-29 –


Subject to the conditions set out in the [REDACTED] Share Option Scheme, the outstanding

option may be exercised by the grantee at any time during the period ending on or before 31

December 2025 as specified in the offer letter, within which the vested part of the options may

be exercised by the grantee (‘‘Pre-[REDACTED] Scheme Option Period’’) on or after the date upon

which such option becomes exercisable, provided that:

(i) in the event of the grantee ceasing to be a Director, an officer or an employee of our

Company or any of our subsidiaries by reason of voluntary resignation, dismissal, lay-

off or retirement, the vested part of the option may only be exercised by the grantee

on or before his/her last actual working day with our Company or any of our

subsidiaries (whether salary is paid in lieu of notice or not), after which the grantee

shall be deemed to have given up all of his/her rights to the outstanding option

(whether vested or unvested);

(ii) in the event of the grantee being suspended from duty with our Company or any of our

subsidiaries without pay by reason of governmental order, major personal illness,

major family change or studying abroad, the vested part of the options may only be

exercised by the grantee within one month after the commencement date of the

suspension, after which the grantee shall be deemed to have given up all of his/her

rights to the vested part of the outstanding option. As regards the unvested part of the

outstanding option, the remaining vesting period shall be temporarily suspended from

the date of the suspension until such date when the grantee resumes his/her duty

with our Company or any of our subsidiaries, but in no event may the option be

exercised after the expiry of the [REDACTED] Scheme Option Period;

(iii) in the event of the grantee ceasing to be a Director, an officer or an employee of our

Company or any of our subsidiaries by reason of death (other than death from

occupational injury which is provided in paragraph (v), (a) the grantee’s legal personal

representatives shall be deemed to have given up all of their rights to the unvested

part of the outstanding option on the date of the grantee’s death, and (b) the vested

part of the outstanding option may only be exercised by the grantee’s legal personal

representative(s) within 12 months from such cessation, after which the grantee’s legal

personal representatives shall be deemed to have given up all of their rights to the

vested part of the outstanding option;

(iv) in the event of the transfer of the grantee’s employment from our Company or any of

our subsidiaries to an affiliated company of our Group (not being a transfer at the

request of our Company or any of our subsidiaries), the vested part of the outstanding

option may only be exercised by the grantee on or before his/her last actual working

day with our Company or any of our subsidiaries, after which the grantee shall be

deemed to have given up all of his/her rights to the outstanding option (whether

vested or unvested). For the avoidance of doubt, this paragraph does not apply to a

transfer of employment out of our Group at the request of our Company or any of our

subsidiaries;


– IV-30 –


(v) in the event of the grantee ceasing to be a Director, an officer or an employee of our

Company or any of our subsidiaries by reason of death or disability from occupational

injury, the option (whether vested or unvested) may be exercised by the grantee or

his/her legal personal representatives (as the case may be) in full or in part within one

month from such cessation, after which the grantee or his/her legal personal

representatives (as the case may be) shall be deemed to have given up all of their

rights to the outstanding option (whether vested or unvested);

(vi) if a general offer by way of voluntary or mandatory offer or take-over is made to all the

Shareholders (or all such Shareholders other than the offeror and/or any person

controlled by the offeror and/or any person acting in association or concert with the

offeror) and such offer becomes or is declared unconditional prior to the expiry of the

[REDACTED] Scheme Option Period, the grantee may by notice in writing to our

Company within five business days after such offer becoming or being declared

unconditional (but before such time as shall be notified by our Company) exercise all

or part of the outstanding option (whether vested or unvested) as specified in such

notice, after which the grantee shall be deemed to have given up all of his/her rights

to the outstanding option (whether vested or unvested);

(vii) if a general offer by way of a scheme of arrangement is made to all the Shareholders

and the scheme has been approved by the necessary number of Shareholders at the

requisite meetings, the grantee may thereafter (but before such time as shall be

notified by our Company) by notice in writing to our Company exercise all or part of the

outstanding option (whether vested or unvested) as specified in such notice, and the

grantee shall be deemed to have given up all of his/her rights to the outstanding

option (whether vested or unvested) after the aforesaid period;

(viii) other than a general offer or a scheme of arrangement contemplated in paragraphs (vi)

and (vii), if a compromise or arrangement between our Company and its members or

creditors is proposed for the purposes of or in connection with a scheme for the

reconstruction of our Company or its amalgamation with any other company or

companies, our Company shall give notice thereof to the grantee (together with a

notice of the existence of the provisions of this paragraph) on the same date or soon

after it dispatches the notice to each member or creditor of our Company summoning

the meeting to consider such a compromise or arrangement, and thereupon the

grantee may forthwith and until the expiry of the period commencing with such date

and ending with the earlier of one month thereafter and the date on which such

compromise or arrangement is sanctioned by the court of competent jurisdiction,

exercise all or part of the outstanding option (whether vested or unvested), but the

exercise of an option as aforesaid shall be conditional upon such compromise or

arrangement being sanctioned by the court of competent jurisdiction and becoming

effective. Upon such compromise or arrangement becoming effective, all options shall

lapse except insofar as previously exercised pursuant to the [REDACTED] Share Option

Scheme. Our Company may require the grantee to transfer or otherwise deal with the

Shares issued as a result of the exercise of option in these circumstances so as to

place the grantee in the same position as nearly as would have been the case had

such Shares been subject to such compromise or arrangement; and


– IV-31 –


(ix) in the event that a notice is given by our Company to our Shareholders to convene a

general meeting for the purposes of considering, and if thought fit, approving a

resolution to voluntarily wind-up our Company, our Company shall on the same date as

or soon after it despatches such notice to each Shareholder give notice thereof to all

grantees and thereupon, each grantee shall be entitled to exercise all or part of the

outstanding option (whether vested or unvested) at any time not later than five

business days prior to the proposed general meeting of our Company by giving notice

in writing to our Company, whereupon our Company shall as soon as possible and, in

any event, no later than one business day immediately prior to the date of the

proposed general meeting referred to above, allot and issue the relevant Shares to the

grantee credited as fully paid. Upon the relevant resolution to voluntarily wind-up our

Company having been approved in the general meeting, all options shall lapse except

insofar as previously exercised pursuant to the Pre-[REDACTED] Share Option Scheme.

In the event that the relevant resolution to voluntarily wind-up our Company is not

approved in the general meeting, any option, if exercisable, shall continue to be

exercisable subject to the terms and conditions under the Pre-[REDACTED] Share option

Scheme and the offer letter.

Notwithstanding any of the above provisions, the chairman of our Board is empowered to

make such appropriate and equitable adjustments or additions as he/she deems necessary or

appropriate either to meet with the requirement of any applicable laws and regulations or to deal

with a situation not covered by the Pre-[REDACTED] Share Option Scheme.

The Shares to be allotted and issued upon the exercise of the options shall be subject to

our Company’s memorandum and articles of association and the laws of the Cayman Islands for

the time being in force and shall rank pari passu in all respects with the other fully-paid Shares

in issue of our Company as at the date of allotment and will entitle the holders to participate in

all dividends or other distributions paid or made on or after the date of allotment other than any

dividend or other distribution previously declared or recommended or resolved to be paid or

made if the record date therefor shall be on or before the date of allotment.

The Pre-[REDACTED] Scheme Option Period (being the period within which the vested part of

the option may be exercised by the grantee) in respect of each option granted under the Pre-

[REDACTED] Share Option Scheme shall be determined by our Board at its sole and absolute

discretion and set out in the relevant offer letter.

Transferability of options

An option shall be personal to the grantee and shall not be assignable nor transferable, and

no grantee shall in any way sell, transfer, dispose of, charge, mortgage, encumber or create any

interest (legal or beneficial) in favor of any third party over or in relation to any option, except

for the transmission of an option on the death of the grantee on terms of the Pre-[REDACTED]

Share Option Scheme. Any breach of the foregoing by a grantee shall entitle our Company to

cancel, revoke or terminate any outstanding option (or any part thereof) granted to such grantee

(to the extent not already exercised) without compensation.


– IV-32 –


Lapse of options

The right to exercise an outstanding option (which is unexercised) shall terminate

immediately upon the earliest of:

(i) the expiry of the Pre-[REDACTED] Scheme Option Period;

(ii) the expiry of any of the periods referred to in sub-paragraphs (i), (ii) (in respect of the

vested part of the options only), (iii), (iv), (v) or (vi) under ‘‘— Exercise of options’’;

(iii) subject to the scheme of arrangement referred to in the sub-paragraph (vii) under ‘‘—

Exercise of options’’ becoming effective, the expiry of the period referred to in such

sub-paragraph;

(iv) subject to the compromise or arrangement referred to in sub-paragraph (viii) under ‘‘—

Exercise of options’’ having been sanctioned by the court of competent jurisdiction and

becoming effective, the expiry of the period referred to in such sub-paragraph;

(v) the date of the commencement of the winding-up of our Company;

(vi) the date on which the grantee commits a breach of provisions referred to in the

paragraph under ‘‘— Transferability of options’’; or

(vii) the date on which the Option is cancelled by our Board as provided in the paragraph

‘‘— Cancellation of options granted.’’

Our Company shall owe no liability to any grantee for the lapse of any option under the

provisions of the Pre-[REDACTED] Share Option Scheme.

Alteration of the Pre-[REDACTED] Share Option Scheme

Our Board may amend any of the provisions of the Pre-[REDACTED] Share Option Scheme

(including without limitation amendments in order to comply with changes in legal or regulatory

requirements) at any time. No changes to the authority of our Board in relation to any alteration

of the terms of the Pre-[REDACTED] Share Option Scheme shall be made without the prior

approval of the Shareholders in general meeting. Any alteration to the terms and conditions of

the Pre-[REDACTED] Share Option Scheme which are of a material nature (as determined by our

Board in its sole discretion) must, to be effective, be approved by the Shareholders in general

meeting, except where the alterations take effect automatically under the existing terms of the

Pre-[REDACTED] Share Option Scheme.

Cancellation of options granted

Our Board may cancel an option granted but not exercised with the approval of the grantee

of such option. All lapsed options shall be cancelled and shall not be granted to any other

Eligible Employee. No option may be granted to an Eligible Employee in place of his/her

cancelled option unless there are available unissued options (excluding the cancelled option)

within the limit as mentioned in the paragraphs ‘‘— Maximum number of Shares available for

subscription.’’


– IV-33 –


Termination

Our Company may, by resolution in general meeting or resolution of our Board, terminate

the operation of the Pre-[REDACTED] Share Option Scheme at any time and in such event no

further option may be granted but in all other respects the provisions of the Pre-[REDACTED]

Share Option Scheme shall remain in full force and effect and the options granted prior to such

termination shall continue to be valid and exercisable in accordance with the Pre-[REDACTED]

Share Option Scheme.

Outstanding Options granted under the Pre-[REDACTED] Share Option Scheme

As of the date of this Document, options to subscribe for [REDACTED] Shares, representing

approximately [REDACTED] of the issued share capital of our Company immediately after the

completion of the [REDACTED] (assuming the [REDACTED] is not exercised and without taking into

account any Shares which may be issued upon the exercise of the options granted under the Pre-

[REDACTED] Share Option Scheme or any options which may be granted under the Post-

[REDACTED] Share Option Scheme), have been granted by our Company to 132 grantees under the

Pre-[REDACTED] Share Option Scheme. The following table sets out information on the grantees

who are Directors or senior management of our Group:

Name of grantees Position(s) in our GroupDate of acceptance

of grant Residential address

Number of Shares tobe issued pursuant

to the exercise of theoptions in full(1)

Percentage of Sharesimmediately following

completion of the[REDACTED] (assuming the[REDACTED] is not exercised

and without taking intoaccount any Shares whichmay be issued upon theexercise of the optionsgranted under the Pre-

[REDACTED] Share OptionScheme or any options

which may be granted underthe Post-[REDACTED] Share

Option Scheme)

Mr. Lee Yu-cheng(李裕成) . . . . . .

Executive Director andchairman of the Board

30 August 2021 No. 1103, Ln. 366Minghua RoadShanghaiPRC


Mr. Liao Chih-wei(廖志偉) . . . . . .

Executive Director andgeneral manager

30 August 2021 Room 903, Building 36Xinghu GardenSuzhou Industrial ParkSuzhou, Jiangsu ProvincePRC


Mr. Lu Hao-wei(盧皓偉) . . . . . .

Chief financial officer 30 August 2021 6/F, No. 15 Aly. 27Ln. 372, Sec. 5Zhongxiao E. RoadGuangju Neighborhood 15Xinyi districtTaipei, Taiwan


Mr. Lee Chun-yi(李俊儀) . . . . . .

Deputy general manager forsupply chainmanagement

30 August 2021 3/F. No. 97Zhongpu 6th StreetBaoan Neighborhood 2Taoyuan DistrictTaoyuan CountyTaipei, Taiwan


Note:

(1) As adjusted as resulted of the Second Re-denomination of Share Capital.


– IV-34 –


All the other 128 grantees are full-time employees of our Group. Assuming that all theoptions granted under the Pre-[REDACTED] Share Option Scheme are exercised in full, ourCompany will be required to allot and issue an aggregate of [REDACTED] Shares for considerationof HK$3.67 per Share, representing a 72.84% discount to the low end of the stated [REDACTED]range of HK$[REDACTED] and a [REDACTED] discount to the [REDACTED] of the stated [REDACTED]range of HK$[REDACTED] On the basis of the foregoing, the grantees who are our Directors andsenior management will hold in aggregate of 1,410,000 Shares issued pursuant to the optionsgranted under the Pre-[REDACTED] Share Option Scheme, representing [REDACTED] of our Sharesin issue immediately after completion of the [REDACTED] (assuming the [REDACTED] is notexercised and without taking into account any Shares which may be issued upon the exercise ofthe options granted under the Pre-[REDACTED] Share Option Scheme or any options which may begranted under the Post-[REDACTED] Share Option Scheme).

Assuming full exercise of the Pre-[REDACTED] Share Options, the shareholding of theShareholders immediately following completion of the [REDACTED] (assuming the [REDACTED] isnot exercised and without taking into account any Shares which may be issued upon the exerciseof any Options which may be granted under the Post-[REDACTED] Share Option Scheme) wouldhave been diluted by approximately [REDACTED] and the dilution effect on our earnings per Sharewould be approximately [REDACTED].

Waiver and exemption

Our Company has applied for and [has been granted] (i) a waiver from the Stock Exchangefrom strict compliance with the disclosure requirements under Rule 17.02(1)(b) of and paragraph27 of Appendix 1A to the Listing Rules and (ii) an exemption from the SFC under section 342A ofthe Companies (Winding Up and Miscellaneous Provisions) Ordinance exempting our Companyfrom strict compliance with the disclosure requirements of paragraph 10(d) of Part I of the ThirdSchedule to the Companies (Winding Up and Miscellaneous Provisions) Ordinance. Furtherinformation on the waiver and the exemption is set out in ‘‘Waivers from Strict Compliance withthe Listing Rules and Exemptions from the Companies (Winding Up and MiscellaneousProvisions) Ordinance’’ in this Document.

(b) Post-[REDACTED] Share Option Scheme

Pursuant to resolutions passed by our Shareholders in general meeting on [date] (the ‘‘Post-[REDACTED] Scheme Adoption Date’’), we conditionally approved and adopted the rules of thePost-[REDACTED] Share Option Scheme. The terms of the Post-[REDACTED] Share Option Schemeare in accordance with the provisions under the Listing Rules. As of the Latest Practicable Date,no option has been granted or agreed to be granted by our Company pursuant to the Post-[REDACTED] Share Option Scheme. The principle terms of the Post-[REDACTED] Share OptionScheme are as follows:

Purpose

The purpose of the Post-[REDACTED] Share Option Scheme is to motivate the EligiblePersons (as defined below) to optimize their future contributions to our Group and/or to rewardthem for their past contributions, to attract and retain or otherwise maintain ongoingrelationships with such Eligible Persons who are significant to and/or whose contributions are orwill be beneficial to the performance, growth or success of our Group, and additionally in the


– IV-35 –


case of Executives (as defined below), to enable our Group to attract and retain individuals withexperience and ability and/or to reward them for their past contributions. Subject to the terms ofthe Post-[REDACTED] Share Option Scheme, all applicable statutory requirements and the ListingRules, our Board shall be entitled at any time during the life of the Post-[REDACTED] Share OptionScheme to offer the grant of any option to any Eligible Person as our Board may in its absolutediscretion select. The basis of eligibility shall be determined by our Board from time to time.

Conditions of the Post-[REDACTED] Share Option Scheme

The Post-[REDACTED] Share Option Scheme shall come into effect on the [REDACTED] subjectto the following conditions having been fulfilled:

(i) the approval of our Shareholders for the adoption of the Post-[REDACTED] Share OptionScheme and authorization be given to our Board to grant options and to allot, issueand [REDACTED] with Shares under the Post-[REDACTED] Share Option Scheme;

(ii) the approval of the Stock Exchange for the [REDACTED] of and permission to[REDACTED] in, any Shares to be allotted and issued pursuant to the exercise of theoptions in accordance with the terms and conditions of the Post-[REDACTED] ShareOption Scheme; and

(iii) the obligations of the [REDACTED] under the [REDACTED] Agreement(s), if any,becoming unconditional and not being terminated in accordance with the termsthereof or otherwise.

If the conditions referred to the above are not satisfied within six calendar months after thePost-[REDACTED] Scheme Adoption Date:

(i) the Post-[REDACTED] Share Option Scheme will forthwith determine;

(ii) any option granted or agreed to be granted pursuant to the Post-[REDACTED] ShareOption Scheme and any offer of such a grant shall be of no effect;

(iii) no person shall be entitled to any rights or benefits or be under any obligations underor in respect of the Post-[REDACTED] Share Option Scheme or any option; and

(iv) our Board may further discuss and devise another share option scheme that isapplicable to a private company for adoption by our Company.

Administration

Subject to the fulfillment of the conditions and the termination provisions of the Post-[REDACTED] Share Option Scheme, the Post-[REDACTED] Share Option Scheme shall be valid andeffective for a period of ten years commencing on the Post-[REDACTED] Scheme Adoption Date.Upon the expiry of the Post-[REDACTED] Share Option Scheme, no further options will be offeredbut the provisions of the Post-[REDACTED] Share Option Scheme shall remain in force and effectin all other respects. All options granted prior to such expiry and not then exercised shallcontinue to be valid and exercisable subject to and in accordance with the Post-[REDACTED]Share Option Scheme. The Post-[REDACTED] Share Option Scheme shall be subject to theadministration of our Board whose decision on all matters arising in relation to the Post-


– IV-36 –


[REDACTED] Share Option Scheme or its interpretation or effect shall (save as otherwise providedin the Post-[REDACTED] Share Option Scheme and in the absence of manifest error) be final andbinding on all parties who may be affected thereby. Subject to the requirements of the ListingRules, the Board shall have the right (i) to interpret and construe the provisions of the Post-[REDACTED] Share Option Scheme, (ii) to determine the persons who will be awarded optionsunder the scheme, the minimum period of the options to be held, the number of Shares to beissued under the option and the subscription price, (iii) to make such appropriate and equitableadjustments to the terms of options granted under the scheme as it deems necessary, and (iv) tomake such other decisions, determinations or regulations as it shall deem appropriate in theadministration of the scheme. Our Board may delegate any or all of its powers in relation to thePost-[REDACTED] Share Option Scheme to any of its committees.

Who may join

Our Board may, in its absolute discretion, offer options to subscribe for such number ofShares in accordance with the terms set out in the Post-[REDACTED] Share Option Scheme to:

(i) any executive director of, manager of, or other employee holding an executive,managerial, supervisory or similar position in any member of our Group (‘‘Executive’’);

(ii) any proposed employee, any full-time or part-time employee, or a person for the timebeing seconded to work full-time or part-time for any member of our Group;

(iii) a director or proposed director (including an independent non-executive director) ofany member of our Group;

(iv) a direct or indirect shareholder of any member of our Group;

(v) a supplier of goods or services to any member of our Group;

(vi) a customer, consultant, business or joint venture partner, franchisee, contractor, agentor representative of any member of our Group;

(vii) a person or entity that provides design, research, development or other support or anyadvisory, consultancy, professional or other services to any member of our Group; and

(viii) an associate (as defined in the Listing Rules) of any of the persons referred to inparagraph (i) to (vii) above. (the person referred above are the ‘‘Eligible Persons’’).

Maximum number of Shares

The maximum number of Shares which may be issued upon exercise of all options to begranted under the Post-[REDACTED] Share Option Scheme and any other schemes of our Groupshall not in aggregate exceed 10% of the Shares in issue as at the [REDACTED] (‘‘SchemeMandate Limit’’) provided that:

(i) our Company may at any time as our Board may think fit seek approval from ourShareholders to refresh the Scheme Mandate Limit, save that the maximum number ofShares which may be issued upon exercise of all options to be granted under the Post-[REDACTED] Share Option Scheme and any other schemes of our Company shall not


– IV-37 –


exceed 10% of the Shares in issue as at the date of approval by our Shareholders in

general meeting where the Scheme Mandate Limit is refreshed. Options previously

granted under the Post-[REDACTED] Share Option Scheme and any other schemes of

our Company (including those outstanding, cancelled, lapsed or exercised in

accordance with the terms of the Post-[REDACTED] Share Option Scheme or any other

schemes of our Company) shall not be counted for the purpose of calculating the

Scheme Mandate Limit as refreshed. The Company shall send to our Shareholders a

circular containing the details and information required under the Listing Rules; and

(ii) our Company may seek separate approval from our Shareholders in general meeting for

granting options beyond the Scheme Mandate Limit, provided that the options in

excess of the Scheme Mandate Limit are granted only to the Eligible Person specified

by our Company before such approval is obtained. The Company shall issue a circular

to our Shareholders containing the details and information required under the Listing

Rules.

Notwithstanding paragraph (i) above, the maximum number of Shares which may be issued

upon exercise of all outstanding options granted and yet to be exercised under the Post-

[REDACTED] Share Option Scheme and any other schemes of our Group shall not exceed 30% of

our Shares in issue from time to time. No options shall be granted under the Post-[REDACTED]

Share Option Scheme or any other share option scheme of the Company or any of its

Subsidiaries which will result in the limit being exceeded.

Maximum entitlement of each participant

The maximum number of Shares issued and to be issued upon exercise of the options

granted to any one Eligible Person (including exercised and outstanding options) in any 12-month

period shall not exceed 1% of our Shares in issue from time to time. Where any further grant of

options to such an Eligible Person would result in the Shares issued and to be issued upon

exercise of all options granted and to be granted to such Eligible Person (including exercised,

cancelled and outstanding options) in the 12-month period up to and including the date of such

further grant representing in aggregate over 1% of our Shares in issue, such further grant shall

be separately approved by our Shareholders in general meeting with such Eligible Person and his

close associates or his associates (if such Eligible Person is a connected person) abstaining from

voting. The Company shall send a circular to our Shareholders disclosing the identity of the

Eligible Person, the number and terms of the options to be granted (and options previously

granted) to such Eligible Person, and containing the details and information required under the

Listing Rules. The number and terms (including the subscription price) of the options to be

granted to such Eligible Person must be fixed before the approval of our Shareholders and the

date of our Board meeting proposing such grant shall be taken as the offer date for the purpose

of calculating the subscription price of those options.

The maximum numbers in respect of which options may be granted shall be adjusted in

such manner as the auditors of our Company shall certify in writing to our Board to be fair and

reasonable in the event of any alteration to the capital structure of our Company whether by way


– IV-38 –


of capitalization of profits or reserves, rights issue, consolidation, reclassification,

reconstruction, subdivision or reduction of the number of our Shares but shall not in any event

exceed the limits imposed by the Listing Rules.

Offer and grant of options

Subject to the terms of the Post-[REDACTED] Share Option Scheme, our Board shall be

entitled at any time within ten years after the Post-[REDACTED] Scheme Adoption Date to offer the

grant of an option to any Eligible Person as our Board may in its absolute discretion select to

subscribe at the subscription price for such number of Shares as our Board may (subject to the

terms of the Post-[REDACTED] Share Option Scheme) determine provided that:

(i) no options shall be granted under the Post-[REDACTED] Share Option Scheme after the

termination of the Post-[REDACTED] Share Option Scheme;

(ii) no options shall be granted if our Company would be required to issue a document or

[REDACTED] document in respect of such grant under applicable laws or regulations

applicable to our Company;

(iii) no options shall be granted if the grant would result in a breach by our Company or

our Directors of applicable laws or regulations (including those relating to shares); and

(iv) any option, once issued, shall not be reissued under the Post-[REDACTED] Share

Option Scheme.

Granting options to Connected Persons

Subject to the terms of the Post-[REDACTED] Share Option Scheme, but only insofar as and

for so long as the Listing Rules require, where any offer of an option is proposed to be made to a

Director, chief executive or a substantial shareholder (as defined in the Listing Rules) of our

Company or any of their respective associates, such offer must first be approved by the

independent non-executive Directors (excluding the independent non-executive Director who or

whose associate is the grantee of an option).

Where any grant of options to a substantial shareholder (as defined in the Listing Rules) or

an independent non-executive Director or any of their respective associates would result in the

shares issued and to be issued upon exercise of all options already granted and to be granted

(including options exercised, cancelled and outstanding) to such person in the 12-month period

up to and including the date of such grant:

(i) representing in aggregate over 0.1% of the relevant class of Shares in issue; and

(ii) (where the Shares are listed on the Stock Exchange) having an aggregate value, based

on the closing price of the Shares at the date of each grant, in excess of HK$5.0

million,


– IV-39 –


such further grant of options must be approved by our Shareholders, with such person, his

associates and all core connected persons of our Company (as defined in the Listing Rules)

abstaining from voting in favor of such general meeting. Any vote taken at the meeting to

approve the grant of such options must be taken on a poll.

Approval from our Shareholders is required for any change in the terms of options granted

to a participant who is a substantial shareholder or an independent non-executive Director or any

of their respective associates.

Offer letter

If in accordance with the terms of the Post-[REDACTED] Share Option Scheme, our Board

determines to offer the grant of an option to an Eligible Person, our Board shall forward to the

relevant Eligible Person an offer letter specifying:

(i) the Eligible Person’s name, address and occupation;

(ii) the offer date;

(iii) the Acceptance Date (as defined below);

(iv) the number of Shares in respect of which the option is offered;

(v) the subscription price and the manner of payment of the subscription price of the

Shares on and in consequence of the exercise of the option;

(vi) how the expiry date in relation to that option is ascertained;

(vii) the method of acceptance of the option which shall, unless our Board otherwise

determines, be as set out in the paragraphs under ‘‘— Offer period and number

accepted’’ below;

(viii) the method of exercise of the option which shall, unless our Board otherwise

determines, as set out in ‘‘— Exercise of options’’ below; and

(ix) such other terms and conditions relating to the offer of the option which in the opinion

of our Board are fair and reasonable but not being inconsistent with the rules and

procedures applicable to the Post-[REDACTED] Share Option Scheme and requiring the

Eligible Person to undertake to hold the option on the terms on which it is to be

granted and to be bound by the provisions of the Post-[REDACTED] Share Option

Scheme.

Offer period and number accepted

An offer of the grant of an option shall remain open for acceptance by the Eligible Person

concerned for a period of 28 days from the offer date provided that no such grant of an option

may be accepted after the expiry of the effective period of the Post-[REDACTED] Share Option

Scheme or the termination of the scheme. An option shall be deemed to have been granted and

accepted by the Eligible Person and to have taken effect when the duplicate offer letter


– IV-40 –


comprising acceptance of the offer of the option duly signed by the grantee together with a

remittance in favor of our Company of RMB1.00 by way of consideration for the grant thereof is

received by our Company on or before the date upon which an offer of an option must be

accepted by the relevant Eligible Person, being a date not later than 30 days after the offer date

(‘‘Acceptance Date’’). Such remittance shall in no circumstances be refundable.

Any offer of the grant of an option may be accepted or deemed to have been accepted in

respect of less than the number of Shares in respect of which it is offered provided that it is

accepted in respect of [REDACTED] for [REDACTED] in Shares on the Stock Exchange or an integral

multiple thereof and such number is clearly stated in the duplicate offer letter comprising

acceptance of the offer of the option. To the extent that the offer of grant of an option is not

accepted by the Acceptance Date, it will be deemed to have been irrevocably declined and the

offer will lapse.

Restriction on the time of grant of options

Our Board shall not offer the grant of any option to any Eligible Person after inside

information (has the meaning defined in the SFO) has come to its knowledge, until such inside

information has been announced pursuant to the requirements of the Listing Rules or during the

period commencing one month immediately preceding the earlier of: (i) the date of the Board

meeting (as such date is first notified to the Stock Exchange in accordance with the Listing

Rules) for the approval of our Company’s results for any year, half-year, quarterly or any other

interim period (whether or not required under the Listing Rules); and (ii) the deadline for our

Company to publish an announcement of its results for any year or half-year under the Listing

Rules, or quarterly or any other interim period (whether or not required under the Listing Rules),

and ending on the date of the results announcement.

Vesting and performance target

Subject to the provisions of the Listing Rules, our Board may in its absolute discretion when

offering the grant of an option impose any conditions, restrictions or limitations in relation

thereto in addition to those set forth in the Post-[REDACTED] Share Option Scheme as our Board

may think fit (to be stated in the letter containing the offer of grant of the option) including

(without prejudice to the generality of the foregoing) qualifying and/or continuing eligibility

criteria, conditions, restrictions or limitations relating to the achievement of performance,

operating or financial targets by our Company and/or the grantee, the satisfactory performance

or maintenance by the grantee of certain conditions or obligations or the time or period when the

right to exercise the option in respect of all or some of our Shares to which the option relates

shall vest provided that such terms or conditions shall not be inconsistent with any other terms

or conditions of the Post-[REDACTED] Share Option Scheme. For the avoidance of doubt, subject

to such terms and conditions as our Board may determine as aforesaid (including such terms

and conditions in relation to their vesting, exercise or otherwise) there is no performance target

which need to be achieved by the grantee before the option can be exercised.

Amount payable for options

The amount payable on acceptance of an option is RMB1.00.


– IV-41 –


Subscription price

Subject to any adjustment made pursuant to the terms of the Post-[REDACTED] Share Option

Scheme, the subscription price in respect of any particular option shall be such price as our

Board may in its absolute discretion determine at the time of grant of the relevant option (and

shall be stated in the letter containing the offer of grant of the option) but the subscription price

shall not be less than whichever is the highest of:

(i) the closing price of a Share as stated in the Stock Exchange’s daily quotations sheet

on the offer date; and

(ii) the average closing price of a Share as stated in the Stock Exchange’s daily quotations

sheet for the five business days (as defined in the Listing Rules) immediately

preceding the offer date.

Exercise of options

(i) An option shall be exercised in whole or in part (but if in part only, in respect of a

[REDACTED] or any integral multiple thereof) within the period, in respect of an option,

commencing immediately after the business day (as defined in the Listing Rules) on

which the option is deemed to be granted and accepted in accordance with the Post-

[REDACTED] Share Option Scheme (‘‘Commencement Date’’) and expiring on such date

of the expiry of the option as our Board may in its absolute discretion determine and

which shall not exceed ten years from the Post-[REDACTED] Scheme Adoption Date

(‘‘Post-[REDACTED] Scheme Option Period’’) but subject to the provisions for early

termination thereof contained in the Post-[REDACTED] Share Option Scheme (‘‘ExpiryDate’’) in the manner as set out in the Post-[REDACTED] Share Option Scheme, by the

grantee (or his legal personal representative(s)) by giving notice in writing to our

Company stating that the option is thereby exercised and specifying the number of

Shares in respect of which it is exercised. Each such notice must be accompanied by a

remittance for the full amount of the aggregate subscription price for the Shares in

respect of which the notice is given. Within 30 days after receipt of the notice and the

remittance and, where appropriate, receipt of a certificate from the auditors of our

Company pursuant to the Post-[REDACTED] Share Option Scheme, our Company shall

accordingly allot and issue the relevant number of Shares to the grantee (or his legal

personal representative(s)) credited as fully paid with effect from (but excluding) the

relevant exercise date and instruct the relevant share [REDACTED] to and issue to the

grantee (or his legal personal representative(s)) share certificate(s) in respect of the

Shares so allotted.

(ii) The exercise of any option shall be subject to the members of our Company in general

meeting approving any necessary increase in the authorized share capital of our

Company.


– IV-42 –


(iii) Subject as hereinafter provided, an option may be exercised by the grantee at any time

during the Post-[REDACTED] Scheme Option Period, provided that:

(a) in the event that the grantee dies or becomes permanently disabled before

exercising an option (or exercising it in full), he (or his legal representative(s))

may exercise the option up to the grantee’s entitlement (to the extent not already

exercised) within a period of 12 months following his death or permanent

disability or such longer period as our Board may determine;

(b) in the event that the grantee ceases to be an Executive by reason of his

retirement pursuant to such retirement scheme applicable to our Group at the

relevant time, his option (to the extent not already exercised) shall be exercisable

until the expiry of the Post-[REDACTED] Scheme Option Period;

(c) in the event that the grantee ceases to be an Executive by reason of his transfer

of employment to an affiliate company, his option (to the extent not already

exercised) shall be exercisable until the expiry of the Post-[REDACTED] Scheme

Option Period unless our Board in its absolute discretion otherwise determines in

which event the option (or such remaining part thereof) shall be exercisable

within such period as our Board has determined;

(d) in the event that the grantee ceases to be an Executive for any reason (including

his employing company ceasing to be a member of our Group) other than his

death, permanent disability, retirement pursuant to such retirement scheme

applicable to our Group at the relevant time or the transfer of his employment to

an affiliate company or the termination of his employment with the relevant

member of our Group by resignation or on the grounds that he has been guilty of

serious misconduct or other culpable reason (‘‘Culpable Termination’’), his option

(to the extent not already exercised) shall lapse on the date of cessation of such

employment and not be exercisable unless our Board otherwise determines in


within such period as our Board may in its absolute discretion determine

following the date of such cessation;

(e) in the event that the grantee ceases to be an Executive by reason of the

termination of his employment by resignation or Culpable Termination, his option

(to the extent not already exercised) shall lapse on the date on which the notice

of termination is served (in the case of resignation) or the date on which the

grantee is notified of the termination of his employment (in the case of Culpable

Termination) and not be exercisable unless our Board otherwise determines in


within such period as our Board may in its absolute discretion determine

following the date of such service or notification. A resolution of our Board

resolving that the Executive’s option has lapsed pursuant to this paragraph (iii)(e)

shall be final and conclusive;


– IV-43 –


(f) if a grantee being:

(i) an executive Director ceases to be an Executive but remains a non-executive

Director, his option (to the extent not already exercised) shall be exercisable

until the expiry of the Post-[REDACTED] Scheme Option Period unless our

Board in its absolute discretion otherwise determines in which event the

option (or such remaining part thereof) shall be exercisable within such

period as our Board has determined; or

(ii) a non-executive Director ceases to be a Director:

(1) by reason of retiring pursuant to the Articles and who notifies our

Company that he is not offering himself for re-election at our

Company’s annual general meeting (‘‘Non-Executive DirectorRetirement’’), his option (to the extent not already exercised) shall be

exercisable until the expiry of the Post-[REDACTED] Scheme Option

Period unless our Board in its absolute discretion otherwise determines

in which event the option (or such remaining part thereof) shall be

exercisable within such period as our Board has determined; or

(2) for reasons other than Non-Executive Director Retirement, his option (to

the extent not already exercised) shall lapse on the date of cessation

of such appointment and not be exercisable unless our Board

otherwise determines in which event the option (or such remaining

part thereof) shall be exercisable within such period as our Board may

in its absolute discretion determine following the date of such

cessation;

(g) if:

(i) our Board in its absolute discretion at any time determines that a grantee

has ceased to be an Eligible Person; or

(ii) a grantee has failed to or no longer satisfies or complies with such criteria

or terms and conditions that may be attached to the grant of the option or

which were the basis on which the option was granted, his option (to the

extent not already exercised) shall lapse on the date on which the grantee is

notified thereof (in the case of (i)) or on the date on which the grantee has

failed to or no longer satisfies or complies with such criteria or terms and

conditions as aforesaid (in the case of (ii)) and not be exercisable unless

our Board otherwise determines in which event the option (or such

remaining part thereof) shall be exercisable within such period as our Board

may in its absolute discretion determine following the date of such

notification or the date of such failure, non-satisfaction or non-compliance.

In the case of (i), a resolution of our Board resolving that the grantee’s

option has lapsed pursuant to this paragraph (iii)(g)(ii) shall be final and

conclusive;


– IV-44 –


(h) if a grantee (being a corporation):

(i) has a liquidator or receiver appointed anywhere in the world in respect of

the whole or any part of the assets or undertaking of the grantee; or

(ii) has suspended, ceased or threatened to suspend or cease business; or

(iii) is unable to pay its debts; or

(iv) otherwise becomes insolvent or has been served a petition for winding-up;

or

(v) suffers a change in its constitution, management, directors or shareholding

which in the opinion of our Board is material; or

(vi) commits a breach of any contract entered into between the grantee or its

associate and any member of our Group,

its option (to the extent not already exercised) shall lapse on the date of

appointment of the liquidator or receiver or on the date of suspension or

cessation of business or on the date when the grantee is deemed to be unable to

pay its debts as aforesaid or on the date the grantee otherwise becomes

insolvent or has been served a petition for winding-up or on the date of

notification by our Company that the said change in constitution, management,

directors or shareholding is material or on the date of notification by our

Company of the said breach of contract (as the case may be) and not be

exercisable unless our Board otherwise determines in which event the option (or

such remaining part thereof) shall be exercisable within such period as our Board

may in its absolute discretion determine following the date of such occurrence. A

resolution of our Board resolving that the grantee’s option has lapsed pursuant to

this paragraph (iii)(h) by reason of breach of contract or material change in the

constitution, management, directors or shareholding as aforesaid shall be final

and conclusive;

(i) if a grantee (being an individual):

(i) is unable or has no reasonable prospects of being able to pay his debts

within the meaning of the Bankruptcy Ordinance (Chapter 6 of the Laws of

Hong Kong) or any other applicable law or has otherwise become insolvent

or has been served a petition for bankruptcy; or

(ii) has made any arrangement or composition with his creditors generally; or

(iii) has been convicted of any criminal offense involving his integrity or

honesty; or


– IV-45 –


(iv) commits a breach of any contract entered into between the grantee or his

associate and any member of our Group, his option (to the extent not

already exercised) shall lapse on the date on which he is deemed unable or

to have no reasonable prospects of being able to pay his debts as aforesaid

or on the date on which a petition for bankruptcy has been presented in any

jurisdiction or on the date on which he enters into the said arrangement or

composition with his creditors or on the date of his conviction or on the

date of the said breach of contract (as the case may be) and not be

exercisable unless our Board otherwise determines in which event the

option (or such remaining part thereof) shall be exercisable within such

period as our Board may in its absolute discretion determine following the

date of such occurrence. A resolution of our Board resolving that the

grantee’s option has lapsed pursuant to this paragraph (i) for breach of

contract as aforesaid shall be final and conclusive;

(j) if a general offer is made to all holders of Shares and such offer becomes or is

declared unconditional (in the case of a takeover offer) or is approved by the

requisite majorities at the relevant meetings of our Shareholders (in the case of a

scheme of arrangement), the grantee shall be entitled to exercise his option (to

the extent not already exercised) at any time (in the case of a takeover offer)

within one month after the date on which the offer becomes or is declared

unconditional or (in the case of a scheme of arrangement) prior to such time and

date as shall be notified by our Company;

(k) if a compromise or arrangement between our Company and its members or

creditors is proposed for the purpose of or in connection with a scheme for the

reconstruction of our Company or its amalgamation with any other company, our

Company shall give notice thereof to the grantees who have options unexercised

at the same time as it despatches notices to all members or creditors of our

Company summoning the meeting to consider such a compromise or arrangement

and thereupon each grantee (or his legal representatives or receiver) may until

the expiry of the earlier of:

(i) the Post-[REDACTED] Scheme Option Period;

(ii) the period of two months from the date of such notice; or

(iii) the date on which such compromise or arrangement is sanctioned by the

court,

exercise in whole or in part his option. Except insofar as exercised in accordance

with this paragraph (k), all options outstanding at the expiry of the relevant

period referred to in this paragraph (k) shall lapse. Our Company may thereafter

require each grantee to transfer or otherwise deal with our Shares issued on

exercise of the option to place the grantee in the same position as would have

been the case had such Shares been the subject of such compromise or

arrangement; and


– IV-46 –


(l) in the event a notice is given by our Company to its members to convene ageneral meeting for the purposes of considering, and if thought fit, approving aresolution to voluntarily wind-up our Company, our Company shall on the samedate as or soon after it despatches such notice to each member of our Companygive notice thereof to all grantees and thereupon, each grantee (or his legalpersonal representative(s)) shall be entitled to exercise all or any of his optionsat any time not later than two business days prior to the proposed generalmeeting of our Company by giving notice in writing to our Company, accompaniedby a remittance for the full amount of the aggregate subscription price for theShares in respect of which the notice is given whereupon our Company shall assoon as possible and, in any event, no later than the business day immediatelyprior to the date of the proposed general meeting referred to above, allot therelevant Shares to the grantee credited as fully paid.

Ranking of Shares

The Shares to be allotted upon the exercise of an option will be subject to all the provisionsof the Articles and the laws of the Cayman Islands from time to time and shall rank pari passu inall respects with the then existing fully paid Shares in issue on the allotment date or, if that datefalls on a day when the register of members of our Company is closed, the first date of the re-opening of the register of members, and accordingly will entitle the holders to participate in alldividends or other distributions paid or made on or after the allotment date or, if that date fallson a day when the register of members of our Company is closed, the first day of the re-openingof the register of members, other than any dividend or other distribution previously declared orrecommended or resolved to be paid or made if the record date thereof shall be before theallotment date.

A Share issued upon the exercise of an option shall not carry rights until the registration ofthe grantee (or any other person) as the holder thereof.

Duration

Subject to the terms of the Post-[REDACTED] Share Option Scheme, the Post-[REDACTED]Share Option Scheme shall be valid and effective for a period of ten years from the Post-[REDACTED] Scheme Adoption Date, after which no further options will be offered but theprovisions of the Post-[REDACTED] Share Option Scheme shall remain in force and effect in allother respects. All options granted prior to such expiry and not then exercised shall continue tobe valid and exercisable subject to and in accordance with the Post-[REDACTED] Share OptionScheme.

Lapse of options

An option shall lapse automatically and not be exercisable (to the extent not alreadyexercised) on the earliest of:

(i) the expiry of the Post-[REDACTED] Scheme Option Period;

(ii) the expiry of any of the periods referred to in paragraph (iii) under ‘‘— Exercise ofoptions’’;


– IV-47 –


(iii) subject to paragraph (iii)(l) under ‘‘— Exercise of options’’, the date of the

commencement of the winding-up of our Company;

(iv) there is an unsatisfied judgment, order or award outstanding against the grantee or

our Board has reason to believe that the grantee is unable to pay or to have no

reasonable prospect of being able to pay his/its debts;

(v) there are circumstances which entitle any person to take any action, appoint any

person, commence proceedings or obtain any order of the type mentioned in

paragraph (iii)(h) under ‘‘— Exercise of options’’; or

(vi) a bankruptcy order has been made against any director or shareholder of the grantee

(being a corporation) in any jurisdiction.

No compensation shall be payable upon the lapse of any option, provided that our Board

shall be entitled in its discretion to pay such compensation to the grantee in such manner as it

may consider appropriate in any particular case.

Alteration of capital structure

In the event of any alteration to the capital structure of our Company while any option

remains exercisable, whether by way of capitalization of profits or reserves, open offer, rights

issue, consolidation, reclassification, reconstruction, sub-division or reduction of the number of

Shares, our Board may, if it considers the same to be appropriate, direct that adjustments be

made to:

(i) the maximum number of Shares subject to the Post-[REDACTED] Share Option Scheme;

and/or

(ii) the total number of Shares subject to the option so far as unexercised; and/or

(iii) the subscription price of each outstanding option.

Where our Board determines that such adjustments are appropriate (other than an

adjustment arising from a capitalization issue), the auditors of our Company shall certify in

writing to our Board that any such adjustments are in their opinion fair and reasonable, provided

that:

(i) any such adjustments shall be made on the basis that the aggregate subscription price

payable by the grantee on the full exercise of any option shall remain as nearly as

practicable the same as (but shall not be greater than) as it was before such event;

(ii) any such adjustments shall be made in accordance with the provisions as stipulated

under Chapter 17 of the Listing Rules and supplementary guidance on the

interpretation of the Listing Rules issued by the Stock Exchange from time to time; and

(iii) the issue of shares as consideration in a transaction shall not be regarded as a

circumstance requiring any such adjustments.


– IV-48 –


The capacity of the auditors of our Company in this paragraph is that of experts and not

arbitrators and their certification shall be final and binding on our Company and the grantees in

the absence of manifest error. The costs of the auditors of our Company shall be borne by our

Company.

If there has been any alteration in the capital structure of our Company as referred to in this

paragraph, our Company shall inform the grantees of such alteration and shall either inform the

grantees of the adjustment to be made pursuant to the certificate of the auditors of our Company

obtained by our Company for such purpose, or if no such certificate has yet been obtained,

inform the grantees of such fact and instruct the auditors of our Company to issue a certificate in

that regard in accordance with this paragraph.

Cancellation of options

Our Board shall be entitled for the following causes to cancel any option in whole or in part

by giving notice in writing to the grantee stating that such option is thereby cancelled with effect

from the date specified in such notice (‘‘Cancellation Date’’):

(i) the grantee commits or permits or attempts to commit or permit a breach of the

transferability restrictions or any terms or conditions attached to the grant of the

option;

(ii) the grantee makes a written request to our Board for the option to be cancelled; or

(iii) if the grantee has, in the opinion of our Board, conducted himself in any manner

whatsoever to the detriment of or prejudicial to the interests of our Company or any of

our subsidiaries.

The option shall be deemed to have been cancelled with effect from the Cancellation Date

in respect of any part of the option which has not been exercised as at the Cancellation Date. No

compensation shall be payable upon any such cancellation, provided that our Board shall be

entitled in its discretion to pay such compensation to the grantee in such manner as it may

consider appropriate in any particular case.

Termination

The Company may by resolution in general meeting, or the Board way, at any time terminate

the operation of the Post-[REDACTED] Share Option Scheme. Upon termination of the Post-

[REDACTED] Share Option Scheme as aforesaid, no further options shall be offered but the

provisions of the Post-[REDACTED] Share Option Scheme shall remain in force and effect in all

other respects. All options granted prior to such termination and not then exercised shall

continue to be valid and exercisable subject to and in accordance with the Post-[REDACTED]

Share Option Scheme and the Listing Rules.


– IV-49 –


Transferability

An option shall be personal to the grantee and shall not be assignable and no grantee shallin any way sell, transfer, charge, mortgage, encumber or create any interest (legal or beneficial)in favor of any third party over or in relation to any option or attempt so to do (save that thegrantee may nominate a nominee in whose name our Shares issued pursuant to the Post-[REDACTED] Share Option Scheme may be registered), except with the prior written consent of ourBoard from time to time. Any breach of the foregoing shall entitle our Company to cancel anyoutstanding option or part thereof granted to such grantee without incurring any liability on thepart of our Company.

Alteration of the Post-[REDACTED] Share Option Scheme

The Post-[REDACTED] Share Option Scheme may be altered in any respect by a resolution ofour Board subject to that the following shall not be carried out except with the prior sanction ofan ordinary resolution of our Shareholders in general meeting, provided always that the amendedterms of the Post-[REDACTED] Share Option Scheme shall comply with the applicablerequirements of the Listing Rules and any guidance/interpretation of the Listing Rules issued bythe Stock Exchange from time to time: (i) any material alteration to its terms and conditions orany change to the terms of options granted (except where the alterations take effectautomatically under the existing terms of the Post-[REDACTED] Share Option Scheme); (ii) anyalteration to the provisions of the Post-[REDACTED] Share Option Scheme in relation to thematters set out in Rule 17.03 of the Listing Rules to the advantage of the grantees; (iii) anychange to the authority of our Board or any person or committee delegated by our Board toadminister the day-to-day running of the Post-[REDACTED] Share Option Scheme; and (iv) anyalteration to the aforesaid provisions.

Disputes

Any dispute arising in connection with the Post-[REDACTED] Share Option Scheme (whetheras to the number of Shares the subject of an option, the amount of the subscription price orotherwise) shall be referred to the decision of the auditors of our Company who shall act asexperts and not as arbitrators and whose decision shall, in the absence of manifest error, befinal and conclusive and binding on all persons who may be affected thereby.

Miscellaneous

(i) Our Company shall bear the costs of establishing and administering the Post-[REDACTED] Share Option Scheme (including the costs of the auditors of our Company).

(ii) A grantee shall be entitled to inspect copies of all notices and other documents sentby our Company to its members at the same time or within a reasonable time of suchnotices or documents being sent, which shall be made available to him during normaloffice hours.

(iii) Any notices, documents or other communication between our Company and a granteeshall be in writing and may be sent by prepaid post or by personal delivery to, in thecase of our Company, its principal office in the PRC and, in the case of the grantee, hisaddress as notified to our Company from time to time.


– IV-50 –


(iv) Any notice or other communication served:

(a) by our Company shall be deemed to have been served 24 hours after the same

was put in the post or if delivered by hand, when delivered; and

(b) by the grantee shall not be deemed to have been received until the same shall

have been received by our Company.

(v) All allotments and issues of Shares pursuant to the Post-[REDACTED] Share Option

Scheme shall be subject to any necessary consents under the applicable laws,

enactments or regulations for the time being in force in the Cayman Islands, the PRC,

Hong Kong or elsewhere and a grantee shall be responsible for obtaining any

governmental or other official consent that may be required by any country or

jurisdiction in order to permit the grant or exercise of his option. By accepting an offer

or exercising his option, the grantee thereof is deemed to have represented to our

Company that he has obtained all such consents. A grantee shall indemnify our

Company fully against all claims, demands, liabilities, actions, proceedings, fees,

costs and expenses which our Company may suffer or incur (whether alone or jointly

with other party or parties) for or in respect of any failure on the part of the grantee to

obtain any necessary consent or to pay tax or other liabilities referred therein. Our

Company shall not be responsible for any failure by a grantee to obtain any such

consent or for any tax or other liability to which a grantee may become subject as a

result of his participation in the Post-[REDACTED] Share Option Scheme. Our Company

shall owe no liability to any grantee for the lapse of any options granted to any

grantee.

(vi) A grantee shall pay all taxes and discharge all other liabilities to which he may

become subject as a result of his participation in the Post-[REDACTED] Share Option

Scheme or the exercise of any option.

(vii) The Post-[REDACTED] Share Option Scheme shall not confer on any person any legal or

equitable rights (other than those constituting the options themselves) against our

Company directly or indirectly or give rise to any cause of action at law or in equity

against our Company.

(viii) The Post-[REDACTED] Share Option Scheme shall not form part of any contract of

employment between our Company or any of our subsidiaries and any Executive and

the rights and obligations of any Executive under the terms of his office or employment

shall not be affected by his participation in it, and the Post-[REDACTED] Share Option

Scheme shall afford such an Executive no additional rights to compensation or

damages in consequence of the termination of such office or employment for any

reason.

Governing law

The Post-[REDACTED] Share Option Scheme and all options granted thereunder shall be

governed by and construed in accordance with the laws of Hong Kong.


– IV-51 –


15. Estate Duty and Tax Indemnity

Our Directors have been advised that no material liability for estate duty is likely to fall on

our Company or any of our subsidiaries.

Our Controlling Shareholders (the ‘‘Indemnifiers’’) [have entered] into the Deed of Indemnity

with and in favor of the Company (for itself and as trustee for each of its present subsidiaries) to

provide indemnities on a joint and several basis, in respect of, among other matters, any

taxation (including all fines, penalties, costs, charges, expenses and interests relating to

taxation) falling on any member of our Group resulting from or by reference to any income,

profits or gains earned, accrued or received on or before the [REDACTED] (‘‘Taxation’’), save:

(a) to the extent that provision or reserve has been made for such Taxation in the

consolidated accounts of the Company in the Accountants’ Report as set out in

Appendix I to this Document or in the audited accounts of the relevant member of our

Group for the three financial years ended 31 December 2020 and the six months ended

30 June 2021;

(b) to the extent that such Taxation falling on any member of our Group in respect of any

accounting period commencing on or after 1 July 2021 and ending on the [REDACTED],

where such Taxation would not have arisen but for some act or omission of, or

transaction voluntarily entered into by any member of our Group (whether alone or in

conjunction with some other act, omission or transaction, whenever occurring) without

the prior written consent or agreement of the Indemnifiers, otherwise than any such

act, omission or transaction:

(i) carried out or effected in the ordinary course of business or in the ordinary

course of acquiring and disposing of capital assets on or before the [REDACTED];

and

(ii) carried out, made or entered into pursuant to a legally binding commitment

created on or before the [REDACTED] or pursuant to any statement of intention

made in this Document; or

(c) to the extent that such Taxation arises or is incurred as a result of the imposition of

Taxation as a consequence of any retrospective change in the law, rules and

regulations or the interpretation or practice thereof by the Hong Kong Inland Revenue

Department or any other competent authority (whether in Hong Kong or any other part

of the world) coming into force after the date of the Deed of Indemnity or to the extent

such Taxation arises or is increased by an increase in rates of Taxation after the date

of the Deed of Indemnity with retrospective effect; or

(d) to the extent of any provision or reserve made for Taxation in the consolidated

accounts of the Company in the Accountants’ Report as set out in Appendix I to this

Document or in the audited accounts of the relevant member of our Group for the three

financial years ended 31 December 2020 and the six months ended 30 June 2021,

which is finally established to be an over-provision or an excessive reserve, in which

case the Indemnifiers’ liability (if any) in respect of Taxation shall be reduced by an


– IV-52 –


amount not exceeding such provision or reserve, provided that the amount of any suchprovision or reserve applied to reduce the Indemnifiers’ liability in respect of Taxationshall not be available in respect of any such liability arising thereafter.

16. Litigation

As of the Latest Practicable Date, no member of our Group was engaged in any materiallitigation, arbitration or claim of material importance, and no litigation, arbitration or claim ofmaterial importance is known to our Directors to be pending or threatened by or against ourGroup member, that would have a material impact on our results of operations or financialcondition of our Group.

17. Preliminary Expenses

The preliminary expenses incurred by our Company amounted to approximately US$4.150and has been fully paid by our Company.

18. Promoters

Our Company has no promoter for the purpose of the Listing Rules. Within two yearsimmediately preceding the date of this Document, no cash, securities or other benefit has beenor is proposed to be paid, allotted or given to any promoter in connection with the [REDACTED] orthe related transactions described in this Document.

19. Agency Fees or Commissions Paid or Payable

Save as disclosed in ‘‘[REDACTED]’’ in this Document, no commissions, discounts,brokerages or other special terms have been granted in connection with the issue or sale of anyshare or loan capital of any member of our Group within the two years preceding the date of thisDocument.

20. Joint Sponsors

The Joint Sponsors have applied on behalf of our Company to the [REDACTED] Committee ofthe Stock Exchange for the [REDACTED] of, and permission to deal in, the Shares in issue and tobe issued as mentioned in this Document and any Shares which may be issued upon theexercise of the [REDACTED], the options granted under the Pre-[REDACTED] Share Option Schemeand any Options which may be granted under the Post-[REDACTED] Share Option Scheme on theStock Exchange. All necessary arrangements have been made to enable the Shares to beadmitted into [REDACTED].

LWSPV, being a close associate of the controlling shareholder of China International CapitalCorporation Hong Kong Securities Limited, is regarded as a member of the sponsor group ofChina International Capital Corporation Hong Kong Securities Limited as defined under theListing Rules. As set out in the section headed ‘‘History and Corporate Structure’’, as of theLatest Practicable Date, LWSPV held approximately 0.64% (i.e. below [REDACTED] threshold setout in Rule 3A.07(1) of the Listing Rules) of the issue share capital of our Company. Accordingly,such holding does not affect the independence of China International Capital Corporation HongKong Securities Limited as one of the Joint Sponsors.


– IV-53 –


The Joint Sponsors satisfy the independence criteria applicable to sponsors set out in Rule3A.07 of the Listing Rules.

The fee payable to the Joint Sponsors in respect of their service as sponsor for the[REDACTED] is US$250,000 in aggregate and payable by us.

21. Qualification of Experts

The qualifications of the experts who have given opinions or advice in this Document are asfollows:

Name Qualification

China International Capital

Corporation Hong Kong

Securities Limited . . . . . . .

A corporation licenced under the SFO for 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

Huatai Financial Holdings

(Hong Kong) Limited . . . . . .

A corporation licenced under the SFO for type 1 (dealing in

securities), type 2 (dealing in futures contracts), type 4

(advising on securities), type 6 (advising on corporate finance)

and type 9 (asset management) of the regulated activities as

defined under the SFO

Jingtian & Gongcheng . . . . . . Legal advisors to our Company as to PRC law

Appleby . . . . . . . . . . . . . . . . Legal advisors to our Company as to Cayman Islands law

Baker & McKenzie . . . . . . . . . Legal advisors to our Company as to Taiwan law

Deloitte Touche Tohmatsu . . . Certified public accountants

Frost & Sullivan . . . . . . . . . . Industry consultants

Guangdong Huayi Fire Safety

Testing Co., Ltd . . . . . . . . .

Fire safety consultant

22. Consents of Experts

Each of the experts as referred to in the paragraph headed ‘‘Qualification of Experts’’ in this

Appendix has given, and has not withdrawn, their respective written consents to the issue of this

Document with the inclusion of their reports and/or letters and/or opinion (as the case may be)

and the references to their names or summaries of opinions included herein in the form and

context in which they are respectively included.


– IV-54 –


23. Interests of Experts

None of the experts has any shareholding interest in our Company or any of our

subsidiaries or the right (whether legally enforceable or not) to subscribe for or to nominate

persons to subscribe for securities in our Company or any of our subsidiaries.

None of the experts has any direct or indirect interest in the promotion of, or in any assets

which have been, within the two years immediately preceding the issue of this Document,

acquired or disposed of by or leased to any member of our Group, or are proposed to be

acquired or disposed of by or leased to any member of our Group.

24. Binding Effect

This Document shall have the effect, if an application is made in pursuance hereof, of

rendering all persons concerned bound by all the provisions (other than the penal provisions) of

sections 44A and 44B of the Companies (Winding Up and Miscellaneous Provisions) Ordinance

so far as applicable.

25. No Material Adverse Change

Save as disclosed in this Document, our Directors confirm that there has been no material

adverse change in our financial or trading position or prospects of our Group since 30 June 2021

(being the date to which the latest consolidated financial statements of our Group were made

up).

26. Taxation of holders of Shares

(a) Hong Kong

[REDACTED] in Shares registered on our Company’s Hong Kong branch register of members

will be subject to Hong Kong [REDACTED]. The sale, purchase and transfer of Shares are subject

to Hong Kong [REDACTED], the current rate of which is 0.13% of the consideration or, if higher,

the value of the Shares being sold or transferred. Profits from [REDACTED] in the Shares arising

in or derived from Hong Kong may also be subject to Hong Kong profits tax.

(b) Cayman Islands

Under the present Cayman Islands law, there is no [REDACTED] payable in the Cayman

Islands on transfer of shares of a Cayman Islands company except those which hold interests in

land in the Cayman Islands.

(c) Consultation with professional advisors

Intending holders of Shares are recommended to consult their professional advisors if they

are in any doubt as to the taxation implications of subscribing for, purchasing, holding or

disposing of or dealing in Shares or exercising any rights attaching to them. It is emphasized

that none of our Company, our Directors or the other parties involved in the [REDACTED] can


– IV-55 –


accept responsibility for any tax effect on, or liabilities of, holders of Shares resulting from their

subscription for, purchase, holding or disposal of or dealing in Shares or exercising any rights

attaching to them.

27. Bilingual Document

The English language and Chinese language versions of this Document 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). In case of any discrepancies between the English language

version and Chinese language version of this Document, the English language version shall

prevail.

28. Miscellaneous

(a) Save as disclosed herein:

(i) within two years preceding the date of this Document:

(aa) no share or loan capital or debenture of our Company or of any of our

subsidiaries has been issued, agreed to be issued or is proposed to be

issued fully or partly paid either for cash or for a consideration other than

cash;

(bb) no commissions, discounts, brokerages or other special terms have been

granted in connection with the issue or sale of any share or loan capital of

our Company or any of our subsidiaries; and

(cc) no commission has been paid or payable for subscribing or agreeing to

subscribe, or procuring or agreeing to procure the subscriptions, for any

shares in our Company or any of our subsidiaries;

(ii) no share or loan capital of our Company or any of our subsidiaries is under

Option or is agreed conditionally or unconditionally to be put under Option;

(b) there has not been any interruption in the business of our Group which may have or

has had a significant effect on the financial position of our Group in the 12 months

preceding the date of this Document;

(c) no founder, management or deferred shares of our Company or any of our subsidiaries

have been issued or agreed to be issued;

(d) there is no arrangement under which future dividends are waived or agreed to be

waived;

(e) our Company has no outstanding convertible debt securities or debentures;

(f) no company within our Group is presently listed on any stock exchange or traded on

any [REDACTED] system;


– IV-56 –


(g) there are no exercise of any right of pre-exemption or the transferability of

subscription rights of relevant procedures; and

(h) there are no restrictions affecting the remittance of profits or repatriation of capital

into Hong Kong from outside Hong Kong.


– IV-57 –


DOCUMENTS DELIVERED TO THE [REDACTED] OF COMPANIES

The documents attached to a copy of this Document and delivered to the [REDACTED] of

Companies in Hong Kong for registration were:

(a) a copy of the [REDACTED];

(b) the written consents referred to in the section headed ‘‘Statutory and General

Information — D. Other information — 22. Consents of Experts’’ in Appendix IV to this

Document; and

(c) certified copies of the material contracts referred to in the section headed ‘‘Statutory

and General Information — B. Further Information about our Business — 6. Summary of

Material Contracts’’ in Appendix IV to this Document.

DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection at the offices of our

Company’s Hong Kong legal advisors, Akin Gump Strauss Hauer & Feld at Unit 1801–08 &10, 18/

F, Gloucester Tower, 15 Queen’s Road Central, Central, Hong Kong, during normal business hours

up to and including the date which is 14 days from the date of this Document:

(a) the Memorandum of Association and the Articles of Association;

(b) the Accountants’ Reports from Deloitte Touche Tohmatsu, the text of which is set out

in Appendix I to this Document;

(c) the report from Deloitte Touche Tohmatsu in respect of the unaudited [REDACTED]

financial information, the text of which is set out in Appendix II to this Document;

(d) the audited consolidated financial statements of our Group for the financial years

ended 31 December 2018, 2019 and 2020 and the six months ended 30 June 2021;

(e) the legal opinion issued by Jingtian & Gongcheng, our legal advisors as to PRC law, in

respect of certain general corporate matters and property interests of our Group in the

PRC;

(f) the legal opinion issued by Baker & Mckenzie, our legal advisors as to Taiwan Law, in

respect of our branch in Taiwan;

(g) the letter of advice issued by Appleby, our legal advisors as to Cayman Islands law,

summarizing certain aspects of Cayman Islands company law as referred to in

Appendix III to this Document;

(h) the Cayman Companies Act;

APPENDIX V DOCUMENTS DELIVERED TO THE [REDACTED] OF COMPANIESIN HONG KONG AND AVAILABLE FOR INSPECTION

– V-1 –


(i) the material contracts referred to in the section headed ‘‘Statutory and General

Information — Further Information about our Business — 6. Summary of Material

Contracts’’ in Appendix IV to this Document;

(j) the written consents referred to in the section headed ‘‘Statutory and General

Information — D. Other Information — 22. Consents of Experts’’ in Appendix IV to this

Document;

(k) the service contracts with our Directors referred to in the section headed ‘‘Statutory

and General Information — C. Further Information about our Directors and Substantial

Shareholders — 9. Directors — (a) Particulars of Directors’ service contracts’’ in

Appendix IV to this Document;

(l) the rules of the Pre-[REDACTED] Share Option Scheme;

(m) the full list of all the grantees who have been granted options to subscribe for Shares

under the Pre-[REDACTED] Share Option Scheme, containing all the details as required

under Rule 17.02(1)(b) of and paragraph 27 of Appendix 1A to the Listing Rules and

paragraph 10 of Part I of the Third Schedule to the Companies (Winding Up and

Miscellaneous Provisions) Ordinance;

(n) the rules of the Post-[REDACTED] Share Option Scheme;

(o) the industry report issued by Frost & Sullivan; and

(p) the fire safety report issued by the Fire Safety Consultant.

APPENDIX V DOCUMENTS DELIVERED TO THE [REDACTED] OF COMPANIESIN HONG KONG AND AVAILABLE FOR INSPECTION

– V-2 –


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